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 ~~April~~July 3, 2010


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission File Number: 0-18602

ATS MEDICAL, INC.

(Exact name of registrant as specified in its charter)

Minnesota		41-1595629
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)
3905 Annapolis Lane N., Suite 105
Minneapolis, Minnesota		55447
(Address of Principal Executive Offices)		(Zip Code)

(763) 553-7736

3905 Annapolis Lane N., Suite 105
Minneapolis, Minnesota		55447
(Address of Principal Executive Offices)		(Zip Code)

(Registrant’s Telephone Number, Including Area Code)

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:

þ Yes o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files):

o Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):


Large accelerated filer o	Accelerated filer þ	Non-accelerated filer o	Smaller reporting company o
		(Do not check if a smaller reporting company)

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

o Yes þ No

The number of shares outstanding of each of the issuer’s classes of common stock as of ~~April 29~~August 6, 2010, was:

Common Stock, $.01 par value 7981,~~021~~596,~~244~~406 shares

TABLE OF CONTENTS

	Page(s)		~~Page(s)~~
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited):
Consolidated Balance Sheets as of April 3, 2010 and December 31, 2009				3
Consolidated Balance Sheets as of July 3, 2010 and December 31, 2009		3
Consolidated Statements of Operations for the three month periods ended April 3, 2010 and April 4, 2009				4
Consolidated Statements of Operations for the three and six month periods ended July 3, 2010 and July 4, 2009		4
Consolidated Statements of Cash Flows for the three month periods ended April 3, 2010 and April 4, 2009				5
Consolidated Statements of Cash Flows for the six month periods ended July 3, 2010 and July 4, 2009		5
Notes to Consolidated Financial Statements		6 – 14		~~6 – 13~~
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		15 – 24		~~14 – 22~~
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk		24		23
ITEM 4. Controls and Procedures		25		23
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings	26 – 29			~~24 – 25~~
ITEM 1A. Risk Factors	29 – 30			~~25 – 26~~
ITEM 6. Exhibits				26
ITEM 5. Other Information	30
SIGNATURES				27
ITEM 6. Exhibits	30 – 31
EXHIBIT INDEX				28
SIGNATURES	32
Exhibit 12.1
EXHIBIT INDEX	33
Exhibit 31.1
EX-12.1
Exhibit 31.2
EX-31.1
Exhibit 32.1
EX-31.2
Exhibit 32.2
EX-32.1
EX-32.2

PART I. FINANCIAL INFORMATION


ITEM 1.		Financial Statements

ATS Medical, Inc. ~~Consolidated Balance Sheets (In Thousands, Except Share Data)~~

	April 3,			December 31,
	2010			2009
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	9,549		$	14,235
Accounts receivable, less allowances of $427 at April 3, 2010 and $420 at December 31, 2009		14,701			14,398
Inventories, net		21,562			20,814
Prepaid expenses		2,239			1,774
Total current assets		48,051			51,221
Leasehold improvements, furniture and equipment, net		7,539			7,659
Goodwill		32,166			32,166
Other intangible assets		28,098			28,910
Other assets		1,259			1,299
Total assets	$	117,113		$	121,255
Liabilities and shareholders’ equity
Current liabilities:
Current portion of bank loan payable	$	2,646		$	2,646
Accounts payable		4,781			4,995
Accrued compensation		2,921			2,076
Convertible senior notes payable, net of unamortized discounts and bifurcated derivatives of $4,709 at April 3, 2010 and $4,741 at December 31, 2009		17,691			17,659
Other accrued liabilities		2,549			2,894
Total current liabilities		30,588			30,270
Bank loan payable		441			1,323
Other long-term liabilities		1,017			790
Shareholders’ equity:
Common stock, $.01 par value:
Authorized shares - 150,000,000
Issued and outstanding shares — 78,945,469 at April 3, 2010 and 78,187,741 at December 31, 2009		789			782
Additional paid-in capital		247,183			246,024
Accumulated deficit		(162,900	)		(158,229	)
Accumulated other comprehensive income (loss)		(5	)		295
Total shareholders’ equity		85,067			88,872
Total liabilities and shareholders’ equity	$	117,113		$	121,255

Consolidated Balance Sheets

(Unaudited)

(In Thousands, Except Share Data)


	July 3,			December 31,
	2010			2009
Assets
Current assets:
Cash and cash equivalents	$	11,970		$	14,235
Accounts receivable, less allowances of $506 at July 3, 2010 and $420 at December 31, 2009		14,657			14,398
Inventories, net		22,214			20,814
Prepaid expenses		1,526			1,774


Total current assets		50,367			51,221

Leasehold improvements, furniture and equipment, net		7,278			7,659
Goodwill		32,166			32,166
Other intangible assets		27,286			28,910
Other assets		1,573			1,299


Total assets	$	118,670		$	121,255


Liabilities and shareholders’ equity
Current liabilities:
Current portion of bank loan payable	$	—		$	2,646
Accounts payable		3,962			4,995
Accrued compensation		3,569			2,076
Convertible senior notes payable, net of unamortized discounts and bifurcated derivatives of $4,741 at December 31, 2009		—			17,659
Other accrued liabilities		2,157			2,894


Total current liabilities		9,688			30,270

Payable to Medtronic, Inc.		30,000			—
Bank loan payable		—			1,323
Other long-term liabilities		1,081			790

Shareholders’ equity:
Common stock, $.01 par value:
Authorized shares — 150,000,000
Issued and outstanding shares — 81,347,228 at July 3, 2010 and 78,187,741 at December 31, 2009		813			782
Additional paid-in capital		253,240			246,024
Accumulated deficit		(175,793	)		(158,229	)
Accumulated other comprehensive income (loss)		( 359	)		295


Total shareholders’ equity		77,901			88,872


Total liabilities and shareholders’ equity	$	118,670		$	121,255

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

ATS Medical, Inc.

Consolidated Statements of Operations

(Unaudited) ~~(In Thousands, Except Per Share Amounts)~~

	Three months ended
	April 3,			April 4,
	2010			2009
Net sales	$	18,591		$	18,403
Cost of goods sold		6,405			6,130
Gross profit		12,186			12,273
Operating expenses:
Sales and marketing		8,704			7,501
Research and development		3,267			2,044
General and administrative		3,041			2,476
Amortization of intangibles		812			788
Total operating expenses		15,824			12,809
Operating loss		(3,638	)		(536	)
Net interest expense		(617	)		(719	)
Other expense, net		(331	)		(353	)
Net loss before income taxes		(4,586	)		(1,608	)
Income tax expense		(85	)		(63	)
Net loss	$	(4,671	)	$	(1,671	)
Net loss per share:
Basic and diluted	$	(0.06	)	$	(0.02	)
Weighted average number of shares outstanding:
Basic and diluted		78,435			71,262

(In Thousands, Except Per Share Amounts)


	Three months ended July 3 (July 4)						Six months ended July 3 (July 4)
	2010			2009			2010			2009
Net sales	$	19,014		$	19,781		$	37,605		$	38,184
Cost of goods sold		6,607			7,040			13,012			13,170

Gross profit		12,407			12,741			24,593			25,014

Operating expenses:
Sales and marketing		9,199			7,525			17,903			15,026
Research and development		2,755			1,817			6,022			3,861
General and administrative		6,332			2,431			9,373			4,907
Amortization of intangibles		812			812			1,624			1,600


Total operating expenses		19,098			12,585			34,922			25,394


Operating income (loss)		(6,691	)		156			(10,329	)		(380	)

Net interest expense		(888	)		(694	)		(1,505	)		(1,413	)
Loss on redemption of convertible senior notes		(4,806	)		—			(4,806	)		—
Other income (expense), net		(448	)		471			(779	)		118


Net loss before income taxes		(12,833	)		(67	)		(17,419	)		(1,675	)
Income tax expense		(61	)		(119	)		(146	)		(182	)


Net loss	$	(12,894	)	$	(186	)	$	(17,565	)	$	(1,857	)


Net loss per share:
Basic and diluted	$	(0.16	)	$	(0.00	)	$	(0.22	)	$	(0.03	)


Weighted average number of shares outstanding:
Basic and diluted		79,953			71,688			79,185			71,471

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

ATS Medical, Inc. ~~Consolidated Statements of Cash Flows (Unaudited) (In Thousands)~~

	Three months ended
	April 3,			April 4,
	2010			2009
Operating activities:
Net loss	$	(4,671	)	$	(1,671	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		1,312			1,254
Stock-based compensation expense		1,022			484
Deferred income taxes		67			61
Non-cash interest expense		172			216
Change in value of derivative liability bifurcated from convertible senior notes		(9	)		(9	)
Changes in operating assets and liabilities:
Accounts receivable, net		(408	)		(699	)
Inventories, net		(1,206	)		(1,184	)
Prepaid expenses		(520	)		(873	)
Accounts payable and accrued expenses		603			51
Net cash used in operating activities		(3,638	)		(2,370	)
Investing activities:
Purchases of leasehold improvements, furniture and equipment		(244	)		(286	)
Net cash used in investing activities		(244	)		(286	)
Financing activities:
Payments on bank loan		(882	)		(882	)
Net proceeds from issuance of common stock		144			96
Other		9			37
Net cash used in financing activities		(729	)		(749	)
Effect of foreign exchange rate changes on cash		(75	)		(68	)
Decrease in cash and cash equivalents		(4,686	)		(3,473	)
Cash and cash equivalents at beginning of period		14,235			20,895
Cash and cash equivalents at end of period	$	9,549		$	17,422

Consolidated Statements of Cash Flows

(Unaudited)

(In Thousands)


	Six months ended
	July 3,			July 4,
	2010			2009
Operating activities:
Net loss	$	(17,565	)	$	(1,857	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		2,643			2,540
Stock-based compensation expense		1,869			1,197
Deferred income taxes		127			141
Non-cash interest expense		295			431
Loss on redemption of convertible senior notes		4,806			—
Change in value of derivative liability bifurcated from convertible senior notes		(9	)		(18	)
Changes in operating assets and liabilities:
Accounts receivable, net		(497	)		(822	)
Inventories, net		(2,434	)		(1,013	)
Prepaid expenses		117			(782	)
Accounts payable and accrued expenses		546			(5,825	)

Net cash used in operating activities		(10,102	)		(6,008	)

Investing activities:
Payments for business acquisitions		—			(2,000	)
Purchases of leasehold improvements, furniture and equipment		(526	)		(699	)
Other		—			479

Net cash used in investing activities		(526	)		(2,220	)

Financing activities:
Loan from Medtronic, Inc.		30,000			—
Payments on bank loan		(3,969	)		(1,543	)
Redemption and retirement of convertible senior notes		(22,400	)		—
Proceeds from issuance of common stock, net of issuance costs		5,379			158
Other		(425	)		29

Net cash provided by (used in) financing activities		8,585			(1,356	)

Effect of foreign exchange rate changes on cash		(222	)		11

Decrease in cash and cash equivalents		(2,265	)		(9,573	)
Cash and cash equivalents at beginning of period		14,235			20,895

Cash and cash equivalents at end of period	$	11,970		$	11,322

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

ATS Medical, Inc. ~~Notes to Consolidated Financial Statements (Unaudited)~~

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” or “ATS”) without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and United States Generally Accepted Accounting Principles (“GAAP”) as set forth by the Financial Accounting Standards Board (“FASB”) in its Accounting Standards Codification (“ASC”), to ensure consistent and accurate reporting of the Company’s financial condition, results of operations and cash flows. 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 U. S. GAAP have been condensed or omitted pursuant to SEC rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. The year-end balance sheet was derived from audited financial statements but does not include all disclosures required by U.S. GAAP. 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 for the fiscal year ended December 31, 2009.

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.

The Company utilizes a 52 week calendar year that ends on December 31. For interim periods, the Company utilizes a 13 week quarterly period that ends on the Saturday nearest the end of the calendar quarter. The three month periods ended ~~April~~July 3, 2010 and ~~April~~July 4, 2009 each consisted of 9391 calendar days. The six month periods ended July 3, 2010 and 94July 4, 2009 consisted of 184 and 185 calendar days, respectively.

~~Note~~Certain 2amounts in the consolidated statement of cash flows for the six months ended July 4, 2009 have been reclassified to conform to the full year 2009 presentation. ~~Stock-Based~~These ~~Compensation~~reclassifications had no effect on the net decrease in cash and ~~Equity~~cash ~~Plans~~equivalents as previously reported.

Note 2. Merger with Medtronic, Inc.

On April 28, 2010, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Medtronic, Inc. (“Medtronic”) and Pilgrim Merger Corporation, a wholly owned subsidiary of Medtronic, pursuant to which Medtronic agreed to acquire all of the outstanding shares of the Company for $4.00 per share in cash, without interest, subject to decrease under the limited circumstances described in the Merger Agreement (the “Merger Consideration”), and pursuant to which the Company will become a wholly owned subsidiary of Medtronic (the “Merger”). Each option to purchase Company common stock that is outstanding as of the effective time of the Merger (the “Effective Time”) will be canceled in exchange for the right to receive in cash the amount by which the Merger Consideration exceeds the exercise price, multiplied by the number of shares subject to such option, less applicable withholding tax obligations. Each restricted stock unit (“RSU”) that is outstanding immediately prior to the Effective Time will, at the Effective Time, be canceled in exchange for the right to receive, in cash, the Merger Consideration, less applicable withholding tax obligations. Each warrant to purchase Company common stock that is outstanding immediately prior to the Effective Time will be converted into the right to receive, upon exercise, an amount in cash equal to the amount by which the Merger Consideration exceeds the exercise price, multiplied by the number of shares subject to such warrant, less applicable withholding tax obligations. The Merger has been unanimously approved by the Company’s Board of Directors and was approved by the Company’s shareholders at a special meeting of shareholders held on August 5, 2010.

Pursuant to the Merger Agreement, the Company has made certain representations, warranties and covenants, including, among others, not to engage in certain kinds of transactions during the transition period from the date of the Merger Agreement until the Merger is completed, and not to solicit proposals relating to alternative business combination transactions or, subject to certain exceptions, enter into discussions concerning or provide confidential information in connection with any proposals for alternative business combination transactions. In addition, the Company was required to redeem, and in June 2010 redeemed (see next paragraph), as a condition of and prior to the completion of the proposed Merger, all of its 6% Convertible Senior Notes due 2025 (“Notes”) at a redemption price in cash equal to 100% of the principal amount of the Notes, together with accrued and unpaid interest.

In addition, under the Merger Agreement Medtronic agreed to loan the Company and certain of its subsidiaries up to $30 million (the “Loan”). In May 2010, the Company drew the maximum permitted advance of $30 million. Advances under the Loan bear interest at the annual rate of 10%, payable monthly. The Loan documents provide that the proceeds of any advance may only be used to redeem the Notes, to repay outstanding borrowings under the Company’s $8.6 million term loan with Silicon Valley Bank (the “Term Loan”), and/or to finance working capital or, if the Merger Agreement is terminated, for general corporate purposes in the ordinary course of business consistent with past practice. In accordance with the terms of the Loan, the Company used the May 2010 advance to redeem and retire the Notes and repay all outstanding borrowings under the Term Loan. The entire unpaid principal balance of the Loan, together with accrued and unpaid interest, will be due and payable in full 24 months following the termination, for any reason, of the Merger Agreement. A facility fee of 1.5% of the original principal balance of the Loan was paid at the time of the May 2010 advance. Upon final payment of the Loan, the Company will be required to pay, in addition to the then outstanding principal and accrued but unpaid interest, a final payment equal to 6% of the original principal balance of the Loan. In addition, if the Merger Agreement is terminated for any reason, the Company is required under the terms of the Loan to issue Medtronic a seven-year warrant (the “Medtronic Warrant”) to purchase, at a per share exercise price of $2.61, a number of shares of the Company’s common stock equal to 4% of the quotient of $30 million divided by $2.61, provided that the maximum number of shares issuable pursuant to the Medtronic Warrant may not exceed that number of shares which is 19.9% of the total number of shares of common stock of the Company outstanding on the date of issuance of such shares. The exercise price and the number of shares purchasable upon exercise of the Medtronic Warrant will be subject to the anti-dilution adjustments provided for in the Medtronic Warrant. The Loan is secured by security interests in certain collateral of the Company and the stock in certain subsidiaries of the Company.

The Merger Agreement contains certain termination rights for both Medtronic and the Company, and further provides that in the event of termination of the Merger Agreement under certain specified circumstances, the Company would be required to pay Medtronic a termination fee of $13 million.

Consummation of the Merger is subject to customary conditions and approvals, including, but not limited to (i) the approval of the Company’s shareholders, (ii) the absence of any law or order prohibiting the consummation of the Merger, (iii) the expiration or termination of any applicable waiting period under the Hart—Scott—Rodino Antitrust Improvements Act of 1976, as amended, and the receipt of approvals under applicable foreign antitrust laws, (iv) not more than 10% of the outstanding shares of our Common Stock being the subject of validly exercised appraisal rights and (v) the absence of a material adverse effect with respect to ATS. As of the date of this Form 10-Q, the Company’s shareholders have approved the Merger, the Company has received all required antitrust approvals relating to the Merger and no holders of the Company’s common stock asserted dissenters’ rights in accordance with Minnesota law. The Merger is expected to be completed on or about August 12, 2010, subject to satisfaction or waiver of all conditions to closing specified in the Merger Agreement.

Note 3. Stock-Based Compensation and Equity Plans

Stock-Based Compensation

The Company accounts for its stock-based employee compensation plans under the recognition and measurement principles set forth in FASB ASC 718, Stock Compensation, which requires all share-based payments to be recognized in the income statement based on their fair values.

~~The following table summarizes stock compensation expense recognized in the statements of~~7 ~~operations for the quarterly periods ended April 3, 2010 and April 4, 2009 (in thousands, except per share data):~~

	Three months ended
	April 3,		April 4,
	2010		2009
Stock compensation expense included in:
Cost of goods sold	$	49	$	—
Sales and marketing expenses		390		271
Research and development expenses		240		71
General and administrative expenses		343		142
Total stock compensation expense	$	1,022	$	484
Stock compensation expense per share	$	0.01	$	0.01

Based on an analysis of the Company’s historical data, the Company applied forfeiture rates during the quarterly periods ended April 3, 2010 and April 4, 2009 of 10.16% and 9.56%, respectively, to stock options and restricted stock units (“RSUs”) outstanding in determining its stock compensation expense, which it believes are reasonable forfeiture estimates for these periods.

AsThe offollowing ~~April 3,~~table ~~2010,~~summarizes ~~the~~stock ~~Company~~compensation ~~had~~expense ~~approximately~~recognized ~~$0.3 million~~in ofthe ~~total~~statements ~~unrecognized compensation~~of ~~expense,~~operations ~~net~~for ofthe ~~estimated~~three ~~forfeitures,~~and ~~related~~six tomonth ~~stock~~periods ~~options~~ended ~~that will be recognized over a weighted average period of 4.25~~July ~~years~~3, 2010 and ~~approximately $7.9~~July ~~million of total unrecognized compensation expense~~4, ~~net~~2009 of(in ~~estimated forfeitures~~thousands, ~~related to RSU awards that will be recognized~~ ~~over~~except aper ~~weighted~~share ~~average period of approximately 3.75 years.~~data):


	Three months ended				Six months ended
	July 3,		July 4,		July 3,		July 4,
(in thousands, except per share data)	2010		2009		2010		2009

Stock compensation expense included in:
Cost of goods sold	$	60	$	47	$	109	$	47
Sales and marketing expenses		340		349		730		620
Research and development expenses		141		78		381		149
General and administrative expenses		306		239		649		381

Total stock compensation expense	$	847	$	713	$	1,869	$	1,197


Stock compensation expense per weighted average share outstanding	$	0.01	$	0.01	$	0.02	$	0.02

Based on an analysis of the Company’s historical data, the Company applied forfeiture rates of 10.16% during the three and six month periods ended July 3, 2010 and 9.56% for the three and six month periods ended July 4, 2009, to stock options and RSUs outstanding in determining its stock compensation expense, which it believes are reasonable forfeiture estimates for these periods.

