UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549

                                    FORM 10-Q

[X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
      THE SECURITIES EXCHANGE ACT OF 1934.

      For the quarterly period ended October 31, 2004

                                       or

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

      For the transition period from ______________ to ______________

                          Commission File Number 0-944

                              POSSIS MEDICAL, INC.

             (exact name of registrant as specified in its charter)

                   MINNESOTA                              41-0783184
----------------------------------------------        -------------------
(State or other jurisdiction of incorporation         (I.R.S. Employer
  organization)                                       Identification No.)

     9055 EVERGREEN BLVD NW MINNEAPOLIS MN                    55433-8003
---------------------------------------------------           ---------
     (Address of principal executive offices)                 (Zip Code)

                                  763-780-4555
-------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)

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 ___

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes _X_ No ___

The number of shares outstanding of the Registrant's Common Stock, $.40 par
value, as of November 28, 2004 was 17,808,910.

                                       1


<PAGE>


                              POSSIS MEDICAL, INC.

                                      INDEX

                                                                          PAGE

PART I.         FINANCIAL INFORMATION

     ITEM 1.    Financial Statements .....................................   3

                Consolidated Balance Sheets, October 31, 2004 and
                July 31, 2004 ............................................   3

                Consolidated Statements of Income and Comprehensive
                Income for the three months ended
                October 31, 2004 and 2003 ................................   4

                Consolidated Statements of Cash Flows for the three months
                ended October 31, 2004 and 2003 ..........................   5

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

     ITEM 2.    Management's Discussion and Analysis of Financial
                Condition and Results of Operations ......................  10

     ITEM 3.    Quantitative and Qualitative Disclosures
                about Market Risk ........................................  17

     ITEM 4.    Controls and Procedures ..................................  17

PART II.        OTHER INFORMATION

     ITEM 2.    Unregistered Sales of Equity Securities and
                Use of Proceeds ..........................................  18

     ITEM 6.    Exhibits .................................................  19

                SIGNATURES ...............................................  20

                                       2

<PAGE>



PART 1     FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

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


<TABLE>
<CAPTION>

ASSETS                                                                        OCTOBER 31, 2004         JULY 31, 2004
                                                                               ---------------          ------------
CURRENT ASSETS:
<S>                                                                               <C>                   <C>
   Cash and cash equivalents ..............................................       $  4,339,350          $  8,411,784
   Marketable securities ..................................................         40,249,428            39,759,403
   Trade receivables (less allowance for doubtful  accounts and returns
     of $561,000 and $536,000, respectively) ..............................          8,885,359            10,232,180
   Inventories ............................................................          6,044,469             5,389,653
   Prepaid expenses and other assets ......................................            690,635               958,616
   Deferred tax asset .....................................................            890,000               890,000
                                                                                  ------------          ------------
      Total current assets ................................................         61,099,241            65,641,636

PROPERTY AND EQUIPMENT, net ...............................................          5,137,242             5,073,775
DEFERRED TAX ASSET ........................................................         13,713,949            15,103,949
OTHER ASSET ...............................................................            202,281               201,281
                                                                                  ------------          ------------
TOTAL ASSETS ..............................................................       $ 80,152,713          $ 86,020,701
                                                                                  ============          ============
LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
   Trade accounts payable .................................................       $  2,109,766          $  1,791,694
   Accrued salaries, wages, and commissions ...............................          2,817,290             4,228,804
   Other liabilities ......................................................          2,346,321             2,222,465
                                                                                  ------------          ------------
     Total current liabilities ............................................          7,273,377             8,242,963
OTHER LIABILITES ..........................................................            242,476               160,536
COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY:
   Common stock-authorized, 100,000,000 shares of
      $0.40 par value each; issued and
      outstanding, 17,808,910 and 18,254,942 shares,
      respectively ........................................................          7,123,564             7,301,977
   Additional paid-in capital .............................................         81,305,736            88,434,540
   Unearned compensation ..................................................             (6,000)              (15,000)
   Accumulated other comprehensive loss ...................................            (11,000)             (136,000)
   Retained deficit .......................................................        (15,775,440)          (17,968,315)
                                                                                  ------------          ------------
      Total shareholders' equity ..........................................         72,636,860            77,617,202
                                                                                  ------------          ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ................................       $ 80,152,713          $ 86,020,701
                                                                                  ============          ============
</TABLE>


See notes to consolidated financial statements.


                                       3

<PAGE>


                      POSSIS MEDICAL, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
              FOR THE THREE MONTHS ENDED OCTOBER 31, 2004 AND 2003
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                        2004                     2003
                                                                     -----------             -----------
<S>                                                                  <C>                     <C>
Product sales ..................................................     $17,501,988             $ 15,602,288

Cost of sales and other expenses:
      Cost of medical products .................................       4,304,339                3,819,231
      Selling, general and administrative ......................       7,556,583                6,714,550
      Research and development .................................       2,437,704                2,127,243
                                                                     -----------             ------------
      Cost of sales and other expenses .........................      14,298,626               12,661,024
                                                                     -----------             ------------
Operating income ...............................................       3,203,362                2,941,264
      Interest income ..........................................         286,432                  160,352
      Gain (loss) on sale of securities ........................          18,081                  (18,517
                                                                     -----------             ------------
Income before income taxes .....................................       3,507,875                3,083,099
Provision for income taxes .....................................       1,315,000                1,156,000
                                                                     -----------             ------------
Net income .....................................................       2,192,875                1,927,099

Other comprehensive income, net of tax:
      Unrealized gain on securities ............................         125,000                   69,000
                                                                     -----------             ------------
Comprehensive income ...........................................     $ 2,317,875             $  1,996,099
                                                                     ===========             ============
Weighted average number of common of shares outstanding:
      Basic ....................................................      18,080,940               17,777,727
      Diluted ..................................................      19,159,308               19,085,281

Net income per common share:
      Basic ....................................................     $      0.12             $       0.11
                                                                     ===========             ============
      Diluted ..................................................     $      0.11             $       0.10
                                                                     ===========             ============
</TABLE>

See notes to consolidated financial statements.

