_______________________________________________

                       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, 1999


     Commission File Number 001-12567

                              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 February 24,
1999 was 13,829,714.

                        ________________________________

<PAGE>

                              POSSIS MEDICAL, INC.

                                      INDEX


                                                                          PAGE

 PART I.      FINANCIAL INFORMATION

    ITEM 1.   Financial Statements

              Consolidated Balance Sheets, January 31, 1999
              and July 31, 1998.........................................    3

              Consolidated Statements of Operations for three
              months and six months ended January 31, 1999 and 1998.....    4

              Consolidated Statements of Cash Flows for
              six months ended January 31, 1999 and 1998................    5

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

    ITEM 2.   Management's Discussion and Analysis of Financial
              Condition and Results of Operations.......................    7

    ITEM 3.   Quantitative and Qualitative Disclosure on Market Risks...   12


 PART II.     OTHER INFORMATION

    ITEM 4.   Submission of Matters to a Vote of Security-Holders.......   13

    ITEM 6.   Exhibits and Reports on Form 8-K..........................   14

              SIGNATURES................................................   15

<PAGE>

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

<TABLE>
<CAPTION>

                                              January 31, 1999   July 31, 1998
<C>                                              <S>              <S>                 
ASSETS
CURRENT ASSETS:                                                                                
 Cash and cash equivalents....................   $ 8,320,904      $13,841,793
 Receivables:
   Trade (less allowances for doubtful accounts 
      and returns:
   $217,000 and $67,000, respectively)........     1,773,008        1,144,472
   Other......................................          --              3,091
 Inventories:
   Parts......................................     1,028,870        1,085,236
   Work-in-progress...........................     1,593,942        1,740,834
   Finished goods.............................     1,765,343        1,913,084
 Prepaid expenses and other assets............       204,766          313,158
     Total current assets.....................    14,686,833       20,041,668
PROPERTY:
 Leasehold improvements.......................     1,210,984        1,210,984
 Machinery and equipment......................     3,795,744        3,720,772
 Assets-in-construction.......................       281,596          113,094
    Total property............................     5,288,324        5,044,850
  Less accumulated depreciation...............    (2,613,966)      (2,343,691)
    Property - net............................     2,674,358        2,701,159
OTHER ASSETS:
  Deferred debt issue costs...................       673,446          884,105
  Goodwill....................................       233,922          269,922
TOTAL ASSETS..................................   $18,268,559      $23,896,854

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
  Trade accounts payable......................   $   313,314      $ 1,245,552
  Accrued salaries, wages, and commissions....       938,497        1,060,687
  Current portion of long-term debt...........        94,156           97,713
  Clinical trials accrual.....................       525,020          335,067
  Accrued interest............................       277,566           34,176
  Litigation settlement.......................          --            200,000
  Other liabilities...........................       653,183          470,448
    Total current liabilities.................     2,801,736        3,443,643

LONG-TERM DEBT................................     9,361,581       11,492,661
OTHER LIABILITIES.............................        97,100          216,200

SHAREHOLDERS' EQUITY:
  Common stock - authorized, 100,000,000 shares 
    of $.40 par value each; issued and outstanding, 
    12,749,351 shares and 12,203,345 shares, 
    respectively..............................     5,099,740        4,887,449
  Additional paid-in capital..................    45,652,745       42,476,257
  Unearned compensation ......................      (228,741)        (489,060)
  Retained deficit............................   (44,515,602)     (38,130,296)
       Total shareholders' equity.............     6,008,142        8,744,350
 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY....   $18,268,559      $23,896,854

<FN>
See notes to consolidated financial statements.

</FN>
</TABLE>

<PAGE>


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

<TABLE>
<CAPTION>
                                                       For Three Months Ended            For Six Months Ended          
                                                     Jan. 31, 1999  Jan. 31, 1998    Jan. 31, 1999  Jan. 31, 1998
<S>                                                    <C>            <C>              <C>            <C>
Product sales........................................  $2,762,908     $1,214,669       $4,622,468     $2,582,652

Cost of sales and other expenses:
     Cost of medical products........................   1,887,295      1,536,613        3,421,554      3,014,652
     Selling, general and administrative.............   2,436,784      1,735,356        4,491,624      3,250,731
     Research and development........................   1,534,030      1,086,216        3,020,667      2,457,680
     Interest........................................     173,969          4,259          351,025          4,807
         Total cost of sales and other expenses......   6,032,078      4,362,444       11,284,870      8,727,870

