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, 1999
                           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
incorporation or organization)                               Identification No.)

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

Registrant's telephone number, including area code: (612) 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. (X)

         The aggregate market value of voting stock held by nonaffiliates of the
registrant as of March 17, 2000, was approximately $157,364,793.75 (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 17, 2000, was:

          Common Stock, $.01 par value               17,926,371 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, 1999 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 2000 Annual
Meeting of Shareholders to be held on May 4, 2000.

<PAGE>


                                ATS MEDICAL, INC.
                                 1999 FORM 10-K

                                     PART I

ITEM 1.  BUSINESS

OVERVIEW

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, Chief Executive Officer and founder, Manuel
Villafana, has 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
1998 was estimated to be over $325 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.

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 1997 was
approximately $310 million. We estimate that approximately 75,000 heart valve
replacement surgeries were conducted in the United States in 1997. Of the total
number of heart valve replacement surgeries, approximately 50,000, or 67%,
involved mechanical heart valves and approximately

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25,000, or 33%, involved tissue heart valves. Since 1993, the total U.S.
replacement heart valve market grew at a compound annual growth rate of 2.5 to
3.0%, with mechanical valves growing at an annual rate of 1.5 to 2.0%.

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 popular 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.

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<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.

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.

CLINICAL RESULTS AND REGULATORY STATUS

The ATS heart valve has not yet been approved for sale in the United States. On
August 3, 1999, the FDA accepted for filing our PMA application for approval to
sell the ATS heart valve in the United States. On February 4, 2000, we received
a letter from the FDA requesting additional information regarding the ATS heart
valve. To support our PMA application with the FDA, we submitted data on over
950 implants of the ATS heart valve in 17 U.S. and 3 international clinical
centers. An application for marketing the ATS heart valve is also under review
in Canada by Health Canada.

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, 1999, the ATS heart valve was available for sale in 32 countries
worldwide.

As of December 31, 1999, we estimate that over 33,500 ATS heart valves have been
implanted in patients. We have received implant registration data from over 172
institutions in 26 countries which have implanted the ATS heart valve in
patients.


MARKETING, SALES AND DISTRIBUTION

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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 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.

If we receive FDA approval of our PMA application, we intend to market the ATS
heart valve in the United States through a direct sales force. We plan to focus
our marketing efforts on the top 20 to 30% of the approximately 880 open heart
centers and on leading cardiac surgeons at those institutions. We believe that
we can effectively market and sell to these surgeons through a 25 to 30 person
direct sales force divided into three to four regions. The cardiac surgeons at
these centers perform a significant portion of the heart valve implant
procedures in the United States and tend to adopt new technologies and devices
more readily. We also believe that acceptance of our product by leading U.S.
cardiac surgeons will help to generate greater demand.

At December 31, 1999, we had contracts with 24 independent distributors covering
32 countries outside the United States. Sales to distributors in Japan, France
and Germany represented over 45% of our total sales for each of the past three
years. The table below sets forth the sales to our top three independent
distributors and the respective countries in which they operate.


                                              SALES AS A PERCENTAGE OF TOTAL
                                                         REVENUE
                                           -------------------------------------
                                               1997        1998        1999
                                               ----        ----        ----
Japan                                          17.2%       19.2%       18.6%
Germany                                        16.7        15.1        16.2
France                                         11.2        16.0        14.7


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 a change in control of us. 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.

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 and cardiologists. 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
upon which our product is based. We recently restructured our contractual
relationships with 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 from which the ATS
heart valve was developed. The license agreement does not include the right to
manufacture

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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. Carbomedics may
terminate the license agreement or declare the license to be non-exclusive if we
fail to meet the minimum purchase requirements under the supply agreement during
any year prior to 2001. Upon satisfaction of these minimum purchase requirements
under the supply agreement, we will have a paid-up, exclusive, royalty-free,
worldwide license. After making certain design changes in the valve, we
finalized the design of the ATS heart valve and filed and received an additional
U.S. patent covering the design modifications. The design improvements and the
U.S. patent covering the modifications are the exclusive property of ATS.

