_______________________________________________

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D. C. 20549

                                    FORM 10-Q


               QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                      THE SECURITIES EXCHANGE ACT OF 1934.

                  For the quarterly period ended April 30, 1999


     Commission File Number 0-944

                              POSSIS MEDICAL, INC.

                          9055 Evergreen Boulevard N.W.

                        Minneapolis, Minnesota 55433-8003

                                 (612) 780-4555


     A Minnesota Corporation                   IRS Employer ID No. 41-0783184

                        _________________________________


     Indicate  by check mark  whether the  Registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
Registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes X No___

     The number of shares outstanding of the Registrant's Common Stock, $.40 par
value, as of June 10, 1999 was 14,990,592.

                        ________________________________

<PAGE>

                              POSSIS MEDICAL, INC.

                                      INDEX

                                                                     PAGE


PART I.     FINANCIAL INFORMATION

  ITEM 1.   Financial Statements

            Consolidated Balance Sheets, April 30, 1999
            and July 31, 1998.......................................    3

            Consolidated Statements of Operations for the three
            months and nine months ended April 30, 1999 and 1998....    4

            Consolidated Statements of Cash Flows for the
            nine months ended April 30, 1999 and 1998 ..............    5

            Notes to Consolidated Financial Statements..............    6

  ITEM 2.   Management's Discussion and Analysis of Financial
            Condition and Results of Operations.....................    7-11

  ITEM 3.   Quantitative and Qualitative Disclosures
            about Market Risk.......................................   12

PART II.    OTHER INFORMATION

  ITEM 6.   Exhibits and Reports on Form 8-K........................   13

            SIGNATURES..............................................   14

<PAGE>

                                    POSSIS MEDICAL, INC. AND SUBSIDIARIES
                                          CONSOLIDATED BALANCE SHEETS
                                                  (UNAUDITED)

<TABLE>
<CAPTION>

<C>
ASSETS                                                                         April 30, 1999          July 31, 1998
                                                                                 <S>                    <S>
CURRENT ASSETS:
     Cash and cash equivalents...............................................    $ 4,910,663            $13,841,793
        Receivables:
        Trade (less allowances for doubtful accounts and returns
        of $289,000 and $67,000, respectively) ..............................      2,645,552              1,144,472
        Other................................................................           --                    3,091
     Inventories:
        Parts................................................................        997,603              1,085,236
        Work-in-progress.....................................................      1,335,752              1,740,834
        Finished goods.......................................................      1,525,257              1,913,084
     Prepaid expenses and other assets.......................................        197,775                313,158
           Total current assets..............................................     11,612,602             20,041,668
PROPERTY:
     Leasehold improvements..................................................      1,274,813              1,210,984
     Machinery and equipment.................................................      4,044,437              3,720,772
     Assets-in-construction..................................................        185,542                113,094
           Total property....................................................      5,504,792              5,044,850
     Less accumulated depreciation...........................................      2,745,371              2,343,691
           Property - net....................................................      2,759,421              2,701,159
OTHER ASSETS:
     Deferred debt issue costs...............................................           --                  884,105
     Goodwill................................................................        215,922                269,922
TOTAL ASSETS.................................................................    $14,587,945            $23,896,854

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
     Trade accounts payable..................................................    $   447,608             $1,245,552
     Accrued salaries, wages, and commissions................................      1,002,672              1,060,687
     Current portion of long-term debt.......................................         89,463                 97,713
     Clinical trials accrual.................................................        176,260                335,067
     Litigation settlement...................................................          --                   200,000
     Other liabilities.......................................................        739,459                504,624
           Total current liabilities.........................................      2,455,462              3,443,643

LONG-TERM DEBT...............................................................        103,940             11,492,661
OTHER LIABILITIES............................................................        107,000                216,200


SHAREHOLDERS' EQUITY:
     Common stock - authorized 100,000,000 shares of $.40 par value each;
        issued and outstanding, 14,163,740 shares and 12,218,622
        shares,  respectively................................................      5,665,496              4,887,449
     Additional paid-in capital..............................................     54,204,449             42,476,257
     Unearned compensation ..................................................       (208,174)              (489,060)
     Retained deficit........................................................    (47,740,228)           (38,130,296)
           Total shareholders' equity........................................     11,921,543              8,744,350

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY...................................    $14,587,945            $23,896,854

<FN>
See notes to consolidated financial statements.

</FN>
</TABLE>

<PAGE>

                      POSSIS MEDICAL, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>

<S>
                                                                      For Three Months Ended            For Nine Months Ended
                                                                 April 30, 1999   April 30, 1998   April 30, 1999   April 30, 1998
                                                                   <C>             <C>               <C>             <C>
Product sales...................................................  $ 3,739,108      $ 1,779,416      $ 8,361,575      $ 4,362,068
Cost of sales and other expenses:
      Cost of medical products..................................    2,388,331        1,320,760        5,809,886        4,335,411
      Selling, general and administrative.......................    3,117,129        2,045,872        7,608,750        5,296,607
 Research and development.......................................    1,510,315        1,273,540        4,530,982        3,731,219
 Interest.......................................................       28,216            2,200          379,241            7,007
              Total cost of sales and other expenses............    7,043,991        4,642,372       18,328,859       13,370,244


Operating loss..................................................   (3,304,883)      (2,862,956)      (9,967,284)      (9,008,176)
Interest income.................................................       80,256           90,191          357,352          409,036

Gain (loss) on sale of investments..............................         --             (2,074)            --             12,090

Net loss........................................................  $(3,224,627)     $(2,774,839)     $(9,609,932)     $(8,587,050
Weighted average number of common
      shares outstanding........................................   13,909,660       12,207,036       12,852,970       12,184,132


Basic and dilutive net loss per common share....................        $(.23)           $(.23)           $(.75)           $(.70)





