SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-QSB

QUARTERLY REPORT UNDER SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended March 31, 2007 Commission File No.   0-19944

M~WAVE, INC.

(Exact name of registrant as specified in its charter)

DELAWARE	36-3809819
(State or other jurisdiction of Incorporation or organization)	(I.R.S.  Employer identification No.)

11533 Franklin Ave. Franklin Park, Illinois	60131
(Address of principal executive offices)	(Zip Code)

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 and 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes x  No

Indicate by check mark whether the Registrant is an	Yes	No
Accelerated filer (as defined by rule 12b-6 of the Act)	¨	x

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

The registrant has 1,793,150 shares of common stock outstanding at May 11, 2007.

M-WAVE, INC.

CONTENTS

PART I.  FINANCIAL INFORMATION
Item 1.	Financial Statements:
	Consolidated Balance Sheets as of March 31, 2007 and December 31, 2006 (unaudited)	Page 3
	Consolidated Statements of Operations for the Three Months Ended March 31, 2007 and 2006 (unaudited)	Page 4
	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2007 and 2006 (unaudited)	Pages 5
	Notes to Consolidated Financial Statements (unaudited)	Pages 7-13
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	Pages 13-20
Item 3	Controls and Procedures	Page 21
PART II.  OTHER INFORMATION
Item 1	Legal Proceedings	Page 22
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	Page 22
Item 3	Defaults Upon Senior Securities	Page 22
Item 4	Submission of Matters to a Vote of Security Holders	Page 22
Item 5	Other Information	Page 22
Item 6	Exhibits	Page 23
	Signatures	Page 23

2

Part I - Financial Information

Item 1 - Financial Statements

M-Wave, Inc.

CONSOLIDATED BALANCE SHEETS

(unaudited)

	March 31,			December 31,
	2007			2006
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	1,442,450		$	1,696,340
Accounts receivable, net of allowance for doubtful accounts, 2007- $80,000: 2006- $80,000		892,906			1,089,021
Inventories, net		1,408,952			1,348,004
Prepaid expenses and other assets		182,916			115,932
Note receivable, net		0			6,836
Total current assets		3,927,224			4,256,133
EQUIPMENT:
Equipment		434,156			434,156
Less accumulated depreciation		(167,875	)		(145,607	)
Equipment, net		266,281			288,549
TOTAL	$	4,193,505		$	4,544,682
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable	$	1,368,510		$	1,449,083
Accrued expenses		259,688			277,746
Note payable		40,000			58,000
Total current liabilities		1,668,198			1,784,829
COMMITTMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, $100 par value; Series A authorized, 30,000 shares;      issued and outstanding: 2007 and 2006: 12,500 shares		656,800			656,800
Series B authorized, 70,000 shares; issued and outstanding:        2007 and 2006: 69,648 shares		6,842,797			6,842,797
Common stock, $.005 par value; authorized, 20,000,000 shares; issued      And outstanding 2007 and 2006: 1,763,150 shares		10,986			10,986
Additional paid-in capital		14,291,235			14,199,062
Accumulated deficit		(16,991,341	)		(16,664,622	)
Treasury stock, at cost, 2007 and 2006: 433,954 shares		(2,285,170	)		(2,285,170	)
Total stockholders' equity (deficit)		2,525,307			2,759,853
TOTAL	$	4,193,505		$	4,544,682

See notes to consolidated financial statements

3

M-Wave, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
	Three Months Ended March 31
	2007			2006
NET SALES	$	2,262,921		$	2,291,843
COST OF GOODS SOLD		1,700,396			1,689,841
Gross profit		562,525			602,002
OPERATING EXPENSES:
General and administrative		676,178			1,577,116
Selling and marketing		213,066			205,811
Total operating expenses		889,244			1,782,927
Operating loss from continuing operations		(326,719	)		(1,180,925	)
OTHER INCOME (EXPENSE):
Interest expense		0			(408,863	)
Total other income (expense)		0			(408,863	)
LOSS FROM CONTINUING OPERATIONS		(326,719	)		(1,589,788	)
Income tax expense		0			0
Loss from continuing operations	$	(326,719	)	$	(1,589,788	)
Loss from discontinued operations (note 9), net of tax	$	0		$	(249,390	)
Net loss	$	(326,719	)	$	(1,839,178	)
Preferred stock dividends	$	0		$	(71,629	)
Net loss attributable to common shareholders	$	(326,719	)	$	(1,910,807	)
BASIC AND DILUTED LOSS PER COMMON SHARE
Continuing operations	$	(0.19	)	$	(1.07	)
Discontinued operations		-			(0.16	)
	$	(0.19	)	$	(1.23	)
Weighted average shares outstanding		1,763,150			1,550,650

