10QSB

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 September 30, 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 o

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 o    No x

The registrant has 1,813,150 shares of common stock outstanding at November 14, 2007.

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M-WAVE, INC.

CONTENTS

PART I.  FINANCIAL INFORMATION

Item 1.	Financial Statements:
	Consolidated Balance Sheets as of September 30, 2007 and December 31, 2006 (unaudited)	Page 3
	Consolidated Statements of Operations for the Three Months Ended September 30, 2007 and 2006 (unaudited)	Page 4
	Consolidated Statements of Operations for the Nine Months Ended September 30, 2007 and 2006 (unaudited)	Page 5
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2007 and 2006 (unaudited)	Pages 6
	Notes to Consolidated Financial Statements (unaudited)	Pages 7-14
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results  of Operations	Pages 14-25
Item 3	Controls and Procedures	Page 25
PART II.  OTHER INFORMATION
Item 1	Legal Proceedings	Page 26
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	Page 26
Item 3	Defaults Upon Senior Securities	Page 26
Item 4	Submission of Matters to a Vote of Security Holders	Page 26
Item 5	Other Information	Page 26
Item 6	Exhibits	Page 26
	Signatures	Page 27

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Part I - Financial Information

Item 1 - Financial Statements

M-Wave, Inc.

CONSOLIDATED BALANCE SHEETS

(unaudited)

	September 30,			December 31,
	2007			2006
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	659,082		$	1,696,340
Accounts receivable, net of allowance for doubtful accounts,
2007- $80,000: 2006- $80,000		1,099,014			1,089,021
Inventories, net		1,611,039			1,348,004
Prepaid expenses and other assets		172,160			115,932
Other receivable		200,000			6,836
Total current assets		3,741,295			4,256,133
EQUIPMENT:
Equipment		424,910			434,156
Less accumulated depreciation		(208,247	)		(145,607	)
Equipment, net		216,663			288,549
TOTAL	$	3,957,958		$	4,544,682
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable	$	1,323,897		$	1,449,083
Accrued expenses		701,660			277,746
Note payable		0			58,000
Total current liabilities		2,025,557			1,784,829
COMMITTMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
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, 200,000,000 shares; issued and outstanding 2007: 1,813,150;  2006: 1,763,150 shares		11,236			10,986
Additional paid-in capital		14,427,683			14,199,062
Accumulated deficit		(17,720,945	)		(16,664,622	)
Treasury stock, at cost, 2007 and 2006: 433,954 shares		(2,285,170	)		(2,285,170	)
Total stockholders' equity		1,932,401			2,759,853
TOTAL	$	3,957,958		$	4,544,682

See notes to consolidated financial statements

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M-Wave, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	Three Months Ended September 30
	2007			2006
NET SALES	$	2,942,854		$	2,597,939
COST OF GOODS SOLD		2,223,813			2,006,869
Gross profit		719,041			591,070
OPERATING EXPENSES:
General and administrative		918,535			649,691
Selling and marketing		209,887			188,308
Total operating expenses		1,128,422			837,999
Operating loss from continuing operations		(409,381	)		(246,929	)
Total interest expense		0			(10,165	)
LOSS FROM CONTINUING OPERATIONS		(409,381	)		(257,094	)
Loss from discontinued operations (note 9), net of tax	$	0		$	(276,131	)
Net loss	$	(409,381	)	$	(533,225	)
Preferred stock dividends	$	(266,984	)	$	(83,504	)
Net loss attributable to common shareholders	$	(676,365	)	$	(616,729	)
BASIC AND DILUTED LOSS PER COMMON SHARE
Continuing operations	$	(0.37	)	$	(0.22	)
Discontinued operations		-			(0.18	)
	$	(0.37	)	$	(0.40	)
Weighted average shares outstanding		1,813,150			1,552,960

