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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
  þ
    
    Annual report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended July 31, 2005 or
 o
    
    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 001-10382
 SYNERGETICS USA, INC.
 
  Delaware
    
    23-2131580(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)3845 Corporate Centre DriveOFallon, Missouri
    
    63368(Address of principal executive offices)
    
    (Zip Code)Registrants telephone number, including area code
    
    (636) 939-5100
  Title of each class
    
    Name of each exchange on which registeredCommon stock
    
    Boston Stock Exchange
   
  þ o
 þ
 o þ
 o þ




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PagePART I
    
    
    
    
    2Item 1.
    
    Business
    
    
    2Item 2.
    
    Properties
    
    
    22Item 3.
    
    Legal Proceedings
    
    
    22Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    24PART II
    
    
    
    
    27Item 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and
Issuer Repurchases of Equity Securities
    
    
    27Item 6.
    
    Selected Financial Data
    
    
    27Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results
of Operations
    
    
    28Item 7A.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    38Item 8.
    
    Financial Statements and Supplementary Data
    
    
    39Item 9.
    
    Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure
    
    
    39Item 9A.
    
    Controls and Procedures
    
    
    40Item 9B.
    
    Other Information
    
    
    40PART III
    
    
    
    
    41Item 10.
    
    Directors and Executive Officers of the Registrant
    
    
    41Item 11.
    
    Executive Compensation
    
    
    43Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
    
    
    47Item 13.
    
    Certain Relationships and Related Transactions
    
    
    48Item 14.
    
    Principal Accountant Fees and Services
    
    
    49PART IV
    
    
    
    
    51Item 15.
    
    Exhibits and Financial Statement Schedules.
    
    
    51SignaturesExhibit IndexLoan AgreementPromissory NoteSecurity AgreementFuture Advance Deed of Trust and Security AgreementGuaranty AgreementGuaranty of Unassigned Issuers's RightsBond Purchase AgreementFirst Supplemental Loan AgreementPromissory NoteFirst Supplemental Future Advance Deed of Trust & Security AgreementFirst Supplemental Guaranty of Unassigned Issuer's RightsBond Purchase AgreementBusiness Loan AgreementChange in Terms AgreementCommercial GuarantyCommercial Security AgreementBusiness Loan AgreementChange in Terms AgreementCommercial Security AgreementBusiness Loan AgreementPromissory NoteCommercial GuarantyCommercial Security AgreementSubsidiaries of RegistrantConsent of McGladrey & Pullen, LLPConsent of MPP&W, P.C.Certification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of CFO Pursuant to Section 906




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SYNERGETICS USA, INC.
  The Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities
Exchange Act of 1934, as amended, provide a safe harbor for forward-looking statements made by or
on behalf of the Company. The Company and its representatives may from time to time make written
or oral statements that are forward-looking, including statements contained in this report and
other filings with the Securities and Exchange Commission (SEC) and in our reports to stockholders.
In some cases forward-looking statements can be identified by words such as believe, expect,
anticipate, plan, potential, continue or similar expressions. Because such forward-looking
statements include risks and uncertainties, actual results may differ materially from those
expressed or implied by such forward-looking statements. For example, uncertainty exists with
respect to: the effects of local and national economic, credit and capital market conditions on
the economy in general, and on the medical device industry in particular, and the effects of
foreign exchange rates and interest rates; the ability to timely and cost-effectively integrate the
operations of Synergetics, Inc., now a wholly owned subsidiary of the Company, and Valley Forge
Scientific Corp., including the ability to maintain our relationship with Valley Forges largest
customers; the ability to realize the synergies and other perceived advantages resulting from our
recently completed merger; the ability to attract and retain key personnel; the ability to meet all
existing and new U.S. FDA requirements and comparable non-U.S. medical device regulations in
jurisdictions in which the Company conducts its business; the ability to successfully execute our
business strategies; the extent and timing of market acceptance of new products or product
indications; the ability to procure, maintain, enforce and defend our patent and proprietary know
how; changes in laws, including increased tax rates, regulations or accounting standards,
third-party relations and approvals, and decisions of courts, regulators and governmental bodies;
the ability to continue to increase customer loyalty; the ability to recoup costs of capital
investments through higher revenues; the effects of environmental and structural building
conditions relating to the Companys properties; acts of war and terrorism incidents and the
effects of operating and market competition.
 Although we believe the expectations reflected in our forward-looking statements are based
upon reasonable assumptions, it is not possible to foresee or identify all facts that could have a
material effect on the future financial performance of the Company. The forward-looking statements
in this report are made on the basis of managements assumptions and analyses, as of the time the
statements are made, in light of their experience and perception of historical conditions, expected
future developments and other factors believed to be appropriate under the circumstances. Further
information concerning important factors that could cause actual events or results to be materially
different from the forward-looking statements can be found in the Risk Factors section of this
Form 10-K included at the end of Item 1.
 In addition, certain market data and other statistical information used throughout this report
are based on independent industry publications. Although we believe these sources to be reliable,
we have not independently verified the information and cannot guarantee the accuracy and
completeness of such sources.
 Except as otherwise required by the federal securities laws, we disclaim any obligation or
undertaking to publicly release any updates or revisions to any forward-looking statement contained
in this annual report on Form 10-K and the information incorporated by reference in this report to
reflect any change in our expectations with regard thereto or any change in events, conditions or
circumstances on which any statement is based.




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PART I
 
  Overview
    TM TM
 ® ® ® ®
 2




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® ®
 Combination of Valley Forge and Synergetics
    TM TM ® TM
 Other Recent Events
 ® ® ®
 3




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TM
 ® TM ® TM
 Strategy
  
    
    Introducing new technology that can be easily differentiated from our competition
    
    Identifying microsurgical niches that may offer the prospect for substantial growth and
higher profit margins
    
    Accelerating our international (including Canada) growth
    
    Combining the breadth and depth of knowledge, experience and resources in our research
and development groups
    
    Branding and marketing a substantial portion of our neurosurgical products with the
Malis® trademark
    
    Developing our distribution channels
    
    Developing our new multifunctional bipolar electrosurgical systems, which will be marketed
as the Malis® AdvantageTM
    
    Growing our disposables revenue stream
    
    Expanding the use of our new multifunctional bipolar electrosurgical generator, which
will be marketed as the Malis® AdvantageTM, into other surgical markets
    
    Exploring opportunities for growth through strategic partnering with other companies,
such as our current relationship with Stryker Corporation
  Products and Services
 Ophthalmic and Vitreoretinal Surgical Market
   4




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TM
 TM TM TM
  Neurosurgery Market
  ®
 ®
 5




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® ® ® ®
 Pain Control Market
  Dental Market
 TM
 Manufacturing and Supplies
 ®
 6




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® TM
   Marketing and Sales
 Ophthalmic and Vitreoretinal Surgical Market
 TM TM
  7




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Neurosurgery Market
 ® TM ® ® ®
  Pain Control Market
  Competition
  8




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Ophthalmic and Vitreoretinal Surgical Market
 TM
 Neurosurgery Market
 ® ®
 Pain Control Market
  Dental Market
 ®
 Research and Development
 ® TM ® TM ®
 9




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TM
  Government Regulations
      10




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
    
    Warning letters;
    
    Fines, injunctions and civil penalties against us;
    
    Recall or seizure of our products;
    
    Operating restrictions, partial suspension or total shutdown of our production;
    
    Refusing our requests for premarket clearance or approval of new products;
    
    Withdrawing product approvals already granted; and
    
    Criminal prosecution.
     11




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Safety Approvals
  Patents and Intellectual Property
 TM TM TM
  ® ® ®
 TM ® TM ® TM TM TM TM TM TM TM TM TM ® TM ®
 Product Liability Risk and Insurance Coverage
  12




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Employees
  Seasonality
  Risk Factors
 A significant part of our sales of our neurosurgical products comes from a single customer, which
makes us vulnerable to the loss of that customer.
  If any of our single source suppliers were to cease providing components, we may not be able to
produce our products.
 ® ® TM ®
  13




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The medical device industry is highly competitive, and we may be unable to compete effectively with
other companies.
   Our future results are dependent, in part, upon the successful introduction of our new
multifunctional bipolar electrosurgical generator, to be marketed as the Malis®
Advantage TM .
 th
 
    
    the completion of the design and testing;
    
    their acceptance by surgeons;
    
    the recognition of hospitals and surgical centers that the new generator and
instruments offer sufficient advantages and benefits to warrant the cost of
purchasing the Malis® AdvantageTM;
    
    our ability to create an effective sales network;
    
    our ability to sustain our average selling price through this network; and
    
    the reaction of our competitors in this market.
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If we are not successful in integrating the operations of Valley Forge and Synergetics, the
anticipated benefits of the merger may not be realized.
   
    
    developing a strategy for the Company, communicating it to the market and
executing on this strategic vision;
    
    rapidly and successfully integrating Valley Forges products into the existing
Synergetics distribution channels while simultaneously launching the new generation
Valley Forge multifunctional bipolar electrosurgical generator;
    
    coordinating and harmonizing research and development activities to accelerate
introduction of new products and technologies, and to react more quickly to market
conditions, all at a reduced cost;
    
    preserving customer, distribution, reseller, manufacturing, supplier, marketing
and other important relationships of both Valley Forge and Synergetics and
resolving any potential conflicts that may arise;
    
    coordinating sales and marketing functions, particularly in the neurosurgery market;
    
    retaining and attracting key employees;
    
    managing the diversion of managements attention from ongoing business concerns;
    
    consolidating operations, including rationalizing corporate information
technology and administrative infrastructures; and
    
    coordinating geographically separate organizations.
  Our products may not be accepted in the market.
  15




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
    
    convince third-party distributors and customers that our technology is an
attractive alternative to other technologies;
    
    manufacture products in sufficient quantities and at acceptable costs; and
    
    supply and service sufficient quantities of our products directly or through
distribution alliances.
 If we do not introduce new commercially successful products in a timely manner, our products may
become obsolete over time, thereby decreasing our revenue and profitability.
  
    
    properly identify and anticipate customer needs;
    
    commercialize new products in a cost-effective and timely manner;
    
    manufacture and deliver products in sufficient volumes on time;
    
    obtain regulatory approval for new products;
    
    differentiate our products from those of our competitors;
    
    achieve positive clinical outcomes;
    
    satisfy the increased demands by health care payors, providers and patients for
lower-cost procedures and shorter hospital stays and recovery times;
    
    innovate and develop new materials, product designs and surgical techniques; and
    
    provide adequate medical and/or customer education relating to new products and
attract key surgeons to advocate these new products.
  Our operating results may fluctuate.
  
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
    
    the introduction of new product lines;
 
    
    product modifications;
    
    the level of market acceptance of new products;
    
    the timing of research and development expenditures;
    
    timing of the receipt of orders from, and product shipments to, distributors and
customers;
    
    timing of expenditures;
    
    changes in the distribution arrangements for our products;
    
    manufacturing or supply delays;
    
    the time needed to educate and train additional sales personnel;
    
    costs associated with product introductions;
    
    product returns; and
    
    receipt of necessary regulatory approvals.
 Changes in the health care industry may require us to decrease the selling price for our products
or could result in a reduction in the size of the market for our products, each of which could have
a negative impact on our financial performance.
  
    
    there has been a consolidation among health care facilities and purchasers of
medical devices in the United States who prefer to limit the number of suppliers
from whom they purchase medical products and these entities may decide to stop
purchasing their products or demand discounts on our prices;
    
    major third-party payors of hospital services, including Medicare, Medicaid and
private health care insurers could substantially revise their payment methodologies
or could impose reimbursement cutbacks that could create downward price pressure on
our products;
    
    numerous legislative proposals have been considered that would result in major
reforms in the United States health care system that could have an adverse effect
on our business;
    
    there is economic pressure to contain health care costs in international
markets; and
    
    there have been initiatives by third-party payors to challenge the prices
charged for medical products that could affect our ability to sell products on a
competitive basis.
 17




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We will first need to obtain regulatory approval to market our products under development. We may
be subject to penalties and may be precluded from marketing our products if we fail to comply with
extensive governmental regulations.
      18




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We will first need to obtain electrical safety approval to market our applicable products under
development.
  We may not achieve our intended benefits from our significant investment in the Malis® trademark.
 ® ® ® ® ® ® ® ®
 Our intellectual property rights may not be meaningful commercial protection for our products and
could adversely affect our ability to compete in the market.
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We may have product liability claims, and our insurance may not cover all claims.
  The loss of key personnel could harm our business.
  If we are unable to hire, train and retain additional sales, marketing, operations, engineering and
finance personnel, our growth could be impaired.
  We plan to expand our international sales and distribution operations, and the success of our
international expansion is subject to significant uncertainties.
  
    
    difficulties and costs of staffing and managing international operations;
    
    fluctuations in currency exchange rates;
    
    unexpected changes in regulatory requirements, including
imposition of currency exchange controls;
    
    longer accounts receivable collection cycles;
    
    import or export licensing requirements;
    
    potentially adverse tax consequences;
    
    political and economic instability;
    
    obtaining regulatory approval for our products;
    
    end-market and/or regional competition that may have
competitive advantages;
    
    potentially reduced protection for intellectual property rights; and
 
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
    
    subjectivity of foreign laws.
  The market price of our stock may be highly volatile.
  
    
    our ability to successfully commercialize our products;
    
    the execution of new agreements and material changes in our relationships with
companies with whom we contract;
    
    quarterly fluctuations in results of operations;
    
    announcements regarding technological innovations or new commercial products by
us or our competitors or the results of regulatory filings;
    
    market reaction to trends in sales, marketing and research and development and
reaction to acquisitions;
    
    sales of common stock by existing shareholders;
    
    economic and political condition, including worldwide geopolitical events; and
    
    fluctuations in the United States financial markets.
 The trading volume for Synergetics USA common stock may be limited.
  Synergetics USA has anti-takeover defenses that could delay or prevent an acquisition and
could adversely affect the price of its common stock.
  21




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Compliance with rules and regulations concerning corporate governance may be costly and time
consuming.
   
