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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-KSB
 
 þ
    
    ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended September 30, 2007
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For
the transition period from
 to.
 Commission file number: 0-50775
 XENONICS HOLDINGS, INC.
  Nevada
    
    84-1433854(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification Number)2236 Rutherford Road, Suite 123
Carlsbad, California
(Address of principal executive offices)
    
    92008-7297
(Zip code)
 (760) 448-9700
 Securities registered under Section 12(b) of the Act:Title of each class
    
    Name of each exchange on which registeredCommon Stock, $.001 par value
    
    American Stock ExchangeSecurities registered under Section 12(g) of the Act: None
 o
 þ o
 o
 o þ
    o þ




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##### 



TABLE OF CONTENTS
 PART IITEM 1. DESCRIPTION OF BUSINESS
    
    
    4ITEM 2. DESCRIPTION OF PROPERTY
    
    
    8ITEM 3. LEGAL PROCEEDINGS
    
    
    8ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    9PART IIITEM 5. MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
    
    
    10ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
    
    
    11ITEM 7. FINANCIAL STATEMENTS
    
    
    F-1ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
    
    
    21ITEM 8A. CONTROLS AND PROCEDURES
    
    
    21ITEM 8B. OTHER INFORMATION
    
    
    21PART IIIITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
    
    
    22ITEM 10. EXECUTIVE COMPENSATION
    
    
    22ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED SHAREHOLDER MATTERS
    
    
    22ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
    
    
    22ITEM 13. EXHIBITS
    
    
    23ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    25EXHIBIT 23.1EXHIBIT 23.2EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2
  2




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Introductory Comment
  Forward-Looking Statements
  3




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PART I
 
 ITEM 1. DESCRIPTION OF BUSINESS
 Overview
     History
   Our Products
  4




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NightHunter One
 NightHunter II
 NightHunter ext
 NightHunter 3
 SuperVision
 The Markets
  Military Forces, of the United States and Foreign Allies
   5




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U.S. Department of Homeland Security
  U.S. Law Enforcement and Fire, Search & Rescue
  Commercial Markets
  Sales & Marketing
      6




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Manufacturing
     Competition
    Regulation
  7




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Intellectual Property
    Research and Development
    Employees
  
 ITEM 2. DESCRIPTION OF PROPERTY
  
 ITEM 3. LEGAL PROCEEDINGS
  8




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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  9




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PART II
 
 ITEM 5. Market for Common Equity and Related Shareholder Matters and Small Business Issuer
Purchases of Equity Securities
  Year ended September 30, 2007
    
    High
    
    LowFirst Quarter
    
    $
    4.05
    
    
    $
    1.27Second Quarter
    
    $
    3.09
    
    
    $
    1.95Third Quarter
    
    $
    3.07
    
    
    $
    2.18Fourth Quarter
    
    $
    2.58
    
    
    $
    1.77
 Year ended September 30, 2006
    
    High
    
    LowFirst Quarter
    
    $
    2.60
    
    
    $
    1.52Second Quarter
    
    $
    2.50
    
    
    $
    1.37Third Quarter
    
    $
    2.45
    
    
    $
    1.42Fourth Quarter
    
    $
    2.18
    
    
    $
    1.40
  Dividends
  Repurchase of Securities
  Recent Sales of Unregistered Securities
  Equity Compensation Plan Information
  Number of securities
    
    
    
    
    
    Number of securitiesto be issued upon
    
    Weighted-average
    
    remaining available forexercise of
    
    exercise price of
    
    future issuance underoutstanding options,
    
    outstanding options,
    
    equity compensation plansPlan Category
    
    warrants and rights
    
    warrants and rights
    
    (excluding column (a))(a)
    
    (b)
    
    (c)Equity compensation plans approved by security holders
    
    
    1,988,000
    
    
    $
    2.52
    
    
    
    471,000Equity compensation plans not approved by security
holders
    
    
    500,000
    
    
    $
    1.60
    
    
    
    Totals
    
    
    2,388,000
    
    
    $
    2.43
    
    
    
    471,000
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ITEM 6. Managements Discussion and Analysis or Plan of Operation
 Forward-Looking Statements
  Overview
     11




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How We Generate Revenue
       Trends in Our Business
   12




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Critical Accounting Policies and Estimates
  Revenue Recognition
 Accounts Receivable
 Tax Valuation Allowance
 Inventory Valuation
  Results of Operations
Year ended September 30, 2007 compared to September 30, 2006
 Revenues:
  Cost of Goods and Gross Profit:
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Selling, General and Administrative:
 Engineering, Research & Development:
 Other Income / Expense:
 Provision for Income Taxes: :
 Net Loss:
 Year ended September 30, 2006 compared to September 30, 2005
 Revenues:
   Cost of Goods and Gross Profit:
 Selling, General and Administrative:
 Engineering, Research & Development:
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Other Income / Expense:
 Provision for Income Taxes:
 Liquidity and Capital Resources
       Contractual Obligations
    
