##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended January 31, 2010
 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
    
    20-5715943(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)
 þ o
 o o
  Large Accelerated Filer o   
    Accelerated Filer o
    Non-Accelerated Filer o
    Smaller Reporting Company þ(Do not check if a smaller reporting company)
 o þ




---



##### 



PagePART I Financial Information
    
    1Item 1. Unaudited Condensed Consolidated Financial Statements
    
    1Balance Sheets as of January 31, 2010 and July 31, 2009
    
    1Statements of Income for the three and six months ended
January 31, 2010 and February 3, 2009
    
    2Statements of Cash Flows for the six months ended January 31,
2010 and February 3, 2009
    
    3Notes to Unaudited Condensed Consolidated Financial Statements
    
    4Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    13Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    25Item 4. Controls and Procedures
    
    26PART II Other Information
    
    26Item 1. Legal Proceedings
    
    26Item 1A. Risk Factors
    
    27Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    27Item 3. Defaults Upon Senior Securities
    
    27Item 4. Submission of Matters to a Vote of Security Holders
    
    27Item 5. Other Information
    
    28Item 6. Exhibits
    
    28Trademark Acknowledgements
    
    28Signatures
    
    29Certification of Principal Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002Certification of Chief Financial Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002Certification of Principal Executive Officer Pursuant to Section 906 of Sarbanes-Oxley Act of 2002Certification of Chief Financial Officer Pursuant to Section 906 of Sarbanes-Oxley Act of 2002




---



##### Table of Contents



Part I  Financial Information
 
 Item 1  Unaudited Condensed Consolidated Financial Statements
 Synergetics USA, Inc. and Subsidiaries
 
 Condensed Consolidated Balance Sheets
 As of January 31, 2010 (Unaudited) and July 31, 2009
 (Dollars in thousands, except share information)
 January 31, 2010
    
    
    July 31, 2009AssetsCurrent AssetsCash and cash equivalents
    
    $
    478
    
    
    $
    160Accounts receivable, net of allowance for
doubtful accounts of $277 and $330,
respectively
    
    
    8,722
    
    
    
    9,105Inventories
    
    
    14,418
    
    
    
    15,025Prepaid expenses
    
    
    661
    
    
    
    416Deferred income taxes
    
    
    608
    
    
    
    654Total current assets
    
    
    24,887
    
    
    
    25,360Property and equipment, net
    
    
    7,673
    
    
    
    7,914Goodwill
    
    
    10,690
    
    
    
    10,690Other intangible assets, net
    
    
    12,743
    
    
    
    13,135Patents, net
    
    
    940
    
    
    
    918Cash value of life insurance
    
    
    63
    
    
    
    63Total assets
    
    $
    56,996
    
    
    $
    58,080Liabilities and Stockholders EquityCurrent LiabilitiesExcess of outstanding checks over bank balance
    
    $
    288
    
    
    $
    75Lines-of-credit
    
    
    3,563
    
    
    
    5,035Current maturities of long-term debt
    
    
    1,873
    
    
    
    1,856Current maturities of revenue bonds payable
    
    
    249
    
    
    
    249Accounts payable
    
    
    1,746
    
    
    
    1,822Accrued expenses
    
    
    2,451
    
    
    
    2,874Income taxes payable
    
    
    26
    
    
    
    37Total current liabilities
    
    
    10,196
    
    
    
    11,948Long-Term LiabilitiesLong-term debt, less current maturities
    
    
    2,124
    
    
    
    2,665Revenue bonds payable, less current maturities
    
    
    3,301
    
    
    
    3,414Deferred income taxes
    
    
    1,667
    
    
    
    1,923Total long-term liabilities
    
    
    7,092
    
    
    
    8,002Total liabilities
    
    
    17,288
    
    
    
    19,950Commitments and contingencies (Note 7)Stockholders EquityCommon stock at January 31, 2010 and July 31,
2009, $0.001 par value, 50,000,000 shares
authorized; 24,687,056 and 24,454,256 shares
issued and outstanding, respectively
    
