_______________________________________________

                       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 January 31, 1996


     Commission File Number 0-944

                              POSSIS MEDICAL, INC.

                            2905 Northwest Boulevard

                        Minneapolis, Minnesota 55441-2644

                                 (612) 550-1010


             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 March 8, 1996 was 11,996,049.

                        ________________________________

<PAGE>
                              POSSIS MEDICAL, INC.

                                      INDEX


 
 
PAGE


PART I.      FINANCIAL INFORMATION

     ITEM 1. Financial Statements

             Consolidated Balance Sheets, January 31, 1996
             and July 31, 1995..........................................   3

             Consolidated Statements of Operations for three
             months and six months ended January 31, 1996 and 1995......   4

             Consolidated Statements of Cash Flows for
             six months ended January 31, 1996 and 1995 ................   5

             Notes to Consolidated Financial Statements.................  6-7

     ITEM 2. Management's Discussion and Analysis of Financial
             Condition and Results of Operations........................  8-9
 


PART II.     OTHER INFORMATION

     ITEM 4. Submission of Matters to a Vote of Security-Holders........  10

     ITEM 6. Exhibits and Reports on Form 8-K........................... 11-13

     SIGNATURES.......................................................... 14
<PAGE>
<TABLE>                                                        
                                       POSSIS MEDICAL, INC. AND SUBSIDIARIES
                                            CONSOLIDATED BALANCE SHEETS
 <CAPTION>
                                                                                     January 31, 1996          July 31, 1995
 ASSETS                                                                                (UNAUDITED)                      
<S>                                                                                     <C>                   <C>  
CURRENT ASSETS:                                                                     
     Cash and cash equivalents...............................................           $18,949,437           $  5,450,057
     Marketable securities...................................................            11,022,840              1,270,654
     Receivables:
        Trade (less allowances for doubtful accounts:
            $13,337 and $27,019, respectively)...............................               170,300                 14,976
        Notes ...............................................................                 --                   123,918
        Other................................................................               106,132                204,297
     Inventories:
        Parts................................................................               802,098                489,418
        Work-in-progress.....................................................               593,258                427,495
        Finished goods.......................................................               261,850                 94,101
     Prepaid expenses and other assets.......................................               206,934                191,535
                Total current assets.........................................            32,112,849              8,266,451
PROPERTY:
     Leasehold improvements..................................................               176,346                175,556
     Machinery and equipment.................................................             2,403,446              2,287,755
     Assets-in-construction..................................................               282,982                300,377
                Total property...............................................             2,862,774              2,763,688
        Less accumulated depreciation........................................            (1,477,994)            (1,303,021)
                Property - net...............................................             1,384,780              1,460,667
OTHER ASSETS:
     Goodwill................................................................               449,922                485,922
     Notes receivable........................................................                 --                   108,153
TOTAL ASSETS.................................................................           $33,947,551            $10,321,193

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
     Trade accounts payable..................................................         $     334,370          $     159,365
     Accrued salaries, wages, and commissions................................               553,934                693,402
     Current portion of long-term debt.......................................                86,693                 82,925
     Other liabilities.......................................................               632,596                484,597
                 Total current liabilities...................................             1,607,593              1,420,289

DEFERRED REVENUE.............................................................               167,067                132,912
LONG-TERM DEBT...............................................................                48,646                 92,955
OTHER LIABILITIES............................................................                27,380                 27,380

SHAREHOLDERS' EQUITY:
     Common stock - authorized, 20,000,000 shares of $.40
        par value each; issued and outstanding,
        11,972,867 shares and 9,970,031 shares, respectively.................             4,789,467              3,988,013
     Additional paid-in capital..............................................            40,310,500             14,201,925
     Unearned compensation ..................................................               (30,421)               (50,387)
     Unrealized gain on investments..........................................                66,622                 --
     Retained deficit........................................................           (13,039,303)            (9,491,894)
                 Total shareholders' equity..................................            32,096,865              8,647,657

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY...................................           $33,947,551            $10,321,193
<FN>
See accompanying Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
<TABLE>                                              
                                       POSSIS MEDICAL, INC. AND SUBSIDIARIES
                                       CONSOLIDATED STATEMENTS OF OPERATIONS
                                                    (UNAUDITED)

