POSSIS MEDICAL INC - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JULY 31, 1995

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For 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 (I.R.S. Employer
incorporation or organization) Identification No.)

2905 Northwest Boulevard, Minneapolis, Minnesota 55441-2644
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code 612-550-1010

SECURITIES REGISTERED PURSUANT TO SECTION 12 (b) OF THE ACT: None

SECURITIES REGISTERED PURSUANT TO SECTION 12 (g) OF THE ACT:
Common Stock, 40 Cents Par Value

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. (X)

Aggregate market value of the voting stock held by nonaffiliates of the
registrant as of September 18, 1995 was approximately $136,444,344.

The number of shares outstanding of the registrant's common stock as of
September 18, 1995: 9,970,781.

POSSIS MEDICAL, INC.
PART I

Item 1. Business:

General

The Company was incorporated in 1956 and went public in 1960 as Possis Machine
Corporation. During the next thirty years the Company was engaged in several
businesses including a medical device subsidiary established in 1982. In 1990,
the Company made the decision to focus on medical products and subsequently
divested all non-medical operations, beginning with its Technical Services
Division in September 1991 followed by its industrial equipment subsidiary and
corporate real estate in January and March 1994, respectively. See Notes 2 and
12 of Notes to Consolidated Financial Statements contained in Part II, Item 8.
In March 1994 the Company sold its pacemaker lead business because it
anticipated that revenues from this business would decline due to a pacemaker
lead technology shift. In connection with this sale, the Company received $1.1
million in cash and the right to receive royalty payments over a twelve-month
period. See Note 11 of Notes to Consolidated Financial Statements contained in
Part II, Item 8. The sale of the pacemaker lead business enabled Possis to focus
its human and financial resources exclusively on its current products, which are
in human clinical trials in the United States and in early stage sales in Europe
and Japan for limited clinical and pre-clinical use.

Products

ANGIOJET(TM) THROMBECTOMY SYSTEM. The development of blood clots in various
parts of the vascular system is common and is one of the leading causes of
morbidity and death. Blood clots may be caused by various factors, including
cardiovascular disease, trauma, interventional procedures using catheters and
needles or prolonged bed rest. If a blood clot becomes large enough, it can
block an artery, preventing oxygenated blood from reaching the organ or tissue
supplied by the artery. In addition, if a blood clot breaks off it can travel
through the bloodstream and block oxygenated blood flow to other organs and
tissue. Conditions caused by blood clots include peripheral ischemia, which can
lead to limb loss, vascular access failure, pulmonary embolism, acute myocardial
infarction (heart attack), stroke and deep vein obstruction.

Currently, the two primary methods of removing blood clots are thrombolytic
drugs and mechanical devices. Thrombolytic drug treatment involves the
administration of a drug designed to dissolve the blood clot in an intensive or
critical care setting. Thrombolytic drugs may require several administrations to
be effective, and then may only partially remove the clot. In addition,
thrombolytic drugs may require significant time to take effect, which is costly
in an intensive or critical care setting, and may cause uncontrolled bleeding.
Mechanical devices such as the Fogarty-type catheter operate by inflating a
balloon past the point of the blood clot and then dragging the blood clot out of
the patient's body through the artery. Fogarty-type catheters require surgical
intervention, which may result in overnight hospital stays, are more limited in
their applications and may cause vascular trauma.

Possis believes that its AngioJet System represents a new approach to the
removal of blood clots from arteries, veins and grafts and offers certain
potential advantages over current methods of treatment. The AngioJet System is a
minimally invasive catheter system designed for rapidly removing blood clots
with minimal vascular trauma. The system's principal components are a reusable
drive unit, a high-pressure single use pump and a single use small diameter (3.5
to 5F or 1.2 to 1.7 mm) catheter. In clinical trials, the AngioJet System has
demonstrated the ability to remove blood clots within minutes without surgical
intervention and without the risk of uncontrolled bleeding.

The AngioJet System removes blood clots through the non-surgical insertion of
the catheter over a guidewire into the patient's blood vessel and then, with the
aid of fluoroscopy, directing the tip of the catheter to the site of the blood
clot. The drive unit is then activated to deliver pressurized saline through
tiny openings in the catheter's tip. These small waterjets clean the blood clot
from the vessel wall, break it into small fragments and, in order to prevent
formation of a new blood clot downstream, propel the debris down the central
lumen of the catheter and into a collection bag attached to the drive unit,
without the need for a separate suction or vacuum device. Unlike certain other
mechanical devices that are able only to create channels through blood clots of
a size similar to that of the catheter used, the AngioJet System's waterjet
technology enables it to break up large blood clots from vessels much larger
than its catheter diameter.

Because the Possis AngioJet System is unlike any existing procedure or device,
market potential is difficult to quantify, but may be estimated by determining
the number of thrombectomy and thrombolytic procedures performed using other
therapies and devices and estimating the number of procedures that might
reasonably be replaced or supplemented by using the AngioJet System.

Based upon information provided by medical practitioners and its own analysis,
the Company believes that the AngioJet System may potentially be used for
alternative or supplemental therapy for the 60,000 thrombectomy procedures using
lytic drugs, the 380,000 thrombectomy procedures using mechanical devices and
the 60,000 thrombolysis/revision procedures involving dialysis access grafts
estimated to be performed each year in the United States. The Company also
believes that the AngioJet System may be used in Percutaneous Transluminal
Angioplasty ("PTA") procedures that involve the presence of clinically
significant clot. The Company also believes that of the 5.0 million patients
with deep vein thrombosis, 10% would be suitable for treatment with the AngioJet
System. Additionally, the Company believes that the approximately 600,000
patients with pulmonary embolism annually in the United States are candidates
for treatment with the AngioJet System. Further, the Company estimates that more
than 550,000 patients annually are candidates for AngioJet treatment of failed
or occluded saphenous vein grafts, unstable angina, acute myocardial infarction
and strokes.

Although the Company has not yet determined pricing for the AngioJet System, it
anticipates that the price to the hospital for the single use catheter and pump
set will be between $800 and $1,500 and for the drive unit the price will be
between $30,000 and $35,000. The Company cannot estimate the ultimate charge for
this procedure to the patient. The average mechanical thrombectomy procedure is
performed in a surgical setting with an overnight hospital stay and could result
in charges to the patient exceeding $10,000. Lytic drug therapy may cost $500 to
$5,000 for the drug plus hospital and procedure charges, resulting in a total
patient cost of as much as $10,000.

The Company is currently conducting clinical trials in the United States with
the AngioJet System for removing blood clots from peripheral arteries and
vascular grafts and for use in removing blood clots from coronary arteries and
coronary bypass grafts. Possis received FDA approval to initiate clinical
testing of its AngioJet System for use in removing blood clots from peripheral
arteries and vascular grafts in December 1992. The first patient was enrolled in
the trial in July 1993 and by March 31, 1994, Phase I of the trial, consisting
of 19 patients undergoing 23 treatments, was complete and the summary report had
been submitted to the FDA. In July 1994, the Company received approval from the
FDA to commence Phase II of the trial, in which patients receive, on a
one-to-one randomized basis, treatment with either the AngioJet System or a
Fogarty-type catheter already marketed for blood clot removal. As of August 28,
1995, 92 patients had been treated in both phases of the trial, of which 57 were
treated with the AngioJet System. The Company anticipates filing an application
in early 1996 for 510(k) marketing authorization for use in leg arteries or
grafts and A-V access grafts.

In April 1995, Possis received conditional FDA approval to initiate clinical
testing of its AngioJet System for use in removing blood clots from coronary
arteries and bypass grafts. As of August 28, 1995, 10 patients had been treated
to open blocked saphenous vein bypass grafts and native coronary arteries. The
Company believes that the coronary application of the AngioJet System will be
subject to a PMA approval process and anticipates filing a PMA application in
early 1997.

PERMA-FLOW(R) GRAFT. Coronary artery bypass graft ("CABG") surgery is performed
to treat impairment of blood flow to portions of the heart. CABG surgery
involves the addition of one or more new vessels to the heart to re-route blood
around blocked coronary arteries.

Autogenous grafts using the saphenous vein or mammary artery have been
successfully used in CABG procedures for a number of years and have shown a
relatively high patency rate (80% to 90% for saphenous veins and over 90% for
mammary arteries one year after surgery) with no risk of tissue rejection.
However, the harvesting of vessels for autogenous grafts involves significant
trauma and expense. In addition, not all patients requiring CABG surgery have
sufficient native vessels as a result of previous bypass surgeries, or their
vessels may be of inferior quality due to trauma or disease. Cryopreserved
saphenous veins are available, but these veins often deteriorate due to the
body's immune system.

The Possis Perma-Flow Graft is a synthetic graft 5mm in diameter for use in CABG
surgery. The Perma-Flow Graft is intended initially to provide an alternative to
patients with insufficient or inadequate native vessels for use in bypass
surgery as a result of repeat procedures, trauma, disease or other factors. The
Company believes, however, that the Perma-Flow Graft may ultimately be used as a
substitute for native saphenous veins, thus avoiding the trauma and expense
associated with the surgical harvesting of the vein.

The Perma-Flow Graft is made of ePTFE that contains a molded silicone
venturi-shaped flow resistance element approximately 2mm in diameter. The
Perma-Flow Graft is designed to be implanted by initially suturing it to the
vena cava followed by side-to-side anastomoses (connections) of the graft to the
coronary arteries beyond the blockages and finally suturing the graft to the
aorta. The formation of this artery-to-vein shunt is designed to create a
continuous blood flow at a sufficiently high rate through the graft to reduce
the incidence of blood clot formation, the major reason for synthetic graft
failure in the past. The flow resistance element is designed to prevent
excessive shunting of blood to the vena cava and to maintain high arterial
pressure for effective coronary perfusion.

The Company believes that in 1995 approximately 540,000 CABG procedures will be
performed worldwide, of which approximately 300,000 will be performed in the
United States, and that approximately 20% of these CABG procedures will be
performed on patients who have previously undergone bypass surgery. The Company
further believes that the number of repeat procedures will continue to increase
as a percentage of procedures performed, as the number of patients who have the
procedure increases. Currently, approximately 70% of CABG procedures are
performed utilizing the saphenous vein. Based upon its interviews with
cardiovascular surgeons, including those involved in the clinical trials, the
Company believes that patients whose native vessels are not available for use in
bypass surgery comprise approximately 4% of those receiving CABG procedures, or
approximately 20,000 annually, and that approximately 80,000 patients annually
are determined by the treating physician to have native vessels inadequate to be
used in bypass surgery. If initial use of the Perma-Flow Graft is shown to be
clinically acceptable, the Company believes that the graft may be used for these
patients. The Company further believes that if long-term clinical results are
acceptable to clinicians (generally greater than 50% patency five years after
implant), the graft may ultimately be used as a substitute for native saphenous
veins.

Currently, no synthetic coronary graft has been approved by the FDA.
Cryopreserved saphenous veins sell to hospitals for approximately $3,500 to
$4,000 in the United States. The Company anticipates pricing for the Perma-Flow
Graft will be competitive with cryopreserved saphenous veins.

The Company received FDA approval to initiate clinical testing of its Perma-Flow
Graft in November 1991. The Company currently has eight sites actively
recruiting patients. In July 1995, the Company received approval to commence
Phase II of the study comprising 100 additional patients at up to 20 sites. As
of August 28, 1995, 30 patients had been implanted with the Perma-Flow Graft.
Angiographic results within 30 days of surgery have been reported on 17
patients, which confirmed 33 of their 34 side-to-side anastomoses to be patent.
Within this 30-day interval, of the remaining 13 patients, angiographic results
were not reported for nine and four died of causes reported by the investigator
to be unrelated to the graft. In addition, angiographic follow-up was performed
within three to 12 months of implant on seven patients, which confirmed that 14
of 18 anastomoses were patent. The Company anticipates filing a PMA application
for marketing authorization in early 1997.

PERMA-SEAL(R) GRAFT. Patients suffering from renal disease may be required to
undergo long-term kidney dialysis. The majority of these patients require
long-term vascular access to facilitate treatment. A point of access for
dialysis needles may be created by connecting an artery and a vein in the
patient's arm. However, because kidney dialysis therapy typically requires
patients to undergo blood dialysis treatment three times per week, these
connections often become unusable over time. Other methods of vascular access
for kidney dialysis such as temporary catheters are not designed for long-term
use.

