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

                                   ----------

                                    FORM 10-Q

[X]  Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934

     FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2005

                           COMMISSION FILE NO. 0-18602

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

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

<TABLE>
<S>                                                      <C>
    3905 ANNAPOLIS LANE N., SUITE 105
         MINNEAPOLIS, MINNESOTA                             55447
(Address of principal executive offices)                 (Zip Code)
</TABLE>

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

                                 Not Applicable
              (Former name, former address and former fiscal year,
                          if changed since last report)

     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 whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

                               Yes   X   No
                                   -----    -----

     Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act).

                               Yes       No   X
                                   -----    -----

     The number of shares outstanding of each of the registrant's classes of
common stock as of October 28, 2005, was:

<TABLE>
<S>                            <C>
Common Stock, $.01 par value   31,062,514 shares
</TABLE>

================================================================================

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                         Page(s)
                                                                         -------
<S>                                                                      <C>
PART I.    FINANCIAL INFORMATION

Item 1.    Financial Statements (Unaudited)

              Consolidated Balance Sheets as of
              September 30, 2005 and December 31, 2004                       3

              Consolidated Statements of Operations for the three and
              nine months ended September 30, 2005 and 2004                  4

              Consolidated Statements of Cash Flows for the nine
              months ended September 30, 2005 and 2004                       5

              Notes to Consolidated Financial Statements                   6 - 8

Item 2.    Management's Discussion and Analysis of
           Financial Condition and Results of Operations                  9 - 21

Item 3.    Quantitative and Qualitative Disclosures About Market Risk       22

Item 4.    Controls and Procedures                                          22

PART II.   OTHER INFORMATION                                                23

Item 6.    Exhibits                                                         23

SIGNATURES                                                                  24

EXHIBIT INDEX                                                               25
</TABLE>


                                        2

<PAGE>

                          PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                                ATS MEDICAL, INC.
                           CONSOLIDATED BALANCE SHEETS
                 (in thousands, except per share and share data)

<TABLE>
<CAPTION>
                                                        SEPTEMBER 30,   DECEMBER 31,
                                                            2005            2004
                                                        -------------   ------------
                                                         (unaudited)
<S>                                                     <C>             <C>
ASSETS
Current assets:
   Cash and cash equivalents                              $  1,019        $  8,302
   Short-term investments                                    1,954           7,692
   Accounts receivable, net                                 10,030           7,893
   Other receivables                                           270              --
   Inventories                                              23,782          24,303
   Prepaid expenses                                            831           1,053
                                                          --------        --------
Total current assets                                        37,886          49,243

Leasehold improvements, furniture and equipment, net         8,012           7,650
Inventories                                                     --           3,000
Intangible assets                                           20,515          18,720
Other assets                                                   442             438
                                                          --------        --------
Total assets                                              $ 66,855        $ 79,051
                                                          ========        ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Accounts payable                                       $  2,699        $  4,049
   Accrued compensation                                      1,790           1,797
   Accrued distributor liabilities                             744             527
   Other accrued liabilities                                   358             430
   Due to related party                                        145             217
   Current maturities of note payable                          833             764
                                                          --------        --------
Total current liabilities                                    6,569           7,784

Due to related party                                            --              90
Note payable                                                 1,111           1,736
Shareholders' equity:
   Common stock, $.01 par value:
      authorized 40,000,000 shares; issued and
      outstanding 31,061,514 and 30,889,637 shares at
      September 30, 2005 and December 31, 2004                 311             309
   Additional paid-in capital                              137,308         136,562
   Deferred compensation                                        --             (24)
   Accumulated other comprehensive income (loss)               227              95
   Accumulated deficit                                     (78,671)        (67,501)
                                                          --------        --------
Total shareholders' equity                                  59,175          69,441
                                                          --------        --------
Total liabilities and shareholders' equity                $ 66,855        $ 79,051
                                                          ========        ========
</TABLE>

The accompanying notes are an integral part of the cosolidated financial
statements.


                                        3

<PAGE>

                                ATS MEDICAL, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (unaudited)
                      (in thousands, except per share data)

<TABLE>
<CAPTION>
                                                          THREE MONTHS ENDED     NINE MONTHS ENDED
                                                             SEPTEMBER 30,         SEPTEMBER 30,
                                                         -------------------   ---------------------
                                                           2005       2004        2005        2004
                                                         --------   --------   ---------   ---------
<S>                                                      <C>        <C>        <C>         <C>
Net sales                                                $  8,333   $  6,547   $  24,703   $  20,789
Cost of goods sold                                          5,714      5,178      15,489      15,372
                                                         --------   --------   ---------   ---------
Gross profit                                                2,619      1,369       9,214       5,417
Operating expenses:
   Sales and marketing                                      4,323      4,211      13,765      11,827
   Research and development                                   409        278       1,118         651
   General and administrative                               1,928      1,423       5,443       4,171
                                                         --------   --------   ---------   ---------
Total operating expenses                                    6,660      5,912      20,326      16,649
                                                         --------   --------   ---------   ---------
Operating loss                                             (4,041)    (4,543)    (11,112)    (11,232)

Net interest income (expense)                                 (37)        17         (58)         33
                                                         --------   --------   ---------   ---------
Net loss                                                  ($4,078)   ($4,526)   ($11,170)   ($11,199)
                                                         ========   ========   =========   =========
Net loss per share:
   Basic and diluted                                       ($0.13)    ($0.15)     ($0.36)     ($0.40)

Weighted average number of shares used in calculation:
   Basic and diluted                                       31,039     30,730      30,981      28,215
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.


                                        4

<PAGE>

                                ATS MEDICAL, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOW
                                   (unaudited)
                                 (in thousands)

<TABLE>
<CAPTION>
                                                        NINE MONTHS ENDED
                                                          SEPTEMBER 30,
                                                      ---------------------
                                                         2005        2004
                                                      ---------   ---------
<S>                                                   <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES

Net loss                                               ($11,170)   ($11,199)
Adjustments to reconcile net loss to net cash
   used in operating activities:

   Depreciation                                           1,145         802

   Compensation expense on stock options and
      restricted stock units                                359          33
   Non-cash interest expense                                 22           5
   Lower of cost or market adjustment                       700          --
   Changes in operating assets and liabilities:
      Accounts and other receivables                     (2,407)     (1,833)
      Inventories                                         2,821       8,979
      Prepaid expenses                                      222          14
      Other assets                                           (4)         --
      Accounts payable and accrued expenses              (1,374)      1,981
                                                      ---------   ---------
Net cash used in operating activities                    (9,686)     (1,218)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of short-term investments                         (497)     (1,018)
Sale of short-term investments                            6,235       2,999
Payments for technology and distribution licenses        (1,817)       (232)

Purchases of furniture, machinery and equipment          (1,507)     (1,840)
                                                      ---------   ---------
Net cash provided by (used by) investing activities       2,414         (91)

CASH FLOWS FROM FINANCING ACTIVITIES
Loan advances                                                --       2,500
Repayments of note payable                                 (556)         --
Net proceeds from sales of common stock                     413      12,975
                                                      ---------   ---------
Net cash provided by (used in) financing activities        (143)     15,475
                                                      ---------   ---------
Effect of exchange rate changes and unrealized
   investment gains and losses                              132          32
                                                      ---------   ---------
Increase (decrease) in cash and cash equivalents         (7,283)     14,198

Cash and cash equivalents at beginning of period          8,302       6,472
                                                      ---------   ---------
Cash and cash equivalents at end of period            $   1,019   $  20,670
                                                      =========   =========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.


                                        5

<PAGE>

                                ATS MEDICAL, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

NOTE 1. BASIS OF PRESENTATION

The consolidated financial statements included in this Form 10-Q have been
prepared by ATS Medical, Inc. (hereinafter the "Company," "ATS," "we," "us," or
"our") without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission (SEC). The consolidated financial statements include the
accounts of the Company and its subsidiaries, and all significant inter-company
accounts and transactions are eliminated in consolidation. Certain information
and footnote disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United States
have been condensed or omitted pursuant to these rules and regulations. The
year-end balance sheet was derived from audited financial statements but does
not include all disclosures required by accounting principles generally accepted
in the United States. These unaudited consolidated interim financial statements
should be read in conjunction with the Company's consolidated financial
statements and related notes included in the Company's Annual Report on Form
10-K, as amended, for 2004.