As of July 3, 2010, the Company had approximately $0.3 million of total unrecognized compensation expense, net of estimated forfeitures, related to stock options that will be recognized over a weighted average period of four years, and approximately $7.6 million of total unrecognized compensation expense, net of estimated forfeitures, related to RSU awards that will be recognized over a weighted average period of approximately 3.66 years.

Equity Plans

The Company had a total of 712,~~970~~654,~~629~~605 shares of common stock reserved for stock option grants and RSU awards at ~~April~~July 3, 2010, of which ~~139~~5,~~738~~097,609 shares were available for future grants or awards under the Company’s stock-based compensation plans, including 5,000,000 shares approved at the 2010 annual meeting of shareholders. Due to the proposed Merger with Medtronic, the Company does not intend to grant or award additional stock options or RSUs.

The following table summarizes the 2010 changes in stock options outstanding under the Company’s stock-based compensation plans:

													Weighted
	Stock Options Outstanding												Average Option
	Under the Plans						~~Non-Plan~~						Exercise Price
	ISO			Non-ISO			Non-Plan Options			Total			Per Share
Outstanding at December 31, 2009		717,800			289,000			1,493,200			2,500,000		$	2.82
Options granted		176,100			—			—			176,100			2.45
Options exercised		(1338,~~100~~375	)		—			—(84,200	)		(13122,~~100~~575	)		23.3111
Options canceled		(4773,~~800~~400	)		(7,500	)		—(75,000	)		(55155,~~300~~900	)		86.1215
Outstanding at April 3, 2010		833,000			281,500			1,493,200			2,607,700		$	2.69
Outstanding at July 3, 2010		782,125			281,500			1,334,000			2,397,625		$	2.57

As of ~~April~~July 3, 2010, the aggregate intrinsic value of options outstanding was approximately $13.46 million and the aggregate intrinsic value of options exercisable was approximately $13.0 million. For the six month period ended July 3, 2010, the aggregate intrinsic value of options exercised was approximately $0.1 million.

The following table summarizes 2010 RSU award activity under the Company’s stock-based compensation plans:

Weighted Average

Weighted

Weighted Average

Average

Number of

Award Date

Remaining

Fair Value

Contractual Term

Outstanding (unvested ) at December 31, 2009

4,167,677

2.12

1.92 years

Awards granted

12,~~846~~050,~~444~~203

2.4756

Awards vested

(~~707~~959,~~026~~982

)

2.0211

Awards forfeited

(8398,~~904~~527

)

2.0710

Outstanding (unvested) at April 3, 2010

5,223,191

2.26

2.29 years

Outstanding (unvested) at July 3, 2010

5,159,371

2.30

2.16 years

As of ~~April~~July 3, 2010, the aggregate intrinsic value of unvested RSU awards outstanding was approximately $1320.34 million.

Note 34. Inventories

The Company carries and relieves inventories at the lower of manufacturing cost (first-in, first-out basis) or market (net realizable value). Inventories consisted of the following (in thousands):

	April 3,			December 31,
	July 3,			December 31,
	2010			2009
Raw materials	$	3,~~357~~350		$	2,639
Work-in-process		6,~~175~~736			6,390
Finished goods		13,~~030~~228			12,685
Total inventories		2223,~~562~~314			21,714
Less: non-current inventories		(1,~~000~~100	)		(900	)
Inventories, net	$	2122,~~562~~214		$	20,814

A portion of the Company’s finished goods inventories was in excess of its current requirements based on the historical and anticipated level of sales. Management believes that the majority of these excess quantities will be utilized over the next two to five years. The Company therefore included $1.01 million and $0.9 million of inventories in non-current other assets on the balance sheets at ~~April~~July 3, 2010 and December 31, 2009, respectively.

7Note 5. Comprehensive Income (Loss)

~~Table~~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. The Company recognized net comprehensive losses of ~~Contents~~$0.4 million and $0.7 million for the three and six month periods ended July 3, 2010, respectively, and recognized net comprehensive gains of $0.3 million and $0.1 million for the three and six month periods ended July 4, 2009, respectively.

Note 46. ~~Comprehensive~~Intangible ~~Income (Loss)~~Assets

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. The Company recognized net comprehensive losses of $0.3 million and $0.2 million for the quarterly periods ended April 3, 2010 and April 4, 2009, respectively.

Note 5. Intangible Assets

Indefinite-lived intangible assets consist of goodwill, which is carried at cost. The Company applies the accounting principles set forth in FASB ASC 350, Intangibles-Goodwill and Other, which prohibits the amortization of intangible assets with indefinite useful lives and requires that these assets be reviewed for impairment at least annually. Management reviews goodwill for impairment annually, or more frequently if a change in circumstances or occurrence of events suggests the remaining value may not be recoverable. The test for impairment requires management to make estimates about fair-value which are based either on the expected present value of future cash flows or on other measures of value such as the market capitalization of the Company. If the carrying amount of the assets is greater than the measures of fair value, impairment is considered to have occurred and a write-down of the asset is recorded.

Definite-lived intangible assets consist of purchased technology and patents, technology licenses and agreements, trademarks, tradenames and distribution intangibles, which are carried at amortized cost. The Company assesses definite-lived intangible asset impairment in accordance with FASB ASC 360-10-35, Property, Plant and Equipment-Overall-Subsequent Measurement. If a triggering event occurs, the Company assesses the recoverability of definite-lived intangible assets by reference to future gross profit cash flows from the underlying products utilizing the capitalized intangible assets.

Impairment testing on all of the Company’s intangible assets was completed by management as of December 31, 2009. Management determined that the Company’s intangible assets, including goodwill, were not impaired. In performing its year-end impairment test for goodwill, the Company used a market capitalization approach based on the closing price of the Company’s common stock on the date of measurement. This market capitalization value was compared to the net book value of the Company (i.e. total assets, including goodwill, minus total liabilities). The total market capitalization exceeded the net book value of the Company; therefore, no goodwill impairment was indicated. In performing its year-end impairment review for definite-lived intangible assets, the Company assessed the recoverability of definite-lived intangible assets by reference to future gross profit cash flows from the underlying products using the capitalized technology and trademarks. Based on this assessment, no impairment of definite-lived intangible assets was indicated.

Note 67. Debt and Borrowings

Medtronic Loan

In connection with the proposed Merger with Medtronic, Medtronic provided a $30 million Loan to the Company in May 2010. This Loan and its terms are disclosed in Note 2 above.

Debt Refinancing

On February 25, 2010, the Company received a commitment letter for four-year (interest only during the first year) term debt financing of approximately $30 million from a member of its Board of Directors, Theodore C. Skokos, and The Ted and Shannon Skokos Foundation (the “Skokos Commitment”). This financing was intended to be used to call and retire the Company’s Convertible Senior Notes and bank Term Loan, together totaling approximately $26 million, as well as to provide general corporate working capital. In light of the Company’s proposed Merger with Medtronic, ~~Inc. (“Medtronic”)~~ and the related $30 million Loan from Medtronic (see Note 122 ~~below~~above), the Company allowed the Skokos Commitment to expire. As required under the terms of the commitment letter, the Company paid a one-time $0.45 million facility fee during the first quarter of 2010 and ~~will~~paid ~~pay~~ a break-up fee of $0.45 million in the second quarter of 2010 in connection with the expiration of the Skokos Commitment. These amounts are included in general and administrative expenses on the Consolidated Statement of Operations for the three and six months ended July 3, 2010.

Convertible Senior Notes Payable

In 2005, the Company sold a combined $22.4 million aggregate principal amount of 6% Convertible Senior Notes, ~~due~~which ~~2025~~were, ~~(“Notes”)~~prior ~~which~~to ~~are~~their redemption and retirement in June 2010, convertible into 5,333,334 shares of the Company’s common stock,. Included with the Notes were Warrants to purchase 1,344,000 shares of the Company’s common stock exercisable at $4.40 per share (“Warrants”), and certain embedded derivatives. Interest ison ~~payable under~~ the Notes was payable each April and October. In June 2010, the Company redeemed and retired the Notes, which was required as a condition of the proposed Merger with Medtronic. The Notes were redeemed using proceeds from the $30 million Loan obtained from Medtronic in connection with the proposed Merger. See Note 2 above. For the three months ended July 3, 2010, the Company ~~has~~recorded a non-cash, non-operating loss on redemption and retirement of the Notes of $4.8 million, related primarily to the write-off of the remaining balances of unamortized discounts on the Notes. Prior to the June 2010 redemption and retirement of the Notes, the Note holders had the right to ~~redeem~~require the Company to repurchase the Notes at 100% of the principal amount plus accrued interest aton ~~any~~October 15 ~~time~~in 2010, 2015 and 2020. Accordingly, the Company included the Notes within current liabilities on orits ~~after~~balance ~~October~~sheet at December 2031, ~~2008~~ 2009.

8The Company had bifurcated embedded derivatives from the Notes as required by FASB ASC 815, Derivatives and Hedging, and applicable SEC rules. The Company recorded a $5.5 million derivative liability on the date of issuance of the Notes, with an offsetting discount on the Notes. The total value of the Warrants on the date of issuance was also recorded as a discount on the Notes. The total discount on the Notes was being amortized to interest expense over the 20 year life of the Notes, using the effective interest method. Interest expense attributable to discount amortization totaled $0.07 million and $0.08 million for the six month periods ended July 3, 2010 and July 4, 2009, respectively.

The ~~redemption~~most ofsignificant ~~the~~derivative ~~Notes~~related isto ~~required~~the aslack ~~a condition~~ of ~~the~~authorized ~~proposed~~shares ~~Merger~~to ~~with~~cover ~~Medtronic.~~the ~~See~~potential ~~Note~~conversion 12and ~~below~~warrant exercise. ~~The~~That ~~Notes~~derivative ~~will~~was bemarked ~~redeemed~~to ~~using~~market ~~the~~until ~~proceeds~~appropriate shareholder ofapproval afor ~~$30 million~~additional ~~Loan~~authorized toshares bewas obtained in ~~connection with the proposed Merger. When the Notes are redeemed~~2006, ~~the~~at ~~Company~~which ~~will~~time ~~recognize a~~the ~~non-cash~~balance ~~debt restructuring charge~~ of ~~approximately~~the ~~$4.7 million~~liability ~~related~~was ~~primarily~~offset toagainst the ~~unamortized~~ remaining discount on the ~~Notes~~debt. The ~~investors~~other derivatives ~~have~~identified ~~the~~were ~~right~~not tomaterial. ~~require~~The ~~the~~derivative ~~Company~~liability ~~to repurchase~~included ~~the~~certain ~~Notes~~time-based provisions ~~at 100%~~ of the ~~principal~~Notes ~~amount~~which ~~plus~~expired ~~accrued~~over ~~interest~~time ~~on October 15 in 2010, 2015~~ and ~~2020.~~was ~~Accordingly,~~adjusted ~~the~~to ~~Company~~fair ~~has~~value ~~included the Notes within current liabilities~~ on ~~its~~a quarterly ~~balance~~basis. ~~sheets~~Derivative atliability ~~April 3,~~activity ~~2010~~is ~~and~~summarized ~~December 31,~~below ~~2009.~~(in thousands):

The Company bifurcated embedded derivatives from the Notes as required by FASB ASC 815, Derivatives and Hedging, and applicable SEC rules. The Company recorded a $5.5 million derivative liability on the date of issuance of the Notes, with an offsetting discount on the Notes. The total value of the Warrants on the date of issuance was also recorded as a discount on the Notes. The total discount on the Notes is being amortized to interest expense over the 20 year life of the Notes, using the effective interest method. Interest expense attributable to discount amortization totaled approximately $0.04 million for each of the quarterly periods ended April 3, 2010 and April 4, 2009.


	Six months ended
	July 3, 2010			July 4, 2009
Derivative liability balance at beginning of period	$	56		$	90
Change in valuation gain included in other income:
First quarter		(9	)		(9	)
Second quarter		—			(9	)
Write-off remaining derivative liability due to redemption of Notes		(47	)		—

Derivative liability balance at end of period	$	—		$	72

The ~~most significant~~ derivative ~~related~~liability tois ~~the~~shown ~~lack~~on ~~of authorized shares to cover~~ the ~~potential conversion and warrant exercise. That derivative was marked to market until appropriate shareholder approval for additional authorized shares was obtained in 2006~~December 31, at2009 ~~which time the~~ balance ofsheet ~~the~~within ~~liability was offset against~~ the ~~remaining~~same ~~discount~~line on as the ~~debt.~~Convertible ~~The~~Senior ~~other derivatives identified were not material. The derivative liability includes certain time-based provisions of the~~ Notes ~~which expire over time, the latest in 2011, and is adjusted to fair value on a quarterly basis~~payable. ~~Derivative liability activity is summarized below (in thousands):~~

	Three months ended
	April 3, 2010			April 4, 2009
Derivative liability balance at beginning of period	$	56		$	90
Change in valuation gain included in other income		(9	)		(9	)
Derivative liability balance at end of period	$	47		$	81

The derivative liability is presented in the balance sheet within the same line as the Convertible Senior Notes payable.

Bank Loan Payable

The Company ~~has~~ maintained a Loan and Security Agreement ~~(“Loan Agreement”)~~ with Silicon Valley Bank (“Bank”) ~~since~~from 2004 until June 2010. All Company assets ~~are~~were pledged as collateral under the Loan and Security Agreement. The Loan and Security Agreement, as amended, ~~subjects~~subjected the Company to certain financial covenants and ~~restricts~~ restricted the Company from declaring or paying dividends.

In ~~June~~ 2007, the Company entered into an Amendment to the Loan ~~Agreement~~and ~~(“June 2007~~Security ~~Amendment”)~~ Agreement whereby the Bank provided for anthe $8.6 million ~~term loan (the “~~Term Loan”) todiscussed ~~the~~in ~~Company~~Note 2 above, which was used to purchase a portion of the cryoablation surgical device business of CryoCath Technologies, Inc. (“CryoCath”) and to repay then-outstanding term loans and advances from the Bank under the Loan and Security Agreement.

Under the Term Loan, as amended, the Company began making 39 monthly payments of principal plus interest effective April 2008 until June 2011. ~~The~~In ~~Company~~June 2010, ~~also~~the ~~has~~Company ~~the~~exercised its right to prepay ~~all~~the outstanding Term Loan, ~~but not~~which ~~less~~was ~~than~~required ~~all,~~as a condition of the proposed Merger with Medtronic. The outstanding Term Loan atbalance ~~any~~was ~~time~~paid sousing ~~long~~proceeds asfrom nothe ~~event~~$30 million Loan obtained from Medtronic in connection with the proposed Merger. See Note 2 above. Under the Loan and Security Agreement, the Company paid prepayment penalties and credit facility fees of ~~default~~$0.16 million ~~has~~in connection with the prepayment. These penalties and fees are included in net interest ~~occurred~~expense on the Consolidated Statement of Operations for the three and six months ended July 3, 2010. ~~Interest~~Prior to the Company’s prepayment of the Term Loan, interest on the Term Loan ~~accrues~~accrued at a fixed rate per annum of 9.5%, equal to 1.25% above the prime rate in effect as of the funding date of the Term Loan. During the life of the Term Loan, the Company maintained compliance with all financial covenants as set forth in the Loan and Security Agreement, as amended.

The June 2007 Amendment also made certain changes to the liquidity ratio covenant set forth in the Loan Agreement, as amended. The liquidity ratio was changed to require that the Company maintain, at all times, on a consolidated basis, a ratio of (a) the sum of (1) unrestricted cash (and equivalents) of the Company on deposit with the Bank plus (2) 50% of the Company’s accounts receivable arising from the sale or lease of goods, or provision of services, in the ordinary course of business, divided by (b) the indebtedness of the Company to the Bank for borrowed money, equal to or greater than 1.4 to 1.0. In December 2008, the Company entered into an Amendment to the Loan Agreement (“December 2008 Amendment”) whereby the liquidity ratio was raised to 2.0 to 1.0 until a $4.5 million litigation settlement payment was made to CarboMedics, Inc. (“Carbomedics”) and a related security interest granted to CarboMedics was released. Upon such payment, the Bank agreed to return the liquidity ratio requirement to 1.4 to 1.0. In addition, the December 2008 Amendment required the Company to maintain at least $4.5 million on deposit with the Bank at all times until the litigation settlement payment of $4.5 million was made. On April 30, 2009, the Company made the $4.5 million settlement payment. As of April 3, 2010 and December 31, 2009, the Company was in compliance with the financial covenants as set forth in the Loan Agreement, as amended.

Subordinated Credit Agreement

In June 2008, the Company entered into a Subordinated Credit Agreement (“Credit Agreement”) with Mr. Skokos for a two-year, $5 million Revolving Credit Facility (“Credit Facility”). Advances under the Credit Facility ~~carry~~carried interest at 15% per annum payable quarterly. The Credit Facility also ~~carries~~carried an annual commitment fee of 1% of the average unused Revolving Commitment Amount, payable annually. The first annual commitment fee of $50,000 was paid to Mr. Skokos in July 2009. AsNo ofadvances ~~April 3,~~were ~~2010,~~made nounder ~~advances~~the ~~had~~Credit ~~been~~Facility ~~made~~prior ~~and~~to ~~all~~its $5termination in May ~~million~~2010. ~~was~~All ~~available~~Company assets ~~for~~were ~~borrowing~~pledged ~~under~~ as collateral on the Credit Facility.

~~The~~In May 2010, in light of the Company’s ~~obligations~~proposed toMerger ~~Mr. Skokos~~with ~~under~~Medtronic and the ~~Credit~~related ~~Agreement~~$30 million Loan ~~have~~from ~~been~~Medtronic ~~made~~(see ~~subordinate~~Note ~~to (1~~2 above) , the Company’s ~~obligations~~and Mr. Skokos agreed to terminate the ~~holders~~Credit Agreement. In connection with the termination of ~~its~~the 6%Credit ~~Convertible~~Agreement, ~~Senior~~the ~~Notes~~Company ~~due~~paid ~~2025~~to ~~and~~Mr. Skokos a $50,000 fee (2the “Fee”) equal to the ~~Company’s~~commitment ~~obligations~~fee to ~~Silicon~~which ~~Valley~~Mr. Skokos ~~Bank~~would asotherwise have ~~provided~~been inentitled ahad ~~Subordination~~the Credit Agreement ~~executed by~~been ~~and~~allowed ~~between~~to ~~the~~expire ~~Bank~~by ~~and~~its ~~Mr.~~terms in June ~~Skokos~~2010. Other ~~All~~than ~~Company~~the ~~assets~~Fee, ~~are~~there ~~pledged~~were asno ~~collateral~~termination onfees or penalties incurred by the ~~Credit~~Company in ~~Facility~~connection with the termination.

~~In connection with the execution of the Credit Agreement, the Company issued to Mr. Skokos a~~11 warrant to purchase 245,098 shares of common stock of the Company at $2.04 per share (“Effective Date Warrant”), which Mr. Skokos exercised in full in July 2008. The Company received $0.5 million from the exercise. The Company is obligated to issue additional seven-year warrants to Mr. Skokos in the future based on the total amount of advances under the Credit Facility. If the aggregate unpaid principal amount of all advances (“Total Outstanding Revolver Amount”) under the Credit Facility, after giving effect to each new advance, is greater than the amount of the highest Total Outstanding Revolver Amount at any time prior to the date of any such advance (“Maximum Total Outstanding Revolver Amount”), then the Company shall issue a warrant to Mr. Skokos for a number of shares of common stock equal to 20% of (a) the difference between (1) such Total Outstanding Revolver Amount less (2) the Maximum Total Outstanding Revolver Amount, (b) divided by the warrant exercise price of $2.04 per share. The maximum number of additional shares issuable pursuant to warrants issued under the Credit Facility is 490,196 shares (not including the Effective Date Warrant), which represents 20% of the maximum amount of advances under the $5 million Credit Facility divided by the $2.04 warrant exercise price.

NoteTable 7.of Income Taxes Contents

~~For~~Note ~~each of the quarterly periods ended April 3, 2010 and April 4, 2009, the Company recognized $0~~8.~~1 million~~ ofIncome ~~income tax expense related to (1) deferred income taxes connected with the~~Taxes deductibility of goodwill from the 2007 acquisition of the cryoablation surgical device business of CryoCath for tax purposes, but not for book purposes, and the uncertainty of the timing of its reversal for book purposes and (2) current income taxes for certain of its international subsidiaries and certain state franchise taxes. In future years, the Company will continue recognizing deferred income tax expense related to the CryoCath goodwill over its tax life as long as there is no impairment of the goodwill’s recorded value.

