##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
    Form 10-K
 (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    April 27, 2007oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission file
    number: 0-19806
      Cyberonics, Inc.
 (Exact name of registrant as
    specified in its charter)
  Delaware

76-0236465(State or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer
    Identification No.)   Cyberonics
    Building
    100 Cyberonics Blvd.
    Houston, Texas77058-2072 (Address
    of principal executive offices)
    (Zip Code)
  Registrants telephone number, including area code:
 (281) 228-7200
      Securities registered pursuant to Section 12(b) of the
    Act:
  Title of Each Class of Stock

Name of Each Exchange on Which RegisteredCommon Stock 
    $0.01 par value per share

The NASDAQ Stock Market LLC   Securities registered pursuant to Section 12(g) of the
    Act:
 None
      o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. þ
  Rule 12b-2
  o þ o
  Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-K.




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##### 



TABLE OF
    CONTENTS
  
  PART IItem 1.


Business


3Item 1A.


Risk
    Factors


13Item 1B.


Unresolved Staff
    Comments


22Item 2.


Properties


22Item 3.


Legal
    Proceedings


22Item 4.


Submission of
    Matters to a Vote of Security Holders


22PART IIItem 5.


Market for
    Registrants Common Equity, Related Stockholder Matters and
    Issuer Purchases of Equity Securities


23Item 6.


Selected Financial
    Data


24Item 7.


Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations


25Item 7A.


Quantitative and
    Qualitative Disclosures About Market Risk


33Item 8.


Financial
    Statements and Supplementary Data


33Item 9.


Changes in and
    Disagreements With Accountants on Accounting and Financial
    Disclosure


33Item 9A.


Controls and
    Procedures


34Item 9B.


Other
    Information


37PART IIIItem 10.


Directors,
    Executive Officers and Corporate Governance


37Item 11.


Executive
    Compensation


37Item 12.


Security Ownership
    of Certain Beneficial Owners and Management and Related
    Stockholder Matters


37Item 13.


Certain
    Relationships and Related Transactions, and Director
    Independence


37Item 14.


Principal
    Accountant Fees and Services


37PART IVItem 15.


Exhibits, Financial
    Statement Schedules


38Retention Agreement - John RiccardiDescription of Non-Equity Incentive Compensation PlansConsulting Agreement between Cyberonics, Inc. and BK ConsultingExecutive Restricted Stock AgreementNon-Equity Incentive Compensation of Robert P. CumminsConsent of KPMG LLPCertification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO and CFO Pursuant to Section 906      Form 10-K,
    1




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CAUTIONARY
    STATEMENT ABOUT FORWARD-LOOKING STATEMENTS
  Form 10-K Form 10-K)
  
    continued market acceptance of our VNS Therapy
    Systemtm
    (VNS Therapy System) and sales of our product;
    refusal by third-party payers to cover or adequately reimburse
    vagus nerve stimulation (VNS) therapy (VNS
    Therapy) for treatment-resistant depression
    (TRD) or refractory epilepsy;
    intellectual property protection and potential infringement
    claims;
    maintaining compliance with government regulations;
    obtaining necessary government approvals for new applications
    and retaining governmental approvals for existing applications;
    product liability claims and potential litigation;
    reliance upon single suppliers and manufacturers for certain
    components;
    the development, satisfactory completion and results of clinical
    trials
    and/or
    market tests of the VNS Therapy System for the treatment of
    epilepsy, TRD or other disorders;
    the accuracy of managements estimates of future sales,
    expenses and capital requirements;
    changes in financial estimates and recommendations by securities
    analysts;
    changes in market valuations of medical device companies in
    general;
    additions or departures of key management personnel;
    possible acceleration of our convertible note debt;
    maintaining adequate insurance at economical rates;
    our ability to retire or refinance our debt at or before its
    maturity, which could be affected by conditions in financial
    markets or our financial position, and our ability to obtain any
    replacement long-term financing on terms as favorable to us, if
    at all;
    risks and costs associated with the previously disclosed
    inquiries by the Securities and Exchange Commission
    (SEC) staff and the United States (U.S.)
    Attorney and with any litigation relating thereto or to our
    stock option grants, procedures and practices;
    the impact of the restatement of our financial statements and
    any other actions that might be taken or required as a result of
    such inquiries, including a default under our credit facility or
    debt instruments;
    the potential identification of new material weaknesses in our
    internal controls over financial reporting; and
    uncertainties associated with stockholder derivative litigation.  Form 10-K
 2




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##### Table of Contents



PART I  Item 1.
    Business  General
      
    repositioning VNS Therapy in a unique, defensible market
    position in epilepsy by rejuvenating growth and accelerating
    penetration of the epilepsy market;
    developing broad third-party reimbursement in TRD and
    positioning VNS Therapy to satisfy the unmet medical need in
    TRD; and
    focusing our financial resources to develop and expand future
    revenue growth.    follow-up case-by-case case-by-case case-by-case
   3




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##### Table of Contents



start-up Form 10-K.
  VNS
    Therapy Epilepsy Indication Overview
  tm
  VNS
    Therapy for Epilepsy
  follow-up
  VNS
    Therapy Depression Indication Overview
   4




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VNS
    Therapy for Depression
  12-month 12-month
  FDA
    Post-Approval Study Commitments and Other Clinical Research
    Studies
    VNS
    Therapy System
     5




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Pulse Generator.
  Bipolar Lead.
  Programming Wand and Software.
  Tunneling Tool.
  Accessory Pack.
    Manufacturing
    and Sources of Supply
   6




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##### Table of Contents




    various specifications and controls be established for devices;
    devices be designed under a quality system to meet these
    specifications;
    devices be manufactured under a quality system;
    finished devices meet these specifications;
    devices be correctly installed, checked and serviced;
    quality data be analyzed to identify and correct quality
    problems; and
    complaints be processed.      Marketing
    and Sales
  United
    States
      
    sales personnel with medical device, pharmaceutical, or nursing
    experience;
    reimbursement specialists experienced in obtaining third-party
    coverage and payments for new medical technologies;
    account executives and field clinical engineers experienced in
    obtaining, training and maintaining adequate surgical capacity
    for implanting the VNS Therapy System;
    marketing teams experienced in educational and promotional
    marketing programs; and
    case managers experienced in patient education, insurance
    verification and authorization issues.     7




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International
    Third-Party
    Reimbursement
  follow-up
    
    the status of FDAs review of the product;
    CMSs national coverage determinations, as well as local
    coverage determinations by Medicare contractors;
    BlueCross BlueShield Technology Evaluation Center
    recommendations;
    the products safety and efficacy;
    the number of studies performed and peer-reviewed articles
    published with respect to the product; and
    how the product and therapy compare to alternative therapies.  case-by-case and/or
  Medicare
  Section 60-22).
 8




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Medicaid
  case-by-case
    Private
    Payers
  case-by-case
        Product
    Development
    tm tm tm tm tm tm
 9




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tm tm
  tm tm
      Competition
      and/or
 10




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Patents,
    Licenses and Proprietary Rights
               11




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Product
    Liability and Insurance
      Employees
    Financial
    Information About Segment and Geographical Areas
  page F-1.
  Internet
    Website and Availability of Public Filings with the
    SEC
  www.cyberonics.com. Form 10-K, Form 10-Q, Form 8-K,
  1-800-SEC-0330. www.sec.gov
  Form 10-K.
 12




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Item 1A.
    Risk
    Factors  Our
    common stock price constantly changes.
    
    changes in the general conditions of the economy;
    regulatory activities and announcements;
    federal and state enforcement initiatives related to medical
    device companies;
    changes in market valuations of medical device companies in
    general;
    national and regional coverage determinations by third-party
    payers, including private insurance companies, Medicare, state
    Medicaid programs and others;
    results of studies regarding the safety and efficacy of drugs or
    devices that are potential competitors to our VNS Therapy System;
    results of studies regarding the safety and efficacy of our VNS
    Therapy treatment for various indications including epilepsy,
    depression, Alzheimers Disease, anxiety and other
    disorders;
    quarterly variations in our sales and operating results;
    announcements of significant contracts, acquisitions or capital
    commitments;
    changes in financial estimates by securities analysts;
    additions or departures of key management personnel;
    risks and costs associated with the previously disclosed
    inquiries by the SEC staff and the U.S. Attorney and with
    any litigation relating thereto or to our stock option grants,
    procedures and practices;
    the impact of the restatement of our financial statements and
    any other actions that might be taken or required as a result of
    such inquiries, including a default under our credit facility or
    debt instruments;
    the potential identification of material weaknesses in our
    internal controls over financial reporting; and
    uncertainties associated with stockholder derivative litigation.    We are
    not profitable now, and we have been profitable for only seven
    fiscal quarters since our inception.
    
    sales and marketing expenses related to our U.S. launch of
    VNS Therapy in TRD and to our re-launch of VNS Therapy in
    epilepsy;
    clinical expenses related to our commitment for post-market
    studies in the TRD indication;
    regulatory expenses related to our post-market surveillance and
    other regulatory obligations and manufacturing expenses; and
    general administrative expenses, including substantial expenses
    related to internal and governmental investigations of our stock
    option granting practices and procedures. 13




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In the
    future, we could have a material weakness in our internal
    control over financial reporting.
  Form 10-K Form 10-K)
  Our
    quarterly operating results may fluctuate in the future, which
    may cause our stock price to decline.
    
    the extent to which the VNS Therapy System gains market
    acceptance;
    the timing of obtaining marketing approvals for the VNS Therapy
    System for other indications, if any;
    the existence and timing of any approvals or non-coverage
    determinations for reimbursement by third-party payers;
    the rate and size of expenditures incurred as we expand our
    clinical, manufacturing, sales, marketing and product
    development efforts;
    our ability to retain qualified sales personnel;
    the availability of key components, materials and contract
    services, which depends on our ability to forecast sales among
    other things;
    investigations of our business and business-related activities
    by regulatory or other governmental authorities;
    product recalls or safety alerts; and
    litigation, including product liability, securities class
    action, stockholder derivative, general commercial and other
    lawsuits.    We may
    fail to comply with one or more of the many regulations that
    govern our business activities.
   14




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Our
    indebtedness and debt service obligations may adversely affect
    our cash flow, cash position and stock price.
    
    requiring the dedication of a portion of our cash to service our
    indebtedness and to pay off the principal at maturity, thereby
    reducing the amount of our expected cash available for other
    purposes, including funding our research, development and
    commercialization efforts and planned capital expenditures;
    increasing our vulnerability to general adverse economic
    conditions;
    limiting our ability to obtain additional financing; and
    placing us at a possible competitive disadvantage to less
    leveraged competitors and competitors with better access to
    capital resources.  Upon
    the occurrence of a fundamental change, holders of our senior
    subordinated Convertible Notes may force us to purchase their
    Convertible Notes at the full amount owed, including accrued but
    unpaid interest.
    Upon
    the occurrence of certain events, the initial conversion rate of
    our Convertible Notes will be adjusted, which could result in an
    increased number of shares being issued upon
    conversion.
    We may
    be forced to repay the full amount of our outstanding
    $125.0 million convertible note indebtedness and senior
    credit indebtedness on an accelerated basis.
  Form 10-K Form 10-K
 15




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We may
    not be able to access sufficient additional capital sources or
    to access capital on terms which are acceptable to
    us.
    We may
    not be successful in our efforts to develop VNS Therapy for the
    treatment of other indications and, as such, we may not
    experience revenue growth from these other
    indications.
    We may
    not be able to expand or maintain market acceptance of the use
    of the VNS Therapy System to treat epilepsy or depression, which
    could cause our sales to be lower than
    expectations.
  case-by-case case-by-case
 16




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We may
    not be successful in our marketing and sales efforts, which
    could severely harm our business.
    Patient
    confidentiality and federal and state privacy and security laws
    and regulations may adversely impact our selling
    model.
    We may
    be unable to obtain and maintain adequate third-party
    reimbursement on our product, which could have a significant
    negative impact on our future operating results.
   17




