**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**FORM 10-KSB**

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

**THE SECURITIES EXCHANGE ACT OF 1934****For the fiscal year ended April 30, 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)**
**Securities registered pursuant to Section 12(b) of the Act: None**

**Securities registered pursuant to Section 12(g) of the Act:**

**Common Stock, par value $.05 per share**

**(Title of Class)**

**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 Actof 1934 during the preceding twelve months (or for such a shorter period that the Registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days. Yes X  No**

**Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not becontained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form10-KSB or any amendment to this Form 10-KSB. Yes X  No**

**Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No X**

**The Company's revenues from operations for the fiscal year ended April 30, 2006 totaled $14,016,000.**

**The aggregate market value of the Class A Common Stock held by non-affiliates of the Registrant on July 14, 2006 was $6,127,000 based uponthe bid price of the Class A common stock as quoted on OTC Electronic Bulletin Board. On that date there were 2,723,264 shares of Class ACommon Stock issued and outstanding. Transitional Small Business Issue Format (Check one). Yes No X**

**Documents Incorporated by Reference**

**Parts I, II and III incorporate by reference certain information to be included in Registrant's definitive Information Statement relating to actiontaken by written consent of the Board of Directors and Majority Stockholders, which Registrant intends to file with the Securities and ExchangeCommission pursuant to Regulation 14C in August 2006.**

**PART I**

**Item 1. Business**

*Forward-Looking Statements*

 Statements included in this Annual Report on Form 10-KSB, in the letter to shareholders, in the Company's quarterly reports, in future filings by theCompany with the Securities and Exchange Commission, in the Company's press releases, and oral statements made with the approval of an authorizedexecutive officer that are not historical, or current facts are "forward-looking statements " made pursuant to the safe harbor provisions of the PrivateSecurities Litigation Reform Act of 1995. When used in this report, the words "believe," "expect," "will," "can," "estimate," "anticipate" and similarexpressions are intended to identify such forward-looking statements. Certain important factors could cause results to differ materially from thoseanticipated by some statements made herein and these statements are not predictions of actual future results. Investors are cautioned that allforward-looking statements involve risks and uncertainties. A number of factors that could cause results to differ materially are those discussed in thisAnnual Report on Form 10-KSB, including those discussed under "Risk Factors," as well as others not now anticipated. All such forward-lookingstatements, whether written or oral, and whether made by or on behalf of the Company are expressly qualified by these cautionary statements. In addition,the Company disclaims any obligation to update forward-looking statements to reflect events or circumstances after the date hereof. 

 These risks and uncertainties include, without limitation: competitive pressures, inflation, consumer debt levels, changes in freight rates, capital marketcondition and other risks indicated in the Company's filings with Securities and Exchange Commission. 

*General*

 Milastar Corporation ("Milastar" and sometimes the "Company") was organized under Delaware law on February 24, 1969. Milastar sells specialmetallurgical services to a diversified list of manufacturers primarily located in the greater Midwest industrial market. The customer base manufactures avariety of mechanical end-products and customarily outsources (subcontracts) the processing of some components incorporated in those end-products. Themenu of special processing services performed include metallurgical engineering, heat treating, brazing and surface finishing.

 Milastar owns the wholly-owned subsidiary; Flame Metals Processing Corporation ("Flame Metals") located in Minnesota. Flame Metals currentlygenerates 100% of Milastar's consolidated net sales, which flow from the sale of a variety of subcontract services to industrial customers. These specialservices include metallurgical-related processing involving the heating and cooling of metal products under controlled conditions in order to restructurethe molecular property of such products to achieve specified characteristics.

 Flame Metals' customer list includes more than 800 firms generally classified as manufacturers. The customer furnishes all direct materials andcomponents processed for their account. These parts are then heat treated, primarily to achieve a certain hardness or surface finish, in preparation of themetal parts for their designated use. The Company had sales to one customer which accounted for 23 percent of total sales in fiscal 2006.

 Flame Metals' operating assets were acquired by Milastar in May 1985. Flame Metals has since been expanded by a succession of acquisitions ofcomplementary businesses. The initial acquisition was consummated in October 1988 when Milastar directly acquired certain assets of NorthwestEngineering Labs, Inc. ("Northwest") located in Minneapolis, MN. The second acquisition was consummated in November 1991 when Flame Metalsdirectly acquired certain assets and assumed certain liabilities from Getchell Steel Treating Company, Inc. located in Bloomington, MN. The thirdacquisition occurred in April 1996 when Flame Metals directly acquired certain assets and assumed certain liabilities from New England Metal TreatingInc. located in Auburn, Massachusetts. Flame Metals operated this entity as the wholly owned subsidiary, New England Metal Treating Corporation untilits sale in August 2000. The fourth acquisition occurred in March 1998 when Flame Metals directly acquired certain assets and assumed certain liabilitiesfrom Twin City Steel Treating Company, Inc. located in Rogers, MN. 

 The Company currently owns two plants located in the Minneapolis-St. Paul, Minnesota area. These include a 35,000 sq. ft. facility in St. Louis Park, MNand a 55,000 sq. ft. facility in Rogers, MN.