                                       4
<PAGE>



                      POSSIS MEDICAL, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              FOR THE THREE MONTHS ENDED OCTOBER 31, 2004 AND 2003
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                              2004                     2003
                                                                           ------------            ------------
OPERATING ACTIVITIES:
<S>                                                                        <C>                     <C>
   Net income ........................................................     $  2,192,875            $  1,927,099
   Adjustments to reconcile net income to net cash provided by
      operating activities:
   Depreciation ......................................................          562,211                 412,545
   Gain on asset disposal ............................................          (11,313)                 (2,571)
   Stock compensation expense ........................................            9,000                   9,000
   (Gain) loss on sale of marketable securities ......................          (17,140)                 18,517
   Deferred taxes ....................................................        1,315,200               1,131,030
   Decrease in trade receivables .....................................        1,346,821                   1,021
   Increase in inventories ...........................................         (788,816)               (226,969)
   Decrease in prepaid expenses and other assets .....................          267,041                 296,997
   Increase in trade accounts payable ................................          318,072                 304,944
   Decrease in accrued and other liabilities .........................       (1,205,718)               (809,313)
                                                                           ------------            ------------
      Net cash provided by operating activities ......................        3,988,233               3,062,300
INVESTING ACTIVITIES:
   Additions to property and equipment ...............................         (485,975)               (679,480)
   Proceeds from sale of fixed assets ................................            5,610                   4,485
   Proceeds from sale of marketable securities .......................       16,164,230               7,750,915
   Purchase of marketable securities .................................      (16,437,315)             (7,905,143)
                                                                           ------------            ------------
      Net cash used in investing activities ..........................         (753,450)               (829,223)

FINANCING ACTIVITIES:
   Proceeds from issuance and exercise of options and warrants........          286,216                 682,954
   Repurchase of common stock ........................................       (7,593,433)             (1,478,056)
                                                                           ------------            ------------
   Net cash used in financing activities .............................       (7,307,217)               (795,102)
                                                                           ------------            ------------
(DECREASE) INCREASE IN CASH AND CASH
      EQUIVALENTS ....................................................       (4,072,434)              1,437,975
CASH AND CASH EQUIVALENTS AT BEGINNING OF  QUARTER ..................         8,411,784               4,782,942
                                                                           ------------            ------------
CASH AND CASH EQUIVALENTS AT END OF QUARTER ..........................     $  4,339,350            $  6,220,917
                                                                           ============            ============
SUPPLEMENTAL CASH FLOW DISCLOSURE:
   Cash paid for income taxes ........................................     $    132,500            $     24,970
   Inventory transferred to property and equipment ...................           39,360                    --
</TABLE>



 See notes to consolidated financial statements.


                                       5
<PAGE>



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

1.   BASIS OF PRESENTATION

     The accompanying unaudited consolidated financial statements have been
     prepared in accordance with accounting principles generally accepted in the
     United States of America 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
     accounting principles generally accepted in the United States of America
     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 accompanying notes thereto included in the
     Company's 2004 Annual Report.

2.   STOCK OPTIONS

     Pursuant to Statement of Financial Accounting Standards (SFAS) No. 123,
     Accounting for Stock-Based Compensation, we apply the recognition and
     measurement principles of Accounting Principles Board (APB) Opinion No. 25,
     Accounting for Stock Issued to Employees, to our stock options and other
     stock-based compensation plans.

     In accordance with APB Opinion No. 25, compensation cost for stock options
     is recognized in income based on the excess, if any, of the quoted market
     price of the stock at the grant date of the award or other measurement date
     over the amount an employee must pay to acquire the stock. The exercise
     price for stock options granted to employees equals the fair market value
     of our common stock at the date of grant, thereby resulting in no
     recognition of compensation expense.

     The following table illustrates the effect on net income and earnings per
     share if we had applied the fair value recognition provisions of SFAS No.
     123 to stock-based employee compensation.


<TABLE>
<CAPTION>
                                                                                      Three Months Ended
                                                                                          October 31,
                                                                             --------------------------------------
                                                                                  2004                    2003
                                                                             --------------          --------------
<S>                                                                          <C>                     <C>
Net Income - as reported ...............................................     $    2,192,875          $    1,927,099
      Less estimated stock-based employee compensation
      determined under fair value based method, net of tax .............           (584,000)               (563,000)
                                                                             --------------          --------------
           Net income - pro forma ......................................          1,608,875          $    1,364,099
                                                                             ==============          ==============
Earnings per share:
           Basic - as reported .........................................     $         0.12          $         0.11
           Less estimated stock-based employee
                    compensation determined under fair value
                    based method, net of tax ...........................              (0.03)                  (0.03)
                                                                             --------------          --------------
           Basic pro forma .............................................     $         0.09          $         0.08
                                                                             ==============          ==============
Diluted - as reported ..................................................     $         0.11          $         0.10
Less estimated stock-based employee compensation determined under
fair value based method, net of tax ....................................              (0.03)                  (0.03)
                                                                             --------------          --------------
           Diluted - pro forma .........................................     $         0.08          $         0.07
                                                                             ==============          ==============
Weighted average common shares outstanding
           Basic .......................................................         18,080,940              17,777,727
           Diluted .....................................................         19,159,308              19,085,281
</TABLE>

