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

                                    FORM 10-Q

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

         For the quarterly period ended January 31, 2005

                                       or

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

         For the transition period from ____________________ to _______________

                          Commission File Number 0-944

                              POSSIS MEDICAL, INC.
             (exact name of registrant as specified in its charter)

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

     9055 Evergreen Blvd NW Minnesota MN                      55433-8003
-------------------------------------------------  -----------------------------
(Address of principal executive offices)                      (Zip Code)

                                  783-780-4555
--------------------------------------------------------------------------------
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding  12 months  (or for such short  period  that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes _X_ No _

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

The number of shares  outstanding  of the  Registrant's  Common Stock,  $.40 par
value, as of February 28, 2005 was 17,431,278.





                                       1
<PAGE>



                              POSSIS MEDICAL, INC.

                                      INDEX



                                                                            PAGE
                                                                            ----

PART I.        FINANCIAL INFORMATION

     ITEM 1.   Financial Statements

               Consolidated Balance Sheets, January 31, 2005
               and July 31, 2004............................................. 3

               Consolidated Statements of Income and Comprehensive Income for
               the three and six months ended January 31, 2005 and 2004...... 4

               Consolidated Statements of Cash Flows for the
               six months ended January 31, 2005 and 2004 ................... 5

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

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

     ITEM 3.   Quantitative and Qualitative Disclosures about Market Risk ...18

     ITEM 4.   Controls and Procedures.......................................18

PART II.       OTHER INFORMATION

     ITEM 2.   Unregistered Sales of Equity Securities and Use of Proceeds...19

     ITEM 4.   Submission of Matters to a Vote of Security Holders...........20

     ITEM 6.   Exhibits......................................................20

               SIGNATURES....................................................21



                                       2
<PAGE>




PART 1   FINANCIAL INFORMATION


ITEM 1.  FINANCIAL STATEMENTS


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

<TABLE>
<CAPTION>

                                                                  January 31, 2005        July 31, 2004
                                                                  ----------------      -----------------
ASSETS

CURRENT ASSETS:
<S>                                                                 <C>                  <C>
     Cash and cash equivalents .............................        $  4,794,650         $  8,411,784
     Marketable securities .................................          36,819,665           39,759,403
     Trade receivables (less allowance for doubtful
          accounts and returns of $516,000 and
          $536,000, respectively) ..........................           8,365,936           10,232,180
     Inventories ...........................................           6,075,061            5,389,653
     Prepaid expenses and other assets .....................             495,158              958,616
     Deferred tax asset ....................................             890,000              890,000
                                                                    ------------         ------------
               Total current assets ........................          57,440,470           65,641,636
PROPERTY AND EQUIPMENT, net ................................           4,907,753            5,073,775
DEFERRED TAX ASSET .........................................          12,685,949           15,103,949
OTHER  ASSET ...............................................             218,704              201,341
                                                                    ------------         ------------
TOTAL ASSETS ...............................................        $ 75,252,876         $ 86,020,701
                                                                    ============         ============

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
     Trade accounts payable ................................        $    939,798         $  1,791,694
     Accrued salaries, wages, and commissions ..............           2,535,380            4,228,804
     Other liabilities .....................................           2,165,809            2,222,465
                                                                    ------------         ------------
              Total current liabilities ....................           5,640,987            8,242,963
OTHER LIABILITIES ..........................................             340,273              160,536

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY:
     Common stock-authorized, 100,000,000 shares
          of $0.40 par value each; issued and outstanding,
          17,424,965 and 18,254,942 shares, respectively               6,969,986            7,301,977
     Additional paid-in capital ............................          76,581,908           88,434,540
     Unearned compensation .................................             (33,000)             (15,000)
     Accumulated other comprehensive loss ..................            (141,000)            (136,000)
     Retained deficit ......................................         (14,106,278)         (17,968,315)
                                                                    ------------         ------------
          Total shareholders' equity .......................          69,271,616           77,617,202
                                                                    ------------         ------------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY .................        $ 75,252,876         $ 86,020,701
                                                                    ============         ============
</TABLE>

See notes to consolidated financial statements.



                                       3
<PAGE>



                      POSSIS MEDICAL, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
          FOR THE THREE AND SIX MONTHS ENDED JANUARY 31, 2005 AND 2004
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                               Three Months Ended                            Six Months Ended
                                                        ----------------------------------        ----------------------------------
                                                        Jan. 31, 2005        Jan. 31, 2004        Jan. 31, 2005     Jan. 31, 2004
                                                        -------------        -------------        -------------       -------------
<S>                                                      <C>                  <C>                  <C>                 <C>
Product sales ...................................        $ 16,168,884         $ 17,448,677         $ 33,670,872        $ 33,050,965

Cost of sales and other expenses:
     Cost of medical products ...................           4,283,418            3,967,145            8,587,757           7,786,376
     Selling, general and administrative ........           6,711,939            6,659,517           14,268,521          13,374,067
     Research and development ...................           2,604,131            1,978,868            5,041,835           4,106,111
                                                         ------------         ------------         ------------        ------------
           Total cost of sales and other expenses          13,599,488           12,605,530           27,898,113          25,266,554
                                                         ------------         ------------         ------------        ------------

Operating income ................................           2,569,396            4,843,147            5,772,759           7,784,411
     Gain (loss) on sale of securities ..........               1,950              (15,516)              20,031             (34,033)
     Interest income ............................             306,701              160,570              593,133             320,922
                                                         ------------         ------------         ------------        ------------