     
   22




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23




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Synergetics
 (a)
    
    A special meeting of the stockholders of Synergetics was held on September 16,
2005. Of the 3,456,773 shares entitled to vote at such meeting, 3,345,198 shares were
present at such meeting in person or by proxy.(b)
    
    None(c)
    
    The merger of Synergetics with and into Synergetics Acquisition Corporation, a
wholly owned subsidiary of Valley Forge, was unanimously approved by the stockholders.
The granting of discretionary authority to Synergetics board of directors to adjourn or
postpone the special meeting was also approved with 3,342,692 shares voting for this
proposal and 2,500 shares abstaining on this proposal.(d)
    
    None
 Valley Forge Scientific Corp.
 (a)
    
    Valley Forges annual meeting of the stockholders was held on September 19,
2005. Of the 7,939,712 shares entitled to vote at such meeting, 7,856,595 shares were
present at such meeting in person or by proxy.(b)
    
    The individuals listed below were elected as directors of Valley Forge (now
Synergetics USA, Inc.) at the meeting:
 i.
    
    Gregg D. Scheller
    
    (Class C Director)ii.
    
    Jerry L. Malis
    
    (Class C Director)iii.
    
    Kurt W. Gampp, Jr.
    
    (Class C Director)iv.
    
    Robert H. Dick
    
    (Class A Director)v.
    
    Lawrence C. Cardinale
    
    (Class B Director)vi.
    
    Guy R. Guarch
    
    (Class B Director)vii.
    
    Juanita H. Hinshaw
    
    (Class A Director)
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(c)
    
    The stockholders elected each of the following directors at the meeting, and
with respect to each director, the number of shares voted for and withheld were as
follows:
 Number of Shares VotedName of Nominee
    
    For
    
    WithheldGregg D. Scheller
    
    
    7,832,080
    
    
    
    24,515Jerry L. Malis
    
    
    7,830,080
    
    
    
    26,515Kurt W. Gampp, Jr.
    
    
    7,828,811
    
    
    
    27,784Robert H. Dick
    
    
    7,827,880
    
    
    
    28,715Larry C. Cardinale
    
    
    7,848,329
    
    
    
    8,266Guy R. Guarch
    
    
    7,844,266
    
    
    
    12,239Juanita H. Hinshaw
    
    
    7,828,811
    
    
    
    27,784
 The stockholders approved the issuance of 15,973,912 shares of Valley Forge common stock
in connection with the merger of Synergetics Acquisition Corporation, a wholly owned
subsidiary of Valley Forge, with Synergetics with 5,073,632 shares voting for the
proposal, 7,765 shares voting against the proposal, 2,216 shares abstaining and
2,772,982 broker non-votes.The stockholders voted to amend and restate the articles of incorporation of Valley
Forge to increase the number of authorized shares of Valley Forge common stock from
20,000,000 shares to 50,000,000 shares, to increase the number of directors on the
Valley Forge Board of Directors to seven and to divide the Valley Forge board of
directors into three classes, as nearly equal as practicable, with three-year staggered
terms with 5,072,947 shares voting for the proposal, 8,000 shares voting against the
proposal, 2,666 shares abstaining and 2,772,982 broker non-votes.The stockholders voted to reincorporate Valley Forge under the laws of the state of
Delaware through a merger with VFSC Delaware, Inc., a wholly owned subsidiary of Valley
Forge with 5,060,296 shares voting for the proposal, 21,251 shares voting against the
proposal, 2,066 shares abstaining and 2,772,982 broker non-votes.The stockholders voted to amend the Valley Forge Scientific Corp. 2001 Stock Plan to
increase the number of shares issuable upon exercise of options granted from 345,000 to
1,345,000 with 5,044,229 shares voting for the proposal, 37,136 shares voting against
the proposal, 2,248 shares abstaining and 2,772,982 broker non-votes.The stockholders voted to adopt the Valley Forge Scientific Corp. 2005 Non-Employee
Directors Stock Option Plan to authorize the issuance of up to 200,000 shares of Valley
Forge common stock issuable upon exercise of options granted with 5,017,450 shares
voting for the proposal, 43,155 shares voting against the proposal, 23,008 shares
abstaining and 2,772,982 broker non-votes.The stockholders voted to grant discretionary authority to the Valley Forge board of
directors and to effect a reverse stock split of shares of Valley Forge common stock at
a ratio of not more than 1-for-2 with 7,803,829 shares voting for the proposal, 48,310
shares against the proposal and 4,456 shares abstaining.The stockholders voted to grant discretionary authority to the Valley Forge board of
directors to adjourn or postpone the annual meeting to a later date, if necessary, to
solicit additional
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proxies if there were not sufficient votes in favor the above proposals with 7,791,752
shares voting for the proposal, 62,587 shares voting against the proposal and 2,256
shares abstaining.(d)
    
    None
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PART II
 
 Item 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Repurchases
of Equity Securities
  High
    
    
    LowYear ended July 31, 2004Quarter ended October 31, 2003
    
    $
    2.00
    
    
    $
    1.27Quarter ended January 31, 2004
    
    
    2.65
    
    
    
    1.30Quarter ended April 30, 2004
    
    
    2.54
    
    
    
    1.29Quarter ended July 31, 2004
    
    
    2.20
    
    
    
    1.73Year ended July 31, 2005Quarter ended October 31, 2004
    
    $
    2.05
    
    
    $
    1.35Quarter ended January 31, 2005
    
    
    2.10
    
    
    
    1.40Quarter ended April 30, 2005
    
    
    1.90
    
    
    
    1.32Quarter ended July 31, 2005
    
    
    5.79
    
    
    
    1.86
    
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For the Fiscal Years Ended July 31,*2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001(in thousands, except per share data)Statements of Income Data:Net sales
    
    $
    21,792
    
    
    $
    16,887
    
    
    $
    13,017
    
    
    $
    10,447
    
    
    $
    8,315Cost of Sales
    
    
    8,289
    
    
    
    6,514
    
    
    
    4,483
    
    
    
    3,609
    
    
    
    3,853Gross profit
    
    
    13,503
    
    
    
    10,373
    
    
    
    8,534
    
    
    
    6,838
    
    
    
    4,462Income from operations
    
    
    2,383
    
    
    
    1,690
    
    
    
    1,866
    
    
    
    1,572
    
    
    
    251Net income
    
    
    1,458
    
    
    
    1,094
    
    
    
    1,091
    
    
    
    1,004
    
    
    
    113Earnings per common shareBasic
    
    $
    0.43
    
    
    $
    0.32
    
    
    $
    0.32
    
    
    $
    0.31
    
    
    $
    0.04Diluted
    
    $
    0.42
    
    
    $
    0.32
    
    
    $
    0.32
    
    
    $
    0.31
    
    
    $
    0.04
 
 *This tabular information reflects Synergetics results
only and does not reflect the effect of the combination of
Synergetics and Valley Forge. For the Fiscal Years Ended July 31,*2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001(in thousands)Balance Sheets Data:Cash and cash equivalents
    
    $
    1,817
    
    
    $
    1,540
    
    
    $
    1,049
    
    
    $
    943
    
    
    $
    1,249Current assets
    
    
    12,757
    
    
    
    9,563
    
    
    
    7,709
    
    
    
    5,920
    
    
    
    4,980Total assets
    
    
    20,116
    
    
    
    14,474
    
    
    
    12,254
    
    
    
    7,724
    
    
    
    6,144Current liabilities
    
    
    3,969
    
    
    
    2,862
    
    
    
    1,687
    
    
    
    1,396
    
    
    
    1,724Long-term liabilities
    
    
    6,008
    
    
    
    3,113
    
    
    
    3,251
    
    
    
    254
    
    
    
    234Retained earnings
    
    
    5,402
    
    
    
    3,944
    
    
    
    2,851
    
    
    
    1,760
    
    
    
    756Stockholders equity
    
    
    10,139
    
    
    
    8,499
    
    
    
    7,316
    
    
    
    6,074
    
    
    
    4,185
 
 *This tabular information reflects Synergetics results
only and does not reflect the effect of the combination of
Synergetics and Valley Forge. 
  Overview
  
    
    Our Business  a general description of the key drivers that affect our business and
the industries in which we operate.
    
    Our Business Strategy  a description of the strategic initiatives on which we focus
and the goals we seek to achieve.
    
    Results of Operations  an analysis of our Companys results of operations for the
three years presented in our financial statements.
    
    Liquidity and Capital Resources  an analysis of cash flows, sources and uses of cash,
currency exchange and an overview of our financial position.
    
    Pre-Merger and Post-Merger Contractual Obligations  an analysis of contracts entered
into in the normal course of business that will require future payments.
    
    Use of Estimates and Critical Accounting Policies  a description of critical
accounting policies including those that affect the more significant judgments and
estimates used in the preparation of our consolidated financial statements.
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Our Business
  New Product Sales
  Growth in Minimally Invasive Surgery Procedures
 TM
 Demand Trends
  Pricing Trends
  29




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Our Business Strategy
  
    
    Introducing new technology that can be easily differentiated from our competition by
capitalizing on our combined successes in delivering minimally invasive products that
enable concentrated application to a surgical area with decreased impact beyond the
specific desired surgical effects, resulting in improved recovery times and shorter
hospital stays;
    
    Identifying microsurgical niches that may offer the prospect for substantial growth and
higher profit margins that allow us an opportunity to build upon our existing technologies,
such as expanding the use of our products in ENT (ear, nose and throat), plastic surgery
and other forms of microsurgery;
    
    Accelerating our international (including Canada) growth by continuing to build on our
recent successes supported by Valley Forges long-established relationships and reputation
in global markets;
    
    Combining the breadth and depth of knowledge, experience and resources in Valley Forges
and Synergetics existing research and development groups to form a new combined research
and development capability aligned to deliver precision engineered instruments based on our
own proprietary technologies and innovations;
    
    Branding and marketing a substantial portion of our neurosurgical products with the
Malis® trademark;
    
    Developing hybrid direct sales/independent sales agent distribution channels to assure
that our products and benefits are seen by those making or influencing the purchasing
decisions;
    
    Developing our new multifunctional bipolar electrosurgical system, which will be
marketed as the Malis® AdvantageTM, with our new state-of-the-art bipolar
generator and our new proprietary single use hand-switching bipolar instruments with
enhanced features and functionality to expand the array of procedures they are designed to
perform;
    
    Growing our disposables revenue stream by focusing on the development of a full offering
of disposable adjuncts, such as instruments, adapters and fiber optics, to our capital
equipment offerings and emphasizing disposables designed to eliminate hospital repair costs
and minimize patient-to-patient disease transfer;
    
    Expanding the use of our new multifunctional bipolar electrosurgical generator, which
will be marketed as the Malis® AdvantageTM, into other surgical markets as its
increased power and
 30




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##### Table of Contents



functionality allows the surgeon to perform functions similar to traditional monopolar
systems, without the inherent safety limitations; and
    
    Exploring opportunities for growth through strategic partnering with other companies
with complimentary products and technologies to facilitate strategic growth in our defined
niche markets, such as our current relationship with Stryker Corporation.
 Results of Operations
  Year-Ended July 31, 2005 Compared to Year-Ended July 31, 2004
   Year Ended July 31,*2005
    
