##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-Q
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period Ended March 29, 2008
 Commission File Number: 0-18602
 ATS MEDICAL, INC.
  Minnesota
    
    41-1595629(State or Other Jurisdiction of
    
    (I.R.S. Employer Identification No.)Incorporation or Organization)
 3905 Annapolis Lane N., Suite 105Minneapolis, Minnesota
    
    55447(Address of Principal Executive Offices)
    
    (Zip Code)
  (Registrants Telephone Number, Including Area Code)
  (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
  þ o
  Large accelerated filer
o
    
    Accelerated filer
þ
    
    Non-accelerated filer   o
(Do not check if a smaller reporting company)
    
    Smaller Reporting Company o
  o þ
  Common Stock, $.01 par value
    
    59,894,709 shares




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##### 



TABLE OF CONTENTS
 Page(s)PART I. FINANCIAL INFORMATIONITEM 1. Financial Statements (Unaudited):Consolidated Balance Sheets as of March 29, 2008
and December 31, 2007
    
    
    3Consolidated Statements of Operations for the quarters
ended March 29, 2008 and March 31, 2007
    
    
   4Consolidated Statements of Cash Flow for the quarters
ended March 29, 2008 and March 31, 2007
    
    
    5Notes to Consolidated Financial Statements
    
    
    6 - 14ITEM 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations
    
    
    15 - 22ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    22 - 23ITEM 4. Controls and Procedures
    
    
    23PART II. OTHER INFORMATIONITEM 1 Legal Proceedings
    
    
    24 - 25ITEM 1A. Risk Factors
    
    
    25ITEM 6. Exhibits
    
    
    25 - 27SIGNATURES
    
    
    28EXHIBIT INDEX
    
    
    29 - 30Certification of Principal Executive OfficerCertification of Principal Financial OfficerSection 906 CertificationSection 906 Certification
  2




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PART I. FINANCIAL INFORMATION
 
 ITEM 1. Financial Statements
 ATS Medical, Inc.
 
 Consolidated Balance Sheets
  March 29,
    
    
    December 31,2008
    
    
    2007(Unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    10,218
    
    
    $
    10,480Short-term investments
    
    
    1,708
    
    
    
    4,189Accounts receivable, net
    
    
    11,488
    
    
    
    11,186Inventories
    
    
    19,266
    
    
    
    18,743Prepaid expenses
    
    
    1,016
    
    
    
    1,143Total current assets
    
    
    43,696
    
    
    
    45,741Leasehold improvements, furniture and equipment, net
    
    
    7,646
    
    
    
    7,739Goodwill
    
    
    15,175
    
    
    
    15,175Other intangible assets
    
    
    34,713
    
    
    
    35,604Other assets
    
    
    1,530
    
    
    
    1,638Total assets
    
    $
    102,760
    
    
    $
    105,897Liabilities and shareholders equityCurrent liabilities:Current maturities of bank notes payable
    
    $
    2,646
    
    
    $
    2,457Accounts payable
    
    
    4,959
    
    
    
    4,794Accrued compensation
    
    
    2,195
    
    
    
    2,361Accrued distributor liabilities
    
    
    430
    
    
    
    791Warrant liability
    
    
    2,393
    
    
    
    3,913Other accrued liabilities
    
    
    1,662
    
    
    
    1,209Total current liabilities
    
    
    14,285
    
    
    
    15,525Convertible senior notes payable, net of unamortized
discounts and bifurcated derivatives of $4,944 and
$4,964 at March 29, 2008 and December 31, 2007
    
    
    17,456
    
    
    
    17,436Payable to CryoCath Technologies, Inc.
    
    
    1,782
    
    
    
    1,742Notes payable
    
    
    5,954
    
    
    
    6,143Deferred income taxes
    
    
    143
    
    
    
    95Shareholders equity:Common stock, $.01 par value:Authorized shares - 100,000,000Issued and outstanding shares- 59,863,750 and 59,512,085
at March 29, 2008 and December 31, 2007
    
    
    599
    
    
    
    595Additional paid-in capital
    
    
    196,482
    
    
    
    196,108Accumulated deficit
    
    
    (134,988
    )
    
    
    (132,577
    )Accumulated other comprehensive income
    
    
    1,047
    
    
    
    830Total shareholders equity
    
    
    63,140
    
    
    
    64,956Total liabilities and shareholders equity
    
    $
    102,760
    
    
    $
    105,897
 The accompanying notes are an integral part of the consolidated financial statements.
 3




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##### Table of Contents



ATS Medical, Inc.
 
