##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended March 31, 2007
 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)
  (Former name, former address and former fiscal year, if changed since last report)
 þ o
  o þ o
  o þ




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##### 



TABLE OF CONTENTS
 Page(s)PART I. FINANCIAL INFORMATIONITEM 1. Financial Statements (Unaudited)Consolidated Balance Sheets as of March 31, 2007 and December 31, 2006
    
    3Consolidated Statements of Operations for the three months ended March 31, 2007 and 2006
    
    4Consolidated Statements of Cash Flows for the three months ended March 31, 2007 and 2006
    
    5Notes to Consolidated Financial Statements
    
    6-12ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    13-20ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
    
    20ITEM 4. Controls and Procedures
    
    20-21PART II. OTHER INFORMATIONITEM 1 Legal Proceedings
    
    22-23ITEM 1A. Risk Factors
    
    23ITEM 6. Exhibits
    
    23-24SIGNATURES
    
    25EXHIBIT INDEX
    
    26-27Confidential Separation and Release AgreementCertificationCertificationCertificationCertification
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM
1. Financial Statements
 ATS Medical, Inc.
 
 Consolidated Balance Sheets
  March 31,
    
    
    December 31,2007
    
    
    2006(Unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    17,485
    
    
    $
    4,612Short-term investments
    
    
    3,525
    
    
    
    6,092Accounts receivable, net
    
    
    11,670
    
    
    
    11,677Inventories
    
    
    19,682
    
    
    
    18,782Prepaid expenses
    
    
    1,313
    
    
    
    1,175Total current assets
    
    
    53,675
    
    
    
    42,338Leasehold improvements, furniture and equipment, net
    
    
    7,937
    
    
    
    8,213Goodwill
    
    
    5,092
    
    
    
    5,092Other intangible assets
    
    
    28,171
    
    
    
    28,063Other assets
    
    
    1,980
    
    
    
    2,134Total assets
    
    $
    96,855
    
    
    $
    85,840Liabilities and shareholders equityCurrent liabilities:Accounts payable
    
    $
    2,330
    
    
    $
    3,183Accrued compensation
    
    
    2,360
    
    
    
    2,589Accrued distributor liabilities
    
    
    1,778
    
    
    
    1,024Other accrued liabilities
    
    
    1,499
    
    
    
    1,433Current maturities of bank notes payable
    
    
    994
    
    
    
    1,133Total current liabilities
    
    
    8,961
    
    
    
    9,362Convertible senior notes payable, net of unamortized
discounts and bifurcated derivatives of $4,991 and
$5,006 at March 31, 2007 and December 31, 2006
    
    
    17,409
    
    
    
    17,394Bank notes payable
    
    
    1,050
    
    
    
    1,194Shareholders equity:Common stock, $.01 par value:Authorized shares - 100,000,000Issued and outstanding shares- 48,957,221 and
40,320,487 at March 31, 2007 and December 31, 2006
    
    
    490
    
    
    
    403Additional paid-in capital
    
    
    182,604
    
    
    
    166,411Accumulated other comprehensive income
    
    
    730
    
    
    
    645Accumulated deficit
    
    
    (114,389
    )
    
    
    (109,569
    )Total shareholders equity
    
    
    69,435
    
    
    
    57,890Total liabilities and shareholders equity
    
    $
    96,855
    
    
    $
    85,840
 The accompanying notes are an integral part of the consolidated financial statements.
 3




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ATS Medical, Inc.
 
 Consolidated Statements of Operations
   Three months ended March 31,2007
    
    
    2006Net sales
    
    $
    10,796
    
    
    $
    9,730Cost of goods sold
    
    
    4,553
    
    
    
    4,998Gross profit
    
    
    6,243
    
    
    
    4,732Operating expenses:Sales and marketing
    
    
    5,916
    
    
    
    4,834Research and development
    
    
    1,657
    
    
    
    405General and administrative
    
    
    2,649
    
    
    
    1,942Amortization of intangibles
    
    
    415
    
    
    
    Total operating expenses
    
    
    10,637
    
    
    
    7,181Operating loss
    
    
    (4,394
    )
    
    
    (2,449
    )Net interest expense
    
    
    (445
    )
    
    
    (311
    )Change in value of derivative
liability bifurcated from
convertible senior notes
    
    
    19
    
    
    
    1,185Net loss
    
    
    ($4,820
    )
    
    
    ($1,575
    )Net loss per share:Basic and diluted
    
    
    ($0.11
    )
    
    
    ($0.05
    )Weighted average number of shares outstanding:Basic and diluted
    
    
    42,052
    
    
    
    31,187
 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
   Three months ended March 31,2007
    
    
    2006Operating activitiesNet loss
    
    
    ($4,820
    )
    
    
    ($1,575
    )Adjustments to reconcile net loss to net cash
used in operating activities:Depreciation and amortization
    