    
    25
    
    
    
    24Additional paid-in capital
    
    
    24,678
    
    
    
    24,520Retained earnings
    
    
    15,005
    
    
    
    13,586Total stockholders equity
    
    
    39,708
    
    
    
    38,130Total liabilities and stockholders equity
    
    $
    56,996
    
    
    $
    58,080
  1




---



##### Table of Contents



Synergetics USA, Inc. and Subsidiaries
 
 Unaudited Condensed Consolidated Statements of Income
 Three and Six Months Ended January 31, 2010 and February 3, 2009
 (Dollars in thousands, except per share information)
 Three Months Ended
    
    
    Three Months Ended
    
    
    Six Months Ended
    
    
    Six Months EndedJanuary 31, 2010
    
    
    February 3, 2009
    
    
    January 31, 2010
    
    
    February 3, 2009Net sales
    
    $
    13,014
    
    
    $
    13,652
    
    
    $
    25,160
    
    
    $
    25,898Cost of sales
    
    
    5,688
    
    
    
    5,811
    
    
    
    11,015
    
    
    
    10,977Gross profit
    
    
    7,326
    
    
    
    7,841
    
    
    
    14,145
    
    
    
    14,921Operating expensesResearch and development
    
    
    731
    
    
    
    854
    
    
    
    1,331
    
    
    
    1,506Sales and marketing expenses
    
    
    3,045
    
    
    
    3,940
    
    
    
    6,304
    
    
    
    7,183General and administrative
    
    
    2,045
    
    
    
    2,140
    
    
    
    4,064
    
    
    
    4,1625,821
    
    
    
    6,934
    
    
    
    11,699
    
    
    
    12,851Operating income
    
    
    1,505
    
    
    
    907
    
    
    
    2,446
    
    
    
    2,070Other income (expense)Interest income
    
    
    2
    
    
    
    
    
    
    
    2
    
    
    
    2Interest expense
    
    
    (131
    )
    
    
    (221
    )
    
    
    (299
    )
    
    
    (403
    )Miscellaneous
    
    
    
    
    
    
    (5
    )
    
    
    28
    
    
    
    (1
    )(129
    )
    
    
    (226
    )
    
    
    (269
    )
    
    
    (402
    )Income before provision
for income taxes
    
    
    1,376
    
    
    
    681
    
    
    
    2,177
    
    
    
    1,668Provision for income taxes
    
    
    499
    
    
    
    292
    
    
    
    758
    
    
    
    617Net income
    
    $
    877
    
    
    $
    389
    
    
    $
    1,419
    
    
    $
    1,051Earnings per share:Basic
    
    $
    0.04
    
    
    $
    0.02
    
    
    $
    0.06
    
    
    $
    0.04Diluted
    
    $
    0.04
    
    
    $
    0.02
    
    
    $
    0.06
    
    
    $
    0.04Basic weighted-average
common shares outstanding
    
    
    24,584,393
    
    
    
    24,451,904
    
    
    
    24,521,241
    
    
    
    24,446,561Diluted weighted-average
common shares outstanding
    
    
    24,614,628
    
    
    
    24,459,568
    
    
    
    24,554,522
    
    
    
    24,457,399
  2




---



##### Table of Contents



Synergetics USA, Inc. and Subsidiaries
 
 Unaudited Condensed Consolidated Statements of Cash Flows
 Six Months Ended January 31, 2010 and February 3, 2009
 (Dollars in thousands)
 Six Months Ended
    
    
    Six Months EndedJanuary 31, 2010
    
    
    February 3, 2009Cash Flows from Operating ActivitiesNet income
    
    $
    1,419
    
    
    $
    1,051Adjustments to reconcile net income to net cash provided by
(used in) operating activitiesDepreciation and amortization
    
    
    967
    
    
    
    887Provision for doubtful accounts receivable
    
    
    (53
    )
    