 Consolidated Statements of Operations
 (Unaudited)
  Quarter endedMarch 29,
    
    
    March 31,2008
    
    
    2007Net sales
    
    $
    14,845
    
    
    $
    10,796Cost of goods sold
    
    
    5,897
    
    
    
    4,553Gross profit
    
    
    8,948
    
    
    
    6,243Operating expenses:Sales and marketing
    
    
    6,487
    
    
    
    5,923Research and development
    
    
    2,206
    
    
    
    1,657General and administrative
    
    
    3,004
    
    
    
    2,616Amortization of intangibles
    
    
    891
    
    
    
    415Total operating expenses
    
    
    12,588
    
    
    
    10,611Operating loss
    
    
    (3,640
    )
    
    
    (4,368
    )Net interest expense
    
    
    (619
    )
    
    
    (445
    )Other income (expense), net
    
    
    1,918
    
    
    
    (6
    )Net loss before income taxes
    
    
    (2,341
    )
    
    
    (4,819
    )Income tax expense
    
    
    (70
    )
    
    
    (1
    )Net loss
    
    $
    (2,411
    )
    
    $
    (4,820
    )Net loss per share:Basic and diluted
    
    $
    (0.04
    )
    
    $
    (0.11
    )Weighted average number of shares outstanding:Basic and diluted
    
    
    59,739
    
    
    
    42,052
 The accompanying notes are an integral part of the consolidated financial statements.
 4




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ATS Medical, Inc.
 
 Consolidated Statements of Cash Flow
 (Unaudited)
  Quarter endedMarch 29,
    
    
    March 31,2008
    
    
    2007Operating activities:Net loss
    
    $
    (2,411
    )
    
    $
    (4,820
    )Adjustments to reconcile net loss to net cash
used in operating activities:Depreciation and amortization
    
    
    1,496
    
    
    
    904Stock compensation expense
    
    
    327
    
    
    
    316Deferred income taxes
    
    
    48
    
    
    
    Non-cash interest expense
    
    
    155
    
    
    
    112Change in value of warrant liability and convertible senior
notes derivatives
    
    
    (1,535
    )
    
    
    (19
    )Changes in operating assets and liabilities, net of acquisitions:Accounts receivable
    
    
    (288
    )
    
    
    9Inventories
    
    
    (483
    )
    
    
    (890
    )Prepaid expenses
    
    
    127
    
    
    
    (138
    )Accounts payable and accrued expenses
    
    
    68
    
    
    
    (260
    )Net cash used in operating activities
    
    
    (2,496
    )
    
    
    (4,786
    )Investing activities:Purchases of short-term investments
    
    
    (938
    )
    
    
    Maturities of short-term investments
    
    
    3,419
    
    
    
    2,567Payments for technology and distribution licenses
    
    
    
    
    
    
    (23
    )Purchases of leasehold improvements, furniture and equipment
    
    
    (488
    )
    
    
    (90
    )Net cash provided by investing activities
    
    
    1,993
    
    
    
    2,454Financing activities:Repayments of bank notes payable
    
    
    
    
    
    
    (283
    )Net proceeds from sales of common stock and warrants
    
    
    51
    
    
    
    15,464Other
    
    
    29
    
    
    
    76Net cash provided by financing activities
    
    
    80
    
    
    
    15,257Effect of exchange rate changes
    
    
    161
    
    
    
    (52
    )Increase (decrease) in cash and cash equivalents
    
    
    (262
    )
    
    
    12,873Cash and cash equivalents at beginning of period
    
    
    10,480
    
    
    
    4,612Cash and cash equivalents at end of period
    
    $
    10,218
    
    
    $
    17,485Significant non-cash transaction:Issuance of common stock for acquisition of intangible assets
    
    
    
    
    
    $
    500
 The accompanying notes are an integral part of the consolidated financial statements.
 5




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ATS Medical, Inc.
 