    
    904
    
    
    
    439Loss on disposal of equipment
    
    
    
    
    
    
    5Stock compensation expense
    
    
    316
    
    
    
    199Non-cash interest expense
    
    
    112
    
    
    
    115Change in value of derivative liability bifurcated
from convertible senior notes
    
    
    (19
    )
    
    
    (1,185
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    9
    
    
    
    (1,214
    )Inventories
    
    
    (890
    )
    
    
    1,129Prepaid expenses
    
    
    (138
    )
    
    
    (752
    )Accounts payable and accrued expenses
    
    
    (260
    )
    
    
    (1,531
    )Other
    
    
    76
    
    
    
    (100
    )Net cash used in operating activities
    
    
    (4,710
    )
    
    
    (4,470
    )Investing activitiesPurchases of short-term investments
    
    
    
    
    
    
    (3,842
    )Maturities of short-term investments
    
    
    2,567
    
    
    
    1,694Payments for technology and distribution licenses
    
    
    (23
    )
    
    
    Purchases of leasehold improvements, furniture and equipment
    
    
    (90
    )
    
    
    (97
    )Net cash provided by (used in) investing activities
    
    
    2,454
    
    
    
    (2,245
    )Financing activitiesAdvances on bank notes payable
    
    
    
    
    
    
    1,500Repayments of bank notes payable
    
    
    (283
    )
    
    
    (209
    )Net proceeds from sales of common stock
    
    
    15,464
    
    
    
    86Net cash provided by financing activities
    
    
    15,181
    
    
    
    1,377Effect of exchange rate changes
    
    
    (52
    )
    
    
    (47
    )Increase (decrease) in cash and cash equivalents
    
    
    12,873
    
    
    
    (5,385
    )Cash and cash equivalents at beginning of period
    
    
    4,612
    
    
    
    16,620Cash and cash equivalents at end of period
    
    $
    17,485
    
    
    $
    11,235Significant non-cash transactionIssuance 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
 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, 2006
    
    
    917,625
    
    
    
    299,000
    
    
    
    2,532,700
    
    
    
    3,749,325
    
    
    $
    2.94Options granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Options exercised
    
    
    (6,125
    )
    
    
    
    
    
    
    (2,000
    )
    
    
    (8,125
    )
    
    
    0.63Options canceled
    
    
    (7,500
    )
    
    
    
    
    
    
    (48,750
    )
    
    
    (56,250
    )
    
    
    2.63Balance at March 31, 2007
    
    
    904,000
    
    
    
    299,000
    
    
    
    2,481,950
    
    
    
    3,684,950
    
    
    $
    2.95
  6




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##### Table of Contents



Options Outstanding at
    
    Options Exercisable atMarch 31, 2007:
    
    March 31, 2007:Weighted
    
    Weighted
    
    
    
    
    
    WeightedAverage
    
    Average
    
    
    
    
    
    AverageRange of
    
    Number
    
    Remaining
    
    Exercise
    
    Number
    
    ExerciseExercise Prices
    
    Outstanding
    
    Contractual Life
    
    Price
    
    Exercisable
    
    Price$0.37  $0.52
    
    
    759,875
    
    
    5.65 years
    
    $
    0.44
    
    
    
    759,875
    
    
    $
    0.440.79    2.35
    
    
    621,250
    
    
    6.02 years
    
    
    1.46
    
    
    
    558,750
    
    
    
    1.402.51    3.36
    
    
    687,700
    
    
    6.06 years
    
    
    2.97
    
    
    
    608,200
    
    
    
    3.023.46    3.80
    
    
    881,750
    
    
    6.82 years
    
    
    3.70
    
    
    
    874,250
    
    
    
    3.703.99    8.50
    
    
    679,375
    
    
    5.41 years
    
    
    5.51
    
    
    
    679,375
    
    
    
    5.519.88  12.44
    
    
    55,000
    
    
    3.26 years
    
    
    10.57
    
    
    
    55,000
    
    
    
    10.57$0.37$12.44
    
    
    3,684,950
    
    
    5.99 years
    
    $
    2.95
    
    
    
    3,535,450
    
    
    $
    2.97
   Weighted
    
    WeightedAverage
    
    AverageAward Date
    
    RemainingNumber of Shares
    
    Fair Value
    
    Contractual TermUnvested at December 31, 2006
    
    
    1,169,522
    
    
    $
    2.83
    
    
    2.03 yearsAwards granted
    
    
    105,000
    
    
    
    2.15
    
    
    
    Awards vested
    
    
    (243,000
    )
    
    
    3.11Awards forfeited
    
    
    (55,200
    )
    
    
    3.01
    
    
    