<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>

<PAGE>

                      POSSIS MEDICAL, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                FOR THE NINE MONTHS ENDED APRIL 30, 1999 AND 1998
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                                         1999                 1998
<S>                                                                                <C>                    <C>
OPERATING ACTIVITIES:
Net loss .......................................................................    $ (9,609,932)         $(8,587,050)
Adjustments to reconcile net loss to net
  cash used in operating activities:
Gain on sale of marketable securities...........................................            --                (12,090)
(Gain) loss on asset disposal ..................................................           3,049               (2,100)
Depreciation....................................................................         743,220              482,261
Amortization  ..................................................................         186,077               54,000
Stock compensation..............................................................         263,202              290,035
Increase in receivables.........................................................      (1,497,989)            (250,217)
(Increase)decrease in inventories...............................................         592,167           (1,146,510)
Decrease in other assets........................................................         115,383               28,079
Increase(decrease) in trade accounts payable....................................        (797,944)              31,188
Increase in accrued and other current liabilities...............................         338,216                5,976

Net cash used in operating activities...........................................      (9,664,551)          (9,106,428)

INVESTING ACTIVITIES:
Additions to plant and equipment................................................        (505,157)            (466,814)
Proceeds from the disposal of assets............................................          14,001                2,100
Purchase of marketable securities...............................................            --                (10,852)
Proceeds from sale/maturity of marketable securities............................            --              6,995,313
Net cash provided by (used in) investing activities.............................        (491,156)           6,519,747

FINANCING ACTIVITIES:
Proceeds from notes payable.....................................................          21,074              175,000
Repayment of long-term debt.....................................................         (12,884)             (23,532)
Proceeds from issuance of stock and exercise of options.........................       1,240,642              140,970
Deferred debt issue costs.......................................................         (24,255)              --
Net cash provided by financing activities.......................................       1,224,577              292,438

DECREASE IN CASH AND CASH EQUIVALENTS ..........................................      (8,931,130)          (2,294,243)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD................................      13,841,793            3,849,194

CASH AND CASH EQUIVALENTS AT END OF  PERIOD.....................................    $  4,910,663          $ 1,554,951

SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid...................................................................    $      1,674          $     1,101
Conversion of subordinated debentures and accrued
     interest into common stock.................................................      12,346,174                 --
Deferred debt issue costs and original issue discount netted against
     conversion of subordinated debentures......................................       1,371,122                 --
Issuance of stock to settle litigation..........................................         225,000                 --
Accrued payroll taxes related to restricted stock...............................          83,229              286,002
Cancellation of restricted stock................................................          37,934                 --
Inventory transferred to fixed assets...........................................          32,150               16,288
Issuance of restricted stock....................................................          20,250              816,300

<FN>
See notes to consolidated financial statements.

</FN>
</TABLE>

<PAGE>


                      POSSIS MEDICAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   BASIS OF PRESENTATION

     The  accompanying  unaudited  consolidated  financial  statements have been
prepared in accordance with generally accepted accounting principles for interim
financial  information and with the  instructions to Form 10-Q and Article 10 of
Regulation  S-X.  Accordingly,  they do not include all of the  information  and
footnotes  required by generally  accepted  accounting  principles  for complete
financial statements. In the opinion of management,  all adjustments (consisting
of normal recurring accruals)  considered necessary for a fair presentation have
been included.  The  accompanying  consolidated  financial  statements and notes
should be read in conjunction  with the audited  financial  statements and notes
thereto included in the Company's 1998 Annual Report.


2.   INTERIM FINANCIAL STATEMENTS

     Operating results for the three and nine month periods ended April 30, 1999
are not necessarily  indicative of the results that may be expected for the year
ending July 31, 1999.


3.   RECENTLY ISSUED ACCOUNTING STANDARD

     Comprehensive Income:

     Effective  August 1, 1998,  the  Company  adopted  Statement  of  Financial
Accounting Standards No. 130 "Reporting  Comprehensive Income" (SFAS 130), which
establishes  standards  for  the  reporting  of  comprehensive  income  and  its
components.  Comprehensive  income is defined as the change in equity during the
period from  transactions  and other  events and  circumstances  from  non-owner
sources.  Implementation  of SFAS 130 did not have an  effect  on the  Company's
consolidated  financial  statements because  comprehensive  income (loss) is the
same as the Company's net income (loss).


4.   EARNINGS (LOSS) PER SHARE

     The  Company's  outstanding  stock  options  and  stock  warrants  were not
included in the  computation  of earnings  per share since the impact would have
been anti-dilutive because of the net loss.

<PAGE>


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

Results of Operations

Three and Nine Month Periods Ended April 30, 1999 and 1998

     Total  product  sales for the three and nine month  periods ended April 30,
1999 were  $3,739,000  and  $8,362,000,  respectively.  This was an  increase of
$1,960,000  and  $4,000,000 as compared to the previous  year.  The  significant
revenue growth  resulted from growing  physician  acceptance of the  AngioJet(R)
Rheolytic(TM)  Thrombectomy  System and the receipt of PMA approval on March 12,
1999 from the U.S. Food and Drug  Administration  ("FDA") to market its Coronary
AngioJet(R) Rheolytic(TM) Thrombectomy System in the United States.


Revenue - AngioJet Systems

     The  Company  received  PMA  approval  in March  from the FDA to market its
Coronary  AngioJet  System  in the  U.S.  for the  removal  of  blood  clots  in
symptomatic  native coronary  arteries and coronary  bypass grafts.  In December
1996 the Company  received  FDA  clearance  to commence  U.S.  marketing  of the
AngioJet  System,  with  labeling  claims for removal of blood clots from grafts
used by patients on kidney  dialysis.  U.S.  product sales  generated from these
approvals for the three and nine months ended April 30, 1999 were $3,186,000 and
$7,546,000,  respectively. This was a 99% and 90% increase from the same periods
in the previous  year.  In the U.S.  the Company  sold 37 and 89 AngioJet  drive
units in the three and nine month  periods  ending  April 30,  1999.  During the
three  and  nine  month  periods   ended  April  30,  1999,   the  Company  sold
approximately  2,300 and 5,700 disposable sets in the U.S. versus  approximately
1,200 and 2,800 in the same year-ago  periods.  As of April 30, 1999 the Company
had 239 AngioJet System drive units in U.S.  hospitals as compared to 151 a year
earlier.