See notes to consolidated financial statements

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M-Wave, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	Nine Months Ended September 30
	2007			2006
NET SALES	$	7,991,758		$	7,176,776
COST OF GOODS SOLD		5,997,828			5,380,916
Gross profit		1,993,930			1,795,860
OPERATING EXPENSES:
General and administrative		2,149,650			3,262,220
Selling and marketing		633,619			585,229
Total operating expenses		2,783,269			3,847,449
Operating loss from continuing operations		(789,339	)		(2,051,589	)
Total interest expense		0			(419,028	)
Loss from continuing operations	$	(789,339	)	$	(2,470,617	)
Loss from discontinued operations (note 9), net of tax	$	0		$	(406,435	)
Net loss	$	(789,339	)	$	(2,877,052	)
Preferred stock dividends	$	(266,984	)	$	(235,943	)
Net loss attributable to common shareholders	$	(1,056,323	)	$	(3,112,995	)
BASIC AND DILUTED LOSS PER COMMON SHARE
Continuing operations	$	(0.59	)	$	(1.74	)
Discontinued operations		-			(0.26	)
	$	(0.59	)	$	(2.01	)
Weighted average shares outstanding		1,791,099			1,551,429

See notes to consolidated financial statements

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M-Wave, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	Nine Months Ended September 30
	2007			2006
OPERATING ACTIVITIES:
Net loss	$	(789,339	)	$	(2,877,052	)
Adjustments to reconcile net loss to net cash flows used in operating activities:
Loss on disposal of property, plant, and equipment		334			31,405
Depreciation		66,338			58,710
Amortization of discount on long-term debt		0			356,787
Trade debt forgiveness		0			(323,772	)
Provision for inventories		0			120,000
Stock compensation recognized on options and warrants		140,871			755,967
Fair value adjustment to common stock warrants		0			(4,993	)
Changes in assets and liabilities, net of effects of acquired business:
Accounts receivable		(9,993	)		(76,859	)
Inventories		(263,035	)		1,034,821
Prepaid expenses and other assets		(256,229	)		119,958
Accounts payable		(125,186	)		(362,927	)
Accrued expenses		156,931			(40,244	)
Net cash flows used in operating activities		(1,079,308	)		(1,208,199	)
INVESTING ACTIVITIES:
Purchase of equipment		0			(21,448	)
Proceeds from sale of property, plant and equipment		5,214			154,494
Repayments on note receivable		6,836			61,498
Net cash flows provided by investing activities		12,050			194,544
FINANCING ACTIVITIES:
Proceeds from exercise of stock options and warrants		88,000			527,000
Net borrowings on note payable, bank		0			545,000
Payments on short and long term debt		(58,000	)		0
Proceeds from preferred stock issuance		0			1,777,989
Payment of preferred dividends		0			(235,943	)
Net cash flows provided by financing activities		30,000			2,614,046
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(1,037,258	)		1,600,391
CASH AND CASH EQUIVALENTS:
Beginning of period		1,696,340			247,731
End of period	$	659,082		$	1,848,122
SUPPLEMENTAL SCHEDULES OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Reclassification of common stock warrants to stockholders' equity	$	0		$	290,494
Conversion of long-term debt to stockholders' equity		0			4,564,808
Accrued interest added to note payable balance		0			20,601
Accrued dividends preferred stock		266,984			0

See notes to consolidated financial statements

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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 and nine months ended September 30, 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 and nine months ended September 30, 2007 and 2006 consisted of the following:

	Three months ended September 30,				Nine months ended September 30,
	2007		2006		2007		2006
Digital	$	1,707,565	$	2,295,876	$	5,364,600	$	6,074,544
Non PCB		1,166,886		141,787		2,394,280		240,903
Other		68,403		160,276		232,878		861,329
Total sales	$	2,942,854	$	2,597,939	$	7,991,758	$	7,176,776

Sales within the digital product line include ten key customers, which represented approximately 90% of sales in the third quarter of 2007 versus approximately 93% of sales in the third quarter of 2006.  Year to date sales for these key customers within the digital product line represented approximately 92% of sales versus approximately 90% of year to date sales in 2006.  Year to date sales for the Company’s top ten digital customers were down approximately 9% 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 primary customers, which represented approximately 84% of sales of Non PCB products in the third quarter of 2007 versus approximately 100% of sales in the third quarter of 2006.  Year to date sales for these key Non PCB customers represented approximately 88% of sales of non PCB products versus approximately 88% of year to date sales in 2006.  Year to date sales for the Company’s top three Non PCB customers were up approximately 902% compared to prior year to date sales

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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 $38,000 in commissions during the third quarter of 2006.  Prior year to date sales included approximately $195,000 in commissions and approximately $282,000 in sales to former RF customers.

