<PAGE>   1


                      SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, DC 20549



                                  FORM 10-Q



                  QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934




For the quarter ended June 30, 1997                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                               (I.R.S.  Employer
incorporation or organization)                               identification No.)


216 Evergreen Street, Bensenville, Illinois                         60106
--------------------------------------------------------------------------------
(Address of principal executive offices)                          (Zip Code)



Registrant's telephone number including area code:               (630) 860-9542
                                                                 --------------


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 ___



The registrant has 3,049,806 shares of common stock outstanding at August 6,
1997.




                                      1
<PAGE>   2


                        PART I - FINANCIAL INFORMATION
                         ITEM 1: FINANCIAL STATEMENTS

                                 M~WAVE, INC.

                         CONSOLIDATED BALANCE SHEETS
                                 (Unaudited)
<TABLE>
<CAPTION>
                                                                               DECEMBER 31,           JUNE 30,
                                                                                   1996                1997
                                                                               -----------          -----------
<S>                                                                            <C>                  <C>
                    ASSETS
CURRENT ASSETS:
  Cash and cash equivalents..............................................      $ 1,216,859          $ 2,342,450
  Accounts receivable....................................................        1,725,340            2,460,560
  Inventories............................................................        1,349,645            1,265,868           
  Refundable income taxes................................................        2,426,081              923,290           
  Deferred income taxes..................................................          804,088              585,395           
  Prepaid expenses and other.............................................          191,729              103,876           
                                                                               -----------          -----------
    Total current assets.................................................        7,713,742            7,681,439           
PROPERTY, PLANT AND EQUIPMENT:                                                                                            
  Land, buildings and improvements.......................................        6,224,247            6,237,204           
  Machinery and equipment................................................        9,885,170           10,110,853
                                                                               -----------          -----------
    Total property, plant and equipment..................................       16,109,417           16,348,057           
  Less accumulated depreciation..........................................       (3,646,209)          (4,370,435)
                                                                               -----------          -----------
    Property, plant and equipment-net....................................       12,463,208           11,977,622           
NOTE RECEIVABLE, net of valuation                                                                                         
  allowance of $250,000..................................................          871,718              871,718           
GOODWILL.................................................................          771,853              720,961           
OTHER ASSETS.............................................................           15,030               13,889 
                                                                               -----------          -----------
TOTAL....................................................................      $21,835,551          $21,265,629           
                                                                               ===========          ===========                
                                                                                                                          
  LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                    
CURRENT LIABILITIES:                                                                                                      
  Accounts payable.......................................................      $ 1,549,997          $ 1,549,247           
  Accrued expenses.......................................................        1,254,436            1,126,488           
  Current portion of long-term debt......................................          307,606              307,606           
                                                                               -----------          -----------
    Total current liabilities............................................        3,112,039            2,983,341           
                                                                                                                          
DEFERRED INCOME TAXES....................................................        1,106,786            1,106,786           
LONG-TERM DEBT...........................................................        2,604,464            2,423,843           
STOCKHOLDERS' EQUITY:                                                                                                     
  Preferred stock, $.01 par value; authorized, 1,000,000                                                                  
    shares; no shares issued.............................................                                                 
  Common stock, $.01 par value; authorized, 10,000,000 shares                                                             
    3,069,806 shares issued and 3,049,806 shares outstanding                                                              
    at June 30, 1997.....................................................           30,416               30,698           
  Additional paid-in capital.............................................        7,492,472            7,574,688           
  Retained earnings .....................................................        7,609,374            7,266,273           
  Treasury stock:  20,000 shares, at cost................................         (120,000)            (120,000)
                                                                               -----------          -----------
    Total stockholders' equity ..........................................       15,012,262           14,751,659           
                                                                               -----------          -----------
TOTAL....................................................................      $21,835,551          $21,265,629           
                                                                               ===========          ===========
</TABLE>

               See notes to consolidated financial statements.