~~Note~~For 8the six month periods ended July 3, 2010 and July 4, 2009, the Company recognized income tax expense of approximately $0.1 million ~~Fair~~and ~~Value~~$0.2 million, ~~Measurements~~respectively, related to (1) deferred income taxes connected with the deductibility of goodwill from the 2007 acquisition of the cryoablation surgical device business of CryoCath for tax purposes, but not for book purposes, and the uncertainty of the timing of its reversal for book purposes and (2) current income taxes for certain of its international subsidiaries and certain state taxes.

Note 9. Fair Value Measurements

The Company uses fair value measurement accounting principles related to its financial and non-financial assets and liabilities as required by FASB ASC 820, Fair Value Measurements and Disclosures (“ASC 820”). ASC 820 defines fair value, establishes a framework for measuring fair value in accordance with U.S. GAAP and expands disclosures about fair value measurements.

ASC 820 defines fair value as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also describes three levels of inputs that may be used to measure fair value:

	•		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 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.

10The fair value of the Company’s Convertible Senior Notes derivative liability (described in Note 7 above) was determined based on Level 3 inputs using discounted probability cash flow valuation models. As discussed in Note 6 above, the Company’s goodwill is analyzed annually for impairment by reference to fair value based on the Company’s market capitalization, a Level 1 input. The Company assesses the potential impairment of definite-lived intangible assets by reference to future gross profit cash flows from the underlying products using the capitalized technology and trademarks, a Level 3 input.

~~Table~~Note of10. ~~Contents~~Subsequent Events

The ~~fair value of the~~ Company’s ~~Convertible~~applies ~~Senior~~FASB ~~Notes~~ASC ~~derivative~~855, ~~liability~~Subsequent ~~(described~~Events, in ~~Note~~its ~~6 above)~~accounting ~~was~~and ~~determined~~reporting ~~based~~of ~~on Level 3 inputs using discounted probability cash flow valuation~~subsequent ~~models~~events. AsThe ~~discussed in Note 5 above, the~~ Company’s ~~goodwill~~has isevaluated ~~analyzed~~subsequent ~~annually~~events for ~~impairment by~~potential ~~reference~~disclosure tothrough ~~fair value based on~~ the ~~Company’s~~date ~~market capitalization, a Level 1 input. The~~of ~~Company~~filing ~~assesses~~of ~~the~~this ~~potential~~Form ~~impairment of definite~~10-~~lived~~Q. ~~intangible~~See ~~assets~~Note by2 ~~reference~~above ~~to future~~for ~~gross~~subsequent ~~profit~~event ~~cash~~information ~~flows~~regarding ~~from~~ the ~~underlying products using the capitalized technology and~~Merger ~~trademarks,~~with ~~a Level 3 input~~Medtronic.

InNote ~~August 2009,~~11. ~~the~~Recently ~~FASB~~Issued ~~issued~~ Accounting ~~Standards Update No. 2009-05 (“ASU 2009-05”), which~~Pronouncements amended ASC 820 to provide guidance on fair value measurement of liabilities. ASU 2009-05 requires the use of specific valuation techniques when measuring the fair value of liabilities and was effective for the Company in the fourth quarter of 2009. The implementation of ASU 2009-05 did not have a material impact on the Company’s financial condition or results of operations.

Note 9. Subsequent Events

The Company applies FASB ASC 855, Subsequent Events, in its accounting and reporting of subsequent events. The Company has evaluated subsequent events for potential disclosure through the date of filing of this Form 10-Q. See Note 12 below, for information regarding reportable subsequent events identified.

Note 10. Recently Issued Accounting Pronouncements

In January 2010, the FASB issued Accounting Standards Update No. 2010-06 (“ASU 2010-06”), Improving Disclosures about Fair Value Measurements, which includes amendments to Topic 820, Fair Value Measurements and Disclosures, that will provide more robust disclosures about (1) the different classes of assets and liabilities measured at fair value, (2) the valuation techniques and inputs used, (3) the activity in Level 3 fair value measurements, and (4) the transfers between Levels 1, 2, and 3. The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the roll-forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The application of ASU 2010-06 will not have a material impact on the Company’s consolidated financial statements.

Note 1112. Litigation

Medtronic Merger Class Action Litigation

In May and June 2010, ~~one~~seven ~~class~~shareholders, ~~action~~each ~~complaint~~purporting ~~was~~to ~~filed,~~act ~~and~~on ~~the~~behalf ~~Company received notice~~ of ~~two~~a ~~other~~ class ~~action~~of ~~complaints,~~all ~~each concerning the proposed Merger with~~public ~~Medtronic~~shareholders, ~~Inc.~~separately ~~discussed~~sued ~~in Note 12 below. These class actions were instituted against~~ the Company, ~~its~~and ~~board~~other ofnamed ~~directors,~~defendants ~~chief financial officer~~alleging, ~~Medtronic~~among ~~and/or~~other ~~Pilgrim Merger Corporation~~things, ~~a wholly owned subsidiary of Medtronic. The complaints generally allege breach of~~ ~~fiduciary~~that ~~duty by~~ the members of the Company’s ~~board~~Board of ~~directors~~Directors ~~arising~~breached ~~out~~their offiduciary ~~the~~duties ~~attempt~~in toconnection ~~sell~~with the ~~Company~~proposed byMerger ~~(i) means of unfair process~~ with ~~preclusive~~Medtronic. ~~deal~~Of ~~protection~~the ~~devices~~seven ~~and~~lawsuits atfiled, ~~an unfair~~six ~~price~~were offiled ~~$4.00~~ in ~~cash~~the District ~~for~~Court ~~each share~~ of the ~~Company’s~~State ~~common~~of ~~stock~~Minnesota ~~resulting in a failure~~Hennepin toCounty ~~maximize shareholder value;~~ and ~~(ii) through~~one ~~materially~~was ~~inadequate~~filed ~~disclosures and material omissions~~ in the ~~preliminary proxy statement~~U.S. ~~The~~District ~~complaints~~Court ~~also~~for ~~allege that each defendant aided and abetted~~ the ~~alleged~~District ~~breach~~ of ~~fiduciary duties~~Minnesota. ~~The~~On ~~complaints seek damages and an accounting~~June 16, to2010, ~~the~~all ~~plaintiffs~~of ~~for any special benefits wrongly received by~~ the ~~defendants,~~cases asfiled ~~well~~in ~~as injunctive~~state ~~relief~~court towere ~~prevent~~consolidated ~~the~~in ~~consummation~~In ofre ~~the~~ATS ~~proposed merger~~Medical, orInc. Shareholder inLitigation (the ~~event~~“Lawsuit”). ~~that~~On ~~the merger is consummated~~July 12, ~~then rescission or rescissory damages. See Part II~~2010, ~~Item~~the 1case —filed ~~Legal Proceedings~~ in ~~this~~federal ~~Form~~court ~~10-Q~~was ~~for~~dismissed ~~additional~~voluntarily ~~information concerning these class actions. The Company believes these class actions to be~~ without ~~merit and will vigorously defend itself against the claims asserted~~prejudice.

Abbey Litigation

In January 2006, following execution of a Merger Agreement between the Company and 3F Therapeutics, Inc. (“3F”), 3F was informed of a summons and complaint which was filed in the U.S. District Court in the Southern District of New York by Arthur N. Abbey (“Abbey”) against 3F Partners Limited Partnership II (a major stockholder of 3F, “3F Partners II”), Theodore C. Skokos (the then chairman of the board and a stockholder of 3F), 3F Management II, LLC (the general partner of 3F Partners II), and 3F (collectively, the “Defendants”) (“Abbey I Litigation”). The summons and complaint alleges that the Defendants

committed fraud under federal securities laws, common law fraud and negligent misrepresentation in connection with the purchase by Abbey of certain securities of 3F Partners II. In particular, Abbey claims that the Defendants induced Abbey to invest $4 million in 3F Partners II, which, in turn, invested $6 million in certain preferred stock of 3F, by allegedly causing Abbey to believe, among other things, that such investment would be short-term. Pursuant to the complaint, Abbey is seeking rescission of his purchase of his limited partnership interest in 3F Partners II and return of the amount paid therefor (together with pre-and post-judgment interest), compensatory damages for the alleged lost principal of his investment (together with interest thereon and additional general, consequential and incidental damages), general damages for all alleged injuries resulting from the alleged fraud in an amount to be determined at trial and such other legal and equitable relief as the court may deem just and proper. Abbey did not purchase any securities directly from 3F and is not a stockholder of 3F. In March 2006, 3F filed a motion to dismiss the complaint. In August 2007, the Court granted 3F’s motion to dismiss the complaint based on plaintiff’s failure to state a claim upon which relief may be granted and ordered the Clerk of the Court to close the case. Abbey filed a Notice of Appeal with the United States Court of Appeals for the Second Circuit seeking to reverse the District Court’s August 2007 Order dismissing the case. In December 2008, the Second Circuit issued a Summary Order that affirmed the District Court’s judgment of dismissal finding that Abbey failed to state a claim against 3F. However, the Second Circuit remanded the case to the District Court to allow Abbey a chance to replead his claims. On or about February 13, 2009, Abbey filed an amended complaint which purports to allege additional facts to support the same claims against 3F that were asserted and dismissed in the original complaint. On or about March 31, 2009, 3F served and filed its motion to dismiss the amended complaint with prejudice. 3F’s motion to dismiss was fully submitted on June 8, 2009. By Order entered December 2, 2009, the District Court denied 3F’s motion to dismiss on the ground of lack of standing and converted the remainder of 3F’s motion to dismiss for failure to state a claim into a motion for summary judgment. Accordingly, the Court ordered “limited discovery” to be completed by February 26, 2010 and additional briefings on summary judgment to be completed by April 9, 2010. This schedule has been modified and discovery is to be completed by June 8, 2010 and additional briefings on summary judgment are to be fully submitted by August 16, 2010.

In June 2006, Abbey commenced a second civil action in the Court of Chancery in the State of Delaware by serving 3F with a complaint naming both 3F and Mr. Skokos as defendants (“Abbey II Litigation”). The complaint alleges, among other things, fraud and breach of fiduciary duties in connection with the purchase by Abbey of his partnership interest in 3F Partners II. The Delaware action seeks: (1) a declaration that (a) for purposes of the merger, Abbey was a record stockholder of 3F and was thus entitled to withhold his consent to the merger and seek appraisal rights after the merger was consummated and (b) the irrevocable stockholder consent submitted by 3F Partners II to approve the merger be voided as unenforceable; and (2) damages based upon allegations that 3F aided and abetted Mr. Skokos in breaching Mr. Skokos’s fiduciary duties of loyalty and faith to Abbey. On July 17, 2006, 3F filed a motion to dismiss the complaint in the Abbey II Litigation, or, alternatively, to stay the action pending adjudication of the Abbey I Litigation. In October 2006, the Delaware Chancery Court entered an order staying the Delaware action pending the outcome of the Abbey I litigation. In August 2007, the parties informed the Delaware Chancery Court that they would consent to the continued stay of the Delaware action pending the outcome of Abbey’s appeal of the Abbey I Litigation. The stay remains in effect pending the outcome of 3F’s motion to dismiss the amended complaint.

3F has been notified by its director and officer insurance carrier that such carrier will defend and cover all defense costs as to 3F and Mr. Skokos in the Abbey I Litigation and Abbey II Litigation, subject to policy terms and full reservation of rights. In addition, under the Merger Agreement, 3F and the 3F stockholder representative have agreed that the Abbey I Litigation and Abbey II Litigation are matters for which express indemnification is provided. As a result, certain escrow shares and contingent shares, if any, which may in the future be issued under the Merger Agreement, may be used by ATS to satisfy, in part, ATS’s set-off rights and indemnification claims for damages and losses incurred by 3F or ATS, and their directors, officers and affiliates, that are not otherwise covered by applicable insurance arising from the Abbey I Litigation and Abbey II Litigation. See Note 5 of “Notes to Consolidated Financial Statements” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009 for a description of the contingent shares. The Company believes the Abbey I Litigation and Abbey II Litigation will not have a material impact on the Company’s financial position or operating results.

Note 12. Subsequent Event-Merger with Medtronic, Inc.

On April 28, 2010, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Medtronic, Inc. and Pilgrim Merger Corporation, a wholly owned subsidiary of Medtronic, pursuant to which Medtronic will acquire all of the outstanding shares of the Company for $4.00 per share in cash, without interest, and pursuant to which the Company will become a wholly owned subsidiary of Medtronic (the “Merger”). In addition, at the effective time of the Merger, all outstanding stock options, RSUs and common stock warrants will become fully vested and eligible to receive $4.00 per share in cash, without interest (less any applicable exercise price). The Merger has been unanimously approved by the Company’s Board of Directors.

~~Pursuant~~On toJuly 26, ~~the~~2010, ~~Merger~~after ~~Agreement~~extensive negotiations, the Company ~~has~~and ~~made~~the ~~certain~~other ~~representations,~~defendants ~~warranties~~reached ~~and~~an ~~covenants,~~agreement ~~including,~~in ~~among~~principle ~~others,~~with ~~not~~the toplaintiffs ~~engage~~regarding insettlement ~~certain~~of ~~kinds~~the ofLawsuit. ~~transactions~~In ~~during~~connection ~~the~~with ~~transition~~the ~~period~~settlement ~~from~~contemplated ~~the~~by ~~date~~that ofagreement in principle, the ~~Merger~~Lawsuit ~~Agreement~~and ~~until~~all ~~the~~claims ~~Merger~~asserted therein iswill ~~completed,~~be ~~and~~dismissed ~~not~~with toprejudice. The terms of the settlement contemplated by that ~~solicit~~agreement ~~proposals~~in ~~relating~~principle torequire ~~alternative~~that ~~business~~ATS ~~combination~~make ~~transactions~~certain ~~or,~~additional ~~subject~~disclosures related to ~~certain~~the ~~exceptions~~Merger, ~~enter~~which ~~into~~the ~~discussions~~Company ~~concerning~~has ordone. ~~provide~~The ~~confidential~~agreement ~~information~~ in ~~connection with~~principle ~~any~~contemplates ~~proposals~~that ~~for~~the ~~alternative~~parties ~~business~~will ~~combination~~enter ~~transactions.~~into Ina ~~addition~~stipulation of settlement, ~~the~~which ~~Company~~will ~~is required~~be subject to ~~redeem~~customary conditions, asincluding aCourt ~~condition~~approval offollowing notice ~~and~~to ~~prior~~the toCompany’s shareholders. There can be no assurance that the ~~completion~~parties will ultimately enter into a stipulation of settlement, that the Court will approve any proposed ~~Merger~~settlement, ~~all of~~or ~~its~~that 6%any ~~Convertible~~eventual ~~Senior~~settlement ~~Notes~~will atbe aunder ~~redemption~~the ~~price~~same terms as those contemplated by the agreement in principle. ~~cash~~By ~~equal~~entering tointo ~~100%~~the ofproposed settlement, the ~~principal~~Company ~~amount~~and the other defendants are in ofno way acknowledging that the ~~Notes,~~allegations ~~together~~contained ~~with~~in ~~accrued~~the Lawsuit have merit, and ~~unpaid~~the ~~interest~~defendants deny any liability.

InSee ~~addition~~Part II, ~~Medtronic~~Item 1-Legal ~~has~~Proceedings ~~agreed to loan to the Company,~~ in ~~one~~this orForm ~~more advances, up to $30 million (the “Loan”). Advances under the Loan will bear interest at the annual rate of~~ 10~~%, payable~~-Q monthly. The proceeds of any advance may only be used to redeem the Notes, to repay outstanding borrowings under our Term Loan with Silicon Valley Bank, and/or to finance working capital or, if the Merger Agreement is terminated, for ~~general~~additional ~~corporate~~information ~~purposes~~concerning ~~in the ordinary~~this ~~course of business consistent with past practice~~litigation. The entire unpaid principal balance of the Loan, together with accrued and unpaid interest, will be due and payable in full 24 months following the termination for any reason of the Merger Agreement. The Loan carries an upfront facility fee of 1.5% of the original principal balance of the Loan, due within 10 days of funding. Upon final payment of the Loan, the Company ~~will~~believes bethese ~~required~~class toactions ~~pay, in addition~~ to ~~the~~be ~~then~~without ~~outstanding principal~~merit and, ~~accrued~~if ~~but unpaid interest~~necessary, ~~a final payment equal to 6% of the original principal~~would ~~balance~~vigorously ofdefend ~~the~~itself ~~Loan.~~against ~~The Loan is secured by security interests in certain collateral of~~ the ~~Company~~ ~~and~~claims ~~the stock in certain subsidiaries of the Company~~asserted.

~~The~~Abbey ~~Merger Agreement contains certain termination rights for both Medtronic and the Company, and~~Litigation ~~further provides that in the event of termination of the Merger Agreement under certain specified circumstances, the Company would be required to pay Medtronic a termination fee of $13 million.~~

~~Consummation~~In January 2006, following execution of ~~the~~a Merger isAgreement ~~subject~~between tothe ~~customary~~Company ~~conditions~~ and ~~approvals~~3F Therapeutics, Inc. ~~including~~(“3F”), ~~but~~3F ~~not~~was informed of a summons and complaint which was filed in the U.S. District Court ~~limited~~in tothe Southern District of New York by Arthur N. Abbey (i“Abbey”) against 3F Partners Limited Partnership II (a major stockholder of 3F, “3F Partners II”), Theodore C. Skokos (the ~~approval~~then chairman of the ~~Company’s~~board ~~shareholders~~and a stockholder of 3F), 3F Management II, LLC (~~ii)~~ the ~~absence~~general partner of ~~any~~3F Partners II), and 3F (collectively, the “Defendants”) (“Abbey I Litigation”). The summons and complaint alleges that the Defendants committed fraud under federal securities laws, common law orfraud ~~order~~and ~~prohibiting~~negligent misrepresentation in connection with the ~~consummation~~purchase by Abbey of certain securities of 3F Partners II. In particular, Abbey claims that the ~~Merger~~Defendants induced Abbey to invest $4 million in 3F Partners II, ~~(iii)~~which, in turn, invested $6 million in certain preferred stock of 3F, by allegedly causing Abbey to believe, among other things, that such investment would be short-term. Pursuant to the ~~expiration~~complaint, orAbbey ~~termination~~is seeking rescission of ~~any~~his ~~applicable~~purchase of his limited partnership interest in ~~waiting~~3F ~~period~~Partners ~~under~~II and return of the ~~Hart—Scott—Rodino~~amount ~~Antitrust~~paid ~~Improvements~~therefor ~~Act~~(together with pre-and post-judgment interest), compensatory damages for the alleged lost principal of ~~1976~~his investment (together with interest thereon and additional general, asconsequential ~~amended~~and incidental damages), general damages for all alleged injuries resulting from the alleged fraud in an amount to be determined at trial and such other legal and equitable relief as the ~~receipt~~court ofmay ~~approvals~~deem ~~under~~just ~~applicable~~and ~~foreign~~proper. ~~antitrust~~Abbey ~~laws~~did not purchase any securities directly from 3F and is not a stockholder of 3F. In March 2006, ~~(iv)~~3F filed a motion to dismiss the complaint. In August ~~not~~2007, ~~more~~the ~~than~~Court ~~10%~~granted 3F’s motion to dismiss the complaint based on plaintiff’s failure to state a claim upon which relief may be granted and ordered the Clerk of the Court to close the case. Abbey filed a Notice of Appeal with the United ~~outstanding~~States ~~shares~~Court of ~~our~~Appeals ~~Common~~for ~~Stock~~the ~~being~~Second Circuit seeking to reverse the ~~subject~~District Court’s August 2007 Order dismissing the case. In December 2008, the Second Circuit issued a Summary Order that affirmed the District Court’s judgment of ~~validly~~dismissal ~~exercised~~finding ~~appraisal~~that ~~rights~~Abbey failed to state a claim against 3F. However, the Second Circuit remanded the case to the District Court to allow Abbey a chance to replead his claims. On or about February 13, 2009, Abbey filed an amended complaint which purports to allege additional facts to support the same claims against 3F that were asserted and dismissed in the original complaint. On or about March 31, 2009, 3F served and filed its ~~(v)~~motion to dismiss the amended complaint with prejudice. 3F’s motion to dismiss was fully submitted on June 8, 2009. By Order entered December 2, 2009, the ~~absence~~District Court denied 3F’s motion to dismiss on the ground of lack of standing and converted the remainder of 3F’s motion to dismiss for failure to state a ~~material~~claim ~~adverse~~into ~~effect~~a ~~with~~motion ~~respect~~for summary judgment. Accordingly, the Court ordered “limited discovery” to ~~ATS~~be completed by February 26, 2010 and additional briefings on summary judgment to be completed by April 9, 2010. ~~The~~This ~~Merger~~schedule ishas ~~expected~~been modified and discovery is to be completed inby ~~late~~June 8, ~~summer~~2010 orand ~~early~~additional ~~fall~~briefings ofon summary judgment are to be fully submitted by August 16, 2010.