     The Company plans to continue  growing AngioJet System revenue by obtaining
additional  FDA marketing  approvals for existing  products,  by developing  and
marketing  AngioJet products that improve on the performance and are less costly
to make than current  versions and by developing  and marketing new catheters to
remove clots from large  diameter  blood vessels and the arteries in the central
brain. The coronary PMA presented the results of a 349 patient  randomized trial
comparing  AngioJet  System  treatment  to  intracoronary  infusion of the blood
clot-dissolving  drug  urokinase for patients with  demonstrated  clot in native
coronary arteries and saphenous vein bypass grafts.  The randomized trial showed
that  AngioJet  System  treatment  has  significantly  better  outcomes than the
urokinase  treatment for procedure  success and device success.  AngioJet System
treatment  also had lower  in-hospital  major cardiac  complications,  including
fewer bleeding  complications  and vascular  complications.  Also,  results of a
cost-effectiveness trial run concurrently with the coronary AngioJet trial shows
that the  AngioJet  treatment  costs are  approximately  $5,000  less than those
associated with the use of urokinase. The Company believes that the treatment of
blood clots in coronary  vessels and bypass  grafts is a $800 million  worldwide
marketing  opportunity  for the  AngioJet  System.  In July  1997,  the  Company
submitted a 510(k)  application  to the FDA seeking  clearance  to expand  label
claims for its AngioJet System to include use in peripheral  arteries and bypass
grafts in the U.S.  The Company  expects an FDA decision on the  application  in
calendar  1999. In December 1997,  the Company  received  approval to commence a
clinical study of the AngioJet  System for use in the treatment of stroke caused
by blockage of the carotid  arteries,  the main vessels  supplying  blood to the
brain.  There are three patients enrolled to date in the carotid stroke clinical
study. The Company believes that the treatment of neurovascular stroke is a $500
million worldwide marketing  opportunity for the AngioJet System. A new catheter
in  development,  the  NV150,  is planned  to begin a  neurovascular  stroke FDA
clinical trial in late calendar 1999.

<PAGE>

     Foreign  sales of the  AngioJet  System for the three and nine months ended
April 30,  1999 were  $128,000  and  $322,000,  respectively.  This  compared to
foreign  sales of the  AngioJet  System of  $149,000  and  313,000  for the same
periods the previous year.

     In Japan,  the coronary  AngioJet  System  clinical  study  enrollment  was
completed  in April 1998 and a  regulatory  filing is planned for June 1999 with
the Japanese Ministry of Health and Welfare.  Japanese approval for coronary use
of the AngioJet System is expected mid-calendar 2000.


Revenue - Vascular Grafts

     Vascular  graft sales were  $425,000  and  $494,000  for the three and nine
month periods ended April 30, 1999. This compared to $32,000 and $85,000 for the
three and nine month periods ended April 30, 1998.  All vascular graft sales for
fiscal 1999 were  Perma-Seal(R)  Dialysis  Access  Grafts.  In December 1998 the
Company entered into an exclusive  worldwide Supply and  Distribution  Agreement
with Horizon Medical Products, Inc. for its Perma-Seal(R) Dialysis Access Graft.
The first  shipment  under this  agreement was made in January 1999.  All fiscal
1998  vascular  graft  sales were  Perma-Flow(R)  Coronary  Bypass  Grafts.  The
Company's  Perma-Flow(R) Coronary Bypass Graft Distribution Agreement expired in
March 1999 and the Company is seeking a new distributor.

     In February  1999,  the company  received  510(k)  approval from the FDA to
market  three  expanded  polytetrafluoroethylene  ("ePTFE")  synthetic  vascular
grafts.  ePTFE  synthetic  grafts are the most commonly used synthetic  graft in
peripheral vessel bypass procedures. This product will be marketed and sold by a
marketing partner or independent distributor.

     A goal of the  Company  is to  maximize  the  value of these  products  and
technologies  for  its  shareholders.  Its  strategy  is  to  seek  partners  to
distribute the products and possibly fund the graft product development program.
In  addition,  the  Company  will  continue to pursue the  possible  sale of the
products  and  technologies.  While the Company  works toward  completing  these
activities,  it has  placed  further  product  development  activities  on hold,
including enrollment into the Perma-Flow Graft clinical trial (PerFCT).

     The  Company is  planning  for  continued  growth in product  sales for the
remainder of fiscal 1999 and beyond and  believes  that most of this growth will
come from AngioJet System sales in the U.S. marketplace.


Cost of Medical Products

     Cost of medical  products  increased 80% and 34% in the 1999 three and nine
month  periods,  respectively,  over the same periods in the previous  year. The
increase is  primarily  due to the  significant  growth in the  AngioJet  System
product  sales.   Medical  product  gross  margins   improved  by  $892,000  and
$2,525,000,  respectively,  for the three and nine month  periods as compared to
the same periods a year ago. This resulted in positive  gross margins of 36% and
31%,  respectively,  for the three and nine month periods ending April 30, 1999.
This  compares  to positive  gross  margins of 26% and 1% for the three and nine
month periods  ending April 30, 1998.  The Company  believes that  manufacturing
costs per unit will be reduced  and gross  margins  will  continue to improve as
product sales and related production volumes continue to grow.