    
    5Stock-based compensation
    
    
    147
    
    
    
    128Deferred income taxes
    
    
    (210
    )
    
    
    (202
    )(Gain) on sales of property and equipment
    
    
    (15
    )
    
    
    Change in assets and liabilities(Increase) decrease in:Accounts receivable
    
    
    436
    
    
    
    161Income taxes receivable
    
    
    
    
    
    
    (290
    )Inventories
    
    
    607
    
    
    
    (2,202
    )Prepaid expenses
    
    
    (245
    )
    
    
    (345
    )(Decrease) increase in:Accounts payable
    
    
    (76
    )
    
    
    (499
    )Accrued expenses
    
    
    (423
    )
    
    
    (18
    )Income taxes payable
    
    
    (11
    )
    
    
    (1,071
    )Net cash provided by (used in) operating activities
    
    
    2,543
    
    
    
    (2,395
    )Cash Flows from Investing ActivitiesProceeds from the sale of property and equipment
    
    
    15
    
    
    
    Purchase of property and equipment
    
    
    (281
    )
    
    
    (425
    )Acquisition of patents and other intangibles
    
    
    (75
    )
    
    
    (56
    )Net cash used in investing activities
    
    
    (341
    )
    
    
    (481
    )Cash Flows from Financing ActivitiesExcess of outstanding checks over bank balance
    
    
    213
    
    
    
    Net borrowings (repayments) on lines-of-credit
    
    
    (1,472
    )
    
    
    3,357Principal payments on long-term debt
    
    
    (246
    )
    
    
    (246
    )Principal payments on revenue bonds payable
    
    
    (113
    )
    
    
    (124
    )Payments on debt incurred for acquisition of trademark
    
    
    (278
    )
    
    
    (262
    )Proceeds from stock options exercises
    
    
    12
    
    
    
    Net cash (used in) provided by financing activities
    
    
    (1,884
    )
    
    
    2,725Net increase (decrease) in cash and cash equivalents
    
    
    318
    
    
    
    (151
    )Cash and cash equivalentsBeginning
    
    
    160
    
    
    
    500Ending
    
    $
    478
    
    
    $
    349
  3




---



##### Table of Contents



Synergetics USA, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
(Tabular information reflects dollars in thousands, except share and per share information)
 Note 1. General
 Nature of business: mission
 Reporting period:
 Basis of presentation:
 Note 2. Summary of Significant Accounting Policies
 Reclassifications:
  4




---



##### Table of Contents



5




---



##### Table of Contents



Subsequent events:
 Note 3. Marketing Partner Agreements
  Codman & Shurtleff, Inc. (Codman)
 ®
   Three months
    
    
    
    
    
    Six monthsended January 31,
    
    Three months ended
    
    ended January
    
    Six months ended2010
    
    February 3, 2009
    
    31, 2010
    
    February 3, 2009Net Sales
    
    $
    1,588
    
    
    $
    1,439
    
    
    $
    2,473
    
    
    $
    2,341Percent of net sales
    
    
    12.2
    %
    
    
    10.5
    %
    
    
    9.8
    %
    
    
    9.0
    %
  6




---



##### Table of Contents



Note 4. Stock-Based Compensation
 Stock Option Plans
  Six  Months Ended January 31, 2010Weighted-Average
    
    
    Weighted-Exercise
    
    
    AverageShares
    
    
    Price
    
    
    Fair ValueOptions outstanding, beginning of period
    
    
    527,735
    
    
    $
    2.10
    
    
    $
    1.74For the period from August 1, 2009 through January 31, 2010:Granted
    
    
    127,500
    
    
    
    1.37
    
    
    
    1.10Forfeited
    
    
    14,770
    
    
    
    0.94
    
    
    
    0.78Exercised
    
    
    13,770
    
    
    
    0.87
    
    
    
