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EXCEL - IDEA: XBRL DOCUMENT - XENONICS HOLDINGS, INC. | Financial_Report.xls |
EX-32.2 - EX-32.2 - XENONICS HOLDINGS, INC. | d297068dex322.htm |
EX-31.1 - EX-31.1 - XENONICS HOLDINGS, INC. | d297068dex311.htm |
EX-32.1 - EX-32.1 - XENONICS HOLDINGS, INC. | d297068dex321.htm |
EX-31.2 - EX-31.2 - XENONICS HOLDINGS, INC. | d297068dex312.htm |
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended December 31, 2011
or
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number: 001-32469
XENONICS HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Nevada | 84-1433854 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
3186 Lionshead Avenue Carlsbad, California |
92010 | |
(Address of principal executive offices) | (Zip code) |
(760) 477-8900
(Registrants telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer,and smaller reporting company in Rule 12b-2 of the Exchange Act (Check one):
Large accelerated filer |
¨ |
Accelerated filer |
¨ | |||
Non-accelerated filer |
¨ |
Smaller reporting company |
x |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ¨ No x
The registrant had 24,975,929 shares of common stock outstanding as of February 2, 2012.
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ITEM 1. | Financial Statements |
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, | September 30, | |||||||
2011 | 2011 | |||||||
Rounded in thousands, except par value |
(unaudited) | |||||||
Assets |
||||||||
Current Assets: |
||||||||
Cash |
$ | 282,000 | $ | 738,000 | ||||
Accounts receivable, net |
28,000 | 273,000 | ||||||
Inventories, net |
2,500,000 | 2,542,000 | ||||||
Other current assets |
141,000 | 144,000 | ||||||
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Total Current Assets |
2,951,000 | 3,697,000 | ||||||
Equipment, furniture and fixtures at cost, less accumulated depreciation of $169,000 and $160,000 |
26,000 | 35,000 | ||||||
Goodwill |
375,000 | 375,000 | ||||||
Other assets |
92,000 | 116,000 | ||||||
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Total Assets |
$ | 3,444,000 | $ | 4,223,000 | ||||
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Liabilities and Shareholders Equity |
||||||||
Current Liabilities: |
||||||||
Accounts payable |
$ | 290,000 | $ | 414,000 | ||||
Accrued expenses |
92,000 | 99,000 | ||||||
Accrued payroll and related taxes |
80,000 | 96,000 | ||||||
Notes payable, net of debt discount |
480,000 | | ||||||
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Total Current Liabilities |
942,000 | 609,000 | ||||||
Notes payable, net of debt discount |
| 459,000 | ||||||
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Total Liabilities |
942,000 | 1,068,000 | ||||||
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Commitments and contingencies (Note 10) |
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Shareholders Equity: |
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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 as of December 31, 2011 and September 30, 2011; 24,976,000 shares issued and outstanding as of December 31, 2011 and September 30, 2011 |
25,000 | 25,000 | ||||||
Additional paid-in capital |
26,652,000 | 26,652,000 | ||||||
Accumulated deficit |
(24,175,000 | ) | (23,522,000 | ) | ||||
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Total Shareholders Equity |
2,502 ,000 | 3,155,000 | ||||||
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Total Liabilities and Shareholders Equity |
$ | 3,444,000 | $ | 4,223,000 | ||||
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See notes to unaudited condensed consolidated financial statements.
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended | ||||||||
December 31, | ||||||||
2011 | 2010 | |||||||
Rounded in thousands, except per share amounts |
(unaudited) | |||||||
Revenues |
$ | 325,000 | $ | 3,548,000 | ||||
Cost of goods sold |
231,000 | 1,879,000 | ||||||
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Gross profit |
94,000 | 1,669,000 | ||||||
Selling, general and administrative |
526,000 | 651,000 | ||||||
Research and development |
181,000 | 163,000 | ||||||
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Income (loss) from operations |
(613,000 | ) | 855,000 | |||||
Other income/(expense): |
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Interest income |
| 1,000 | ||||||
Interest (expense) |
(38,000 | ) | (38,000 | ) | ||||
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Income (loss) before provision for income taxes |
(651,000 | ) | 818,000 | |||||
Income tax provision |
2,000 | 76,000 | ||||||
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Net income (loss) |
$ | (653,000 | ) | $ | 742,000 | |||
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Net income (loss) per share: |
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Basic and fully-diluted |
$ | (0.03 | ) | $ | 0.03 | |||
Weighted average shares outstanding: |
||||||||
Basic and fully-diluted |
24,976,000 | 25,365,000 |
See notes to unaudited condensed consolidated financial statements.