These statements reflect, in management's opinion, all adjustments (which
include only normal, recurring adjustments) necessary for a fair presentation of
the financial position and the results of operations and cash flows for the
periods presented. The results of operations for any interim period may not be
indicative of results for the full year.

NOTE 2. STOCK-BASED COMPENSATION

The Company accounts for its stock-based employee compensation plans under the
recognition and measurement principles of APB Opinion No. 25, Accounting for
Stock Issued to Employees, and related interpretations. The exercise price of
the Company's employee stock options generally equals the market price of the
underlying stock on the date of grant for all options granted, and thus, under
APB 25, no compensation expense is recognized. During April and May of 2005,
restricted stock unit awards for 348,000 shares of common stock were granted to
officers and certain employees, resulting in compensation expense charged to
operating expenses of approximately $0.3 million and $0.4 million for the three
and nine-month periods ended September 30, 2005.

Stock options granted to non-employees are valued and accounted for in
accordance with Financial Accounting Statement No. 123, Accounting for
Stock-Based Compensation (FAS 123). Accordingly, these costs are charged to
operating expenses over the vesting period of the option.

The following table illustrates the effect on net loss and net loss per share if
the Company had applied the fair value recognition provisions of FAS 123 to
stock-based employee compensation.

<TABLE>
<CAPTION>
                                                Three months ended    Nine months ended
                                                   September 30,        September 30,
                                                ------------------   -------------------
                                                  2005      2004       2005       2004
                                                -------   --------   --------   --------
(in thousands, except per share data)
<S>                                             <C>       <C>        <C>        <C>
Net loss, as reported                           ($4,078)  ($4,526)   ($11,170)  ($11,199)
Less: Total stock-based employee compensation
   expense determined under fair value based
   method for all awards                           (547)     (537)     (1,629)    (1,789)
                                                -------   -------    --------   --------
Pro forma net loss                              ($4,625)  ($5,063)   ($12,799)  ($12,988)
                                                =======   =======    ========   ========
Net loss per share:
   As reported
      Basic and diluted                          ($0.13)   ($0.15)     ($0.36)    ($0.40)
   Pro forma
      Basic and diluted                          ($0.15)   ($0.16)     ($0.41)    ($0.46)
</TABLE>


                                        6

<PAGE>

NOTE 3. INVENTORIES

Inventories consist of the following:

<TABLE>
<CAPTION>
                               September 30,   December 31,
(in thousands)                      2005           2004
--------------                 -------------   ------------
<S>                            <C>             <C>
Raw materials                     $ 6,283        $ 7,780
Work in process                     7,395          7,258
Finished goods                     10,269         12,465
Obsolescence reserve                 (165)          (200)
                                  -------        -------
Total, net                        $23,782        $27,303
                                  =======        =======
Balance sheet classification
Current assets                    $23,782        $24,303
Non-current assets                     --          3,000
                                  -------        -------
Total, net                        $23,782        $27,303
                                  =======        =======
</TABLE>

At December 31, 2004, the Company maintained significant levels of inventory
that exceeded current demand. Therefore, the Company classified $3.0 million of
inventories as non-current assets at December 31, 2004.

NOTE 4. COMPREHENSIVE INCOME (LOSS)

Comprehensive income (loss) for the Company includes gains and losses from
foreign currency translation which are charged or credited to the cumulative
translation account within shareholders' equity. Gains and losses from foreign
currency translation are not material. Comprehensive income also includes
unrealized gains and losses on the Company's investment portfolio which are also
charged or credited to shareholders' equity. Unrealized gains and losses on
investments are not material.

NOTE 5. NEW PRONOUNCEMENTS

On December 16, 2004, the Financial Accounting Standards Board (FASB) issued
FASB Statement No. 123 (Revised 2004), Share-Based Payment, which is a revision
of FASB Statement No. 123, Accounting for Stock-Based Compensation. Statement
123(R) supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees,
and amends FASB Statement No. 95, Statement of Cash Flows. Generally, the
approach in Statement 123(R) is similar to the approach described in Statement
123. However, Statement 123(R) requires all share-based payments to employees,
including grants of employee stock options, to be recognized in the income
statement based on their fair values. Pro forma disclosure is no longer an
alternative.

The effective date of Statement 123(R) has been delayed and must now be adopted
by the Company no later than January 1, 2006. Early adoption will be permitted
in periods in which financial statements have not yet been issued. Management
expects to adopt Statement 123(R) on January 1, 2006. Management is evaluating
which methodology to use in adopting Statement 123(R) and has not determined
what effect it will have on its financial statements.

In December 2004, the FASB issued FASB Statement No. 151, Inventory Costs.
Statement 151 requires abnormal amounts of inventory costs related to idle
facility, freight handling, and wasted material expenses to be recognized as
current period charges. Additionally, Statement 151 requires that allocation of
fixed production overheads to the costs of conversion be based on the normal
capacity of the production facilities. The standard is effective for fiscal
years beginning after June 15, 2005. The Company believes the adoption of FASB
Statement No. 151 will not have a material impact on its consolidated financial
results.


                                        7

<PAGE>

NOTE 6. LICENSING FEE PAYMENTS

During the quarter ended June 30, 2005, the Company made $1.6 million in
licensing fee payments to Canadian-based CryoCath Technologies, Inc. under a
November 2004 global partnership agreement. These payments are refundable upon
cancellation of the agreements.

Statement of Accounting Standard No. 142, Goodwill and Other Intangible Assets
(SFAS 142), guides the accounting treatment for ATS Medical's intangible assets
including the exclusive distribution and agency agreements with CryoCath
Technologies. This asset is considered an indefinite-lived asset and therefore
not subject to amortization. Paragraph 17 of SFAS 142 states, "An intangible
asset that is not subject to amortization shall be tested for impairment
annually, or more frequently if events or changes in circumstances indicate that
the asset might be impaired. The impairment test shall consist of a comparison
of the fair value of an intangible asset with its carrying value. If the
carrying amount of an intangible asset exceeds its fair value, an impairment
loss shall be recognized in an amount equal to that excess."

In July 2005, the Company made additional licensing fee payments of $0.3 million
to ErySave AB under an exclusive development and licensing agreement signed in
April 2004. Future payments under this agreement, based upon the attainment of
developmental milestones, could total an additional $1.0 million and will occur
over the next year. Upon payment of all milestones, an evaluation of the life of
the technology will be made and an amortization period will be set.

NOTE 7. SUBSEQUENT EVENT - ISSUANCE OF CONVERTIBLE DEBT AND WARRANTS

On October 7, 2005 and October 12, 2005, the Company sold a combined $22.4
million aggregate principal amount of 6% Convertible Senior Notes due 2025
(Notes) and issued warrants to purchase 1,344,000 shares of the Company's common
stock (Warrants). The Warrants are exercisable at $4.40 per share and expire in
2010. In addition, the Company also granted each of the purchasers of the Notes
and Warrants a 120-day option to purchase its pro-rata portion of an additional
$5.6 million of Notes and related Warrants to purchase 336,000 shares of common
stock.

The Notes are convertible into common stock at any time at a fixed conversion
price of $4.20 per share, subject to certain adjustments. If fully converted,
the Notes would convert into approximately 5,333,334 shares of the Company's
common stock. If the Notes are converted under certain circumstances on or prior
to October 15, 2008, the Company will pay the investors the interest they would
have received on the Notes through that date. The Company has the right to
redeem the Notes at 100% of the principal amount plus accrued interest at any
time on or after October 20, 2008, and the investors have the right to require
the Company to repurchase the Notes at 100% of the principal amount plus accrued
interest on October 15 in 2010, 2015 and 2020.


