FORM 10-QSB
                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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

                  For the fiscal quarter ended: March 31, 2004


                        Commission file number: 000-30651

                            INDUSTRIAL MINERALS, INC.
             (Exact name of registrant as specified in its charter)


Delaware                                          06-1474412
--------                              -----------------------------------
(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 |_|

         There were 72,063,896  shares  outstanding of the  registrant's  Common
Stock as of March 31, 2004.

<PAGE>


                                TABLE OF CONTENTS
                                                                            Page
                                                                            ----
PART I. - FINANCIAL INFORMATION

ITEM 1.   CONSOLIDATED FINANCIAL STATEMENTS....................................3

         Balance Sheets as of March 31, 2004 (unaudited) and
         December 31, 2003.....................................................4

         Statements of Operations for the Three Months ended March 31, 2004
         and March 31, 2003....................................................5

         Statements of Cash Flows (unaudited) for the Three Months
         ended March 31, 2004 and 2003.........................................6

         Statement of Stockholders' Equity for the year ended December 31, 2003,
         and for the Three Months ended March 31, 2004 (unaudited).............8

         Notes to Condensed Consolidated Financial Statements (unaudited)......9

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS................................................10

ITEM 3.CONTROLS AND PROCEDURES    ............................................13

PART II. - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS....................................................14

ITEM 2.  CHANGES IN SECURITIES................................................14

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES......................................14

ITEM 4.  SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS...................14

ITEM 5.  OTHER INFORMATION....................................................14

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.....................................14

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


                                      -2-

<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  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
to 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, 2003, included in the Company's Form 10-KSB.



























                                      -3-
<PAGE>
<TABLE>
<CAPTION>


                            INDUSTRIAL MINERALS, INC.
                                 AND SUBSIDIARY
                         (An Exploration Stage Company)
                           Consolidated Balance Sheets
                      March 31, 2004 and December 31, 2003

<S>                                                                                 <C>                <C>
                                                                                         March 31,         December 31,
Assets                                                                                     2004               2003
------                                                                                  (Unaudited)         (Audited)

Current assets:
     Cash                                                                            $    305,567      $    585,934
     Receivables                                                                           53,034            40,267
     Prepaid expenses                                                                      10,462            10,462
     Deposits                                                                              62,464            65,242
                                                                                     ------------      ------------

                           Total current assets                                           431,527           701,905

Building and equipment, at cost, less accumulated
     depreciation of $147,447 in 2004 and $124,493 in 2003                              1,040,517           911,652
                                                                                     ------------      ------------

                           Total assets                                              $  1,472,044      $  1,613,557
                                                                                     ============      ============

Liabilities and Stockholders' Equity

Current liabilities:
     Accounts Payable                                                                $     70,217      $    165,753
     Current installments of mortgages payable                                              1,610             2,144
                                                                                     ------------      ------------
                           Total current liabilities                                       71,827           167,897


     Accrued interest payable                                                             139,667            83,579
     Loans payable                                                                      3,308,707         3,058,707
     Mortgage payable, excluding current installments                                      14,332            14,332
                                                                                     ------------      ------------

                           Total liabilities                                            3,534,533         3,324,515
                                                                                     ------------      ------------

Stockholders' equity:
     Preferred Stock, par value $0.01 per share; 50,000,000
         shares authorized; no shares issued and outstanding                                    -                 -
     Common Stock, par value $.0001; 100,000,000 shares authorized;
         72,063,896 shares issued and outstanding                                           3,600             3,600
     Additional paid-in capital                                                            14,142            14,142
     Deficit accumulated during exploration stage                                      (2,080,231)       (1,728,700)
                                                                                     ------------      ------------

                           Total stockholders' equity (deficit)                        (2,062,489)       (1,710,958)
                                                                                     ------------      ------------

                           Total liabilities and stockholders' equity                $  1,472,044      $  1,613,557
                                                                                     ============      ============
</TABLE>


See accompanying notes to consolidated financial statements.






