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

                                   FORM 10-QSB

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

                    FOR QUARTERLY PERIOD ENDED MARCH 31, 2007
                                               --------------

     [_]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT


                        Commission file number: 000-30651
                                                ---------

                            INDUSTRIAL MINERALS, INC.
                      -----------------------------------
             (Exact name of Registrant as Specified in its Charter)


       Delaware                                          11-3763974
-----------------------                      ----------------------------------
(State of Incorporation)                    (I.R.S. Employer Identification No.)


          2500 One Dundas Street West, Toronto, Ontario, Canada M5G 1Z3
                   -----------------------------------------
               (Address of principal executive offices) (Zip Code)

                                 (416) 979-4621
                   -----------------------------------------
               Registrant's telephone number, including area code

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such 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 whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act).

                                 Yes [_] No [X]

     Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practicable date:

     As of March 31, 2007 the number of shares outstanding of the registrant's
only class of common stock was 118,043,776.

     Transitional Small Business Disclosure Format (Check one):

                                 Yes [_] No [X]



<PAGE>

                                TABLE OF CONTENTS

                                                                            PAGE

PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements  ...........................................    1


        Consolidated Balance Sheets as of March 31, 2007 (unaudited) and
        December 31, 2006 (audited).......................................    2

        Consolidated Statements of Operations (unaudited) for the three
        month period ended March 31, 2006 and 2005 and for the period
        November 6, 1996 (date of inception), to March 31, 2007...........    3

        Consolidated Statements of Cash Flows (unaudited) for the three month
        period ended March 31, 2006 and 2005 and for the period November 6,
        1996 (date of inception) to March 31, 2006 .......................    4

         Notes to Consolidated Financial Statements (unaudited) ..........    6

Item 2.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations ...........................................    9

Item 3.  Controls and Procedures .........................................   13

PART II - OTHER INFORMATION

Item 1.  Legal Proceedings................................................   13

Item 2.  Unregistered Sales of Equity Securities..........................   13

Item 3.  Defaults upon Senior Securities..................................   14

Item 4.  Submission of Matters to a Vote of Security Holders .............   14

Item 5.  Other Information  ..............................................   14

Item 6.  Exhibits  .......................................................   14

Signatures................................................................   15






<PAGE>

PART I.    FINANCIAL INFORMATION

Item 1.   FINANCIAL STATEMENTS

For financial information, please see the financial statements and the notes
thereto, attached hereto and incorporated by this reference.

The financial statements have been adjusted with all adjustments which, in the
opinion of management, are necessary in order to make the financial statements
not misleading.

The financial statements have been prepared by Industrial Minerals, Inc. without
audit pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnotes disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted as allowed by such rules and
regulations, and management believes that the disclosures are adequate to make
the information presented not misleading. These financial statements include all
the adjustments which, in the opinion of management, are necessary for a fair
presentation of financial position and results of operations. All such
adjustments are of a normal and recurring nature. These financial statements
should be read in conjunction with the audited financial statements at December
31, 2006, included in the Company's Form 10-KSB.



<PAGE>
<TABLE>
<CAPTION>
                            INDUSTRIAL MINERALS, INC.
                                 And Subsidiary
                         (An Exploration Stage Company)
                           CONSOLIDATED BALANCE SHEET
                      March 31, 2007 and December 31, 2006



                                                                March 31,    December 31,
                                                                  2007           2006
                                                              (Unaudited)     (Audited)
                                                              -----------    -----------
ASSETS

    CURRENT ASSETS
<S>                                                           <C>            <C>
       Cash                                                   $    17,878    $     6,759
       Receivables                                                     --             --
       Prepaid expenses                                                --             --
       Deposits                                                    10,000         10,000
                                                              -----------    -----------
           Total Current Assets                                    27,878         16,759