    
    2004
    
    
    % IncreaseOphthalmic
    
    $
    17,752
    
    
    $
    14,061
    
    
    
    26.2
    %Neurosurgery
    
    
    4,040
    
    
    
    2,826
    
    
    
    43.0$
    21,792
    
    
    $
    16,887
    
    
    
    29.0
    %
 
 *This tabular information reflects Synergetics results
only and does not reflect the effect of the combination of
Synergetics and Valley Forge. TM ® TM ® ® TM
  Year Ended July 31,*2005
    
    
    2004
    
    
    % IncreaseUnited States
    
    $
    16,384
    
    
    $
    13,462
    
    
    
    21.7
    %International (including Canada)
    
    
    5,408
    
    
    
    3,425
    
    
    
    57.9$
    21,792
    
    
    $
    16,887
    
    
    
    29.0
    %
 
 *This tabular information reflects Synergetics results only and does not
reflect the effect of the combination of Synergetics and Valley Forge. 31




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TM ® TM
            32




---



##### Table of Contents



Year-Ended July 31, 2004 Compared to Year-Ended July 31, 2003
   Year Ended July 31,*2004
    
    
    2003
    
    
    % IncreaseOphthalmic
    
    $
    14,061
    
    
    $
    11,900
    
    
    
    18.2
    %Neurosurgery
    
    
    2,826
    
    
    
    1,117
    
    
    
    153.0$
    16,887
    
    
    $
    13,017
    
    
    
    29.7
 
 *This tabular information reflects Synergetics results
only and does not reflect the effect of the combination of
Synergetics and Valley Forge. TM ®
  Year Ended July 31,*2004
    
    
    2003
    
    
    % IncreaseUnited States
    
    $
    13,462
    
    
    $
    10,395
    
    
    
    29.5
    %International (including Canada)
    
    
    3,425
    
    
    
    2,622
    
    
    
    30.6$
    16,887
    
    
    $
    13,017
    
    
    
    29.7
 
 *This tabular information reflects Synergetics results only and does not
reflect the effect of the combination of Synergetics and Valley Forge.    33




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##### Table of Contents



Liquidity and Capital Resources
     34




---



##### Table of Contents




    
    Revolving Credit Facility: Under this credit facility, Synergetics could borrow
up to $1.25 million with interest at the banks prime lending rate less 0.25%.
Borrowings under this facility at July 31, 2005 were $235,000. Outstanding amounts
were secured by Synergetics receivables and inventory. This credit facility will
expire on February 15, 2006.
    
    Equipment Line of Credit: Under this credit facility, Synergetics may borrow up
to $1.0 million, with interest at the banks prime lending rate. Borrowings under
this facility were $588,492 on July 31, 2005. Outstanding amounts were secured by
the purchased equipment. In October 2005, the Company signed a loan agreement
which consolidated the outstanding balance on the equipment line of credit, along
with three specific bank notes, under one new bank note in the principal amount of
$1,427,105. The Company will make principal payments of $39,642 plus interest, on
a monthly basis. The effective interest rate for this note is 6.75%. Final
payment is due on September 30, 2008. The equipment line of credit facility of
$1.0 million was also renewed as of this date and expires on September 30, 2006.
   35




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##### Table of Contents



Pre-Merger Contractual Obligations
  Payments due by PeriodLess than 1
    
    
    
    
    
    
    
    
    
    
    More thanContractual Obligations
    
    Total
    
    
    Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5 YearsRevolving Line of Credit (1)
    
    $
    235,000
    
    
    $
    235,000
    
    
    
    
    
    
    
    
    
    
    
    Equipment Line of Credit (2)
    
    
    1,427,105
    
    
    
    396,418
    
    
    
    951,403
    
    
    
    79,284
    
    
    
    Revenue Bonds Payable (3)
    
    
    4,637,292
    
    
    
    248,750
    
    
    
    497,500
    
    
    
    497,500
    
    
    
    3,393,542Building Term Loan (4)
    
    
    178,806
    
    
    
    13,668
    
    
    
    165,138
    
    
    
    
    
    
    
    Estimated Interest Payments (5)
    
    
    1,221,407
    
    
    
    315,083
    
    
    
    515,030
    
    
    
    287,075
    
    
    
    104,219Operating Leases (6)
    
    
    156,400
    
    
    
    39,800
    
    
    
    68,400
    
    
    
    48,200
    
    
    
    Other Long-Term Liabilities (7)
    
    
    25,519
    
    
    
    
    
    
    
    25,519
    
    
    
    
    
    
    
    Total Contractual Obligations
    
    $
    7,881,529
    
    
    $
    1,248,719
    
    
    $
    2,222,990
    
    
    $
    912,059
    
    
    $
    3,497,761
 
 (1)
    
    Amount represents the expected cash payment for our $1,250,000 revolving
credit facility.(2)
    
    Amounts represent the expected cash payment for our consolidated equipment term
loan entered into in October 2005.(3)
    
    Amounts represent the expected cash payments for our revenue bonds payable.(4)
    
    Amounts represent the expected cash payment for our building term loan.(5)
    
    Amounts represent the expected cash payment for interest on our fixed rate
long-term debt. After September 1, 2009 and December 1, 2011, the interest rate will
float.(6)
    
    We enter into operating leases in the normal course of business. Some lease
agreements provide us with the option to renew the lease. Our future operating lease
payments would change if we exercised these renewal options or if we entered into
additional operating lease agreements.(7)
    
    Other long-term liabilities represent the expected cash payment on other
deferred liabilities. As deferred taxes have not been determined beyond 2005, this
amount is excluded from this table. 36




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##### Table of Contents



Post-Merger Contractual Obligations
  Payments due by PeriodLess than
    
    
    
    
    
    
    
    
    
    
    More thanContractual Obligations
    
    Total
    
    
    1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5 YearsTotal Pre-Merger
Contractual
Obligations (from
table above)
    
    $
    7,881,529
    
    
    $
    1,248,719
    
    
    $
    2,222,990
    
    
    $
    912,059
    
    
    $
    3,497,761New Promissory Note (1)
    
    
    4,157,504
    
    
    
    639,616
    
    
    
    1,279,232
    
    
    
    1,279,232
    
    
    
    959,424New Lease (2)
    
    
    448,970
    
    
    
    62,382
    
    
    
    226,495
    
    
    
    160,093
    
    
    
    Total Post-Merger
Contractual
Obligations
    
    $
    12,488,003
    
    
    $
    1,950,717
    
    
    $
    3,728,717
    
    
    $
    2,351,384
    
    
    $
    4,457,185
 
 (1)
    
    On October 12, 2005, we acquired the Malis® trademark. We paid Dr. Malis estate
$159,904 in cash and the remainder in a $3,997,600 promissory note which will be paid in
twenty-five equal quarterly installments of $159,904. The promissory note is secured by a
security interest in the trademark and our
DualWaveTM patents.(2)
    
    Effective May 1, 2005, Valley Forge entered into a combination sublease and lease
agreement for a term of four and one half years for approximately 13,500 square feet of
office, assembly and manufacturing space in King of Prussia, Pennsylvania. Use of Estimates and Critical Accounting Policies
  Revenue Recognition
  Inventories
  Loss Contingencies
  37




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##### Table of Contents



Amortization Periods
 Impairment of Long-Lived
Assets
 Allowance for Doubtful Accounts
  Impairment of Long-Lived Assets
  Deferred Tax Assets and Liabilities
  Stock-Based Compensation
  Recent Accounting Pronouncements
  
   38




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39




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##### Table of Contents



Evaluation of Disclosure Controls and Procedures
     Changes in Internal Controls Over Financial Reporting
  
   40




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##### Table of Contents



PART III
 
   Name
    
    Age
    
    Position(s)
    
    Term ExpiresGregg D. Scheller
    
    
    49
    
    
    President, Chief
Executive Officer and
Director
    
    2008Lawrence C. Cardinale
    
    
    67
    
    
    Director
    
    2007Robert H. Dick
    
    
    62
    
    
    Director
    
    2006Kurt W. Gampp, Jr.
    
    
    45
    
    
    Executive Vice President,
Chief Operating Officer
and Director
    
    2008Guy R. Guarch
    
    
    64
    
    
    Director
    
    2007Juanita H. Hinshaw
    
    
    60
    
    
    Director
    
    2006Jerry L. Malis
    
    
    73
    
    
    Executive Vice President,
Chief Scientific Officer
and Director
    
    2008Pamela G. Boone
    
    
    42
    
    
    Executive Vice President,
Chief Financial Officer,
Treasurer and Secretary
    
    
     41




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42




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Summary Compensation Table
  Number of Shares ofCommon StockFiscal
    
    
    
    
    
    
    
    
    
    Underlying Options
    
    All OtherName and Principal Position
    
    Year
    
    Salary
    
    Bonus
    
    Granted
    
    Compensation(1)Gregg D. Scheller
    
    
    2005
    
    
    $
    409,740
    (2)
    
    $
    39,433
    
    
    
    
    
    
    President and
    
    
    2004
    
    
    
    285,972
    
    
    
    19,000
    
    
    
    
    
    
    $
    2,000Chief Executive Officer
    
    
    2003
    
    
    
    284,027
    
    
    
    11,500
    
    
    
    
    
    
    Jerry L. Malis(3)
    
    
    2005
    
    
    $
    226,306
    
    
    
    
    
    
    
    
    
    
    Executive Vice President and
    
    
    2004
    
    
    
    220,000
    
    
    
    
    
    
    
    
    
    
    Chief Scientific Officer
    
    
    2003
    
    
    
    217,166
    
    
    
    
    
    
    
    
    
    
    Kurt W. Gampp, Jr.
    
    
    2005
    
    
    $
    385,775
    (2)
    
    $
    52,231
    
    
    
    
    
    
    Executive Vice President and
    
    
    2004
    
    
    
    238,617
    
    
    
    19,000
    
    
    
    
    
    
    $
    2,000Chief Operating Officer
    
    
    2003
    
    
    
    261,054
    
    
    
    11,000
    
    
    
    
    
    
    Pamela G. Boone
    
    
    2005
    
    
    $
    31,635
    (4)
    
    
    
    
    
    
    41,310
    (5)
    
    Executive Vice President,
    
    
    2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Chief Financial Officer,
Treasurer and Secretary
    
    
    2003
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 
 (1)
    
    All Other Compensation for Messrs. Scheller and Gampp represents compensation they
received for serving as members of the Synergetics board of directors. The Synergetics
board served without compensation in fiscal year 2002, which would have been paid in
calendar year 2003.(2)
    
    The salaries of Messrs. Scheller and Gampp for fiscal
year 2005 contained an incentive compensation arrangement that was
based upon Synergetics sales. In fiscal year 2006, their
salaries will be based upon their employment contracts that are
described under Item 11.(3)
    
    The historical compensation disclosed for Mr. Malis is that received by Mr.
Malis as Chief Executive Officer of Valley Forge.(4)
    
    Ms. Boones employment as Synergetics Chief Financial Officer did not begin
until May 19, 2005.(5)
    
    The number of shares underlying options granted to Ms. Boone give effect to the
conversion ratio of 4.59 shares of Valley Forge common stock for each share of
Synergetics common stock, pursuant to the terms of the merger. 43




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##### Table of Contents



Option Grants in Last Fiscal Year
 Potential Realizable Value atAssumed Annual Rates ofStock Price Appreciation forIndividual Grants
    
    Option Term (1)Number of
    
    % of TotalSecurities
    
    Options /
    
    ExerciseUnderlying
    
    SARs
    
    or BaseOptions /
    
    Granted to
    
    Price ($SARs
    
    Employees in
    
    per
    
    ExpirationName
    
    Granted (#)
    
    Fiscal Year
    
    share)
    
    Date
    
    5% ($)
    
    10% ($)Pamela G. Boone
    
    41,310(2)
    
    36.6%
    
    $
    1.089
    
    
    5/19/2015
    
    $28,007
    
    $70,830
 
 (1)
    
    Amounts represent hypothetical gains that could be achieved for the options if
exercised at the end of the option term. These gains are based on arbitrarily assumed
rates of stock price appreciation of 5% and 10% compounded annually from the date the
options are granted to their expiration date. Actual gains, if any, on stock option
exercises will be dependent on, among other things, the future performance of the
common stock and overall market conditions. There can be no assurance that the amounts
reflected above will be achieved.(2)
    
