8-K/A

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 8-K/A

Amendment No. 1

Current Report

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 27, 2006 (February 23, 2005)

M-WAVE, INC.

(Exact name of registrant as specified in its charter)

Delaware	33-45449	36-3809819
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

475 Industrial Drive, West Chicago, Illinois	60185
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (630)562-5550

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Section 2 - Financial Information

Item 2.01. Completion of Acquisition or Disposition of Assets.

On February 23, 2005, we filed a Current Report on Form 8-K to disclose that M-Wave had acquired substantially all of the assets of Jayco Ventures Inc. In that Form 8-K, no historical or pro forma information was provided.

This Amendment No. 1 of the Current Report on Form 8-K/A provides the required historical and pro forma financial information as of December 31, 2004 and amends the Initial 8-K Report filed by M-Wave on February 23, 2005.

The unaudited pro forma condensed financial information is presented for informational purposes only. The pro forma data is not necessarily indicative of what M-Wave’s financial position or results of operations actually would have been had M-Wave completed the acquisition as of the dates indicated. In addition, the unaudited pro forma condensed combined financial information does not purport to project the future financial position or operating results of the combined company.

This Current Report on Form 8-K may contain, among other things, certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitation, (i) statements with respect to the Company’s plans, objectives, expectations and intentions; and (ii) other statements identified by words such as “may”, “could”, “would”, “should”, “believes”, “expects”, “anticipates”, “estimates”, “intends”, “plans” or similar expressions. These statements are based upon the current beliefs and expectations of the Company’s management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. These forward-looking statements involve certain risks and uncertainties that are subject to change based on various factors (many of which are beyond the Company’s control).

Section 9 - Financial Statements and Exhibits

Item 9.01. Financial Statements and Exhibits

(a) Financial Statements of Business Acquired

· The following financial statements of Jayco Ventures, Inc. are being filed with this report as Exhibit 99.1:

· Report of Independent Auditors’ Report;

· Balance Sheet as of December 31, 2004;

· Statement of Operations for the twelve months ended December 31, 2004;

· Statement of Cash Flows for the twelve months ended December 31, 2004;

· Statement of Stockholders’ Equity for the twelve months ended December 31, 2004; and

· Notes to Financial Statements

(b) Pro forma financial information

· The following pro forma financial information is being filed with this report as Exhibit 99.2:

· Pro Forma Condensed Balance Sheet as of December 31, 2004;

· Pro Forma Condensed Combined Statement of Operations for the twelve months ended December 31, 2004

· Notes to Pro Forma Condensed Combined Financial Statements.

(c) Exhibits

Exhibit	Description
99.1	Financial Statements listed in Item 9.01 (a)
99.2	Pro Forma Financial Information listed in Item 9.01 (b)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed by the undersigned, thereunto duly authorized.

	M-WAVE, INC.
	(Registrant)
By	/s/ Jim Mayer
	Jim Mayer
Interim Chief Executive Officer

Dated: February 27, 2006

EX-99.1

Exhibit 99.1

JAYCO VENTURES, INC.

Financial Statements

December 31, 2004

1

JAYCO VENTURES, INC.

Independent Auditors’ Report	3
Financial Statements:
Balance Sheet	4
Statement of Operations	5
Statement of Stockholder’s Deficit	6
Statement of Cash Flows	7
Notes to Financial Statements	8-14

2

Independent Auditors’ Report

To the Stockholder of

Jayco Ventures, Inc.

We have audited the accompanying balance sheet of Jayco Ventures, Inc. (the “Company”) as of December 31, 2004, and the related statement of operations, stockholder’s deficit, and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these 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 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 audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Jayco Ventures, Inc. as of December 31, 2004, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company is a going concern. As discussed in Note 3 of the financial statements, the Company has incurred losses from operations and used cash flows from operations, and at December 31, 2004, the Company had working capital and shareholders’ deficits. These factors raised substantial doubt about the Company’s ability to continue as a going concern. Management’s plans regarding these matters are also described in Note 3 of the financial statements. The accompanying financial statements do not include any adjustments that resulted from the outcome of these uncertainties.

/s/ McKennon, Wilson & Morgan LLP

Irvine, California

February 17, 2006

3

JAYCO VENTURES, INC.

