**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**FORM 10-QSB**

**QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF**

**THE SECURITIES EXCHANGE ACT OF 1934**

|**For the quarter ended July 31, 2004** | **Commission File Number: 0-5105**
|--------------------------------------- | ----------------------------------

**MILASTAR CORPORATION**

**(Exact name of registrant as specified in its charter)**

|**DELAWARE**                                                           | **13-2636669**                              
|---------------------------------------------------------------------- | --------------------------------------------
|**(State or other jurisdiction of** **incorporation or organization)** | **(I.R.S. Employer** **Identification No.)**
|                                                                       |                                             
|**7317 West Lake Street, Minneapolis, MN****55426**                    | **(952) 929-4774**                          
|**(Address of principal executive offices)**                           | **(Telephone number)**                      

**Not Applicable**

**Former name, former address and former fiscal year, if changed since last report.**

**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. YesX No**

**At September 10, 2004,** **2,723,264 shares of common stock of the Registrant were issued and outstanding.**

MILASTAR CORPORATION AND SUBSIDIARIES

PART I

**Item 1. Financial Statements**

The condensed consolidated financial statements included herein have been prepared by Milastar Corporation (the "Company") without audit, pursuant
to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principlesgenerally accepted in the United States of Americahave been condensed or omitted
pursuant to such rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not
misleading. Operating results for the three months ended July 31, 2004 are not necessarily indicative of the results that may be expected for the year
ending April 30, 2005. It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial
statements and the notes thereto included in the Company's annual report on Form 10-KSB for the fiscal year ended April 30, 2004.

The condensed consolidated financial statements included herein, which are unaudited, include, in the opinion of management, all adjustments
(consisting only of normal recurring accruals) necessary to present fairly the consolidated financial position and results of operations of the Company for
the periods presented.

|MILASTAR CORPORATION AND SUBSIDIARIES
|-------------------------------------
|**CONSOLIDATED BALANCE SHEETS**      
|                                     
|**ASSETS**                           

|                                                                      | **July 31,**    |  | ******April 30,**
|--------------------------------------------------------------------- | --------------- |  | -----------------
|                                                                      | **2004**        |  | ******2004**     
|                                                                      | **(Unaudited)** |  | ******(Audited)**
|Current assets:                                                       |                 |  |                  
|Cash                                                                  | $ 256,000       |  | $ 10,000         
|Accounts and other receivables, net                                   | 1,614,000       |  | 1,659,000        
|Inventory                                                             | 138,000         |  | 145,000          
|Deferred income taxes                                                 | 190,000         |  | 305,000          
|Prepaid supplies and other                                            | 361,000         |  | 311,000          
|Total current assets                                                  | 2,559,000       |  | 2,430,000        
|                                                                      |                 |  |                  
|Property, plant and equipment:                                        |                 |  |                  
|Land                                                                  | 420,000         |  | 420,000          
|Buildings and improvements                                            | 3,102,000       |  | 3,094,000        
|Equipment                                                             | 8,671,000       |  | 8,745,000        
|                                                                      | 12,193,000      |  | 12,259,000       
|Less accumulated depreciation                                         | (4,987,000)     |  | (4,743,000)      
|                                                                      | 7,206,000       |  | 7,516,000        
|                                                                      |                 |  |                  
|Total assets                                                          | $ 9,765,000     |  | $ 9,946,000      
|                                                                      |                 |  |                  
|**LIABILITIES AND
STOCKHOLDERS' EQUITY**                              |                 |  |                  
|                                                                      |                 |  |                  
|Current liabilities:                                                  |                 |  |                  
|Current maturities of long-term debt                                  | $ 974,000       |  | $ 974,000        
|Accounts payable                                                      | 580,000         |  | 731,000          
|Accrued payroll and benefits                                          | 415,000         |  | 361,000          
|Accrued real estate taxes                                             | 75,000          |  | 100,000          
|Other accrued liabilities                                             | 74,000          |  | 89,000           
|Total current liabilities                                             | 2,118,000       |  | 2,255,000        
|                                                                      |                 |  |                  
|Long-term debt, less current
maturities                               | 1,715,000       |  | 1,949,000        
|Deferred income taxes                                                 | 385,000         |  | 385,000          
|                                                                      |                 |  |                  
|Total liabilities                                                     | 4,218,000       |  | 4,589,000        
|                                                                      |                 |  |                  
|Stockholders' equity:                                                 |                 |  |                  
|Common stock, $.05 par value;
authorized 7,500,000 shares, issued
and |                 |  |                  
|outstanding 2,723,264 shares at July
31, 2004 and April 30, 2004      | 136,000         |  | 136,000          
|Additional paid-in capital                                            | 1,647,000       |  | 1,647,000        
|Retained earnings                                                     | 3,764,000       |  | 3,574,000        
|Total stockholders' equity                                            | 5,547,000       |  | 5,357,000        
|                                                                      |                 |  |                  
|Total liabilities and stockholders'
equity                            | $ 9,765,000     |  | $ 9,946,000      
|                                                                      |                 |  |                  
|See accompanying notes to
condensed consolidated financial
statements |                 |  |                  