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case-by-case case-by-case
    Our
    current and future expense estimates are based, in large part,
    on estimates of our future sales, which are difficult to
    predict.
    If our
    suppliers and manufacturers are unable to meet our demand for
    materials, components and contract services, we may be forced to
    qualify new vendors or change our product design, which would
    impair our ability to deliver products to our customers on a
    timely basis.
  and/or
  Our
    products may have defects that result in product recalls, which
    may result in substantial costs and reduced sales.
     18




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We may
    not be able to protect our technology from unauthorized use,
    which could diminish the value of our products and impair our
    ability to compete.
    We may
    engage in litigation to protect our proprietary rights, or
    defend against infringement claims by third parties, causing us
    to suffer significant liabilities or expenses or preventing us
    from selling our products.
    Intense
    competition and rapid technological changes could reduce our
    ability to market our products and achieve sales.
   19




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We are
    subject to claims of product liability and we may not have the
    resources or insurance to cover the cost for losses under these
    claims.
    If we
    do not continue to comply with changing government laws and
    regulations, we could lose our ability to market and sell our
    product or be subject to substantial fines or other
    penalties.
    We are
    subject to federal and state laws governing our sales and
    marketing practices, and failure to adhere to these laws could
    result in substantial fines and other penalties.
  qui tam
 20




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Our
    international operations are subject to risks not generally
    associated with commercialization efforts in the
    U.S.
    Our
    failure to attract and retain qualified personnel, including key
    officers, could adversely affect our operations.
    We
    have in the past and are again now involved in an investigation
    conducted by the Staff of the Senate Finance Committee resulting
    in adverse publicity, expenditure of substantial resources and
    diversion of management attention, all with an adverse effect on
    our business.
   21




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We
    have been named in a putative securities class action
    lawsuit.
    We are
    the subject of governmental investigations related to our stock
    option granting practices and procedures and other matters, the
    outcome of which could adversely affect our
    business.
    We are
    named as a nominal defendant in six stockholder derivative
    lawsuits which, as a result of our indemnity obligations to the
    current and former officers and directors named as defendants,
    could be costly to us.
     Item 1B.
    Unresolved
    Staff Comments     Item 2.
    Properties     Item 3.
    Legal
    Proceedings    Item 4.
    Submission
    of Matters to a Vote of Security Holders   22




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PART II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities  mark-ups,
  High


LowFiscal Year Ended
    April 28, 2006First Quarter

$
47.77


$
32.70Second Quarter


40.69



26.63Third Quarter


35.30



26.88Fourth Quarter


30.96



22.61Fiscal Year Ended
    April 27, 2007First Quarter


27.16



19.74Second Quarter


21.64



14.70Third Quarter


27.55



17.30Fourth Quarter


23.02



17.62        23




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##### Table of Contents



Item 6.  Selected
    Financial Data  Form 10-K. Form 10-K. Form 10-K.
  52 Weeks Ended


53 Weeks Ended


52 Weeks EndedApril 27,


April 28,


April 29,


April 30,


April 25,2007


2006


2005


2004


2003Consolidated Statement of
    Operations Data:Net sales

$
130,968,437


$
123,441,575


$
103,442,570


$
110,721,499


$
104,466,998Cost of sales


18,258,374



15,822,045



15,674,040



16,386,487



16,202,831Gross profit


112,710,063



107,619,530



87,768,530



94,335,012



88,264,167Operating expenses:Selling, general and administrative


134,144,315



137,310,196



86,972,068



72,198,977



70,480,847Research and development


28,092,243



29,541,707



20,092,810



17,582,527



18,376,484Total operating expenses


162,236,558



166,851,903



107,064,878



89,781,504



88,857,331Earnings (loss) from operations


(49,526,495
)


(59,232,373
)


(19,296,348
)


4,553,508



(593,164
)Interest income


4,649,394



3,211,956



1,072,488



469,924



471,213Interest expense


(5,913,119
)


(3,018,969
)


(444,270
)


(565,702
)


(413,192
)Other income (expense), net


(311,112
)


69,460



84,736



390,997



572,851Earnings (loss) before income taxes


(51,101,332
)


(58,969,926
)


(18,583,394
)


4,848,727



37,708Income tax expense


78,775



99,266



26,113



230,789



129,563Net earnings (loss)

$
(51,180,107
)

$
(59,069,192
)

$
(18,609,507
)

$
4,617,938


$
(91,855
)Basic earnings (loss) per share

$
(2.01
)

$
(2.37
)

$
(0.77
)

$
0.20


$
(0.00
)Diluted earnings (loss) per share

$
(2.01
)

$
(2.37
)

$
(0.77
)

$
0.18


$
(0.00
)Shares used in computing basic
    earnings (loss) per share


25,514,232



24,916,938



24,036,736



22,921,031



22,034,651Shares used in computing diluted
    earnings (loss) per share


25.514,232



24,916,938



24,036,736



25,954,640



22,034,651Consolidated Balance Sheet
    Data
    (as of Year End):Cash, cash equivalents and
    marketable securities

$
84,804,876


$
92,355,071


$
61,475,892


$
58,363,731


$
43,576,305Total assets


137,644,883



152,300,284



98,855,397



94,296,524



75,115,312Convertible Notes


125,000,000



125,000,000











Line of credit


7,500,000



2,500,000



3,000,000



10,031,000



8,370,000Long-term obligations


295,184



1,148,457



209,928







141,066Accumulated deficit


(258,646,256
)


(207,466,149
)


(148,396,957
)


(129,787,450
)


(134,405,388
)Common stockholders equity
    (deficit)


(16,062,229
)


4,629,866



75,595,841



68,980,479



48,512,003   Share-Based
    Payment
 24




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Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations    Form 10-K.
    Going
    Concern
  start-up
  Form 10-K Form 10-K
  Business
    Overview
   25




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follow-up case-by-case
    start-up
    Related
    Proceedings
  Regulatory Proceedings.
  Legal Proceedings.
 26




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Significant
    Accounting Policies and Critical Accounting Estimates
        Accounts Receivable.
  Inventories. first-in,
  Property and Equipment.
  Revenue Recognition.
  Research and Development.
  Stock Options. Accounting for Stock-Based
    Compensation Accounting for Stock-Based Compensation 
    Transition and Disclosure, Accounting for Stock Issued to
    Employees
   27




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Income Taxes.
  Results
    of Operations
  Net
    Sales
      Gross
    Profit
        Operating
    Expenses
  Selling, General and Administrative (SG&A)
    Expenses.
 28




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Research and Development (R&D)
    Expenses.
  Interest
    Income
    Interest
    Expense
    Other
    Income (Expense), Net
    Income
    Taxes
    For the 52 Weeks EndedApril 27, 2007


April 28, 2006


April 29, 2005Income Tax Expense

$
78,775


$
99,266


$
26,113U.S. statutory rate


(34.0
)%


(34.0
)%


(34.0
)%Change in deferred tax valuation
    allowance


30.2



31.6



32.1Foreign taxes


0.1



0.1



0.1State and local tax provision


0.1



0.1



0.0Other, net


3.8



2.4



1.90.2
%


0.2
%


0.1
%  29




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Liquidity
    and Capital Resources
  Overview
      Cash
    Flows
    52 Weeks EndedApril 27, 2007


April 28, 2006


April 29, 2005Operating activities

$
(20,688,856
)

$
(70,876,209
)

$
(3,969,672
)Investing activities


(1,425,349
)


17,501,141



(11,613,173
)Financing activities


14,434,408



106,994,787



10,851,738   Operating
    Activities
    Investing
    Activities
   30




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Financing
    Activities
      Debt
    Instruments and Related Covenants
  Line
    of Credit
    Form 10-K
 31




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Convertible
    Notes
    Form 10-K Form 10-K
      Contractual
    Obligations
      TotalConvertible Notes


Operating





ContractualLine of Credit(1)


Issuance(2)


Leases(3)


Other(4)


ObligationsContractual
    Obligations:Less Than One Year

$
10,829,222


$
129,375,000


$
3,275,102


$
177,475


$
143,656,7991-3 Years


621,917







5,302,343







5,924,2603-5 Years










23,309







23,309Over 5 Years


















Total Contractual Obligations

$
11,451,139


$
129,375,000


$
8,600,754


$
177,475


$
149,604,368  32




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(1)
    
    Consists of $10.0 million minimum loan balance requirement
    and related interest. See Note 5. Line of
    Credit of the Notes to the Consolidated Financial
    Statements for additional information.(2)
    
    Consists of principal and interest obligations related to the
    Convertible Notes issuance presented as if the Convertible Notes
    were to become due and payable within twelve months from the
    issuance of this annual report. Although the Convertible Notes
    mature in 2012, we have classified them as current due to our
    receipt of the Notice of Default from the Trustee.(3)
    
    Consists of operating lease obligations related to facilities
    and office equipment.(4)
    
    Reflects amounts we expect to expend in connection with sales,
    marketing and training events and debt payments applicable to
    acquisition of computer hardware and software.  Factors
    Affecting Future Operating Results and Common Stock
    Price
    Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk          Item 8.
    Financial
    Statements and Supplementary Data  page F-1.
  Item 9.
    Changes
    in and Disagreements With Accountants on Accounting and
    Financial Disclosure   33




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Item 9A.
    Controls
    and Procedures  Disclosure
    Controls and Procedures
  (a)
    Evaluation
    of Disclosure Controls and Procedures  Rules 13a-15(e) 15d-15(e)
  (b)
    Managements
    Report on Internal Control Over Financial
    Reporting  Rules 13a-15(f) 15d-15(f)
    Internal Control 
    Integrated Framework
    (c)
    Changes
    in Internal Control Over Financial Reporting    
    We conducted training sessions for the Compensation Committee
    and other individuals involved in or responsible for the
    granting and recording of equity incentive awards;
    Management implemented a control which involved a review of
    measurement dates, fair value assumptions, and calculations for
    all grants issued in fiscal year 2007. 34




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Other
    Changes in Internal Control Over Financial
    Reporting
    Audit
    Committee Oversight
   35




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
     Managements Report on Internal Control
    Over Financial Reporting Internal Control  Integrated
    Framework
        Internal
    Control  Integrated Framework Internal Control  Integrated
    Framework
    KPMG
    LLP
    36




---



##### Table of Contents



Item 9B.
    Other
    Information   PART III  Item 10.
    Directors,
    Executive Officers and Corporate Governance  Form 10-K,
  Item 11.
    Executive
    Compensation  Form 10-K,
  Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters  Form 10-K,
  Item 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence  Form 10-K,
  Item 14.
    Principal
    Accountant Fees and Services  Form 10-K,
 37




---



##### Table of Contents



PART IV  Item 15.
    Exhibits,
    Financial Statement Schedules  Financial Statements.
  Form 10-K page F-1:
  Description

Page No.Report of Independent Registered
    Public Accounting Firm


F-2Consolidated Balance Sheets


F-3Consolidated Statements of
    Operations


F-4Consolidated Statements of
    Stockholders Equity (Deficit) and Comprehensive Loss


F-5Consolidated Statements of Cash
    Flows


F-6Notes to Consolidated Financial
    Statements


F-7   Financial Statement Schedules
  Regulation S-X
  Index to Exhibits
  Form 10-K. Regulation S-K.
  SEC File orExhibit





Registration

ExhibitNumber

Document Description

Report or Registration Statement

Number

Reference3
.1

Amended and Restated Certificate of
    Incorporation of Cyberonics, Inc.

Cyberonics, Inc.s
    Registration Statement on
    Form S-3
    filed on February 21, 2001

333-56022

3.13
.2

Bylaws of Cyberonics, Inc.

Cyberonics, Inc.s Current
    Report on
    Form 8-K
    filed on September 12, 2000

000-19806

3.13
.3

Amendment No. 1 to the Bylaws
    of Cyberonics, Inc.

