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: September 30, 2003


                        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.)


    2 Robert Speck Parkway, Suite #750, Mississauga, Ontario, Canada L4Z 1H8
    ------------------------------------------------------------------------
               (Address of principal executive offices) (Zip Code)

                                 (905) 306-3451
                           --------------------------
               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 September 30, 2003.

<PAGE>


                                TABLE OF CONTENTS

                                                                            Page
PART I. - FINANCIAL INFORMATION

ITEM 1.   CONSOLIDATED FINANCIAL STATEMENTS..................................  2

         Balance Sheets as of September 30, 2003 (unaudited) and
         December 31, 2002...................................................  3

         Statements of Operations for the Three and Nine Months ended
         September 30, 2003 and September 30, 2002...........................  4

         Statements of Cash Flows (unaudited) for the Nine Months ended
         September 30, 2003 and 2002.........................................  5

         Statement of Stockholders' Equity for the year ended
         December 31, 2002, and for the Nine Months ended
         September 30, 2003 (unaudited)......................................  7

         Notes to Condensed Consolidated Financial Statements (unaudited)....  8

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS...............................................  9

PART II. - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS....................................................13

ITEM 2.  CHANGES IN SECURITIES................................................13

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES......................................13

ITEM 4.  SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS...................13

ITEM 5. OTHER INFORMATION.....................................................13

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.....................................13

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



                                       1
<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, 2002, included in the Company's Form 10-SB.











                                       2
<PAGE>
<TABLE>
<CAPTION>


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

                           Consolidated Balance Sheets
                    September 30, 2003 and December 31, 2002

                                                                                      September 30,     December 31,
                           ASSETS                                                         2003              2002
                           ------
                                                                                       (Unaudited)       (Audited)
                                                                                     ------------        ----------
<S>                                                                                  <C>                 <C>
Current assets:
     Cash                                                                            $    729,329        $    5,537
     Receivable - GST refunds                                                              31,006            19,594
     Prepaid expenses                                                                      14,531             6,400
     Deposits                                                                             210,220               796
                                                                                     ------------        ----------
                           Total current assets                                           985,086            32,327

Building and equipment, at cost, less accumulated
     depreciation of $103,326 in 2003 and $56,193 in 2002                                 552,440           366,014
                                                                                     ------------        ----------
                           Total assets                                              $  1,537,526        $  398,341
                                                                                     ============        ==========

                         LIABILITIES AND STOCKHOLDERS' EQUITY
                         ------------------------------------

Current liabilities:
     Accounts payable:
         Non-related parties                                                         $      3,628        $    3,845
         Related parties                                                                        -           180,000
                                                                                     ------------        ----------
                           Total accounts payable                                           3,628           183,845

     Accrued interest payable                                                              35,915                 -
     Notes payable                                                                      2,781,666           775,372
     Current installments of mortgage payable                                               1,999             1,999
                                                                                     ------------        ----------
                           Total current liabilities                                    2,823,308           961,216

Mortgage payable, excluding current installments                                           13,232            14,886
                                                                                     ------------        ----------

                           Total liabilities                                            2,836,440           976,102
                                                                                     ------------        ----------

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 for 2003 and
         36,031,621 shares issued and outstanding for 2002                                  3,600             3,600
     Additional paid-in capital                                                            14,142            14,142
     Deficit accumulated during exploration stage                                      (1,316,656)         (595,503)
                                                                                     ------------        ----------

                           Total stockholders' equity (deficit)                        (1,298,914)         (577,761)
                                                                                     ------------        ----------
                           Total liabilities and stockholders' equity                $  1,537,526        $  398,341
                                                                                     ============        ==========

</TABLE>

See accompanying notes to consolidated financial statements.