Income before income taxes ......................           2,878,047            4,988,201            6,385,923           8,071,300
Provision for income taxes ......................           1,208,886            1,869,900            2,523,886           3,025,900
                                                         ------------         ------------         ------------        ------------

Net income ......................................           1,669,161            3,118,301            3,862,037           5,045,400

Other comprehensive (loss) income, net of tax:
     Unrealized (loss) gain on securities .......            (130,000)              82,000               (5,000)            151,000
                                                                              ------------         ------------        ------------
Comprehensive income ............................        $  1,539,161         $  3,200,301         $  3,857,037        $  5,196,400
                                                         ============         ============         ============        ============

Weighted average number of common
    shares outstanding:
         Basic ..................................          17,669,526           17,774,155           17,875,233          17,775,941
         Diluted ................................          18,294,815           19,163,894           18,740,501          19,109,416

Net income per common share:
         Basic ..................................        $       0.09         $       0.18         $       0.22        $       0.28
                                                         ============         ============         ============        ============
         Diluted ................................        $       0.09         $       0.16         $       0.21        $       0.26
                                                         ============         ============         ============        ============
</TABLE>

See notes to consolidated financial statements.


                                       4
<PAGE>




                      POSSIS MEDICAL, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
               FOR THE SIX MONTHS ENDED JANUARY 31, 2005 AND 2004
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                                       2005                 2004
                                                                   ------------         ------------

OPERATING ACTIVITIES:
<S>                                                                <C>                  <C>
Net income ................................................        $  3,862,037         $  5,045,400
Adjustments to reconcile net income to net
  cash provided by operating activities:
Depreciation ..............................................           1,142,743              844,159
Gain on asset disposal ....................................             (11,569)             (12,525)
Stock compensation expense ................................             141,000              123,646
(Gain) loss on sale of marketable securities ..............              (2,668)              34,033
Deferred taxes ............................................           2,421,864            2,924,030
Decrease (increase) in trade receivables ..................           1,866,244           (1,262,758)
Increase in inventories ...................................            (998,768)            (953,798)
Decrease in prepaid expenses and other assets .............             446,095               31,775
Decrease in trade accounts payable ........................            (851,896)             (35,470)
Decrease in accrued and other liabilities .................          (1,570,343)             (82,756)
                                                                   ------------         ------------
    Net cash provided by operating activities .............           6,444,739            6,655,736
INVESTING ACTIVITIES:
Additions to property and equipment .......................            (660,652)          (1,336,087)
Proceeds from sale of fixed assets ........................               8,860               14,370

Proceeds from sale of marketable securities ...............          26,149,824           11,914,534
Purchase of marketable securities .........................         (23,216,282)         (14,222,867)
                                                                   ------------         ------------
     Net cash provided by (used in) investing activities ..           2,281,750           (3,630,050)

FINANCING ACTIVITIES:
Proceeds from issuance and exercise of options and warrants             777,745            2,060,994
Repurchase of common stock ................................         (13,121,368)          (2,794,306)
                                                                    ------------         ------------

     Net cash used in financing activities ................         (12,343,623)            (733,312)
                                                                   ------------         ------------

(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ..........          (3,617,134)           2,292,374
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ..........           8,411,784            4,782,942
                                                                   ------------         ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ................        $  4,794,650         $  7,075,316
                                                                   ============         ============

SUPPLEMENTAL CASH FLOW DISCLOSURE:
Cash paid for income taxes ................................        $    217,150         $    101,870
Issuance of restricted stock ..............................              36,000               36,000
Inventory transferred to property and equipment ...........              39,360                 --


</TABLE>


See notes to consolidated financial statements.



                                       5
<PAGE>



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

1. BASIS OF PRESENTATION

     The  accompanying  unaudited  consolidated  financial  statements have been
     prepared in accordance with accounting principles generally accepted in the
     United  States of America for interim  financial  information  and with the
     instructions  to Form 10-Q and Article 10 of Regulation  S-X.  Accordingly,
     they do not  include  all of the  information  and  footnotes  required  by
     accounting  principles  generally  accepted in the United States of America
     for  complete  financial  statements.  In the  opinion of  management,  all
     adjustments  (consisting of normal recurring accruals) considered necessary
     for a fair presentation have been included.  The accompanying  consolidated
     financial  statements  and  notes  should be read in  conjunction  with the
     audited financial statements and accompanying notes thereto included in the
     Company's 2004 Annual Report.

2. STOCK OPTIONS

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

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

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

                                                            Three Months Ended                 Six Months Ended
                                                               January 31,                         January 31,
                                                          2005             2004               2005             2004
                                                    --------------    --------------    --------------    --------------
  Net income:
<S>                                                 <C>               <C>               <C>               <C>
      Net income - as reported .................... $    1,669,161    $    3,118,301    $    3,862,037    $    5,045,400
      Less estimated stock-based employee
         compensation determined under fair
         value based method, net of tax ...........       (704,000)         (738,000)       (1,288,000)       (1,301,000)
                                                    --------------    --------------    --------------    --------------
      Net income - pro forma ...................... $      965,161    $    2,380,301    $    2,574,037    $    3,744,400
                                                    ==============    ==============    ==============    ==============
  Earnings per common share:
      Basic - as reported ......................... $         0.09    $         0.18    $         0.22    $         0.28
      Less estimated stock-based employee
         compensation determined under
         fair value based method, net of tax ......          (0.04)            (0.05)            (0.08)            (0.07)
                                                    --------------    --------------    --------------    --------------
      Basic - pro forma ........................... $         0.05    $         0.13    $         0.14    $         0.21
                                                    ==============    ==============    ==============    ==============