    Total
    
    2008
    
    2009Long-Term Office Lease
    
    $
    120,000
    
    
    $
    111,000
    
    
    $
    9,000
    15




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RISK FACTORS
 An investment in our common stock is subject to a high degree of risk. The risks described
below should be carefully considered, as well as the other information contained in this annual
report and in the documents incorporated herein by reference. If any of the following risks
actually occurs, our business, financial condition, results of operations and business prospects
could be materially and adversely affected. In such event, the trading price of our common stock
would likely decline.
 Risks Related to Our Business
 We have a limited operating history, which makes it difficult for investors to evaluate our
business prospects.
  Fluctuations in our quarterly and annual operating results make it difficult to assure future
positive cash flows from operations.
  The loss of any one of our major customers would have an adverse effect on our revenue.
   16




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The loss of contracts with U.S. government agencies would adversely affect our revenue.
  Potential customers may prefer our competitors technology and products.
   Because we have a small and new marketing and sales team, we may be unable to compete successfully
against other companies that have a history and track record in the high-intensity lighting and
night vision marketplaces.
  The loss of any of our key personnel could adversely affect our business.
  The interests of our current shareholders will be diluted if we seek additional equity financing in
the future, and any debt financing that we seek in the future will expose us to the risk of default
and insolvency.
 .
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We are subject to government regulation which may require us to obtain additional licenses and
could limit our ability to sell our products outside the United States.
  We may experience production delays if suppliers fail to deliver materials to us, which could
reduce our revenue.
  Our operations involve evolving products and technological change, which could make our products
obsolete.
  We may not have adequate protection of our intellectual property, which could result in a reduction
in our revenue if our competitors are able to use our intellectual property or if we lose our
rights to the NightHunter II or SuperVision patent application.
   Because we currently only have a single line of products, any delay in our ability to market, sell
or ship these existing products would adversely affect our revenue.
  18




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Because we depend on a single manufacturer to make our NightHunter II products, any failure by the
manufacturer to honor its obligations to us will impair our ability to deliver our products to
customers.
 -
  Risks Related to Our Common Stock
 You may be unable to sell your shares at an adequate price or at all
  If securities or industry analysts do not publish research reports about our business or if they
downgrade our stock, the price of our common stock could decline.
  Anti-takeover provisions in our articles of incorporation could adversely affect the value of our
common stock.
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The future issuance of additional common and preferred stock could dilute existing shareholders.
   -
    
    exercising voting, redemption and conversion rights to the detriment of the holders of common stock;-
    
    receiving preferences over the holders of common stock or surplus funds in the event of our dissolution or liquidation;-
    
    delaying, deferring or preventing a change in control of our company; and-
    
    discouraging bids for our common stock.
 We do not plan to pay any cash dividends on our common stock.
  The exercise of outstanding stock options and warrants would dilute the ownership interests of our
existing shareholders.
  Future sales of common stock by our existing shareholders and option and warrantholders could cause
our stock price to decline.
  20




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ITEM 7. FINANCIAL STATEMENTS
 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
 XENONICS HOLDINGS, INC.
 Reports of Independent Registered Public Accounting Firms
    
    
    F-2Consolidated Financial Statements:Balance Sheet as of September 30, 2007
    
    
    F-4Statements of Operations for the years ended September 30, 2007 and 2006
    
    
    F-5Statements of Shareholders Equity for the years ended September 30, 2007 and 2006
    
    
    F-6Statements of Cash Flows for the years ended September 30, 2007 and 2006
    
    
    F-7Notes to Consolidated Financial Statements
    
    
    F-8
 F-1




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REPORT OF CURRENT INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
     
 F-2




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REPORT OF FORMER INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
      
 F-3




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CONSOLIDATED BALANCE SHEET
 September 30,Rounded in thousands
    
    2007AssetsCurrent assets:Cash
    
    $
    2,388,000Accounts receivable, net of allowance for doubtful accounts of $71,000
    
    
    305,000Inventories, net
    
    
    2,635,000Other current assets
    
    
    365,000Total Current Assets
    
    
    5,693,000Equipment, furniture and leasehold improvements at cost, less accumulated depreciation of $108,000
    
    
    215,000Total Assets
    
    $
    5,908,000Liabilities and Shareholders EquityCurrent liabilities:Accounts payable
    
    $
    892,000Accrued expenses
    
    
    123,000Accrued payroll and related taxes
    
    
    151,000Total Current Liabilities
    
    
    1,166,000Commitments and contingencies (Note 9)Shareholders equity:Preferred shares, $0.001 par value, 5,000,000 shares authorized, 0 shares issued and outstanding
    
    
    Common shares, $0.001 par value, 50,000,000 shares authorized,
19,952,000 shares issued and 19,839,000 shares outstanding
    
    
    20,000Additional paid-in capital
    
    
    23,341,000Accumulated deficit
    
    
    (18,313,000
    )5,048,000Less treasury stock, at cost, 113,000 shares
    
    
    (306,000
    )Total Shareholders Equity
    
    
    4,742,000Total Liabilities and Shareholders Equity
    
    $
    5,908,000
 The accompanying notes are an integral part of these consolidated financial statements.
 F-4




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CONSOLIDATED STATEMENTS OF OPERATIONS
 Years ended September 30,Rounded in thousands, except per share amounts
    
