**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**FORM 10-K**

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

**THE SECURITIES EXCHANGE ACT OF 1934**



|**For the fiscal year ended April 30, 2003** | **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 Act of 1934
during the preceding twelve months (or for such a 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. []

Indicate by check mark whether the Registrant is an accelerated filer (as defined by Rule 12b-2 of Act).

Yes NoX

The aggregate market value of the Class A Common Stock held by non-affiliates of the Registrant on July 7, 2003 was $926,000 based upon the 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 A Common Stock issued and
outstanding.

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 action taken by
written consent of the Board of Directors and Majority Stockholders, which Registrant intends to file with the Securities and Exchange Commission
pursuant to Regulation 14C on or before August 8, 2003.

**PART I**

**Item 1. Business**

*Forward-Looking Statements*

Statements included in this Annual Report on Form 10-K, in the letter to shareholders, in the Company's quarterly reports, in future filings by the
Company with the Securities and Exchange Commission, in the Company's press releases, and oral statements made with the approval of an authorized
executive officer that are not historical, or current facts are "forward-looking statements " made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. When used in this report, the words "believe," "expect," "will," "can," "estimate," "anticipate" and similar
expressions are intended to identify such forward-looking statements. Certain important factors could cause results to differ materially from those
anticipated by some statements made herein and these statements are not predictions of actual future results. Investors are cautioned that all
forward-looking statements involve risks and uncertainties. A number of factors that could cause results to differ materially are those discussed in this
Annual Report on Form 10-K, including those discussed under "Risk Factors," as well as others not now anticipated. All such forward-looking
statements, 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 market
condition 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 special
metallurgical services to a diversified list of manufacturers primarily located in the greater Midwest industrial market. The customer base manufactures a
variety of mechanical end-products and customarily outsources (subcontracts) the processing of some components incorporated in those end-products. The
menu 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 currently
generates 100% of Milastar's consolidated net sales, which flow from the sale of a variety of subcontract services to industrial customers. These special
services include metallurgical-related processing involving the heating and cooling of metal products under controlled conditions in order to restructure the
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 and
components processed for their account. These parts are then heat treated, primarily to achieve a certain hardness or surface finish, in preparation of the
metal parts for their designated use. The Company's largest customer accounted for 18 percent of total net sales in fiscal 2003.

Flame Metals' operating assets were acquired by Milastar in May 1985. Flame Metals has since been expanded by a succession of acquisitions of
complementary businesses. The initial acquisition was consummated in October 1988 when Milastar directly acquired certain assets of Northwest
Engineering Labs, Inc. ("Northwest") located in Minneapolis, MN. The second acquisition was consummated in November 1991 when Flame Metals
directly acquired certain assets and assumed certain liabilities from Getchell Steel Treating Company, Inc. located in Bloomington, MN. The third
acquisition occurred in April 1996 when Flame Metals directly acquired certain assets and assumed certain liabilities from New England Metal Treating
Inc. located in Auburn, Massachusetts. Flame Metals operated this entity as the wholly owned subsidiary, New England Metal Treating Corporation until its
sale in August 2000. The fourth acquisition occurred in March 1998 when Flame Metals directly acquired certain assets and assumed certain liabilities from
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, MN
and a 48,000 sq. ft. facility in Rogers, MN.

Milastar reported income before taxes of $210,000 in fiscal 2003 and a loss before income taxes of $187,000 in fiscal 2002. Net income amounted to
$206,000 in fiscal 2003 and a net loss of $194,000 in fiscal 2002. Results of operations are discussed more fully in "Management's Discussion and
Analysis" beginning on page 6.

The Company's non-operating other income (expense) resulted in a net expense of $253,000 in fiscal year 2003, down $46,000 from the $299,000 in
expense recorded in fiscal year 2002. Current assets as a percent of total assets amounted to 17% and 16% at April 30, 2003 and 2002, respectively. The
book value per share based on common shares outstanding was $1.79 per share at April 30, 2003 compared with $1.72 per share at April 30, 2002. The bid
price per share, as quoted on the OTC Electronic Bulletin Board, was $0.34 as of April 30, 2003.

*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 this
regard, Flame Metals has approximately four or five metallurgical processing competitors in the Minneapolis-St. Paul, Minnesota market who can be
classified 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, provide
Flame 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 on
customer 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 does
not 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 75 employees; 40 in St. Louis Park, MN, and 35 in
Rogers, MN. The Company believes the prevailing wage rates, fringe benefits and working conditions afforded its employees compare favorably with those
received by employees employed by regional businesses competitive with the Company. The Company believes its employee relations are satisfactory;
therefore the Company does not anticipate any labor disruption during the forthcoming fiscal 2004.

**Item 2. Properties**

The Company believes that its property and equipment are well maintained, in good working condition, and are adequately insured.

*Executive Offices*

The Company currently maintains its executive offices at 7317 West Lake Street, Minneapolis, Minnesota.

*Flame Metals*

Flame Metals owns the two industrial properties as listed below:

|**ACTIVITY**           | **LOCATION**       | **SIZE (SQ. FT.)** | **STATUS**
|---------------------- | ------------------ | ------------------ | ----------
|Flame Metals - Plant 1 | St. Louis Park, MN | 35,000             | Owned     
|Flame Metals - Plant 2 | Rogers, MN         | 48,000             | Owned     

The Company believes that our current facilities are suitable and 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 of
such proceedings, management believes, based on the facts currently available, that none of such claims will result in losses that would have a materially
adverse 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, 2003.

**Item 5. Market for the Registrant's 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 table
provides, 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 represent
prices established between broker-dealers and therefore do not reflect prices of actual transactions.

|               | **Fiscal 2003** |         |  | **Fiscal 2002** |        
|-------------- | --------------- | ------- |  | --------------- | -------
|               | **High**        | **Low** |  | **High**        | **Low**
|First Quarter  | $ 0.34          | $ 0.34  |  | $ 0.45          | $ 0.38 
|Second Quarter | $ 0.34          | $ 0.30  |  | $ 0.43          | $ 0.32 
|Third Quarter  | $ 0.35          | $ 0.27  |  | $ 0.40          | $ 0.32 
|Fourth Quarter | $ 0.34          | $ 0.32  |  | $ 0.34          | $ 0.33 

On July 7, 2003 there were approximately 4,000 holders of record of the Company's Common Stock. The Company has not paid 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.

*Other Information Regarding Equity Compensation Plans*

The following table sets forth information regarding the Company's equity compensation plans in effect as of April 30, 2003. Each of our equity
compensation plans is an "employee benefit plan" as defined by Rule 405 of Regulation C of the Securities Act of 1933.

*Securities Authorized for Issuance Under Equity Compensation Plans*

|Plan category                                           | Number of shares of
common stock to be
issued upon exercise of
outstanding options,
warrants and rights |  | Weighted-average
exercise price of
outstanding options,
warrants and rights |  | Number of shares of
common stock
remaining available for
future issuance under
equity compensation
plans
|------------------------------------------------------- | ------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------
|Equity compensation
plans approved by
stockholders:     | 955,832                                                                                                 |  | $ 0.72                                                                      |  | 44,168                                                                                                  
|Equity compensation
plans not approved by
stockholders: | --                                                                                                      |  | --                                                                          |  | --                                                                                                      
|Total                                                   | 955,832                                                                                                 |  | $ 0.72                                                                      |  | 44,168                                                                                                  

**Item 6. Selected Financial Data**

|(In thousands except per
share data)         | **2003** | **2002** | **2001** | **2000** | **1999**
|-------------------------------------------- | -------- | -------- | -------- | -------- | --------
|Net sales                                    | $ 9,338  | $ 8,215  | $ 8,870  | $ 9,064  | $ 9,198 
|Net income (loss)                            | 206      | (194)    | 198      | 202      | 462     
|Net income (loss) per
common share - basic   | .08      | (.07)    | .07      | .07      | .17     
|Net income (loss) per
common share - diluted | .07      | (.07)    | .07      | .07      | .16     
|                                             |          |          |          |          |         
|****************Financial Position:          |          |          |          |          |         
|****************Total assets                 | 9,736    | 9,702    | 9,212    | 8,611    | 9,165   
|Current liabilities                          | 1,969    | 1,660    | 1,538    | 1,988    | 1,926   
|Long-term debt less
current maturities       | 2,881    | 3,362    | 2,800    | 1,947    | 2,765   
|Stockholders' equity                         | $ 4,886  | $ 4,680  | $ 4,874  | $ 4,676  | $ 4,474 

The following table shows the effect that the Company's contractual obligations are expected to have on our liquidity position and cash flows in the future
periods:

|                                   | **Total**   | **2004**  | **2005**  | **2006**    | **2007**  | **2008** | **Thereafter**
|---------------------------------- | ----------- | --------- | --------- | ----------- | --------- | -------- | --------------
|Debt                               | $ 3,771,000 | $ 890,000 | $ 932,000 | $ 997,000   | $ 598,000 | $ 43,000 | $ 311,000     
|Operating Leases                   | 27,000      | 14,000    | 9,000     | 4,000       |           |          |               
|Total contractual
cash obligations | $ 3,798,000 | $ 904,000 | $ 941,000 | $ 1,001,000 | $ 598,000 | $ 43,000 | $ 311,000     

**Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations**

Management's Discussion and Analysis of Financial Condition and Results of Operations discusses our consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements
requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related
disclosure of contingent assets and liabilities.