    LONG-TERM DEPOSITS                                            230,000        230,000

    FIXED ASSETS
       Building and Equipment                                   2,120,640      2,180,640
       Less accumulated depreciation                             (727,458)      (699,790)
                                                              -----------    -----------
                                                                1,393,182      1,480,850
                                                              -----------    -----------

TOTAL ASSETS                                                  $ 1,651,060    $ 1,727,609
                                                              ===========    ===========

LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT)

    CURRENT LIABILITIES
       Accounts payable                                       $   115,791    $   110,710
       Accrued interest payable                                    27,671         25,488
       Loans payable                                               90,796         90,796
       Due to related parties                                     283,327        264,906
       Mortgage payable, due within one year                        9,996         10,413
                                                              -----------    -----------
           Total Current Liabilities                              527,581        502,313

    OTHER LIABILITIES
       Accrued interest payable                                    21,867         13,282
       Loans payable                                              526,421        446,987
       Mortgage payable, net of portion due within one year            --             --
                                                              -----------    -----------
           Total Liabilities                                    1,075,869        962,582
                                                              -----------    -----------

    STOCKHOLDERS' EQUITY (DEFICIT)
       Common stock, 200,000,000 shares authorized, $0.0001
           par value;118,043,776 and 118,043,776 shares
           issued and outstanding, respectively                    11,801         11,801
       Additional paid-in capital                               6,142,882      6,142,882
       Deficit accumulated during exploration stage            (5,579,492)    (5,389,656)
                                                              -----------    -----------

    TOTAL STOCKHOLDERS' EQUITY (DEFICIT)                          575,191        765,027
                                                              -----------    -----------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                    $ 1,651,060    $ 1,727,609
                                                              ===========    ===========
</TABLE>


           See accompanying notes to consolidated financial statements


                                       2

<PAGE>
<TABLE>
<CAPTION>

                            INDUSTRIAL MINERALS, INC.
                                  AND SUBIDARY
                         (An Exploration Stage Company)
                Consolidaded Statements of Operation (Unaudited)
             Three months ended March 31, 2007 and 2006 and for the
       period from November 6, 1996 (Date of Inception) to March 31, 2007




                                                                                              Period from
                                                                                            November 6, 1996
                                                                Three Months Ended           (Inception of
                                                                      March 31,            Exploration Stage)
                                                          -----------------------------           To
                                                               2007            2006         March 31, 2007
                                                            (unaudited)      (unaudited)     (unaudited)
                                                          -------------    -------------    -------------
<S>                                                       <C>              <C>              <C>
REVENUE                                                   $          --    $          --    $      19,337
                                                          -------------    -------------    -------------
EXPENSES
    Cost of revenues                                                 --           86,901
    Professional fees                                            25,300           45,555        1,509,820
    Royalty fees                                                 12,119            5,738          110,173
    Depreciation and amortization                                57,667           34,152          809,730
    Impairment of long-lived assets                                  --               --          582,176
    Loss on disposal of assets                                   11,920           66,171
    Management fees and salaries                                 16,159          112,491          962,533
    Other general and administrative                             66,670          178,643        4,219,705
                                                          -------------    -------------    -------------
       TOTAL EXPENSES                                           189,835          376,579        8,347,209
                                                          -------------    -------------    -------------

LOSS FROM OPERATIONS                                           (189,835)        (376,579)      (8,327,872)

OTHER INCOME (EXPENSE)
    Interest income                                                  --                3            3,172
    Gain from extinguishment of debt                                 --               --        1,047,634
    Other income                                                     --               --              594
                                                          -------------    -------------    -------------
       TOTAL OTHER INCOME                                            --                3        1,051,400

LOSS FROM OPERATIONS                                           (189,835)        (376,576)      (7,276,472)

INCOME TAXES                                                         --               --
                                                          -------------    -------------    -------------

NET LOSS                                                  $    (189,835)   $    (376,576)   $  (7,276,472)
                                                          =============    =============    =============

    NET LOSS PER SHARE, BASIC AND DILUTED                 $        0.00    $        0.00
                                                          =============    =============