Operating loss.......................................  (3,269,170)    (3,147,775)      (6,662,402)    (6,145,218)
 
Interest income......................................     116,034        137,963          277,096        318,844
Gain on sale of investments..........................        --           14,163            --            14,163
 
Net loss............................................. $(3,153,136)   $(2,995,649)     $(6,385,306)   $(5,812,211)

Weighted average number of common
     shares outstanding..............................  12,431,165     12,196,301       12,341,854     12,172,922

Basic and dilutive net loss per common share.........       $(.25)         $(.25)           $(.52)         $(.48)
 
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>

<PAGE>

                      POSSIS MEDICAL, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
               FOR THE SIX MONTHS ENDED JANUARY 31, 1999 AND 1998
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                    1999          1998       
<S>                                                            <C>              <C>
OPERATING ACTIVITIES:
Net loss ...................................................   $ (6,385,306)    $(5,812,211)
Adjustments to reconcile net loss to net
  cash used in operating activities:
Gain on sale of marketable securities.......................           --           (14,163)
(Gain) loss on asset disposal...............................         14,350          (2,100)
Depreciation................................................        503,432         298,736
Amortization ...............................................        158,736          36,000
Stock compensation..........................................        189,631         165,157
(Increase) decrease in receivables..........................       (625,445)        134,027
(Increase) decrease in inventories..........................        172,670        (642,225)
Decrease in other assets....................................        108,392          40,536
Decrease in trade accounts payable..........................       (932,238)       (112,309)
Increase (decrease) in accrued and other liabilities........        491,215        (240,304)
Net cash used in operating activities.......................     (6,304,563)     (6,148,856)
 
INVESTING ACTIVITIES:
Additions to plant and equipment............................       (290,352)       (306,713)
Proceeds from the disposal of assets........................          2,700           2,100
Purchase of marketable securities...........................           --            (7,162)
Proceeds from sale/maturity of marketable securities........           --         4,997,188
Net cash provided by investing activities  .................       (287,652)      4,685,413

FINANCING ACTIVITIES:
Proceeds from notes payable.................................         21,074         175,000
Repayment of long-term debt.................................         (9,444)        (18,778)
Proceeds from issuance of stock and exercise of options.....      1,083,951         138,095
Deferred debt issue costs...................................        (24,255)           --   
Net cash provided by financing activities...................      1,071,326         294,317

DECREASE IN CASH AND CASH EQUIVALENTS ......................     (5,520,889)     (1,169,126)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............     13,841,793       3,849,194 
CASH AND CASH EQUIVALENTS AT END OF PERIOD..................    $ 8,320,904      $2,680,068

SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid...............................................    $       484      $    4,807
Conversion of subordinated debentures and accrued
   interest into common stock...............................      2,358,658            --
Deferred debt issue costs and original issue discount netted
  against conversion of subordinate debentures..............        265,911            --
Issuance of stock to settle litigation......................        225,000            --
Cancellation of restricted stock............................         79,063            --
Accrued payroll taxes related to restricted stock...........        (57,769)        286,002
Inventory transferred to fixed assets.......................         10,804           9,588
Issuance of restricted stock................................          8,375         816,300

<FN>
See notes to consolidated financial statements.

</FN>
</TABLE>

<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 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 1998 Annual Report.
 

2.    INTERIM FINANCIAL STATEMENTS

     Operating  results for the three and six month  periods  ended  January 31,
1999 are not necessarily  indicative of the results that may be expected for the
year ending July 31, 1999.


3.    RECENTLY ISSUED ACCOUNTING STANDARD

     Earnings per Share:

     Effective  August 1, 1998,  the  Company  adopted  Statement  of  Financial
Accounting Standards No. 130 "Reporting  Comprehensive Income" (SFAS 130), which
establishes  standards  for  the  reporting  of  comprehensive  income  and  its
components.  Comprehensive  income is defined as the change in equity during the
period from  transactions  and other  events and  circumstances  from  non-owner
sources.  Implementation  of SFAS 130 did not have an  effect  on the  Company's
consolidated  financial  statements because  comprehensive  income (loss) is the
same as the Company's net income (loss).