We believe that the estimates, assumptions and judgments involved in the accounting policies described below have the greatest potential impact on our
financial statements, so we consider these to be our critical accounting policies. Because of the uncertainty inherent in these matters, actual results could
differ from the estimates we used in applying the critical accounting policies. Within the context of these critical accounting policies, we are not
currently aware of any reasonably likely event that would result in materially different amounts being reported.

Our significant accounting policies are described in Note 1 to the consolidated financial statements. Our critical accounting policies and estimates are
those both having the most impact to the reporting of our financial condition and results, and requiring significant judgments and estimates. Our critical
accounting policies include those related to (a) revenue recognition, (b) allowance for uncollectible accounts receivable, (c) long-lived assets and (d)
valuation allowance.

*(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 April 30, 2003.

*(d) Valuation Allowance***-**The valuation allowance at April 30, 2003 was $21,000. In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Management considers the scheduled
reversal of deferred tax liabilities, projected future taxable income, tax carryover periods available, and tax planning strategies in making this
assessment.

*Overview*

The Company's operating results for the fiscal year ended April 30, 2003 showed a 14% increase in sales and a 313% increase in operating income. Over
the last two years, the weaker economy for the heat treating industry in the Midwest has continued to negatively impact the Company's traditional customer
base. The Company was able to replace the lost revenues with new work received from existing customers which has translated into higher operating
profits. The Company has one customer which accounted for 18% of total sales in fiscal 2003 which is up from 11% of total sales for the previous year.

Milastar's primary revenues flow from metallurgical services provided by Flame Metals Processing Corporation The Company continues to strive to
increase equipment utilization, expand capacity and absorb fixed overhead costs.

Milastar has net operating loss carryforwards of approximately $1,067,000 available to offset future taxable income, if any, which in the future may
enhance earnings as well as cash flow. See note 5 to "Notes to Consolidated Financial Statements."

*Results of Operations*

Fiscal 2003 Compared to Fiscal 2002. Net sales for fiscal 2003 totaled $9,338,000, a 14% increase from $8,215,000 in fiscal 2002. The sales increase was
primarily attributable to additional work received from existing customers, with one customer accounting for approximately half of the revenue increase.

Cost of sales of $6,880,000 (74% of sales) in fiscal 2003 increased $834,000 from $6,046,000 (74% of sales) in the previous fiscal year. The increase in
total dollars was primarily attributable to additional payroll, supply and utility costs associated with the increased revenue. Gross profit increased by
$289,000, from $2,169,000 in fiscal 2002 to $2,458,000 in fiscal 2003.

Selling, general and administrative (SG&A) expenses of $1,917,000 (21% of sales) in fiscal 2003 decreased $59,000 from $1,976,000 (24% of sales) for
the same period a year earlier.The change in SG&A expenses is primarilydue to immaterial fluctuations.SG&A expenses are relatively fixed and as such
are not expected to change significantly in the near future.

Total other expense amounted to $253,000 in fiscal 2003, compared with other expense of $299,000 reported in fiscal 2002. The decrease was primarily
attributable to reduced interest expense which was due to a reduction in interest rates and long-term debt.

**** The provision for income taxes for fiscal 2003 was $4,000 compared to income taxes of $7,000 in fiscal 2002.The income tax expense in fiscal 2003 and
2002 was primarily due to minimum state income taxes.The provision for income taxes for fiscal year 2003 was favorably impacted by the recognition
of deferred income tax assets for which no benefit had been provided for.

Fiscal 2002 Compared to Fiscal 2001. Net sales for fiscal 2002 totaled $8,215,000, a 7% decrease from $8,870,000 in fiscal 2001. The sales decrease was
primarily attributable to the loss of revenue from the sale of New England Metal Treating in the second quarter of fiscal 2001 and to a weaker economy for
the heat treating industry in the Midwest.

Cost of sales of $6,046,000 (74% of sales) in fiscal 2002 decreased $164,000 from $6,210,000 (70% of sales) in the previous fiscal year. The decrease in
total dollars was primarily attributable to the sale of New England Metal Treating, being partially offset by an increase in labor costs in the Midwest. The
increase in cost of sales as a percent of net sales from 70% to 74% was primarily the result of lower sales and increased labor costs in the Midwest. Gross
profit decreased by $491,000, from $2,660,000 in fiscal 2001 to $2,169,000 in fiscal 2002.

Selling, general and administrative (SG&A) expenses of $1,976,000 (24% of sales) in fiscal 2002 decreased $98,000 from $2,074,000 (23% of sales) for
the same period a year earlier. The decrease in SG&A expenses was primarily due to a decrease in administrative salaries.

Total other expense amounted to $299,000 in fiscal 2002, compared with other expense of $284,000 reported in fiscal 2001. The increase was primarily
attributable to $68,000 gain on the sale of New England Metal Treating in fiscal 2001 being partially offset by reduced interest expense in fiscal 2002. The
reduced interest expense was due to a reduction in interest rates.

**** The provision for income taxes for fiscal 2002 was $7,000 compared to income taxes of $9,000 in fiscal 2001.The income tax expense in fiscal 2002 was
due to minimum state income taxes.

*Liquidity and Capital Resources*

At April 30, 2003, the Company had negative working capital of $269,000 compared with $69,000 of negative working capital as of April 30, 2002, and
the ratio of current assets to current liabilities was approximately 0.9 to 1.0 and 1.0 to 1.0 at April 30, 2003 and 2002, respectively. The decrease in working
capital was due primarily to an increase in accounts payable which was inflated by the timing of certain purchases. Cash and current receivables represented
71% (69% at April 30, 2002) and 12% (11% at April 30, 2002) of total current assets and total assets, at April 30, 2003, respectively.

During fiscal 2003 net cash flows from operating activities amounted to $1,280,000 compared with net cash flows from operating activities of $592,000 in
fiscal 2002. The increase in net cash flows from operating activities was primarily due to increase in net income of approximately $400,000. The Company
added $996,000 to property, plant and equipment in fiscal 2003 compared with $1,526,000 in the previous year. The reduction of capital expenditures was
primarily due to the completion of the initial installation of equipment associated with the expansion of the Rogers, MN facility. Working capital
requirements for fiscal 2003 were funded primarily from available cash, cash generated from operations and issuance of long-term debt.

The Company believes it has sufficient capital resources to meet its fiscal 2004 operations and equipment acquisitions cash flow requirements.

*Risks Related to our Business*

The following are important factors that could cause actual results to differ materially from those anticipated in any forward-looking statements made by or
on behalf of the Company.

*Changes in regional capacity* - The commercial heat treating industry is extremely competitive and highly dependent upon available capacity. The
installation of additional equipment in the Minnesota area by either a competitor or a customercould have a material adverse effect on our business
operations.

*****Energy prices* - The cost of natural gas and electricity accounted for 14% of Cost of Sales for the years ended April 30, 2003 and 2002. Increases in energy
and in particular, natural gas,could have a material adverse effect on our business operations.

*Product liability exposure* - The Company performs a service on metalproducts, for which a failure may involve product liability risk. We carry general
casualty insurance, including coverage for product liability claims up to $1 million per occurence. We also carry liability umbrella coverage of an
additional $2 million. However, there can be no assurance that this coverage will be adequate for any claims that may be raised. We have not had any
significant product liability claims in the past and we are not aware of any pending product liability claims against us. However, a successful product
liability suit could have a material adverse effect on our business operations.

*Effects of Inflation*

During fiscal 2003 and 2002 the Company's monetary liabilities materially exceeded its monetary assets resulting in a net negative monetary position. In
periods in which the general price-level index is rising (inflation), it is advantageous to maintain a net negative monetary position. During periods of
significant price inflation, the Company's purchasing power could be eroded if the value of the Company's underlying tangible assets fail to appreciate in
value. Under such a scenario, the Company may be positioned to raise prices to offset the inflation effect and in addition take advantage of revaluation of
underlying tangible assets to bolster borrowing capacity. There is no clear correlation between the effects of inflation and the Company's earning capacity.