Cyberonics, Inc.s Current
    Report on
    Form 8-K
    filed on March 30, 2001

000-19806

3.14
.1

Second Amended and Restated
    Preferred Shares Rights Agreement dated August 21, 2000
    between Cyberonics, Inc. and BankBoston, N.A. (formerly known as
    The First National Bank of Boston), including the Form of First
    Amended Certificate of Designation of Rights, Preferences and
    Privileges of Series A Participating Preferred Stock of
    Cyberonics, Inc., Form of Rights Certificate and Stockholder
    Rights Plan attached thereto as Exhibits A, B and C,
    respectively

Cyberonics, Inc.s Current
    Report on
    Form 8-K
    filed on September 12, 2000

000-19806

4.14
.2

Amendment No. 1 to Second
    Amended and Restated Preferred Share Rights Agreement dated
    April 26, 2001

Cyberonics, Inc.s Annual
    Report and Transition Report on
    Form 10-K
    for the fiscal period ended April 27, 2001 and the
    transition period from July 1, 2000 to April 27, 2001

000-19806

4.24
.3

Amendment No. 2 to Second
    Amended and Restated Preferred Share Rights Agreement dated
    October 31, 2001

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 30, 2004

000-19806

4.34
.4

Amendment No. 3 to Second
    Amended and Restated Preferred Share Rights Agreement dated
    December 9, 2003

Cyberonics, Inc.s Current
    Report on
    Form 8-K
    filed on December 12, 2003

000-19806

99.2 38




---



##### Table of Contents



SEC File orExhibit





Registration

ExhibitNumber

Document Description

Report or Registration Statement

Number

Reference4
.5

Amendment No. 4 to Second
    Amended and Restated Preferred Share Rights Agreement dated
    January 9, 2004

Cyberonics, Inc.s Current
    Report on
    Form 8-K
    filed on January 13, 2004

000-19806

99.24
.6

Indenture dated September 27,
    2005 between Cyberonics, Inc. and Wells Fargo Bank, National
    Association, as Trustee

Cyberonics, Inc.s Current
    Report on
    Form 8-K
    filed on October 3, 2005

000-19806

10.14
.7

Registration Rights Agreement dated
    September 27, 2005 between Cyberonics, Inc. and Merrill
    Lynch, Pierce, Fenner & Smith Incorporated, as the
    Initial Purchaser

Cyberonics, Inc.s Current
    Report on
    Form 8-K
    filed on October 3, 2005

000-19806

10.24
.8

Form of Confirmation of OTC
    Convertible Note Hedge executed September 21, 2005 to
    be effective September 27, 2005

Cyberonics, Inc.s Current
    Report on
    Form 8-K
    filed on October 3, 2005

000-19806

10.34
.9

Form of Confirmation of OTC Warrant
    Transaction executed September 21, 2005 to be effective
    September 27, 2005

Cyberonics, Inc.s Current
    Report on
    Form 8-K
    filed on October 3, 2005

000-19806

10.44
.10

Amendment No. 5 to Second
    Amended and Restated Preferred Share Rights Agreement

Cyberonics, Inc.s Current
    Report on
    Form 8-K
    filed on February 1, 2007

000-19806

4.110
.1

License Agreement dated
    March 15, 1988 between Cyberonics, Inc. and Dr. Jacob
    Zabara

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 28, 2006

000-19806

10.110
.2

License Agreement dated
    August 22, 2000 between Cyberonics, Inc. and
    Dr. Mitchell S. Roslin

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 28, 2006

000-19806

10.210
.3

Lease Agreement dated
    December 5, 2002 between Cyberonics, Inc., as Lessee, and
    Space Center Operating Associates, LP, as Lessor, commencing on
    December 8, 2002 for Space A and
    January 1, 2004 for Space B, as amended
    March 3, 2003 (First Amendment), October 2, 2003
    (Second Amendment), March 11, 2004 (Third Amendment),
    March 17, 2004 (Subordination, Non-Disturbance and
    Attornment), March 19, 2004 (Transfer of Ownership to
    Triple Net Properties, LLC), March 23, 2005 (Fourth
    Amendment), May 5, 2005 (Fifth Amendment) and July 13,
    2005 (Sixth Amendment)

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 28, 2006

000-19806

10.310
.4

Letter Agreement dated
    March 28, 1997 between The Clark Estates, Inc. and
    Cyberonics, Inc.

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended June 30, 1997

000-19806

10.1110
.5

Purchase Agreement dated
    September 21, 2005 between Cyberonics, Inc. and Merrill
    Lynch, Pierce, Fenner & Smith Incorporated, as the
    Initial Purchaser

Cyberonics, Inc.s Current
    Report on
    Form 8-K
    filed on September 27, 2005

000-19806

10.110
.6

Credit Agreement between
    Cyberonics, Inc. and Merrill Lynch Capital, a division of
    Merrill Lynch Business Financial Services Inc., as
    Administrative Agent and as Lender and as Sole Bookrunner and
    Sole Lead Arranger, and the additional Lenders thereto dated
    January 13, 2006

Cyberonics, Inc.s Current
    Report on
    Form 8-K
    filed on January 19, 2006

000-19806

10.1 39




---



##### Table of Contents



SEC File orExhibit





Registration

ExhibitNumber

Document Description

Report or Registration Statement

Number

Reference10
.7

Consent and Amendment Agreement
    effective October 31, 2006 to the Credit Agreement between
    Cyberonics, Inc. and Merrill Lynch Capital, a division of
    Merrill Lynch Business Financial Services Inc., individually as
    Lender, Administrative Agent, Sole Bookrunner and Sole Lead
    Arranger, and the additional Lenders thereto

Cyberonics, Inc.s Current
    Report on
    Form 8-K
    filed on November 6, 2006

000-19806

10.110
.8

Consent and Amendment Agreement
    effective July 27, 2006 to the Credit Agreement between
    Cyberonics, Inc. and Merrill Lynch Capital, a division of
    Merrill Lynch Business Financial Services Inc., individually as
    Lender, Administrative Agent, Sole Bookrunner and Sole Lead
    Arranger, and the additional Lenders thereto

Cyberonics, Inc.s Current
    Report on
    Form 8-K
    filed on July 27, 2006

000-19806

10.110
.9

Consulting Agreement between
    Cyberonics, Inc. and BK Consulting, an assumed name used by
    Reese S. Terry, Jr., a founder and member of the Board of
    Directors of Cyberonics, Inc., dated August 25, 2005

Cyberonics, Inc.s Current
    Report on
    Form 8-K
    filed on August 30, 2005

000-19806

99.110
.10

Amendment to Consulting Agreement
    between Cyberonics, Inc. and BK Consulting dated August 23,
    2006

Cyberonics, Inc.s Current
    Report on
    Form 8-K
    filed on August 25, 2006

000-19806

10.110
.11

Termination of Consulting Agreement
    between Cyberonics, Inc. and BK Consulting effective
    November 19, 2006

Cyberonics, Inc.s Current
    Report on
    Form 8-K
    filed on December 13, 2006

000-19806

10.110
.12

Consulting Agreement dated
    November 19, 2006 between Cyberonics, Inc. and Pamela B.
    Westbrook

Cyberonics, Inc.s Current
    Report on
    Form 8-K
    filed on November 20, 2006

000-19806

10.310
.13

Cyberonics, Inc. Amended and
    Restated 1996 Stock Option Plan

Cyberonics, Inc.s
    Registration Statement on
    Form S-8
    filed on April 29, 1999

333-77361

4.110
.14

First Amendment to the Cyberonics,
    Inc. Amended and Restated 1996 Stock Option Plan dated
    October 2, 2000

Cyberonics, Inc.s Quarterly
    Report on
    Form 10-Q
    for the quarter ended September 30, 2000

000-19806

10.210
.15

Second Amendment to the Cyberonics,
    Inc. Amended and Restated 1996 Stock Option Plan dated
    March 21, 2001

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 30, 2004

000-19806

10.1210
.16

Third Amendment to the Cyberonics,
    Inc. Amended and Restated 1996 Stock Option Plan dated
    July 27, 2001

Cyberonics, Inc.s
    Registration Statement on
    Form S-8
    filed on January 22, 2002

333-81158

4.410
.17

Fourth Amendment to the Cyberonics,
    Inc. Amended and Restated 1996 Stock Option Plan dated January
    2002

Cyberonics, Inc.s
    Registration Statement on
    Form S-8
    filed on January 22, 2002

333-81158

4.510
.18

Fifth Amendment to the Cyberonics,
    Inc. Amended and Restated 1996 Stock Option Plan dated
    July 19, 2002

Cyberonics, Inc.s
    Registration Statement on
    Form S-8
    filed on July 25, 2002

333-97095

4.110
.19

Cyberonics, Inc. Amended and
    Restated 1997 Stock Plan

Cyberonics, Inc.s
    Registration Statement on
    Form S-8
    filed on March 8, 2001

333-56694

4.510
.20

First Amendment to the Cyberonics,
    Inc. Amended and Restated 1997 Stock Plan dated March 21,
    2001

Cyberonics, Inc.s Quarterly
    Report on
    Form 10-Q
    for the quarter ended July 26, 2002

000-19806

10.110
.21

Second Amendment to the Cyberonics,
    Inc. Amended and Restated 1997 Stock Plan dated
    November 21, 2002

Cyberonics, Inc.s Proxy
    Statement for the Annual Meeting of Stockholders filed on
    October 15, 2002

000-19806

Annex B 40




---



##### Table of Contents



SEC File orExhibit





Registration

ExhibitNumber

Document Description

Report or Registration Statement

Number

Reference10
.22

Cyberonics, Inc. 1998 Stock Option
    Plan

Cyberonics, Inc.s
    Registration Statement on
    Form S-8
    filed on November 3, 1998

333-66691

4.110
.23

First Amendment to the Cyberonics,
    Inc. 1998 Stock Option Plan dated March 21, 2001

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 30, 2004

000-19806

10.2310
.24

Cyberonics, Inc. New Employee
    Equity Inducement Plan

Cyberonics, Inc.s
    Registration Statement on
    Form S-8
    filed on August 27, 2003

333-108281

4.310
.25

Cyberonics, Inc. 2005 Stock Plan

Cyberonics, Inc.s Proxy
    Statement for the Special Meeting of Stockholders filed on
    April 14, 2005

000-19806

Annex A10
.26

Indemnification Agreement effective
    August 1, 2003 between Cyberonics, Inc. and Robert P.
    Cummins

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 28, 2006

000-19806

10.3210
.27

Employment Agreement effective
    August 5, 2005 between Cyberonics, Inc. and Robert P.
    Cummins

Cyberonics, Inc.s Current
    Report on
    Form 8-K
    filed on August 9, 2005

000-19806

99.110
.28

Letter Agreement Regarding
    Advancement of Attorneys Fees effective September 28,
    2006 between Cyberonics, Inc. and Robert P. Cummins

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 28, 2006

000-19806

10.3410
.29

Resignation Agreement effective
    November 17, 2006 between Cyberonics, Inc. and Robert P.
    Cummins

Cyberonics, Inc.s Current
    Report on
    Form 8-K
    filed on November 20, 2006

000-19806

10.110
.30

Severance Agreement effective
    June 1, 2003 between Cyberonics, Inc. and William Steven
    Jennings

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 25, 2003

000-19806

10.2110
.31

Officer Stock Option Plan Agreement
    dated June 2, 2003 between Cyberonics, Inc. and William
    Steven Jennings

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 28, 2006

000-19806

10.3710
.32

Employment Agreement effective
    June 15, 2006 between Cyberonics, Inc. and William Steven
    Jennings

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 28, 2006

000-19806

10.3810
.33

Indemnification Agreement effective
    June 28, 1999 between Cyberonics, Inc. and Alan J. Olsen

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 28, 2006

000-19806

10.4410
.34

Severance Agreement effective
    July 14, 2003 between Cyberonics, Inc. and George E. Parker

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 30, 2004

000-19806

10.4010
.35

Officer Stock Option Plan Agreement
    dated July 14, 2003 between Cyberonics, Inc. and George E.
    Parker

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 28, 2006

000-19806

10.4610
.36

Employment Agreement effective
    July 14, 2003 between Cyberonics, Inc. and
    George E. Parker

Cyberonics, Inc.s Quarterly
    Report on
    Form 10-Q
    for the quarter ended October 24, 2003

000-19806

10.110
.37

First Amendment to Employment
    Agreement effective June 15, 2006 between Cyberonics, Inc.
    and George E. Parker

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 28, 2006

000-19806

10.4810
.38

Stand Alone Stock Option Agreement
    dated August 23, 2001 between Cyberonics, Inc. and Richard
    L. Rudolph, M.D.