                                        8

<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following Management's Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. Words such as "may,"
"expect," "believe," "anticipate," or "estimate," identify such forward-looking
statements. These statements by their nature involve substantial risks and
uncertainties, and actual results may differ materially from those expressed in
such forward-looking statements. Some of the factors that could cause such
material differences are identified in "Cautionary Statements" below. We
undertake no obligation to correct or update any forward-looking statements,
whether as a result of new information, future events, or otherwise. You are
advised, however, to consult any future disclosures we make on related subjects
in future filings with the SEC.

EXECUTIVE OVERVIEW

We develop, manufacture, and market medical devices. Our primary interest lies
with devices used by cardiovascular surgeons in the cardiac surgery operating
theater. Currently, we participate in the mechanical bileaflet portion of the
replacement heart valve market and in the market for the surgical treatment of
atrial fibrillation. We also are engaged in a development project for
autotransfusion products.

Carbomedics, Inc. (f/k/a Sulzer Carbomedics, Inc.) developed the basic design
from which the ATS heart valve evolved. Carbomedics is a large and 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. We hold an exclusive, royalty-free, worldwide
license to an open pivot, bileaflet mechanical heart valve design owned by
Carbomedics from which the ATS heart valve has evolved. In addition, we have an
exclusive, worldwide right and license to use Carbomedics' pyrolytic carbon
technology to manufacture components for the ATS heart valve.

We commenced selling the ATS heart valve in international markets in 1992. In
October 2000, we received FDA approval to sell the ATS Open Pivot(R) mechanical
heart valve and commenced sales and marketing of our valve in the United States.
The original sales forecasts as well as the pricing models that were used when
the original supply agreement was signed with Carbomedics proved to be too
optimistic. Accordingly, to keep the supply agreement active and the license to
sell the valve exclusive, we purchased quantities of inventory far in excess of
demand.

From 1990 through 2002, we paid Carbomedics approximately $125 million for the
development of our valve, for the technology to manufacture our pyrolytic carbon
components, and for pyrolytic valve components manufactured by Carbomedics. On
December 31, 2002, we had remaining payments due under our technology agreement
with Carbomedics that totaled $28 million. This led us in 2003 to negotiate an
accelerated but reduced payment for all outstanding debts to Carbomedics related
to the technology agreement. In August 2003 we paid $12 million to satisfy all
future obligations under this agreement.

With inventory purchases exceeding sales through the years, we built up
significant inventories. The drawing down of these inventories since 2002 has
provided a source of cash for operations. During 2004, we started manufacturing
our own carbon components. In 2005 our manufacturing levels will approach our
sales and in 2006 our inventory levels will flatten with manufacturing and sales
being more in balance.

We have been steadily building both our domestic and international sales and
marketing infrastructure since 2003. This rebuilding is the most significant
factor in our expense levels since that time. Because sales prices in the United
States exceed selling prices elsewhere, we feel that our future success will
depend on achieving increased market share in the United States. Our U.S. sales
as a percentage of our overall sales have grown from 4% in 2000 to 38.5% during
the first nine months of 2005.

During 2004, we made our first ventures outside the mechanical heart valve
market by completing two business development agreements. The first, signed in
April 2004, is with ErySave AB (ErySave), a Swedish research firm, for exclusive
worldwide rights to ErySave's PARSUS filtration technology for cardiac surgery
procedures. We had no revenues in 2004 nor do we expect any for 2005 from this
technology. In November, we completed a global partnership agreement with
CryoCath Technologies, Inc. (CryoCath) to market CryoCath's surgical cryotherapy
products for the ablation of cardiac arrhythmias. We realized revenue from the
CryoCath agreement starting in the first quarter of 2005.


                                        9

<PAGE>

In 2005 we have continued our ventures outside the mechanical heart valve market
by entering into two additional business development agreements. On June 22,
2005, we entered into a Marketing Services Agreement with Alabama Tissue Center,
Inc. (ATC, a/k/a Regeneration Technologies, Inc. - Cardiovascular), a subsidiary
of Regeneration Technologies, Inc. Under the terms of the agreement, ATC has
appointed the Company as its exclusive marketing services representative to
promote, market and solicit orders for ATC's processed cardiovascular allograft
tissue from doctors, hospitals, clinics and patients throughout North America.
On June 23, 2005, we entered into an Exclusive Development, Supply and
Distribution Agreement with Genesee BioMedical, Inc. (GBI), under which GBI will
develop, supply, and manufacture cardiac surgical products to include
annuloplasty repair rings, c-rings and accessories, and the Company will have
exclusive worldwide rights to market and sell such products.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

We base our estimates on historical experience and on various other assumptions
that we believe to be reasonable under the circumstances. Management's
discussion and analysis of financial condition and results of operations are
based upon the consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States.
The preparation of these financial statements requires us to make estimates and
judgments that affect (1) the reported amounts of assets, liabilities, revenues,
and expenses; and (2) the related disclosure of contingent assets and
liabilities. At each balance sheet date, we evaluate our estimates and
judgments. The critical accounting policies that are most important to fully
understanding and evaluating the financial condition and results of operations
are discussed in our most recent Annual Report on Form 10-K, as amended, on file
with the SEC.

RESULTS OF OPERATIONS

The following table compares the dollar and percentage change in the Statements
of Operations for the three and nine month periods ended September 30, 2005 and
2004.

<TABLE>
<CAPTION>
                                     THREE MONTHS ENDED SEPTEMBER 30              NINE MONTHS ENDED SEPTEMBER 30,
                                -----------------------------------------   -------------------------------------------
                                                      Increase (Decrease)                           Increase (Decrease)
(dollars in thousands)            2005       2004          $        %          2005        2004          $        %
----------------------          --------   --------     ------   ------     ---------   ---------     ------   ------
<S>                             <C>        <C>        <C>        <C>        <C>         <C>         <C>        <C>
Net sales                       $  8,333   $  6,547     $1,786     27.3%    $  24,703   $  20,789     $3,914     18.8%
Cost of goods sold                 5,714      5,178        536     10.4%       15,489      15,372        117      0.8%
                                --------   --------     ------     ----     ---------   ---------     ------   ------
Gross profit                       2,619      1,369      1,250     91.3%        9,214       5,417      3,797     70.1%
Gross profit %                      31.4%      20.9%                             37.3%       26.1%
Operating expenses:
   Sales and marketing             4,323      4,211        112      2.7%       13,765      11,827      1,938     16.4%
   Research and development          409        278        131     47.1%        1,118         651        467     71.7%
   General and administrative      1,928      1,423        505     35.5%        5,443       4,171      1,272     30.5%
                                --------   --------     ------     ----     ---------   ---------     ------   ------
Total operating expenses           6,660      5,912        748     12.7%       20,326      16,649      3,677     22.1%
                                --------   --------     ------     ----     ---------   ---------     ------   ------
Operating loss                    (4,041)    (4,543)       502    -11.0%      (11,112)    (11,232)       120     -1.1%
Net interest income (expense)        (37)        17        (54)  -317.6%          (58)         33        (91)  -275.8%
                                --------   --------     ------     ----     ---------   ---------     ------   ------
Net  loss                        ($4,078)   ($4,526)    $  448     -9.9%     ($11,170)   ($11,199)    $   29     -0.3%
                                ========   ========     ======     ====     =========   =========     ======   ======
</TABLE>


                                        10

<PAGE>

The following table presents the Statement of Operations as a percentage of net
sales for the three and nine month periods ended September 30, 2005 and 2004:

<TABLE>
<CAPTION>
                                THREE MONTHS ENDED   NINE MONTHS ENDED
                                   SEPTEMBER 30,        SEPTEMBER 30,
                                ------------------   -----------------
                                    2005    2004        2005    2004
                                   -----   -----       -----   -----
<S>                             <C>        <C>       <C>       <C>
Net sales                          100.0%  100.0%      100.0%  100.0%
Cost of goods sold                  68.6%   79.1%       62.7%   73.9%
                                   -----   -----       -----   -----
Gross profit                        31.4%   20.9%       37.3%   26.1%
Operating expenses:
   Sales and marketing              51.9%   64.3%       55.7%   56.9%
   Research and development          4.9%    4.2%        4.5%    3.1%
   General and administrative       23.1%   21.7%       22.0%   20.1%
                                   -----   -----       -----   -----
Total operating expenses            79.9%   90.3%       82.3%   80.1%
                                   -----   -----       -----   -----
Operating loss                     -48.5%  -69.4%      -45.0%  -54.0%
Net interest income (expense)       -0.4%    0.3%       -0.2%    0.2%
                                   -----   -----       -----   -----
Net  loss                          -48.9%  -69.1%      -45.2%  -53.9%
                                   =====   =====       =====   =====
</TABLE>