WEIGHTED AVERAGE NUMBER OF
    COMMON STOCK SHARES OUTSTANDING, BASIC AND DILUTED:     118,043,776      111,621,299
                                                          =============    =============
</TABLE>


          See accompanying notes to consolidated financial statements

                                       3

<PAGE>
<TABLE>
<CAPTION>

                            INDUSTRIAL MINERALS, INC.
                         (An Exploration Stage Company)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                Consolidaded Statements of Cash Flows (Unaudited)
             Three months ended March 31, 2007 and 2006 and for the
       period from November 6, 1996 (Date of Inception) to March 31, 2007

                                                                                                   Period from
                                                                                                 November 6, 1996
                                                                      Three Months Ended          (Inception of
                                                                            March 31,           Exploration Stage)
                                                                  ----------------------------         To
                                                                    2007               2006      March 31, 2007
                                                                  ------------    ------------    ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                               <C>             <C>             <C>
    Net loss                                                      $   (189,835)   $   (376,576)   $ (7,276,472)
    Adjustments to reconcile net loss
       to net cash used by operating activities:
          Depreciation                                                  57,667          34,152         801,438
          Provision for bad debts                                           --              --          49,676
          Stock issued for services                                         --              --         414,606
          Impairment of long-lived assets                                   --              --         297,882
          Loss on disposal of assets                                    11,920              --          66,170
          Gain on extinguishment of debt                                    --              --      (1,047,634)
          Changes in:
             Receivables                                                    --          33,387          (4,169)
             Inventory                                                      --              --          (5,527)
             Prepaid expenses                                               --             270            (540)
             Deposits                                                       --             700         (10,000)
             Accounts payable                                            5,081          37,281         (42,637)
             Due to related parties                                     18,421          64,454         678,327
                                                                  ------------    ------------    ------------
    Net cash used in operating activities                              (96,746)       (206,332)     (6,078,880)

    Cash flows from investing activities:
       Purchase of building and equipment                                   --              --      (2,078,032)
       Investment inMultiplex                                               --              --         (75,000)
       Acquisition of goodwill                                              --              --        (149,057)
       Loan to related party                                                --              --         (50,000)
       Loan repayments                                                      --              --           4,493
       Long-term deposits                                                   --              --        (159,600)
       Proceeds from sale of assets                                     18,080              --          18,080
                                                                  ------------    ------------    ------------
    Net cash used in investing activites                                18,080              --      (2,489,116)

    See accompanying notes to consolidated financial statements

    CASH FLOWS FROM FINANCING ACTIVITIES:

       Net proceeds from sale of common stock                               --          69,660       2,691,262
       Net proceeds from loans payable                                  79,434          16,500       7,328,373
       Loan repayments                                                      --              --      (1,761,717)
       Proceeds from mortgage                                               --              --          17,000
       Principal payments on mortgage                                     (417)             --          (7,004)
       Accrued interest payable                                         10,768          44,793         317,820
       Cash acquired in acquisition of Peanut Butter &
       Jelly, Inc.                                                          --              --             140
                                                                  ------------    ------------    ------------
    Net cash provided by financing activities                           89,785         130,953       8,585,874
                                                                  ------------    ------------    ------------

NET INCREASE (DECREASE) IN CASH                                         11,119         (75,379)         17,878


</TABLE>

                                       4




<PAGE>
<TABLE>
<CAPTION>

                            INDUSTRIAL MINERALS, INC.
                         (An Exploration Stage Company)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                Consolidaded Statements of Cash Flows (Unaudited)
             Three months ended March 31, 2007 and 2006 and for the
       period from November 6, 1996 (Date of Inception) to March 31, 2007


                                                                                                   Period from
                                                                                                 November 6, 1996
                                                                      Three Months Ended          (Inception of
                                                                            March 31,           Exploration Stage)
                                                                  ----------------------------         To
                                                                    2007               2006      March 31, 2007
                                                                  ------------    ------------    ------------