A synthetic graft may be implanted in kidney dialysis patients to provide the
necessary vascular access. The vast majority of these synthetic grafts are made
of ePTFE. The use of synthetic grafts currently available is often accompanied
by excessive bleeding when the dialysis needle is withdrawn, requiring a nurse
to apply pressure to help stop the bleeding and requiring the patient to remain
in the treatment area until the bleeding has been stopped. In addition, to limit
the risk of graft infection following implant, at least a two-week healing
period following implantation is required to allow for tissue ingrowth into the
graft before initiating dialysis.

The Possis Perma-Seal Graft is a self-sealing synthetic graft comprised of
silicone elastomers, with a winding of polyester yarn encapsulated within its
wall, and is manufactured using proprietary electrostatic spinning technology
developed by the Company. The Company believes that its Perma-Seal Graft may
offer advantages over currently used synthetic grafts because of its
self-sealing characteristic. The Company believes that this characteristic will
be effective in sealing puncture sites in the grafts with minimal compression
time and bleeding as compared with other currently available graft products and,
as a result, will reduce dialysis procedure and administrative time per patient
and the costs associated therewith. In addition, because of its ability to seal
a needle puncture without depending on tissue ingrowth, the Perma-Seal Graft may
provide an option for patients who require dialysis immediately after implant.

Approximately 170,000 patients in the United States undergo kidney dialysis each
year, of which approximately 140,000 receive vascular access procedures
utilizing either natural vessel grafts or synthetic access grafts. The Company
estimates that of these patients approximately 40,000 are implanted with a
synthetic graft. The Company believes that a comparable market exists outside
the United States as well.

The hospital prices of ePTFE and biological graft products manufactured by
certain other manufacturers currently range from $400 to $700 per unit,
depending on length, style, and configuration. Although final pricing of the
Company's Perma-Seal Graft will depend upon manufacturing costs, distribution
methods, and competitive pressures, the Company anticipates that pricing for the
Perma-Seal Graft will be at a premium relative to standard ePTFE graft products.

In July 1992, Possis received FDA approval to initiate clinical testing of its
Perma-Seal Graft. The study is randomized on a one-to-one basis with patients
receiving either a Perma-Seal Graft or a conventional ePTFE graft. As of August
28, 1995, 138 patients at four clinical sites had been enrolled in the study, 67
of which had received the Perma-Seal Graft. Clinical data indicates that
Perma-Seal Graft patients who have been accessed for dialysis have compression
times to stop bleeding after removing the dialysis needles averaging two minutes
compared to an average of nine minutes with conventional grafts. The Company
filed a 510(k) application for marketing authorization with the FDA in August
1994. In May 1995, the Company received a request for additional information
from the FDA and the Company responded to the request on August 31, 1995. In
July 1995, the Company received approval of an investigational device exemption
("IDE") supplement to commence clinical testing of its new thinner-walled
Perma-Seal Graft.

Research and Development

The Company's product development efforts for its existing products are focused
primarily on clinical testing and obtaining necessary FDA approvals. The
Company's new product development efforts are focused primarily on developing
additional applications of the AngioJet System, including the treatment of deep
vein thrombosis and certain non-vascular tissue cutting applications, and on
utilizing its Perma-Flow Graft and Perma-Seal Graft technologies to develop
other graft products, including endovascular stent grafts. Research and
development expenses are generally incurred for product design and
qualification, manufacturing process development and validation, and clinical
trials and governmental approvals. The Company's research and development
expense is expected to increase as the Company continues its clinical trials and
current product development plans.

As of September 18, 1995, the Company employed approximately 29 full-time
employees in research and development, including six in concept research
(focusing on initial development of new products), five in engineering and
equipment design, 11 in manufacturing process design, four in manufacturing
process qualification and three in regulatory and clinical affairs. The Company
performs all of its research and development activities at its headquarters in
Minneapolis, Minnesota. The Company spent $3.3 million, $3.7 million and $3.6
million in fiscal 1995, 1994 and 1993, respectively, on medical product research
and development. Clinical trial expenses are included in total research and
development expense.

Marketing and Sales

The Company expects to market its AngioJet System and graft products to
physician specialty groups, including vascular surgeons, cardiovascular and
thoracic surgeons, interventional radiologists and interventional cardiologists.
The Company will initially market the AngioJet System for peripheral arterial
and vascular graft thrombosis, targeting vascular surgeons and interventional
clinicians who perform PTA and other thrombectomy or lytic procedures. AngioJet
Systems for coronary applications will be marketed to interventional
cardiologists and cardiovascular surgeons. The primary customer for the
Perma-Flow Graft is expected to be the cardiovascular surgeon and thoracic
surgeon. The initial focus of the Company's marketing will be for use in
procedures involving patients having inadequate native vessels. The Perma-Seal
Graft will be marketed to vascular surgeons, who typically are the primary
decisionmakers with respect to the placement of vascular access grafts for
patients receiving dialysis for renal failure. The Company will also target
other clinicians influential in dialysis treatment selection, including
nephrologists, internists, and dialysis unit technicians.

Possis is currently marketing its AngioJet System and Perma-Flow Graft outside
the United States using an independent distributor network. The Company has
entered into distributorship agreements with six distributors covering Belgium,
Denmark, Germany, Greece, Italy, Luxembourg, The Netherlands, Norway, Spain and
Switzerland. The Company is also selling these products to distributors covering
Canada, France, Japan, and the United Kingdom. Generally, the distributorship
agreements are for a five-year term and provide that the distributors, at their
own expense, will investigate, negotiate and obtain regulatory approvals for the
Company's products in the specified territory. Possis Medical Europe B.V., the
Company's newly formed subsidiary in The Netherlands, acts as a point of
centralized warehousing and distribution in Europe in order to enhance response
time, efficiency and service to European customers. All sales made to the
Company's independent distributors will be denominated in United States dollars.

The Company will begin commercial marketing of the AngioJet System and
Perma-Flow Graft in the United States following receipt of FDA marketing
authorization. The Company intends to market and distribute the AngioJet System
in the United States through a direct sales force and is evaluating distribution
channels for the Perma-Flow Graft.

The Company entered into a distribution agreement with Bard pursuant to which
the Company granted to Bard the exclusive worldwide right to market, sell and
distribute the Company's Perma-Seal Graft. Under the agreement, Bard agreed to
purchase the Perma-Seal Graft from the Company at certain transfer prices, to
purchase certain minimum quantities and to make certain milestone payments to
the Company relating to the commercialization of the product.

Promotional activities by the Company are designed primarily to enlist the
support of key medical opinion leaders in the United States and abroad. The
Company believes that sales to key opinion leaders in European countries will be
especially important to encourage broader acceptance of its products and will
give the Company experience in marketing its products prior to their
introduction in the United States. Other promotional activities may include
publishing analytical papers, making scientific symposium presentations and
conducting comparative clinical trials demonstrating the uses and effectiveness
of the Company's products.

Patents, Patent Applications, Licenses 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 one patent application pending in the United States and one patent
application pending in a foreign jurisdiction. The Company also holds one United
States patent relating to the AngioJet System and a second United States patent
has been allowed which the Company expects to be issued in the near future. In
addition, the Company has 11 United States and 15 foreign patent applications
pending relating to the AngioJet System. In connection with the Perma-Seal
Graft, one United States patent is pending, one of the claims included in which
has been allowed, 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. The Company is
aware of one pending foreign patent application relating to a water jet system
for removing blood clots. Although the application was filed after the AngioJet
System patent application, no assurance can be given that such third party will
not receive a patent.

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 its employees having access to proprietary information 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 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. 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 or 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.

Competition

The Company's products will compete with a number of different products and
methods of treatment for the conditions they address. 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. It is
the Company's understanding that Cordis Corporation currently has a
waterjet-based thrombectomy system in early stage sales in Europe.

The Company is not aware of any synthetic graft being developed that will
compete with the Perma-Flow Graft and believes it is the first developer to
obtain FDA approval for clinical trials with a synthetic coronary bypass graft.
The Company's Perma-Seal Graft will compete with, among others, ePTFE grafts
manufactured by W.L. Gore and Associates and IMPRA, Inc., which currently have a
combined market share estimated to be in excess of 90%.

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 and 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.

Government Regulation

Government regulation in the United States and other countries is a significant
factor in the development and marketing of the Company's products and in the
Company's ongoing manufacturing and research and development activities. The
Company and its products are regulated by the FDA under a number of statutes,
including the FDC Act.

Under the FDC Act, medical devices are classified into one of three classes
(i.e., Class I, II or III) on the basis of the controls deemed necessary to
reasonably ensure their safety and effectiveness. Class I devices are subject to
the least extensive controls, as the safety and effectiveness reasonably can be
assured through general controls (e.g., labeling, premarket notification and
adherence to GMP). For Class II devices, safety and effectiveness can be assured
through the use of special controls (e.g., performance standards, post market
surveillance, patient registries and FDA guidelines). Class III devices (i.e.,
life-sustaining or life-supporting implantable devices, or new devices which
have been found not to be substantially equivalent to legally marketed devices)
require the highest level of control, generally requiring premarket approval by
the FDA to ensure their safety and effectiveness.

If a manufacturer or distributor of medical devices can establish that a
proposed device is "substantially equivalent" to a legally marketed Class I or
Class II medical device or to a Class III medical device for which the FDA has
not required a PMA application, the manufacturer or distributor may seek FDA
marketing clearance for the device by filing a 510(k) notification. Following
submission of the 510(k) notification, the manufacturer or distributor may not
place the device into commercial distribution in the United States until an
order has been issued by the FDA. The FDA's target for issuing such orders is
within 90 days of submission, but the process can take significantly longer. The
order may declare the FDA's determination that the device is "substantially
equivalent" to another legally marketed device and allow the proposed device to
be marketed in the United States. The FDA may, however, determine that the
proposed device is not substantially equivalent or may require further
information, such as additional test data, before making a determination
regarding substantial equivalence. Any adverse determination or request for
additional information could delay market introduction and have a materially
adverse effect on the Company's continued operations.

If a manufacturer or distributor of medical devices cannot establish that a
proposed device is substantially equivalent to another device via the 510(k)
process, the manufacturer or distributor must seek PMA approval of the proposed
device. A PMA application must be submitted, supported by extensive data,
including preclinical and clinical trial data to prove the safety and efficacy
of the device. Generally, a company is required to obtain an IDE before it
commences clinical testing in the United States in support of such PMA. The FDA
monitors and oversees the use and distribution of such "research use only" and
"investigational use only" products. Although by statute the FDA has 180 days to
review a PMA application once it has been accepted for filing, during which time
an advisory committee may also evaluate the application and provide
recommendations to the FDA, PMA reviews often extend over a significantly
protracted time period, usually 12 to 24 months or longer from filing.
Accordingly, there can be no assurance that FDA review of any PMA application
submitted by the Company will not encounter prolonged delays or that the data
collected and submitted by the Company in its PMA will support approval.

Labeling and promotional activities are subject to scrutiny by the FDA and, in
certain instances, by the Federal Trade Commission. The FDA also imposes
post-marketing controls on the Company and its products, and registration,
listing, medical device reporting, post-market surveillance, device tracking and
other requirements on medical devices. Failure to meet these pervasive FDA
requirements or adverse FDA determinations regarding the Company's clinical and
preclinical trials could subject the Company and/or its employees to injunction,
prosecution, civil fines, seizure or recall of products, prohibition of sales or
suspension or withdrawal of any previously granted approvals.

The FDC Act regulates the Company's quality control and manufacturing procedures
by requiring the Company and its contract manufacturers to demonstrate
compliance with current GMP as specified in published FDA regulations. The FDA
monitors compliance with GMP by requiring manufacturers to register with the
FDA, which subjects them to periodic unannounced FDA inspections of
manufacturing facilities. If violations of applicable regulations are noted
during FDA inspections of the Company's manufacturing facilities or the
facilities of its contract manufacturers, the continued marketing of the
Company's products may be adversely affected. Such regulations are subject to
change and depend heavily on administrative interpretations. There can be no
assurance that future changes in regulations or interpretations made by the FDA
or other regulatory bodies, with possible retroactive effect, will not adversely
affect the Company.