**Item 7a. Quantitative and Qualitative Disclosures about Market Risk**

*****Market Risks*

The Company is exposed to certain market risks relative to interest rates on its long-term debt and $500,000 line of credit of which $0 is outstanding atApril 30, 2003.The majority of long-term debt bears interest at 2.5% above the LIBOR rate and the line of credit bears interest at the bank's reference
rate.

**Item 8. Financial Statements**

|                                                                                                    | Page No.
|--------------------------------------------------------------------------------------------------- | --------
|Independent Auditors' Reports                                                                       | 10 - 11 
|Consolidated Balance Sheets at April 30, 2003 and 2002                                              | 12 - 13 
|Consolidated Statements of Operations for the three years ended April 30,
2003                      | 14      
|Consolidated Statements of Cash Flows for the three years ended April 30,
2003                      | 15      
|Consolidated Statements of Changes in Stockholders' Equity for the three
years ended April 30, 2003 | 16      
|Notes to Consolidated Financial Statements                                                          | 17 - 25 
|                                                                                                    |         
|Financial Statement Schedule:                                                                       |         
|Independent Auditors' Report                                                                        | 26      
|Valuation and Qualifying Accounts for the three years ended April 30,
2003                          | 27      

**INDEPENDENT AUDITORS' REPORT**

Stockholders and Board of Directors

Milastar Corporation and Subsidiary

Minneapolis, Minnesota

We have audited the accompanying consolidated balance sheet of Milastar Corporation and Subsidiary as of April 30, 2003 and the related consolidated
statements of operations, stockholders' equity and cash flows for the year then ended. These consolidated financial statements and financial statement
schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements
based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management as well as evaluating the overall consolidated financial statement
presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Milastar
Corporation and Subsidiary as of April 30, 2003 and the results of their operations and their cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States of America.

Virchow, Krause & Company, LLP

Minneapolis, Minnesota

June 6, 2003



**INDEPENDENT AUDITORS' REPORT**

The Stockholders and Board of Directors

Milastar Corporation:

We have audited the consolidated balance sheets of Milastar Corporation and subsidiaries as of April 30, 2002, and the related consolidated statements of
operations, cash flows and changes in stockholders' equity for each of the fiscal years in the two-year period ended April 30, 2002. In connection with our
audits of the consolidated financial statements, we have also audited the accompanying consolidated financial statement schedule. These consolidated
financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Milastar Corporation
and subsidiaries as of April 30, 2002, and the results of their operations and their cash flows for each of the fiscal years in the two-year period ended April
30, 2002 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related consolidated
financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.

KPMG LLP

Minneapolis, Minnesota

June 3, 2002

|**CONSOLIDATED BALANCE SHEETS**
|-------------------------------
|**April 30, 2003 and 2002**    
|**ASSETS**                     

|                                                       | **2003**    |  | **********2002**
|------------------------------------------------------ | ----------- |  | ----------------
|Current assets:                                        |             |  |                 
|Cash                                                   | $ 9,000     |  | $ 69,000        
|Accounts and other receivables, net                    | 1,197,000   |  | 1,027,000       
|Inventory                                              | 205,000     |  | 183,000         
|Prepaid supplies and other                             | 289,000     |  | 312,000         
|Total current assets                                   | 1,700,000   |  | 1,591,000       
|                                                       |             |  |                 
|Property, plant and equipment:                         |             |  |                 
|Land                                                   | 420,000     |  | 420,000         
|Buildings and improvements                             | 3,051,000   |  | 2,935,000       
|Deposits on equipment                                  | --          |  | 564,000         
|Equipment                                              | 9,496,000   |  | 9,491,000       
|                                                       | 12,967,000  |  | 13,410,000      
|Less accumulated depreciation                          | (4,931,000) |  | (5,377,000)     
|                                                       | 8,036,000   |  | 8,033,000       
|Other assets:                                          |             |  |                 
|Non-compete agreement, net of
accumulated amortization |             |  |                 
|of $446,000 and $368,000
respectively                  | --          |  | 78,000          
|                                                       |             |  |                 
|Total assets                                           | $ 9,736,000 |  | $ 9,702,000     

The accompanying notes are an integral part of these consolidated financial statements.

|**CONSOLIDATED BALANCE SHEETS**     
|------------------------------------
|**April 30, 2003 and 2002**         
|LIABILITIES AND STOCKHOLDERS' EQUITY

|                                                                 | **2003**    |  | **********2002**
|---------------------------------------------------------------- | ----------- |  | ----------------
|Current liabilities:                                             |             |  |                 
|Current maturities of long-term debt                             | $ 890,000   |  | $ 755,000       
|Accounts payable                                                 | 644,000     |  | 441,000         
|Accrued payroll and benefits                                     | 277,000     |  | 272,000         
|Accrued real estate taxes                                        | 87,000      |  | 92,000          
|Other accrued liabilities                                        | 71,000      |  | 100,000         
|                                                                 |             |  |                 
|Total current liabilities                                        | 1,969,000   |  | 1,660,000       
|                                                                 |             |  |                 
|Long-term debt, less current
maturities                          | 2,881,000   |  | 3,362,000       
|                                                                 |             |  |                 
|Total liabilities                                                | 4,850,000   |  | 5,022,000       
|                                                                 |             |  |                 
|Commitments and contingencies
(Note 9)                           |             |  |                 
|                                                                 |             |  |                 
|Stockholders' equity:                                            |             |  |                 
|Common stock, Class A, $.05 par
value. Authorized 7,500,000      |             |  |                 
|shares, issued and outstanding
2,723,264 shares in 2003 and 2002 | 136,000     |  | 136,000         
|                                                                 |             |  |                 
|Additional paid-in capital                                       | 1,647,000   |  | 1,647,000       
|Retained earnings                                                | 3,103,000   |  | 2,897,000       
|                                                                 |             |  |                 
|Total stockholders' equity                                       | 4,886,000   |  | 4,680,000       
|                                                                 |             |  |                 
|Total liabilities and stockholders'
equity                       | $ 9,736,000 |  | $ 9,702,000     

The accompanying notes are an integral part of these consolidated financial statements.

|**CONSOLIDATED STATEMENTS OF OPERATIONS**
|-----------------------------------------
|**Fiscal Years Ended April 30,**         

|                                                     | **2003**    |  | **********2002** |  | **********2001**
|---------------------------------------------------- | ----------- |  | ---------------- |  | ----------------
|                                                     |             |  |                  |  |                 
|Net sales                                            | $ 9,338,000 |  | $ 8,215,000      |  | $ 8,870,000     
|Cost of sales                                        | 6,880,000   |  | 6,046,000        |  | 6,210,000       
|                                                     |             |  |                  |  |                 
|Gross profit                                         | 2,458,000   |  | 2,169,000        |  | 2,660,000       
|Selling, general and
administrative expenses         | 1,917,000   |  | 1,976,000        |  | 2,074,000       
|Amortization of
non-compete agreements               | 78,000      |  | 81,000           |  | 95,000          
|                                                     |             |  |                  |  |                 
|Operating income                                     | 463,000     |  | 112,000          |  | 491,000         
|                                                     |             |  |                  |  |                 
|Other income (expense):                              |             |  |                  |  |                 
|Dividend and interest
income                         | 1,000       |  | 2,000            |  | 14,000          
|Interest expense                                     | (195,000)   |  | (243,000)        |  | (293,000)       
|Net gain on sale of net
assets of a business         | --          |  | --               |  | 68,000          
|Net gain on sale of
property and equipment           | --          |  | 7,000            |  | __              
|Net loss on sale of
property and equipment           | (59,000)    |  | (65,000)         |  | (73,000)        
|Total other expense                                  | (253,000)   |  | (299,000)        |  | (284,000)       
|                                                     |             |  |                  |  |                 
|Income (loss) before
income taxes                    | 210,000     |  | (187,000)        |  | 207,000         
|Income tax expense                                   | 4,000       |  | 7,000            |  | 9,000           
|                                                     |             |  |                  |  |                 
|Net income (loss)                                    | $ 206,000   |  | $ (194,000)      |  | $ 198,000       
|                                                     |             |  |                  |  |                 
|Net income (loss) per
Class A common share -
basic   | $ 0.08      |  | $ (0.07)         |  | $ 0.07          
|Weighted average
shares outstanding -
basic          | 2,723,264   |  | 2,723,264        |  | 2,723,264       
|                                                     |             |  |                  |  |                 
|Net income (loss) per
Class A common share -
diluted | $ 0.07      |  | $ (0.07)         |  | $ 0.07          
|Weighted average
shares outstanding -
diluted        | 2,775,360   |  | 2,723,264        |  | 2,829,885       

