##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended January 31, 2008
 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 000-51602
 SYNERGETICS USA, INC.
  Delaware
    
    20-5715943(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 3845 Corporate Centre DriveOFallon, Missouri
    
    63368(Address of principal executive offices)
    
    (Zip Code)
 
 þ o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



PagePART I
    
    Financial InformationItem 1.
    
    Unaudited Condensed Consolidated Financial Statements
    
    
    3Balance Sheets  January 31, 2008 and July 31, 2007
    
    
    3Statements of Operations for the three and six months ended January 31, 2008 and January 30, 2007
    
    
    4Statements of Cash Flows for the six months ended January 31, 2008 and January 30, 2007
    
    
    5Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    6Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    12Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    21Item 4.
    
    Controls and Procedures
    
    
    21PART II
    
    Other InformationItem 1.
    
    Legal Proceedings
    
    
    22Item 1A.
    
    Risk Factors
    
    
    22Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    23Item 3.
    
    Defaults Upon Senior Securities
    
    
    23Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    23Item 5.
    
    Other Information
    
    
    23Item 6.
    
    Exhibits
    
    
    23Signatures
    
    
    
    
    
    
    24Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002Certification of the Chief Executive Officer Pursuant to Section 302Certification of the Chief Financial Officer Pursuant to Section 302Certification of the Chief Executive Officer Pursuant to Section 906Certification of the Chief Financial Officer Pursuant to Section 906
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##### 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, 2008 (Unaudited) and July 31, 2007
(Dollars in thousands, except share data)
 January 31, 2008
    
    
    July 31, 2007AssetsCurrent AssetsCash and cash equivalents
    
    $
    153
    
    
    $
    167Accounts receivable, net of allowance for
doubtful accounts of approximately $267
and $227, respectively
    
    
    8,339
    
    
    
    8,264Income taxes receivable
    
    
    321
    
    
    
    473Inventories
    
    
    14,849
    
    
    
    14,247Prepaid expenses
    
    
    432
    
    
    
    343Deferred income taxes
    
    
    498
    
    
    
    516Total current assets
    
    
    24,592
    
    
    
    24,010Property and equipment, net
    
    
    8,148
    
    
    
    8,031Goodwill
    
    
    10,660
    
    
    
    10,660Other intangible assets, net
    
    
    14,351
    
    
    
    14,782Patents, net
    
    
    887
    
    
    
    871Deferred expenses
    
    
    232
    
    
    
    216Cash value of life insurance
    
    
    46
    
    
    
    46Total assets
    
    $
    58,916
    
    
    $
    58,616Liabilities and Stockholders EquityCurrent LiabilitiesExcess of outstanding checks over bank balance
    
    $
    490
    
    
    $
    531Lines-of-credit
    
    
    7,860
    
    
    
    5,715Current maturities of long-term debt
    
    
    1,864
    
    
    
    2,161Current maturities of revenue bonds payable
    
    
    249
    
    
    
    249Accounts payable
    
    
    1,135
    
    
    
    2,262Accrued expenses
    
    
    2,637
    
    
    
    2,739Total current liabilities
    
    $
    14,235
    
    
    $
    13,657Long-Term LiabilitiesLong-term debt, less current maturities
    
    
    4,540
    
    
    
    5,014Revenue bonds payable, less current maturities
    
    
    3,767
    
    
    
    3,891Deferred income taxes
    
    
    2,482
    
    
    
    2,619Total long-term liabilities
    
    
    10,789
    
    
    
    11,524Total liabilities
    
    
    25,023
    
    
    
    25,181Commitments and contingencies (Note 6)Stockholders EquityCommon stock at January 31, 2008 and July 31,
2007,
$.001 par value, 50,000,000 shares authorized;
24,316,769 and 24,265,500 shares issued and
outstanding, respectively
    
    
    24
    
    
    
    24Additional paid-in capital
    
    
    24,197
    
    
    
    24,083Retained earnings
    
    
    9,671
    
    
    
    9,328Total stockholders equity
    
    
    33,892
    
    
    
    33,435Total liabilities and stockholders
equity
    
    $
    58,916
    
    
    $
    58,616
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##### Table of Contents