|MILASTAR CORPORATION AND SUBSIDIARIES    
|-----------------------------------------
|**CONSOLIDATED STATEMENTS OF OPERATIONS**
|**Three Months Ended July 31,**          
|(Unaudited)                              

|                                                                      | **2004**    |  | ******2003**
|--------------------------------------------------------------------- | ----------- |  | ------------
|                                                                      |             |  |             
|Net sales                                                             | $ 3,158,000 |  | $ 2,595,000 
|Cost of sales                                                         | 2,153,000   |  | 1,826,000   
|                                                                      |             |  |             
|Gross profit                                                          | 1,005,000   |  | 769,000     
|Selling, general and administrative
expenses                          | 579,000     |  | 548,000     
|Disposal loss on property and
equipment                               | 95,000      |  | 20,000      
|                                                                      |             |  |             
|Operating income                                                      | 331,000     |  | 201,000     
|                                                                      |             |  |             
|Other expense:                                                        |             |  |             
|Interest expense                                                      | (26,000)    |  | (41,000)    
|Total other expense                                                   | (26,000)    |  | (41,000)    
|                                                                      |             |  |             
|Income before income taxes                                            | 305,000     |  | 160,000     
|Income tax expense                                                    | 115,000     |  | --          
|                                                                      |             |  |             
|Net income                                                            | $ 190,000   |  | $ 160,000   
|                                                                      |             |  |             
|Net income per common share - basic                                   | $ 0.07      |  | $ 0.06      
|Weighted average shares outstanding
- basic                           | 2,723,264   |  | 2,723,264   
|                                                                      |             |  |             
|Net income per common share -
diluted                                 | $ 0.06      |  | $ 0.06      
|Weighted average shares outstanding
- diluted                         | 3,118,886   |  | 2,856,406   
|                                                                      |             |  |             
|See accompanying notes to
condensed consolidated financial
statements |             |  |             

|MILASTAR CORPORATION AND SUBSIDIARIES    
|-----------------------------------------
|**CONSOLIDATED STATEMENTS OF CASH FLOWS**
|**Three Months Ended July 31,**          
|(Unaudited)                              