    Unvested at March 31, 2007
    
    
    976,322
    
    
    $
    2.68
    
    
    2.24 years
     7




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Private Placement
  Note 3. Acquisition of 3F Therapeutics, Inc.
   Pro Forma Results of Operations
  Quarter EndedMarch 31,(in thousands, except per share data)
    
    2006Net sales
    
    $
    9,773License revenue
    
    
    3,691Total revenue
    
    $
    13,464Net loss
    
    $
    (2,054
    )Net loss per share  basic and diluted
    
    $
    (0.05
    )
   8




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##### Table of Contents



Note 4. Inventories
  March 31,
    
    
    December 31,(in thousands)
    
    2007
    
    
    2006Raw materials
    
    $
    4,324
    
    
    $
    4,615Work-in-process
    
    
    3,518
    
    
    
    2,948Finished goods
    
    
    11,840
    
    
    
    11,219$
    19,682
    
    
    $
    18,782
 Note 5. Comprehensive Income (Loss)
  Note 6. Intangible Assets
 Indefinite-lived Intangibles and Impairment Policy
 Goodwill
and Other Intangible Assets,
 Change in Status of Indefinite-lived Intangible Asset
  Intangible Asset Purchase
  9




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Note 7. Long-Term Debt
 Convertible Senior Notes Payable
  Accounting for Derivative Instruments and Hedging Activities,
  Bank Notes Payable
   Note 8. Recently Issued Accounting Pronouncements
 Accounting for Uncertainty in Income Taxes-an interpretation of SFAS No. 109.
 Fair Value Measurements
 Considering the
Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial
Statements
 10




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The Fair Value Option for Financial Assets and
Financial Liabilities Accounting for Certain Investments in
Debt and Equity Securities
 Note 9. Litigation
 Abbey Litigation
    CarboMedics Litigation
  11




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12




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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. Some of 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, 2006. 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
   ® .
    13




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Critical Accounting Policies and Estimates
  14




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Results of Operations
  Three months ended March 31,Increase(Decrease)(In thousands)
    
    2007
    
    2006
    
    $
    
    %Net sales
    
    $
    10,796
    
    
    $
    9,730
    
    
    $
    1,066
    
    
    
    11.0
    %Cost of goods sold
    
    
    4,553
    
    
    
    4,998
    
    
    
    (445
    )
    
    
    (8.9
    )%Gross profit
    
    
    6,243
    
    
    
    4,732
    
    
    
    1,511
    
    
    
    31.9
    %Operating expenses:Sales and marketing
    
    
    5,916
    
    
    
    4,834
    
    
    
    1,082
    
    
    
    22.4
    %Research and development
    
    
    1,657
    
    
    
    405
    
    
    
    1,252
    
    
    
    309.1
    %General and administrative
    
    
    2,649
    
    
    
    1,942
    
    
    
    707
    
    
    
    36.4
    %Amortization of
intangibles
    
    
    415
    
    
    
    
    
    
    
    415
    
    
    
    Total operating expenses
    
    
    10,637
    
    
    
    7,181
    
    
    
    3,456
    
    
    
    48.1
    %Operating loss
    
    
    (4,394
    )
    
    
    (2,449
    )
    
    
    1,945
    
    
    
    79.4
    %Net interest income (expense)
    
    
    (445
    )
    
    
    (311
    )
    
    
    134
    
    
    
    43.1
    %Change in value of derivative
liability bifurcated from
convertible senior notes
    
    
    19
    
    
    
    1,185
    
    
    
    (1,166
    )
    
    
    (98.4
    )%Net loss
    
    
    ($4,820
    )
    
    
    ($1,575
    )
    
    $
    3,245
    
    
    
    206.0
    %
  Three months endedMarch 31,2007
    
    2006Net sales
    
    
    100.0
    %
    
    
    100.0
    %Cost of goods sold
    
    
    42.2
    %
    
    
    51.4
    %Gross profit
    
    
    57.8
    %
    
    
    48.6
    %Operating expenses:Sales and marketing
    
    
    54.8
    %
    
    
    49.7
    %Research and development
    
    
    15.3
    %
    
    
    4.2
    %General and administrative
    
    
    24.5
    %
    
    
    20.0
    %Amortization of intangibles
    
    
    3.8
    %
    
    
    0.0
    %Total operating expenses
    
    
    98.5
    %
    
    
    73.8
    %Operating loss
    
    
    (40.7
    )%
    
    
    (25.2
    )%Net interest income (expense)
    
    
    (4.1
    )%
    
    
    (3.2
    )%Change in value of derivative
liability bifurcated from
convertible senior notes
    
    
    0.2
    %
    
    
    12.2
    %Net loss
    
    
    (44.6
    )%
    
    
    (16.2
    )%
 15




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Net Sales.
 Three months ended March 31,Increase(In thousands)
    
    2007
    
    2006
    
    $
    
    %United States and Canada
    
    $
    4,307
    
    
    $
    3,894
    
    
    $
    413
    
    
    