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended | ||||||||
December 31, | ||||||||
2011 | 2010 | |||||||
Rounded in thousands |
(unaudited) | |||||||
Cash flows from operating activities: |
||||||||
Net income(loss) |
$ | (653,000 | ) | $ | 742,000 | |||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
||||||||
Depreciation |
9,000 | 8,000 | ||||||
Non-cash compensation for warrants issued |
| 4,000 | ||||||
Non-cash compensation to consultants |
24,000 | 25,000 | ||||||
Amortization of debt discount |
21,000 | 21,000 | ||||||
Changes in operating assets and liabilities: |
||||||||
Accounts receivable |
245,000 | 353,000 | ||||||
Inventories |
42,000 | 473,000 | ||||||
Other current assets |
3,000 | (173,000 | ) | |||||
Accounts payable |
(124,000 | ) | 62,000 | |||||
Accrued expenses |
(9,000 | ) | (32,000 | ) | ||||
Accrued payroll and related taxes |
(16,000 | ) | (19,000 | ) | ||||
Accrued income taxes |
2,000 | 76,000 | ||||||
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Net cash provided by (used in) operating activities |
(456,000 | ) | 1,540,000 | |||||
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Cash flows from financing activities: |
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Purchase of common stock |
| (106,000 | ) | |||||
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Net cash (used in) provided by financing activities |
| (106,000 | ) | |||||
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Net (decrease) increase in cash |
(456,000 | ) | 1,434,000 | |||||
Cash, beginning of period |
738,000 | 705,000 | ||||||
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Cash, end of period |
$ | 282,000 | $ | 2,139,000 | ||||
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Supplemental cash flow information: |
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Cash paid during the period for income taxes |
$ | | $ | | ||||
Cash paid during the period for interest |
$ | 17,000 | $ | 17,000 |
See notes to unaudited condensed consolidated financial statements.
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Rounded in thousands)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These financial statements and notes thereto should be read in conjunction with the financial statements and notes thereto for the year ended September 30, 2011 included in the Xenonics Holdings, Inc. (Holdings) Form 10-K filing. The results for the interim period are not necessarily indicative of the results for the full fiscal year.
The condensed consolidated financial statements include the accounts of Holdings and its wholly-owned subsidiary, Xenonics, Inc. (Xenonics), collectively, the Company.
2. RECENT ACCOUNTING PRONOUNCEMENTS
In January 2010, FASB issued ASU No. 2010-06, Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures About Fair Value Measurements. The ASU requires new disclosures about transfers into and out of Levels 1 and 2 and separate disclosures about purchases, sales, issuances, and settlements relating to Level 3 measurements. It also clarifies existing fair value disclosures about the level of disaggregation of disclosed assets and liabilities, and about inputs and valuation techniques used to measure fair value for both recurring and nonrecurring fair value measurements that fall in either Level 2 or Level 3. The new disclosures and clarifications of existing disclosures were effective, and adopted, during the Companys second quarter ended March 31, 2010, however the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 measurements, will be effective for the Companys first quarter ending December 31, 2011. Other than requiring additional disclosures, the full adoption of this new guidance will not have an impact on our consolidated financial statements.
In May 2011, the FASB issued ASU 2011-04 to amend the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurement to (1) clarify the application of existing fair value measurement requirements and (2) change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. The primary purpose of the amendments are to achieve common fair value measurement and disclosure requirements in U.S. GAAP and IFRS. The amendments in ASU 2011-04 are to be applied prospectively for interim and annual periods beginning after December 15, 2011. Adoption of this new guidance is not expected to have a material impact on the Companys consolidated financial statements.
