_______________________________________________

                              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, 1997


     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 9, 1997 was 12,193,100.

<PAGE>
                        ________________________________
 

                              POSSIS MEDICAL, INC.

                                      INDEX


 
                                                                        PAGE


PART I.    FINANCIAL INFORMATION

 ITEM 1.   Financial Statements

           Consolidated Balance Sheets, October 31, 1997
           and July 31, 1997.........................................     3

           Consolidated Statements of Operations for the three
           months ended October 31, 1997 and 1996....................     4

           Consolidated Statements of Cash Flows for the
           three months ended October 31, 1997 and 1996 .............     5

           Notes to Consolidated Financial Statements................     6
 
 ITEM 2.   Management's Discussion and Analysis of Financial
           Condition and Results of Operations.......................     7-9



PART II.   OTHER INFORMATION


 ITEM 6.   Exhibits and Reports on Form 8-K..........................    10
 
           SIGNATURES................................................    11

<PAGE>
<TABLE>

                      POSSIS MEDICAL, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
 
<CAPTION>        
                                                                                  October 31, 1997         July 31, 1997
ASSETS                                                                               (Unaudited)          
<S>                                                                                 <C>                     <C>          
CURRENT ASSETS:
    Cash and cash equivalents..........................................             $  2,807,378            $  3,849,194
Marketable securities .................................................                8,973,122              10,964,170
    Receivables:
       Trade (less allowance for doubtful accounts of $95,000 and
       $80,000, respectively)..........................................                1,037,540                 878,893
       Other  .........................................................                  157,621                 120,558
    Inventories:
       Parts...........................................................                1,189,849               1,242,580
       Work-in-process.................................................                1,082,479                 940,918
       Finished goods..................................................                1,417,137               1,191,870
    Prepaid expenses and other assets..................................                  217,148                 264,117
       Total current assets............................................               16,882,274              19,452,300
PROPERTY:
    Leasehold improvements.............................................                1,176,608               1,166,306
    Machinery and equipment............................................                3,411,212               3,317,391
    Assets-in-construction.............................................                  119,024                  51,753
       Total property                                                                  4,706,844               4,535,450
    Less accumulated depreciation......................................                2,028,314               1,906,500
       Property - net..................................................                2,678,530               2,628,950
OTHER ASSETS:
    Goodwill ..........................................................                  323,922                 341,922
TOTAL ASSETS...........................................................              $19,884,726             $22,423,172
 
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
    Trade accounts payable.............................................             $    712,368            $    648,502
    Accrued salaries, wages, and commissions...........................                  833,732                 762,587
    Current portion of long-term debt .................................                   21,561                  28,356
    Clinical trials accrual............................................                  746,258                 879,166
    Other liabilities..................................................                  417,677                 294,002
       Total current liabilities.......................................                2,731,596               2,612,613
 
OTHER LIABILITIES .....................................................                  189,000                    --
LONG-TERM DEBT ........................................................                  180,313                  10,213 

SHAREHOLDERS' EQUITY:
    Common stock-authorized, 100,000,000 shares of $ .40 par
        value each; issued and outstanding,  12,193,100 and
        12,121,312 shares, respectively................................                4,877,240               4,848,525
    Additional paid-in capital.........................................               41,670,494              41,118,611
    Unearned compensation..............................................                 (786,400)                   --
    Unrealized loss on investments.....................................                     --                    (5,836)
    Retained deficit...................................................              (28,977,517)            (26,160,954)
    Total shareholders' equity.........................................               16,783,817              19,800,346
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.............................              $19,884,726             $22,423,172
<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, 1997 AND 1996
                                   (UNAUDITED)
<CAPTION>
                                                                                                           
                                                                                                                                  
                                                                                       1997                 1996 
<S>                                                                                 <C>                 <C>
REVENUES: 
  Medical product sales..................................................           $1,367,983          $   389,154
  Sales agreement revenue................................................                 --                   --
    Total revenues.......................................................            1,367,983              389,154
COST OF SALES AND OTHER EXPENSES:
  Cost of medical products...............................................            1,478,039            1,269,021
  Selling, general and administrative....................................            1,515,376              715,865
  Research and development...............................................            1,371,463            1,077,797
  Interest...............................................................                  548                2,261
    Total cost of sales and other expenses...............................            4,365,426            3,064,944