Abbey Litigation Relating to the Medtronic Merger

On August 2, 2010, the Company received notice of an action venued in the District Court of the State of Minnesota Hennepin County concerning the Merger. The action was instituted by Abbey, a former beneficial owner of 3F Therapeutics, Inc. stock and current beneficial owner of ATS stock, against the Company, its board of directors and chief executive officer, and Medtronic. The complaint seeks a declaratory judgment of the parties’ rights and obligations under the Merger Agreement as it concerns the January 23, 2006 Agreement and Plan of Merger among ATS, Seabiscuit Acquisition Corp., 3F Therapeutics, Inc. and Boyd D. Cox (the “3F Agreement”), and specifically, that the 3F Agreement entitles plaintiff to additional consideration in the Merger. The complaint also alleges breach of fiduciary duty by the members of the Company’s board of directors arising out of the attempt to sell ATS through an arrangement that would allegedly abrogate the right to additional consideration of ATS shareholders who are former holders of 3F shares. The complaint also alleges that ATS and Medtronic aided and abetted the alleged breach of fiduciary duties. In addition to the declaration of rights and obligations under the Merger Agreement and the 3F Agreement, the complaint seeks damages and costs.

The Company believes that the Abbey I Litigation, Abbey II Litigation and the Abbey Litigation relating to the Medtronic Merger are without merit and will not have a material impact on the Company’s financial position or operating results. In addition, the Company intends to continue to vigorously defend against the claims asserted.


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, 2009 and in Part II, Item 1A of this Form 10-Q. 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

ATS Medical, Inc. (hereinafter the “Company”, “ATS”, “we”, “us” or “our”) develops, manufactures, and markets medical devices for the treatment of structural heart disease used by cardiovascular surgeons in the cardiac surgery operating theater. Currently, we participate in the markets for heart valve therapy including mechanical bileaflet replacement heart valves, tissue heart valves and valve repair products and the surgical treatment of cardiac arrhythmias, primarily the treatment of atrial fibrillation. Additionally, a small portion of our business is comprised of surgical tools and accessories used by the cardiac surgeon for the treatment of structural heart disease.

In 1990, we licensed a patented and partially developed mechanical heart valve from CarboMedics, Inc. Under the terms of the license, we would complete the development of the valve and agreed to purchase carbon components from CarboMedics. As a result, ATS now holds an exclusive, royalty-free, worldwide license to an open pivot, bileaflet mechanical heart valve design owned by CarboMedics. In addition, we have an exclusive, worldwide right and license to use CarboMedics’ pyrolytic carbon technology to manufacture components for the ATS mechanical heart valve. We commenced selling the ATS mechanical heart valve in international markets in 1992. In 2000, we received U.S. Food and Drug Administration (“FDA”) approval to sell the ATS Open Pivot^® mechanical heart valve and commenced sales and marketing of our valve in the United States.

During 2002, we reorganized the Company and began the process of rebuilding our sales and marketing teams, both in the United States and internationally. This rebuilding has been a significant factor in our operating expense levels since 2002. During 2004 and 2005, we developed and implemented a plan to ramp-up our own manufacturing facility for pyrolytic carbon. By the end of 2005, this process was substantially complete.

In 2004, we made our first investments outside the mechanical heart valve market. We completed a global partnership agreement with CryoCath Technologies, Inc. to market CryoCath’s surgical cryotherapy products for the ablation of cardiac arrhythmias. CryoCath developed a portfolio of novel products marketed under the SurgiFrost^® and FrostByte^® trade names which are used by cardiac surgeons to treat cardiac arrhythmias. Treatment is accomplished through the creation of an intricate pattern of lesions on the surface of the heart to block inappropriate electrical conduction circuits which cause the heart to be less effective when pumping blood and can lead to stroke, heart failure and death. Unique to this technology is the use of cryothermy (cold) to create lesions. The agreement with CryoCath has resulted in revenues for ATS since 2005.

In 2005, we continued to expand our business outside the mechanical heart valve market. We entered into an exclusive development, supply and distribution agreement with Genesee BioMedical, Inc. (“GBI”) under which GBI develops, supplies and manufactures cardiac surgical products to include annuloplasty repair rings and bands and accessories, and we have exclusive worldwide rights to market and sell such products. Our agreement with GBI has produced revenues for us since 2006.

In 2006, we completed the acquisition of all the voting and non-voting stock of 3F Therapeutics, Inc., an early stage privately-held medical device company at the forefront of the emerging field of minimally invasive open- and closed-chest tissue valve replacement. The acquisition of 3F was a major step in the execution of our long-standing vision of obtaining a leadership position in the major segments of the cardiac surgery market. The acquisition was consummated pursuant to an agreement and plan of merger, as amended (“3F Merger Agreement”). Under the terms of the 3F Merger Agreement, upon closing, we paid each 3F stockholder its pro-rata portion of an initial payment of 9,000,000 shares of our common stock, subject to certain adjustments. In December 2009, we issued 5,000,000 shares of our common stock to 3F stockholders under the 3F Merger Agreement upon obtaining the European CE Mark on our Enable^® Aortic Bioprosthesis sutureless tissue valve product. In addition, we are obligated under the Merger Agreement to make an additional contingent payment to 3F stockholders of up to 5,000,000 shares of our common stock upon obtaining U.S. FDA approval on the Enable product or FDA or European CE Mark approval for certain future key products acquired in the 3F acquisition on or prior to December 31, 2013. Milestone share payments may be accelerated upon completion of certain transactions involving these future key products.

1415

The first generation tissue valve of the 3F portfolio, the ATS 3f^® Aortic Bioprosthesis, has received both FDA approval and the European CE mark and is available for sale in the United States, Europe and certain other international markets. As discussed above, in December 2009 we received European CE Mark approval of our second tissue valve, the sutureless ATS 3f Enable Aortic Bioprosthesis, which is intended to enable less invasive aortic valve replacement. We are also developing an aortic tissue valve for use in beating heart procedures based in part on the characteristics of the next generation of Enable valves. First in-human studies of this technology is targeted for 2010, and if successful, commercialization of a beating heart solution could occur within one to two years thereafter.

In 2007, we acquired the cryoablation surgical device business of CryoCath. The acquisition included the SurgiFrost, FrostByte and SurgiFrost XL family of products for which we had served as CryoCath’s exclusive agent in the United States and distributor in certain international markets. Under the acquisition agreement, we paid CryoCath $22.0 million upon closing of the transaction (reduced by $0.9 million subsequent to closing) and $2.0 million during 2008 upon the achievement of certain manufacturing transition milestones. We also paid $2.0 million in 2009 (two years after closing) and agreed to pay up to $4.0 million in contingent payments based on future sales of Surgifrost XL, a product the Company discontinued developing in late 2008. The Company continues to develop less invasive procedures utilizing its existing set of tools. The acquisition of the cryoablation surgical device business of CryoCath enables us to leverage our current operating infrastructure and allows us to better address the rapidly growing cardiac arrhythmia market within cardiac surgery.

Merger with Medtronic, Inc.

On April 28, 2010, we entered into an Agreement and Plan of Merger with Medtronic, Inc. and Pilgrim Merger Corporation, a wholly owned subsidiary of Medtronic, pursuant to which Medtronic ~~will~~agreed to acquire all of the outstanding shares of ATS for $4.00 per share in cash, without interest, ~~and~~subject to decrease under the limited circumstances described in the Merger Agreement (the “Merger Consideration”), and pursuant to which ATS will become a wholly owned subsidiary of Medtronic.

On the terms and subject to the conditions set forth in the Merger Agreement, which has been unanimously approved by our Board of Directors and approved by our shareholders at a special meeting of shareholders held on August 5, 2010, at the effective time of the Merger ~~(the “Effective Time”)~~, each share of our common stock, par value $0.01 per share, that is issued and outstanding immediately prior to the Effective Time (other than ATS common stock held by us, Medtronic or its subsidiaries, which will be canceled without payment of any consideration, and ATS common stock for which appraisal rights have been validly exercised and not withdrawn) will be converted at the Effective Time into the right to receive ~~$4.00 in cash, without interest (~~the “Merger Consideration”), subject to adjustment under certain conditions as described in the Merger Agreement. Each option to purchase ATS common stock that is outstanding as of the Effective Time will be canceled in exchange for the right to receive in cash the amount by which the Merger Consideration exceeds the exercise price, multiplied by the number of shares subject to such option, less applicable withholding tax obligations. Each ~~RSU~~restricted stock unit that is outstanding immediately prior to the Effective Time will be, at the Effective Time, be canceled in exchange for the right to receive in cash the Merger Consideration., less applicable withholding tax obligations. Each warrant to purchase ATS common stock that is outstanding immediately prior to the Effective Time will be converted into the right to receive, upon exercise, an amount in cash equal to the amount by which the Merger Consideration exceeds the exercise price, multiplied by the number of shares subject to such warrant, less applicable withholding tax obligations.

We have made customary representations, warranties and covenants in the Merger Agreement, including, among others, covenants that: (i) we will conduct our business in the ordinary course consistent with past practice during the interim period between the execution of the Merger Agreement and the Effective Time, (ii) we will not engage in certain kinds of transactions during such period, (iii) we hold a meeting of ATS shareholders to consider approval of the Merger Agreement, (iv) subject to certain customary exceptions, that our Board of Directors will recommend approval by its shareholders of the Merger Agreement and (v) both Medtronic and ATS will use their respective reasonable best efforts to make any required filings under applicable U.S. and foreign antitrust laws, to obtain any required consents, approvals or the expiration of any applicable waiting periods under such laws and, if any objections are asserted under such laws, to resolve such objections. We have also made certain additional customary covenants, including, among others, covenants not to: (i) solicit proposals relating to alternative business combination transactions or (ii) subject to certain exceptions, enter into discussions concerning or provide confidential information in connection with any proposals for alternative business combination transactions. In addition, we ~~are~~were required to redeem, and in June 2010 redeemed, as a condition of the proposed Merger and prior to the Effective Time, all of our 6% Convertible Senior Notes at a redemption price in cash equal to 100% of the principal amount of the Notes, together with accrued and unpaid interest thereon. ~~When the Notes are redeemed, we will recognize~~ ~~a non-cash debt restructuring charge of approximately $4.7 million related primarily to the unamortized discount on the Notes.~~

1516

In ~~addition,~~connection ~~Medtronic~~with ~~has~~the ~~agreed~~proposed ~~to loan to us~~Merger, inMedtronic ~~one~~provided ora ~~more advances, up to~~ $30 million~~. Advances~~ ~~under the~~ Loan ~~will~~to ~~bear~~us ~~interest~~and atcertain ~~the annual rate~~ of our ~~10%, payable monthly~~subsidiaries. ~~The proceeds~~This offinancing ~~any~~is ~~advance~~discussed ~~may~~in ~~only~~Note be2 ~~used~~of ~~to redeem the Convertible Senior~~ Notes, to ~~repay~~Consolidated Financial ~~outstanding~~Statements ~~borrowings~~above ~~under our Term Loan with Silicon Valley Bank,~~ and~~/or~~ ~~to finance working capital or, if the Merger Agreement is terminated, for general corporate purposes~~ in ~~the~~Liquidity ~~ordinary course~~and ofCapital ~~business~~Resources-Financing ~~consistent~~Activities ~~with past practice~~below. The ~~entire~~Merger Agreement ~~unpaid~~contains ~~principal~~certain ~~balance~~termination ofrights ~~the~~for ~~Loan, together~~both ~~with~~Medtronic ~~accrued~~ and ~~unpaid interest~~ATS, ~~will be due~~ and ~~payable~~further provides that in ~~full~~the ~~24 months~~event ~~following~~of ~~the~~ termination ~~for any reason~~ of the Merger Agreement. ~~The~~under ~~Loan~~certain ~~carries~~specified ~~an upfront facility fee of 1.5% of the original principal balance of the Loan~~circumstances, ~~due within 10 days of funding. Upon final payment of the Loan,~~ we ~~will~~ would be required to pay, inMedtronic ~~addition to the then outstanding principal and accrued but unpaid interest,~~ a ~~final~~termination ~~payment~~fee ~~equal to 6%~~ of ~~the original principal balance of the Loan~~$13 million. ~~Our obligations under the Loan are secured by a security interest in certain collateral of~~ ~~ATS and a security interest in the stock of certain subsidiaries of ATS.~~

~~The~~In connection with the Merger Agreement, ~~contains~~Alta ~~certain~~Partners ~~termination~~VIII, ~~rights~~L.P., ~~for~~Essex ~~both~~Woodlands ~~Medtronic~~Health ~~and~~Ventures Fund ~~ATS~~VIII, L.P. and ~~further~~Theodore C. Skokos, each a significant shareholder of our common stock (the ~~provides~~“Voting ~~that~~Parties”), inentered into voting agreements (the ~~event~~“Voting Agreements”) covering a total of 16,151,244 ~~termination~~shares of our common stock legally or beneficially owned by the Voting Parties (the “Voting Party Shares”). Under the Voting Agreements, each Voting Party agreed to vote its Voting Party Shares in favor of the Merger ~~Agreement~~and ~~under~~also agreed to certain ~~specified~~restrictions on the disposition of ~~circumstances,~~such weVoting ~~would~~Party beShares, ~~required~~subject to ~~pay~~the ~~Medtronic~~terms aand ~~termination~~conditions ~~fee~~set forth in the Voting Agreements. The Voting Agreements provide that they will terminate concurrently with any termination of ~~$13 million~~the Merger Agreement.

InConsummation ~~connection~~of ~~with~~ the Merger ~~Agreement,~~is ~~Alta~~subject ~~Partners~~to ~~VIII,~~customary ~~L.P.~~conditions, ~~Essex~~including ~~Woodlands~~(i) approval ~~Health~~of ~~Ventures~~the ~~Fund~~holders ~~VIII,~~of ~~L.P.~~a ~~and~~majority ~~Theodore~~of C.the ~~Skokos,~~outstanding ~~each~~shares ~~a significant shareholder~~ of our ~~Common~~common ~~Stock~~stock, (ii) the absence of any law or ~~“Voting~~order ~~Parties”),~~prohibiting ~~have~~the ~~entered~~consummation ~~into~~of ~~voting~~the ~~agreements~~Merger, (iii) the ~~“Voting~~expiration ~~Agreements”)~~or ~~covering~~termination aof ~~total~~any ofapplicable ~~15,673,095~~waiting ~~shares~~period ofunder ~~our~~the ~~Common~~Hart-Scott-Rodino ~~Stock~~Antitrust ~~legally~~Improvements orAct ~~beneficially~~of ~~owned~~1976, byas amended, and the ~~Voting~~receipt ~~Parties~~of ~~(the “Voting~~approvals ~~Party~~under ~~Shares”~~applicable foreign antitrust laws, (iv). not ~~Under~~more than 10% of the ~~Voting~~outstanding ~~Agreements,~~shares ~~each~~of ~~Voting~~our ~~Party~~common ~~has~~stock ~~agreed~~being tothe ~~vote~~subject ~~its Voting~~of ~~Party~~validly ~~Shares~~exercised inappraisal rights ~~favor~~and (v) the absence of ~~the~~a ~~Merger~~material ~~and~~adverse ~~has~~effect ~~also~~with ~~agreed~~respect to ~~certain~~ATS. ~~restrictions~~As onof the ~~disposition~~ date of this ~~such~~Form ~~Voting~~10-Q, ~~Party~~our ~~Shares~~shareholders have approved the Merger, ~~subject~~we have received all required antitrust approvals relating to the ~~terms~~Merger and ~~conditions~~no ~~set~~holders ~~forth~~of inour ~~the~~common stock asserted dissenters’ rights in ~~Voting~~accordance ~~Agreements~~with Minnesota law. The ~~Voting~~Merger ~~Agreements~~is ~~provide~~expected ~~that~~to ~~they~~be ~~will~~completed ~~terminate~~on ~~concurrently~~or ~~with~~about ~~any~~August 12, 2010, ~~termination~~subject to satisfaction or waiver of all conditions to closing specified in the Merger Agreement.

Consummation of the Merger is subject to customary conditions, including (i) approval of the holders of a majority of the outstanding shares of our Common Stock, (ii) the absence of any law or order prohibiting the consummation of the Merger, (iii) the expiration or termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the receipt of approvals under applicable foreign antitrust laws, (iv) not more than 10% of the outstanding shares of our Common Stock being the subject of validly exercised appraisal rights and (v) the absence of a material adverse effect with respect to ATS. The Merger is expected to be completed in late summer or early fall of 2010.

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 is 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 our financial condition and results of operations are discussed in our most recent Annual Report on Form 10-K on file with the SEC.

See Note 1011 of “Notes to Consolidated Financial Statements” in Item 1 of this Form 10-Q for information on recently issued accounting pronouncements which will or could affect our accounting policies and estimates.

Results of Operations

The following table provides the dollar and percentage change in the Statements of Operations for the three month periods ended April 3, 2010 and April 4, 2009.

	Three months ended April 3 (April 4)
							Increase			(Decrease)
(in thousands)	2010			2009			$			%
Net sales	$	18,591		$	18,403		$	188			1.0	%
Cost of goods sold		6,405			6,130			275			4.5	%
Gross profit		12,186			12,273			(87	)		(0.7	)%
Operating expenses:
Sales and marketing		8,704			7,501			1,203			16.0	%
Research and development		3,267			2,044			1,223			59.8	%
General and administrative		3,041			2,476			565			22.8	%
Amortization of intangibles		812			788			24			3.0	%
Total operating expenses		15,824			12,809			3,015			23.5	%
Operating loss		(3,638	)		(536	)		3,102			578.7	%
Net interest expense		(617	)		(719	)		(102	)		(14.2	)%
Other expense, net		(331	)		(353	)		(22	)		(6.2	)%
Net loss before income taxes		(4,586	)		(1,608	)		2,978			185.2	%
Income tax expense		(85	)		(63	)		22			34.9	%
Net loss	$	(4,671	)	$	(1,671	)	$	3,000			179.5	%

The following table presents the Statements of Operations as a percentage of net sales for the three month periods ended April 3, 2010 and April 4, 2009.

	Three months ended
	April 3 (April 4)
	2010			2009
Net sales		100.0	%		100.0	%
Cost of goods sold		34.5	%		33.3	%
Gross profit		65.5	%		66.7	%
Operating expenses:
Sales and marketing		46.8	%		40.8	%
Research and development		17.6	%		11.1	%
General and administrative		16.4	%		13.5	%
Amortization of intangibles		4.4	%		4.3	%
Total operating expenses		85.1	%		69.6	%
Operating loss		(19.6	)%		(2.9	)%
Net interest expense		(3.3	)%		(3.9	)%
Other expense, net		(1.8	)%		(1.9	)%
Net loss before income taxes		(24.7	)%		(8.7	)%
Income tax expense		(0.5	)%		(0.3	)%
Net loss		(25.1	)%		(9.1	)%

~~Net~~Results ~~Sales.~~of ~~The following table provides the dollar and percentage change in net sales inside~~Operations ~~and outside the United States for the three month periods ended April 3, 2010 and April 4, 2009.~~

	Three months ended April 3 (April 4)
					Increase			(Decrease)
(in thousands)	2010		2009		$			%
United States	$	7,491	$	7,932	$	(441	)		(5.6	)%
Outside United States		11,100		10,471		629			6.0	%
Total	$	18,591	$	18,403	$	188			1.0	%

The following table provides the dollar and percentage change in the Statements of Operations for the three and six periods ended July 3, 2010 and July 4, 2009.