See notes to consolidated financial statements

4

M-Wave, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
	Three Months Ended March 31
	2007			2006
OPERATING ACTIVITIES:
Net loss	$	(326,719	)	$	(1,839,177	)
Adjustments to reconcile net loss to net cash flows    used in operating activities:
Loss on disposal of property, plant, and equipment		0			24,167
Depreciation		22,268			20,310
Amortization of discount on long-term debt		0			356,787
Stock compensation recognized on options and warrants		92,173			569,179
Fair value adjustment to common stock warrants		0			(15,158	)
Changes in assets and liabilities:
Accounts receivable		196,115			(271,088	)
Inventories		(60,948	)		924,769
Prepaid expenses and other assets		(66,984	)		234,090
Accounts payable		(80,573	)		(158,009	)
Accrued expenses		(18,058	)		(60,310	)
Net cash flows used in operating activities		(242,726	)		(214,440	)
INVESTING ACTIVITIES:
Purchase of equipment		0			(6,500	)
Proceeds from sale of property, plant and equipment		0			5,000
Repayments on note receivable		6,836			20,500
Net cash flows provided by (used in) investing activities		6,836			19,000
FINANCING ACTIVITIES:
Net borrowings on note payable, bank		0			545,000
Payments on short and long term debt		(18,000	)		0
Proceeds from preferred stock issuance		0			1,777,989
Payment of preferred dividends		0			(71,629	)
Net cash flows provided by financing activities		(18,000	)		2,251,360
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(253,890	)		2,055,920
CASH AND CASH EQUIVALENTS:
Beginning of period		1,696,340			247,731
End of period	$	1,442,450		$	2,303,651
SUPPLEMENTAL SCHEDULES OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Reclassification of common stock warrants to stockholders' equity	$	0		$	270,163
Conversion of long-term debt to stockholders' equity		0			4,564,808
Accrued interest added to note payable balance		0			20,601

  See notes to consolidated financial statements

5

M-WAVE, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.  Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America for interim financial information and with the instructions to Form 10-QSB.  Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments necessary for a fair presentation, consisting only of normal recurring adjustments, have been included.

Operating results for the three months ended March 31, 2007 are not necessarily indicative of the results that may be expected for the year ending December 31, 2007.  For further information, refer to the financial statements and footnotes thereto included in the Company’s annual report on Form 10-KSB for the year ended December 31, 2006.

2. Business Product Lines

Sales by product line for the three months ended March 31, 2007 and 2006 consisted of the following:

	2007		2006
Digital	$	1,715,104	$	1,976,189
Non PCB		457,715		4,211
Other		90,102		311,443
Total sales	$	2,262,921	$	2,291,843

Sales within the digital product line include ten key customers, which represented approximately 95% of sales in the first quarter of 2007 versus approximately 84% of sales in the first quarter of 2006.  Year to date sales for the Company’s top ten digital customers were down approximately 2% compared to prior year to date sales.

Non printed circuit board (“Non PCB”) sales represent sales of new products, other than printed circuit boards, to the Company’s existing digital customer base.  Sales within the Non PCB product line include three customers, which represented approximately 90% of sales in the first quarter of 2007 versus approximately 100% of sales in the first quarter of 2006.

6

Other sales primarily represent tooling charges billed to customers for either new products or existing products that have gone through a revision.  Prior year other sales also include commission revenues billed per our October 2005 agreement with American Standard Circuits (“ASC”), pursuant to which the Company sold its “RF” (radio frequency) product line, but continued to assist ASC in transitioning the RF customers throughout 2006 as well as sales to former RF customers of its remaining inventory.  Prior year sales included approximately $74,000 in commissions and approximately $129,000 in sales to former RF customers during the first quarter of 2006.

The loss of, or a substantial reduction in the orders from, the Company’s major customers could have a material effect on the financial statements.

3. Debt

On January 25, 2006, the Company entered into an Agreement with Mercator Momentum Fund III, amending the Loan Document Purchase Agreements that Mercator purchased from Silicon Valley Bank on November 9, 2005.   Provisions of this amendment include elimination of certain provisions and conditions of the loan originally between the Company and Silicon Valley Bank, including financial covenants that existed under the original agreement.  As part of this amendment, all previous defaults that had existed under the original agreement were waived.

In connection with the loan purchase, the principal amount due was amended to include interest accrued between November 9 and December 31, 2005 of approximately $21,000.  As of March 1, 2006, the balance due on the bank notes purchased by MAG Capital was approximately $1,620,000.  During the first quarter of 2006, MAG Capital provided additional debt financing of approximately $545,000.

On March 1, 2006 the Company entered into an agreement with M.A.G. Capital, LLC to convert its debt of approximately $4,565,000 into approximately 45,648 shares of Series B Convertible Preferred Stock.

The amount of debt converted into the Series B Convertible Preferred Stock was comprised of the following amounts:

Promissory notes issued to MAG Capital	$	2,400,000
Bank notes purchased by MAG Capital	$	1,619,808
MAG debt financing first quarter	$	545,000
Total debt converted to equity	$	4,564,808

7

Upon the conversion of debt to equity described above, the remaining unamortized debt discount was recognized as interest expense in the amount of approximately $357,000 during the first quarter of 2006.

On October 10, 2006, the Company financed equipment for $70,000 with a note payable with eleven monthly installments of $6,000 and a final payment of $4,000.  Amounts outstanding on the note payable at March 31, 2007 are $40,000 and are collateralized by the equipment with a depreciated cost of approximately $59,000.