In September 2011, the FASB issued ASU 2011-08 to amend and simplify tests for goodwill impairment by permitting an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform a two-step goodwill impairment test. The amendments in ASU 2011-08 are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Adoption of this new guidance is not expected to have a material impact on the Companys consolidated financial statements.
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3. EARNINGS (LOSS) PER SHARE
Earnings (loss) per share is computed by dividing the income available to common shareholders by the weighted average number of common shares outstanding. Diluted earnings per share is computed similarly to basic earnings per share, except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential additional common shares that were dilutive had been issued. Common share equivalents are excluded from the computation if their effect is anti-dilutive. The Companys common share equivalents consist of stock options and warrants.
The diluted earnings per share did not include the dilutive effect, if any, from the potential exercise of stock options and warrants outstanding using the treasury stock method, because the exercise prices for all of the stock options and warrants outstanding was less than the average stock price for the period. For the three months ended December 31, 2011, the number of stock options and warrants excluded was 6,953,000. For the three months ended December 31, 2010, the number of stock options and warrants excluded was 8,033,000.
4. INVENTORIES
Inventories were comprised of :
December 31, 2011 |
September 30, 2011 |
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(unaudited) | ||||||||
Raw materials |
$ | 1,338,000 | $ | 1,126,000 | ||||
Work in process |
118,000 | 282,000 | ||||||
Finished goods |
1,044,000 | 1,134,000 | ||||||
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$ | 2,500,000 | $ | 2,542,000 | |||||
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5. USE OF ESTIMATES
The preparation of financial statements, in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
6. NOTES PAYABLE
On July 15, 2009 the Company borrowed $525,000 under the terms of promissory notes due July 15, 2012 with interest only payments due quarterly at an annual rate of 13%. The notes could have been prepaid without penalty on or after January 15, 2010.
In connection with the notes payable transaction, the Company granted and issued 525,000 warrants with an exercise price of $0.75 and valued the warrants at $250,000 using the Black-Scholes option-pricing model and the following assumptions: the market price was $0.68, the volatility was estimated at 104%, the life of the warrants was 4 years, the risk free rate was 2.06% and the dividend yield of 0%. The value assigned for the warrants issued in conjunction with the notes payable was recorded as debt discount and is being amortized over the three year life of the notes. Pursuant to the terms of the promissory notes, the exercise price for the warrants was adjusted to $0.65 in April 2010 when the Company issued warrants at that lower price in connection with a stock offering. The Company recorded a valuation adjustment in 2010 of $6,000 for this change in the exercise price. For the three months ended December 31, 2011 and 2010 the Company recorded amortization of $21,000 and $21,000, respectively.
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On December 7, 2011 the Company and the holders of the promissory notes agreed to amend the due date to October 15, 2012. In conjunction with the amendment, the Company amended the warrants issued with the original notes to lower the exercise price from $0.65 per share to $0.49 per share. The Company evaluated these amendments under ASC 470-50, Debt-Modification and Extinguishment, and concluded that the amendments were not significant and were therefore treated as debt modification.
December 31, | September 30, | |||||||||
2011 | 2011 | |||||||||
Notes payable |
Unsecured Notes payable, maturing in October 2012, bearing interest at 13% per annum (net of unamortized debt discount of $45,000 as of December 31, 2011 and $66,000 as of September 30, 2011) |
$ | 480,000 | $ | 459,000 | |||||
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Total short and long-term debt obligations |
$ | 480,000 | $ | 459,000 | ||||||
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Future payments under short-term obligations as of December 31, 2011 are as follows:
2013 |
$ | 525,000 | ||
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Total |
$ | 525,000 | ||
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7. STOCK BASED COMPENSATION
Stock Options US GAAP requires that compensation cost relating to share-based payment arrangements be recognized in the financial statements. US GAAP requires measurement of compensation cost for all employee share-based awards at fair value on date of grant and recognition of compensation over the service period for awards expected to vest. The fair value of stock options is determined using the Black-Scholes valuation model. Such fair value is recognized as expense over the service period, net of estimated forfeitures.