    2007
    
    2006Revenue
    
    $
    4,984,000
    
    
    $
    4,833,000Cost of goods sold
    
    
    2,366,000
    
    
    
    2,048,000Gross profit
    
    
    2,618,000
    
    
    
    2,785,000Selling, general and administrative
    
    
    6,007,000
    
    
    
    3,714,000Engineering, research and development
    
    
    713,000
    
    
    
    576,000Loss from operations
    
    
    (4,102,000
    )
    
    
    (1,505,000
    )Other income (expense):Interest income
    
    
    71,000
    
    
    
    26,000Interest expense
    
    
    (1,000
    )
    
    
    (4,000
    )Other (expense) / income
    
    
    
    
    
    
    (3,000
    )Loss before provision for income taxes
    
    
    (4,032,000
    )
    
    
    (1,486,000
    )Income tax provision
    
    
    2,000
    
    
    
    2,000Loss before minority interest
    
    
    (4,034,000
    )
    
    
    (1,488,000
    )Minority interest
    
    
    
    
    
    
    Net loss
    
    $
    (4,034,000
    )
    
    $
    (1,488,000
    )Net loss per share:Basic and diluted
    
    $
    (0.22
    )
    
    $
    (0.09
    )Weighted average shares outstandingBasic and diluted
    
    
    18,016,000
    
    
    
    16,044,000
 The
accompanying notes are an integral part of these consolidated
financial statements.
 F-5




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CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
 Additional
    
    Accumulated
    
    SubscriptionCommon Stock
    
    Treasury Stock
    
    Paid-In Capital
    
    Deficit
    
    Receivable
    
    TotalRounded in thousands
    
    Shares
    
    Amount
    
    Shares
    
    AmountBalances at
September 30, 2005
    
    
    15,686,000
    
    
    $
    16,000
    
    
    
    (113,000
    )
    
    $
    (306,000
    )
    
    $
    14,847,000
    
    
    $
    (12,791,000
    )
    
    $
    
    
    
    $
    1,766,000Warrants exercised
    
    
    218,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    136,000
    
    
    
    
    
    
    
    
    
    
    
    136,000Issuance of common
stock in private
placement, net of
offering costs of
$115
    
    
    1,000,000
    
    
    
    1,000
    
    
    
    
    
    
    
    
    
    
    
    1,534,000
    
    
    
    
    
    
    
    (650,000
    )
    
    
    885,000Compensation charge
for stock options
issued to employees
and directors
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    560,000
    
    
    
    
    
    
    
    
    
    
    
    560,000Issuance of
warrants for
services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    541,000
    
    
    
    
    
    
    
    
    
    
    
    541,000Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,488,000
    )
    
    
    
    
    
    
    (1,488,000
    )Balances at
September 30, 2006
    
    
    16,904,000
    
    
    $
    17,000
    
    
    
    (113,000
    )
    
    $
    (306,000
    )
    
    $
    17,618,000
    
    
    $
    (14,279,000
    )
    
    $
    (650,000
    )
    
    $
    2,400,000Proceeds from
subscription
receivable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    650,000
    
    
    
    650,000Issuance of common
stock in private
placements, net of
offering costs
of $40,000
    
    
    2,289,000
    
    
    
    2,000
    
    
    
    
    
    
    
    
    
    
    
    4,008,000
    
    
    
    
    
    
    
    
    
    
    
    4,010,000Warrants and stock
options exercised
    
    
    759,000
    
    
    
    1,000
    
    
    
    
    
    
    
    
    
    
    
    586,000
    
    
    
    
    
    
    
    
    
    
    
    587,000Compensation charge
for stock options
issued to employees
and directors
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,074,000
    
    
    
    
    
    
    
    
    
    
    
    1,074,000Issuance of
warrants for
services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    55,000
    
    
    
    
    
    
    
    
    
    
    
    55,000Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,034,000
    )
    
    
    
    
    
    
    (4,034,000
    )Balances at
September 30, 2007
    
    
    19,952,000
    
    
    $
    20,000
    
    
    
    (113,000
    )
    
    $
    (306,000
    )
    
    $
    23,341,000
    
    
    $
    (18,313,000
    )
    
    $
    
    
    
    $
    4,742,000
 The accompanying notes are an integral part of these consolidated financial statements.
 F - 6




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CONSOLIDATED STATEMENTS OF CASHFLOWS
 Years ended September 30,Rounded in thousands
    
    2007
    
    2006Cash flows from operating activities:Net loss
    
    $
    (4,034,000
    )
    
    $
    (1,488,000
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation
    
    
    39,000
    
    
    
    13,000Compensation charge for stock options issued to employees and directors
    
    
    1,074,000
    
    
    
    560,000Issuance of warrants for services
    
    
    55,000
    
    
    
    541,000Changes in operating assets and liabilities:Accounts receivable
    
    
    1,889,000
    
    
    
    (1,981,000
    )Inventories
    
    
    (2,030,000
    )
    
    
    601,000Other current and non-current assets
    
    
    (244,000
    )
    
    
    (14,000
    )Accounts payable and accrued expense
    
    
    331,000
    
    
    
    (47,000
    )Accrued payroll and related taxes
    
    
    27,000
    
    
    
