<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    ---------

                                    FORM 10-K

            |X| Annual report pursuant to Section 13 or 15(d) of the
                         Securities Exchange Act of 1934

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001
                           COMMISSION FILE NO. 0-18602

                                ATS MEDICAL, INC.
             (Exact name of registrant as specified in its charter)

           MINNESOTA                                     41-1595629
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)

        3905 ANNAPOLIS LANE
        MINNEAPOLIS, MINNESOTA                             55447
(Address of principal executive offices)                 (Zip Code)

Registrant's telephone number, including area code: (763) 553-7736

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock $.01
par value

      Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                                 Yes |X| No | |

      Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. | |

      The aggregate market value of voting stock held by nonaffiliates of the
registrant as of March 18, 2002, was approximately $39,568,996 (based on the
last sale price of such stock as reported by the NASDAQ National Market).

      The number of shares outstanding of each of the registrant's classes of
common stock as of March 18, 2002, was:

         Common Stock, $.01 par value            22,229,773 shares

                       DOCUMENTS INCORPORATED BY REFERENCE

      Pursuant to General Instruction G, the responses to Items 5, 6, 7, and 8
of Part II of this report are incorporated by reference to certain information
contained in the Registrant's Annual Report to Shareholders for the fiscal year
ended December 31, 2001 and the responses to Items 10, 11, 12 and 13 of Part III
of this report are incorporated herein by reference to certain information
contained in the Registrant's definitive Proxy Statement for its 2002 Annual
Meeting of Shareholders to be held on May 2, 2002.


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<PAGE>
                                ATS MEDICAL, INC.
                                 2001 FORM 10-K

                                     PART I

ITEM 1. BUSINESS

OVERVIEW

ATS Medical, Inc. is a Minnesota corporation founded by Manuel A. Villafana in
June, 1987. We manufacture and market a mechanical bileaflet heart valve with a
unique open pivot design. Our valve is used to treat heart valve failure caused
by the natural aging process, rheumatic heart disease, prosthetic valve failure
and congenital defects. Our Chairman and founder, Manuel Villafana, led ATS in
the development of a valve designed to achieve a significant advancement in
mechanical heart valve technology. Mechanical heart valves have been in use
since the early 1960s. In 1976, Mr. Villafana founded St. Jude Medical, Inc. to
develop a bileaflet mechanical heart valve that has become the world's most
frequently implanted prosthetic heart valve and is currently the industry
standard. The U.S. market for replacement heart valves in 2001 was estimated to
be over $335 million.

The ATS heart valve is designed to "advance the standard" among mechanical heart
valves by incorporating a pivot consisting of protruding spheres upon which the
leaflets of the valve pivot to open and close. This unique open pivot has been
designed to eliminate the cavity associated with the pivot of other bileaflet
valves and to improve the ability of the blood to flow through the valve without
forming clots. We began selling the ATS heart valve in international markets in
1992. In October 2000, we received FDA approval to sell the ATS heart valve in
the United States and since that time we have been actively seeking to introduce
the ATS heart valve in the U.S. market.

PROSTHETIC HEART VALVE MARKET

There are two types of replacement heart valves: tissue and mechanical. Tissue
valves are made from animal or cadaver tissue or in some cases the patient's own
tissue. Tissue valves do not present the same level of risk of blood clotting
around the valve as mechanical valves. Tissue valves, however, have limited
long-term durability due to calcification and deterioration. If a tissue valve
fails, a new prosthetic valve must be implanted, requiring another open heart
surgery. Mechanical valves are made from durable materials such as metals and
carbon. In vitro testing of current pyrolytic carbon mechanical valves has
yielded estimated useful lives in excess of any patient's lifetime. Current
mechanical valves, however, require the use of anti-coagulants to prevent
formation of blood clots; tissue valves generally do not require anti-coagulant
treatment. Tissue valves are generally prescribed for patients who are less able
to tolerate anti-coagulants due to conditions such as gastrointestinal ulcers or
liver dysfunction, elderly patients, women in their childbearing years and very
active people.

Heart surgeons choose a particular type of mechanical valve based on a number of
factors. A principal factor in the choice of a valve is the potential for
forming blood clots, or thrombosis, resulting from areas in the valve where the
blood can stagnate. Blood clots can impair the performance of a valve and, if
the clot detaches and moves through the bloodstream (a thromboembolism), result
in an arterial blockage or stroke. Another principal factor in the choice of a
mechanical valve is the blood flow efficiency, or hemodynamics, of the valve. A
mechanical valve should allow blood to flow easily through the valve with
minimal pressure required to open the valve and minimal backflow of blood when
the valve closes. The valve also should not exert force on the blood that could
damage the fragile blood cells. Other factors that are important in a surgeon's
choice of a mechanical valve are the ease in implanting and monitoring the
valve's performance, the patient's quality of life and the physician's
familiarity with and confidence in the valve.

In addition to heart surgeons, administrators or business managers at hospitals
and clinics have become increasingly influential in the purchase decision-making
process in recent years. The increasing emphasis on medical cost containment in
most world markets has elevated the decision-making power of the administrator
to a level equal to or greater than that of the surgeon. The administrator tends
to focus on cost-effectiveness and, in some markets, primarily on the cost of
the valve.

We estimate that the total heart valve market in the U.S. in 2001 was
approximately $335 million. We estimate that approximately 75,000 heart valve
replacement surgeries were conducted in the United States in 2000. Of the total
number of


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<PAGE>
heart valve replacement surgeries, approximately 41,000, or 55%, involved
mechanical heart valves and approximately 34,000, or 45%, involved tissue heart
valves.

THE ATS OPEN PIVOT BILEAFLET VALVE

Our product is designed to advance the standard of existing mechanical heart
valves by combining a proprietary open pivot design and other innovative
features with the widely accepted biocompatibility and durability of pyrolytic
carbon. The standard ATS heart valve is available in seven sizes ranging from
19mm to 31mm in diameter, with sewing cuffs for either aortic valve or mitral
valve replacement. In 1994, we introduced the Advanced Performance series of the
ATS heart valve in international markets. This valve is available in seven sizes
ranging from 16mm to 28mm in diameter. Our 16mm valve is currently the world's
smallest mechanical valve.

The major design features of the ATS heart valve are:

      OPEN PIVOT AREAS. The proprietary open pivot areas of the ATS heart valve
      feature spherical protrusions from the orifice that match spherical
      notches in the leaflets. The pivot areas protrude into the orifice and so
      are exposed to the washing action of the blood flowing through the heart
      valve. All other currently marketed bileaflet valves contain pivot
      cavities in the orifice wall into which protrusions from the semi-circular
      leaflets extend to allow the leaflets to open and close. The open pivot
      design also features angled inflow and outflow pivot stops.

      A THIN BUT DURABLE ORIFICE. The orifice of the ATS heart valve is
      manufactured using a mandrel which is coated with pyrolytic carbon. The
      mandrel is then removed, leaving a solid pyrolytic carbon orifice. In
      contrast, the industry standard valve's orifice is composed of a soft
      graphite substrate coated with pyrolytic carbon. By eliminating the
      graphite substrate, we have made the orifice wall thinner, resulting in a
      larger average inside diameter. The orifice is surrounded by a titanium
      stiffening ring and is rotatable.

      LOW PROFILE DESIGN. The ATS heart valve has a low profile design. The
      profile of a mechanical heart valve refers to the extension of the orifice
      and leaflets above and below the natural tissue anulus, or location of the
      natural heart valve. The inflow side of the orifice of the ATS heart valve
      is flat, unlike the most widely used cavity pivot valve which has upward
      protrusions on the orifice to house the cavity.