Balance Sheet

December 31, 2004

Assets (Notes 3 and 5)

Current assets:
Cash	$	-
Accounts receivable, net of allowance for doubtful accounts of $17,204		199,432
Inventories		754,145
Prepaid expenses and other current assets		19,785
Total current assets		973,362
Property and equipment, net of accumulated depreciation of $430,666		98,839
	$	1,072,201

Liabilities and Stockholder’s Deficit

Current liabilities:
Line of credit	$	798,411
Accounts payable		3,190,004
Accrued expenses		107,682
Notes payable (Note 6)		327,749
Capital lease obligations		45,707
Lease abandonment costs (Note 8)		914,914
Total current liabilities		5,384,467
Stockholder loan payable (Note 7)		55,000
Total liabilities		5,439,467
Commitments and contingencies (Note 8)		-
Stockholder’s deficit:
Common stock, $1.00 par value, 500 shares authorized, issued and outstanding		500
Accumulated deficit		(4,367,766	)
Total stockholder’s deficit		(4,367,266	)
	$	1,072,201

The accompanying notes are an integral part of these financial statements

4

JAYCO VENTURES, INC.

Statement of Operations

For the Year Ended December 31, 2004

Net sales	$	16,399,921
Cost of sales (Notes 4 and 8)		14,264,084
Gross profit		2,135,837
Operating expenses:
Sales and marketing		3,010,671
General and administrative		2,694,867
Total operating expenses		5,705,538
Operating loss		(3,569,701	)
Other income (expenses):
Interest		(175,238	)
Other		11,097
Net loss	$	(3,733,842	)

The accompanying notes are an integral part of these financial statements

5

JAYCO VENTURES, INC.

Statement of Stockholder’s Deficit

For the Year Ended December 31, 2004

	Common Stock		Accumulated Deficit			Total
Balances, December 31, 2003	$	500	$	(618,778	)	$	(618,278	)
Net loss		-		(3,733,842	)		(3,733,842	)
Distributions		-		(15,146	)		(15,146	)
Balances, December 31, 2004	$	500	$	(4,367,766	)	$	(4,367,266	)

The accompanying notes are an integral part of these financial statements

6

JAYCO VENTURES, INC.

Statement of Cash Flows

For the Year Ended December 31, 2004

Cash flows from operating activities:
Net loss	$	(3,733,842	)
Adjustments to reconcile net loss to net cash flows providing by operating activities:
Depreciation and amortization		120,452
Impairment of long-lived assets		267,715
Lease abandonment costs		914,914
Provision for obsolete inventory		209,317
Changes in operating assets and liabilities:
Accounts receivable		2,474,993
Inventories		1,126,536
Prepaid and other assets		719,469
Accounts payable		(722,622	)
Accrued expenses		90,953
Net cash provided by operating activities		1,467,885
Cash flows from investing activities:
Purchases of property and equipment		(163,089	)
Proceeds from sales of property and equipment		9,267
Net cash used in investing activities		(153,822	)
Cash flows from financing activities:
Net repayments on line of credit		(1,179,964	)
Payments on notes payable		(68,540	)
Repayment of stockholder loan		(45,000	)
Principal payments on capital lease obligations		(19,031	)
Distributions to stockholder		(15,145	)
Net cash used in financing activities		(1,327,680	)
Net decrease in cash		(13,617	)
Cash, beginning of year		13,617
Cash, end of year	$	-
Supplemental disclosures of cash flow information:
Cash paid for the year for:
Interest	$	175,238
Income taxes	$	-

The accompanying notes are an integral part of these financial statements

7

JAYCO VENTURES, INC.

Notes to Financial Statements

December 31, 2004

1. Organization and Business

Jayco Ventures, Inc. (the “Company”) was a supplier of installation products and materials for the digital broadcast satellite industry. The Company maintained distribution centers in Florida, Colorado and New Jersey and distributed products purchased from distributors overseas under the trademark “JVI”.

On February 25, 2005, the Company made an irrevocable assignment for the benefit of creditors (the “Assignment") of all its assets to an independent trustee (the "Assignee") in the State of Florida. Immediately, the Assignee began an orderly sale of the Company’s assets.

Simultaneously with the Assignment, substantially all of the Company’s assets were sold to M Wave Incorporated for cash proceeds of $1,360,000. The proceeds from the sale of these assets were used to repay $1,089,222 of outstanding principal, accrued interest and other fees under the Company’s line of credit which held a senior security interest in all of the Company’s assets, as described in Note 5. In addition, as of January 4, 2006, the assignee received claims for $2,998,000 against the Company, of which aggregate distributions to holders of these allowed claims were $56,000. The Company was not released of its outstanding liabilities and no further payments to the holders of allowed claims are to be made.

