**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, 2006** | **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 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**

**Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes NoX**

**At March 10, 2006,** **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 and nine months ended January 31, 2006 are not necessarily indicative of the results that may be expected for
the year ending April 30, 2006. 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, 2005.

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**                               

|                                                                      | **January 31,** |  | ******April 30,**
|--------------------------------------------------------------------- | --------------- |  | -----------------
|                                                                      | **2006**        |  | ******2005**     
|                                                                      | **(Unaudited)** |  | ******(Audited)**
|Current assets:                                                       |                 |  |                  
|Cash                                                                  | $ 1,153,000     |  | $ 205,000        
|Accounts and other receivables, net                                   | 1,642,000       |  | 1,627,000        
|Inventory                                                             | 109,000         |  | 191,000          
|Deferred income taxes                                                 | 250,000         |  | 134,000          
|Prepaid supplies and other                                            | 212,000         |  | 266,000          
|Total current assets                                                  | 3,366,000       |  | 2,423,000        
|                                                                      |                 |  |                  
|Property, plant and equipment:                                        |                 |  |                  
|Land                                                                  | 420,000         |  | 420,000          
|Buildings and improvements                                            | 3,127,000       |  | 3,138,000        
|Deposits on Equipment                                                 | --              |  | 469,000          
|Equipment                                                             | 8,850,000       |  | 8,916,000        
|                                                                      | 12,397,000      |  | 12,943,000       
|Less accumulated depreciation                                         | (5,678,000)     |  | (5,382,000)      
|                                                                      | 6,719,000       |  | 7,561,000        
|                                                                      |                 |  |                  
|Total assets                                                          | $ 10,085,000    |  | $ 9,984,000      
|**LIABILITIES AND
STOCKHOLDERS' EQUITY**                              |                 |  |                  
|Current liabilities:                                                  |                 |  |                  
|Current maturities of long-term debt                                  | $ 600,000       |  | $ 630,000        
|Accounts payable                                                      | 224,000         |  | 416,000          
|Accrued payroll and benefits                                          | 677,000         |  | 444,000          
|Accrued income taxes                                                  | 276,000         |  | 158,000          
|Accrued real estate taxes                                             | 79,000          |  | 101,000          
|Other accrued liabilities                                             | 206,000         |  | 163,000          
|Total current liabilities                                             | 2,062,000       |  | 1,912,000        
|                                                                      |                 |  |                  
|Long-term debt, less current
maturities                               | 1,208,000       |  | 1,595,000        
|Deferred income taxes                                                 | 450,000         |  | 494,000          
|                                                                      |                 |  |                  
|Total liabilities                                                     | 3,720,000       |  | 4,001,000        
|                                                                      |                 |  |                  
|Stockholders' equity:                                                 |                 |  |                  
|Common stock, $.05 par value;
authorized 7,500,000 shares, issued
and |                 |  |                  
|outstanding 2,723,264 shares at
January 31, 2006 and April 30, 2005   | 136,000         |  | 136,000          
|Additional paid-in capital                                            | 1,647,000       |  | 1,647,000        
|Retained earnings                                                     | 4,582,000       |  | 4,200,000        
|Total stockholders' equity                                            | 6,365,000       |  | 5,983,000        
|                                                                      |                 |  |                  
|Total liabilities and stockholders'
equity                            | $ 10,085,000    |  | $ 9,984,000      