NET SALES. The following tables compare net sales between the three and nine
month periods ended September 30, 2005 and 2004:

<TABLE>
<CAPTION>
                          THREE MONTHS ENDED SEPTEMBER 30,       NINE MONTHS ENDED SEPTEMBER 30,
                        -----------------------------------   -------------------------------------
                                           Increase                                Increase
(in thousands)           2005     2004    (Decrease)     %      2005      2004    (Decrease)     %
--------------          ------   ------   ----------   ----   -------   -------   ----------   ----
<S>                     <C>      <C>      <C>          <C>    <C>       <C>       <C>          <C>
United States           $3,392   $2,003     $1,389     69.3%  $ 9,514   $ 6,855     $2,659     38.8%
Outside United States    4,941    4,544        397      8.7%   15,189    13,934      1,255      9.0%
                        ------   ------     ------     ----   -------   -------     ------     ----
Total                   $8,333   $6,547     $1,786     27.3%  $24,703   $20,789     $3,914     18.8%
                        ======   ======     ======     ====   =======   =======     ======     ====
</TABLE>

<TABLE>
<CAPTION>
                        THREE MONTHS ENDED    NINE MONTHS ENDED
                           SEPTEMBER 30,        SEPTEMBER 30,
                        ------------------   ------------------
                            2005    2004         2005    2004
                           -----   -----        -----   -----
<S>                     <C>        <C>       <C>        <C>
Share of total sales:
United States               40.7%   30.6%        38.5%   33.0%
Outside United States       59.3%   69.4%        61.5%   67.0%
                           -----   -----        -----   -----
Total                      100.0%  100.0%       100.0%  100.0%
                           =====   =====        =====   =====
</TABLE>

<TABLE>
<CAPTION>
                             THIRD QUARTER 2005        NINE MONTHS YEAR-TO-DATE 2005
                                  CHANGE IN                      CHANGE IN
                        MECHANICAL HEART VALVE SALES    MECHANICAL HEART VALVE SALES
                        ----------------------------   -----------------------------
                           Average                        Average
                            Sales     Unit                 Sales     Unit
                            Price    Sales   Total         Price    Sales   Total
                           -------   -----   -----        -------   -----   -----
<S>                     <C>          <C>     <C>       <C>          <C>     <C>
United States                1.3%    22.2%   23.79%         2.7%    12.4%   15.4%
Outside United States       -9.5%    13.0%    2.30%        -3.9%     9.1%    4.9%
                            -----    ----    -----         -----    ----    ----
Total                       -4.7%    14.2%     8.9%        -1.1%     9.6%    8.4%
                            =====    ====    =====         =====    ====    ====
</TABLE>


                                       11

<PAGE>

Our sales organization in the United States consists of four area directors
managing multiple sales territories. The number of sales territories has
steadily increased since early 2004. Our representation within these territories
consists of both direct sales representatives and independent agents. The
experience gained by our growing sales organization and overall greater sales
efforts has contributed to our increase in domestic sales during 2005 and to our
U.S. sales accounting for a larger percentage of overall sales. Also
contributing to our U.S. as well as international net sales growth for both the
third quarter and year-to-date 2005 was commission income and direct sales
revenue from CryoCath's surgical cryotherapy products under the global
partnership agreement entered into in November 2004; and revenues received from
Regeneration Technologies, Inc. under a marketing services agreement and net
sales from a surgical tool system, both beginning in the third quarter of 2005.
Revenues from new products are 14.5% and 8.8% of total revenues for the three
and nine-month periods ended September 30, 2005.

Since 2003, we have aggressively entered several international markets that
represent opportunities for greater sales unit growth but at prices lower than
our other markets. Prices in some of these territories are lower than our
current manufacturing costs. We feel this strategy is reasonable because it
allows us to increase our market share while reducing our high priced but
paid-for inventories. Once we have exhausted our high priced components, we
expect to have lower manufacturing costs per valve which will allow us to
realize gross profit in these international markets. During the first half of
2005, we established a direct sales subsidiary in Germany. We now have sales
organizations established in France, China and Germany.

COST OF GOODS SOLD. Our cost of goods sold as a percentage of net sales has
varied due to changes in average selling price. Our gross profit is anticipated
to improve as sales within the Unites States increase as a percentage of total
sales and as we start selling valves that have been entirely manufactured in our
facilities. Our inventories of high priced carbon components currently exceed
our expected sales during 2005.

The ATS valve is made of materials that do not deteriorate. Other than the need
to resterilize the valves periodically, there is no risk of perishability.
Pyrolytic carbon, which is the substrate used in manufacturing our valves, has
been the only material used to manufacture mechanical heart valves for humans
for many years and remains the most advanced raw material for our products. The
other sources of prosthetic heart valves for humans are cadaver, bovine and
porcine tissues. Inventory obsolescence issues are remote because of certain
advantages offered by mechanical heart valves, including superior durability.
Similarly, we believe that, given the lead time that would be required, there is
no material risk that there would be the introduction and FDA approval of
another substrate that would replace pyrolytic carbon prior to the end of the
period over which we expect to sell our inventory of valves.

Before 2004, all purchased pyrolytic carbon components for the ATS heart valve
came from Carbomedics pursuant to a multi-year supply agreement entered into in
1990. The cost of the pyrolytic carbon components represents approximately 80%
of the total cost of the ATS heart valve. Under the supply agreement, the cost
of the pyrolytic carbon components has varied according to annual volume
purchases and has been adjusted annually by reference to increases in the U.S.
Department of Labor Employment Cost Index. The supply agreement with Carbomedics
is still in effect but has been re-negotiated several times. Our current
obligations under the supply agreement call for future purchase obligations
starting in 2007 and continuing through 2011.

We maintain significant levels of carbon components in inventory due to past
purchase requirements under the supply agreement. In addition, the cost of these
components has been high and at times exceeded selling prices, necessitating
lower of cost or market write-downs of inventories.

Pyrolytic carbon purchases after 2000 were at a lower cost than previous
purchases. As these lower priced carbon sets were manufactured into finished
valves and sold, our gross profit increased. Our margin increase from 26.1% for
the nine-months ended September 30, 2004, to 37.3% in the nine-months ended
September 30, 2005 was driven by three factors; (1) lower mechanical heart valve
component costs, (2) agency commissions from CryoCath Technologies and
Regeneration Technologies that have no cost of sales associated with the
revenue, and (3) product sales from CryoCath Technologies that have higher gross
margins than our mechanical valve business.

During the third quarter of 2005, we made write-downs of $0.7 million to our
inventories due to future selling prices being lower than manufacturing costs in
select international markets. During the third quarter of 2004, we incurred
production ramp-up costs of $0.4 million as we began the process of
manufacturing pyrolytic carbon components in our own facility. Without these
adjustments for lower of cost or market and production ramp up costs, our
adjusted gross profit as a percent of net sales for the three months ended
September 30, 2005 and 2004 would have been 8.4% and 6.3%


                                       12

<PAGE>

higher than the actual gross profit of 31.4% and 20.9%, respectively. For the
nine months ended September 30, 2005 and 2004, adjusted gross profit as a
percent of net sales would have been 2.8% and 2.0% higher than the actual gross
profit of 37.3% and 26.1%, respectively.