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 28, 2006

000-19806

10.4910
.39

Severance Agreement effective
    January 1, 2002 between Cyberonics, Inc. and Richard L.
    Rudolph, M.D.

Cyberonics, Inc.s Quarterly
    Report on
    Form 10-Q
    for the quarter ended January 25, 2002

000-19806

10.3 41




---



##### Table of Contents



SEC File orExhibit





Registration

ExhibitNumber

Document Description

Report or Registration Statement

Number

Reference10
.40

Employee Restricted Stock Agreement
    dated July 22, 2005 between Cyberonics, Inc. and Richard L.
    Rudolph, M.D.

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 28, 2006

000-19806

10.5110
.41

Employment Agreement effective
    June 15, 2006 between Cyberonics, Inc. and Richard L.
    Rudolph, M.D.

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 28, 2006

000-19806

10.5210
.42

Stock Option Agreement Amendment
    and Bonus Agreement dated December 28, 2006 between
    Cyberonics, Inc. and Richard L. Rudolph, M.D.

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 28, 2006

000-19806

10.5310
.43

Employment Agreement effective
    June 15, 2006 between Cyberonics, Inc. and Pamela B.
    Westbrook

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 28, 2006

000-19806

10.5810
.44

Letter Agreement Regarding
    Advancement of Attorneys Fees effective October 12,
    2006 between Cyberonics, Inc. and Pamela B. Westbrook

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 28, 2006

000-19806

10.5910
.45

Resignation Agreement effective
    November 19, 2006 between Cyberonics, Inc. and Pamela B.
    Westbrook

Cyberonics, Inc.s Current
    Report on
    Form 8-K
    filed on November 20, 2006

000-19806

10.4510
.46

Indemnification Agreement effective
    August 1, 2003 between Cyberonics, Inc. and
    David S. Wise

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 28, 2006

000-19806

10.6110
.47

Severance Agreement effective
    September 17, 2003 between Cyberonics, Inc. and
    David S. Wise

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 30, 2004

000-19806

10.4210
.48

Employment Agreement effective
    September 17, 2003 between Cyberonics, Inc. and David S.
    Wise

Cyberonics, Inc.s Quarterly
    Report on
    Form 10-Q
    for the quarter ended October 24, 2003

000-19806

10.210
.49

First Amendment to Employment
    Agreement effective June 15, 2006 between Cyberonics, Inc.
    and David S. Wise

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 28, 2006

000-19806

10.6410
.50

New Employee Equity Inducement Plan
    Agreement dated September 17, 2003 between Cyberonics, Inc.
    and David S. Wise

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 28, 2006

000-19806

10.6510
.51

Form of Indemnification Agreement
    for directors of Cyberonics, Inc.

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 28, 2006

000-19806

10.6610
.52

Form of Director Restricted Stock
    Agreement effective June 1, 2005

Cyberonics, Inc.s Quarterly
    Form 10-Q
    for the quarter ended July 29, 2005

000-19806

10.5210
.53

Form of Amendment to Director Stock
    Option Agreement dated December 2006 between Cyberonics, Inc.
    and the directors listed on the schedule attached thereto

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 28, 2006

000-19806

10.6810
.54

Form of Stock Option Agreement
    under the Cyberonics, Inc. Amended and Restated 1996 Stock
    Option Plan between Cyberonics, Inc. and the executive officers
    listed on the schedule attached thereto

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 28, 2006

000-19806

10.6910
.55

Form of Stock Option Agreement
    under the Cyberonics, Inc. 2005 Stock Plan between Cyberonics,
    Inc. and the executive officers listed on the schedule attached
    thereto

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 28, 2006

000-19806

10.70 42




---



##### Table of Contents



SEC File orExhibit





Registration

ExhibitNumber

Document Description

Report or Registration Statement

Number

Reference10
.56

Form of Employee Restricted Stock
    Agreement under the Cyberonics, Inc. 2005 Stock Plan (one-year
    vesting)

Cyberonics, Inc.s Quarterly
    Form 10-Q
    for the quarter ended July 29, 2005

000-19806

10.210
.57

Form of Employee Restricted Stock
    Agreement under the Cyberonics, Inc. 2005 Stock Plan (five-year
    vesting) and the executive officers listed on the schedule
    attached thereto

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 28, 2006

000-19806

10.7210
.58

Consent and Amendment Agreement,
    dated December 29, 2006, by and among Cyberonics, Inc.,
    Merrill Lynch Capital, and the Lenders party to the Credit
    Agreement (as defined therein)

Cyberonics, Inc.s Current
    Report on
    Form 8-K
    filed on January 5, 2007

000-19806

10.110
.59

Separation Agreement between Steve
    Jennings and Cyberonics, Inc., dated January 31, 2007

Cyberonics, Inc.s Current
    Report on
    Form 8-K
    filed on February 6, 2007

000-19806

10.110
.60

Amended and Restated Cyberonics,
    Inc. New Employee Inducement Plan

Cyberonics, Inc.s Current
    Report on
    Form 8-K
    filed on April 30, 2007

000-19806

10.110
.61

Employment Agreement by and between
    Cyberonics, Inc. and Daniel Jeffrey Moore

Cyberonics, Inc.s Current
    Report on
    Form 8-K
    filed on May 1, 2007

000-19806

10.110
.62

Release Agreement by and between
    Cyberonics, Inc. and John Riccardi

Cyberonics, Inc.s Current
    Report on
    Form 8-K
    filed on May 10, 2007

000-19806

10.110
.63*

Retention Agreement by and between
    Cyberonics, Inc. and John Riccardi dated November 14, 200510
.64*

Description Of Non-Equity Incentive
    Compensation Plans10
.65*

Consulting Agreement between
    Cyberonics, Inc. and BK Consulting, an assumed name used by
    Reese S. Terry, Jr., a founder and member of the Board of
    Directors of Cyberonics, Inc., dated May 16, 200710
.66*

Executive Restricted Stock
    Agreement between Cyberonics, Inc. and Daniel J. Moore dated
    June 18, 200710
.67*

Description of Non-Equity Incentive
    Compensation under the Employment Agreement of Robert P. Cummins21
.1

List of Subsidiaries of Cyberonics,
    Inc.

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 28, 2006

000-19806

21.123
.1*

Consent of Independent Registered
    Public Accounting Firm, KPMG LLP24
.1*

Powers of Attorney (included on the
    Signature Page to this Annual Report on
    Form 10-K)31
.1*

Certification of the Chief
    Executive Officer of Cyberonics, Inc. pursuant to
    Section 302 of the Sarbanes-Oxley Act of 200231
.2*

Certification of the Chief
    Financial Officer of Cyberonics, Inc. pursuant to
    Section 302 of the Sarbanes-Oxley Act of 200232
.1*

Certification of the Chief
    Executive Officer and Chief Financial Officer of Cyberonics,
    Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of
    2002  43




---



##### Table of Contents



SIGNATURES
    Cyberonics, Inc.
  By:
    /s/  George
    E. Parker III  Interim Principal Accounting Officer
  (Principal Financial Officer and
    Principal Accounting Officer)
    POWER OF
    ATTORNEY
  attorneys-in-fact, Form 10-K, attorneys-in-fact,
    Signature

Title

Date/s/  HUGH
    M. MORRISONHugh
    M. Morrison

Chairman of the Board of Directors

July 6, 2007/s/  DANIEL
    J. MOOREDaniel
    J. Moore

Director, President and
    Chief Executive Officer
    (Principal Executive Officer)

July 6, 2007/s/  GEORGE
    E.
    PARKER IIIGeorge
    E. Parker III

Interim Principal Accounting
    Officer 
    (Principal Financial Officer and Principal Accounting Officer)

July 6, 2007/s/  GUY
    C. JACKSONGuy
    C. Jackson

Director

July 6, 2007/s/  ALFRED
    J. NOVAKAlfred
    J. Novak

Director

July 6, 2007/s/  ALAN
    J. OLSENAlan
    J. Olsen

Director

July 6, 2007/s/  ARTHUR
    L. ROSENTHAL PH
    D.Arthur
    L. Rosenthal, Ph D.

Director

July 6, 2007 44




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##### Table of Contents



Signature

Title

Date/s/  JEFFREY
    E. SCHWARZJeffrey
    E. Schwarz

Director

July 6, 2007/s/  MICHAEL
    J. STRAUSS, M.D.,
    M.P.H.Michael
    J. Strauss, M.D., M.P.H.

Director

July 6, 2007/s/  REESE
    S.
    TERRY, JR.Reese
    S. Terry, Jr.

Director

July 6, 2007  45




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##### Table of Contents



CONSOLIDATED
    FINANCIAL STATEMENTS
    April 27, 2007, April 28, 2006 and April 29,
    2005
    TOGETHER WITH INDEPENDENT REGISTERED PUBLIC ACCOUNTING
    FIRMS REPORT
  F-1




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
             Internal Control  Integrated
    Framework
    
    F-2




---



##### Table of Contents



CYBERONICS,
    INC. AND SUBSIDIARY
  CONSOLIDATED
    BALANCE SHEETS
  April 27, 2007


April 28, 2006ASSETSCurrent Assets:Cash and cash equivalents

$
84,804,876


$
92,355,071Restricted cash


1,000,000



1,000,000Accounts receivable, net


18,914,206



21,341,942Inventories


17,580,830



17,304,794Other current assets


3,127,345



5,274,133Total Current Assets


125,427,257



137,275,940Property and equipment, net


8,028,037



10,322,289Other assets


4,189,589



4,702,055Total Assets

$
137,644,883


$
152,300,284LIABILITIES AND
    STOCKHOLDERS EQUITY (DEFICIT)Current Liabilities:Line of credit

$
7,500,000


$
2,500,000Accounts payable


5,951,931



5,190,385Accrued liabilities


14,844,266



12,655,970Convertible Notes


125,000,000



125,000,000Other


115,731



1,175,606Total Current Liabilities


153,411,928



146,521,961Long Term Liabilities:Other


295,184



1,148,457Total Long Term Liabilities


295,184



1,148,457Total Liabilities


153,707,112



147,670,418Stockholders Equity
    (Deficit):Preferred Stock, $.01 par
    value per share; 2,500,000 shares authorized; no shares
    issued and outstanding






Common Stock, $.01 par value
    per share; 50,000,000 shares authorized; 26,701,054 issued
    and 26,400,054 outstanding at April 27, 2007; and
    25,781,349 shares issued and 25,480,349 shares
    outstanding at April 28, 2006


267,011



257,813Additional paid-in capital


265,608,804



244,648,193Common stock warrants


25,200,000



25,200,000Hedges on Convertible Notes


(38,200,000
)


(38,200,000
)Deferred compensation






(9,167,093
)Treasury stock, 301,000 common
    shares, at cost


(9,993,200
)


(9,993,200
)Accumulated other comprehensive
    loss


(298,588
)


(649,698
)Accumulated deficit


(258,646,256
)


(207,466,149
)Total Stockholders Equity
    (Deficit)


(16,062,229
)


4,629,866Total Liabilities and
    Stockholders Equity (Deficit)