<CAPTION>
                                                                          For Three Months Ended           For Six Months Ended    
                                                                      Jan. 31, 1996   Jan. 31, 1995    Jan. 31, 1996  Jan. 31, 1995
<S>                                                                  <C>               <C>              <C>            <C> 
REVENUES:
     Medical product sales.................................          $    222,768      $    44,587      $   423,663    $     66,259
     Service revenue.......................................                13,500           --               13,500          --
     Net heart valve patent payments.......................                 --             800,496            --          1,600,992
     Royalty payments relating to pacemaker
`         leads business...................................                 --             129,879            --            256,299
     Sales agreement revenue...............................                 --             250,000            --            250,000
          Total revenues...................................               236,268        1,224,962          437,163       2,173,550 
COST OF SALES AND OTHER EXPENSES:
     Cost of medical products..............................             1,205,583          820,690        2,254,969       1,584,860 
     Selling, general and administrative...................               540,216          553,052        1,098,539       1,057,556
     Research and development..............................               646,636          818,316        1,524,388       1,556,475
     Interest..............................................                 3,617            3,384            8,606          13,552 
          Total cost of sales and other expenses...........             2,396,052        2,195,442        4,886,502       4,212,443 
Operating loss.............................................            (2,159,784)        (970,480)      (4,449,339)     (2,038,893)
     Interest income.......................................               436,053          105,861          624,159         174,869

Loss from continuing operations............................            (1,723,731)        (864,619)      (3,825,180)     (1,864,024)

Income from discontinued operations-net....................               209,701           79,791          277,771         157,659 
Net loss...................................................           $(1,514,030)       $(784,828)     $(3,547,409)    $(1,706,365)
Weighted average number of common
     shares outstanding....................................            11,948,984        9,896,400       11,200,973       9,510,841
 
Earnings (loss) per common share:
      Continuing operations................................             $(.15)            $(.09)          $(.35)           $(.20)
      Discontinued operations .............................               .02               .01             .03              .02 
Net loss...................................................             $(.13)            $(.08)          $(.32)           $(.18)   
 
<FN>

See accompanying Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
<TABLE>                                                  
                                       POSSIS MEDICAL, INC. AND SUBSIDIARIES
                                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                    (UNAUDITED)
<CAPTION>
                                                                                        For Six Months Ended      
                                                                                    Jan 31, 1996          Jan 31, 1995
<S>                                                                                  <C>                    <C>
OPERATING ACTIVITIES:
Net loss .......................................................................     $(3,547,409)           $(1,706,365)
Adjustments to reconcile net loss to net
  cash used in operating activities:
     Depreciation...............................................................         195,101                175,401
     Amortization of goodwill...................................................          36,000                 36,000
     Loss on asset disposal ....................................................             808                  5,631
      Stock compensation........................................................          61,616                 37,078
     (Increase) decrease in receivables.........................................        (410,182)               129,059
     Increase in inventories....................................................        (646,192)               (28,730)
     (Increase) decrease in other assets........................................         (19,744)                68,185
     Increase in trade accounts payable.........................................         175,005                 58,441
     Increase (decrease) in accrued and other current liabilities...............          42,685               (240,513)
Net cash used in operating activities...........................................      (4,112,312)            (1,465,813)   

INVESTING ACTIVITIES:
Proceeds from discontinued operations...........................................         589,441                312,179
Additions to plant and equipment................................................        (121,913)              (318,945)
Proceeds from the disposal of assets............................................           1,892                  2,728
Purchase of marketable securities...............................................     (10,960,564)            (4,831,029)
Proceeds from sale/maturity of marketable securities............................       1,275,000              2,734,365    
Net cash used in investing activities...........................................      (9,216,144)            (2,100,702)   

FINANCING ACTIVITIES:
Repayment of long-term debt.....................................................         (40,541)              (545,242)
Proceeds from notes payable.....................................................          --                    115,673
Proceeds from issuance of stock and exercise of options.........................      26,868,377              7,286,754    
Net cash provided by financing activities.......................................      26,827,836              6,857,185    

INCREASE IN CASH AND CASH EQUIVALENTS...........................................      13,499,380              3,290,670
CASH AND CASH EQUIVALENTS AT BEGINNING
  OF PERIOD.....................................................................       5,450,057              1,769,348
CASH AND CASH EQUIVALENTS AT END OF
  PERIOD ............................................................                $18,949,437             $5,060,018         

SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid...................................................................     $     8,606             $   13,552
Inventory transferred to fixed assets...........................................          19,983                 --
<FN>
See accompanying 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 1995 Annual Report.