                                      2
<PAGE>   3





                                 M~WAVE, Inc.
                    CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (Unaudited)

<TABLE>
<CAPTION>
                                                                   Three months ended June 30,
                                                                 ------------------------------
                                                                    1996                1997
                                                                 ----------          ----------
<S>                                                              <C>                 <C>
Net sales..........................................              $6,340,968          $4,524,052
Cost of goods sold.................................               5,556,279           3,433,884
                                                                 ----------          ----------
 Gross profit .....................................                 784,689           1,090,168

Operating expenses:                                                  
 General and administrative........................                 673,628             648,269
 Selling and marketing.............................                 439,782             293,365
 Research and development..........................                 141,116                   0
                                                                 ----------          ----------
  Total operating expenses.........................               1,254,526             941,634
                                                                 ----------          ----------
                        
 Operating income (loss) ..........................                (469,837)            148,534

Other income (expense):
 Interest income...................................                  17,957              42,200
 Interest expense..................................                 (55,130)            (63,815)                
 Loss on disposal of assets........................                       0              (8,485)
                                                                 ----------          ----------
  Total other income (expense)                                      (37,173)            (30,100)
                                                                 ----------          ----------
                                                                                                   
 Income (loss) before income  taxes................                (507,010)            118,434

Provision (credit) for income taxes................                (172,201)             65,367
                                                                 ----------          ----------
Net  income (loss).................................               ($334,809)            $53,067
                                                                 ==========          ==========
Net income (loss) per share                                          ($0.11)              $0.02

Weighted average shares                                           3,020,526           3,049,806
</TABLE>



               See notes to consolidated financial statements.




                                      3
<PAGE>   4

                                 M~WAVE, Inc.
                    CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (Unaudited)
<TABLE>
<CAPTION>
                                                                         Six months ended June 30,
                                                                      -------------------------------
                                                                          1996                1997
                                                                      -----------          ----------
<S>                                                                   <C>                  <C>
Net sales.................................................            $12,597,526          $8,795,056
Cost of goods sold........................................             13,660,565           7,295,917
                                                                      -----------          ----------
 Gross profit (loss)......................................             (1,063,039)          1,499,139

Operating expenses:
 General and administrative...............................              1,456,090           1,386,271
 Selling and marketing....................................                923,185             593,106
 Research and development.................................                203,194                   0
                                                                      -----------          ----------
  Total operating expenses................................              2,582,469           1,979,377
                                                                      -----------          ----------

 Operating loss...........................................             (3,645,508)           (480,238)

Other income (expense):
 Interest income..........................................                 47,508              65,060
 Interest expense.........................................               (113,134)           (126,893)
 Gain (loss) on disposal of assets........................               (149,751)             34,089
                                                                      -----------          ----------
  Total other income (expense)                                           (215,377)            (27,744)
                                                                      -----------          ----------

 Loss before income taxes.................................             (3,860,885)           (507,982)

Credit for income taxes...................................             (1,399,732)           (164,880)
                                                                      -----------          ----------

Net loss..................................................            ($2,461,153)          ($343,102)
                                                                      ===========          ==========

Net loss per share                                                         ($0.81)             ($0.11)


Weighted average shares                                                 3,020,451           3,038,681
</TABLE>


               See notes to consolidated financial statements.




                                      4
<PAGE>   5


                                 M~WAVE, INC.
                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (Unaudited)


<TABLE>
<CAPTION>                                                                          Six months ended June 30,       
                                                                                 ------------------------------    
                                                                                    1996               1997        
                                                                                 ------------       -----------    
<S>                                                                              <C>                <C>            
OPERATING ACTIVITIES:                                                                                              
 Net income (loss)....................................................           ($2,461,153)        ($343,102)
 Adjustments to reconcile net loss to net cash flows
  from operating activities:
   Gain on disposal of property, plant and equipment..................                     0           (34,089)
   Depreciation and amortization......................................               752,998           799,996
   Deferred income taxes..............................................              (450,108)          218,693
  Changes in assets and liabilities:
   Accounts receivable-trade..........................................                89,544          (735,220)
   Inventories........................................................               559,386            83,777
   Income taxes.......................................................              (531,416)        1,502,791
   Prepaid expenses and other assets..................................               142,378            88,995
   Accounts payable...................................................               659,996              (750)
   Accrued expenses...................................................               374,865          (127,948)
                                                                                 ------------       -----------
    Net cash flows from operating activities..........................              (863,510)        1,453,143
                                                                                 ------------       -----------
INVESTING ACTIVITIES:
 Purchase of property, plant and equipment............................            (4,349,802)         (281,529)
 Proceeds from sale of property, plant and equipment..................                                  52,100
 Redemption of marketable securities..................................               248,567                 0
                                                                                 ------------       -----------
    Net cash flows from investing activities..........................            (4,101,235)         (229,429)

FINANCING ACTIVITIES:
 Common stock issued upon exercise of stock options...................                 4,062            32,500
 Common stock issued for cash.........................................                     0            49,998
 Line of credit borrowings............................................               500,000
 Payments on long term debt...........................................                (8,361)         (180,621)
 Mortgage debt incurred...............................................             2,439,323                 0
                                                                                 ------------       -----------
   Net cash flows from financing activities...........................             2,935,024           (98,123)
                                                                                 ------------       -----------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS..................            (2,029,721)        1,125,591

CASH AND CASH EQUIVALENTS - Beginning of period.......................             2,403,747         1,216,859
                                                                                 ------------       -----------
CASH AND CASH EQUIVALENTS - End of period.............................              $374,026        $2,342,450
                                                                                 ============       ===========


SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

 Cash paid during the period for interest.............................              $113,134          $126,893
</TABLE>

                See notes to consolidated financial statements.