The supply agreement, as amended through December 1999, runs through the end of
2007 and requires us to purchase a minimum number of valve components each year.
If we do not satisfy the minimum purchase requirements during any year prior to
2001, Carbomedics will have the right to terminate the supply agreement and the
license agreement or to declare the license agreement to be non-exclusive. In
addition, prior to 2001, we cannot purchase valve components from any source
other than Carbomedics, unless Carbomedics is unable to deliver suitable
components. We have currently satisfied all of our purchase obligations under
the supply agreement. We are obligated to purchase 16.5 million heart valve
components from Carbomedics in 2000. After 2000, the number of valve components
and the price of each set of components that we are obligated to purchase under
the supply agreement will decrease substantially as compared to prior years
under the agreement, 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 has 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, subject to deferral if certain milestones are not satisfied.

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 will have to establish a facility for manufacturing pyrolytic carbon
components under the Carbomedics technology agreement. We are currently in the
process of locating a facility. Our preliminary plans call for a 19,000
square-foot building with facilities capable of producing 10,000 valve sets per
year. The manufacturing operations will include substrate machining and
preparation, carbon coating, coated part machining and final polishing and
finishing activities. We expect to hire 7 to 10 technical and production
personnel over the next twelve months. We anticipate that the facility will not
be operational until 2003. The key steps required to complete the facility
include:

         o        outfitting the building;

         o        purchasing and installing manufacturing equipment;

         o        training technical and production personnel;

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         o        conducting pilot production runs;

         o        demonstrating compliance with FDA and international good
                  manufacturing practices and quality system regulations; and

         o        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 and pyrolytic carbon
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. We currently have in inventory enough carbon
components to satisfy our projected requirements for pyrolytic carbon components
for over two years. In addition, we are obligated to continue to buy some valve
components from Carbomedics under the supply agreement through 2007.

COMPETITION

The prosthetic heart valve market is highly competitive with one dominant
company, St. Jude Medical, Inc. In 1999, according to industry estimates, St.
Jude Medical supplied approximately 50% of the mechanical heart valves sold
worldwide. Other companies that sell mechanical valves include Medtronic, Inc.,
Carbomedics, Baxter Edwards, Sorin Biomedica sPa and Medical Carbon Research,
Inc. St. Jude Medical, Medtronic, Baxter Edwards, 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.

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

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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
Bileaflet(TM).

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 FDC Act. Under the FDC
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.

Before it can be sold in the United States, the ATS heart valve requires
premarket approval by the FDA. In December 1996, we received approval of our
investigational device exemption application to start limited clinical studies,
and on August 3, 1999, the FDA accepted for filing our PMA application. Under
the FDC Act, the FDA has 180 days to review a PMA application, although the
review time usually takes longer and may require additional information. The PMA
application process can be expensive, uncertain and lengthy. A number of devices
for which premarket approval has been sought have never been approved for
marketing and sale.

On February 4, 2000, we received a letter from the FDA relating to our PMA
application. In this letter, the FDA requested additional information regarding
the ATS heart valve. We expect to submit the requested information in April
2000. Upon completion of this review, the FDA could, among other things, request
additional information or schedule a meeting for presentation of clinical data
to a FDA advisory panel. Premarket approval to sell the ATS heart valve will be
subject to the advisory panel's recommendation.

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.

Even if regulatory approval of a product is granted, the FDA may require testing
and surveillance programs to monitor the safety and effect of the product and
may prevent or limit further marketing of the product based on the results of
these post-marketing programs.

The advertising of our product also will be 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

                                       7
<PAGE>


Therapeutic Goods Administration for commercial sales in Australia. We are in
the process of pursuing regulatory approval for the ATS heart valve in Canada.

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, 2000 we had 80 full-time employees, of whom 21 were engaged in
regulatory affairs and quality assurance, 38 in production and 21 in
administrative, purchasing and marketing activities.



ITEM 2.  PROPERTIES

We lease approximately 23,912 square feet of administrative, production and
engineering space in a suburb of Minneapolis, Minnesota. The lease expires on
February 28, 2003. Although we believe that this facility is adequate for our
current needs,

                                       8
<PAGE>


we intend to establish a new pyrolytic carbon manufacturing facility in close
proximity to our principal executive offices. Also, see our discussion of a
possible new manufacturing facility under Item 1, "Manufacturing."


