_______________________________________________

                            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 April 30, 1998


     Commission File Number 0-944

                              POSSIS MEDICAL, INC.

                          9055 Evergreen Boulevard N.W.

                        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 May 21, 1998 was 12,209,466.

                        ________________________________

<PAGE>




                              POSSIS MEDICAL, INC.

                                      INDEX


                                                                       PAGE


PART I.     FINANCIAL INFORMATION

  ITEM 1.   Financial Statements

            Consolidated Balance Sheets, April 30, 1998
            and July 31, 1997.........................................   3

            Consolidated Statements of Operations for three
            months and nine months ended April 30, 1998 and 1997......   4

            Consolidated Statements of Cash Flows for the
            nine months ended April 30, 1998 and 1997 ................   5

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

  ITEM 2.   Management's Discussion and Analysis of Financial
            Condition and Results of Operations.......................   8-12



PART II.    OTHER INFORMATION

  ITEM 6.   Exhibits and Reports on Form 8-K..........................   13

            SIGNATURES................................................   14

<PAGE>

                      POSSIS MEDICAL, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS                                                                                April 30, 1998          July 31, 1997
                                                                                        (Unaudited)        
<S>                                                                                   <C>                     <C>
                                                         
CURRENT ASSETS:
     Cash and cash equivalents...............................................          $  1,554,951           $  3,849,194
     Marketable securities...................................................             3,995,626             10,964,170
     Receivables:
        Trade (less allowances for doubtful accounts of $82,000 and
        $80,000, respectively) ..............................................             1,187,258                878,893
        Other................................................................                62,410                120,558
     Inventories:
        Parts................................................................             1,164,647              1,242,580
        Work-in-progress.....................................................             1,445,622                940,918
        Finished goods.......................................................             1,779,321              1,191,870
     Prepaid expenses and other assets.......................................               227,159                264,117
                Total current assets.........................................            11,416,994             19,452,300
PROPERTY:
     Leasehold improvements..................................................             1,207,863              1,166,306
     Machinery and equipment.................................................             3,666,449              3,317,391
     Assets-in-construction..................................................               143,340                 51,753
                Total property...............................................             5,017,652              4,535,450
     Less accumulated depreciation...........................................            (2,271,861)             1,906,500
                Property - net...............................................             2,745,791              2,628,950
OTHER ASSETS:
     Goodwill................................................................               287,922                341,922
TOTAL ASSETS.................................................................          $ 14,450,707           $ 22,423,172

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
     Trade accounts payable..................................................          $    679,690           $    648,502
     Accrued salaries, wages, and commissions................................               955,335                762,587
     Current portion of long-term debt.......................................                15,037                 28,356
     Clinical trials accrual.................................................               442,752                879,166
     Other liabilities.......................................................               580,760                294,002
                Total current liabilities....................................             2,673,574              2,612,613

OTHER LIABILITIES............................................................               191,200                   --
LONG-TERM DEBT...............................................................               175,000                 10,213

SHAREHOLDERS' EQUITY:
     Common stock - authorized 100,000,000 shares of $.40 par value each;
        issued and outstanding, 12,209,466 shares and 12,121,312 shares,
         respectively........................................................             4,883,787              4,848,525
     Additional paid-in capital..............................................            41,803,424             41,118,611
     Unearned compensation ..................................................              (526,265)                  --
     Unrealized loss on investments..........................................                (2,009)                (5,836)
     Retained deficit........................................................           (34,748,004)           (26,160,954)
                Total shareholders' equity...................................            11,410,933             19,800,346

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY...................................          $ 14,450,707           $ 22,423,172
<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 Nine Months Ended 
                                                                  April 30, 1998   April 30, 1997  April 30, 1998   April 30, 1997
<S>                                                                <C>              <C>             <C>             <C>
REVENUES: 
      Medical product sales................................        $ 1,779,416      $ 1,075,229     $ 4,362,068     $  1,628,319
      Sales agreement and other............................              --             247,330           --           1,997,330
               Total revenue...............................          1,779,416        1,322,559       4,362,068        3,625,649
 
COST OF SALES AND OTHER EXPENSES:
      Cost of medical products.............................          1,320,760        1,230,375       4,335,411        3,605,514
      Selling, general and administrative..................          2,048,072        1,299,188       5,303,614        2,995,185
      Research and development.............................          1,273,540        1,380,018       3,731,219        3,515,954
              Total cost of sales and other expenses.......          4,642,372        3,909,581      13,370,244       10,116,653
 
Operating loss.............................................         (2,862,956)      (2,587,022)     (9,008,176)      (6,491,004)
 