                                       5
<PAGE>   6


                                 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 for
  interim financial information and with the instructions to Form 10-Q.
  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 have been included.  For further information, refer to the
  consolidated financial statements contained in the Annual Report on Form 10-K
  for the year ended December 31, 1996 filed March 31, 1997.

2.   Business

     M~Wave, through its wholly-owned subsidiaries, Poly Circuits Inc. and P C  
  Dynamics Corporation (collectively, the "Company"), manufactures Teflon-based
  printed circuit boards used by makers of wireless and microwave related
  communication equipment.

3.   Reclassifications

     Certain reclassifications of 1996 amounts have been made to conform to the
  presentation in the current year.

4.   Inventories

     Substantially all the Company's inventories are in work in process.

5.   Debt

     The Company has a mortgage loan of $2,727,000 for the facility at P C      
  Dynamics Corporation in Frisco, Texas.  Interest on this mortgage loan is at
  1/2 % over the prime rate.  The loan is payable in monthly installments of
  principal and interest and is due in October 2001.

     The Company has a $2,000,000 line of credit available based on 80% of the
  eligible accounts receivable to fund the working capital needs of the 
  Company. The agreement expires May 31, 1998 and is renewable annually at the
  mutual consent of the Company and the lender.  No balance was outstanding
  under the line at June 30, 1997.




                                      6
<PAGE>   7


6.   LITIGATION

     The Company is a party to various actions and proceedings related to its   
  normal business operations.  The Company believes that the outcome of this
  litigation will not have a material adverse effect on the financial position
  or results of operations of the Company.

     The Company and Joseph Turek have been named as defendants in Lionheart    
  Partners, Inc., as general partner of Lionheart USA Micro Cap Value, L.P. v.
  M~Wave, Inc. and Joseph Turek, which was filed on or about November 17, 1995
  in the United States District Court for the Northern District of Illinois. 
  The case was filed as a purported class action on behalf of all persons who
  purchased common stock of the Company between August 8, 1995 and October 18,
  1995.  The complaint alleges that the defendants made materially false and
  misleading statements and failed to correct public representations which had
  become materially false and misleading regarding the Company's revenues and
  earnings.  The complaint asserts claims under Sections 10(b) and 20 of the
  Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder and
  seeks compensatory damages in an unspecified amount.

     On April 25, 1997, the plaintiffs and the defendants entered into a        
  settlement agreement which resolves all of the claims arising out of this
  action, except as to claims of class members who opt out of the settlement.
  This settlement received court approval on July 8, 1997. The settlement
  provides for a $150,000 payment to the plaintiff class plus administrative
  fees not to exceed $20,000.  The Company's contribution to the settlement
  would be approximately $85,000.






                                      7
<PAGE>   8

Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                     CONDITION AND RESULTS OF OPERATIONS

RESULTS FOR THE QUARTER ENDED JUNE 30, 1997 COMPARED TO THE QUARTER ENDED JUNE
30, 1996

Net Sales

     Net sales were $4,524,000 for the second quarter ended June 30, 1997, a
decrease of $1,817,000 or 29% below the second quarter of 1996. The decline was
the result of a combination of factors including a Company decision to exit the
low margin commodity business; shifts by customers to alternate materials and
suppliers; and lower volumes associated with certain customers products
entering later stages in their life cycles. Net sales to the Company's largest
customer increased $564,000 or 104% to $1,105,000; net sales to the Company's
next largest customer decreased ($1,291,000) or (61%) to $830,000 and net sales
to the Company's third largest customer decreased ($350,000) or (42%) to
$488,000.

     The Company's three largest customers accounted for 54% of the Company's
net sales for the second quarter ended June 30, 1997 compared to 55% in the
second quarter of 1996.