Synergetics USA, Inc. and Subsidiaries
 
 Unaudited Condensed Consolidated Statements of Operations
Three and Six Months Ended January 31, 2008 and January 30, 2007
(Dollars in thousands, except per share information)
 Three Months Ended
    
    
    Three Months Ended
    
    
    Six Months Ended
    
    
    Six Months EndedJanuary 31, 2008
    
    
    January 30, 2007
    
    
    January 31, 2008
    
    
    January 30, 2007Sales
    
    $
    11,636
    
    
    $
    11,353
    
    
    $
    22,106
    
    
    $
    21,259Cost of sales
    
    
    4,882
    
    
    
    4,835
    
    
    
    8,826
    
    
    
    8,435Gross profit
    
    
    6,754
    
    
    
    6,518
    
    
    
    13,280
    
    
    
    12,824Operating expensesResearch and development
    
    
    697
    
    
    
    780
    
    
    
    1,147
    
    
    
    1,431Selling, general and administrative
    
    
    5,819
    
    
    
    5,556
    
    
    
    11,110
    
    
    
    10,4936,516
    
    
    
    6,336
    
    
    
    12,257
    
    
    
    11,924Operating income
    
    
    238
    
    
    
    182
    
    
    
    1,023
    
    
    
    900Other income (expense)Interest income
    
    
    3
    
    
    
    
    
    
    
    4
    
    
    
    1Interest expense
    
    
    (305
    )
    
    
    (243
    )
    
    
    (565
    )
    
    
    (409
    )Loss on sale of asset
    
    
    (5
    )
    
    
    
    
    
    
    (5
    )
    
    
    Miscellaneous
    
    
    (2
    )
    
    
    
    
    
    
    18
    
    
    
    9(309
    )
    
    
    (243
    )
    
    
    (548
    )
    
    
    (399
    )Income (loss) before provision for
income taxes
    
    
    (71
    )
    
    
    (61
    )
    
    
    475
    
    
    
    501Provision for income taxes
    
    
    (17
    )
    
    
    23
    
    
    
    132
    
    
    
    209Provision for re-enactment of the research
and experimentation credit
    
    
    
    
    
    
    (266
    )
    
    
    
    
    
    
    (266
    )(17
    )
    
    
    (243
    )
    
    
    132
    
    
    
    (57
    )Net income (loss)
    
    $
    (54
    )
    
    $
    182
    
    
    $
    343
    
    
    $
    558Earnings per share:Basic
    
    $
    0.00
    
    
    $
    0.01
    
    
    $
    0.01
    
    
    $
    0.02Diluted
    
    $
    0.00
    
    
    $
    0.01
    
    
    $
    0.01
    
    
    $
    0.02Basic weighted-average common shares
outstanding
    
    
    24,312,930
    
    
    
    24,214,322
    
    
    
    24,304,800
    
    
    
    24,212,531Diluted weighted-average common shares
outstanding
    
    
    24,387,064
    
    
    
    24,410,302
    
    
    
    24,411,689
    
    
    
    24,412,642
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Synergetics USA, Inc. and Subsidiaries
 
 Unaudited Condensed Consolidated Statements of Cash Flows
Six months Ended January 31, 2008 and January 30, 2007
(Dollars in thousands)
 Six Months Ended
    
    
    Six Months EndedJanuary 31, 2008
    
    
    January 30, 2007Cash Flows from Operating ActivitiesNet income
    
    $
    343
    
    
    $
    558Adjustments to reconcile net income to net cash used
in operating activitiesDepreciation and amortization
    
    
    992
    
    
    
    716Provision for doubtful accounts receivable
    
    
    40
    
    
    
    26Stock-based compensation
    
    
    92
    
    
    
    188Deferred income taxes
    
    
    (119
    )
    
    
    (130
    )Loss on sale of assets
    
    
    5
    
    
    
    Change in assets and liabilities:(Increase) decrease in:Accounts receivable
    
    
    (115
    )
    
    
    (487
    )Income taxes receivable
    
    
    152
    
    
    
    (111
    )Inventories
    
    
    (602
    )
    
    
    (1,071
    )Prepaid expenses
    
    
    (89
    )
    
    
    (79
    )Other current assets
    
    
    
    
    
