_______________________________________________

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D. C. 20549

                                    FORM 10-Q


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

                 For the quarterly period ended January 31, 1997


     Commission File Number 0-944

                              POSSIS MEDICAL, INC.

                            9055 Evergreen Blvd. NW

                        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 March 12,
1997 was 12,126,890.


                        ________________________________
<PAGE>


                              POSSIS MEDICAL, INC.

                                      INDEX


 
 
                                                                          PAGE


PART I.   FINANCIAL INFORMATION

 ITEM 1.  Financial Statements

          Consolidated Balance Sheets, January 31, 1997
          and July 31, 1996.........................................        3

          Consolidated Statements of Operations for three
          months and six months ended January 31, 1997 and 1996.....        4

          Consolidated Statements of Cash Flows for
          six months ended January 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 4.  Submission of Matters to a Vote of Security-Holders.......        9

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

          SIGNATURES...................................................... 11
<PAGE>
<PAGE>
<TABLE>
                      POSSIS MEDICAL, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
<CAPTION> 
--ASSETS--                                                                           January 31, 1997          July 31, 1996
                                                                                        (Unaudited)               
<S>                                                                                    <C>                    <C>
CURRENT ASSETS:
     Cash and cash equivalents...............................................          $  5,844,776           $  7,688,507
     Marketable securities...................................................            12,928,118             15,838,543
     Receivables:
        Trade (less allowances for doubtful accounts of $60,000).............               354,138                389,983
        Other................................................................             1,906,536                218,154
     Inventories:
        Parts................................................................               867,651                755,081
        Work-in-progress.....................................................               882,362                898,721
        Finished goods.......................................................               697,931                466,985
     Prepaid expenses and other assets.......................................               290,447                207,156
                Total current assets                                                     23,771,959             26,463,130
PROPERTY:
     Leasehold improvements..................................................             1,154,032              1,090,935
     Machinery and equipment.................................................             3,015,951              2,782,287
     Assets-in-construction..................................................               124,279                 92,743
                Total property...............................................             4,294,262              3,965,965
        Less accumulated depreciation........................................            (1,695,966)            (1,482,233)
                Property - net...............................................             2,598,296              2,483,732
OTHER ASSETS:
     Goodwill................................................................               377,922                413,922
TOTAL ASSETS.................................................................            26,748,177             29,360,784

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
     Trade accounts payable..................................................               360,142                317,905
     Accrued salaries, wages, and commissions................................               642,404                725,988
     Current portion of long-term debt.......................................                35,658                 73,386
     Other liabilities.......................................................               790,897                566,313
                 Total current liabilities...................................             1,829,101              1,683,592

DEFERRED REVENUE.............................................................                 --                    41,768
LONG-TERM DEBT...............................................................                31,134                 38,569

SHAREHOLDERS' EQUITY:
     Common stock - authorized 100,000,000 and 20,000,000 shares,
        respectively, of $.40 par value each; issued and outstanding,
        12,124,721 shares and 12,052,644 shares, respectively................             4,849,888              4,821,058
     Additional paid-in capital..............................................            41,043,436             40,688,535
     Unearned compensation ..................................................               (39,181)              (102,690)
     Unrealized loss on investments..........................................               (41,195)              (145,276)
     Retained deficit........................................................           (20,925,006)           (17,664,772)
                 Total shareholders' equity..................................            24,887,942             27,596,855

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY...................................           $26,748,177            $29,360,784
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>

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

<CAPTION>
                                                                      For Three Months Ended                For Six Months Ended 
                                                                   Jan. 31, 1997     Jan. 31, 1996    Jan. 31, 1997   Jan. 31, 1996
<S>                                                                <C>               <C>              <C>             <C>
REVENUE:
     Medical product sales.................................        $   163,936       $    236,268     $   553,090     $    437,163
     Sales agreement and other.............................          1,750,000               --         1,750,000            --
     Total revenue.........................................          1,913,936            236,268       2,303,090          437,163
COST OF SALES AND OTHER EXPENSES:
     Cost of medical products..............................          1,098,887          1,205,583       2,375,139        2,254,969
     Selling, general and administrative...................            983,600            540,216       1,692,233        1,098,539
     Research and development..............................          1,058,140            646,636       2,135,936        1,524,388
     Interest         .....................................              1,501              3,617           3,762            8,606
         Total cost of sales and other expenses   .........          3,142,128          2,396,052       6,207,070        4,886,502