 Notes to Consolidated Financial Statements
 (Unaudited)
 Note 1. Basis of Presentation
     Note 2. Common Stock and Stock-Based Compensation
 Stock-Based Compensation
 Share-Based Payment
  Stock Options Outstanding
    
    
    
    
    
    
    
    
    
    WeightedUnder the Plans
    
    
    
    
    
    
    
    
    
    Average OptionNon-Plan
    
    
    
    
    
    Exercise PriceISO
    
    Non-ISO
    
    Options
    
    Total
    
    Per ShareBalance at December 31, 2007
    
    
    669,875
    
    
    
    299,000
    
    
    
    1,696,950
    
    
    
    2,665,825
    
    
    $
    3.02Options granted
    
    
    123,400
    
    
    
    
    
    
    
    
    
    
    
    123,400
    
    
    
    1.57Options exercised
    
    
    (16,000
    )
    
    
    
    
    
    
    
    
    
    
    (16,000
    )
    
    
    0.51Options canceled
    
    
    (10,500
    )
    
    
    
    
    
    
    
    
    
    
    (10,500
    )
    
    
    3.06Balance at March 29, 2008
    
    
    766,775
    
    
    
    299,000
    
    
    
    1,696,950
    
    
    
    2,762,725
    
    
    $
    2.97
  6




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##### Table of Contents



Weighted
    
    WeightedAverage
    
    AverageNumber of
    
    Award Date
    
    RemainingShares
    
    Fair Value
    
    Contractual TermUnvested at December 31, 2007
    
    
    2,037,538
    
    
    $
    2.06
    
    
    2.09 yearsAwards granted
    
    
    1,192,689
    
    
    
    1.58
    
    
    
    Awards vested
    
    
    (306,235
    )
    
    
    2.39
    
    
    
Awards forfeited
    
    
    (126,956
    )
    
    
    2.26
    
    
    
Unvested at March 29, 2008
    
    
    2,797,036
    
    
    $
    1.81
    
    
    2.73 years
   Quarter endedMarch 29,
    
    March 31,(in thousands)
    
    2008
    
    2007Stock compensation expense included in:Sales and marketing expenses
    
    $
    192
    
    
    $
    187General and administrative expenses
    
    
    135
    
    
    
    129Total stock compensation expense
    
    $
    327
    
    
    $
    316Stock compensation expense per share
    
    $
    0.01
    
    
    $
    0.01
    Private Placements of Common Stock
    7




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##### Table of Contents



Note 3. Acquisitions
 Acquisition of Assets from CryoCath Technologies, Inc.
 ®
  Purchase Price.
  Cash paid (includes $926 post-closing purchase price adjustment)
    
    $
    21,074License payments made under prior Distribution and Agency Agreements
    
    
    1,765Non-contingent cash payment to be made (discounted to present value
using discount rate of 9.25%)
    
    
    1,663Acquisition-related costs
    
    
    1,791Total preliminary purchase price
    
    $
    26,293
 8




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Preliminary Purchase Price Allocation.
 Current assets
    
    $
    951Fixed assets
    
    
    761Definite-lived intangible assets subject to amortization
    
    
    11,800Goodwill
    
    
    10,047Acquired in-process research and development
    
    
    3,500Current liabilities
    
    
    (766
    )Total preliminary purchase price allocation
    
    $
    26,293
  Weighted AverageAmount
    
    
    Amortization(in thousands)
    
    Assigned
    
    
    PeriodDefinite-lived intangible assets:Existing technology  core
    
    $
    4,400
    
    
    16 yearsExisting technology  developed
    
    
    5,600
    
    
    5 yearsDistributor relationships
    
    
    1,500
    
    
    12 yearsProduct trademarks
    
    
    300
    
    
    10 yearsTotal definite-lived intangible assets
    
    $
    11,800
    
    
    10 yearsGoodwill
    
    $
    10,047Acquired in-process research
and development
    
    $
    3,500
   Pro Forma Results of Operations
   9




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Quarter ended(in thousands, except per share data)
    