    
    (15
    )(Decrease) increase in:Accounts payable
    
    
    (1,127
    )
    
    
    (758
    )Accrued expenses
    
    
    (102
    )
    
    
    (872
    )Net cash used in operating activities
    
    
    (530
    )
    
    
    (2,035
    )Cash Flows from Investing ActivitiesNet decrease in notes receivable, officer-stockholder
    
    
    
    
    
    
    13Increase in deferred expenses
    
    
    (51
    )
    
    
    Proceeds from sale of equipment
    
    
    19
    
    
    
    Purchase of property and equipment
    
    
    (621
    )
    
    
    (157
    )Acquisition of patents and other intangibles
    
    
    (62
    )
    
    
    (177
    )Sales of trading securities
    
    
    
    
    
    
    50Net cash used in investing activities
    
    
    (715
    )
    
    
    (271
    )Cash Flows from Financing ActivitiesExcess of outstanding checks over bank balance
    
    
    (41
    )
    
    
    205Net borrowings on lines-of-credit
    
    
    2,145
    
    
    
    1,903Principal payments on revenue bonds payable
    
    
    (124
    )
    
    
    (124
    )Proceeds from long-term debt
    
    
    
    
    
    
    919Principal payments on long-term debt
    
    
    (525
    )
    
    
    (286
    )Payments on debt incurred for acquisition of trademark
    
    
    (246
    )
    
    
    (232
    )Proceeds from stock options exercised
    
    
    22
    
    
    
    Net cash provided by financing activities
    
    
    1,231
    
    
    
    2,385Net increase (decrease) in cash and cash equivalents
    
    
    (14
    )
    
    
    79Cash and cash equivalentsBeginning
    
    
    167
    
    
    
    557Ending
    
    $
    153
    
    
    $
    636
  5




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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:
 Reporting period:
 Basis of presentation:
 Note 2. Summary of Significant Accounting Policies
  Accounting for Uncertainties in Income Taxes:
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Accounting for Taxes Collected from Customers and Remitted to Governmental Authorities
 Reclassifications
 Note 3. Distribution Agreements
  Codman & Shurtleff, Inc. (Codman)
 ®
  Note 4. Stock-Based Compensation
 Stock Option Plans
  Six Months Ended January 31, 2008Weighted-Average
    
    
    Weighted-Exercise
    
    
    AverageShares
    
    
    Price
    
    
    Fair ValueOptions outstanding, beginning of period
    
    
    428,735
    
    
    $
    2.18
    
    
    $
    1.79For the period from August 1, 2007 through January 31, 2008:Granted
    
    
    40,000
    
    
    
    2.95
    
    
    
    2.45Forfeited
    
    
    (7,000
    )
    
    
    3.08
    
    
    
    1.59Exercised
    
    
    (9,000
    )
    
    
    2.48
    
    
    
    2.24Options outstanding, end of period
    
    
    452,735
    
    
    $
    2.32
    
    
    $
    1.84Options exercisable, end of period
    
    
    368,707
    
    
    $
    2.45
    
    
    $
    2.05
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Expected average risk-free interest rate
    
    
    3.5
    %Expected average life (in years)
    
    
    10Expected volatility
    
    
    69.5
    %Expected dividend yield
    
    
    0.0
    %
  Restricted Stock Plans
  Note 5. Supplemental Balance Sheet Information
 Inventories
 January 31,
    
    
    July 31,2008
    
    
    2007Raw material and component parts
    
    $
    6,729
    
    
    $
    6,754Work-in-progress
    
    
    2,401
    
    
    
    1,948Finished goods
    
    
    5,719
    
    
    
    5,545$
    14,849
    
    
    $
    14,247
 Property and equipment
 January 31,
    
    
    July 31,2008
    
    
    2007Land
    
    $
    730
    
    
    $
    730Building and improvements
    
    
    5,642
    
    
    
    5,436Machinery and equipment
    
    
    4,704
    
    
    
    4,428Furniture and fixtures
    
    
    623
    
    
    
    610Software
    
    
    115
    
    
    
    115Construction in process
    
    
    109
    
    
    
    3411,923
    
    
    
    11,353Less accumulated depreciation
    
    
    3,775
    
    
    