      Diluted - as reported ....................... $         0.09    $         0.16    $         0.21    $         0.26
      Less estimated stock-based employee
         compensation determined under fair
         value based method, net of tax ...........          (0.04)            (0.04)            (0.07)            (0.06)
                                                    --------------    --------------    --------------    --------------
      Diluted - pro forma ......................... $         0.05    $         0.12    $         0.14    $         0.20
                                                    ==============    ==============    ==============    ==============
      Weighted average common shares
         outstanding
      Basic .......................................     17,669,526        17,774,155        17,875,233        17,775,941
      Diluted .....................................     18,294,815        19,163,894        18,740,501        19,109,416
</TABLE>


                                       6
<PAGE>

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

<TABLE>
<CAPTION>
                                                                         2005                       2004
                                                                   ----------------         -----------------
<S>                                                                    <C>                    <C>
    Risk-free rate......................................               4.1-4.5%                   4.0-4.6%
    Expected dividend yield.............................                     0%                         0%
    Expected stock price volatility.....................                 54-68%                     59-64%
    Expected option term................................               10 years                   10 years
    Fair value per option...............................            $8.72-19.88               $11.85-14.02
</TABLE>

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

     Beginning with our fiscal year 2006, an in accordance with SFAS 123(R), the
     Company will be required to recognize the  compensation  costs  relating to
     share-based  transactions in the consolidated statement of operations.  See
     note 4.

3. INTERIM FINANCIAL STATEMENTS

     Operating  results for the three and six month  periods  ended  January 31,
     2005 are not necessarily indicative of the results that may be expected for
     the year ending July 31, 2005.

4. RECENT ACCOUNTING PRONOUNCEMENTS

     In November  2003 and March 2004,  the  Emerging  Issues Task Force  (EITF)
     reached  a   consensus   on  EITF   Issue  No.   03-1,   "The   Meaning  of
     Other-Than-Temporary    Impairment   and   Its   Application   to   Certain
     Investments."  The  consensus  reached  requires  companies  to  apply  new
     guidance for  evaluating  whether an investment  is  other-than-temporarily
     impaired and also requires quantitative and qualitative  disclosure of debt
     and   equity    securities,    classified    as    available-for-sale    or
     held-to-maturity,  that are determined to be only  temporarily  impaired at
     the balance sheet date. The Company  incorporated the required  disclosures
     for investments  accounted for under SFAS No. 115,  "Accounting for Certain
     Investments  in Debt and  Equity  Securities,"  as  required  in the fourth
     quarter  of  fiscal  year  2004.  In  September  2004,  the  consensus  was
     indefinitely  delayed as it relates to the  measurement  and recognition of
     impairment  losses for all  securities in the scope of paragraphs  10-20 of
     EITF 03-1. The disclosures prescribed by EITF No. 03-1 and guidance related
     to impairment  measurement prior to the issuance of this consensus continue
     to remain in effect.  Adoption is not expected to have a material impact on
     the Company's consolidated earnings, financial position or cash flows.
     In December 2004, the Financial  Accounting  Standards Board published SFAS
     No. 123 (revised 2004),  Share-Based Payment.  SFAS No. 123(R) revises SFAS
     No. 123,  Accounting  for  Stock-Based  Compensation,  and  supersedes  APB
     Opinion  No. 25,  Accounting  for Stock  Issued to  Employees.  The revised
     statement  addresses the accounting for  share-based  payment  transactions
     with employees and other third  parties,  eliminates the ability to account
     for share-based payment  transactions using APB Opinion No. 25 and requires
     that the compensation  costs relating to such transactions be recognized in
     the consolidated statement of operations based on the grant-date fair value
     of those  instruments.  The revised  statement is effective as of the first
     interim period beginning after June 15, 2005 and will be applicable for all
     of the Company's fiscal year ending July 31, 2006. The Company is currently
     determining what impact the newly issued statement will have on its results
     of operations and financial  position.  See the "Stock-Based  Compensation"
     discussion  in Note 2, which  includes the pro forma impact of  recognizing
     stock-based  compensation  under SFAS No. 123, on the  Company's net income
     and  income  per common  share for the three  months  and six months  ended
     January 31, 2005 and 2004.

                                       7
<PAGE>


5. MARKETABLESECURITIES

     During the quarter ended January 31, 2005, the Company  invested its excess
     cash  and  cash  equivalents  in  a  professionally  managed  portfolio  of
     marketable  securities.  All securities in this portfolio as of January 31,
     2005 were classified as available-for-sale  and consisted primarily of U.S.
     government  securities and corporate bonds.  These investments are reported
     at fair value. The unrealized  loss, net of taxes, on these  investments of
     approximately  $130,000  and  $5,000,  respectively,  for the three and six
     months ended January 31, 2005 is included within other  comprehensive loss.
     The unrealized gain, net of taxes, on these  investments,  of approximately
     $82,000  and  $151,000,  respectively,  for the three and six months  ended
     January 31, 2004 is  included  within  other  comprehensive  gain.  The net
     unrealized loss included in shareholders' equity as of January 31, 2005 was
     $141,000,  net of tax and the net unrealized gain included in shareholders'
     equity as of January 31, 2004 was $51,000, net of tax.