The following table provides net sales inside and outside the United States as a percentage of total net sales for the three month periods ended April 3, 2010 and April 4, 2009.


	Three months ended July 3 (July 4)												Six months ended July 3 (July 4)
							Increase (Decrease)												Increase (Decrease)
(in thousands)	2010			2009			$			%			2010			2009			$			%
Net sales	$	19,014		$	19,781		$	(767	)		(3.9	)%	$	37,605		$	38,184		$	(579	)		(1.5	)%
Cost of goods sold		6,607			7,040			(433	)		(6.2	)%		13,012			13,170			(158	)		(1.2	)%

Gross profit		12,407			12,741			(334	)		(2.6	)%		24,593			25,014			(421	)		(1.7	)%
Operating expenses:
Sales and marketing		9,199			7,525			1,674			22.2	%		17,903			15,026			2,877			19.1	%
Research and development		2,755			1,817			938			51.6	%		6,022			3,861			2,161			56.0	%
General and administrative		6,332			2,431			3,901			160.5	%		9,373			4,907			4,466			91.0	%
Amortization of intangibles		812			812			—			0.0	%		1,624			1,600			24			1.5	%

Total operating expenses		19,098			12,585			6,513			51.8	%		34,922			25,394			9,528			37.5	%

Operating income (loss)		(6,691	)		156			(6,847	)		(4,389.1	)%		(10,329	)		(380	)		9,949			2,618.2	%
Net interest expense		(888	)		(694	)		194			28.0	%		(1,505	)		(1,413	)		92			6.5	%
Loss on redemption of convertible senior notes		(4,806	)		—			4,806		NM				(4,806	)		—			4,806		NM
Other income (expense), net		(448	)		471			(919	)		(195.1	)%		(779	)		118			(897	)		(760.2	)%

Net loss before income taxes		(12,833	)		(67	)		12,766			19,053.7	%		(17,419	)		(1,675	)		15,744			939.9	%
Income tax expense		(61	)		(119	)		(58	)		(48.7	)%		(146	)		(182	)		(36	)		(19.8	)%

Net loss	$	(12,894	)	$	(186	)	$	12,708			6,832.3	%	$	(17,565	)	$	(1,857	)	$	15,708			845.9	%

	Three months ended
	April 3 (April 4)
	2010			2009
United States		40.3	%		43.1	%
Outside United States		59.7	%		56.9	%
Total		100.0	%		100.0	%

The following table presents the Statements of Operations as a percentage of net sales for the three and six month periods ended July 3, 2010 and July 4, 2009.

The following table provides net sales by product group for the three month periods ended April 3, 2010 and April 4, 2009.


	Three months ended						Six months ended
	July 3 (July 4)						July 3 (July 4)
	2010			2009			2010			2009
Net sales		100.0	%		100.0	%		100.0	%		100.0	%
Cost of goods sold		34.7	%		35.6	%		34.6	%		34.5	%

Gross profit		65.3	%		64.4	%		65.4	%		65.5	%
Operating expenses:
Sales and marketing		48.4	%		38.0	%		47.6	%		39.4	%
Research and development		14.5	%		9.2	%		16.0	%		10.1	%
General and administrative		33.3	%		12.3	%		24.9	%		12.9	%
Amortization of intangibles		4.3	%		4.1	%		4.3	%		4.2	%

Total operating expenses		100.4	%		63.6	%		92.9	%		66.5	%

Operating income (loss)		(35.2	)%		0.8	%		(27.5	)%		(1.0	)%
Net interest expense		(4.7	)%		(3.5	)%		(4.0	)%		(3.7	)%
Loss on redemption of convertible senior notes		(25.3	)%		0.0	%		(12.8	)%		0.0	%
Other income (expense), net		(2.4	)%		2.4	%		(2.1	)%		0.3	%

Net loss before income taxes		(67.5	)%		(0.3	)%		(46.3	)%		(4.4	)%
Income tax expense		(0.3	)%		(0.6	)%		(0.4	)%		(0.5	)%

Net loss		(67.8	)%		(0.9	)%		(46.7	)%		(4.9	)%

	Three months ended April 3 (April 4)
					Increase			(Decrease)
(in thousands)	2010		2009		$			%
Heart valve therapy	$	13,653	$	13,245	$	408			3.1	%
Surgical arrhythmia		4,895		4,904		(9	)		(0.2	)%
Surgical tools and accessories		43		254		(211	)		(83.1	)%
Total	$	18,591	$	18,403	$	188			1.0	%

Total net sales in the first quarter of 2010 increased 1.0% over the same period in 2009. Our net sales increase in the first quarter of 2010 was favorably impacted by approximately 140 basis points related to higher foreign currency exchange rates against the U.S. dollar during 2010. Approximately 20% of our total sales for the first quarter of 2010 was invoiced in Euros or other local currencies in European markets where we sell our products directly to hospitals.

Heart valve therapy sales, our largest product group, consists of mechanical and tissue heart valves and heart valve repair products. Our mechanical heart valve products continue to be our primary product line and comprised approximately 58% of our total worldwide sales for the first quarter of 2009, compared to 59% for the same period in 2009. Worldwide mechanical heart valve revenue for the three months ended April 3, 2010 decreased 2% from the same period in 2009 due to weaker mechanical heart valve sales in the United States as the market continues to move more toward tissue valves. Tissue heart valve revenue for the three months ended April 3, 2010 was $1.8 million, an increase of 59% compared to the same period in 2009. This increase was driven by the ongoing commercial launch of our first generation U.S. tissue valve product, the ATS 3f Aortic Bioprosthesis, approved by the FDA in October 2008, and the limited launch of our second generation tissue valve product, the sutureless ATS 3f Enable Aortic Bioprosthesis, which received European CE Mark approval in December 2009 and is intended to enable less invasive aortic valve replacement. Heart valve repair revenue was $1.2 million for the three months ended April 3, 2010 million, flat compared to the same period in 2009.

~~Surgical~~Net ~~arrhythmia~~Sales. ~~therapy~~The ~~products~~following ~~consist~~table ofprovides ~~cryotherapy products for~~ the ~~ablation~~dollar ofand ~~cardiac arrhythmias.~~percentage Wechange ~~acquired this business from CryoCath~~ in ~~2007.~~net ~~Surgical~~sales ~~arrhythmia therapy revenue~~inside ~~was $4.9 million for the first quarters of both 2010~~ and ~~2009,~~outside ~~increasing 25% internationally while declining 9% in~~ the United States. ~~Cryotherapy~~for ~~products in general and CryoMaze procedural growth in particular have benefited from~~ the ~~growth~~three ~~of the surgical ablation market~~ and ~~increased~~six ~~market acceptance~~month ofperiods ~~cryo-energy~~ended ~~(cold)~~July as3, a2010 ~~preferred~~and ~~technology to perform Cox-Maze lesion sets~~July 4, ~~especially in international markets~~2009.

Surgical tools and accessories consist primarily of cardiac anastomosis assist devices and thoracic port systems. Effective August 1, 2009, we ceased distribution of anastomotic assist devices, which represented approximately $0.2 million of sales in the first quarter of 2009.


	Three months ended July 3 (July 4)										Six months ended July 3 (July 4)
					Decrease										Decrease
(in thousands)	2010		2009		$			%			2010		2009		$			%

United States	$	7,567	$	7,581	$	(14	)		(0.2	)%	$	15,059	$	15,513	$	(454	)		(2.9	)%

Outside United States		11,447		12,200		(753	)		(6.2	)%		22,546		22,671		(125	)		(0.6	)%


Total	$	19,014	$	19,781	$	(767	)		(3.9	)%	$	37,605	$	38,184	$	(579	)		(1.5	)%

~~Cost~~The offollowing ~~Goods~~table ~~Sold~~provides ~~and~~net ~~Gross~~sales ~~Profit.~~inside ~~Our~~and ~~first~~outside ~~quarter~~the ~~2010~~United ~~gross~~States ~~profit~~as a percentage of total net sales ~~was~~ ~~65.5%~~for ~~compared~~the tothree ~~66.7%~~and ~~for~~six ~~the~~month ~~same~~periods ~~period~~ended inJuly 3, ~~the~~2010 ~~prior~~and ~~year~~July 4, 2009.

Our first quarter 2010 gross profit as a percentage of net sales was negatively impacted by lower international selling prices due to geographical sales mix shifts resulting from greater sales growth in lower-margin countries, where we sell our products through independent distributors, than in higher-margin countries where we sell our products direct. This had a combined net unfavorable impact on our first quarter 2010 gross profit percentage of net sales of approximately 130 basis points compared to the first quarter of 2009. Our first quarter 2010 gross profit was also negatively impacted by shifts in the overall product mix to lower margin products, which decreased our first quarter 2010 gross profit percentage of net sales by approximately 80 basis points compared to the first quarter of 2009.


	Three months ended						Six months ended
	July 3 (July 4)						July 3 (July 4)
	2010			2009			2010			2009

United States		39.8	%		38.3	%		40.0	%		40.6	%

Outside United States		60.2	%		61.7	%		60.0	%		59.4	%


Total		100.0	%		100.0	%		100.0	%		100.0	%

~~Our~~The ~~first~~following ~~quarter~~table ~~2010~~provides ~~gross profit as a percentage of~~ net sales ~~has~~by ~~benefited from lower~~ product ~~manufacturing~~ ~~costs,~~group ~~particularly~~ for ~~mechanical~~the ~~heart~~three ~~valve~~ and ~~cryotherapy~~six ~~products.~~month ~~The cost~~periods ~~declines~~ended ~~are~~July 3, ~~attributable~~2010 ~~primarily to higher manufacturing volumes~~ and ~~manufacturing~~July 4, ~~efficiency improvements. Lower product costs increased our first quarter 2010 gross profit percentage of net sales by approximately 110 basis points compared to the first quarter of~~ 2009.

Sales and Marketing. In the United States, our sales and marketing costs for the first quarter of 2010 increased 16.8% over the comparable period in the prior year, to $5.8 million. The increase reflects infrastructure investments and increased headcount for the U.S. sales force (field selling costs in the United States were 19.7% higher in the first quarter of 2010), higher marketing program costs, particularly for our tissue heart valve business, and higher stock compensation expense.


	Three months ended July 3 (July 4)										Six months ended July 3 (July 4)
					Decrease										Decrease
(in thousands)	2010		2009		$			%			2010		2009		$			%
Heart valve therapy	$	14,205	$	14,736	$	(531	)		(3.6	)%	$	27,858	$	27,981	$	(123	)		(0.4	)%

Surgical arrhythmia		4,717		4,722		(5	)		(0.1	)%		9,612		9,626		(14	)		(0.1	)%

Surgical tools and accessories		92		323		(231	)		(71.5	)%		135		577		(442	)		(76.6	)%


Total	$	19,014	$	19,781	$	(767	)		(3.9	)%	$	37,605	$	38,184	$	(579	)		(1.5	)%

~~Internationally,~~Total ~~our~~net sales ~~and~~in ~~marketing~~the ~~costs~~second ~~for~~quarter ~~the~~and first ~~quarter~~half of 2010 ~~increased~~decreased ~~14.6%~~ over the ~~first~~same ~~quarter~~periods in of 2009~~, to $2~~.~~9 million.~~ ~~The~~We ~~increase~~believe isthe ~~attributable~~announcement toof ~~our~~the ~~continuing investment~~Merger inwith ~~headcount~~Medtronic ~~and~~negatively ~~programs~~impacted ~~to support and expand our direct~~ sales ~~operations~~ in ~~Europe and prepare for~~ the ~~full~~second ~~commercial~~quarter ~~launch~~ of ~~our~~2010, ~~Enable~~due ~~tissue~~to ~~valve~~uncertainty ~~product~~related ~~line. Also contributing~~ to the ~~higher first quarter 2010 international sales and marketing costs was higher~~ ~~Euro-to-U.S.~~future ~~dollar foreign exchange rates during 2010 than 2009. More than 75%~~ of ~~our international~~ sales and marketing ~~costs~~employees ~~are~~and ~~denominated~~distributor ~~in Euros~~relationships.

~~Research~~The ~~and~~first ~~Development~~half 2010 sales decrease of 1.5% ~~Research~~was ~~and~~favorably ~~development~~impacted ~~(“R~~by &approximately ~~D”)~~60 basis ~~expenses~~points ~~for~~related to higher foreign currency exchange rates against the U.S. dollar over the first ~~quarter~~half of 2010 ~~increased~~compared ~~almost~~to ~~60%~~the ~~over~~first ~~the~~half ~~comparable~~of ~~period~~2009. inConversely, the ~~prior~~second ~~year~~quarter to2010 $net sales decrease of 3.~~3 million.~~9% ~~The increase~~was ~~reflects~~unfavorably ~~significantly~~impacted ~~higher~~by ~~pre-clinical~~approximately ~~study,~~30 ~~testing~~basis ~~and~~points ~~prototype~~related ~~costs~~to ~~for next~~the ~~generation~~strengthening ~~tissue~~of ~~valve~~the ~~product~~U.S. ~~platforms~~dollar ~~and~~during the ~~Forcefield~~second ~~biocompatible~~quarter ~~interface~~of ~~development~~2010 compared to the second quarter ~~program,~~of as2009. ~~well~~Approximately as20% Rof &our Dtotal ~~headcount~~sales ~~additions~~for ~~and~~the ~~higher~~first ~~stock~~half ~~compensation~~of ~~expense.~~2010 ~~Fluctuations in~~were ~~our~~invoiced Rin &Euros Dor other ~~spending~~local ~~are~~currencies ~~generally~~in ~~related~~European tomarkets ~~the~~where ~~timing~~we ~~and~~sell ~~stages~~our ofproducts ~~individual~~directly ~~projects~~to ~~and programs~~hospitals.

~~General~~Heart ~~and~~valve ~~Administrative.~~therapy ~~General~~sales, our largest product group, consists of mechanical and ~~administrative~~tissue ~~(“G~~heart valves &and ~~A”)~~heart ~~expenses~~valve ~~increased~~repair 22products.~~8%,~~ orOur mechanical heart valve products continue to be our primary product line and comprised approximately ~~$0.6 million,~~58% inof our total worldwide sales for the first half ~~quarter~~ of 2010, compared to 60% for the ~~first~~same period in 2009. Worldwide mechanical heart valve revenue for the second quarter and first half of ~~2009~~2010 decreased 6.6% and 4.5% from the same periods ~~The~~in ~~increase~~2009, isrespectively, due to weaker mechanical heart valve sales in the ~~result~~United States as the overall market continues to move toward tissue valves and to affect of ~~higher~~the ~~consulting~~announcement of the Merger with Medtronic discussed above. Tissue heart valve revenue for the second quarter and ~~professional~~first ~~fees~~half (of 2010 was $02.30 million), ~~legal~~and ~~fees (~~$03.18 million), respectively, representing increases of approximately 30% and ~~stock~~42% ~~compensation~~compared ~~expense~~to ~~($0~~the same periods in 2009.2 These increases were driven by the ongoing commercial launch of our first generation U.S. tissue valve product, the ATS 3f Aortic Bioprosthesis, approved by the FDA in October ~~million)~~2008, and the limited launch of our second generation tissue valve product, the sutureless ATS 3f Enable Aortic Bioprosthesis, which received European CE Mark approval in December 2009 and is intended to enable less invasive aortic valve replacement. Heart valve repair revenue decreased 17% in the second quarter of 2010 and 10% for the first half of 2010, compared to the same periods in 2009, primarily the result of weaker international sales.

We anticipate recording significant additional costs, fees and expenses in 2010 related to (1) the proposed Merger with Medtronic, (2) corporate development activities and (3) the structuring and evaluation of alternative debt refinancing options.

InSurgical ~~the~~arrhythmia ~~first~~therapy ~~quarters~~products consist of ~~2010~~cryotherapy ~~and~~products ~~2009,~~for wethe ~~recognized~~ablation ~~total stock compensation expense~~ of ~~$1.0~~cardiac ~~million and $0~~arrhythmias.~~5 million,~~ ~~respectively.~~We ~~Stock~~acquired ~~compensation~~this ~~expense~~business ~~has~~from ~~been~~CryoCath ~~allocated~~in to2007. ~~cost~~While ~~of goods~~overall ~~sold,~~surgical ~~sales and marketing, R~~arrhythmia &therapy Drevenue ~~and~~was Gflat &during Athe ~~expenses~~first ashalf ~~indicated above in Note 2~~ of ~~“Notes~~2010, tointernational ~~Consolidated~~surgical ~~Financial~~arrhythmia ~~Statements”~~therapy revenue inincreased ~~this~~6% ~~Form~~while ~~10-Q~~U.S. ~~The~~surgical ~~increase~~arrhythmia intherapy ~~stock~~revenue ~~compensation~~declined ~~expense~~3% infor the first ~~quarter~~half of 2010 ~~over~~ compared to the ~~first~~same ~~quarter~~period ofin 2009. isCryotherapy ~~attributable~~products toin ~~new~~general ~~equity grants~~ and ~~awards,~~CryoMaze ~~accelerated~~procedural growth ~~vesting~~in ~~of certain~~particular ~~RSUs~~have ~~due~~benefited tofrom ~~management~~the ~~incentive~~growth ~~goals~~of ~~achieved~~the ~~and~~surgical toablation ~~the~~market ~~prior~~and ~~year~~increased market ~~reduction~~acceptance of ~~stock compensation~~cryo-energy ~~expense~~(cold) as ~~for~~a ~~forfeitures~~preferred oftechnology ~~RSUs~~to ~~originally~~perform ~~granted~~Cox-Maze inlesion ~~2005~~sets, especially ~~before~~in ~~our~~international ~~adoption FAS 123(R)~~markets.

~~Amortization~~Surgical oftools ~~Intangibles.~~and ~~Amortization~~accessories ~~expense~~consist ~~for~~primarily ~~the~~of ~~first~~cardiac ~~quarters~~anastomosis ofassist ~~2010~~devices and ~~2009 totaled~~thoracic ~~approximately~~port $0systems.~~8 million~~ ~~and~~Effective ~~consisted~~August 1, ~~primarily~~2009, ofwe ~~amortization~~ceased distribution of ~~our~~anastomotic ~~pyrolytic~~assist ~~carbon~~devices, ~~technology~~which ~~license~~represented ~~with~~approximately ~~CarboMedics~~$0.2 million asand ~~well~~$0.4 million ~~as amortization~~ of ~~definite-lived~~sales ~~intangible assets acquired~~ in ~~connection~~the ~~with~~second ~~our~~quarter ~~2006 acquisition of 3F~~ and ~~our 2007 acquisition of the surgical~~ ~~cryoablation~~first ~~business~~half of ~~CryoCath.~~2009, ~~We estimate total amortization expense for full year 2010 will be approximately $3~~respectively.~~2 million.~~

~~Net~~Cost ~~Interest~~of ~~Expense.~~Goods ~~Net~~Sold ~~interest~~and ~~expense~~Gross ~~for~~Profit. ~~the~~Our ~~first~~second quarter ofand first half 2010 ~~declined~~gross ~~approximately~~profit ~~14%~~percentages ~~from the same period in 2009 due to lower interest on the declining principal balance~~ of ~~our loan~~net ~~with~~sales ~~Silicon~~were ~~Valley~~65.3% ~~Bank~~ and ~~the~~65.4%, ~~cessation~~respectively, ofcompared ~~imputed~~to ~~interest~~64.4% ~~expense~~and on65.5% ~~the~~for ~~$2.0 million~~the ~~acquisition~~same ~~payment~~periods ~~made~~in tothe ~~CryoCath~~prior ~~in June 2009~~year.

