_______________________________________________
                       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 October 31, 1996


     Commission File Number 0-944


                              POSSIS MEDICAL, INC.

                            9055 Evergreen Boulevard

                        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 December 12, 1996 was 12,095,034.

                        ________________________________
<PAGE>

                              POSSIS MEDICAL, INC.

                                      INDEX


  
                                                                           PAGE


PART I.           FINANCIAL INFORMATION

     ITEM 1.      Financial Statements

                  Consolidated Balance Sheets, October 31, 1996
                  and July 31, 1996.......................................3

                  Consolidated Statements of Operations for the three
                  months ended October 31, 1996 and 1995..................4

                  Consolidated Statements of Cash Flows for the
                  three months ended October 31, 1996 and 1995 ...........5

                  Notes to Consolidated Financial Statements..............6
 
     ITEM 2.      Management's Discussion and Analysis of Financial
                  Condition and Results of Operations.....................7-8
 



PART II.          OTHER INFORMATION


     ITEM 6.      Exhibits and Reports on Form 8-K........................9
 
              SIGNATURES..................................................10
<PAGE>
<TABLE>



                                       POSSIS MEDICAL, INC. AND SUBSIDIARIES
                                            CONSOLIDATED BALANCE SHEETS
<CAPTION>
                                                                                October 31, 1996            July 31, 1996
ASSETS                                                                             (Unaudited)                            
<S>                                                                             <C>                         <C>     
CURRENT ASSETS:
  Cash and cash equivalents..........................................           $  7,111,387                $  7,688,507
  Marketable securities .............................................             13,943,297                  15,838,543
  Receivables:
    Trade (less allowance for doubtful accounts of $60,000,...........               367,558                     389,983
    Other  ..........................................................                254,893                     218,154
  Inventories:
    Parts............................................................                875,100                     755,081
    Work-in-process..................................................                726,773                     898,721
    Finished goods...................................................                695,550                     466,985
  Prepaid expenses and other assets..................................                204,273                     207,156   
     Total current assets............................................             24,178,831                  26,463,130
PROPERTY:
  Leasehold improvements.............................................              1,154,032                   1,090,935
  Machinery and equipment............................................              2,966,397                   2,782,287
  Assets-in-construction.............................................                 50,496                      92,743
     Total property..................................................              4,170,925                   3,965,965
  Less accumulated depreciation......................................             (1,597,336)                 (1,482,233)
          Property - net.............................................              2,573,589                   2,483,732
OTHER ASSETS:
  Goodwill ..........................................................                395,922                     413,922
TOTAL ASSETS.........................................................            $27,148,342                 $29,360,784

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
  Trade accounts payable.............................................           $    199,520                $    317,905
  Accrued salaries, wages, and commissions...........................                693,811                     725,988
  Current portion of long-term debt .................................                 54,280                      73,386
  Other liabilities..................................................                673,659                     566,313            
     Total current liabilities.......................................              1,621,270                   1,683,592
DEFERRED REVENUE ....................................................                 --                          41,768
LONG-TERM DEBT ......................................................                 34,934                      38,569

SHAREHOLDERS' EQUITY:
  Common stock-authorized, 20,000,000 shares of $ .40 par
    value each; issued and outstanding,
    12,061,317 and 12,052,644 shares, respectively...................              4,824,527                   4,821,058
  Additional paid-in capital.........................................             40,739,885                  40,688,535
  Unearned compensation..............................................                (71,859)                   (102,690)
  Unrealized loss on investments.....................................                (33,657)                   (145,276)
  Retained deficit...................................................            (19,966,758)                (17,664,772)
     Total shareholders' equity......................................             25,492,138                  27,596,855
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY...........................           $ 27,148,342                 $29,360,784

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



                                       POSSIS MEDICAL, INC. AND SUBSIDIARIES
                                       CONSOLIDATED STATEMENTS OF OPERATIONS
                               FOR THE THREE MONTHS ENDED OCTOBER 31, 1996 AND 1995
                                                    (UNAUDITED)