<PAGE>

Selling, General and Administrative Expense

     Selling,  general and administrative expenses, in the three and nine months
ended  April  30,  1999,  increased  $1,071,000  and  $2,312,000,  respectively,
compared to the same periods a year ago. The primary factors are increased sales
and  marketing   expenses  related  to  the  establishment  of  a  direct  sales
organization  to sell the AngioJet  System and expenses of marketing the product
in the United States.  Based upon early physician interest and with the AngioJet
System  receiving FDA approval for coronary use , the Company has grown the U.S.
AngioJet  System sales and  marketing  organization  from 27 in April 1998 to 39
employees in April 1999.  The Company plans to further  increase the direct U.S.
sales force to 50  employees  by July 1999,  to meet the growing  demand for the
Company's  AngioJet  System.  The  Company  plans on  increasing  its  sales and
marketing expenditures going forward.


Research and Development Expense

     Research and development  expense, in the three and nine months ended April
30, 1999,  increased  19% and 21%,  respectively,  over the previous  year.  The
increase  is  primarily  due to  increased  expenses in the  development  of new
AngioJet  System  products.  Vascular  graft research and  development  expenses
decreased  $330,000  and  $326,000 for the three and nine months ended April 30,
1999 as compared to the same periods a year ago. The Company has placed  further
vascular graft research and development activities on hold, including enrollment
into the Perma-Flow  Graft clinical trial  (PerFCT).  The Company  believes that
research and development expenses for AngioJet  Thrombectomy System applications
will  continue at the  current  level as it  completes  the  development  of its
current products and invests in development of new AngioJet System  thrombectomy
applications and new high-pressure waterjet technology-based products.


Interest Income and Expense

     Interest income decreased slightly in the most recent three and nine months
ended April 30, 1999 due to a reduction in cash  reserves.  The Company  expects
interest  income to increase  through the  remainder of the year due to the $7.0
million raised in a private placement  offering closed in May and June 1999 (see
Subsequent  Events).  Interest expense for the three and nine month periods were
$28,000 and $379,000 for the 1999 periods compared to $2,000 and $7,000 in 1998.
These  increases  were due to the  issuance of the 5%  convertible  subordinated
debentures  in July 1998.  The  Company  expects  interest  expense to  decrease
through  the  remainder  of the  year.  The  final 5%  convertible  subordinated
debenture was converted into the Company's common stock in March 1999.


Liquidity and Capital Resources

     Cash and cash equivalents,  and marketable securities totaled $4,911,000 at
April 30, 1999 versus $13,842,000 at July 31, 1998.

     Net cash usage for the nine months ended April 30, 1999  averaged  $992,000
per  month.  Cash  usage was less  than the  Company  expected  due to the early
conversion of stock warrants in the amount $828,000. Most of the $9,665,000 cash
used  in  operations  in the  most  recent  nine  month  period  was  due to the
$9,610,000  net loss.  The other primary uses of cash is the payment of $720,000
in  transaction  fees and expenses  relating to the issuance of the  convertible
debentures  issued in July 1998, the increase in receivables due to the increase
in product sales and the additions of plant and equipment.

<PAGE>

     During February and March 1999, the remaining $9,700,000 of debentures were
converted into 1,390,566 shares of the Company's common stock,  including shares
issued for accumulated interest.  These conversions combined with the $2,300,000
of debentures  converted in January 1999 resulted in a total of 1,733,334 shares
being issued.  As of April 30, 1999 all of the $12.0 million of debentures  have
been converted.

     The Company believes that product sales of the AngioJet  System,  primarily
in the U.S.,  will yield  meaningful  sales growth going forward.  Concurrently,
sales and marketing  expenditures are planned to increase with the sales growth.
Research and development  expenditures are expected to slightly  decrease due to
the reduced  activity with the vascular  grafts.  Interest income is expected to
increase  due to the $7.0  million  private  placement in May and June 1999 (see
Subsequent  Events).  Interest  expense  is  expected  to  decrease  due  to the
convertible  debentures  being  converted into the Company's  common stock.  The
Company expects to report a loss for the current fourth quarter and fiscal year.
In addition,  the Company expects that increasing working capital investments in
trade  receivables  and inventory  will be required to support  growing  product
sales.

     Management believes that the Company's April 30, 1999 cash balance together
with proceeds from the $7.0 million private  placement (see  Subsequent  Events)
will satisfy the Company's short term capital needs.


Subsequent Events

     In May and early June 1999,  the  Company  received  an  aggregate  of $7.0
million from the issuance of 827,852  shares of Possis Common Stock in a private
placement offering.  The institutional  investors also received 106,509 warrants
exercisable at $11.43 and 17,669 warrants exercisable at $11.49.


Year 2000

     The Company established a team in May 1998 to assess the possible exposures
related  to the Y2K  issue.  The areas  investigated  include:  product  issues,
business computer systems and software,  production equipment,  vendor readiness
and contingency plans.

     Products  currently sold by the Company are Y2K compliant.  The Company has
responded to all inquiries  regarding  Y2K  compliance by customers and vendors.
The Company has noted an increase in requests from customers since January 1999.
The Company has taken steps to attach stickers to all drive units indicating Y2K
compliance.

     The  Company  uses  commercial  software  to manage  the  primary  business
functions of production,  finance and payroll. These systems have been certified
by the vendors as Y2K compliant on the software  releases  currently  installed.
The Company has service  contracts with these vendors so any additional  changes
needed are obtained in service packs. The Company's  network operating system is
certified as Y2K  compliant and has been tested by the Company.  Production  and
quality control equipment do not use dates to control operations.

     Certain  personal  computers were not Y2K compliant.  The Company still has
about two dozen  computers  that are not Y2K compliant  that will be replaced by
July, 1999 as planned  spending  necessary to maintain current  technology.  The
Company  uses  Microsoft  software  to operate its  workstations  and to provide
office  productivity  functions.  It knows that not all of the current  versions
used are fully Y2K ready.  The  Company is  installing  software  to  distribute
software  upgrades  as they  become  available,  and this  installation  will be
completed  by the end of  June.  In  addition,  the  company  plans  to  install
commercial   tools  to   continuously   monitor  Y2K  readiness  of  all  office
productivity  software on its computers.  The company  remains on target to have
nonconforming software upgraded by mid-1999.