      AN ADVANCED SEWING CUFF. The sewing cuff surrounding the orifice of the
      ATS heart valve is made of double velour polyester and includes a surgical
      felt ring for ease of sewing. An extended sewing cuff is used with the
      31mm carbon components to create a 33mm valve for special mitral valve
      replacements. The Advanced Performance series offers a reconfigured sewing
      cuff, allowing a valve with a larger inside diameter to be used in small
      anulus situations.

      PYROLYTIC CARBON. Pyrolytic carbon has been used in mechanical heart
      valves for over 25 years. The orifice of our heart valve is fabricated
      entirely from pyrolytic carbon, while the leaflets are fabricated by
      coating pyrolytic carbon on graphite substrates. Pyrolytic carbon used in
      other mechanical valves has been tested to function longer than any
      patient's lifetime. Pyrolytic carbon is believed to be superior to metal
      and plastics in terms of the human body's acceptance of the material, thus
      resulting in lower rates of thrombosis and thromboembolism than with other
      materials. Because of its durability and biocompatibility, pyrolytic
      carbon is used in virtually every mechanical heart valve in the market.

      TWO LEAFLETS. Bileaflet valves are used in substantially all mechanical
      heart valves being marketed today. The leaflets in the ATS heart valve
      have tungsten impregnated in the substrate to make them visible under
      x-ray.

The ATS heart valve is designed to provide the following primary advances over
the industry standard mechanical heart valve:

      REDUCED RATES OF THROMBOEMBOLIC COMPLICATIONS. The pivot cavities found in
      other bileaflet heart valves are areas of blood flow stagnation and
      possible blood clot formation. By eliminating the cavities in the orifice
      and placing the pivot areas within the normal blood flow, the improved
      washing action in the ATS heart valve is intended to lower the likelihood
      of blood clot formation and the resulting incidence of thromboembolism.
      The open pivot design as well as the angled inflow and outflow pivot stops
      also result in low levels of hemolysis (damage to blood cells), which may
      contribute to a low rate of thromboembolic complications.


                                       3
<PAGE>
      IMPROVED BLOOD FLOW EFFICIENCIES. We have made the orifice of our product
      both durable and thinner, thereby resulting in a larger inside diameter.
      The larger inside diameter of the ATS heart valve is intended to result in
      lower pressure gradients in our product. (The term "gradients" refers to
      the pressure difference between the inflow and outflow side of the valve
      needed to support the required blood flow through the valves.) The ATS
      heart valve is also designed to have less regurgitation (backflow of blood
      when the valve is closing and closed) due to the geometry of its angled
      inflow and outflow pivot stops which minimize the direct leakage paths.
      These design characteristics are intended to result in superior blood flow
      efficiencies which should reduce the workload on the heart.

      EASE OF IMPLANT. Our product has been designed for ease of use by the
      heart surgeon. The low profile of the ATS heart valve is intended to
      minimize implant complications. Leaflets that extend significantly below
      the natural tissue anulus in the mitral position may obstruct blood
      outflow or interfere with the septum or other parts of the heart.
      Protrusions on the inflow side of the anulus in the aortic position may
      snag sutures used to attach the mechanical valve to the heart. In
      addition, because the orifice can be rotated, the surgeon can optimize
      valve orientation by adjusting the position of the leaflets after the ATS
      heart valve has been sutured in the natural anatomical position in the
      patient's heart. Suturing the ATS heart valve into the heart is made
      easier by reducing the number of layers of polyester material in the
      aortic and mitral cuffs and by adding the surgical felt ring in the sewing
      cuff, thereby easing the passage of the suture needle through the sewing
      cuff. The packaging and accessories of the ATS heart valve also are
      designed to facilitate the implant procedure by including all of the
      required items pre-assembled in a sterilized dual barrier container.

      IMPROVED FOLLOW-UP DIAGNOSTIC CAPABILITY. Our product facilitates the
      follow-up diagnostic process by being more easily visible to x-rays. The
      titanium stiffening ring provides a clear image on x-rays when taken from
      any angle. The leaflets also have a higher density of tungsten impregnated
      in the substrate, making them more visible to x-rays.

      IMPROVED PATIENT QUALITY OF LIFE THROUGH LOWER NOISE LEVELS. Patients with
      other implanted mechanical heart valves frequently complain of
      disturbances resulting from the clicking sound created as the valve
      closes. These disturbances range from irritability and insomnia to
      paranoia and depression. Spouses of patients with implanted mechanical
      valves also report disturbances resulting from the noise of the valve.
      Based on informal surveys, we believe that the ATS heart valve is quieter
      than our competitors' valves and below the threshold of hearing of most
      patients. We believe that the reduced noise level of our product further
      improves the quality of life of the patient.

CLINICAL RESULTS AND REGULATORY STATUS

On October 13, 2000, the FDA approved our pre-market approval or PMA application
to sell the ATS heart valve in the United States.

In May 1992, we began to sell the ATS heart valve in Switzerland, Germany,
Belgium and the United Kingdom. We received ISO 9001 certification in April 1994
and European Regulatory Approval ("CE") for the ATS heart valve in March 1995.
The ISO 9001 certification signifies that our procedures and manufacturing
facilities comply with international standards for quality assurance. The CE
mark denotes conformity with European standards for safety and allows certified
devices to be sold in all European Union countries. By the end of 1995, the ATS
heart valve was available in most European countries. We received approval to
begin commercial sales in Japan in June 1996 and in Australia in September 1998.
We have obtained regulatory approvals in other countries where required. As of
December 31, 2001, the ATS heart valve was available for sale in approximately
40 countries worldwide, including in the United States.

In 1997, we introduced an aortic valved graft. The aortic valved graft consists
of an ATS heart valve connected to a collagen-impregnated vascular graft. It is
used in cases where the aortic valve and a portion of the ascending aorta must
be replaced. We expect FDA approval of this product in the fourth quarter of
2002.

Research, development and engineering expenses totaled $3,905,556 in 2001,
$1,911,815 in 2000 and $1,306,531 in 1999.

MARKETING, SALES AND DISTRIBUTION

Our international marketing strategy combines the substantial cardiovascular
sales experience of our senior officers with a network of experienced
independent distributors to sell the ATS heart valve internationally. We believe
that our independent distributor network has provided a rapid and cost efficient
means of increasing market penetration and commercial acceptance


                                       4
<PAGE>
of the ATS heart valve in key international markets. The use of an independent
distributor does not involve significant expense to us. We have been able to
attract experienced mechanical valve sales organizations familiar with local
markets and customs to act as independent distributors.

We market the ATS valve in the United States through a 15-20 person direct sales
force divided into four regions. Of the approximately 900 open heart centers, we
focus our sales and marketing efforts on the top 30% of these centers and where
the percentage of mechanical valve implants is high relative to tissue valve
implants.

We operate in one segment, the sale of a bileaflet mechanical heart valve. In
each of the last three years, we derived the following percentages of our net
sales from the geographic regions listed in the table below. See Note 10 under
the Notes to Consolidated Financial Statements in Item 8 herein.
<TABLE>
<CAPTION>
                                          SALES AS A PERCENTAGE OF TOTAL REVENUE
                                          --------------------------------------
                                             2001         2000         1999
                                             ----         ----         ----
<S>                                          <C>          <C>          <C>
      Europe                                   36%          46%          59%
      Asia Pacific                             34           34           25
      North America                            19            4            5
      Emerging Markets                         11           16           11
</TABLE>

At December 31, 2001, we had contracts with 25 independent distributors covering
29 countries outside the United States. Sales to our top three distributors
represented over 42% of our total sales for each of the past three years. The
table below sets forth the sales to our top three independent distributors. See
Note 10 under the Notes to Consolidated Financial Statements in Item 8 herein.