                                      -4-


<PAGE>
<TABLE>
<CAPTION>


                            INDUSTRIAL MINERALS, INC.
                                 AND SUBSIDIARY
                         (An Exploration Stage Company)
                Consolidated Statements of Operations (Unaudited)
                 Three months ended March 31, 2004 and 2003 and
           for the period from November 6, 1996 (Date of Inception) to
                                 March 31, 2004






                                                                              Three months
                                                                                 ended                November 6, 1996
                                                                                March 31,              (inception) to
                                                                                ---------
<S>                                                                 <C>              <C>            <C>
                                                                          2004              2003     March 31, 2004
                                                                    ------------     ------------    --------------


Revenue                                                             $          -                -            15,537
                                                                    ------------     ------------    --------------
Expenses
     Cost of revenues                                                          -                -            76,201
     Professional fees                                                    36,973           15,676         1,148,635
     Royalty fees                                                         10,000            8,775            46,325
     Depreciation and amortization                                        22,954           14,030           156,156
     Impairment of long-lived assets                                           -                -           582,176
     Management fees and salaries                                         30,826                -            86,953
     Other general and administrative                                    250,818          105,723         1,699,749
                                                                    ------------     ------------    --------------

                           Total expenses                                351,571          144,204        (3,796,195)
                                                                    ------------     ------------    --------------

                           Loss from operations                         (351,571)        (144,204)       (3,780,658)
                                                                    ------------     ------------    --------------

Other income:
     Interest income                                                          40                -             2,851
     Other income                                                              -                -               594
                                                                    ------------     ------------    --------------

                           Total other income                                 40                -             3,445
                                                                    ------------     ------------    --------------

                           Net loss                                 $   (351,531)        (144,204)       (3,777,213)
                                                                    ============     =============   ==============

Net loss per common share                                           $       (.00)            (.00)
                                                                    ============     =============

Weighted average common shares outstanding                            72,063,896       36,031,621
                                                                    ============     =============
</TABLE>




See accompanying notes to consolidated financial statements.






                                      -5-

<PAGE>
<TABLE>
<CAPTION>


                            INDUSTRIAL MINERALS, INC.
                                 AND SUBSIDIARY
                         (An Exploration Stage Company)
                Consolidated Statements of Cash Flows (Unaudited)
                 Three months ended March 31, 2004 and 2003 and
           for the period from November 6, 1996 (Date of Inception) to
                                 March 31, 2004


                                                                              Three months
                                                                                 ended               November 6, 1996
                                                                               March 31,             (inception) to
                                                                               ---------
<S>                                                                 <C>              <C>             <C>
                                                                         2004             2003       March 31, 2004
                                                                    ------------     ------------    --------------
Cash flows from operating activities:
     Net loss                                                       $   (351,531)        (144,204)       (3,777,213)
     Adjustments to reconcile net loss to
            net cash used in operating activities:
         Depreciation and amortization                                    22,954           14,030           147,864
         Provision for bad debts                                               -                -            49,676
         Stock issued for services                                             -                -           414,606
         Impairment of long-lived assets                                       -                -           297,882
         Changes in:
              Receivables                                                (12,767)          (2,721)          (57,203)
              Inventory                                                        -                -            (5,527)
              Prepaid expenses                                                 -                -           (11,001)
              Deposits                                                     2,778          (12,555)          (62,464)
              Accounts payable and accrued expenses                      (95,536)          10,397           (17,811)
              Due to related parties                                           -          (38,065)          395,000
                                                                    ------------     ------------    --------------

                           Net cash used in operating
                             activities                                 (434,102)        (173,118)       (2,626,191)
                                                                    ------------     ------------    --------------

Cash flows from investing activities:
     Purchase of building and equipment                                 (151,819)               -          (987,541)
     Investment in Multiplex                                                   -                -           (75,000)
     Acquisition of goodwill                                                   -                -          (149,057)
     Loan to related party                                                     -                -           (50,000)
     Loan repayments                                                           -                -             4,493
                                                                    ------------     ------------    --------------

                           Net cash used in
                             investing activities                       (151,819)               -        (1,257,105)
                                                                    ------------     ------------    --------------

                                                                                                                       (Continued)
</TABLE>


See accompanying notes to consolidated financial statements.








