##### 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 April 30, 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 
incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 3845 Corporate Centre Drive 
OFallon, Missouri
    
    63368(Address of principal executive offices)
    
    (Zip Code)
 
 þ o
 o o
  Large Accelerated Filer o
Accelerated Filer o
Non-Accelerated Filer o(Do not check if a smaller reporting company)
Smaller Reporting Company þ o þ




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##### 



PagePART I Financial InformationItem 1.
    
    Unaudited Condensed Consolidated Financial StatementsBalance Sheets as of April 30, 2010 and July 31, 2009
    
    
    2Statements of Income for the three and nine months ended April 30, 2010 and May 4, 2009
    
    
    3Statements of Cash Flows for the nine months ended April 30, 2010 and May 4, 2009
    
    
    4Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    5Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    15Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    28Item 4.
    
    Controls and Procedures
    
    
    28PART II Other InformationItem 1.
    
    Legal Proceedings
    
    
    29Item 1A.
    
    Risk Factors
    
    
    29Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    29Item 3.
    
    Defaults Upon Senior Securities
    
    
    29Item 4.
    
    [Removed and Reserved]
    
    
    29Item 5.
    
    Other Information
    
    
    29Item 6.
    
    Exhibits
    
    
    30Trademark Acknowledgements
    
    
    30Signatures
    
    
    31Certification of Chief 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 Chief 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 2002EX-10.1EX-10.2EX-31.1EX-31.2EX-32.1EX-32.2
  1




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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 April 30, 2010 (Unaudited) and July 31, 2009
(Dollars in thousands, except share information)
 April 30, 2010
    
    
    July 31, 2009AssetsCurrent AssetsCash and cash equivalents
    
    $
    17,458
    
    
    $
    160Accounts receivable, net of allowance for
doubtful accounts of $266 and $330,
respectively
    
    
    11,216
    
    
    
    9,105Inventories
    
    
    13,176
    
    
    
    15,025Prepaid expenses
    
    
    610
    
    
    
    416Deferred income taxes
    
    
    646
    
    
    
    654Total current assets
    
    
    43,106
    
    
    
    25,360Property and equipment, net
    
    
    7,709
    
    
    
    7,914Goodwill
    
    
    10,690
    
    
    
    10,690Other intangible assets, net
    
    
    12,548
    
    
    
    13,135Patents, net
    
    
    969
    
    
    
    918Cash value of life insurance
    
    
    63
    
    
    
    63Total assets
    
    $
    75,085
    
    
    $
    58,080Liabilities and Stockholders EquityCurrent LiabilitiesExcess of outstanding checks over bank balance
    
    $
    
    
    
    $
    75Lines-of-credit
    
    
    
    
    
    
    5,035Current maturities of long-term debt
    
    
    1,389
    
    
    
    1,856Current maturities of revenue bonds payable
    
    
    249
    
    
    
    249Accounts payable
    
    
    1,849
    
    
    
    1,822Accrued expenses
    
    
    2,006
    
    
    
    2,874Income taxes payable
    
    
    1,655
    
    
    
    37Deferred revenue
    
    
    400
    
    
    
    Total current liabilities
    
    
    7,548
    
    
    
    11,948Long-Term LiabilitiesLong-term debt, less current maturities
    
    
    1,092
    
    
    
    2,665Revenue bonds payable, less current maturities
    
    
    3,239
    
    
    
    3,414Deferred revenue
    
    
    18,630
    
    
    
    Deferred income taxes
    
    
    1,480
    
    
    
    1,923Total long-term liabilities
    
    
    24,441
    
    
    
    8,002Total liabilities
    
    
    31,989
    
    
    
    19,950Commitments and contingencies (Note 7)Stockholders EquityCommon stock at April 30, 2010 and July 31, 2009,
$0.001 par value, 50,000,000 shares authorized;
24,704,841 and 24,454,256 shares issued and
outstanding, respectively
    
    
    25
    
    
    