Interest income............................................             90,191          253,051         409,036          778,150
Gain (loss) on sale of marketable securities...............             (2,074)           --             12,090            7,109
 
Loss from continuing operations - net......................         (2,774,839)      (2,333,971)     (8,587,050)      (5,705,745)
 
Income from discontinued operations-net....................              --               --              --             111,539

Net loss...................................................        $(2,774,839)     $(2,333,971)    $(8,587,050      $(5,594,206)
 
Weighted average number of common
   shares outstanding......................................         12,207,036       12,126,397      12,184,132       12,091,076
 
Basic and dilutive net income (loss)
   per common share:
      Loss from continuing operations......................          $ (.23)          $ (.19)        $ (.70)           $ (.47)
      Income from discontinued operations .................              --               --             --               .01
      Net loss.............................................          $ (.23)          $ (.19)        $ (.70)           $ (.46)
<FN> 

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

<PAGE>

<TABLE>

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

<CAPTION>                                                                                        
                                                                          For Nine Months Ended          
                                                                    April 30, 1998     April 30, 1997
<S>                                                                   <C>               <C>
OPERATING ACTIVITIES:
Net loss ...........................................................  $(8,587,050)       $(5,594,206)
Adjustments to reconcile net loss to net
  cash used in operating activities:
     Gain on sale of marketable securities..........................      (12,090)            (7,109)
     Gain on asset disposal ........................................       (2,100)            (1,526)
     Depreciation...................................................      482,261            355,149
     Amortization of goodwill.......................................       54,000             54,000
     Stock compensation.............................................      290,035             70,751
     Increase in receivables........................................     (250,217)          (401,409)
     Increase in inventories........................................   (1,146,510)          (655,400)
     Increase (decrease) in other assets............................       28,079            (70,066)
     Increase in trade accounts payable.............................       31,188            131,048
     Increase in accrued and other current liabilities..............        5,976            403,304
Net cash used in operating activities...............................   (9,106,428)        (5,715,464)

INVESTING ACTIVITIES:
Additions to plant and equipment....................................     (466,814)          (474,694)
Proceeds from the disposal of assets................................        2,100             20,954
Purchase of marketable securities...................................      (10,852)        (1,987,665)
Proceeds from sale/maturity of marketable securities................    6,995,313          7,011,641
Net cash provided by investing activities...........................    6,519,747          4,570,236
FINANCING ACTIVITIES:
Proceeds from notes payable.........................................      175,000               --
Repayment of long-term debt.........................................      (23,532)           (62,805)
Proceeds from issuance of stock and exercise of options.............      140,970            430,407               
Net cash provided by financing activities...........................      292,438            367,602
 
DECREASE IN CASH AND CASH EQUIVALENTS ..............................   (2,294,243)          (777,626)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD....................    3,849,194          7,688,507
CASH AND CASH EQUIVALENTS AT END OF PERIOD..........................  $ 1,554,951       $  6,910,881

SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid.......................................................  $     1,101         $    4,790
Inventory transferred to fixed assets...............................       16,288             31,733
Issuance of restricted stock........................................      816,300               --
Accrued payroll taxes related to restricted stock...................      286,002               --
<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 and nine month periods ended April 30, 1998
are not necessarily  indicative of the results that may be expected for the year
ending July 31, 1998.


3.   RECENTLY ISSUED ACCOUNTING STANDARD

     Earnings per Share:

     Effective  January 31,  1998,  the Company  adopted  Statement of Financial
Accounting  Standards  ("SFAS")  No.  128,  Earnings  per  Share.  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 requires  restatement  of prior  periods'
earnings  per share  calculations.  The  implementation  of SFAS No. 128 did not
impact  earnings  per share  because  the  Company  had  losses  in all  periods
presented.


4.   COMPREHENSIVE INCOME

     Effective  August 1, 1998,  the Company  will adopt  Statement of Financial
Accounting Standards ("SFAS") No. 130, "Reporting  Comprehensive  Income," 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.  Management  believes that  implementation  of SFAS 130 will not have a
material effect on the Company's financial statements.