The Company has complied with GMP requirements in the past and believes it will
be able to comply with all applicable regulations regarding the manufacture and
sale of medical devices.

Sales of medical devices outside of the United States are subject to United
States export requirements and foreign regulatory requirements. Export sales of
investigational devices that are subject to PMA requirements and have not
received FDA marketing clearance or approval generally are subject to FDA export
permit requirements under Section 801(e) of the FDC Act. In order to obtain such
a permit, the Company must provide the FDA with documentation from the medical
device regulatory authority of the country in which the purchaser is located,
stating that the sale of the device is not a violation of that country's medical
device laws. The Company has received permits to export its AngioJet System,
Perma-Flow Graft and Perma-Seal Graft to the Netherlands and Switzerland and
will use this authorization to transship to additional countries, an activity
that the FDA does not regulate. The Company may also seek additional approvals
to export its products directly into other countries. Legal restrictions on the
sale of imported medical devices vary from country to country. The time required
to obtain approval by a foreign country may be longer or shorter than that
required for FDA approval, and the requirements may differ. For countries in the
EU, in January 1995, CE Mark certification procedures became available for
medical devices, the successful completion of which would allow certified
devices to be placed on the market in all EU countries. After June 1998, medical
devices may not be sold in EU countries unless they display the CE Mark. There
can be no assurance that Possis will be able to obtain regulatory approvals or
clearances for its products in foreign countries.

Employees

As of September 18, 1995, the Company had 107 full-time employees, 1 part-time
employee and 6 contract employees. Of these full-time employees, 29 are in
research and development (including regulatory and clinical), 40 are in
manufacturing and production, 18 are in quality assurance, 4 are in
facilities/maintenance, and 16 are in management or administrative positions.
None of the Company's employees is covered by a collective bargaining agreement,
and management considers its relations with its employees to be good.

Item 2. Properties:

The Company leases approximately 28,300 square feet of office and manufacturing
space (including 6,400 square feet of clean manufacturing space) at 2905
Northwest Boulevard, Minneapolis, Minnesota 55441-2644. The Company is currently
negotiating an extension of this lease which expires in August 1996. See Note 8
of Notes to Consolidated Financial Statements contained in Part II, Item 8.

Item 3. Legal Proceedings:

None

Item 4. Submission of Matters to a Vote of Security-Holders:

None

PART II

Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters:

The Company had 1,878 common shareholders of record at July 31, 1995. The common
stock is traded on the NASDAQ National Market System under the symbol POSS. High
and low closing sale prices for each quarter of fiscal years ended July 31, 1995
and 1994 are presented below:

1995 1994
High Low High Low
QUARTER:
First ................ 6-3/4 5-1/2 12 8-3/4
Second ............... 8-1/4 5-1/2 10-1/4 7-3/8
Third ................ 9-1/4 6-3/8 8-3/4 5-3/4
Fourth ............... 14-7/8 9-1/8 7-3/8 5-3/4

Additional information is contained in Note 5 of Notes to Consoldiated Financial
Statements included in Part II, Item 8.

The Company has not paid cash dividends on its Common Stock since 1983. The
Company currently intends to retain all earnings for use in its business and
does not anticipate paying cash dividends in the foreseeable future.

Item 6. Selected Financial Data:

Listed below is selected financial data for fiscal years ended July 31, 1995,
1994, 1993, 1992, and 1991. All data is in thousands except Earnings Per Share.

1995 1994 1993 1992 1991
INCOME STATEMENT DATA:
Operating revenues-
Continuing operations............... $3,621 $6,400 $8,435 $7,160 $5,422
Net income (loss):
Continuing operations............... (5,153)(1,246) (181) 471 801
Discontinued operations............. 421 523 (1,331) 153 (434)
Net income (loss) per common share:
Continuing operations............... (.53) (.15) (.02) .06 .10
Discontinued operations............. .04 .06 (.16) .02 (.06)

BALANCE SHEET DATA:
Total assets.........................$10,321 $8,882 $11,472 $11,133 $10,222
Shareholders' equity................. 8,648 5,684 5,947 6,969 6,124
Current ratio........................ 5.8 2.4 2.4 3.6 2.6
Long-term debt,
excluding current maturities...... 93 80 1,279 1,313 1,250
Long-term debt-to-equity ratio....... 1.1% 1.4% 21.5% 18.8% 20.4%

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations:

General

The Company was incorporated in 1956 and went public in 1960 as Possis Machine
Corporation. Initial operations consisted of design, manufacturing, and sales of
industrial equipment and a division that provided temporary technical personnel.
The Company's involvement with medical products began in 1976, when it sold its
rights to a patented bileaflet mechanical heart valve, which it had obtained
from Zinon C. Possis, the founder of the Company, to St. Jude Medical, Inc. for
annual royalty payments based on St. Jude's valve sales (the "St. Jude
Royalties"). In 1982 a subsidiary was established to focus initially on the
development of a synthetic blood vessel used to bypass blocked coronary
arteries. In the late 1980's the Company decided to leverage existing management
expertise and entered the pacemaker lead business. The strategic role of the
pacemaker lead business was to provide cash flow to fund the development of
synthetic grafts and thrombectomy systems and to give the Company access to and
name recognition within the medical device industry. In 1990 the Company made
the decision to focus on medical products and subsequently divested all
non-medical operations, beginning with its Technical Services Division in
September 1991 followed by its industrial equipment subsidiary and related land
and buildings in January 1994. See Notes 2 and 12 of Notes to Consolidated
Financial Statements. In March 1994 the Company sold its pacemaker lead business
because it anticipated that revenues from this business would decrease due to a
pacemaker lead technology shift. In connection with this sale, the Company
received $1.1 million in cash and the right to receive royalty payments over a
twelve-month period. See Note 11 of Notes to Consolidated Financial Statements.
The sale of the pacemaker lead business has enabled Possis to focus its human
and financial resources exclusively on its other products, which are currently
in clinical trials in the United States and in early stages of commercialization
in Europe, Japan and Canada.

Over the past three fiscal years, substantially all of the Company's revenues
and gross profits have been derived from the sale of pacemaker leads and the St.
Jude Royalties. The resulting cash flow together with the approximately $7.2
million net proceeds from the Company's 1994 Common Stock offering has been used
to fund the Company's operations, including research and development related to
its products. With the sale of its pacemaker lead business and the expiration of
royalty payments from St. Jude in March 1995, Possis does not expect to become
profitable unless it achieves significant sales outside the United States and
its products receive FDA marketing approval. There can be no assurance that
significant sales or marketing approvals will occur.

Results of Operations

Fiscal Years ended July 31, 1995, 1994 and 1993

Total revenues decreased 55% in fiscal 1995 and decreased 5% in fiscal 1994 as
compared to the prior years. Significant factors in the revenue decreases were
the March 1994 sale of the Company's pacemaker lead business and the expiration
of the St. Jude Royalties in March 1995. Partially offsetting the revenue
reductions in fiscal 1994 was a gain $1.6 million on the sales of the pacemaker
lead business and the Company's land and buildings associated with its
discontinued operations. The Company believes that future revenues will come
primarily from sale of its current products.

Cost of medical products in fiscal 1995 and fiscal 1994 included approximately
$3.0 million and $2.3 million, respectively, of manufacturing start-up expense
relating primarily to new technology and manufacturing processes. Manufacturing
start-up expense includes excess labor and material costs, higher than normal
levels of scrap product and unabsorbed manufacturing overhead expenses
associated with the installation and start-up of new manufacturing processes.
Additional manufacturing start-up expenses are expected as the Company continues
to refine its manufacturing processes and until the Company begins to produce
its products in commercial quantities. The Company believes manufacturing cost
per unit produced will decrease from fiscal 1995 levels as it gains line
operating experience and as production volume grows in response to anticipated
sales increases.

Selling, general and administrative expense increased 24% to $2.1 million in
fiscal 1995 from $1.7 million in fiscal 1994 which decreased 20% from $2.1
million in fiscal 1993. The fiscal 1995 expense increase results primarily from
growing sales and marketing expenditures for personnel, travel, conventions and
related expenses necessary to introduce the Company's products into the
international marketplace. The fiscal 1994 expense decrease versus the prior
year reflects a $600,000 decrease in administrative expenses associated with
consolidating administrative responsibilities, a real estate tax reduction and
the nonrecurrence of computer system installation expenses incurred in fiscal
1993. Partially offsetting the fiscal 1994 expense reduction was a sales and
marketing expense increase of approximately $200,000 related to the
international introduction of the Company's products. Sales and marketing
expenses are expected to increase from fiscal 1995 levels along with anticipated
product sales increases and the establishment of a direct sales organization in
the United States, which the Company believes will begin in fiscal 1996.

Research and development expense decreased 12% to $3.3 million in fiscal 1995
versus the prior year and increased 4% to $3.7 million in fiscal 1994 from $3.6
million in fiscal 1993. The fiscal 1995 decrease results from the lack of
pacemaker lead research activity following the March 1994 sale of the pacemaker
lead business. The Company's research and development expenditures are expected
to increase from fiscal 1995 levels as the Company continues its United States
clinical trials and current product development plans.

Interest expense decreased to $24,000 in fiscal 1995 and decreased 13% to
$124,000 in fiscal 1994 versus the prior years. Between fiscal 1993 and fiscal
1995 the Company reduced its mortgage and note payable debt from $1.3 million at
July 31, 1993 to $176,000 at July 31, 1995. The debt reduction was accomplished
utilizing cash proceeds from sale of assets and the Company's 1994 Common Stock
offering.

Income from the Company's discontinued operations, excluding the fiscal 1994
gain of $68,000 and fiscal 1993 estimated loss of $1.4 million on the sale of
Jet Edge, was $421,000, $455,000 and $80,000 in fiscal years 1995, 1994 and
1993, respectively. The Company will continue to recognize revenue related to
the sale of its Technical Services Division through the first quarter of fiscal
1997. See Note 2 of Notes to Consolidated Financial Statements.

Liquidity and Capital Resources

The Company's cash, cash equivalents and marketable securities balance at July
31, 1995, 1994 and 1993 was $6.7 million, $1.8 million and $569,000,
respectively. The increase in fiscal 1995 is primarily the result of the
Company's September 1994 Common Stock Offering.

During fiscal 1995, cash used in operating activities was $1.9 million, which
resulted principally from the net loss of $4.7 million and a decrease in accrued
and other current liabilities of $1.1 million, offset by depreciation and
amortization of goodwill and stock compensation totalling $546,000 and a
decrease in accounts receivable of $3.2 million. Cash used in investing
activities was $1.5 million, which resulted primarily from net purchases of
marketable securities of $1.3 million and additions to plant and equipment of
$562,000, offset by proceeds from the sale of discontinued operations of
$350,000. Net cash provided by financing activities of $7.1 million resulted
principally from the September 1994 Common Stock offering of $7.2 million, the
exercise of stock options of $297,000 and proceeds from notes payable of
$116,000, offset by the repayment of long-term debt of $595,000.

During fiscal 1994, cash used in operating activities was $1.2 million, which
resulted principally from a net loss before gains on the sale of the pacemaker
lead business and real estate of approximately $2.3 million and decreases in
accounts payable and accrued and other current liabilities of $825,000, offset
by depreciation and amortization of goodwill and stock compensation totalling
$665,000 and a decrease in accounts receivable of $1.5 million. Cash provided by
investing activities was $2.9 million, including primarily proceeds from the
sale of discontinued operations of $1.1 million and proceeds from the sale of
real estate and the pacemaker lead business of $1.2 million and $1.1 million,
respectively, offset by additions to plant and equipment of $554,000. Net cash
used in financing activities of $460,000 resulted principally from repayment of
long-term debt of $803,000 offset by proceeds from notes payable of $144,000 and
proceeds from the issuance of stock and exercise of options and warrants of
$199,000.

During fiscal 1993, cash used in operating activities was $490,000, which
resulted primarily from the loss of $1.5 million and a decrease in receivables
and inventories of $444,000 and $426,000, respectively, offset by depreciation
of $510,000 and an increase in accrued and other current liabilities of $1.2
million. Cash used in investing activities was $344,000, which was the result of
additions to plant and equipment of $579,000 offset by proceeds from the sale of
discontinued operations of $150,000 and proceeds from the sale of fixed assets
of $85,000. Net cash provided by financing activities of $454,000 was
principally the result of proceeds from the issuance of stock and exercise of
options and warrants.