    0.72Options outstanding, end of period
    
    
    626,695
    
    
    $
    2.01
    
    
    $
    1.65Options exercisable, end of period
    
    
    454,184
    
    
    $
    2.28
    
    
    $
    1.89
    Expected average risk-free interest rate
    
    
    2.35
    %Expected average life (in years)
    
    
    10Expected volatility
    
    
    77.8
    %Expected dividend yield
    
    
    0.0
    %
  7




---



##### Table of Contents



Restricted Stock Plans
 nd
 Number of Shares
    
    
    Weighted-Average
Grant Date Fair ValueBalance as of July 31, 2009
    
    
    112,076
    
    
    $
    3.13Granted
    
    
    164,207
    
    
    $
    1.37Forfeited
    
    
    
    
    
    $
    Balance as of January 31, 2010
    
    
    276,283
    
    
    $
    2.08
 Note 5. Fair Value Information
    Note 6. Supplemental Balance Sheet Information
 Inventories
 January 31, 2010
    
    
    July 31, 2009Raw material and component parts
    
    $
    5,815
    
    
    $
    6,058Work-in-progress
    
    
    2,564
    
    
    
    2,723Finished goods
    
    
    6,039
    
    
    
    6,244$
    14,418
    
    
    $
    15,025
 8




---



##### Table of Contents



Property and equipment
 January 31, 2010
    
    
    July 31, 2009Land
    
    $
    730
    
    
    $
    730Building and improvements
    
    
    5,906
    
    
    
    5,782Machinery and equipment
    
    
    5,414
    
    
    
    5,363Furniture and fixtures
    
    
    736
    
    
    
    720Software
    
    
    363
    
    
    
    336Construction in process
    
    
    79
    
    
    
    16613,228
    
    
    
    13,097Less accumulated depreciation
    
    
    5,555
    
    
    
    5,183$
    7,673
    
    
    $
    7,914
 Other intangible assets
  GrossCarrying
    
    
    AccumulatedValue
    
    
    Amortization
    
    
    NetJanuary 31, 2010Proprietary know-how
    
    $
    4,057
    
    
    $
    1,421
    
    
    $
    2,636Trademark
    
    
    5,923
    
    
    
    
    
    
    
    5,923Licensing agreements
    
    
    5,834
    
    
    
    1,650
    
    
    
    4,184Patents
    
    
    1,410
    
    
    
    470
    
    
    
    940$
    17,224
    
    
    $
    3,541
    
    
    $
    13,683
 July 31, 2009Proprietary know-how
    
    $
    4,057
    
    
    $
    1,295
    
    
    $
    2,762Trademark
    
    
    5,923
    
    
    
    
    
    
    
    5,923Licensing agreements
    
    
    5,834
    
    
    
    1,384
    
    
    
    4,450Patents
    
    
    1,335
    
    
    
    417
    
    
    
    918$
    17,149
    
    
    $
    3,096
    
    
    $
    14,053
    Periods Ending July 31:
    
    AmountFiscal Year 2010 (remaining 6 months)
    
    $
    399Fiscal Year 2011
    
    
    629Fiscal Year 2012
    
    
    575Fiscal Year 2013
    
    
    573Fiscal Year 2014
    
    
    573
  9




---



##### Table of Contents



Pledged assets; short and long-term debt (excluding revenue bonds payable)
  Revolving Credit Facility:
  Non-U.S. Receivables Revolving Credit Facility
 Equipment Line of Credit
  January 31,
    
    
    July 31,2010
    
    
    2009Note payable to bank, due in monthly
installments of $41,022 beginning August
2008 plus interest at a rate of 5.0
percent, remaining balance due July 31,
2011, collateralized by substantially all
assets of the Company
    
    $
    738
    
    
    $
    984Note payable to the estate of the late Dr.
Leonard I. Malis, due in quarterly
installments of $159,904 which includes
interest at an imputed rate of 6.0
percent, remaining balance of $1,279,232,
including contractual interest payments,
due December 2011, collateralized by the
Malis® trademark
    
    
    1,197
    
    
    