5.   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 Nine Month Periods Ended April 30, 1998 and 1997

     Total  revenues for the three and nine month  periods  ended April 30, 1998
were $1,779,000 and $4,362,000, respectively. This compared to total revenues of
$1,323,000  and  $3,626,000  for the  same  periods  the  previous  year.  Sales
agreement and other  revenue for the third  quarter 1997 included  $200,000 from
Baxter Healthcare  Corporation  ("Baxter") for the first anniversary payment due
Possis under a supply and  distribution  agreement for the  Perma-Flow  Coronary
Bypass Graft and an additional  $47,000 from the  termination  and settlement of
the  Company's   Perma-Seal   Dialysis  Access  Graft  Supply  and  Distribution
Agreement. Sales agreement and other revenue for the nine months ended April 30,
1997  included  $200,000 from Baxter and  $1,997,000  from the  termination  and
settlement of the Company's Perma-Seal Graft Supply and Distribution  Agreement.
In April 1998,  the Company  renegotiated  its Perma-Flow  Graft  agreement with
Baxter,  whereby  the  Company  agreed to forego the  $200,000  payment due from
Baxter  in  exchange  for  Baxter's  agreement  to  give  up(i)Perma-Flow  Graft
marketing rights for the U.S. and (ii) non-U.S. marketing exclusivity.

     Product  sales for the three and nine month  periods  ending April 30, 1998
increased  $704,000 and  $2,734,000,  respectively,  from the previous year. The
significant  growth in  product  sales  resulted  primarily  from U.S.  AngioJet
Rheolytic Thrombectomy System sales, which received U.S. FDA marketing clearance
for blood clot removal in dialysis grafts in December 1996. U.S. AngioJet System
drive unit and disposable sales for the three and nine month periods ended April
30, 1998 were $1,599,000 and $3,965,000,  respectively,  an increase of $948,000
and $3,224,000 from the same periods in the previous year.

     Since the U.S. market  introduction of the AngioJet System, the Company has
listed its AngioJet System drive unit, considered capital equipment,  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  sold only 17 of the 150+ drive units placed in U.S.  hospitals  through
April 30,  1998.  In May 1998,  the  AngioJet  System  drive unit list price was
reduced to $25,000  following a  successful  test of a lower price in two of the
Company's  15 sales  territories.  A lower drive unit sales price is intended to
improve the competitive position of the AngioJet System,  facilitate  evaluation
of the technology,  ease sale closure on units  currently  under  evaluation and
provide added time for the Company's  direct sales force to encourage use of the
systems currently in the field.

<PAGE>
 
     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. The Company
believes that the treatment of stoke is a significant  marketing opportunity for
the  AngioJet  System.  In May 1998 the Company  introduced  it's AV60  AngioJet
Catheter.  The AV60 Catheter has been designed  specifically to more effectively
and efficiently  remove blood clots from dialysis access grafts - the indication
for use for which Possis  received FDA marketing  approval in December  1996. In
May 1998 the FDA  agreed to permit  unblinding  the  Company's  Vegas 2 Coronary
AngioJet  U.S.  clinical  trial  results.   These  important  clinical  results,
involving  300  patients,  showed the  AngioJet  System to be much  faster  than
urokinase,  removing  blood  clots in  minutes  versus  the  hours  required  by
urokinase.  In addition,  the AngioJet System  typically  achieved more complete
thrombus  removal than  urokinase,  caused fewer adverse  events and resulted in
lower treatment  costs. The Company plans to submit a PMA application to the FDA
in August 1998 seeking  approval to market the AngioJet  System for coronary use
in the United  States.  The  Company  plans to file an  AngioJet  System  510(k)
application with the FDA in late June or July seeking U.S.  marketing  clearance
for  peripheral  artery and  peripheral  bypass  graft blood clot  removal.  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 were $149,000 in the most
recent  quarter.  Capital  equipment,  such as the Company's drive unit, is very
difficult  to  sell in the  price-sensitive  European  market.  The  Company  is
interviewing  potential AngioJet System independent  distributors for the German
market and expects to have a German  distributor  in place in 1998.  Actions the
Company is taking to improve AngioJet System sales in Europe include  conducting
European cost  effectiveness  studies, a carotid artery study in Germany, a deep
vein thrombosis study in Italy and developing  European physician  advocates for
the AngioJet  System.  In Japan,  the coronary  AngioJet  System  clinical study
enrollment  was completed in the quarter ended April 30, 1998,  and a regulatory
filing  with the  Japanese  Ministry  of Health and Welfare is planned for 1998.
Registrations are currently being finalized in Taiwan and the initial drive unit
was shipped in April 1998. The Company  believes that the U.S.  market will lead
the worldwide growth of AngioJet System sales revenue.