6.   INVENTORIES

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

<TABLE>
<CAPTION>


                                                          January 31,                  July 31,
                                                              2005                       2004
                                                         --------------            ---------------
<S>                                                      <C>                       <C>
     Finished goods.................................     $    2,493,846            $     2,018,152
     Work-in-process................................          1,198,054                  1,260,449
     Raw materials..................................          2,383,161                  2,111,052
                                                         --------------            ---------------
                                                         $    6,075,061             $    5,389,653
                                                         ==============            ===============
</TABLE>




                                       8
<PAGE>



7. PROPERTY AND EQUIPMENT

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

                                     January 31,         July 31,
                                        2005               2004                Life
                                     -----------        -----------        -------------
<S>                                  <C>                <C>                     <C>
Leasehold improvements ......        $ 2,223,769        $ 2,189,955             10 years
Equipment ...................         10,159,556          9,525,117        3 to 10 years
Assets in construction ......            279,297            526,793                  N/A
                                     -----------        -----------
                                      12,662,622         12,241,865
Less accumulated depreciation          7,754,869          7,168,090
                                     -----------        -----------

Property and equipment - net         $ 4,907,753        $ 5,073,775
                                     ===========        ===========
</TABLE>


8. SEGMENT AND GEOGRAPHIC INFORMATION AND CONCENTRATION OF CREDIT RISK

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

     Total revenues from sales in the United States and outside the United
     States are as follows:
<TABLE>
<CAPTION>


                                              Three Months Ended        Six Months Ended
                                          -------------------------  ------------------------
                                            Jan. 31      Jan. 31      Jan. 31      Jan. 31
                                              2005         2004         2005         2004
                                          ------------  -----------  -----------  -----------

<S>                                        <C>          <C>          <C>          <C>
     United States.....................    $15,617,004  $17,008,188  $32,815,862  $32,318,259
     Non-United States.................        551,880      440,489      855,010      732,706
                                          ------------  -----------  -----------  -----------
     Total revenues....................    $16,168,884  $17,448,677  $33,670,872  $33,050,965
                                          ============  ===========  ===========  ===========
</TABLE>

9. NET INCOME PER COMMON SHARE

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

10. COMMON STOCK

     During the six  months  ended  January  31,  2005,  stock  options  for the
     purchase of 70,089 shares of the Company's  common stock were  exercised at
     prices  between  $3.88  and  $16.66  per share  resulting  in  proceeds  of
     $347,000.  During the six months ended January 31, 2004,  stock options and
     warrants for the purchase of 202,921  shares of the Company's  common stock
     were  exercised at prices  between $2.22 and $17.50 per share  resulting in
     proceeds of $1,689,000.

                                      9
<PAGE>

     During the six months ended January 31, 2005 and 2004,  the Company  issued
     37,580 and 24,445 shares in  connection  with its employee  stock  purchase
     plan.

     During the six months ended January 31, 2005 and 2004,  the Company  issued
     2,754 and 1,884 shares of  restricted  stock to the outside  members of the
     Board of Directors.

     During the six months  ended  January 31,  2005,  the  Company  repurchased
     940,400  shares in the public  market at stock  prices  between  $10.66 and
     $18.34 per share for  $13,121,000.  During the six months ended January 31,
     2004, the Company  repurchased 161,600 shares in the public market at stock
     prices between $15.65 and $19.29 per share for $2,794,000.

11. ACCRUED WARRANTY COSTS

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


<S>                                                                                                            <C>
                  Accrued warranty costs at July 31, 2004........................................          $293,500
                  Payments made for warranty costs...............................................          (208,000)
                  Accrual for product costs......................................................            89,000
                                                                                                         ----------
                  Accrued warranty costs at January 31, 2005.....................................          $171,500
                                                                                                         ==========

