**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 January 31, 2005****Commission File Number: 0-5105**
**MILASTAR CORPORATION**

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

**DELAWARE**
**(State or other jurisdiction of****incorporation or organization)****13-2636669**
**(I.R.S. Employer****Identification No.)****7317 West Lake Street, Minneapolis, MN****55426**
**(Address of principal executive offices)****(952) 929-4774**
**(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 of1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days. Yes X  No**

**At March 11, 2005,****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, pursuantto the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financialstatements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omittedpursuant to such rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented notmisleading. Operating results for the three and nine months ended January 31, 2005 are not necessarily indicative of the results that may be expected forthe year ending April 30, 2005. It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidatedfinancial 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 forthe periods presented.MILASTAR CORPORATION AND SUBSIDIARIES**CONSOLIDATED BALANCE SHEETS****ASSETS****January 31,********April 30,****2005********2004****(Unaudited)********(Audited)**Current assets: Cash $ 245,000 $ 10,000  Accounts and other receivables, net 1,406,000 1,659,000  Inventory 183,000 145,000  Deferred income taxes 104,000 305,000  Prepaid supplies and other 284,000 311,000  Total current assets 2,222,000 2,430,000 Property, plant and equipment: Land 420,000 420,000  Buildings and improvements 3,495,000 3,094,000  Equipment 8,952,000 8,745,000 12,867,000 12,259,000  Less accumulated depreciation (5,475,000)(4,743,000)7,392,000 7,516,000  Total assets $ 9,614,000 $ 9,946,000 **LIABILITIES ANDSTOCKHOLDERS' EQUITY**Current liabilities: Current maturities of long-term debt $ 600,000 $ 974,000  Accounts payable 323,000 731,000  Accrued payroll and benefits 382,000 361,000  Accrued income taxes 94,000 2,000  Accrued real estate taxes 81,000 100,000  Other accrued liabilities 167,000 87,000  Total current liabilities 1,647,000 2,255,000 Long-term debt, less currentmaturities 1,734,000 1,949,000 Deferred income taxes 385,000 385,000  Total liabilities 3,766,000 4,589,000 Stockholders' equity: Common stock, $.05 par value;authorized 7,500,000 shares, issuedand outstanding 2,723,264 shares atJanuary 31, 2005 and April 30, 2004 136,000 136,000  Additional paid-in capital 1,647,000 1,647,000  Retained earnings 4,065,000 3,574,000  Total stockholders' equity 5,848,000 5,357,000  Total liabilities and stockholders'equity $ 9,614,000 $ 9,946,000 
See accompanying notes to condensed consolidated financial statements
MILASTAR CORPORATION AND SUBSIDIARIES**CONSOLIDATED STATEMENTS OF OPERATIONS**(Unaudited)******__________________________________****Three Months Ended********Nine Months Ended********January 31,********January 31,****2005********2004********2005********2004**************************Net sales $ 3,176,000 $ 2,617,000 $ 9,652,000 $ 7,975,000 Cost of sales 2,294,000 1,946,000 6,788,000 5,738,000 Gross profit 882,000 671,000 2,864,000 2,237,000 Selling, generaland administrativeexpenses 557,000 522,000 1,698,000 1,609,000 Disposal loss onproperty andequipment 100,000 40,000 305,000 100,000 Operating income 225,000 109,000 861,000 528,000 Other expense: Interest expense (27,000)(37,000)(79,000)(115,000) Total otherexpense (27,000)(37,000)(79,000)(115,000)Income beforeincome taxes 198,000 72,000 782,000 413,000 Income taxexpense 73,000 --  291,000 --  Net income $ 125,000 $ 72,000 $ 491,000 $ 413,000 Net income percommon share -basic $ 0.05 $ 0.03 $ 0.18 $ 0.15 Weighted averageshares outstanding- basic 2,723,2642,723,2642,723,2642,723,264Net income percommon share -diluted $ 0.04 $ 0.02 $ 0.15 $ 0.14 Weighted averageshares outstanding- diluted 3,261,1943,051,5133,171,2372,900,673
See accompanying notes to condensed consolidated financial statements
MILASTAR CORPORATION AND SUBSIDIARIES**CONSOLIDATED STATEMENTS OF CASH FLOWS****Nine Months Ended January 31,**(Unaudited)**2005********2004**CASH FLOWS FROM OPERATINGACTIVITIES: Net income $ 491,000 $ 413,000  Adjustments to reconcile net incometo net cash flows from operating activities: Depreciation and amortization 732,000 674,000  Net loss on disposal of property andequipment 305,000 100,000  Deferred income taxes 201,000 --  Changes in operating assets andliabilities: Accounts and other receivables 253,000 33,000  Inventory (38,000)47,000  Prepaid supplies and other 27,000 (43,000) Accounts payable and accruedexpenses (234,000)248,000  Net cash flows from operatingactivities1,737,000 1,472,000 CASH FLOWS FROM INVESTINGACTIVITIES: Purchases of property, plant andequipment  (913,000) (777,000) Net cash flows from investingactivities (913,000)(777,000)CASH FLOWS FROM FINANCINGACTIVITIES: Principal payments of long-term debt(589,000)(658,000) Net cash flows from financingactivities (589,000)(658,000)NET INCREASE IN CASH 235,000 37,000 CASH, BEGINNING OF YEAR 10,000 9,000 CASH, END OF THIRD QUARTER $ 245,000 $ 46,000 Supplemental disclosures of cashflow information: Cash paid during the first ninemonths for: Interest $ 79,000 $ 115,000 
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 andits wholly owned subsidiaries, after elimination of all material intercompany transactions and balances.