~~Net~~Our ~~interest~~2010 ~~expense~~gross ~~includes~~profit ~~(1) commitment~~as ~~fee~~a ~~and~~percentage ~~deferred~~of ~~financing~~net ~~costs~~sales ~~related~~was tonegatively ~~the~~impacted ~~2008~~by lower international ~~Credit~~selling ~~Agreement~~prices ~~and~~due ~~Credit~~to ~~Facility~~geographical ~~with~~sales ~~Theodore~~mix C.shifts ~~Skokos~~resulting ~~(2) interest~~from ongreater ~~the~~sales ~~$8.6 million~~growth ~~Term~~in ~~Loan~~lower-margin ~~with~~countries, ~~Silicon~~where ~~Valley~~we ~~Bank~~sell ~~obtained~~our products through independent distributors, than in higher-margin ~~connection~~countries ~~with~~where ~~the~~we ~~2007~~sell ~~acquisition~~our ofproducts ~~the~~direct. ~~surgical~~This had a combined net unfavorable ~~cryoablation~~impact ~~business~~on ofour ~~CryoCath,~~second quarter and ~~(3) interest~~first onhalf ~~the~~2010 ~~$22.4 million~~gross ~~aggregate~~profit ~~principal~~percentages ~~amount~~ of 6%net ~~Convertible~~sales ~~Senior~~of approximately ~~Notes~~230 ~~issued~~and in190 ~~2005.~~basis ~~Interest~~points, ~~expense~~respectively, oncompared to the ~~Notes~~comparable ~~includes~~periods ~~amortization~~in 2009. ofOur ~~(a) financing~~second ~~costs,~~quarter ~~(b) the~~and ~~discount~~first ~~related~~half to2010 ~~the~~gross ~~implied~~profit ~~value~~was ofalso ~~common~~impacted ~~stock~~by ~~warrants~~shifts ~~sold with~~in the ~~Notes,~~overall product and ~~(c) the~~geography ~~discounts~~sales ~~related~~mix, towhich ~~the~~increased ~~bifurcated~~our ~~Convertible~~second ~~Senior~~quarter ~~Notes derivatives.~~2010 ~~See~~gross ~~Note~~profit 6percentage of net ~~“Notes~~sales toby ~~Consolidated~~approximately ~~Financial~~40 ~~Statements”~~basis inpoints ~~this~~but ~~Form~~decreased ~~10-Q~~our ~~for~~first ~~more information~~half ~~regarding~~2010 ~~all~~gross profit percentage of ~~these~~net ~~debt~~sales ~~instruments~~by approximately 20 basis points, compared to the comparable periods in 2009.

~~Other~~Our ~~Expense.~~second ~~The~~quarter ~~following~~and ~~table~~first ~~summarizes~~half ~~our~~2010 gross profit as a percentage of net ~~other~~sales ~~expense~~has benefited from lower product manufacturing costs, particularly for ~~the~~mechanical ~~three~~heart ~~month~~valve ~~periods~~and cryotherapy ~~ended~~products. ~~April 3,~~The cost declines are attributable primarily to higher manufacturing volumes and manufacturing efficiency improvements. Lower product costs increased our second quarter and first half 2010 gross profit percentages of net sales by approximately 280 and ~~April 4,~~200 basis points compared to the comparable periods in 2009.

	Three months ended
	April 3 (April 4)
(in thousands)	2010			2009
Convertible Senior Notes derivative liability gain	$	9		$	9
Net foreign currency transaction losses:
Realized		(30	)		(229	)
Unrealized		(310	)		(133	)
Other expense, net	$	(331	)	$	(353	)

Sales and Marketing. In the United States, our sales and marketing costs for the second quarter and first half of 2010 increased approximately 17% over the comparable periods in the prior year, to $5.6 million and $11.4 million, respectively. The increases reflect infrastructure investments and increased headcount for the U.S. sales force (field selling costs in the United States rose 25.3% in the first half of 2010) and higher bonus expense.

~~Net~~Internationally, ~~other~~our ~~expense~~sales ~~includes~~and ~~net~~marketing ~~foreign~~costs ~~currency~~for ~~transaction~~the ~~gains~~second quarter and ~~losses,~~first ~~including~~half ~~unrealized~~of 2010 ~~foreign~~increased ~~currency~~approximately ~~gains~~33% and ~~losses,~~24% ~~related~~over tothe ~~short-term~~comparable ~~intercompany~~periods ~~balances~~of ~~with~~2009, ~~our~~to ~~foreign~~$3.6 million and $6.5 ~~subsidiaries~~million, respectively. These ~~gains~~increases ~~and~~are ~~losses~~attributable ~~have~~to ~~been~~our ~~impacted~~continuing investment in ~~recent~~headcount and ~~years~~programs byto ~~larger~~support ~~fluctuations~~and expand our direct sales operations in Europe and prepare for the full ~~foreign~~commercial ~~currency~~launch ~~exchange~~of ~~rates~~our Enable tissue valve product line. ~~The~~Also ~~currency~~contributing ~~transaction~~to ~~losses~~the higher 2010 international sales and marketing costs was expense related to a distributor dispute in the ~~first~~Middle East, ~~quarters~~higher ofselling ~~both 2010~~costs for our Asian and ~~2009~~Latin ~~reflect~~American ~~weaker~~markets ~~Euro-to-U.S.~~and ~~dollar~~higher ~~exchange~~incentive compensation ~~rates~~expense.

~~Since~~Research ~~2005~~and weDevelopment. ~~have~~Research ~~recorded~~and ~~non-operating~~development ~~other~~(“R ~~income~~& D”) expenses for both the ~~change~~second inquarter and ~~fair~~first ~~value~~half of ~~the Convertible~~2010 ~~Senior~~increased ~~Notes~~over ~~derivative~~50% ~~liability.~~over ~~See~~the ~~Note~~comparable 6periods ofin ~~“Notes~~2009, to ~~Consolidated~~$2.8 million ~~Financial~~and ~~Statements”~~$6.0 million, inrespectively. ~~this~~The ~~Form~~increases 10reflect significantly higher pre-Qclinical study, testing and prototype costs for ~~more~~next ~~information~~generation ~~regarding~~tissue valve product platforms and the ~~Notes~~Forcefield biocompatible ~~derivative~~interface ~~liability~~development program, as well as R & D headcount additions and higher incentive compensation and stock compensation expense. Fluctuations in our R & D spending are generally related to the timing and stages of individual projects and programs.

~~Income~~General ~~Taxes~~and Administrative. InGeneral ~~the~~and ~~first~~administrative ~~quarters~~(“G of& ~~both~~A”) ~~2010~~expenses ~~and~~increased ~~2009,~~significantly in wethe ~~recognized~~second ~~approximately~~quarter $0of 2010.~~1 million~~ ofG ~~income~~& ~~tax~~A ~~expense~~expenses increased 160% and 91%, respectively, ~~related~~or approximately to$3.9 ~~(1)~~and $4.5 ~~deferred~~million, ~~income~~in ~~taxes connected with~~ the ~~deductibility~~second ofquarter ~~goodwill~~and ~~from~~first ~~the~~half ~~2007~~of ~~acquisition~~2010 ofcompared to the same ~~cryoablation~~periods ~~surgical~~in ~~device business~~2009. ofThe ~~CryoCath~~increases ~~for~~are ~~tax~~primarily ~~purposes,~~the ~~but~~result ~~not~~of ~~for~~significant ~~book~~additional ~~purposes~~costs, fees and expenses in the ~~uncertainty~~second quarter of ~~the~~2010 ~~timing of~~related ~~its~~to ~~reversal~~(1) the ~~for~~proposed ~~book~~Merger ~~purposes~~with Medtronic ($1.8 million) and (2) ~~current~~the ~~income~~structuring ~~taxes~~and ~~for~~evaluation ~~certain~~ of ~~our~~alternative ~~international sales~~debt ~~subsidiaries~~refinancing options and ~~certain~~other corporate ~~state~~development ~~franchise~~activities ~~taxes~~($1.6 million). InOther ~~future~~G ~~years,~~& weA ~~will~~cost ~~continue recognizing~~increases ~~deferred~~for ~~income~~the ~~tax~~first ~~expense~~half ~~related~~of 2010 compared to the ~~CryoCath~~same ~~goodwill~~period ~~over~~in ~~its~~2009 ~~tax~~relate ~~life~~primarily asto ~~long~~higher incentive compensation expense ($0.3 asmillion), ~~there~~stock iscompensation noexpense ~~impairment~~($0.3 million) ofand consulting and professional fees ($0.2 million). We anticipate recording significant additional costs, fees and expenses in 2010 related to the ~~goodwill’s~~proposed ~~recorded~~Merger ~~value~~with Medtronic.

Through 2009 we had accumulated approximately $167 million of net operating loss (“NOL”) carryforwards for U.S. tax purposes ($59 million related to 3F). We believe that our ability to fully utilize the existing NOL carryforwards could be restricted on a portion of the NOL by changes in control that may have occurred or may occur in the future and by our ability to generate net income. We are continuing to conduct a formal study of whether, or to what extent, past changes in control of ATS impair our NOL carryforwards. We have recorded no net deferred tax asset related to our NOL carryforwards and other deferred items as we currently cannot determine that it is more likely than not that this asset will be realized and we, therefore, have provided a valuation allowance for the entire asset.

~~Net~~In ~~Loss.~~the ~~Our~~first ~~increase~~half of 2010 and 2009, we recognized total stock compensation expense of $1.9 million ($0.8 million in ~~net~~the ~~loss~~second quarter) and $1.2 million ($0.7 million in the ~~first~~second quarter), respectively. ofStock ~~2010~~compensation ~~compared~~expense has been allocated to ~~the~~cost ~~comparable~~of ~~period~~goods sold, sales and marketing, R & D and G & A expenses as indicated above in ~~2009~~Note ~~was~~2 ~~due~~of ~~primarily~~“Notes to ~~increased~~Consolidated Financial ~~operating~~Statements” ~~expenses~~in this Form 10-Q. The increase in stock compensation expense in 2010 is attributable to new equity grants and awards, ~~which~~accelerated ~~have~~first ~~been~~quarter ~~described~~2010 vesting of certain RSUs due to management incentive goals achieved and to the prior year reduction of stock compensation expense for forfeitures of RSUs originally granted in ~~detail~~2005, before our adoption of ~~above~~FASB ASC 718, Stock Compensation.

Amortization of Intangibles. Amortization expense for the first halves of both 2010 and 2009 totaled approximately $1.6 million ($0.8 million per quarter) and consisted primarily of amortization of our pyrolytic carbon technology license with CarboMedics as well as amortization of definite-lived intangible assets acquired in connection with our 2006 acquisition of 3F and our 2007 acquisition of the surgical cryoablation business of CryoCath.

Net Interest Expense. Net interest expense for the second quarter and first half of 2010 increased approximately 28% and 7%, respectively, from the same periods in 2009. These increases were the result of higher interest cost on the $30 million Loan from Medtronic (10%) than on our $22.4 million aggregate principal balance of Convertible Senior Notes (6%) and our Term Loan with Silicon Valley bank (9.5%), both of which were repaid in the second quarter of 2010 using the proceeds of the Loan from Medtronic. Also contributing to the higher interest expense was (1) an overlapping period of about 20 days during the second quarter of 2010 when both the Loan from Medtronic and the Notes were outstanding, (2) prepayment and accelerated credit facility fees related to the payoff the Term Loan and (3) amortization of deferred financing costs on the Loan from Medtronic. The higher interest expense was offset in part by lower interest on the declining principal balance of the Term Loan and the cessation of imputed interest expense on a $2.0 million acquisition payment made to CryoCath in June 2009.

Loss on Redemption of Convertible Senior Notes. During the second quarter of 2010, we recorded a non-cash, non-operating charge of $4.8 million related primarily to the write-off of the remaining balances of unamortized discounts on our Convertible Senior Notes after the redemption and retirement of the Notes in June 2010 in connection with the proposed Merger with Medtronic and the related $30 million Loan from Medtronic.

Other Income (Expense). The following table summarizes our net other income (expense) for the three and six month periods ended July 3, 2010 and July 4, 2009.


	Three months ended					Six months ended
	July 3 (July 4)					July 3 (July 4)
(in thousands)	2010			2009		2010			2009

Convertible Senior Notes derivative liability gain	$	—		$	9	$	9		$	18
Net foreign currency transaction gains (losses):
Realized		29			118		(1	)		(110	)
Unrealized		(477	)		344		(787	)		210

Net other income (expense)	$	(448	)	$	471	$	(779	)	$	118

Net other expense consists primarily of net foreign currency transaction gains and losses, including unrealized foreign currency gains and losses, related to short-term intercompany balances with our foreign subsidiaries. These gains and losses have been impacted in recent years by larger fluctuations in foreign currency exchange rates. The currency transaction losses in 2010 reflect a stronger U.S. dollar and weaker Euro-to-U.S. dollar exchange rates.

Income Taxes. In the first halves of 2010 and 2009, we recognized approximately $0.1 million and $0.2 million of income tax expense, respectively, related to (1) deferred income taxes connected with the deductibility of goodwill from the 2007 acquisition of the cryoablation surgical device business of CryoCath for tax purposes, but not for book purposes, and the uncertainty of the timing of its reversal for book purposes and (2) current income taxes for certain of our international sales subsidiaries and certain state taxes.

Through 2009 we had accumulated approximately $167 million of net operating loss (“NOL”) carryforwards for U.S. tax purposes ($59 million related to 3F). We believe that our ability to fully utilize the existing NOL carryforwards could be restricted on a portion of the NOL by changes in control that may have occurred or may occur in the future and by our ability to generate net income. We have recorded no net deferred tax asset related to our NOL carryforwards and other deferred items as we currently cannot determine that it is more likely than not that this asset will be realized and we, therefore, have provided a valuation allowance for the entire asset.

Net Loss. The increases in net loss for the second quarter and first six months of 2010 compared to the comparable periods in 2009 were due primarily to slightly lower gross profit on sales, significantly increased operating expenses, non-operating foreign currency losses and the non-cash loss related to the redemption of our Convertible Senior Notes, all of which have been described in detail above.

Liquidity and Capital Resources

Cash and cash equivalents totaled $912.50 million and $14.2 million at ~~April~~July 3, 2010 and December 31, 2009, respectively.

Operating Activities. During the first ~~quarter~~six months of 2010, we received cash payments from ~~customers~~ customers of approximately $1837.21 million (compared to approximately $1737.74 million for the ~~first~~same period ~~quarter~~in of 2009) and made payments to employees and suppliers of approximately $2145.82 million (compared to approximately $2042.05 million for the same period in 2009). Cash payments made during the first ~~quarter~~six months of 2009) included the payment of a $4.5 million litigation settlement payment to CarboMedics, Inc., in April 2009.

We have incurred significant expenses to support the commercialization of ATS products both in the United States and in international markets, have invested in new products and technologies and have completed strategic acquisitions and business partnerships to diversify our product portfolio. As we grow sales in future periods, better leverage our operating expenses and continue to drive declines in our product manufacturing costs, we believe that our operating losses will decrease and that we will move toward a cash flow breakeven on sales and eventually to full-year profitability.

Investing Activities. We ~~purchased~~used cash to purchase leasehold improvements, property and equipment totaling $0.2 5 million and $0.37 million during the first ~~three~~six months of 2010 and 2009, respectively. ~~Capital~~ Capital spending in both 2010 and 2009 has been focused on information technology and manufacturing ~~improvement~~ improvement projects.

~~Financing Activities.~~ During the first ~~three~~six months of ~~both 2010 and~~ 2009, we ~~raised~~made a $02.10 million acquisition payment to CryoCath due two ~~from~~years after the ~~issuance~~June 2007 closing of ~~common~~the ~~stock,~~acquisition ~~primarily~~of ~~through~~the ~~exercises~~cryoablation surgical device business of ~~stock~~CryoCath. ~~options~~Also ~~and~~during ~~warrants~~the ~~as well~~first ashalf ~~purchases~~of ~~under~~2009, ~~our~~we ~~employee~~converted ~~stock~~a ~~purchase~~long-term ~~plan~~restricted investment of $0.5 million to cash.

~~On February 25,~~Financing ~~2010,~~Activities. weDuring ~~received a commitment letter for four-year (interest only during~~ the first ~~year)~~half ~~term debt~~of ~~financing~~2010 ofwe ~~approximately~~raised $304.8 million from ~~one~~the ofissuance ~~our directors, Theodore C. Skokos, and The~~of ~~Ted~~common ~~and~~stock ~~Shannon~~related ~~Skokos Foundation. This financing was intended~~ to bethe ~~used~~exercise toof ~~call and retire our Convertible Senior Notes and bank Term Loan together totaling approximately $26~~2 million aswarrants ~~well~~on asour tocommon ~~provide general corporate working capital~~stock. InThe ~~light~~warrants ofwere originally ~~the~~issued ~~proposed~~in ~~Merger~~connection with ~~Medtronic~~private ~~and the~~placement ~~related~~stock ~~$30 million~~sales ~~Loan~~in ~~from~~2008 ~~Medtronic~~and ~~(see “Merger with Medtronic, Inc~~2007.” ~~above),~~During ~~we allowed~~ the ~~Skokos Commitment~~ tofirst ~~expire.~~halves ~~As required under the terms~~ of ~~the~~2010 ~~commitment~~and ~~letter~~2009, we ~~paid~~received ~~a one-time~~ $0.456 million ~~facility fee during the first quarter of 2010~~ and ~~will pay a break-up fee of~~ $0.452 million, respectively, in ~~the~~proceeds from ~~second~~exercises ~~quarter~~ of ~~2010~~stock ~~in connection~~options ~~with~~as ~~the~~well ~~expiration~~as purchases of ~~the~~common ~~Skokos~~stock ~~Commitment~~under our employee stock purchase plan.

In ~~2005~~May 2010, in connection with the proposed Merger with Medtronic, we ~~sold~~and acertain ~~combined~~of our subsidiaries received a $~~22.4~~30 million ~~aggregate~~Loan ~~principal~~from ~~amount~~Medtronic. ofThe 6%Loan ~~Convertible~~bears ~~Senior~~interest ~~Notes~~at the annual ~~due~~rate inof ~~2025~~10%, ~~Warrants~~payable tomonthly. ~~purchase~~We ~~1,344,000~~used ~~shares~~the proceeds of ~~our~~the ~~common~~Loan ~~stock~~to redeem and ~~certain~~retire ~~embedded~~our ~~derivatives.~~Convertible ~~The~~Senior ~~Warrants~~Notes, ~~are~~to ~~exercisable~~repay atoutstanding ~~$4.40~~borrowings ~~per~~under ~~share~~our ~~and~~Term ~~expire~~Loan inwith ~~2010.~~Silicon WeValley Bank, ~~used~~and ~~the proceeds~~for ~~from~~working ~~the~~capital. ~~Notes~~The ~~for~~entire ~~general~~unpaid ~~corporate~~principal ~~purposes,~~balance ~~working~~of ~~capital~~the Loan, ~~capital~~together ~~expenditures~~with accrued and to ~~fund~~unpaid ~~business~~interest, ~~development~~will ~~opportunities.~~be ~~Interest~~due onand ~~the~~payable ~~Notes~~in isfull ~~due~~24 months ~~semi-annually~~following inthe ~~April~~termination ~~and~~for ~~October.~~any ~~The~~reason ~~Notes~~of ~~are~~the ~~convertible~~Merger ~~into~~Agreement. ~~common~~A ~~stock~~facility atfee ~~any~~of ~~time~~1.5% atof athe ~~fixed~~original ~~conversion~~principal ~~price~~balance of ~~$4.20~~the ~~per~~Loan ~~share,~~was ~~subject~~paid toat ~~certain~~the ~~adjustments~~time of the May 2010 advance. IfUpon ~~fully~~final ~~converted,~~payment of the ~~Notes~~Loan, ~~would~~we ~~convert~~will ~~into~~be ~~approximately~~required 5to pay,~~333,334~~ ~~shares~~in ofaddition ~~our~~to ~~common~~the ~~stock.~~then Weoutstanding ~~have~~principal ~~the~~and ~~right~~accrued tobut ~~redeem~~unpaid ~~the~~interest, a ~~Notes~~final ~~at 100~~payment equal to 6% of the original principal ~~amount~~balance ~~plus~~of ~~accrued~~the ~~interest~~Loan. atIn ~~any~~addition, ~~time~~if onthe Merger orAgreement ~~after~~is ~~October 20,~~terminated ~~2008.~~for ~~The redemption~~any ofreason, ~~the~~we ~~Notes~~are is required asunder athe ~~condition~~terms of the ~~proposed~~Loan ~~Merger~~to ~~with~~ issue Medtronic. ~~See “Merger~~a ~~with~~seven-year ~~Medtronic~~warrant to purchase, ~~Inc.”~~at ~~above~~a per share exercise price of $2.61, ~~The~~a ~~Notes~~number ~~will~~of shares beof ~~redeemed~~our ~~using~~common ~~the~~stock ~~proceeds~~equal to 4% of athe quotient of $30 million ~~Loan~~divided toby be$2.61, ~~obtained~~provided that inthe ~~connection~~maximum ~~with~~number ~~the~~of ~~proposed~~shares ~~Merger.~~issuable ~~When~~pursuant to the ~~Notes~~Medtronic ~~are~~Warrant ~~redeemed,~~may not exceed that wenumber ~~will~~of ~~recognize~~shares awhich ~~non-cash~~is ~~debt~~19.9% ~~restructuring~~of ~~charge~~the total number of ~~approximately~~shares ~~$4.7 million~~of ~~related primarily~~our tocommon stock outstanding on the ~~unamortized~~date ~~discount~~of onissuance ~~the~~of ~~Notes~~such shares. The ~~investors~~exercise ~~have~~price and the ~~right~~number toof ~~require~~shares uspurchasable toupon ~~repurchase~~exercise of the ~~Notes~~Medtronic atWarrant ~~100%~~will ofbe ~~the~~subject ~~principal~~to ~~amount~~the ~~plus~~anti-dilution ~~accrued~~adjustments ~~interest~~provided onfor ~~October 15~~ in ~~2010,~~ ~~2015~~the ~~and~~Medtronic ~~2020~~Warrant. ~~Accordingly,~~The weLoan ~~have~~is ~~reclassified~~secured ~~the~~by ~~Notes~~security ~~from~~interests ~~long-term~~in tocertain ~~current~~collateral ~~liabilities~~of the onCompany ~~our~~and ~~balance~~the ~~sheet~~stock atin ~~both~~certain ~~December 31,~~subsidiaries ~~2009~~of ~~and~~the ~~April 3, 2010~~Company.