    10,000Other current liabilities
    
    
    143,000
    
    
    
    2,000Net cash used in operating activities
    
    
    (2,750,000
    )
    
    
    (1,803,000
    )Cash flows from investing activities:Purchases of equipment, furniture and fixtures
    
    
    ( 208,000
    )
    
    
    (9,000
    )Net cash used for investing activities
    
    
    ( 208,000
    )
    
    
    (9,000
    )Cash flows from financing activities:Proceeds from subscription receivable
    
    
    650,000
    
    
    
    Net proceeds from issuance of common stock net of expenses
    
    
    4,010,000
    
    
    
    885,000Proceeds in connection with the exercise of options and warrants
    
    
    587,000
    
    
    
    136,000Net cash provided by financing activities
    
    
    5,247,000
    
    
    
    1,021,000Increase (decrease) in cash
    
    
    2,289,000
    
    
    
    (791,000
    )Cash, beginning of period
    
    
    99,000
    
    
    
    890,000Cash, end of period
    
    $
    2,388,000
    
    
    $
    99,000Supplemental cash flow information:Cash paid during the year for income taxes
    
    $
    2,000
    
    
    $
    2,000Cash paid during the year for interest
    
    $
    1,000
    
    
    $
    4,000Non-cash transactions:Subscription receivable
    
    $
    
    
    
    $
    650,000
 The accompanying notes are an integral part of these consolidated financial statements
 F - 7




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1. OPERATIONS AND OTHER ORGANIZATIONAL MATTERS
    2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Principles of Consolidation
 Use of Estimates
 Equipment, Furniture and Leasehold Improvements 
 Long-Lived Assets
 Fair Value Of Financial Instruments 
 Accounts Receivable 
 F - 8




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Inventories
 Revenue Recognition
 Advertising Costs
 Industry Segment -
 For the years endedSeptember 30,2007
    
    2006US Government
    
    
    79
    %
    
    
    96
    %Commercial (SuperVision product)
    
    
    15
    %
    
    
    
    %International
    
    
    3
    %
    
    
    2
    %Other
    
    
    3
    %
    
    
    2
    %100
    %
    
    
    100
    %
 Cost of Goods Sold -
 Income Taxes
 Loss Per Common Share -
  For the years endedSeptember 30,2007
    
    2006Shares outstanding, beginning
    
    
    16,791,000
    
    
    
    15,573,000Weighted average shares issued
    
    
    1,225,000
    
    
    
    471,000Weighted average shares outstanding  Basic
    
    
    18,016,000
    
    
    
    16,044,000Effect of dilutive securities (stock
options and warrants)
    
    
    
    
    
    
    Weighted average shares outstanding  diluted
    
    
    18,016,000
    
    
    
    16,044,000
 F - 9




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September 30,2007
    
    2006Stock options and warrants
    
    
    5,679,000
    
    
    
    5,154,000
 Research and Development
 Stock Options Accounting for Stock-Based Compensation
 Share-Based
Payments
 Recent Accounting Pronouncements
      F - 10




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3. FIXED ASSETS
  Estimated
    
    September 30,Useful Lives
    
    2007Computer equipment and software
    
    
    5
    
    
    $
    283,000Furniture and leasehold improvements
    
    
    7
    
    
    
    40,000323,000Less: accumulated depreciation and amortization
    
    
    
    
    
    
    (108,000
    )$
    215,000
 4. INVENTORIES
  September 30,2007Raw materials
    
    $
    805,000Work in process
    
    
    228,000Finished goods
    
    
    1,602,000Reserve for obsolescence
    
    
    $
    2,635,000
 5. SHAREHOLDERS EQUITY
  Common Stock
 ,
 F -11




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6. INCOME TAXES
  For the years endedSeptember 30,2007
    
    2006Current provision:Federal
    
    $
    
    
    
    $
    State
    
    
    2,000
    
    
    
    2,0002,000
    
    
    
    2,000Deferred provision:Federal
    
    
    (1,416,000
    )
    
    
    (561,000
    )State
    
    
    (274,000
    )
    
    
    (127,000
    )(1,690,000
    )
    
    
    (688,000
    )Valuation allowance
    
    
    1,690,000
    
    
    
    688,000$
    2,000
    
    
    $
    2,000
  For the years endedSeptember 30,2007
    
    2006Inventory reserve
    
    $
    
    
    
    $
    466,000Allowance
for doubtful accounts
    
    
    71,000Stock compensation expense
    
    
    665,000
    
    
    
    468,000Warrant expense
    
    
    390,000
    
    
    
    369,000State taxes
    
    
    1,000
    
    
    
    1,000Accumulated depreciation / amortization
    
    
    (14,000
    )
    
    
    (21,000
    )R&D credit
    
    
    333,000
    
    
    
    237,000Other
    
    
    61,000
    
    
    
    56,000Net operating loss carry-forwards
    
    
    5,265,000
    
    
    
    3,435,0006,772,000
    
    
    
    5,011,000Valuation allowance
    
    
    (6,772,000
    )
    
    
    (5,011,000
    )Net deferred tax asset
    
    $
    
    
    