<S>                                                                      <C>            <C>       <C>
Cash, beginning of period                                                6,759          83,300              --
                                                                  ------------    ------------    ------------

Cash, end of period                                               $     17,878    $      7,921    $     17,878
                                                                  ============    ============    ============

SUPPLEMENTAL CASH FLOW DISCLOSURES:

    Interest paid                                                 $     10,332    $         --    $     14,743
                                                                  ============    ============    ============
    Income taxes paid                                             $         --    $         --    $         --
                                                                  ============    ============    ============

    Non-cash investing and financing activities:
       Shares issued for debt                                                                       11,437,279
                                                                                                   ===========

       Shares issued for services                                                                      414,606
                                                                                                   ===========

       Shares issued for investment                                                                    200,030
                                                                                                   ===========

       Shares issued for accrued interest                                                              651,702
                                                                                                   ===========

       Long term deposits financed by accounts payable                                                  70,400
                                                                                                   ===========

    Property costs financed by issuance of common stock                                                 30,000
                                                                                                   ===========

    Equipment financed by:                                                                             200,000
                                                                                                   ===========
       Accounts payable
       Issuance of common stock                                                                          5,000
                                                                                                   -----------

                                                                                                       205,000
                                                                                                   ===========
</TABLE>


           See accompanying notes to consolidated financial statements


                                       5

<PAGE>


                           INDUSTRIAL MINERALS, INC.
                                 AND SUBSIDIARY
                         (An Exploration Stage Company)
                   Notes to Consolidated Financial Statements
                Three month period ended March 31, 2007 and 2006


NOTE 1 - BASIS OF PRESENTATION

The financial statements have been prepared in accordance with generally
accepted accounting principles for the interim financial information with the
instructions to Form 10-QSB and Rule 10-01 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of the Company's management, all adjustments (consisting of only normal
accruals) considered necessary for a fair presentation have been included.

For further information, refer to the financial statements and notes thereto
included in the Company's Annual Report on Form 10KSB for the year ended
December 31, 2006.

The Company's fiscal year-end is December 31.

NOTE 2 - ACCOUNTING POLICIES

This summary of significant accounting policies of Industrial Minerals, Inc. is
presented to assist in understanding the Company's financial statements. The
financial statements and notes are representations of the Company's management,
which is responsible for their integrity and objectivity. These accounting
policies conform to accounting principles generally accepted in the United
States of America and have been consistently applied in the preparation of the
financial statements.

Basic and Diluted Loss Per Share
Loss per share was computed by dividing the net loss by the weighted average
number of shares outstanding during the period. The weighted average number of
shares was calculated by taking the number of shares outstanding and weighting
them by the amount of time that they were outstanding. Basic and diluted loss
per share are the same, as inclusion of common stock equivalents would be
anti-dilutive.

Going Concern
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and satisfaction of
liabilities in the normal course of business. The Company has suffered material
recurring losses from operations since inception. At March 31, 2007, the Company
had a negative working capital of $499,703, recurring losses, and an accumulated
deficit of $5,579,492 and negative cash flow from operations. These factors
raise substantial doubt about the Company's ability to continue as a going
concern.

Continuation of the Company is dependent on achieving sufficiently profitable
operations and possibly obtaining additional financing. Management has and is
continuing to raise additional capital from various sources. The Company's
website contains all news releases in the past year as well as detailed
descriptions and analysis of the Company's mineral property. There can be no
assurance that the Company will be successful in raising additional capital as
and when it is required.

The financial statements do not include any adjustment relating to the
recoverability and classification of assets and liabilities that might be
necessary should the Company be unable to continue as a going concern.