Operating loss...........................................................           (2,997,443)          (2,675,790)
Interest income..........................................................              180,880              255,156
Gain on sale of investments..............................................                 --                  7,109
Loss from continuing operations - net....................................           (2,816,563)          (2,413,525)
Income from discontinued operations - net................................                 --                111,539
Net loss.................................................................          $(2,816,563)         $(2,301,986)

Weighted average number of common shares outstanding.....................           12,149,544           12,057,089
Earnings (loss) per common share:
  Continuing operations..................................................               $(.23)                $(.20)
  Discontinued operations ...............................................                  --                   .01
  Net loss...............................................................               $(.23)                $(.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, 1997 AND 1996
                                   (UNAUDITED)
<CAPTION>
                                                                                    1997             1996
<S>                                                                              <C>              <C>
OPERATING ACTIVITIES:
Net loss ..................................................................      $(2,816,563)     $(2,301,986)
Adjustments to reconcile net loss to net
  cash used in operating activities:
     Gain on sale of marketable securities.................................             --             (7,109)
Gain on asset disposal.....................................................           (2,100)            --
Depreciation...............................................................          122,714          115,103
Amortization of goodwill...................................................           18,000           18,000
Stock compensation.........................................................           22,200           30,831
Increase in receivables....................................................         (195,710)         (14,314)
     Increase in inventories...............................................         (314,097)        (176,636)
     Decrease in other assets..............................................           46,969            2,883
Increase (decrease) in trade accounts payable..............................           63,866         (118,385)
Increase (decrease) in accrued and other liabilities.......................          (32,090)          33,401
Net cash used in operating activities......................................       (3,086,811)      (2,418,212)

INVESTING ACTIVITIES:
Additions to plant and equipment...........................................         (172,294)        (204,960)
Proceeds from the disposal of assets.......................................            2,100             --
Purchase of marketable securities..........................................           (3,116)      (1,997,667)
Proceeds from sale/maturity of marketable securities.......................        2,000,000        4,011,641
Net cash provided by investing activities..................................        1,826,690        1,809,014

FINANCING ACTIVITIES:
Proceeds from notes payables...............................................          175,000             --
Repayment of long-term debt................................................          (11,695)         (22,741)
Proceeds from issuance of stock and exercise of options....................           55,000           54,819
Net cash provided by financing activities..................................          218,305           32,078

DECREASE IN CASH AND CASH
  EQUIVALENTS..............................................................       (1,041,816)        (577,120)
CASH AND CASH EQUIVALENTS AT BEGINNING
   OF QUARTER..............................................................        3,849,194        7,688,507
CASH AND CASH EQUIVALENTS AT END OF
  QUARTER..................................................................       $2,807,378       $7,111,387

SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid..............................................................       $      548       $    2,211
Inventory transferred to fixed assets......................................            --               9,730
Issuance of restricted stock...............................................          808,600             --
Accrued payroll taxes related to restricted stock..........................          283,000             --
<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 1997 Annual Report.


2.    INTERIM FINANCIAL STATEMENTS

     Operating results for the three month period ended October 31, 1997 are not
necessarily  indicative  of the results that may be expected for the year ending
July 31, 1998.


3.    RECENTLY ISSUED ACCOUNTING STANDARD

     In February 1997 the Financial  Accounting Standards Board issued Statement
of  Financial  Accounting  Standards  No.  128,  Earnings  per  Share,  which is
effective for interim and annual  reporting  periods ending after December 1997.
SFAS No. 128 supersedes Accounting Principles Board Opinion No. 15, Earnings per
Share,  and  replaces  the  presentation  of primary  earnings  per share with a
presentation of basic earnings per share. It also requires dual presentation for
all entities  with complex  capital  structures  and provides  guidance on other
computational  changes.  The  implementation  of SFAS No. 128 is not expected to
have a material impact on earnings per share.