    24Additional paid-in capital
    
    
    24,749
    
    
    
    24,520Accumulated other comprehensive income
    
    
    8
    
    
    
    Retained earnings
    
    
    18,314
    
    
    
    13,586Total stockholders equity
    
    
    43,096
    
    
    
    38,130Total liabilities and stockholders equity
    
    $
    75,085
    
    
    $
    58,080
  2




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Synergetics USA, Inc. and Subsidiaries
 
 Unaudited Condensed Consolidated Statements of Income
Three and Nine Months Ended April 30, 2010 and May 4, 2009
(Dollars in thousands, except per share information)
 Three Months Ended
    
    
    Three Months Ended
    
    
    Nine Months Ended
    
    
    Nine Months EndedApril 30, 2010
    
    
    May 4, 2009
    
    
    April 30, 2010
    
    
    May 4, 2009Net sales
    
    $
    13,859
    
    
    $
    13,161
    
    
    $
    39,020
    
    
    $
    39,059Cost of sales
    
    
    5,828
    
    
    
    5,760
    
    
    
    16,647
    
    
    
    16,737Gross profit
    
    
    8,031
    
    
    
    7,401
    
    
    
    22,373
    
    
    
    22,322Operating expensesResearch and development
    
    
    886
    
    
    
    741
    
    
    
    2,320
    
    
    
    2,248Sales and marketing expenses
    
    
    2,896
    
    
    
    3,557
    
    
    
    9,200
    
    
    
    10,740General and administrative
    
    
    2,204
    
    
    
    2,224
    
    
    
    6,286
    
    
    
    6,3855,986
    
    
    
    6,522
    
    
    
    17,806
    
    
    
    19,373Operating income
    
    
    2,045
    
    
    
    879
    
    
    
    4,567
    
    
    
    2,949Other income (expense)Interest income
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    3Interest expense
    
    
    (113
    )
    
    
    (219
    )
    
    
    (412
    )
    
    
    (622
    )Settlement gain
    
    
    2,398
    
    
    
    
    
    
    
    2,398
    
    
    
    Gain on sale of product
line
    
    
    893
    
    
    
    
    
    
    
    817
    
    
    
    Miscellaneous
    
    
    (5
    )
    
    
    1
    
    
    
    23
    
    
    
    (1
    )3,173
    
    
    
    (218
    )
    
    
    2,828
    
    
    
    (620
    )Income before provision
for income taxes
    
    
    5,218
    
    
    
    661
    
    
    
    7,395
    
    
    
    2,329Provision for income taxes
    
    
    1,909
    
    
    
    203
    
    
    
    2,667
    
    
    
    820Net income
    
    $
    3,309
    
    
    $
    458
    
    
    $
    4,728
    
    
    $
    1,509Earnings per share:Basic
    
    $
    0.13
    
    
    $
    0.02
    
    
    $
    0.19
    
    
    $
    0.06Diluted
    
    $
    0.13
    
    
    $
    0.02
    
    
    $
    0.19
    
    
    $
    0.06Basic weighted-average
common shares outstanding
    
    
    24,701,260
    
    
    
    24,470,755
    
    
    
    24,579,928
    
    
    
    24,454,483Diluted weighted-average
common shares outstanding
    
    
    24,740,304
    
    
    
    24,471,258
    
    
    
    24,614,869
    
    
    
    24,492,374
  3




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Synergetics USA, Inc. and Subsidiaries
 
 Unaudited Condensed Consolidated Statements of Cash Flows
Nine Months Ended April 30, 2010 and May 4, 2009
(Dollars in thousands)
 Nine Months Ended
    
    
    Nine Months EndedApril 30, 2010
    
    
    May 4, 2009Cash Flows from Operating ActivitiesNet income
    
    $
    4,728
    
    
    $
    1,509Adjustments to reconcile net income to net cash provided by
(used in) operating activitiesDepreciation and amortization
    
    
    1,451
    
    
    
    1,366Provision for doubtful accounts receivable
    
    
    (65
    )
    