The accompanying notes are an integral part of these consolidated financial statements.

|**CONSOLIDATED STATEMENTS OF CASH FLOWS**
|-----------------------------------------
|**Fiscal Years Ended April 30,**         

|                                                                                                       | **2003**  |  | **********2002** |  | **********2001**
|------------------------------------------------------------------------------------------------------ | --------- |  | ---------------- |  | ----------------
|CASH FLOWS FROM
OPERATING
ACTIVITIES:                                                                  |           |  |                  |  |                 
|Net income (loss)                                                                                      | $ 206,000 |  | $ (194,000)      |  | $ 198,000       
|Adjustments to
reconcile net income
(loss) to                                                          |           |  |                  |  |                 
|net cash flows from
operating activities:                                                              |           |  |                  |  |                 
|Depreciation and
amortization                                                                          | 1,010,000 |  | 961,000          |  | 964,000         
|Net loss on disposal of
property and equipment                                                         | 59,000    |  | 65,000           |  | 73,000          
|Gain on sale of the net
assets of a business                                                           | --        |  | --               |  | (68,000)        
|Changes in operating
assets and liabilities, net
of effectof the sale of
the net assets of a
business: |           |  |                  |  |                 
|Accounts and other
receivables, net of
allowance                                                       | (170,000) |  | (2,000)          |  | 61,000          
|Inventory                                                                                              | (22,000)  |  | (63,000)         |  | (4,000)         
|Prepaid supplies and
other                                                                             | 23,000    |  | (85,000)         |  | (80,000)        
|Accounts payable and
accrued expenses                                                                  | 174,000   |  | (90,000)         |  | 101,000         
|Net cash flows from
operating activities                                                               | 1,280,000 |  | 592,000          |  | 1,245,000       
|CASH FLOWS FROM
INVESTING
ACTIVITIES:                                                                  |           |  |                  |  |                 
|Purchases of property,
plant and equipment, net
of effect                                              |           |  |                  |  |                 
|of the sale of the net
assets of a business                                                            | (996,000) |  | (962,000)        |  | (1,991,000)     
|Proceeds from disposal
of property, plant and
equipment                                                | 2,000     |  | --               |  | 2,000           
|Deposits made for
equipment                                                                            | --        |  | (564,000)        |  | --              
|Proceeds from the sale
of net assets of a
business                                                     | --        |  | --               |  | 615,000         
|Net cash flows from
investing activities                                                               | (994,000) |  | (1,526,000)      |  | (1,374,000)     
|CASH FLOWS FROM
FINANCING
ACTIVITIES:                                                                  |           |  |                  |  |                 
|Proceeds (repayments)
from bank line of credit                                                         | --        |  | --               |  | (250,000)       
|Principal payments of
long-term debt                                                                   | (846,000) |  | (661,000)        |  | (846,000)       
|Proceeds from issuance
of long-term debt                                                               | 500,000   |  | 1,435,000        |  | 1,398,000       
|Net cash flows from
financing activities                                                               | (346,000) |  | 774,000          |  | 302,000         
|                                                                                                       |           |  |                  |  |                 
|NET CHANGE IN
CASH                                                                                     | (60,000)  |  | (160,000)        |  | 173,000         
|CASH, BEGINNING
OF YEAR                                                                                | 69,000    |  | 229,000          |  | 56,000          
|CASH, END OF YEAR                                                                                      | $ 9,000   |  | $ 69,000         |  | $ 229,000       
|                                                                                                       |           |  |                  |  |                 
|Supplemental
disclosures of cash flow
information:                                                     |           |  |                  |  |                 
|Cash paid during the
year for:                                                                         |           |  |                  |  |                 
|Interest                                                                                               | $ 196,000 |  | $ 243,000        |  | $ 289,000       
|Income taxes                                                                                           | $ 3,000   |  | $ 4,000          |  | $ 38,000        
|                                                                                                       |           |  |                  |  |                 
|Supplemental
schedule of
non-cash investing
and financing:                                             |           |  |                  |  |                 
|Reduction of officer
note receivable for stock                                                         | $--       |  | $--              |  | $ 20,000        

The accompanying notes are an integral part of these consolidated financial statements.

|**CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY** 
|----------------------------------------------------
|**Fiscal Years Ended April 30, 2003, 2002 and 2001**

|                        | Common
Stock
Shares |  | Common
Stock
Amount |  | Note
receivable
from
officer |  | Additional
paid in
capital |  | Retained
earnings |  | Total
Stockholders' Equity
|----------------------- | ------------------- |  | ------------------- |  | ---------------------------- |  | -------------------------- |  | ----------------- |  | --------------------------
|Balance,
April 30,
2000 | 2,738,264           |  | $ 137,000           |  | $ (20,000)                   |  | $1,666,000                 |  | $
2,893,000       |  | $
4,676,000               
|Repurchase
Shares       | (15,000)            |  | (1,000)             |  | 20,000                       |  | (19,000)                   |  | __                |  | __                        
|Net Income
for 2001     | __                  |  | __                  |  | __                           |  | __                         |  | 198,000           |  | 198,000                   
|Balance,
April 30,
2001 | 2,723,264           |  | 136,000             |  | __                           |  | 1,647,000                  |  | 3,091,000         |  | 4,874,000                 
|Net Loss
for 2002       | __                  |  | __                  |  | __                           |  | __                         |  | (194,000)         |  | (194,000)                 
|Balance,
April 30,
2002 | 2,723,264           |  | 136,000             |  | __                           |  | 1,647,000                  |  | 2,897,000         |  | 4,680,000                 
|Net Income
for 2003     | __                  |  | __                  |  | __                           |  | __                         |  | 206,000           |  | 206,000                   
|Balance,
April 30,
2003 | 2,723,264           |  | $ 136,000           |  | $ __                         |  | $
1,647,000                |  | $
3,103,000       |  | $
4,886,000               
|                        |                     |  |                     |  |                              |  |                            |  |                   |  |                           

The accompanying notes are an integral part of these consolidated financial statements.

**1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

*Nature of business*-- Milastar Corporation ("Milastar" and sometimes the "Company") sells special metallurgical services to a diversified list of
manufacturers primarily located in the greater Midwest region. The menu of special processing services performed include metallurgical engineering,
heat treating, brazing and surface finishing. The Company extends credit to many of its customers.

*Principles of consolidation*-- The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Flame
Metals Processing Corporation. In consolidation, all significant intercompany accounts and transactions are eliminated.

*Cash*-- The Company maintains its cash in high quality financial institutions. The balances, at times, may exceed federally insured limits.

*Credit risk and allowance for doubtful accounts*--The Company reviews customers' credit history before extending unsecured credit and establishes
an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers and other information. Invoices for services are
due net 30 days. Accounts receivable over 60 days are considered past due. The Company does not accrue interest on past due accounts receivable. The
Company writes off accounts receivable when they are deemed uncollectible. Accounts receivable are shown net of an allowance for doubtful accounts
of $50,000 at both April 30, 2003 and 2002.

*Inventory*-- Inventory is valued at the lower of cost or market utilizing costing methods using the First-In-First-Out (FIFO) method.

Prepaid supplies-- Prepaid supplies are expensed as used.

*Property, plant and equipment*-- Property, plant and equipment are carried at cost. Depreciation is provided for using the straight-line method. When
assets are retired or otherwise disposed of, the cost and related depreciation are removed from the accounts, and any gain or loss is reflected in income
for the period. The cost of maintenance and repairs is charged to income as incurred, whereas significant renewals and betterments are capitalized and
deductions are made for retirements resulting from the renewals or betterments. Depreciation expense was $932,000, $880,000 and $869,000 for the
years ended April 30, 2003, 2002 and 2001, respectively.

The estimated useful lives of the fixed assets are as follows:

|Buildings and Improvements | 23 to 40 years
|-------------------------- | --------------
|Equipment                  | 5 to 12 years 
|Vehicles                   | 3 to 5 years  

*Other assets* -- Other assets were comprised of one five-year non-compete agreement which was being amortized over 60 months using the straight-line
method. The non-compete agreement expired during the year ended April 30, 2003.

*Income taxes*-- Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. In assessing the realizability of deferred tax
assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Management
considers the scheduled reversal of deferred tax liabilities, projected future taxable income, tax carryover periods available, and tax planning strategies
in making this assessment.