 The consolidated financial statements as of January 31, 2005 and for the three and nine month periods ended January 31, 2005 and January 31, 2004,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 principles generallyaccepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although the Company believes that thedisclosures are adequate to make the information presented not misleading. The interim financial statements reflect all adjustments (consisting of normalrecurring accruals) that are, in the opinion of management, necessary for a fair statement of the results for the interim periods. These consolidated financialstatements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's 2004 Annual Report toShareholders and incorporated by reference in the Company's annual report on Form 10-KSB filed with the Securities and Exchange Commission. Theresult 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 theintrinsic value-based method for measuring stock-based compensation cost which measures compensation cost as the excess, if any, of quoted market priceof 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 stockoptions at fair value at the date of grant. Consistent with Statement of Financial Accounting Standards (SFAS) No. 123 "Accounting for Stock-BasedCompensation", the Company did not have any pro forma compensation costs associated with the options outstanding for the three or nine months endedJanuary 31, 2005 or 2004. FIN No. 46 - revised with 46R - In December 2003, the Financial Accounting Standards Board (FASB) issued FASBInterpretation No. 46 (Revised December 2003), "Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51" (FIN 46R). This standardreplaces FIN 46, Consolidation of Variable Interest Entities" that was issued in January 2003. FIN 46R modifies or clarifies various provisions of FIN 46.FIN 46R addresses the consolidation of business enterprises of variable interest entities (VIEs), as defined by FIN 46R. FIN 46R exempts certain entitiesfrom its requirements and provides for special effective dates for entities that have fully or partially applied FIN 46 prior to issuance of FIN 46R.Otherwise, application of FIN 46R is required in financial statements of public entities that have interest in structures commonly referred to as specialpurpose entities for periods ending after December 15, 2003. Application by the Company for all other types of VIEs is required in financial statements forperiods ending no later than the quarter ended January 31, 2005. The adoption of FIN 46R did not have a material effect on the Company's financialstatements.

SFAS No. 151 - In November 2004, FASB issued SFAS No. 151 "Inventory Costs" amends the guidance in ARB No. 43, Chapter 4 "Inventory Pricing,"to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). Paragraph 5 pf ARB 43,Chapter 4, previously stated that under some circumstances, items such as idle facility expense, excessive spoilage, double freight, and rehandling costsmay be so abnormal as to require treatment as current period charges." SFAS No. 151 requires that those items be recognized as current-period chargesregardless of whether they meet the criterion of "so abnormal." In addition, SFAS No, 151 requires that allocation of fixed production overheads to thecosts of conversion be based on the normal capacity of the production facilities. SFAS No. 151 shall be effective for inventory costs incurred during fiscalyears beginning after June 15, 2005. Earlier application is permitted for inventory costs incurred during fiscal years beginning after the date SFAS No. 151was issued. SFAS No. 151 shall be applied prospectively. The Company does not expect the adoption of SFAS No. 151 to have a material effect on itsfinancial statements.

SFAS No. 153 - In December 2004, FASB issued SFAS No. 153 "Exchanges of Nonmonetary Assets" amends APB Opinion No. 29, "Accounting forNonmonetary Transactions." APB No. 29 is based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of theassets exchanged. The guidance in that Opinion, however, included certain exceptions to that principle. SFAS No. 153 amends APB No. 29 to eliminate theexception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do nothave commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantlyas a result of the exchange. SFAS No. 153 shall be effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005.Earlier application is permitted for nonmonetary asset exchanges occurring in fiscal periods beginning after the date SFAS No. 153 was issued. SFAS No.153 shall be applied prospectively. The Company does not expect the adoption of SFAS No. 153 to have a material effect on its financial statements.