4. Equity

During the first quarter of 2006 the Company issued an aggregate of 45,648 shares of Series B Convertible Preferred Stock which are convertible into shares of the Company’s common stock. The Series B Preferred was issued to Mercator Momentum Fund, LP, Mercator Momentum Fund III, LP, and Monarch Pointe Fund, Ltd. in exchange for cancellation of indebtedness owed to them by the Company.

The Company also issued an additional 19,000 shares of Series B Preferred Stock in exchange for $1,900,000 which will be held in a reserve account to be released by a majority of the independent directors as appropriate to fund expenses of the company.

The Company paid fees of approximately $122,000 in connection with the combination of debt to equity conversion and additional equity placement.

On December 29, 2006 the Company issued an additional 5,000 shares of Series B Preferred Stock in exchange for $500,000.

The Series B stock is non-voting and is entitled to receive monthly dividends at an annual rate of 15%, subject to reduction to 9% after the Registration Statement is declared effective by the Securities and Exchange Commission. The Company is to use its best efforts to file a registration statement covering the shares of common stock underlying the Series B Convertible Preferred Stock (the “Conversion Shares”), the shares of common stock underlying the Warrants (the “Warrant Shares”), and the shares of common stock underlying the Series A Preferred Stock issued by the Company to the Purchasers on June 17, 2004.  Mercator waived their dividend payments for the three months ended March 31, 2007.

During the first three months of 2007, Mercator did not convert any shares of their preferred stock into common shares. As of March 31, 2007 there are 12,500 Series A preferred shares outstanding and 69,648 Series B preferred shares outstanding.

8

Potentially dilutive common shares consist of the incremental common shares issuable upon conversion of convertible preferred shares, and the exercise of common stock options and warrants for all periods.  For all periods ended March 31, 2007 and 2006, the basic and diluted shares reported are equal because the common share equivalents are anti-dilutive due to the net losses for each period.  Below is a tabulation of the potentially dilutive securities:

	2007		2006
Weighted average shares outstanding		1,763,150		1,550,650
Options in the money, net		68,302		6,081
Warrants in the money, net		127,026		17,164
Preferred shares convertible to Common		2,204,051		-
Total Outstanding and Potentially
Dilutive shares		4,162,529		1,573,895

On February 28, 2006, the Company re-priced all of their warrants issued to M.A.G. Capital, LLC and related entities.  A total of 532,862 warrants were re-priced from between $4.08 and $5.08 per share to $2.48 per share, one cent above the closing market price on that date.  The Company recorded approximately $286,000 of stock compensation expense during 2006 related to the re-pricing of these warrants.  The fair value of the re-pricing was determined using the Black Scholes option pricing model.

5. Litigation

The Company is not a party to any litigation whose outcome is expected to have a material adverse effect on the financial position or results of operations of the Company.

6. Share-Based Compensation

The Company has a stock option plan that authorizes the granting of options to officers, key employees and directors to purchase the Company’s common stock at prices equal to or above the market value of the stock at the date of grant.  Under this plan the Company has 2 shares available for future grants as of March 31, 2007.  The exercise price of all employee and director options granted in 2007 and 2006 were above fair market value.

Compensation expense is recognized only for share-based payments expected to vest. We estimate forfeitures at the date of grant based on our historical experience and future expectations. Estimated forfeitures are expected to be minimal and not material to the financial statements.

9

The Company recognizes share-based compensation expense in general and administrative expenses in the statement of operations.  For the three months ended March 31, 2007 and 2006 respectively, the Company issued 11,592 and 166,331 options, respectively.  These grants were priced at $3.41 and $2.72 respectively.  There were no options exercised or forfeited during the three months ended March 31, 2007 and 2006, respectively.

Information related to the Company’s share-based compensation plan for the three months ended March 31, 2007 and 2006, is as follows:

	2007		2006
Total share-based compensation expense	$	92,173	$	331,422
Weighted average grant date fair value	$	3.10	$	2.48
Unrecognized compensation cost		0		233,733
Remaining weighted average period cost will be recognized over		0.00		0.80

Total common stock warrants outstanding at March 31, 2007 were 404,113, and were all exercisable at March 31, 2007.

7. Taxes

In July 2006, the FASB issued FASB Interpretation No. 48 (FIN 48) "Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109, Accounting for Income Taxes". FIN 48 clarifies the accounting for income taxes by prescribing the minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. FIN 48 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. The interpretation applies to all tax positions related to income taxes subject to FASB Statement No. 109.

FIN 48 is effective for fiscal years beginning after December 15, 2006. Differences between amounts recognized in the statements of financial position prior to the adoption of FIN 48 and the amounts reported after adoption should be accounted for as cumulative-effect adjustment recorded to the beginning balance of retained earnings. The adoption of FIN 48 did not have a material impact on our loss from continuing operation, net loss, or earnings per share.

The Company currently has not developed a policy on classification of interest and penalties.  The Company has no unrecognized tax benefits, accrued interest, or penalties as of the date of adoption.  The Company has no tax positions at the date of adoption in which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase within one year of the adoption of FIN 48.  Tax years 2004 through 2006 remain subject to examination by major tax jurisdictions upon the adoption of FIN 48.

10

8. Reclassifications

Certain items in the 2006 consolidated financial statements have been reclassified to conform to the 2007 presentation.