    One-half of these options become exercisable on May 19, 2009 and the remainder
become exercisable on May 19, 2010. The number of shares underlying options granted to
Ms. Boone and the exercise price give effect to the conversion ratio of 4.59 shares of
Valley Forge common stock for each share of Synergetics common stock, pursuant to the
terms of the merger. Aggregate Fiscal Year End Option Values
  Number of Shares ofCommon Stock Underlying
    
    Aggregate Value ofUnexercised Options at
    
    Unexercised Options atName
    
    July 31, 2005
    
    July 31, 2005Jerry L. Malis
    
    
    50,000
    (1)
    
    $
    212,245Pamela G. Boone
    
    
    41,310
    (2)
    
    $
    176,844
 
 (1)
    
    These options were granted on December 12, 2000 with an exercise price
of $1.125 per share and expire on December 12, 2010. All of these options were
exercisable at July 31, 2005.(2)
    
    These options were granted on May 19, 2005 with an exercise price of $1.089 per
share and expire on May 19, 2015. One-half of these options become exercisable on May
19, 2009 and the remainder become exercisable on May 19, 2010. The number of shares
underlying options granted to Ms. Boone and the exercise price give effect to the
conversion ratio of 4.59 shares of Valley Forge common stock for each share of
Synergetics common stock, pursuant to the terms of the merger. 44




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##### Table of Contents



Equity Compensation Plan Information
 Number of Shares ofCommon Stock AvailableNumber of Shares of
    
    
    
    
    
    
    for Future Issuance underCommon Stock to be
    
    
    
    
    
    
    Equity CompensationIssued upon Exercise of
    
    
    Weighted Average
    
    
    Plans at July 31, 2005Outstanding Options,
    
    
    Exercise Price of
    
    
    (Excluding SharesWarrants and Rights at
    
    
    Outstanding Options
    
    
    Reflected in the FirstPlan Category
    
    July 31, 2005
    
    
    Warrants and Rights
    
    
    Column)Equity compensation
plans approved by
security holders
    
    
    700,015
    
    
    $
    1.52
    
    
    
    653,000Equity compensation
plans not approved
by security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    700,015
    
    
    $
    1.52
    
    
    
    653,000
 Directors Compensation
   Employment Contracts
   45




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##### Table of Contents



Compensation Committee Interlocks and Insider Participation
     Code of Ethics
  46




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##### Table of Contents



Compliance with Section 16(a) of the Securities and Exchange Act
   
   Number ofSynergetics
    
    
    Percent ofUSA Shares
    
    
    SharesBeneficially
    
    
    BeneficiallyName and Address of Beneficial Owner(1)
    
    Owned
    
    
    Owned(i)
    
    Named Executive Officers and DirectorsGregg D. Scheller (2) (3)
    
    
    807,840
    
    
    
    3.4
    %Lawrence C. Cardinale (2) (4)
    
    
    20,144
    
    
    
    *Robert H. Dick (2) (5)
    
    
    74,000
    
    
    
    *Kurt W. Gampp, Jr. (2) (6)
    
    
    958,392
    
    
    
    4.0Guy R. Guarch (2) (7)
    
    
    10,000
    
    
    
    *Juanita H. Hinshaw (2) (8)
    
    
    326,710
    
    
    
    1.4Jerry L. Malis (2) (9)
    
    
    1,182,276
    
    
    
    4.9Pamela G. Boone (2)
    
    
    
    
    
    
    (ii)
    
    All Executive Officers and Directors
as a Group (8 Persons)
    
    
    3,379,362
    
    
    
    14.1(iii)
    
    Certain Beneficial Owners
None
 
 *
    
    less than 1%(1)
    
    Except as indicated in the footnotes to this table, the persons named in the
table have sole voting and investment power with respect to all shares of common stock
shown as beneficially owned the them.(2)
    
    The mailing address of Messrs. Scheller, Cardinale, Dick, Gampp, Guarch and
Malis and Mses. Hinshaw and Boone is 3845 Corporate Centre Drive, OFallon, Missouri
63368. 47




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##### Table of Contents



(3)
    
    Includes shares held in the Gregg D. Scheller Trust. Mr. Scheller, in his
capacity as trustee, possesses sole voting and investment power with respect to these
shares. This does not include 817,020 shares held by the Donna Scheller Trust, of
which Mr. Schellers wife is trustee. Mr. Scheller disclaims beneficial ownership as
to these shares.(4)
    
    Includes 10,000 shares issuable to Mr. Cardinale subject to options exercisable
currently or within 60 days.(5)
    
    Includes 74,000 shares issuable to Mr. Dick subject to options exercisable
currently or within 60 days.(6)
    
    Includes shares held in the Kurt W. Gampp, Jr. Trust.(7)
    
    Includes 10,000 shares issuable to Mr. Guarch subject to options exercisable
currently or within 60 days.(8)
    
    Includes shares held in the Hinshaw-Harrison Joint Revocable Living Trust. Ms.
Hinshaw, in her capacity as trustee, possesses joint voting and investment power with
respect to these shares. Also includes 10,000 shares issuable to Ms. Hinshaw subject
to options exercisable currently or within 60 days.(9)
    
    Includes 50,000 shares issuable to Mr. Malis subject to options exercisable
currently or within 60 days. Also includes 200,000 shares held in the Malis Family
L.P., a limited partnership in which Jerry L. Malis is the general partner and
possesses voting and investment power. 
  ® ®
 ®
   48




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##### Table of Contents



Year Ended
    
    Year EndedJuly 31, 2005
    
    July 31, 2004Audit Fees
    
    $
    355,000
    (a)
    
    $
    0Audit-Related Fees
    
    
    0
    
    
    
    0Tax Fees
    
    
    2,000
    (b)
    
    
    0Other
    
    
    0
    
    
    
    0
 
 (a)
    
    Audit Fees applicable to fiscal year ended July 31, 2005
includes fees for assistance with and review of SEC filings and
related documents, including two years of audits (audit of fiscal
year ended July 31, 2005 and re-audit of fiscal year ended July 31,
2004) and for certain quarterly and other review services.(b)
    
    Tax Fees applicable to fiscal year ended July
31, 2005 are comprised of fees relating to income tax matters,
planning and advice.    49




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##### Table of Contents



50




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##### Table of Contents



PART IV
 
  (a)
    
    The following documents are filed as part of this report.
 1.
    
    Financial StatementsThe consolidated financial statements and supplemental schedule of
Synergetics, Inc. and Subsidiaries, together with the report thereon of
McGladrey & Pullen, LLP, are included following Item 15 of this report. See
Index to Financial Statements and Financial Statement Schedules on Page F-1,
herein.The Unaudited Pro Forma Condensed Combined Financial Statements of
Synergetics, Inc. and Valley Forge are included following Item 15 of this
report. See Index to Financial Statements and Financial Statement Schedules
on Page F-1, herein.2.
    
    Financial Statement SchedulesSchedule II  Valuation and Qualifying Accounts.3.
    
    ExhibitsThe exhibits required to be filed as part of this annual report on Form 10-K
are listed in the attached Index to Exhibits.
 (b)
    
    The exhibits filed with this annual report on Form 10-K
are listed in the attached Index to Exhibits.
 (c)
    
    None.
 51




---



INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
  
 Audited Financial StatementsReport of Independent Registered Public Accounting Firm
    
    
    F-2Report of Independent Certified Public Accountants
    
    
    F-3Consolidated Balance Sheets as of July 31, 2005 and 2004
    
    
    F-4Consolidated Statements of Income for the years ended
July 31, 2005, 2004 and 2003
    
    
    F-5Consolidated Statements of Stockholders Equity for the years ended
July 31, 2005, 2004 and 2003
    
    
    F-6Consolidated Statements of Cash Flows for the years ended
July 31, 2005, 2004 and 2003
    
    
    F-7Notes to Consolidated Financial Statements
    
    
    F-8Unaudited Pro Forma Condensed Combined Financial StatementsIntroduction
to Unaudited Pro Forma Condensed Combined Financial Statements
    
    
    F-19Pro Forma Condensed Combined Balance Sheet (Unaudited)
    
    
    F-20Notes to Unaudited Pro Forma Condensed Combined Balance Sheet
    
    
    F-21Pro Forma Condensed Combined Statement of Income (Unaudited)
    
    
    F-23Notes to Unaudited Pro Forma Condensed Combined Statement of Income
    
    
    F-24Financial
Statement SchedulesSchedule II - Valuation and Qualifying Accounts
    
    
    F-25
  F-1




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Report of Independent Registered Public Accounting Firm
 
    -s- McGLADREY AND PULLEN, LLP 
 
 F-2




---



##### Table of Contents









Report of Independent Certified Public Accountants












|                    |  |                             
|------------------- |  | ----------------------------
|                    |  | -s- MPP&W, P.C.             
|September 26, 2003  |  | Certified Public Accountants
|St. Louis, Missouri |  |                             

|                                                                                                                |  |              |  |                                                                                                                   
|--------------------------------------------------------------------------------------------------------------- |  | ------------ |  | ------------------------------------------------------------------------------------------------------------------
|1034 S. Brentwood Blvd.
    Suite 1700
    St. Louis, Missouri 63117
    (314) 862-2070
    Fax: (314) 862-1549 |  | www.mppw.com |  | 2500 Old Highway 94 South
    Suite 203
    St. Charles, Missouri 63303
    (636) 441-5800
    Fax: (636) 922-3139

F-3



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##### Table of Contents



Synergetics, Inc. and Subsidiaries
 
 Consolidated Balance Sheets
July 31, 2005 and 2004
 2005
    
    2004AssetsCurrent AssetsCash and cash equivalents
    
    $
    1,816,823
    
    
    $
    1,540,042Investment in trading securities
    
    
    29,333
    
    
    
    Accounts receivable, net of allowance for doubtful accounts
2005 $135,000; 2004 $40,000
    
    
    3,344,214
    
    
    
    2,694,073Inventories
    
    
    7,188,636
    
    
    
    4,814,082Prepaid expenses
    
    
    220,903
    
    
    
    253,525Prepaid income taxes
    
    
    
    
    
    
    85,960Deferred income taxes
    
    
    157,000
    
    
    
    76,000Other
    
    
    
    
    
    
    99,537Total current assets
    
    
    12,756,909
    
    
    
    9,563,219Property and equipment, net
    
    
    6,483,307
    
    
    
    4,584,857Intangible and other assetsPatents, net
    
    
    451,556
    
    
    
    325,938Acquisition costs
    
    
    394,452
    
    
    
    Cash value of life insurance
    
    
    29,545
    
    
    
    $
    20,115,769
    
    
    $
    14,474,014Liabilities and Stockholders EquityCurrent LiabilitiesLines-of-credit
    
    $
    235,000
    
    
    $
    542,395Current maturities of long-term debt
    
    
    276,771
    
    
    
    140,275Current maturities of revenue bonds payable
    
    
    248,750
    
    
    
    132,250Accounts payable
    
    
    1,148,082
    
    
    
    761,523Accrued construction costs
    
    
    613,469
    
    
    
    Accrued expenses
    
    
    1,135,217
    
    
    
    1,268,876Income taxes payable
    
    
    311,684
    
    
    
    16,406Total current liabilities
    
    
    3,968,973
    
    
    
    2,861,725Long-Term LiabilitiesLong-term debt, less current maturities
    
    
    1,250,939
    
    
    
    499,419Revenue bonds payable, less current maturities
    
    
    4,388,542
    
    
    
    2,336,417Deferred income taxes
    
    
    343,000
    
    
    
    277,000Deferred compensation
    
    
    25,519
    
    
    
    Total long-term liabilities
    
    
    6,008,000
    
    
    
    3,112,836Total liabilities
    
    
    9,976,973
    
    
    
    5,974,561Commitments and contingencies (Notes 7, 14 and 17)Stockholders EquityCommon stock, $.01667 par value, 8,000,000 shares authorized;
3,542,111 and 3,496,702 shares issued, respectively; 3,456,773
and 3,411,364 shares outstanding, respectively
    
    
    59,047
    
    
    
    58,291Additional paid-in capital
    
    
    4,985,936
    
    
    
    4,805,061Retained earnings
    
    
    5,401,816
    
    
    
    3,944,10410,446,799
    
    
    
    8,807,456Less: Treasury stock, 85,338 shares, at cost
    
    
    308,003
    
    
    
    308,00310,138,796
    
    
    
    8,499,453$
    20,115,769
    
    
    $
    14,474,014
  F-4




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##### Table of Contents



Synergetics, Inc. and Subsidiaries
 
 Consolidated Statements of Income
Years Ended July 31, 2005, 2004 and 2003
 2005
    
    2004
    
    2003Sales
    
    $
    21,791,582
    
    
    $
    16,887,378
    
    
    $
    13,016,711Cost of sales
    
    
    8,288,884
    
    
    