Gross Profit and Cost of Goods Sold

     Gross profit increased to $1,090,000 in the second quarter of 1997 from
$785,000 in the second quarter of 1996. The increase in gross profit was the
result of significant improvements in productivity and cost reductions.  The
Bensenville facility made changes that allowed it to meet customer delivery
requirements on a one-shift operation versus two shifts, thus reducing
manufacturing costs. The Texas facility has not to date achieved the same
magnitude of manufacturing improvements and is hindered by the type of business
(small lot sizes) it produces. The second quarter of 1997 included $140,000
favorable adjustments primarily relating to recapturing inventories that were
previously written off in 1996.  The Company also recorded approximately
$100,000 of non-recurring expenses primarily relating to severance costs.  The
second quarter of 1996 included $355,000 of non-recurring expenses relating to
inventory write-downs, sales returns and severance payments. The Company has
made operational changes designed to enhance its quality control and ability to
manufacture highly complex products; however, there can be no assurance as to
when, or if, these changes will result in improved manufacturing processes.
Future production problems would adversely impact the Company's gross margins
and profitability, which would also result in decreased liquidity and adversely
affect the Company's financial position.

Operating Expenses

     General and administrative expenses were $648,000 or 14.3% of net sales in
the second quarter of 1997 compared to $674,000 or






                                      8
<PAGE>   9

10.6% of net sales in the second quarter of 1996. The net decrease was due to   
a reduction in professional fees partially offset by an increase in payroll
expenses associated with the hiring of a new president and relocation expenses.
General and administrative expenses consist primarily of salaries and benefits,
professional services, depreciation of office equipment, computer systems and
occupancy expenses.

     Selling and marketing expenses were $293,000 or 6.5% of net sales in the
second quarter of 1997 compared to $440,000 or 6.9% of net sales in the second
quarter of 1996. The dollar spending reductions were due to lower commissions
earned and lower payroll and other expenses due to the sale of the Assembly
Division and the Asian based distribution entity (Vortex) at the end of 1996.
Selling and marketing expenses include the cost of salaries, advertising and
promoting the Company's products, and commissions paid to independent sales
organizations.

     Research and development expenses related to the assembly division were
$141,000 or 2.2% of net sales in the second quarter of 1996. The Company sold
the Assembly Division in December 1996.

Operating Income (Loss)

     Operating income was $149,000 or 3.3% in the second quarter of 1997
compared to operating loss of ($470,000) or (7.4%) of net sales in the second
quarter of 1996, an increase of $619,000. The swing of $619,000 of operating
income from the second quarter of 1996 to the second quarter of 1997 was due to
many factors; however, the major factor was strong productivity gains and
aggressive cost reductions leading to increased operating margins. The change
in operating income can be summarized as follows:


Decrease in net sales                     $(224,000)
Increase in gross margin                    530,000
Decrease in operating expenses              313,000
                                          ---------
Increase in operating income              $ 619,000


Interest Income

     Interest income in the second quarter of 1997 includes $22,000 from the
notes receivable, obtained in the sale of the Assembly Division in 1996. Other
interest income is on short-term investments.

Interest Expense

     Interest expense, primarily related to the Company's mortgage obligation
on its P C Dynamics facility, was $64,000 in the second quarter of 1997
compared to $55,000 in the second quarter of 1996.





                                      9
<PAGE>   10

Loss on disposal of fixed assets

     The Company recorded a loss of $8,000 on the disposal of fixed assets in
the second quarter of 1997.

Income Taxes

     In the second quarter of 1997 the Company had an effective tax rate of
55.2% due to the effects of state income taxes. In the second quarter of 1996,
the Company had an effective tax credit rate of 34.0%.

















                                      10
<PAGE>   11

RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO THE SIX MONTHS ENDED
JUNE 30, 1996

Net Sales

     Net sales were $8,795,000 for the six months ended June 30, 1997, a
decrease of $3,802,000 or 30% below the first six months of 1996. The decrease
in sales was due to several factors including a Company decision to exit the
low margin commodity business; shifts by customers to alternate materials and
suppliers; and the tapering off of specific customer program business as it
enters the later stages in its life cycle.  There has also been some lessening
of the rate of growth for microwave/wireless communications infrastructure
equipment.  Net sales to the Company's largest customer increased $778,000 or
66% to $1,966,000; net sales to the Company's next largest customer decreased
($2,355,000) or (57%) to $1,775,000 and net sales to the Company's third
largest customer decreased ($875,000) or (49%) to $894,000.

     The Company's three largest customers accounted for 52% of the Company's
net sales for the six months ended June 30, 1997 compared to 56% for the six
months ended June 30, 1996.