In the fourth quarter of fiscal 1995, the Company received its final payments of
royalties from the heart valve patent sale and the sale of the pacemaker lead
business. In recent years, the St. Jude Royalties and the cash generated by the
lead business have been the Company's primary operating sources of cash.

The Company expects to receive up to an additional $2.0 million in payments from
Bard during the next 12 months pursuant to the distribution agreement executed
in December 1994. Such payments are dependent upon the Company achieving certain
milestones. See Note 13 of Notes to Consolidated Financial Statements.

The Company anticipates reporting a loss in fiscal 1996 and believes that
current capital resources together with the proceeds of this offering will fund
planned operations for the foreseeable future.

Item 8. Financial Statements and Supplementary Data

(a) Financial Statements

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders of
Possis Medical, Inc. (formerly Possis Corporation):

We have audited the accompanying consolidated balance sheets of Possis Medical,
Inc. and its subsidiaries (the Company) as of July 31, 1995 and 1994 and the
related consolidated statements of operations, cash flows and changes in
shareholders' equity for each of the three years in the period ended July 31,
1995. Our audits also included the financial statement schedule listed in the
Index at Item 14. These financial statements and financial statement schedule
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and schedule based on our
audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
July 31, 1995 and 1994 and the results of its operations and its cash flows for
each of the three years in the period ended July 31, 1995 in conformity with
generally accepted accounting principles. Also, in our opinion, the financial
statement schedule referred to above, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.

/s/Deloitte & Touche LLP

August 28, 1995
Minneapolis, Minnesota

Item 8. Financial Statements and Supplementary Data:

POSSIS MEDICAL, INC.
CONSOLIDATED BALANCE SHEETS
JULY 31, 1995 AND 1994

1995 1994
ASSETS

CURRENT ASSETS:
Cash and cash equivalents (Notes 1 & 8) ...................... $ 5,450,057 $ 1,769,348
Marketable securities (Note 1) ............................... 1,270,654 --
Receivables:
Trade (less allowance for doubtful accounts:
$10,000 and $30,000, respectively) ..................... 14,976 45,706
St. Jude Medical, Inc. (Note 6) ............................ -- 2,930,158
Jet Edge (less allowance for doubtfull accounts:
$17,019 and $90,000, respectively) (Note 2) ............ -- 215,160
Notes receivable (Note 2) .................................. 123,918 123,918
Other ...................................................... 204,297 385,798
Inventories (Note 1):
Parts ...................................................... 489,418 471,943
Work-in-process ............................................ 427,495 482,181
Finished goods ............................................. 94,101 89,500
Prepaid expenses and other assets ............................ 191,535 309,629
Total current assets .................................. 8,266,451 6,823,341

PROPERTY (Notes 1,2, and 3):
Leasehold improvements ....................................... 175,556 160,069
Machinery and equipment ...................................... 2,287,755 2,041,873
Assets in construction ....................................... 300,377 83,305
2,763,688 2,285,247
Less accumulated depreciation ................................ (1,303,021) (1,017,013)
Property - net .......................................... 1,460,667 1,268,234

OTHER ASSETS:
Goodwill (Note 1) ............................................ 485,922 557,922
Notes receivable (Note 2) .................................... 108,153 232,071
$ 10,321,193 $ 8,881,568

See notes to consolidated financial statements.

POSSIS MEDICAL, INC.
CONSOLIDATED BALANCE SHEETS
JULY 31, 1995 AND 1994

1995 1994

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Trade accounts payable ................................................ 159,365 115,359
Accrued liabilities:
Related parties (Note 6) .......................................... -- 1,062,182
Salaries, wages, and commissions .................................. 693,402 622,982
Warranty reserve .................................................. -- 30,000
Current portion of long-term debt (Note 3) ............................ 82,925 574,366
Other liabilities (Note 3) ............................................ 484,597 411,016
Total current liabilities ................................... 1,420,289 2,815,905

DEFERRED REVENUE (Note 2) ................................................. 132,912 246,828

LONG-TERM DEBT (Note 3) ................................................... 92,955 80,370

OTHER LIABILITIES ......................................................... 27,380 54,760

COMMITMENTS AND CONTINGENCIES (Notes 8 and 14)

SHAREHOLDERS' EQUITY (Note 5):
Common stock-authorized, 20,000,000 hares of $ .40 par value each;
issued and outstanding, 9,970,031 and 8,456,252
shares, respectively .............................................. 3,988,013 3,382,501
Additional paid-in capital ............................................ 14,201,925 7,180,089
Unearned compensation ................................................. (50,387) (118,836)
Retained deficit ...................................................... (9,491,894) (4,760,049)
Total shareholders' equity ...................................... 8,647,657 5,683,705
$ 10,321,193 $ 8,881,568

See notes to consolidated financial statements.

POSSIS MEDICAL, INC.
Consolidated Statements of Operations
Years Ended July 31, 1995, 1994, and 1993

1995 1994 1993

REVENUES:
Medical products (Notes 9 & 10)......................... $229,984 $3,140,335 $5,169,100
Net heart valve patent payments (Note 6)................ 1,817,388 2,998,091 3,172,602
Royalty payments relating to
pacemaker lead business (Note 11)................... 410,118 176,292 -
Sales agreement revenue (Note 13)....................... 750,000 - -
Gain on sale of pacemaker lead
business (Note 11).................................. - 647,816 -
Gain on sale of real estate (Note 12)................... - 957,573 -
Other, primarily interest............................... 413,628 85,397 92,971
Total revenues...................................... 3,621,118 8,005,504 8,434,673

COST OF SALES AND OTHER EXPENSES:
Cost of medical products................................ 3,334,589 3,675,461 2,734,644
Selling, general and administrative..................... 2,118,183 1,706,420 2,124,767
Research and development (Note 9)....................... 3,297,524 3,745,762 3,613,050
Interest................................................ 23,568 124,104 142,992
Total cost of sales and other expenses.............. 8,773,864 9,251,747 8,615,453

LOSS FROM CONTINUING OPERATIONS ............................. (5,152,746) (1,246,243) (180,780)

INCOME (LOSS) FROM DISCONTINUED
OPERATIONS, INCLUDING GAIN (LOSS)
ON DISPOSAL - NET (Note 2).......................... 420,901 523,504 (1,330,884)

NET LOSS .................................................... $(4,731,845) $(722,739) $(1,511,664)

WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING........................... 9,726,105 8,435,818 8,361,347

EARNINGS (LOSS) PER COMMON SHARE:
Continuing operations................................... $(.53) $(.15) $(.02)
Discontinued operations................................. .04 .06 (.16)

NET .................................................... $(.49) $(.09) $(.18)

See notes to consolidated financial statements.

POSSIS MEDICAL, INC.
Consolidated Statements of Cash Flows
Years Ended July 31, 1995, 1994, and 1993

1995 1994 1993

OPERATING ACTIVITIES:
Net loss ...................................................... $(4,731,845) $(722,739) $(1,511,664)
Adjustments to reconcile net loss to net
cash used in operating activities:
Gain on sale of discontinued operations........................ - (68,123) -
(Gain) loss on disposal of assets.............................. 5,631 245 (43,936)
Gain on sale of lead business.................................. - (647,816) -
Gain on sale of real estate.................................... - (957,573) -
Depreciation................................................... 361,024 353,584 509,891
Amortization of goodwill....................................... 72,000 72,000 72,000
Stock compensation............................................. 113,298 238,930 165,206
(Increase) decrease in receivables............................. 3,157,870 1,537,092 (443,618)
(Increase) decrease in inventories............................. 32,610 (18,722) (426,270)
(Increase) decrease in other current assets.................... 56,493 (159,734) (16,023)
Increase (decrease) in trade accounts payable.................. 44,006 (457,786) 226,483
Increase (decrease) in accrued and other current liabilities... (1,059,792) (367,340) 1,150,138
Other.......................................................... - - (172,121)
Net cash used in operating activities...................... (1,948,705) (1,197,982) (489,914)
INVESTING ACTIVITIES:
Proceeds from sale of discontinued operations.................. 349,679 1,111,792 150,000
Additions to plant and equipment............................... (561,817) (553,506) (578,576)
Proceeds from sale of fixed assets............................. 2,728 430 85,000
Proceeds upon disposal of real estate.......................... - 1,200,000 -
Proceeds upon sale of lead business............................ - 1,100,000 -
Purchase of marketable securities.............................. (11,431,373) - -
Proceeds from sale/maturity of marketable securities........... 10,160,719 - -
Net cash provided by (used in)
investing activities.................................... (1,480,064) 2,858,716 (343,576)
FINANCING ACTIVITIES:
Proceeds from notes payable.................................... 115,673 143,928 -
Repayment of long-term debt.................................... (594,530) (803,136) (31,091)
Proceeds from issuance of stock and exercise
of options and warrants..................................... 7,588,335 198,988 485,099
Net cash provided by (used in)
financing activities.................................... 7,109,478 (460,220) 454,008

INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS...................................................... 3,680,709 1,200,514 (379,482)

CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD......................................................... 1,769,348 568,834 948,316

CASH AND CASH EQUIVALENTS AT END OF PERIOD.......................... $5,450,057 $1,769,348 $568,834

SUPPLEMENTAL CASH FLOW DISCLOSURE:
Cash paid for interest......................................... $23,568 $130,313 $131,408
Inventory transferred to fixed assets.......................... 30,473 21,298 -

See notes to consolidated financial statements

POSSIS MEDICAL, INC.
Consolidated Statements of Changes in Shareholders' Equity
Years Ended July 31, 1995, 1994, and 1993

Common Stock Additional
Paid-in Unearned Retained
Shares Amount Capital Compensation Deficit Total

BALANCE AT JULY 31, 1992........... 8,256,297 $3,302,519 $6,191,707 - $(2,525,646) $6,968,580
Employee stock purchase
plan...................... 14,996 5,998 113,520 - - 119,518
Stock options issued to
directors (Note 5)........ - - 26,747 - - 26,747
Stock options and
warrants exercised........ 105,793 42,317 323,264 - - 365,581
Stock grants and amortization
(Note 5).................... 42,717 17,087 257,182 (295,668) - (21,399)
Net loss....................... - - - - (1,511,664) (1,511,664)
BALANCE AT JULY 31, 1993........... 8,419,803 3,367,921 6,912,420 (295,668) (4,037,310) 5,947,363
Employee stock purchase
plan...................... 16,019 6,408 95,714 - - 102,122
Stock options issued to
directors (Note 5)......... - - 62,100 - - 62,100
Stock options exercised........ 20,430 8,172 109,855 - - 118,027
Unearned stock compensation
amortization............... - - - 176,832 - 176,832
Net loss....................... - - - - (722,739) (722,739)
BALANCE AT JULY 31, 1994........... 8,456,252 $3,382,501 $7,180,089 $(118,836) $(4,760,049) $5,683,705
Employee stock purchase
plan........................ 10,932 4,373 65,319 - - 69,692
Stock options issued to
directors (Note 5)........... - - 44,849 - - 44,849
Stock options exercised........ 147,000 58,800 640,021 698,821
Stock retired.................. (58,281) (23,312) (378,229) - - (401,541)
Stock bonus.................... 11,628 4,651 59,303 - - 63,954
Stock offering................. 1,402,500 561,000 6,590,573 - - 7,151,573
Unearned stock compensation
amortization................. - - - 68,449 - 68,449
Net loss........................... - - - - (4,731,845) (4,731,845)
BALANCE AT JULY 31, 1995........... 9,970,031 $3,988,013 $14,201,925 $(50,387) $(9,491,894) $8,647,657

See notes to consolidated financial statements.

POSSIS MEDICAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Consolidation The accompanying consolidated financial statements
include the accounts of Possis Medical, Inc. (the Company, formerly
Possis Corporation) and its wholly-owned subsidiaries, Possis
Holdings, Inc., JEI Liquidation, Inc. (Jet Edge) (Note 2) and Possis
Medical Europe B.V., after elimination of intercompany accounts and
transactions.