<TABLE>
<CAPTION>
                                          SALES AS A PERCENTAGE OF TOTAL REVENUE
                                          --------------------------------------
                                             2001           2000           1999
                                             ----           ----           ----
<S>                                          <C>            <C>            <C>
      Century Medical, Inc.                  23.6%          19.2%          18.6%
      Gemetron GmbH & Co. KG                 10.3           12.9           16.2
      Advanced Biomedical Pty. Ltd.            --           11.9             --
      Medi-Service                             --             --           14.7
</TABLE>

Each of our independent distributors has the exclusive right to sell the ATS
heart valve within a defined territory. These distributors also market other
medical products, although they have agreed not to sell other mechanical heart
valves. Most of our distributor agreements establish quotas for sales of the ATS
heart valve in the distributor's territory. Under most of the distributor
agreements, we may, at our option, terminate the agreement upon the departure of
certain key employees of the distributor or if our company experiences a change
in control. We sell the ATS heart valve to each distributor F.O.B. Minneapolis,
Minnesota. Sales to international distributors are denominated in U.S. dollars.
We allow the return of unused valves as long as the valve packaging has not been
opened and the sterilization date has not expired. Returns requiring
reimbursement are insignificant (less than 1% sales).

Our sales, marketing and customer service personnel provide support to our
independent distributors. Our marketing efforts include displaying the ATS heart
valve at major international, national and regional medical meetings attended by
cardiovascular surgeons, journal advertisements and by direct mail programs. We
also distribute product brochures and product information bulletins and conduct
product training sessions.

RELATIONSHIP WITH SULZER CARBOMEDICS

Sulzer Carbomedics ("Carbomedics") developed the basic design from which the ATS
heart valve evolved. Carbomedics is the largest and most experienced
manufacturer of pyrolytic carbon components used in mechanical heart valves.
Carbomedics has also designed and patented numerous mechanical valves.
Carbomedics offered to license a patented and partially developed valve to us if
we would complete the development of the valve and agree to purchase carbon
components from Carbomedics. Since 1990, Carbomedics has been our sole source of
the carbon components used in our valve and the licensor of certain technology
relating to our product. In December 1999 we restructured our contractual
relationships with


                                       5
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Carbomedics to lower our cost of carbon components and to begin the technology
transfer which will enable us to manufacture those components ourselves.

We have three agreements with Carbomedics: a license agreement and a long-term
carbon supply agreement entered into in September 1990, and a carbon technology
agreement entered into in December 1999. Under the terms of the license
agreement with Carbomedics, we hold an exclusive, royalty-free, worldwide
license to an open pivot, bileaflet mechanical heart valve design from which the
ATS heart valve has evolved. The license agreement does not include the right to
manufacture the pyrolytic carbon components of the ATS heart valve, except that
if Carbomedics were unable to produce the components, we would have the right
and license to make the components or have them made for us. After making
certain design changes in the valve, we finalized the design of the ATS heart
valve and filed and received our own U.S. patent covering the design of the ATS
valve. The design modifications and the resulting U.S. patent covering the new
design are the exclusive property of ATS.

The supply agreement, as amended in November 2000, runs through the end of 2007
and requires us to purchase a minimum number of valve components each year thru
2006. We have currently satisfied all of our purchase obligations under the
supply agreement. We are obligated to purchase $8.3 million of heart valve
components from Carbomedics in 2002. After 2002, the number of valve components
that we are obligated to purchase under the supply agreement will decrease
substantially as compared to prior years under the agreement, and the price is
subject to a yearly price adjustment for changes in the U.S. Department of Labor
Employment Cost Index.

In December 1999, we entered into a carbon technology agreement with Carbomedics
under which we obtained an exclusive, worldwide right and license to use
Carbomedics' pyrolytic carbon technology to manufacture components for the ATS
heart valve, and a non-exclusive worldwide right and license to use the
technology to produce pyrolytic carbon components for other devices and
manufacturers, including, after 2008, for other heart valve manufacturers. Under
the agreement Carbomedics also agreed to assist us in designing, building,
equipping, qualifying and commencing operations in a pyrolytic carbon component
production facility in Minneapolis, Minnesota. In return, we have agreed to pay
Carbomedics a license fee totaling $41 million in eight installments over seven
years, contingent on attainment of specific milestones. Through December 31,
2001, we have made three of the installment payments totaling $13 million.

We are obligated under the carbon technology agreement to pay all of the costs
of establishing the new carbon production facility, including hourly fees and
out-of-pocket expenses of the Carbomedics employees assigned to assist us in
setting up the facility. We and Carbomedics have also mutually agreed not to
solicit or hire each other's employees (other than sales and marketing
employees) for two years after completion of the milestone payments or
termination of the agreement.

The carbon technology agreement may be terminated by either party upon a
material breach of the agreement by the other party, subject to certain waiting
periods during which the breaching party will have an opportunity to cure the
default. In addition, Carbomedics may terminate the agreement if we cease
business, make an assignment for the benefit of creditors, or enter into certain
insolvency, receivership or bankruptcy proceedings. We can terminate the
agreement at any time after the third anniversary if we determine to exit the
mechanical heart valve business.

MANUFACTURING

We assemble the ATS heart valve in a controlled clean room environment at our
facility in a suburb of Minneapolis, Minnesota. Our manufacturing operation
currently consists of fabricating the sewing cuff, assembling, inspecting,
testing and packaging all of the components into a finished valve, and then
sterilizing the valve prior to shipment to distributors.

We have established a facility for manufacturing pyrolytic carbon components
under the Carbomedics technology agreement. We are currently in the process of
performing the qualification and certification necessary to operate this
facility. We have leased a 22,900 square-foot area of a building which is
currently equipped to produce 10,000 valve sets per year. We anticipate that
this facility will not be operational until 2003. We have completed the
following steps required to start the facility operations:

      -     outfitting the building

      -     purchasing and installing manufacturing equipment


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<PAGE>
      -     performing equipment operational qualifications

      -     training technical and production personnel

      -     conducting pilot production runs

The next steps to begin manufacturing operations are as follows:

      -     demonstrating compliance with FDA, ISO and other international good
            manufacturing practices and quality system regulations

      -     scaling up production

Under the terms of our agreement with Carbomedics, we may also elect to have
Carbomedics train our personnel how to machine graphite parts, and teach us how
to fabricate our own tooling. We have not yet determined whether we will develop
these capabilities internally or contract these steps out to third party
vendors. In the event we decide to go to third party vendors, then under the
agreement Carbomedics will provide the machining and tool fabrication know-how
to the vendor. Carbomedics will also qualify the vendor using their current
specifications. We currently have in inventory enough carbon components to
satisfy our projected requirements for over two years. In addition, we are
obligated to continue to buy some valve components from Carbomedics under the
supply agreement through 2006.

COMPETITION

The prosthetic heart valve market is highly competitive with one dominant
company, St. Jude Medical, Inc. In 2001, according to industry estimates, St.
Jude Medical supplied approximately 62% of the mechanical heart valves sold
worldwide. Other companies that sell mechanical valves include Medtronic, Inc.,
Carbomedics, Edwards Lifesciences, Sorin Biomedica sPa, Medical CV and Medical
Carbon Research, Inc. St. Jude Medical, Medtronic, Edward Lifesciences, Sorin
Biomedica and CryoLife also sell tissue valves. Many of our competitors have
greater financial, manufacturing, and marketing resources than we have.

We are aware of several companies that are developing new prosthetic heart
valves. Several companies are developing and testing new autologous (created
from the patient's own tissue) valves, potentially more durable tissue valves
and new bileaflet and trileaflet mechanical designs. Advancements also are being
made in surgical procedures such as mitral valve reconstruction, whereby the
natural mitral valve is repaired, delaying the need for a replacement valve.
Other companies are pursuing biocompatible coatings to be applied to mechanical
valves in an effort to reduce the incidence of thromboembolic events and to
treat tissue valves to forestall or eliminate calcific degeneration in these
valves.