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,**      

|                                              | **2006**    |  | ******2005** |  | ******2006** |  | ******2005**
|--------------------------------------------- | ----------- |  | ------------ |  | ------------ |  | ------------
|                                              |             |  |              |  |              |  |             
|************************Net sales             | $ 3,319,000 |  | $ 3,176,000  |  | $ 10,336,000 |  | $ 9,652,000 
|Cost of sales                                 | 2,279,000   |  | 2,294,000    |  | 6,958,000    |  | 6,788,000   
|                                              |             |  |              |  |              |  |             
|Gross profit                                  | 1,040,000   |  | 882,000      |  | 3,378,000    |  | 2,864,000   
|Selling, general
and administrative
expenses  | 892,000     |  | 557,000      |  | 2,190,000    |  | 1,698,000   
|Payment for
surrender of
Director options     | 207,000     |  | --           |  | 207,000      |  | --          
|Disposal loss on
property and
equipment       | 20,000      |  | 100,000      |  | 181,000      |  | 305,000     
|Loss on
impairment of
property and
equipment  | --          |  | --           |  | 70,000       |  | --          
|                                              |             |  |              |  |              |  |             
|Operating income
(loss)                       | (79,000)    |  | 225,000      |  | 730,000      |  | 861,000     
|                                              |             |  |              |  |              |  |             
|Other expense:                                |             |  |              |  |              |  |             
|Interest expense                              | (30,000)    |  | (27,000)     |  | (88,000)     |  | (79,000)    
|Total other
expense                           | (30,000)    |  | (27,000)     |  | (88,000)     |  | (79,000)    
|                                              |             |  |              |  |              |  |             
|Income (loss)
before income
taxes             | (109,000)   |  | 198,000      |  | 642,000      |  | 782,000     
|Income tax
expense (benefit)                  | (44,000)    |  | 73,000       |  | 260,000      |  | 291,000     
|                                              |             |  |              |  |              |  |             
|Net income (loss)                             | $ (65,000)  |  | $ 125,000    |  | $ 382,000    |  | $ 491,000   
|                                              |             |  |              |  |              |  |             
|Net income (loss)
per common share
- basic    | $ (0.02)    |  | $ 0.05       |  | $ 0.14       |  | $ 0.18      
|Weighted average
shares outstanding
- basic   | 2,723,264   |  | 2,723,264    |  | 2,723,264    |  | 2,723,264   
|                                              |             |  |              |  |              |  |             
|Net income (loss)
per common share
- diluted  | $ (0.02)    |  | $ 0.04       |  | $ 0.12       |  | $ 0.15      
|Weighted average
shares outstanding
- diluted | 2,723,264   |  | 3,261,194    |  | 3,245,135    |  | 3,171,237   

See accompanying notes to condensed consolidated financial statements

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

|                                                   | **2006**    |  | ******2005**
|-------------------------------------------------- | ----------- |  | ------------
|CASH FLOWS FROM OPERATING
ACTIVITIES:              |             |  |             
|Net income                                         | $ 382,000   |  | $ 491,000   
|Adjustments to reconcile net income
to net cash    |             |  |             
|flows from operating activities:                   |             |  |             
|Depreciation and amortization                      | 756,000     |  | 732,000     
|Loss on disposal of property and
equipment         | 181,000     |  | 305,000     
|Impairment of property and
equipment               | 70,000      |  | --          
|Deferred income taxes                              | (160,000)   |  | 201,000     
|                                                   |             |  |             
|Changes in operating assets and
liabilities:       |             |  |             
|Accounts and other receivables                     | (15,000)    |  | 253,000     
|Inventory                                          | 82,000      |  | (38,000)    
|Prepaid supplies and other                         | 54,000      |  | 27,000      
|Accounts payable and accrued
expenses              | 180,000     |  | (234,000)   
|Net cash flows from operating
activities           | 1,530,000   |  | 1,737,000   
|                                                   |             |  |             
|CASH FLOWS FROM INVESTING
ACTIVITIES:              |             |  |             
|Purchases of property, plant and
equipment         | (165,000)   |  | (913,000)   
|Net cash flows from investing
activities           | (165,000)   |  | (913,000)   
|                                                   |             |  |             
|CASH FLOWS FROM FINANCING
ACTIVITIES:              |             |  |             
|Proceeds from long-term debt                       | 1,800,000   |  | --          
|Principal payments of long-term debt               | (2,217,000) |  | (589,000)   
|Net cash flows from financing
activities           | (417,000)   |  | (589,000)   
|                                                   |             |  |             
|NET INCREASE IN CASH                               | 948,000     |  | 235,000     
|CASH, BEGINNING OF YEAR                            | 205,000     |  | 10,000      
|CASH, END OF THIRD QUARTER                         | $ 1,153,000 |  | $ 245,000   
|                                                   |             |  |             
|                                                   |             |  |             
|Supplemental disclosures of cash
flow information: |             |  |             
|Cash paid during the first nine
months for:        |             |  |             
|Interest                                           | $ 97,000    |  | $ 79,000    
|                                                   |             |  |             
|Income taxes                                       | $ 308,000   |  | $ 7,000     

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 and
its wholly owned subsidiaries, after elimination of all material intercompany transactions and balances.

The consolidated financial statements as of January 31, 2006 and for the three and nine month periods ended January 31, 2006 and January 31, 2005,
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 thenotes thereto included in the Company's annual report on
Form 10-KSB for the fiscal year ended April 30, 2005.The result of operations for the interim period should not be considered indicative of the results to
be expected for the entire year.