<PAGE>

     The  Company  evaluated  its  suppliers  of  utility,   telecommunications,
payroll,  banking,  and  employee  benefits  services.  It does not  expect  any
disruptions in these services.  The Company  replaced its voice mail system with
one that is Y2K compliant; the replacement was needed for other business reasons
so was not budgeted as a specific Y2K expense.

     Company vendors have responded to questionnaires  and follow-up phone calls
regarding  their Y2K readiness.  The Company  continues to monitor key suppliers
and has incorporated Y2K readiness into its supplier  certification  process. In
May 1999 the Company began working on contingency  plans for critical  supplies.
This  start was  somewhat  later  than  planned;  the  Company  expects a timely
completion  of the process.  In the event any vendors are not or will not be Y2K
compliant,  the Company plans to seek new vendors and/or stockpile  inventory to
meet its production needs.

     The Company budgeted approximately $50,000 for expenses directly related to
Y2K identification and remediation.  Expenses to date are approximately  $3,000;
total expenses are not expected to deviate  significantly  from the budget.  The
Company has  purchased  continuation  of business  insurance  and  director  and
officer liability insurance for the Y2K issue.

     Although the Company does not at this time expect a  significant  effect on
its consolidated  financial position,  results of operations and cash flows, our
internal preparations are ongoing and there can be no assurance that the systems
of other  companies or the systems of the Company  itself will be converted on a
timely basis and will not have a corresponding adverse effect on the Company.

Forward-Looking Statements

     This  Management's  Discussion  and  Analysis of  Financial  Condition  and
Results of Operations,  including the discussion regarding Year 2000 compliance,
contain  certain   "forward-looking   statements"  as  defined  in  the  Private
Securities  Litigation  Reform Act of 1995. Such  statements  relating to future
events and financial  performance,  including the submission of  applications to
the FDA,  revenue  and  expense  levels and  future  capital  requirements,  are
forward-looking  statements that involve risks and uncertainties,  including the
Company's ability to meet its timetable for FDA submissions,  the review time at
the FDA, changes in the Company's marketing strategies, the Company's ability to
establish  product  distribution  channels,  changes in  manufacturing  methods,
market  acceptance  of the  AngioJet  System,  changes  in the levels of capital
expenditures  by hospitals,  the levels of sales of the Company's  products that
can be achieved,  ability to raise additional capital and other risks identified
in Exhibit 99 to this  Quarterly  Report on Form 10-Q and detailed  from time to
time in the Company's various Securities and Exchange Commission filings.

<PAGE>

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The Company  invests  its excess cash in money  market  mutual  funds.  The
market risk on such investments is minimal.

     The product sales for the Company's foreign  subsidiary are in U.S. Dollars
("USD").  At the end of April  1999,  the  amount of  currency  held in  foreign
exchange was approximately  $1,000 USD. The market risk on the Company's foreign
subsidiary operations is minimal.

     At April 30, 1999, all of the Company's  outstanding long-term debt carries
interest at a fixed  rate.  There is no  material  market  risk  relating to the
Company's long-term debt.

<PAGE>

Part II.  OTHER INFORMATION

ITEM 6.  Exhibits and Reports on Form 8-K

     (a)  Exhibits

     Certain of the following  exhibits are incorporated by reference from prior
filings.  The form with which each  exhibit was filed and the date of filing are
indicated below.

Exhibit    Form       Date Filed                   Description


 3.1       10-K    Fiscal year ended        Articles of incorporation as
                   July 31, 1994            amended and restated to date.

 3.2       S-2     Amendment No. 1          Bylaws as amended and
                   August 9, 1994           restated to date.

 27                                         Financial data schedule

 99                                         Investment risk factors



     (b) Reports on Form 8-K

     Possis Medical,  Inc. filed no reports on form 8-K during the quarter ended
April 30, 1998.

<PAGE>




SIGNATURES

     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.


                                    POSSIS MEDICAL, INC.


DATE:      June 10, 1999            BY:     /s/   Robert G. Dutcher
                                    ROBERT G. DUTCHER
                                    President and Chief Executive Officer



DATE:      June 10, 1999            BY:     /s/   Russel E. Carlson
                                    RUSSEL E. CARLSON
                                    Vice President of Finance
                                    Chief Financial and Accounting Officer

<PAGE>


EXHIBIT 99




                             INVESTMENT RISK FACTORS

     In evaluating the Company and its business,  prospective  investors  should
carefully  consider  the  following  risk  factors.  This Exhibit  contains,  in
addition to  historical  information,  forward-looking  statements  that involve
risks and  uncertainties.  The Company's actual results could differ  materially
from the results discussed in the forward-looking statements. Factors that could
cause or contribute to such differences  include,  but are not limited to, those
discussed below.


History of Operating Losses and Lack of Profitable Operations

     We incurred  losses for fiscal years 1996,  1997 and 1998.  As of April 30,
1999, we had accumulated a deficit of $47.7 million. We incurred a net operating
loss of $9.9 million for the year ended July 31, 1996, a net  operating  loss of
$9.6 million for the year ended July 31, 1997, and a net operating loss of $12.5
million for the year ended July 31, 1998.

     We do not expect to become profitable  unless we achieve  significant sales
in the United States.  We must convince health care  professionals,  third-party
payors and the  general  public of the  medical  and  economic  benefits  of the
AngioJet(R) Rheolytic(TM) Thrombectomy System. We cannot assure you that we will
succeed in  marketing  is product  and  achieve  significant  sales.  Even if we
accomplish this goal, we cannot assure you that we will operate  profitably on a
consistent basis.