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 (“Mercator”), 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 Mercator Advisory Group, LLC (“M.A.G. Capital “)was approximately $1,620,000.  During the first quarter of 2006, M.A.G. Capital provided additional debt financing of approximately $545,000.  Mercator is affiliated with M.A.G. Capital.

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

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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

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.  Amount outstanding on the note payable at September 30, 2007 was $0.

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. (“the Purchasors”)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 was held in a reserve account to be released by a majority of the independent directors as appropriate to fund expenses of the company.  As of September 30, 2007, there was approximately $445,000 remaining in the account to fund future expenses.

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 months of January through June 2007.  Dividends for the three months ended September 30, 2007 of approximately $267,000 has been accrued but unpaid.

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During the first nine months of 2007 and 2006, Mercator did not convert any shares of their preferred stock into common shares. As of September 30, 2007 there are 12,500 Series A preferred shares outstanding and 69,648 Series B preferred shares outstanding.

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 September 30, 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:

	3 months ended September 30,				9 months ended September 30,
	2007		2006		2007		2006
Weighted average shares outstanding		1,813,150		1,552,960		1,791,099		1,551,429
Options in the money, net		290		43,690		25,433		48,096
Warrants in the money, net		0		96,861		51,041		102,759
Total Outstanding and
Potentially Dilutive shares		1,813,440		1,693,511		1,867,572		1,702,284

 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.

On July 12, 2007, the Board of Directors authorized a six month extension of M.A.G. Capital’s warrants that were set to expire on July 23, 2007.  This action extended the life of approximately 253,000 of approximately 320,000 warrants, all priced at $2.48, to January 23, 2008.  The value of the warrants was determined using the Black-Scholes pricing model which calculated a value of approximately $49,000 based on a fair value price of $0.19, assuming an expected life of 6 months, a risk-free interest rate of 5.13%, volatility of 21.3%, and no dividend yield.  M.A.G. Capital has approximately 50,000 warrants set to expire on February 23, 2008, and approximately 17,000 warrants set to expire on June 16, 2008.  All warrants owned by M.A.G. Capital are fully vested and exercisable as of September 30, 2007.

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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, substantially all shares authorized under the plan have been granted as of September 30, 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.

The Company recognizes share-based compensation expense in general and administrative expenses in the statement of operations.  The Company did not issue any options during the three months ended September 30, 2007 and 2006 respectively.  For the nine months ended September 30, 2007 and 2006 respectively, the Company issued 34,776 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 and nine months ended September 30, 2007 and 2006, respectively.

Information related to the Company’s share-based compensation plan for the three and nine months ended September 30, 2007 and 2006, is as follows:

	Three months ended September 30,				Nine months ended September 30,
	2007		2006		2007		2006
Total share-based compensation expense	$	-	$	121,133	$	92,173	$	452,555
Weighted average grant date fair value	$	-	$	-	$	3.10	$	2.48
Unrecognized compensation cost		0		0		0		112,600
Remaining weighted average period cost will be recognized over		0.00		0.00		0.00		0.70

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Total common stock warrants outstanding at September 30, 2007 were 354,113, and were all exercisable at September 30, 2007.  During the second quarter of 2007, 50,000 warrants priced at $1.76 were exercised.  The Company received cash of approximately $88,000 and recorded an increase to common stock and additional paid in capital.

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 adopted FIN 48 as of January 1, 2007.  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.

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 September 30, 2007 and December 31, 2006 is below:

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	2007		2006
Accounts Receivable	$	0	$	65,000
Total assets	$	0	$	65,000

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.