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, 1997 and 1996.

     Total  revenue for the three  months  ended  October 31, 1997 and 1996 were
$1,368,000 and $389,000,  respectively.  The  significant  revenue growth in the
current  quarter  resulted  from  AngioJet  Rapid  Thrombectomy  System sales of
$1,367,000,  compared to  $241,000  in the year  earlier.  The  AngioJet  System
received U.S. FDA marketing  clearance for blood clot removal in dialysis grafts
in December 1996. The AngioJet System drive unit is a piece of capital equipment
and currently lists for $80,000 to U.S. hospitals.  The purchasing cycle for the
AngioJet  System drive unit, the Company  believes,  will average nine to twelve
months, depending on the customer's budget cycle. The Company offers an AngioJet
System  evaluation  program  during which,  in return for free  placement of the
drive unit, the hospital purchases a minimum number of disposable  catheters and
pumps.  If the hospital  requires  additional  time to complete the purchase and
chooses to keep the drive unit,  monthly rent or a charge for each  procedure is
made with a portion of rent or per procedure  payment applied to the final drive
unit purchase  price.  Drive unit rental  programs are available and,  through a
third party,  the Company offers various drive unit  financing  plans  including
prime interest rate capital leases,  operating leases, and a plan to acquire the
drive unit  through the  purchase of a minimum  number of  marked-up  disposable
products.  AngioJet  System drive unit and  disposable  sales in the U.S. in the
most  recent  quarter were $1,289,000.  In  December  1997 the Company  received
conditional  approval from the FDA to commence a clinical  study of its AngioJet
Rapid Thrombectomy  System for use in the treatment of stroke caused by blockage
of the carotid  arteries,  the main vessels  supplying  blood to the brain.  The
Company  believes  that the  treatment  of  stroke  is a  significant  marketing
opportunity  for the AngioJet  System.  The Company  expects that U.S.  AngioJet
System  sales will grow  primarily  through the  addition of sales  people,  the
completion  of  clinical  trials  designed  to yield  additional  label-approved
product uses, the  publication of clinical  performance  and cost  effectiveness
data and the introduction of additional catheter designs.

     AngioJet  System sales  outside the United  States have been below  Company
expectations.  Capital  equipment,  such as the  Company's  drive unit,  is very
difficult to sell in the  price-sensitive  European market. The Company has been
without  product  distribution  in Germany since  February 1997 and is currently
interviewing  potential  AngioJet System independent  distributors.  Actions the
Company is taking to improve AngioJet System sales in Europe include  conducting
European cost effectiveness  studies and developing European physician advocates
for the AngioJet System.  In Japan, the coronary  AngioJet System clinical study
is nearing  completion  and a  regulatory  filing is  planned  for 1998 with the
Japanese Ministry of Health. The Company believes that the U.S. market will lead
the worldwide growth of AngioJet System sales revenue.

<PAGE>

     Vascular  graft sales were $1,000 and  $148,000  for the three months ended
October 31,1997 and 1996, respectively.  Perma-Flow Coronary Bypass Graft sales
were  $1,000 and  $24,000,  respectively.  In  October  1997  Baxter  Healthcare
Corporation,  the Company's  Perma-Flow  Graft worldwide  distribution  partner,
launched the product within the European market following the receipt of CE Mark
regulatory  approval.  In  November  1997 the Company  submitted a  Humanitarian
Device  Exemption  (HDE)  application  to the FDA  requesting  approval for U.S.
marketing of the Perma-Flow  Coronary  Bypass Graft.  This exemption would allow
the Company to market the  product in the U.S.  for a limited  indication  as it
completes the U.S. clinical study and PMA registration designed to provide broad
marketing  approval.  The  Company  expects a  decision  from the FDA on the HDE
application  in the first half of 1998.  The sales for the quarter ended October
31, 1996  included  $124,000 to the  Company's  worldwide  Perma-Seal  Dialysis
Access Graft distributor.  This distributor  agreement was terminated in January
1997.  The  Company is seeking  another  distributor  of this  product and is in
discussion with several potential companies.  There were no sales of the 
Perma-Seal Graft during the three months ended October 31, 1997.