    6,514,120
    
    
    
    4,482,875Gross profit
    
    
    13,502,698
    
    
    
    10,373,258
    
    
    
    8,533,836Operating expensesResearch and development
    
    
    857,798
    
    
    
    796,916
    
    
    
    563,267Selling, general and administrative
    
    
    10,261,627
    
    
    
    7,886,014
    
    
    
    6,104,43411,119,425
    
    
    
    8,682,930
    
    
    
    6,667,701Operating income
    
    
    2,383,273
    
    
    
    1,690,328
    
    
    
    1,866,135Other income (expense)Investment income
    
    
    30,252
    
    
    
    17,514
    
    
    
    22,780Interest expense
    
    
    (215,590
    )
    
    
    (196,143
    )
    
    
    (156,650
    )Loss on sale of equipment
    
    
    
    
    
    
    (7,178
    )
    
    
    (71,360
    )Miscellaneous
    
    
    (223
    )
    
    
    9,654
    
    
    
    (37,975
    )(185,561
    )
    
    
    (176,153
    )
    
    
    (243,205
    )Income before provision for income taxes
    
    
    2,197,712
    
    
    
    1,514,175
    
    
    
    1,622,930Provision for income taxes
    
    
    740,000
    
    
    
    420,600
    
    
    
    532,400Net income
    
    $
    1,457,712
    
    
    $
    1,093,575
    
    
    $
    1,090,530Earnings per share:Basic
    
    $
    0.43
    
    
    $
    0.32
    
    
    $
    0.32Diluted
    
    $
    0.42
    
    
    $
    0.32
    
    
    $
    0.32Basic weighted average common shares outstanding
    
    
    3,424,030
    
    
    
    3,401,184
    
    
    
    3,383,041Diluted weighted average common shares outstanding
    
    
    3,443,000
    
    
    
    3,413,866
    
    
    
    3,392,746
  F-5




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##### Table of Contents



Synergetics, Inc. and Subsidiaries
 
 Consolidated Statements of Stockholders Equity
Years Ended July 31, 2005, 2004 and 2003
 AdditionalCommon
    
    paid-in
    
    Retained
    
    TreasuryStock
    
    capital
    
    earnings
    
    stock
    
    TotalBalance, July 31, 2002
    
    $
    56,658
    
    
    $
    4,415,185
    
    
    $
    1,759,999
    
    
    $
    (158,000
    )
    
    $
    6,073,842Issuance of 75,700
shares of common
stock
    
    
    1,262
    
    
    
    300,446
    
    
    
    
    
    
    
    
    
    
    
    301,708Acquisition of
45,838 shares of
treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (150,003
    )
    
    
    (150,003
    )Net income
    
    
    
    
    
    
    
    
    
    
    1,090,530
    
    
    
    
    
    
    
    1,090,530Balance, July 31, 2003
    
    
    57,920
    
    
    
    4,715,631
    
    
    
    2,850,529
    
    
    
    (308,003
    )
    
    
    7,316,077Issuance of 22,200
shares of common
stock
    
    
    371
    
    
    
    89,430
    
    
    
    
    
    
    
    
    
    
    
    89,801Net income
    
    
    
    
    
    
    
    
    
    
    1,093,575
    
    
    
    
    
    
    
    1,093,575Balance, July 31, 2004
    
    
    58,291
    
    
    
    4,805,061
    
    
    
    3,944,104
    
    
    
    (308,003
    )
    
    
    8,499,453Issuance of 45,409
shares of common
stock
    
    
    756
    
    
    
    180,875
    
    
    
    
    
    
    
    
    
    
    
    181,631Net income
    
    
    
    
    
    
    
    
    
    
    1,457,712
    
    
    
    
    
    
    
    1,457,712Balance, July 31, 2005
    
    $
    59,047
    
    
    $
    4,985,936
    
    
    $
    5,401,816
    
    
    $
    (308,003
    )
    
    $
    10,138,796
  F-6




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##### Table of Contents



Synergetics, Inc. and Subsidiaries
 
 Consolidated Statements of Cash Flows
Years Ended July 31, 2005, 2004 and 2003
 2005
    
    2004
    
    2003Cash Flows from Operating ActivitiesNet income
    
    $
    1,457,712
    
    
    $
    1,093,575
    
    
    $
    1,090,530Adjustments to reconcile net income to net cash provided
by (used in) operating activitiesDepreciation
    
    
    510,503
    
    
    
    394,427
    
    
    
    341,679Amortization
    
    
    69,597
    
    
    
    29,273
    
    
    
    28,254Provision for doubtful accounts receivable
    
    
    123,798
    
    
    
    7,510
    
    
    
    Stock compensation
    
    
    181,631
    
    
    
    
    
    
    
    Loss on sale of equipment
    
    
    
    
    
    
    7,178
    
    
    
    71,360Deferred income taxes
    
    
    (15,000
    )
    
    
    106,000
    
    
    
    95,000Change in assets and liabilities:(Increase) decrease in:Trading securities
    
    
    (29,333
    )
    
    
    
    
    
    
    Receivables
    
    
    (773,939
    )
    
    
    (668,420
    )
    
    
    (413,770
    )Inventories
    
    
    (2,374,554
    )
    
    
    (853,673
    )
    
    
    (859,408
    )Prepaid expenses
    
    
    32,622
    
    
    
    (73,605
    )
    
    
    (24,350
    )Prepaid income taxes
    
    
    85,960
    
    
    
    286,681
    
    
    
    (372,641
    )Other current assets
    
    
    99,537
    
    
    
    (29,710
    )
    
    
    (3,390
    )(Decrease) increase in:Accounts payable
    
    
    386,559
    
    
    
    31,918
    
    
    
    454,845Accrued expenses
    
    
    (133,659
    )
    
    
    582,744
    
    
    
    34,001Deferred compensation
    
    
    25,519
    
    
    
    
    
    
    
    Income taxes payable
    
    
    295,278
    
    
    
    16,406
    
    
    
    (362,469
    )Net cash provided by (used in) operating activities
    
    
    (57,769
    )
    
    
    930,304
    
    
    
    79,641Cash Flows from Investing ActivitiesPurchase of property and equipment
    
    
    (1,795,484
    )
    
    
    (686,816
    )
    
    
    (323,649
    )Proceeds from sale of equipment
    
    
    
    
    
    
    3,182
    
    
    
    110,000Acquisition of patents
    
    
    (195,215
    )
    
    
    (113,772
    )
    
    
    (68,810
    )Acquisition costs
    
    
    (394,452
    )
    
    
    
    
    
    
    Increase in cash value of life insurance
    
    
    (29,545
    )
    
    
    
    
    
    
    Net cash used in investing activities
    
    
    (2,414,696
    )
    
    
    (797,406
    )
    
    
    (282,459
    )Cash Flows from Financing ActivitiesNet borrowings on lines-of-credit, equipment
    
    
    281,097
    
    
    
    542,395
    
    
    
    Proceeds from revenue bonds payable
    
    
    2,330,000
    
    
    
    
    
    
    
    201,078Principal payments on revenue bonds payable
    
    
    (161,375
    )
    
    
    (132,250
    )
    
    
    (44,083
    )Proceeds from long-term debt
    
    
    542,395
    
    
    
    
    
    
    
    205,000Principal payments on long-term debt
    
    
    (242,871
    )
    
    
    (142,174
    )
    
    
    (51,581
    )Principal payments on obligation under capital leases
    
    
    
    
    
    
    
    
    
    
    (152,903
    )Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    (150,003
    )Proceeds from the issuance of common stock
    
    
    
    
    
    
    89,801
    
    
    
    301,708Net cash provided by financing activities
    
    
    2,749,246
    
    
    
    357,772
    
    
    
    309,216Net increase in cash and cash equivalents
    
    
    276,781
    
    
    
    490,670
    
    
    
    106,398Cash and cash equivalentsBeginning
    
    
    1,540,042
    
    
    
    1,049,372
    
    
    
    942,974Ending
    
    $
    1,816,823
    
    
    $
    1,540,042
    
    
    $
    1,049,372Supplemental Disclosures of Cash Flow InformationCash paid for:Interest (Capitalized as a part of property 2005 $67,818;
2004 and 2003 none)
    
    $
    283,408
    
    
    $
    186,164
    
    
    $
    147,150Income taxes
    
    
    373,762
    
    
    
    237,496
    
    
    
    1,235,273Supplemental Schedule of Noncash Investing andFinancing ActivitiesProperty and equipment acquired in exchange for issuance
of notes and revenue bonds payable
    
    $
    
    
    
    $
    
    
    
    $
    2,899,470Construction in progress financed by accounts payable
    
    
    613,469
    
    
    
    
    
    
    
    
  F-7




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##### Table of Contents



Synergetics, Inc. and Subsidiaries
 
 Notes to Consolidated Financial Statements
 Note 1. Nature of Business and Significant Accounting Policies
 Nature of business
  Use of estimates in the preparation of financial statements
 Principles of consolidation
 Cash and cash equivalents
 Investment in trading securities
 Accounts receivable
 Concentration of credit risk
 Inventories
 Property and equipment
 Useful livesBuilding and improvements
    
    
    7-39Machinery and equipment
    
    
    5-7Furniture and fixtures
    
    
    5-7Software
    
    
    3-5
 Patents
 Acquisition
costs:
 Impairment of long-lived assets
 F-8




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##### Table of Contents



Synergetics, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 1. Significant Accounting Policies (Continued)
 Deferred income taxes
 Fair value of financial instruments
 Revenue recognition
 Product warranty
 Advertising
 Royalties
 Earnings per share
 Stock compensation Accounting for
Stock-Based Compensation Accounting for Stock Issued to Employees. Accounting for Stock-Based Compensation  Transition and
Disclosure  an amendment of FASB Statement No. 123
 F-9




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##### Table of Contents



Synergetics, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 1. Significant Accounting Policies (Continued)
  2005
    
    2004
    
    2003Net income:As reported
    
    $
    1,457,712
    
    
    $
    1,093,575
    
    
    $
    1,090,530Pro forma
    
    
    1,448,153
    
    
    
    1,082,809
    
    
    
    1,083,063Earnings per share:As reportedBasic
    
    
    0.43
    
    
    
    0.32
    
    
    
    0.32Diluted
    
    
    0.42
    
    
    
    0.32
    
    
    
    0.32Pro formaBasic
    
    
    0.42
    
    
    
    0.32
    
    
    
    0.32Diluted
    
    
    0.42
    
    
    
    0.32
    
    
    
    0.32
 Reclassifications
 Note 2. Inventories
  2005
    
    2004Raw materials and component parts
    
    $
    2,398,238
    
    
    $
    1,170,205Work in progress
    
    
    1,295,976
    
    
    
    1,096,115Finished goods
    
    
    3,494,422
    
    
    
    2,547,762$
    7,188,636
    
    
    $
    4,814,082
 Note 3. Property and Equipment
  2005
    
    2004Land
    
    $
    729,753
    
    
    $
    729,753Building and improvements
    
    
    2,568,612
    
    
    
    2,562,027Machinery and equipment
    
    
    2,888,687
    
    
    
    2,221,297Furniture and fixtures
    
    
    266,225
    
    
    
    225,781Software
    
    
    39,734
    
    
    
    29,199Construction in progress
    
    
    1,688,355
    
    
    
    28,5578,181,366
    
    
    
    5,796,614Less accumulated depreciation
    
    
    1,698,059
    
    
    
    1,211,757$
    6,483,307
    
    
    $
    4,584,857
   Note 4. Accrued Expenses
  2005
    
    2004Payroll, commissions and employee benefits
    
    $
    401,684
    
    
    $
    566,929Royalties
    
    
    134,077
    
    
    
    271,977Other
    
    
    599,456
    
    
    
    429,970$
    1,135,217
    
    
    $
    1,268,876
 F-10




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##### Table of Contents



Synergetics, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 5. Pledged Assets, Short and Long-Term Debt
    2005
    
    2004Note payable to bank, due in monthly installments of $3,033
plus interest at prime rate (an effective rate of 6.25% as
of July 31, 2005), remaining balance due May 2007,
collateralized by substantially all assets of the Company
    
    $
    63,713
    
    
    $
    100,109Note payable to bank, due in monthly principal installments
of $7,083 plus interest at prime rate (an effective rate of
6.25% as of July 31, 2005), remaining balance due
June 2008, collateralized by machinery and equipment
    
    
    240,833
    
    
    
    325,833Note payable to bank, due in monthly principal installments
of $11,300 plus interest at prime rate (an effective rate of
6.25% as of July 31, 2005), remaining balance due
September 2008, collateralized by machinery and
equipment
    