</TABLE>

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

OUR BUSINESS

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

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

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

                                       10
<PAGE>

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

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

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

                                       11
<PAGE>

In April 2004,  the Company  announced that it had signed a three year agreement
to be the exclusive distributor of the Angiometrx  Metricath(TM) products in the
United States. The Metricath System is an innovative,  catheter-based technology
that allows  cardiologists  to quickly and easily  measure  arterial size during
procedures  for treatment of coronary  artery  disease.  Such  measurements  are
helpful to select appropriately sized stents to achieve optimum patient outcomes
from  coronary  angioplasty  and  related  stent  implantation  procedures.  The
Metricath  System was  developed  in  response  to the  limitations  of existing
measurement  technologies,  which require large capital  investment and which do
not offer the ease of use of the  Metricath  System.  The  Metricath(TM)  System
received FDA 510(k) clearance for sale in the United States in July 2003. During
a limited market release it was discovered that the Metricath System had several
product  design issues that need to be addressed  prior to full market  release.
Angiometrx is currently  addressing  these product design issues.  Future market
release for the Metricath  System will be dependent upon the resolution of these
issues. The Company's AngioJet Rheolytic Thrombectomy System was approved by the
U.S. FDA in 1999 for removing  thrombus in coronary  vessels and saphenous  vein
bypass grafts during percutaneous coronary intervention (balloon angioplasty and
stenting).  This approval includes use in heart attack victims,  who are assumed
to have thrombus whether or not it is angiographically  visible. However, in the
years  following  approval,  AngioJet  was mostly  used in  patients  with large
visible  thrombus.  Some  physician  customers  proposed a study of AngioJet use
specifically in heart attack  patients.  Therefore,  in order to further support
and  expand  AngioJet  use in such  patients,  the  Company  agreed to sponsor a
post-marketing  study to test the  ability of AngioJet  treatment  to reduce the
final infarction size in patients with acute myocardial  infarct (heart attack).
The AiMI study (AngioJet  Rheolytic  Thrombectomy In Patients Undergoing Primary
Angioplasty for Acute Myocardial  Infarction) was a prospective randomized trial
that between 2001 and 2004  enrolled  480  patients  with  anterior or predicted
large inferior infarcts at 32 sites in the U.S. and Canada.  Visible thrombus at
presentation  was  not  a  consideration  for  enrollment.  AiMI  patients  were
randomized  to  receive  either  AngioJet  treatment  followed   immediately  by
conventional balloon angioplasty and stenting, or ballooning and stenting alone.
The study's primary endpoint was final infarct size assessed by nuclear imaging.
Clinical  investigators and the Company were blinded to study outcomes until its
completion. The AiMI study results were first released in August 2004, and first
presented  to  the  cardiology  community  at the  Transcatheter  Cardiovascular
Therapeutics (TCT) conference in September 2004. The study showed no benefit for
infarct size reduction  using  AngioJet,  with larger infarct sizes occurring in
the AngioJet  treatment  group in patients  with inferior  myocardial  infarcts.
However,   other  secondary  endpoints  were  neutral.  The  AiMI  investigators
concluded  that  routine use of AngioJet in all acute heart  attack  patients to
reduce final infarct size cannot be recommended. The results also suggested that
there may be a higher  mortality  risk when using the  AngioJet in acute MI, but
this is less  conclusive  because of  possibly  important  clinical  differences
between the two treatment  groups at baseline that favored the control group and
the  unusually  low death rate noted in the  control  group,  compared  to other
large,  recent AMI studies.  The  investigators  also noted that  AngioJet has a
longstanding  history of safe use in elective  removal of large and  potentially
dangerous  thrombus,  and the selective use of the AngioJet for acute myocardial
infarction  in cases of such  thrombus  was not  specifically  studied  in AIMI.
Still, these study results have negatively  impacted AngioJet catheter sales for
coronary applications.

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

CRITICAL ACCOUNTING POLICIES

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

                                       12
<PAGE>

Revenue Recognition

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

Allowance for Returns

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

Allowance for Doubtful Accounts

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

Inventories

Inventories are valued at the lower of cost or market. In order to determine the
market  value  of  inventory  on a  quarterly  basis,  management  assesses  the
inventory  quantities  on hand to  estimated  future  usage  and sales  and,  if
necessary,  sets up a  obsolescence  reserve  for  inventory  deemed  excess  or
obsolete  to  estimated  market  value.  Management  believes  the amount of the
reserve for inventory  obsolescence  is  appropriate;  however,  actual obsolete
inventory could differ from the original estimate,  requiring adjustments to the
reserve.

Warranty Reserve

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


                                       13
<PAGE>

RESULTS OF OPERATIONS

Three and Six Month Periods Ended January 31, 2005 and 2004

Total  product  sales for the three  months  ended  January 31,  2005  decreased
$1,280,000 or 7%, to  $16,169,000  compared to  $17,449,000  for the  comparable
period in fiscal 2004.  Total product sales for the six months ended January 31,
2005 increased $620,000,  or 2%, to $33,671,000  compared to $33,051,000 for the
comparable  period in fiscal  2004.  The  Company  recorded  net  income for the
quarter  ended  January 31,  2005 of  $1,669,000,  or $0.09 per  diluted  share,
compared  to net  income of  $3,118,000,  or $0.16  per  diluted  share,  in the
comparable  quarter in 2004.  For the six months  ended  January 31,  2005,  the
Company  recorded net income of $3,862,000 or $0.21 per diluted share,  compared
to net income of $5,045,000,  or $0.26 per diluted share,  in the same period in
2004.

Revenue - AngioJet System

U.S.  AngioJet  System  revenue  for the three  months  ended  January  31, 2005
decreased 8% to $15,585,000  from  $17,001,000 for the same period in 2004. U.S.
AngioJet  System  revenue for the six months ended January 31, 2005 increased 1%
to $32,783,000  from $32,311,000 for the same period in 2004. The main factor in
the revenue  decrease  during the second  quarter is due to the negative  impact
from the  results of the AiMI  post-marketing  study.  The  nominal  increase in
revenue during the six months ended January 31, 2005 as compared to 2004 is also
due to this same impact from the results of the AiMI post-marketing study.