|                                                                      | **2004**  |  | ******2003**
|--------------------------------------------------------------------- | --------- |  | ------------
|CASH FLOWS FROM OPERATING
ACTIVITIES:                                 |           |  |             
|Net income                                                            | $ 190,000 |  | $ 160,000   
|Adjustments to reconcile net income
to net cash                       |           |  |             
|flows from operating activities:                                      |           |  |             
|Depreciation and amortization                                         | 244,000   |  | 224,000     
|Net loss on disposal of property and
equipment                        | 95,000    |  | 20,000      
|Deferred income taxes                                                 | 115,000   |  | --          
|                                                                      |           |  |             
|Changes in operating assets and
liabilities:                          |           |  |             
|Accounts and other receivables                                        | 45,000    |  | 44,000      
|Inventory                                                             | 7,000     |  | 39,000      
|Prepaid supplies and other                                            | (50,000)  |  | (22,000)    
|Accounts payable and accrued
expenses                                 | (137,000) |  | (24,000)    
|Net cash flows from operating
activities                              | 509,000   |  | 441,000     
|                                                                      |           |  |             
|CASH FLOWS FROM INVESTING
ACTIVITIES:                                 |           |  |             
|Purchases of property, plant and
equipment                            | (29,000)  |  | (180,000)   
|Net cash flows from investing
activities                              | (29,000)  |  | (180,000)   
|                                                                      |           |  |             
|CASH FLOWS FROM FINANCING
ACTIVITIES:                                 |           |  |             
|Net proceeds from bank line of credit                                 | --        |  | 50,000      
|Principal payments of long-term debt                                  | (234,000) |  | (218,000)   
|Net cash flows from financing
activities                              | (234,000) |  | (168,000)   
|                                                                      |           |  |             
|NET INCREASE IN CASH                                                  | 246,000   |  | 93,000      
|CASH, BEGINNING OF YEAR                                               | 10,000    |  | 9,000       
|CASH, END OF FIRST QUARTER                                            | $ 256,000 |  | $ 102,000   
|                                                                      |           |  |             
|                                                                      |           |  |             
|Supplemental disclosures of cash
flow information:                    |           |  |             
|Cash paid during the first quarter for:                               |           |  |             
|Interest                                                              | $ 26,000  |  | $ 41,000    
|                                                                      |           |  |             
|Income taxes                                                          | $ --      |  | $ --        
|                                                                      |           |  |             
|See accompanying notes to
condensed consolidated financial
statements |           |  |             

**1**CONSOLIDATED FINANCIAL STATEMENTS

The consolidated financial statements of Milastar Corporation (the "Company") reflect the financial position and results of operations of the Company and
its wholly owned subsidiaries, after elimination of all material intercompany transactions and balances.

The consolidated financial statements as of July 31, 2004 and for the three month periods ended July 31, 2004 and July 31, 2003, included herein are
unaudited and have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission.Certain information
and footnote disclosures normally included in financial statements prepared in accordance with accounting principlesgenerally accepted in the United
States of America have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate
to make the information presented not misleading. The interim financial statements reflect all adjustments (consisting of normal recurring accruals) that are,
in the opinion of management, necessary for a fair statement of the results for the interim periods. These consolidated financial statements should be read in
conjunction with the consolidated financial statements and the notes thereto included in the Company's 2004 Annual Report to Shareholders and
incorporated by reference in the Company's annual report on Form 10-KSB filed with the Securities and Exchange Commission. The result of operations
for the interim period should not be considered indicative of the results to be expected for the entire year.

**2**SIGNIFICANT ACCOUNTING POLICIES

*Stock-Based Compensation**-***In accordance with Accounting Principles Board (APB) Opinion No. 25 and related interpretations, the Company uses the
intrinsic value-based method for measuring stock-based compensation cost which measures compensation cost as the excess, if any, of quoted market price
of the Company's common stock at the grant date over the amount the employee must pay for the stock. The Company's general policy is to grant stock
options at fair value at the date of grant. Consistent with Statement of Financial Accounting Standards (SFAS) No. 123 "Accounting for Stock-Based
Compensation", the Company did not have any pro forma compensation costs associated with the options outstanding for the three months ended July 31,
2004 or 2003.**3**NET INCOME PER COMMON SHARE

The following table presents a reconciliation of the denominators used in the computation of net income per common share - basic and net income per
common share - diluted for the quarters ended July 31, 2004 and 2003:

|                                                                                                                                      |  |  |  |  | Three Months
Ended |  | Three Months
Ended
|------------------------------------------------------------------------------------------------------------------------------------- |  |  |  |  | ------------------ |  | ------------------
|                                                                                                                                      |  |  |  |  | July 31, 2004      |  | July 31, 2003     
|Weighted
shares
outstanding -
basic                                                                                                   |  |  |  |  | 2,723,264          |  | 2,723,264         
|Weighted shares
assumed upon
exercise of stock
options                                                                                |  |  |  |  | 395,622            |  | 133,142           
|Weighted shares
outstanding -
diluted                                                                                                 |  |  |  |  | 3,118,886          |  | 2,856,406         
|                                                                                                                                      |  |  |  |  |                    |  |                   
|Options excluded
from the net
income per share
calculations
because their
exercise prices
were greater than
the average
market price. |  |  |  |  | 0                  |  | 420,832           

4 BANK CREDIT LINE

The Company has a revolving line of credit with its bank, which permits borrowings of up to $750,000 and bears interest at the bank's reference rate which
was 4.25% at July 31, 2004. The revolving line of credit expires August 31, 2004 and per discussions with the bank is expected to be renewed. At July 31,
2004 and April 30, 2004, borrowings under this agreement were $0.