                                      -6-


<PAGE>
<TABLE>
<CAPTION>


                            INDUSTRIAL MINERALS, INC.
                                 AND SUBSIDIARY
                         (An Exploration Stage Company)
          Consolidated Statements of Cash Flows (Unaudited), Continued




                                                                              Three months
                                                                                 ended               November 6, 1996
                                                                               March 31,             (inception) to
                                                                               ---------
<S>                                                                 <C>              <C>             <C>
                                                                         2004             2003       March 31, 2004
                                                                    ------------     ------------    --------------
Cash flows from financing activities:
     Net proceeds from sale of common stock                         $          -                -           744,859
     Net proceeds from loans payable                                     250,000          160,875         3,288,255
     Proceeds from mortgage                                                    -                -            17,000
     Principal payments on mortgage                                         (534)            (505)           (1,058)
     Accrued interest payable                                             56,088           14,767           139,667
     Cash acquired in acquisition of Peanut
         Butter & Jelly, Inc.                                                  -                -               140
                                                                    ------------     ------------    --------------

                           Net cash provided by
                               financing activities                      305,554          175,137         4,188,863
                                                                    ------------     ------------    --------------

Net increase (decrease) in cash                                         (280,367)           2,019           305,567

Cash, beginning of period                                                585,934            5,537             -
                                                                    ------------     ------------    --------------

Cash, end of period                                                 $    305,567            7,556           305,567
                                                                    ============     ============    ==============

Supplemental cash flow disclosures:
     Cash paid for interest                                         $          -                -               113
                                                                    ============     ============    ==============


     Cash paid for income taxes                                     $          -                -                 -
                                                                    ============     ============    ==============

Non cash investing and financing activities:
     Shares issued for debt                                         $          -                -           595,000
                                                                    ============     ============    ==============
     Shares issued for services                                     $          -                -           414,606
                                                                    ============     ============    ==============
     Shares issued for investment                                   $          -                -                30
                                                                    ============     ============    ==============

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

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

                                                                    $          -                -           205,000
                                                                    ============     ============    ==============

</TABLE>

See accompanying notes to consolidated financial statements.


                                      -7-

<PAGE>
<TABLE>
<CAPTION>


                                              INDUSTRIAL MINERALS, INC.
                                                   AND SUBSIDIARY
                                           (An Exploration Stage Company)

                             Consolidated Statement of Stockholders' Equity (Unaudited)
                                                   March 31, 2004
                                                                                          Deficit
                                                                                        Accumulated
                                                   Common Stock           Additional    During the
                                          ---------------------------      Paid-In      Exploration
                                           # of Shares        Amount        Capital         Stage           Totals
                                        -------------      -----------    -----------     ----------     -----------
<S>                                     <C>                <C>            <C>            <C>             <C>
Inception - November 6, 1996                        -      $        -              -              -               -

Balance at December 31, 1998                  252,500              25        505,143       (750,830)       (245,662)
Issuance of stock for cash                     30,000               3        146,618              -         146,621
Issuance of stock for services                 55,000               6        274,994              -         275,000
Net loss                                            -               -              -       (259,404)       (259,404)
                                        -------------      -----------    -----------     ----------     -----------
Balance at December 31, 1999                  337,500              34        926,755     (1,010,234)        (83,445)