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, 1999 and 1998

     Total  product  sales for the three and six month periods ended January 31,
1999 were  $2,763,000  and  $4,622,000,  respectively.  This was an  increase of
$1,548,000  and  $2,039,000 as compared to the previous  year.  The  significant
revenue growth  resulted from growing  physician  acceptance of the  AngioJet(R)
Rheolytic(TM)   Thrombectomy   System  and  was  impacted  by  medical   meeting
presentations of the favorable results of the Company's randomized U.S. Food and
Drug Administration ("FDA") clinical trial, VeGAS 2.

Revenue - AngioJet Systems

     In December  1996 the  Company  received  FDA  clearance  to commence  U.S.
marketing of the AngioJet Rheolytic  Thrombectomy  System,  with labeling claims
for removal of blood clots from grafts used by patients on kidney dialysis. When
the Company  introduced  the  AngioJet  System to the U.S.  market in 1996,  the
AngioJet System drive unit, considered capital equipment,  was listed at $80,000
to hospitals.  Despite  employing a variety of flexible  drive unit  acquisition
programs including outright purchase,  rental, lease and fee-per-procedure,  the
Company  only sold three and seven  drive  units  during the first three and six
month periods of fiscal 1998. In April 1998, the AngioJet System drive unit list
price was  reduced to $25,000.  A lower  drive unit sales price was  intended to
improve the competitive position of the AngioJet System,  facilitate  evaluation
of the technology and speed sale closure on units  currently  under  evaluation.
The  Company  sold 39 and 55  AngioJet  drive  units in the  three and six month
periods ending January 31, 1999. In the U.S.,  where most of the AngioJet System
sales are  occurring,  there  were 207 drive  units  placed in  hospitals  as of
January 31, 1999 compared to 124 a year earlier.  During the three and six month
periods ended January 31, 1999, the Company sold  approximately  2,100 and 3,600
catheters  and pump sets  versus  approximately  800 and 1,700 in the same prior
year-ago periods.

     The  Company's  strategy  to grow  AngioJet  System  revenue  is to  obtain
additional FDA marketing approvals for existing products,  to develop and market
AngioJet  products that improve on the  performance  and are less costly to make
than current  versions  and to develop and market new  catheters to remove clots
from large  diameter  blood  vessels and the arteries in the central  brain.  In
September  1998,  Possis  submitted  to the FDA a  pre-market  approval  ("PMA")
application seeking approval to market its AngioJet System to remove blood clots
from  coronary  arteries and bypass  grafts.  The FDA targets  completion of its
review and a response to the Company  within 180 days.  However,  recent  actual
industry-wide average elapsed time from sponsor submission to FDA approval is 12
months. In November 1998, the FDA granted the Company expedited review status to
its pending PMA. In addition,  the FDA  indicated  that no Panel meeting will be
necessary to evaluate device safety and effectiveness. The coronary PMA presents
the  results  of a  349  patient  randomized  trial  comparing  AngioJet  System
treatment to intracoronary  infusion of the blood clot-dissolving drug urokinase
for patients with  demonstrated  clot in native coronary  arteries and saphenous
vein bypass grafts.  The randomized  trial showed that AngioJet System treatment
has  significantly  better  outcomes than the urokinase  treatment for procedure
success and device success. AngioJet System treatment also had lower in-hospital
major cardiac complications, including fewer bleeding complications and vascular
complications.  Also, the preliminary results of a cost-effectiveness  trial run
concurrently with the coronary AngioJet trial shows that the AngioJet  treatment
costs are on average $3,000 - $3,500 lower than those associated with the use of
urokinase.  The Company  believes  that the treatment of blood clots in coronary
vessels and bypass grafts is a $550 million worldwide marketing  opportunity for
the AngioJet System. In July 1997, the Company submitted a 510(k) application to
the FDA seeking  clearance to expand  label  claims for its  AngioJet  System to
include use in  peripheral  arteries  and bypass  grafts in the U.S. The Company
expects an FDA decision on the  application  in calendar 1999. In December 1997,
the  Company  received  approval to  commence a clinical  study of the  AngioJet
System for use in the  treatment  of stroke  caused by  blockage  of the carotid
arteries,  the main vessels  supplying  blood to the brain. In January 1999, the
first patient was enrolled in the carotid  stroke  clinical  study.  The Company
believes that the treatment of neurovascular  stroke is a $500 million worldwide
marketing  opportunity for the AngioJet  System.  A new catheter in development,
the NV150, is planned to begin a neurovascular  stroke FDA clinical trial in the
second half of calendar 1999.