*Accounting estimates*-- The preparation of financial statements in conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.

*Fair value of financial instruments*-- The Company's financial instruments are recorded on its balance sheet. The carrying amount for cash, accounts
receivable, accounts payable, and accrued expenses approximates fair value due to the immediate or short-term maturity of these financial instruments.
The fair value of long-term debt approximates the carrying amounts based upon the Company's expected borrowing rate for debt with similar remaining
maturities and comparable risk.

*Impairment of long-lived assets and long-lived assets to be disposed of*-- In August 2001 the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which superseded
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets to be Disposed Of," among other items. The Company adopted the provisions of
SFAS No. 144 as of May 1, 2002. Similar to SFAS No. 121, SFAS No. 144 established procedures for review of recoverability, and measurement of
impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. SFAS No. 144 also
requires that long-lived assets to be disposed of other than by sale shall continue to be classified as held and used until disposal. Further, SFAS No. 144
specifies the criteria for classifying long-lived assets as "held for sale" and requires that long-lived assets to be disposed of by sale be reported as the
lower of carrying amount or fair value less estimated selling costs. Management believes that there has not been any impairment of the Company's
long-lived assets.

*Stock-based compensation*--The Company uses the intrinsic value method prescribed by Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees," and related interpretations in accounting for employee stock options. Under the intrinsic value method, compensation
expense is recorded only to the extent that the market price of the common stock exceeds the exercise price of the stock option on the date of grant.

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure."  SFAS No. 148 is an
amendment to SFAS No. 123 providing alternative methods of transition for a voluntary change to the fair value based method of accounting for
stock-based employee compensation and also provides requires additional disclosures about the method of accounting for stock-based employee
compensation.  The amendments are effective for financial statements for fiscal years ending after December 31, 2002 and for the interim periods
beginning after December 15, 2002. The Company adopted the annual disclosure provision of SFAS No. 148 during the year ended April 30, 2003. The
Company has currently chosen to not adopt the voluntary change to the fair value based method of accounting for stock-based employee compensation,
pursuant to SFAS No. 148.

****The Company has adopted the disclosure-only provisions of SFAS No. 123, Accounting for Stock-Based Compensation. Accordingly, no compensation
cost has been recognized with respect tostock options. Had compensation cost forstock options been determined based on the fair value methodology
prescribed by SFAS 123, the Company's income (loss) per share would have been reduced to the pro forma amounts indicated below:

|                                                  | **2003**  |  | **********2002** |  | **********2001**
|------------------------------------------------- | --------- |  | ---------------- |  | ----------------
|Net income (loss) - as
reported                   | $ 206,000 |  | $ (194,000)      |  | $ 198,000       
|Net income (loss) - pro
forma                     | $ 171,000 |  | $ (200,000)      |  | $ 192,000       
|Net income (loss) per
share - basic - as
reported | $ 0.08    |  | $ (0.07)         |  | $ 0.07          
|Net income (loss) per
share - basic - pro
forma   | $ 0.06    |  | $ (0.07)         |  | $ 0.07          
|Stock based
compensation - as
reported            | $ --      |  | $ --             |  | $ --            
|Stock based
compensation - pro
forma              | $ 35,000  |  | $ 6,000          |  | $ 6,000         

The pro forma amounts may not be representative of the effects on reported net income (loss) for future years. The per share, weighted-average fair
value of each option granted is calculated using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants
in the following years:

|                        | **2003**   |  | **********2002** |  | **********2001**
|----------------------- | ---------- |  | ---------------- |  | ----------------
|Dividend yield          | 0%         |  | 0%               |  | 0%              
|Expected volatility     | 60%        |  | 64%              |  | 66%             
|Risk-free interest rate | 5.0%       |  | 6.0%             |  | 5.0%            
|Expected lives          | 5-10 years |  | 10 years         |  | 5 years         

The weighted average fair value of options granted during the years ended April 30, 2003, 2002 and 2001, was $0.34 $0.00 and $0.47, respectively.

*Earnings per share*--Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares
outstanding. Diluted net income (loss) per share includes the effect of all dilutive potential common shares (primarily related to stock options), unless
the effect is anti-dilutive.For the years ended April 30, 2003, 2002 and 2001, 52,096, 0 and 106,621 shares of common stock equivalents (based on the
treasury stock method) were included in the computation of diluted net income per Class A common share, respectively.

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 years ended April 30, 2003, 2002 and 2001:

|                                                                                                                                                   | **2003**  |  | **********2002** |  | **********2001**
|-------------------------------------------------------------------------------------------------------------------------------------------------- | --------- |  | ---------------- |  | ----------------
|Weighted shares
outstanding - basic                                                                                                                | 2,723,264 |  | 2,723,264        |  | 2,723,264       
|Weighted shares
assumed upon exercise
of stock options                                                                                             | 52,096    |  | 0                |  | 106,621         
|Weighted shares
outstanding - diluted                                                                                                              | 2,775,360 |  | 2,723,264        |  | 2,829,885       
|                                                                                                                                                   |           |  |                  |  |                 
|Options excluded from
the net income (loss) per
share calculations
because the effect on net
income (loss) per share
would not have been
dilutive. | 0         |  | 116,455          |  | 0               
|Options excluded from
the net income (loss) per
share calculations
because their exercise
prices were greater than
the average market
price.       | 530,832   |  | 0                |  | 0               

*New Accounting Pronoucements*--In April 2002, the FASB issued SFAS No. 145, "Recission of FASB Statements No. 4, 44, and 64, Amendment of
FASB Statement No. 13, and Technical Corrections." The Company adopted the new standard in fiscal 2003 and has determined that there is no
material effect on the Company's consolidated financial statements.

In June 2002, the FASB issued SFAS No. 146 "Accounting for Costs Associated with Exit or Disposal Activities." SFAS No. 146 requires the
recognition of a liability for a cost associated with an exit or disposal activity when the liability is incurred versus the date the Company commits to an
exit plan. In addition, SFAS No. 146 states the liability should be initially measured at fair value. The requirements of SFAS No. 146 are effective for
exit or disposal activities that are initiated after December 31, 2002. The Company adopted the new standard in fiscal 2003 and has determined that
there is no material effect on the Company's consolidated financial statements.

In October 2002, the FASB issued SFAS No. 147, "Acquisitions of Certain Financial Institutions". SFAS No. 147 is effective October 1, 2002. The
Company adopted the new standard in fiscal 2003 and has determined that there is no material effect on the Company's consolidated financial
statements.

In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities," effective for
contracts entered into or modified after June 30, 2003. This amendment clarifies when a contract meets the characteristic of a derivative, clarifies when
a derivative contains a financing component and amends certain other existing pronouncements. The Company believes the adoption of SFAS No. 149
will not have a material effect on the Company's consolidated financial statements.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity."
SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first
interim period beginning after June 15, 2003. SFAS No. 150 requires the classification as a liability of any financial instruments with a mandatory
redemption feature, an obligation to repurchase equity shares, or a conditional obligation based on the issuance of a variable number of its equity shares.
The Company does not have any authorized preferred shares or other financial instruments with a mandatory redemption feature. The Company believes
the adoption of SFAS No. 150 will not have a material effect on the Company's consolidated financial statements.

In November 2002, the FASB issued FASB Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others" (FIN 45).  FIN 45 clarifies the requirements for a guarantor's accounting for and disclosure of certain
guarantees issued and outstanding.  The initial recognition and initial measurement provisions of FIN 45 are applicable to guarantees issued or modified
after December 31, 2002.  The disclosure requirements of FIN 45 are effective for financial statements for periods ending after December 15, 2002. 
The adoption of FIN 45 did not impact the Company's consolidated financial statements.

In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable Interest Entities" (FIN 46). FIN No. 46 states that companies that have
exposure to the economic risks and potential rewards from another entity's assets and activities have a controlling financial interest in a variable interest
entity and should consolidate the entity, despite the absence of clear control through a voting equity interest. The consolidation requirements apply to all
variable interest entities created after January 31, 2003. For variable interest entities that existed prior to February 1, 2003, the consolidation
requirements are effective for annual or interim periods beginning after June 15, 2003. Disclosure of significant variable interest entities is required in
all financial statements issued after January 31, 2003, regardless of when the variable interest was created. The adoption of FIN No. 46 did not have a
material impact on the Company's consolidated financial statements.

*Revenue Recognition*--The Company recognizes revenue when the metallurgical services have been completed and the product has been received by
the customer.