                                       3
<PAGE>
<TABLE>
<CAPTION>


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

                                     Consolidated Statements of Operations (Unaudited)

                            Three and nine month periods ended September 30, 2003 and 2002 and
                                for the period from November 6, 1996 (Date of Inception) to
                                                    September 30, 2003

                                             Three months ended                  Nine months ended
                                                  Sept. 30,                        Sept. 30,               November 6, 1996
                                                  ---------                        ---------                (inception) to
                                          2003               2002            2003            2002           Sept. 30, 2003
                                       ------------       ----------      ------------    -------------      ------------
<S>                                    <C>                <C>             <C>             <C>                <C>
Revenue                                $          -                -                 -                -      $     15,537
                                       ------------       ----------      ------------    -------------      ------------
Expenses:
     Cost of revenues                             -                -                 -                -            76,201
     Professional fees                       18,894           20,661            76,090           79,520         1,095,894
     Royalty fees                            10,000            8,775            18,775           17,550            36,325
     Depreciation and amortization           18,230           21,898            47,133           28,790           111,618
     Impairment of long-lived assets              -                -                 -                -           582,176
     Management fees and salaries            28,923                -            32,923                -            32,923
     Other general and administrative       224,111          133,020           546,232          192,614         1,097,359
                                       ------------       ----------      ------------    -------------      ------------

Total expenses                              300,158          184,354           721,153          318,474         3,032,496
                                       ------------       ----------      ------------    -------------      ------------

Loss from operations                       (300,158)        (184,354)         (721,153)        (318,474)       (3,016,959)
                                       ------------       ----------      ------------    -------------      ------------


Other income:
     Interest income                              -                -                 -                3             2,727
     Other income                                 -                -                 -                -               594
                                       ------------       ----------      ------------    -------------      ------------

Total other income                                -                -                 -                3             3,321
                                       ------------       ----------      ------------    -------------      ------------

Net loss                               $   (300,158)        (184,354)         (721,153)       ( 318,471)     $ (3,013,638)
                                       ============       ==========      ============    =============      ============

Net loss per common share              $          -             (.01)             (.01)            (.01)
                                       ============       ==========      ============    =============

Weighted average common
shares outstanding                       72,063,896       36,001,380        50,132,935       28,666,252
                                       ============       ==========      ============    =============
</TABLE>


See accompanying notes to consolidated financial statements.

                                       4

<PAGE>
<TABLE>
<CAPTION>



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

                                  Consolidated Statements of Cash Flows (Unaudited)

                                Nine months ended September 30, 2003 and 2002 and for
                               the period from November 6, 1996 (Date of Inception) to
                                                 September 30, 2003

                                                                               Nine months
                                                                                 ended                 November 6, 1996
                                                                               Sept. 30,               (inception) to
                                                                               ---------
                                                                        2003               2002        Sept. 30, 2003
                                                                  --------------        ---------      --------------
<S>                                                               <C>                <C>              <C>
Cash flows from operating activities:
     Net loss                                                     $     (721,153)    $   (318,471)    $  (3,013,638)
     Adjustments to reconcile net loss to cash
         used in operating activities activities:
         Depreciation                                                     47,133           28,790           103,326
         Provision for bad debts                                               -                -            49,676
         Stock issued for services                                             -                -           414,606
         Impairment of long-lived assets                                       -                -           297,882
         Changes in:
              Receivable                                                 (11,412)         (12,404)          (35,175)
              Inventory                                                        -                -            (5,527)
              Prepaid expenses                                            (8,131)          (6,400)          (15,070)
              Deposits                                                  (209,424)          (7,596)         (210,220)
              Accounts payable and accrued expenses                         (217)          30,429           (84,400)
              Accrued interest payable                                    35,915            5,913            35,915
              Due to related parties                                    (180,000)          10,725           395,000
                                                                  ---------------    ------------     -------------
Cash flows from operating activities                                 ( 1,047,289)        (269,014)       (2,067,625)
                                                                  ---------------    ------------     -------------