    $
    
  F - 12




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For the years endedSeptember 30,2007
    
    2006Federal statutory rate
    
    
    (34.01
    %)
    
    
    (34.00
    %)State income taxes, net of federal income tax benefit
    
    
    (5.83
    %)
    
    
    (5.81
    %)Change in valuation allowance
    
    
    41.91
    %
    
    
    45.8
    %R&D credit carry-forward
    
    
    (2.38
    %)
    
    
    5.62
    %Other
    
    
    0.35
    %
    
    
    0.25
    %0.04
    %
    
    
    (0.12
    %)
 7. MINORITY INTEREST
  8. SAVINGS PLAN
  9. COMMITMENTS AND CONTINGENCIES
 Leases
  Purchase Agreement with PerkinElmer, Inc . 
 Employment Agreements 
  Litigation
 F - 13




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##### Table of Contents



10. STOCK OPTIONS AND WARRANTS
 Stock Options Accounting for Stock-Based
Compensation,
    For the  years endedSeptember 30,2007
    
    2006Risk-free interest rate
    
    
    4.60% - 4.87%
    
    
    
    4.37% - 4.43%Expected life (in years)
    
    
    4
    
    
    
    3Dividend yield
    
    
    0.0%
    
    
    
    0.0%Expected volatility
    
    
    99% - 111%
    
    
    
    103 - 104%Weighted-average volatility
    
    
    104%
    
    
    
    103%
  F - 14




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##### Table of Contents



WeightedAverageWeighted
    
    ContractualStock
    
    Average
    
    Term in
    
    AggregateOptions
    
    Exercise Price
    
    Years
    
    Intrinsic ValueOutstanding at October 1, 2005
    
    
    1,635,000
    
    
    $
    2.56Granted
    
    
    106,000
    
    
    $
    1.72Exercised
    
    
    Forfeited or Expired
    
    
    (15,000
    )
    
    $
    3.75Outstanding at September 30, 2006
    
    
    1,726,000
    
    
    $
    2.50
    
    
    
    4.17
    
    
    $
    542,000Granted
    
    
    700,000
    
    
    $
    2.26
    
    
    
    4.14Exercised
    
    
    (36,000
    )
    
    $
    1.62Forfeited or Expired
    
    
    (402,000
    )
    
    $
    2.06
    
    
    
    Outstanding at September 30, 2007
    
    
    1,988,000
    
    
    $
    2.52
    
    
    
    3.75
    
    
    $
    758,000Exercisable at September 30, 2007
    
    
    1,289,000
    
    
    $
    2.44
    
    
    
    3.47
    
    
    $
    753,000
 
   Weighted AverageGrant-DateStock Options
    
    Fair ValueNon-vested at October 1, 2006
    
    
    744,000
    
    
    $
    1.21Granted
    
    
    700,000
    
    
    $
    1.55Forfeited or Exercised
    
    
    (372,000
    )
    
    $
    0.52Vested
    
    
    (373,000
    )
    
    $
    1.79Non-vested at September 30, 2007
    
    
    699,000
    
    
    $
    1.72
     F - 15




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##### Table of Contents



Options Outstanding
    
    
    Options ExercisableAt September 30, 2007
    
    
    at September 30, 2007WeightedAverage
    
    Weighted-
    
    
    
    
    
    
    Weighted-Range of
    
    
    
    
    
    Remaining
    
    Average
    
    
    Number
    
    AverageExercise
    
    Number
    
    Contractual
    
    Exercise
    
    
    Vested and
    
    ExercisePrices
    
    Outstanding
    
    Life (Years)
    
    Price
    
    
    Exercisable
    
    Price$0.25  $1.00
    
    
    545,000
    
    
    
    4.50
    
    
    $
    0.71
    
    
    
    
    545,000
    
    
    $
    0.71$1.87  $2.85
    
    
    634,000
    
    
    
    4.75
    
    
    $
    2.34
    
    
    
    
    95,000
    
    
    $
    2.31$3.50  $3.80
    
    
    769,000
    
    
    
    2.42
    
    
    $
    3.78
    
    
    
    
    609,000
    
    
    $
    3.78$5.75  $6.00
    
    
    40,000
    
    
    
    3.23
    
    
    $
    5.91
    
    
    
    
    40,000
    
    
    $
    5.911,988,000
    
    
    
    3.75
    
    
    $
    2.52
    
    
    
    
    1,289,000
    
    
    $
    2.44
 Stock Warrants 
  For the years ended September 30,2007
    
    
    2006Weighted
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    
    ExerciseWarrants
 
    Price
    
 
Warrants

    
    PriceOutstanding-beginning of period
    
    
    3,428,000
    
    
    $
    1.51
    
    
    
    
    2,646,000
    
    
    $
    1.19Issued
    
    
    1,424,000
    
    
    $
    2.95
    
    
    
    
    2,313,000
    
    
    $
    2.07Exercised
    
    
    (724,000
    )
    
    $
    0.73
    
    
    
    
    (218,000
    )
    
    $
    0.63Canceled
    
    
    (437,000
    )
    
    $
    2.00
    
    
    
    
    (1,313,000
    )
    