                                       6
<PAGE>



     We estimated the fair values using the Black-Scholes option-pricing model,
     modified for dividends and using the following assumptions:


<TABLE>
<CAPTION>
                                                 2004                   2003
                                             ------------         -------------
<S>                                          <C>                  <C>
     Risk-free rate ......................       4.1-4.5%             4.0-4.6%
     Expected dividend yield .............              0%                   0%
     Expected stock price volatility .....         54-64%               61-64%
     Expected option term ................       10 years             10 years
     Fair value per option ...............   $11.86-19.88         $11.63-14.02
</TABLE>


     For purposes of determining the pro forma amounts, the fair value of
     options is amortized to expense over the option-vesting period in
     determining the pro forma impact. The option-vesting period is six months
     to four years.

3.   INTERIM FINANCIAL STATEMENTS

     Operating results for the three months ended October 31, 2004 are not
     necessarily indicative of the results that may be expected for the year
     ending July 31, 2005.

4.   ACCOUNTING PRONOUNCEMENTS

     In November 2003 and March 2004, the Emerging Issues Task Force (EITF)
     reached a consensus on EITF Issue No. 03-1, "The Meaning of
     Other-Than-Temporary Impairment and Its Application to Certain
     Investments." The consensus reached requires companies to apply new
     guidance for evaluating whether an investment is other-than-temporarily
     impaired and also requires quantitative and available-for-sale or
     held-to maturity, that are determined to be only temporarily impaired at
     the balance sheet date. The Company incorporated the required disclosures
     for investments accounted for under SFAS No. 115, "Accounting for Certain
     Investments in Debt and Equity Securities," as required in the fourth
     quarter of fiscal year 2004. In September 2004, the consensus was
     indefinitely delayed as it relates to the measurement and recognition of
     impairment losses for all securities in the scope of paragraphs 10-20 of
     EITF 03-1. The disclosures prescribed by EITF No. 03-1 and guidance related
     to impairment measurement prior to the issuance of this consensus continue
     to remain in effect. Adoption is not expected to have a matrial impact on
     the Company's consolidated earnings, financial position or cash flows.



                                       7
<PAGE>

5.   MARKETABLE SECURITIES

     During the quarter ended October 31, 2004, the Company invested its excess
     cash and cash equivalents in a professionally managed portfolio of
     marketable securities. All securities in this portfolio as of October 31,
     2004 were classified as available-for-sale and consisted primarily of U.S.
     government securities and corporate bonds. These investments are reported
     at fair value, and the net unrealized gain of approximately $125,000 and
     $69,000 respectively, net of tax, for the three months ended October 31,
     2004 and 2004, respectively, is included within other comprehensive income.
     The net unrealized loss included in shareholders' equity as of October 31,
     2004 and 2003 was $11,000 and $136,000, net of tax.

6.   INVENTORIES

     Inventories are stated at the lower of cost (on the first-in, first-out
basis) or market. Inventory balances were as follows:

                                         October 31,     July 31,
                                            2004           2004
                                         ----------     ----------
           Finished goods ............   $2,327,693     $2,018,152
           Work-in-process ...........    1,454,197      1,260,449
           Raw materials .............    2,262,579      2,111,052
                                         ----------     ----------
                                         $6,044,469     $5,389,653
                                         ==========     ==========

                                       8

<PAGE>



7.   PROPERTY AND EQUIPMENT

     Property is carried at cost and depreciated using the straight-line method
     over the estimated useful lives of the various assets. Property and
     equipment balances and corresponding lives were as follows:


<TABLE>
<CAPTION>

                                                           October 31,       July 31,
                                                               2004            2004               Life
                                                           ------------    -------------      -------------
<S>                                                        <C>             <C>                <C>
          Leasehold improvements .......................   $  2,283,490    $  2,189,955       5-10 years
          Equipment ....................................     10,110,754       9,525,117       3 to 10 years
          Assets in construction .......................        309,676         526,793       N/A
                                                           ------------    -------------
                                                             12,703,920      12,241,865
          Less accumulated depreciation ................     (7,566,678)     (7,168,090)
                                                           ------------    -------------
          Property and equipment - net .................   $  5,137,242    $  5,073,775
                                                           ============    =============
</TABLE>

8.   SEGMENT AND GEOGRAPHIC INFORMATION AND CONCENTRATION OF CREDIT RISK

     The Company's operations are in one business segment: the design,
     manufacture and distribution of cardiovascular medical devices. The Company
     evaluates revenue performance based on the worldwide revenues of each major
     product line and profitability based on an enterprise-wide basis due to
     shared infrastructures to make operating and strategic decisions.