    
    36Stock-based compensation
    
    
    218
    
    
    
    196Deferred income taxes
    
    
    (435
    )
    
    
    (310
    )(Gain) on sales of property and equipment
    
    
    (15
    )
    
    
    (Gain) on sale of product line
    
    
    (817
    )
    
    
    Change in assets and liabilities(Increase) decrease in:Accounts receivable
    
    
    (1,963
    )
    
    
    58Income taxes receivable
    
    
    
    
    
    
    (75
    )Inventories
    
    
    1,388
    
    
    
    (1,761
    )Prepaid expenses
    
    
    (194
    )
    
    
    (245
    )(Decrease) increase in:Accounts payable
    
    
    27
    
    
    
    (1,173
    )Accrued expenses
    
    
    (979
    )
    
    
    (552
    )Income taxes payable
    
    
    1,618
    
    
    
    (1,071
    )Deferred revenue
    
    
    19,030
    
    
    
    Net cash provided by (used in) operating activities
    
    
    23,992
    
    
    
    (2,022
    )Cash Flows from Investing ActivitiesProceeds from the sale of property and equipment
    
    
    15
    
    
    
    Purchase of property and equipment
    
    
    (594
    )
    
    
    (560
    )Acquisition of patents and other intangibles
    
    
    (146
    )
    
    
    (102
    )Proceeds from sale of product line
    
    
    1,336
    
    
    
    Net cash provided by (used in) investing activities
    
    
    611
    
    
    
    (662
    )Cash Flows from Financing ActivitiesExcess of outstanding checks over bank balance
    
    
    (75
    )
    
    
    396Net borrowings (repayments) on lines-of-credit
    
    
    (5,035
    )
    
    
    3,929Principal payments on long-term debt
    
    
    (1,620
    )
    
    
    (956
    )Principal payments on revenue bonds payable
    
    
    (175
    )
    
    
    (186
    )Payments on debt incurred for acquisition of trademark
    
    
    (420
    )
    
    
    (396
    )Proceeds from stock options exercises
    
    
    12
    
    
    
    Net cash (used in) provided by financing activities
    
    
    (7,313
    )
    
    
    2,787Foreign exchange rate effect on cash and cash equivalents
    
    
    8
    
    
    
    Net increase in cash and cash equivalents
    
    
    17,298
    
    
    
    103Cash and cash equivalentsBeginning
    
    
    160
    
    
    
    500Ending
    
    $
    17,458
    
    
    $
    603
  4




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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: mission
 Reporting period:
 Basis of presentation:
 Note 2. Summary of Significant Accounting Policies
 Deferred
revenue:
 5




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Reclassifications:
      6




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Subsequent events:
 Note 3. Marketing Partner Agreements
  Codman & Shurtleff, Inc. (Codman)
 ®
 7




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Three months ended
    
    Three months
    
    Nine months ended
    
    Nine months endedApril 30, 2010
    
    ended May 4, 2009
    
    April 30, 2010
    
    May 4, 2009Net Sales
    
    $
    2,304
    
    
    $
    1,221
    
    
    $
    4,777
    
    
    $
    3,562Percent of net sales
    
    
    16.6
    %
    
    
    9.3
    %
    
    
    12.2
    %
    
    
    9.1
    %
 Stryker Corporation (Stryker)
  ® ®
  Three months ended
    
    Three months
    
    Nine months ended
    
    Nine months endedApril 30, 2010
    
    ended May 4, 2009
    
    April 30, 2010
    
    May 4, 2009Net Sales
    
    $
    1,640
    
    
    $
    555
    
    
    $
    2,898
    
    
    $
    2,054Percent of net sales
    
    
    11.8
    %
    
    
    4.2
    %
    
    
    7.4
    %
    
    
    5.3
    %
  8




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Note 4. Stock-Based Compensation
 Stock Option Plans
  Nine Months Ended April 30, 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 April 30, 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
    