9. Discontinued Operations

The Company follows the provisions of SFAS 144 to identify and account for discontinued operations.  The Company carried assets and liabilities related to its discontinued operations on its balance sheet.  These assets were carried at their net book value which approximated its estimated net realizable value less estimated costs to sell the assets, and were included with assets from continuing operations in the accompanying consolidated balance sheet.  These liabilities are carried at their net book value which approximated the full amount of consideration necessary to settle these obligations.  The approximate carrying value of these assets and liabilities at March 31, 2007 and December 31, 2006 is below:

	2007		2006
Accounts Receivable	$	60,000	$	65,000
Inventory		0		0
Prepaid Expenses		0		0
Total assets	$	60,000	$	65,000
Accounts Payable	$	0	$	0
Accrued Expenses		0		0
Total Liabilities	$	0	$	0

On January 9, 2006, the Company announced it had taken steps to liquidate its M-Wave DBS, Inc (DBS) assets it previously acquired in February 2005.  In connection with that activity, the Company announced that it had terminated all but its logistics and warehousing DBS personnel and discontinued current operations.

The Company entered into an agreement in October 2006 to complete the liquidation of all remaining inventory by the end of the year at a selling price which approximated the carrying value of approximately $169,000 at September 30, 2006. The Company also settled all of its remaining obligations to DBS inventory suppliers for nominal value.  Based on these vendor settlements, the Company recorded approximately $324,000 in vendor debt forgiveness during the second quarter of 2006, which are included in the results from discontinued operations.

11

The net loss from discontinued operations for the three months ended March 31, 2007 and 2006 are as follows:

	2007		2006
Net sales	$	0	$	748,665
Cost of goods sold		0		941,830
Gross (loss)/profit		0		(193,165	)
Operating expenses		0		56,225
Loss from discontinued operations	$	0	$	(249,390	)

The loss from discontinued operations resulted in an increase to the basic and diluted loss per common share of approximately $0.00 and $0.16 for the three months ended March 31, 2007 and 2006 respectively.

10.  New Accounting Pronouncements

In February 2007, the FASB issued SFAS 159, The Fair Value Option for Financial Assets and Financial Liabilities.  SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value at specified election dates. Under SFAS 159, a business entity shall report unrealized gains and losses on items for which the fair value option has been elected in earnings (or another performance indicator if the business entity does not report earnings) at each subsequent reporting date.  SFAS 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities.  This Statement is effective for fiscal years beginning after November 15, 2007.   The Company does not believe that adoption of SFAS 159 will have a material effect on its financial statements.

Item 2:

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

We are a value added service provider of high performance printed circuit boards used in a variety of digital and high frequency communications applications for a variety of telecommunications and industrial electronics applications. We satisfy our customers’ requirements for telecommunications and industrial electronics printed circuit boards, either rigid, flexible or bonded, by directly booking orders, supervising and inspecting outsourced manufacture of such boards through our global base of production partners located in China and Southeast Asia, and domestically, through pre-screened production partners.

12

Our business model is referred to as Virtual Manufacturing. Through Virtual Manufacturing we contractually supply a wide range of printed circuit board needs of our customers, creating a “pipeline” between those customers and production that covers early prototypes and pilot production, directly into mass production, offering one seamless source. We deliver products when our customers need them through consignment inventory control, demand pull, just in time, in plant storehouses, supplier or vendor managed inventory and other supply-chain programs.

We began Virtual Manufacturing during 2000 by developing subcontracting relationships with predominately Asian global manufacturers, from our base in Singapore. In virtual manufacturing, we assume many of the pre and post-production services of a manufacturer, while outsourcing the physical processes either adjunct to our personnel or in relatively close proximity to assure the highest quality fulfillment.

Our manufacturing partners maintain most certificates for quality, environmental and safety, including ISO, QS, UL, CE and others. We believe our manufacturing partners have a reputation for timely fulfillment of orders that are competitively priced, shipped from modern plants operating with the highest standards of worker and environmental safety both within and outside of the United States.

We market our products through regional sales managers supported by independent sales organizations.  Our base of approximately 50 customers represents a highly sophisticated group of purchasers.

In 2005, we started to solicit new orders and extend our product lines to include custom or engineered electronic products sourced from Asia on behalf of existing accounts. These products are sourced and imported on a pan-Asian basis and cover a broad range of components that include LED’s, wire bonding services, harnesses, extruded housing products, and other customer specific products.  This effort has been geared toward diversifying and increasing our overall margins. Initially, we solicited existing customers, but we also intend to solicit new accounts.  Our niche focuses in a higher mix of products at lower volumes that larger scale distributors or brokers fail to address.  Our customers tend to be smaller middle market companies through midsize firms with little presence or capability in Asia that elect us as their procurement partners.

Significant Event

On January 26, 2007, the Company entered into a Merger Agreement with SunFuels, Inc. and Blue Sun Biodiesel, LLC (SunFuels).