As of January 31, 2005, the Company had a total of 1,422 domestic drive units in
the field, compared to 1,168 drive units at January 31, 2004, and 1,371 units as
of October 31, 2004.  During the three month period ended January 31, 2005,  the
Company's  catheter sales decreased  approximately  6% to  approximately  12,000
catheters versus  approximately  12,800 catheters in the same prior year period.
During the six month period ended January 31, 2005, the Company's catheter sales
increased   approximately   2%  to   approximately   24,900   catheters   versus
approximately  24,200  catheters  in the same prior  year  period.  The  average
catheter  utilization  rate per  installed  domestic  drive  unit was 8.3 in the
second quarter of fiscal 2004, compared to a rate of 10.8 in the same prior year
period,  and compared to a rate of 9.3 in the first quarter of fiscal 2005.  The
Company  sold 58 and 115 drive  units  during  the three  and six  months  ended
January 31, 2005,  respectively,  compared to 51 and 106 drive units in the same
periods in the prior year, respectively.

Foreign  sales of the AngioJet  System for the three and six month periods ended
January 31, 2005 were  $552,000 and  $855,000,  respectively.  This  compared to
foreign sales of the AngioJet System of $440,000 and $733,000, respectively, for
the same periods the previous  year.  The Company has recently  hired an outside
consultant to expand product  penetration in Germany.  Limited foreign sales are
primarily due to cost  constraints  in overseas  markets.  In European  markets,
where  public  sector  funds  are more  crucial  for  hospital  operation,  Euro
devaluations  generated  higher public sector deficits,  which, in turn,  forced
reductions in hospital procedure and equipment budgets.

Cost of Medical Products

                                       14
<PAGE>

Cost of medical  products  increased  $316,000 to  $4,283,000 in the three month
period  ended  January 31, 2005 over the same period in the previous  year,  and
increased $801,000 to $8,588,000 for the six month period ended January 31, 2005
over the same period in the previous year.  These increases are primarily due to
the unallocated production overhead and the increase in overhead.

For the  three  months  ended  January  31,  2005,  gross  profit  decreased  by
$1,596,000  to  $11,885,000  over the same  period in the  previous  year.  This
resulted in a gross profit margin of 74% as a percentage of product sales. Gross
profit  decreased  $181,000 to  $25,083,000,  or 74% as a percentage  of product
sales,  for the six month period ended  January 31, 2005 over the same period in
the previous  year.  This  compares to gross  margins as a percentage of product
sales of 77% and 76% for the three and six month periods ended January 31, 2004.
The  decrease  in the gross  margin  rate for the three  and six  months  ending
January 31, 2005 was  primarily  due to lower revenue and to lower mix of XMI RX
and XMI catheters  compared to the same periods in the previous  year.  This was
offset by the impact of higher international sales versus the prior year period.
The  Company  believes  that gross  margins as a percent of sales will be in the
lower to mid seventies for the remainder of fiscal 2005.

Selling, General and Administrative Expense

Selling,  general and administrative expense increased $52,000 to $6,712,000 for
the three months ended  January 31, 2005 and increased  $894,000 to  $14,269,000
for the six months ended  January 31, 2005,  compared to the same periods in the
previous year.  The primary  factors in the changes in the expense for the three
months ended January 31, 2005 were $283,000 of  additional  expenses  associated
with the  growth in the sales  force,  increased  medical  insurance  expense of
$204,000 and increased depreciation of $112,000.  These increases were offset by
a reduction in marketing  clinical  trial  expense of $394,000 and  reduction in
incentives of $141,000. The primary factors for the expense increase for the six
months ended January 31, 2005 were the $623,000  additional  expenses associated
with the  growth in the sales  force,  increased  medical  insurance  expense of
$424,000,  increase in executive  benefit plan expense of $162,000,  increase in
depreciation of $220,000, an increase in sales conventions and sales meetings of
$136,000,  and increase in building rent and operating  costs of $108,000 and an
increase in patent expense of $113,000.  This increase was partially offset by a
reduction in expenses  associated with marketing clinical trials of $572,000 and
a reduction of incentives of $215,000.

Research and Development Expense

Research and development expense increased $625,000 to $2,604,000,  in the three
months  ended  January 31, 2005,  when  compared to the same period in the prior
year.  Research and development  expense increased $936,000 to $5,042,000 in the
six months ended January 31, 2005. The increase was largely due to the timing of
expenses  incurred for various research and development  projects  including the
new drive unit, an associated project to combine the pump and catheter, 6 French
peripheral  catheter  and  projects  relating  to the  improvement  of the rapid
exchange  catheter and the distal occlusion  guidewires.  We expect research and
development  expense to remain  relatively  stable for the balance of the fiscal
year.

                                       15
<PAGE>


Interest Income

Interest income increased $146,000 in the three months ended January 31, 2005 to
$307,000,  when compared to the same period in the prior year.  Interest  income
increased  $272,000 in the six months ended  January 31, 2005,  when compared to
the same period in the prior year.  The increase was due to the recent  interest
rate increases and the increase in the amount of cash available for investments.
Excess cash is invested in an enhanced cash  management  portfolio of marketable
securities.  The Company  expects  interest income to increase in fiscal 2005 as
compared to fiscal 2004 as cash is generated from operations.

Provision For Income Taxes

The Company  recorded a provision for income taxes of $1,209,000  and $1,870,000
for the three months ended January 31, 2005 and 2004, respectively.  The Company
recorded a provision for income taxes of $2,524,000  and  $3,026,000 for the six
months ended January 31, 2005 and 2004, respectively.

During the second quarter of fiscal 2005 the Company  determined it had nexus in
states in which it had not previously  filed corporate state income tax returns.
The Company  will file the  appropriate  corporate  state  income tax returns in
these states  including prior years to obtain the appropriate net operating loss
carry-forwards.  The Company expensed an additional  $100,000 of corporate state
income tax expense  relating to the filing of these state  corporate  income tax
returns  during the three  months  ended  January 31,  2005.  Going  forward the
corporate income tax rate is expected to be approximately 38%.