**2****SALE OF SUBSIDIARY**

On August 25, 2000, the Company sold all of the assets of its wholly owned subsidiary, New England Metal Treating Corporation located in Auburn,
Massachusetts.The Company received $615,000 in cash from the sale and recorded a $68,000 gain. The net book value of the assets sold consisted of
the following:

|Machinery & Equipment | $ 325,000
|--------------------- | ---------
|Accounts Receivable   | 211,000  
|Other                 | 11,000   
|Total                 | $ 547,000

**3 LONG-TERM DEBT**

Long-term debt consisted of the following at April 30:

|                                                                                                                                                                                                                                                                             | **2003**          |  | **********2002** 
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------- |  | -----------------
|Amount due under loan agreement
with TCF National Bank, payable in
monthly****installments of $61,685
including interest at2.5% above the
LIBOR(3.8% and 4.4% at April 30,
2003 and 2002) through December,
2006. Collateralized by substantially
all assets of the Company. | 2,466,000         |  | 3,087,000        
|Amount due under loan agreement
with TCF National Bank, payable in
monthly installments of $10,672
including****interest at2.5% above the
LIBOR(3.8% and 4.4% at April 30,
2003 and 2002) through February,
2007. Collateralized by buildings.                               | 440,000           |  | ********547,000  
|Amount due under loan agreement
with TCF National Bank, payable in
monthly****installments of $9,286
including interest at2.5% above the
LIBOR(3.8% and 4.4% at April 30,
2003 and 2002) through July, 2007.
Collateralized by substantially all
assets of the Company.      | 439,000           |  | ********--       
|Amount due under loan agreement
with the SBA, facilitated by TCF
National****Bank, payable in monthly
installments****of $4,300 including
interest at 7.5% through December,
2016. Collateralized by substantially
all assets of the Company.                                | 426,000           |  | ********444,000  
|Amount due under loan agreement
with Marvin Schendel. Paid in full
during fiscal 2003.                                                                                                                                                                                       | --                |  | ********39,000   
|                                                                                                                                                                                                                                                                             | ********3,771,000 |  | ********4,117,000
|Less current maturities                                                                                                                                                                                                                                                      | (890,000**)**     |  | ********(755,000)
|Total long-term debt                                                                                                                                                                                                                                                         | 2,881,000         |  | ********3,362,000

The estimated maturities of long-term debt for the years following April 30, 2003 are as follows:

|2004              | $ 890,000  
|----------------- | -----------
|2005              | 932,000    
|2006              | 997,000    
|2007              | 598,000    
|2008              | 43,000     
|Thereafter        | 311,000    
|Total obligations | $ 3,771,000

Total interest expense incurred on long-term debt for the years ended April 30, 2003, 2002 and 2001 amounted to $189,000, $230,000 and $265,000,
respectively.

**4 BANK CREDIT LINE**

The Companyhas a revolving line of credit with its bank, which permits borrowings of up to $500,000. Borrowings under the agreement bear interest
at the bank's reference rate and are secured by the general assets of the Company (rate at April 30, 2003 and April 30, 2002 was 4.25% and 4.75%,
respectively). The agreement contains covenants that, among other things, require the Company to maintain a minimum capital base, current ratio, and
other financial ratios. The Company was in compliance with these covenants at April 30, 2003 and 2002, respectively. The current agreement, which is
subject to annual renewal by the Company and the bank, expires on August 30, 2003 and is expected to be renewed. There were no borrowings
outstanding under this agreement at April 30, 2003 and 2002.

**5 INCOME TAXES**

The Company has federal net operating loss carryforwards of approximately $1,067,000 and state net operating losses of $2,187,000 which, if not
used, will begin to expire in 2010. The Company also has alternative minimum tax credit carryforwards of approximately $75,000 which are available
to reduce income taxes, if any, over an indefinite period. Future changes in the ownership of the Company may place limitations on the use of these
carryforwards. The provision for (benefit from) income taxes consisted of the following components for the years ended April 30:

|Current: | **2003** |  | **********2002** |  | **********2001**
|-------- | -------- |  | ---------------- |  | ----------------
|Federal  | $--      |  | $--              |  | $--             
|State    | 4,000    |  | 7,000            |  | 9,000           
|Deferred | --       |  | --               |  | --              
|         | $ 4,000  |  | $ 7,000          |  | $ 9,000         

Components of net deferred income taxes are as follows at April 30:

|Deferred income tax
assets:                    | **2003**  |  | **********2002** |  | **********2001**
|---------------------------------------------- | --------- |  | ---------------- |  | ----------------
|Net operating loss
carryforwards               | $ 554,000 |  | $ 540,700        |  | $ 524,900       
|Amortization                                   | 124,000   |  | 94,700           |  | 74,700          
|Capital loss
carryforward                      | 6,000     |  | 216,100          |  | 216,100         
|AMT credit
carryforward                        | 74,700    |  | 74,700           |  | 74,700          
|Asset valuation
reserves                       | 21,000    |  | 19,400           |  | 19,400          
|Accrued liabilities                            | 100,300   |  | 61,000           |  | 50,000          
|                                               | 880,000   |  | 1,006,600        |  | 959,800         
|Less valuation
allowance                       | (21,000)  |  | (290,700)        |  | (302,700)       
|                                               | 859,000   |  | 715,900          |  | 657,100         
|Deferred income tax
liabilities - depreciation | (859,000) |  | (715,900)        |  | (657,100)       
|Net deferred income tax
assets                 | $--       |  | $--              |  | $--             

Reconciliation between the statutory rate and the effective tax rate for the years ended April 30 is as follows:

|                                                                          | **2003** |  | **********2002** |  | **********2001**
|------------------------------------------------------------------------- | -------- |  | ---------------- |  | ----------------
|Federal statutory tax
rate                                                | 34.0%    |  | (34.0)%          |  | 34.0%           
|State taxes, net of
federal benefit                                       | 5.0      |  | 2.4              |  | 3.0             
|Change in valuation
allowance and
expiration of capital loss
carryforward | (41.8)   |  | (5.6)            |  | (32.2)          
|State net operating loss
carryforward                                     | --       |  | 39.6             |  | --              
|Other                                                                     | 4.7      |  | 1.3              |  | (0.5)           
|Effective tax rate                                                        | 1.9%     |  | 3.7%             |  | 4.3%            

**6 OPTIONS**

In accordance with the terms of an Executive Employment Agreement dated as of April 12, 1989, between the Company and L. Michael McGurk, the
then Vice President and Secretary of the Company, and a Stock Option Agreement dated as of April 12, 1989, between the Company and Lance H.
Duncan, the then President of the Company, the Company granted each of Messrs. McGurk and Duncan options to purchase 100,000 shares of the
Company's Class A Stock at $1.125 per share, the average of the closing "bid" and "ask" quotations for a share of the Company's Class A Stock on the
date of grant. The unexercised options granted to Messrs. McGurk and Duncan expired on April 12, 2000. On April 26, 2000 the board of directors
elected to extend Messrs. McGurk's and Duncan's options to April 12, 2010 at a price of $0.4375 per share.

In accordance with the Milastar Corporation Stock Option Plan (the "Option Plan") options to purchase 800,000 shares of Class A Stock may be
granted to directors, key employees and key consultants. The options granted under the Option Plan may be incentive or nonstatutory stock options and
are subject to approval by a stock option committee (the "Committee") comprised of one or more disinterested persons and appointed by the Board of
Directors. Nonstatutory options have a per share exercise price of not less than 85% of the fair market value of a share of Class A Stock on the effective
date of the grant of the stock option while incentive options have a per share exercise price of not less than 100% of the fair market value of a share of
Class A Stock on the effective date of the grant. Options are exercisable in such installments and during such period as may be fixed by the Committee
at the time of grant, but no option is exercisable after the expiration of ten years from the date of grant of such option.

Information regarding stock options is summarized below:

|                                    | Number of Options |  | Weighted Average
Exercise Price |  | Range of Option
Exercise Price
|----------------------------------- | ----------------- |  | ------------------------------- |  | ------------------------------
|Options outstanding,
April 30, 2000 | 960,332           |  | $ 0.56                          |  | $ 0.44 to 0.96                
|Granted                             | 15,000            |  | $ 0.56                          |  | $ 0.56                        
|Canceled                            | 440,332           |  | $ 0.67                          |  | $ 0.56 to 0.96                
|Exercised                           | --                |  | --                              |  | --                            
|Options outstanding,
April 30, 2001 | 535,000           |  | $ 0.46                          |  | $ 0.44 to 0.56                
|Granted                             | --                |  | --                              |  | --                            
|Canceled                            | --                |  | --                              |  | --                            
|Exercised                           | --                |  | --                              |  | --                            
|Options outstanding,
April 30, 2002 | 535,000           |  | $ 0.46                          |  | $ 0.44 to 0.56                
|Granted                             | 420,832           |  | $ 1.05                          |  | $ 0.68 to 1.11                
|Canceled                            | --                |  | --                              |  | --                            
|Exercised                           | --                |  | --                              |  | --                            
|Options outstanding,
April 30, 2003 | 955,832           |  | $ 0.72                          |  | $ 0.44 to 1.11                
|Options exercisable,
April 30, 2003 | 845,832           |  | $ 0.76                          |  | $ 0.44 to 1.11                

At April 30, 2003, 2002 and 2001, the weighted average remaining contractual life of the outstanding options was 5.7, 7.4 and 8.4 years, respectively.