$
137,644,883


$
152,300,284    F-3




---



##### Table of Contents



CYBERONICS,
    INC. AND SUBSIDIARY
  CONSOLIDATED
    STATEMENTS OF OPERATIONS
  52 Weeks EndedApril 27, 2007


April 28, 2006


April 29, 2005Net sales

$
130,968,437


$
123,441,575


$
103,442,570Cost of sales


18,258,374



15,822,045



15,674,040Gross Profit


112,710,063



107,619,530



87,768,530Operating Expenses:Selling, general and administrative


134,144,315



137,310,196



86,972,068Research and development


28,092,243



29,541,707



20,092,810Total Operating Expenses


162,236,558



166,851,903



107,064,878Loss From Operations


(49,526,495
)


(59,232,373
)


(19,296,348
)Interest income


4,649,394



3,211,956



1,072,488Interest expense


(5,913,119
)


(3,018,969
)


(444,270
)Other income (expense), net


(311,112
)


69,460



84,736Loss before income taxes


(51,101,332
)


(58,969,926
)


(18,583,394
)Income tax expense


78,775



99,266



26,113Net Loss

$
(51,180,107
)

$
(59,069,192
)

$
(18,609,507
)Basic loss per share

$
(2.01
)

$
(2.37
)

$
(0.77
)Diluted loss per share

$
(2.01
)

$
(2.37
)

$
(0.77
)Shares used in computing basic
    loss per share


25,514,232



24,916,938



24,036,736Shares used in computing diluted
    loss per share


25,514,232



24,916,938



24,036,736    F-4




---



##### Table of Contents



CONSOLIDATED
    STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT) AND
    COMPREHENSIVE LOSS
  AccumulatedCommon


Hedges on








Other





TotalCommon Stock


Additional


Stock


Convertible


Deferred


Treasury


Comprehensive


Accumulated


StockholdersShares


Amount


Paid-In Capital


Warrants


Notes


Compensation


Stock


Loss


Deficit


EquityBalance at April 30, 2004


23,457,397


$
234,574


$
202,769,369


$



$



$
(3,589,265
)

$



$
(646,748
)

$
(129,787,450
)

$
68,980,480Stock Options exercised


1,241,889



12,419



16,674,877



























16,687,296Issuance of common stock under
    Employee Stock Purchase Plan


82,420



824



1,335,684



























1,336,508Cancellation of restricted stock


(250
)


(2
)


(6,620
)










6,622















Deferred compensation relating to
    stock options










6,417,160











(6,417,160
)














Amortization of deferred
    compensation and expense of certain stock options






















7,103,005















7,103,005Net Loss


































(18,609,507
)


(18,609,507
)Translation adjustment






























98,059







98,059Comprehensive loss






































(18,511,448
)Balance at April 29, 2005


24,781,456



247,815



227,190,470











(2,896,798
)






(548,689
)


(148,396,957
)


75,595,841Stock options exercised


637,191



6,371



8,694,565



























8,700,936Issuance of common stock under
    Employee Stock Purchase Plan


88,970



890



1,777,939



























1,778,829Issuance of restricted stock


278,732



2,787



9,651,358











(9,654,145
)














Cancellation of restricted stock


(5,000
)


(50
)


(174,662
)










174,712















Deferred compensation relating to
    stock options










(2,491,477
)










2,491,477















Amortization of deferred
    compensation and expense of certain stock options






















717,661















717,661Purchase of Treasury stock


























(9,993,200
)










(9,993,200
)Sale of common stock warrants














25,200,000























25,200,000Purchase of convertible note hedge


















(38,200,000
)


















(38,200,000
)Net Loss


































(59,069,192
)


(59,069,192
)Translation adjustment






























(101,009
)






(101,009
)Comprehensive loss






































(59,170,201
)Balance at April 28, 2006,


25,781,349



257,813



244,648,193



25,200,000



(38,200,000
)


(9,167,093
)


(9,993,200
)


(649,698
)


(207,466,149
)


4,629,866Stock options exercised


798,074



7,981



9,924,390



























9,932,371Unregistered shares issued


75,000



750



1,940,250



























1,941,000Issuance of common stock under
    Employee Stock Purchase Plan


6,283



63



148,030



























148,093Issuance of Restricted Stock


52,500



525































525Cancellation of Restricted Stock


(12,152
)


(121
)


121



























Transfer of Deferred Compensation
    Balance (123R adoption)










(9,167,093
)










9,167,093















Non-cash compensation expense










18,594,246



























18,594,246Modification of Non-employee Stock
    Options










(258,262
)


























(258,262
)Excise Tax Remediation










(221,071
)


























(221,071
)Net loss


































(51,180,107
)


(51,180,107
)Translation adjustment






























351,110







351,110Comprehensive loss






































(50,828,997
)Balance at April 27, 2007


26,701,054


$
267,011


$
265,608,804


$
25,200,000


$
(38,200,000
)

$



$
(9,993,200
)

$
(298,588
)

$
(258,646,256
)

$
(16,062,229
)    F-5




---



##### Table of Contents



CYBERONICS,
    INC. AND SUBSIDIARY
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
  52 Weeks EndedApril 27, 2007


April 28, 2006


April 29, 2005Cash Flows From Operating
    Activities:Net loss

$
(51,180,107
)

$
(59,069,192
)

$
(18,609,507
)Non-cash items included in net
    loss:Depreciation


3,708,710



3,350,988



3,274,843Gain on disposal of assets


(8,189
)


(81,433
)


(50,066
)Unrealized (gain) loss in foreign
    currency transactions


10,968



(104,542
)


15,758Stock-Based Compensation


19,421,391



717,661



7,103,005Amortization of financing costs


781,638



419,497



Other non-cash items


36,432



(232,752
)


Changes in operating assets and
    liabilities:Accounts receivable, net


2,809,389



(4,995,947
)


747,906Inventories


90,620



(8,767,305
)


(758,512
)Other current assets


2,051,878



(1,488,869
)


(668,745
)Other assets, net


55,641



(84,653
)


33,435Accounts payable and accrued
    liabilities


1,703,008



(250,778
)


4,678,684Other


(170,235
)


(288,884
)


263,527Net Cash Used In Operating
    Activities


(20,688,856
)


(70,876,209
)


(3,969,672
)Cash Flows From Investing
    Activities:Purchase of short-term marketable
    securities










(10,400,229
)Proceeds from sale of short-term
    marketable securities






22,800,000



2,500,693Restricted cash






(1,000,000
)


Purchases of property and equipment


(1,425,349
)


(4,298,859
)


(3,713,637
)Net Cash Provided By (Used In)
    Investing Activities


(1,425,349
)


17,501,141



(11,613,173
)Cash Flows From Financing
    Activities:Increase (decrease) in borrowing
    against line of credit


5,000,000



(500,000
)


(7,031,000
)Payment related to line of credit
    origination costs






(499,814
)


Payments on financing obligations


(246,701
)


(192,378
)


(141,066
)Proceeds from issuance of
    Convertible Notes, net of issuance costs






120,700,414



Additional costs related to
    Convertible Notes


(3,557
)






Sale of Common Stock Warrants






25,200,000



Purchase of Convertible Note Hedge






(38,200,000
)


Proceeds from issuance of Common
    Stock


9,684,666



10,479,765



18,023,804Purchase of treasury stock






(9,993,200
)


Net Cash Provided By Financing
    Activities


14,434,408



106,994,787



10,851,738Effect of exchange rate changes on
    cash and cash equivalents


129,602



59,460



(56,268
)Net Increase (Decrease) in Cash
    and Cash Equivalents


(7,550,195
)


53,679,179



(4,787,375
)Cash and cash equivalents at
    beginning of year


92,355,071



38,675,892



43,463,267Cash and cash equivalents at end
    of year

$
84,804,876


$
92,355,071


$
38,675,892Supplementary Disclosures of Cash
    Flow Information:Cash paid for interest

$
4,979,462


$
2,213,594


$
416,986Cash paid for income taxes

$
65,609


$
98,414


$
53,312Supplemental Disclosure of
    Non-cash Activity:Purchases of capital assets with
    notes payable

$



$
497,698


$
    F-6




---



##### Table of Contents



CYBERONICS,
    INC. AND SUBSIDIARY
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
  Note 1.
    Summary
    of Significant Accounting Policies and Related Data  Nature of Operations. tm
    Consolidation.
  Use of Estimates.
  Foreign Currency Translation.
  Cash and Cash Equivalents.
  Restricted Cash.
  Fair Value of Financial Instruments.
 F-7




---



##### Table of Contents



CYBERONICS,
    INC. AND SUBSIDIARY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Accounts Receivable.
  52 Weeks EndedApril 27, 2007


April 28, 2006


April 29, 2005Balance at beginning of year

$
234,478


$
275,457


$
279,699Increase in allowance


161,652



51,245



75,374Reductions for write-offs


(88,047
)


(92,224
)


(79,616
)Balance at end of year

$
308,083


$
234,478


$
275,457   Inventories. first-in
  Property and Equipment.
  Leases. Accounting for Leases
  Long-Lived Assets. Accounting for the Impairment or Disposals of
    Long-Lived Assets
  Other Current Assets and Other Assets.
  Stock Options. Accounting for Stock-Based
    Compensation Accounting for Stock-Based
    Compensation  Transition and Disclosure Accounting for Stock Issued to
    Employees
  Share-Based Payment
 F-8




---



##### Table of Contents



CYBERONICS,
    INC. AND SUBSIDIARY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    52 Weeks EndedApril 28, 2006


April 29, 2005Net loss as reported

$
(59,069,192
)

$
(18,609,507
)(1)Add: Stock-based employee
    compensation expense included in reported net loss, net of
    related tax effects


717,661



7,103,005(1)Deduct: Total stock-based
    employee compensation expense determined under the fair value
    method for all awards, net of related tax effects


(26,384,997
)


(21,924,138
)Pro forma net loss

$
(84,736,528
)

$
(33,430,640
)Loss per share:Basic  as reported

$
(2.37
)

$
(0.77
)Basic  pro forma

$
(3.40
)

$
(1.39
)Diluted  as reported

$
(2.37
)

$
(0.77
)Diluted  pro forma

$
(3.40
)

$
(1.39
)     (1)
    
    There was no tax effect included in these amounts due to the
    valuation allowance.  Revenue Recognition.
  Research and Development.
  Product Warranty.
    Balance atBalance at


Warranty





the Endthe Beginning


Expense


Warranties


of theYear

of the Year


Recognized


Settled


Year2007

$
46,991


$
27,037


$
(5,206
)

$
68,8222006


46,991



10,312



(10,312
)


46,9912005


50,935



29,077



(33,021
)


46,991   License Agreements.
  Income Taxes.
 F-9




---



##### Table of Contents



CYBERONICS,
    INC. AND SUBSIDIARY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Net Earnings (Loss) Per
    Share. Earnings
    Per Share
    For the 52 Weeks EndedApril 27, 2007


April 28, 2006


April 29, 2005Numerator:Net loss

$
(51,180,107
)

$
(59,069,192
)

$
(18,609,507
)Denominator:Basic weighted average shares
    outstanding


25,514,232



24,916,938



24,036,736Effect of dilutive securities










Diluted weighted average shares
    outstanding


25,514,232



24,916,938



24,036,736Basic loss per share

$
(2.01
)

$
(2.37
)

$
(0.77
)Diluted loss per share

$
(2.01
)

$
(2.37
)

$
(0.77
)     Earnings Per Share, Earnings Per
    Share,
  Comprehensive Loss.
 F-10




---



##### Table of Contents



CYBERONICS,
    INC. AND SUBSIDIARY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 2.
    Going
    Concern  start-up Form 10-K Form 10-K) Form 10-K
  Note 3.
    Inventories    April 27, 2007


April 28, 2006Raw materials

$
9,205,449


$
10,709,541Finished goods


6,702,196



4,960,028Work-in-process


1,673,185



1,635,225$
17,580,830


$
17,304,794  F-11




---



##### Table of Contents



CYBERONICS,
    INC. AND SUBSIDIARY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 4.
    Property
    and Equipment    April 27, 2007


April 28, 2006Computer equipment

$
9,164,999


$
9,158,340Manufacturing equipment


8,788,850



8,057,989Leasehold improvements


4,218,858



4,040,486Furniture and fixtures


3,518,179



3,735,069Office equipment


1,415,515



1,417,397Construction in progress


528,149



1,145,82827,634,550



27,555,109Accumulated depreciation


(19,606,513
)