2. Summary of Significant Accounting Policies

Concentrations

The Company has accounts receivable with customers in excess of 10% of total accounts receivable. Two customers had balances representing 42% and 16%, respectively, of accounts receivable.

The Company has sales to customers which exceeded 10% of total sales. Two customers had balances representing for 25% and 15%, respectively, of total sales.

The Company performed periodic credit evaluations of its customers and did not require collateral. The Company maintains allowances for credit losses. As of December 31, 2004, the Company’s management performed an evaluation of accounts receivable allowances and determined they were within expectations.

Inventories

The Company’s inventories consisted of finished goods, including connectors, switches and cables are stated at the lower of cost or market. Cost is determined using the first-in, first-out (FIFO) method. Slow moving and obsolete inventories were reduced to net realizable value.

8

JAYCO VENTURES, INC.

Notes to Financial Statements

December 31, 2004

Property and Equipment

Property and equipment were stated at cost, less accumulated depreciation and asset impairments. Expenditures for major betterments and additions were changed to the property and equipment accounts, while replacements, maintenance and repairs, which do not improve or extend the lives of the respective assets, were charged to expense. Depreciation was computed using the straight-line method over the estimated useful lives of the underling asset, ranging from three to seven years. Leasehold improvements were depreciated over the term of the lease or the estimated life, whichever was less.

Income Taxes

The Company and its stockholder elected to be treated as a “Small Business Corporation” for income tax purposes under Subchapter “S” of the Internal Revenue Code. In accordance with the provisions of such election, the Company’s income or loss passes through to its stockholder; accordingly, income taxes are not significant.

As of the date of this report, the Company has not filed its federal and state income tax returns which were due on or before September 15, 2005.

Management Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at December 31, 2004, and revenues and expenses during the year then ended. Actual results did not differ from those estimates.

Sales

The Company recognized revenues when the following four basic criteria have been met:

· persuasive evidence that an arrangement exists;

· delivery has occurred or services have been rendered;

· the fee is fixed and determinable; and

· collectibility is reasonably assured.

9

JAYCO VENTURES, INC.

Notes to Financial Statements

December 31, 2004

Impairment of Long-Lived Assets

The Company reviewed the carrying value of property, equipment and other long-lived assets for impairment. In cases where the expected future cash flows were less than the carrying value, an impairment loss was recognized equal to an amount by which the carrying value exceeded the fair value of assets. See Note 4 for a discussion on the impairment to the Company's long-lived assets during the year ended December 31, 2004.

Fair Value of Financial Instruments

Financial instruments consist of cash, accounts receivable, accounts payable, and line of credit. The fair value of financial instruments approximated their carrying values at December 31, 2004. Related party notes payable have no readily ascertainable fair value.

3. Going Concern

The accompanying financial statements have been prepared assuming the Company’s business was going-concern. The Company incurred significant losses and uses of cash from operations, and as of December 31, 2004, it had a working capital deficit and a stockholders’ deficit of $4,411,105 and $4,367,266, respectively. These factors raised substantial doubt about the Company’s ability to continue as a going concern. Management planned to raise additional capital and work out its liabilities with its creditors; however, they were unsuccessful. Subsequent to December 31, 2004, the Company sold its assets to M Wave Incorporated. The accompanying financial statements do not include any adjustments that resulted from the outcome of these uncertainties. However, in connection with management’s annual assessment of impairment of assets due to significant losses sustained in 2004, they used cash flows received from the sale of certain operating assets in February 2005, in the analysis to determine impairment amounts of the Company’s assets (see Note 4).

4. Property and Equipment

The Company’s property and equipment consists primarily of computer and warehouse equipment, as well as a small amount of leasehold improvements, which were abandoned and written-off as of December 31, 2004 (see below).

In connection with the preparation of the financial statements for the year ended December 31, 2004, a review of the Company’s assets was performed to assess the recoverability of their carrying values. The assessment resulted in an impairment loss of $267,715. This loss reflects the amount by which the carrying values of these assets exceeded their estimated fair values. The fair value of these assets was determined based, in part, on the subsequent proceeds from the sale of these assets to M Wave Incorporated as described in Note 1.

10

JAYCO VENTURES, INC.