5 INCOME TAXES

At July 31, 2004, the Company has federal net operating loss carryforwards of approximately $400,000 and state net operating losses of $1,400,000 which,
if not used, will begin to expire in 2010. Future changes in the ownership of the Company may place limitations on the use of these carryforwards. For the
quarter ended July 31, 2004, the Company recorded a provision for income taxes of $115,000. The net income for the quarter ended July 31, 2003 was
favorably impacted by the utilization of prior net operating losses, thus a provision for income taxes of approximately 37% was not recorded.

**Item 2. Management's Discussion and Analysis or Plan of Operation**

Results of Operations

Three Months Ended July 31, 2004 as Compared with the Three Months Ended July 31, 2003. The Company recorded sales of $3,158,000 during the first
quarter of fiscal year 2004 as compared with $2,595,000 for the same period last year, a $563,000 (22%) increase. The increase was primarily attributable
to additional work received from existing customers.

Cost of sales of $2,153,000 (68% of net sales) during the first quarter of fiscal year 2005 increased $327,000 (18%) from $1,826,000 (70% of net sales) for
the same period a year earlier. The increase was primarily attributable to increased labor, factory supplies and utility costs. Gross margin increased to
$1,005,000 as compared with $769,000 for the prior year first quarter. The increase in gross margin was primarily attributable to higher sales without a
corresponding increase in fixed expenses during the period ended July 31, 2004.

Selling, general and administrative (SG&A) expenses of $579,000 (18% of net sales) increased $31,000 (6%) from $548,000 (21% of net sales) for the
same period a year earlier. The change in SG&A expenses is primarily due to immaterial fluctuations. SG&A expenses are relatively fixed and as such are
not expected to change significantly in the near future.

The Company recorded operating income of $331,000 in the first quarter of fiscal 2005 as compared with operating income of $201,000 recorded in the
prior year first quarter. The increase in operating income in the first quarter of fiscal year 2005 is primarily attributable to higher sales and gross profit
margin.

Total other expense amounted to $26,000 in the first quarter of fiscal 2005 as compared with other expense of $41,000 in the first quarter of last year.
Other expense in both first quarters relates primarily to interest expense, which decreased $15,000 due to a reduction in long-term debt.

The Company recorded a tax provision of $115,000 in the first quarter of fiscal 2005 as compared with a provision of $0 in the first quarter of fiscal 2004.
The prior year first quarter was favorably impacted by the utilization of prior net operating losses.

The Company recorded net income of $190,000 in the first quarter of fiscal 2005 as compared with net income of $160,000 in the prior year first quarter.

*Liquidity and Capital Resources*

At July 31, 2004, the Company had working capital of $441,000 compared with $175,000 of working capital at April 30, 2004. Cash and accounts
receivables represented 73% (69% at April 30, 2004) and 19% (17% at April 30, 2004) of total current assets and total assets, respectively. During the first
quarter of fiscal 2005, net cash flows from operating activities amounted to $509,000 compared to $441,000 in the first quarter of fiscal 2004. Working
capital requirements for the first quarter of fiscal 2005 was funded primarily from available cash and cash generated from operations.

****Capital expenditures for fiscal 2005 are expected to be between $1.0 and $1.5 million, which will consist primarily of a 7,200 sq. ft. building addition to
the Rogers facility and the associated equipment. The Company believes anticipated cash flows from operations, issuance of long-term debt and its line of
credit will be adequate to satisfy projected operating and capital expenditures through at least the next twelve months.