2122

WeIn ~~have maintained a Loan and Security Agreement with Silicon Valley Bank since 2004. Under the Loan Agreement~~February 2010, ~~as amended, all ATS assets are pledged as collateral and~~ we ~~are~~received ~~subject~~a tocommitment ~~certain financial~~letter ~~covenants.~~for Infour-year ~~2007,~~(interest weonly ~~entered~~during ~~into an Amendment to~~ the ~~Loan~~first year) ~~Agreement~~term ~~whereby~~debt ~~the~~financing ~~Bank provided~~of ~~for~~approximately an $~~8.6~~30 million ~~Term Loan, which we used to repay then outstanding term loans and advances~~ from ~~the~~one ~~Bank~~of ~~and~~our ~~to purchase the surgical cryoablation business from CryoCath. Under the Term Loan~~directors, asTheodore ~~amended, we began making monthly payments of principal plus interest in 2008 that continue until June 2011~~C. ~~Accordingly~~Skokos, weand ~~repaid~~The ~~$0.9 million~~Ted ofand ~~principal~~Shannon onSkokos ~~the Term Loan during the first three months of both 2010 and 2009~~Foundation. WeThis ~~have~~financing ~~the~~was ~~right~~intended to ~~prepay~~be ~~all,~~used ~~but~~to ~~not less than all, of the outstanding~~call ~~Term~~and ~~Loan~~retire atour ~~any~~Convertible ~~time~~Senior soNotes ~~long~~and asour nobank ~~event of default has occurred. Interest on the~~ Term Loan ~~accrues at a fixed rate per annum of 9.5%~~, ~~equal~~together tototaling ~~1.25%~~approximately ~~above the prime rate in effect as of the~~$26 ~~funding date of the Term Loan. The 2007 Amendment also made certain changes to the liquidity ratio covenant set forth in the Loan Agreement~~million, as ~~amended.~~well ~~The~~as ~~liquidity ratio was changed~~ to ~~require that~~provide wegeneral ~~maintain,~~corporate atworking ~~all~~capital. ~~times,~~In onlight ~~a consolidated basis, a ratio~~ of ~~(1)~~ the ~~sum~~proposed ~~of (a) our~~Merger ~~unrestricted~~with ~~cash~~Medtronic (and ~~equivalents) on deposit with~~ the ~~Bank~~related ~~plus~~Loan ~~(b) 50% of the our accounts receivable arising~~ from ~~the sale or lease of goods~~Medtronic, orwe ~~provision~~allowed ~~of services, in~~ the ~~ordinary course~~Skokos ofCommitment ~~business, divided by (2) our indebtedness~~ to ~~the~~expire. ~~Bank for borrowed money, equal to or~~As ~~greater~~required ~~than~~under ~~1.4~~the toterms ~~1.0.~~of Inthe ~~late~~commitment ~~2008~~letter, we ~~entered~~paid ~~into~~a ~~another~~one-time ~~Amendment to the Loan Agreement whereby the liquidity ratio was raised to 2.~~$0 ~~to 1~~.~~0 until a $4.5~~45 million ~~litigation~~facility ~~settlement~~fee ~~payment~~during ~~was made to CarboMedics and a related security interest granted to CarboMedics was released. Upon such payment,~~ the ~~Bank~~first ~~agreed~~quarter toof ~~return~~2010 ~~the~~and ~~liquidity~~paid ~~ratio~~a ~~requirement~~break-up tofee ~~1.4~~of ~~to 1.~~$0. ~~In April~~45 ~~2009,~~million wein ~~made~~ the ~~$4.5 million~~second ~~settlement~~quarter ~~payment. As~~ of ~~April 3,~~ 2010 ~~and December 31, 2009, we were~~ in ~~compliance~~connection with ~~all~~the ~~financial~~expiration ~~covenants~~of ~~set forth in~~ the ~~Loan~~Skokos ~~Agreement, as amended~~Commitment.

In 2008, we entered into a Credit Agreement with Mr. Skokos, for a two-year, $5 million Credit Facility. Advances under the Credit Facility ~~carry~~carried interest at 15% per annum payable quarterly. The Credit Facility also ~~carries~~carried an annual commitment fee of 1% of the average unused Revolving Commitment Amount, payable annually. We paid the first annual commitment fee of $0.05 million to Mr. Skokos in July 2009. AsNo ofadvances ~~April 3,~~were ~~2010,~~made ~~no amounts had been drawn~~ under the Credit Facility~~. Our~~ ~~obligations~~prior to ~~Mr. Skokos~~its ~~under~~termination in ~~the~~May 2010. ~~Credit~~All ~~Agreement~~assets ~~are~~were ~~subordinate~~pledged toas ~~(1) our~~collateral ~~obligations~~on to the ~~holders~~Credit ofFacility. ~~our~~In ~~Convertible~~light ~~Senior~~of ~~Notes~~the proposed ~~and~~Merger ~~(2) our~~with ~~obligations~~Medtronic toand ~~Silicon~~related ~~Valley~~Loan ~~Bank.~~from ~~All assets~~Medtronic, ~~are~~we ~~pledged~~terminated asthe ~~collateral~~Credit onAgreement with ~~the~~Mr. Skokos ~~Credit~~in ~~Facility~~May 2010. In connection with the ~~execution~~termination of the Credit Agreement, we ~~issued~~ paid to Mr. Skokos a ~~warrant to purchase 245,098 shares of our common stock at~~ $20.0405 million ~~per~~fee ~~share~~equal ~~until~~to ~~June 29,~~the ~~2015.~~commitment Infee ~~July 2008,~~to which Mr. Skokos ~~exercised~~would ~~this warrant in full~~otherwise ~~and~~have webeen ~~received~~entitled ~~$0.5 million~~had ~~from~~ the ~~exercise.~~Credit WeAgreement ~~are~~been ~~obligated~~allowed to ~~issue~~expire ~~additional~~by ~~seven-year warrants~~its toterms ~~Mr.~~in June ~~Skokos~~2010. Other inthan the ~~future~~Fee, ~~based~~there onwere ~~the~~no ~~total~~termination ~~amount~~fees ofor ~~advances~~penalties ~~under~~incurred by the ~~Credit~~Company in ~~Facility~~connection with the termination.

In 2005, we sold a combined $22.4 million aggregate principal amount of 6% Convertible Senior Notes due 2025, which were, prior to their redemption and retirement in June 2010, convertible into 5,333,334 shares of our common stock. We used the proceeds from the Notes for general corporate purposes, working capital, capital expenditures and to fund business development opportunities. As discussed above, in June 2010 we redeemed and retired the Notes, which was required as a condition of the proposed Merger with Medtronic. The Notes were redeemed using proceeds from the Loan obtained in connection with the proposed Merger with Medtronic. During the second quarter of 2010, we recorded a non-cash, non-operating loss on redemption and retirement of the Notes of $4.8 million, related primarily to the write-off of the remaining balances of unamortized discounts on the Notes.

We maintained a Loan and Security Agreement with Silicon Valley Bank from 2004 until May 2010. Under the Loan and Security Agreement, as amended, all ATS assets were pledged as collateral and we were subject to certain financial covenants. In 2007, we entered into an Amendment to the Loan and Security Agreement whereby the Bank provided for an $8.6 million Term Loan, which we used to repay then outstanding term loans and advances from the Bank and to purchase the surgical cryoablation business from CryoCath. Under the Term Loan, as amended, we began making monthly payments of principal plus interest beginning in 2008 and continuing until June 2011. In June 2010, the Company exercised its right to prepay the outstanding Term Loan using proceeds from the Loan obtained in connection with the proposed Merger with Medtronic. This prepayment was required as a condition of the proposed Merger. Under the Loan and Security Agreement, the Company paid prepayment penalties and credit facility fees of $0.16 million in connection with the prepayment. Interest on the Term Loan accrued at a fixed rate per annum of 9.5%. During the life of the Term Loan, we were in compliance with all financial covenants set forth in the Loan and Security Agreement, as amended.

Cash Management and Funding of Future Operations

We anticipate that operating costs will remain relatively high in comparison to sales during 2010 and will continue to require the use of cash to fund operations. However, we anticipate having sufficient cash to fund our operations until the consummation of the proposed Merger with Medtronic. As identified in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2009, global economic turmoil may adversely impact our revenue, access to the capital markets or future demand for our products, all of which could affect our long-term viability. Approximately 60% of our revenue is derived from markets outside the United States and this revenue may be adversely impacted by large swings in foreign currency exchange rates and the availability of credit for our distributors in emerging markets. 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.

If the Merger with Medtronic is not consummated, we may need to raise additional cash in or after 2010 to fund our business and to pay off our $30 million Loan ~~to be~~ obtained from Medtronic when it ~~comes~~ comes due 24 months after termination of the Merger Agreement. If the Merger with Medtronic is not consummated, funding of our operations in future periods would likely require additional investments in ATS in the form of equity or debt. Any sale of additional equity or issuance of debt securities may result in dilution to our stockholders, and we cannot be certain that additional public or private financing will be available in amounts or on terms acceptable to us, or at all. If we are unable to obtain this additional financing when needed, we may be required to delay, reduce the scope of, or eliminate one or more aspects of our business development activities, which could harm the growth of our business.

Off-Balance Sheet Arrangements

We do not have any “off-balance sheet arrangements” (as such term is defined in Item 303 of Regulation S-K) that are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, operating results, liquidity, capital expenditures or capital resources.

22Contractual Obligations

~~Table~~A table of ~~Contents~~our contractual obligations and other commitments is contained in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations — Contractual Obligations, of our Annual Report on Form 10-K for the year ended December 31, 2009 (“2009 Form 10-K”). As of July 3, 2010, we had the following significant changes to our contractual obligations table contained in our 2009 Form 10-K:

•

We redeemed and retired our Convertible Senior Notes.

•

We prepaid our Term Loan with Silicon Valley Bank.

•

We repaid the Notes and Term Loan using the proceeds of the $30 million Loan obtained from Medtronic in connection with the proposed Merger with Medtronic. The entire unpaid principal balance of the Loan, together with accrued and unpaid interest, will be due and payable in full 24 months following the termination, for any reason, of the Merger Agreement. Upon final payment of the Loan, we would be required to pay, in addition to the then outstanding principal and accrued but unpaid interest, a final payment equal to 6% of the original principal balance of the Loan.


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.

In the United States, the United Kingdom, France, Germany, Belgium, the Netherlands and Switzerland, 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 our direct selling markets in Europe, are entered into in U.S. dollars, precluding the need for foreign currency hedges on such sales. Sales through our French and German subsidiaries, as well as sales to Belgium and the Netherlands, are in Euros. Sales to the United Kingdom and Switzerland are denominated in British pounds and Swiss francs, respectively. Therefore, we are subject to profitability risk arising from exchange rate movements. Our foreign subsidiaries are also subject to exchange rate risk related to their U.S dollar-denominated intercompany payable balances. We have not used foreign exchange contracts or similar devices to reduce these risks. We will evaluate the need to use foreign exchange contracts or similar devices if sales in our European direct markets increase substantially.


ITEM 4.		Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures, which are designed to ensure that information required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934, as amended (“Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Principal Executive Officer and our Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of our management, including our Principal Executive Officer and our Principal 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 Exchange Act). Based on that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

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 ~~April~~July 3, 2010 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION


ITEM 1.		Legal Proceedings

Medtronic Merger Class Action Litigation

On May 4, 2010, a class action complaint was filed in the District Court of the State of Minnesota Hennepin County concerning the Merger. The class action was instituted by Patrick Vandenberghe, individually and on behalf of all public shareholders of ~~the Company~~ATS, against ~~the Company~~ATS, our board of directors, our president and chief executive officer, Medtronic and Pilgrim Merger Corporation, a wholly owned subsidiary of Medtronic (“Merger Sub”). The complaint alleges breach of fiduciary duty by the members of our board of directors arising out of the attempt to sell ~~the~~ATS ~~Company~~ by means of unfair process with preclusive deal protection devices, and at an unfair price of $4.00 in cash for each share of our ~~the Company’s~~ common stock. The complaint also alleges that ~~the~~ATS ~~Company~~ and Medtronic aided and abetted the alleged ~~breach~~breaches of fiduciary duties by the other defendants. On June 2, 2010, we received notice of an amended class action complaint, which further alleges that the preliminary proxy statement we filed on May 25, 2010 fails to provide our shareholders with material information and/or provides our shareholders with materially misleading information, which the complaint alleges renders our shareholders unable to make an informed decision on whether to vote in favor of the Merger. The amended class action complaint includes a claim brought pursuant to Minnesota Statutes §302A.467, alleging that each member of our board of directors violated the standard of conduct imposed on him pursuant to Minnesota Statutes §302A.251 and that each such member and our president and chief executive officer violated the standard of conduct imposed on him pursuant to Minnesota Statutes §302A.361, in each case by allegedly failing to discharge his respective duties as a member of our board of directors in good faith, in a manner he reasonably believes to be in the best interests of our shareholders and with the care an ordinarily prudent person in a like position would exercise under similar circumstances. The complaint seeks damages, costs and injunctive relief to prevent the consummation of the Merger, or in the event that the Merger is consummated, then rescission or rescissory damages, and such further relief as the court deems just and proper.

On May 4, 2010, ~~the~~we ~~Company~~ received notice of a class action complaint venued in the District Court of the State of Minnesota Hennepin County concerning the Merger. The class action was instituted by Scott Kirklighter, individually and on behalf of all public shareholders of ~~the Company~~ATS, against ~~the Company~~ATS, our ~~board~~ board of directors, our chief executive officer, our chief financial officer, Medtronic and ~~Pilgrim~~ Merger ~~Corporation, a wholly owned subsidiary of Medtronic~~Sub. The complaint alleges breach of fiduciary duty by the members of our board of directors, our chief executive officer and our chief financial officer arising out of the attempt to sell ~~the~~ATS ~~Company~~ by means of unfair process with preclusive deal protection devices and at an unfair price of $4.00 in cash for each share of ~~the~~our ~~Company’s~~ common stock. The complaint also alleges that ~~the Company~~ATS, Medtronic, ~~and Pilgrim~~ Merger ~~Corporation,~~Sub aand our ~~wholly~~chief ~~owned~~financial ~~subsidiary~~officer ~~of Medtronic,~~ aided and abetted the breach of fiduciary duties. On June 11, 2010, we received a notice of motion and motion for leave to amend the complaint, accompanied by supporting documents, including a proposed amended complaint. The proposed amended complaint further alleges that the preliminary proxy statement we filed on May 25, 2010 contains numerous material misleading statements or omissions. The complaint seeks costs and injunctive relief to prevent the consummation of the Merger unless and until ~~the~~we ~~Company~~adopt ~~adopts~~ and ~~implements~~ implement a procedure or process to obtain a transaction that provides the best possible terms for our shareholders, and, rescission of, to the extent already implemented, the Merger Agreement or any of the terms thereof. The complaint also seeks a declaration and decree that the Merger Agreement was agreed to in breach of the fiduciary duties of the members of our board of directors, our chief executive officer and our chief financial officer, a direction from the court to the members of our board of directors, our chief executive officer and our chief financial officer to exercise their fiduciary duties to commence a sale process that is reasonably designed to secure the best possible consideration for ATS ~~the Company~~ and the imposition of a constructive trust, in favor of Mr. Kirklighter and members of the purported class, upon any benefits improperly received by the defendants as a result of their alleged wrongful conduct.

On May 10, 2010, ~~the~~we ~~Company~~ received notice of a class action complaint venued in the District Court of the State of Minnesota Hennepin County concerning the Merger. The class action was instituted by Vance S. Dahle, individually and on behalf of all public shareholders of ~~the Company~~ATS, against ~~the Company~~ATS, our board of directors, Medtronic and ~~Pilgrim~~ Merger ~~Corporation, a wholly owned subsidiary of Medtronic~~Sub. The complaint alleges breach of fiduciary duty by the members of our board of directors arising out of the attempt to sell ~~the~~ATS ~~Company~~ by means of unfair process with preclusive deal protection devices, and at an unfair price of $4.00 in cash for each share of ~~the Company’s common~~our common stock. The complaint also alleges that Medtronic and ~~its~~Merger ~~wholly~~Sub ~~owned~~aided ~~subsidiary~~and abetted the alleged breach of fiduciary duties. An amended complaint, ~~Pilgrim~~dated ~~Merger~~May 28, 2010, further alleges that ~~Corporation~~the preliminary proxy statement we filed on May 25, ~~aided~~2010 ~~and~~is ~~abetted~~deficient with respect to disclosures pertaining to the Merger, the financial analyses conducted by J.P. Morgan Securities, Inc. and the alleged ~~breach~~conflict of ~~fiduciary~~interest ~~duties~~of various parties involved in the Merger. The complaint seeks damages, costs, ~~and~~ injunctive relief to prevent the consummation of the Merger, or in the event that the Merger is consummated, then rescission or rescissory damages, and filing an updated proxy statement to correct the alleged disclosure deficiencies articulated in the complaint.

~~We believe the class actions described above are without merit, and we intend to vigorously defend~~26 ~~against the claims asserted.~~

On May 20, 2010, we received notice of a class action complaint venued in the District Court of the State of Minnesota Hennepin County concerning the Merger. The class action was instituted by Pricha Tuksaudom, individually and on behalf of all public shareholders of ATS, against ATS and our board of directors. The complaint alleges breach of fiduciary duty by the members of our board of directors arising out of the attempt to sell ATS by means of unfair process with preclusive deal protection devices, and at an unfair price of $4.00 in cash for each share of our common stock. An amended complaint, dated May 28, 2010, further alleges that the preliminary proxy statement we filed on May 25, 2010 fails to provide our shareholders with material information and/or provides our shareholders with materially misleading information, which the complaint alleges renders our shareholders unable to make an informed decision on whether to vote in favor of the Merger. The complaint seeks damages, costs and injunctive relief to prevent the consummation of the Merger, or in the event that the Merger is consummated, then rescission or rescissory damages.