2. INTERIM FINANCIAL STATEMENTS

     Operating  results for the three and six month  periods  ended  January 31,
1996 are not necessarily  indicative of the results that may be expected for the
year ending July 31, 1996.


3.   RECENTLY ISSUED ACCOUNTING STANDARD

     In October 1995, the Financial  Accounting Standards Board issued Statement
of  Financial   Accounting   Standards  No.  123,   Accounting  for  Stock-Based
Compensation.  Pursuant to the new standard,  companies are encouraged,  but are
not  required,  to adopt  the fair  value  method  of  accounting  for  employee
stock-based  transactions.  Companies are also  permitted to continue to account
for  such  transactions  under  Accounting  Principles  Board  Opinion  No.  25,
Accounting for Stock Issued to Employees, but would be required to disclose in a
note to the  financial  statements  pro  forma net  income  and,  if  presented,
earnings per share as if the Company had applied the new method of accounting.

     Disclosure  provisions are required to be adopted when the  recognition and
measurement  provisions  are adopted,  but no later than fiscal years  beginning
after  December 15, 1995. The Company has not yet determined if it will elect to
change to the fair  value  method,  nor has it  determined  the  effect  the new
standard  will have on net income and earnings per share should it elect to make
such a change.  

4. HEART VALVE  PATENT  REVENUE 

     The Company received its heart valve patent payments from St. Jude Medical,
Inc.  at six-  month  intervals,  approximately  60 days  following  June 30 and
December 31. Management  estimated and recorded the revenue monthly and adjusted
the  estimate to actual upon  receipt of the  payment.  In the third  quarter of
fiscal 1995, the Company recorded the final payment from St. Jude.

5. COST OF MEDICAL  PRODUCTS 

     Cost of medical  products  includes  manufacturing  start-up  expense which
consists of excess labor and material costs,  higher than normal levels of scrap
product and  unabsorbed  manufacturing  overhead  expenses  associated  with the
installation and start-up of new manufacturing processes.

6.  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 Six Month Periods Ended January 31, 1996 and 1995

     Total  revenues for the three and six month  periods ended January 31, 1996
were  $989,000  and  $1,736,000,  respectively,  below the same  periods  in the
previous  fiscal year.  These same periods in fiscal 1995 included  $930,000 and
$1,857,000,  respectively,  in heart valve patent  payments and pacemaker  leads
business  royalties,  both of which ended in the third quarter of last year. The
increase in product  sales of $178,000  and  $357,000 in the three and six month
periods,  respectively, are primarily due to sales of the AngioJet Thrombectomy
System to key European  medical  opinion leaders for clinical use. The Company's
primary  revenue  source  in the  future  will be  sales  of its  three  current
products:  the AngioJet  Thrombectomy  System,  the Perma-Flow  Coronary Bypass
Graft and the Perma-Seal Dialysis Access Graft. International product sales are
expected to increase as these very unique products gain physician acceptance and
as foreign markets are developed.  A 510(k) request for U.S. marketing clearance
of the  AngioJet  System for  peripheral  use is expected to be submitted to the
United States Food and Drug Administration  (FDA) in March. The Company believes
that the  AngioJet  System  for  peripheral  use will be  cleared by the FDA for
United  States  marketing  during  calendar  1996,  which should result in added
product sales revenue. There can be no assurance that Possis Medical will obtain
FDA  approvals on a timely basis or at all.

     Cost of medical  products  increased 47% and 42% in the three and six month
periods,  respectively,  over the same periods in the previous year. An increase
in manufacturing startup expense explains  approximately  $275,000 and $450,000,
respectively,  of the increase.  See Notes to Consolidated Financial Statements,
Note 5 in this Quarterly Report.  The remaining  increase results from increased
sales.  The Company does not  anticipate a reduction  in  manufacturing  startup
expense  until  product sales grow allowing the Company to produce in sufficient
quantities to achieve manufacturing efficiencies.