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:

Name                 Age   Position
----                 ---   --------
Manuel A. Villafana   59   Chairman of the Board and Chief Executive Officer
Richard W. Kramp      54   President, Chief Operating Officer and Director
Russell W. Felkey     49   Executive Vice President of Regulatory Affairs and
                           Secretary
John H. Jungbauer     50   Vice President, Treasurer and Chief Financial Officer
Frank R. Santiago     48   Vice President, Sales and Marketing

MANUEL A. VILLAFANA, a founder of our company, has served as Chief Executive
Officer and Chairman of the Board since our inception in 1987. From 1983 to
1987, Mr. Villafana served as Chairman of GV Medical, Inc., a company co-founded
by Mr. Villafana to develop, manufacture and market the LASTAC System, a laser
transluminal angioplasty catheter system. From 1976 to 1982, Mr. Villafana
served as President and Chairman of St. Jude Medical, Inc., a company founded by
Mr. Villafana to develop, manufacture and market a prosthetic bileaflet heart
valve manufactured from pyrolytic carbon. From 1972 to 1976, Mr. Villafana
served as President and Chairman of Cardiac Pacemakers, Inc., a company founded
by Mr. Villafana to develop, manufacture and market a new generation of lithium
powered pacemakers.

RICHARD W. KRAMP has served as our President and Chief Operating Officer and a
Director since March 1988. Mr. Kramp also will be responsible for overseeing the
development of and managing the new pyrolytic carbon manufacturing facility.
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.
Mr. Kramp also is a director of MedAmicus, Inc., a medical products company.

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

                                       9
<PAGE>


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.

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.

                                       10
<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, 1999 (the "Annual Report to Shareholders") is incorporated herein by
reference.

ITEM 6.  SELECTED FINANCIAL DATA

The information contained under the heading "Financial Highlights" on the inside
cover 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 6 to 10 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 8 of the Annual Report to Shareholders is incorporated herein
by reference.


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information contained under the headings "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 12 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.

                                       11
<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 2000 Annual Meeting of Shareholders to be
filed with the Securities and Exchange Commission on or before April 30, 2000,
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 2000 Annual Meeting of
Shareholders to be filed with the Securities and Exchange Commission on or
before April 30, 2000, 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 2000 Annual Meeting of Shareholders to be filed with the
Securities and Exchange Commission on or before April 30, 2000, which
information is incorporated herein.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Pursuant to General Instruction G(3), reference is made to information contained
under the heading "Election of Directors" and "Executive Compensation" in the
Company's definitive proxy statement for its 2000 Annual Meeting of Shareholders
to be filed with the Securities and Exchange Commission on or before April 30,
2000, which information is incorporated herein, excluding the "Report of the
Compensation Committee Concerning Executive Compensation."

                                       12
<PAGE>


                                     PART IV

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

(a)      1.       FINANCIAL STATEMENTS

The financial statements of the Company are incorporated by reference from the
Company's Annual Report to Shareholders.

(a)      2.       FINANCIAL STATEMENT SCHEDULES

The financial statement schedule is incorporated by reference from the Company's
Annual Report to Shareholders.

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

EXHIBIT
NUMBER                              DESCRIPTION

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")).

4.2               Form of Warrant issued in 1993 Private Placement (Incorporated
                  by reference to Exhibit 4.4 to the 1993 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**            Agreement between the Company and Manuel A. Villafana dated
                  April 20, 1998 (Incorporated by reference to Exhibit 10.1 to
                  the Company's Form 10-Q for the quarter ended June 30, 1998).

10.3              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")).

10.4              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).

10.5              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).

10.6              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).

10.7              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).

                                       13
<PAGE>


10.8              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).

10.9              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).

10.10             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).

10.11             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).

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

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

10.14             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).

10.15             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).

10.16             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).

10.17             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).

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

10.19**           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")).

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

10.21             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).

10.22             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).

10.23             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).

10.24             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).

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

                                       14
<PAGE>


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

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

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

13                1999 Annual Report to Shareholders

23                Consent of Ernst & Young LLP.

24                Power of Attorney.

27                Financial Data Schedule.

99                Cautionary Statements.



*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.

(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 attached on a separate section of this report.

                                       15
<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 28, 2000                  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>      <C>
Manuel A. Villafana*                Chairman, Chief Executive)
                                    Officer, and Director              )
                                    (principal executive officer)      )
                                                                       )
Richard W. Kramp*                   President, Chief Operating         )
                                    Officer and Director               )        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 28, 2000
Charles F. Cuddihy, Jr.*            Director                           )
                                                                       )
David L. Boehnen*                   Director                           )
                                                                       )
A. Jay Graf*                        Director                           )
</TABLE>


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

                                       16
<PAGE>


                                ATS MEDICAL, INC.