US GAAP requires that equity instruments issued to non-employees in exchange for services be valued at the more accurate of the fair value of the services provided or the fair value of the equity instruments issued. For equity instruments issued that are subject to a required service period the expense associated with the equity instruments is recorded as the instruments vest or the services are provided. The Company has granted options and warrants to non-employees and recorded the fair value of these equity instruments on the date of issuance using the Black-Scholes valuation model. The Company has granted stock to non-employees for services and values the stock at the more reliable of the market value on the date of issuance or the value of the services provided. For grants subject to vesting or service requirements, expenses are deferred and recognized over the more appropriate of the vesting period, or as services are provided.
In July 2003, the Companys board of directors adopted a stock option plan. Under the 2003 option plan, options to purchase up to 1,500,000 shares of common stock are available for employees, directors, and outside consultants.
In December 2004, the Companys board of directors adopted a 2004 stock incentive plan. The Company may issue up to 1,500,000 shares of common stock under the 2004 plan and no person may be granted awards during any twelve-month period that cover more than 300,000 shares of common stock.
The fair value of each option award is estimated on the date of grant using the Black-Scholes valuation model. There were no options granted in the three months ended December 31, 2011 and 2010:
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Expected volatility is determined based on historical volatility. Expected life is determined based on historical experience of similar awards, giving consideration to the contractual terms of the stock-based awards and vesting schedules. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. Share-based compensation expense recognized is based on the options ultimately expected to vest. US GAAP requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimated. Forfeitures were estimated based on the Companys historical experiences.
A summary of the Companys stock option activity as of December 31, 2011, and changes during the three months then ended is presented below:
Stock Options |
Weighted Average Exercise Price |
Weighted Average Contractual Term (Years) |
Aggregate Intrinsic Value * |
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Outstanding at October 1, 2011 |
805,000 | $ | 0.73 | 2.30 | ||||||||||||
Granted |
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Exercised |
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Forfeited, Expired or Cancelled |
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Outstanding at December 31, 2011 |
805,000 | $ | 0.73 | 2.05 | $ | | ||||||||||
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Exercisable at December 31, 2011 |
805,000 | $ | 0.33 | 2.05 | $ | | * | |||||||||
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* | The aggregate intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the exercise price of the option. The market value of our stock was $0.18 at December 31, 2011. |
There were no non-vested stock options as of December 31, 2011.
There was no compensation expense related to outstanding options for the three months ended December 31, 2011 and 2010.
Stock warrants The Company recognizes the value of stock warrants issued based upon an option-pricing model at their fair value as an expense over the period in which the grants vest from the measurement date, which is the date when the number of warrants, their exercise price and other terms became certain.
At December 31, 2011 and 2010, 6,098,000 and 7,148,000 warrants were outstanding and 5,412,000 and 6,212,000 warrants were vested, respectively.
There was no compensation expense related to outstanding warrants for the three months ended December 31, 2011. Compensation expense related to outstanding warrants for the three months ended December 31, 2010 was $4,000.
Common stock On October 10, 2009 the Company issued 300,000 shares of unregistered common stock to an independent firm for investor relations, financial public relations and marketing services for a period of three years. The total value of the common stock issued was $240,000, of which $80,000 was recorded in Other current assets and $142,000 was recorded in Other assets. On April 28, 2010 the Company issued 300,000 shares to the same independent firm for an additional year for investor relations, financial public relations and marketing services. The total value of the common stock issued was $147,000, of which $43,000 was recorded in Other current assets and $104,000 was recorded in Other assets. For the three months ended December 31, 2011 and 2010, $24,000 and $25,000, respectively, was recorded as selling, general and administrative expense.
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On December 6, 2010, in connection with the resignation of a director, the Company purchased and retired all 533,529 of its common shares owned by the director for a total price of $106,000 or $0.20 per share.