**2****RECENT ACCOUNTING PRONOUNCEMENTS**

*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 or nine months ended
January 31, 2006 or 2005. *SFAS No. 123R* - In December 2004, FASB issued SFAS No. 123 (revised 2004), "Share-Based Payment", that focuses primarily
on accounting for transactions in which an entity obtains employee services in share-based payment transactions. This statement replaces SFAS No. 123,
"Accounting for Stock-Based Compensation", and supersedes APB Opinion No. 25, "Accounting for Stock Issued to Employees." Beginning May 1, 2006,
we will be required to expense the fair value of employee stock options and similar awards. As a public company, we are allowed to select from two
alternative transition methods, each having different reporting implications. The impact of SFAS No. 123R has not been determined at this time.

**3****NET INCOME (LOSS) PER COMMON SHARE**

The following table presents a reconciliation of the denominators used in the computation of net income (loss) per common share - basic and net income
(loss) per common share - diluted for the three and nine month periods ended January 31, 2006 and 2005:

|**________________________________________** | **Three Months Ended** |  | ******Nine Months Ended**
|-------------------------------------------- | ---------------------- |  | -------------------------
|                                             | ******January 31,**    |  | ******January 31,**      

|                                                | **2006**  |  | ******2005** |  | ******2006** |  | ******2005**
|----------------------------------------------- | --------- |  | ------------ |  | ------------ |  | ------------
|Weighted shares
outstanding -
basic             | 2,723,264 |  | 2,723,264    |  | 2,723,264    |  | 2,723,264   
|Weighted shares
assumed upon
exercise           |           |  |              |  |              |  |             
|of stock options                                | 0         |  | 537,930      |  | 521,871      |  | 447,973     
|Weighted shares
outstanding -
diluted           | 2,723,264 |  | 3,261,194    |  | 3,245,135    |  | 3,171,237   
|                                                |           |  |              |  |              |  |             
|Options excluded
from the net loss
per share    |           |  |              |  |              |  |             
|calculations
because the effect
on net loss per |           |  |              |  |              |  |             
|share would not
have been
dilutive.             | 360,783   |  |              |  |              |  |             
|Options excluded
from the net
income per share  |           |  |              |  |              |  |             
|calculations
because their
exercise prices
were |           |  |              |  |              |  |             
|greater than the
average market
price.          | 0         |  | 0            |  | 0            |  | 0           

**4 BANK CREDIT LINE**

Prior to January 27, 2006, the Company had a revolving line of credit with TCF National Bank, which permitted borrowings of up to $1,000,000. At
January 27, 2006 and April 30, 2005, borrowings under this agreement were $0. The Company canceled this line of credit on January 27, 2006.

On January 27, 2006, the Company obtained a new revolving line of credit with Excel Bank Minnesota, which permits borrowings of up to $2,000,000 and
is collateralized by the Company's accounts receivable and equipment and is guaranteed by the Company's majority stockholder. The line bears interest at
2.5% above the LIBOR rate which was 6.9% at January 31, 2006. The revolving line of credit expires September 30, 2006. At January 31, 2006,
borrowings under the Company's revolving line of credit were $0 (See Note 8).

**5 LONG-TERM DEBT**

In January 2006, the Company refinanced the $1,767,000 due under three loan agreements with TCF National Bank. The new loan agreement with Excel
Bank Minnesota in the amount of $1,800,000 is payable in monthly installments and bears interest at 2.5% above the LIBOR rate through January 2009.****At
January 31, 2006, the monthly principal payment on this loan was $50,000 and the interest rate was 6.9%. The loan is collateralized by substantially all of
the Company's assets and is guaranteed by the Company's majority stockholder and Easton Southpaw Incorporated, a corporation controlled by the
Company's majority stockholder (See Note 8).

**6 INCOME TAXES**

For the three and nine month periods ended January 31, 2006, the Company recorded a benefit for income taxes of $44,000 (40%) and a provision of
$260,000 (41%), respectively. This compares to the three and nine month periods ended January 31, 2005, where the Company recorded a provision for
income taxes of $73,000 (37%) and $291,000 (37%), respectively.

**7 SIGNIFICANT CUSTOMER**

The Company's largest customer accounted for 26% (22% for the prior year period) and 24% (19% for the prior year period) of total sales for the three and
nine month periods ended January 31, 2006, respectively. The Company's largest customer accounted for 34% and 29% of total accounts receivable at
January 31, 2006 and April 30, 2005, respectively.