    1,475Settlement obligation to Iridex
Corporation, due in annual installments of
$800,000 which includes interest at an
imputed rate of 8.0 percent, remaining
balance of $2,400,000 including the
effects of imputing interest, due April
15, 2012
    
    
    2,062
    
    
    
    2,0623,997
    
    
    
    4,521Less current maturities
    
    
    1,873
    
    
    
    1,856Long-term portion
    
    $
    2,124
    
    
    $
    2,665
 10




---



##### Table of Contents



Note 7. Commitments and Contingencies
       11




---



##### Table of Contents



Note 8. Enterprise-wide Information
  Three Months Ended
    
    
    Six Months EndedJanuary 31,
    
    
    February 3,
    
    
    January 31,
    
    
    February 3,2010
    
    
    2009
    
    
    2010
    
    
    2009Product Line:Ophthalmic
    
    $
    7,801
    
    
    $
    7,466
    
    
    $
    15,323
    
    
    $
    14,850Neurosurgery
    
    
    2,829
    
    
    
    3,816
    
    
    
    5,729
    
    
    
    6,769Marketing partners
(Codman, Stryker
Corporation and
Iridex Corporation)
    
    
    2,353
    
    
    
    2,263
    
    
    
    4,043
    
    
    
    4,045Other (ENT and Dental)
    
    
    31
    
    
    
    107
    
    
    
    65
    
    
    
    234Total
    
    $
    13,014
    
    
    $
    13,652
    
    
    $
    25,160
    
    
    $
    25,898Region Specific:Domestic
    
    $
    8,751
    
    
    $
    9,195
    
    
    $
    17,240
    
    
    $
    17,941International
    
    
    4,263
    
    
    
    4,457
    
    
    
    7,920
    
    
    
    7,957Total
    
    $
    13,014
    
    
    $
    13,652
    
    
    $
    25,160
    
    
    $
    25,898
  Note 9. Recent Accounting Pronouncements
     12




---



##### Table of Contents



Item 2  Managements Discussion and Analysis of Financial Condition and Results of Operations
  The Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities
Exchange Act of 1934, as amended (the Exchange Act), 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. Such
forward-looking statements include risks and uncertainties and there are important factors that
could cause actual results to differ materially from those expressed or implied by such
forward-looking statements. These factors, risks and uncertainties can be found in Part I, Item 1A,
Risk Factors section of the Companys Form 10-K for the fiscal year ended July 31, 2009.
 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 factors 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.
 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 quarterly report on Form 10-Q 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.
 13




---



##### Table of Contents



Mission
 mission
 Overview
   Summary of Financial Information
  NET SALES BY CATEGORY
 Three Months EndedJanuary 31, 2010
    
    
    Mix
    
    
    February 3, 2009
    
    
    MixOphthalmic
    
    $
    7,801
    
    
    
    60.0
    %
    
    $
    7,466
    
    
    
    54.7
    %Neurosurgery
    
    
    2,829
    
    
    
    21.7
    %
    
    
    3,816
    
    
    
    27.9
    %Marketing Partners (1)
    
    
    2,353
    
    
    
    18.1
    %
    
    
    2,263
    
    
    
    16.6
    %Other
    
    
    31
    
    
    
    0.2
    %
    
    
    107
    
    
    
    0.8
    %Total
    
    $
    13,014
    
    
    
    
    
    
    $
    13,652
 Six Months EndedJanuary 31, 2010
    
    
    Mix
    
    
    February 3, 2009
    
    
    MixOphthalmic
    
    $
    15,323
    
    
    
    60.9
    %
    
    $
    14,850
    
    
    
    57.4
    %Neurosurgery
    
    
    5,729
    
    
    
    22.8
    %
    
    
    6,769
    
    
    
    26.1
    %Marketing Partners (1)
    
    
    4,043
    
    
    
    16.1
    %
    
    
    4,045
    
    
    
    15.6
    %Other
    
    
    65
    
    
    