     Selling,  general and  administrative  expense  decreased by $13,000 in the
three month period while  increasing by $41,000 in the six month period compared
to the same year-ago  periods.  Selling and  marketing  expenses are expected to
increase  over the next six  months  and  beyond as  international  markets  are
further  developed  and as a  domestic  sales  organization  is  established  in
anticipation  of the  receipt of  clearance  to market the  AngioJet  System for
peripheral use in the United States.

     Research and development  expense in the three and six month periods ending
January 31, 1996, decreased by 21% and 2%, respectively, over the previous year.
Expense for the current quarter declined $172,000 primarily due to completion of
the Company's development programs to self-manufacture Perma-Flow Graft material
and to  develop a thin wall  Perma-Seal  Dialysis  Access  Graft.  Research  and
development  expense  is  expected  to  increase  in the  future  as the pace of
clinical trials  enrollment  grows and as the Company invests in the development
of new products that leverage its existing technology base.

     Interest  income has grown  significantly  in the most recent three and six
month periods  because more money has been invested as a result of the Company's
October  1995  stock  offering  that  raised  a net  $27  million. 

     Income from  discontinued  operations - net has  increased  $130,000 in the
most  recent  three  months  compared  to the  same  year-ago  period  due to an
acceleration  of the payment of the  remaining  money owed the Company  from the
previous sale of its Technical Services Division.


LIQUIDITY AND CAPITAL RESOURCES
 
     Cash, cash equivalents,  and marketable  securities totaled  $29,972,000 on
January  31,  1996  versus   $6,721,000  on  July  31,  1995.  The  increase  is
attributable  to a public  stock  offering  completed  in  October  1995.  After
expenses,  the company recorded net proceeds of  approximately  $23,643,000 from
the sale of  1,750,000  shares of common  stock.  In November,  the  underwriter
exercised an  over-allotment  option on 221,258 shares,  providing an additional
$3,015,000 to the Company.

     With the elimination of royalty revenues and the related cash inflows,  the
Company's  cash  usage in the first six months of fiscal  1996 is  significantly
greater than for the same period in fiscal 1995.  Possis  expects its cash usage
for the next several  quarters will increase to $800,000 to $1,000,000 per month
and thereafter will decline as international  product sales increase and as U.S.
FDA  marketing  approvals  are obtained  resulting in the  commencement  of U.S.
sales.  The Company believes that its existing cash reserves will be adequate to
fund the development and commercialization of its three current products.

FORWARD-LOOKING STATEMENTS

     This  Management's  Discussion  and  Analysis of  Financial  Condition  and
Results of Operations contains 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,  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  which  is out of  the  Company's  control,  changes  in the  Company's
marketing strategies,  changes in manufacturing  methods, the levels of sales of
the Company's products that can be achieved,  and other risks detailed from time
to time in the Company's various Securities and Exchange Commission filings.
<PAGE>



Part II.  OTHER INFORMATION

ITEM 4.       Submission of Matters to a Vote of Security Holders

     (a) The 1995 Annual Meeting of  Shareholders  of Possis  Medical,  Inc. was
held on December 6, 1995. 

     (b) By the following vote,  management's nominees were elected as Directors
of the  Corporation  for one year or until  their  successors  are  elected  and
qualified:
                                                         WITHHOLD
                                         FOR             AUTHORITY
        Dodald C. Wegmiller          10,469,604           76,186
        Joe A. Walters               10,467,664           78,126
        Dean Belbas                  10,485,280           60,510
        Seymour J. Mansfield         10,468,231           77,559
        Demetre M. Nicoloff, MD      10,486,044           59,746
        Robert G. Dutcher            10,484,852           60,938
        Ann M. Possis                10,458,617           87,173

     (c) By a vote of 10,475,657 in the affirmative,  41,097 in the negative and
29,036  abstaining,  ratified  the  appointment  of Deloitte & Touche LLP as the
Company's  certified  public  accountants.  

     (d) By a vote of 8,481,112 in the  affirmative,  1,689,255 in the negative,
143,347  abstaining and 232,076 being counted as broker non-votes,  the proposed
amendment  to the  Company's  1992 Stock  Compensation  Plan was  ratified.  The
amendment  increased  the shares added to the Plan annually from 1% to 2% of the
total number of shares  outstanding  and increased the maximum  number of shares
which may be issued as Incentive Stock Options from 350,000 to 1,000,000.
<PAGE>
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 on the following pages.