     Total revenues from sales in the United States and outside the United
     States are as follows:

                                                      Three Months Ended
                                                          October 31,
                                                     2004           2003
                                                 ------------   -----------
           United States ......................   $17,198,858   $15,310,071
           Non-United States ..................       303,130       292,217
                                                  -----------   -----------
           Total Revenues .....................   $17,501,988   $15,602,288
                                                  ===========   ===========


9.   NET INCOME PER COMMON SHARE

     Basic income per common share is computed by dividing net income for the
     period by the weighted average number of common shares outstanding during
     the period. Diluted income per share is computed using the treasury stock
     method by dividing net income by the weighted average number of common
     shares plus the dilutive effect of outstanding stock options, stock
     warrants and shares issuable under the employee stock purchase plan.

10.  COMMON STOCK

     During the three months ended October 31, 2004, stock options for the
     purchase of 56,887 shares of the Company's common stock were exercised at
     prices between $3.94 and $16.66 per share resulting in proceeds of
     $285,000. During the three months ended October 31, 2003, stock options
     and warrants for the purchase of 101,682 shares of the Company's common
     stock were exercised at prices between $2.22 and $17.45 per share
     resulting in proceeds of $676,000.


                                       9
<PAGE>

     During the three months ended October 31, 2004 and 2003, the Company
     issued 81 and 497 shares in connection with its employee stock
     purchase plan.

     During the three months ended October 31, 2004, the Company repurchased
     503,000 shares in the public market at stock prices between $10.66 and
     $18.34 per share for $7,593,000. During the three months ended October
     31, 2003, the Company repurchased 91,000 shares in the public market at
     prices between $15.65 and $16.81 per share for $1,478,000.

11.  ACCRUED WARRANTY COSTS

     The Company estimates the amount of warranty claims on sold product that
     may be incurred based on current and historical data. The actual warranty
     expense could differ from the estimates made by the Company based on
     product performance. The following table presents the changes in the
     Company's product warranty liability:

            Accrued warranty costs at July 31, 2004 ..   $ 293,500
            Payments made for warranty costs .........     (84,000)
            Accrual for product costs ................      84,000
                                                         ---------
            Accrued warranty costs at October 31, 2004   $ 293,500
                                                         =========


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

OUR BUSINESS

Possis Medical Inc. develops, manufactures and markets pioneering medical
devices for the large and growing cardiovascular and vascular treatment markets.
The AngioJet(R) Rheolytic(TM) Thrombectomy System (AngioJet System) is marketed
worldwide for blood clot removal from native coronary arteries, leg arteries,
coronary bypass grafts and AV dialysis access grafts. The AngioJet System
consists of a drive unit (capital equipment), which powers a disposable pump,
and a family of disposable catheters, each aimed at a specific indication.

The Company expanded its product line with the introduction of the XMI(R) Rapid
Exchange catheter (XMI RX) in December 2003 for the removal of blood blots in
peripheral arteries in a limited market release, the introduction of the
AVX(TM)(R) catheter in July 2003 for the removal of blood clots in AV-access
grafts and the introduction of the Xpeedior(R) Plus 120 catheter in August 2002
to remove blood clots in peripheral arteries greater than or equal to 3mm in
diameter.

In February 2004, the Company released its XMI RX in a full market release for
peripheral arterial use in the U.S. In May 2004, the Company received approval
from the U.S. Food & Drug Administration (FDA) to market the XMI RX for coronary
indications. The Company also received Community Europe (CE) mark approval in
May 2004, allowing coronary marketing of the XMI RX in the European Community.
This new product will put our proven XMI technology into a configuration
preferred by many physicians, increasing our utility and acceptance in the
interventional lab.

                                       10
<PAGE>


The AVX catheter is an improved version of our Xpeedior 60 catheter and designed
specifically for the av-access market. The new AVX catheter is a slightly
shorter length catheter with a new hub design and hemostasis valve that is
easier to use. In addition, it is 25% more powerful than the Xpeedior 60,
putting more thrombectomy action in the hands of the physician. The Company's
Xpeedior Plus 120 catheter is an improved version of our Xpeedior 100. Compared
to the Xpeedior 100 catheter, the new Xpeedior Plus 120 catheter's increased
length will allow the physician to treat more distal vessels. The Xpeedior Plus
120 catheter also has the added features of dual marker bands, a braided shaft
and a sleek tapered tip for greater ease of use.

In addition to the Company's XMI RX and Xpeedior catheters, the XMI catheter and
XVG(R) (XVG) catheter continue to gain acceptance by physicians. The XVG, XMI,
XMI RX and Xpeedior catheters feature the Company's patented Cross-Stream(R)
Technology. This exclusive technology platform intensifies the action at the tip
of the catheter, which doubles the clot removal rate and triples the treatable
vessel size compared to other available mechanical thrombectomy devices on the
market today. In addition, Cross-Stream Technology has been able to deal more
effectively than previous catheters with "mural thrombus," the older, more
organized material that adheres to vessel walls and can complicate patient
results.

The Company employs a variety of flexible drive unit acquisition programs
including outright purchase and various evaluation programs. The Company has no
leasing programs for its capital equipment. The purchasing cycle for the
AngioJet System drive unit varies depending on the customer's budget cycle. The
Company has signed contracts with seven purchasing groups in order to accelerate
orders and increase market penetration. These purchasing groups evaluate and
screen new medical technologies on behalf of their members, and once they
recommend a technology, such as the AngioJet System, they negotiate
pre-determined discounts on behalf of their members. The benefit for the Company
is access to the recommended vendor list, along with marketing support provided
by the purchasing group. The purchasing groups receive a marketing fee on their
member purchases from the Company. These discounts and marketing fees have been
offset by the increase in sales to the member hospitals of the purchasing group.
There has been no material negative effect on the Company's margins due to these
discounts and marketing fees. The discounts reduce gross revenue on the income
statement, while marketing fees are included in selling, general and
administrative expense on the income statement.