Possis Medical, Inc. is a developer, manufacturer and marketer of medical
devices. The Company was incorporated in 1956 and has operated several
businesses over the last 39 years. In 1990 the Board of Directors decided
to focus on medical products, which led to the sale of the Technical
Services Division in 1991 and the Jet Edge industrial waterjet business in
1994. In March 1994 the Company sold its pacemaker lead business because it
anticipated that revenues from this business would decline due to a
pacemaker lead technology shift. The name of the Company was changed to
Possis Medical, Inc. in 1993. In January 1995, the Company established a
100% owned subsidiary (Possis Medical Europe B.V.) in The Netherlands to
support international product distribution.

Inventories Inventories are stated at the lower of cost (on the first-in,
first-out basis) or market.

Property, Depreciation, and Amortization Property is carried at cost and
depreciated using the straight-line method over estimated useful lives of
the assets at the following annual rates:

Building............................... 3-10%
Machinery and equipment................ 10-25%

Goodwill Goodwill is being amortized on a straight-line basis over 13 1/2
years, based on the remaining life of patent rights related to the
Perma-Flow(R) graft acquired in 1988. Accumulated amortization at July 31,
1995 and 1994 was $501,500 and $429,500, respectively.

Income Taxes The Company accounts for income taxes under the Statement of
Financial Accounting Standard ("SFAS") No. 109, "Accounting for Income
Taxes." Certain items are accounted for tax purposes in a different period
than for financial statement purposes.

Revenue Recognition Revenue associated with medical products sales is
recognized when products are shipped. Heart valve patent revenue and
royalty payments related to the pacemaker lead business sale were accrued
based on estimated sales of the companies making the royalty payments.

Earnings (Loss) Per Share The Company's outstanding stock options and stock
warrants are not considered in the computation of earnings per share
because the impact would be antidilutive because of the net loss. The
difference between primary and fully diluted earnings per share was not
significant in any period.

Cash Equivalents The Company considers highly liquid investments with
original maturities of three months or less to be cash equivalents.

Marketable Securities Effective August 1, 1994 the Company adopted
Financial Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities." All Company securities as of July 31, 1995
are classified as available-for-sale and carried at fair value. There was
no material difference between amortized cost and fair value for the
marketable securities at adoption or at July 31, 1995.

2. DISCONTINUED OPERATIONS
Waterjet Equipment In April 1993, the Company decided to discontinue its
waterjet equipment business (Jet Edge). A reserve of $850,000 for the
estimated loss on disposal of Jet Edge was established at July 31, 1993.
The business was sold on January 28, 1994 to TC/American Monorail, Inc.
Under the terms of the sale, the Company received $963,000 for certain
inventory and fixed assets. The sale resulted in a book gain of
approximately $68,000. The Company retained all liabilities and the right
to all proceeds from the collection of the accounts receivable.

No assets or liabilities of the waterjet equipment business remain as of
July 31, 1995. A summary of the assets and liabilities at July 31, 1994 is
as follows:

Receivables, net........................... $215,160
Accrued liabilities ....................... 30,000
Net..................................... $185,160

Technical Services On September 29, 1991, the Company sold its
Technical Services division to Advance Technical Services, Inc. (ATS)
which is 51% owned by a former officer of the Company. Under the terms
of the sale, the Company received approximately $550,000 in cash and a
note of $250,000 for the net assets of the business and realized a
gain of $66,517. In addition, the Company will receive a percentage
of ATS's annual revenues in excess of a specified amount for a five-year
period, up to a maximum of $2,000,000. These amounts are recognized as
income when received or when collection is reasonably assured. As part of
the sale, the Company also received $200,000 in cash and a note of
$500,000 for an agreement not to compete for a five-year period; income
from this agreement is recognized ratably over the period of the agreement.

Notes receivable related to the Technical Services division at July 31,
1995 and 1994 are as follows:

1995 1994
9% note receivable, due in 20 quarterly
installments of principal and interest
through October 1, 1996................ $62,500 $112,500
Note receivable, no interest, principal
due in five equal annual installments
on October 1, 1992 through
October 1, 1996........................ 200,000 300,000
Discount on noninterest bearing note
(amortized over the term of the note).. (30,429) (56,511)
232,071 355,989
Less current portion...................... (123,918) (123,918)
$108,153 $232,071

Operating Results from Discontinued Operations Operating results of the
waterjet equipment business and Technical Services division were as follows
for the years ended July 31, 1995, 1994 and 1993:

1995 1994 1993

Sales .............................. $ - $3,400,170 $5,525,106
Income (loss) from operations........ $87,306 $142,259 $ (221,923)
Amortization of not-to-compete
agreement......................... 113,916 113,916 113,916
Percentage of ATS's revenues......... 219,679 199,206 188,279
Income before income taxes.......... 420,901 455,381 80,272
Gain or estimated (loss) on disposal,
including, for Jet Edge, provision
for estimated losses from
measurement date to date of
disposal.......................... - 68,123 (1,411,156)
Net income (loss).................... $420,901 $523,504 $(1,330,884)

3. OTHER CURRENT LIABILITIES AND LONG-TERM DEBT
Other current liabilities at July 31, 1995 and 1994 are as follows:

1995 1994
Animal trial expense..................... $19,344 $209,818
Clinical trial expense................... 243,202 4,000
Legal fees............................... 96,900 42,748
Other.................................... 125,151 154,450
$484,597 $411,016

Long-term debt at July 31, 1995 and 1994 is as follows:
1995 1994
11% mortgage payable, paid in September 1994...... - $500,000
9.75% note payable, paid in April 1995............ - 28,740
8.25% note payable, principal and
interest payable monthly, final payment
due in February 1997, collateralized by
the Company's equipment........................ 80,370 125,996
9.90% note payable, principal and
interest payable monthly, final payment
due in November 1997, collateralized
by the Company's equipment..................... 60,258 -
9.75% note payable, principal and
intesest payable monthly, final payment
due in November 1998, collateralized
by the Company's equipment..................... 17,880 -
10.15% note payable, principal and
interest payable monthly, final payment
due in December 1998, collateralized
by the Company's equipment..................... 17,372 -
175,880 654,736
Less current maturities........................ (82,925) (574,366)
$92,955 $ 80,370

Maturities of long-term debt are $82,925 in 1996 and $67,686 in 1997,
and $20,756 in 1998, and $4,513 in 1999.

4. INCOME TAXES
At July 31, 1995, the Company has net operating loss carryforwards of
approximately $8,180,000 for financial reporting purposes; $6,354,000 for
federal tax purposes which expire in 2002 through 2010 and $2,713,000 for
Minnesota tax purposes which expire in 2002 through 2010.

In addition, at July 31, 1995 the Company has approximately $1,394,000 in
federal tax credits, substantially all of which is a research and
development tax credit which expire from 1999 through 2010, and $65,182 AMT
which does not expire.

Deferred tax assets and liabilities as of July 31 are described in the
table below. The Company has not recorded any net deferred tax assets due
to the uncertainty of realizing such assets:

1995 1994
Current assets (liabilities):
Allowance for doubtful accounts....... $10,000 $48,000
Inventory............................. 294,000 340,000
Accrued vacation...................... 45,000 50,000
Heart valve patent payments........... - (750,000)
Other ............................... 31,000 48,000
380,000 (264,000)
Less valuation allowance.............. (380,000) -
Net................................... $ - $(264,000)

Long-term assets:
Net operating losses.................. $2,912,000 $1,680,000
Amortization of patents............... 122,000 117,000
Depreciation.......................... 4,000 (4,000)
3,038,000 1,793,000
Less valuation allowance.............. (3,038,000) (1,529,000)
Net ............................... $ - $ 264,000

The effective income tax rate differed from the U.S. federal statutory
rate for each of the three years ended July 31, as follows:

1995 1994 1993
Tax benefit on loss from
continuing operations computed at
statutory rate of 34%............$(1,751,934) $(423,640) $(61,465)
Increases in tax due to nonrecognizable
benefits of net operating loss
carryforwards................ 1,751,934 423,640 61,465
Total income tax expense -
continuing operations............$ - $ - $ -

5. COMMON STOCK
Stock Options Certain officers, directors, key employees, and certain other
individuals may purchase common stock of the Company under stock option
plans.

In 1992, the Company established the 1992 Stock Compensation Plan (the 1992
Plan), which replaced the 1983 and 1985 plans. Although the 1983 and 1985
plans remain in effect for options outstanding, no new options may be
granted under these plans.

The 1992 Plan authorizes awards of the following types of equity-based
compensation: Incentive Stock Options, Nonqualified Stock Options, Stock
Appreciation Rights, Restricted Stock, Deferred Stock, Annual Grants of
Stock Options to Directors, Stock Options to Directors in Lieu of
Compensation for Services rendered as Directors, and Other Stock-Based
Awards valued in whole or in part by reference to stock of the Company. No
Incentive Stock Options may be granted on or after August 1, 2002, nor
shall such options remain valid beyond ten years following the date of
grant.

The total number of shares of stock reserved and available for distribution
under the 1992 Plan originally was 600,000 shares, a maximum of 350,000 of
which may be issued as Incentive Stock Options. The total number of shares
reserved and available for distribution under the plan shall be increased
annually on January 2 by 1% of the number of shares of the Company's common
stock outstanding at July 31 of each prior fiscal year. At July 31, 1995,
there were 788,194 shares reserved and 447,791 shares available for
granting under the 1992 Plan.

In 1983, the Company established an Incentive Stock Option Plan. A maximum
of 545,000 shares were authorized under the plan at an option price of at
least 100% of the fair market value at date of grant. The options become
exercisable at date of grant, except for those options granted after March
17, 1985, which vest ratably over a three or four-year period. All options
expire ten years from date of grant.

In 1985, the Company established a Nonqualified Stock Option Plan under
which a maximum of 200,000 shares were authorized to be granted at a price
of at least 100% of the fair market value at date of grant. The options
vest ratably over a three or four year period and expire not more than ten
years from date of grant.

In 1991, the Company granted 12,750 noncompensatory options to Z.C. Possis,
former Chief Executive Officer of the Company. These options are fully
vested and expire not more than ten years from date of grant. At July 31,
1995, none of these options had been exercised.

In fiscal 1995, 1994 and 1993, the Company granted 11,574, 16,560 and 5,219
compensatory options, respectively, to its outside directors in lieu of
cash payments for directors fees. These options were granted under the 1992
Plan.

A summary of changes in outstanding options for each of the three years
ended July 31, 1995 follows:
1995 1994 1993
Shares under option at
beginning of year................. 870,478 751,835 610,909
Options granted - 1992 plan.......... 33,374 163,560 149,219
Options exercised.................... (147,000) (23,417) (5,793)
Options canceled..................... (38,750) (21,500) (2,500)
Shares under option at end of year 718,102 870,478 751,835
Shares exercisable at end of year.... 490,341 546,603 470,710
Exercise price of options granted.... $3.875-7.75 $3.75-7.50 $5.125-10.25
Exercise price of options exercised.. $2.625-11.38 $2.75-8.625 $2.75-4.87
Market price of options exercised.... $6.25-13.625 $5.71-10.25 $7.00-10.00
Aggregate market value of options
exercised......................... $1,180,469 $ 153,587 $ 48,022

In 1993, the Company granted 37,000 shares of restricted stock to employees
under the terms of the 1992 Plan, which vest 7,400 shares each on December
2, 1993 and June 3, 1994 through 1997. Approximately $128,000 was accrued
to pay the estimated withholding taxes on those shares as management
believes that the employees will elect to receive fewer shares in lieu of
paying the withholding taxes. In case of termination of the employees, with
the exception of those shares that vested December 2, 1993, unvested shares
are forfeited. Unearned compensation of $342,250 was recorded at the date
of grant and will be recognized over the vesting period. In addition, the
Company issued 5,717 shares of deferred stock under the 1992 Plan which
were fully vested at July 31, 1993. In fiscal 1995, 1994 and 1993, total
compensation expense of $68,449, $176,832 and $138,459, respectively, was
recognized on these shares.

Stock Warrants Stock purchase warrants held by unrelated parties
representing the right to purchase an aggregate of 26,400 shares of the
Company's common stock at $8.52 a share were outstanding at July 31, 1995.
These warrants do not have an expiration date and must be exercised if the
market value of the Company's common stock exceeds $22.73 per share for a
specified period.

Warrants to purchase 100,000 shares of common stock issued in conjunction
with the Company's mortgage and note payable (Note 3) were exercised by the
lender on September 24, 1992. Proceeds received totaled approximately
$343,000.