    March 31, 2007Net sales
    
    $
    12,970Net loss
    
    $
    (4,660
    )Net loss per share  basic and diluted
    
    $
    (0.09
    )
  Note 4. Inventories
  March 29,
    
    
    December 31,(in thousands)
    
    2008
    
    
    2007Raw materials
    
    $
    3,489
    
    
    $
    3,655Work-in-process
    
    
    3,643
    
    
    
    2,920Finished goods
    
    
    12,134
    
    
    
    12,168$
    19,266
    
    
    $
    18,743
 Note 5. Comprehensive Income (Loss)
  Note 6. Intangible Assets
 Indefinite-lived Intangibles and Impairment Policy
 Goodwill and Other Intangible Assets,
 10




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Intangible Asset Impairment
  Intangible Asset Purchases
   Note 7. Long-Term Debt
 Convertible Senior Notes Payable
  Accounting for Derivative Instruments and Hedging Activities,
  Bank Notes Payable
   11




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Note 8. Income Taxes
  Note 9. Fair Value Measurements
 Fair Value Measurements.
  
    
    Level 1  quoted prices in active markets for identical assets and liabilities.
    
    Level 2  observable inputs other than quoted prices in active markets for identical
assets and liabilities.
    
    Level 3  unobservable inputs in which there is little or no market data available,
which require the reporting entity to develop its own assumptions.
  The Fair Value Option for
Financial Assets and Financial Liabilities Accounting for
Certain Investments in Debt and Equity Securities
 12




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Note 10. Recently Issued Accounting Pronouncements
 Business
Combinations
 11. Litigation
 Abbey Litigation
    13




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CarboMedics Litigation
   14




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ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 This document 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. The factors that could cause such material differences are
identified in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December
31, 2007. 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
  ®
 .
 ® ®
   15




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Critical Accounting Policies and Estimates
  16




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Results of Operations
  Quarter endedIncreaseMarch 29,
    
    March 31,
    
    (Decrease)(in thousands)
    
    2008
    
    2007
    
    $
    
    %Net sales
    
    $
    14,845
    
    
    $
    10,796
    
    
    $
    4,049
    
    
    
    37.5
    %Cost of goods sold
    
    
    5,897
    
    
    
    4,553
    
    
    
    1,344
    
    
    
    29.5
    %Gross profit
    
    
    8,948
    
    
    
    6,243
    
    
    
    2,705
    
    
    
    43.3
    %Operating expenses:Sales and marketing
    
    
    6,487
    
    
    
    5,923
    
    
    
    564
    
    
    
    9.5
    %Research and development
    
    
    2,206
    
    
    
    1,657
    
    
    
    549
    
    
    
    33.1
    %General and administrative
    
    
    3,004
    
    
    
    2,616
    
    
    
    388
    
    
    
    14.8
    %Amortization of intangibles
    
    
    891
    
    
    
    415
    
    
    
    476
    
    
    
    114.7
    %Total operating expenses
    
    
    12,588
    
    
    
    10,611
    
    
    
    1,977
    
    
    
    18.6
    %Operating loss
    
    
    (3,640
    )
    
    
    (4,368
    )
    
    
    (728
    )
    
    
    (16.7
    )%Net interest income (expense)
    
    
    (619
    )
    
    
    (445
    )
    
    
    174
    
    
    
    39.1
    %Other income (expense), net
    
    
    1,918
    
    
    
    (6
    )
    
    
    1,924
    
    
    NMNet loss before income taxes
    
    
    (2,341
    )
    
    
    (4,819
    )
    
    
    (2,478
    )
    
    
    (51.4
    )%Income tax expense
    
    
    (70
    )
    
    
    (1
    )
    
    
    69
    
    
    NMNet loss
    
    $
    (2,411
    )
    
    $
    (4,820
    )
    
    $
    (2,409
    )
    