Competition within the prosthetic heart valve market is based on, among other
things, clinical performance record, minimalization of complications, ease of
use for the surgeon, patient comfort and cost effectiveness. We believe that the
most important factors in a heart surgeon's selection of a particular prosthetic
valve are the perceived benefits of the valve and the heart surgeon's confidence
in the valve design. As a result, valves that have developed a favorable
clinical performance record have a significant marketing advantage over new
valves. In addition, negative publicity resulting from isolated incidents can
have a significant negative effect on a valve's overall acceptance. Our success
is dependent upon the surgeon's willingness to use a new prosthetic heart valve
as well as the future clinical performance of the ATS heart valve compared with
the more established competition.

We believe that mechanical heart valves are currently being marketed to
hospitals at prices that vary significantly from country to country due to
market conditions, currency valuations, distributor mark-ups and government
regulations. We believe that, after distributor mark-up, the ATS heart valve
sells at or above the current price of other valves in most markets. In many
markets, government agencies are imposing or proposing price controls or
restrictions on medical products. We work with our independent distributors to
price the ATS heart valve in each market to meet these limitations. In addition,
our primary competitors have the ability, due to their internal carbon
manufacturing facilities and economies of scale, to manufacture their valves at
a lower cost than we can currently manufacture the ATS heart valve. The market
leader has recently been using price as a method to compete in several markets.


                                       7
<PAGE>
PATENTS AND PROPRIETARY TECHNOLOGY

Our policy is to protect our proprietary position by obtaining U.S. and foreign
patents to protect technology, inventions and improvements important to the
development of our business. Under our agreements with Carbomedics, we have
obtained a royalty-free license to the Carbomedics patent on the basic design of
an open pivot bileaflet mechanical heart valve and, in December 1999, the right
to manufacture pyrolytic carbon components, subject to the payment of license
fees. See "Business--Relationship with Sulzer Carbomedics." The Carbomedics
patent expires in 2004. We subsequently made modifications to the basic design.
We were issued a U.S. patent covering our design improvements to the ATS heart
valve in October 1994. We also have filed patent applications in Japan, Belgium,
France, Germany, Netherlands, Spain, Switzerland and the United Kingdom relating
to the design improvements. Patents have been granted in all of these countries.
We cannot be certain that any patents will not be challenged or circumvented by
competitors.

We also rely on trade secrets and technical know-how in the manufacture and
marketing of the ATS heart valve. We typically require our employees,
consultants and contractors to execute confidentiality agreements with respect
to our proprietary information.

We claim trademark protection on ATS Medical(TM) and ATS Open Pivot(R).

GOVERNMENT REGULATION

Our ATS heart valve is regulated in the United States as a medical device by the
FDA under the Federal Food, Drug and Cosmetic Act, or FD&C Act. Under the FD&C
Act, the FDA regulates the research, testing, manufacturing, safety, labeling,
storage, record keeping, advertising and distribution of medical devices. The
FDA classifies our ATS heart valve as a Class III device, which is subject to
the highest level of controls. Noncompliance with applicable regulations can
result in withdrawal of prior approvals, total or partial suspension of
production, fines, injunctions, recall of products, civil penalties and criminal
prosecution.

The FDA approved our PMA Application on October 13, 2000. The approval included
five mitral valve sizes (26, 28, 29, 31, and 33mm) and ten aortic valve sizes
(18, 20, 21, 23, 24, 25, 26, 27, 28, and 29mm). A PMA supplement for four
additional sizes (16 and 19mm aortic and 24 and 27mm mitral sizes) was approved
on May 10, 2001. A PMA supplement for our aortic valved graft was submitted on
September 21, 2001 and approval is expected in the second half of 2002.

We also are subject to FDA regulations concerning manufacturing processes and
reporting obligations. These regulations require that manufacturing steps be
performed according to FDA standards and in accordance with documentation,
control and testing standards. The FDA monitors compliance with its good
manufacturing practices regulations by conducting periodic inspections. We are
required to provide information to the FDA on adverse incidents as well as
maintain a detailed record keeping system in accordance with FDA guidelines. We
expect that our carbon fabrication processes and new manufacturing facility will
be subject to domestic and international regulatory inspection and review. We
will be required to perform testing and analysis on the components we
manufacture before we can sell the ATS heart valve in the United States and
international markets. We may be required to conduct clinical studies of the ATS
heart valve incorporating the components that we manufacture.

The advertising of our product also is subject to both FDA and Federal Trade
Commission regulations. In addition, we will be subject to the "fraud and abuse"
laws and regulations promulgated by the U.S. Department of Health and Human
Services and the U.S. Health Care Finance Administration if we sell the ATS
heart valve to Medicare or Medicaid patients.

Regulation of heart valves varies widely in foreign countries. Foreign countries
vary from having no regulations to having a pre-market notice or pre-market
approval process. The European Union has adopted rules which require that
medical products receive the right to affix the CE mark, an international symbol
that denotes conformity with European standards for safety and allows certified
devices to be marketed in all European Union countries. As part of the CE
compliance, manufacturers are required to comply with the ISO 9000 series of
standards for quality operations. We received ISO 9001 certification in 1994 and
CE Mark approval in March 1995. We will continue to be subjected to various
audits and tests under the European Community directives. In June 1996, we
received approval to begin commercial sales in Japan through a Shonin regulatory
approval obtained by our distributor, Century Medical, Inc. In September 1998,
we received approval from the Therapeutic Goods Administration for commercial
sales in Australia. In June, 2000 we received regulatory approval to distribute
the ATS heart valve in Canada.


                                       8
<PAGE>
THIRD PARTY REIMBURSEMENT

In the United States, healthcare providers that purchase medical devices, such
as our product, generally rely on third-party payors, including Medicare,
Medicaid, private health insurance carriers and managed care organizations, to
reimburse all or part of the cost and fees associated with the procedures
performed using these devices. The commercial success of the ATS heart valve
will depend on the ability of health care providers to obtain adequate
reimbursement from third-party payors for the surgical procedures in which our
products are used. Third-party payors are increasingly challenging the pricing
of medical products and procedures. Even if a procedure is eligible for
reimbursement, the level of reimbursement may not be adequate. In addition,
third-party payors may deny reimbursement if they determine that the device used
in the treatment was not cost-effective or was used for a non-approved
indication.

In international markets, market acceptance of the ATS heart valve depends in
part upon the availability of reimbursement from healthcare payment systems.
Reimbursement and healthcare payment systems in international markets vary
significantly by country. The main types of healthcare payment systems in
international markets are government sponsored healthcare and private insurance.
Countries with governmental sponsored healthcare, such as the United Kingdom,
have a centralized, nationalized healthcare system. New devices are brought into
the system through negotiations between departments at individual hospitals at
the time of budgeting. In Japan, France and Germany, the government sets an
upper limit of reimbursement for various valve types. In most foreign countries,
there are also private insurance systems that may offer payments for alternative
devices.

We have pursued reimbursement for our ATS heart valve internationally through
our independent distributors. While the healthcare financing issues in these
countries are substantial, we have been able to sell the ATS heart valve to
private clinics and nationalized hospitals in each of the countries served by
our distributors.

PRODUCT LIABILITY AND INSURANCE

Cardiovascular device companies are subject to an inherent risk of product
liability and other liability claims in the event that the use of their products
results in personal injury. A mechanical heart valve is a life-sustaining
device, and the failure of any mechanical heart valve usually results in the
death of the patient. We have not received any reports of mechanical failure of
our valves implanted to date and have not experienced any product liability
claims. Any product liability claim could subject us to costly litigation,
damages and adverse publicity.