<PAGE>

     Foreign  sales of the AngioJet  System for the three and six month  periods
ended January 31, 1999 were $165,000 and $194,000,  respectively.  This compared
to foreign  sales of the  AngioJet  System of $76,000 and  $105,000 for the same
periods the previous
year.

Revenue - Vascular Grafts

     Vascular graft sales were $69,000 for the three and six month periods ended
January 31, 1999.  This compared to $52,000 for the three and six month periods,
respectively,  ended January 31, 1998.  All vascular graft sales for fiscal 1999
were Perma-Seal(r)  Dialysis Access Grafts. In December 1998 the Company entered
into an  exclusive  worldwide  Supply and  Distribution  Agreement  with Horizon
Medical  Products,  Inc. for its  Perma-Seal  Dialysis  Access Graft.  The first
shipment under this agreement was made in January 1999. All fiscal 1998 vascular
graft sales were Perma-Flow(r)  Coronary Bypass Grafts. The Company is seeking a
new distributor for the Perma-Flow  Graft.  The current  distribution  agreement
expires in March 1999.

     In February  1999,  the Company  received  510(k)  approval from the FDA to
market  three  expanded  polytetrafluoroethylene  ("ePTFE")  synthetic  vascular
grafts.  ePTFE  synthetic  grafts are the most commonly used synthetic  graft in
peripheral vessel bypass procedures. This product will be marketed and sold by a
marketing partner or independent distributor.

     A goal of the  Company  is to  maximize  the  value of these  products  and
technologies  for  its  shareholders.  Its  strategy  is  to  seek  partners  to
distribute the products and possibly fund the graft product development program.
In  addition,  the  Company  will  continue to pursue the  possible  sale of the
products  and  technologies.  While the Company  works toward  completing  these
activities,  it has placed  further  development  activities on hold,  including
enrollment into the Perma-Flow clinical trial (PerFCT).

     The  Company is  planning  for  continued  growth in product  sales for the
remainder of fiscal 1999 and beyond and  believes  that most of this growth will
come from AngioJet System sales in the U.S. marketplace.

<PAGE>

Cost of Medical Products

     Cost of medical  products  increased  23% and 13% in the 1999 three and six
month  periods,  respectively,  over the same periods in the previous  year. The
increase is  primarily  due to the  significant  growth in the  AngioJet  System
product  sales.  Medical  product  gross  margins  improved  by  $1,198,000  and
$1,633,000, respectively, for the three and six month periods as compared to the
same  periods  a year  ago.  This  resulted  in  gross  margins  of 32% and 26%,
respectively,  for the three and six month periods ending January 31, 1999. This
compares to negative  gross margins for the three and six month  periods  ending
January 31, 1998. The Company  believes that  manufacturing  costs per unit will
decline and gross  margins will continue to improve as product sales and related
production volumes continue to grow and fixed manufacturing  expenses are spread
over a larger volume of production.

Selling, General and Administrative Expense

     Selling,  general and administrative  expenses, in the three and six months
ended  January  31,  1999,  increased  $701,000  and  $1,241,000,  respectively,
compared to the same periods a year ago. The primary factors are increased sales
and  marketing   expenses  related  to  the  establishment  of  a  direct  sales
organization  to sell the AngioJet  System and expenses of marketing the product
in the United States. Based upon early physician interest, the Company has grown
the U.S.  AngioJet System sales and marketing  organization from 25 employees in
January  1998 to 35  employees  in January  1999.  Concurrent  with the AngioJet
System  receiving  FDA approval for coronary  use, the Company  plans to further
increase the direct U.S.  sales force to 43 employees by July 1999,  to meet the
expected  demand  for the  Company's  AngioJet  System.  The  Company  plans  on
increasing  its sales and  marketing  expenditures  through the remainder of the
current year.

Research and Development Expense

     Research and development expense, in the three and six months ended January
31, 1999,  increased  41% and 23%,  respectively,  over the previous  year.  The
increase  is  primarily  due to  increased  expenses in the  development  of new
AngioJet System products.  Vascular graft research and development expenses were
at approximately the same level of expense as compared to the previous year. The
Company   believes   that  research  and   development   expenses  for  AngioJet
Thrombectomy  System  applications  will continue at  approximately  the current
level as it  completes  the  development  of its  current  products,  invests in
development of new AngioJet System  thrombectomy  applications  and new AngioJet
technology-based products.  Vascular graft research and development expenses are
expected to decrease in the second half of the fiscal year.

