Exhibit 99.1
                                ATS MEDICAL INC.
                               REPORT ON FORM 10-K
                                DECEMBER 31, 2000

CAUTIONARY STATEMENTS FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.

         The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements to encourage companies to provide
prospective information without fear of litigation so long as those statements
are identified as forward-looking and are accompanied by meaningful cautionary
statements identifying important factors that could cause actual results to
differ materially from those projected in the statement. We desire to take
advantage of these "safe harbor" provisions and are filing this Exhibit 99 in
order to do so. Accordingly, we hereby identify the following important factors
which could cause our actual results to differ materially from any such results
which may be projected, forecast, estimated or budgeted by us in forward-looking
statements made by us from time to time in reports, proxy statements,
registration statements and other written communications, or in oral
forward-looking statements made from time to time by the Company's officers and
agents. We do not intend to update any of these forward-looking statements after
the date of this Form 10-K to conform them to actual results.

OUR HEART VALVE MAY NEVER ACHIEVE MARKET ACCEPTANCE.

         Our success will depend, in large part, on the medical community's
acceptance of the ATS heart valve. The medical community's acceptance of the ATS
heart valve will depend upon our ability to demonstrate the safety and efficacy,
advantages, long-term clinical performance and cost-effectiveness of the ATS
heart valve as compared to other prosthetic heart valves. We cannot predict
whether the medical community will accept the ATS heart valve or, if accepted,
the extent of its use. Negative publicity resulting from isolated incidents
involving the ATS heart valve or other prosthetic heart valves could have a
significant adverse effect on the overall acceptance of our heart valve. If we
encounter difficulties developing a market for the ATS heart valve in the United
States, our business and results of operations will be seriously harmed.

WE CURRENTLY RELY ON THE ATS HEART VALVE AS OUR SOLE SOURCE OF REVENUE.

         We have developed only one product, which is currently being sold
primarily outside the United States. Even if we were to develop additional
products, regulatory approval would likely be required to sell them. Clinical
testing and the approval process itself are very expensive and can take many
years. Therefore, we do not expect to be in a position to sell additional
products in the foreseeable future. As a result, if we fail to achieve
widespread market acceptance for the ATS heart valve, our business and results
of operations will be seriously harmed.

INCURRENCE OF COSTS IN CONNECTION WITH FDA APPROVAL OF OUR VALVE IS EXPECTED TO
ADVERSELY AFFECT EARNINGS.


<PAGE>


         In connection with the FDA approval of the ATS heart valve which we
received on October 13, 2000, we have taken, and will be taking in the near
term, a number of important steps that we believe will facilitate
commercialization of our valve in the United States market and enhance our
profitability in international markets. These steps include:

     o    the establishment of a licensing arrangement with Sulzer Carbomedics,
          Inc. ("Carbomedics") to permit us to manufacture pyrolytic carbon
          components;

     o    the planned leasing, construction, equipping, staffing and
          commercialization of a facility to manufacture pyrolytic carbon
          components; and

     o    the hiring and training of a direct sales force to market our valve in
          the United States.

         These actions involve incurring significant costs. The timing of these
expenditures is expected to adversely affect quarter-to-quarter comparisons of
our earnings. As there is no assurance of commercial success of our valve in the
United States, the commitment of our resources to these matters at this time
entails, in addition to the adverse effects on earnings for at least the next
three years, substantial uncertainty and business risk.

WE CURRENTLY DEPEND SOLELY ON THE MARKETING AND SALES EFFORTS OF INDEPENDENT
DISTRIBUTORS, AND OUR SALES HAVE BEEN CONCENTRATED IN THREE COUNTRIES.

         The ATS heart valve is sold internationally through independent
distributors. The loss of an international distributor could seriously harm our
business and results of operations if a new distributor could not be found on a
timely basis in the relevant geographic market. Sales to our Japanese, German
and French distributors have accounted for approximately 42% of our net sales in
fiscal year 2000 and 50% of our net sales in fiscal years 1999 and 1998. We do
not control the amount and timing of marketing resources that these third
parties devote to our product. Furthermore, to the extent we rely on sales
through independent distributors, any revenues we receive will depend primarily
on the efforts of these parties. In addition, as part of our agreement with our
distributors, we allow for the return of unopened valves for credit. If a
distributor(s) were to terminate their distributorship agreement with us, we
could be obligated to buy back their inventory of valves as well as valves on
consignment at hospitals. Such a buyback could have an adverse impact on our
results of operations for the quarter and/or year in which it occurs.

WE ARE DEPENDENT UPON SALES OUTSIDE THE UNITED STATES, WHICH ARE SUBJECT TO A
NUMBER OF RISKS THAT COULD HARM OUR BUSINESS.