Notes to Financial Statements

December 31, 2004

5. Line of Credit

On July 13, 2003, the Company entered into a Credit and Security Agreement (the “Line of Credit”) with Wells Fargo Business Credit, Inc. The Line of Credit, as amended provided borrowings of up to $6,000,000 for working capital advances and letters of credit based on borrowing base formulas, as defined. The Line of Credit was secured by a first priority lien on substantially all of the Company’s assets and had a stated interest rate of Prime plus 0.5% plus a 3% default rate (8.75% at December 31, 2004) and required the Company to make monthly interest payments.

As of December 31, 2004, the Company was in default of certain financial covenants under the Line of Credit and the balance outstanding exceeded the borrowing base formula by $189,000.

In conjunction with the Assignment, Wells Fargo Business Credit, Inc. enforced its priority lien on the Company’s assets and received $1,089,222 in aggregate proceeds on or about February 25, 2006, which was used to offset against the amounts outstanding under the Line of Credit.

6. Notes Payable

As of December 31, 2004, notes payable consisted of:

Settlement note payable	$	176,203
Promissory note payable		128,723
Equipment notes payable		22,823
	$	327,749

Settlement Note Payable

On September 16, 2002, the Company was party to a lawsuit with a customer. The lawsuit against the Company sought to recover payments of $423,214 (“Preferential Payment”) made to the Company by a customer who had filed for bankruptcy on behalf of the customer’s creditor committee. In August 2003, both parties settled the lawsuit for $320,000 which stipulated the Company was to pay (1) $50,000 upon court approval of the settlement and (2) sixteen monthly payments of $16,875 per month, beginning thirty days after an order approving the settlement. The agreement also provided that if the Company failed to pay the settlement amount, it would be required to pay the amount the Preferential Payment.

11

JAYCO VENTURES, INC.

Notes to Financial Statements

December 31, 2004

During the third quarter of 2004, the Company ceased making the required payments under this agreement. As such, on December 28, 2004, a lawsuit was filed against the Company seeking to recover $176,203 consisting of the unpaid amount of the Preferential Payment including accrued interest, less the principal and interest payments received to date from the Company. As of December 31, 2004, the Company recorded the unpaid Preferential Payment as a current liability in the accompanying balance sheet.

Promissory Note Payable

On October 23, 2000, the Company renewed a promissory note dated February 11, 1999. Under this note, the Company was required to make monthly principal and interest payments of $5,000. The note bared interest at a rate of 15% per annum. The loan was due on demand and had a second position to the Company’s accounts receivable, inventory and equipment as security, subordinate to the Line of Credit. The loan was guaranteed by the Company’s stockholder. As of December 31, 2004, the Company was unable to make the required monthly payments due under the agreement and is in default under the terms of the underlying agreement. As such, the outstanding balance on the note has been classified as a current liability in the accompanying balance sheet as of December 31, 2004.

Equipment Notes Payable

The Company purchases certain computer equipment from vendors in exchange for promissory notes. Under these agreements, the Company is required to make monthly principal and interest payments. The notes bared interest at a rate of 20.99% per annum. As of December 31, 2004, the Company was unable to make the required monthly payments due under the agreement and is in default under the terms of the underlying agreement. As such, the outstanding balance on the note has been classified as a current liability in the accompanying balance sheet as of December 31, 2004.

7. Stockholder Loan Payable

In March 2003, the Company entered into a promissory note for $100,000 with the Chief Executive Officer and Chairman of the Board of Directors. The note bared interest at a rate 10% per annum and was due and payable in March 2006. During 2004, the Company repaid $45,000 of the principal outstanding on the note. In January 2005, the Chief Executive Officer agreed to forgive the $55,000 balance due on the note.

12

JAYCO VENTURES, INC.

Notes to Financial Statements

December 31, 2004

8. Commitments and Contingencies

Capital Leases

The Company has entered into various capital leases for computer equipment. As of December 31, 2004, the Company has been unable to make the required monthly payments due under the agreement and is in default under the terms of the underlying agreement. As such, the remaining minimum lease payments balances on the note have been classified as a current liability in the accompanying balance sheet as of December 31, 2004.

Facilities Leases

The Company leased its office space and warehouses in Florida, New Jersey, Colorado and California under non-cancelable operating leases expiring through 2010. In connection with the cessation of operations in February 2005, the Company was unable to pay its remaining contractual obligations under the leases. As such, as of December 31, 2004, the Company recorded the minimum contractual future rental payments due of $857,769 under these operating leases as a current liability in the accompanying balance sheet.