     Vascular graft sales were $32,000 and $85,000 for the three and nine months
ended April 30, 1998.  This compared to $20,000 and $167,000,  for the three and
nine months ended April 30, 1997.  Perma-Flow  Coronary  Bypass Graft sales were
$82,000  and  $43,000  for the nine  months  ended  April  30,  1998  and  1997,
respectively.  In April 1998 the Company received  Humanitarian Device Exception
(HDE)  approval  from  the  FDA,  clearing  the way for  U.S.  marketing  of the
Perma-Flow  Coronary  Bypass  Graft for  patients  who require  coronary  bypass
surgery  but who have  inadequate  blood  vessels  of  their  own for use in the
surgery. The sales for the nine months ended April 30, 1997 included $124,000 to
the Company's  worldwide  Perma-Seal  Dialysis  Access Graft  distributor.  This
Distributor  Agreement  was  terminated  in January  1997.  In April 1998 an FDA
Circulatory  Systems Advisory Panel  recommended  that the Company's  Perma-Seal
Dialysis Access Graft receive U.S. market  approval with  appropriate  labeling.
The Company expects to receive FDA marketing  approval for the Perma-Seal  Graft
by July 1998. In January 1998 the Company engaged Salomon Smith Barney to assist
in the development and  implementation  of a strategic plan designed to maximize
the value of the Company's vascular graft business. This project is in process.

<PAGE>

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

     Cost of medical products  increased 7% and 20% in the fiscal 1998 three and
nine month  periods,  respectively,  over the same periods in the previous year.
AngioJet System production costs increased $175,000 and $734,000,  respectively,
in the fiscal  1998 three and nine month  periods as  compared  to the  previous
year.  The increase is primarily due to the  significant  growth in the AngioJet
System product  sales.  Medical  product gross margins  improved by $614,000 and
$2,004,000,  respectively,  in the fiscal  1998 three and nine month  periods as
compared to the previous year. The Company believes that manufacturing costs per
unit will be reduced and gross margins will continue to improve as product sales
and related production volumes continue to grow.

     Selling,  general and administrative  expenses in the three and nine months
ended April 30, 1998, increased $749,000 and $2,308,000,  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  U.S.  sales
organization  to sell the AngioJet  System and expenses of marketing the product
in the United States. At April 30, 1998, the Company had 25 direct  salespersons
as compared to eight as of April 30, 1997. Sales and marketing  expenditures are
expected  to grow  significantly  in the  current  year and  beyond.  During the
quarter  ended April 30, 1998,  the Company  agreed to settle a lawsuit with its
former German AngioJet System distributor for $200,000. This amount was expensed
in the quarter ended April 30, 1998.

     Research and  development  expenses  decreased 8% in the three months ended
April 30, 1998 as compared to the same period in the previous year. Research and
development  expenses  increased  6% for the nine month  ended April 30, 1998 as
compared to the same period in the previous  year. The increase is primarily due
to the increased  expenses of conducting the AngioJet System  coronary  clinical
trial in the U.S. and the cost of developing  new AngioJet  System  thrombectomy
applications. Vascular graft research and development expenses decreased 30% and
17%,  respectively,  from the prior year.  The decrease is primarily  due to the
reduced  new  enrollment  in the  Company's  Perma-Flow  Coronary  Bypass  Graft
clinical  trial,  the completion of the  enrollment of the Company's  Perma-Seal
Dialysis  Graft  clinical  trial in May 1997 and the  decision  not to conduct a
Perma-Flow Graft clinical study investigators  meeting in the Spring of in 1998.
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  System  thrombectomy  applications,  new vascular
grafts and new AngioJet technology-based products.

<PAGE>

     Interest  income has decreased in the most recent periods due to the use of
the Compan's cash reserves in funding 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.


Liquidity and Capital Resources

     Cash, cash equivalents,  and marketable  securities  totaled  $5,551,000 at
April 30, 1998 versus $14,813,000 at July 31, 1997.

     Net cash usage for the nine months ended April 30, 1998 averaged $1,030,000
per month,  consistent with the Company's  expectations.  Most of the $9,106,000
cash used in  operations  in the most  recent  nine  month  period is due to the
$8,587,000 net loss. The other primary use of cash is the increase in inventory.
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 quarter of 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 expects to secure additional capital by July 31, 1998.


Year 2000

     The Company  formed a team that is assessing  and  addressing  the possible
exposures  related to the year 2000 issue.  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 "Year 2000  Compliant." The financial  impact
of the  year  2000  issue  is  not  expected  to be  material  to the  Company's
consolidated financial position, results of operations and cash flows.


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,  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  identified  in Exhibit 99 to this  Quarterly  Report on
Form 10-Q and detailed from time to time in the Company's various Securities and
Exchange Commission filings.

<PAGE>

Part II.  OTHER INFORMATION

ITEM 6.  Exhibits and Reports on Form 8-K

     (a)  Exhibits

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

  Exhibit  Form          Date Filed                  Description   
                    
 
   3.1     10-K      Fiscal year ended        Articles of incorporation as
                     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.

   27                                         Financial data schedule

   99                Quarter ended            Investment Risk Factors
                     April 30, 1998



     (b) Reports on Form 8-K

     Possis Medical,  Inc. filed no reports on form 8-K during the quarter ended
April 30, 1998.
 