    
    440,696
    
    
    
    Note payable to bank, due in monthly principal installments
of $1,139 plus interest at prime rate plus 1% (an effective
rate of 7.25% as of July 31, 2005), remaining balance due
September 2007, collateralized by a second deed of trust
    
    
    178,806
    
    
    
    192,472Note payable, due in monthly installments of $509
including interest at 4.9%, remaining balance
due May 2008, collateralized by a vehicle
    
    
    15,170
    
    
    
    21,280939,218
    
    
    
    639,694Less current maturities
    
    
    276,771
    
    
    
    140,275Long-term portion
    
    $
    662,447
    
    
    $
    499,419
  Year Ending July 31:
    
    Amount2006
    
    $
    276,7712007
    
    
    267,6922008
    
    
    360,8552009
    
    
    33,900$
    939,218
 F-11




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##### Table of Contents



Synergetics, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 6. Revenue Bonds Payable
     Year Ending July 31:
    
    Amount2006
    
    $
    248,7502007
    
    
    248,7502008
    
    
    248,7502009
    
    
    248,7502010
    
    
    248,750Thereafter
    
    
    3,393,542$
    4,637,292
 Note 7. Operating Leases
   Year Ending July 31:
    
    Amount2006
    
    $
    39,8002007
    
    
    37,6002008
    
    
    30,8002009
    
    
    24,1002010
    
    
    24,100$
    156,400
  F-12




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##### Table of Contents



Synergetics, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 8. Income Tax Matters
  2005
    
    2004Deferred tax assets:Accounts receivable
    
    $
    54,000
    
    
    $
    16,000Inventories
    
    
    59,000
    
    
    
    31,000Accrued liabilities
    
    
    44,000
    
    
    
    29,000157,000
    
    
    
    76,000Deferred tax liabilities:Property and equipment
    
    
    343,000
    
    
    
    277,000$
    (186,000
    )
    
    $
    (201,000
    )
  2005
    
    2004Current assets
    
    $
    157,000
    
    
    $
    76,000Long-term liabilities
    
    
    (343,000
    )
    
    
    (277,000
    )$
    (186,000
    )
    
    $
    (201,000
    )
  2005
    
    2004
    
    2003Currently payable
    
    $
    755,000
    
    
    $
    314,600
    
    
    $
    437,400Deferred
    
    
    (15,000
    )
    
    
    106,000
    
    
    
    95,000$
    740,000
    
    
    $
    420,600
    
    
    $
    532,400
  2005
    
    2004
    
    2003Computed at the statutory rate
    
    
    34.0
    %
    
    
    34.0
    %
    
    
    34.0
    %State taxes net of federal tax benefit
    
    
    8.2
    
    
    
    3.8
    
    
    
    8.2Extraterritorial income exclusion
    
    
    (4.0
    )
    
    
    (4.0
    )
    
    
    (1.2
    )Research and development
    
    
    (6.9
    )
    
    
    (8.8
    )
    
    
    (5.6
    )Other
    
    
    2.4
    
    
    
    2.8
    
    
    
    (2.5
    )33.7
    %
    
    
    27.8
    %
    
    
    32.9
    %
 Note 9. Employee Benefit Plan
  F-13




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##### Table of Contents



Synergetics, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 10. Stockholders Equity
     Note 11. Stock Based Compensation Plans
    2005
    
    
    2004
    
    
    2003Weighted-
    
    
    
    
    
    
    Weighted-
    
    
    
    
    
    
    Weighted-average
    
    
    
    
    
    
    average
    
    
    
    
    
    
    averageexercise
    
    
    
    
    
    
    exercise
    
    
    
    
    
    
    exerciseShares
    
    
    price
    
    
    Shares
    
    
    price
    
    
    Shares
    
    
    priceOutstanding at beginning of year
    
    
    33,916
    
    
    $
    2.33
    
    
    
    19,916
    
    
    $
    1.46
    
    
    
    12,666
    
    
    $
    1.89Granted
    
    
    24,584
    
    
    
    4.00
    
    
    
    14,000
    
    
    
    3.57
    
    
    
    7,250
    
    
    
    0.69Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Outstanding at end of year
    
    
    58,500
    
    
    
    3.03
    
    
    
    33,916
    
    
    
    2.33
    
    
    
    19,916
    
    
    
    1.46Exercisable at end of year
    
    
    21,666
    
    
    
    
    
    
    
    9,166
    
    
    
    
    
    
    
    Weighted-average fair value
per award of awards granted
during the year
    
    $
    2.97
    
    
    
    
    
    
    $
    2.22
    
    
    
    
    
    
    $
    2.84
 F-14




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##### Table of Contents



Synergetics, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 11. Stock Based Compensation Plans (Continued)
  Options and Restricted Stock OutstandingWeighted-averageNumber
    
    remaining
    
    NumberRange of Exercise Price
    
    outstanding
    
    contractual life
    
    exercisable$  
    
    
    15,416
    
    
    1.3 years
    
    
    9,166$4.00
    
    
    13,500
    
    
    6.8 years
    
    
    12,500$5.00
    
    
    29,584
    
    
    8.1 years
    
    
    
 Note 12. Research and Development Costs
  Note 13. Enterprise-Wide Disclosures
  Years Ended July 31,2005
    
    2004
    
    2003Ophthalmic
    
    $
    17,752,231
    
    
    $
    14,061,273
    
    
    $
    11,899,812Neurosurgery
    
    
    4,039,351
    
    
    
    2,826,105
    
    
    
    1,116,899$
    21,791,582
    
    
    $
    16,887,378
    
    
    $
    13,016,711
  Years Ended July 31,2005
    
    2004
    
    2003United States
    
    $
    16,383,432
    
    
    $
    13,462,161
    
    
    $
    10,395,227International
    
    
    5,408,150
    
    
    
    3,425,217
    
    
    
    2,621,484$
    21,791,582
    
    
    $
    16,887,378
    
    
    $
    13,016,711
  Note 14. Commitments and Contingencies
    F-15




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##### Table of Contents



Synergetics, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 15. Quarterly Financial Data (Unaudited)
 Quarters Ended
    
    July 31, 2005
    
    April 29, 2005
    
    January 31, 2005
    
    October 28, 2004Net Sales
    
    $
    5,719,939
    
    
    $
    5,750,074
    
    
    $
    5,346,962
    
    
    $
    4,974,607Gross Profit
    
    
    3,326,914
    
    
    
    3,529,413
    
    
    
    3,366,955
    
    
    
    3,279,416Income from Operations
    
    
    323,952
    
    
    
    710,902
    
    
    
    706,771
    
    
    
    641,648Net Income
    
    
    275,614
    
    
    
    387,278
    
    
    
    423,597
    
    
    
    371,223Earnings per ShareBasic
    
    $
    0.08
    
    
    $
    0.11
    
    
    $
    0.12
    
    
    $
    0.11Diluted
    
    $
    0.08
    
    
    $
    0.11
    
    
    $
    0.12
    
    
    $
    0.11Basic weighted average
common shares outstanding
    
    
    3,456,773
    
    
    
    3,456,773
    
    
    
    3,411,364
    
    
    
    3,411,364Diluted weighted average
common shares outstanding
    
    
    3,437,803
    
    
    
    3,444,092
    
    
    
    3,424,045
    
    
    
    3,424,045
 Note 16. Recent Accounting Pronouncements
 FASB Statement No. 150, Accounting for Certain Financial Instruments with Characteristics of
both Liabilities and Equity Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity
  FASB Statement No. 151, Inventory Costs Inventory Costs .
 FASB Statement No. 153, Exchange of Nonmonetary Assets Exchange of Nonmonetary Assets
 F-16




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##### Table of Contents



Synergetics, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 16. Recent Accounting Pronouncements (Continued)
 FASB Statement No. 123 (revised 2004), Share-Based Payment : Share-Based
Payment Accounting for
Stock-Based Compensation Accounting for Stock Issued to
Employees
     Note 17. Subsequent Events
   
 F-17




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##### Table of Contents



Synergetics, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 17. Subsequent Events (Continued)
   F-18




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##### Table of Contents




    
    the unaudited pro forma condensed combined balance sheet assuming the merger between
Valley Forge and Synergetics occurred as of the balance sheet dates presented; and
    
    the unaudited pro forma condensed combined statement of
income for the year ended July 31, 2005, for Synergetics, Inc. and for the year
ended June 30, 2005, for Valley Forge (which was derived by taking the year ended
September 30, 2004 less the nine months ended June 30, 2004 and adding the
nine months ended June 30, 2005), assuming the merger between Synergetics and
Valley Forge occurred as of the beginning of the periods presented.
   F-19




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##### Table of Contents



Unaudited Pro Forma Condensed Combined Balance Sheet
 Synergetics, Inc.
    
    Valley Forgeand
    
    Scientific Corp.Subsidiaries
    
    and Subsidiary
    
    Pro Forma
    
    
    
    
    
    Pro FormaJuly 31, 2005
    
    June 30, 2005
    
    Adjustments
    
    
    
    
    
    CombinedASSETSCash and cash equivalents
    
    $
    1,816,823
    
    
    $
    2,386,742
    
    
    
    
    
    
    
    
    
    
    $
    4,203,565Investment in trading securities
    
    
    29,333
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29,333Accounts receivable
    
    
    3,344,214
    
    
    
    941,778
    
    
    
    
    
    
    
    
    
    
    
    4,285,992Inventories
    
    
    7,188,636
    
    
    
    792,385
    
    
    
    50,000
    
    
    
    c
    
    
    
    8,031,021Other current assets
    
    
    377,903
    
    
    
    210,852
    
    
    
    
    
    
    
    
    
    
    
    588,755Total current assets
    
    
    12,756,909
    
    
    
    4,331,757
    
    
    
    50,000
    
    
    
    
    
    
    
    17,138,666Property and
equipment
    
    
    6,483,307
    
    
    
    221,101
    
    
    
    
    
    
    
    
    
    
    
    6,704,408Other assets
    
    
    
    
    
    
    49,659
    
    
    
    
    
    
    
    
    
    
    
    49,659Goodwill
    
    
    
    
    
    
    153,616
    
    
    
    (153,616
    )
    
    
    b
    
    
    
    10,169,21610,169,216
    
    
    
    hIntangible and other assets
    
    
    481,101
    
    
    
    187,875
    
    
    
    5,788,000
    
    
    
    d
    
    
    
    11,176,9764,475,000
    
    
    
    f245,000
    
    
    
    gAcquisition costs
    
    
    394,452
    
    
    
    
    
    
    
    (394,452
    )
    
    
    iTotal
assets
    
    $
    20,115,769
    
    
    $
    4,944,008
    
    
    $
    20,179,148
    
    
    
    
    
    
    $
    45,238,925LIABILITIES AND STOCKHOLDERS EQUITYCurrent maturities of notes and
revenue bonds payable
    
    $
    525,521
    
    
    $
    
    
    
    $
    457,608
    
    
    
    e
    
    
    $
    983,129Lines-of-credit
    
    
    235,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    235,000Accounts payable, accrued expenses
and income taxes payable
    
    
    3,208,452
    
    
    
    479,603
    
    
    
    
    
    
    
    
    
    
    
    3,688,055Total current liabilities
    
    
    3,968,973
    
    
    
    479,603
    
    
    
    457,608
    
    
    
    
    
    
    
    4,906,184Long-term liabilities, excluding deferred taxes
    
    
    5,665,000
    
    
    
    0
    
    
    
    2,930,392
    
    
    
    e
    
    
    
    8,595,392Deferred income taxes
    
    
    343,000
    
    
    
    15,313
    
    
    
    2,667,240
    
    
    
    j
    
    
    
    3,025,553Stockholders equity:Common stock
    
    
    59,047
    
    
    
    3,589,130
    
    
    
    (3,589,130
    )
    
    
    k
    
    
    
    23,888(35,159
    )
    
    
    mAdditional paid-in capital
    
    
    4,985,936
    
    
    
    
    
    
    
    18,300,156
    
    
    
    n
    
    
    
    23,286,092Retained earnings
    
    
    5,401,816
    
    
    
    859,962
    
    
    
    (859,962
    )
    
    
    k
    
    
    
    5,401,816Treasury stock
    
    
    (308,003
    )
    
    
    
    
    
    
    308,003
    
    
    
    l
    
    
    
    Total stockholders equity
    
    
    10,138,796
    
    
    
    4,449,092
    
    
    
    14,123,908
    
    
    
    
    
    
    
    28,711,796Total liabilities and stockholders
equity
    
    $
    20,115,769
    
    
    $
    4,944,008
    
    
    $
    20,179,148
    
    
    