    
    (50.0
    )%
  Quarter endedMarch 29,
    
    March 31,2008
    
    2007Net sales
    
    
    100.0
    %
    
    
    100.0
    %Cost of goods sold
    
    
    39.7
    %
    
    
    42.2
    %Gross profit
    
    
    60.3
    %
    
    
    57.8
    %Operating expenses:Sales and marketing
    
    
    43.7
    %
    
    
    54.9
    %Research and development
    
    
    14.9
    %
    
    
    15.3
    %General and administrative
    
    
    20.2
    %
    
    
    24.2
    %Amortization of intangibles
    
    
    6.0
    %
    
    
    3.8
    %Total operating expenses
    
    
    84.8
    %
    
    
    98.2
    %Operating loss
    
    
    (24.5
    )%
    
    
    (40.5
    )%Net interest income (expense)
    
    
    (4.2
    )%
    
    
    (4.1
    )%Other income (expense), net
    
    
    12.9
    %
    
    
    (0.1
    )%Net loss before income taxes
    
    
    (15.8
    )%
    
    
    (44.6
    )%Income tax expense
    
    
    (0.5
    )%
    
    
    
    %Net loss
    
    
    (16.2
    )%
    
    
    (44.6
    )%
 17




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##### Table of Contents



Net Sales.
 Quarter endedMarch 29,
    
    March 31,
    
    Increase(in thousands)
    
    2008
    
    2007
    
    $
    
    %United States
    
    $
    5,830
    
    
    $
    4,280
    
    
    $
    1,550
    
    
    
    36.2
    %Outside United States
    
    
    9,015
    
    
    
    6,516
    
    
    $
    2,499
    
    
    
    38.3
    %Total
    
    $
    14,845
    
    
    $
    10,796
    
    
    $
    4,049
    
    
    
    37.5
    %
  Quarter endedMarch 29,
    
    March 31,2008
    
    2007United States
    
    
    39.3
    %
    
    
    39.6
    %Outside United States
    
    
    60.7
    %
    
    
    60.4
    %Total
    
    
    100.0
    %
    
    
    100.0
    %
  Quarter endedIncreaseMarch 29,
    
    March 31,
    
    (Decrease)(in thousands)
    
    2008
    
    2007
    
    $
    
    %Heart valve therapy
    
    $
    10,681
    
    
    $
    8,992
    
    
    $
    1,689
    
    
    
    18.8
    %Surgical arrhythmia
    
    
    3,848
    
    
    
    1,477
    
    
    
    2,371
    
    
    
    160.5
    %Surgical tools and accessories
    
    
    316
    
    
    
    327
    
    
    
    (11
    )
    
    
    (3.4
    )%Total
    
    $
    14,845
    
    
    $
    10,796
    
    
    $
    4,049
    
    
    
    37.5
    %
   18




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Cost of Goods Sold and Gross Profit.
   Sales and Marketing.
  Research and Development.
 General and Administrative.
  19




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Amortization of Intangibles.
 Net Interest Expense .
   Other Income (Expense)
 Accounting for Derivative Instruments and Hedging Activities.
  Income Taxes
  20




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Net Loss.
 Liquidity and Capital Resources
  Operating Activities.
 Investing Activities.
  Financing Activities.
   21




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Cash Management
   Off-Balance Sheet Arrangements
  
 ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
  22




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ITEM 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
   Changes in Internal Control over Financial Reporting
  23




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PART II. OTHER INFORMATION
 
 ITEM 1. Legal Proceedings
 Abbey Litigation
    24




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CarboMedics Litigation
   
 ITEM 1A. Risk Factors
  
 ITEM 6. Exhibits
 2.1***
    
    Agreement and Plan of Merger, dated as of January 23, 2006, by and among ATS Medical, Inc.,
Seabiscuit Acquisition Corp.; 3F Therapeutics, Inc.; and Boyd D. Cox, as Stockholder
Representative (Incorporated by reference to Exhibit 10.1 of the Companys Current Report on
Form 8-K filed on January 26, 2006).2.2
    
    Amendment No. 1 to Agreement and Plan of Merger, dated as of June 13, 2006, by and among ATS
Medical, Inc., Seabiscuit Acquisition Corp., 3F Therapeutics, Inc. and Boyd D. Cox, as
stockholder representative (Incorporated by reference to Exhibit 2.1 to the Companys Current
Report on Form 8-K filed on June 19, 2006).2.3
    