    
    472,559
    
    
    $
    2.25
    
    
    $
    1.86
    Expected average risk-free interest rate
    
    
    2.35
    %Expected average life (in years)
    
    
    10Expected volatility
    
    
    77.8
    %Expected dividend yield
    
    
    0.0
    %
   9




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##### Table of Contents



Restricted Stock Plans
  Weighted-AverageNumber of Shares
    
    
    Grant Date Fair ValueBalance as of July 31, 2009
    
    
    112,076
    
    
    $
    3.13Granted
    
    
    176,885
    
    
    $
    1.36Forfeited
    
    
    
    
    
    $
    Balance as of April 30, 2010
    
    
    288,961
    
    
    $
    2.05
 Note 5. Fair Value Information
    Note 6. Supplemental Balance Sheet Information
 Inventories
 April 30, 2010
    
    
    July 31, 2009Raw material and component parts
    
    $
    5,761
    
    
    $
    6,058Work-in-progress
    
    
    2,128
    
    
    
    2,723Finished goods
    
    
    5,287
    
    
    
    6,244$
    13,176
    
    
    $
    15,025
 Property and equipment
 April 30, 2010
    
    
    July 31, 2009Land
    
    $
    730
    
    
    $
    730Building and improvements
    
    
    5,908
    
    
    
    5,782Machinery and equipment
    
    
    5,654
    
    
    
    5,363Furniture and fixtures
    
    
    736
    
    
    
    720Software
    
    
    363
    
    
    
    336Construction in process
    
    
    135
    
    
    
    16613,526
    
    
    
    13,097Less accumulated depreciation
    
    
    5,817
    
    
    
    5,183$
    7,709
    
    
    $
    7,914
 10




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##### Table of Contents



Other intangible assets
  GrossCarrying
    
    
    AccumulatedValue
    
    
    Amortization
    
    
    NetApril 30, 2010Proprietary know-how
    
    $
    4,057
    
    
    $
    1,482
    
    
    $
    2,575Trademark
    
    
    5,923
    
    
    
    
    
    
    
    5,923Licensing agreements
    
    
    5,834
    
    
    
    1,784
    
    
    
    4,050Patents
    
    
    1,460
    
    
    
    491
    
    
    
    969$
    17,274
    
    
    $
    3,757
    
    
    $
    13,517
 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 3 months)
    
    $
    225Fiscal Year 2011
    
    
    630Fiscal Year 2012
    
    
    577Fiscal Year 2013
    
    
    575Fiscal Year 2014
    
    
    575
  Pledged assets; short and long-term debt (excluding revenue bonds payable)
  April 30, 2010
    
    
    July 31, 2009Revolving credit facility
    
    $
    
    
    
    $
    4,772Non-U.S. receivable revolving credit facility
    
    
    
    
    
    
    Equipment line of credit
    
    
    
    
    
    
    263$
    
    
    
    $
    5,035
 Revolving Credit Facility:
 11




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##### Table of Contents



Non-U.S. Receivables Revolving Credit Facility
 Equipment Line of Credit
  April 30,
    
    
    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
    
    $
    
    
    
    $
    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 $1,119,328, including
contractual interest payments, due December
2011, collateralized by the
Malis® trademark
    
    
    1,055
    
    
    
    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 $1,600,000 including the effects
of imputing interest, due April 15, 2012
    
    
    1,426
    
    
    
    2,0622,481
    
    
    
    4,521Less current maturities
    
    
    1,389
    
    
    
    1,856Long-term portion
    
    $
    1,092
    
    
    $
    2,665
 Note 7. Commitments and Contingencies
    12




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Note 8. Enterprise-wide Information
  Three Months Ended
    
    
    Nine Months EndedApril 30,
    
    
    May 4,
    
    
    April 30,
    
    
    May 4,2010
    
    
    2009
    
    
    2010
    
    
    2009Product Line:Ophthalmic
    
    $
    7,776
    
    
    $
    7,476
    
    
    $
    23,100
    
    
    $
    22,326Neurosurgery  Direct
    
    
    2,038
    
    
    