(17,232,820
)$
8,028,037


$
10,322,289   Note 5.
    Line of
    Credit    agreed-upon
   F-12




---



##### Table of Contents



CYBERONICS,
    INC. AND SUBSIDIARY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Form 12b-25 Form 10-Q Form 10-K Form 10-Q, Form 10-Q; Form 10-K
  Form 10-K Form 10-Q, Form 10-Q Form 10-Q) Form 10-Q Form 10-Q); Form 10-K agreed-upon
  Note 6.
    Accrued
    Liabilities    April 27, 2007


April 28, 2006Payroll and other compensation

$
7,279,726


$
6,839,060Clinical costs


2,746,677



529,582Professional services


1,214,821



680,683Royalties


922,221



1,061,893Tax accruals


807,909



963,426Other


1,872,912



2,581,326$
14,844,266


$
12,655,970    F-13




---



##### Table of Contents



CYBERONICS,
    INC. AND SUBSIDIARY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 7.
    Convertible
    Notes    90-day 90-day
  Convertible
    Notes Indenture Default Notice
  Form 10-K Form 10-K Form 10-K
 F-14




---



##### Table of Contents



CYBERONICS,
    INC. AND SUBSIDIARY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Note 8.
    Convertible
    Note Hedge and Warrants    Note 9.
    Stockholders
    Equity (Deficit)  Preferred Stock.
  Preferred Share Purchase Rights. 1 1000
 F-15




---



##### Table of Contents



CYBERONICS,
    INC. AND SUBSIDIARY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Note 10.
    Stock
    Incentive and Purchase Plans  Stock Options.
      For the 52 Weeks EndedApril 27, 2007


April 28, 2006


April 29, 2005Total cost of share-based payment
    plans during the year

$
19,796,954


$
717,661


$
7,103,005Amounts capitalized in inventory
    and fixed assets during the year


(915,111
)






Amounts recognized in operations
    for amounts previously capitalized in inventory and fixed assets


539,548







Amounts charged against
    operations, before income tax benefit

$
19,421,391


$
717,661


$
7,103,005Amount of related income tax
    benefit recognized in operations










    F-16




---



##### Table of Contents



CYBERONICS,
    INC. AND SUBSIDIARY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    For the 52 Weeks EndedApril 27, 2007


April 28, 2006Wtd. Avg.


Wtd. Avg.














Wtd. Avg.Wtd. Avg.


Fair


Remaining


Aggregate





Wtd. Avg.


Wtd. Avg.


Remaining


AggregateNumber


Exercise


Market


Contractual


Intrinsic


Number of


Exercise


Fair Market


Contractual


IntrinsicOptions

of Shares


Price


Value


Term


Value


Shares


Price


Value


Term


ValueOutstanding  beginning
    of year


6,839,578


$
20.18


$
15.54






$
32,873,282



6,923,046


$
17.93


$
13.98






$
42,485,418Granted


156,250



22.78



11.36







173,443



1,120,513



35.65



26.48







Exercised


798,074



11.95



9.53







7,221,524



637,090



13.66



11.02







12,360,044Forfeited


497,481



25.72



19.34







1,033,370



557,208



30.49



22.99







1,232,491Expired


230,910



27.91



21.20







373,183



9,683



39.01



29.11







5,154Outstanding  end of year


5,469,363



20.62



15.72



4.47



23,467,483



6,839,578



20.18



15.54



4.39



35,351,864Fully Vested and
    Exercisable  end of year


4,329,499



18.72



14.45



3.61



21,610,813



4,302,595



17.18



13.35



3.57



28,344,613Expected to vest  end of
    year


979,820



28.25



20.74



7.81



1,480,270



2,174,605



25.95



19.72



8.24



5,856,553         Per APB 25 and Pro Forma DisclosurePer FAS 123(R)

Requirements of SFAS 123 and SFAS 148For the 52 Weeks Ended

For the 52 Weeks EndedApril 27, 2007



April 28, 2006

April 29, 2005Dividend Yield



Dividend Yield



Risk-free interest rate 
    per grant date

4.51% - 5.23%

Risk-free interest rate 
    rolling 12 months

3.85%

3.59%Expected option term  in
    years per group of employees

4.98 - 6.96

Expected option term  in
    years for the company as a whole

6.24

5.74Implied volatility at grant date

32.10% - 54.47%

Historic Volatility at the end of
    each reporting period

84.58%

88.08%Discount for post-vesting
    restrictions

None

Discount for post-vesting
    restrictions

None

NoneOption price

Closing price on last trading day
    prior to date of grant

Option price

Closing price on last trading day
    prior to date of grant

Closing price on last trading day
    prior to date of grantGrant price

Closing price on date of grant

Grant Price

Closing price on last trading day
    prior to date of grant

Closing price on last trading day
    prior to date of grant  F-17




---



##### Table of Contents



CYBERONICS,
    INC. AND SUBSIDIARY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          Restricted Stock, Restricted Stock Units and Other
    Share-Based Awards.
      For the 52 Weeks EndedApril 27, 2007


April 28, 2006Wtd. Avg.


Aggregate





Wtd. Avg.


AggregateNumber of


Grant Date


Intrinsic


Number of


Grant Date


IntrinsicShares


Fair Value


Value


Shares


Fair Value


ValueOutstanding  beginning
    of period


270,889


$
36.10


$
6,011,027






$



$
Granted


52,500



20.89



1,164,975



278,732



36.16



6,327,216Vested


150,220



37.75



3,333,382











Forfeited


28,309



35.29



628,177



7,843



38.30



178,036Outstanding  end of
    period


144,860



29.03



3,214,443



270,889



36.10



6,149,180   Employee Stock Purchase Plan.
 F-18




---



##### Table of Contents



CYBERONICS,
    INC. AND SUBSIDIARY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Modifications. Form 10-K Form S-8 Form 10-Q
         F-19




---



##### Table of Contents



CYBERONICS,
    INC. AND SUBSIDIARY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      For the 52 Weeks Ended April 27, 2007Without


Effect ofSFAS 123(R)


SFAS 123(R)


As reportedLoss from continuing operations

$
(35,154,136
)

$
(14,372,359
)

$
(49,526,495
)Loss before income taxes


(36,728,973
)


(14,372,359
)


(51,101,332
)Net loss


(36,807,748
)


(14,372,359
)


(51,180,107
)Cash flow used in operations


(20,688,856
)






(20,688,856
)Cash flow provided by financing
    activities


14,434,408







14,434,408Basic loss per share


(1.45
)


(0.56
)


(2.01
)Diluted loss per share


(1.45
)


(0.56
)


(2.01
)       For the 52 Weeks EndedApril 28, 2006


April 29, 2005Net loss as reported

$
(59,069,192
)

$
(18,609,507
)(1)Add: Stock-based employee
    compensation expense included in net loss, net of tax effects


717,661



7,103,005(1)Deduct: Total stock-based
    employee compensation expenses determined under the fair value
    method for all awards, net of related tax effects


(26,384,997
)


(21,924,138
)Pro-forma net loss

$
(84,736,528
)

$
(33,430,640
)Loss per share:Basic  as reported

$
(2.37
)

$
(0.77
)Basic  pro-forma

$
(3.40
)

$
(1.39
)Diluted  as reported

$
(2.37
)

$
(0.77
)Diluted  pro-forma

$
(3.40
)

$
(1.39
)     (1)
    
    There was no tax effect included in these amounts due to the
    valuation allowance.  Stock Recognition Program. and/or
 F-20




---



##### Table of Contents



CYBERONICS,
    INC. AND SUBSIDIARY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 11.
    New
    Accounting Pronouncements  Inventory Costs  an Amendment to ARB
    No. 43, Chapter 4. Inventory Pricing, ...under some circumstances,
    items such as idle facility expense, excessive spoilage, double
    freight, and rehandling costs may be so abnormal as to require
    treatment as current period charges... so abnormal.
  Exchanges of Nonmonetary Assets Accounting for Nonmonetary Transactions,
  No. 96-18, Accounting for Equity Instruments That Are Issued to
    Other Than Employees for Acquiring, or in Conjunction with
    Selling, Goods or Services. 93-6, Employers Accounting for Employee Stock Ownership
    Plans.
  Accounting Changes and Error Corrections  a
    replacement of Accounting Principles Board (APB) Opinion
    No. 20 and FASB Statement No. 3. Accounting
    Changes, Reporting Accounting Changes in Interim Financial
    Statements,
 F-21




---



##### Table of Contents



CYBERONICS,
    INC. AND SUBSIDIARY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Fair Value Measurements
  EITF 00-19-2 Accounting for Registration Payment Arrangements (FSP 00-19-2). Accounting for Contingencies  Accounting for Derivative Instruments and
    Hedging Activities, Accounting for Certain Financial Instruments with
    Characteristics of both Liabilities and Equity, Guarantors Accounting and Disclosure Requirements
    for Guarantees, Including Indirect Guarantees of Indebtedness of
    Others EITF 00-19-2
  The Fair Value Option for Financial Assets and
    Financial Liabilities  Including an amendment of FASB
    Statement No. 115 Fair
    Value Measurements.
  Accounting for Uncertainty in Income Taxes 
    an interpretation of FASB Statement No. 109 Accounting for Income
    Taxes.
 F-22




---



##### Table of Contents



CYBERONICS,
    INC. AND SUBSIDIARY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Considering the Effects of Prior Year Misstatements
    when Quantifying Misstatements in Current Year Financial
    Statements
  Note 12.
    Income
    Taxes    52 Weeks EndedApril 27, 2007


April 28, 2006


April 29, 2005Loss before income taxes:Domestic

$
(48,172,762
)

$
(57,271,372
)

$
(17,917,356
)Foreign


(2,928,570
)


(1,698,554
)


(666,038
)$
(51,101,332
)

$
(58,969,926
)

$
(18,583,394
)Provision for current income tax
    expense:Federal

$



$



$
State and local


27,790



39,730



Foreign


50,985



59,536



26,113$
78,775


$
99,266


$
26,113     52 Weeks EndedApril 27, 2007


April 28, 2006


April 29, 2005U.S. statutory rate


(34.0
)%


(34.0
)%


(34.0
)%Change in deferred tax valuation
    allowance


30.2



31.6



32.1Foreign taxes


0.1



0.1



0.1State and local tax provision


0.1



0.1



0.0Other, net


3.8



2.4



1.90.2
%


0.2
%


0.1
%  F-23




---



##### Table of Contents



CYBERONICS,
    INC. AND SUBSIDIARY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    April 27, 2007


April 28, 2006Deferred tax assets:Federal net operating loss
    carryforwards

$
82,344,559


$
74,861,125State net operating loss
    carryforwards and other


9,337,842



6,543,275Deferred compensation expense


8,238,132



3,710,945Foreign net operating loss
    carryforwards


7,305,790



6,380,628Federal tax credit carryforwards


4,207,517



4,309,541Charitable contribution
    carryforwards


877,286



507,781Accrued expenses


710,119



609,128Property and equipment


467,325



312,930Inventory costs capitalized


400,011



310,055Reserves


258,237



283,444Total deferred tax assets


114,146,818



97,828,852Deferred tax liabilities, net






Deferred tax valuation allowance


(114,146,818
)


(97,828,852
)Net deferred tax assets and
    liabilities

$



$
   Regulation 1.1275-6.
  Accounting for
    Income Taxes.
 F-24




---



##### Table of Contents



CYBERONICS,
    INC. AND SUBSIDIARY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 13.
    Employee
    Retirement Savings Plan    Note 14.
    Commitments
    and Contingencies  Post-market Clinical Surveillance. follow-up
  License Agreements.
      Lease Agreements.
 F-25




---



##### Table of Contents



CYBERONICS,
    INC. AND SUBSIDIARY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    52/53 Weeks Ending on the last
    Friday of April:2008