13

SunFuel’s primary business is the acquisition and distribution of canola oils refined into a biodiesel blend that can operate in both commercial and passenger vehicles. The primary marketing of SunFuel’s products focuses on the branded Blue Sun Fusion™ that is a blend of premium Blue Sun Biodiesel (20%) with petroleum diesel fuel (80%), along with Blue Sun's proprietary additive package specifically tailored for regional climates and seasons.  Blue Sun indicates that it will also refine biodiesel products from the plant it intends to break ground on early in 2007 located in Los Cruces, New Mexico

The transaction is expected to close in 2007, pending satisfaction of conditions to closing. When the transaction closes, certain directors and the officers of SunFuels will assume control of the Company, which will change its name to Blue Sun Holdings, Inc.  The Company’s operating subsidiary will be renamed Blue Sun Biodiesel, Inc.  The Company is expected to be a publicly traded and reporting company following the closing of the transaction.

As consideration for the merger transaction, the outstanding equity securities of SunFuels will be exchanged for equity securities of M-Wave.  Specifically, outstanding SunFuels Common Stock, Series A Convertible Preferred Stock, options and warrants will be exchanged for Company Common Stock, Series C Convertible Preferred Stock, options and warrants, respectively.  As a result, the holders of such SunFuels equity securities will own approximately 87.2% of the Common Stock of the Company, on a fully-diluted basis, assuming (i) the completion of the SunFuels Series A Convertible Preferred Stock financing described below and (ii) conversion or exercise of all convertible or exercisable securities of the Company that will be outstanding after the completion of the merger.  Similarly, all of the outstanding Blue Sun membership interests not already owned by SunFuels will be exchanged for shares of Company Common Stock.  As a result, the holders of such Blue Sun membership interests will own approximately 3.8% of the Common Stock of the Company, as so calculated on a fully-diluted basis.  The currently outstanding shares of M-Wave Common Stock will remain outstanding and, following the exchange of SunFuels and Blue Sun equity securities for M-Wave equity securities, the currently outstanding shares, warrants and options of M-Wave will represent approximately 9.0% of the outstanding shares, warrants, and options of the Company, as so calculated on a fully-diluted basis.

The merger transaction is subject to the approval by the stockholders of M-Wave and SunFuels and the members of Blue Sun, receipt of all required consents, receipt of all regulatory approvals, and other customary closing conditions.  Holders of a majority of the outstanding shares of each class of stock of SunFuels and holders of approximately 48% of the outstanding shares of Common Stock of M-Wave and 100% of the outstanding shares of each class of preferred stock of M-Wave have agreed to vote in favor of the mergers.  SunFuels, which holds 94.4% of the outstanding Blue Sun membership interests, has agreed to the Blue Sun merger.  In addition, the merger transaction is subject to the receipt of the remaining $10.125 million in SunFuels Series A Convertible Preferred Stock. There can be no assurances that SunFuels will receive the remaining $10.125 million or that the merger transaction will be completed as contemplated.

14

Because the holders of the equity securities of SunFuels will acquire a majority of M-Wave’s shares of capital stock as a result of the merger transaction, the merger transaction will be treated as a reverse merger for accounting purposes, and SunFuels will be deemed to be the acquirer in the reverse merger. Consequently, the historical financial statements of the Company will be the historical financial statements of SunFuels rather than the historical financial statements of M-Wave, and the assets and liabilities of SunFuels will be recorded at their historical cost basis to SunFuels, and the assets and liabilities of M-Wave will be recorded as if they were purchased on the closing date at their fair market value on that date.

RESULTS FOR THE THREE MONTHS ENDED March 31, 2007 COMPARED TO THE THREE MONTHS March 31, 2006

Net Sales

Net sales were approximately $2,263,000 for the three months ended March 31, 2007 versus approximately $2,292,000 during the three months ended March 31, 2006, a decrease of approximately $29,000 or 1.3%.  Sales within our digital product line decreased approximately $261,000 during the first quarter of 2007, a decrease of approximately 13% of prior year first quarter sales.   Primary factor was lower sales amongst our smaller customers of approximately $234,000.  Sales to our top ten digital customers was approximately $1,636,000 during the three months ended March 31, 2007, a decrease of approximately $29,000 compared to the three months ended March 31, 2006.  Sales amongst our top ten digital customers represented approximately 95% of sales within this product line for the three months ended March 31, 2007 compared to approximately 84% of sales within this product line for the three months ended March 31, 2006.

Sales within our non-PCB product line were approximately $458,000 for the three months ended March 31, 2007, approximately $454,000 above sales for the first three months offended March 31, 2006. As this line grows, we expect to achieve long-term revenues to approach those currently experienced within our digital product line.  The non-PCB sales recorded in the first quarter were the result of our ongoing efforts to effectively grow our core business into other products that we initiated during the latter half of 2005.  We continue to focus our efforts on growing our core business and customer base, primarily by concentrating efforts on expanding our customer base within our digital product line.  In addition, we are expanding our global sourcing efforts beyond printed circuit boards into other product lines such as extrusions, wire harnesses, castings, spinning’s, etc. Sourcing of these additional product lines, initially to our existing customer base, we believe will improve our operating results by providing increased profits on these products than we experienced with our former radio frequency (“RF”) product line.