Issuance of stock for cash                     84,900               8        413,062              -         413,070
Issuance of stock for services                 70,000               7        349,993              -         350,000
Issuance of stock for Multiplex
     stock                                      3,000               1             29              -              30
Issuance of stock for acquisition             475,463              47          4,699              -           4,746
Net loss                                            -               -              -       (694,758)       (694,758)
                                        -------------      -----------    -----------     ----------     -----------
Balance at December 31, 2000                  970,863              97      1,694,538     (1,704,992)       (10,357)

Issuance of stock for
     compensation                              30,000               3         59,997              -         60,000
Net loss                                            -               -              -        (67,251)       (67,251)
                                        -------------      -----------    -----------     ----------     -----------
Balance at December 31, 2001                1,000,863             100      1,754,535     (1,772,243)       (17,608)

Issuance of stock in connection
     with acquisition of Industrial
     Minerals Incorporated                 35,000,000           3,500     (1,740,393)     1,696,982        (39,911)
Minimum 50 shares
     post-split allocation                     30,758               -              -              -              -
Net loss                                            -               -              -       (520,242)      (520,242)
                                        -------------      -----------    -----------     ----------     -----------
Balance at December 31, 2002               36,031,621           3,600         14,142       (595,503)      (577,761)

Minimum 50 shares
     post-split allocation                        327               -              -              -              -
2-for-1 split                              36,031,948               -              -              -              -

Net loss                                            -               -              -     (1,133,197)    (1,133,197)
                                        -------------      -----------    -----------     ----------     -----------
Balance at December 31, 2003               72,063,896      $    3,600         14,142     (1,728,700)    (1,710,958)
                                        =============      ===========    ===========     ==========     ===========

Net loss                                            -               -              -       (351,531)       (351,531)
                                        -------------      -----------    -----------     ----------     -----------

Balance at March 31, 2004                  72,063,896       $  3,600          14,142     (2,080,231)     (2,062,489)
                                        =============      ===========    ===========     ==========     ===========
</TABLE>



See accompanying notes to consolidated financial statements.

                                      -8-
<PAGE>


                            INDUSTRIAL MINERALS, INC.
                                 AND SUBSIDIARY
                         (An Exploration Stage Company)

                   Notes to Consolidated Financial Statements
                   Three months ended March 31, 2004 and 2003





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.

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, 2004 and the
results of  operations  and cash flows for the three months ended March 31, 2004
and 2003. 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  contain  certain  information  included  in  the  Company's  audited
financial statements and notes for the year ended December 31, 2003.


















                                      -9-

<PAGE>


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

              Three-months ending March 31, 2004 and March 31, 2003

During the three-month period ending March 31, 2004 the Company had no revenues.
The Company had no revenue during the same  three-month  period ending March 31,
2003.

The Company  incurred  expenses for  professional  fees in the amount of $36,973
during the  three-month  period ending March 31, 2004 compared to $15,676 during
the three-month period ending March 31, 2003. This is an increase of $21,297.

The  Company  incurred  royalty  expenses  in the amount of  $10,000  during the
three-month  period  ending  March 31,  2004.  The  Company is required to pay a
minimum yearly royalty of $20,000  ($27,000 CDN dollars)  whether the Company is
producing  graphite or not.  There was a royalty  payment  made in the amount of
$8,775 during the three-month  period ending March 31, 2003. This is an increase
of  $1,225.The  weakness of the United States dollar in relation to the Canadian
dollar over the past year has resulted in an increased cost in US dollars to the
Company. If the United States dollar remains at the current level in relation to
the  Canadian  dollar the  royalty  payment in  subsequent  years will remain at
$20,000 US dollars.

Depreciation  and amortization  expense for the three-month  period ending March
31, 2004 totaled $22,954,  compared to $14,030 for the three-month period ending
March 31, 2003.  This  represents  an increase of $8,924.  This  increase is the
result of additional  asset  purchases  involving  the  Company's  Bissett Creek
Graphite property.