$
3,275,1022009


3,144,8082010


2,157,5352011


23,3092012 and thereafter


       Other Commitments.
  Note 15.
    Litigation    Indenture
    Default Litigation
  Form 10-K Form 10-K Cyberonics, Inc. v. Wells Fargo Bank, N.A. as the
    Trustee under Indenture No. A:07-CV-121,
   F-26




---



##### Table of Contents



CYBERONICS,
    INC. AND SUBSIDIARY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Securities
    Class Action Lawsuit
  Richard
    Darquea v. Cyberonics Inc., et al. No. H:05-cv-02121. Stanley
    Sved v. Cyberonics, Inc., et al., No. H:05-cv-2414 No. H-05-2121, In re Cyberonics, Inc. Securities Litigation,
       F-27




---



##### Table of Contents



CYBERONICS,
    INC. AND SUBSIDIARY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Stockholder
    Derivative Litigation
  Rudolph v. Cummins, et al
  Smith v. Cummins, Adel v. Cummins, McKeehan v. Cummins, Nussbaum v.
    Cummins, Wunschel v. Cummins, In re Cyberonics, Inc.
  Rudolph
  Governmental
    Investigation of Options Granting Practices
   F-28




---



##### Table of Contents



CYBERONICS,
    INC. AND SUBSIDIARY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      NASDAQ
    Delisting Notice
  Form 12b-25 Form 10-K Form 10-K Form 8-K Form 10-K
  Form 10-K,
  Form 10-Q
    Form 10-K Form 10-Q Form 10-Q
  Form 10-K, Form 10-Q Form 10-Q.
 F-29




---



##### Table of Contents



CYBERONICS,
    INC. AND SUBSIDIARY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Form 10-K Form 10-Q Form 10-Q. Form 10-Q Form 10-Q. Form 10-Q
  Senate
    Finance Committee Investigation
      Note 16.
    Concentrations       F-30




---



##### Table of Contents



CYBERONICS,
    INC. AND SUBSIDIARY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    and/or
    Note 17.
    Geographic
    Information  Net Sales52 Weeks EndedApril 27, 2007


April 28, 2006


April 29, 2005United States

$
111,077,666


$
107,906,412


$
90,281,978International


19,890,771



15,535,163



13,160,592Total

$
130,968,437


$
123,441,575


$
103,442,570   Long-Lived AssetsApril 27, 2007


April 28, 2006United States

$
11,475,519


$
14,502,293International


742,107



522,051Total

$
12,217,626


$
15,024,344      F-31




---



##### Table of Contents



CYBERONICS,
    INC. AND SUBSIDIARY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 18.
    Quarterly
    Financial Information  Unaudited  First


Second


Third


FourthQuarter


Quarter


Quarter


Quarter


Totals(1)52 weeks ended April 27,
    2007Net sales

$
33,731,520


$
34,140,796


$
31,664,282


$
31,431,839


$
130,968,437Gross profit


29,930,192



30,336,850



26,736,914



25,706,107



112,710,063Net loss


(8,533,387
)


(12,493,703
)


(19,385,300
)


(10,767,717
)


(51,180,107
)Diluted loss per share


(0.34
)


(0.49
)


(0.76
)


(0.42
)


(2.01
)52 weeks ended April 28,
    2006 Net sales

$
27,019,459


$
29,070,298


$
31,304,205


$
36,047,613


$
123,441,575Gross profit


23,238,237



25,263,770



27,421,427



31,696,096



107,619,530Net loss


(19,413,960
)


(20,551,212
)


(14,831,742
)


(4,272,278
)


(59,069,192
)Diluted loss per share


(0.78
)


(0.82
)


(0.60
)


(0.17
)


(2.37
)     (1)
    
    EPS in each quarter is computed using the weighted-average
    number of shares outstanding during that quarter while EPS for
    the full year is computed using the weighted-average number of
    shares outstanding during the year. Thus, the sum for the four
    quarters EPS does not necessarily equal the full year EPS.  Note 19.
    Subsequent
    Events  Excise
    Tax Remediation Under Internal Revenue Code
    Section 409A
       F-32




---



##### Table of Contents



INDEX TO
    EXHIBITS
  Form 10-K. Regulation S-K.
  SEC File orExhibit





Registration

ExhibitNumber

Document Description

Report or Registration Statement

Number

Reference3
.1

Amended and Restated Certificate of
    Incorporation of Cyberonics, Inc.

Cyberonics, Inc.s
    Registration Statement on Form S-3 filed on February 21, 2001

333-56022

3.13
.2

Bylaws of Cyberonics, Inc.

Cyberonics, Inc.s Current
    Report on
    Form 8-K
    filed on September 12, 2000

000-19806

3.13
.3

Amendment No. 1 to the Bylaws of
    Cyberonics, Inc.

Cyberonics, Inc.s Current
    Report on
    Form 8-K
    filed on March 30, 2001

000-19806

3.14
.1

Second Amended and Restated
    Preferred Shares Rights Agreement dated August 21, 2000 between
    Cyberonics, Inc. and BankBoston, N.A. (formerly known as The
    First National Bank of Boston), including the Form of First
    Amended Certificate of Designation of Rights, Preferences and
    Privileges of Series A Participating Preferred Stock of
    Cyberonics, Inc., Form of Rights Certificate and Stockholder
    Rights Plan attached thereto as Exhibits A, B and C, respectively

Cyberonics, Inc.s Current
    Report on
    Form 8-K
    filed on September 12, 2000

000-19806

4.14
.2

Amendment No. 1 to Second Amended
    and Restated Preferred Share Rights Agreement dated April 26,
    2001

Cyberonics, Inc.s Annual
    Report and Transition Report on
    Form 10-K
    for the fiscal period ended April 27, 2001 and the transition
    period from July 1, 2000 to April 27, 2001

000-19806

4.24
.3

Amendment No. 2 to Second Amended
    and Restated Preferred Share Rights Agreement dated October 31,
    2001

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 30, 2004

000-19806

4.34
.4

Amendment No. 3 to Second Amended
    and Restated Preferred Share Rights Agreement dated December 9,
    2003

Cyberonics, Inc.s Current
    Report on
    Form 8-K
    filed on December 12, 2003

000-19806

99.24
.5

Amendment No. 4 to Second Amended
    and Restated Preferred Share Rights Agreement dated January 9,
    2004

Cyberonics, Inc.s Current
    Report on
    Form 8-K
    filed on January 13, 2004

000-19806

99.24
.6

Indenture dated September 27, 2005
    between Cyberonics, Inc. and Wells Fargo Bank, National
    Association, as Trustee

Cyberonics, Inc.s Current
    Report on
    Form 8-K
    filed on October 3, 2005

000-19806

10.14
.7

Registration Rights Agreement dated
    September 27, 2005 between Cyberonics, Inc. and Merrill Lynch,
    Pierce, Fenner & Smith Incorporated, as the Initial
    Purchaser

Cyberonics, Inc.s Current
    Report on
    Form 8-K
    filed on October 3, 2005

000-19806

10.24
.8

Form of Confirmation of OTC
    Convertible Note Hedge executed September 21, 2005 to be
    effective September 27, 2005

Cyberonics, Inc.s Current
    Report on
    Form 8-K
    filed on October 3, 2005

000-19806

10.34
.9

Form of Confirmation of OTC Warrant
    Transaction executed September 21, 2005 to be effective
    September 27, 2005

Cyberonics, Inc.s Current
    Report on
    Form 8-K
    filed on October 3, 2005

000-19806

10.44
.10

Amendment No. 5 to Second Amended
    and Restated Preferred Share Rights Agreement

Cyberonics, Inc.s Current
    Report on
    Form 8-K
    filed on February 1, 2007

000-19806

4.110
.1

License Agreement dated March 15,
    1988 between Cyberonics, Inc. and Dr. Jacob Zabara

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 28, 2006

000-19806

10.110
.2

License Agreement dated August 22,
    2000 between Cyberonics, Inc. and Dr. Mitchell S. Roslin

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 28, 2006

000-19806

10.2




---



##### Table of Contents



SEC File orExhibit





Registration

ExhibitNumber

Document Description

Report or Registration Statement

Number

Reference10
.3

Lease Agreement dated December 5,
    2002 between Cyberonics, Inc., as Lessee, and Space Center
    Operating Associates, LP, as Lessor, commencing on December 8,
    2002 for Space A and January 1, 2004 for Space
    B, as amended March 3, 2003 (First Amendment),
    October 2, 2003 (Second Amendment), March 11, 2004 (Third
    Amendment), March 17, 2004 (Subordination, Non-Disturbance and
    Attornment), March 19, 2004 (Transfer of Ownership to Triple Net
    Properties, LLC), March 23, 2005 (Fourth Amendment), May 5, 2005
    (Fifth Amendment) and July 13, 2005 (Sixth Amendment)

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 28, 2006

000-19806

10.310
.4

Letter Agreement dated March 28,
    1997 between The Clark Estates, Inc. and Cyberonics, Inc.

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended June 30, 1997

000-19806

10.1110
.5

Purchase Agreement dated September
    21, 2005 between Cyberonics, Inc. and Merrill Lynch, Pierce,
    Fenner & Smith Incorporated, as the Initial Purchaser

Cyberonics, Inc.s Current
    Report on
    Form 8-K
    filed on September 27, 2005

000-19806

10.110
.6

Credit Agreement between
    Cyberonics, Inc. and Merrill Lynch Capital, a division of
    Merrill Lynch Business Financial Services Inc., as
    Administrative Agent and as Lender and as Sole Bookrunner and
    Sole Lead Arranger, and the additional Lenders thereto dated
    January 13, 2006

Cyberonics, Inc.s Current
    Report on
    Form 8-K
    filed on January 19, 2006

000-19806

10.110
.7

Consent and Amendment Agreement
    effective October 31, 2006 to the Credit Agreement between
    Cyberonics, Inc. and Merrill Lynch Capital, a division of
    Merrill Lynch Business Financial Services Inc., individually as
    Lender, Administrative Agent, Sole Bookrunner and Sole Lead
    Arranger, and the additional Lenders thereto

Cyberonics, Inc.s Current
    Report on
    Form 8-K
    filed on November 6, 2006

000-19806

10.110
.8

Consent and Amendment Agreement
    effective July 27, 2006 to the Credit Agreement between
    Cyberonics, Inc. and Merrill Lynch Capital, a division of
    Merrill Lynch Business Financial Services Inc., individually as
    Lender, Administrative Agent, Sole Bookrunner and Sole Lead
    Arranger, and the additional Lenders thereto

Cyberonics, Inc.s Current
    Report on
    Form 8-K
    filed on July 27, 2006

000-19806

10.110
.9

Consulting Agreement between
    Cyberonics, Inc. and BK Consulting, an assumed name used by
    Reese S. Terry, Jr., a founder and member of the Board of
    Directors of Cyberonics, Inc., dated August 25, 2005

Cyberonics, Inc.s Current
    Report on
    Form 8-K
    filed on August 30, 2005

000-19806

99.110
.10

Amendment to Consulting Agreement
    between Cyberonics, Inc. and BK Consulting dated August 23, 2006

Cyberonics, Inc.s Current
    Report on
    Form 8-K
    filed on August 25, 2006

000-19806

10.110
.11

Termination of Consulting Agreement
    between Cyberonics, Inc. and BK Consulting effective November
    19, 2006

Cyberonics, Inc.s Current
    Report on
    Form 8-K
    filed on December 13, 2006

000-19806

10.110
.12

Consulting Agreement dated November
    19, 2006 between Cyberonics, Inc. and Pamela B. Westbrook

Cyberonics, Inc.s Current
    Report on
    Form 8-K
    filed on November 20, 2006

000-19806

10.3




---



##### Table of Contents



SEC File orExhibit





Registration

ExhibitNumber

Document Description

Report or Registration Statement

Number

Reference10
.13

Cyberonics, Inc. Amended and
    Restated 1996 Stock Option Plan

Cyberonics, Inc.s
    Registration Statement on Form S-8 filed on April 29, 1999

333-77361

4.110
.14

First Amendment to the Cyberonics,
    Inc. Amended and Restated 1996 Stock Option Plan dated October
    2, 2000