15

Other revenues for the three months ended March 31, 2007 were approximately $90,000, approximately $221,000 below other revenues recorded in the three months ended March 31, 2006.  Other revenues primarily consist of tooling charges for new and redesigned products, freight charges billed, and cash discounts taken by customers for early payments, which are recorded as a reduction of sales.  Other sales for the prior year also included sales of our remaining RF inventory during the first half of the year and commissions received on providing sales assistance after the sales of our RF product line in late 2005.  Those commissions were received throughout 2006, and concluded on December 31, 2006.  Primary drivers in the decrease were prior year sales of our remaining RF product of approximately $129,000 and a decrease in commissions of approximately $57,000.  Tooling revenues decreased by approximately $24,000 in the first quarter of 2007 versus prior year sales.

Gross Profit and Cost of Goods Sold

The Company’s gross profit for the first three months ended March 31, 2007 was approximately $563,000, or 24.9% of net sales, compared to a gross profit of approximately $602,000, or 26.3% of net sales, for the three months ended March 31, 2006.  Primary driver in the reduced margin dollars and percentage were commissions received during the prior year.  Margins within our digital product line increased by approximately 0.7% over the prior year as we continue to focus sales efforts on our higher margin customers.

Operating Expenses

General and administrative expenses were approximately $676,000 or 29.9% of net sales in the first quarter of 2007 compared to approximately $1,577,000 or 68.8% of net sales in the first quarter of 2006, a decrease of approximately $901,000.

General and administrative expenses consist primarily of salaries and benefits, professional services, depreciation of office, equipment and computer systems and occupancy expenses. In comparison to the first quarter of 2006, payroll related expenses decreased approximately $12,000.   Professional services, which include legal, auditing, and consulting fees, increased approximately $43,000 in 2007 compared to prior year expenses.  Public company related costs such as investor relations, Sarbanes-Oxley expenses, and board and committee fees were approximately $124,000 in the first quarter of 2007 compared to approximately $483,000 during the first quarter of 2006, a decrease of approximately $359,000.  We recorded stock compensation expenses during the first quarter of 2007 of approximately $92,000 compared to approximately $569,000 for the first quarter of 2006, a decrease of approximately $477,000.  Stock compensation expense is primarily related to Board of Director and employee stock option grants issued during the first three months of 2007 and 2006, respectively.  Prior year stock compensation expense also includes expenses of approximately $238,000 recorded when we re-priced warrants in connection with our debt to equity conversion in the first quarter of 2006.  Other operating expenses decreased approximately $96,000 during the first quarter of 2007 compared to the first quarter of 2006, primarily due to a refund on prior year workers compensation premium of approximately $24,000, loss on the sale of assets in the prior year of approximately $24,000, and a reduction of miscellaneous operating expenses of approximately $48,000.

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Selling and marketing expenses were approximately $213,000 or 9.4% of net sales in the first quarter of 2007 compared to approximately $206,000 or 9.0% of net sales in the first quarter of 2006.  Selling and marketing expenses include the cost of salaries, advertising and promotion of the Company’s products, and commissions paid to independent sales organizations. In comparison to the first quarter of 2006, commission paid to independent sales organizations decreased by approximately $5,000; payroll-related expenses increased by approximately $15,000. Costs related to our Singapore office increased by approximately $6,000; other sales expenses, including travel related expenses decreased by approximately $9,000 in the first quarter of 2007 versus 2006.

Operating Loss

Operating loss from continuing operations was approximately $327,000 in the first quarter of 2007 compared to an operating loss of approximately $1,181,000 in the first quarter of 2006. The decrease in operating loss of approximately $854,000 was primarily related to lower administrative expenses of approximately $901,000 described above.

Interest Income

We recorded no interest income during the first quarter of 2007 or 2006.

Interest Expense

We recorded no interest expense during the first quarter of 2007, compared to approximately $404,000 during the first quarter of 2006.   Primary factor in the decrease in interest expense related to our conversion of our debt to equity in March 2006, whereby we expensed the remaining unamortized debt discount as interest expense in the amount of approximately $357,000 for the period ended March 31, 2006.  We paid approximately $62,000 in interest expenses related to interest on our promissory notes during the first quarter of 2006. We recorded a reduction of interest expense of approximately $15,000 related to the re-valuation of warrants during the first quarter of 2006.

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Preferred Stock Dividends

We did not record any preferred stock dividends in the first quarter of 2007, primarily due to the waiver of dividend payments by our preferred stockholder.  The Company recorded approximately $72,000 in preferred dividend expense during the first quarter of 2006 related to the issuance of Series B preferred stock to M.A.G. Capital, LLC, and its affiliates, in March 2006.

Liquidity and Capital Resources

Net cash used by operations was approximately $243,000 for the first three months of 2007 compared to approximately $214,000 used by operations for the first three months of 2006.

Accounts Receivable decreased approximately $196,000 due to improved collections. Inventories decreased approximately $61,000 related to normal monitoring of inventory levels. Accounts Payable decreased approximately $81,000 primarily due to the payments to suppliers in the normal course of business.

Net cash provided by investing activities was approximately $7,000 for the first three months of 2007 compared to approximately $19,000 in the first three months of 2006.   Capital expenditures were $0 in the three months of 2007 compared to approximately $7,000 in the first three months of 2006.