In April 2004, the Company announced that it had signed a three year agreement
to be the exclusive distributor of the Angiometrx Metricath(TM) products in the
United States. The Metricath System is an innovative, catheter-based technology
that allows cardiologists to quickly and easily measure arterial size during
procedures for treatment of coronary artery disease. Such measurements are
helpful to select appropriately sized stents to achieve optimum patient outcomes
from coronary angioplasty and related stent implantation procedures. The
Metricath System was developed in response to the limitations of existing
measurement technologies, which require large capital investment and which do
not offer the ease of use of the Metricath System. The Metricath(TM) System
received FDA 510(k) clearance for sale in the United States in July 2003.

The Company expects U.S. AngioJet System sales to continue to grow primarily
through obtaining additional FDA approved product uses, introduction of new
catheter models for existing indications, introduction of AngioJet
System-related products, more face-time selling to existing accounts,
peer-to-peer selling, and the publication of clinical performance and
cost-effectiveness data.



                                       11
<PAGE>


CRITICAL ACCOUNTING POLICIES

The consolidated financial statements include accounts of the Company and all
wholly-owned subsidiaries. The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions in certain circumstances
that affect amounts reported in the accompanying consolidated financial
statements and related footnotes. In preparing these financial statements,
management has made its best estimates and judgments of certain amounts included
in the financial statements, giving due consideration to materiality. The
Company's most critical accounting policies are those described below.
Application of these accounting policies involves the exercise of judgment and
use of assumptions as to future uncertainties and, as a result, actual results
could differ from these estimates.

Revenue Recognition

Revenues associated with products that are already maintained at customer
locations are recognized and ownership and risk of loss are transferred to the
customer when the Company receives a valid purchase order from the customer.
Revenues associated with products that are not maintained at the customer
locations are recognized and title and risk of loss are transferred to the
customer when a valid purchase order is received and the products are received
at the customer's location. Provisions for returns are recorded in the same
period the related revenues are recognized. Revenue recognition for drive unit
extended warranties is amortized on a straight-line basis over the life of the
warranty period.

Allowance for Returns

Accounts receivable are reduced by an allowance for items that may be returned
in the future. The allowance requires us to make estimates at the time the
account receivable is recorded concerning the likelihood for returns in the
future. The estimate is based upon historical product return experience,
customer complaint rates, information received from our customers and
assumptions that are believed to be reasonable under the circumstances.
Management, on a quarterly basis, evaluates the adequacy of the allowance for
returns. Management believes the amount of the allowance for returns is
appropriate; however, actual returns incurred could differ from the original
estimate, requiring adjustments to the allowance.

Allowance for Doubtful Accounts

Substantially all of the Company's receivables are due from health care
facilities located in the United States. The estimated allowance for doubtful
accounts is based upon the age of the outstanding receivables and the payment
history and creditworthiness of each customer. Management, on a quarterly basis,
evaluates the adequacy of the allowance for doubtful accounts. Management
believes the amount of the allowance for doubtful accounts is appropriate;
however, nonpayment of accounts could differ from the original estimate,
requiring adjustments to the allowance.

                                       12
<PAGE>



Inventories

Inventories are valued at the lower of cost or market. In order to determine the
market value of inventory on a quarterly basis, management assesses the
inventory quantities on hand to estimated future usage and sales and, if
necessary, writes down inventory deemed excess or obsolete to estimated market
value.

Warranty Reserve

The Company provides a one-year limited warranty on its AngioJet System drive
unit and a limited warranty on AngioJet System disposable products. The Company
establishes a warranty reserve at the time products are sold, which is based
upon historical frequency of claims relating to the Company's products and the
cost to replace disposable products and to repair drive units under warranty.
Management, on a quarterly basis, evaluates the adequacy of the warranty
reserve. Management believes the amount of the warranty reserve is appropriate,
given our historical experience; however, actual claims incurred could differ
from the original estimate, requiring adjustments to the reserve.

RESULTS OF OPERATIONS

Three Month Periods Ended October 31, 2004 and 2003

Total product sales for the three months ended October 31, 2004 increased
$1,900,000, or 12%, to $17,502,000 compared to $15,602,000 for the comparable
period in fiscal 2004. The Company recorded net income for the quarter ended
October 31, 2004 of $2,193,000, or $0.11 per diluted share, compared to net
income of $1,927,000, or $0.10 per diluted share, in the comparable quarter in
fiscal 2004.

Revenue - AngioJet System

U.S. AngioJet System revenue for the three months ended October 31, 2004
increased 12% to $17,199,000 from $15,310,000 for the same period in 2004. The
main factors in the revenue increase were increased sales resulting from
continuing customer acceptance of our expanded and improved coronary and
peripheral catheter product lines and the expansion of our direct sales force.
U.S. AngioJet System revenue for the first quarter of fiscal 2005 decreased 12%
compared to the fourth quarter of fiscal 2004. The decrease in revenue in the
first quarter of fiscal 2005 compared to the fourth quarter of fiscal 2004 is
due to a greater than expected impact from the results of the AiMI (AngioJet
Rheolytic Thrombectomy In Patients Undergoing Primary Angioplasty for Acute
Myocardial Infarction) post-marketing study.