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

	Three Months Ended September 30,					Nine Months Ended September 30,
	2007		2006			2007		2006
Net sales	$	-	$	68,000		$	-	$	899,000
Cost of goods sold		-		269,000			-		1,359,000
Gross (loss)/profit		-		(201,000	)		-		(460,000	)
Operating income/(expenses)		-		(75,000	)		-		49,000
Income/(loss) from Discontinued operations	$	-	$	(276,000	)	$	-	$	(411,000	)

The loss from discontinued operations resulted in an increase to the basic and diluted loss per common share of approximately $0.00 and $0.18 for the three months ended September 30, 2007 and 2006 respectively.   The loss from discontinued operations resulted in an increase to the basic and diluted loss per common share of approximately $0.00 and $0.26 for the nine months ended September 30, 2007 and 2006 respectively.

10.  New Accounting Pronouncements

In September 2006, the FASB issued SFAS 157, Fair Value Measurements.  SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements.  The requirements of SFAS 157 are effective for the Company's fiscal year ending December 31, 2008.  The Company does not believe the adoption of SFAS 157 will have a material effect on its financial statements.

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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.

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.

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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 Events

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

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 in 2007 located in Las Cruces, New Mexico.

The transaction is expected to close in the fourth quarter of 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 remain 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 8.0% of the outstanding shares, warrants, and options of the Company, as so calculated on a fully-diluted basis.

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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 their Common Stock 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.

On July 24, 2007, the Company filed Form S-4 with the Securities and Exchange Commission (“SEC”).  This filing included Amendment 1 to the Merger Agreement between the Company and Blue Sun, dated June 27, 2007,  which extended the date to complete the merger from June 30, 2007 to December 31, 2007.

On September 21, 2007, the Company filed Amendment 1 to Form S-4 that responded to SEC comments in connection with Form S-4.  In connection with this filing, the Company filed Amendment 2 to the Merger Agreement between the Company and Blue Sun, dated September 20, 2007, in which the exchange ratio of conversion shares was fixed.  In addition, the amendment also provided that a portion of the Company’s costs associated with the merger will be reimbursed by Blue Sun at closing, up to $200,000.  As of September 30, 2007, the Company has recorded merger costs of approximately $609,000, of which approximately $409,000 has been expensed during the nine months ended September 30, 2007.

On October 29, 2007, the Company filed Amendment 2 to Form S-4 that responded to additional comments from the SEC.  In connection with this filing, the Company filed Amendment 3 to the Merger Agreement between the Company and Blue Sun, dated October 26, 2007, which allows the transaction to be classified as described under Section 351 of the Internal Revenue Code of 1986.  As of November 14, 2007, the Company’s Form S-4 had not yet been deemed effective by the SEC.

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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 book value on that date.

On July 20, 2007, the Company entered into an Asset Purchase Agreement for the sale of the Company’s current business operations, by and among the Company, M-Wave International, LLC, an Illinois limited liability company (the “Purchaser”), Joseph Turek, and Robert Duke.  The Purchaser is a company formed by Joseph Turek, the Company’s Chairman and Chief Operating Officer and Robert Duke, the President of the Company’s Electro-Mechanical Group division.

In accordance with the terms of the Asset Purchase Agreement, the Purchaser will acquire substantially all of the assets and will assume substantially all of the liabilities of the Company related to its current business operations.  As consideration for the acquisition, the Purchaser will deliver to the Company 300,000 shares of the Company’s common stock that are currently owned by Mr. Turek.  In addition, if the net working capital of the sold business exceeds $770,000 at the closing of the acquisition, the Purchaser will be required to deliver to the Company additional shares of the Company’s common stock, which shares will be valued at $3.00 per share for such purpose.