Rent expense for the year ended December 31, 2004 was $496,302, excluding $857,769 of future minimum contractual future rental payments.

Equipment Leases

The Company leased certain computer equipment and vehicles under non-cancelable operating leases expiring through 2007. As of December 31, 2004, the Company was unable to make the minimum payments and the underlying collateral was returned to the respective lessor. Generally, under these agreements, in the event of default, all future rental payments continue to accrue. As such, the Company recorded the minimum contractual future rental payments of $57,145 due under these operating leases as a current liability in the accompanying balance sheet.

Litigation

The Company is exposed to various asserted and unasserted potential claims encountered in the normal course of business. The Company believes that the resolution of these legal actions will not have a material adverse effect on the Company's financial position, results of operations or cash flows.

13

JAYCO VENTURES, INC.

Notes to Financial Statements

December 31, 2004

Royalties

On August 1, 2004, the Company entered into a non-exclusive, non-transferable patent license agreement with an unrelated third party. Under this agreement, the Company was required to pay royalties on certain connectors and methods of operations for use on certain of the Company’s products. The license bared a royalty rate ranging from 5% declining to 3.5% based on the aggregate number of units sold per year. Minimum royalties under this agreement were $125,000 per quarter, becoming due beginning May 1, 2005. This agreement was terminated prior to May 1, 2005. As such, no resulting liability was incurred in connection with the termination of this agreement.

14

EX-99.2

Exhibit 99.2

Unaudited Pro forma Condensed Combined Financial Statements

On February 23, 2005, M-Wave, Inc. completed its acquisition of substantially all the assets of Jayco Ventures, Inc. The following unaudited pro forma condensed combined financial statements have been prepared to give effect to the completed acquisition.

The unaudited pro forma condensed balance sheet as of December 31, 2004, and the unaudited pro forma condensed combined statements of operations for the twelve months ended December 31, 2004, are presented herein. The unaudited pro forma condensed combined balance sheet was prepared using the historical balance sheets of M-Wave, Inc. and Jayco ventures, Inc. as of December 31, 2004. The unaudited pro forma condensed combined statements of operations were prepared using the historical statements of operations of M-Wave, Inc. and Jayco Ventures, Inc. for the twelve months ended December 31, 2004.

The unaudited pro forma condensed balance sheet gives effect to the acquisition as if it had been completed on December 31, 2004, and combines the audited condensed balance sheets of M-Wave, Inc. and Jayco Ventures, Inc. The unaudited pro forma condensed combined statement of operations for the twelve months ended December 31, 2004 give effect to the acquisition as if it had occurred on January 1, 2004.

The unaudited pro forma condensed combined financial statements are presented for illustrative purposes and do not purport to represent what the financial position or results of operations actually would have been if the events described above occurred as of the dates indicated or what the financial position or results would be for any future periods. The unaudited pro forma condensed combined financial statements are based upon the respective historical consolidated and combined financials statements of M-Wave, Inc. or Jayco Ventures, Inc., and should be read in conjunction with M-Wave, Inc.’s historical financial statements and related notes, M-Wave’s “Management’s Discussion and Analysis of Financial Condition and Results of Operation” contained in M-Wave’s Quarterly Report on Form 10-QSB for the periods ending March 31, 2005, June 30, 2005, September 30, 2005 and its Annual Report on Form 10-KSB for the year ended December 31, 2004, and Jayco Venture Inc.’s financial statements presented herein.

M-Wave, Inc.