    $
    2.00Outstanding-end of period
    
    
    3,691,000
    
    
    $
    2.16
    
    
    
    
    3,428,000
    
    
    $
    1.51Exercisable-end of period
    
    
    2,729,000
    
    
    $
    1.79
    
    
    
    
    3,178,000
    
    
    $
    1.38
  Warrants Vested and Exercisableat September 30, 2007WeightedAverage
    
    Weighted-Range of
    
    Number
    
    Remaining
    
    AverageExercise
    
    Vested and
    
    Contractual
    
    ExercisePrices
    
    Exercisable
    
    Life (Years)
    
    Price$0.60  $1.04
    
    
    1,045,000
    
    
    
    0.79
    
    
    $
    0.68$1.05  $2.20
    
    
    872,000
    
    
    
    3.48
    
    
    $
    1.71$2.21  $5.04
    
    
    687,000
    
    
    
    4.67
    
    
    $
    2.75$5.05  $8.00
    
    
    125,000
    
    
    
    1.91
    
    
    $
    6.412,729,000
    
    
    
    2.68
    
    
    $
    1.79
 F - 16




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##### Table of Contents



11. SUBSEQUENT EVENTS
    F - 17




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##### Table of Contents



ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 8A. CONTROLS AND PROCEDURES
 Disclosure Controls
  Changes in Internal Control Over Financial Reporting
    
 ITEM 8B. OTHER INFORMATION
  21




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##### Table of Contents



PART III
 
 ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE GOVERANCE ;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
  
 ITEM 10. EXECUTIVE COMPENSATION
  
 ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER
MATTERS
  
 ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
  22




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##### Table of Contents



ITEM 13. EXHIBITS
 ExhibitNumber
    
    Description2.1
    
    Agreement and Plan of Reorganization between Xenonics, Inc. and Digital Home Theater Systems, Inc.,
dated July 23, 2003 (incorporated by reference to Exhibit 2.1 to the Registration Statement on Form
SB-2 of Xenonics Holdings, Inc., File No. 333-115324, filed on May 10, 2004).3.1
    
    Restated Articles of Incorporation of Xenonics Holdings, Inc. (incorporated by reference to Exhibit
3.1 to the Registration Statement on Form SB-2 of Xenonics Holdings, Inc., File No. 333-123221, filed
on March 9, 2005).3.2
    
    Bylaws of Xenonics Holdings, Inc., formerly known as Digital Home Theater Systems, Inc. (incorporated
by reference to Exhibit 3.3 to Amendment No. 1 to the Registration Statement on Form SB-2 of Xenonics
Holdings, Inc., File No. 333-115324, filed on June 30, 2004).10.1
    
    Lease between Xenonics, Inc. and SM/CT Partners, L.P., dated August 16, 2000 (incorporated by
reference to Exhibit 10.3 to Amendment No. 1 to the Registration Statement on Form SB-2 of Xenonics
Holdings, Inc., File No. 333-115324, filed on June 30, 2004).10.2
    
    1st Amendment to Lease Agreement, dated July 21, 2004, between Bay West Equities Carlsbad Research
Center, LLC and Xenonics, Inc. (incorporated by reference to Exhibit 10.11 to Amendment No. 3 to the
Registration Statement on Form SB-2 of Xenonics Holdings, Inc., File No. 333-115324, filed on
September 2, 2004).10.3
    
    PerkinElmer Manufacturing Terms and Conditions Agreement, dated as of January 6, 2003, between
Xenonics, Inc. and PerkinElmer Electronics, Inc. (incorporated by reference to Exhibit 10.7 to
Amendment No. 4 to the Registration Statement on Form SB-2 of Xenonics Holdings, Inc., File No.
333-115324, filed on September 21, 2004; the Commission has granted confidential treatment to selected
portions of this document).10.4
    
    Agreement for the License and Transfer of Intellectual Property Rights from Lightrays, Ltd. to
Xenonics, Inc., dated March 27, 1997, between Xenonics, Inc. and Lightrays, Ltd. (incorporated by
reference to Exhibit 10.9 to Amendment No. 2 to the Registration Statement on Form SB-2 of Xenonics
Holdings, Inc., File No. 333-115324, filed on August 16, 2004).10.5
    
    Amendment to Agreement for the License and Transfer of Intellectual Property Rights, dated April 23,
1998, between Xenonics, Inc. and Lightrays, Ltd. (incorporated by reference to Exhibit 10.10 to
Amendment No. 2 to the Registration Statement on Form SB-2 of Xenonics Holdings, Inc., File No.
333-115324, filed on August 16, 2004).10.6
    
    Form of Indemnification Agreement entered into between Xenonics Holdings, Inc. and its directors and
certain officers (incorporated by reference to Exhibit 10.1 to the Registration Statement on Form SB-2
of Xenonics Holdings, Inc., File No. 333-115324, filed on May 10, 2004).*10.7
    
    Employment Agreement between Xenonics, Inc. and Alan P. Magerman, dated January 1, 2003 (incorporated
by reference to Exhibit 10.5 to the Registration Statement on Form SB-2 of Xenonics Holdings, Inc.,
File No. 333-115324, filed on May 10, 2004).*10.8
    