ATS reports its financial results in accordance with generally accepted
accounting principles ("GAAP"). In addition, from time to time, we include other
measures in our reports which are not prepared in accordance with GAAP.
Investors should consider these non-GAAP measures in addition to, not as a
substitute for or as superior to, financial reporting measures prepared in
accordance with GAAP. In the above paragraph, we have included adjusted versions
of our gross margin percentages for the third quarters and first nine months of
2005 and 2004. These non-GAAP measures do not reflect a lower of cost or market
inventory adjustment in the third quarter of 2005 and certain factory production
ramp-up costs in the third quarter of 2004 because we believe that these charges
will not be incurred on a regular basis in the future. Historically, we have
taken lower of cost or market inventory adjustments because our inventory
consisted largely or entirely of high-cost heart valve components purchased
under our Carbomedics Supply Agreement and a larger percentage of our sales of
heart valves was in foreign markets with depressed pricing. With the suspension
of purchases under the Supply Agreement in 2002 and the commencement of
manufacturing our own lower-cost heart valve components in 2004 we have steadily
reduced our inventory of high-cost components to the point that we expect our
inventory and sales levels to be in balance in 2006. At the same time our sales
of valves in the higher-priced U.S. market have increased. As a result, we
anticipate that we will record few if any lower of cost or market inventory
adjustments in future periods. Similarly, our factory production ramp-up costs
recorded in the third quarter of 2004 related to the launch and qualification of
our valve component manufacturing facility. Now that our manufacturing facility
is up and running we do not expect to incur such ramp-up costs in future
periods. We use the adjusted gross margin measure in our internal analysis and
review of our operational performance. We believe that these non-GAAP measures
provide investors with useful information in comparing our performance over
different periods, particularly when comparing one of these periods to a period
in which we did not incur these kind of charges. By using these non-GAAP
measures we believe investors get a better picture of the performance of our
underlying business. The table below reconciles our gross margin percentage
calculated using numbers prepared in accordance with GAAP to our adjusted gross
margin percentages presented above.

                                ATS MEDICAL, INC.
          RECONCILIATION OF GAAP GROSS PROFIT TO ADJUSTED GROSS PROFIT
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                        Three months ended   Nine months ended
                                           September 30,       September 30,
                                        ------------------   -----------------
                                          2005     2004        2005      2004
                                         ------   ------     -------   -------
<S>                                     <C>       <C>        <C>       <C>
Net sales, as reported                   $8,333   $6,547     $24,703   $20,789
Cost of goods sold, as reported           5,714    5,178      15,489    15,372
                                         ------   ------     -------   -------
Gross profit, as reported                 2,619    1,369       9,214     5,417
Gross profit %                             31.4%    20.9%       37.3%     26.1%
Adjustments to gross profit
   Factory production ramp-up costs          --      415          --       415
   Lower of cost or market write-down       700       --         700        --
                                         ------   ------     -------   -------
Adjusted gross profit                     3,319    1,784       9,914     5,832
Adjusted gross profit %                    39.8%    27.2%       40.1%     28.1%
</TABLE>

SALES AND MARKETING. Cost increases for the three and nine month periods ended
September 30, 2005 over the same periods in 2004 were for further development,
mostly increased personnel costs, of our worldwide sales and marketing
organization. Our U.S. sales and marketing costs for the three month period
ended September 30, 2005 were approximately equal to our costs during the same
period in 2004. For the nine-month period ended September 30, 2005, sales and
marketing costs increased $1.9 million over the same period in the prior year to
support an increase in sales territories, the development of marketing programs
in support of the new products and services, and new marketing programs directed
at increasing the U.S. market share of our mechanical heart valves.
Internationally, our sales and marketing costs for the three and nine month
periods ended September 30, 2005 increased approximately $0.3 million and $1.3
million, respectively, over the same periods in the prior year for costs to
support our efforts to go direct in China and Germany, for separation costs in
France, and for increased sales management.

RESEARCH AND DEVELOPMENT. Research and development (R & D) expenses increased
$0.1 and $0.5 million for the three and nine month periods ended September 30,
2005, respectively, over the same periods in 2004 and include the costs to
develop and improve current and future products and the costs for regulatory and
clinical activities for these products. The increase in R & D spending reflects
staff additions as well as an increase in the number of R & D programs.

GENERAL AND ADMINISTRATIVE. General and administrative expenses increased $0.5
million for the three months ended September 30, 2005 and $1.3 million for the
first nine months of 2005 over the same periods in 2004. Major cost increases
for the three month period ended September 30, 2005 were for employee salary and
benefits of $0.1 million, non-cash stock compensation and bonus expense of $0.3
million, and outside consulting services relating


                                       13

<PAGE>

primarily to Board of Directors fees of $0.1 million. Major cost increases for
the nine month period ended September 30, 2005 were for employee salary and
benefits of $0.2 million, non-cash stock compensation and bonus expense of $0.4
million, legal fees in support of business development and other outside
services of $0.3 million, and outside consulting services relating primarily to
Board of Directors fees of $0.1 million.

During the three months ended June 30, 2005, restricted stock unit awards for
348,000 shares of common stock were granted to officers and certain employees,
resulting in non-cash stock compensation expense charged to general and
administrative expenses of approximately $0.1 million during the second quarter
of 2005 and $0.3 million during the third quarter of 2005. Stock compensation
expense is expected to be $0.3 million in the fourth quarter of 2005.

NET INTEREST INCOME (EXPENSE). Interest income is primarily attributable to the
investment of our cash balances. In July 2004, we entered into an agreement for
a credit facility consisting of a $2.5 million term note and a $6.0 million line
of credit, and we fully drew down the term note. During 2005, net interest
expense is attributable to the excess of interest expense on the term note over
interest income on lower cash and investment balances.

INCOME TAXES. At the end of 2004, we had accumulated approximately $62 million
of net operating loss (NOL) carryforwards for U.S. tax purposes. We believe that
our ability to fully utilize the existing NOL carryforwards could be restricted
on a portion of the NOL for changes in control that may have occurred or may
occur in the future. We have not conducted a formal study of whether a change in
control of ATS has occurred in the past that impairs our NOL carryforwards
because we are unable to utilize such NOL carryforwards until we achieve
profitability and because this study would be very expensive to complete. When
we attain profitability, we will conduct a formal study of any restrictions on
our carryforwards. We have not recorded any net assets related to our NOL
carryforwards and other deferred items as we currently cannot determine that it
is reasonably likely that this asset will be realized and we, therefore, have
provided a valuation allowance for the entire asset.

NET LOSS. Our net loss declined $0.4 million to $4.1 million for the three
months ended September 30, 2005 from a net loss of $4.5 million for the same
period in the prior year, while for the nine months ended September 30, 2005,
our net loss was $11.2 million for both years. The changes in net loss resulted
from changes in sales offset by changes in operating costs, all of which are
described above.

LIQUIDITY AND CAPITAL RESOURCES

Cash, cash equivalents and short-term investments were $3.0 million as of
September 30, 2005, compared to $16.0 million as of December 31, 2004. This
decrease in cash, cash equivalents, and short-term investments is discussed
below.

OPERATING ACTIVITIES. Net cash used in operations was $9.7 million for the nine
months ended September, 2005 compared to $1.2 million for the same period in
2004. During the last half of 2004 and all of 2005, we have been increasing the
amount of manufacturing activity as we replace inventory purchased in prior
years with our own manufactured inventory. This rebuilding of our inventories
reduced the positive cash flows realized in 2005 as inventories decreased $2.8
million versus $9.0 million in 2004 even though we experienced revenue growth of
approximately 19%.

During the first nine months of 2005, we received net cash payments from
customers of approximately $22.6 million. We made net cash payments to employees
and suppliers of approximately $31.9 million. Our use of cash for operating
activities during the first nine months of 2005 was substantially funded through
existing cash and investment balances. We have incurred significant expenses
commercializing the ATS heart valve in the United States. As we build sales in
future periods and our cost of inventories decreases, our operating losses will
decrease, and we expect to move steadily towards a cash flow breakeven on sales
and eventually to profitability. We believe our current cash and investment
balances are adequate to fund our operating activities during 2005.

INVESTING ACTIVITIES. During the first nine months of 2005, we purchased
equipment, machinery and furniture totaling $1.5 million. For the remainder of
2005, we expect to purchase approximately $0.5 million of additional equipment.
Capital purchases during 2005 have been mainly in support of increasing
production in our pyrolytic carbon facility.