    3,588
    
    
    
    7,767
    
    
    
    10,357Marketing partners
(Codman and Stryker)
    
    
    1,818
    
    
    
    
    
    
    
    2,280
    
    
    
    OEM (Codman, Stryker
and Iridex Corporation)
    
    
    2,195
    
    
    
    1,957
    
    
    
    5,776
    
    
    
    6,003Other (ENT and Dental)
    
    
    32
    
    
    
    140
    
    
    
    97
    
    
    
    373Total
    
    $
    13,859
    
    
    $
    13,161
    
    
    $
    39,020
    
    
    $
    39,059Region Specific:Domestic
    
    $
    9,408
    
    
    $
    8,636
    
    
    $
    26,648
    
    
    $
    26,578International
    
    
    4,451
    
    
    
    4,525
    
    
    
    12,372
    
    
    
    12,481Total
    
    $
    13,859
    
    
    $
    13,161
    
    
    $
    39,020
    
    
    $
    39,059
  13




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Note 9. Recent Accounting Pronouncements
       14




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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, 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.
 Mission
 mission
 Overview
   15




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##### Table of Contents



Summary of Financial Information
  NET SALES BY CATEGORY
 Three Months EndedApril 30, 2010
    
    
    Mix
    
    
    May 4, 2009
    
    
    MixOphthalmic
    
    $
    7,776
    
    
    
    56.1
    %
    
    $
    7,476
    
    
    
    56.8
    %Neurosurgery  Direct
    
    
    2,038
    
    
    
    14.7
    %
    
    
    3,588
    
    
    
    27.2
    %Marketing Partners (1)
    
    
    1,818
    
    
    
    13.1
    %
    
    
    
    
    
    
    OEM (2)
    
    
    2,195
    
    
    
    15.9
    %
    
    
    1,957
    
    
    
    14.9
    %Other
    
    
    32
    
    
    
    0.2
    %
    
    
    140
    
    
    
    1.1
    %Total
    
    $
    13,859
    
    
    
    
    
    
    $
    13,161
 
 (1)
    
    Revenues from marketing partners represent sales of bipolar forceps and ultrasonic
instrument tips and accessories which have been transitioned from our direct neurosurgery
sales force to our marketing partners.(2)
    
    Revenues from OEM represent sales of generators, related accessories and certain
laser probes to Stryker, Codman and Iridex. Nine Months EndedApril 30, 2010
    
    
    Mix
    
    
    May 4, 2009
    
    
    MixOphthalmic
    
    $
    23,100
    
    
    
    59.2
    %
    
    $
    22,326
    
    
    
    57.2
    %Neurosurgery  Direct
    
    
    7,767
    
    
    
    19.9
    %
    
    
    10,357
    
    
    
    26.5
    %Marketing Partners (1)
    
    
    2,280
    
    
    
    5.8
    %
    
    
    
    
    
    
    OEM (2)
    
    
    5,776
    
    
    
    14.8
    %
    
    
    6,003
    
    
    
    15.4
    %Other
    
    
    97
    
    
    
    0.3
    %
    
    
    373
    
    
    
    0.9
    %Total
    
    $
    39,020
    
    
    
    
    
    
    $
    39,059
  16




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##### Table of Contents



RESULTS OF OPERATIONS
 Three Months EndedIncreaseApril 30, 2010
    
    May 4, 2009
    
    (Decrease)Net Sales
    
    $
    13,859
    
    
    $
    13,161
    
    
    
    5.3
    %Gross Profit
    
    
    8,031
    
    
    
    7,401
    
    
    
    8.5
    %Gross Profit Margin %
    
    
    57.9
    %
    
    
    56.2
    %
    
    
    3.0
    %Commercial ExpensesSales and Marketing
    
    
    2,896
    
    
    
    3,557
    
    
    
    (18.6
    %)General and Administrative
    
    
    2,204
    
    
    