         Most of our commercial sales to date have been outside the United
States, and we expect that international sales will account for a substantial
majority all of our revenue until we develop our sales force for sale of the ATS
heart valve in the United States and until the ATS heart valve receives market
acceptance from U.S. customers.

         There are risks inherent in doing business in international markets,
including:


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     o    unforeseen changes in regulatory requirements and government health
          programs;

     o    weaker intellectual property rights protection in some countries;

     o    potentially adverse tax consequences;

     o    political and economic instability; and

     o    greater difficulty in collecting payments from product sales.

         These factors could harm our ability to successfully commercialize our
product internationally and could harm our business.

         The value of the U.S. dollar in relation to other currencies may also
harm our sales to customers outside the United States because we sell in U.S.
dollars to all of our customers abroad. For the year ended December 31, 2000,
sales decreased by about 16% compared to the same period for 1999. The decrease
in sales was due primarily to the increase in value of the U.S. dollar against
the Euro. Our sales in Europe declined 35% for the year ended December 31, 2000
as compared to the year ended December 31, 1999. Our dependence in sales outside
of the United States will continue to expose us to U.S. dollar currency
fluctuations for the foreseeable future.

THE MARKET FOR PROSTHETIC HEART VALVES IS HIGHLY COMPETITIVE.

         The market for prosthetic heart valves is highly competitive. We expect
that competition will intensify as additional companies enter the market or
modify their existing products to compete directly with us. Our primary
competitor, St. Jude Medical, Inc., currently controls approximately 50% of the
worldwide mechanical heart valve market. Many of our competitors have
long-standing FDA approval for their valves and extensive clinical data
demonstrating the performance of their valves. In addition, they have greater
financial, manufacturing, marketing and research and development capabilities
than we have. For example, many of our competitors have the ability, due to
their internal carbon manufacturing facilities and economics of scale, to
manufacture their heart valves at a lower cost than we can manufacture our ATS
heart valve. Our primary competitor has recently used price as a method to
compete in several markets. We might not be able to compete successfully.

NEW PRODUCTS OR TECHNOLOGIES DEVELOPED BY OTHERS COULD HARM OUR BUSINESS AND
RESULTS OF OPERATIONS.

         The medical device industry is characterized by significant
technological advances. Several companies are developing new prosthetic heart
valves based on new or potentially improved technologies. Significant advances
are also being made in surgical procedures, which may delay the need for
replacement heart valves. A new product or technology may emerge that renders
our ATS heart valve noncompetitive or obsolete.

OUR FUTURE RESULTS WILL BE HARMED IF THE USE OF MECHANICAL HEART VALVES
DECLINES.


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         Our business could suffer if the use of mechanical heart valves
declines. Historically, mechanical heart valves have accounted for over
two-thirds of all heart valve replacements. Recently, there has been an increase
in the use of tissue valves. We estimate that mechanical heart valves are
currently being used in 50 to 70% of all heart valve replacements, depending on
the geographic market, down from 65 to 75% about ten years ago. We believe
improvements in tissue valve longevity and an increase in the average age of
valve patients have contributed to the recent increase in the use of tissue
valves.

WE CURRENTLY MAINTAIN A LARGE VOLUME OF INVENTORY, WHICH EXCEEDS THE CURRENT
DEMAND FOR THE ATS HEART VALVE.

         We currently purchase pyrolytic carbon components under a long-term
supply agreement with Carbomedics. To date, our purchases of pyrolytic carbon
components have exceeded our sales of the ATS heart valve. We currently have in
inventory enough pyrolytic carbon components to satisfy our projected
requirements for over two years. In addition, we expect that our minimum
purchase requirements in 2001 under the supply agreement will exceed our product
sales in 2001. If we are unable to achieve widespread acceptance for the ATS
heart valve or if competitive pressures result in price reductions, the value of
the excess inventory would likely decrease, which could seriously harm our
results of operations and financial condition. Because the pyrolytic carbon
components are made to meet the unique specifications of the ATS heart valve,
our inventory may have little, if any, value in the open market.

WE LICENSE PATENTED TECHNOLOGY AND OTHER PROPRIETARY RIGHTS FROM CARBOMEDICS. IF
THESE AGREEMENTS ARE TERMINATED, OUR BUSINESS AND RESULTS OF OPERATIONS COULD BE
SERIOUSLY HARMED.

         If our agreements with Carbomedics are breached or terminated, our
business and results of operations could be seriously harmed. We have licensed
from Carbomedics an exclusive right to the basic design of an open pivot,
bileaflet mechanical valve from which our ATS heart valve has been developed.
Termination of this agreement would prevent or delay us from manufacturing and
selling the ATS heart valve.