8. INCOME TAXES
The Company made a comprehensive review of its portfolio of uncertain tax positions in accordance with recognition standards established for certain tax positions. In this regard, an uncertain tax position represents the Companys expected treatment of a tax position taken in a filed tax return, or planned to be taken in a future tax return, that has not been reflected in measuring income tax expense for financial reporting purposes. As of December 31, 2011 and September 30, 2011, the Company does not have a liability for unrecognized tax benefits. The Company concluded that at this time there are no uncertain tax positions. As of December 31, 2011, the Company does not expect any material changes to unrecognized tax positions within the next twelve months.
The Company recognizes the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in the Companys financial statements or tax returns. Judgment is required in assessing the future tax consequences of events that have been recognized in our financial statements or tax returns. Fluctuations in the actual outcome of these future tax consequences could materially impact our financial position or our results of operations. For the three months ended December 31, 2011, deferred income tax assets and the corresponding valuation allowance increased by $288,000.
The Companys 2012 provision for income taxes primarily relates to state taxes. The difference between the Companys 2012 effective rate and statutory rate is primarily due to the use of federal net operating losses to offset taxable income. The difference between the Companys 2011 effective rate and statutory rate is primarily due to the utilization of net operating losses
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Companys cash and cash equivalents are measured at fair value in the Companys condensed consolidated financial statements and are valued using unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 inputs under ASC 820). The carrying amount of our accounts receivable, accounts payable and accrued expenses reported in the consolidated balance sheets approximates fair value because of the short maturity of those instruments. The fair value of the notes payable is estimated based on current rates offered to the Company for similar debt of the same remaining maturities.
10. COMMITMENTS AND CONTINGENCIES
The Company is occasionally subject to legal proceedings and claims that arise in the ordinary course of business. It is impossible to predict with any certainty the outcome of pending disputes, and management cannot predict whether any liability arising from pending claims and litigation will be material in relation to the Companys consolidated financial position or results of operations.
11. GOODWILL
The $375,000 recorded as goodwill represents the excess of the purchase price over the recorded minority interest of the Xenonics common stock repurchased as of December 10, 2009. The Company does not amortize goodwill. Instead, the Company evaluates goodwill annually in the fourth quarter and whenever events or changes in circumstances indicate that it is more likely than not that an impairment loss has been incurred. As of December 31, 2011, the Company determined that no such impairment indicators exist.
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12. SUBSEQUENT EVENTS
Management evaluated all activity through the date that the consolidated financial statements were issued, and concluded that no subsequent events have occurred that would require recognition in the condensed consolidated financial statements or disclosure in the notes to the condensed consolidated financial statements.
ITEM 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations (rounded in thousands) |
The following discussion and analysis should be read in conjunction with the condensed consolidated financial statements and accompanying notes filed as part of this report.
Forward-Looking Statements
The following Managements Discussion and Analysis of Financial Condition and Results of Operations, as well as information contained elsewhere in this report, contain statements that constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. These statements include statements regarding the intent, belief or current expectations of us, our directors or our officers with respect to, among other things: anticipated financial or operating results, financial projections, business prospects, future product performance and other matters that are not historical facts. The success of our business operations is dependent on factors such as the impact of competitive products, product development, commercialization and technology difficulties, the results of financing efforts and the effectiveness of our marketing strategies, general competitive and economic conditions. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Actual results may differ materially from those projected in the forward-looking statements as a result of various factors, including as a result of the factors described in the Risk Factors section of our most recent Annual Report on Form 10-K. We do not undertake any obligation to update or revise any forward-looking statements contained in this report, whether as a result of new information, future events or otherwise.
Results of Operations
Three-months ended December 31, 2011 compared to the three-months ended December 31, 2010
We operate in the security lighting systems and night vision industries, and the majority of our revenues are derived from sales of our illumination products and our SuperVision night vision product to various customers.
Revenues: Revenues for the quarter ended December 31, 2011 were $325,000 compared to revenues of $3,548,000 for the quarter ended December 31, 2010. In the quarter ended December 31, 2011, 65% of revenues were from sales of our NightHunter products to the military (U.S. Army, U.S. Marines and military distributors) and 35% were from sales of SuperVision units. In the quarter ended December 31, 2010, 95% of revenues were to the military market.