We currently maintain product liability insurance policy with an annual coverage
limit of $25 million in the aggregate. A $5 million product liability insurance
policy is required by the supply agreement with Carbomedics. We are financially
responsible for any uninsured claims or claims which exceed the insurance policy
limits. Product liability insurance is expensive for mechanical valves. If
insurance becomes completely unavailable, we must either develop a
self-insurance program or sell without insurance, which would require the
consent of Carbomedics. The development of a self-insurance program would
require significant capital.

Carbomedics has made no warranty on our valve components. We have agreed to hold
Carbomedics harmless and indemnify Carbomedics in the event claims are made or
damages are assessed against Carbomedics as a result of our valve.

EMPLOYEES

As of January 1, 2002, we had 84 full-time and 5 part-time employees, of whom 13
were engaged in regulatory affairs and quality assurance, 31 in production and
19 in administrative and purchasing and 26 in sales and marketing activities.

ITEM 2. PROPERTIES

We lease approximately 56,000 square feet of space in two buildings in a suburb
of Minneapolis, Minnesota. The lease covering approximately 33,000 square feet
expires on December 31, 2003 and it is used for administrative, production and
engineering purposes. The lease on the other 23,000 square feet expires July 31,
2008 and is used for carbon manufacturing. We believe that these facilities are
adequate for our current needs.


                                       9
<PAGE>
ITEM 3.  LEGAL PROCEEDINGS

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

                      EXECUTIVE OFFICERS OF THE REGISTRANT

Our executive officers are as follows:

<TABLE>
<CAPTION>

Name                                        Age       Position
----                                        ---       --------
<S>                                         <C>       <C>
Richard W. Kramp                             56       Chief Executive Officer, President, and Director
Russell W. Felkey                            51       Executive Vice President of Regulatory Affairs and Secretary
John H. Jungbauer                            52       Vice President, Treasurer and Chief Financial Officer
Frank R. Santiago                            50       Vice President, Sales and Marketing
</TABLE>

RICHARD W. KRAMP is our President, Chief Executive Officer and a Director. Mr.
Kramp is responsible for overseeing the development of and managing the new
pyrolytic carbon manufacturing facility. Mr. Kramp was promoted to President and
Chief Executive Officer of the Company effective January 1, 2002. Before that
time, he was Chief Operating Officer and a Director of the Company since March
1988. Prior to joining us, Mr. Kramp was Vice President of Sales and Marketing
for St. Jude Medical, Inc., where Mr. Kramp served in a variety of sales and
marketing capacities from 1978 to 1988. From 1976 through 1978, Mr. Kramp served
as Illinois Sales Manager for Life Instruments, a distributor of cardiovascular
products. From 1972 to 1976, Mr. Kramp was the Senior Design Engineer and then
Supervisor of Electrical Design for Cardiac Pacemakers, Inc., where he designed
the first lithium powered demand pacemaker, for which he received a U.S. patent.

RUSSELL W. FELKEY has served as our Executive Vice President of Regulatory
Affairs since April 1991 and as Secretary since October 1995. From 1989 to 1991,
Mr. Felkey was Vice President of Regulatory Affairs and Quality Assurance at
Cardiovascular Imaging Systems, Inc., a company involved in the development of
peripheral and coronary ultrasound catheters. From 1984 to 1989, Mr. Felkey was
Vice President of Regulatory Affairs at GV Medical, Inc.

JOHN H. JUNGBAUER has served as Vice President since April 1995 and as Treasurer
and Chief Financial Officer since October 1990. From 1988 to 1990, Mr. Jungbauer
was Executive Vice President of Titan Medical, Inc., a medical products company.
During 1987, Mr. Jungbauer served as a consultant to Titan Medical, Inc. From
1981 to 1987, Mr. Jungbauer was Vice President of Finance at St. Jude Medical,
Inc.

FRANK R. SANTIAGO has served as our Vice President, Sales and Marketing since
June 1998 and as Director of Sales and Marketing since June 1997. From March
1985 to March 1997, Mr. Santiago owned and operated Hemotech Systems, a
cardiovascular products and services company providing services such as
ambulatory recording of electrocardiograms and blood pressure. Prior to 1987,
Mr. Santiago was a cardiovascular specialist at American Edwards/Baxter, a
regional training manager in various sales and marketing divisions of Johnson
and Johnson and a product specialist at Ayerst Laboratories/American Home
Products.


                                       10
<PAGE>
MEDICAL ADVISORY BOARD

The Company has a Medical Advisory Board that meets periodically to review and
guide the design and testing of the valve as well as to provide assessments of
potential new cardiovascular products. The members of the Medical Advisory Board
are as follows:

DR. DEMETRE M. NICOLOFF is a world-renowned cardiac surgeon practicing with
Cardiac Surgical Associates in association with the Minneapolis Heart Institute
and St. Paul Heart and Lung Center. Previously, Dr. Nicoloff was an Associate
Professor of Surgery at the University of Minnesota and taught in the Department
of Surgery at the University of Minnesota for over 15 years. Dr. Nicoloff
participated in the first human implant of the ATS Medical valve in May 1992.
Dr. Nicoloff also participated in the design of the first general of bileaflet
valves and performed the first human implant of the most frequently implanted
mechanical bileaflet valve. Dr. Nicoloff previously was a member of the
Scientific Advisory Board of St. Jude Medical, Inc. Dr. Nicoloff received his
medical degree from Ohio State University.

DR. H. DAVID FRIEDBERG is a Clinical Professor of Medicine and Cardiology at the
University of South Florida. Dr. Friedberg is certified in cardiac pacing and
electrophysiology. He is a Fellow of the American College of Cardiology,
American College of Chest Physicians and the Council of Clinical Cardiology of
the American Heart Association. Dr. Friedberg participated in the first implant
of the ATS Medical valve in May 1992. Dr. Friedberg previously was a member of
the Scientific Advisory Board of St. Jude Medical, Inc. Dr. Friedberg obtained
his medical degree in South Africa and performed his internal medicine studies
and residencies in London, England.


                                       11
<PAGE>
                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

The information contained under the heading "Common Stock Information" on page
10 of the Company's Annual Report to Shareholder's for the year ended December
31, 2001 (the "Annual Report to Shareholders") is incorporated herein by
reference.

ITEM 6. SELECTED FINANCIAL DATA

The information contained under the heading "Financial Highlights" on page 1 of
the Annual Report to Shareholders is incorporated herein by reference.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

The information contained under the heading "Management's Discussion and
Analysis of Financial Condition and Results of Operations" on pages 5 to 9 of
the Annual Report to Shareholders is incorporated herein by reference.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information contained under the heading "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources" on page 7 of the Annual Report to Shareholders is incorporated herein
by reference.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information contained under the headings "Report of Independent Auditors,"
"Consolidated Statements of Financial Position," "Consolidated Statements of
Income," "Consolidated Statement of Changes in Shareholders' Equity,"
"Consolidated Statements of Cash Flows," and "Notes to Consolidated Financial
Statements" on pages 10 to 20 of the Annual Report to Shareholders is
incorporated herein by reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

None.


                                       12
<PAGE>
                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

See Part I of this Report. Pursuant to General Instruction G(3), reference is
made to information contained under the heading "Election of Directors" and
"Section 16(a) Beneficial Ownership Reporting Compliance" in the Company's
definitive proxy statement for its 2002 Annual Meeting of Shareholders to be
filed with the Securities and Exchange Commission on or before April 30, 2002,
which information is incorporated herein.