Cash flows from investing activities:
     Purchase of building and equipment                                 (233,559)        (184,208)         (454,926)
     Investment in Multiplex                                                   -                -           (75,000)
     Acquisition of goodwill                                                   -                -          (149,057)
     Loan to related party                                                     -                -           (50,000)
     Loan repayments                                                           -                -             4,493
                                                                  ---------------    ------------     -------------

Cash flows from investing activities                                    (233,559)        (184,208)         (724,490)
                                                                  ---------------    ------------     -------------

Cash flows from financing activities:
     Net proceeds from sale of common stock                                   -                 -           744,859
     Net proceeds from loans payable                                   2,006,294          437,010         2,761,214
     Proceeds from Mortgage payable                                           -            17,000            17,000
     Principal payments on mortgage                                       (1,654)               -            (1,769)
     Cash acquired in acquisition of Peanut
         Butter & Jelly, Inc.                                                  -                -               140
                                                                  ---------------    ------------     -------------

Cash flows from financing activities                                    2,004,640         454,010         3,521,444
                                                                  ---------------    ------------     -------------


                                                                                                                 (Continued)

</TABLE>

                                       5
<PAGE>
<TABLE>
<CAPTION>
                                              INDUSTRIAL MINERALS, INC.
                                                   AND SUBSIDIARY
                                           (An Exploration Stage Company)
                            Consolidated Statements of Cash Flows (Unaudited), Continued


                                                                               Nine months
                                                                                 ended                 November 6, 1996
                                                                               Sept. 30,               (inception) to
                                                                               ---------
                                                                        2003               2002        Sept. 30, 2003
                                                                  --------------        ---------      --------------
<S>                                                               <C>                <C>              <C>
Net increase in cash                                              $      723,792              788     $     729,329

Cash, at beginning of period                                               5,537               21                -
                                                                  ---------------    ------------     -------------

     Cash, at end of period                                       $      729,329     $        809     $     729,329
                                                                  ===============    ============     =============

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 insurance
         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.






                                       6
<PAGE>
<TABLE>
<CAPTION>



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

                             Consolidated Statement of Stockholders' Equity (Unaudited)
                                                   September, 2003
                                                                                          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                                            -               -              -       (721,153)      (721,153)
                                        -------------      -----------    -----------     ----------     -----------
Balance at September 30, 2003              72,063,896      $    3,600         14,142     (1,316,656)    (1,298,914)
                                        =============      ===========    ===========     ==========     ===========
</TABLE>

See accompanying notes to consolidated financial statements.

                                       7
<PAGE>


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

                   Notes to Consolidated Financial Statements
               Nine month period ended September 30, 2003 and 2002



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  September  30, 2003 and the results of  operations  and
         cash  flows for the nine  months  ended  September  30,  2003 and 2002.
         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, 2002.











                                       8
<PAGE>


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

          Three-months ending September 30, 2003 and September 30, 2002

During the  three-month  period  ending  September  30,  2003 the company had no
revenues.  The company had no revenue during the same three-month  period ending
September 30, 2002.

The company  incurred  expenses for  professional  fees in the amount of $18,894
during the  three-month  period  ending  September  30, 2003 compared to $20,661
during the three-month  period ending  September 30, 2002. This is a decrease of
$1,767.

The  company  incurred  royalty  expenses  in the amount of  $10,000  during the
three-month  period ending  September 30, 2003. 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. The total amount of
$18,775  ($27,000 CDN dollars) has been paid for the fiscal year ending December
31, 2003.  The weakness of the United  States dollar in relation to the Canadian
dollar  over the past  three  months 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
increase  in US dollars to $20,000  discussed  in  previous  SEC  filings,  this
represents an increase of $2,450 on an annualized basis.

Depreciation  and  amortization   expense  for  the  three-month  period  ending
September  30, 2003  totaled  $18,230,  compared to $21,898 for the  three-month
period ending  September 30, 2002.  This  represents a decrease of $3,668.  This
decrease is due to the timing of asset purchases  during the three-month  period
ending  September  30,  2003  compared  to the same  three-month  period  ending
September 30, 2002.