Limited Regulatory Approval for Our Products; Government Regulation

     Our  products and  manufacturing  activities  are subject to extensive  and
rigorous  federal  and  state  regulation  in  the  United  States  and  various
regulatory  requirements in other  countries,  including  Japan.  Current United
States  Food  and  Drug  Administration   ("FDA")  enforcement  policy  strictly
prohibits  the  marketing  of  approved  medical  devices for  unapproved  uses.
Therefore,  even if our products  receive  regulatory  approval,  regulators may
significantly  limit  the  uses for  which  our  products  may be  marketed.  In
addition, the process of obtaining and maintaining required regulatory approvals
can be lengthy and  expensive,  and the outcome of the process can be uncertain.
Moreover,  regulatory  approvals  may be  withdrawn  if we fail to  comply  with
regulatory  standards or if  unforeseen  problems  arise  following  the initial
marketing of a product.

     Additionally,  we are  required  to adhere to  Quality  System  Regulations
relating to product design, development,  manufacturing,  servicing, testing and
documentation.  Failure to comply with applicable  Quality System Regulations or
other  regulatory  requirements  may result in fines,  delays or  suspensions of
approvals, injunctions against further distribution of our products, seizures or
recalls of products,  operating  restrictions,  criminal  prosecutions  or other
sanctions, in addition to adverse publicity.  The adoption of new regulations or
changes in existing  regulations could prevent us from obtaining,  or affect the
timing of, future regulatory  approvals and could adversely affect the marketing
of our existing  products.  We cannot  assure you that we will be able to obtain
necessary  regulatory  approvals  on a  timely  basis or at all.  Delays  in our
receipt of or failure to receive  regulatory  approvals,  the loss of previously
received  approvals or our failure to comply with regulatory  requirements would
have a material adverse effect on our business,  financial condition and results
of operations.

<PAGE>

Uncertainty of Clinical and Marketing Acceptance and Technology

     Because our products are new to the market,  they are still  unfamiliar  to
many members of the medical  community.  The AngioJet  System has only  recently
begun to be used for the removal of vascular,  cardiovascular  and  intercranial
blood clots  (known to the medical  community  as  "thrombus").  Similarly,  the
medical  community has only  recently  begun to use our  Perma-Flow(R)  Coronary
Bypass  Graft  to  perform  coronary  artery  bypass  graft  procedures  and our
Perma-Seal(R)  Dialysis  Access Graft to provide A-V access for kidney  dialysis
patients. Market acceptance of our AngioJet,  Perma-Flow and Perma-Seal products
will depend largely on our ability to  demonstrate  to the medical  community in
general, and to cardiologists and cardiac surgeons in particular,  the efficacy,
relative safety and cost-effectiveness of treating  cardiovascular disease using
our  products,  as well as on our  ability to train  cardiologists  and  cardiac
surgeons to perform  necessary  procedures using our products.  We cannot assure
you that our products will provide benefits  considered adequate by providers of
cardiovascular  and vascular  treatments,  or that enough providers will use our
products to ensure  their  commercial  success.  Moreover,  even if our products
become generally  accepted by the medical  community,  physicians trained to use
our  products  may not use them or may  recommend a  competitor's  products.  We
cannot assure you that cardiologists,  cardiac surgeons or other physicians will
determine that our AngioJet,  Perma-Flow or Perma-Seal  products are appropriate
courses of treatment  for their  patients or  acceptable  alternatives  to other
therapies.  Even if they are accepted by the medical  community,  our ability to
successfully market our products before they receive FDA approval may be limited
by FDA  regulations,  guidelines  or  policies.  Lack  of  clinical  and  market
acceptance and significant  restrictions  on our marketing  program would have a
material  adverse  effect on our  business,  financial  condition and results of
operations.


Dependence on AngioJet Products

     We have focused our resources on the continued  development  and refinement
of our AngioJet System. If we fail to obtain necessary regulatory approvals,  or
the  medical  community  rejects  the use of the  AngioJet  System for  multiple
purposes,  our business,  financial condition and results of operations would be
materially and adversely affected.


Rapid Technological Change and Intense Competition

     The medical products market is characterized by rapidly evolving technology
and intense competition.  Our future success depends on our ability to keep pace
with advancing  technology and competitive  innovations.  Potential  competitors
have developed or are in the process of developing  technologies that are, or in
the  future  may be,  the  basis  for  competitive  products,  some of which may
accomplish desired  therapeutic  effects through entirely different methods than
the products we are developing.

     We believe our AngioJet System will face intense competition from a variety
of  treatments  for  the  removal  of  blood  clots,  including  clot-dissolving
(thrombolytic)  drug  therapies,  surgical  intervention,  balloon  embolectomy,
mechanical  and  laser  thrombectomy  devices,  ultrasound  ablators,  and other
thrombectomy  devices  based  on  waterjet  systems  that  are  currently  being
developed by other  companies.  We know of a small  number of  synthetic  grafts
being  developed  that could  compete with our  Perma-Flow  Graft.  However,  we
believe we are the first  developer  to obtain FDA  approval  for U.S.  clinical
trials with a synthetic  coronary  bypass  graft and the first to obtain CE Mark
approval for marketing such a product in Europe.  Our Perma-Seal  Graft competes
with expanded  polytetrafluoroethylene  synthetic  grafts (also known as "ePTFE"
grafts) and other synthetic grafts with needle sealing properties.

<PAGE>

     Many of the  companies  developing  competing  devices  have  substantially
greater  capital and  substantially  greater  resources  for and  experience  in
research and development,  regulatory matters,  manufacturing and marketing than
we have.  These companies will be serious  competitors for us and may succeed in
developing products that are more effective and/or less costly than the AngioJet
System or the Perma-Flow and Perma-Seal Grafts. Furthermore, these companies may
be more  successful than we are in  manufacturing  and marketing their products.
Our competitors or others may develop technologies,  products or procedures that
are more  effective  or less  invasive  than any we are  developing  or that may
render our technology and products obsolete or noncompetitive. The advent of new
devices,  procedures  or new  pharmaceutical  agents could hinder our ability to
compete  effectively  and could have a material  adverse effect on our business,
financial condition and results of operations.