Cyberonics, Inc.s Quarterly
    Report on
    Form 10-Q
    for the quarter ended September 30, 2000

000-19806

10.210
.15

Second Amendment to the Cyberonics,
    Inc. Amended and Restated 1996 Stock Option Plan dated March 21,
    2001

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 30, 2004

000-19806

10.1210
.16

Third Amendment to the Cyberonics,
    Inc. Amended and Restated 1996 Stock Option Plan dated July 27,
    2001

Cyberonics, Inc.s
    Registration Statement on Form S-8 filed on January 22, 2002

333-81158

4.410
.17

Fourth Amendment to the Cyberonics,
    Inc. Amended and Restated 1996 Stock Option Plan dated January
    2002

Cyberonics, Inc.s
    Registration Statement on Form S-8 filed on January 22, 2002

333-81158

4.510
.18

Fifth Amendment to the Cyberonics,
    Inc. Amended and Restated 1996 Stock Option Plan dated July 19,
    2002

Cyberonics, Inc.s
    Registration Statement on Form S-8 filed on July 25, 2002

333-97095

4.110
.19

Cyberonics, Inc. Amended and
    Restated 1997 Stock Plan

Cyberonics, Inc.s
    Registration Statement on Form S-8 filed on March 8, 2001

333-56694

4.510
.20

First Amendment to the Cyberonics,
    Inc. Amended and Restated 1997 Stock Plan dated March 21, 2001

Cyberonics, Inc.s Quarterly
    Report on
    Form 10-Q
    for the quarter ended July 26, 2002

000-19806

10.110
.21

Second Amendment to the Cyberonics,
    Inc. Amended and Restated 1997 Stock Plan dated November 21, 2002

Cyberonics, Inc.s Proxy
    Statement for the Annual Meeting of Stockholders filed on
    October 15, 2002

000-19806

Annex B10
.22

Cyberonics, Inc. 1998 Stock Option
    Plan

Cyberonics, Inc.s
    Registration Statement on Form S-8 filed on November 3, 1998

333-66691

4.110
.23

First Amendment to the Cyberonics,
    Inc. 1998 Stock Option Plan dated March 21, 2001

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 30, 2004

000-19806

10.2310
.24

Cyberonics, Inc. New Employee
    Equity Inducement Plan

Cyberonics, Inc.s
    Registration Statement on Form S-8 filed on August 27, 2003

333-108281

4.310
.25

Cyberonics, Inc. 2005 Stock Plan

Cyberonics, Inc.s Proxy
    Statement for the Special Meeting of Stockholders filed on April
    14, 2005

000-19806

Annex A10
.26

Indemnification Agreement effective
    August 1, 2003 between Cyberonics, Inc. and Robert P.
    Cummins

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 28, 2006

000-19806

10.3210
.27

Employment Agreement effective
    August 5, 2005 between Cyberonics, Inc. and Robert P. Cummins

Cyberonics, Inc.s Current
    Report on
    Form 8-K
    filed on August 9, 2005

000-19806

99.110
.28

Letter Agreement Regarding
    Advancement of Attorneys Fees effective September 28, 2006
    between Cyberonics, Inc. and Robert P. Cummins

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 28, 2006

000-19806

10.3410
.29

Resignation Agreement effective
    November 17, 2006 between Cyberonics, Inc. and Robert P.
    Cummins

Cyberonics, Inc.s Current
    Report on
    Form 8-K
    filed on November 20, 2006

000-19806

10.110
.30

Severance Agreement effective June
    1, 2003 between Cyberonics, Inc. and William Steven Jennings

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 25, 2003

000-19806

10.2110
.31

Officer Stock Option Plan Agreement
    dated June 2, 2003 between Cyberonics, Inc. and William Steven
    Jennings

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 28, 2006

000-19806

10.3710
.32

Employment Agreement effective June
    15, 2006 between Cyberonics, Inc. and William Steven Jennings

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 28, 2006

000-19806

10.38




---



##### Table of Contents



SEC File orExhibit





Registration

ExhibitNumber

Document Description

Report or Registration Statement

Number

Reference10
.33

Indemnification Agreement effective
    June 28, 1999 between Cyberonics, Inc. and Alan J. Olsen

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 28, 2006

000-19806

10.4410
.34

Severance Agreement effective July
    14, 2003 between Cyberonics, Inc. and George E. Parker

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 30, 2004

000-19806

10.4010
.35

Officer Stock Option Plan Agreement
    dated July 14, 2003 between Cyberonics, Inc. and George E. Parker

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 28, 2006

000-19806

10.4610
.36

Employment Agreement effective July
    14, 2003 between Cyberonics, Inc. and George E. Parker

Cyberonics, Inc.s Quarterly
    Report on Form 10-Q for the quarter ended October 24, 2003

000-19806

10.110
.37

First Amendment to Employment
    Agreement effective June 15, 2006 between Cyberonics, Inc. and
    George E. Parker

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 28, 2006

000-19806

10.4810
.38

Stand Alone Stock Option Agreement
    dated August 23, 2001 between Cyberonics, Inc. and Richard L.
    Rudolph, M.D.

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 28, 2006

000-19806

10.4910
.39

Severance Agreement effective
    January 1, 2002 between Cyberonics, Inc. and Richard L.
    Rudolph, M.D.

Cyberonics, Inc.s Quarterly
    Report on Form 10-Q for the quarter ended January 25, 2002

000-19806

10.310
.40

Employee Restricted Stock Agreement
    dated July 22, 2005 between Cyberonics, Inc. and Richard L.
    Rudolph, M.D.

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 28, 2006

000-19806

10.5110
.41

Employment Agreement effective June
    15, 2006 between Cyberonics, Inc. and Richard L.
    Rudolph, M.D.

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 28, 2006

000-19806

10.5210
.42

Stock Option Agreement Amendment
    and Bonus Agreement dated December 28, 2006 between Cyberonics,
    Inc. and Richard L. Rudolph, M.D.

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 28, 2006

000-19806

10.5310
.43

Employment Agreement effective June
    15, 2006 between Cyberonics, Inc. and Pamela B. Westbrook

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 28, 2006

000-19806

10.5810
.44

Letter Agreement Regarding
    Advancement of Attorneys Fees effective October 12, 2006
    between Cyberonics, Inc. and Pamela B. Westbrook

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 28, 2006

000-19806

10.5910
.45

Resignation Agreement effective
    November 19, 2006 between Cyberonics, Inc. and Pamela B.
    Westbrook

Cyberonics, Inc.s Current
    Report on
    Form 8-K
    filed on November 20, 2006

000-19806

10.4510
.46

Indemnification Agreement effective
    August 1, 2003 between Cyberonics, Inc. and David S. Wise

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 28, 2006

000-19806

10.6110
.47

Severance Agreement effective
    September 17, 2003 between Cyberonics, Inc. and David S. Wise

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 30, 2004

000-19806

10.4210
.48

Employment Agreement effective
    September 17, 2003 between Cyberonics, Inc. and David S.
    Wise

Cyberonics, Inc.s Quarterly
    Report on Form 10-Q for the quarter ended October 24, 2003

000-19806

10.210
.49

First Amendment to Employment
    Agreement effective June 15, 2006 between Cyberonics, Inc. and
    David S. Wise

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 28, 2006

000-19806

10.6410
.50

New Employee Equity Inducement Plan
    Agreement dated September 17, 2003 between Cyberonics, Inc. and
    David S. Wise

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 28, 2006

000-19806

10.65




---



##### Table of Contents



SEC File orExhibit





Registration

ExhibitNumber

Document Description

Report or Registration Statement

Number

Reference10
.51

Form of Indemnification Agreement
    for directors of Cyberonics, Inc.

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 28, 2006

000-19806

10.6610
.52

Form of Director Restricted Stock
    Agreement effective June 1, 2005

Cyberonics, Inc.s Quarterly
    Form 10-Q for the quarter ended July 29, 2005

000-19806

10.5210
.53

Form of Amendment to Director Stock
    Option Agreement dated December 2006 between Cyberonics, Inc.
    and the directors listed on the schedule attached thereto

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 28, 2006

000-19806

10.6810
.54

Form of Stock Option Agreement
    under the Cyberonics, Inc. Amended and Restated 1996 Stock
    Option Plan between Cyberonics, Inc. and the executive officers
    listed on the schedule attached thereto

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 28, 2006

000-19806

10.6910
.55

Form of Stock Option Agreement
    under the Cyberonics, Inc. 2005 Stock Plan between Cyberonics,
    Inc. and the executive officers listed on the schedule attached
    thereto

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 28, 2006

000-19806

10.7010
.56

Form of Employee Restricted Stock
    Agreement under the Cyberonics, Inc. 2005 Stock Plan (one-year
    vesting)

Cyberonics, Inc.s Quarterly
    Form 10-Q for the quarter ended July 29, 2005

000-19806

10.210
.57

Form of Employee Restricted Stock
    Agreement under the Cyberonics, Inc. 2005 Stock Plan (five-year
    vesting) and the executive officers listed on the schedule
    attached thereto

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 28, 2006

000-19806

10.7210
.58

Consent and Amendment Agreement,
    dated December 29, 2006, by and among Cyberonics, Inc., Merrill
    Lynch Capital, and the Lenders party to the Credit Agreement (as
    defined therein)

Cyberonics, Inc.s Current
    Report on
    Form 8-K
    filed on January 5, 2007

000-19806

10.110
.59

Separation Agreement between Steve
    Jennings and Cyberonics, Inc., dated January 31, 2007

Cyberonics, Inc.s Current
    Report on
    Form 8-K
    filed on February 6, 2007

000-19806

10.110
.60

Amended and Restated Cyberonics,
    Inc. New Employee Inducement Plan

Cyberonics, Inc.s Current
    Report on
    Form 8-K
    filed on April 30, 2007

000-19806

10.110
.61

Employment Agreement by and between
    Cyberonics, Inc. and Daniel Jeffrey Moore

Cyberonics, Inc.s Current
    Report on
    Form 8-K
    filed on May 1, 2007

000-19806

10.110
.62

Release Agreement by and between
    Cyberonics, Inc. and John Riccardi

Cyberonics, Inc.s Current
    Report on
    Form 8-K
    filed on May 10, 2007

000-19806

10.110
.63*

Retention Agreement by and between
    Cyberonics, Inc. and John Riccardi dated November 14, 200510
.64*

Description Of Non-Equity Incentive
    Compensation Plans10
.65*

Consulting Agreement between
    Cyberonics, Inc. and BK Consulting, an assumed name used by
    Reese S. Terry, Jr., a founder and member of the Board of
    Directors of Cyberonics, Inc., dated May 16, 200710
.66*

Executive Restricted Stock
    Agreement between Cyberonics, Inc. and Daniel J. Moore dated
    June 18, 200710
.67*

Description of Non-Equity Incentive
    Compensation under the Employment Agreement of Robert P. Cummins




---



##### Table of Contents



SEC File orExhibit





Registration

ExhibitNumber

Document Description

Report or Registration Statement

Number

Reference21
.1

List of Subsidiaries of Cyberonics,
    Inc.

Cyberonics, Inc.s Annual
    Report on
    Form 10-K
    for the fiscal period ended April 28, 2006

000-19806

21.123
.1*

Consent of Independent Registered
    Public Accounting Firm, KPMG LLP24
.1*

Powers of Attorney (included on the
    Signature Page to this Annual Report on Form 10-K)31
.1*

Certification of the Chief
    Executive Officer of Cyberonics, Inc. pursuant to Section 302 of
    the Sarbanes-Oxley Act of 200231
.2*

Certification of the Chief
    Financial Officer of Cyberonics, Inc. pursuant to Section 302 of
    the Sarbanes-Oxley Act of 200232
.1*

Certification of the Chief
    Executive Officer and Chief Financial Officer of Cyberonics,
    Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002