Other  general and  administrative  expenses for the  three-month  period ending
September  30,  2003  totaled  $224,111   compared  to  $133,020  for  the  same
three-month period ending September 30, 2002. This represents an increase in the
three-month  period  ending  September  30, 2003 of $91,091 over the same period
ending  September  30,  2002.  This  increase  is due to an increase in activity
surrounding the operations of the company during the  three-month  period ending
September 30, 2003 compared to the same three-month  period ending September 30,
2002.

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.

The company paid $28,923 in management  fees and salaries during the three-month
period  ending  September 30, 2003.  There were no management  fees and salaries
paid during the three-month  period ending  September 30, 2002. The company paid
$23,125 in wages to the  President  of the  company  and $1,798 in  benefits  to
Revenue Canada on behalf of the President. Benefits in the amount of $1,798 paid
to Revenue  Canada  represent the company's  portion of Canada  Pension Plan and
Employment  Insurance  Premiums payable.  A Management fee of $4,000 was paid to
the CFO during the three-month period ending September 30, 2003.

The company has had a net loss of $300,158  for the  three-month  period  ending
September  30, 2003 as compared  to a net loss of $184,354  for the  three-month
period ending  September 30, 2002.  This  represents an increase of $115,804 for
the  three-month   period  ending  September  30,  2003  compared  to  the  same
three-month  period  ending  September  30,  2002.  This  increase  is due to an
increase in  activity  surrounding  the  operations  of the  company  during the
three-month  period ending  September 30, 2003 compared to the same  three-month
period ending September 30, 2002.

                                       9
<PAGE>



          Nine-months ending September 30, 2003 and September 30, 2002

During the  nine-month  period  ending  September  30,  2003 the  company had no
revenues. The company had no revenue during the same period ending September 30,
2002.

The company  incurred  expenses for  professional  fees in the amount of $76,090
during the period  ending  September  30, 2003  compared  to $79,520  during the
period ending September 30, 2002. This is a decrease of $3,430.

Depreciation and  amortization  expense for the period ending September 30, 2003
totaled  $47,133,  compared to $28,790 for the period ending September 30, 2002.
This  represents an increase of $18,343.  This increase is due to the additional
asset purchases during the period ending September 30, 2003 compared to the same
period ending September 30, 2002.

Other  general and  administrative  expenses for the  three-month  period ending
September  30, 2003  totaled  $546,232  compared to $192,614 for the same period
ending  September 30, 2002.  This  represents an increase of $353,618 (183%) for
the period ending  September 30, 2003 over the same period ending  September 30,
2002. This increase is due to an increase in activity surrounding the operations
of the company during the period ending  September 30, 2003 compared to the same
period ending September 30, 2002.

The company  paid  $32,923 in  management  fees and  salaries  during the period
ending  September  30, 2003.  There were no  management  fees and salaries  paid
during the same period ending  September  30, 2002.  The company paid $23,125 in
wages to the  President of the company and $1,798 in benefits to Revenue  Canada
on behalf of the  President.  Benefits  in the amount of $1,798  paid to Revenue
Canada  represent the Company's  portion of Canada  Pension Plan and  Employment
Insurance  Premiums  payable.  A  Management  fee of $8,000  was paid to the CFO
during the period ending September 30, 2003.

The company has had a net loss of $721,153 for the period  ending  September 30,
2003 as compared to a net loss of $318,471 for the period  ending  September 30,
2002.  This  represents an increase of $402,682 for the period ending  September
30, 2003  compared to the same  period  ending  September  30,  2002.  This 126%
increase is due to an increase in activity  surrounding  the  operations  of the
company during the period ending  September 30, 2003 compared to the same period
ending September 30, 2002.