                           ANNUAL REPORT ON FORM 10-K

                          YEAR ENDED DECEMBER 31, 1999

                    ITEM 8 AND ITEM 14(a) (1) AND (2) AND (d)

              FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE

                         COMMISSION FILE NUMBER 0-18602

                                       17
<PAGE>


ATS MEDICAL, INC.

FORM 10-K ITEM 8 AND ITEM 14(a) (1) and (2) and (d)

LIST OF FINANCIAL STATEMENTS AND STATEMENT SCHEDULE


The following financial statements of ATS Medical, Inc. are incorporated in Part
II, Item 8 and Part IV, Item 14(a)(1) of this Annual Report on Form 10-K by this
reference:

Report of Independent Auditors.

Consolidated Statements of Financial Position at December 31, 1999 and 1998.

Consolidated Statements of Income for the years ended December 31, 1999, 1998
and 1997.

Consolidated Statement of Changes in Shareholders' Equity for the years ended
December 31, 1999, 1998 and 1997.

Consolidated Statements of Cash Flows for the years ended December 31, 1999,
1998 and 1997.

Notes to Consolidated Financial Statements.


The following financial statement schedule of ATS Medical, Inc. is incorporated
in Part IV, Item 14(a)(2) and (d) of this Annual Report on Form 10-K by this
reference:

         Schedule II - Valuation and Qualifying Accounts and Reserves

                                       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
                                                                           (2)
                                                          (1)         Charged to
                                     Balance at        Charged to        Other                     Balance at
                                     Beginning         Costs and       Accounts-    Deductions-      End of
         Description                  of Year           Expenses        Describe      Describe         Year

Allowance for Doubtful Accounts
-------------------------------

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

   Totals                             $185,000          $ 20,000        $      0      $      0       $205,000

Year ended December 31, 1998:
   Deducted from asset accounts:
   Allowance for doubtful accounts    $260,000          $ 20,000              --      $ 95,000(1)    $185,000
                                      --------          --------        --------      --------       --------

   Totals                             $260,000          $ 20,000        $      0      $ 95,000       $185,000

Year ended December 31, 1997:
   Deducted from asset accounts:
   Allowance for doubtful accounts    $200,000          $ 60,000              --            --       $260,000
                                      --------          --------        --------      --------       --------

   Totals                             $200,000          $ 60,000        $      0      $      0       $260,000


Reserve for Obsolete Inventory
------------------------------

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

   Totals                             $200,000          $ 38,045        $      0      $ 38,045       $200,000

Year ended December 31, 1998:
   Deducted from asset accounts:
   Reserve for Obsolete Inventory     $      0          $200,000              --            --       $200,000
                                      --------          --------        --------      --------       --------

   Totals                             $      0          $200,000        $      0      $      0       $200,000
</TABLE>

(1) Uncollectible accounts written off due to a single customer going bankrupt.
(2) Obsolete part written off that is no longer in use.

                                       19
<PAGE>


                                  EXHIBIT INDEX


EXHIBIT NUMBER                 DESCRIPTION


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 eDecember 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")).

4.2               Form of Warrant issued in 1993 Private Placement (Incorporated
                  by reference to Exhibit 4.4 to the 1993 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**            Agreement between the Company and Manuel A. Villafana dated
                  April 20, 1998 (Incorporated by reference to Exhibit 10.1 to
                  the Company's Form 10-Q for the quarter ended June 30, 1998).

10.3              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")).

10.4              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).

10.5              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).

10.6              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).

10.7              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).

10.8              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).

10.9              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).

10.10             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).

10.11             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).

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<PAGE>


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

10.13             Amendment 1 to License Agreement dated December 16, 1993, with
                  CarboMedics, Inc. (incorporated by reference to Exhibit 10.17
                  to the 1993 Form 10-K).

10.14             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).

10.15             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).

10.16             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).

10.17             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).

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

10.19**           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")).

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

10.21             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).

10.22             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).

10.23             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).

10.24             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).

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

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

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

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

13                1999 Annual Report to Shareholders.

                                       21
<PAGE>


23                Consent of Ernst & Young LLP.

24                Power of Attorney.

27                Financial Data Schedule.

99                Cautionary Statements.


*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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