    
    
    
    $
    45,238,925
  F-20




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##### Table of Contents



Issuance of Valley Forge shares (approximately 7.9 million shares at $2.16)
    
    $
    17,125,000Estimated
fair value of stock options (Risk-free interest rate of 4.00%, 0%
dividend yield, 79.70%
volatility factor of the expected market price of Valley Forges common stock
and 10 year expected life of option)
    
    
    748,000Estimated transaction costs
    
    
    700,000$
    18,573,000The consideration was allocated as follows:(a) Valley Forge historical carrying value of net assets
    
    $
    4,449,092(b) Elimination of Valley Forges historical goodwill
    
    
    (153,616
    )(c) Adjust inventory to market value
    
    
    50,000(d) Estimated fair value of trademark, intangible
    
    
    5,788,000(e) Note payable in conjunction with the exercise of option to acquire rights to trademark
    
    
    (3,388,000
    )(f) Estimated fair value of proprietary technology, intangible
    
    
    4,475,000(g) Estimated fair value of Stryker minimum purchase obligation
    
    
    245,000(h) Estimated goodwill
    
    
    10,169,216(i) Reclassification of acquisition costs to goodwill
    
    
    (394,452
    )(j) Estimated deferred income taxes, net
    
    
    (2,667,240
    )$
    18,573,000Additional notes regarding stockholders equity adjustments:(k) Elimination of Valley Forges no par value common stock and retained earnings.(l) Elimination of Synergetics, Inc. treasury stock as is contemplated in the merger agreement.(m) Establishing par value of $0.001 on estimated outstanding stock of 23,887,624 shares.(n) Establishing fair value of Valley Forges stock on date of the merger.
 F-21




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##### Table of Contents



TM TM TM
   F-22




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##### Table of Contents



Unaudited Pro
Forma Condensed Combined Statement of Income
 Synergetics andSynergetics, Inc.
    
    Valley Forge Scientific Corp.
    
    Valley Forgeand Subsidiaires
    
    and
Subsidiary
    
    Twelve MonthsTwelve Months
    
    Nine Months
    
    Three Months
    
    CombinedEnded
    
    Ended
    
    Ended
    
    BeforeJuly 31,
    
    June 30,
    
    September 30,
    
    Pro Forma
    
    Pro Forma
    
    
    
    
    
    Pro Forma2005
    
    2005
    
    2004(h)
    
    Adjustments
    
    Adjustments
    
    
    
    
    
    CombinedSales
    
    $
    21,791,582
    
    
    $
    4,926,387
    
    
    $
    1,149,810
    
    
    $
    27,867,779
    
    
    
    
    
    
    
    
    
    
    $
    27,867,779Cost of sales
    
    
    8,288,884
    
    
    
    2,221,128
    
    
    
    627,068
    
    
    
    11,137,080
    
    
    
    50,000
    
    a
    
    
    
    
    
    11,187,080Gross profit
    
    
    13,502,698
    
    
    
    2,705,259
    
    
    
    522,742
    
    
    
    16,730,699
    
    
    
    (50,000
    )
    
    
    
    
    
    
    16,680,699Operating expenses
Selling, general and administrative
    
    
    10,261,627
    
    
    
    1,996,153
    
    
    
    437,254
    
    
    
    12,695,034
    
    
    
    (518,965
    )
    b
    
    

    
    
    
    12,614,584356,848
    
    c81,667
    
    dResearch and development
    
    
    857,798
    
    
    
    454,752
    
    
    
    152,625
    
    
    
    1,465,175
    
    
    
    
    
    
    
    
    
    
    
    1,465,17511,119,425
    
    
    
    2,450,905
    
    
    
    589,879
    
    
    
    14,160,209
    
    
    
    (80,450
    )
    
    
    
    
    
    
    14,079,759Operating income
    
    
    2,383,273
    
    
    
    254,354
    
    
    
    (67,137
    )
    
    
    2,570,490
    
    
    
    30,450
    
    
    
    
    
    
    
    2,600,940Other income (expense), net
    
    
    (185,561
    )
    
    
    (10,205
    )
    
    
    6,124
    
    
    
    (189,642
    )
    
    
    (182,008
    )
    e
    
    
    
    
    
    (371,650
    )Pre-tax income
    
    
    2,197,712
    
    
    
    244,149
    
    
    
    (61,013
    )
    
    
    2,380,848
    
    
    
    (151,558
    )
    
    
    
    
    
    
    2,229,290Provision for income taxes
    
    
    740,000
    
    
    
    105,083
    
    
    
    (26,869
    )
    
    
    818,214
    
    
    
    (51,199
    )
    f
    
    
    
    
    
    767,015Net income
    
    $
    1,457,712
    
    
    $
    139,066
    
    
    $
    (34,144
    )
    
    $
    1,562,634
    
    
    $
    (100,359
    )
    
    
    
    
    
    $
    1,462,275Earnings per share:Basic
    
    $
    0.43
    
    
    $
    0.02
    
    
    $
    (0.00
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    0.06Diluted
    
    $
    0.42
    
    
    $
    0.02
    
    
    $
    (0.00
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    0.06Basic weighted average shares
    
    
    3,424,030
    
    
    
    7,915,558
    
    
    
    7,913,712
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,889,470
    gDiluted weighted average shares
    
    
    3,443,000
    
    
    
    8,000,895
    
    
    
    7,973,624
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,974,807
    g
  F-23




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##### Table of Contents



a)
    
    To record $50,000 for the annual period of additional cost of goods resulting from
the adjustment to Valley Forges inventories based on the adjustment of such assets to
fair value as discussed in Note (c) of the Notes to the Unaudited Pro Forma Condensed
Consolidated Balance Sheet. We have assumed a six month life for the finished goods
inventories.b)
    
    To eliminate Valley Forges one-time merger related professional fees as these would
have not been expensed once the purchase price allocation is complete.c)
    
    To record $356,848 for the annual period of amortization expense resulting from the
adjustment to Valley Forges proprietary technology based on the adjustment of such assets
to fair value as discussed in Note (a) of the Notes to the Unaudited Pro Forma Condensed
Consolidated Balance Sheet. For purposes of amortization expense recorded above, we have
allocated $4,475,000 to proprietary technology and we have assumed an estimated remaining
useful life of 7 to 15 years.d)
    
    To record $81,667 for the annual period of amortization expense resulting from the
adjustment to Valley Forges contractual minimum purchase obligation from Stryker. For
purposes of the amortization expense recorded above, we have allocation $245,000 to this
guarantee and we have assumed a 3 year useful life.e)
    
    To record interest expense on the note payable (at an 6% imputed interest rate)
assumed in conjunction with the exercise of the operation agreement with respect to the
Malis® trademark.f)
    
    Represent the aggregate pro forma statutory tax effect (33.8% for the annual period)
of notes a-e above. These rates are the combined effective tax rate for Synergetics, Inc.
and Valley Forge prior to the pro forma adjustments.g)
    
    Represents the addition of the 15,973,912 shares of Valley Forge common stock issued to Synergetics shareholders pursuant to the merger agreement. The
reconciliation is as follows:
 AnnualBasic:Valley Forges weighted
average common shares
    
    
    
    7,915,558Merger consideration
    
    
    
    15,973,91223,889,470Diluted:Valley Forges weighted
average common shares
    
    
    
    8,000,895Merger consideration
    
    
    
    15,973,91223,974,807
 h)
    
    Derived from the year ended September 30, 2004 less nine months ended June 30, 2004 to
derive the three months ended September 30, 2004 as follows:
 Valley Forge Scientific Corp. and SubsidiaryNine Months
    
    Three MonthsYear Ended
    
    Ended
    
    EndedSeptember 30,
    
    June 30,
    
    September 30,2004
    
    2004
    
    2004Sales
    
    $
    4,756,439
    
    
    $
    3,606,629
    
    
    $
    1,149,810Cost of sales
    
    
    2,316,304
    
    
    
    1,689,236
    
    
    
    627,068Gross Profit
    
    
    2,440,135
    
    
    
    1,917,393
    
    
    
    522,742Operating expenses:Selling, general and
administrative
    
    
    1,753,794
    
    
    
    1,316,540
    
    
    
    437,254Research and development
    
    
    508,287
    
    
    
    355,662
    
    
    
    152,6252,262,081
    
    
    
    1,672,202
    
    
    
    589,879Operating income (loss)
    
    
    178,054
    
    
    
    245,191
    
    
    
    (67,137
    )Other income (expense), net
    
    
    23,030
    
    
    
    16,906
    
    
    
    6,124Pre-tax income (loss)
    
    
    201,084
    
    
    
    262,097
    
    
    
    (61,013
    )Provision for income taxes
    
    
    89,664
    
    
    
    116,533
    
    
    
    (26,869
    )Net income (loss)
    
    $
    111,420
    
    
    $
    145,564
    
    
    $
    (34,144
    )
 F-24




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##### Table of Contents



Synergetics, Inc. and Subsidiaries
Schedule II  Valuation and Qualifying Accounts
 Balance at
    
    
    Charged to
    
    
    Charged toBeginning of
    
    
    Cost and
    
    
    Other
    
    
Deductions
    
    
    Balance at EndClassifications
    
    Year
    
    
    Expenses
    
    
    Accounts
    
    

from
Reserves*
    
    
    of YearYear ended July 31, 2003Allowance for Doubtful Accounts
    
    $
    40,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    40,000Year ended July 31, 2004Allowance for Doubtful Accounts
    
    $
    40,000
    
    
    $
    7,510
    
    
    $
    
    
    
    $
    (7,510
    )
    
    $
    40,000Year ended July 31, 2005Allowance for Doubtful Accounts
    
    $
    40,000
    
    
    $
    123,798
    
    
    $
    
    
    
    $
    (28,798
    )
    
    $
    135,000
 
 *
    
    Adjustments represent write-offs of uncollectible accounts
receivable. F-25




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##### Table of Contents



Synergetics USA, Inc.(registrant)October 31, 2005/s/ Pamela G. BoonePamela G. Boone, Executive Vice President, Chief
Financial Officer, Secretary and Treasurer
  October 31, 2005/s/ Gregg D. SchellerGregg D. Scheller, President and Chief Executive
Officer (Principal Executive Officer) and DirectorOctober 31, 2005
    
    /s/ Pamela G. BoonePamela G. Boone, Executive Vice President, Chief
Financial Officer, Secretary and Treasurer (Principal Financial
and Accounting Officer)October 31, 2005
    
    /s/ Lawrence C. CardinaleLawrence C. Cardinale, DirectorOctober 31, 2005Robert H. Dick, DirectorOctober 31, 2005
    
    /s/ Kurt W. Gampp, Jr.Kurt W. Gampp, Jr., DirectorOctober 31, 2005
    
    /s/ Guy GuarchGuy Guarch, DirectorOctober 31, 2005
    
    /s/ Juanita H. HinshawJuanita H. Hinshaw, DirectorOctober 31, 2005
    
    /s/ Jerry L. MalisJerry L. Malis, Director




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##### Table of Contents



Index to Exhibits
 ExhibitNumber
    
    Description2.1
    
    Agreement and Plan of Merger by and among Valley Forge
Scientific Corp. (Valley Forge), Synergetics Acquisition
Corporation and Synergetics, Inc. dated May 2, 2005.
(Filed as Exhibit 2.1 to Valley Forges Current Report on
Form 8-K filed on May 4, 2005 and incorporated herein by
reference.)2.2
    
    Amendment No. 1 to Agreement and Plan of Merger by and
among Valley Forge, Synergetics Acquisition Corporation and
Synergetics, Inc. dated June 2, 2005. (Filed as Exhibit
2.1 to Valley Forges Current Report on Form 8-K filed on
June 3, 2005 and incorporated herein by reference.)2.3
    
    Amendment No. 2 to Agreement and Plan of Merger by and
among Valley Forge, Synergetics Acquisition Corporation and
Synergetics, Inc. dated July 15, 2005. (Filed as Exhibit
2.1 to Valley Forges Current Report on Form 8-K filed on
July 15, 2005 and incorporated herein by reference.)2.4
    
    Agreement and Plan of Reincorporation Merger, dated as of
September 22, 2005, between Valley Forge and VFSC Delaware,
Inc. (Filed as Exhibit 2.1 to the Registrants Current
Report on Form 8-K filed on September 27, 2005 and
incorporated herein by reference.)3.1
    
    Amended and Restated Certificate of Incorporation of the
Registrant. (Filed as Exhibit 3.1 to the Registrants
Current Report on Form 8-K filed on September 27, 2005 and
incorporated herein by reference.)3.2
    
    Amended and Restated Bylaws of the Registrant. (Filed as
Exhibit 3.2 to the Registrants Current Report on Form 8-K
filed on September 27, 2005 and incorporated herein by
reference.)4.1
    
    Form of common stock certificate of the Registrant. (Filed
as Exhibit 4.1 to the Registrants Current Report on Form
8-K filed on September 27, 2005 and incorporated herein by
reference.)10.1
    
    Valley Forge Scientific Corp. Amended and Restated 2001
Stock Plan. (Filed as Annex C the registrants
Registration Statement on Form S-4, Registration No.
333-125521 and incorporated herein by reference.)10.2
    
    Valley Forge Scientific Corp. 2000 Non-Employee Directors
Stock Option Plan. (Filed as Exhibit 4.3 to Valley Forges
Registration Statement on Form S-8, Registration No.
333-72134 and incorporated herein by reference.)10.3
    
    Valley Forge Scientific Corp. 1988 Non-Qualified Employee
Stock Option Plan, as amended. (Filed as Exhibit 10.1 to
Valley Forges Registration Statement on Form S-8,
Registration No. 333-63637 and incorporated herein by
reference).10.4
    
    Valley Forge Scientific Corp. 2005 Non-Employee Directors
Stock Option Plan. (Filed as Annex D to the Registrants
Registration Statement on Form S-4, Registration No.
333-125521 and incorporated herein by reference.)