                                       10
<PAGE>

                         Liquidity and Capital Resources

The company has cash on hand as at  September  30, 2003 of $729,329 and accounts
receivable  of $31,006 was incurred as a result of tax input credits owed to the
company by the Government of Canada.

The company has prepaid expenses of $14,531.  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 $210,220 in deposits,  with its landlord $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
balance of  $208,699  is  represented  by a $74,000  deposit to the  Minister of
Finance for the Province of Ontario  which is a security  deposit  regarding the
mine  closure  plan that has been  filed for the  Bissett  Creek  Property.  The
balance of $134,699 are deposits as follows:  $128,020 on a building,  $5,939 on
equipment, and $740 on a mobile phone account and legal fees.

The company had no revenue during  three-month  period ending September 30, 2003
and expects to have no revenue in each of the next two-quarters  ending December
31, 2003 and March 31, 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 $3,628.  The company has the cash on
hand in order to pay these accounts payable in an orderly  fashion.  The Company
owes $35,915 in accrued interest payable. The interest is not due until July 31,
2004.

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
previously  $260 monthly however due to the weakness of the United States dollar
in relation to the Canadian dollar the $36 USD a month increase has occurred.

During the  three-month  period  ending  September 30, 2003 the company has been
able to secure debt financing in the amount of $1,203,866 from a  non-affiliated
shareholder..  Total debt now totals  $2,781,666 for the period ending September
30,  2003.  Interest  has  accrued  on this debt in the amount of  $35,915.  The
interest rate  associated  with this debt will be 7% yearly.  During the quarter
ending  September 30, 2003 the Company made  interest  payments in the amount of
$20,000.  This debt is due and payable  together with  principal and any accrued
interest on July 31, 2004.

Industrial  Minerals  has the  following  future  commitments.  During the third
quarter ending September 30, 2003 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.

o        Two buildings total 12,700 square feet                     $  30,576
o        Conveyor belts                                             $   9,800
o        Completion of mine closure plan.                           $   1,500
o        Concrete work.                                             $   9,000
o        Steel work.                                                $  13,455
o        Electrical installations                                   $ 210,000
o        Payment to Contractors to complete work.                   $  90,000
o        Purchase of Carpco Unit                                    $  67,500


                                       11
<PAGE>

The company  requires  $431,831 to complete the construction of the mine on it's
Bissett  Creek  Property as of  September  30, 2003 the Company has  $729,329 on
hand. The company has also budgeted for a monthly administration cost of $30,000
for each of the months of October 1, 2003 through  March 31,  2004.  The company
will also require $100,000 to start processing graphite to build an inventory of
approximately  500 tons of graphite;  these funds are required for the operation
of the mine. Thus total funds in the amount of $711,831 are required to complete
construction  at the Bissett Creek Graphite mine,  pay  administration  costs of
$180,000 for the  six-month  period  beginning  October 1, 2003 ending March 31,
2003 and produce 500 tons of graphite. Since the Company has $729,329 on hand as
of September 30, 2003 management believes the Company will successfully complete
construction of the mine and start  operation.  However  investors and potential
investors  should be aware that the  Company  might not be able to  continue  to
operate subsequent to March 31, 2004 without sales of its graphite or additional
financing.

Investors and potential  investors  should be aware that even though the company
has the funds to complete construction of the mine, operate until March 31, 2004
and produce 500 tons of graphite  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 March 31,
2004. 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.

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  have  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.

                                       12
<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 September 30, 2003.

         Report on Form 8-K dated September 15, 2003, relating to changes in the
Company's address and telephone number.






                                       13
<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: November 10, 2003                 INDUSTRIAL MINERALS, INC.

                                         By:/s/Robert Stoutley
                                         --------------------------------------
                                          Robert Stoutley,
                                          Chief Executive Officer and President


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/Robert Stoutley                                  Dated:November 10, 2003
   -----------------------------------------
    Robert Stoutley, Chief Executive Officer
    and President

















                                       14