ITEM 11. EXECUTIVE COMPENSATION

Pursuant to General Instruction G(3), reference is made to information contained
under the heading "Executive Compensation" and "Compensation of Directors" in
the Company's definitive proxy statement for its 2002 Annual Meeting of
Shareholders to be filed with the Securities and Exchange Commission on or
before April 30, 2002, which information is incorporated herein, excluding the
"Report of the Compensation Committee Concerning Executive Compensation."

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Pursuant to General Instruction G(3), reference is made to information contained
under the heading "Security Ownership of Certain Beneficial Owners and
Management" and "Election of Directors" in the Company's definitive proxy
statement for its 2002 Annual Meeting of Shareholders to be filed with the
Securities and Exchange Commission on or before April 30, 2002, which
information is incorporated herein.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

None.


                                       13
<PAGE>
                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)   1. FINANCIAL STATEMENTS

Report of Independent Auditors.

Consolidated Statements of Financial Position at December 31, 2001 and 2000.

Consolidated Statements of Operations for the years ended December 31, 2001,
2000 and 1999.

Consolidated Statement of Changes in Shareholders' Equity for the years ended
December 31, 2001, 2000 and 1999.

Consolidated Statements of Cash Flows for the years ended December 31, 2001,
2000 and 1999.

Notes to Consolidated Financial Statements.

(a)   2. FINANCIAL STATEMENT SCHEDULES

Please see Schedule II - Valuation and Qualifying Accounts and Reserves on page
19.

All other schedules have been omitted because of absence of conditions under
which they are required or because the required information is included in the
financial statements or notes thereto.

(a)   3. LISTING OF EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                              DESCRIPTION
<S>               <C>
3.1               Restated Articles of Incorporation, as amended to date
                  (Incorporated by reference to Exhibit 3.1 to the Company's
                  Annual Report on Form 10-K for the year ended December 31,
                  1993 (the "1993 Form 10-K")).

3.2               Bylaws of the Company, as amended to date (Incorporated by
                  reference to Exhibit 3.2 to the Company's Annual Report on
                  Form 10-K for the year ended December 31, 1996 (the "1996 Form
                  10-K")).

4.1               Specimen certificate for shares of Common Stock of the Company
                  (Incorporated by reference to Exhibit 4.1 to the Company's
                  Annual Report on Form 10-K for the year ended December 31,
                  1997 (the "1997 Form 10-K")).

10.1**            1987 Stock Option and Stock Award Plan, as restated and
                  amended to date (Incorporated by reference to Exhibit 10.1 to
                  the Company's Quarterly Report on Form 10-Q for the quarter
                  ended June 30, 1997).

10.2**            ATS Medical Inc. 2000 Stock Incentive Plan (Incorporated by
                  reference to Exhibit 10.1 to the Company's Form 10-Q for the
                  quarter ended September 30, 2000).

10.3**            Agreement between the Company and Manuel A. Villafana dated
                  September 11, 2001.

10.4              Lease Agreement between the Company and Crow Plymouth Land
                  Limited Partnership dated December 22, 1987 (Incorporated by
                  reference to Exhibit 10(d) to the Company's Registration
                  Statement on Form S-18, File No. 33-34785-C (the "Form
                  S-18")).

10.5              Amendment No. 1 to Lease Agreement between the Company and
                  Crow Plymouth Land Limited Partnership, dated January 5, 1989
                  (Incorporated by reference to Exhibit 10(e) to the Form S-18).
</TABLE>


                                       14
<PAGE>
<TABLE>
<S>               <C>
10.6              Amendment No. 2 to Lease Agreement between the Company and
                  Crow Plymouth Land Limited Partnership, dated January 1989
                  (Incorporated by reference to Exhibit 10(f) to the Form S-18).

10.7              Amendment No. 3 to Lease Agreement between the Company and
                  Crow Plymouth Land Limited Partnership, dated June 14, 1989
                  (Incorporated by reference to Exhibit 10(g) to the Form S-18).

10.8              Amendment No. 4 to Lease Agreement between the Company and
                  Plymouth Business Center Limited Partnership, dated February
                  10, 1992 (Incorporated by reference to Exhibit 10.8 to the
                  1996 Form 10-K).

10.9*             Development Agreement dated September 24, 1990, with
                  CarboMedics, Inc. (confidential treatment granted)
                  (Incorporated by reference to Exhibit 10.9 to the 1996 Form
                  10-K).

10.10*            O.E.M. Supply Contract dated September 24, 1990, with
                  CarboMedics, Inc. (confidential treatment granted)
                  (Incorporated by reference to Exhibit 10.10 to the 1996 Form
                  10-K).

10.11*            License Agreement dated September 24, 1990, with CarboMedics,
                  Inc. (confidential treatment granted) (Incorporated by
                  reference to Exhibit 10.11 to the 1996 Form 10-K).

10.12*            Option Agreement dated September 24, 1990, with CarboMedics,
                  Inc. (confidential treatment granted) (Incorporated by
                  reference to Exhibit 10.12 to the 1996 Form 10-K).

10.13             Helix BioCore, Inc. Self-Insurance Trust Agreement dated
                  February 28, 1991 (Incorporated by reference to Exhibit 10.13
                  to the 1996 Form 10-K).

10.14*            Amendment 1 to License Agreement dated December 16, 1993, with
                  CarboMedics, Inc. (confidential treatment granted)
                  (Incorporated by reference to Exhibit 10.17 to the 1993 Form
                  10-K).

10.15*            Amendment 4 to O.E.M. Supply Contract dated December 16, 1993,
                  with CarboMedics, Inc. (confidential treatment granted)
                  (Incorporated by reference to Exhibit 10.18 to the 1993 Form
                  10-K).

10.16*            Amendment 5 to O.E.M. Supply Contract dated September 1, 1994,
                  with CarboMedics, Inc. (confidential treatment granted)
                  (Incorporated by reference to Exhibit 10.19 to the 1994 Form
                  10-K).

10.17*            Amendment 1 to Option Agreement dated December 16, 1993, with
                  CarboMedics, Inc. (confidential treatment granted)
                  (Incorporated by reference to Exhibit 10.19 to the 1993 Form
                  10-K).

10.18             Line of Credit dated August 11, 1994, between the Company and
                  First Bank National Association (Incorporated by reference to
                  Exhibit 10.1 to the Company's Form 10-Q for the quarter ended
                  September 30, 1994).

10.19             Form of Distributor Agreement (Incorporated by reference to
                  Exhibit 10.22 to the 1994 Form 10-K).

10.20**           Form of Agreement between ATS Medical, Inc. and each officer
                  dated June 30, 1995, concerning severance benefits upon a
                  change in control (Incorporated by reference to Exhibit 10.23
                  to the Company's Annual Report on Form 10-K for the year ended
                  December 31, 1995 (the "1995 Form 10-K")).

10.21**           ATS Medical, Inc. Change in Control Severance Pay Plan
                  (Incorporated by reference to Exhibit 10.24 to the 1995 Form
                  10-K).

10.22             Amendment No. 5 to Lease Agreement between the Company and St.
                  Paul Properties, Inc., dated May 30, 1996 (Incorporated by
                  reference to Exhibit 10.22 to the 1996 Form 10-K).

10.23             Stock Purchase Agreement dated February 3, 1997 between ITOCHU
                  Corporation and the Company (Incorporated by reference to
                  Exhibit 1 to Schedule 13D filed with respect to the Company by
                  ITOCHU Corporation on February 18, 1997).
</TABLE>


                                       15
<PAGE>
<TABLE>
<S>               <C>
10.24             Amendment No. 6 to Lease Agreement between the Company and St.
                  Paul Properties, Inc., dated November 25, 1997 (Incorporated
                  by reference to Exhibit 10.23 to the 1997 Form 10-K).