         In addition, under our carbon technology agreement with Carbomedics, we
have obtained a license to use Carbomedics' pyrolytic carbon technology to
manufacture components for the ATS heart valve. Carbomedics also has agreed to
assist us in establishing our pyrolytic carbon manufacturing facility. If this
agreement is breached or terminated, our business and results of operations
could be seriously harmed.

A DELAY OR INTERRUPTION IN THE SUPPLY OF PYROLYTIC CARBON COMPONENTS COULD
SERIOUSLY HARM OUR BUSINESS.

         We cannot be certain that, after our current inventory is exhausted,
sufficient quantities of pyrolytic carbon components will be available to
assemble the ATS heart valve. We currently purchase pyrolytic carbon components
from a single source, Carbomedics, on an exclusive basis. There is currently no
other FDA-approved alternate supplier of our pyrolytic carbon components.


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While Carbomedics has granted to us the right to manufacture pyrolytic carbon
components, we agreed to continue to purchase a minimum annual number of
pyrolytic carbon components from Carbomedics through 2007. Failure to purchase
these minimum annual amounts would cause us to lose our right to manufacture the
pyrolytic carbon components. We anticipate that our carbon manufacturing
facilities will not be operational until at least 2003. Consequently, any
interruption in our supply from Carbomedics could seriously harm our business.

OUR DIRECT SALES EFFORTS MAY NOT BE SUCCESSFUL.

         We intend to market the ATS heart valve directly in the United States.
We will need to expend significant funds and management resources to develop an
internal sales force. We believe there is significant competition for direct
sales personnel with the advanced sales skills and technical knowledge we need.
We may not be able to hire, retain and motivate qualified personnel. Our
business and results of operations may suffer if we do not establish or maintain
an effective direct sales force.

BECAUSE WE LACK MANUFACTURING EXPERIENCE, WE MAY ENCOUNTER DIFFICULTIES IN
MANUFACTURING PYROLYTIC CARBON COMPONENTS FOR OUR HEART VALVE.

         Under our agreement with Carbomedics, we have been granted an exclusive
worldwide license to manufacture pyrolytic carbon components for the ATS heart
valve. We cannot be certain that our strategy to establish internal
manufacturing capabilities will result in a cost-effective means for
manufacturing the ATS heart valve. We have no experience in manufacturing
pyrolytic carbon. We may encounter difficulties in establishing and maintaining
our manufacturing operations, including problems involving:

     o    renovating and equipping the facility;

     o    production yields;

     o    quality control;

     o    per unit manufacturing costs;

     o    shortages of qualified personnel; and

     o    compliance with FDA and international regulations and requirements
          regarding good manufacturing practices.

         Difficulties encountered by us in establishing or maintaining a
commercial-scale manufacturing facility may limit our ability to manufacture our
heart valve and therefore could seriously harm our business and results of
operations.

OUR BUSINESS COULD BE SERIOUSLY HARMED IF THIRD-PARTY PAYORS DO NOT REIMBURSE
THE COSTS FOR OUR HEART VALVE.


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         Our ability to successfully commercialize the ATS heart valve depends
on the extent to which reimbursement for the cost of our product and the related
surgical procedure is available from third-party payors, such as governmental
programs, private insurance plans and managed care organizations. Third-party
payors are increasingly challenging the pricing of medical products and
procedures that they consider are not cost-effective or are used for a
non-approved indication. The failure by physicians, hospitals and other users of
our product to obtain sufficient reimbursement from third-party payors would
seriously harm our business and results of operations.

         In recent years, there have been numerous proposals to change the
health care system in the United States. Some of these proposals have included
measures that would limit or eliminate payment for medical procedures or
treatments. In addition, government and private third-party payors are
increasingly attempting to contain health care costs by limiting both the
coverage and the level of reimbursement. In international markets, reimbursement
and health care payment systems vary significantly by country. In addition, we
have encountered price resistance from government-administered health programs.
Significant changes in the health care system in the United States or elsewhere,
including changes resulting from adverse trends in third-party reimbursement
programs, could have a material adverse effect on our business and results of
operations.

WE MAY FACE PRODUCT LIABILITY CLAIMS.

         The manufacture and sale of mechanical heart valves entail significant
risk of product liability claims and product recalls. A mechanical heart valve
is a life-sustaining device and the failure of any mechanical heart valve
usually results in the patient's death. A product liability claim or product
recall, regardless of the ultimate outcome, could require us to spend
significant time and money in litigation or to pay significant damages and could
seriously harm our business. We currently maintain product liability insurance
coverage in an aggregate amount of $25 million. However, we cannot assure you
that our current insurance coverage is adequate to cover the costs of any
product liability claims made against us. Product liability insurance is
expensive and does not cover the costs of a product recall. In the future,
product liability insurance may not be available at satisfactory rates or in
adequate amounts.