    10.6
    %Outside U. S. and Canada
    
    
    6,489
    
    
    
    5,836
    
    
    
    653
    
    
    
    11.2
    %Total
    
    $
    10,796
    
    
    $
    9,730
    
    
    $
    1,066
    
    
    
    11.0
    %
  Three months endedMarch 31,2007
    
    2006United States and Canada
    
    
    39.9
    %
    
    
    40.0
    %Outside U. S. and Canada
    
    
    60.1
    %
    
    
    60.0
    %Total
    
    
    100.0
    %
    
    
    100.0
    %
  Three months ended March 31,Increase(In thousands)
    
    2007
    
    2006
    
    $
    
    %Heart valve therapy
    
    $
    8,992
    
    
    $
    8,628
    
    
    $
    364
    
    
    
    4.2
    %Surgical arrhythmia
    
    
    1,477
    
    
    
    1,058
    
    
    
    419
    
    
    
    39.6
    %Surgical tools and
accessories
    
    
    327
    
    
    
    44
    
    
    
    283
    
    
    
    643.2
    %Total
    
    $
    10,796
    
    
    $
    9,730
    
    
    $
    1,066
    
    
    
    11.0
    %
    16




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Cost of Goods Sold and Gross Profit.
    Sales and Marketing.
  Research and Development.
 General and Administrative.
  17




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Amortization of Intangibles.
 Net Interest Income (Expense ).
 Change in Value of Derivative Liability Bifurcated from Convertible Senior Notes Accounting for Derivative Instruments and Hedging Activities.
 Income Taxes
 Net Loss.
 Liquidity and Capital Resources
  Operating Activities.
 18




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Investing Activities.
  Financing Activities.
    Cash Management
  19




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Off-Balance Sheet Arrangements
  
 ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
     
 ITEM 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
   20




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Changes in Internal Control over Financial Reporting
  21




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PART II. OTHER INFORMATION
 
 ITEM 1. Legal Proceedings
 Abbey Litigation
    CarboMedics Litigation
  22




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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 10.1of 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)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)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)
 23




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##### Table of Contents



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)10.1
    
    Securities Purchase Agreement, dated March 15, 2007, between the Company and Certain
Investors (Incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form
8-K filed on March 16, 2007)10.2
    
    Registration Rights Agreement, dated March 15, 2007, between the Company and Certain
Investors (Incorporated by reference to Exhibit 10.2 to the Companys Current Report on Form
8-K filed on March 16, 2007)10.3
    
    Amendment, effective as of January 1, 2007, to the Marketing Services Agreement with Alabama
Tissue Center, Inc. (Incorporated by reference to Exhibit 10.61 of the Companys Annual Report
on Form 10-K for the year ended December 31, 2006)10.4
    
    Amendment No. 4, dated February 15, 2007, to the Loan and Security Agreement between Silicon
Valley Bank and the Company, dated July 28, 2004 (Incorporated by reference to the Companys
Current Report on Form 8-K filed on February 23, 2007)10.5
    
    Confidential Separation and Release Agreement executed as of March 6, 2007 between Marc R.
Sportsman and the Company31.1
    
    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)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 have been omitted but will be provided supplementally to the Securities
and Exchange Commission upon request. 24




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##### Table of Contents



SIGNATURES
  Date: May 9, 2007
    
    ATS MEDICAL, INC.By:
    
    /s/ Michael D. DaleMichael D. Dale, Chief Executive Officer(Duly Authorized Officer)By:
    
    /s/ Michael R. KramerMichael R. Kramer, Acting Chief 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 10.1of 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)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)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)10.1
    
    Securities Purchase Agreement, dated March 15, 2007, between the Company and Certain Investors (Incorporated
by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K filed on March 16, 2007)10.2
    
    Registration Rights Agreement, dated March 15, 2007, between the Company and Certain Investors (Incorporated
by reference to Exhibit 10.2 to the Companys Current Report on Form 8-K filed on March 16, 2007)10.3
    
    Amendment, effective as of January 1, 2007, to the Marketing Services Agreement with Alabama Tissue Center,
Inc. (Incorporated by reference to Exhibit 10.61 of the Companys Annual Report on Form 10-K for the year
ended December 31, 2006)10.4
    
    Amendment No. 4, dated February 15, 2007, to the Loan and Security Agreement between Silicon Valley Bank and
the Company, dated July 28, 2004 (Incorporated by reference to the Companys Current Report on Form 8-K filed
on February 23, 2007)10.5
    
    Confidential Separation and Release Agreement executed as of March 6, 2007 between Marc R. Sportsman and the
Company
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##### Table of Contents



ExhibitNumber
    
    Description31.1
    
    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)
 
 ***
    
    Exhibits and Schedules have been omitted but will be provided supplementally to the Securities and
Exchange Commission upon request. 27