    Amendment dated April 15, 2005 to Employment Agreement between Xenonics, Inc. and Alan P. Magerman
(incorporated by reference to Exhibit 99.1 to the Current Report on Form 8-K of Xenonics Holdings,
Inc. filed on April 21, 2005).*10.9
    
    Employment Agreement between Xenonics, Inc. and Jeffrey Kennedy, dated January 1, 2003 (incorporated
by reference to Exhibit 10.6 to the Registration Statement on Form SB-2 of Xenonics Holdings, Inc.,
File No. 333-115324, filed on May 10, 2004).*10.10
    
    2003 Stock Option Plan of Xenonics Holdings, Inc. (incorporated by reference to Exhibit 10.4 to
Amendment No. 1 to the Registration Statement on Form SB-2 of Xenonics Holdings, Inc., File No.
333-115324, filed on June 30, 2004).*10.11
    
    Form of Option Agreement for the 2003 Stock Option Plan (incorporated by reference to Exhibit 4.3 to
the Registration Statement on Form S-8 of Xenonics Holdings, Inc., File No. 333-125468, filed on June
3, 2005).*10.12
    
    2004 Stock Incentive Plan of Xenonics Holdings, Inc (incorporated by reference to Exhibit 10.12 to
Post-Effective Amendment No. 1 to the Registration Statement on Form SB-2 of Xenonics Holdings, Inc.,
File No. 333-115324, filed on February 17, 2005).*10.13
    
    Form of Option Agreement for the 2004 Stock Incentive Plan (incorporated by reference to Exhibit 10.13
to the Registration Statement on Form SB-2 of Xenonics Holdings, Inc., File No. 333-123221, filed on
March 9, 2005).*
 23




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##### Table of Contents



ExhibitNumber
    
    Description10.14
    
    Form of Warrant Certificate of Xenonics Holdings, Inc. (incorporated by reference to Exhibit 4.2 to
the Registration Statement on Form SB-2 of Xenonics Holdings, Inc., File No. 333-115324, filed on May
10, 2004).10.15
    
    Form of Participating Dealers Warrant Agreement, entered into by Xenonics Holdings, Inc. and certain
participating broker-dealers on July 23, 2003 (incorporated by reference to Exhibit 4.3 to the
Registration Statement on Form SB-2 of Xenonics Holdings, Inc., File No. 333-115324, filed on May 10,
2004).10.16
    
    Form of Stock Purchase Agreement entered into by Xenonics Holdings, Inc. and certain investors in
March 2004 in connection with the purchase of common stock (incorporated by reference to Exhibit 10.2
to the Registration Statement on Form SB-2 of Xenonics Holdings, Inc., File No. 333-115324, filed on
May 10, 2004).10.17
    
    Form of Warrant to Purchase Common Stock of Xenonics Holdings, Inc., dated April 26, 2004, issued to
White Rock Capital Partners, L.P. (incorporated by reference to Exhibit 4.4 to the Registration
Statement on Form SB-2 of Xenonics Holdings, Inc., File No. 333-115324, filed on May 10, 2004).10.18
    
    Form of Warrant to Purchase Common Stock of Xenonics Holdings, Inc., dated April 26, 2004, issued to
Texrock, Ltd. (incorporated by reference to Exhibit 4.5 to the Registration Statement on Form SB-2 of
Xenonics Holdings, Inc., File No. 333-115324, filed on May 10, 2004).10.19
    
    Warrant Certificate, dated July 1, 2004, for the purchase of 25,000 shares of Xenonics Holdings, Inc.
common stock, issued to Neil G. Berkman Associates (incorporated by reference to Exhibit 4.7 to
Amendment No. 3 to the Registration Statement on Form SB-2 of Xenonics Holdings, Inc., File No.
333-115324, filed on September 2, 2004).10.20
    
    Warrant, dated September 5, 2006, issued by Xenonics Holdings, Inc. to Third Coast Marketing, LLC for
the purchase of an aggregate of 500,000 shares of the common stock of Xenonics Holdings, Inc.
(incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K of Xenonics Holdings,
Inc. filed on September 11, 2006).10.21
    
    Form of Selling Shareholder and Securities Purchase Agreement, dated as of January 17, 2005, entered
into by and among Xenonics Holdings, Inc. and the Selling Shareholders and the Investors named therein
(incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Xenonics Holdings,
Inc. filed on January 18, 2005).10.22
    
    Form of Registration Rights Agreement, dated as of January 17, 2005, entered into among Xenonics
Holdings, Inc. and the Selling Shareholders and the Investors named therein (incorporated by reference
to Exhibit 10.2 to the Current Report on Form 8-K of Xenonics Holdings, Inc. filed on January 18,
2005).10.23
    
    Consulting Agreement dated as of September 5, 2006 between Xenonics Holdings, Inc. and Third Coast
Marketing, LLC (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of
Xenonics Holdings, Inc. filed on September 11, 2006).10.24
    
    Securities Purchase Agreement dated as of February 2, 2007 between Xenonics Holdings, Inc. and Gemini
Master Fund, Ltd. (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of
Xenonics Holdings, Inc. filed on February 7, 2007).10.25
    