    3,322$
    8,148
    
    
    $
    8,031
 8




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##### Table of Contents



Other intangible assets
  GrossCarrying
    
    
    AccumulatedValue
    
    
    Amortization
    
    
    NetJanuary 31, 2008Patents
    
    $
    1,165
    
    
    $
    278
    
    
    $
    887Proprietary know-how
    
    
    4,057
    
    
    
    879
    
    
    
    3,178Trademark
    
    
    5,923
    
    
    
    
    
    
    
    5,923Licensing agreements
    
    
    5,834
    
    
    
    584
    
    
    
    5,250$
    16,979
    
    
    $
    1,741
    
    
    $
    15,238
 July 31, 2007Patents
    
    $
    1,103
    
    
    $
    232
    
    
    $
    871Proprietary know-how
    
    
    4,057
    
    
    
    740
    
    
    
    3,317Trademark
    
    
    5,923
    
    
    
    
    
    
    
    5,923Licensing agreements
    
    
    5,834
    
    
    
    292
    
    
    
    5,542$
    16,917
    
    
    $
    1,264
    
    
    $
    15,653
   Periods Ending July 31:
    
    AmountFiscal Year 2008 (remaining 6 months)
    
    $
    430Fiscal Year 2009
    
    
    858Fiscal Year 2010
    
    
    828Fiscal Year 2011
    
    
    606Fiscal Year 2012
    
    
    562
  Pledged assets; short and long-term debt (excluding revenue bonds payable)
  Revolving Credit Facility:
 Non-U.S. Receivables Revolving Credit Facility
 9




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##### Table of Contents



Equipment Line of Credit
  January 31,
    
    
    July 31,2008
    
    
    2007Note payable to bank, due in
monthly principal installments of
$1,139 plus interest at prime
rate plus 1% (an effective rate
of 9.25% as of July 31, 2007),
remaining balance due September
2007, collateralized by a second
deed of trust
    
    $
    
    
    
    $
    151Note payable, due in monthly
installments of $509, including
interest at 4.9%, remaining
balance due May 2008,
collateralized by a vehicle
    
    
    2
    
    
    
    3Note payable to bank, due in
monthly principal installments of
$39,642 beginning November 2005
plus interest at a rate of 8.25%,
remaining balance due September
30, 2010, collateralized by
substantially all assets of the
Company
    
    
    317
    
    
    
    555Note payable to bank, due in
monthly installments of $19,173
beginning December 2006 plus
interest at a rate of 8.25%,
remaining balance due on November
14, 2010, collateralized by
substantially all assets of the
Company
    
    
    631
    
    
    
    766Note 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 6.00%,
remaining balance of $2,718,368,
including contractual interest
payments, due December 2011,
collateralized by the
Malis® trademark
    
    
    2,260
    
    
    
    2,506Settlement obligation to Iridex
Corporation, due in annual
installments of $800,000 which
includes interest at an imputed
rate of 8.00%, remaining balance
of $4,000,000 including the
effects of imputing interest, due
April 15, 2012
    
    
    3,194
    
    
    
    3,194$
    6,404
    
    
    
    7,175Less current maturities
    
    
    1,864
    
    
    
    2,161Long-term portion
    
    $
    4,540
    
    
    $
    5,014
 Note 6. Commitments and Contingencies
      10




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Note 7. Entity Wide Information
  Three months ended
    
    
    Six Month EndedJanuary 31,
    
    
    January 30,
    
    
    January 31,
    
    
    January 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Product Line:Ophthalmic
    
    $
    6,863
    
    
    $
    5,958
    
    
    $
    13,228
    
    
    $
    11,229Neurosurgery
    
    
    3,320
    
    
    
    2,767
    
    
    
    5,970
    
    
    
    4,794OEM (Codman and Stryker)
    
    
    1,213
    
    
    
    2,245
    
    
    
    2,489
    
    
    
    4,547Other (ENT and Dental)
    
    
    240
    
    
    
    383
    
    
    
    419
    
    
    
    689Total
    
    $
    11,636
    
    
    $
    11,353
    
    
    $
    22,106
    
    
    $
    21,259Region Specific:Domestic
    
    $
    8,246
    
    
    $
    8,856
    
    
    $
    15,955
    
    
    $
    16,893International
    
    
    3,390
    
    
    