As of October 31, 2004, the Company had a total of 1,371 domestic drive units in
the field, compared to 1,108 drive units at October 31, 2003, and 1,317 units as
of July 31, 2004. During the three month period ended October 31, 2004, the
Company's catheter sales increased approximately 11% to approximately 12,800
catheters versus approximately 11,500 catheters in the same prior year period.
The average catheter utilization rate per installed domestic drive unit was 9.3
in the first quarter of fiscal 2005 compared to 10.2 in the same prior year
period, and compared to a rate of 10.8 in the fourth quarter of fiscal 2004. The
Company sold 49 domestic drive units during the three months ended October 31,
2004, compared to 50 drive units in the same period in the prior year.



                                       13
<PAGE>


Foreign sales of the AngioJet System for the three months ended October 31, 2004
and 2003 were $348,000 and $292,000, respectively. The Company has recently
hired an outside consultant to expand product penetration in Germany. Limited
foreign sales are primarily due to cost constraints in overseas markets. In
European markets, where public sector funds are more crucial for hospital
operation, Euro devaluations generated higher public sector deficits, which, in
turn, forced reductions in hospital procedure and equipment budgets. In Japan,
the Company has been pursuing a regulatory strategy that utilizes the Company's
U.S. coronary clinical trial results and extensive body of published clinical
studies. Our plan has been to first obtain approval to market coronary AngioJet,
and then use favorable AiMI trail results to obtain approval for a reimbursement
amount higher than is currently paid for other, low-tech intra-vascular suction
and aspiration devices. This higher reimbursement is necessary for AngioJet to
develop a profitable market in Japan. However, given the AiMI results, we will
not be able to obtain approval for a higher reimbursement amount. Therefore, we
have decided to discontinue our efforts to obtain marketing and reimbursement
approval for AngioJet in Japan.

Cost of Medical Products

Cost of medical products increased $485,000 to $4,304,000 in the three month
period ended October 31, 2004 over the same period in the previous year. This
increase is primarily due to the growth in the U.S. AngioJet System product
sales.

For the three months ended October 31, 2004, gross profit improved by $1,415,000
to $13,198,000 compared to the same period in the previous year. This resulted
in a gross profit margin of 75% as a percentage of product sales. This compares
to gross margins as a percentage of product sales of 76% for the three months
ended October 31, 2003. The decrease in the gross margin rate for the three
months ending October 31, 2004 was primarily due to lower mix of XMI RX and XMI
catheters compared to the same periods in the previous year. The Company
believes that gross margins as a percent of sales will be in the mid seventies
for the remainder of fiscal 2005.

Selling, General and Administrative Expense

Selling, general and administrative expense increased $842,000 to $7,557,000 for
the three months ended October 31, 2004 compared to the same periods in the
previous year. The primary factors in the expense increase for the three months
ended October 31, 2004 were the $340,000 in additional expenses associated with
the growth in the sales force, increased medical insurance expense of $200,000,
an increase in sales meeting expense of $132,000, an increase in depreciation of
$108,000, and an increase in patent expense of $110,000. These expenses
increases were partially offset by a reduction in expenses associated with
marketing clinical trials of $178,000 and outside services of $117,000.

Research and Development Expense

Research and development expense increased $310,000 to $2,438,000, in the three
months ended October 31, 2004, when compared to the same period in the prior
year. The increase was largely due to the timing of expenses incurred for
various research and development projects including the new drive unit, an
associated project to combine the pump and catheter, and projects relating to
the improvement of the rapid exchange catheter and the distal occlusion
guidewires.


                                       14
<PAGE>

Interest Income

Interest income increased $126,000 in the three months ended October 31, 2004 to
$286,000, when compared to the same period in the prior year. The increase was
due to the recent interest rate increase and the increase in the amount of cash
available for investments. Excess cash is invested in an enhanced cash
management portfolio of marketable securities. The Company expects interest
income to increase in fiscal 2005 as compared to fiscal 2004 as cash is
generated from operations.

Provision For Income Taxes

The Company recorded a provision for income taxes of $1,315,000 and $1,156,000
or approximately 37.5% of income before income taxes for the three months ended
October 31, 2004 and 2003, respectively.

The Company became profitable in the third quarter of fiscal 2001 and has
maintained profitability since. In fiscal 2004 and 2003, the Company increased
its deferred tax asset by an additional $2,578,000 and $2,777,000, respectively.
These increases were related to tax benefits from disqualified stock options
that are recorded directly in the Consolidated Statement of Changes in
Shareholders' Equity. Management believes the remaining valuation allowance is
necessary as it is more likely than not that $690,000 of the deferred tax asset
will not be realizable due to the expiration of research and development tax
credits.

LIQUIDITY AND CAPITAL RESOURCES

The Company's cash, cash equivalents and marketable securities totaled
approximately $44,589,000 at October 31, 2004 versus $48,171,000 at July 31,
2004.