    Amendment No. 2 to Agreement and Plan of Merger, dated as of August 10, 2006, by and among
the Company, Seabiscuit Acquisition Corp., 3F Therapeutics, Inc. and Boyd D. Cox, as
stockholder representative (Incorporated by reference to Exhibit 2.1 to the Companys Current
Report on Form 8-K filed on August 15, 2006).2.4
    
    Escrow Agreement, effective as of September 29, 2006, by and among the Company, Boyd D. Cox,
as stockholder representative and Wells Fargo Bank, N.A. (Incorporated by reference to Exhibit
2.4 to the Companys Annual Report on Form 10-K for the year ended December 31, 2006).2.5***
    
    Option and Asset Purchase Agreement, dated as of May 31, 2005, by and among ATS Medical,
Inc., em Vascular, Inc., Keith L. March, M.D., John Havek, Walter L. Sembrowich and James E.
Shapland II (Incorporated by reference to Exhibit 2.5 to the Companys Annual Report on Form
10-K for the year ended December 31, 2006).2.6
    
    Letter Amendment, dated as of November 29, 2006, to the Option and Asset Purchase Agreement,
dated as of May 31, 2005, by and among ATS Medical, Inc., em Vascular, Inc., Keith L. March,
M.D., John Havek, Walter L. Sembrowich and James E. Shapland II, (Incorporated by reference to
Exhibit 2.6 to the Companys Annual Report on Form 10-K for the year ended December 31, 2006).2.7***
    
    Asset Purchase Agreement dated June 18, 2007 by and between ATS Medical, Inc. and CryoCath
Technologies Inc. (Incorporated by reference to Exhibit 2.1 to the Companys Current Report on
Form 8-K filed on June 25, 2007).
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3.1
    
    Second Restated Articles of Incorporation of ATS Medical, Inc. (Incorporated by reference to
Exhibit 3.1 to the Companys Quarterly Report on Form 10-Q for the quarter ended September 30,
2006 (the September 2006 Form 10-Q)).3.2
    
    Bylaws of the Company, as amended February 13, 2007 (Incorporated by reference to Exhibit
10.2 to the Companys Current Report on Form 8-K filed on February 20, 2007).4.1
    
    Specimen certificate for shares of common stock of the Company (Incorporated by reference to
Exhibit 4.1 to the Companys Annual Report on Form 10-K for the year ended December 31, 1997
(the 1997 Form 10-K)).4.2
    
    Indenture, dated as of October 7, 2005, between ATS Medical, Inc. and Wells Fargo Bank,
National Association, as Trustee (Incorporated by reference to Exhibit 4.1 of the Companys
Current Report on Form 8-K filed on October 12, 2005 (the October 12, 2005 Form 8-K)).4.3
    
    First Supplemental Indenture, dated October 13, 2005, to the Indenture dated as of October 7,
2005, by and between ATS Medical, Inc. and Wells Fargo Bank, National Association, as Trustee
(Incorporated by reference to Exhibit 4.3 of the Companys October 18, 2005 Form 8-K).4.4
    
    Form of 6% Convertible Senior Notes due 2025 (Incorporated by reference to Exhibit 4.1 of the
Companys Current Report on Form 8-K filed on October 18, 2005 (the October 18, 2005 Form
8-K)).4.5
    
    Form of Warrant (Incorporated by reference to Exhibit 4.2 of the Companys October 18, 2005
Form 8-K).4.6
    
    Form of Warrant (Incorporated by reference to Exhibit 10.3 to the Companys Current Report on
Form 8-K filed on March 16, 2007).4.7
    
    Warrant, dated June 28, 2007, issued by ATS Medical, Inc. to Alta Partners VIII, L.P.
(Incorporated by reference to Exhibit 10.4 to the Companys Current Report on Form 8-K filed
on July 5, 2007).10.1
    
    First Amendment, dated February 29, 2008, to the Loan and Security Agreement between Silicon
Valley Bank and the Company dated July 28, 2004 (Incorporated by reference to Exhibit 10.1 of
the Companys Current Report on Form 8-K filed on March 6, 2008 (the March 6, 2008 Form
8-K)).10.2
    