*Critical Accounting Policies*

The Company's estimates related to certain assets and liabilities are an integral part of the consolidated financial statements. These estimates are considered
critical to the consolidated financial statements because they require subjective and complex judgements.

*(a) Revenue Recognition***-** The Company's revenues are recognized when products are shipped to unaffiliated customers. The Securities and Exchange
Commission's Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition" provides guidance on the application of accounting principles generally
accepted in the United States of America to selected revenue recognition issues. The Company has concluded that its revenue recognition policy is
appropriate and in accordance with accounting principles generally accepted in the United States of America and SAB No. 101.

*(b) Allowance for Uncollectible Accounts Receivable***-**The Company records an allowance for accounts receivable which are potentially uncollectible. The
allowance is established by estimating the amounts that are potentially uncollectible based on a review of customer accounts, age of the receivable, the
customer's financial condition and industry, and general economic conditions. Results could be materially different if economic conditions deteriorated for
the Company's customers.

*(c) Long-Lived Assets***-**Property and equipment are depreciated over their useful lives. Useful lives are based on management's estimates of the period that
the assets will generate revenue. Property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. The Company believes no impairment changes need to be recorded as of July 31, 2004.

*Forward-Looking Statements*

Certain statements contained in Management's Discussion and Analysis and elsewhere in the 10-QSB are forward-looking statements. These statements
may discuss, among other things, expected growth, future revenues and future performance. The forward-looking statements are subject to risks and
uncertainties, including, but not limited to, competitive pressures, inflation, consumer debt levels, currency exchange fluctuations, trade restrictions,
changes in tariff and freight rates, capital market conditions and other risks indicated in the Company's filings with the Securities and Exchange
Commission. Actual results may materially differ from anticipated results described in these statements.

**Item 3. Controls and Procedures.**

****The Company carried out an evaluation, under the supervision and with the participation of the Company's management, of the effectiveness as of July 31,
2004, of the Company's disclosure controls and procedures pursuant to Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934. Based upon
that evaluation, the Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are
effective in alerting them in a timely basis to material information relating to the Company required to be disclosed in the Company's periodic SEC reports.
There have been no significant changes in the Company's internal controls or in other factors which could significantly affect internal controls subsequent
to the date the Company carried out its evaluation.

The Company has also evaluated, with the participation of the Chief Executive Officer and Chief Financial Officer of the Company, any change as of July
31, 2004, in the Company's internal control over financial reporting pursuant to Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934.
There was no change in the Company's internal control over financial reporting identified in that evaluation that occurred during the fiscal quarter covered
by this quarterly report on Form 10-QSB that has materially affected, or is reasonably likely to materially affect, the Company's internal control over
financial reporting. Management is aware that there is a lack of segregation of duties due to the small number of employees dealing with general
administrative and financial matters. However, management has decided that considering the employees involved and the control procedures in place, risks
associated with such lack of segregation are insignificant and the potential benefits of adding employees to clearly segregate duties do not justify the
expenses associated with such increases.

**PART II**

Items 1 thru 3

None.

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

On July 6, 2004, a written consent was executed by J. Russell Duncan and Mimi G. Duncan, the record owners of approximately 62.7 percent of the
outstanding Class A Common Stock of the Company, approving the election of J. Russell Duncan to the Board of Directors of the Company.

Item 5. Other Information

None.

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits:

31.1 Certification of the Chief Executive Officer pursuant to 13a-14 and 15d-14

31.2 Certification of the Chief Financial Officer pursuant to 13a-14 and 15d-14

32 Certification pursuant to 18 U.S.C. section 1350

(b) Reports on Form 8-K: None

MILASTAR CORPORATION AND SUBSIDIARIES

**S I G N A T U R E**

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this interim report to be signed on its behalf by the
undersigned, there unto duly authorized.

MILASTAR CORPORATION

|/s/ M. G. DUNCAN                              | /s/ DENNIS J. STEVERMER                          
|--------------------------------------------- | -------------------------------------------------
|**M.G. Duncan**                               | **Dennis J. Stevermer**                          
|**Chairperson of the Board, Chief Executive** | **Vice President Treasurer, Principal Financial**
|**Officer and Director**                      | **and Accounting Officer**                       

Dated: September 13, 2004