    0.2
    %
    
    
    234
    
    
    
    0.9
    %Total
    
    $
    25,160
    
    
    
    
    
    
    $
    25,898
  14




---



##### Table of Contents



RESULTS OF OPERATIONS
 Three Months EndedIncreaseJanuary 31, 2010
    
    February 3, 2009
    
    (Decrease)Net Sales
    
    $
    13,014
    
    
    $
    13,652
    
    
    
    (4.7
    %)Gross Profit
    
    
    7,326
    
    
    
    7,841
    
    
    
    (6.6
    %)Gross Profit Margin %
    
    
    56.3
    %
    
    
    57.4
    %
    
    
    (1.9
    %)Commercial ExpensesSales and Marketing
    
    
    3,045
    
    
    
    3,940
    
    
    
    (22.7
    %)General and Administrative
    
    
    2,045
    
    
    
    2,140
    
    
    
    (4.4
    %)Research and Development
    
    
    731
    
    
    
    854
    
    
    
    (14.4
    %)Operating Income
    
    
    1,505
    
    
    
    907
    
    
    
    65.9
    %Operating Margin
    
    
    11.6
    %
    
    
    6.6
    %
    
    
    75.8
    %EBITDA (2)
    
    
    1,992
    
    
    
    1,323
    
    
    
    50.6
    %Net Income
    
    $
    877
    
    
    $
    389
    
    
    
    125.4
    %Earnings per share
    
    $
    0.04
    
    
    $
    0.02
    
    
    
    100.0
    %Return on equity (2)
    
    
    2.2
    %
    
    
    1.0
    %
    
    
    120.0
    %Return on assets (2)
    
    
    1.8
    %
    
    
    1.0
    %
    
    
    80.0
    %
 Six Months EndedIncreaseJanuary 31, 2010
    
    February 3, 2009
    
    (Decrease)Net Sales
    
    $
    25,160
    
    
    $
    25,898
    
    
    
    (2.8
    %)Gross Profit
    
    
    14,145
    
    
    
    14,921
    
    
    
    (5.2
    %)Gross Profit Margin %
    
    
    56.2
    %
    
    
    57.6
    %
    
    
    (2.4
    %)Commercial ExpensesSales and Marketing
    
    
    6,304
    
    
    
    7,183
    
    
    
    (12.2
    %)General and Administrative
    
    
    4,064
    
    
    
    4,162
    
    
    
    (2.4
    %)Research and Development
    
    
    1,331
    
    
    
    1,506
    
    
    
    (11.6
    %)Operating Income
    
    
    2,446
    
    
    
    2,070
    
    
    
    18.2
    %Operating Margin
    
    
    9.7
    %
    
    
    8.0
    %
    
    
    21.3
    %EBITDA (2)
    
    
    3,441
    
    
    
    2,956
    
    
    
    16.4
    %Net Income
    
    $
    1,419
    
    
    $
    1,051
    
    
    
    35.0
    %Earnings per share
    
    $
    0.06
    
    
    $
    0.04
    
    
    
    50.0
    %Return on equity (2)
    
    
    3.7
    %
    
    
    2.8
    %
    
    
    32.1
    %Return on assets (2)
    
    
    3.0
    %
    
    
    2.4
    %
    
    
    25.0
    %
 
 (1)
    
    Sales from our marketing partners are primarily neurosurgery and pain control revenues.(2)
    
    EBITDA, return on equity and return on assets are not financial measures recognized by U.S.
generally accepted accounting principles (GAAP). EBITDA is defined as income before net
interest expense, income taxes, depreciation and amortization. Return on equity is defined
as net income divided by average equity. Return on assets is defined as net income plus
interest expense divided by average assets. See disclosure following regarding the use of
non-GAAP financial measures. Three Months Ended
    
Six Months EndedJanuary 31, 2010
    
    February 3, 2009
    
    January 31, 2010
    
    February 3, 2009Net income
    
    $
    877
    
    
    $
    389
    
    
    $
    1,419
    
    
    $
    1,051Interest, net
    
    
    129
    
    
    