    2,224
    
    
    
    (0.9
    %)Research and Development
    
    
    886
    
    
    
    741
    
    
    
    19.6
    %Operating Income
    
    
    2,045
    
    
    
    879
    
    
    
    132.7
    %Operating Margin
    
    
    14.8
    %
    
    
    6.7
    %
    
    
    120.9
    %EBITDA (1)
    
    
    5,815
    
    
    
    1,359
    
    
    
    327.9
    %Net Income
    
    $
    3,309
    
    
    $
    458
    
    
    
    622.5
    %Earnings per share (2)
    
    $
    0.13
    
    
    $
    0.02
    
    
    
    550.0
    %Return on equity (1)
    
    
    8.0
    %
    
    
    1.2
    %
    
    
    566.7
    %Return on assets (1)
    
    
    5.2
    %
    
    
    1.1
    %
    
    
    372.7
    %
 Nine Months EndedIncreaseApril 30, 2010
    
    May 4, 2009
    
    (Decrease)Net Sales
    
    $
    39,020
    
    
    $
    39,059
    
    
    
    (0.1
    %)Gross Profit
    
    
    22,373
    
    
    
    22,322
    
    
    
    0.2
    %Gross Profit Margin %
    
    
    57.3
    %
    
    
    57.1
    %
    
    
    0.4
    %Commercial ExpensesSales and Marketing
    
    
    9,200
    
    
    
    10,740
    
    
    
    (14.3
    %)General and Administrative
    
    
    6,286
    
    
    
    6,385
    
    
    
    (1.6
    %)Research and Development
    
    
    2,320
    
    
    
    2,248
    
    
    
    3.2
    %Operating Income
    
    
    4,567
    
    
    
    2,949
    
    
    
    54.9
    %Operating Margin
    
    
    11.7
    %
    
    
    7.6
    %
    
    
    53.9
    %EBITDA (1)
    
    
    9,256
    
    
    
    4,314
    
    
    
    114.6
    %Net Income
    
    $
    4,728
    
    
    $
    1,509
    
    
    
    213.3
    %Earnings per share (2)
    
    $
    0.19
    
    
    $
    0.06
    
    
    
    216.7
    %Return on equity (1)
    
    
    11.8
    %
    
    
    4.1
    %
    
    
    187.8
    %Return on assets (1)
    
    
    8.3
    %
    
    
    3.6
    %
    
    
    130.6
    %
 
 (1)
    
    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.(2)
    
    Earnings per share for the third quarter and first nine months of fiscal 2010 were as follows: Three Months Ended
    
    
    Nine Months EndedApril 30, 2010
    
    
    April 30, 2010Earnings per share from operations
    
    $
    0.05
    
    
    $
    0.11Earnings per share from Stryker gain
    
    
    0.02
    
    
    
    0.02Earnings per share from Alcon settlement
    
    
    0.06
    
    
    
    0.06$
    0.13
    
    
    $
    0.19
 17




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##### Table of Contents



Three Months Ended
    
    Nine Months EndedApril 30, 2010
    
    May 4, 2009
    
    April 30, 2010
    
    May 4, 2009Net income
    
    $
    3,309
    
    
    $
    458
    
    
    $
    4,728
    
    
    $
    1,509Interest, net
    
    
    113
    
    
    
    219
    
    
    
    410
    
    
    
    619Income taxes
    
    
    1,909
    
    
    
    203
    
    
    
    2,667
    
    
    
    820Depreciation and Amortization
    
    
    484
    
    
    
    479
    
    
    
    1,451
    
    
    
    1,366EBITDA
    
    $
    5,815
    
    
    $
    1,359
    
    
    $
    9,256
    
    
    $
    4,314Net income
    
    $
    3,309
    
    
    $
    458
    
    
    $
    4,728
    
    
    $
    1,509Average Equity:April 30, 2010
    
    
    43,096
    
    
    
    
    
    
    
    43,096January 31, 2010
    
    
    39,708
    
    
    