<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:      June 9, 1998             BY: /s/   Robert G. Dutcher  
                                        ROBERT G. DUTCHER
                                        President and Chief Executive Officer



DATE:      June 9, 1998             BY: /s/   Russel E. Carlson   
                                        RUSSEL E. CARLSON
                                        Vice President of Finance
                                        Chief Financial and Accounting Officer

<PAGE>

EXHIBIT 99


                             INVESTMENT RISK FACTORS

     In evaluating the Company and its business,  prospective  investors  should
carefully  consider  the  following  risk  factors.  This Exhibit  contains,  in
addition to  historical  information,  forward-looking  statements  that involve
risks and  uncertainties.  The Company's actual results could differ  materially
from the results discussed in the forward-looking statements. Factors that could
cause or contribute to such differences  include,  but are not limited to, those
discussed below as well.


History of Operating Losses; No Assurance of Future Profitability

     The Company has incurred  losses for the years 1995,  1996 and 1997, and as
of July 31,  1997 had a retained  deficit of $26.2  million.  For the year ended
July 31, 1995,  the Company had a net operating  loss of $5.6  million.  For the
year ended July 31,  1996,  the Company  incurred a net  operating  loss of $9.9
million.  The Company incurred a net operating loss of $9.6 million for the year
ended July 31 1997, and a net operating loss for the nine months ended April 30,
1998 of $8.6  million.  No assurance  can be given that the Company will operate
profitably  on a  quarterly  or  annual  basis  in  the  future.  See  "Selected
Consolidated  Financial  Data," and  "Management's  Discussion  and  Analysis of
Financial Condition and Results of Operations" in the 1997 Annual Report on Form
10-K and Quarterly Report on Form 10-Q for the quarter ended April 30, 1998.

     The  Company  does not  expect to  become  profitable  unless  it  achieves
significant  sales in the United  States  and its  products  receive  additional
United States Food and Drug Administration  ("FDA") marketing  approvals.  There
can be no assurance that  significant  sales or additional  marketing  approvals
will  occur.   In  addition,   the  Company  must  also  convince   health  care
professionals,  third  party  payors and the  general  public of the medical and
economic benefits of its AngioJet,  Perma-Flow and Perma-Seal Products. However,
no assurance  can be given that the Company will be  successful in marketing the
AngioJet  System,  the Perma-Flow  Graft,  or the Perma-Seal  Graft, or that the
Company will be able to operate profitably on a consistent basis, even following
FDA approval.  See "Management' s Discussion and Analysis of Financial Condition
and Results of  Operations" in the 1997 Annual Report on Form 10-K and Quarterly
Report on Form 10-Q for the quarter ended April 30, 1998.


Limited Regulatory Approval for Company's Products; Government Regulation

     The  Company's  products and its  manufacturing  activities  are subject to
extensive and rigorous  federal and state regulation in the United States and to
various regulatory requirements in other countries,  including Japan. Regulatory
approvals, if granted, may include significant limitations on the indicated uses
for which a product may be marketed.  In addition,  the process of obtaining and
maintaining  required  regulatory  approvals  can  be  lengthy,   expensive  and
uncertain.  See Business Description - Government Regulation" in the 1997 Annual
Report on Form 10-K.

<PAGE>

     Current FDA enforcement policy strictly prohibits the marketing of approved
medical  devices for unapproved  uses. In addition,  product  approvals could be
withdrawn for failure to comply with  regulatory  standards or the occurrence of
unforeseen problems following initial marketing. The Company will be required to
adhere to  applicable  regulations  setting  forth  Quality  System  Regulations
("QSR"), which include design, development,  manufacturing,  servicing,  testing
and documentation  requirements.  Failure to comply with applicable QSR or other
regulatory  requirements can result in, among other sanctions,  fines, delays or
suspensions of approvals, injunctions against further distribution,  seizures or
recalls of products,  adverse  publicity,  operating  restrictions  and criminal
prosecutions.  Furthermore,  changes in existing  regulations or adoption of new
regulations  could prevent the Company from obtaining,  or affect the timing of,
future regulatory  approvals and could adversely affect the continued  marketing
of the Company's existing  products.  No assurance can be given that the Company
will be able to obtain  necessary  regulatory  approvals on a timely basis or at
all, and delays in receipt of or failure to receive such approvals,  the loss of
previously received approvals, or failure to comply with regulatory requirements
would  have a  material  adverse  effect on the  Company's  business,  financial
condition  and results of  operations.  See  "Business  Description - Government
Regulation" in the 1997 Annual Report on Form 10-K.