     The Company is planning for  continued  growth in product sales for the
remainder of fiscal 1998 and beyond and believes that for the next several years
most  of  this  growth  will  come  from  AngioJet  System  sales  in  the  U.S.
marketplace.

     Cost of medical  products in the current period  increased 16% or $209,000
compared to the same period a year ago.  The  increase is  primarily  due to the
significant  growth in the AngioJet System product sales.  The Company  believes
that  manufacturing  costs  per unit will be  reduced  and  gross  margins  will
increase as product sales and related  production volumes grow and as identified
product and process improvements are made.

     Selling,  general and  administrative  expenses  for the three months ended
October 31, 1997 increased by $800,000  compared to the same period a year ago.
The primary  factor is increased  sales and  marketing  expense  related to the
establishment  of a direct U.S.  sales  organization  to sell the AngioJet Rapid
Thrombectomy  System and expenses of marketing the product in the United States.
The Company plans to continue to grow its field sales organization during fiscal
1998, and sales and marketing expenditures are expected to grow significantly in
the current year and beyond.

    Research  and  development  expenses  increased  27%  or  $293,000  in  the
mostrecent  three-month  period,  compared  to the same  period a year ago.  The
increase is primarily due to increased U.S.  clinical study expenses  associated
with  the use of the  AngioJet  System  in  coronary  vessels  and  the  cost of
developing  additional  AngioJet System catheter  designs.  The Company believes
that research and development expenses will continue to increase as it completes
the development of its current products,  invests in development of new AngioJet
Rapid  Thrombectomy  System  applications,  new vascular grafts and new AngioJet
technology-based products.

     Interest  income has decreased in the most recent period due to the use of
the Company's cash reserves to fund the Company's operations.

     The Company recorded the final income relating to the sale of its Technical
Service division during the first quarter of fiscal 1997.

<PAGE>

Liquidity and Capital Resources

     Cash, cash  equivalents and marketable  securities  totaled  $11,781,000 at
October 31, 1997 versus $14,813,000 at July 31, 1997.

     Net cash  usage  for the three  months  ended  October  31,  1997  averaged
$1,014,000 per month,  consistent with the Company's  expectations.  Most of the
$3,087,000  cash used in operations in the most recent three month period is due
to the  $2,817,000  first  quarter net loss.  The Company  believes that product
sales of the AngioJet System  primarily in the U.S. will yield  meaningful sales
growth going forward. Concurrently, sales and marketing expenditures are planned
to increase with the sales growth.  Research and  development  expenditures  are
expected  to grow as well.  The  Company  expects  to report a loss for the last
three quarters of the current fiscal year. In addition, the Company expects that
increasing  working  capital   investments  in  trade  accounts  receivable  and
inventory will be required to support growing product sales.

     The  Company is  currently  evaluating  its  capital  needs and the options
available for raising cash. Additional capital will be sought in fiscal 1998.

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,  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,  the  Company's  ability  to
establish  product  distribution  channels,  changes in  manufacturing  methods,
market  acceptance  of the  AngioJet  System,  changes  in the levels of capital
expenditures  by hospitals,  the levels of sales of the Company's  products that
can be achieved  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
                             July 31, 1994          as amended and restated
                                                    to date.

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

      27                                            Financial Data Schedule







     (b)   Reports on Form 8-K

     Possis Medical,  Inc. filed no reports on Form 8-K during the quarter ended
October 31, 1997.

<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 11, 1997          BY: ____/s/____________________________
                                      ROBERT G. DUTCHER
                                      President and Chief Executive Officer



DATE:  December 11, 1997          BY: ____/s/____________________________
                                      RUSSEL E. CARLSON
                                      Vice President of Finance and
                                      Chief Financial Officer