RESULTS FOR THE THREE MONTHS ENDED September 30, 2007 COMPARED TO THE THREE MONTHS ENDED September 30, 2006

Net Sales

Net sales were approximately $2,943,000 for the three months ended September 30, 2007 versus approximately $2,598,000 during the three months ended September 30, 2006, an increase of approximately $345,000 or 13.3%.  Sales within our digital product line decreased approximately $588,000 during the third quarter of 2007, a decrease of approximately 26% of prior year third quarter sales.  Sales to our top ten digital customers were approximately $1,535,000 during the three months ended September 30, 2007, a decrease of approximately $599,000 compared to the three months ended September 30, 2006.  Primary factors in the decrease were the loss of one customer and general softness in orders among two other customers.  Sales amongst our top ten digital customers represented approximately 90% of sales within this product line for the three months ended September 30, 2007 compared to approximately 93% of sales within this product line for the three months ended September 30, 2006.

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Sales within our non-PCB product line were approximately $1,167,000 for the three months ended September 30, 2007, approximately $1,015,000 above sales for the three months ended September 30, 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 third 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.

Other revenues for the three months ended September 30, 2007 were approximately $68,000, approximately $92,000 below other revenues recorded in the three months ended September 30, 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.   Commissions for the three months ended September 30, 2007 were approximately $7,000, a decrease of approximately $31,000 versus commissions recorded in the three months ended September 30, 2006.  Tooling revenues were approximately $82,000 for the three months ended September 30, 2007, a decrease of approximately $40,000 versus tooling revenues recorded in the three months ended September 30, 2006.

Gross Profit and Cost of Goods Sold

The Company’s gross profit for the three months ended September 30, 2007 was approximately $719,000, or 24.4% of net sales, compared to a gross profit of approximately $591,000, or 22.8% of net sales, for the three months ended September 30, 2006.  Increased sales levels was the primary driver of increased margin dollars, while lower sales commissions recorded in prior year results attributed to the slight decrease in margin percentage.  Margins within our digital product line increased by approximately 0.4% over the prior year as we continue to focus sales efforts on our higher margin customers.

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Operating Expenses

General and administrative expenses were approximately $918,000 or 31.2% of net sales in the third quarter of 2007 compared to approximately $650,000 or 25.0% of net sales in the third quarter of 2006, an increase of approximately $268,000.

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 third quarter of 2006, payroll related expenses decreased approximately $6,000.   Professional services, which include legal, auditing, and consulting fees, decreased approximately $27,000 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 $425,000 in the third quarter of 2007 compared to approximately $92,000 during the third quarter of 2006, an increase of approximately $333,000.  Approximately $409,000 of expenses recorded during the third quarter of 2007 related to merger costs associated with the Blue Sun transaction.  We recorded stock compensation expenses during the third quarter of 2007 of approximately $49,000 compared to approximately $66,000 for the third quarter of 2006.  Stock compensation expense for the third quarter of 2007 related to extending the life of warrants held by M.A.G. Capital, LLC while prior year expenses related to the vested portion of prior options granted. Other operating expenses decreased approximately $15,000 during the third quarter of 2007 compared to the third quarter of 2006.  These expenses include travel, telephone, insurance, depreciation, and rent.

Selling and marketing expenses were approximately $210,000 or 7.1% of net sales in the third quarter of 2007 compared to approximately $188,000 or 7.2% of net sales in the third 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 third quarter of 2006, commission paid to independent sales organizations increased by approximately $1,000 due to higher sales levels; payroll-related expenses increased by approximately $10,000. Costs related to our Singapore office increased by approximately $9,000; other sales expenses, including travel related expenses increased by approximately $2,000 in the third quarter of 2007 compared to the third quarter of 2006.

Operating Loss

Operating loss from continuing operations was approximately $409,000 in the third quarter of 2007 compared to an operating loss of approximately $249,000 in the third quarter of 2006. The increase in operating loss of approximately $160,000 was primarily related to merger related expenses of approximately $409,000 described above offset by increased gross profit dollars attributable to higher sales levels.

Interest Income

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

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Interest Expense

We recorded no interest expense during the third quarter of 2007 compared to approximately $10,000 recorded during the third quarter of 2006.

Preferred Stock Dividends

We recorded preferred stock dividends in the third quarter of 2007 of approximately $267,000.  The Company recorded approximately $84,000 in preferred stock dividends during the third quarter of 2006.  In the prior year,  we received a waiver of dividends for two months during the third quarter of 2006, only recording one month of preferred stock dividends.  Dividends relate to the issuance of Series B preferred stock to M.A.G. Capital, LLC, and its affiliates, in March 2006.