**8 CERTAIN TRANSACTIONS**

On January 27, 2006, Dennis J. Stevermer (through Easton Southpaw Incorporated) acquired an aggregate of 1,713,013 shares of the Class A common
stock of the Company from the J. Russell Duncan Trust, the Mimi G. Duncan Trust and Lance Duncan. The 1,713,013 shares of the Class A common stock
acquired by Mr. Stevermer represent 62.9% of all outstanding common stock of the Company and, as a result of these purchases, Mr. Stevermer acquired
control of the Company. The financing of the purchase of the Class A common stock was principally provided by Excel Bank Minnesota, which is the same
bank that the Company used for its line of credit and long-term debt (see Notes 4 and 5). The Easton Southpaw Incorporated debt is not collateralized by
the Company's assets or guaranteed by the Company. The principal terms of this transaction were disclosed in a Schedule 13D dated June 24, 2005 that was
filed by Mr. Stevermer with the Securities and Exchange Commission.As disclosed in the Company's 10-KSB for the year ended April 30, 2005, there are
employment agreements which provide for potential severance payments in the event of a change in control of the Company.As such, a severance accrual
was recorded in the amount of $300,000 for the quarter ended January 31, 2006.

On January 27, 2006 Mr. L. Michael McGurk agreed to the termination of his employment contract and resigned as the Company's President and Chief
Operating Officer in exchange for a lump sum payment of $255,000, which has been expensed.

On January 27, 2006, Mimi Duncan resigned as Chairperson of the Board, Chief Executive Officer and a Director, Lance Duncan resigned as Secretary
and a Director and Robert Duncan resigned as a Director.Following these resignations,Mr. Stevermer was elected to the offices of Chairperson of the
Board, Chief Executive Officer, President and Secretary.In addition, Mr. Stevermercontinues to serve as the Company's Chief Financial Officer and
Treasurer.

On January 27, 2006, concurrent with their resignations, the Company paid Lance H. Duncan $167,000 to surrender 107,500 fully vested options with an
average exercise price of $0.45 per share and Robert G. Duncan $40,000 to surrender 25,000 fully vested options with an exercise price of $0.44 per share.Both individuals were paid approximately $2.00 per share, less the applicable exercise price, for the cancellation of their options which was $0.30 per share
less than the $2.30 market price for Milastar on January 27, 2006.

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

Results of Operations

Three Months Ended January 31, 2006 as Compared with the Three Months Ended January 31, 2005. The Company recorded sales of $3,319,000 during
the third quarter of fiscal year 2006 as compared with $3,176,000 for the same period last year, a $143,000 (5%) increase. The increase was primarily
attributable to additional work performed for existing customers at our Rogers facility. The current level of sales growth is not necessarily indicative of
future sales in that the Company operates with a backlog that is generally less than 10 days.

Cost of sales of $2,279,000 (69% of net sales) during the third quarter of fiscal year 2006 decreased $15,000 (1%) from $2,294,000 (72% of net sales) for
the same period a year earlier. The decrease was primarily attributable to immaterial fluctuations. Gross profit increased to $1,040,000 as compared with
$882,000 for the prior year third quarter. The increase in gross profit was primarily attributable to higher sales without a corresponding increase in fixed
expenses during the period ended January 31, 2006.

Selling, general and administrative (SG&A) expenses of $892,000 (27% of net sales) increased $335,000 (60%) from $557,000 (18% of net sales) for the
same period a year earlier. The increase in SG&A expenses is primarily due to a severance payment and an accrual for severance resulting from a change in
control of the Company totaling $555,000 being partially offset by a reduction in incentive compensation. SG&A expenses, except for incentive
compensation and severance, are relatively fixed and as such are expected to be about 17-18% of sales going forward.

In the third quarter of fiscal 2006, the Company recorded a payment for the surrender of Director options in the amount of $207,000. The disposal loss on
property and equipment of $20,000 decreased $80,000 from the $100,000 recorded for the prior year third quarter. The loss was the result of equipment
which was replaced prior to its expected useful life.

The Company recorded an operating loss of $79,000 in the third quarter of fiscal 2006 as compared with operating income of $225,000 recorded in the
prior year third quarter. The decrease in operating income in the third quarter of fiscal year 2006 is primarily attributable to severance expense of $555,000
being partially offset by a reduction in incentive compensation and the payment for the surrender of Director options in the amount of $207,000.