The $3,582,000 net decrease in cash, cash equivalents and marketable securities
in the most recent three-month period was primarily due to the repurchase of
common stock of $7,593,000 offset by net cash provided by operating activities
of $3,988,000. Net cash provided by operating activities was primarily due to
the net income of $2,193,000, depreciation of $562,000, a decrease in deferred
tax asset of $1,315,000, a decrease in accounts receivable of $1,347,000, a
decrease in prepaid expenses of $267,000 and an increase in accounts payables of
$318,000. This net cash provided by operating activities was partially offset by
an increase in inventory of $789,000 and a decrease in accrued and other
liabilities of $1,206,000. Depreciation includes company-owned drive units at
customer locations, as well as property and equipment. The decrease in the
deferred tax asset was due to the utilization of the net operating loss
carryovers to offset current taxes payable. The decrease in accounts receivable
was due to the reduced revenue in the first quarter of fiscal 2005 compared to
the fourth quarter of fiscal 2004. The decrease to prepaid expenses was due to
the expensing of prepaid insurance. The increase in accounts payable was due to
the timing of payments. Inventory increased to meet the expected increase in
demand of the AngioJet System. This demand was less than expected due to the
AiMI post-marketing study results. The decreases in accrued liabilities were due
to the timing of payments. This decrease included the payment of fiscal 2004
corporate incentives in September 2004. Cash used in investing activities was
$753,000 including the net purchase of marketable securities of $273,000 and the
purchase of $486,000 of property and equipment. Net cash used in financing
activities was $7,307,000, which resulted from the repurchase of 503,000 shares
of the Company's stock in open market transactions for $7,593,000, offset by the
cash received in connection with the exercise of stock options of $286,000.


                                       15
<PAGE>

The Company expects its cash on hand and funds from operations to be sufficient
to cover both short-term and long-term operating requirements of its current
AngioJet business and the repurchase of its common stock as authorized by the
Board of Directors.

OFF-BALANCE SHEET OBLIGATIONS

The Company does not have any material off-balance-sheet arrangements.

OUTLOOK

The Company expects overall revenue from the AngioJet System, primarily in the
United States, will be in the range of $66 million to $72 million in fiscal
2005. Gross margin as a percent of sales for fiscal 2005 is expected to be in
the mid seventies. The Company expects selling, general and administrative
expenses to continue increasing throughout the remainder of fiscal 2005 as a
result of the Company's recent expansion of its sales force to enhance market
penetration and to address customer concerns about the recent AiMI
post-marketing study results. Research and development expenditures are expected
to be in the range of 12% to 13% of revenue in fiscal 2005. The Company expects
net income per diluted share for the full year in the range of $0.40 to $0.54.
The Company anticipates second quarter revenue to be approximately $16 million
to $17 million and net income in the range of $0.09 to $0.11 per diluted share.


The Company expects that working capital investments in trade receivables and
inventory will increase towards the end of fiscal 2005 as projected revenue
increases are anticipated. The Company's primary source of cash is from its
product sales. Collections of trade receivables resulting from product sales are
reviewed monthly to ensure that customers are paying in a timely manner. The
Company's use of cash is for payment of normal trade accounts payable, capital
equipment purchases, employee compensation, stock repurchases and other normal
business expenses, all on terms that are customary in the industry. The Company
is current with its vendors.

FORWARD-LOOKING STATEMENTS

Certain statements made in Management's Discussion and Analysis of Financial
Condition and Results of Operations and elsewhere in this Form 10-Q are
"forward-looking statements" as defined in the Private Securities Litigation
Reform Act of 1995. These forward-looking statements relate to among other
things, financial projections such as anticipated gross margins, overall
revenue, expected expense levels, anticipated revenue increases and investment
levels.

Forward-looking statements in this 10-Q are based on current expectations and
assumptions and entail various risks and uncertainties that could cause actual
results to differ materially from those expressed in such forward-looking
statements. Certain factors that may affect whether these anticipated results
occur include clinical and market acceptance of our products; factors affecting
the health care industry such as restricting sales time at interventional labs;
consolidation, cost containment due to rising expenditures on drug-eluting
stents and trends toward managed care; changes in supplier requirements by group
purchasing organizations; unanticipated costs or other difficulties and
uncertainties associated with lengthy and costly new product development and
regulatory clearance processes; changes in governmental laws and regulations;
changes in reimbursement; the development of new competitive products such as
filterwires and compounds that may make our products obsolete; sudden
restrictions in supply of key materials; and deterioration of general market and
economic conditions, effectiveness of our sales and marketing efforts in
re-establishing coronary product usage, our ability to effectively manage new
product development timelines, our ability to generate suitable clinical
registry data to support growing use of the AngioJet in coronary applications,
physician customer response to trial data, our ability to increase sales of
disposable product and capital equipment in the face of new product
introductions from competitors; the ability to obtain additional regulatory
approvals on a timely basis; the ability to obtain regulatory clearance in new
foreign markets; our ability to retain and motivate skilled employees,
especially for sales positions; our ability to expand the sales force; deferred
tax asset valuation allowance; our outlook including future revenue, earnings,
earnings per share and expense levels; future equity financing needs; and our
ability to develop new products and enhance existing ones.


                                       16
<PAGE>


We also caution you not to place undue reliance on forward-looking statements,
which speak only as of the date made. Any or all forward-looking statements in
this report and in any other public statements we make may turn out to be
inaccurate or false. They can be affected by inaccurate assumptions we might
make or by known or unknown risks and uncertainties. Except as required by
federal securities laws, we undertake no obligation to update any
forward-looking statement. A discussion of these and other factors that could
impact our future results are set forth in the risk factors included in Exhibit
99.1 to the Company's Form 10-K for the year ended July 31, 2004 as filed with
the Securities and Exchange Commission.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company invests its excess cash in a professionally managed, institutional
fixed income portfolio of short duration. The market risk on a diversified
portfolio of relatively short duration is minimal, while enhancing returns above
money market levels.