The following table summarizes information about stock options outstanding at April 30, 2003:

| | Options Outstanding |  | Options Exercisable
| | ------------------- |  | -------------------

|Exercise
prices |  | Number
outstanding |  | Weighted
average
remaining
contractual
life |  | Weighted
average
exercise
price |  | Number
Exercisable |  | Weighted
average
exercise
price
|--------------- |  | ------------------ |  | ------------------------------------------- |  | ------------------------------- |  | ------------------ |  | -------------------------------
|$ 0.44          |  | 425,000            |  | 7.0                                         |  | $ 0.44                          |  | 315,000            |  | $ 0.44                         
|$ 0.56          |  | 110,000            |  | 4.0                                         |  | $ 0.56                          |  | 110,000            |  | $ 0.56                         
|$ 0.68          |  | 55,833             |  | 9.2                                         |  | $ 0.68                          |  | 55,833             |  | $ 0.68                         
|$ 1.11          |  | 364,999            |  | 4.2                                         |  | $ 1.11                          |  | 364,999            |  | $ 1.11                         
|$ 0.44 to
1.11  |  | 955,832            |  | 5.7                                         |  | $ 0.72                          |  | 845,832            |  | $ 0.76                         

**7 RETIREMENT SAVINGS PLAN**

The Company has a pre-tax salary reduction plan under the provisions of Section 401(k) of the Internal Revenue Code. The plan coverssubstantially all
full-time employees who have reached the age of 21 and have been employed by the Company for six months. The Company will match 50% of the
first 6% of employee contributions. Company contributions to the 401(k) plan, which are made at the discretion of management,for the years ended
April 30, 2003, 2002 and 2001 were $60,000, $53,000 and $56,000, respectively.

**8 RELATED PARTY TRANSACTIONS**

The Company entered into a note during fiscal 1993 with L. Michael McGurk, President, Chief Operating Officer and a director of the Company who, with
the encouragement of the Company, bought 15,000 shares of Milastar Class A Common Stock and entered into a note with the Company. The note of
$20,000 was dated August 15, 1992 and bore interest at 50 basis points over NYC Prime adjustable upward or downward at the end of each six-month
period, which interest rate was subject to an 8% "cap" during the life of the loan. Interest on the principal was payable each year on the anniversary date of
the note. The principal portion of the note that was originally due on August 15, 1995 had been extended until August 15, 2002. On February 19, 2001 the
Milastar Board of Directors and Mr. McGurk agreed to surrender the 15,000 shares of common stock in satisfaction of the officer note receivable. The
interest due on the note of $19,000 was expensed in fiscal 2001.

Total interest income related to this note for the fiscal years ended April 30, 2003, 2002 and 2001 amounted to $0, $0 and $3,000, respectively.

**9 COMMITMENTS AND CONTINGENCIES**

*Operating Leases*-- The Company leases various equipment under leases expiring through 2006. Total rent expense was $25,000, $57,000 and
$111,000 for the years ended April 30, 2003, 2002 and 2001, respectively.

Future minimum rental payments for the years ending April 30 are as follows:

|2004              | $ 14,000
|----------------- | --------
|2005              | 9,000   
|2006              | 4,000   
|Total obligations | $ 27,000

*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 of such proceedings, management believes, based on the facts currently available, that none of such claims will result in losses that
would have a materially adverse effect on the Company's consolidated financial statements.

*Employment Agreements*--The Company has employment agreements with various employees which require annual compensation as defined by the
agreements. The agreements require the Company to pay a severance if the Company terminates the agreements without cause of up to $859,000, at
April 30, 2003, as defined in the employment agreements. More information required by this Item will be contained in the Information Statement, and
reference is expressly made thereto for the information incorporated herein by the aforesaid reference.

*Significant Customers*-- During the years ended April 30, 2003 and 2002 the Company had sales to one customer which approximated 18% and 11%
of total sales, respectively. The Company did not have a major customer as of April 30, 2001. Accounts receivable from two customers approximated
13% and 11% of total accounts receivable at April 30, 2003. Accounts receivable from one customer accounted for approximately 13% of total accounts
receivable at April 30, 2002.

*Unaudited Quarterly Results*-- The following table sets forth certain unaudited quarterly operating information for each of the eight quarters in the
two-year period ending April 30, 2003. This data includes, in the opinion of management, all normal recurring adjustments necessary for the fair
presentation of the information for the periods presented when read in conjunction with the Company's consolidated financial statements and related
notes thereto. Results for any previous fiscal quarter are not necessarily indicative of results for the full year or for any future quarter.

In Thousands (000's) except per share data:

|                                      | **Apr 30,** | **Jan 31,** | **Oct 31,** | **July 31,** | **Apr 30,** | **Jan 31,** | **Oct 31,** | **July 31,**
|------------------------------------- | ----------- | ----------- | ----------- | ------------ | ----------- | ----------- | ----------- | ------------
|                                      | **2003**    | **2003**    | **2002**    | **2002**     | **2002**    | **2002**    | **2001**    | **2001**    
|Revenues                              | $ 2,497     | $ 2,191     | $ 2,414     | $ 2,236      | $ 2,107     | $ 1,887     | $ 2,157     | $ 2,064     
|Cost of Sales                         | 1,878       | 1,648       | 1,718       | 1,636        | 1,583       | 1,498       | 1,512       | 1,453       
|Gross Profit                          | 619         | 543         | 696         | 600          | 524         | 389         | 645         | 611         
|SG&A
Expenses                         | 452         | 489         | 506         | 470          | 498         | 494         | 497         | 487         
|Amortization                          | 12          | 22          | 22          | 22           | 22          | 22          | 23          | 14          
|Operating
income (loss)               | 155         | 32          | 168         | 108          | 4           | (127)       | 125         | 110         
|Interest
Expense                      | (44)        | (49)        | (52)        | (50)         | (68)        | (47)        | (65)        | (63)        
|Other Expenses                        | (14)        | (14)        | (15)        | (15)         | 6           | (20)        | (21)        | (21)        
|Net Income
(loss) before
taxes        | 97          | (31)        | 101         | 43           | (58)        | (194)       | 39          | 26          
|Income tax
expense                    | (1)         | 0           | 3           | 2            | 0           | 2           | 3           | 2           
|Net Income
(loss)                     | 98          | (31)        | 98          | 41           | (58)        | (196)       | 36          | 24          
|Net income per
common share -
basic   | 0.04        | (0.01)      | 0.04        | 0.02         | (0.02)      | (0.07)      | 0.01        | 0.01        
|Net income per
common share -
diluted | $ 0.04      | $ (0.01)    | $ 0.04      | $ 0.01       | $ (0.02)    | $ (0.07)    | $ 0.01      | $ 0.01      

**INDEPENDENT AUDITORS' REPORT**

Stockholders and Board of Directors

Milastar Corporation and Subsidiary

Minneapolis, Minnesota

Under date of June 6, 2003, we reported on the consolidated balance sheet of Milastar Corporation and Subsidiary as of April 30, 2003, and the related
consolidated statements of operations, stockholders' equity, and cash flows for the year then ended, which are included in the annual report on Form
10-K for the 2003 fiscal year. In connection with our audit of the aforementioned consolidated financial statements, we also audited the related
consolidated financial statement schedule as listed in the accompanying index. This financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion on this financial statement schedule based on our audit.

In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.