Operating loss.............................................         (1,228,192)        (2,159,784)     (3,903,980)      (4,449,339)

Interest income............................................            269,942            436,053         525,098          624,159
Gain on sale of investments................................               --                 --             7,109            --     

Loss from continuing operations - net......................           (958,250)        (1,723,731)     (3,371,773)      (3,825,180)

Income from discontinued operations-net....................               --              209,701         111,539          277,771
Net loss...................................................         $ (958,250)       $(1,514,030)    $(3,260,234)     $(3,547,409)

Weighted average number of common
     shares outstanding....................................         12,090,895         11,948,984      12,073,992       11,200,973

Earnings (loss) per common share:
     Continuing operations.................................        $      (.08)  $          (.15) $          (.28) $          (.35)
     Discontinued operations...............................                 --               .02              .01              .03
     Net loss..............................................        $      (.08)  $          (.13) $          (.27) $          (.32)
<FN> 
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
                      POSSIS MEDICAL, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

 <CAPTION>
                                                                                            For Six Months Ended         
                                                                                   Jan 31, 1997            Jan 31, 1996
<S>                                                                                <C>                     <C>
OPERATING ACTIVITIES:
Net loss .......................................................................   $  (3,260,234)          $ (3,547,409)
Adjustments to reconcile net loss to net
  cash used in operating activities:
     Gain on sale of marketable securities......................................          (7,109)                --
     (Gain) Loss on asset disposal..............................................          (1,526)                   808
     Depreciation...............................................................         241,454                195,101
Amortization of goodwill........................................................          36,000                 36,000
     Stock compensation.........................................................          41,309                 61,616
Increase in receivables.........................................................      (1,652,538)              (410,182)
Increase in inventories.........................................................        (357,543)              (646,192)
Increase in other assets........................................................         (83,291)               (19,744)
Increase in trade accounts payable..............................................          42,238                175,005
Increase in accrued and other liabilities.......................................          99,233                 42,685
Net cash used in operating activities...........................................      (4,902,007)            (4,112,312)

INVESTING ACTIVITIES:
Proceeds from sale of discontinued operations...................................           --                   589,441
Additions to plant and equipment................................................        (345,060)              (121,913)
Proceeds from the disposal of assets............................................          20,953                  1,892
Purchase of marketable securities...............................................      (1,990,025)           (10,960,564)
Proceeds from sale/maturity of marketable securities............................       5,011,641              1,275,000 
Net cash provided by (used in) investing activities  ...........................       2,697,509             (9,216,144)
FINANCING ACTIVITIES:
Repayment of long-term debt.....................................................         (45,164)               (40,541)
Proceeds from issuance of stock and exercise of options.........................         405,931             26,868,377             
Net cash provided by financing activities.......................................         360,767             26,827,836
INCREASE (DECREASE)  IN CASH AND CASH
 EQUIVALENTS ...................................................................      (1,843,731)            13,499,380
CASH AND CASH EQUIVALENTS
 AT BEGINNING OF PERIOD.........................................................       7,688,507              5,450,057  
CASH AND CASH EQUIVALENTS AT END OF
  PERIOD .......................................................................      $5,844,776            $18,949,437

SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid...................................................................    $      3,762        $         8,606
Inventory transferred to fixed assets...........................................          30,386                 19,983
<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 and six month  periods  ended  January 31,
1997 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
Three and Six Month Periods Ended January 31, 1997 and 1996