Net cash used in financing activities was approximately $18,000 during the first three months of 2007, primarily through payments on our note payable for equipment acquired in the prior year. Net cash provided by financing activities in the first three months of 2006 was approximately $2,251,000 related to borrowings of approximately $545,000 and issuance of preferred stock of approximately $1,778,000.

Currently the Company is committed to growing its core business, as it relates to the continuing operations of its digital product line and other non-PCB components and assemblies. The Company also announced a merger agreement with SunFuels, Inc. and Blue Sun Biodiesel LLC on January 26^th that expects to close during 2007.  However, if the Company is unable to secure adequate financing to grow its core business, or if the merger agreement is not consummated, the Company may be forced to modify its business and strategic plan.

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Based upon the current level of operations and anticipated growth, restructuring of its business focusing on higher margin product lines, placement of follow on equity financing during the past year, we believe that future cash flows from operations will be adequate to meet our anticipated liquidity requirements through this fiscal year.

Inflation

Management believes inflation has not had a material effect on the Company’s operations or on its financial position.  However, expected supplier price increases averaging approximately 4% may have a material effect on the Company’s operations and financial position in the remainder of 2007, if the Company is unable to pass through those increases under its present contracts.

Foreign Currency Transactions

All of the Company’s foreign transactions are negotiated, invoiced and paid in United States dollars.

Risk Factors Affecting Business and Results of Operations

This report, as well as our other reports filed with the SEC, our press releases, and other communications contain forward-looking statements made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. Forward-looking statements include all statements regarding our expected financial position, results of operations, cash flows, dividends, financing plans, strategy, budgets, capital and other expenditures, competitive positions, growth opportunities, benefits from new technology, plans and objectives of management, and markets for stock. These forward-looking statements are based largely on our expectations and, like any other business, are subject to a number of risks and uncertainties, many of which are beyond our control. The risks include those stated in the section entitled "Risk Factors Affecting Business and Results of Operations" at the end of Item 6 of our Annual Report on Form 10-KSB and economic, competitive and other factors affecting our operations, markets, products and services, expansion strategies and other factors discussed elsewhere in this report, our Annual Report on Form 10-KSB and the other documents we have filed with the Securities and Exchange Commission. In light of these risks and uncertainties, there can be no assurance that the forward-looking information contained in this report will in fact prove accurate, and our actual results may differ materially from the forward-looking statements.

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Item 3: Controls and Procedures

 a) Disclosure controls and procedures.  As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and the Company's Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended).

Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective, except as discussed in the next paragraph below, and in timely alerting them to material information relating to the Company required to be included in our periodic filings with the Securities and Exchange Commission. It should be noted that in designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. The Company has designed its disclosure controls and procedures to reach a level of reasonable assurance of achieving desired control objectives and, based on the evaluation described above, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective at reaching that level of reasonable assurance, except as discussed in the next paragraph below.

As previously reported in the Company’s annual report on Form 10-KSB for the year ended December 31, 2006, the Company has a material weakness within its internal control framework relating to the preparation and timeliness of financial reporting, in connection with the adequacy of segregation of duties.  The Company attributes this material weakness to limited personnel resources. Though the Company has implemented levels of supervisory reviews from time to time, and employs a temporary workforce from time to time, there can be no assurance that these measures can definitively prevent transactional errors from occurring or provide the necessary accounting and financial reporting support to the Company’s accounting and finance department.

(b) Changes in internal controls. There was no change in the Company's internal control over financial reporting during the three months ended March 31, 2007 that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.

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Part II - Other Information

Item 1:  Legal Proceedings

None

Item 2:  Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3:  Defaults Upon Senior Securities

None

Item 4:  Submission of Matters to a Vote of Security Holders

None

Item 5:  Other Information

None

Item 6: Exhibits

(a)   Exhibits

31.1 Certification of the CEO pursuant to Section 302 of the Sarbanes-Oxley Act.

31.2 Certification of the CFO pursuant to Section 302 of the Sarbanes-Oxley Act.

32.1 Certification pursuant to 18 U.S.C. Section 135O, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURE

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	M~WAVE, Inc.
Date: May 15, 2007	/s/    Jeff Figlewicz
	Jeff Figlewicz
	Chief Financial Officer

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	Exhibit Index
Exhibit
No.	Description	Location
2.1	Agreement and Plan of Merger, dated January 26, 2007, by and between M-Wave, Inc., Ocean Merger Sub Inc., Sunfuels Inc., and Blue Sun Biodiesel LLC	12
3.1	Certificate of Incorporation of the Company	1
3.2	Bylaws of the Company	1
3.3	Certificate of Designations for Series A Convertible Preferred Stock	4
3.4	Certificate of Designations for Series B Convertible Preferred Stock	10
4.1	Specimen Common Stock Certificate	3
10.1	2003 Stock Incentive Plan	2
10.2	Warrant to Purchase Stock dated March 31, 2004 by and between the Company and Silicon Valley Bank	2
10.3	Employment Agreement dated July 28, 2004 between the Company and Jim Mayer	3
10.4	Employment Agreement dated July 28, 2004 between the Company and Joe Turek	3
10.5	Employment Agreement dated May 1, 2004 between the Company and Robert Duke	3
10.6	Subscription Agreement date June 28, 2004 between the Company and Mercator Advisory Group	3
10.7	Stock Registration Rights Agreement date June 28, 2004 between the Company and Mercator Advisory Group	3
10.8	Non-statutory Stock Option Agreement date July 28, 2004 between the Company and Jim Mayer	3