On September 15, 1994, warrants to purchase 120,000 shares of common stock
at $6.90 per share were issued to John G. Kinnard & Company in conjunction
with the Company's September 1994 public offering. As of July 31, 1995, all
warrants were outstanding.

Employee Stock Purchase Plan The Employee Stock Purchase Plan, effective
January 1, 1991, enables eligible employees, through payroll deduction, to
purchase the Company's common stock at the end of each calendar year. The
purchase price is the lower of 85% of the fair market value of the stock on
the first or last day of the calendar year. The Company issued 10,932
shares in 1995, 16,019 shares in 1994 and 14,996 shares in 1993 under this
plan.

6. RELATED-PARTY TRANSACTIONS
The Company and St. Jude Medical, Inc. (St. Jude),an unrelated corporation,
entered into an agreement under which the Company transferred to St. Jude
its entire right, title, and interest in the patents relating to a
prosthetic heart valve developed by Z. C. Possis, former Chief Executive
Officer of the Company, on his own time and without consideration. Under
the terms of the agreement, St. Jude remitted royalty payments to the
Company through March 14, 1995 equal to 2% of St. Jude's total net
sales of heart valves in excess of $4,052,000 per year. The Company paid
25% of such payments to a group of individuals including a shareholder
of the Company, three relatives of Z. C. Possis, and four unrelated persons
and 11.25% (7.5% through February 1992) to Z. C. Possis or his estate.

7. 401 K PLAN
The Company has an employees' savings and profit sharing plan for all
qualified employees who have completed one year of service. Company
contributions are made at the discretion of the Board of Directors subject
to the maximum amount allowed under the Internal Revenue Code.
Contributions for the years ended July 31, 1995, 1994, and 1993 were
$77,907, $98,417 and $109,934, respectively.

8. LEASE COMMITMENTS
The Company's medical products operation is conducted from a leased
facility under an operating lease which expires in 1996. Rental payments
under the lease are guaranteed by a letter of credit in the amount of
$68,000 at July 31, 1995, which requires a compensating balance of $68,000.
Rental expense charged against earnings was $378,000 in fiscal 1995,
$340,000 in fiscal 1994, and $325,000 in fiscal 1993. The future minimum
annual rentals on this noncancelable operating lease at July 31, 1995 are
$409,000 and $35,000 in fiscal 1996 and 1997, respectively, including
estimated additional operating costs.

9. RESEARCH AND DEVELOPMENT
The Company has had agreements for joint funding of certain research and
development costs related to the Company's products and projects. In
connection therewith, the Company recorded medical products revenue of
approximately $576,000 and $181,000 in fiscal 1994 and fiscal 1993,
respectively, in exchange for the rights to the use of certain technology
and products.

10. SALES TO MAJOR CUSTOMERS
The Company's continuing operations are in one segment, the design and
production of cardiovascular-related devices for use in health care. In
1995, sales to two customers amounted to 62% and 15% of medical products
revenues. In 1994, sales to two customers amounted to 70% and 14% and in
1993, sales to one customer amounted to 83% of medical product revenues.

11. SALE OF PACEMAKER LEAD BUSINESS
On March 18, 1994, the Company sold the assets of the pacemaker leads
product line to Innovex, Inc. The Company received $1,100,000 in cash in
exchange for $451,786 in inventories and fixed assets, recording a gain of
$647,816. In addition, the Company received a 75% royalty on gross sales of
pacemaker leads and related services. The pacemaker lead business was a
product line and component of the medical products segment. Since other
components of this segment (research and development activities and initial
production of new products) are continuing, the sale of the pacemaker lead
business has not been reported as a discontinued operation.

12. SALE OF REAL ESTATE
In March 1994, the Company closed on the sale of its land, buildings and
leasehold improvements associated with the Jet Edge business to TC/American
Monorail, Inc. The property sold for $1,200,000 and the Company recorded a
gain on the sale of $957,573. All Company operations are now conducted at
the leased facility in Plymouth, Minnesota.

13. PRODUCT SUPPLY AND DISTRIBUTION AGREEMENT
On December 30, 1994, the Company executed a Supply and Distribution
Agreement with Bard Vascular Systems Division, C.R. Bard, Inc. ("Bard").
The Agreement grants to Bard exclusive worldwide sales and marketing rights
to the Possis Perma-Seal Dialysis Access graft for an initial 10-year term,
renewable for the life of applicable patents. Through July 31, 1995, the
Company has received $750,000 under this agreement and may receive up to an
additional $2,000,000 upon achievement of additional milestones.

14. SUBSEQUENT EVENTS
The Company filed a registration statement with the Securities Exchange
Commission on August 22, 1995 for the offering of 1,910,000 shares of its
Common Stock, of which 1,750,000 shares are being sold by the Company. The
net proceeds will be used to fund clinical trials, to increase
manufacturing capacity, to expand marketing and sales activities, to
develop new products and for working capital and general corporate
purposes.

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure:

During fiscal 1994 and 1995, there were no changes in or disagreements with the
Company's independent certified public accountants on accounting procedures or
accounting and financial disclosures.

PART III

Item 10. Directors and Executive Officers of the Registrant:

Name Age Position
Robert G. Dutcher 50 Chief Executive Officer, President and Director
Russel E. Carlson 49 Vice President, Finance
and Chief Financial Officer
William J. Drasler 46 Vice President, Research and Development
Robert J. Scott 50 Vice President, Manufacturing Operations
James D. Gustafson 39 Vice President, Quality Assurance and
Regulatory/Clinical Affairs
Joseph J. Afryl Jr 47 Vice President, Sales and Marketing
Irving R. Colacci 42 Vice President, Legal Affairs &
Human Resources,General Counsel and Secretary
Donald C. Wegmiller 56 Chairman of the Board
Joe A. Walters 75 Director
Dean Belbas 63 Director
Seymour J. Mansfield 50 Director
Demetre M. Nicoloff, MD 62 Director
Ann M. Possis 35 Director

Robert G. Dutcher served as Executive Vice President of the Company from June
1992 until October 1993 and has served as President, Chief Executive Officer and
a director of the Company since October 1993 and as President and Chief
Operating Officer of Possis Holdings, Inc. (a subsidiary formerly known as
Possis Medical, Inc.) since 1987. Prior to joining the Company, Mr. Dutcher had
served in several positions (most recently as Director of Research and
Development) at Medtronic, Inc. since 1972. Mr. Dutcher received a master's
degree in biomedical engineering from the University of Minnesota.

Russel E. Carlson joined the Company in September 1991 and has served as Vice
President and Chief Financial Officer of the Company since June 1992. Prior to
joining the Company, Mr. Carlson had been Chief Financial Officer of
SpectraScience, Inc. (formerly GV Medical, Inc.), a Minneapolis, Minnesota
medical device company, since September 1989 and had served in several financial
management positions with The Pillsbury Company, a food manufacturer and
processor, since 1972.

William J. Drasler has served as Vice President of the Company since December
1993 and as Vice President of Research and Development and Director of New
Product Development of Possis Holdings, Inc. since 1986. Prior to joining the
Company, Dr. Drasler had served as an engineering and program manager at SciMed
Life Systems, Inc. since 1983. Dr. Drasler received a Ph.D. in biomedical
engineering and a M.S. in chemical engineering from the University of Minnesota.

Robert J. Scott has served as Vice President of the Company since December 1993
and as Vice President of Manufacturing Operations of Possis Holdings, Inc. since
1988 and was Director of Manufacturing Operations for Possis Holdings, Inc. from
1984 through 1988. Prior to joining the Company, Mr. Scott had served as a
consultant to various medical and nonmedical manufacturing companies and as
Manufacturing Manager for Aequitron Medical, Inc. and Resistance Technology
Incorporated and in various positions for Daig Corporation and Medtronic, Inc.

James D. Gustafson has served as a Vice President of the Company since January
1, 1994 and has been Director of Quality Assurance and Regulatory/Clinical
Affairs for Possis Holdings, Inc. since June 1993. Prior to joining the Company,
Mr. Gustafson had served as a Manager of Clinical and Regulatory Affairs and of
Clinical Programs at St. Jude Medical, Inc., a medical device manufacturer,
since June 1989, and as a Senior Clinical Scientist at Shiley, Inc., Irvine,
California, since March 1985. Mr. Gustafson received a master's degree in
management from University of Redlands and a master's degree in biology from the
University of California at Irvine.

Joseph J. Afryl, Jr. has served as Vice President of the Company since April
1994. Prior to joining the Company, Mr. Afryl served as Vice President of Sales
and Marketing for Bio-Vascular, Inc. from July 1992 to March 1994, as Director
of Sales for Angeion Corporation from September 1991 through July 1992, and as
Director of Marketing at St. Jude Medical, Inc. from May 1987 to September 1991.
Each of these companies is a manufacturer of medical devices.

Irving R. Colacci has served as Secretary and Corporate Counsel of the Company
since July 1988 and as Vice President and General Counsel since December 1993.
Prior to joining the Company, Mr. Colacci had been an attorney at Dorsey &
Whitney P.L.L.P.

Donald C. Wegmiller has served as a director since 1987 and became Chairman in
October 1993. Since April 1993, Mr. Wegmiller has served as President and Chief
Executive Officer of Management Compensation Group/Health Care, a consulting
firm specializing in compensation and benefits for health care executives and
physicians. From May 1987 until April 1993, Mr. Wegmiller was President and CEO
of Health One Corporation, Minneapolis, Minnesota. He currently serves as a
director of Minnesota Power & Light Company, HBO & Co., Medical Graphics
Corporation, LifeRate Systems Inc. and InPhyNet Medical Management Co. From 1986
to 1988, Mr. Wegmiller served as Chairman of the Board of the American Hospital
Association. From 1972 to 1976, Mr. Wegmiller served as a White House staff
assistant to Presidents Nixon and Ford.

Joe A. Walters has served as a director since 1960. Mr. Walters is a partner in
the law firm of O'Connor & Hannan, Minneapolis, Minnesota, which has
periodically performed legal services for the Company.

Dean Belbas has served as a director since 1985. Mr. Belbas currently serves as
Senior Vice President, Investor Relations of General Mills, Inc., a Minneapolis,
Minnesota, food manufacturer and processor. For more than five years prior to
his appointment to such position in January 1993, Mr. Belbas had served as Vice
President and Director of Corporate Communications for General Mills, Inc.

Seymour J. Mansfield has served as a director since 1987. Mr. Mansfield is
currently a shareholder in the law firm of Mansfield & Tanick, P.A.,
Minneapolis, Minnesota, and performs legal services for the Company from time to
time. From 1982 until the formation of Mansfield & Tanick, P.A., he was an
attorney with the law firm of S.J.
Mansfield & Associates, Minneapolis, Minnesota.

Demetre M. Nicoloff, M.D. has served as a director since 1991. Dr. Nicoloff has
been a cardiac surgeon with and Vice President of Cardiac Surgical Associates
P.A. in Minneapolis, Minnesota, since 1982 and serves as a director of
Micromedics, Inc. and Optical Sensors for Medicine.

Ann M. Possis was appointed as a director in December 1993. Ms. Possis is
currently the Director of Development for the Voyageur Outward Bound School, a
position she has held since April 1995. From 1992 to April 1995, she was a
Development Associate for Planned Parenthood of Minnesota. From April 1983
through October 1991, Ms. Possis held a variety of sales and marketing positions
with West Publishing Company. Ms. Possis is the daughter of Z.C. Possis, the
Company's former Chairman and Chief Executive Officer.

With the exception of the Chairman of the Board, each outside Director receives
$2,000 as an annual retainer. Mr. Wegmiller receives an $8,000 annual retainer
as Chairman. Each outside Director also receives $500 for each Board meeting
attended and $200 for each teleconference Board meeting attended. Outside
Directors sitting on the Executive Committee receive a $4,000 annual retainer.
All committee Chairmen receive a $3,000 annual retainer. The Chairmen of the
Compensation and Audit Committees each receive $500 per meeting and the members
receive $250 per meeting. Total fees of $55,750 were earned by outside Directors
during fiscal 1995.