10.25             1998 Employee Stock Purchase Plan (Incorporated by reference
                  to Exhibit 4 to the Company's Registration Statement on Form
                  S-8, File No. 333-57527).

10.26**           1998 Management Incentive Compensation Plan (Incorporated by
                  reference to Exhibit 10.25 to the 1998 Form 10-K).

10.27*            Carbon Agreement by and between Sulzer Carbomedics, Inc. and
                  ATS Medical, Inc., dated December 29, 1999 (confidential
                  treatment granted) (Incorporated by reference to Exhibit 99.1
                  to the Company's Registration Statement on Form S-8, January
                  13, 2000, File No. 000-18602).

10.28*            Amendment 7 to OEM Supply Contract by and between Sulzer
                  Carbomedics, Inc. and ATS Medical, Inc., dated December 29,
                  1999 (confidential treatment granted) (Incorporated by
                  reference to Exhibit 99.2 to the Company's Registration
                  Statement on Form S-8, January 13, 2000, File No. 000-18602).

10.29*            Amendment 2 to License Agreement by and between Sulzer
                  Carbomedics, Inc. and ATS Medical, Inc., dated December 29,
                  1999 (confidential treatment granted) (Incorporated by
                  reference to Exhibit 99.3 to the Company's Registration
                  Statement on Form S-8, January 13, 2000, File No. 000-18602).

10.30             Amendment No. 7 to Lease Agreement between the Company and St.
                  Paul Properties, Inc., dated May 18, 2000 (Incorporated by
                  reference to Exhibit 10.2 to the Company's Form 10-Q for the
                  quarter ended June 30, 2000).

10.31             Lease Agreement between the Company and St. Paul Properties,
                  Inc., dated April 29, 2000 (Incorporated by reference to
                  Exhibit 10.1 to the Company's Form 10-Q for the quarter ended
                  June 30, 2000).

10.32             Amendment No. 8 to Lease Agreement between the Company and St.
                  Paul Properties, Inc., dated December 14, 2000 (Incorporated
                  by reference to Exhibit 10.32 to the Company's Annual Report
                  on Form 10-K for the year ended December 31, 2000 (the "2000
                  Form 10-K")).

10.33*            Amendment 8 to OEM Supply Contract by and between Sulzer
                  Carbomedics, Inc. and ATS Medical, Inc., dated November 3,
                  2000 (confidential treatment granted) (Incorporated by
                  reference to Exhibit 10.33 to the 2000 Form 10-K).

10.34             Amendment No. 1 to Lease Agreement between the Company and St.
                  Paul Properties, Inc. dated May 1, 2001.

13                Portions of 2001 Annual Report to Shareholders.

21                List of Subsidiaries

23                Consent of Ernst & Young LLP.

24                Power of Attorney.

99.1              Cautionary Statements.
</TABLE>

*Pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended,
confidential portions of this exhibit have been redacted.

**Represents a management contract or compensatory plan or arrangement required
to be filed as an exhibit pursuant to Item 14(c) of Form 10-K.


                                       16
<PAGE>
(b)   Reports on Form 8-K

None.

(c)   Exhibits

See Exhibit Index and Exhibits attached as a separate section of this report.

(d)   Financial Statement Schedule

See Financial Statement Schedule in the Annual Report to shareholders, Exhibit
13.


                                       17
<PAGE>
                                   SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

Dated: March 25, 2002                            ATS MEDICAL, INC.


                                                 By  /s/ John H. Jungbauer
                                                   -----------------------------
                                                 John H. Jungbauer
                                                 Chief Financial Officer

      Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.

<TABLE>
<CAPTION>
SIGNATURE                                   TITLE
<S>                                 <C>                                    <C>
Manuel A. Villafana*                Chairman and Director         )
                                                                  )
Richard W. Kramp*                   Chief Executive Officer,      )
                                    President and Director        )
                                    (principal executive officer) )        By: /s/ John H. Jungbauer
                                                                              ---------------------
                                                                  )           John H. Jungbauer
John H. Jungbauer*                  Vice President, Treasurer     )           Pro se and
                                    and Chief Financial  Officer  )           Attorney-in-fact
                                    (principal financial and      )
                                    accounting officer)           )
                                                                  )        Dated: March 25, 2002
David L. Boehnen*                   Director                      )
                                                                  )
A. Jay Graf*                        Director                      )
</TABLE>

*By Power of Attorney filed with this report as Exhibit 24 hereto.


                                       18
<PAGE>
                                ATS MEDICAL, INC.
          SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

<TABLE>
<CAPTION>
              COL. A                           COL. B                   COL. C                   COL. D           COL. E
                                                                      Additions
                                                                 (1)              (2)
                                                              Charge to        Charged to
                                             Balance at       to Costs           Other                          Balance at
                                              Beginning         and             Accounts-      Deductions-        End of
            Description                        Of Year        Expenses          Describe        Describe           Year

<S>                                          <C>              <C>              <C>             <C>              <C>
Allowance for Doubtful Accounts

Year ended December 31, 2001:
   Deducted from asset accounts:
   Allowance for doubtful accounts             $425,000        $198,000              --        $223,000(1)        $400,000

Year ended December 31, 2000:
   Deducted from asset accounts:
   Allowance for doubtful accounts             $205,000        $220,000              --              --           $425,000

   Year ended December 31, 1999:
   Deducted from asset accounts:
   Allowance for doubtful accounts             $185,000        $ 20,000              --              --           $205,000

Reserve for Obsolete Inventory

Year ended December 31, 2001:
   Deducted from asset accounts:
   Reserve for Obsolete Inventory              $200,000              --              --              --           $200,000

   Year ended December 31, 2000:
   Deducted from asset accounts:
   Reserve for Obsolete Inventory              $200,000              --              --              --           $200,000

Year ended December 31, 1999:
   Deducted from asset accounts:
   Reserve for Obsolete Inventory              $200,000        $ 38,045              --        $ 38,045(2)        $200,000
</TABLE>

(1)   Uncollectible accounts written off.
(2)   Obsolete part written off that is no longer in use.


                                       19
<PAGE>
                                  EXHIBIT INDEX

<TABLE>
<CAPTION>

EXHIBIT NUMBER                          DESCRIPTION
<S>                 <C>
3.1                 Restated Articles of Incorporation, as amended to date
                    (Incorporated by reference to Exhibit 3.1 to the Company's
                    Annual Report on Form 10-K for the year ended December 31,
                    1993 (the "1993 Form 10-K")).

3.2                 Bylaws of the Company, as amended to date (Incorporated by
                    reference to Exhibit 3.2 to the Company's Annual Report on
                    Form 10-K for the year ended December 31, 1996 (the "1996
                    Form 10-K")).

4.1                 Specimen certificate for shares of Common Stock of the
                    Company (Incorporated by reference to Exhibit 4.1 to the
                    Company's Annual Report on Form 10-K for the year ended
                    December 31, 1997 (the "1997 Form 10-K")).

10.1**              1987 Stock Option and Stock Award Plan, as restated and
                    amended to date (Incorporated by reference to Exhibit 10.1
                    to the Company's Quarterly Report on Form 10-Q for the
                    quarter ended June 30, 1997).

10.2**              ATS Medical Inc. 2000 Stock Incentive Plan (Incorporated by
                    reference to Exhibit 10.1 to the Company's Form 10-Q for the
                    quarter ended September 30, 2000).

10.3**              Agreement between the Company and Manuel A. Villafana dated
                    September 11, 2001.

10.4                Lease Agreement between the Company and Crow Plymouth Land
                    Limited Partnership dated December 22, 1987 (Incorporated by
                    reference to Exhibit 10(d) to the Company's Registration
                    Statement on Form S-18, File No. 33-34785-C (the "Form
                    S-18")).