<CAPTION> 
<S>
                                                                                            1996                       1995     
                                                                                      <C>                       <C>
REVENUES:
     Medical product sales..................................................          $   389,154               $    200,895
     Sales agreement revenue................................................               --                          --  
          Total revenues....................................................              389,154                    200,895
COST OF SALES AND OTHER EXPENSES:
     Cost of medical products...............................................            1,269,021                  1,049,384
     Selling, general and administrative....................................              715,865                    558,322
     Research and development...............................................            1,077,797                    877,752
     Interest...............................................................                2,261                      4,989        
          Total cost of sales and other expenses............................            3,064,944                  2,490,447

Operating loss..............................................................           (2,675,790)                (2,289,552)

Interest income.............................................................              255,156                    188,106
Gain on sale of investments.................................................                7,109                     --    

Loss from continuing operations - net.......................................           (2,413,525)                (2,101,446)

Income from discontinued operations - net...................................              111,539                     68,070

Net loss....................................................................          $(2,301,986)               $(2,033,376)

Weighted average number of common shares outstanding........................           12,057,089                 10,461,004        
Earnings (loss) per common share:
     Continuing operations..................................................               $(.20)                      $(.20)
     Discontinued operations ...............................................                 .01                         .01
     Net loss...............................................................               $(.19)                      $(.19)

<FN>

See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
                                        POSSIS MEDICAL, INC. AND SUBSIDIARIES
                                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                               FOR THE THREE MONTHS ENDED OCTOBER 31, 1996 AND 1995
                                                    (UNAUDITED)

                                                                                                                  
<CAPTION>
<S>        
                                                                                          1996                      1995     
                                                                                     <C>                    <C>
OPERATING ACTIVITIES:
Net loss ......................................................................      $(2,301,986)           $(2,033,376)
Adjustments to reconcile net loss to net
  cash used in operating activities:
     Gain on sale of marketable securities......................................          (7,109)                --
     Gain on asset disposal.....................................................          --                       (267)
     Depreciation...............................................................         115,103                 96,842
     Amortization of goodwill...................................................          18,000                 18,000
     Stock compensation.........................................................          30,831                  9,983
     Increase in receivables....................................................         (14,314)              (227,590)
     Increase in inventories....................................................        (176,636)               (71,256)
     Decrease in other assets...................................................           2,883                 56,932
     Increase (decrease) in trade accounts payable..............................        (118,385)               425,220
     Increase (decrease) in accrued and other current liabilities...............          33,401               (200,698)
Net cash used in operating activities...........................................      (2,418,212)            (1,926,210)

INVESTING ACTIVITIES:
Proceeds from sale of discontinued operations...................................          --                     12,500
Additions to plant and equipment................................................        (204,960)               (52,977)
Proceeds from the disposal of assets............................................          --                        267
Purchase of marketable securities...............................................      (1,997,667)                (4,345)
Proceeds from sale/maturity of marketable securities............................       4,011,641              1,275,000
Net cash provided by investing activities.......................................       1,809,014              1,230,445

FINANCING ACTIVITIES:
Repayment of long-term debt.....................................................         (22,741)               (14,063)
Proceeds from issuance of stock and exercise of options.........................          54,819             23,782,080
Net cash provided by financing activities.......................................          32,078             23,768,017

INCREASE (DECREASE) IN CASH AND CASH
  EQUIVALENTS...................................................................        (577,120)            23,072,252
CASH AND CASH EQUIVALENTS AT BEGINNING..........................................
   OF QUARTER...................................................................       7,688,507              5,450,057
CASH AND CASH EQUIVALENTS AT END OF
  QUARTER.......................................................................      $7,111,387            $28,522,309    
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid...................................................................   $       2,211        $         4,989
Inventory transferred to fixed assets...........................................           9,730                 10,015
 
<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 1996 Annual Report.


2.   INTERIM FINANCIAL STATEMENTS

     Operating results for the three month period ended October 31, 1996 are not
necessarily  indicative  of the results that may be expected for the year ending
July 31, 1997.


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.   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
Quarters Ended October 31, 1996 and 1995.