    2,497
    
    
    
    6,151
    
    
    
    4,366Total
    
    $
    11,636
    
    
    $
    11,353
    
    
    $
    22,106
    
    
    $
    21,259
  Note 8. Recent Accounting Pronouncements
    11




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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, 2007.
 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.
 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.
 Overview
    12




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® ® TM
   TM TM
 ® ® TM
 New Product Sales
  13




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##### Table of Contents



Growth in Minimally Invasive Surgery Procedures
 TM TM ® TM
 Demand Trends
  Pricing Trends
  Results Overview
  Our Business Strategy
  
    
    Introducing new technology that easily differentiates our products 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;
 14




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##### Table of Contents




    
    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, spine surgery, plastic surgery and other
forms of microsurgery;
 
    
    Accelerating our international growth by continuing to build on our recent successes
supported by Valley Forges long-established relationships and reputation in global markets;
 
    
    Utilizing the full breadth and depth of knowledge, experience and resources of our research
and development department to deliver precision-engineered capital equipment, instruments,
accessories and disposables to the MIS market based on our own proprietary technologies and
innovations;
 
    
    Branding and marketing a substantial portion of our neurosurgical and ENT products with the
Malis® trademark;
 
    
    Continuing to develop our distribution channels, including the expansion of our domestic
ophthalmic, neurosurgical and ENT direct sales forces, continued development of an
international direct ophthalmic sales force and continued expansion of our international
neurosurgical distributor relationships to assure that our products and their associated
benefits are seen by those making or influencing the purchasing decisions;
 
    
    Continuing to grow our disposables revenue stream across our product lines 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 reprocessing and repair costs and minimize patient-to-patient disease transfer;
 
    
    Expanding the PhotonTM product line into other surgical markets such as
neurosurgery, ENT and general surgery markets;
 
    
    Continuing the penetration of the Malis® AdvantageTM, our newest
multifunctional bipolar electrosurgical generator, into the neurosurgery market;
 
    
    Developing the Malis® AdvantageTM applications with our new
proprietary single-use, hand-switching bipolar instruments with enhanced features and
functionality further into the neurosurgical market and into other surgical markets such as
spine, ENT and plastic markets;
 
    
    Expanding the use of the Malis® AdvantageTM into other micro-surgical
markets as its increased power and functionality allows the surgeon to perform functions
similar to traditional monopolar systems, without the inherent safety limitations;
 
    
    Expanding the use of the Omni®, our ultrasonic aspirator, into other surgical
markets such as spine and the ENT markets as its torsional bone cutting capability allows the
surgeon to perform delicate procedures safely;
 
    
    Exploring opportunities for growth through strategic partnering with other companies, such as
our current relationships with Codman;
 
    
    Exploring opportunities for growth through strategic, accretive mergers or acquisitions which
would further expand our product offerings, distribution channels or research and development
capabilities; and
 
    
    Developing business-focused intellectual property on innovative new technologies, while
continuing to protect existing patent rights, trademarks, proprietary know-how and other
confidential information.
 15




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Results of Operations
 Three Month Period Ended January 31, 2008 Compared to Three Month Period Ended January 30, 2007
 Net Sales
  Quarter Ended,
    
    
    % IncreaseJanuary 31, 2008
    
    
    January 30, 2007
    
    
    (Decrease)Ophthalmic
    
    $
    6,863
    
    
    $
    5,958
    
    
    
    15.2
    %Neurosurgery
    
    
    3,320
    
    
    
    2,767
    
    
    
    20.0
    %OEM (Codman and Stryker)
    
    
    1,213
    
    
    
    2,245
    
    
    
    (46.0
    %)Other
    
    
    240
    
    
    
    383
    
    
    
    (37.3
    %)Total
    
    $
    11,636
    
    
    $
    11,353
    
    
    
    2.5
    %
  ® TM ®
   Quarter Ended
    
    
    % IncreaseJanuary 31, 2008
    
    
    January 30, 2007
    
    
    (Decrease)United States (including OEM sales)
    
    $
    8,246
    
    
    $
    8,856
    
    
    
    (6.9
    %)International (including Canada)
    