Pursuant to the Company's 1992 Stock Compensation Plan, each outside Director is
permitted to elect to receive Director fees in the form of discounted stock
options. Each Director must make an election on or before June 1 of each year
with regard to fees that would otherwise by payable for that calendar year. The
exercise price of the options is 50% of the fair market value on the date of
grant, which is January 2 of the year following the year for which the fees are
earned. Each option becomes exercisable in full six months following the date of
grant, is exercisable for 10 years following the date of grant, and is subject
to the general restrictions on exercise and transferability applicable to stock
options issued to employees. The number of shares subject to each option is
calculated by dividing the fees owed to the particular Director by the dollar
amount of the discount from fair market value in the exercise price. All outside
Directors, with the exception of Dean Belbas and Ann M. Possis, elected to
receive discounted stock options in lieu of cash payment of Director fees for
calendar year 1995.

On January 2, 1995, all outside Directors, with the exception of Ms. Possis and
Mr. Belbas, received discounted stock options in lieu of cash payments of fees
for calendar year 1994. These options were granted pursuant to elections made in
May 1994. A total of 11,574 options at an exercise price of $3.875 were granted.
Ms. Possis and Mr. Belbas elected to receive cash payment of fees for calendar
year 1994.

The Company's 1992 Stock Compensation Plan provides for the annual grant of
options to purchase 3,000 Common Shares to outside Directors. The exercise price
of these options must be at least 100% of the fair market value at date of
grant. The date of grant is the first business day of each calendar year. The
options vest ratably over a four-year period and expire ten years after the date
of grant. During fiscal 1995, 18,000 options were granted to outside Directors
under this Plan at an exercise price of $7.75.

SECTION 16 REQUIREMENT

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires that
Officers and Directors of the Company and persons who own more than 10% of a
registered class of the Company's equity securities file initial reports of
ownership and reports of changes in ownership with the Securities and Exchange
Commission (the "SEC"). Such persons are required by SEC regulation to furnish
the Company with copies of all Section 16(a) forms they file.

Based solely on its review of the copies of such forms received by it with
respect to fiscal 1995 and written representations from certain reporting
persons, the Company believes that all filing requirements applicable to its
Officers and Directors have been complied with. The Company is not aware of any
person who owns more than 10% of the Company's Common Shares.

Item 11. Executive Compensation:

Summary of Compensation Table

The following table sets forth compensation paid for services rendered to the
Corporation and its subsidiaries during each of the three fiscal years ended
July 31, 1995, to each executive officer who received salary and bonus in excess
of $100,000 during fiscal year 1995 ("Named Executive Officer"):

Name and Annual Long-Term
Principal Position Year Compensation Compensation
Awards
Salary Bonus Restricted Securities All Other
($) ($) Stock Award Underlying Compensation(1)
Options/SARs ($)
(#)

Robert G. Dutcher 1995 124,154 36,000(2) -- -- 3,725
CEO and President 1994 112,923 23,000 -- 20,000 4,087
1993 102,308 36,000(3) 138,750(4) 22,000 3,519

Irving R. Colacci 1995 83,258 18,000(5) -- -- 2,498
VP, Legal Affairs & 1994 80,663 13,000 -- 10,000 2,765
Human Resources, 1993 75,651 5,000 -- 12,000 1,975
General Counsel and
Secretary

William J. Drasler 1995 89,460 14,000(6) -- -- 2,684
VP, Research and 1994 85,520 15,000 -- 15,000 3,018
Development 1993 83,723 23,700(7) 111,000(8) 18,000 2,725

(1) Includes only Company matching contributions to its 401(k) Plan.
(2) Includes $21,959 in cash and $14,041 in Common Shares of the Corporation.
(3) Includes $15,000 in cash and $21,000 in Common Shares of the Corporation.
(4) Mr. Dutcher was granted 15,000 shares of restricted stock, of which 3,000
shares vested or will vest on each of December 1, 1993 and June 3, 1994 through
1997. As of July 31, 1995, 6,000 shares with an aggregate market value on that
date of $84,000 remained restricted. Any dividends paid to common shareholders
will be paid on these shares. (5) Includes $10,982 in cash and $7,018 in Common
Shares of the Corporation. (6) Includes $8,539 in cash and $5,461 in Common
Shares of the Corporation. (7) Includes $9,000 in cash and $14,700 in Common
Shares of the Corporation. (8) Mr. Drasler was granted 12,000 shares of
restricted stock, of which 2,400 shares vested or will vest on each of December
2, 1993 and June 3, 1994 through 1997. As of July 31, 1995, 4,800 shares with an
aggregate market value on that date of $67,200 remained restricted. Any
dividends paid to common shareholders will be paid on these shares.

Option Grants in Last Fiscal Year

No options or SARs were granted to named executive officers during fiscal year
1995.

Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values

The following table provides information concerning stock option exercises and
the value of unexercised options at July 31, 1995, for the Named Executive
Officers.

Name Shares Acquired Value Realized Number of Value of Unexercised
Upon Exercise (#) Unexercised In-The-Money Options at
($) Options Fiscal Year-End (1)
at Fiscal Year-End ($)
(#) Exercisable/
Exercisable/ Unexercisable
Unexercisable

Robert G. Dutcher -- -- 105,250/30,750 792,196/201,531
Irving R. Colacci -- -- 30,126/14,500 251,330/95,750
William J. Drasler -- -- 61,750/23,250 450,031/151,688

(1) The dollar values shown are calculated by determining the difference between
the fair market value of the common stock underlying the options and the
exercise price of the options at fiscal year-end.

Performance Data

Set forth below is data showing the five-year cumulative return through July 31,
1995 of Possis Medical, Inc. Common Stock as compared with Standard and Poor's
Medical Products and Supplies index and Standard and Poor's 500 Stock Index.
This information assumes a base point at July 31, 1990 of $100.00 and the
reinvestment of all dividends.

Base
Period Return Return Return Return Return
Company/Index Name 1990 1991 1992 1993 1994 1995

POSSIS MEDICAL INC 100 206.25 218.75 262.5 162.5 346.88
S&P 500 INDEX 100 112.76 127.18 138.29 145.42 183.39
S&P MEDICAL PRODUCTS & SUPPLIES INDEX 100 140.64 152.21 111.93 121.06 191.71

REPORT OF THE COMPENSATION COMMITTEE

The Compensation Committee of the Board of Directors (the "Committee") consists
of three independent outside directors. The Committee is responsible for setting
salaries for officers and for granting incentive awards and stock-based
compensation to officers and other key employees.

Compensation Philosophy

Compensation decisions for fiscal 1995 continue to be guided by the general
compensation philosophy adopted by the Committee in 1993, as supplemented by an
Incentive Compensation Plan adopted in concept by the Committee in October 1994.
The Company's compensation program is intended to attract and retain the highest
quality personnel possible consistent with the Company's resources.

Compensation of management personnel continues to be based on four types of
compensation: a) base salaries; b) cash and/or stock bonuses; c) stock options;
and d) restricted stock.

(a) Base Salaries

Base salaries continue to be determined and adjusted consistent with policies
and procedures applied in past years. Base salaries for officers are intended to
be competitive with salaries offered by other emerging medical device companies.
Emerging companies continue to be used for comparison purposes because during
1995 the Company's products remained in clinical testing in the United States
and achieved only limited initial sales outside of the United States. In the
absence of meaningful revenues and profitable operations, the Company does not
have the financial resources to match salaries offered by larger and profitable
medical companies. The Company, however, seeks whenever possible to offer
salaries at the time of hire competitive with salaries offered by companies with
which it competes for the services of key personnel. By augmenting base salary
with equity-based compensation, the Company seeks to continue to attract and
retain quality management personnel despite limited financial resources. Annual
increases in base salaries for existing officers are generally limited to
cost-of-living adjustments. Larger increases are given, as appropriate, to
reflect changes in job responsibility, authority, or to internally balance the
salary structure among the executive officer group. Because no officer-level
personnel were hired during fiscal year 1995, all base salary compensation
levels were restricted to internal balancing adjustments and a cost-of-living
increase implemented on January 1, 1995.

Because no officer-level personnel were hired in 1995, the Company did not
engage in a detailed comparison of competitive salary levels for new officers.
This information is, however, tracked on a continuous basis and is used in
compensation decisions as the need arises.

(b) Bonuses

Cash and/or stock bonuses are awarded annually and are used to reward officers
and other key employees for achievement of corporate financial and technical
milestones, as well as individual performance. Bonuses awarded during fiscal
year 1995 to reward fiscal year 1994 performance consisted of cash and stock
awards to a total of twenty-seven employees. The awards were based on a
Committee-approved total pool available for awards. The size of the pool was
determined by corporate performance and was apportioned based on management's
evaluation of performance by individual key employees. The awards granted
consisted of 61% cash and 39% Possis Common Stock. The value of the total award
per person ranged from 5% to 30% of base salary.

An Incentive Compensation Plan that provides objective guidelines for
determining total and individual awards was approved in concept by the Committee
in October 1994 to guide incentive awards for performance during fiscal year
1995. The Committee substantially approved the specifics of the Plan in August
1995 and, on September 13, 1995, approved cash bonuses for thirty-six employees.
These cash bonuses ranged in value from 3% to 40% of base salary.

(c) Stock Option

Stock options under the 1992 Stock Compensation Plan are intended as incentive
compensation and have historically been granted annually to officers and other
key employees based on the Company's financial performance and achievement of
technical and regulatory milestones. Stock options were granted in June 1994 to
reflect fiscal 1994 performance. No awards were granted during fiscal year 1995.
Stock option awards consistent with the intent of the Incentive Compensation
Plan were approved on September 13, 1995, to reward performance during fiscal
year 1995. A total of 183,400 stock options were approved and shall be granted
effective on a date to be determined, at a price equal to 100% of the fair
market value on the date of grant and subject to a four year vesting period.

(d) Restricted Stock

The fourth component of the Company's compensation system is a restricted stock
program instituted in June 1993 primarily as a vehicle to retain key officers.
No restricted stock has been granted since the initial grant in June 1993 to the
CEO and two vice presidents. No additional grants are contemplated at this time.
Future grants will be made at the discretion of the Committee based on an
ongoing assessment of the need to utilize this form of equity compensation to
retain key officers in light of the Company's financial resources and ability to
compete with compensation packages offered by other medical companies.

CEO Compensation

Robert G. Dutcher, as CEO of the Company, participates in the general
compensation program of the Company, as described above, along with all other
key employees. At the time of his assumption of responsibilities as CEO in 1993,
Mr. Dutcher's base salary was set at a level determined by the Committee to be
appropriate for his level of experience and performance as an officer of the
Company. During 1995 his base salary was increased 6% to reflect a cost-of
living increase and to recognize favorable corporate and individual performance.
Mr. Dutcher also received a cash and stock bonus in October 1994 equal to
approximately 30% of base salary. This bonus award reflected the Committee's
judgment as to Mr. Dutcher's individual performance and the overall performance
of the Company in completing a significant public stock offering, achieving
regulatory and technical milestones, and making significant progress toward a
major strategic marketing alliance during fiscal year 1994.

At this time the Committee has no formal, written plan for CEO compensation
separate and apart from the Company's general compensation philosophy and the
Incentive Compensation Plan. Until a plan specific to the CEO is developed, CEO
compensation will be based on corporate and individual performance measured
against established guidelines and objectives, consistent with guidelines
applicable to all key employees. Current guidelines and objectives are contained
in the Company's 1996-1999 Strategic Plan, as approved by the Board of Directors
in July 1995.

Compensation Committee
of the Board of Directors

Seymour J. Mansfield, Chairman
Donald C. Wegmiller
Dean Belbas

Item 12. Security Ownership of Certain Beneficial Owners and Management:

COMMON STOCK OWNERSHIP

The following table sets forth the beneficial holdings as of September 18, 1995
of each Director and Named Executive Officer and all Directors and Executive
Officers as a group. The Corporation is aware of no person who beneficially owns
more than five percent of the Corporation's Common shares.