    Registration Rights Agreement dated as of February 2, 2007 between Xenonics Holdings, Inc. and Gemini
Master Fund, Ltd. (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K of
Xenonics Holdings, Inc. filed on February 7, 2007).10.26
    
    A Warrant issued by Xenonics Holdings, Inc. on February 2, 2007 to Gemini Master Fund, Ltd. for the
purchase of 300,000 shares of the common stock of Xenonics Holdings, Inc. (incorporated by reference
to Exhibit 10.3 to the Current Report on Form 8-K of Xenonics Holdings, Inc. filed on February 7,
2007).10.27
    
    B Warrant issued by Xenonics Holdings, Inc. on February 2, 2007 to Gemini Master Fund, Ltd. for the
purchase of 300,000 shares of the common stock of Xenonics Holdings, Inc. (incorporated by reference
to Exhibit 10.4 to the Current Report on Form 8-K of Xenonics Holdings, Inc. filed on February 7,
2007).10.28
    
    Engagement Letter dated January 25, 2007 between Xenonics Holdings, Inc. and Granite Financial Group,
Inc. (incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K of Xenonics
Holdings, Inc. filed on February 7, 2007).
 24




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##### Table of Contents



ExhibitNumber
    
    Description10.29
    
    A Warrant issued by Xenonics Holdings, Inc. on February 2, 2007 to Granite Financial Group, Inc. for
the purchase of 30,000 shares of the common stock of Xenonics Holdings, Inc. (incorporated by
reference to Exhibit 10.6 to the Current Report on Form 8-K of Xenonics Holdings, Inc. filed on
February 7, 2007).10.30
    
    B Warrant issued by Xenonics Holdings, Inc. on February 2, 2007 to Granite Financial Group, Inc. for
the purchase of 30,000 shares of the common stock of Xenonics Holdings, Inc. (incorporated by
reference to Exhibit 10.7 to the Current Report on Form 8-K of Xenonics Holdings, Inc. filed on
February 7, 2007).10.31
    
    Securities Purchase Agreement dated as of September 21, 2007 among Xenonics Holdings, Inc., Gemini
Master Fund, Ltd., and the other purchasers named in the Securities Purchase Agreement (incorporated
by reference to Exhibit 10.1 to the Current Report on Form 8-K of Xenonics Holdings, Inc. filed on
September 27, 2007).10.32
    
    Registration Rights Agreement dated as of September 21, 2007 among Xenonics Holdings, Inc., Gemini
Master Fund, Ltd., and the other purchasers named in the Registration Rights Agreement (incorporated
by reference to Exhibit 10.2 to the Current Report on Form 8-K of Xenonics Holdings, Inc. filed on
September 27, 2007).10.33
    
    Form of A Warrant and B Warrant issued by Xenonics Holdings, Inc. on September 21, 2007 to Gemini
Master Fund, Ltd. and the other purchasers named in the Securities Purchase Agreement dated as of
September 21, 2007 for the purchase of 615,000 shares of the common stock of Xenonics Holdings, Inc.
(incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K of Xenonics Holdings,
Inc. filed on September 27, 2007).10.34
    
    Form of A Warrant and B Warrant issued by Xenonics Holdings, Inc. to Granite Financial Group,
Inc. for the purchase of 98,400 shares of the common stock of Xenonics Holdings, Inc. (incorporated by
reference to Exhibit 10.4 to the Current Report on Form 8-K of Xenonics Holdings, Inc. filed on
September 27, 2007).21.1
    
    List of subsidiaries of Xenonics Holdings, Inc. (incorporated by reference to Exhibit 21.1 to the
Registration Statement on Form SB-2 of Xenonics Holdings, Inc., File No. 333-115324, filed on May 10,
2004).23.1
    
    Consent of Singer Lewak Greenbaum & Goldstein LLP23.2
    
    Consent of Eisner LLP.31.1
    
    Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 *
    
    Denotes a management contract or compensatory plan or arrangement in which one or more
directors or executive officers participate. 
 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  25




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##### Table of Contents



SIGNATURES
  Xenonics Holdings, Inc.By:
    /s/ Charles W. HunterDate: December 18, 2007
    
    Charles W. HunterChief Executive Officer  Signature
    
    Title
    
    Date/s/ Alan P. Magerman
    
    Chairman of the Board
    
    December 18, 2007Alan P. Magerman/s/ Charles W. Hunter
    
    Chief Executive Officer
    
    December 18, 2007Charles W. Hunter
    
    (Principal
Executive Officer)/s/ Jeffrey P. Kennedy
    
    Chief Operating Officer, President and Director
    
    December 18, 2007Jeffrey P. Kennedy/s/ Richard S. Kay
    
    Chief Financial Officer (Principal Financial
    
    December 18, 2007Richard S. Kay
    
    Officer
and Principal Accounting Officer)/s/ Robert Petersen
    
    DirectorRobert Petersen
    
    
    
    December 18, 2007/s/ Robert Buie
    
    DirectorRobert Buie
    
    
    
    December 18, 2007/s/ Eli Shapiro
    
    DirectorEli Shapiro
    
    
    
    December 18, 2007
 26