Reliance on Patents and Proprietary Rights

     Our success  depends and will  continue to depend in part on our ability to
maintain patent protection for our products and processes, to preserve our trade
secrets  and to  operate  without  infringing  the  proprietary  rights of third
parties.  We attempt to protect our technology by filing patent applications for
technology that we consider important to the development of our business,  among
other  measures.  We  currently  hold five United  States  patents and  eighteen
foreign  patents  related to the  Perma-Flow  Graft,  and we have two additional
patent  applications  pending  in the United  States and one patent  application
pending in foreign jurisdictions  relating to the Perma-Flow Graft. We currently
hold three United States patents  relating to the AngioJet  System,  and we have
twelve United States and numerous foreign patent  applications  pending relating
to the AngioJet  System.  The European  Patent Office has accepted  three of our
AngioJet System patent applications. In connection with the Perma-Seal Graft, we
hold two United States patents,  with three pending foreign patent applications.
Claims relating to medical  technology patents involve complex legal and factual
questions.  Therefore, their outcomes are highly uncertain. We cannot assure you
that our pending  applications will result in patents being issued to us or that
either  our new  patents  or our  existing  patents  will give us a  competitive
advantage. Moreover, our competitors may design around any patents issued to us,
third parties may receive patent protection on their own waterjet  devices,  and
others may hold or receive  patents  containing  claims that may cover  products
developed by us.

     We require all our employees to execute non-disclosure agreements when they
join Possis Medical.  These agreements  generally  provide that all confidential
information  developed  or made known to the employee by us during the course of
his or her  employment  with Possis  Medical must be kept  confidential  and not
disclosed  to  third  parties.  We  cannot  assure  you,  however,   that  these
non-disclosure  agreements  and other  safeguards  will protect our  proprietary
information and know-how,  or that they will provide us adequate remedies in the
event of  unauthorized  use or disclosure of confidential  information.  We also
cannot  assure  you that  others  will be unable  to  develop  such  information
independently.

     We also rely on unpatented proprietary technology and trade secrets that we
seek to protect in part through  confidentiality  agreements  with employees and
other  parties.  We cannot  assure you that the employees and other parties will
comply with these agreements, that we will have adequate remedies for any breach
or that  we can  meaningfully  protect  our  rights  to  unpatented  proprietary
technology  in any other way.  We also  cannot  assure you that  others  will be
unable  independently to develop or otherwise acquire  substantially  equivalent
proprietary  technology and trade secrets, or that they will keep the technology
secret. The disclosure of this type of information could have a material adverse
effect on our business, financial condition and results of operations.

<PAGE>

     The medical device industry has seen much litigation with respect to patent
and other  intellectual  property rights.  Litigation may be necessary for us to
enforce our  patents,  to protect  our trade  secrets  and  know-how,  to defend
against  claimed  infringement  of others' rights or to determine the ownership,
scope or  validity  of the  proprietary  rights of Possis and  others.  However,
litigation  also could be extremely  costly to us and could divert our resources
and efforts away from our  products  and  day-to-day  business  matters.  If the
litigation  had  an  adverse  outcome,   it  could  subject  us  to  substantial
liabilities to third parties, require us to seek licenses from third parties and
prevent  us from  manufacturing,  selling  or using our  products.  Any of these
results  could  have  a  material  adverse  effect  on our  business,  financial
condition and results of operations.


Potential Limitations on Third-Party Reimbursement

     Health care  providers  (such as hospitals  and  physicians)  that purchase
medical devices like the AngioJet System or the Perma-Seal and Perma-Flow Grafts
for the  treatment  of  patients  generally  rely  on  third-party  payors  like
Medicare,  Medicaid and private  insurance plans to reimburse all or part of the
costs associated with the health care services they provide.  In certain foreign
markets,  the  pricing of and profits  generated  by health  care  products  are
subject to  government  control.  In some states,  Medicare and Medicaid  payors
reimburse  hospitals for inpatient medical  procedures at a pre-determined  rate
based  on  diagnosis-related   groups.  If  these  rates  do  not  include,  and
third-party  payors do not otherwise provide,  adequate  reimbursement to health
care  providers  for the cost of our  products,  our products will not gain wide
market acceptance and our financial results will suffer.

     The Health Care  Financing  Administration  ("HCFA") is the federal  agency
responsible for administering the Medicare system.  HCFA has prohibited Medicare
from paying for procedures  that are still under  investigation  or that are not
deemed safe and effective for the condition being treated.  Therefore, even if a
device has FDA approval, Medicare payors may deny reimbursement if they conclude
that the device is  experimental or that it will not improve the condition being
treated.

     The market for our  products  also could be  adversely  affected  by future
legislation to reform the nation's  health care system or by changes in industry
practices regarding  reimbursement.  We cannot assure you that the reimbursement
rates of  third-party  payors  will  allow us to price  our  products  at levels
sufficient  to  realize  an  appropriate  return on our  investment  in  product
development.


Dependence on Key Personnel

     We depend  greatly  on a limited  number of key  management  and  technical
personnel. Moreover, because of the highly technical nature of our business, our
ability to continue our technological developments and to market our products --
and thereby  develop a competitive  edge in the  marketplace -- depends in large
part on our ability to attract and retain qualified technical and key management
personnel.  Competition for qualified personnel is intense, and we cannot assure
you that we will be able to attract and retain the individuals we need. The loss
of key personnel, or our inability to hire or retain qualified personnel,  could
have a material adverse effect on our business,  financial condition and results
of operations.