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 restated
                  August 9, 1994       to date
 
4.1      10-K     Fiscal Year Ended    Norwest Equipment Finance, Inc.
                  July 31, 1994        loan agreement, dated January 12, 1994

10.1     S-1      June 30, 1988        Agreement with St. Jude Medical, Inc.,
                                       dated August 2, 1983

10.2     8-K      February 14, 1994    Asset purchase agreement with
                                       TC/American Monorail, Inc.,
                                       dated January 28, 1994

10.3     S-2      July 1, 1994         Real estate purchase agreement
                                       with TC/American Monorail, Inc.,
                                       dated January 28, 1994

10.4     10-Q     Quarter ended        Asset purchase agreement with
                  January 31, 1994     Innovex, Inc., dated March 11, 1994

10.5     S-2      July 1, 1994         Lease agreement for corporate head-
                                       quarters and manufacturing facility,
                                       dated January 4, 1991

10.6     S-2      Amendment No.1       License agreement with Imperial
                  August 9, 1994       Chemical Industries Plc., dated
                                       April 15, 1991

10.7     S-2      Amendment No.1       License agreement with the
                  August 9, 1994       University of Liverpool, dated
                                       May 10, 1990

10.8     S-1      June 30, 1988        Form of Indemnification Agreement
                                       with officers and directors of
                                       Registrant

*10.9    S-8      February 7, 1990     1983 Incentive Stock Option Plan as
                                       amended to date

*10.10   S-1      June 30, 1988        1985 Nonqualified Stock Option
                                       Plan as amended to date

*10.11   10-K     Fiscal year ended    Form of incentive stock option
                  July 31, 1989        agreement for officers

*10.12   10-K     Fiscal year ended    Form of stock option agreement for
                  July 31, 1989        directors

*10.13   S-8      December 30, 1992    1992 Stock Compensation Plan

*10.14   10-K     Fiscal year ended    Form of restricted stock agreement
                  July 31, 1993        for officers (1992 Plan)

*10.15   10-K     Fiscal year ended    Form of nonqualified stock option
                  July 31, 1993        agreement for officers (1992 Plan)

*10.16   10-K     Fiscal year ended    Form of incentive stock option
                  July 31, 1993        agreement for officers (1992 Plan)

*10.17   10-K     Fiscal year ended    Form of nonqualified stock option
                  July 31, 1993        agreement for 1992 directors' fees
                                       (1992 Plan)

*10.18   10-K     Fiscal year ended    Form of nonqualified stock option
                  July 31, 1993        agreement for 1990 directors' fees
 
*10.19   10-K     Fiscal year ended    Form of nonqualified stock option
                  July 31, 1993        agreement for 1989 directors' fees

10.20    10-Q     Quarter ended        Supply & Distribution Agreement
                  January 31, 1995     with Bard Vascular Systems
                                       Division, C.R.Bard, Inc.
 
10.21    S-2      Amendment No. 1      Underwriting Agreement entered into
                  August 9, 1994       between the Company and John G. Kinnard 
                                       and Company, Incorporated including Form 
                                       of Warrant to Representative dated 
                                       September 8, 1994

10.22    S-3      Amendment No. 2      Underwriting Agreement entered
                                       September 29, 1995 into between the 
                                       Company, Dain Bosworth Incorporated and 
                                       John G. Kinnard and Company, Incorporated
                                       dated October 2, 1995

10.23   10-Q                           Lease agreement for Corporate
                                       headquarters and manufacturing
                                       facility dated December 15, 1995.
 

*    Indicates management contract or compensatory plan or arrangement.

     (b) Reports on Form 8-K

     Possis Medical,  Inc. filed no reports on Form 8-K during the quarter ended
January 31, 1996.
 

<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: March 13, 1996              BY:     /S/   Robert G. Dutcher          
                                     ROBERT G. DUTCHER
                                     President and Chief Executive Officer



DATE: March 13, 1996             BY:     /s/   Russel E. Carlson              
                                     RUSSEL E. CARLSON
                                     Vice President of Finance
                                     Chief Financial and Accounting Officer