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


LIQUIDITY AND CAPITAL RESOURCES

The  Company's  cash,  cash  equivalents  and  marketable   securities   totaled
approximately  $41,614,000  at January 31, 2005 versus  $48,171,000  at July 31,
2004.

The $6,557,000 net decrease in cash, cash equivalents and marketable  securities
in  the  most  recent   six-month  period  was  primarily  due  to  the  use  of
$13,121,000of  cash to  repurchase  common stock offset by net cash  provided by
operating  activities of $6,445,000.  Net cash provided by operating  activities
was primarily due to the net income of $3,862,000,  depreciation  of $1,143,000,
non-cash stock  compensation  expense of $141,000 and a decrease in the deferred
tax asset of $2,422,000,  a decrease in accounts  receivable of $1,866,000 and a
decrease in prepaid  expenses of $446,000.  This net cash  provided by operating
activities  was  partially  offset by an increase in inventory  of  $999,000,  a
decrease  in accounts  payable of  $852,000  and a decrease in accrued and other
liabilities of $1,570,000.  Depreciation  includes  company-owned drive units at
customer  locations,  as well as property  and  equipment.  The  decrease in the
deferred  tax  asset  was  due to the  utilization  of the  net  operating  loss
carryovers to offset current taxes payable.  The decrease in accounts receivable
was due to the reduced  revenue in the second quarter of fiscal 2005 compared to
the first  quarter of fiscal 2005.  The decrease to prepaid  expenses was due to
the  expensing of prepaid  insurance.  Inventory  increased to meet the expected
increase in demand of the AngioJet  System.  This demand was less than  expected
due to the AiMI post-marketing  study results.  The decrease in accounts payable
and  accrued  liabilities  were due to the  timing of  payments.  This  decrease
included the payment of fiscal 2004 corporate incentives in September 2004. Cash
provided in investing  activities was  $2,282,000  including the net proceeds of
marketable securities of $2,934,000 and the purchase of $661,000 of property and
equipment. Net cash used in financing activities was $12,344,000, which resulted
from the  repurchase  of 940,400  shares of the  Company's  stock in open market
transactions for $13,121,000, offset by the cash received in connection with the
exercise of stock options of $778,000.

                                       16
<PAGE>

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


OFF-BALANCE SHEET OBLIGATIONS

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


OUTLOOK

The Company expects overall revenue from the AngioJet  System,  primarily in the
United  States,  will be in the range of $64  million  to $66  million in fiscal
2005.  Gross  margin as a percent of sales for fiscal  2005 is expected to be in
the  low  to  mid  seventies.   The  Company   expects   selling,   general  and
administrative expenses to be relatively flat throughout the remainder of fiscal
2005 as a result of the Company's recent expansion of its sales force to enhance
market  penetration  and to address  customer  concerns  about the  recent  AiMI
post-marketing study results. Research and development expenditures are expected
to be  consistent  with the levels during the first two quarters of fiscal 2005.
This level may change if the Company initiates a clinical trial relating to deep
vein  thrombosis and or pulmonary  embolism.  The Company expects net income per
diluted  share for the full year in the  range of $0.30 to  $0.36.  The  Company
anticipates third quarter revenue to be approximately $15 million and net income
in the range of $0.04 to $0.07 per diluted share.

FORWARD-LOOKING STATEMENTS

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

Forward-looking  statements  in this  10-Q are  based on the  Company's  current
expectations  and  assumptions and entail various risks and  uncertainties  that
could cause actual  results to differ  materially  from those  expressed in such
forward-looking statements. Factors that could affect the realization of forward
looking statements include:

                                       17
<PAGE>

o    changes in clinical and market acceptance of our products;
o    changes in the health care industry generally, such as restrictions imposed
     on sales time at interventional labs; consolidation of industry
     participants, cost containment and trends toward managed care;
o    changes in supplier requirements by group purchasing organizations;
     unanticipated costs or other difficulties and uncertainties associated with
     lengthy and costly new product development and regulatory clearance
     processes;
o    changes in governmental laws and regulations;
o    changes in reimbursement;
o    the development of new competitive products such as inexpensive aspiration
     devices, combined aspiration/occlusion products and compounds that may make
     our products obsolete;
o    sudden restrictions in supply of key materials;
o    the effectiveness of our sales and marketing efforts in re-establishing
     coronary product usage,
o    our ability to effectively manage new product development timelines,
o    our ability to generate suitable clinical registry data to support growing
     use of the AngioJet in coronary applications,
o    our the ability to obtain additional regulatory approvals on a timely
     basis;
o    our ability to obtain regulatory clearance in new foreign markets and
o    our ability to retain and motivate skilled employees, especially for sales
     positions.

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

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

The product  sales for the  Company's  foreign  subsidiary  are in U.S.  Dollars
("USD")  except for product  sales in Germany,  which are in Euro's.  The German
product sales were minimal  during the second  quarter.  As of January 31, 2005,
the Company  opened a foreign  bank  account in which the German  product  sales
receipts are deposited and immediately transferred to the operating bank account
in the United  States.  The  balance in the German  bank  account was zero as of
January 31, 2005.