    
    
    
    
    39,708October 31, 2009
    
    
    
    
    
    
    
    
    
    
    38,746July 31, 2009
    
    
    
    
    
    
    
    
    
    
    38,130May 4, 2009
    
    
    
    
    
    
    38,062
    
    
    
    
    
    
    
    38,062February 3, 2009
    
    
    
    
    
    
    37,536
    
    
    
    
    
    
    
    37,536October 29, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37,068July 31, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,357Average Equity
    
    
    41,402
    
    
    
    37,799
    
    
    
    39,920
    
    
    
    37,256Return on Equity
    
    
    8.0
    %
    
    
    1.2
    %
    
    
    11.8
    %
    
    
    4.1
    %Net income
    
    $
    3,309
    
    
    $
    458
    
    
    $
    4,728
    
    
    $
    1,509Interest
    
    
    113
    
    
    
    219
    
    
    
    410
    
    
    
    619Net income + interest expense
    
    $
    3,422
    
    
    $
    677
    
    
    $
    5,138
    
    
    $
    2,128Average Assets:April 30, 2010
    
    
    75,085
    
    
    
    
    
    
    
    75,085January 31, 2010
    
    
    56,996
    
    
    
    
    
    
    
    56,996October 31, 2009
    
    
    
    
    
    
    
    
    
    
    56,737July 31, 2009
    
    
    
    
    
    
    
    
    
    
    58,080May 4, 2009
    
    
    
    
    
    
    59,965
    
    
    
    
    
    
    
    59,965February 3, 2009
    
    
    
    
    
    
    60,544
    
    
    
    
    
    
    
    60,544October 29, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    59,124July 31, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    58,396Average Assets
    
    
    66,041
    
    
    
    60,255
    
    
    
    61,725
    
    
    
    59,507Return on Assets
    
    
    5.2
    %
    
    
    1.1
    %
    
    
    8.3
    %
    
    
    3.6
    %
    18




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##### Table of Contents



Recent Developments
 ® ®
 ® ®
    19




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##### Table of Contents



TM
  Our Business Strategy
   Manufacturing Efficiencies
 Lean Manufacturing 
 Plastic Molding 
 Supply Chain Management 
 Human Resource Rationalization 
 20




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##### Table of Contents



Cash Management 
  Research & Development (R&D) 
 New Business Development 
  Recent Developments ® ®
  21




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##### Table of Contents



New Product Sales
  Demand Trends
   Pricing Trends
  Economic Trends
  Results Overview
  22




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##### Table of Contents



Results of Operations
 Three-Month Period Ended April 30, 2010 Compared to Three-Month Period Ended May 4, 2009
 Net Sales
  Quarter Ended% IncreaseApril 30, 2010
    
    
    May 4, 2009
    
    
    (Decrease)Ophthalmic
    
    $
    7,776
    
    
    $
    7,476
    
    
    
    4.0
    %Neurosurgery  Direct
    
    
    2,038
    
    
    
    3,588
    
    
    
    (43.2
    %)Marketing partners (Codman and
Stryker)
    
    
    1,818
    
    
    
    
    
    
    
    100.0
    %OEM (Codman, Stryker and
Iridex Corporation)
    
    
    2,195
    
    
    
    1,957
    
    
    
    12.2
    %Other
    
    
    32
    
    
    
    140
    
    
    
    (77.1
    %)Total
    
    $
    13,859
    
    
    $
    13,161
    
    
    
    5.3
    %
   Three Months Ended% IncreaseApril 30, 2010
    
    
    May 4, 2009
    
    
    (Decrease)United States (including
Marketing Partner and OEM sales)
    
    $
    9,408
    
    
    $
    8,636
    
    
    
    8.9
    %International (including Canada)
    
    
    4,451
    
    
    
    4,525
    
    
    
    (1.6
    %)Total
    
    $
    13,859
    
    
    $
    13,161
    
    
    