     Total  revenues for the three and six month  periods ended January 31, 1997
were $1,914,000 and $2,303,000, respectively. This was an increase of $1,678,000
and $1,866,000  from the same periods in the previous year.  Second quarter 1997
total revenues  included  $1,750,000  from the termination and settlement of the
Company's  Perma-Seal  Graft  Supply  and  Distribution  Agreement  (Agreement).
Product sales for the second  quarter  decreased  $72,000  while they  increased
$116,000 for the six month period  ending  January 31, 1997.  Non-U.S.  AngioJet
System  sales have not met Company  expectations  and Possis is taking  steps to
terminate its German and Greek  distributors.  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. AngioJet System disposable product sales in the U.S. during the
second  quarter  were  $90,000.  The AngioJet  System  drive unit is  considered
capital  equipment  by  customers  and  has a list  price  of  $80,000  to  U.S.
hospitals.  Management believes that the sales process for a drive unit takes at
least three to six months to complete. The Company offers a program for AngioJet
System evaluation lasting up to 90 days during which time the hospital purchases
disposable products.  Through a third party, the Company offers what it believes
to be attractive  drive unit financing plans such as prime interest rate capital
leases,  operating  leases,  and a plan to acquire  the drive unit  through  the
purchase  of a minimum  number of  disposable  products.  U.S.  AngioJet  System
disposable  products sales are growing and the Company expects to sell its first
U.S. AngioJet drive units in the third quarter ending April 30, 1997.

     There were no vascular  graft product sales in the second  quarter.  Baxter
Healthcare   Corporation,   the  Company's   Perma-Flow  Coronary  Bypass  Graft
distributor,  has  recently  developed  marketing  materials  targeted  for  its
non-U.S. sales effort and has increased its resource allocation to the marketing
of the Perma-Flow  Graft going forward.  Due to the termination of the Company's
Perma-Seal  Graft  distributor  in  January  1997,  there  were no sales of this
product during the second quarter. The Company intends to select another partner
to market this product and is in discussions with potential distributors. Possis
anticipates significant growth in product sales in the third and fourth quarters
of fiscal  1997 and  believes  most of this  growth will be a result of AngioJet
System sales in the U.S. marketplace.

     Cost of medical products decreased 9% and increased 5% in the three and six
month  periods,  respectively,  over  the same  periods  in the  previous  year.
Production  expenses  relating to the  vascular  grafts  decreased  $241,000 and
$523,000 in the three and six month periods, respectively, over the same periods
in the previous year. The decrease was due to the lack of sales demand. AngioJet
System production costs increased  $118,000 and $971,000,  respectively,  in the
three and six  months as  compared  to the  previous  year.  The  increases  are
primarily due to an inventory buildup in anticipation of growth in U.S. AngioJet
System product sales.
<PAGE>

     Selling,  general  and  administrative  expense in the three and six months
periods ending January 31, 1997 increased  $443,000 and $594,000,  respectively,
over the same periods in the previous year.  Such increases  resulted  primarily
from increased  sales and marketing  expense related to the  establishment  of a
direct U.S.  sales  organization  to sell the  AngioJet  System and  expenses of
marketing  the  product in the United  States.  The  Company  has  employed  six
regional sales  representatives  and expects to hire additional  salespeople and
support staff over the next three to six months.  Sales and  marketing  expenses
are expected to increase going forward.

     Research and development  expense in the three and six month periods ending
January 31, 1997, increased $412,000 and $612,000,  respectively,  over the same
periods in the previous  year. The increases are due primarily to vascular graft
product and production  process validation  expenses.  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
System  applications,  an endovascular  stent graft and other vascular graft and
AngioJet technology-based products.

     Interest  income has decreased in the most recent periods due to the use of
the Company's  cash reserves in funding the  Company's  operations.  The Company
believes  that interest  income will  continue to decrease,  along with its cash
balance, until operations become profitable.

     The Company recorded the final income relating to the sale of its Technical
Service division during the first quarter of fiscal 1997 and does not anticipate
further revenues from discontinued operations.

Liquidity and Capital Resources
     Cash, cash equivalents,  and marketable  securities totaled  $18,773,000 on
January 31, 1997 versus $23,527,000 at July 31, 1996.