    Second Amendment, dated February 29, 2008, to the Loan and Security Agreement between Silicon
Valley Bank and the Company dated July 28, 2004 (Incorporated by reference to Exhibit 10.2 of
the Companys March 6, 2008 Form 8-K).10.3
    
    Unconditional Guaranty, dated February 29, 2008, entered into by 3F Therapeutics and ATS
Acquisition Corp., in favor of Silicon Valley Bank (Incorporated by reference to Exhibit 10.3
of the Companys March 6, 2008 Form 8-K).10.4
    
    Security Agreement, dated February 29, 2008, by and between Silicon Valley Bank, 3F
Therapeutics, Inc. and ATS Acquisition Corp. (Incorporated by reference to Exhibit 10.4 of the
Companys March 6, 2008 Form 8-K).31.1
    
    Certification of Principal Executive Officer pursuant to Rules 13a-15(e)/15d-15(e) of the
Securities Exchange Act, as amended (Section 302 Certification).31.2
    
    Certification of Principal Financial Officer pursuant to Rules 13a-15(e)/15d-15(e) of the
Securities Exchange Act, as amended (Section 302 Certification).
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32.1
    
    Certification of the Principal Executive Officer pursuant to 18 U.S.C. Section 1350 (Section
906 Certification).32.2
    
    Certification of the Principal Financial Officer pursuant to 18 U.S.C. Section 1350 (Section
906 Certification).
 
 
 ***
    
    Exhibits and Schedules to the acquisition agreement have been omitted but will be provided
supplementally to the Securities and Exchange Commission upon request. 27




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##### Table of Contents



SIGNATURES
  Date: May 7, 2008
    
    ATS MEDICAL, INC.By:
    
    /s/ Michael D. DaleMichael D. DaleChief Executive Officer(Duly Authorized Officer)By:
    
    /s/ Michael R. KramerMichael R. KramerChief Financial Officer(Principal Financial Officer)
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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description2.1***
    
    Agreement and Plan of Merger, dated as of January 23, 2006, by and among ATS Medical, Inc., Seabiscuit
Acquisition Corp.; 3F Therapeutics, Inc.; and Boyd D. Cox, as Stockholder Representative (Incorporated by
reference to Exhibit 10.1 of the Companys Current Report on Form 8-K filed on January 26, 2006).2.2
    
    Amendment No. 1 to Agreement and Plan of Merger, dated as of June 13, 2006, by and among ATS Medical, Inc.,
Seabiscuit Acquisition Corp., 3F Therapeutics, Inc. and Boyd D. Cox, as stockholder representative
(Incorporated by reference to Exhibit 2.1 to the Companys Current Report on Form 8-K filed on June 19, 2006).2.3
    
    Amendment No. 2 to Agreement and Plan of Merger, dated as of August 10, 2006, by and among the Company,
Seabiscuit Acquisition Corp., 3F Therapeutics, Inc. and Boyd D. Cox, as stockholder representative
(Incorporated by reference to Exhibit 2.1 to the Companys Current Report on Form 8-K filed on August 15,
2006).2.4
    
    Escrow Agreement, effective as of September 29, 2006, by and among the Company, Boyd D. Cox, as stockholder
representative and Wells Fargo Bank, N.A. (Incorporated by reference to Exhibit 2.4 to the Companys Annual
Report on Form 10-K for the year ended December 31, 2006).2.5***
    
    Option and Asset Purchase Agreement, dated as of May 31, 2005, by and among ATS Medical, Inc., em Vascular,
Inc., Keith L. March, M.D., John Havek, Walter L. Sembrowich and James E. Shapland II (Incorporated by
reference to Exhibit 2.5 to the Companys Annual Report on Form 10-K for the year ended December 31, 2006).2.6
    
    Letter Amendment, dated as of November 29, 2006, to the Option and Asset Purchase Agreement, dated as of May
31, 2005, by and among ATS Medical, Inc., em Vascular, Inc., Keith L. March, M.D., John Havek, Walter L.
Sembrowich and James E. Shapland II, (Incorporated by reference to Exhibit 2.6 to the Companys Annual Report
on Form 10-K for the year ended December 31, 2006).2.7***
    