Unaudited Pro Forma Condensed Combined Balance Sheet

As of December 31, 2004

	M-Wave			Jayco Ventures			Pro forma Adjustments				Pro forma Combined
ASSETS	(As Reported)
Current Assets:
Cash	$	1,321,445		$	0		$	1,550,000		(A)
								(1,718,471	)	(B)	$	1,152,974
Accounts receivable, net		2,040,768			199,432			300,568		(B)		2,540,768
Inventories, net		785,979			754,145			(554,145	)	(B)		985,979
Prepaid product credits		340,000			-			-				340,000
Prepaid expenses and other		136,865			19,785			(19,785	)	(B)		136,865
Total current assets		4,625,057			973,362			(441,833	)			5,156,586
Machinery and equipment-net		322,929			98,839			1,161		(B)		422,929
Land, building and improvements held for sale and idle		745,821			0			0				745,821
Other Intangible Assets, net		0			0			60,000		(B)		60,000
Investment in equity securities		225,000			0			0				225,000
Goodwill		0			0			858,471		(B)		858,471
Total Assets	$	5,918,807		$	1,072,201		$	477,799			$	7,468,807
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	1,163,013		$	3,190,004			($3,358,475	)	(B)
							$	168,471		(B)	$	1,163,013
Accrued expenses		518,484			107,682			(107,682	)	(B)		518,484
Line of Credit		0			798,411			(798,411	)	(B)		0
Capital Lease Obligations		0			45,707			(45,707	)	(B)		0
Note payable, bank, net		1,189,192			327,749			(327,749	)	(B)		1,189,192
Lease Abandonment Costs		0			914,914			(914,914	)	(B)		0
Total current liabilities		2,870,689			5,384,467			(5,384,467	)			2,870,689
Long Term Debt		0			0			1,173,520		(A)		1,173,520
Stockholder Loan Payable		0			55,000			(55,000	)	(B)		0
Total liabilities		2,870,689			5,439,467			(4,265,947	)			4,044,209
Stockholders' Equity/(deficit):
Preferred Convertible Stock - Series A		1,261,010			0			0				1,261,010
Common Stock		33,974			500			(500	)	(B)		33,974
Additional paid-in capital		11,840,351			0			376,480		(A)		12,216,831
Accumulated deficit		(7,802,047	)		(4,367,766	)		4,367,766		(B)		(7,802,047	)
Treasury stock		(2,285,170	)		0			0				(2,285,170	)
Total stockholders' equity/(deficit)		3,048,118			(4,367,266	)		4,743,746				3,424,598
Total Liabilities and Stockholders' Equity	$	5,918,807		$	1,072,201		$	477,799			$	7,468,807

See accompanying Notes to Unaudited Pro forma Condensed Combined Financial Statements

M~Wave, Inc.

Unaudited Pro Forma Condensed Combined Statement of Operations

For the Twelve Months Ended December 31, 2004

	M-Wave			Jayco Ventures			Pro forma Adjustments				Pro forma Combined
Net sales	$	17,461,858		$	16,399,921		$	0			$	33,861,779
Cost of goods sold		14,252,656			14,264,084			0				28,516,740
Gross profit		3,209,202			2,135,837			0				5,345,039
Operating expenses:
General and administrative		2,394,255			2,694,867			(1,901,117	)	(C)
								30,000		(D)		3,218,005
Selling and marketing		1,340,823			3,010,671			0				4,351,494
Impairment loss recognized on investment in AM-Wave, LLC		591,359			0			(591,359	)	(E)		0
Stock compensation		227,948			0			(227,948	)	(E)		0
Total operating expenses		4,554,385			5,705,538			(2,690,424	)			7,569,499
Operating loss		(1,345,183	)		(3,569,701	)		2,690,424				(2,224,460	)
Other income (expense):
Interest income		46,729			11,097			0				57,826
Interest expense		(162,742	)		(175,238	)		(280,493	)	(F)		(618,473	)
Trade debt forgiveness		1,013,377			0			(1,013,377	)	(E)		0
Recovery and settlement of note receivable		225,000			0			(225,000	)	(E)		0
Total other income (expense)		1,122,364			(164,141	)		(1,518,870	)			(560,647	)
Loss from continuing operations	$	(222,819	)	$	(3,733,842	)	$	1,171,554			$	(2,785,107	)

See accompanying Notes to Unaudited Pro forma Condensed Combined Financial Statements

M-Wave, Inc.

Notes to Unaudited Pro Forma Condensed Combined Financial Statements

Note 1. Basis of Presentation

The unaudited pro forma condensed combined financial statements of M-Wave, Inc. (“M-Wave”) for the twelve months ended December 31, 2004 give effect to the acquisition of Jayco Ventures Inc. (“Jayco”) as if it had been completed on January 1, 2004. The unaudited pro forma condensed combined balance sheet as of December 31, 2004 gives effect to the acquisition of Jayco as if it had occurred on December 31, 2004.

The unaudited pro forma condensed combined statements of operations and unaudited pro forma condensed combined balance sheet were derived by adjusting M-Wave’s historical financial statements for the acquisition of Jayco. The unaudited pro forma condensed combined balance sheet and unaudited pro forma condensed combined statement of operations are provided for informational purposes only and should not be construed to be indicative of M-Wave’s financial position or results of operations for any future period or date.