    221
    
    
    
    297
    
    
    
    401Income taxes
    
    
    499
    
    
    
    292
    
    
    
    758
    
    
    
    617Depreciation and
    
    
    487
    
    
    
    421
    
    
    
    967
    
    
    
    887AmortizationEBITDA
    
    $
    1,992
    
    
    $
    1,323
    
    
    $
    3,441
    
    
    $
    2,956
 15




---



##### Table of Contents



Three Months Ended
    
    Six Months EndedJanuary 31, 2010
    
    February 3, 2009
    
    January 31, 2010
    
    February 3, 2009Net income
    
    $
    877
    
    
    $
    389
    
    
    $
    1,419
    
    
    $
    1,051Average Equity:January 31, 2010
    
    $
    39,708
    
    
    
    
    
    
    $
    39,708October 31, 2009
    
    $
    38,746
    
    
    
    
    
    
    $
    38,746July 31, 2009
    
    
    
    
    
    
    
    
    
    $
    38,130February 3, 2009
    
    
    
    
    
    
    37,536
    
    
    
    
    
    
    
    37,536October 29, 2008
    
    
    
    
    
    
    37,068
    
    
    
    
    
    
    
    37,068July 31, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,357Average Equity
    
    $
    39,227
    
    
    
    37,302
    
    
    $
    38,861
    
    
    
    36,987Return on Equity
    
    
    2.2
    %
    
    
    1.0
    %
    
    
    3.7
    %
    
    
    2.8
    %Net income
    
    $
    877
    
    
    $
    389
    
    
    $
    1,419
    
    
    $
    1,051Interest
    
    
    129
    
    
    
    221
    
    
    
    297
    
    
    
    401Net income + interest expense
    
    $
    1,006
    
    
    $
    610
    
    
    $
    1,716
    
    
    $
    1,452Average Assets:January 31, 2010
    
    $
    56,996
    
    
    
    
    
    
    $
    56,996October 31, 2009
    
    $
    56,737
    
    
    
    
    
    
    $
    56,737July 31, 2009
    
    
    
    
    
    
    
    
    
    $
    58,080February 3, 2009
    
    
    
    
    
    
    60,544
    
    
    
    
    
    
    
    60,544October 29, 2008
    
    
    
    
    
    
    59,124
    
    
    
    
    
    
    
    59,124July 31, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    58,396Average Assets
    
    $
    56,867
    
    
    
    59,834
    
    
    $
    57,271
    
    
    
    59,355Return on Assets
    
    
    1.8
    %
    
    
    1.0
    %
    
    
    3.0
    %
    
    
    2.4
    %
       16




---



##### Table of Contents



Recent Developments
 ® ®
    TM
 Our Business Strategy
  17




---



##### Table of Contents



Lean Manufacturing 
 Plastic Molding 
 Supply Chain Management 
 Human Resource Rationalization 
 Cash Management 
  Research & Development (R&D) 
 New Business Development 
 18




---



##### Table of Contents



Recent Developments ® ®
   Key
Trends
 New Product Sales
  Demand Trends
 ®
  Pricing Trends
  19




---



##### Table of Contents



Economic Trends
  Results Overview
  Results of Operations
 Three-Month Period Ended January 31, 2010 Compared to Three-Month Period Ended February 3, 2009
 Net Sales
  Quarter Ended% IncreaseJanuary 31, 2010
    
    
    February 3, 2009
    
    
    (Decrease)Ophthalmic
    
    $
    7,801
    
    
    $
    7,466
    
    
    
    4.5
    %Neurosurgery
    
    
    2,829
    
    
    
    3,816
    
    
    
    (25.9
    %)Marketing
partners (Codman,
Stryker and
Iridex
Corporation)
    
    
    2,353
    
    
    
    2,263
    
    
    
    4.0
    %Other
    
    
    31
    
    
    