     Net cash usage for the six months ending January 31, 1997 averaged $811,000
per month,  consistent with the Company's  expectations.  Most of the $4,902,000
cash  used in  operations  in the most  recent  six  month  period is due to the
$3,260,000  net  loss.  The  other  major  component  of the  cash  used  is the
$1,750,000  cash  settlement  from the Agreement  which was recorded as an Other
Receivable as of January 31, 1997. The $1,750,000  cash  settlement was received
in February 1997. The Company believes that product sales of the AngioJet System
in the U.S.  and  internationally  will  yield  meaningful  sales  growth  going
forward.  At the same time,  sales and marketing  expenditures  will continue to
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
two quarters of the current fiscal year. In addition,  the Company  expects that
working capital  investment in trade accounts  receivables and inventory will be
required to support growing product sales.

     The Company  believes  that its existing  cash reserves will be adequate to
complete the development and commercialization of its three current products.
<PAGE>

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 fillings.


 Part II.  OTHER INFORMATION

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

     (a) The 1996 annual meeting of  shareholders  of Possis  Medical,  Inc. was
held on December 11, 1996.

     (b) By the following vote,  management's nominees were elected as directors
of the  Corporation  for one year or until  their  successors  are  elected  and
qualified:

                                                FOR                 AGAINST
                   Donald C. Wegmiller       10,401,947             518,398
                   Joe A. Walters            10,397,327             541,018
                   Dean Belbas               10,421,810             498,535
                   Seymour J. Mansfield      10,439,743             480,602
                   Demetre M. Nicoloff, MD   10,396,388             523,957
                   Robert G. Dutcher         10,384,282             536,063
                   Ann M. Possis             10,390,261             530,084

     (c) By a vote of 10,814,212 in the affirmative,  66,021 in the negative and
40,112  abstaining,  the  shareholders  ratified the  appointment  of Deloitte &
Touche LLP as the Company's certified public accountants.

     By a vote of  8,903,093  in the  affirmative,  1,747,563  in the  negative,
83,459  abstaining and 186,230 being counted as broker  non-votes,  the proposed
amendment to the Corporation's  restated articles of incorporation was ratified.
The  amendment   increases  the  total  number  of  authorized   shares  of  the
Corporation's   capital  stock,   $.40  per  value  share,  from  20,000,000  to
100,000,000 shares and allows for creation of a new class of undesignated stock.

<PAGE>

ITEM 6. Exhibits and Reports on Form 8-K

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

     Exhibit    Form    Date Filed                      Description  
                    
      4.2       8-A     December 13, 1996    Rights agreement, dated December
                                             12, 1996, between the Company and 
                                             Norwest Bank Minnesota N.A., as 
                                             rights agent.

     10.25                                   Settlement agreement and mutual
                                             release relating to the termination
                                             of the Perma-Seal supply and
                                             distribution agreement with C.R.
                                             Bard, Inc.

     27                                      Financial data schedule.

 

     (b) Reports on Form 8-K

     During the quarter  ended  January 31, 1997,  the Company filed a report on
Form 8-K dated  December  6, 1996,  reporting  under Item 5  termination  of its
Perma-Seal  supply and distributor  agreement.  On the same Form 8-K,  reporting
under Item 5, the Company  announced that it had received 510(k)  clearance from
the FDA to market its  AngioJet  Rapid  Thrombectomy  System in the U.S. for A-V
access graft applications.

     The  Company  also  filed a report on Form 8-K  dated  December  12,  1996,
reporting  under Item 5 the  declaration  of a preferred  share  purchase  right
dividend in connection with the Company's adoption of a shareholder rights plan.
<PAGE>

SIGNATURES


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


                                   POSSIS MEDICAL, INC.


DATE:     March 12, 1997          BY:  /s/   Robert G. Dutcher
                                       ROBERT G. DUTCHER
                                       President and Chief Executive Officer



DATE:     March 12, 1997          BY:  /s/   Russel E. Carlson
                                       RUSSEL E. CARLSON
                                       Vice President of Finance and
                                       Chief Financial Officer