On May 21, 2010, we received notice of a class action complaint venued in the District Court of the State of Minnesota Hennepin County concerning the Merger. The class action was instituted by Marian J. Holmquist, individually and on behalf of all public shareholders of ATS, against ATS, our board of directors, our chief executive officer and our chief financial officer. The complaint alleges breach of fiduciary duty by the members of our board of directors arising out of the attempt to sell ATS by means of unfair process with preclusive deal protection devices, and at an unfair price of $4.00 in cash for each share of our common stock. The complaint seeks costs and injunctive relief to prevent the consummation of the Merger, to prevent the defendants from taking any actions that violate their fiduciary duties to our shareholders and to prevent the defendants from taking any actions that impede or deter other potential acquirers.

On May 26, 2010, we received notice of a class action complaint venued in the District Court of the State of Minnesota Hennepin County concerning the Merger. The class action was instituted by Mark W. Johnson, individually and on behalf of all public shareholders of ATS, against ATS, our board of directors, Medtronic and Merger Sub. The complaint alleges breach of fiduciary duty by the members of our board of directors arising out of the attempt to sell ATS by means of unfair process with preclusive deal protection devices, and at an unfair price of $4.00 in cash for each share of our common stock. The complaint also alleges that ATS and Medtronic aided and abetted the alleged breach of fiduciary duties. The complaint also alleges that the preliminary proxy statement we filed on May 25, 2010 fails to disclose certain material information necessary for our shareholders to make a rational and fully-informed decision regarding the Merger. The complaint seeks costs and injunctive relief to prevent the consummation of the Merger, or in the event that the Merger is consummated, then rescission or rescissory damages.

On June 22, 2010, we became aware of the filing of a class action complaint venued in the U.S. District Court for the District of Minnesota concerning the Merger. The class action was instituted by Larry P. Fournier and Patrice M. Fournier individually and on behalf of all public shareholders of ATS against ATS, our board of directors, Medtronic and Merger Sub. The complaint alleges: (a) violations of Section 14(a) of the Securities Exchange Act of 1934 and SEC Rule 14a-9 promulgated thereunder by all defendants arising out of the defendants’ alleged dissemination of a false and misleading preliminary proxy statement, in reference to the preliminary proxy statement we filed on May 25, 2010, which the plaintiffs allege the defendants knew or should have known was misleading in that it allegedly contained misrepresentations and failed to disclose material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading, including regarding alleged conflicts of interest of certain members of our board of directors; (b) breach of fiduciary duty by the members of our board of directors arising out of the attempt to sell ATS by means of unfair process with preclusive deal protection devices, and at an unconscionable, unfair and grossly inadequate price of $4.00 in cash for each share of our common stock; (c) breach of fiduciary duty by the members of our board of directors arising out of the alleged failure of our preliminary proxy statement, which we filed on May 25, 2010, to provide our shareholders with material information and/or providing them with materially misleading information, thereby rendering our shareholders unable to make an informed decision regarding whether to vote in favor of the Merger; and (d) that ATS and Medtronic aided and abetted the alleged breach of fiduciary duties. The complaint seeks costs and injunctive relief to prevent the consummation of the Merger.

On June 16, 2010, all of the cases filed in state court were consolidated in In re ATS Medical, Inc. Shareholder Litigation (the “Lawsuit”). On July 12, 2010, the case filed in federal court was dismissed voluntarily without prejudice.

On July 26, 2010, after extensive negotiations, ATS and the other defendants reached an agreement in principle with the plaintiffs regarding settlement of the Lawsuit. In connection with the settlement contemplated by that agreement in principle, the Lawsuit and all claims asserted therein will be dismissed with prejudice. The terms of the settlement contemplated by that agreement in principle require that ATS make certain additional disclosures related to the Merger, which the Company has done. The agreement in principle contemplates that the parties will enter into a stipulation of settlement, which will be subject to customary conditions, including Court approval following notice to ATS’s shareholders. There can be no assurance that the parties will ultimately enter into a stipulation of settlement, that the Court will approve any proposed settlement, or that any eventual settlement will be under the same terms as those contemplated by the agreement in principle. By entering into the proposed settlement, ATS and the other defendants are in no way acknowledging that the allegations contained in the Lawsuit have merit, and the defendants deny any liability.

We believe the class actions described above are without merit and, if necessary, would vigorously defend against the claims asserted.

Abbey Litigation

On January 23, 2006, following execution of a Merger Agreement between the Company and 3F Therapeutics, Inc. (“3F”), 3F was informed of a summons and complaint which was filed in the U.S. District Court in the Southern District of New York by Arthur N. Abbey (“Abbey”) against 3F Partners Limited Partnership II (a major stockholder of 3F, “3F Partners II”), Theodore C. Skokos (the then chairman of the board and a stockholder of 3F), 3F Management II, LLC (the general partner of 3F Partners II), and 3F (collectively, the “Defendants”) (the “Abbey I Litigation”). The summons and complaint alleges that the Defendants committed fraud under federal securities laws, common law fraud and negligent misrepresentation in connection with the purchase by Abbey of certain securities of 3F Partners II. In particular, Abbey claims that the Defendants induced Abbey to invest $4 million in 3F Partners II, which, in turn, invested $6 million in certain preferred stock of 3F, by allegedly causing Abbey to believe, among other things, that such investment would be short-term. Pursuant to the complaint, Abbey is seeking rescission of his purchase of his limited partnership interest in 3F Partners II and return of the amount paid therefor (together with pre-and post-judgment interest), compensatory damages for the alleged lost principal of his investment (together with interest thereon and additional general, consequential and incidental damages), general damages for all alleged injuries resulting from the alleged fraud in an amount to be determined at trial and such other legal and equitable relief as the court may deem just and proper. Abbey did not purchase any securities directly from 3F and is not a stockholder of 3F. In March 2006, 3F filed a motion to dismiss the complaint. In August 2007, the Court granted 3F’s motion to dismiss the complaint based on plaintiff’s failure to state a claim upon which relief may be granted and ordered the Clerk of the Court to close the case. Abbey filed a Notice of Appeal with the United States Court of Appeals for the Second Circuit seeking to reverse the District Court’s August 2007 Order dismissing the case. In December 2008, the Second Circuit issued a Summary Order that affirmed the District Court’s judgment of dismissal finding that Abbey failed to state a claim against 3F. However, the Second Circuit remanded the case to the District Court to allow Abbey a chance to replead his claims. On or about February 13, 2009, Abbey filed an amended complaint which purports to allege additional facts to support the same claims against 3F that were asserted and dismissed in the original complaint. On or about March 31, 2009, 3F served and filed its motion to dismiss the amended complaint with prejudice. 3F’s motion to dismiss was fully submitted on June 8, 2009. By Order entered December 2, 2009, the District Court denied 3F’s motion to dismiss on the ground of lack of standing and converted the remainder of 3F’s motion to dismiss for failure to state a claim into a motion for summary judgment. Accordingly, the Court ordered “limited discovery” to be completed by February 26, 2010 and additional briefings on summary judgment to be completed by April 9, 2010. This schedule has been modified and discovery is to be completed by June 8, 2010 and additional briefings on summary judgment are to be fully submitted by August 16, 2010.

On or about June 14, 2006, Abbey commenced a second civil action in the Court of Chancery in the State of Delaware by serving 3F with a complaint naming both 3F and Mr. Skokos as defendants (the “Abbey II Litigation”). The complaint alleges, among other things, fraud and breach of fiduciary duties in connection with the purchase by Abbey of his partnership interest in 3F Partners II. The Delaware action seeks: (1) a declaration that (a) for purposes of the merger, Abbey was a record stockholder of 3F and was thus entitled to withhold his consent to the merger and seek appraisal rights after the merger was consummated and (b) the irrevocable stockholder consent submitted by 3F Partners II to approve the merger be voided as unenforceable; and (2) damages based upon allegations that 3F aided and abetted Mr. Skokos in breaching Mr. Skokos’s fiduciary duties of loyalty and faith to Abbey. On July 17, 2006, 3F filed a motion to dismiss the complaint in the Abbey II Litigation, or, alternatively, to stay the action pending adjudication of the Abbey I Litigation. In October 2006, the Delaware Chancery Court entered an order staying the Delaware action pending the outcome of the Abbey I litigation. In August 2007, the parties informed the Delaware Chancery Court that they would consent to the continued stay of the Delaware action pending the outcome of Abbey’s appeal of the Abbey I Litigation. The stay remains in effect pending the outcome of 3F’s motion to dismiss the amended complaint.

~~3F has been notified by its director and officer insurance carrier that such carrier will defend~~28 and cover all defense costs as to 3F and Mr. Skokos in the Abbey I Litigation and Abbey II Litigation, subject to policy terms and full reservation of rights. In addition, under the Merger Agreement, 3F and the 3F stockholder representative have agreed that the Abbey I Litigation and Abbey II Litigation are matters for which express indemnification is provided. As a result, certain escrow shares and contingent shares, if any, which may in the future be issued under the Merger Agreement, may be used by ATS to satisfy, in part, ATS’s set-off rights and indemnification claims for damages and losses incurred by 3F or ATS, and their directors, officers and affiliates, that are not otherwise covered by applicable insurance arising from the Abbey I Litigation and Abbey II Litigation. See Note 5 of “Notes to Consolidated Financial Statements” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009 for a description of the contingent shares. The Company believes the Abbey I Litigation and Abbey II Litigation will not have a material impact on the Company’s financial position or operating results.

Abbey Litigation Relating to the Medtronic Merger

On August 2, 2010, we received notice of an action venued in the District Court of the State of Minnesota Hennepin County concerning the Merger. The action was instituted by Abbey, a former beneficial owner of 3F Therapeutics, Inc. stock and current beneficial owner of ATS stock, against ATS, our board of directors, our chief executive officer, and Medtronic. The complaint seeks a declaratory judgment of the parties’ rights and obligations under the Merger Agreement as it concerns the January 23, 2006 Agreement and Plan of Merger among ATS, Seabiscuit Acquisition Corp., 3F Therapeutics, Inc. and Boyd D. Cox (the “3F Agreement”), and specifically, that the 3F Agreement entitles plaintiff to additional consideration in the Merger. The complaint also alleges breach of fiduciary duty by the members of our board of directors arising out of the attempt to sell ATS through an arrangement that would allegedly abrogate the right to additional consideration of ATS shareholders who are former holders of 3F shares. The complaint also alleges that ATS and Medtronic aided and abetted the alleged breach of fiduciary duties. In addition to the declaration of rights and obligations under the Merger Agreement and the 3F Agreement, the complaint seeks damages and costs.

We believe that the Abbey I Litigation, Abbey II Litigation and the Abbey Litigation relating to the Medtronic Merger are without merit and will not have a material impact on our financial position or operating results. In addition, we intend to continue to vigorously defend against the claims asserted.


ITEM 1A.		Risk Factors

You should carefully consider the risk factors discussed below and in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2009, any of which could have a material impact on our business, financial condition or results of operations.

~~The~~Included ~~following~~below are updated versions of the three new risk factors ~~that~~we included in Part II, Item 1A of our Quarterly Report on Form 10-Q for the fiscal quarter ended April 3, 2010. Such risk factors should be read in conjunction with the risk factors disclosed in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2009:

Our business and our financial condition may be adversely affected if the proposed Merger with Medtronic is not completed, which could cause our stock price to decline.

The proposed Merger with Medtronic is subject to several customary conditions, including obtaining clearance from governmental entities and the approval of the Merger by the outstanding holders of our common stock. While we have received the required antitrust clearances and the Merger has been approved by our shareholders, certain conditions to closing remain to be satisfied or waived. During the months following execution of the Merger Agreement with Medtronic until we are able to ~~secure these necessary approvals and~~ close the transaction, our employees and customers may have been and could continue, until closing, to be significantly distracted and our business could be adversely affected by the ~~uncertainty~~ uncertainty created by the announcement of the proposed Merger. If the proposed Merger with ~~Medtronic~~ Medtronic ultimately is not completed, we believe our business would have been, and would continue to be, adversely affected by a variety of risks, including those identified below, and we believe we would not be in as good of a position as we would have been had we not entered into a transaction with Medtronic in the first place:

• the consequences of our management’s attention having been diverted from our day-to-day business over an extended period of time between execution of the Merger Agreement with Medtronic and the date on which the agreement would terminate; • the disruption to our relationships with customers and suppliers as a result of our and their efforts relating to the Merger; • actual and potential litigation associated with the proposed transaction with Medtronic; • damage to our financial condition as a result of actions triggered by the proposed Merger, such as the redemption of our 6% Convertible Senior Notes, that we otherwise would not have taken as soon or at all if we had not entered into the proposed Merger with Medtronic;

25 • the disruption to our relationships with customers and suppliers as a result of our and their efforts relating to the Merger;

•

actual and potential litigation associated with the proposed transaction with Medtronic;

•

damage to our financial condition as a result of actions triggered by the proposed Merger, such as the redemption of our 6% Convertible Senior Notes, that we otherwise would not have taken as soon or at all if we had not entered into the proposed Merger with Medtronic;

•

our inability to acquire further necessary financing to fund our ongoing operations post-termination of the proposed Merger with Medtronic;

•

the potential distraction to our sales force caused by uncertainties relating to the proposed Merger;

•

the potential delay in approval of products in the regulatory submission process; and

•

the potential loss of business to our competitors.

• our inability to acquire further necessary financing to fund our ongoing operations post-termination of the proposed Merger with Medtronic; • the potential distraction to our sales force caused by uncertainties relating to the proposed Merger; • the potential delay in approval of products in the regulatory submission process; and • the potential loss of business to our competitors.

If the proposed Merger with Medtronic is not completed, the holders of our common stock, restricted stock units and options and warrants to purchase common stock will not receive the cash merger consideration provided in the Merger Agreement.

Pursuant to the Merger Agreement, each share of our common stock that is issued and outstanding immediately prior to the completion of the Merger (other than shares held by us, Medtronic or its subsidiaries, which will be canceled without payment of any consideration, and shares for which appraisal rights have been validly exercised and not withdrawn) will be converted into the right to receive $4.00 in cash, without interest. Each option to purchase our common stock that is outstanding immediately prior to the completion of the Merger will be canceled in exchange for the right to receive in cash the amount by which $4.00 exceeds the exercise price, multiplied by the number of shares subject to such option. Each restricted stock unit that is outstanding immediately prior to the completion of the Merger will be canceled in exchange for the right to receive $4.00 per restricted stock unit in cash. Each warrant to purchase our common stock that is outstanding immediately prior to the completion of the Merger will be converted into the right to receive, upon exercise, an amount in cash equal to the amount by which $4.00 exceeds the exercise price, multiplied by the number of shares subject to such warrant. The proposed Merger with Medtronic is subject to ~~several~~ customary conditions, including obtaining clearance from ~~governmental~~ governmental entities and the approval of the Merger by a majority of the outstanding holders of our common stock. WeWhile ~~may~~we ~~not~~have bereceived ~~able~~the required antitrust clearances and the Merger has been approved by our shareholders, certain conditions to ~~obtain~~closing ~~all~~remain ~~necessary~~to ~~approvals~~be satisfied or waived. We may not be able to meet all closing conditions in order to complete the proposed Merger. If we are not able to complete the Merger, the holders of our common stock, restricted stock units and options and warrants to purchase common stock will not receive the cash merger consideration provided in the Merger Agreement.

In connection with the proposed Merger with Medtronic, we may incur litigation costs which may harm our business and financial condition and cause our stock price to decline.

The proposed Merger with Medtronic has resulted in and could result in ~~litigation~~ additional litigation against our Company in connection with the transaction itself regardless of whether we are able to close the transaction. This would result in additional litigation costs and management distraction and any failure to successfully defend against these actions could harm our business and our financial condition and cause our stock price to decline.


ITEM 5.		Other Information

On July 28, 2010, the Personnel and Compensation Committee of the Company’s Board of Directors determined to terminate the Company’s 2010 Management Incentive Compensation Plan (the “2010 MICP”) prior to the closing of the proposed Merger with Medtronic and to make payments under the 2010 MICP based on the performance of the Company to date. The amounts to be paid to each of the Company’s named executive officers pursuant to the 2010 MICP are set forth in the table below.


		2010 MICP
Name	Position	Payout ($)
Michael D. Dale	Chairman, Chief Executive Officer and President	$	84,788
Michael R. Kramer	Chief Financial Officer		42,394
Thaddeus Coffindaffer	Vice President, Sales		46,049
Craig A. Swandal	Vice President, Operations		45,069
Michael E. Reinhardt	Vice President, Global Marketing		42,394


ITEM 6.		Exhibits

	2.1			Agreement and Plan of Merger, dated as of April 28, 2010, among Medtronic, Inc., Pilgrim Merger Corporation and ATS Medical, Inc. (Incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on April 29, 2010).
	3.1			Third 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 quarterly period ended June 28, 2008).
	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).
	12.1			Computation of Ratio of Earnings to Fixed Charges.
	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).
	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).

2630


	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			Description of amendment to the ATS Medical, Inc. 1998 Employee Stock Purchase Plan, as amended (Incorporated by reference to Item 1.01 contained in the Company’s Current Report on Form 8-K filed on May 4, 2010).

	10.2			ATS Medical, Inc. 2010 Stock Incentive Plan (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 18, 2010).

	10.3			Promissory Note, dated May 21, 2010, executed by ATS Medical, Inc., 3F Therapeutics, Inc. and ATS Acquisition Corp. in favor of Medtronic, Inc. (including the form of Warrant issuable under certain circumstances by ATS Medical, Inc. to Medtronic, Inc.) (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 21, 2010).

	10.4			Security Agreement, dated May 21, 2010, executed by ATS Medical, Inc., 3F Therapeutics, Inc. and ATS Acquisition Corp. in favor of Medtronic, Inc. (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on May 21, 2010).

	10.5			Pledge Agreement, dated May 21, 2010, made by ATS Medical, Inc. to Medtronic, Inc. (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on May 21, 2010).

	12.1			Computation of Ratio of Earnings to Fixed Charges.

	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).

	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).

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: May 13, 2010	ATS MEDICAL, INC.
Date: August 11, 2010	ATS MEDICAL, INC.
	By:	/s/ Michael D. Dale
		Michael D. Dale
		Chief Executive Officer (Principal Executive Officer)
	By:	/s/ Michael R. Kramer
		Michael R. Kramer
		Chief Financial Officer (Principal Financial Officer)

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EXHIBIT INDEX

Exhibit
Number		~~Description~~	Description
~~2.1~~	2.1	Agreement and Plan of Merger, dated as of April 28, 2010, among Medtronic, Inc., Pilgrim Merger Corporation and ATS Medical, Inc. (Incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on April 29, 2010).	Agreement and Plan of Merger, dated as of April 28, 2010, among Medtronic, Inc., Pilgrim Merger Corporation and ATS Medical, Inc. (Incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on April 29, 2010).
~~3.1~~	3.1	~~Third 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 quarterly period ended June 28, 2008).~~	Third 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 quarterly period ended June 28, 2008).
~~3.2~~	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).~~	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~~	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).~~	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).
12.1		Computation of Ratio of Earnings to Fixed Charges.
	10.1		Description of amendment to the ATS Medical, Inc. 1998 Employee Stock Purchase Plan, as amended (Incorporated by reference to Item 1.01 contained in the Company’s Current Report on Form 8-K filed on May 4, 2010).
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)
	10.2		ATS Medical, Inc. 2010 Stock Incentive Plan (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 18, 2010).
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)
	10.3		Promissory Note, dated May 21, 2010, executed by ATS Medical, Inc., 3F Therapeutics, Inc. and ATS Acquisition Corp. in favor of Medtronic, Inc. (including the form of Warrant issuable under certain circumstances by ATS Medical, Inc. to Medtronic, Inc.) (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 21, 2010).
32.1		Certification of the Principal Executive Officer pursuant to 18 U.S.C. Section 1350 (Section 906 Certification)
	10.4		Security Agreement, dated May 21, 2010, executed by ATS Medical, Inc., 3F Therapeutics, Inc. and ATS Acquisition Corp. in favor of Medtronic, Inc. (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on May 21, 2010).
32.2		Certification of the Principal Financial Officer pursuant to 18 U.S.C. Section 1350 (Section 906 Certification)
	10.5		Pledge Agreement, dated May 21, 2010, made by ATS Medical, Inc. to Medtronic, Inc. (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on May 21, 2010).
	12.1		Computation of Ratio of Earnings to Fixed Charges.
	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)

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Filing Compare · ATS MEDICAL INC