Other  general and  administrative  expenses for the  three-month  period ending
March 31, 2004 totaled  $250,818  compared to $105,723 for the same  three-month
period ending March 31, 2003.  This  represents  an increase in the  three-month
period  ending March 31, 2004 of $145,095  over the same period ending March 31,
2003. This increase is due to an increase in activity surrounding the operations
of the Company during the  three-month  period ending March 31, 2004 compared to
the same three-month period ending March 31, 2003.

The  Company  has  begun  and is  continuing  to  market  graphite  that will be
available  from the Bissett Creek  Graphite  Property.  Several  Companies  have
expressed  interest in the graphite  from the Company's  Bissett Creek  Graphite
Property.  The Company is pleased with this response but cautions investors that
there are no firm orders for the  Company's  graphite  at this time.  Investor's
should be further  cautioned  that the Company  might not be  successful  in its
marketing efforts.

The Company paid $30,826 in management  fees and salaries during the three-month
period ending March 31, 2004.  There were no  management  fees and salaries paid
during the three-month period ending March 31, 2003. The Company paid $23,125 in
wages to the President of the Company and $5,550 to the Chief Financial Officer.
Included in management fees and salaries is amount of $2,151 in benefits paid to
Revenue Canada on behalf of the President and Chief Financial Officer.  Benefits
in the amount of $2,151 paid to Revenue Canada  represent the Company's  portion
of Canada Pension Plan and Employment Insurance Premiums payable.

The Company has had a net loss of $351,531  for the  three-month  period  ending
March 31, 2004 as compared to a net loss of $144,204 for the three-month  period
ending  March  31,  2003.  This  represents  an  increase  of  $207,327  for the
three-month period ending March 31, 2004 compared to the same three-month period
ending  March  31,  2003.  This  increase  is due  to an  increase  in  activity
surrounding the operations of the Company during the  three-month  period ending
March 31, 2004 compared to the same three-month period ending March 31, 2003.




                                      -10-

<PAGE>

                         Liquidity and Capital Resources

The Company has cash on hand at March 31, 2004 of $305,567 and a  receivable  of
$53,034 as a result of tax input  credits owed to the Company by the  Government
of Canada.

The Company has prepaid expenses of $10,462.  This represents the unused portion
of an insurance  policy that the Company carries for its building and equipment.
This policy expires September 6, 2004.

The Company has a total of $62,464 in deposits.  The  Company's  landlord  holds
$1,521 which  represents a deposit on rent and common costs  associated with its
premises located at Suite 750 2 Robert Speck Parkway,  Mississauga,  Ontario L4Z
1H8. The Minister of Finance for the Province of Ontario  holds $55,093 which is
a security  deposit  regarding the mine closure plan that has been filed for the
Bissett  Creek  Property.  Further  deposits in the amounts of $4,000 for future
marketing, $1,480 for future legal fees and $370 for mobile phone deposits.

The Company had no revenue during  three-month  period ending March 31, 2004 and
expects to have no revenue in each of the next two-quarter  ending June 30, 2004
and  September  30, 2004.  The Company is currently  seeking  customers  for its
graphite.  Discussions  are on going with  potential  customers for graphite but
there are no contracts  concluded at this time.  There can be no guarantee  that
the Company will be successful in obtaining a contract for its graphite.

The Company has total accounts  payable of $70,217.  The Company has the cash on
hand in order to pay these accounts payable in an orderly  fashion.  The Company
also owes $139,667 in accrued  interest  payable.  The interest is not due until
July 31, 2005.

The Company has secured a first  mortgage in the amount of $17,000 during fiscal
year 2002 which requires a payment of $296  (Canadian $400 monthly)  monthly for
five  years and the  balance is then due and  payable at the end of five  years.
This mortgage carries an interest rate of 7% annually.  The Company has the cash
on hand to pay  these  payments  in an  orderly  fashion.  These  payments  were
originally  $260 monthly however due to the weakness of the United States dollar
in relation to the Canadian dollar a $36 USD per month increase has occurred.