Name of Beneficial Sole Shared Voting Total
Owner or Identity Voting and and % of Class
of Groups Investment Power Investment
Power
Joe A. Walters, Director 55,283 (1) -- *
Dean Belbas, Director 48,753 (2) -- *
Donald C. Wegmiller, Director 39,927 (3) -- *
Seymour J. Mansfield, Director 154,212 (4) 11,000 1.7
Demetre M. Nicoloff, M.D., Director 327,610 (5) 143,000 4.7
Ann M. Possis, Director 92,750 4,500 (6) *
Robert G Dutcher, Director, 131,746 (7) -- 1.3
President & Chief Executive Officer
Irving R. Colacci, 31,940 (8) -- *
Vice President, Legal Affairs &
Human Resources, General Counsel
and Secretary
William J. Drasler, 86,153 (9) -- *
Vice President of Research
and Development
Directors and Executive Officers
as a Group (13 persons) 1,077,279 (10) 158,500 11.8

(1) Includes 27,306 shares issuable upon exercise of currently exercisable
options.
(2) Includes 39,353 shares issuable upon exercise of currently exercisable
options.
(3) Includes 39,927 shares issuable upon exercise of currently exercisable
options.
(4) Includes 35,260 shares issuable upon exercise of currently exercisable
options. (5) Includes 9,075 shares issuable upon exercise of currently
exercisable options.
(6) Ms. Possis serves as the co-trustee of the Possis Marital Trust and,as such,
has voting power over the additional 364,003 shares of the Corporation's
Common Shares owned by the Trust and not reflected in the above table. In
addition, the Trust holds 20,250 shares issuable upon exercise of currently
exercisable options.
(7) Includes 105,250 shares issuable upon exercise of currently exercisable
options.
(8) Includes 30,126 shares issuable upon exercise of currently exercisable
options.
(9) Includes 61,750 shares issuable upon exercise of currently exercisable
options.
(10)Includes 459,797 shares issuable upon exercise of currently exercisable
options.

* Denotes ownership of less than 1% of shares outstanding.

Item 13. Certain Relationships and Related Transactions:

ROYALTY PAYMENTS

Through fiscal year 1995, Z.C. Possis and the Z.C. Possis Estate (the "Estate")
were paid 11.25% of all payments received by the Company from St. Jude Medical,
Inc. ("St. Jude") pursuant to the terms of an assignment agreement between the
Company and St. Jude relating to certain heart valve patent rights. Payments to
Mr. Possis of 7.5% of all payments received by the Company from St. Jude were
authorized by the Board in 1979 to recognize that Mr. Possis was the sole
inventor of the devices subject to the patents and that Mr. Possis had worked on
development of the devices on his own personal time over a period of
approximately four years. An additional 3.75% of all payments received by the
Company from St. Jude was authorized by the Board in 1992 to be paid to Mr.
Possis in recognition of the contributions of Mr. Possis to the Company, the
absence of a pension program for Mr. Possis following retirement, and the fact
that at the time that Mr. Possis assigned his rights to the Company he received
no consideration individually.

For the fiscal year ended July 31, 1995, the Company paid a total of $366,790
for the benefit of Mr. Possis and the Estate. The Company additionally paid
$76,618 for the benefit of Mr. Possis' daughter, who is a Director of the
Company, $69,283 each for the benefit of two of his sisters-in-law, and $128,785
for the benefit of a trust for the children of Demetre Nicoloff, M.D., a
consultant in the development of the devices subject to the patents and
currently a Director of the Company. Such additional payments for the fiscal
year ended July 31, 1995, arise out of the transfer by the foregoing persons of
their rights in the heart valve patents.

PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K:

(a) 1. Financial Statements

The following financial statements of the Company, accompanied by an
independent auditors' report, are contained in Part II, Item 8:

Consolidated Statements of Income (Loss) for each of the three years in
the period ended July 31, 1995
Consolidated Balance Sheets, July 31, 1995 and 1994
Consolidated Statements of Cash Flows for each of the three years in
the period ended July 31, 1995.
Consolidated Statements of Changes in Shareholders' Equity for each of
the three years in the period ended July 31, 1995.
Notes to Consolidated Financial Statements

2. Schedules
Page
The following financial statement schedules are submitted Number
herewith:
Consent of independent certified public accountants 53

SCHEDULE VIII - Valuation Accounts 49

Other schedules are omitted because they are not required or are not
applicable or because the required information is included in the
financial statements listed above.

3. Exhibits

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

Exhibit Form Date Filed Description

3.1 10-K Fiscal year ended Articles of Incorporation as amended
July 31, 1994 and restated to date

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

4.1 10-K Fiscal year ended Norwest Equipment Finance, Inc.
July 31, 1994 loan agreement, dated January 12, 1994

10.1 S-1 June 30, 1988 Agreement with St. Jude Medical,
Inc., dated August 2, 1983

10.2 8-K February 14, 1994 Asset purchase agreement with
TC/American Monorail, Inc.,
dated January 28, 1994

10.3 S-2 July 1, 1994 Real estate purchase agreement
with TC/American Monorail, Inc.,
dated January 28, 1994

10.4 10-Q Quarter ended Asset purchase agreement with
January 31, 1994 Innovex, Inc., dated March 11, 1994

10.5 S-2 July 1, 1994 Lease agreement for corporate head-
quarters and manufacturing facility,
dated January 4, 1991

10.6 S-2 Amendment No.1 License agreement with Imperial
August 9, 1994 Chemical Industries Plc., dated
April 15, 1991

10.7 S-2 Amendment No.1 License agreement with the
August 9, 1994 University of Liverpool, dated
May 10, 1990

10.8 S-1 June 30, 1988 Form of Indemnification Agreement
with officers and directors of
Registrant

*10.9 S-8 February 7, 1990 1983 Incentive Stock Option Plan as
amended to date

Exhibit Form Date Filed Description

*10.10 S-1 June 30, 1988 1985 Nonqualified Stock Option
Plan as amended to date

*10.11 10-K Fiscal year ended Form of incentive stock option
July 31, 1989 agreement for officers

*10.12 10-K Fiscal year ended Form of stock option agreement for
July 31, 1989 directors

*10.13 S-8 December 30, 1992 1992 Stock Compensation Plan

*10.14 10-K Fiscal year ended Form of restricted stock agreement
July 31, 1993 for officers (1992 Plan)

*10.15 10-K Fiscal year ended Form of nonqualified stock option
July 31, 1993 agreement for officers (1992 Plan)

*10.16 10-K Fiscal year ended Form of incentive stock option
July 31, 1993 agreement for officers (1992 Plan)

*10.17 10-K Fiscal year ended Form of nonqualified stock option
July 31, 1993 agreement for 1992 directors' fees
(1992 Plan)

*10.18 10-K Fiscal year ended Form of nonqualified stock option
July 31, 1993 agreement for 1990 directors' fees

*10.19 10-K Fiscal year ended Form of nonqualified stock option
July 31, 1993 agreement for 1989 directors' fees

*10.20 10-Q Quarter ended Supply & Distribution Agreement
January 31, 1995 with Bard Vascular Systems Division,
C.R.Bard, Inc.

21 Subsidiaries of registrant

23 Consent of independent certified
public accountants

* Indicates management contract or compensatory plan or arrangement.

(b) Reports on Form 8-K

Possis Medical, Inc. filed no reports on Form 8-K during the quarter ended July
31, 1995.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.

POSSIS MEDICAL, INC.

by: /s/ Russel E. Carlson
Russel E. Carlson
Vice President of Finance
Chief Financial and Accounting Officer

Dated: September 22, 1995

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the date indicated.

Signature Title Date

/s/ Donald C. Wegmiller Chairman of the Board September 22, 1995
Donald C. Wegmiller

/s/ Robert G. Dutcher Director, President and September 22, 1995
Robert G. Dutcher Chief Executive Officer

/s/ Dean Belbas Director September 22, 1995
Dean Belbas

/s/ Seymour J. Mansfield Director September 22, 1995
Seymour J. Mansfield

/s/ Demetre Nicoloff, MD Director September 22, 1995
Demetre Nicoloff, MD

/s/ Ann M. Possis Director September 22, 1995
Ann M. Possis

/s/ Joe A. Walters Director September 22, 1995
Joe A. Walters

SCHEDULE VIII

POSSIS MEDICAL, INC.

VALUATION ACCOUNTS
YEARS ENDED JULY 31, 1995, 1994, AND 1993
- ------------------------------------------------------------------------------

Column A Column B Column C Column D Column E
Additions
Balance at Charged to
Beginning Costs and Deductions Balance at
Description of Year Expenses Write-offs End of
Year

Allowance for doubtful
accounts - deducted from
trade receivables in the
balance sheet:

Year ended July 31, 1995 $ 120,000 $ (76,375) $ 16,606 $ 27,019

Year ended July 31, 1994 $ 309,000 $ (93,220) $ 95,780 $ 120,000

Year ended July 31, 1993 $ 340,000 $ 238,665 $ 269,665 $ 309,000

Reserve for loss on disposal
of discontinued waterjet
equipment segment:

Year ended July 31, 1995 $ - $ - $ - $ -

Year ended July 31, 1994 $ 850,000 $ (68,123) $ 781,877 $ -

Year ended July 31, 1993 $ - $ 850,000 $ - $ 850,000

Valuation allowance on
deferred tax asset:

Year ended July 31, 1995 $1,529,000 $1,889,000 $ - $3,418,000

Year ended July 31, 1994 $1,786,000 $ - $ 257,000 $1,529,000

Year ended July 31, 1993 $1,228,000 $ 558,000 $ - $1,786,000

POSSIS MEDICAL, INC.
FORM 10-K - ITEM 14(a)3

EXHIBIT INDEX
Exhibit Page
Number Description Number

++3.1 Articles of Incorporation as amended and restated to date

++3.2 Bylaws as amended and restated to date

++ 4.1 Loan agreement with Norwest Equipment Finance, Inc.,
dated January 12, 1994

++10.1 Agreement with St. Jude Medical, Inc., dated August 2, 1983

++10.2 Asset purchase agreement with TC/American Monorail, Inc.,
dated January 28, 1994

++10.3 Real estate purchase agreement with TC/American Monorail, Inc.,
dated January 28, 1994

++10.4 Asset purchase agreement with Innovex, Inc., dated
March 11, 1994

++10.5 Lease agreement for corporate headquarters and manufacturing
facility, dated January 4, 1991

++10.6 License agreement with Imperial Chemical Industries Plc.,
dated April 15, 1991

++10.7 License agreement with the University of Liverpool,
dated May 10, 1990

++10.8 Form of Indemnification Agreement with officers and directors
of Registrant

++10.9 1983 Incentive Stock Option Plan as amended to date

++10.10 1985 Nonqualified Stock Option Plan as amended to date

++10.11 Form of incentive stock option agreement for officers

++10.12 Form of stock option agreement for directors

Exhibit Page
Number Description Number

++10.13 1992 Stock Compensation Plan

++10.14 Form of restricted stock agreement for officers (1992 Plan)

++10.15 Form of nonqualified stock option agreement for officers
(1992 Plan)

++10.16 Form of incentive stock option agreement for officers (1992 Plan)

++10.17 Form of nonqualified stock option agreement for 1992 directors'
fees (1992 Plan)

++10.18 Form of nonqualified stock option agreement for 1990 directors'
fees

++10.19 Form of nonqualified stock option agreement for 1989 directors'
fees

++10.20 Supply and Distribution Agreement with Bard Vascular Systems
Divison, C.R. Bard, Inc.

21 Subsidiaries of registrant 52

23 Consent of independent certified public accountants 53

++ Document has heretofore been filed with the Securities and
Exchange Commission as indicated in Item 14(a) 3 and is
incorporated herein by reference.

EXHIBIT 21

SUBSIDIARIES OF POSSIS MEDICAL, INC.

POSSIS HOLDINGS, INC., a Minnesota corporation

JEI LIQUIDATION, INC., a Minnesota corporation

POSSIS MEDICAL EUROPE B.V., a Netherlands corporation

EXHIBIT 23

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Possis Medical, Inc.:

We consent to the incorporation by reference in Registration Statement
No. 33-54378 on Form S-3, Post-Effective Ammendment No.1 to Registration
Statement No. 33-5467 on Form S-8, Post-Effective Amendment No. 1 to
Registration Statement No. 33-33416 on Form S-8, Registration Statement No. 33-
39987 on Form S-8, and Registration Statement No. 33-56728 on Form S-8 of our
report, dated August 28, 1995, appearing in this Annual Report on Form 10-K of
Possis Medical, Inc. for the year ended July 31, 1995.

/s/Deloitte & Touche LLP

Minneapolis, MN
September 22, 1995