                                       14

<PAGE>

In November 2004 we signed a global partnership agreement with CryoCath
Technologies, Inc. to market CryoCath's surgical cryotherapy products for the
ablation of cardiac arrhythmias. For certain customers that we will market, we
agreed to make a payment to CryoCath representing a portion of the prior year's
sales to these customers and future payments of a certain percentage of the
sales occurring over the following three-year period. These payments are
refundable to us upon cancellation of the agreements. In June 2005, the Company
made $1.6 million in licensing fee payments to CryoCath under the partnership
agreement.

In April 2004 we signed an exclusive development and licensing agreement with
ErySave AB and made an initial milestone payment of approximately $0.2 million.
In July 2005, we made additional milestone payments of $0.3 million. Future
payments under this agreement, based upon the attainment of developmental
milestones, could total an additional $1.0 million. These payments are expected
to occur during 2005 and 2006.

FINANCING ACTIVITIES. During the first nine months of 2005, we raised
approximately $0.4 million through the issuance of common stock through stock
options and our employee stock purchase plan. During the first nine months of
2004, we raised approximately $12.4 million in a private placement of common
stock and raised approximately $0.6 million through the issuance of common stock
through stock options and our employee stock purchase plan.

In July 2004, we entered into a secured credit facility consisting of a $2.5
million term note and a $6.0 million line of credit, and we fully drew down the
$2.5 million term note. The term note calls for equal installment payments over
36 months which commenced in February 2005. Accordingly, during the first nine
months of 2005, we repaid $0.6 million on the note.

Under an amendment to the secured credit facility agreement effective April 1,
2005, we are subject to certain financial covenants, including a liquidity ratio
of not less than 2.0 to 1.0 and a net tangible net worth of at least $39 million
through June 30, 2005, and $36 million thereafter. At September 30, 2005, the
Company was not in compliance with its liquidity ratio covenant, which was
waived by the bank in a letter dated November 3, 2005.

On October 7, 2005 and October 12, 2005, the Company sold a combined $22.4
million aggregate principal amount of 6% Convertible Senior Notes due 2025
(Notes) and issued warrants to purchase 1,344,000 shares of the Company's common
stock (Warrants). The Warrants are exercisable at $4.40 per share and expire in
2010. In addition, the Company also granted each of the purchasers of the Notes
and Warrants a 120-day option to purchase its pro-rata portion of an additional
$5.6 million of Notes and related Warrants to purchase 336,000 shares of common
stock.

The Notes are convertible into common stock at any time at a fixed conversion
price of $4.20 per share, subject to certain adjustments. If fully converted,
the Notes would convert into approximately 5,333,334 shares of the Company's
common stock. If the Notes are converted under certain circumstances on or prior
to October 15, 2008, the Company will pay the investors the interest they would
have received on the Notes through that date. The Company has the right to
redeem the Notes at 100% of the principal amount plus accrued interest at any
time on or after October 20, 2008, and the investors have the right to require
the Company to repurchase the Notes at 100% of the principal amount plus accrued
interest on October 15 in 2010, 2015 and 2020.

CASH MANAGEMENT

During 2005 and into 2006, we will deplete our high priced but paid-for
inventories of pyrolytic carbon components. We have started increasing
production of these components in our own factory. This will require the use of
cash as we purchase raw materials and incur employee costs and overhead to
manufacture the inventory. We estimate that operating costs will remain high in
comparison to sales during 2005 and will require the use of cash to fund
operations. We will draw down cash balances to build inventories and fund
operations during 2005.

Our current obligations under the Carbomedics Supply Agreement call for us to
resume purchasing heart valve components from 2007 through 2011. Based on
current forecasts, we expect these component purchases to represent a small
percentage of our unit sales in those years. Before the suspension of the Supply
Agreement in 2002, Carbomedics supplied us with 100% of our inventories and our
purchase requirements under the Agreement often significantly exceeded our
sales. In 2004, we started manufacturing our own valve components so we are no
longer are dependent on Carbomedics as a sole supplier. Although our future
purchase requirements under the Agreement will be at a cost that is higher than
our anticipated manufacturing costs, the quantity of components purchased will
be significantly less than in previous years. We expect to be able to adjust our
manufacturing levels during this period to prevent the build up of excess
component inventories. Because the parts we purchase from Carbomedics will be at
a higher cost than our self-manufactured product, our net income and cash flows
in the periods when the parts are sold will be lower; however we anticipate that
our business performance in those future periods will be adequate to absorb
these costs and cash flows.


                                       15

<PAGE>


Based upon the current forecast of sales and operating expenses, we anticipate
having cash to fund our operations through 2006. However, as identified under
the heading of "Cautionary Statements" below, any adverse change that affects
our revenue, access to the capital markets or future demand for our products
will affect our long-term viability. Maintaining adequate levels of working
capital depends in part upon the success of our products in the marketplace, the
relative profitability of those products and our ability to control operating
and capital expenses. Funding of our operations in future periods may require
additional investments in ATS in the form of equity or debt. There can be no
assurance that we will achieve desired levels of sales or profitability, or that
future additional capital will be available.

OFF-BALANCE SHEET ARRANGEMENTS

We do not have any "off-balance sheet arrangements" (as such term is defined in
the rules and regulations of the SEC) that are reasonably likely to have a
current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources.

CAUTIONARY STATEMENTS

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

IF OUR HEART VALVE DOES NOT ACHIEVE WIDESPREAD MARKET ACCEPTANCE IN THE UNITED
STATES, OUR OPERATING RESULTS WILL BE HARMED AND WE MAY NOT ACHIEVE
PROFITABILITY.

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

WE CURRENTLY RELY ON THE ATS HEART VALVE AS OUR PRIMARY SOURCE OF REVENUE. IF WE
ARE NOT SUCCESSFUL IN SELLING THIS PRODUCT, OUR OPERATING RESULTS WILL BE
HARMED.

     While we commenced marketing additional products in 2005 that totaled 14%
of net revenues in the quarter ended September 30, 2005, there can be no
assurance that these new products will decrease our dependence on the sales of
mechanical heart valves. Increasing revenues from new products cannot be
guaranteed. Even if we were to develop additional products, regulatory approval
would likely be required to sell them. Clinical testing and the approval process
itself are very expensive and can take many years. Therefore, we do not expect
to be in a position to sell additional products in the foreseeable future.
Adverse rulings by regulatory authorities, product liability lawsuits, the
failure to achieve widespread U.S. market acceptance, the loss of market
acceptance outside of


                                       16

<PAGE>

the United States, or other adverse publicity may significantly and adversely
affect our sales of the ATS heart valve, and, as a result, would adversely
affect our business, financial condition and results of operations.

IN 2002, WE BEGAN USING A COMBINATION OF DIRECT SALES PERSONS AND INDEPENDENT
MANUFACTURING REPRESENTATIVES TO SELL OUR VALVES IN THE UNITED STATES. IF OUR
U.S. SALES STRATEGY IS NOT SUCCESSFUL, WE WILL NOT BE ABLE TO CONTINUE OUR
OPERATIONS AS PLANNED.

     Our sales approach for the sale of the ATS valve in the United States
consists primarily of direct salespersons with a few independent manufacturer's
representatives. We will need to continue to expend significant funds and
management resources to develop and maintain this hybrid sales force. We believe
there is significant competition for sales personnel and independent
manufacturing representatives with the advanced sales skills and technical
knowledge we need. If we are unable to recruit, retain and motivate qualified
personnel and representatives, U.S. sales of the ATS valve could be adversely
affected. The loss of key salespersons or independent manufacturer's
representatives could have a material adverse effect on our sales or potential
sales to current customers and prospects serviced by such salespersons or
representatives. Further, we cannot assure the successful expansion of our
network of independent manufacturer's representatives on terms acceptable to
ATS, if at all, or the successful marketing of our products by our hybrid sales
force. To the extent we rely on sales through independent manufacturer's
representatives, any revenues we receive will depend primarily on the efforts of
these parties. We do not control the amount and timing of marketing resources
that these third parties devote to our product. If our U.S. sales strategy is
not successful, we may be forced to change our U.S. sales strategy again. Any
such change could disrupt sales in the United States. Further, any change in our
U.S. sales strategy could be expensive and would likely have a material adverse
impact on our results of operations.