Total other expense amounted to $30,000 in the third quarter of fiscal 2006 as compared with other expense of $27,000 in the third quarter of last year.
Other expense in both third quarters relates to interest expense, which increased $3,000 primarily due to a rise in interest rates.

The Company recorded a tax benefit of $44,000 in the third quarter of fiscal 2006 as compared with a provision of $73,000 in the third quarter of fiscal
2005. The Company recorded a net loss of $65,000 in the third quarter of fiscal 2006 as compared with net income of $125,000 in the prior year third
quarter.

Nine Months Ended January 31, 2006 as Compared with the Nine Months Ended January 31, 2005. The Company recorded sales of $10,336,000 during
the first nine months of fiscal year 2006 as compared with $9,652,000 for the same period last year, a $684,000 (7%) increase.  The increase was primarily
attributable to additional work performed for existing customers at our Rogers facility. The current level of sales growth in not necessarily indicative of
future sales in that the Company operates with a backlog that is generally less than 10 days.

Cost of sales of $6,958,000 (67% of net sales) during the first nine months of fiscal year 2006 increased $170,000 (3%) from $6,788,000 (70% of net sales)
for the same period a year earlier.  The increase was primarily attributable to increased energy costs. Gross profit increased to $3,378,000 as compared with
$2,864,000 for the prior year nine months. The increase in gross profit was primarily attributable to higher sales without a corresponding increase in fixed
expenses during the period ended January 31, 2006.

Selling, general and administrative (SG&A) expenses of $2,190,000 (21% of net sales) increased $492,000 from $1,698,000 (18% of net sales) for the
same period a year earlier. The increase in SG&A expenses is primarily due to a severance payment and an accrual for severance resulting from a change in
control of the Company totaling $555,000. SG&A expenses, except for incentive compensation and severance, are relatively fixed and as such are expected
to be about 17-18% of sales going forward.

The Company recorded a payment for the surrender of Director options in the amount of $207,000 in the first nine months of fiscal 2006 as compared with
$0 recorded in the prior year nine months.

The disposal loss on property and equipment of $181,000 decreased $124,000 from the $305,000 recorded for the same period a year earlier. The loss was
the result of equipment which was replaced prior to its expected useful life. The loss on impairment of property and equipment of $70,000 increased
$70,000 from the $0 recorded for the prior year third quarter. The impairment loss was the result of equipment which was not capable of processing work
for a specific customer and other unexpected changes.

The Company recorded operating income of $730,000 in the first nine months of fiscal 2006 as compared with operating income of $861,000 recorded in
the prior year nine months. The decrease in operating income in the first nine months of fiscal year 2006 is primarily attributable to higher sales and gross
profit being offset by severance and the payment for the surrender of Director options.

Total other expense amounted to $88,000 in the first nine months of fiscal 2006 as compared with other expense of $79,000 in the same period of last year.
Other expense in both third quarters relates to interest expense, which increased $9,000 primarily due to a rise in interest rates.

The Company recorded a tax provision of $260,000 in the first nine months of fiscal 2006 as compared with a provision of $291,000 in the first nine
months of fiscal 2005. The Company recorded net income of $382,000 in the first nine months of fiscal 2006 as compared with net income of $491,000 in
the prior year nine months.

*Liquidity and Capital Resources*

At January 31, 2006, the Company had working capital of $1,304,000 compared with $511,000 of working capital at April 30, 2005. Cash and accounts
receivables represented 83% (76% at April 30, 2005) and 28% (18% at April 30, 2005) of total current assets and total assets, respectively. During the first
nine months of fiscal 2006, net cash flows from operating activities amounted to $1,530,000 compared to $1,737,000 in the first nine months of fiscal 2005.
Working capital requirements for the first nine months of fiscal 2006 were funded primarily from available cash and cash generated from operations.

****Capital expenditures for fiscal 2006 are expected to be between $300,000 and $500,000, which will consist primarily of equipment for the Rogers facility
of which $165,000 has been spent through January 31, 2006. The Company believes that available cash and anticipated cash flows from operations 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 as amended by SAB 104, "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.
104.

*(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 recorded an impairment charge of $70,000 for the nine month period ended January 31,
2006.

*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 January
31, 2006, 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
January 31, 2006, 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 5

None.

Item 6. Exhibits

(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

**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/ DENNIS J. STEVERMER                | 
|-------------------------------------- | 
|**Dennis J. Stevermer**                | 
|**Chief Executive********Officer and** | 
|**Chief Financial Officer**            | 

Dated: March 13, 2006