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##### Table of Contents



ExhibitNumber
    
    Description10.5
    
    401(k) and Profit-Sharing Plan. (Filed as Exhibit 10(x) to
Valley Forges Registration Statement on Form S-18,
Registration No. 33-35668-NY and incorporated herein by
reference.)10.6
    
    Employment Agreement, dated as of September 21, 2005,
between Valley Forge and Gregg D. Scheller. (Filed as
Exhibit 10.1 to the Registrants Current Report on Form 8-K
filed on September 27, 2005 and incorporated herein by
reference.)10.7
    
    Employment Agreement, dated as of September 21, 2005,
between Valley Forge and Jerry L. Malis. (Filed as Exhibit
10.2 to the Registrants Current Report on Form 8-K filed
on September 27, 2005 and incorporated herein by
reference.)10.8
    
    Employment Agreement, dated as of September 21, 2005,
between Valley Forge and Kurt W. Gampp, Jr. (Filed as
Exhibit 10.3 to the Registrants Current Report on Form 8-K
filed on September 27, 2005 and incorporated herein by
reference.)10.9
    
    Shareholders Agreement, dated as of September 21, 2005,
between Valley Forge and each of Gregg D. Scheller, Donna
M. Scheller, Kurt W. Gampp, Jr., Jerry L. Malis and the Leonard Malis and Ruth Malis Family Limited Partnership,
individually and/or through revocable trusts or family
partnerships. (Filed as Exhibit 10.4 to the Registrants
Current Report on Form 8-K filed on September 27, 2005 and
referenced in the Registrants Current Report on Form 8-K filed
on October 18, 2005 and
incorporated herein by reference.)10.10
    
    Assignment of Know-How Agreement, dated June 30, 1989.
(Filed as Exhibit 10(I) to Valley Forges Registration
Statement on Form S-18, Registration No. 33-35668-NY and
incorporated herein by reference.)10.11
    
    Assignment of Patents  Bipolar Electrosurgical Systems,
June 30, 1989. (Filed as Exhibit 10(h) to Valley Forges
Registration Statement on Form S-18, Registration No.
33-31008-NY and incorporated herein by reference.)10.12
    
    Assignment of Patents  Binocular Magnification System,
June 30, 1989. (Filed as Exhibit 10(i) to Valley Forges
Registration Statement on Form S-18, Registration No.
33-31008-NY and incorporated herein by reference.)10.13
    
    Assignment of Malis® trademark, dated June 30, 1989.
(Filed as Exhibit 10(j) to Valley Forges Registration
Statement on Form S-18, Registration No. 33-31008-NY and
incorporated herein by reference.)10.14
    
    Option Agreement for Malis® Trademark with Leonard I. Malis
dated October 22, 2004. (Filed as Exhibit 10.14 to Valley
Forges Annual Report on Form 10-K for the year ended
September 30, 2004 and incorporated herein by reference.)10.15
    
    Promissory Note from the Company and Synergetics IP, Inc.
to the Estate of Dr. Leonard I. Malis dated October 12,
2005 in the Principal Amount of $3,997,600. (Filed as
Exhibit 10.1 to the Registrants Current Report on Form 8-K
filed on October 18, 2005 and incorporated herein by
reference.)10.16
    
    Promissory Note from Jerry L. Malis to Valley Forge.
(Filed as Exhibit 10(k) to Valley Forges Annual Report on
Form 10-K for the year ended September 30, 1994 and
incorporated herein by reference.)10.17
    
    Promissory Note from Jerry L. Malis to Valley Forge.
(Filed as Exhibit 10(p) to Valley Forges Annual Report on
Form 10-K for the year ended September 30, 1998 and
incorporated herein by reference.)10.18
    
    Commercial Lease Agreement between GMM Associates and
Valley Forge dated July 1, 1995. (Filed as Exhibit 10(p)
to Valley Forges Annual Report on Form 10-K for the year
ended September 30, 1995 and incorporated herein by
reference.)10.19
    
    Addendum to Commercial Lease Agreement between Valley Forge
and GMM Associates dated as of July 1, 2000. (Filed as
Exhibit 10.2 to Valley Forges Quarterly Report on Form
10-Q for the quarter ended December 31, 2000 and
incorporated herein by reference.)10.20
    
    Agreement with Codman & Shurtleff, Inc. dated October 15,
2004. (Filed as Exhibit 10.12 to Valley Forges Annual
Report on Form 10-K for the year ended September 30, 2004
and incorporated herein by reference.)




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##### Table of Contents



ExhibitNumber
    
    Description10.21
    
    Amendment No. 1 to the Agreement dated as of October 1,
2004 between Valley Forge and Codman & Shurtleff, Inc.
(Filed as Exhibit 10(a) to Valley Forges Current Report on
Form 8-K filed on March 16, 2005 and incorporated herein by
reference.)10.22
    
    Supply and Distribution Agreement with Stryker Corporation
dated October 25, 2004. (Filed as Exhibit 10.13 to Valley
Forges Annual Report on Form 10-K for the year ended
September 30, 2004 and incorporated herein by reference.)10.23
    
    Agreement of Lease between Liberty Property Limited
Partnership and Valley Forge. (Filed as Exhibit 10.16 to
Valley Forges to Registration Statement on Form S-4,
Registration No. 333-125521 and incorporated herein by
reference.)10.24
    
    Agreement for Sale of Commercial Real Estate between
Diversified Electronics Co., Inc. and Steve Smith, dated
April 21, 2005. (Filed as Exhibit 10.17 to Valley Forges
Registration Statement on Form S-4, Registration No.
333-125521 and incorporated herein by reference.)10.25*
    
    Loan Agreement between The Industrial Development Authority
of St. Charles County, Missouri and Synergetics Development
Company, L.L.C. dated as of September 1, 2002.10.26*
    
    Promissory Note from Synergetics Development Company,
L.L.C. to The Industrial Development Authority of St.
Charles County, Missouri dated September 1, 2002 in the
Principal Amount of $2,645,000.10.27*
    
    Security Agreement (Equipment) dated as of September 1,
2002 from Synergetics, Inc. for the benefit of The
Industrial Development Authority of St. Charles County,
Missouri.10.28*
    
    Future Advance Deed of Trust and Security Agreement dated
as of September 1, 2002 between Synergetics Development
Company, L.L.C. and Victor Zarrilli, as trustee, and The
Industrial Development Authority of St. Charles County,
Missouri.10.29*
    
    Guaranty Agreement dated as of September 1, 2002 by and
among William L. Bates, Gregg D. Scheller and Kurt W.
Gampp, Jr. and Synergetics, Inc. and The Industrial
Development Authority of St. Charles County, Missouri.10.30*
    
    Guaranty of Unassigned Issuers Rights dated as of
September 1, 2002 by and among William L. Bates, Gregg D.
Scheller and Kurt W. Gampp, Jr. and Synergetics, Inc. and
The Industrial Development Authority of St. Charles County,
Missouri.10.31*
    
    Bond Purchase Agreement dated as of September 1, 2002 by
and among The Industrial Development Authority of St.
Charles County, Missouri, Union Planters Bank, N.A. and
Synergetics Development Company, L.L.C.10.32*
    
    First Supplemental Loan Agreement between The Industrial
Development Authority of St. Charles County, Missouri and
Synergetics Development Company, L.L.C. dated as of
December 1, 2004.10.33*
    
    Promissory Note from Synergetics Development Company,
L.L.C. to The Industrial Development Authority of St.
Charles County, Missouri dated December 1, 2004 in the
Principal Amount of $2,330,000.10.34*
    
    First Supplemental Future Advance Deed of Trust and
Security Agreement dated as of December 1, 2004 between
Synergetics Development Company, L.L.C. and Victor
Zarrilli, as trustee, and The Industrial Development
Authority of St. Charles County, Missouri.10.35*
    
    First Supplemental Guaranty of Unassigned Issuers Rights
dated as of December 1, 2004 by and between Synergetics,
Inc. and the Industrial Development Authority of St.
Charles County, Missouri.10.36*
    
    Bond Purchase Agreement dated as of December 1, 2004 by and
among The Industrial Development Authority of St. Charles
County, Missouri, Union Planters Bank, N.A. and Synergetics
Development Company, L.L.C.




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##### Table of Contents



ExhibitNumber
    
    Description10.37*
    
    Business Loan Agreement dated September 30, 2005 made and
executed between Synergetics, Inc. and Union Planters Bank
NA for Principal Amount of $1,000,000.10.38*
    
    Change in Terms Agreement dated as of September 30, 2005 by
Synergetics, Inc. in favor of Union Planters Bank NA in the
Principal Amount of $1,000,000.10.39*
    
    Commercial Guaranty made by Synergetics USA, Inc. regarding
Indebtedness of Synergetics, Inc. to Union Planters Bank NA
for Principal Amount of $1,000,000.10.40*
    
    Commercial Security Agreement dated September 30, 2005
between Synergetics, Inc. and Union Planters Bank NA
regarding Indebtedness of Synergetics, Inc. to Union
Planters Bank NA for Principal Amount of $1,000,000.10.41*
    
    Business Loan Agreement dated March 10, 2000 made and
executed between Synergetics, Inc. and Union Planters Bank
NA for Principal Amount of $1,250,000.10.42*
    
    Change in Terms Agreement dated as of February 15, 2005 by
Synergetics, Inc. in favor of Union Planters Bank NA in the
Principal Amount of $1,250,000.10.43*
    
    Commercial Security Agreement dated March 10, 2000 between
Synergetics, Inc. and Union Planters Bank NA regarding
Indebtedness of Synergetics, Inc. to Union Planters Bank NA
for Principal Amount of $1,250,000.10.44*
    
    Business Loan Agreement dated as of September 30, 2005
between Synergetics, Inc. and Union Planters Bank NA for
Principal Amount of $1,427,105.10.45*
    
    Promissory Note dated as of September 30, 2005 by
Synergetics, Inc. in favor of Union Planters Bank NA in the
Principal Amount of $1,427,105.10.46*
    
    Commercial Guaranty made by Synergetics USA, Inc. regarding
Indebtedness of Synergetics, Inc. to Union Planters Bank NA
for Principal Amount of $1,427,105.10.47*
    
    Commercial Security Agreement dated September 30, 2005
between Synergetics, Inc. and Union Planters Bank NA in the
Principal Amount of $1,427,105.14.1
    
    Code of Business Conduct and Ethics of the Registrant.
(Filed as Exhibit 14.1 to the Registrants Current Report
on Form 8-K filed on September 27, 2005 and incorporated
herein by reference.)16
    
    Letter from Rotenberg Meril Solomon Bertiger & Guttilla,
P.C. (Filed as Exhibit 16.1 to the Registrants Current
Report on Form 8-K filed on October 26, 2005 and
incorporated herein by reference).21*
    
    Subsidiaries of Registrant.23.1*
    
    Consent of McGladrey & Pullen, LLP.23.2*
    
    Consent of MPP&W, P.C.31.1*
    
    Certification of the Registrants Chief Executive Officer
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2*
    
    Certification of the Registrants Chief Financial Officer
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1*
    
    Certification of the Registrants Chief Executive Officer
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2*
    
    Certification of the Registrants Chief Financial Officer
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 *
    
    Filed herewith