SFAS No. 123R - In December 2004, FASB issued SFAS No. 123 (revised 2004), "Share-Based Payment", that focuses primarily on accounting fortransactions in which an entity obtains employee services in share-based payment transactions. This statement replaces SFAS No. 123, "Accounting forStock-Based Compensation", and supersedes APB Opinion No. 25, "Accounting for Stock Issued to Employees." Beginning with our quarterly period thatbegins February 1, 2006, we will be required to expense the fair value of employee stock options and similar awards. As a public company, we are allowedto select from two alternative transition methods, each having different reporting implications. The impact of SFAS No. 123R has not been determined atthis time.

3NET 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 percommon share - diluted for the three and nine month periods ended January 31, 2005 and 2004:**________________________________________****Three Months Ended********Nine Months Ended********January 31,********January 31,****2005********2004********2005********2004**Weighted sharesoutstanding -basic2,723,2642,723,2642,723,2642,723,264Weighted sharesassumed uponexercise of stockoptions537,930328,249447,973177,409Weighted sharesoutstanding -diluted3,261,1943,051,5133,171,2372,900,673Options excludedfrom the netincome per sharecalculationsbecause theirexercise pricesweregreater than theaverage marketprice.0364,9990364,999
4 BANK CREDIT LINE

    The Company has a revolving line of credit with its bank, which permits borrowings of up to $1,000,000 and bears interest at 0.25% below the bank'sbase rate which was 5.25% at January 31, 2005. The revolving line of credit expires August 31, 2005. At January 31, 2005 and April 30, 2004, borrowingsunder this agreement were $0. 

5 INCOME TAXES

 At January 31, 2005, the Company has state net operating losses of approximately $900,000 which, if not used, will begin to expire in 2010. Futurechanges in the ownership of the Company may place limitations on the use of this carryforward. For the three and nine month periods ended January 31,2005, the Company recorded a provision for income taxes of $73,000 and $291,000, respectively. The net income for the three and nine month periodsended January 31, 2004 were favorably impacted by the utilization of prior net operating losses, thus a provision for income taxes of approximately 37%was not recorded.

6 SIGNIFICANT CUSTOMER

    The Company's largest customer accounted for 22% (14% for the prior year period) and 19% (15% for the prior year period) of total sales for the threeand nine month periods ended January 31, 2005, respectively. The Company's largest customer accounted for 28% of total accounts receivable at January31, 2005. 

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

Results of Operations

Three Months Ended January 31, 2005 as Compared with the Three Months Ended January 31, 2004. The Company recorded sales of $3,176,000 duringthe third quarter of fiscal year 2005 as compared with $2,617,000 for the same period last year, a $559,000 (21%) increase. The increase was primarilyattributable to additional integral quench work received from existing customers. The current level of sales growth in not necessarily indicative of futuresales in that the Company operates with a backlog that is generally less than 10 days.

Cost of sales of $2,294,000 (72% of net sales) during the third quarter of fiscal year 2005 increased $348,000 (18%) from $1,946,000 (74% of net sales)for the same period a year earlier. The increase was primarily attributable to increased labor, factory supplies and utility costs. Gross profit increased to$882,000 as compared with $671,000 for the prior year third quarter. The increase in gross profit was primarily attributable to higher sales without acorresponding increase in fixed expenses during the period ended January 31, 2005.

 Selling, general and administrative (SG&A) expenses of $557,000 (18% of net sales) increased $35,000 (7%) from $522,000 (20% of net sales) for thesame 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 arenot expected to change significantly in the near future.

 The disposal loss on property and equipment of $100,000 increased $60,000 from the $40,000 recorded for the prior year third quarter. The increase wasprimarily the result of equipment which was replaced prior to its expected useful life.

 The Company recorded operating income of $225,000 in the third quarter of fiscal 2005 as compared with operating income of $109,000 recorded in theprior year third quarter. The increase in operating income in the third quarter of fiscal year 2005 is primarily attributable to higher sales and gross profit.

 Total other expense amounted to $27,000 in the third quarter of fiscal 2005 as compared with other expense of $37,000 in the third quarter of last year.Other expense in both third quarters relates primarily to interest expense, which decreased $10,000 due to a reduction in long-term debt.

 The Company recorded a tax provision of $73,000 in the third quarter of fiscal 2005 as compared with a provision of $0 in the third quarter of fiscal 2004.The prior year third quarter was favorably impacted by the utilization of prior net operating losses. 

 The Company recorded net income of $125,000 in the third quarter of fiscal 2005 as compared with net income of $72,000 in the prior year third quarter.

Nine Months Ended January 31, 2005 as Compared with the Nine Months Ended January 31, 2004. The Company recorded sales of $9,652,000 during thefirst nine months of fiscal year 2005 as compared with $7,975,000 for the same period last year, a $1,677,000 (21%) increase. The increase was primarilyattributable to additional integral quench work received from existing customers. The current level of sales growth in not necessarily indicative of futuresales in that the Company operates with a backlog that is generally less than 10 days.