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

     The ATS heart valve is sold internationally through independent
distributors. The loss of an international distributor could seriously harm our
business and results of operations if a new distributor could not be found on a
timely basis in the relevant geographic market. We do not control the amount and
timing of marketing resources that these third parties devote to our product.
Furthermore, to the extent we rely on sales through independent distributors,
any revenues we receive will depend primarily on the efforts of these parties.

WE ARE DEPENDENT UPON SALES OUTSIDE THE UNITED STATES, WHICH ARE SUBJECT TO A
NUMBER OF RISKS INCLUDING A DROP IN SALES DUE TO CURRENCY FLUCTUATIONS.

     For the nine months ended September 30, 2005, more than 61% of our net
sales were derived from international operations. We expect that international
sales will account for a substantial majority of our revenue until the ATS heart
valve receives wider market acceptance from U.S. customers. Accordingly, any
material decrease in foreign sales may materially and adversely affect our
results of operations.

     We sell in U.S. dollars to most of our customers abroad. An increase in the
value of the U.S. dollar in relation to other currencies can and has adversely
affected our sales outside of the United States. In prior years, the decrease in
sales was due primarily to the change in the value of the U.S. dollar against
the Euro, as well as competitor price pressure. Our dependence on sales outside
of the United States will continue to expose us to U.S. dollar currency
fluctuations for the foreseeable future.

     Our future results of operations could also be harmed by risks inherent in
doing business in international markets, including:

     -    unforeseen changes in regulatory requirements and government health
          programs;

     -    weaker intellectual property rights protection in some countries;

     -    new export license requirements, changes in tariffs or trade
          restrictions;

     -    political and economic instability in our target markets; and

     -    greater difficulty in collecting payments from product sales.


                                       17

<PAGE>

     Slow payment of receivables by our international distributors, or the
occurrence of any of the other factors listed above, could harm our ability to
successfully commercialize our product internationally and could harm our
business.

WE HAVE A HISTORY OF NET LOSSES. IF WE DO NOT HAVE NET INCOME IN THE FUTURE, WE
MAY BE UNABLE TO CONTINUE OUR OPERATIONS.

     We are not currently profitable and have a very limited history of
profitability. As of September 30, 2005, we had an accumulated deficit of $78.7
million. We expect to incur significant expenses over the next several years as
we continue to devote substantial resources to the commercialization of the ATS
heart valve in the United States. We will not generate net income unless we are
able to significantly increase revenue from U.S. sales. If we continue to
sustain losses, we may not be able to continue our business as planned.

THE MARKET FOR PROSTHETIC HEART VALVES IS HIGHLY COMPETITIVE, AND A NUMBER OF
OUR COMPETITORS ARE LARGER AND HAVE MORE FINANCIAL RESOURCES. IF WE DO NOT
COMPETE EFFECTIVELY, OUR BUSINESS WILL BE HARMED.

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

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

     Our business could suffer if the use of mechanical heart valves declines.
Historically, mechanical heart valves have accounted for over two-thirds of all
heart valve replacements. Recently, there has been an increase in the use of
tissue valves. We estimate that mechanical heart valves are currently being used
in 40% to 65% of all heart valve replacements, depending on the geographic
market, down from 65% to 75% about ten years ago. We believe the tissue
manufacturers' claims of improvements in tissue valve longevity and an increase
in the average age of valve patients have contributed to the recent increase in
the use of tissue valves.

NEW PRODUCTS OR TECHNOLOGIES DEVELOPED BY OTHERS COULD RENDER OUR PRODUCT
OBSOLETE.

     The medical device industry is characterized by significant technological
advances. Several companies are developing new prosthetic heart valves based on
new or potentially improved technologies. Significant advances are also being
made in surgical procedures, which may delay the need for replacement heart
valves. A new product or technology may emerge that renders the ATS heart valve
noncompetitive or obsolete. This could materially harm our results of operations
or force us to cease doing business altogether.

WE MAINTAIN A LARGE VOLUME OF INVENTORY, WHICH EXCEEDS THE CURRENT DEMAND FOR
THE ATS HEART VALVE. IF SALES OF OUR PRODUCT DO NOT INCREASE, THE VALUE OF OUR
INVENTORY COULD DECREASE SUBSTANTIALLY.

     We purchased pyrolytic carbon components under a long-term supply agreement
with Carbomedics through June 2002, and we are required to resume purchases of
such components in 2007. To date, our purchases of pyrolytic carbon components
have exceeded our sales of the ATS heart valves. We currently have in inventory
enough pyrolytic carbon components to satisfy our projected requirements through
2005. If we are unable to achieve widespread acceptance for the ATS heart valve
or if competitive pressures result in price reductions, the value of the excess
inventory would likely decrease, which could seriously harm our results of
operations and financial condition. Because the pyrolytic carbon components are
made to meet the unique specifications of the ATS heart valve, our inventory may
have little, if any, value in the open market.


                                       18

<PAGE>

WE LICENSE PATENTED TECHNOLOGY AND OTHER PROPRIETARY RIGHTS FROM CARBOMEDICS. IF
THESE AGREEMENTS ARE BREACHED OR TERMINATED, OUR RIGHT TO MANUFACTURE THE ATS
HEART VALVE COULD BE TERMINATED.

     Under our carbon technology agreement with Carbomedics, we have obtained a
license to use Carbomedics' pyrolytic carbon technology to manufacture
components for the ATS heart valve. If this agreement is breached or terminated,
we would be unable to manufacture our own product. If our inventory is exhausted
and we do not have any other sources of carbon components, we would be forced to
cease doing business.

A DELAY OR INTERRUPTION IN THE SUPPLY OF PYROLYTIC CARBON COMPONENTS COULD DELAY
PRODUCT DELIVERY OR FORCE US TO CEASE OPERATIONS.

     We cannot be certain that, after our current inventory is exhausted,
sufficient quantities of pyrolytic carbon components will be available to
assemble the ATS heart valve. Other than our carbon facility, the only other
FDA-approved alternate supplier of our pyrolytic carbon components is
Carbomedics. Although we have a supply agreement with Carbomedics under which it
agrees to supply us with a minimum annual number of pyrolytic carbon components
starting in 2007 continuing through 2011, the amounts available under this
agreement are not expected to be sufficient to supply all of our needs for
components in those years. If our inventory is exhausted and we are unable to
manufacture carbon components or obtain them from other sources, we could be
forced to reduce or cease operations.

BECAUSE WE LACK MANUFACTURING EXPERIENCE, WE MAY NOT REALIZE EXPECTED SAVINGS
FROM MANUFACTURING OUR OWN PRODUCT. IN ADDITION, WE COULD EXPERIENCE PRODUCTION
DELAYS AND SIGNIFICANT ADDITIONAL COSTS.

     Under our agreement with Carbomedics, we have been granted an exclusive
worldwide license to manufacture pyrolytic carbon components for the ATS heart
valve. We cannot be certain that our strategy to establish internal
manufacturing capabilities will result in a cost-effective means for
manufacturing the ATS heart valve. We have limited experience in manufacturing
pyrolytic carbon. Although we have an FDA-approved carbon manufacturing
facility, we have only just started increasing production to higher levels. In
the future, as we continue to increase production at the plant, we may encounter
difficulties in maintaining and expanding our manufacturing operations,
including problems involving:

     -    production yields;

     -    quality control;

     -    per unit manufacturing costs;

     -    shortages of qualified personnel; and

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

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

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

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

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


                                       19

<PAGE>

elsewhere, including changes resulting from adverse trends in third-party
reimbursement programs, could have a material adverse effect on our business and
results of operations.

WE MAY FACE PRODUCT LIABILITY CLAIMS, WHICH COULD RESULT IN LOSSES IN EXCESS OF
OUR INSURANCE COVERAGE AND WHICH COULD NEGATIVELY AFFECT OUR ABILITY TO ATTRACT
AND RETAIN CUSTOMERS.