During the three-month period ending March 31, 2004 the Company has been able to
secure  debt  financing  in  the  amount  of  $250,000  from  a   non-affiliated
shareholder.  Total loans payable now amount to $3,308,707 as of March 31, 2004.
Interest has accrued on this debt in the amount of $139,667.  The interest  rate
associated  with  this  debt will be 7%  yearly.  This  debt is due and  payable
together with principal and any accrued interest on July 31, 2005.

Industrial  Minerals  has the  following  future  commitments.  During the third
quarter  ending March 31, 2004 the  following  work has  continued and as of the
date of this  filing is at various  stages of  completion.  Investors  should be
cautioned  that a  substantial  amount  of the  following  work  still  requires
completion.

1........Process building                                      $ 40,000
2........Main crushing and screening plants                      40,000
3........Equipment purchases, additional loader                  40,000
4........Equipment, used excavator                               55,000
5........Blasting equipment (dynamite)                           46,000
6........Placing of equipment in process building                65,000
7........Equipment, dryer                                        60,000
8........Equipment for quality control procedures                60,000
9........Final screening equipment                               60,000

Total funds required to complete construction                  $466,000

                                      -11-
<PAGE>

In addition to the above cash requirements to complete  construction of the mill
site the  Company has  budgeted  for the  following  cash  requirements  for the
balance of the current fiscal year ending December 31, 2004:

1........Professional fees                                    $  54,000
2........Royalty Payments                                        10,000
3........Management fees and salaries                            45,000
4........General & Administrative Expenses                      430,000
5........Mining Costs for fiscal year 2004                      200,000
6........Environmental testing (ongoing)                        105,500
7........Mine closure plan                                      250,000

Total Operating Budget                                       $1,094,500

Investors  should be aware that the above are estimates only and could change as
the project develops.

Regarding  point  number 4 above  concerning  general  and  administrative  cash
requirements, this figure does not include interest that is accruing at the rate
of 7% per annum.  Management estimates that additional interest in the amount of
approximately $199,500 will accrue during the remaining of the 3 quarters of the
Company's  fiscal year ending  December 31, 2004.  Since these funds are not due
until July 31, 2005  management  has not included them in the cash  requirements
for the balance of fiscal year ending December 31, 2004.

Regarding  point  number 7 above  concerning  the mine closure  plan,  investors
should be aware that this is an estimate.  The final figure may be substantially
higher.  Management  does not believe the figure will be lower.  The Province of
Ontario requires  financial  assurances to be in place before mining  commences.
The Company has filed a mine  closure  plan with the  Province and is now in the
process of responding to the comments received from the Ministry of Mines. It is
expected this process will be complete during the second quarter of 2004.

The Company  requires  $466,000 to complete the  construction of the mine on its
Bissett Creek  Property.  The Company's  operational  budget for the  nine-month
period  beginning  April  1,  2004 in the  amount  of  $1,094,500  or a  monthly
operational  cost of  $121,611  for each of the months of April 1, 2004  through
December 31, 2004.  Thus total funds in the amount of $1,560,500 are required to
complete  construction  at the  Bissett  Creek  Graphite  mine in the  amount of
$466,000 and pay operational costs of $121,611 monthly for the nine-month period
beginning  April 1, 2004 and ending  December 31, 2004.  Subsequent to March 31,
2004  the  Company  obtained   financing  in  the  amount  of  $275,000  from  a
non-affiliated  shareholder.  The  financing  in the amount of $275,000  accrues
interest at the rate of 7% per annum and the principal in the amount of $275,000
along with accrued  interest is due on July 31, 2005. Since the Company has cash
of  $305,567  and has a  receivable  of $53,034 on hand as of March 31, 2004 and
subsequent  to March 31, 2004 has received an additional  $275,000,  the Company
requires  additional  financing  in the  amount of  $926,899.  While  management
believes the Company will be successful in obtaining  satisfactory  financing to
complete  construction  of the mine and begin  operations,  investors  should be
cautioned that the Company  currently has no commitments of any type made by any
person or entity to provide financing.  Investors and potential investors should
be aware that the Company  might not be able to  continue to operate  throughout
it's current fiscal year ending  December 31, 2004 without sales of its graphite
or additional financing.