RESULTS FOR THE NINE MONTHS ENDED September 30, 2007 COMPARED TO THE NINE MONTHS ENDED September 30, 2006

Net Sales

Net sales were approximately $7,992,000 for the nine months ended September 30, 2007 versus approximately $7,177,000 during the nine months ended September 30, 2006, an increase of approximately $815,000 or 11.4%.  Sales within our digital product line decreased approximately $710,000 during the first nine months of 2007, a decrease of approximately 11.7%.  Sales to our top ten digital customers were approximately $4,962,000 during the nine months ended September 30, 2007, a decrease of approximately $490,000 compared to the nine months ended September 30, 2006.  Sales amongst our top ten digital customers represented approximately 93% of sales within this product line for the nine months ended September 30, 2007 compared to approximately 90% of sales within this product line for the nine months ended September 30, 2006.   Primary factor in sales decrease within our digital line was loss of one customer which represented approximately $461,000 of prior year sales.

Sales within our non-PCB product line were approximately $2,394,000 for the nine months ended September 30, 2007, approximately $2,153,000 above sales for the nine months ended September 30, 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 nine months of 2007 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.

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Other revenues for the nine months ended September 30, 2007 were approximately $233,000, approximately $628,000 below other revenues recorded in the nine months ended September 30, 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.    Primary drivers in the decrease were prior year sales of our remaining RF product of approximately $282,000.  Commissions for the nine months ended September 30, 2007 were approximately $39,000, a decrease of approximately $156,000 versus commissions recorded in the nine months ended September 30, 2006.  Tooling revenues were approximately $248,000 for the nine months ended September 30, 2007, a decrease of approximately $111,000 versus tooling revenues recorded in the nine months ended September 30, 2006.

Gross Profit and Cost of Goods Sold

The Company’s gross profit for the nine months ended September 30, 2007 was approximately $1,994,000, or 24.9% of net sales, compared to a gross profit of approximately $1,796,000, or 25.0% of net sales, for the nine months ended September 30, 2006.  Increased sales levels was the primary driver of increased margin dollars, while lower sales commissions recorded in prior year results attributed to the slight decrease in margin percentage.  Margins within our digital product line increased by approximately 0.2% over the prior year as we continue to focus sales efforts on our higher margin customers.

Operating Expenses

General and administrative expenses were approximately $2,150,000 or 26.9% of net sales in the first nine months of 2007 compared to approximately $3,262,000 or 45.5% of net sales in the first nine months of 2006, a decrease of approximately $1,112,000.

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 nine months of 2006, payroll related expenses decreased approximately $62,000.   Professional services, which include legal, auditing, and consulting fees, decreased approximately $10,000 in the first nine months of 2007 compared to prior year expenses.  Public company related costs such as merger costs, investor relations, Sarbanes-Oxley expenses, and board and committee fees were approximately $603,000 in the first nine months of 2007 compared to approximately $928,000 during the first nine months of 2006, a decrease of approximately $325,000.  Approximately $409,000 of current year public costs is related to the Blue Sun transaction.  We recorded stock compensation expenses of approximately $141,000 during the first nine months of 2007 compared to approximately $756,000 for the first nine months of 2006.  Stock compensation expense is primarily related to Board of Director and employee stock option grants issued during the first quarter of 2007 and 2006, respectively, though approximately $49,000 of current year expense relates to extending approximately 253,000 warrants issued to M.A.G. Capital, LLC and its affiliates by six months, extending the life of these warrants until January 28, 2008.  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 $99,000 during the first nine months of 2007 compared to the first nine months of 2006.  These expenses include travel, telephone, insurance, depreciation, and rent.