     Product  sales of  $389,000  for the three  months  ended  October 31, 1996
increased  significantly from the $201,000 reported in the same year-ago period.
Current  quarter sales mix is $241,000  AngioJet  System sales and $148,000 from
vascular  graft sales.  All product sales in both periods  occurred  outside the
United  States,  primarily  in Europe.  Most of the sales  growth in the current
period is vascular  grafts,  specifically  $124,000  in sales of the  Perma-Seal
Dialysis Access Graft to C. R. Bard (Bard),  the Company's product  distributor.
On December 6, 1996, the Company announced that it had sent a notice terminating
its Supply and Distribution  Agreement with Bard for the Perma-Seal Graft, based
on Bard's breach of the Agreement.  The two parties are  negotiating  concerning
settlement and terms of separation. The Company believes the Perma-Seal Graft is
the smallest  marketing  opportunity of its three products.  Also on December 6,
1996,   the  Company   announced  that  it  had  received  U.S.  Food  and  Drug
Administration  (FDA) clearance to commence U.S. marketing of the AngioJet Rapid
Thrombectomy System with labeling claims for removal of blood clots from grafts
used by patients on kidney dialysis.  The Company  anticipates growth in product
sales in the third and fourth  quarters of fiscal 1997 and believes most of this
growth will be the result of AngioJet System sales in the U.S. marketplace.

     Cost of medical  products in the current period increased 21%, or $227,000,
compared  to the same  year-ago  period.  The  increase is  primarily  due to an
increase  in  manufacturing  start-up  expense  related  to the  AngioJet  Rapid
Thrombectomy System inventory buildup in anticipation of the receipt of U.S. FDA
marketing clearance. 

     Selling, general and administrative expense in the current period increased
28%, or $158,000,  compared to the same period last year.  The  greatest  single
contributing  factor is  increased  sales  compensation  expense and the related
hiring costs of  establishing  a direct U.S.  sales  organization  to market the
AngioJet Rapid Thrombectomy System. The Company has employed five regional sales
representatives  and anticipates  adding a sixth very soon.  Sales and marketing
expenses are expected to grow with increases in product sales.

     Research  and  development  cost  increases  of $200,000 in the most recent
three-month  period are  primarily due to increased  vascular  graft product and
production process validation expenses. AngioJet System research and development
expense  decreased  in the  current  quarter as patient  enrollment  in the U.S.
clinical trial for the Peripheral  AngioJet System slowed in anticipation of FDA
marketing clearance. The Company believes that research and development expenses
will  continue  to  increase  as it  completes  the  development  of its current
products,  invests in the development of new AngioJet Rapid Thrombectomy  System
applications,  an endovascular stent graft and other vascular graft and AngioJet
technology-based products.
<PAGE>

     Interest  income  grew in the  current  period  due to an  increase  in the
Company's current period cash reserves from an October 1995 stock offering.

     Income  from   discontinued   operations   increased  in  the  most  recent
three-month period due to a favorable one-time $70,000  adjustment,  relating to
royalties from the 1991 sale of the Company's  Technical Services division.  The
Company  believes it has now  recorded  the final  income from its  discontinued
operations.


Liquidity and Capital Resources

     Cash, cash  equivalents and marketable  securities  totaled  $21,055,000 at
October 31, 1996 versus $23,527,000 at July 31, 1996.

     Net cash  usage  for the three  months  ended  October  31,  1996  averaged
$824,000 per month,  consistent  with the  Company's  expectations.  Most of the
$2,418,000  cash used in operations in the most recent three month period is due
to the  $2,302,000  first  quarter net loss.  The Company  believes that product
sales of the AngioJet System in the United States, when added to the more modest
but growing  international  product sales,  will yield  meaningful  sales growth
going forward. At the same time, sales and marketing  expenditures will increase
with the sales growth, and research and development expenditures are expected to
grow as well.  The  Company  anticipates  reporting  a loss  for the last  three
quarters of the current  fiscal year.  In addition,  the Company  believes  that
working capital  investments in trade accounts  receivable and inventory will be
required  to  support  growing  product  sales.  The  Company is  planning  on a
comparable  net cash  outflow in the second  quarter  to that  reported  in the
first quarter and reduced cash usage thereafter as product sales growth occurs.

     The Company  believes  that its existing  cash reserves will be adequate to
complete 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" within the
meaning of Section 27A of the  Securities  Act of 1933, as amended,  and Section
21E of the Securities Exchange Act of 1934 as amended.  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 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 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 amended
                    July 31, 1994       and restated to date.

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



(b)   Reports on Form 8-K

     Possis Medical,  Inc. filed no reports on Form 8-K during the quarter ended
October 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:  December 13, 1996             BY:  /s/ Robert G. Dutcher
                                          ROBERT G. DUTCHER
                                          President and Chief Executive Officer



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