Virchow, Krause & Company, LLP

Minneapolis, Minnesota

June 6, 2003

|**VALUATION AND QUALIFYING ACCOUNTS**               
|----------------------------------------------------
|**Fiscal Years Ended April 30, 2003, 2002 and 2001**

|Description                                        |  | Balance at
beginning of
year |  | Additions
charged to costs
& expenses (A) |  | Deductions |  | Balance at end
of year
|-------------------------------------------------- |  | ---------------------------- |  | ----------------------------------------- |  | ---------- |  | ----------------------
|Allowance
deducted from
asset to which it
applies: |  |                              |  |                                           |  |            |  |                       
|Allowance for
doubtful
accounts
receivable:        |  |                              |  |                                           |  |            |  |                       
|April 30, 2003                                     |  | $ 50,000                     |  | $ 20,000                                  |  | $ 20,000   |  | $ 50,000              
|April 30, 2002                                     |  | $ 50,000                     |  | $ 1,000                                   |  | $ 1,000    |  | $ 50,000              
|April 30, 2001                                     |  | $ 50,000                     |  | $ 35,000                                  |  | $ 35,000   |  | $ 50,000              

(A) Write-off of uncollectible receivables

**Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure**

*Changes in Registrant's Certifying Accountant*

On October 7, 2002, the Company's audit committee dismissed KPMG LLP as the Registrant's independent public accountants. The report of KPMG
LLP on the Company's financial statements for the past three fiscal years contained no adverse opinion or disclaimer of opinion, and were not qualified
or modified as to uncertainty, audit scope, or accounting principles.

*New Independent Public Accountants*

On October 7, 2002, the Company's board of directors and audit committee retained Virchow, Krause & Company, LLP to be the registrant's principal
independent accountants.

**PART III**

**Item 10. Directors, Executive Officers, Promoters and Control Persons of the Registrant**

The following table sets forth with respect to each executive officer of the Company his name, age and all positions and offices with the Company held
by him since May 1, 1998. Unless otherwise indicated in the table below, all positions and offices indicated have been continuously held since May 1,
1998. All executive officers serve at the will of the Board of Directors until their successors are duly appointed and qualified. Mr. J. Russell Duncan,
Chairman of the Board and a director of the Company, is the father of Mr. Lance H. Duncan, Secretary and a director of the Company. With the
foregoing exception, no family relationship exists among the officers of the Company.

|**Name**              | **Age** |  | **********Positions and Offices Held with the
Company**
|--------------------- | ------- |  | -------------------------------------------------------
|J. Russell Duncan (1) | 86      |  | Chairman and Chief Executive
Officer                   
|L. Michael McGurk     | 52      |  | President and Chief Operating
Officer                  
|Dennis J. Stevermer   | 42      |  | Vice President Treasurer                               
|Lance H. Duncan (2)   | 47      |  | Secretary                                              

(1) Mr. J. Russell Duncan was Chairman and a director of Sound Techniques, Inc. (audio-video production studios) until December 2001 and has
otherwise been engaged in private investment activities for more than the past five years.

(2) Mr. Lance H. Duncan was President and Chief Operating Officer of Sound Techniques, Inc. (audio-video production studios) until December 2001
and has been engaged in private investment activities for more than the past five years.

Similar information respecting the directors of the Company will be included under the heading "Respecting the Election of Directors" in the
Company's definitive Information Statement ("Information Statement") to be distributed to the stockholders of the Company and filed with the Securities
and Exchange Commission pursuant to the Securities and Exchange Act of 1934, as amended, respecting notification of certain action taken by written
consent in lieu of the Company's Annual Meeting of Stockholders for its 2003 fiscal year. The Company expects to file the Information Statement with
the Securities and Exchange Commission on or before August 8, 2003 and reference is expressly made thereto for the information incorporated herein
by the aforesaid reference.

**Item 11. Executive Compensation**

The information required by this Item will be contained in the Information Statement, and reference is expressly made thereto for the information
incorporated herein by the aforesaid reference.

**Item 12. Security Ownership of Certain Beneficial Owners and Management**

The information required by this Item will be contained in the Information Statement, and reference is expressly made thereto for the information
incorporated herein by the aforesaid reference.

**Item 13. Certain Relationships and Related Transactions**

The information required by this Item will be contained in the Information Statement, and reference is expressly made thereto for the information
incorporated herein by the aforesaid reference.

**Item 14. Controls and Procedures**

(a) Evaluation of Disclosure Controls and Procedures

The Company's President, L. Michael McGurk, and Chief Financial Officer, Dennis J. Stevermer, have reviewed the Company's disclosure controls
and procedures within 90 days prior to the filing of this report. Based upon this review, these officers believe that the Company's disclosure controls
and procedures as currently implemented are effective in ensuring that material information related to the Company is made known to them by others
within the Company.

(b) Changes in Internal Controls.

None

**Item 15. Principal Accountant Fees and Services**

Disclosure not required

**PART IV**

**Item** **16. Exhibits, Financial Statement Schedules and Reports on Form 8-K**

(a) Financial Statements, Financial Statement Schedules and Exhibits.

1. Financial Statements

See Index to Consolidated Financial Statements and Financial Statement Schedules

on page 9 of this report.

2. Financial Statement Schedules

All schedules to the Consolidated Financial Statements normally required by the

applicable accounting regulations are included in Item 8 or are not applicable.

3. Exhibits

See Index to Exhibits on page 28 of this report.

**INDEX TO EXHIBITS**

**Exhibit**

**No. Description**

3.1 Certificate of Incorporation, as amended, a copy of which was filed as Exhibit (1) to Registrant's Registration Statement on Form 10 dated August
27, 1970 and, by this reference, such Exhibit is incorporated herein

3.2 By-laws, as amended a copy of which was filed as Exhibit 3.2 to Registrant's Form 10-K dated for the fiscal year ended April 30, 1998 and, by
this reference, such Exhibit is incorporated herein

3.3 Certificate of Amendment to Certificate of Incorporation, a copy of which was filed as Exhibit 3.3 to Registrant's Annual Report on Form 10-K for
the fiscal year ended April 30, 1984 and, by this reference, such Exhibit is incorporated herein

3.4 Certificate of Amendment to Restated Certificate of Incorporation a copy of which was filed as Exhibit 3.4 to Registrant's Annual Report on Form
10-K for the fiscal year ended April 30, 1987 and, by this reference, such Exhibit is incorporated herein

3.5 Certificate of Amendment to Certificate of Incorporation of Milastar Corporation, a copy of which was filed as Exhibit 3.5 to Registrant's Form
10-Q for the quarter ended January 31, 1989 and, by this reference, such Exhibit is incorporated herein

10.1 Milastar Corporation Stock Option Plan dated as of March 4, 1991 a copy of which was filed as Exhibit 10.6 to Registrant's Form 10-K for the
fiscal year ended April 30, 1991 and, by this reference, such Exhibit is incorporated herein

10.2 Executive Employment Agreement dated as of April 30, 1997 by and between Registrant and L. Michael McGurk

99.1 Certification of Chief Executive Officer and Chief Financial Officer in compliance with 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.

21.1 List of Significant Subsidiary

Subsidiary State of Incorporation

Flame Metals Processing Corporation Delaware

(b) Reports on Form 8-K: None

**SIGNATURES**

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, hereunto duly authorized.

| |  | MILASTAR CORPORATION     
| |  | -------------------------
| |  | (REGISTRANT)             
| |  |                          
| |  | /s/ J. RUSSELL DUNCAN    
| |  | **J. Russell Duncan**    
| |  | **Chairman of the Board**

Dated: July 28, 2003

Pursuant to the requirements of the Securities Exchange Act of 1934, the following persons on behalf of the Registrant and in the capacities indicated
this report of the Registrant and in the capacities indicated on July 28, 2003.

|/s/ J. RUSSELL DUNCAN                             |  | /s/ L. MICHAEL McGURK                 
|------------------------------------------------- |  | --------------------------------------
|**J. Russell Duncan**                             |  | **L. Michael McGurk**                 
|**Chairman of the Board, Chief Executive**        |  | **President, Chief Operating Officer**
|**Officer and Director**                          |  | **and Director**                      
|                                                  |  |                                       
|/s/ DENNIS J. STEVERMER                           |  | /s/ LANCE H. DUNCAN                   
|**Dennis J. Stevermer**                           |  | **Lance H. Duncan**                   
|**Vice President Treasurer, Principal Financial** |  | **Secretary and Director**            
|**and Accounting Officer**                        |  |                                       

I, J. Russell Duncan, certify that:

1. I have reviewed this annual report on Form 10-K of Milastar Corporation and Subsidiary;

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects
the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

/s/J.Russell Duncan

J. Russell Duncan

Chief Executive Officer

Date: July 28, 2003

I, Dennis J. Stevermer, certify that:

1. I have reviewed this annual report on Form 10-K of Milastar Corporation and Subsidiary;

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects
the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

/s/Dennis J. Stevermer

Dennis J. Stevermer

Chief Financial Officer

Date: July 28, 2003

****