                                       6
<PAGE>

NOTE 3 - ORGANIZATION

The Company was incorporated on November 6, 1996, as Winchester Mining
Corporation in the State of Delaware. On May 13, 2000, in connection with its
merger with Hi-Plains Energy Corp. the Company changed its name from Winchester
Mining Corporation to PNW Capital, Inc. On January 31, 2002, the Company
acquired 91% of the outstanding shares of Industrial Minerals, Inc. On May 2,
2002, the Company merged the remaining 9% of Industrial Minerals, Inc. into PNW
Capital, Inc. and changed its name to Industrial Minerals, Inc.


NOTE 4 - PRESENTATION OF INTERIM INFORMATION

The accompanying interim financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
and, in the opinion of management, include all normal adjustments considered
necessary to present fairly the financial position as of March 31, 2007 and the
results of operations and cash flows for the three and three month periods ended
March 31, 2007 and 2006. Interim results are not necessarily indicative for
results for a full year.

The financial statements and notes are presented as permitted by Form 10-QSB,
and do not include information included in the Company's audited financial
statements and notes for the year ended December 31, 2006.


FINANCING

During the three-month period ending March 31, 2007 the Company has been able to
secure debt financing in the amount of $79,434 from non-affiliated shareholders.

NOTE 5 - SUBSEQUENT EVENT

On March 20, 2007, a management change occurred in the Company when three
directors, Mssrs. Birge, Rogers and Weathers resigned, and were replaced on the
Board of Directors by Mr. William Thomson and Mr. William Booth, of Toronto. Mr.
Thomson assumed the position of Chairman of the Board. The Company currently has
three directors: William Thomson, Chairman, Robert Dinning, Chief Financial
Officer and Secretary, and William Booth, director.

Mr. Thomson is Chairman of Thomson Associates, of Toronto Ontario and London
England. Thomson Associates, founded in 1978, is a merchant banking company
providing corporate finance expertise and management leadership to businesses.

In conjunction with the new board of director appointments, on April 3, 2007 Mr.
Dick van Wyck was appointed President and CEO of the company replacing the
retiring W. Campbell Birge.






                                       7
<PAGE>



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

OVERVIEW

     Industrial Minerals, Inc. ("the Company"), a Delaware Corporation, was
incorporated on November 6, 1996 under the name Winchester Mining Corp. The name
of the Company was subsequently changed to PNW Capital, Inc. on May 16, 2000.

     The Company is a successor registrant pursuant to Section 12(g)3 of the
Securities Exchange Act of 1934, by virtue of a statutory merger of the Parent,
Winchester Mining Corp., a Delaware corporation, and its wholly owned
subsidiary, Hi-Plains Energy Corp., a Wyoming corporation, with Winchester
Mining Corporation being the survivor. There was no change to the issued and
outstanding shares of Winchester Mining Corporation, and all shares of Hi-Plains
Energy Corp. were retired by virtue of the merger.

     On May 15, 2000, Winchester Mining Corp. completed a Share Purchase
Agreement with shareholders of Hi-Plains Energy Corp. in which Winchester Mining
Corp., a Delaware Corporation, acquired all 780,000 shares outstanding of the
Registrant for the purposes of accomplishing a Merger of Hi-Plains Energy Corp.
and Winchester Mining Corp. The Merger was completed on May 15, 2000.

     In fall of 2000 the Company acquired 100% of the issued and outstanding
stock of PB&J Inc., a newly formed Colorado Corporation upon issuance of
47,460,000 shares of common stock to the principals of PB&J, who became the
management and Directors of PNWC.

     On December 14, 2001, the shareholders adopted a reverse split of the then
issued and outstanding shares on a 100 for one basis, except that no shareholder
shall be reduced to less than 50 shares. The effective date of the reverse split
was January 7, 2002.

     On January 31, 2002, PNW Capital, Inc. ("PNW" or the "Company"), entered
into a definitive acquisition agreement to acquire Industrial Minerals
Incorporated ("IMI"), a private Nevada Corporation, owner of certain mineral
leases located in the Townships of Head, Clara and Maria in the County of
Renfrew and the Province of Ontario, Canada. The Agreement for Share Exchange
was executed January 31, 2002 and approved by the Board of Directors on January
31, 2002. Under the terms of the acquisition agreement, PNW exchanged a total of
31,511,700 shares of its common stock for 91% of the issued and outstanding
shares of IMI. As a result of the transaction, IMI became a wholly owned
subsidiary of PNW and changed its company name to Industrial Minerals, Inc.