Uncertainty of Clinical and Marketing Acceptance; Technology Uncertainty

     Use of the AngioJet System for vascular,  cardiovascular  and  intercranial
clots  is  new  and  only  now  becoming  widely  known.  Similarly,  use of the
Perma-Flow  Graft in lieu of saphenous  veins to perform CABG  procedures is new
and  not  yet  widely  known.  Market  acceptance  of  the  Company's  AngioJet,
Perma-Flow  and  Perma-Seal  Products will depend in large part on the Company's
ability to  demonstrate  to the medical  community  in  general,  and to cardiac
surgeons and cardiologists in particular, the efficacy, relative safety and cost
effectiveness of treating  cardiovascular  disease using the Company's  products
and to train cardiac surgeons and cardiologists to perform necessary  procedures
using the  Company's  products.  There can be no  assurance  that the  Company's
products   will   provide   benefits   considered   adequate  by   providers  of
cardiovascular  and  vascular  treatments  or that a  sufficient  number of such
providers will use the Company's products for commercial success to be achieved.
To date,  the Company has trained only a limited  number of physicians  and will
need to expand its marketing and training  capabilities.  Moreover,  even if the
Company's   products  become  generally   accepted  by  the  medical  community,
physicians  trained in the use of the Company's products may elect not to use or
to recommend a  competitor's  products  instead of the Company's  products.  The
ability of the Company to conduct such marketing  programs prior to FDA approval
of the  Company's  products  may be limited or  restricted  by FDA  regulations,
guidelines or policies.  No assurance  can be given that the Company's  products
will be accepted as an alternative  to other existing or new therapies,  or that
cardiologists,  cardiac  surgeons  or other  physicians  will  accept  AngioJet,
Perma-Flow or Perma-Seal  Products as appropriate courses of treatment for their
patients.  Lack of clinical and market  acceptance would have a material adverse
effect on the Company's business, financial condition and results of operations.

<PAGE>

Dependence on AngioJet Products

     The Company is focusing its  resources  on the  continued  development  and
refinement of its AngioJet System.  If the Company is unable to obtain requisite
regulatory approvals or to achieve commercial  acceptance of the AngioJet System
for multiple purposes,  the Company's business,  financial condition and results
of operations will be materially and adversely affected.


Rapid Technological Change and Intense Competition

     The medical products market is characterized by rapidly evolving technology
and intense  competition.  The future  success of the Company will depend on its
ability to keep pace with advancing technology and competitive innovations. Many
potential  competitors  have  significantly  greater  research  and  development
capabilities,   experience  in  obtaining  regulatory   approvals,   established
marketing  and  financial  and  managerial  resources  than  the  Company.  Many
potential  competitors  have  developed  or  are in the  process  of  developing
technologies  that are,  or in the  future  may be,  the  basis for  competitive
products,  some of which may employ an entirely  different  approach or means of
accomplishing  the desired  therapeutic  effect than products being developed by
the Company.

     The Company believes that its AngioJet System will face intense competition
from a variety of  treatments  for the  ablation  and  removal  of blood  clots,
including   thrombolytic   drug  therapies,   surgical   intervention,   balloon
embolectomy, mechanical and laser thrombectomy devices, ultrasound ablators, and
other  thrombectomy  devices based on waterjet  systems that are currently being
developed  by  other  companies.  The  Company  is aware  of a small  number  of
synthetic  grafts being developed that could compete with the Perma-Flow  Graft.
However,  the Company  believes it is the first developer to obtain FDA approval
for U.S. clinical trials with a synthetic coronary bypass graft and the first to
obtain CE Mark  approval for marketing  such a product in Europe.  The Company's
Perma-Seal  Graft will compete with ePTFE grafts and other synthetic grafts with
needle sealing properties.

     Many  of the  companies  manufacturing  these  devices  have  substantially
greater  capital,  as well as  greater  research  and  development,  regulatory,
manufacturing  and  marketing  resources  and  experience  than the  Company and
represent significant competition for the Company. Such companies may succeed in
developing  products  that are more  effective  and/or  less  costly in treating
thrombosis than the AngioJet  System and more effective  and/or less costly than
the Perma-Flow  and  Perma-Seal  grafts.  Further,  these  companies may be more
successful than the Company in  manufacturing  and marketing their products.  No
assurance can be given that the Company's competitors or others will not succeed
in developing  technologies,  products or procedures  that are more effective or
less invasive  than any being  developed by the Company or that would render the
Company's technology and products obsolete or noncompetitive.  The advent of new
devices,  procedures  or new  pharmaceutical  agents could hinder the  Company's
ability  to  compete  effectively  and have a  material  adverse  effect  on its
business, financial condition and results of operations.