ITEM 4.  CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures
------------------------------------------------

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

                                       18
<PAGE>


Changes in internal control over financial reporting
----------------------------------------------------

During the fiscal  quarter ended  January 31, 2005,  there has been no change in
our internal  control over financial  reporting (as defined in Rule 13a-15(f) or
15d-15(f) under the Exchange Act) that has materially affected, or are is likely
to materially affect, our internal control over financial reporting.

PART II.  OTHER INFORMATION

ITEM.  2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(C)    COMPANY REPURCHASES OF EQUITY SECURITIES

<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------------------------------------
                                                                                                            (d) Maximum Number (or
                                                                                                              Approximate Dollar
                                                                                   (c) Total Number of       Value) of Shares that
                                                                                Shares Purchased as Part     May Yet Be Purchased
                                     (a) Total Number of     (b) Average Price    of Publicly Announced       Under the Plans or
              Period                Shares Purchased (1)       Paid per Share       Plans or Programs            Programs (1)
----------------------------------------------------------------------------------------------------------------------------------
<S>                                             <C>                    <C>                <C>                            <C>
 November 1, 2004 to
  November 30, 2004                           -                      -                      -                          -
----------------------------------------------------------------------------------------------------------------------------------
 December 1, 2004 to
  December 31, 2004                        182,400                 $12.21                182,400                       -
----------------------------------------------------------------------------------------------------------------------------------
January 1, 2005 to
 January 31, 2005                          255,000                 $13.01                255,000                       -
----------------------------------------------------------------------------------------------------------------------------------
              Total                        437,400                 $12.56                437,400                       -
----------------------------------------------------------------------------------------------------------------------------------

</TABLE>

(1)           The Company  repurchased  an  aggregate  of 437,400  shares of its
              common stock pursuant to the  repurchase  program that it publicly
              announced  on August 23,  2004  providing  for the  repurchase  of
              shares  having  a value  of up to  $10,000,000.  The  shares  were
              purchased in open market  transactions.  The Company purchased all
              of the remaining shares under the August 2004 authorization during
              the second  quarter of fiscal  2005.  On February  23,  2005,  the
              Company  announced  authorization  to use up to an additional  $15
              million to effect stock repurchases through December 2006.

                                       19
<PAGE>



ITEM 4.       SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

              a.  The 2004 annual  meeting of  shareholders  of Possis  Medical,
                  Inc. was held on December 8, 2004.

              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:

<TABLE>
<CAPTION>

                                                                         FOR                  WITHHELD
                                                                     -----------             ---------


<S>                                                                  <C>                       <C>
                      Robert G. Dutcher .....................        15,778,711                359,638
                      Mary K. Brainerd.......................        15,200,974                937,375
                      Seymour J. Mansfield...................        15,734,549                403,800
                      William C. Mattison, Jr................        15,115,191              1,023,158
                      Whitney A. McFarlin....................        14,461,731              1,676,618
                      Donald C. Wegmiller....................        15,290,765                847,584
                      Rodney A. Young........................        14,464,612              1,673,737
</TABLE>

                  The names of each Director whose term of office as a
                  Director continued after the meeting are as follows: Robert
                  G. Dutcher, Mary K, Brainerd, Seymour J. Mansfield, William
                  C. Mattison, Jr., Whitney A. McFarlin, Donald C. Wegmiller,
                  and Rodney A. Young.

c.                By a vote of 15,088,597 in the  affirmative,  1,002,529 in the
                  negative and 47,223 abstaining,  the appointment of Deloitte &
                  Touche LLP as the Corporation's  certified public  accountants
                  was ratified.



ITEM 6.           EXHIBITS

Exhibits

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

  Exhibit                         Description
--------------------------------------------------------------------------------

    31.1          Certification of the Chief Executive Officer pursuant to
                  Section 302 of the Sarbanes-Oxley Act of 2002.

    31.2          Certification of the Chief Financial Officer pursuant to
                  Section 302 of the Sarbanes-Oxley Act of 2002.

    32.1          Certification of the Chief Executive Officer pursuant to
                  Section 906 of the Sarbanes-Oxley Act of 2002.

    32.2          Certification of the Chief Financial Officer pursuant to
                  Section 906 of the Sarbanes-Oxley Act of 2002.



                                       20
<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 4, 2005                BY: /s/ ROBERT G. DUTCHER
                                        ----------------------------------------
                                           ROBERT G. DUTCHER
                                           Chairman, President and
                                           Chief Executive Officer





DATE:  March 4, 2005                BY: /s/ EAPEN CHACKO
                                       -----------------------------------------
                                          EAPEN CHACKO
                                          Vice President of Finance and
                                          Chief Financial Officer



                                       21
<PAGE>


                                  EXHIBIT INDEX

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

 Exhibit                          Description
--------------------------------------------------------------------------------

    31.1          Certification of the Chief Executive Officer pursuant to
                  Section 302 of the Sarbanes-Oxley Act of 2002.
    31.2          Certification of the Chief Financial Officer pursuant to
                  Section 302 of the Sarbanes-Oxley Act of 2002.
    32.1          Certification of the Chief Executive Officer pursuant to
                  Section 906 of the Sarbanes-Oxley Act of 2002.
    32.2          Certification of the Chief Financial Officer pursuant to
                  Section 906 of the Sarbanes-Oxley Act of 2002.

                                       22