 Milastar reported income before taxes of $1,223,000 and $1,050,000 in fiscal 2006 and 2005, respectively. Net income amounted to $728,000 and$626,000 in fiscal 2006 and 2005, respectively. Results of operations are discussed more fully in "Management's Discussion and Analysis" beginning onpage 6. 

 The Company's interest expense was $118,000 in fiscal year 2006, an increase of $11,000 from the $107,000 in expense recorded in fiscal year 2005.Current assets as a percent of total assets amounted to 41% and 24% at April 30, 2006 and 2005, respectively. The bid price per share, as quoted on theOTC Electronic Bulletin Board, was $2.65 as of April 30, 2006.

On May 31, 2006, the Company filed forms 8-K, 13e-3 and Preliminary 14C with the Securities and Exchange Commission (SEC), as amended on July24, 2006, stating the Company's intent to execute a 250 to 1 reverse/forward stock split and the subsequent deregistration from pubicly trading theCompany's stock. As disclosed in the filings, the completion of the reverse/forward stock split will require the Company to spend approximately $745,000,which includes legal, financial, accounting and other fees and costs related to the transaction. The SEC is in the process of reviewing the Company'samended filings. There is no assurance that the deregistration of the Company's common stock will be approved or occur.

*Competition*

 The heat treat business is highly competitive, with price, quality and consistency of service being the principal factors affecting customer preferences.Since the customers' outside manufactured product components are sensitive to freight charges, the proximity of the heat treat facility to the customers'production location is also a primary competitive factor. Thus Flame Metals' business is generally localized and, to a lesser degree, regionalized. In thisregard, Flame Metals has approximately four or five metallurgical processing competitors in the Minneapolis-St. Paul, Minnesota market who can beclassified as being competitive with Flame Metals. Some of these competitors may possess greater resources and may be more cost efficient. Nevertheless,the Company believes Flame Metals' geographical location to customers, relative price structure, processing quality and reliability, collectively, provideFlame Metals with the resources to be competitive.

*Seasonality and Raw Materials*

 The heat treat business is affected during the winter holiday season and midsummer due to vacations and plant shutdowns by Flame Metals' customers.Flame Metals is not materially affected by the sources or availability of raw material in that nearly all revenue is generated by services performed oncustomer owned products.

*Corporate*

 The Company's principal executive offices are located at 7317 West Lake Street, Minneapolis, MN 55426. Its communication numbers are: Telephone(952) 929-4774 and fax number (952) 925-0572.

*Environmental*

 To the best of its knowledge, the Company believes that it is presently in substantial compliance with all existing applicable environmental laws and doesnot anticipate that such compliance will have a material effect on its future capital expenditures, liquidity, earnings or competitive position.

*Employee Relations*

 The Company currently operates two separate plant locations and employs a total of approximately 80 non-union employees; 40 in St. Louis Park, MN,and 40 in Rogers, MN. The Company believes the prevailing wage rates, fringe benefits and working conditions afforded its employees compare favorablywith those received by employees employed by regional businesses competitive with the Company. The Company believes its employee relations aresatisfactory; therefore the Company does not anticipate any labor disruption during the forthcoming fiscal 2007.

**Item 2. Properties**

 The Company believes that its property and equipment are well maintained, in good working condition, and are adequately insured. The Companycurrently maintains its executive offices at 7317 West Lake Street, Minneapolis, Minnesota and owns the two industrial properties as listed below:**ACTIVITY****LOCATION****SIZE (SQ. FT.)****STATUS**Flame Metals - Plant 1St. Louis Park, MN35,000OwnedFlame Metals - Plant 2Rogers, MN55,000Owned
 The Rogers, MN facility is used as collateral for one bank note (see Note 2 to the consolidated financial statements). The Company believes that ourcurrent facilities are adequate for the current level of our operations.

**Item 3. Legal Proceedings**

 The Company has been party to various legal proceedings incidental to its normal operating activities. Although it is impossible to predict the outcome ofsuch proceedings, management believes, based on the facts currently available, that none of such claims will result in losses that would have a materiallyadverse effect on the Company's consolidated financial statements.

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

 No matter was submitted to a vote of the Company's security holders during its fiscal year ended April 30, 2006.

**Item 5. Market for Common Equity and Related Stockholder Matters**

 The Company's Class A Common Stock is traded on the OTC Bulletin Board and the Pink Sheets under the ticker symbol "MILAA". The following tableprovides, for the periods indicated, the high and low bid prices per share of the Company's Class A Common Stock. The Class A share prices representprices established between broker-dealers which do not include retail mark-ups and mark-downs or any commissions to the dealer and therefore do notreflect prices of actual transactions.**Fiscal****2006****Fiscal****2005****High****Low****High****Low**First Quarter$ 1.95$ 1.50$ 1.35$ 1.05Second Quarter$ 2.50$ 1.81$ 1.46$ 1.06Third Quarter$ 2.60$ 2.16$ 1.67$ 1.30Fourth Quarter$ 2.90$ 2.30$ 1.60$ 1.55
 On July 7, 2006 there were approximately 3,000 holders of record and 3,800 beneficial holders of the Company's Common Stock. The Company has notpaid any cash dividends in respect of its Class A Common Stock, and it is not presently anticipating paying any cash dividends, thereon, in the near term.