     On June 13, 2003, the directors approved a resolution to forward split the
common shares of the Company on a two shares for one basis, and a majority of
the shareholders consented in writing to the forward split. This resulted in the
issuance of an additional 36,031,948 shares of common stock.

     The Ministry of Environment of the Province of Ontario has requested a
storm water management plan from the Company. The Company has retained Knight
Piesold to author this plan and this plan will be submitted to the Ministry
of Environment when completed.

     In August 2004, the Company through its wholly owned subsidiary, Industrial
Minerals Canada, Inc. received notice from the Ministry of Northern Development
and Mines for the Province of Ontario that the Bissett Creek Graphite Project
Certified Closure Plan as per Subsection 141(3)(a) of the Mining Act for the
Province of Ontario is now considered filed.

     On March 20, 2007, three members of the Board of Directors resigned, and
were replaced by two new directors. Those resigning were Cam Birge, Stephen
Weathers, and Pat Rogers. They were replaced as directors by Mr. William
Thomson, who assumed the role of Chairman of the Board, and Mr. William Booth,
director. Mr. Robert Dinning C.A. remained as CFO, Secretary, and a director.

     On April 3, 2007, the following additional persons were appointed:

     Mr. Dick van Wyck - President, and Chief Executive Officer
     Mr. Scott Old - Vice President, Sales and Marketing
     Mr. David Wodar - Vice President, Corporate Communications

     Mr. van Wyck has over 20 years of experience practicing business and
commercial law, as in-house counsel with the Department of Justice as well as
with two large corporations. Mr. van Wyck specializes in corporate and
commercial law, intellectual property matters, mergers and acquisitions,
environmental law and human resources management.

                                       8

<PAGE>
     Both Mr. Scott Old and Mr. David Wodar bring extensive background
experience to the roles they will play as the Company moves forward to develop
its resource base.

     Mr. Cam Birge, who resigned to pursue other endeavors, will continue to
assist the Company in the development of its graphite property.

     In addition to the foregoing, Mr. Paul Hynek, will assume the role of
Chairman of the Advisory Board. Mr. Hynek is a geologist with an extensive
background in large scale mining projects.

     The management team recognizes the necessity of acquiring additional
financing and expects to advise shareholders shortly regarding completion of
interim financing.

     The Company intends to engage consultants to prepare a technical report
which will include a resource model with classification, in conformity with NI
43-101 CIM guidelines. This will lead to proper management of the process
development economics.


RESULTS OF OPERATIONS

The Company had no revenues for the fiscal year. The Company continues as an
Exploration Stage Company and will not have revenues until a proposed
feasibility study is completed sometime in 2007 and the Company then acquires
the necessary equipment to commence production.

The Company has significantly reduced its expenses in the quarter ending March
31, 2007 vs. the three months ending March 31, 2006. Total expenses for the
three months ending March 31, 2007 amount to $189,835 vs. $376,579 for the three
months ending March 31, 2006. General and administrative expenses have been
reduced to $66,670 from $178,643, as a result of elimination of the office in
Mankato, Minnesota, and a reduction in personnel. Management fees have been
reduced as well, as the Company moves toward a revised management team,
effective the quarter commencing April 1, 2007.

Professional fees during the quarter ending March 31, 2007 have been reduced to
$25,300 from $45,555 for the quarter ending March 31, 2006.

During the quarter ending March 31, 2007, the Company disposed of outdated
equipment and realized $18,080. This transaction resulted in a loss on disposal
of $11,920 in the current period.

The Company has terminated its lease in Mankato, MN and is obligated to pay the
landlord $5,000 in settlement. This terminates a lease that did not expire until
September 2008. Sale of furniture and equipment on hand will reduce this
termination expense when these assets are sold.