                                      -12-
<PAGE>
Investors and potential investors should be aware that the Company does not have
the funds to complete  construction  of the mine. In addition,  the Company does
not have the  necessary  funds to  operate  throughout  its fiscal  year  ending
December 31, 2004.  Even if the Company is successful in obtaining the necessary
financing there is no guarantee that the Company will be successful in marketing
graphite.  The Company  intends to continue to seek debt financing to ensure its
ability to operate throughout 2004 from  non-affiliates,  and possibly officers,
directors and  shareholders.  No  commitments  of any type have been made by any
person or entity to provide  financing.  Management  has no plan to overcome the
uncertainties  surrounding the Company's  ability to continue as a going concern
for a  reasonable  period of time  extending  beyond  August 31, 2004 unless the
Company  obtains  additional  financing or begins  production  and  successfully
obtains a contract for it's graphite.  Management  will deal with issues as they
arise but as a "start up" company in a graphite mining attempt,  the Company can
neither predict nor solve, in anticipation, the uncertainties of mining, capital
raising,  marketing or operations.  All risks and uncertainties  inherent in any
start up company  exist in the chosen area of the Company.  The Company does not
have any other plan in place to provide capital or financing for its operations.

Should the Company  complete the mine and begin  production  investors should be
further  cautioned that there might not be a market for the Company's  graphite.
The Company is currently seeking customers for its graphite.  Discussions are on
going with potential customers for graphite but there are no contracts concluded
at this time.  There can be no guarantee  that the Company will be successful in
obtaining a contract for its graphite.

Investors and potential  investors should be further cautioned that the ultimate
success of the Company relies on the Company's  ability to successfully mine and
market its graphitic resource at a profit.


ITEM 3.  CONTROLS AND PROCEDURES

Evaluation of Internal and Disclosure Controls

The  management of the Company has evaluated the  effectiveness  of the issuer's
disclosure  controls  and  procedures  as of a date  within 90 days prior to the
filing  date  of the  report  (evaluation  date)  and  has  concluded  that  the
disclosure  controls and procedures are adequate and effective  based upon their
evaluation  as of the  evaluation  date.  There were no  significant  changes in
internal controls or in other factors that could  significantly  affect internal
controls subsequent to the date of the most recent evaluation of such, including
any  corrective  actions with regard to  significant  deficiencies  and material
weaknesses.







                                      -13-
<PAGE>



                           PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         None.

ITEM 2.  CHANGES IN SECURITIES

         None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

         None.

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

         None.

ITEM 5. OTHER INFORMATION

         None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

         (a) Exhibits.

             EXHIBIT NO.        DESCRIPTION

                31.1     Section 302 Certification - CEO
                31.2     Section 302 Certification - CFO
                32.1     Section 906 Certification - CEO
                32.2     Section 906 Certification - CFO

         (b) The following is a list of Current Reports on Form 8-K filed by the
Company during the fiscal quarter for the period ended March 31, 2004.

         Report on Form 8-K dated  January 6, 2004,  relating  to changes in the
Company's Directors and Integrity and Ethics Policy.

         Report on Form 8-K dated  March 14,  2004,  relating  to changes in the
Company's Committees and the Resignation of a Director.






                                      -14-
<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 12, 2004              INDUSTRIAL MINERALS, INC.

                                 By:/s/John Melnyk
                                 -----------------------------------------------
                                 John Melnyk,
                                 Chief Financial Officer and Secretary/Treasurer


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.


By:/s/John Melnyk                                            Dated: May 12, 2004
   -------------------------------------------------------------
    John Melnyk, Chief Financial Officer and Secretary/Treasurer


























                                      -15-