<PAGE>

Reliance Upon Patents and Proprietary Rights

     The  Company's  success  depends and will continue to depend in part on its
ability to maintain  patent  protection for products and processes,  to preserve
its trade secrets and to operate without  infringing the  proprietary  rights of
third parties.  The Company's policy is to attempt to protect its technology by,
among other things,  filing patent applications for technology that it considers
important to the development of its business.  The Company  currently holds five
United States patents and 18 foreign patents related to the Perma-Flow Graft and
has two  patent  applications  pending  in the  United  States  and  two  patent
applications  pending  in foreign  jurisdictions.  The  Company  also holds five
United States patents relating to the AngioJet System. In addition,  the Company
has eleven  United  States and  numerous  foreign  patent  applications  pending
relating to the AngioJet System.  Two AngioJet System patent  applications  have
been accepted by the European  Patent Office.  In connection with the Perma-Seal
Graft,   two  United  States   patents  are  pending  and  four  foreign  patent
applications are pending.  The validity and breadth of claims covered in medical
technology  patents involve complex legal and factual questions and,  therefore,
may be highly  uncertain.  No assurance can be given that the Company's  pending
applications  will  result in patents  being  issued  or, if  issued,  that such
patents,  or  the  Company's  existing  patents,   will  provide  a  competitive
advantage, or that competitors of the Company will not design around any patents
issued to the Company. In addition, no assurance can be given that third parties
will not receive patent protection on their own waterjet devices.

     The Company has acquired  rights  through  licensing  agreements to patents
relating to processes used in the  manufacture of the  Perma-Seal  Graft.  Under
these  agreements,  Possis is required to pay certain  annual fees and royalties
based on net sales of products using the technology covered by these patents.

     The Company requires all its employees to execute non-disclosure agreements
upon  commencement of employment with the Company.  These  agreements  generally
provide  that  all  confidential  information  developed  or made  known  to the
individual by the Company during the course of the individual's  employment with
the Company is to be kept confidential and not disclosed to third parties. There
can be no assurance,  however, that the Company's non-disclosure  agreements and
other  safeguards  will  protect its  proprietary  information  and  know-how or
provide  adequate  remedies for the Company in the event of unauthorized  use or
disclosure of such information, or that others will not be able to independently
develop such information.  In addition, others may hold or receive patents which
contain claims that may cover products developed by the Company. 

     There  has  been   substantial   litigation   regarding  patent  and  other
intellectual property rights in the medical device industry.  Litigation,  which
could result in substantial cost to and diversion of effort by the Company,  may
be necessary to enforce patents issued to the Company,  to protect trade secrets
or  know-how  owned by the  Company,  to  defend  the  Company  against  claimed
infringement  of the  rights of  others to  determine  the  ownership,  scope or
validity  of the  proprietary  rights of the  Company  and  others.  An  adverse
determination  in any such  litigation  could subject the Company to significant
liabilities  to third  parties,  could require the Company to seek licenses from
third parties and could prevent the Company from manufacturing. selling or using
its products, any of which could have a material adverse effect on the Company's
business, financial condition and results of operations.

<PAGE>

     The Company also relies upon  unpatented  proprietary  technology and trade
secrets that it seeks to protect,  in part, through  confidentiality  agreements
with  employees  and  other  parties.  No  assurance  can be  given  that  these
agreements  will not be breached,  that the Company will have adequate  remedies
for any breach, that others will not independently  develop or otherwise acquire
substantially  equivalent  proprietary  technology and trade secrets or disclose
such technology or that the Company can meaningfully  protect its rights in such
unpatented technology.  Any disclosure of such information could have a material
adverse  effect on the Company's  business,  financial  condition and results of
operations.


Potential Limitations on Third-Party Reimbursement

     Health care  providers,  such as hospitals  and  physicians,  that purchase
medical  devices such as the AngioJet  System or the  Perma-Seal  and Perma-Flow
Grafts for use on their patients generally rely upon third party payors, such as
Medicare,  Medicaid and private insurance plans, to reimburse all or part of the
costs and fees  associated  with the  health  care  services  provided  to their
patients.  Medicare and Medicaid  payors (in some states)  determine  whether to
provide  coverage  for  a  particular  procedure  and  reimburse  hospitals  for
inpatient  medical  procedures at a  prospectively  determined rate according to
Diagnosis Related Groups ("DRGs"). The Health Care Financing Administration (the
"HCFA"),  the agency  responsible for  administering  the Medicare  system,  has
prohibited  Medicare  coverage  for  procedures  that  are not  deemed  safe and
effective for the condition being treated,  or which are still  investigational.
Even if a device has FDA approval,  Medicare  payors may deny  reimbursement  if
they  conclude  that  the  device  is  experimental  or used  for an  unimproved
indication.  In certain foreign markets, pricing or profitability of health care
products is subject to government control.  Reimbursement levels with respect to
a medical  products  such as those of the  Company are  critical  for the market
acceptance of the product and the financial results of its manufacturer.