10.5                Amendment No. 1 to Lease Agreement between the Company and
                    Crow Plymouth Land Limited Partnership, dated January 5,
                    1989 (Incorporated by reference to Exhibit 10(e) to the Form
                    S-18).

10.6                Amendment No. 2 to Lease Agreement between the Company and
                    Crow Plymouth Land Limited Partnership, dated January 1989
                    (Incorporated by reference to Exhibit 10(f) to the Form
                    S-18).

10.7                Amendment No. 3 to Lease Agreement between the Company and
                    Crow Plymouth Land Limited Partnership, dated June 14, 1989
                    (Incorporated by reference to Exhibit 10(g) to the Form
                    S-18).

10.8                Amendment No. 4 to Lease Agreement between the Company and
                    Plymouth Business Center Limited Partnership, dated February
                    10, 1992 (Incorporated by reference to Exhibit 10.8 to the
                    1996 Form 10-K).

10.9*               Development Agreement dated September 24, 1990, with
                    CarboMedics, Inc. (confidential treatment granted)
                    (Incorporated by reference to Exhibit 10.9 to the 1996 Form
                    10-K).

10.10*              O.E.M. Supply Contract dated September 24, 1990, with
                    CarboMedics, Inc. (confidential treatment granted)
                    (Incorporated by reference to Exhibit 10.10 to the 1996 Form
                    10-K).

10.11*              License Agreement dated September 24, 1990, with
                    CarboMedics, Inc. (confidential treatment granted)
                    (Incorporated by reference to Exhibit 10.11 to the 1996 Form
                    10-K).

10.12*              Option Agreement dated September 24, 1990, with CarboMedics,
                    Inc. (confidential treatment granted) (Incorporated by
                    reference to Exhibit 10.12 to the 1996 Form 10-K).

10.13               Helix BioCore, Inc. Self-Insurance Trust Agreement dated
                    February 28, 1991 (Incorporated by reference to Exhibit
                    10.13 to the 1996 Form 10-K).
</TABLE>


                                       20
<PAGE>
<TABLE>
<S>                 <C>
10.14*              Amendment 1 to License Agreement dated December 16, 1993,
                    with CarboMedics, Inc. (confidential treatment granted)
                    (Incorporated by reference to Exhibit 10.17 to the 1993 Form
                    10-K).

10.15*              Amendment 4 to O.E.M. Supply Contract dated December 16,
                    1993, with CarboMedics, Inc. (confidential treatment
                    granted) (Incorporated by reference to Exhibit 10.18 to the
                    1993 Form 10-K).

10.16*              Amendment 5 to O.E.M. Supply Contract dated September 1,
                    1994, with CarboMedics, Inc. (confidential treatment
                    granted) (Incorporated by reference to Exhibit 10.19 to the
                    1994 Form 10-K).

10.17*              Amendment 1 to Option Agreement dated December 16, 1993,
                    with CarboMedics, Inc. (confidential treatment granted)
                    (Incorporated by reference to Exhibit 10.19 to the 1993 Form
                    10-K).

10.18               Line of Credit dated August 11, 1994, between the Company
                    and First Bank National Association (Incorporated by
                    reference to Exhibit 10.1 to the Company's Form 10-Q for the
                    quarter ended September 30, 1994).

10.19               Form of Distributor Agreement (Incorporated by reference to
                    Exhibit 10.22 to the 1994 Form 10-K).

10.20**             Form of Agreement between ATS Medical, Inc. and each officer
                    dated June 30, 1995, concerning severance benefits upon a
                    change in control (Incorporated by reference to Exhibit
                    10.23 to the Company's Annual Report on Form 10-K for the
                    year ended December 31, 1995 (the "1995 Form 10-K")).

10.21**             ATS Medical, Inc. Change in Control Severance Pay Plan
                    (Incorporated by reference to Exhibit 10.24 to the 1995 Form
                    10-K).

10.22               Amendment No. 5 to Lease Agreement between the Company and
                    St. Paul Properties, Inc., dated May 30, 1996 (Incorporated
                    by reference to Exhibit 10.22 to the 1996 Form 10-K).

10.23               Stock Purchase Agreement dated February 3, 1997 between
                    ITOCHU Corporation and the Company (Incorporated by
                    reference to Exhibit 1 to Schedule 13D filed with respect to
                    the Company by ITOCHU Corporation on February 18, 1997).

10.24               Amendment No. 6 to Lease Agreement between the Company and
                    St. Paul Properties, Inc., dated November 25, 1997
                    (Incorporated by reference to Exhibit 10.23 to the 1997 Form
                    10-K).

10.25               1998 Employee Stock Purchase Plan (Incorporated by reference
                    to Exhibit 4 to the Company's Registration Statement on Form
                    S-8, File No. 333-57527).

10.26**             1998 Management Incentive Compensation Plan (Incorporated by
                    reference to Exhibit 10.25 to the 1998 Form 10-K).

10.27*              Carbon Agreement by and between Sulzer Carbomedics, Inc. and
                    ATS Medical, Inc., dated December 29, 1999 (confidential
                    treatment granted) (Incorporated by reference to Exhibit
                    99.1 to the Company's Registration Statement on Form S-8,
                    January 13, 2000, File No. 000-18602).

10.28*              Amendment 7 to OEM Supply Contract by and between Sulzer
                    Carbomedics, Inc. and ATS Medical, Inc., dated December 29,
                    1999 (confidential treatment granted) (Incorporated by
                    reference to Exhibit 99.2 to the Company's Registration
                    Statement on Form S-8, January 13, 2000, File No.
                    000-18602).

10.29*              Amendment 2 to License Agreement by and between Sulzer
                    Carbomedics, Inc. and ATS Medical, Inc., dated December 29,
                    1999 (confidential treatment granted) (Incorporated by
                    reference to Exhibit 99.3 to the Company's Registration
                    Statement on Form S-8, January 13, 2000, File No.
                    000-18602).

10.30               Amendment No. 7 to Lease Agreement between the Company and
                    St. Paul Properties, Inc., dated May 18, 2000 (Incorporated
                    by reference to Exhibit 10.2 to the Company's Form 10-Q for
                    the quarter ended June 30, 2000).
</TABLE>


                                       21
<PAGE>
<TABLE>
<S>                 <C>
10.31               Lease Agreement between the Company and St. Paul Properties,
                    Inc., dated April 29, 2000 (Incorporated by reference to
                    Exhibit 10.1 to the Company's Form 10-Q for the quarter
                    ended June 30, 2000).

10.32               Amendment No. 8 to Lease Agreement between the Company and
                    St. Paul Properties, Inc., dated December 14, 2000
                    (Incorporated by reference to Exhibit 10.32 to the Company's
                    Annual Report on Form 10-K for the year ended December 31,
                    2000 (the "2000 Form 10-K")).

10.33*              Amendment 8 to OEM Supply Contract by and between Sulzer
                    Carbomedics, Inc. and ATS Medical, Inc., dated November 3,
                    2000 (confidential treatment granted) (Incorporated by
                    reference to Exhibit 10.33 to the 2000 Form 10-K).

10.34               Amendment No. 1 to Lease Agreement between the Company and
                    St. Paul Properties, Inc. dated May 1, 2001.

13                  Portions of 2001 Annual Report to Shareholders.

21                  List of Subsidiaries

23                  Consent of Ernst & Young LLP.

24                  Power of Attorney.

99.1                Cautionary Statements.
</TABLE>

*     Pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended,
      confidential portions of this exhibit have been redacted.

**    Represents a management contract or compensatory plan or arrangement
      required to be filed as an exhibit pursuant to Item 14(c) of Form 10-K.


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