The unaudited pro forma condensed combined balance sheet and unaudited condensed combined statements of operations and accompanying notes should be read in conjunction with M-Wave’s “Management’s Discussion and Analysis of Financial Condition and Results of Operation” contained in M-Wave’s Quarterly Reports of Form 10-QSB for the periods ending March 31 2005, June 20, 2005, September 30, 2005, and its Annual Report on Form 10-KSB for the year ended December 31, 2004, and Jayco’s financial statements presented herein.

Note 2. Purchase Price

The unaudited pro forma condensed combined financial statements reflect a purchase price of approximately $1,718,000.

Based on the purchase price and direct acquisition costs incurred, the purchase price allocation is as follows:

	Balance at 12/31/2004		Interim Period Activity			Purchase Acctg Adjustments			Value at Acquisition
Accounts Receivable	$	199,432	$	686,197		$	(385,629	)	$	500,000
Inventory	$	754,145	$	(152,625	)	$	(401,520	)	$	200,000
Fixed Assets	$	98,839	$	1,161		$	-		$	100,000
Intangible Assets	$	-	$	-		$	60,000		$	60,000
Goodwill	$	-	$	-		$	858,471		$	858,471
	$	1,052,416	$	534,733		$	131,322		$	1,718,471

The purchase price was substantially funded by the financing discussed in Note 3(A). Valuation of assets discussed in Note 3(B).

Note 3. Pro forma Adjustments

The following pro forma adjustments are based upon management’s estimates of the value of the tangible and intangible assets acquired. These estimates are subject to finalization.

(A) Represents borrowings of $1,550,000 from MAG Capital, LLC to fund the acquisition. The aggregate principal of notes and warrants to purchase an aggregate of 434,783 shares of common stock. The issuances were made to Mercator Momentum Fund, L.P., Monarch Pointe, Ltd., and M.A.G. Capital, LLC (formerly Mercator Advisory Group, LLC), all of which are related entities. The warrants have a term of three years with an exercise price of $1.15 per share. The value of the warrants was determined using the Black-Scholes pricing model which calculated a value of approximately $490,000 based on a fair value price of $1.14, assuming an expected life of 3 years, a risk-free interest rate of 3.63%, volatility of 260.7%, and no dividend yield. When combined with the face value of the notes, these warrants result in a debt discount with an allocated fair value of approximately $376,480, was recorded as additional a reduction of long-term debt and an increase in additional paid in capital on the balance sheet in accordance with EITF 00-19. This debt discount will be expensed using the effective interest rate method. This debt discount, combined with the stated interest rate of 10%, results in an effective interest rate of approximately 25%.

(B) Represents the purchase accounting entry recording the acquisition of Jayco for approximately $1,718,000. Receivables and inventories were recorded at the net realizable value. Fixed assets were recorded based on appraised value of $100,000 and will be depreciated over five years using the straight-line method. Intangible assets consisting primarily of patents and customer lists and were recorded based on appraised value of $60,000 and will be amortized over two years using the straight-line method. Goodwill represents the excess of the purchase price over the fair value of the net assets acquired, plus additional direct acquisition costs totaling $358,471 primarily consisting of legal fees of approximately $155,000, professional fees of approximately $35,000, and incurred costs to continue business with certain key inventory suppliers of approximately $168,471. The legal and professional fees are recorded as an increase in general and administration expenses.

(C) M-Wave assumed certain limited obligations as described in Note 3(B) above. M-Wave did not carry over any historical equity of Jayco.

(D) Represents non-recurring Jayco expenses consisting of lease abandonment costs of approximately $915,000 and judgments recorded against Jayco of approximately $176,000.

(E) Represents the amortization of intangible assets acquired in Note (B) above.

(F) Represents non-recurring M-Wave expenses including impairment charges on M-Wave’s investment in Am-Wave, LLC that was dissolved in 2004; stock compensation expenses recorded for warrants issued; trade debt forgiveness recorded in 2004 that represented forgiveness of M-Wave’s obligations to vendors; and recovery of note receivable relating to M-Wave’s receipt of shares in Integrated Performance Systems, Inc. in 2004 to satisfy a note receivable that had been written off in a prior year.

(G) Represents increased interest expenses relating to the debt placement. Included in this expense is cash related interest expense totaling $155,000 based on the stated interest rate in Note (A), and the non-cash interest expense of $125,493 relating to the amortized portion of the debt discount described in Note (A).