WE DEPEND ON THE CONTINUED SERVICE OF OUR KEY PERSONNEL.

         Our future success depends on the continued services of Manuel A.
Villafana, our founder and Chief Executive Officer, and Richard W. Kramp, our
President and Chief Operating Officer. We are also dependent on our ability to
attract and retain technically qualified personnel in the future. The loss of
the technical knowledge and industry expertise of these officers and other
personnel could seriously impede our success.

OUR BUSINESS WOULD BE ADVERSELY AFFECTED IF WE ARE NOT ABLE TO PROTECT OUR
INTELLECTUAL PROPERTY RIGHTS.

         Our success depends in part on our ability to maintain and enforce our
patents and other proprietary rights. We rely on a combination of patents, trade
secrets, know-how and


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confidentiality agreements to protect the proprietary aspects of out technology.
These measures afford only limited protection and competitors may gain access to
our intellectual property and proprietary information. The patent positions of
medical device companies are generally uncertain and involve complex legal and
technical issues. Litigation may be necessary to enforce our intellectual
property rights, to protect our trade secrets and to determine the validity and
scope of our proprietary rights. Any litigation could be costly and divert our
attention from the growth of the business. We cannot assure you that our patents
and other proprietary rights will not be successfully challenged, or that others
will not independently develop substantially equivalent information and
technology or otherwise gain access to our proprietary technology.

WE MAY BE SUED BY THIRD PARTIES WHICH CLAIM THAT OUR PRODUCT INFRINGES ON THEIR
INTELLECTUAL PROPERTY RIGHTS.

         We may be exposed to future litigation by third parties based on
intellectual property infringement claims. Any claims or litigation against us,
regardless of the merits, could result in substantial costs and could harm our
business. In addition, intellectual property litigation or claims could force us
to:

     o    cease manufacturing and selling our product, which would seriously
          harm us;

     o    obtain a license from the holder of the infringed intellectual
          property right, which license may not be available on reasonable
          terms, if at all; or

     o    redesign our product, which could be costly and time-consuming.

WE ARE SUBJECT TO EXTENSIVE GOVERNMENTAL REGULATION, WHICH IS COSTLY, TIME
CONSUMING AND CAN SUBJECT US TO UNANTICIPATED DELAYS.

         The ATS heart valve and our manufacturing activities are subject to
extensive regulation by a number of governmental agencies, including the FDA and
comparable international agencies. We are required to:

     o    obtain the approval of the FDA and international regulatory agencies
          before we can market and sell the ATS heart valve;

     o    satisfy content requirements for all of our labeling, sales and
          promotional materials;

     o    comply with manufacturing and reporting requirements; and

     o    undergo rigorous inspections by these agencies.

         Compliance with the regulations of these agencies may delay or prevent
us from introducing the ATS heart valve in the United States or introducing any
new or improved products. Violations of regulatory requirements may result in
fines, marketing restrictions, product recall, withdrawal of approvals and civil
and criminal penalties.


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WE MAY NEED TO RAISE CAPITAL AND WE CANNOT BE CERTAIN THAT ADDITIONAL FINANCING
WILL BE AVAILABLE.

         We have cash in hand and credit facilities to support our operations
and capital requirements through 2002. After that we may need to raise
additional capital. Our future liquidity and capital requirements will depend
upon several factors, including actions related to regulatory matters, our
progress in establishing our pyrolytic carbon manufacturing operations and the
extent to which the ATS heart valve gains market acceptance.

THE PRICE OF OUR COMMON STOCK HAS BEEN VOLATILE.

         Historically, the market price of our common stock has fluctuated over
a wide range and it is likely that the price of our common stock will fluctuate
in the future. The market price of our common stock could be impacted by the
following:

     o    the failure of the ATS valve to gain market acceptance in the United
          States;

     o    announcements of technical innovations or new products by our
          competitors;

     o    the status of component supply arrangements;

     o    changes in reimbursement policies;

     o    government regulation;

     o    developments in patent or other proprietary rights;

     o    public concern as to the safety and efficacy of products developed by
          us or others; and

     o    general market conditions.

         In addition, due to one or more of the foregoing factors, in future
years, our results of operations may fall below the expectations of securities
analysts and investors. In that event, the market price of our common stock
could be materially and adversely affected.

OUR CHARTER DOCUMENTS AND MINNESOTA LAW MAY DISCOURAGE A TAKEOVER OF OUR
COMPANY.

         Provisions of our certificate of incorporation, bylaws and Minnesota
law could make it more difficult for a third party to acquire us, even if doing
so would be beneficial to our stockholders.