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Selling and marketing expenses were approximately $633,000 or 7.9% of net sales in the first nine months of 2007 compared to approximately $585,000 or 8.2% of net sales in the first nine months of 2006, an increase of approximately $48,000.  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 nine months of 2006, commission paid to independent sales organizations increased by approximately $1,000 due to higher sales levels; payroll-related expenses increased by approximately $36,000. Costs related to our Singapore office increased by approximately $21,000; other sales expenses, including travel related expenses decreased by approximately $10,000 in the first nine months of 2007 compared to the first nine months of 2006.

Operating Loss

Operating loss from continuing operations was approximately $789,000 in the first nine months of 2007 compared to an operating loss of approximately $2,052,000 in the first nine months of 2006. The decrease in operating loss of approximately $1,263,000 was primarily related to lower administrative expenses of approximately $1,112,000 described above combined with increased gross profit attributable to higher sales levels.

Interest Income

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

Interest Expense

We recorded no interest expense during the first nine months of 2007, compared to approximately $419,000 during the first nine months 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 $67,000 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 $5,000 related to the re-valuation of warrants during the first quarter of 2006.

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Preferred Stock Dividends

We recorded preferred stock dividends of approximately $267,000 in the first nine months of 2007 compared to approximately $236,000 during the first nine months of 2006.  During 2007, we received waivers on dividends for the first six months of the year.  During 2006, we recorded dividends for the months of March, April, and August.  Dividends were waived for the months of May, June, July, and September.Preferred stock dividends are 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 $1,079,000 for the first nine months of 2007 compared to approximately $1,208,000 used by operations for the first nine months of 2006.

Accounts Receivable increased approximately $10,000 due to increased sales levels. Inventories increased approximately $263,000 related to higher inventory levels to support increased sales levels. Accounts Payable decreased approximately $125,000 primarily due to the payments to suppliers in the normal course of business.

Net cash provided by investing activities was approximately $12,000 for the first nine months of 2007 compared to approximately $195,000 in the first nine months of 2006. Capital expenditures were $0 in the first nine months of 2007 compared to approximately $21,000 in the first nine months of 2006.

Net cash provided by financing activities was approximately $30,000 during the first nine months of 2007, primarily due to a second quarter warrant exercise, offset by payments on our note payable for equipment acquired in the prior year. Net cash provided by financing activities in the first nine months of 2006 was approximately $2,614,000 related to borrowings of approximately $545,000, warrant exercise of approximately $527,000, 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.

Off-Balance Sheet Arrangements

The Company has not created, nor is a party to, any special-purpose or off-balance sheet entities for the purposes of raising capital, incurring debt, or operating our business.  The Company does not have any off-balance sheet arrangements or relationships with entities that are not consolidated into our financial statements that are reasonably likely to materially affect our liquidity or the availability of capital resources.

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, as well as the following paragraphs below.

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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.

To maintain the listing of our common stock on the NASDAQ Capital Markets, we must maintain compliance with their continuing listing requirements, including a minimum tangible net worth of $2.5 million.  As of September 30, 2007, we are not in compliance with this requirement.  We anticipate closing our merger with Blue Sun before the end of the year, though there can be no assurances that will happen.  Upon completion of the merger, it is anticipated that the new entity will satisfy the initial listing requirements for listing on the Nasdaq Capital Markets.

We may not be able to maintain a minimum tangible net worth of $2.5 million,  or meet one or more of the other continuing listing requirements of the NASDAQ Capital Markets, any of which would make our common stock subject to delisting.  Upon a delisting of our common stock from the NASDAQ Capital Markets, our common stock would trade on the over-the-counter bulletin board, which may have an adverse impact on the market price and liquidity of our common stock.

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.   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.

During the evaluation of the Company's disclosure controls and procedures as of the end of the period covered by this report, the Company's management determined that a material weakness within its internal control framework, which had been identified earlier, was still present.

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The weakness relates to segregation of duties.  Current business conditions have led to limited financial resources, making it difficult to segregate duties within the financial area. To address this weakness, the Company has implemented levels of financial reviews performed by the Chief Financial Officer and/or Chief Executive Officer.  In completing the evaluation of disclosure controls and procedures as of the end of the period covered by this report, the Company's management concluded that the Company's disclosure controls and procedures were effective despite the material weakness because of the implementation of financial controls by management.