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

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

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

WE MAY BE SUED BY THIRD PARTIES WHICH CLAIM THAT OUR PRODUCT INFRINGES ON THEIR
INTELLECTUAL PROPERTY RIGHTS. ANY SUCH SUITS COULD RESULT IN SIGNIFICANT
LITIGATION OR LICENSING EXPENSES OR WE MIGHT BE PREVENTED FROM SELLING OUR
PRODUCT.

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

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

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

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

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

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

     -    maintain the approval of the FDA and international regulatory agencies
          to continue selling the ATS heart valve;

     -    obtain the approval of international regulatory agencies in countries
          where the ATS heart valve is not yet marketed;

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

     -    comply with manufacturing and reporting requirements; and

     -    undergo rigorous inspections by these agencies.


                                       20

<PAGE>

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

THE PRICE OF OUR COMMON STOCK HAS BEEN VOLATILE, WHICH MAY RESULT IN LOSSES TO
INVESTORS.

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

     -    the success of our management in operating ATS effectively;

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

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

     -    the status of component supply arrangements;

     -    changes in reimbursement policies;

     -    government regulation;

     -    developments in patent or other proprietary rights;

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

     -    general market conditions.

     In addition, due to one or more of the foregoing factors, in future years
our results of operations may fall below the expectations of securities analysts
and investors. In that event, the market price of our common stock could be
materially and adversely affected. Finally, in recent years the stock market has
experienced extreme price and volume fluctuations. This volatility has had a
significant effect on the market prices of securities issued by many companies
for reasons unrelated to their operating performance. These broad market
fluctuations may materially adversely affect our stock price, regardless of our
operating results.

OUR CHARTER DOCUMENTS AND MINNESOTA LAW MAY DISCOURAGE AND COULD DELAY OR
PREVENT A TAKEOVER OF OUR COMPANY.

     Provisions of our articles of incorporation, bylaws and Minnesota law could
make it more difficult for a third party to acquire us, even if doing so would
be beneficial to our shareholders. These provisions include the following:

     -    No cumulative voting by shareholders for directors;

     -    The ability of our board to set the size of the board of directors, to
          create new directorships and to fill vacancies;

     -    The ability of our board, without shareholder approval, to issue
          preferred stock, which may have rights and preferences that are
          superior to our common stock;

     -    The ability of our board to amend the bylaws; and

     -    Restrictions under Minnesota law on mergers or other business
          combinations between us and any holder of 10% or more of our
          outstanding common stock.


                                       21

<PAGE>

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The primary objective of our investment activities is to preserve principal
while at the same time maximizing the income we receive from our investments
without significantly increasing risk. Some of the securities that we invest in
may have market risk. This means that a change in prevailing interest rates may
cause the fair market value of the principal amount of the investment to
fluctuate. For example, if we hold a security that was issued with a fixed
interest rate at the then prevailing rate and the prevailing interest rate later
rises, the fair value of the principal amount of our investment will probably
decline. To minimize this risk, our portfolio of cash equivalents and short-term
investments may be invested in a variety of securities, including commercial
paper, money market funds, and both government and non-government debt
securities. The average duration of all our investments has generally been less
than one year. Due to the short-term nature of these investments, we believe we
have no material exposure to interest rate risk arising from our investments. We
do not use derivative financial instruments to manage interest rate risk or to
speculate on future changes in interest rates.

In the United States, Canada, France and Germany, we sell our products directly
to hospitals. In other international markets, we sell our products to
independent distributors who, in turn, sell to medical hospitals. Loss,
termination, or ineffectiveness of distributors to effectively promote our
product would have a material adverse effect on our financial condition and
results of operations.

Transactions with U.S. and non-U.S. customers and distributors, other than in
France and Germany, are entered into in U.S. dollars, precluding the need for
foreign currency hedges on such sales. Sales through our French and German
subsidiaries are in Euros, so we are subject to profitability risk arising from
exchange rate movements. We have not used foreign exchange contracts or similar
devices to reduce this risk. We will evaluate the need to use foreign exchange
contracts or similar devices if sales in France increase substantially.

We do not believe that inflation has had a material effect on our results of
operations in recent years and periods. There can be no assurance, however, that
our business will not be adversely affected by inflation in the future.

ITEM 4. CONTROLS AND PROCEDURES

As previously reported, in connection with our assessment of the effectiveness
of our internal control over financial reporting at the end of our last fiscal
year, we identified a material weakness in our internal control over financial
reporting. The deficiency in our internal control related to ineffective
application of inventory verification procedures, including cycle count
procedures. Historically, we had relied on cycle counting procedure to
substantiate inventory quantities in lieu of taking physical inventories. During
our evaluation of internal control over our cycle counting procedures, we
determined that our processes in place during 2004 were neither sufficient nor
documented adequately to rely upon. Because of the material weakness described
above, management concluded that (i) the Company did not maintain effective
internal control over financial reporting as of December 31, 2004, based on the
criteria established in "Internal Control - Integrated Framework" issued by
COSO, and (ii) as a result of this material weakness our disclosure controls and
procedures were not effective as of December 31, 2004.

To address this material weakness, commencing with the first quarter of fiscal
2005 we instituted a practice of conducting periodic physical inventories
instead of relying on the cycle count procedure previously in use. We relied on
this physical inventory procedure when our management concluded as of March 31,
2005 and June 30, 2005 that our disclosure controls and procedures were
effective. We will continue to conduct these periodic physical inventories until
we have developed and tested the reliability of a new and more robust process
for documenting and executing our cycle counts. We are currently in the final
stages of testing and verifying the reliability of our new cycle count process.
We currently anticipate that prior to the end of the fourth quarter of fiscal
2005 we will be able to cease conducting physical inventories and commence
relying on the cycle count procedure once again to verify our inventory.

(a) Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including
our Chief Executive Officer and our Chief Financial Officer, we evaluated the
effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of
1934, as amended (the Exchange Act)). Based upon that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that, as of the end of
the period covered by this report, our disclosure controls and procedures were
effective.

(b) Changes in Internal Control over Financial Reporting

As described above we continued to rely on physical inventories to verify our
inventory during the third quarter of fiscal 2005, as we have since the first
quarter of fiscal 2005. Although we anticipate that there will be a change made
in our internal control over financial reporting in the fourth quarter of fiscal
2005 when we expect to cease physical inventory counts, there has been no change
in our internal control over financial reporting (as defined in Rule 13a-15(f)
under the Exchange Act) during the fiscal quarter ended September 30, 2005 that
has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.


                                       22

<PAGE>

                           PART II. OTHER INFORMATION

ITEM 6. EXHIBITS

          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)

          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)

          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)

          31.1 Certification of Chief Executive Officer pursuant to Rules
               13a-15(e)/15d-15(e) (Section 302 Certification)

          31.2 Certification of Chief Financial Officer pursuant to Rules
               13a-15(e)/15d-15(e) (Section 302 Certification)

          32.1 Certification of the Chief Executive Officer pursuant to 18
               U.S.C. Section 1350 (Section 906 Certification)

          32.2 Certification of the Chief Financial Officer pursuant to 18
               U.S.C. Section 1350 (Section 906 Certification)


                                       23

<PAGE>

                                   SIGNATURES

Pursuant to the requirements 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.

Date: November 9, 2005              ATS MEDICAL, INC.


                                    By: /s/ Michael D. Dale
                                        ----------------------------------------
                                        Michael D. Dale, Chief Executive Officer
                                        (Duly Authorized Officer)


                                    By: /s/ John R. Judd
                                        ----------------------------------------
                                        John R. Judd, Chief Financial Officer
                                        (Principal Accounting Officer)


                                       24

<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)

  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)

  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)

  31.1    Certification of the Chief Executive Officer pursuant to Rules
          13a-15(e)/15d-15(e) (Section 302 Certification)

  31.2    Certification of the Chief Financial Officer pursuant to Rules
          13a-15(e)/15d-15(e) (Section 302 Certification)

  32.1    Certification of the Chief Executive Officer pursuant to 18 U.S.C.
          Section 1350 (Section 906 Certification)

  32.2    Certification of the Chief Financial Officer pursuant to 18 U.S.C.
          Section 1350 (Section 906 Certification)
</TABLE>


                                       25