    
    3,390
    
    
    
    2,497
    
    
    
    35.8
    %Total
    
    $
    11,636
    
    
    $
    11,353
    
    
    
    2.5
    %
  Gross Profit
  16




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##### Table of Contents



Operating Expenses
     Other Expenses
  Operating Income, Income Taxes and Net Income
    17




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##### Table of Contents



Six Month Period Ended January 31, 2008 Compared to Six Month Period Ended January 30, 2007
 Net Sales
  Six Months EndedJanuary 31,
    
    
    January 30,
    
    
    % Increase2008
    
    
    2007
    
    
    (Decrease)Ophthalmic
    
    $
    13,228
    
    
    $
    11,229
    
    
    
    17.8
    %Neurosurgery
    
    
    5,970
    
    
    
    4,794
    
    
    
    24.5
    %OEM (including Codman and Stryker)
    
    
    2,489
    
    
    
    4,547
    
    
    
    (45.3
    %)Other
    
    
    419
    
    
    
    689
    
    
    
    (39.2
    %)$
    22,106
    
    
    $
    21,259
    
    
    
    4.0
    %
  ® TM ®
   Six Months EndedJanuary 31,
    
    
    January 30,2008
    
    
    2007
    
    
    % IncreaseUnited States (Including OEM sales)
    
    $
    15,955
    
    
    $
    16,893
    
    
    
    (5.6
    %)International (including Canada)
    
    
    6,151
    
    
    
    4,366
    
    
    
    40.9
    %$
    22,106
    
    
    $
    21,259
    
    
    
    4.0
    %
  Gross Profit
  18




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##### Table of Contents



Operating Expenses
     Other Expenses
  Operating Income, Income Taxes and Net Income
    19




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##### Table of Contents



Liquidity and Capital Resources
        Revolving Credit Facility:
 Non-U.S. Receivables Revolving Credit Facility
 Equipment Line of Credit
 20




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##### Table of Contents



Critical Accounting Policies
 Financial Accounting Standards Board Interpretation Number 48 How Taxes Collected from Customers and Remitted to Governmental
Authorities Should Be Presented in the Income Statement (That is, Gross versus Net Presentation).
 
 Item 3  Quantitative and Qualitative Disclosures about Market Risk
    
 Item 4  Controls and Procedures
 Evolution of Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
  21




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##### Table of Contents



Part II  Other Information
 
 Item 1  Legal Proceedings
  et al
  
 Item 1A  Risk Factors
  22




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##### Table of Contents



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
 (a)
    
    Synergetics USA, Inc.s annual meeting of stockholders was held on December 6, 2007.
Of the 24,274,500 shares entitled to vote at such meeting, 21,587,270 shares were present
at such meeting in person or by proxy. At the meeting, stockholders voted on (1) the
election of two directors whose terms expire at the 2010 annual meeting of stockholders and
(2) the ratification of the appointment of UHY LLP as the Companys independent registered
public accounting firm for fiscal 2008.(b)
    
    The stockholders elected both director nominees at the meeting, and with respect to
each director, the numbers of shares voted for and withheld were as follows:
 Number of Shares
    
    Number of SharesVoted For
    
    WithheldLawrence C. Cardinale
    
    
    20,299,384
    
    
    
    1,197,419Guy R. Guarch
    
    
    20,310,931
    
    
    
    1,276,338
 (c)
    
    The appointment of the Companys independent public accounting firm, UHY LLP, was also
ratified. The number of votes cast were as follows:
 For
    
    Against
    
    Abstain21,525,179
    
    
    41,642
    
    
    
    20,448
 
 Item 5  Other Information
  
 Item 6  Exhibits
 Exhibit No.
    
    Description31.1
    
    Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 Trademark Acknowledgements
  23




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##### Table of Contents



SYNERGETICS USA, INC.
(Registrant)March 11, 2008
    /s/ Gregg D. SchellerGregg D. Scheller, President and ChiefExecutive Officer (Principal Executive
Officer)March 11, 2008
    /s/ Pamela G. BoonePamela G. Boone, Executive VicePresident, Chief Financial Officer, Secretary
and Treasurer (Principal Financial and
Principal Accounting Officer) 24