Cost of Goods and Gross Profit: Cost of goods consist of the cost of manufacturing our NightHunter One and SuperVision products and the price that we pay to Excelitas Technologies (formerly PerkinElmer) for NightHunter 3 products that Excelitas Technologies manufactures for us.
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The gross profit percentages were 29% and 47% for the quarters ended December 31, 2011 and 2010, respectively. The gross profit percentage for the quarter ended December 31, 2011 was negatively impacted by lower sales and because NightHunter 3 sales during this quarter were without shield mounts. Normal gross profit percentages for the complete NightHunter 3 package with shield mounts is 48%. Normal gross profit percentages for our NightHunter One and SuperVision products, which we manufacture, are approximately 50%.
Selling, General and Administrative: Selling, general and administrative expenses decreased by $125,000 to $526,000 for the quarter ended December 31, 2011 as compared to $651,000 for the quarter ended December 31, 2010. The decrease is primarily attributed to the reduction in consulting services of $50,000 and compensation and benefits of $56,000.
Research & Development: Research and development expenses increased by $18,000 to $181,000 for the quarter ended December 31, 2011 compared to $163,000 for the quarter ended December 31, 2010. During the first three months of the current year when the Company had lower sales, production staff personnel were used for the further development of the Companys product lines.
Other Income (Expense): For the quarter ended December 31, 2011 interest expense was $38,000 compared to $38,000 of interest expense for the quarter ended December 31, 2010.
Net Income (Loss): Significantly lower revenues offset by reductions in operating expenses in the current quarter accounted for the net loss of $653,000 compared to net income of $742,000 for the quarter ended December 31, 2010.
Liquidity and Capital Resources
As of December 31, 2011, the Company had working capital of $2,009,000 and a current ratio of 3.1 to 1 as compared to working capital of $3,088,000 and a current ratio of 6.1 to 1 as of September 30, 2011. Current liabilities at December 31, 2011 include notes payable of $480,000 that are now due on October 15, 2012.
Our net loss of $653,000 for the three months ended December 31, 2011 negatively impacted cash. Significant sources of cash provided by operating activities during the first three months of the current year included decreases in accounts receivable of $245,000 and inventories of $42,000, offset by a decrease in accounts payable of $124,000. Cash used in operating activities totaled $456,000 for the three months ended December 31, 2011.
Based on the amount of working capital that we had on hand on December 31, 2011 and the amount of unfilled and potential orders we have pending, we are optimistic about our ability to obtain sales orders and/or additional equity or debt financing to continue to support planned operations and satisfy obligations. However, due to the nature of our business, there is no assurance that we will receive new orders during the quarters that we expect them and although management believes it can obtain additional financing, there is no certainty that it can.
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ITEM 3. | Quantitative and Qualitative Disclosures about Market Risk |
Not applicable
ITEM 4. | Controls and Procedures |
The Companys management conducted an evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness as of the end of the period covered by this quarterly report of the Companys disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the Exchange Act). Disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (the SEC) and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Companys disclosure controls and procedures were effective as of December 31, 2011, which is the end of the period covered by this quarterly report.
Based upon our evaluation, we also concluded that there was no change in our internal control over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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ITEM 6. | Exhibits |
Exhibit Number |
Description | |
31.1 | Certification of the Chairman of the Board and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act | |
31.2 | Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act | |
32.1 | Certification pursuant to Section 906 of the Sarbanes-Oxley Act | |
32.2 | Certification pursuant to Section 906 of the Sarbanes-Oxley Act |
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
XENONICS HOLDINGS, INC. | ||||||
Date: February 14, 2012 | By: | /s/ Alan P. Magerman | ||||
Alan P. Magerman | ||||||
Chairman of the Board | ||||||
Chief Executive Officer | ||||||
Date: February 14, 2012 | By: | /s/ Richard S. Kay | ||||
Richard S. Kay | ||||||
Chief Financial Officer |
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