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This excerpt taken from the CYBX 10-K filed Jul 6, 2007. REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
Cyberonics, Inc.:
We have audited the accompanying consolidated balance sheets of
Cyberonics, Inc. and subsidiary as of April 27, 2007 and
April 28, 2006, and the related consolidated statements of
operations, stockholders’ equity (deficit) and
comprehensive loss, and cash flows for the 52 weeks ended
April 27, 2007, April 28, 2006, and April 29,
2005. These consolidated financial statements are the
responsibility of the Company’s management. Our
responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of Cyberonics, Inc. and subsidiary as of April 27,
2007 and April 28, 2006, and the results of their
operations and their cash flows for the 52 weeks ended
April 27, 2007, April 28, 2006, and April 29,
2005, in conformity with U.S. generally accepted accounting
principles.
As discussed in Note 1 to the consolidated financial
statements, effective April 29, 2006, the Company changed
its method of accounting for share-based payments.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
effectiveness of Cyberonics, Inc.’s internal control over
financial reporting as of April 27, 2007, based on criteria
established in Internal Control — Integrated
Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO), and our report
dated July 6, 2007 expressed an unqualified opinion on
management’s assessment of, and the effective operation of,
internal control over financial reporting.
The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going
concern. As discussed in Note 2 to the consolidated
financial statements, the Company has suffered recurring losses
from operations, received a Notice of Default and demand letter
and Notice of Acceleration for the $125 million senior
subordinated convertible notes and incurred a potential default
of the $40 million Line of Credit. These matters raise
substantial doubt about its ability to continue as a going
concern. Management’s plans in regard to these matters are
also described in Note 2. The consolidated financial
statements do not include any adjustments that might result from
the outcome of this uncertainty.
/s/ KPMG
LLP
Houston, Texas
July 6, 2007
Table of Contents
CYBERONICS,
INC. AND SUBSIDIARY
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