    Asset Purchase Agreement dated June 18, 2007 by and between ATS Medical, Inc. and CryoCath Technologies Inc.
(Incorporated by reference to Exhibit 2.1 to the Companys Current Report on Form 8-K filed on June 25, 2007).3.1
    
    Second Restated Articles of Incorporation of ATS Medical, Inc. (Incorporated by reference to Exhibit 3.1 to
the Companys Quarterly Report on Form 10-Q for the quarter ended September 30, 2006 (the September 2006 Form
10-Q)).3.2
    
    Bylaws of the Company, as amended February 13, 2007 (Incorporated by reference to Exhibit 10.2 to the
Companys Current Report on Form 8-K filed on February 20, 2007).4.1
    
    Specimen certificate for shares of common stock of the Company (Incorporated by reference to Exhibit 4.1 to
the Companys Annual Report on Form 10-K for the year ended December 31, 1997 (the 1997 Form 10-K)).4.2
    
    Indenture, dated as of October 7, 2005, between ATS Medical, Inc. and Wells Fargo Bank, National Association,
as Trustee (Incorporated by reference to Exhibit 4.1 of the Companys Current Report on Form 8-K filed on
October 12, 2005 (the October 12, 2005 Form 8-K)).4.3
    
    First Supplemental Indenture, dated October 13, 2005, to the Indenture dated as of October 7, 2005, by and
between ATS Medical, Inc. and Wells Fargo Bank, National Association, as Trustee (Incorporated by reference to
Exhibit 4.3 of the Companys October 18, 2005 Form 8-K).4.4
    
    Form of 6% Convertible Senior Notes due 2025 (Incorporated by reference to Exhibit 4.1 of the Companys
Current Report on Form 8-K filed on October 18, 2005 (the October 18, 2005 Form 8-K)).4.5
    
    Form of Warrant (Incorporated by reference to Exhibit 4.2 of the Companys October 18, 2005 Form 8-K).
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##### Table of Contents



ExhibitNumber
    
    Description4.6
    
    Form of Warrant (Incorporated by reference to Exhibit 10.3 to the Companys Current Report on Form 8-K filed
on March 16, 2007).4.7
    
    Warrant, dated June 28, 2007, issued by ATS Medical, Inc. to Alta Partners VIII, L.P. (Incorporated by
reference to Exhibit 10.4 to the Companys Current Report on Form 8-K filed on July 5, 2007).10.1
    
    First Amendment, dated February 29, 2008, to the Loan and Security Agreement between Silicon Valley Bank and
the Company dated July 28, 2004 (Incorporated by reference to Exhibit 10.1 of the Companys Current Report on
Form 8-K filed on March 6, 2008 (the March 6, 2008 Form 8-K)).10.2
    
    Second Amendment, dated February 29, 2008, to the Loan and Security Agreement between Silicon Valley Bank and
the Company dated July 28, 2004 (Incorporated by reference to Exhibit 10.2 of the Companys March 6, 2008 Form
8-K).10.3
    
    Unconditional Guaranty, dated February 29, 2008, entered into by 3F Therapeutics and ATS Acquisition Corp., in
favor of Silicon Valley Bank (Incorporated by reference to Exhibit 10.3 of the Companys March 6, 2008 Form
8-K).10.4
    
    Security Agreement, dated February 29, 2008, by and between Silicon Valley Bank, 3F Therapeutics, Inc. and ATS
Acquisition Corp. (Incorporated by reference to Exhibit 10.4 of the Companys March 6, 2008 Form 8-K).31.1
    
    Certification of the Principal Executive Officer pursuant to Rules 13a-15(e)/15d-15(e) of the Securities
Exchange Act, as amended (Section 302 Certification)31.2
    
    Certification of the Principal Financial Officer pursuant to Rules 13a-15(e)/15d-15(e) of the Securities
Exchange Act, as amended (Section 302 Certification)32.1
    
    Certification of the Principal Executive Officer pursuant to 18 U.S.C. Section 1350 (Section 906 Certification)32.2
    
    Certification of the Principal Financial Officer pursuant to 18 U.S.C. Section 1350 (Section 906 Certification)
 
 ***
    
    Certain Exhibits and Schedules have been omitted but will be provided supplementally to the Securities and
Exchange Commission upon request. 30