<PAGE>

Product Liability and Possible Insufficiency of Insurance

     The  manufacture  and  sale  of our  products  may  subject  us to  product
liability  claims.  In a recent  decision,  the United States Supreme Court held
that,  despite  a  company's  compliance  with  FDA  regulations,  it may not be
shielded from common-law  negligent-design  claims or manufacturing and labeling
claims based on state laws. Product liability  insurance is expensive and in the
future may not be available on acceptable terms, if at all. We cannot assure you
that the coverage  limits of our product  liability  insurance  policies will be
adequate if a product  liability claim is brought against us. A successful claim
or series of claims against us that exceeds our insurance  coverage could have a
material  adverse  effect on our  business,  financial  condition and results of
operations.  Moreover,  whether or not successful,  product liability litigation
would likely  divert the  attention  of our key  personnel  and could  adversely
affect our  reputation  and the  marketability  of our  technology and products.
Consequently,  any product  liability  litigation  could have a material adverse
effect on our business, financial condition and results of operations.


Future Capital Needs; Uncertainty of Additional Funding

     We anticipate that cash on hand, the interest expected to be earned on such
cash and expected  revenues will be sufficient to finance our  operations for at
least  the next  six to  twelve  months.  However,  we  cannot  assure  you that
additional capital will not be needed sooner.  We anticipate that we may need to
raise  additional  funds in the  future.  We cannot  assure you that  additional
capital will be  available  to us or that it will be  available on  satisfactory
terms. Raising additional capital through equity financing may dilute the equity
interests of the  shareholders  of the company,  and debt  financing may involve
restrictive covenants. Failure to secure additional financing if and when needed
could have a material  adverse effect on our business,  financial  condition and
results of operations.


Volatile Securities Market Factors and Possible Wide Fluctuations in Stock Price

     The market price of our stock has in the past been  subject to  significant
fluctuations.  Moreover,  the markets for equity securities in general,  and for
those of medical device  manufacturers in particular,  have been volatile in the
past,  and the price of our common  stock in the future could be subject to wide
fluctuations in response to quarterly variations in operating results,  news and
product announcements,  trading volume, general market trends and other factors.
We cannot  assure you that our  common  stock will trade in the future at market
prices in excess of its current market price.

<PAGE>

Anti-Takeover Provisions

     Of the 100 million  shares of capital  stock  authorized by our amended and
restated  articles of  incorporation,  79 million shares are  undesignated.  Our
board of  directors  may  issue  the  undesignated  shares on terms and with the
rights, preferences and designations determined by the board without shareholder
action. In addition, we have adopted a shareholder rights plan that provides for
the  exercise of  preferred  share  purchase  rights  when a person  becomes the
beneficial  owner of 15% or more of our  outstanding  common  stock  (subject to
certain exceptions). We also are subject to provisions of the Minnesota Business
Corporation  Act that limit the voting  rights of shares  acquired in  specified
types  of   acquisitions   and  that  restrict   specified   types  of  business
combinations. The existence or issuance of "blank check" stock, the existence of
our shareholder  rights plan and the effect of  anti-takeover  provisions  under
Minnesota  law,  individually  or in the  aggregate,  may  discourage  potential
takeover attempts and delay, defer or prevent a change in control. They also may
make  the  removal  of  management  more  difficult,  which  could  deprive  our
shareholders  of  opportunities  to sell  their  shares  at prices  higher  than
prevailing market prices.


Dependence on Single Source Suppliers

     We depend on single source  suppliers for some of the raw materials used in
the manufacture of our products.  If we cannot obtain key raw materials from our
suppliers,  we cannot assure you that the materials will be available from other
suppliers,  that other  suppliers  will agree to supply the  materials to us, or
that our use of the other  suppliers  would be approved by the FDA.  Although we
believe our supply of raw  materials  currently is adequate for the needs of our
business, we cannot assure you that new sources of supply will be available when
needed.  Any  interruption  in our supply of raw materials could have a material
adverse effect on our ability to manufacture  our products until a new source of
supply is located and,  therefore,  could have a material  adverse effect on our
business, financial condition and results of operations.

Non-Payment of Dividends

     We have never paid cash dividends on our common stock. We currently  intend
to retain  all  future  earnings,  if any,  for use in our  business  and do not
anticipate paying cash dividends in the near future.


Year 2000 Risks

     In May 1998 we  established  a team to  assess  and  address  our  possible
exposure  related to the Year 2000  computer  software  issue (which we call the
"Y2K" issue).  The team  investigated  areas  including  product  issues and our
business  computer   systems,   production   equipment,   vendor  readiness  and
contingency plans.  Products  currently sold by us are Y2K compliant.  We do not
use internally developed computer software and therefore do not anticipate major
reprogramming  efforts.  Our primary  financial and operational  system has been
assessed and is certified Y2K compliant. The equipment we use for production and
quality control does not use dates to control  operations.  However,  several of
our personal productivity  applications are not Y2K compliant. We are working to
make them compliant and expect them to be compliant by  mid-calendar  year 1999.
Also,  a number of our  personal  computers  are not Y2K  compliant.  We plan to
replace these computers as part of our technology update strategy.  However,  to
the extent the  applications  and computers  are not made Y2K  compliant  during
1999,  problems  arising  as a result of  noncompliance  could  have a  material
adverse effect on our business, financial condition and results of operations.

     Moreover, if our significant vendors are not Y2K compliant, their inability
to provide  services  to us in a timely and  efficient  manner  could  adversely
affect our business and,  consequently,  our financial conditions and results of
operations.  Although  at this  time we do not  expect  the Y2K  issue to have a
significant  impact  on  our  business,   financial   condition  or  results  of
operations,  our internal  preparations  and the preparations of our vendors are
not yet  complete.  Therefore,  we cannot  assure you that our  systems  will be
converted on a timely basis or that our operations will be unaffected by the Y2K
issue.