The Company currently has no employees and any personnel utilized are on a
contract basis only. Other than the current corporate officers, the Company has
no immediate plans to employ any personnel until such time as it conducts its
feasibility study.

The Company will continue the use of outside professional consultants as it
continues its mineralogical assessment and its development of a detailed
mineralogy study. Experienced international consultants from the mining industry
will be used where necessary.

As it is uncertain when revenue will be generated, expenses will need to be
financed by continued outside financial support. The Company intends to seek
equity financing and/or loans from shareholders and other interested parties in
order to finance its operations this year. While the Company feels it can obtain
the necessary financing there is no assurance that such investments, loans, or
other financial assistance will be forthcoming.

For the three months ended March 31, 2007, the Company incurred a loss of
$189,835 vs. a loss of $376,576 for the three months ended March 31, 2006. While
expenses are appreciably down in the current year, the Company cautions that
until it has completed its feasibility study and Baseline Mineralogical
Assessment, there is no assurance that a commercially viable mineral deposit
exists on the property, and that further exploration may be required before a
final evaluation as to any economic and legal feasibility is determined.



                                       9
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

At March 31, 2007 the Company had cash on hand in the amount of $17,878 vs.
$7,921 at March 31, 2006. The Company has no prepaid expenses at the present
time as it has paid its semi-annual royalty costs of $12,119 ($13,500 Cdn$)
under the terms of its agreement. The deposit of $10,000 pertains to a fuel tank
on the premises. The Company rents its office premises at #2500 One Dundas
Street, West, Toronto, Ontario, Canada, M5G 1Z3. The premises are rented on a
month-to-month basis.

The Company has a long-term deposit of $230,000 with the Ministry of Finance for
the Province of Ontario. During the year ending December 31, 2004 a Mine
Development and Closure Plan was filed with, and accepted by, the Ministry of
Northern Development and Mines, in accordance with the MINING ACT, R.S.O. 1990,
Ontario Regulation 240/00, including the standards, procedures and requirements
of the Mining Code of Ontario. The Company's deposit in the amount of $230,000
is a financial guarantee to the Province of Ontario ensuring that there are
enough funds on hand to affect a proper closure of the Bissett Creek Graphite
property.

The Company has accounts payable of $115,791 at March 31, 2007 vs. $129,321 at
March 31, 2006. These payables include fees owing to mining consultants engaged
at Bissett Creek. All outstanding payables will be retired once interim
financing is completed. The Company also owes $49,538 in accrued interest
payable at March 31, 2007. This accrued interest is due and payable in regard to
various loans outstanding.

In September, 2002, the Company purchased a house at the entrance to the road
leading into the Bissett Creek property at a cost of $24,050. Subsequent
additions increased the house cost to $45,191. At the time of purchase, the
Company negotiated a first mortgage in the amount of $17,000 with the vendor
which requires a payment of $359 (Canadian $400) monthly for five years. The
balance outstanding when the mortgage matures in 2007 will be fully retired.
This mortgage carries an interest rate of 7% annually. The balance outstanding
at March 31, 2007 is $9,996, which is due and payable in August 2007.

At March 31, 2007, the Company had liabilities to related parties of $283,327
including fees owed to the former Chairman, of $55,000 and loans and fees
payable to the former President of $193,317. There are no specific terms of
payment for these liabilities.

The Company also received loans from shareholders who are non affiliates, in the
amount of $617,217 as of March 31, 2007. Included in this total is $90,796 due
in July 2007. These loans from shareholders at March 31, 2007 compare to loans
outstanding at March 31, 2006 of $1,852,512. The loans have allowed the Company
to finance its current deficit and retire current liabilities outstanding. Loans
of $457,434 carry an interest rate of 7%, loans of $98,747 carry an interest
rate of 10% and a loan of $25,000 carries an interest rate of 18%. All accruals
have been included in accrued interest payable. The Company intends to obtain
additional loans from shareholders and other interested parties to retire all
outstanding payables, and finance its feasibility study over the next twelve
months. While the Company intends to procure these loans, there is no assurance
that the Company will be successful in its attempt to obtain said loans.