     There can be no  assurance  that  adequate  third  party  coverage  will be
available for the Company to maintain  price levels for its products  sufficient
to realize an appropriate return on its investment in product development.

     The market for the Company's  products could also be adversely  affected by
future  legislation  to reform the nation's  health care system or by changes in
industry practices regarding reimbursement policy and procedures.
 
<PAGE>

Dependence Upon Key Personnel

     The Company is highly  dependent on a limited  number of key management and
technical personnel.  In addition,  the highly technical nature of the Company's
business,  its ability to continue its technological  developments and to market
its products and thereby develop a competitive edge in the marketplace  depends,
in large part,  on its ability to attract and maintain  qualified  technical and
key management  personnel.  Competition  for such  personnel is intense,  and no
assurance  can be given that the Company will be able to attract and retain such
personnel.  The loss of key personnel,  or inability to hire or retain qualified
personnel,  could  have a material  adverse  effect on the  Company's  business,
financial and results of operations.


Product Liability and Possible Insufficiency of Insurance

     The  manufacture  and sale of the  Company's  products  entail  the risk of
product  liability  claims.  A recent United States  Supreme Court decision held
that despite a company's  compliance with FDA  regulations,  it still may not be
shielded from common-law  negligent design claims or manufacturing  and labeling
claims based on state rules.  No assurance can be given that the coverage limits
of the Company's product  liability  insurance  policies will be adequate.  Such
insurance  is expensive  and in the future may not be  available  on  acceptable
terms,  if at all. A successful  claim or series of claims  brought  against the
Company  in  excess  of its  insurance  coverage,  and the  effect  any  product
liability  litigation  may have upon the  reputation  and  marketability  of the
Company's  technology and products,  together with diversion of the attention of
the  Company's  key  personnel,  could  have a  material  adverse  effect on the
Company's business, financial condition and results of operations.


Possible Need for Additional Funding

     Management  is  currently  in the  process of raising  additional  capital.
Management believes that if it is successful in raising additional capital,  the
net proceeds from such additional  capital  together with the Company's  current
capital resources  andrevenues from existing products will be sufficient to meet
its cash requirements for 12 to 18 months. However, delays in raising additional
capital,  delays in obtaining regulatory approvals of the Company's products, or
unanticipated  decreases  in operating  revenues or  increases in expenses,  may
adversely impact the Company's expected funding requirements, in which event the
Company may require additional funding. In such an event, the Company would need
to obtain financing through the issuance and sale of debt or equity  securities,
bank  financing,  joint  ventures or other means,  and no assurance can be given
that  additional  capital will be available to the Company or that  capital,  if
any, will be available upon satisfactory terms.
<PAGE>

Volatile Securities Market Factors and Possible Wide Fluctuations in Stock Price

     The market  price of the  Company's  stock has in the past been  subject to
significant fluctuations.  Moreover, the markets for equity security in general,
and for those of medical device manufacturers in particular,  have been volatile
and the price of the  Company's  common  stock in the future could be subject to
wide fluctuations in response to quarterly variations in operating results, news
and product  announcements,  trading  volume,  general  market  trends and other
factors. No assurance can be given that the Company's common stock will trade in
the future at market prices in excess of its current market price.


Non-Payment of Dividends

     The Company has never paid cash dividends on its common stock.  The Company
currently intends to retain all future earnings, if any, for use in its business
and does not  anticipate  that cash  dividends  will be paid in the  foreseeable
future.


Dependence on Single Source Suppliers

     The  Company  depends on single  source  suppliers  for  certain of the raw
materials  used in the  manufacture  of its  graft  products.  In the  event the
Company must obtain alternative  sources for key raw materials,  there can be no
assurance that such  materials  will be available for purchase from  alternative
suppliers,  that alternative suppliers will agree to supply the Company, or that
the Company's use of such suppliers  would be approved by the FDA.  Although the
Company  currently has an adequate  supply of raw materials and believes it will
be adequate for the needs of its graft business,  there can be no assurance that
new sources of supply will be available  when  necessary.  Any  interruption  in
supply of raw materials  could have a material  adverse  effect on the Company's
ability to manufacture its products until a new source of supply is located and,
therefore,  could  have a material  adverse  effect on its  business,  financial
condition and results of operations.