Interest Income and Expense

     Interest income  decreased  slightly in the most recent three and six month
periods due to a reduction in cash reserves.  Interest expense for the three and
six month  periods were  $174,000 and $351,000 for the 1999 periods  compared to
$4,000 and $5,000 in 1998.  These  increases  were due to the issuance of the 5%
convertible  subordinated  debentures in July 1998. The Company expects interest
expense to decrease as the 5% convertible  subordinated debentures are converted
into the Company's common stock.

<PAGE>

Liquidity and Capital Resources

     Cash and cash equivalents,  and marketable securities totaled $8,321,000 at
January 31, 1999 versus $13,842,000 at July 31, 1998.

     Net cash usage for the six months ended January 31, 1999 averaged  $920,000
per month.  This was less than the Company  expected due to the early conversion
of stock warrants in the amount of $828,000. Most of the $6,305,000 cash used in
operations  in the most recent six month  period was due to the  $6,385,000  net
loss. The other primary uses of cash were the payment of $720,000 in transaction
fees and expenses relating to the issuance of the convertible  debentures issued
in July 1998, the increase in  receivables  due to the increase in product sales
and the additions of plant and equipment.

     In January  1999,  $2,300,000  of debentures  were  converted  into 342,768
shares of the Company's  common stock,  including  shares issued for accumulated
interest. Subsequent to quarter end and through February 24, 1999, an additional
$7,331,000 of debentures were converted into an additional  1,062,263  shares of
the Company's common stock,  including  shares issued for accumulated  interest.
Conversions  to date were at an average of $7.05 per share.  As of February  24,
1999, there remained $2,369,000 of unconverted convertible debentures.

     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 slightly decrease through
the  remainder  of fiscal 1999 due to the  reduced  activity  with the  vascular
grafts.  Interest expense is expected to decrease as the convertible  debentures
are converted into the Company's  common stock.  The Company expects to report a
loss for the  current  fiscal  year.  In  addition,  the  Company  expects  that
increasing  working capital  investments in trade receivables and inventory will
be required to support growing product sales.

     The Company is  currently  pursuing  options to raise  capital.  Additional
capital will likely be secured in fiscal 1999.

<PAGE>

Year 2000

     The  Company  established  a team in May 1998 to  assess  and  address  the
possible  exposures  related to the Y2K  issue.  The areas  under  investigation
include product issues, business computer systems,  production equipment, vendor
readiness and contingency plans.  Products currently sold by the Company are Y2K
compliant.  The Company does not use internally  developed computer software and
is therefore not anticipating major reprogramming efforts. The Company's primary
financial  and  operational  system  has been  assessed  and is  certified  "Y2K
Compliant."  There are several personal  productivity  applications that are not
currently  Y2K  compliant.   The  Company   expects  them  to  be  compliant  by
mid-calendar  1999.  Various personal computers are not currently Y2K compliant.
These  computers are planned to be replaced as part of the Company's  technology
update  strategy.  The  Company is in the  process of  replacing  its voice mail
system  with one that is Y2K  compliant.  None of these  replacements  have been
accelerated  and  they  have no  material  effect  on the  Company  consolidated
financial statements.  Equipment used for production or quality control does not
use dates to control operations.

     The Company mailed  questionnaires  to each of its  significant  vendors in
October 1998 to determine the extent to which the Company is vulnerable to those
third parties'  failure to remediate their own Y2K issues.  As of February 1999,
the Company has received the Y2K questionnaire  back from all of its vendors and
is  currently   working  with  its  significant   vendors  to  ensure  continued
operations.  In addition, the Company has investigated its utility providers and
believes  they will be Y2K  compliant.  The  Company  anticipates  developing  a
contingency  plan once it has completed its  assessment  of  significant  vendor
compliance,  which will be no later that the first  quarter of calendar  1999. A
contingency  plan will be developed to minimize the  Company's  exposure to work
slowdowns  or  business  disruptions.  In the  event  any  vendors  are  not Y2K
compliant,  the Company will seek new vendors and/or stockpile inventory to meet
its production needs.

     The Company  has  budgeted  approximately  $50,000  for  expenses  directly
related to Y2K identification  and remediation of internal systems.  It has also
purchased continuation of business and director's liability insurance related to
the Y2K issue.