    107
    
    
    
    (71.0
    %)Total
    
    $
    13,014
    
    
    $
    13,652
    
    
    
    (4.7
    %)
 ® TM ® ®
 20




---



##### Table of Contents



Three Months Ended% IncreaseJanuary 31, 2010
    
    
    February 3, 2009
    
    
    (Decrease)United States (including OEM sales)
    
    $
    8,751
    
    
    $
    9,195
    
    
    
    (4.8
    %)International (including Canada)
    
    
    4,263
    
    
    
    4,457
    
    
    
    (4.3
    %)Total
    
    $
    13,014
    
    
    $
    13,652
    
    
    
    (4.7
    %)
  Gross Profit
  Operating Expenses
    Other Expenses
  Operating Income, Income Taxes and Net Income
  21




---



##### Table of Contents



Six-Month Period Ended January 31, 2010 Compared to Six-Month Period Ended February 3, 2009
 Net Sales
  Six Months Ended% IncreaseJanuary 31, 2010
    
    
    February 3, 2009
    
    
    (Decrease)Ophthalmic
    
    $
    15,323
    
    
    $
    14,850
    
    
    
    3.2
    %Neurosurgery
    
    
    5,729
    
    
    
    6,769
    
    
    
    (15.4
    %)Marketing
partners (Codman,
Stryker and
Iridex
Corporation)
    
    
    4,043
    
    
    
    4,045
    
    
    
    0.0
    %Other
    
    
    65
    
    
    
    234
    
    
    
    (72.2
    %)Total
    
    $
    25,160
    
    
    $
    25,898
    
    
    
    (2.8
    %)
 ® TM ® ®
  Six Months Ended% IncreaseJanuary 31, 2010
    
    
    February 3, 2009
    
    
    (Decrease)United States (including OEM sales)
    
    $
    17,240
    
    
    $
    17,941
    
    
    
    (3.9
    %)International (including Canada)
    
    
    7,920
    
    
    
    7,957
    
    
    
    (0.5
    %)Total
    
    $
    25,160
    
    
    $
    25,898
    
    
    
    (2.8
    %)
  22




---



##### Table of Contents



Gross Profit
  Operating Expenses
    Other Expenses
  Operating Income, Income Taxes and Net Income
    23




---



##### Table of Contents



Liquidity and Capital Resources
        Revolving Credit Facility:
  24




---



##### Table of Contents



Non-U.S. Receivables Revolving Credit Facility
 Equipment Line of Credit:
  Critical Accounting Policies
  
 Item 3  Quantitative and Qualitative Disclosures about Market Risk
    25




---



##### Table of Contents



Item 4  Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
  
 Part II  Other Information
 
 Item 1  Legal Proceedings
    26




---



##### Table of Contents



® ® ®
  
 Item 1A  Risk Factors
  
 Item 2  Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3  Defaults Upon Senior Securities
  
 Item 4  Submission of Matters to a Vote of Security Holders
   27




---



##### Table of Contents



Number of Shares
    
    Number of SharesVoted For
    
    WithheldRobert Dick
    
    
    18,518,781
    
    
    
    2,691,398Juanita Hinshaw
    
    
    20,704,457
    
    
    
    505,722
  For
    
    Against
    
    Abstain20,561,231
    
    346,203
    
    302,744
 
 Item 5  Other Information
  
 Item 6  Exhibits
 Exhibit No.
    
    Description31.1
    
    
    Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.31.2
    
    
    Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    
    Certification of the Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.32.2
    
    
    Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 Trademark Acknowledgements
  28




---



##### Table of Contents



SYNERGETICS USA, INC.
(Registrant)March 17, 2010
    /s/ David M. HableDavid M. Hable, President and ChiefExecutive Officer (Principal Executive
Officer)March 17, 2010
    /s/ Pamela G. BoonePamela G. Boone, Executive VicePresident, Chief Financial Officer, Secretary
and Treasurer (Principal Financial and
Principal Accounting Officer) 29