It is the Company's opinion that the intrinsic value of the Bissett Creek
property deposit lies in the large 1 to 6 mm (18 mesh to 1/4") Graphite and Mica
flakes. There is not presently any data available as to the specific
size-by-size weight distribution of graphite and mica in the ore. Graphite flake
values vary widely based on its size, but due to the fundamental lack of size
and chemical data, it is not possible at this stage to assign a clear specific
value to the rock.


Item 3.  CONTROLS AND PROCEDURES

The Company maintains disclosure controls and procedures that are designed to
ensure that information required to be disclosed in the Company's Exchange Act
reports is recorded, processed, summarized and reported within the time periods
specified in the SEC's rules and forms, and that such information is accumulated
and communicated to the Company's management, including its Chief Executive
Officer / Chief Financial Officer, as appropriate, to allow timely decisions
regarding required disclosure based closely on the definition of "disclosure
controls and procedures" in Rule 13a-15(e). In designing and evaluating the
disclosure controls and procedures, management recognized that any controls and
procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives, and management
necessarily was required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures.

On or about September 30, 2006, the end of the period of this report, the
Company carried out an evaluation, under the supervision and with the
participation of the Company's management, including the Company's President /
Chief Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures. Based on the foregoing, the
Company's President and Chief Financial Officer concluded that the Company's
disclosure controls and procedures were effective.


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<PAGE>
There have been no material changes in the Company's internal controls or in
other factors that have materially affected or are reasonably likely to
materially affect the internal controls subsequent to the date the Company
completed its evaluation.


PART II.  - OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

The Company has been named in a lawsuit filed by an individual pertaining to a
dispute with an alleged shareholder of the Company.

The lawsuit has been filed in the State of Washington in the Superior Court of
the State of Washington For King County. The Company was served on February 6,
2007 in Delaware.

The Plaintiffs are Mohamad S. Bakizada and Henriette Bakizada.

The Defendants are the Company, Robert D Poirier and Jane Doe Poirier, John
Melnyk and Jane Doe Melnyk, and Larry Van Tol and Jane Doe Van Tol.

Mr. Bakizada is claiming that shares allegedly purchased by him from the
Defendants is in violation of Washington State Securities Act.

Mr. Bakizada is requesting relief for the amount of his investment plus interest
at 8% from date of purchase plus reimbursement of losses plus interest at 8%.

Mr. Melnyk and Mr. Van Tol are previous officers and directors of the Company
while Mr. Poirier is allegedly a shareholder or former share holder of the
Company. The lawsuit is unspecified as to amount and the Company feels it is
without merit.


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

None.

Item 3. DEFAULTS UPON SENIOR SECURITIES

None.

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

None.

Item 5. OTHER INFORMATION

None.

Item 6. EXHIBITS


         EXHIBIT NO.       DESCRIPTION
         -----------       -----------
         31.1               Sarbanes Oxley Section 302 Certification from C.E.O.
         31.2               Sarbanes Oxley Section 302 Certification from C.F.O.
         32.1               Sarbanes Oxley Section 906 Certification from C.E.O.
         32.2               Sarbanes Oxley Section 906 Certification from C.F.O.



                                       11

<PAGE>
                                   SIGNATURES

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

Dated: May  15, 2007              INDUSTRIAL MINERALS, INC.

                             By: /s/ Dick van Wyck
                                 ---------------------
                                 Dick van Wyck, President and CEO, and Director


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

Dated: May 15, 2007              INDUSTRIAL MINERALS, INC.

                             By: /s/ Robert Dinning
                                 ----------------------
                                 Robert Dinning Chief Financial Officer,
                                 Secretary and Director





                                       12

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