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10.9	Asset Purchase Agreement, dated February 25, 2005 by and between Jayco Ventures, Inc. and M-Wave DBS, Inc.	5
10.10	Promissory Note dated February 23, 2005 issued by M-Wave, Inc. to Mercator Momentum Fund, L.P.	5
10.11	Promissory Note dated February 23, 2005, issued by M-Wave, Inc. to Monarch Pointe Fund, L.P.	5
10.12	Warrant , dated February 23, 2005 issued by M-Wave, Inc. to Mercator Momentum Fund, L.P.	5
10.13	Warrant to dated February 23, 2005 issued by M-Wave, Inc, to Monarch Pointe Fund, L.P.	5
10.14	Warrant dated February 23, 2005, issued by M-Wave, Inc. to M.A.G. Capital, LLC	5
10.15	Non-statutory Stock Option Agreement dated December 31, 2004 between Company and Gordhan Patel	6
10.16	Amendment to 2003 Stock Incentive Plan	7
10.17	Sale of real property located at 215 Park Street Bensenville, Illinois	8
10.18	Asset sale and transition agreement dated October 21, 2005 between the Company and American Standard Circuits	8
10.19	Agreement with the Mercator Momentum Fund III amending Loan Document Purchase Agreements it acquired from Silicon Valley Bank on November 9, 2005	9
10.20	Subscription Agreement by and among: M-Wave, Inc.; Mercator Momentum Fund, LP;  Mercator Momentum Fund III, LP; Monarch Pointe Fund, Ltd.; and M.A.G. Capital, LLC dated March 1, 2006.	10
10.21	Registration Rights Agreement by and among: M-Wave, Inc.; Mercator Momentum Fund, LP;  Mercator Momentum Fund III, LP; Monarch Pointe Fund, Ltd.; and M.A.G. Capital, LLC dated March 1, 2006.	10

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10.22	Amendment modifying the terms of existing warrants held by Mercator Momentum Fund, LP; Mercator Momentum Fund III, LP; Monarch Pointe Fund, Ltd.; and M.A.G. Capital, LLC, dated March 1, 2006.	10
10.23	Sale of real property located at 544 Pine Street Bensenville, Illinois	13
10.24	Subscription Agreement by and among: M-Wave, Inc.; Mercator Momentum Fund, LP;  Mercator Momentum Fund III, LP; Monarch Pointe Fund, Ltd.; and M.A.G. Capital, LLC dated December 29, 2006.	11
10.25	Registration Rights Agreement by and among: M-Wave, Inc.; Mercator Momentum Fund, LP; Mercator Momentum Fund III, LP; Monarch Pointe Fund, Ltd.; and M.A.G. Capital, LLC dated December 29, 2006.	11
10.26	Exercise Agreement, dated January 26, 2007, between M-Wave, Inc. and MAG Capital, LLC, Mercator Momentum Fund, LP, Mercator Momentum Fund III, LP, and Monarch Pointe Fund, Ltd.	12
10.27	Form of Voting Agreement between SunFuels, Inc. and certain of the shareholders of M-Wave, Inc.	12
31.1	Certification of the CEO Pursuant to Sections 302 of the Sarbanes-Oxley Act	Filed Herewith
31.2	Certification of the CFO Pursuant to Sections 302 of the Sarbanes-Oxley Act	Filed Herewith
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act	Filed Herewith
(1)	Incorporated herein by reference to the applicable exhibit to Registrants Registration Statement on Form S-1 (Registration No. 33-45499)

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(2)	Incorporated herein by reference to the applicable exhibit to the Registrant's Annual Report on Form 10K for the year ended December 31, 2003
(3)	Incorporated herein by reference to the applicable exhibit to the Registrant's Quarterly Report on Form 10-QSB for the quarter ended June 30, 2004
(4)	Incorporated herein by reference to Appendix B to the Registrant's Definitive Proxy Statement filed July 6, 2004
(5)	Incorporated herein by reference to the applicable exhibit to the Registrant's form 8-K filed March 2, 2005
(6)	Incorporated herein by reference to the applicable exhibit to the Registrant's Annual Report on Form 10-KSB for the year ended December 31, 2004
(7)	Incorporated herein by reference to Appendix A  to the Registrant's Proxy Statement filed April 29, 2005
(8)	Incorporated herein by reference to the applicable exhibit to the Registrant's form 8-K filed October 5, 2005
(9)	Incorporated herein by reference to the applicable exhibit to the Registrant's form 8-K filed February 2, 2006
(10)	Incorporated herein by reference to the applicable exhibit to the Registrant's form 8-K filed March 7, 2006
(11)	Incorporated herein by reference to the applicable exhibit to the Registrant's form 8-K filed January 4, 2007
(12)	Incorporated herein by reference to the applicable exhibit to the Registrant's form 8-K filed February 1, 2007
(13)	Incorporated herein by reference to the applicable exhibit to the Registrant's Annual Report on Form 10-KSB for the year ended December 31, 2006

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