 Cost of sales of $6,788,000 (70% of net sales) during the first nine months of fiscal year 2005 increased $1,050,000 (18%) from $5,738,000 (72% of netsales) for the same period a year earlier.  The increase was primarily attributable to increased labor, factory supplies and utility costs. Gross profit increasedto $2,864,000 as compared with $2,237,000 for the prior year nine months. The increase in gross profit was primarily attributable to higher sales without acorresponding increase in fixed expenses during the period ended January 31, 2005.

 Selling, general and administrative (SG&A) expenses of $1,698,000 (18% of net sales) increased $89,000 from $1,609,000 (20% of net sales) for the sameperiod 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 notexpected to change significantly in the near future.

 The disposal loss on property and equipment of $305,000 increased $205,000 from the $100,000 recorded for the same period a year earlier. The increasewas primarily the result of equipment which was replaced prior to its expected useful life.

 The Company recorded operating income of $861,000 in the first nine months of fiscal 2005 as compared with operating income of $528,000 recorded inthe prior year nine months. The increase in operating income in the first nine months of fiscal year 2005 is primarily attributable to higher sales and grossprofit.

 Total other expense amounted to $79,000 in the first nine months of fiscal 2005 as compared with other expense of $115,000 in the same period of lastyear. Other expense in both nine month periods relates primarily to interest expense, which decreased $36,000 due to a reduction in long-term debt.

 The Company recorded a tax provision of $291,000 in the first nine months of fiscal 2005 as compared with a provision of $0 in the first nine months offiscal 2004. The prior year first nine months was favorably impacted by the utilization of prior net operating losses. 

 The Company recorded net income of $491,000 in the first nine months of fiscal 2005 as compared with net income of $413,000 in the prior year ninemonths.

*Liquidity and Capital Resources*

 At January 31, 2005, the Company had working capital of $575,000 compared with $175,000 of working capital at April 30, 2004. Cash and accountsreceivables represented 74% (69% at April 30, 2004) and 17% (17% at April 30, 2004) of total current assets and total assets, respectively. During the firstnine months of fiscal 2005, net cash flows from operating activities amounted to $1,737,000 compared to $1,472,000 in the first nine months of fiscal 2004.Working capital requirements for the first nine months of fiscal 2005 was funded primarily from available cash and cash generated from operations. 

****The Company added $913,000 to property, plant and equipment in the first nine months of fiscal 2005, which consisted primarily of a 7,200 sq. ft. buildingaddition to the Rogers facility and one additional integral quench furnace for the Rogers facility. The Company believes anticipated cash flows fromoperations, issuance of long-term debt and its line of credit will be adequate to satisfy projected operating and capital expenditures through at least the nexttwelve 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 consideredcritical 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 ExchangeCommission's Staff Accounting Bulletin (SAB) No. 101, as amended by SAB No. 104, "Revenue Recognition" provides guidance on the application ofaccounting principles generally accepted in the United States of America to selected revenue recognition issues. The Company has concluded that itsrevenue recognition policy is appropriate and in accordance with accounting principles generally accepted in the United States of America and SAB No.104.

*(b) Allowance for Uncollectible Accounts Receivable***-**The Company records an allowance for accounts receivable which are potentially uncollectible. Theallowance is established by estimating the amounts that are potentially uncollectible based on a review of customer accounts, age of the receivable, thecustomer's financial condition and industry, and general economic conditions. Results could be materially different if economic conditions deteriorated forthe 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 thatthe assets will generate revenue. Property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that thecarrying amount of an asset may not be recoverable. The Company believes no impairment charges need to be recorded as of January 31, 2005. 

*Forward-Looking Statements*

 Certain statements contained in Management's Discussion and Analysis and elsewhere in the 10-QSB are forward-looking statements. These statementsmay discuss, among other things, expected growth, future revenues and future performance. The forward-looking statements are subject to risks anduncertainties, 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 ExchangeCommission. 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 January31, 2005, 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. Basedupon that evaluation, the Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and proceduresare effective in alerting them in a timely basis to material information relating to the Company required to be disclosed in the Company's periodic SECreports. There have been no significant changes in the Company's internal controls or in other factors which could significantly affect internal controlssubsequent 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 ofJanuary 31, 2005, in the Company's internal control over financial reporting pursuant to Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act of1934. There was no change in the Company's internal control over financial reporting identified in that evaluation that occurred during the nine monthperiod covered by this quarterly report on Form 10-QSB that has materially affected, or is reasonably likely to materially affect, the Company's internalcontrol over financial reporting. Management is aware that there is a lack of segregation of duties due to the small number of employees dealing withgeneral administrative and financial matters. However, management has decided that considering the employees involved and the control procedures inplace, risks associated with such lack of segregation are insignificant and the potential benefits of adding employees to clearly segregate duties do notjustify the expenses associated with such increases.

**PART II**

Items 1 thru 5

 None.

Item 6. 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

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