 (b) Changes in internal controls. There was no change in the Company's internal control over financial reporting during the three and nine months ended September 30, 2007 that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.

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.

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

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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: November 14, 2007	/s/Jeff Figlewicz
	Jeff Figlewicz
	Chief Financial Officer

	Exhibit Index
Exhibit
No.	Description	Location
2.1	First Amendment to the Agreement and Plan of Merger, dated June 27, 2007, by and between M-Wave, Inc., Ocean Merger Sub Inc., Sunfuels Inc., and Blue Sun Biodiesel LLC	2
2.2	Second Amendment to the Agreement and Plan of Merger, dated September 20, 2007, by and between M-Wave, Inc., Ocean Merger Sub Inc., Sunfuels Inc., and Blue Sun Biodiesel LLC	3
2.3	Third Amendment to the Agreement and Plan of Merger, dated October 26, 2007, by and between M-Wave, Inc., Ocean Merger Sub Inc., Sunfuels Inc., and Blue Sun Biodiesel LLC	4
10.1	Asset Purchase Agreement, dated July 20, 2007, by and among M-Wave, Inc., M-Wave International, LLC, Joseph Turek, and Robert Duke	1
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
32.2	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 the Registrant's form 8-K filed July 20, 2007
(2)	Incorporated herein by reference to the applicable exhibit to the Registrant's form S-4 filed July 24, 2007
(3)	Incorporated herein by reference to the applicable exhibit to the Registrant's form S-4/A filed September 21, 2007
(4)	Incorporated herein by reference to the applicable exhibit to the Registrant's form S-4/A filed October 29, 2007

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EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Jim Mayer, Interim Chief Executive Officer of M~Wave, Inc., certify that:

1. I have reviewed this quarterly report on Form 10-QSB of M~Wave, Inc.;

2. Based on my knowledge, this 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 report;

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

4. The small business issuer's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and

5. The small business issuer's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent function):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting.

Date:  November 14, 2007

/s/ Jim Mayer

Jim Mayer

Interim Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Jeff Figlewicz, Chief Financial Officer of M~Wave, Inc., certify that:

1. I have reviewed this quarterly report on Form 10-QSB of M~Wave, Inc.;

2. Based on my knowledge, this 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 report;

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

4. The small business issuer's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and

5. The small business issuer's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent function):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting.

Date:  November 14, 2007

/s/ Jeff Figlewicz

Jeff Figlewicz

Chief Financial Officer

EX-32.1

EXHIBIT 32.1

Certification Pursuant to 18 U.S.C. Section 1350,

As Adopted Pursuant To

Section 906 Of The Sarbanes-Oxley Act Of 2002

In connection with the accompanying Quarterly Report on Form 10-QSB of M~Wave, Inc. for the three months ended September 30, 2007, I, Jim Mayer, Interim Chief Executive Officer of M~Wave, Inc. do hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) such Quarterly Report on Form 10-QSB for the three months ended September 30, 2007, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in such Quarterly Report on Form 10-QSB for the three months ended September 30, 2007, fairly presents, in all material respects, the financial condition and results of operations of M~Wave, Inc.

Dated:  November 14, 2007	/s/ Jim Mayer
	Jim Mayer
	Interim Chief Executive Officer

EX-32.2

EXHIBIT 32.2

Certification Pursuant to 18 U.S.C. Section 1350,

As Adopted Pursuant To

Section 906 Of The Sarbanes-Oxley Act Of 2002

In connection with the accompanying Quarterly Report on Form 10-QSB of M~Wave, Inc. for the three months ended September 30, 2007, I, Jeff Figlewicz, Chief Financial Officer of M~Wave, Inc. do hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) such Quarterly Report on Form 10-QSB for the three months ended September 30, 2007, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in such Quarterly Report on Form 10-QSB for the three months ended September 30, 2007, fairly presents, in all material respects, the financial condition and results of operations of M~Wave, Inc.

Dated:  November 14, 2007	/s/ Jeff Figlewicz
	Jeff Figlewicz
	Chief Financial Officer