     Although the Company does not at this time expect a  significant  impact on
its consolidated  financial position,  results of operations and cash flows, our
internal preparations have not been completed and there can be no assurance that
the systems of other  companies  or the  systems of the  Company  itself will be
converted on a timely basis and will not have a corresponding  adverse effect on
the Company.


Forward-Looking Statements

     This  Management's  Discussion  and  Analysis of  Financial  Condition  and
Results of Operations,  including the discussion regarding Year 2000 compliance,
contain  certain   "forward-looking   statements"  as  defined  in  the  Private
Securities  Litigation Reform Act of 1995. Such as statements relating to future
events and financial  performance,  including the submission of  applications to
the FDA,  revenue  and  expense  levels and  future  capital  requirements,  and
statements  reflecting  management beliefs and expectations are  forward-looking
statements.  Such  forward-looking  statements  involve risks and uncertainties,
including the Company's  ability to meet its timetable for FDA submissions,  the
review  time at the FDA,  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, ability to raise additional capital and
other risks set forth in the cautionary statements included in Exhibit 99 to the
Company's  report on Form 10-Q dated April 30, 1998,  filed with the  Securities
and Exchange Commission.

<PAGE>

ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The Company  invests  its excess cash in money  market  mutual  funds.  The
market risk on such investments is minimal.

     The product sales for the Company's foreign  subsidiary are in U.S. Dollars
("USD").  At the end of January  1999,  the amount of  currency  held in foreign
exchange was approximately  $1,000 USD. The market risk on the Company's foreign
subsidiary operations is minimal.

     At January  31,  1999,  all of the  Company's  outstanding  long-term  debt
carries  interest at a fixed rate.  There is no material market risk relating to
the  Company's  long-term  debt.  The  Company's  5%  convertible   subordinated
debentures,  issued July 15, 1998,  carry a fixed  interest  rate of 5%; are due
July 15, 2004; and are convertible  into common stock at a price  calculated per
predetermined  formulas based on the market price of the Company's  common stock
over a specified period of time.

<PAGE>

Part II.  OTHER INFORMATION

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

     a. The 1998 annual meeting of shareholders of Possis Medical, Inc. was held
on December 9, 1998.

     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

              Dean Belbas                        10,958,476             183,227
              Robert G. Dutcher                  10,973,859             167,844
              Seymour J. Mansfield               10,977,403             164,300
              Whitney A. McFarlin                11,028,461             113,242
              Donald C. Wegmiller                10,976,226             165,477
 
     c. By a vote of  5,371,757  in the  affirmative,  602,505 in the  negative,
143,996 abstaining and 5,023,445 being counted as broker non-votes, the proposal
to approve the issuance of common stock upon conversion of the Company's  Series
A 5% Convertible  Debentures due July 15, 2004 was ratified. The approval of the
issuance of such common stock is required under  applicable  rules of the Nasdaq
Stock Market,  Inc. in the event the conversion of such debentures  would result
in the  issuance  of a number of shares of common  stock in excess of 20% of the
outstanding common stock of the Company as of the date of the transaction.

     d. By a vote of 11,001,432 in the  affirmative,  94,921 in the negative and
45,350  abstaining,  the  appointment  of Deloitte & Touche LLP as the Company's
certified public accountants was ratified.

<PAGE>

 ITEM 6.   Exhibits and Reports on Form 8-K

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

Exhibit    Form     Date Filed                         Description              
  
  3.1      10-K     Fiscal year ended        Articles of incorporation as
                    July 31, 1994            amended and restated to date.

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

 10.1      8-K      December 14, 1998        Distributor Agreement with
                                             Horizon Medical Products

 27                                          Financial data schedule.


     (b) Reports on Form 8-K

     During the quarter  ended  January 31, 1999,  the Company filed a report on
Form 8-K dated  December 14, 1998  reporting  under Item 5, the Company  entered
into a  distribution  agreement  with  Horizon  Medical  Products,  Inc. for the
Company's Perma-Seal Dialysis Access Graft.

<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:  February 26, 1999       BY: /s/ Robert G. Dutcher              
                                       ROBERT G. DUTCHER
                                       President and Chief Executive Officer



DATE:  February 26, 1999       BY: /s/ Russel E. Carlson 
                                       RUSSEL E. CARLSON
                                       Vice President of Finance and 
                                       Chief Financial Officer