    5.3
    %
  Gross Profit
  23




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##### Table of Contents



Operating Expenses
    Other Income/(Expenses)
 ®
 Operating Income, Income Taxes and Net Income
    24




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##### Table of Contents



Nine-Month Period Ended April 30, 2010 Compared to Nine-Month Period Ended May 4, 2009
 Net Sales
  Nine Months Ended% IncreaseApril 30, 2010
    
    
    May 4, 2009
    
    
    (Decrease)Ophthalmic
    
    $
    23,100
    
    
    $
    22,326
    
    
    
    3.5
    %Neurosurgery  Direct
    
    
    7,767
    
    
    
    10,357
    
    
    
    (25.0
    %)Marketing partners (Codman and
Stryker)
    
    
    2,280
    
    
    
    
    
    
    
    100.0
    %OEM (Codman, Stryker and Iridex)
    
    
    5,776
    
    
    
    6,003
    
    
    
    (3.8
    %)Other
    
    
    97
    
    
    
    373
    
    
    
    (74.0
    %)Total
    
    $
    39,020
    
    
    $
    39,059
    
    
    
    (0.1
    %)
   Nine Months Ended% IncreaseApril 30, 2010
    
    
    May 4, 2009
    
    
    (Decrease)United States (including OEM sales)
    
    $
    26,648
    
    
    $
    26,578
    
    
    
    0.0
    %International (including Canada)
    
    
    12,372
    
    
    
    12,482
    
    
    
    (0.1
    %)Total
    
    $
    39,020
    
    
    $
    39,059
    
    
    
    (0.1
    %)
  Gross Profit
  Operating Expenses
  25




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##### Table of Contents



Other Income/(Expenses)
 ®
 Operating Income, Income Taxes and Net Income
    Liquidity and Capital Resources
   26




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##### Table of Contents



®
   Revolving Credit Facility:
  Non-U.S. Receivables Revolving Credit Facility
 27




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##### Table of Contents



Equipment Line of Credit:
  Critical Accounting Policies
  
 Item 3   Quantitative and Qualitative Disclosures about Market Risk
    
 Item 4   Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  28




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##### Table of Contents



Changes in Internal Control over Financial Reporting
  
 Part II  Other Information
 
 Item 1   Legal Proceedings
   
 Item 1A   Risk Factors
  
 Item 2   Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3   Defaults Upon Senior Securities
  
 Item 4   [Removed and Reserved]
 
 Item 5  Other Information
   29




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##### Table of Contents



Item 6   Exhibits
 Exhibit No.
    
    Description10.1
    
    Confidential Settlement and License Agreement between Synergetics
USA, Inc. and Alcon, Inc., Alcon Laboratories, Inc. and Alcon
Research Ltd.10.2
    
    Supply Agreement between Synergetics, Inc. and Alcon Research Ltd.10.3
    
    Amendment executed April 19, 2010 by and among Synergetics USA,
Inc., Steven R. Becker, BC Advisors, LLC, SRB Management, L.P.,
SRB Greenway Opportunity Fund, L.P. and SRB Greenway Capital
(Q.P.), L.P. (filed as Exhibit 10.1 to the Companys Current
Report on Form 8-K filed on April 22, 2010 and incorporated
herein by reference).31.1
    
    Certification of the Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of the Chief Financial Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of the Chief Executive Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of the Chief Financial Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.**
    
    Portions of Exhibits 10.1 and 10.2 have been omitted pursuant to
a request for confidential treatment filed with the SEC. Omitted
material for which confidential treatment has been requested has
been filed separately with the SEC.
 
 Trademark Acknowledgements
  30




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##### Table of Contents



SYNERGETICS USA, INC.
(Registrant)June 14, 2010
    /s/ David M. HableDavid M. Hable, President and ChiefExecutive Officer (Principal Executive
Officer)June 14, 2010
    /s/ Pamela G. BoonePamela G. Boone, Executive VicePresident, Chief Financial Officer, Secretary
and Treasurer (Principal Financial and
Principal Accounting Officer) 31