The product sales for the Company's foreign subsidiary are in U.S. Dollars
("USD"). As of October 31, 2004, all of the Company's foreign bank accounts were
closed.

ITEM 4.    CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Under the supervision and with the participation of our management, including
our Chief Executive Officer and Chief Financial Officer, we evaluated the
effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of
1934 (the "Exchange Act")). Based upon that evaluation, the Chief Executive
Officer and Chief Financial Officer concluded that, as of the end of the period
covered by this report, our disclosure controls and procedures were adequately
designed to ensure that information required to be disclosed by us in the
reports we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in applicable rules
and forms.

                                       17
<PAGE>



CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

During the fiscal quarter ended October 31, 2004, there has been no change in
our internal control over financial reporting (as defined in Rule 13a-15(f)
under the Exchange Act) that has materially affected, or are is likely to
materially affect, our internal control over financial reporting.

PART II.   OTHER INFORMATION

ITEM 2     UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

                    COMPANY REPURCHASES OF EQUITY SECURITIES

<TABLE>
<CAPTION>
                                                                                         (d) MAXIMUM
                                                                                          NUMBER (OR
                                                                       (c) TOTAL NUMBER   APPROXIMATE
                                                                          OF SHARES     DOLLAR VALUE) OF
                                                                        PURCHASED AS     SHARES THAT MAY
                               (a) TOTAL                               PART OF PUBLICLY     YET BE
                               NUMBER OF            (b) AVERAGE           ANNOUNCED     PURCHASED UNDER
                                 SHARES             PRICE PAID PER         PLANS OR       THE PLANS OR
   PERIOD                      PURCHASED(1)             SHARE              PROGRAMS       PROGRAMS (2)
--------------------------------------------------------------------------------------------------------
<S>                             <C>                 <C>                   <C>             <C>
 August 1, 2004 to
 August 31, 2004                   175,000            $   18.04            175,000                  --
--------------------------------------------------------------------------------------------------------
September 1, 2004 to
September 30, 2004                 127,000            $   15.37            127,000                  --
--------------------------------------------------------------------------------------------------------
October 1, 2004 to
October 31, 2004                   201,000            $   12.36            201,000            $5,563,000
--------------------------------------------------------------------------------------------------------
     Total                         503,000            $   15.10            503,000            $5,563,000
--------------------------------------------------------------------------------------------------------
</TABLE>

(1)           The Company repurchased an aggregate of 175,000 shares of its
              common stock pursuant to the repurchase program that it publicly
              announced on March 24, 2004 providing the repurchase of shares
              having a value of up to $4,000,000 and 328,000 shares of its
              common stock pursuant to the repurchase program that it publicly
              announced on August 23, 2004 providing for the repurchase of
              shares having a value of up to $10,000,000. The shares were
              purchased in open market transactions. The March 2004 repurchase
              program has completed purchasing the authorized amount during the
              first quarter of fiscal 2005.

(2)           On August 23, 2004 the board of directors publicly announced that
              it approved the repurchase by the Company of shares of the
              Company's common stock having a value of up to $10 million in the
              aggregate pursuant to a repurchase program that will expire in
              July 2005. As of October 31, 2004 there was $5,563,000 remaining
              in this repurchase program.


                                       18
<PAGE>



ITEM 6.           EXHIBITS

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.

<TABLE>
<CAPTION>
Exhibit                                      Description
-------- ----------------------------------------------------------------------------------------------------------
<S>      <C>
  3.1    Articles of incorporation as amended and restated to date (incorporated by reference to Exhibit 3.1 of the
         Company's Annual Report on Form 10-K for the fiscal year ended July 31, 1994.)
  3.2    Bylaws as amended and restated to date (incorporated by reference to Exhibit 3.2 of the Company's Annual
         Report on Form 10-K for the fiscal year ended July 31, 1999.)
  4.1    Rights Agreement, dated December 12, 1996, between the
         Company and Norwest bank Minnesota, N.A., as rights agent
         (incorporated by reference to Exhibit 1 of the Company's
         8-A filed December 13, 1996.
  31.1   Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
  31.2   Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
  32.1   Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
  32.2   Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
</TABLE>


                                       19

<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 9, 2004            BY:      /s/ Robert G. Dutcher
                                       --------------------------------------
                                                Robert G. Dutcher
                                                Chairman, President and
                                                Chief Executive Officer

Date:  December 9, 2004            By:      /s/ Eapen Chacko
                                      ---------------------------------------
                                                Eapen Chacko
                                                Vice President of Finance and
                                                Chief Financial Officer

                                       20
<PAGE>



                                  EXHIBIT INDEX

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.


<TABLE>
<CAPTION>
Exhibit                                      Description
-------- ----------------------------------------------------------------------------------------------------------
<S>      <C>
  3.1    Articles of incorporation as amended and restated to date (incorporated by reference to Exhibit 3.1 of the
         Company's Annual Report on Form 10-K for the fiscal year ended July 31, 1994.)
  3.2    Bylaws as amended and restated to date (incorporated by reference to Exhibit 3.2 of the Company's Annual
         Report on Form 10-K for the fiscal year ended July 31, 1999.)
  4.1    Rights Agreement, dated December 12, 1996, between the
         Company and Norwest bank Minnesota, N.A., as rights agent
         (incorporated by reference to Exhibit 1 of the Company's
         8-A filed December 13, 1996.
  31.1   Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
  31.2   Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
  32.1   Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
  32.2   Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
</TABLE>



                                       21