Gross Profit (Loss) and Cost of Goods Sold

     Gross profit increased to $1,499,000 in the first six months of 1997 from
($1,063,000) in the first six months of 1996. The improvement is due to many
factors.  In 1996, the Company incurred sales adjustments for pricing and
returns of ($949,000) and inventory writedowns of ($1,295,000) and ($792,000)
relating to manufacturing scrap and rework and inventory obsolescence,
respectively. A total of $301,000 of the inventory writedowns related to the
Assembly Division that was sold in December 1996. These charges did not reoccur
in 1997. Also, the Bensenville facility made good progress in improving
productivity and reducing costs during the first six months of 1997. This
includes moving to a one shift operation from two while improving on time
delivery. The Texas facility has not to date achieved the same magnitude of
manufacturing improvements and is hindered by the type of business (small lot
sizes) it produces. The Company has made operational changes designed to
enhance its quality control and ability to manufacture highly complex products;
however, there can be no assurance as to when, or if, these changes will result
in improved manufacturing processes.  Future production problems could
adversely impact the Company's gross margins and profitability, which could
also result in decreased liquidity and adversely affect the Company's financial
position.

Operating Expenses

     General and administrative expenses were $1,386,000 or 15.8% of net sales
for the first six months of 1997 compared to $1,456,000 or 11.6% of net sales
for the first six months of 1996. The net decrease was due to a reduction in
professional fees



                                      11
<PAGE>   12

partially offset by an increase in payroll expense associated with the hiring
of a new president and relocation expenses. On April 15, 1996 the Company
engaged a consulting firm to provide consulting services with respect to the
Company's operations. The consultants completed their work with the Company in
February 1997. General and administrative expenses consist primarily of
salaries and benefits, professional services, depreciation of office equipment,
computer systems and occupancy expenses.

     Selling and marketing expenses were $593,000 or 6.7% of net sales for the
first six months of 1997 compared to $923,000 or 7.3% of net sales for the
first six months of 1996. Sales commission expense was 3.1% of net sales for
the first six months of 1997 compared to 3.2% of net sales for the first six
months of 1996. The dollar spending reductions were partly due to lower
commissions earned. The first six months of 1996 included $115,000 of selling
expenses relating to the Assembly Division and the Asian based distribution
entity (Vortex). These divisions were sold in December 1996. Selling and
marketing expenses include the cost of salaries, advertising and promoting the
Company's products, and commissions paid to independent sales organizations.

     Research and development expenses related to the Assembly Division were
$203,000 or 1.6% of net sales in the first six months of 1996. The Company sold
the Assembly Division in December 1996.


OPERATING INCOME (LOSS)

     Operating loss was ($480,000) for the first six months of 1997 compared to
($3,646,000)for the first six months of 1995, an improvement of $3,166,000.
The changes in operating income reflect primarily the changes in net sales,
gross profit and cost of goods sold and operating expenses as discussed above.
The change in operating income can be summarized as follows:

Decrease in net sales           $  321,000
Increase in gross margin         2,242,000
Decrease in operating expenses     603,000
                                ----------
Decrease in operating loss      $3,166,000


INTEREST INCOME

     Interest income for the six months ended June 30, 1997 includes $37,000
from the notes receivable, obtained in the sale of the Assembly Division in
1996. Other interest income is on short-term investments.

INTEREST EXPENSE

     Interest expense, primarily related to the Company's mortgage obligation
on its P C Dynamics facility, was $127,000 for the first


                                      12

<PAGE>   13

six months of 1997 compared to $113,000 for the first six months of 1996.

GAIN (LOSS) ON DISPOSAL OF ASSETS

     The Company recorded a gain of $34,000 on the disposal of fixed assets for
the first six months of 1997 compared to a loss of $150,000 for the first six
months of 1996.

INCOME TAXES

     For the first six months of 1997 the Company had an effective tax credit
rate of 32.5%. For the first six months of 1996, the Company had an effective
tax credit rate of 36.3%. The lower rate in 1997 is due to the effect of state
income taxes.

LIQUIDITY AND CAPITAL RESOURCES

     Net cash provided/(used) from operations was $1,453,000 for the first six
months of 1997 compared to ($864,000) for the first six months of 1996. The
Company collected Income tax refunds of $1,886,000 which offset losses of
($343,000) for the first six months of 1997.

     Capital expenditures were $282,000 in the first six months of 1997,
$105,000 to upgrade the network system at the Bensenville facility. Capital
expenditures were $4,350,000 in the first six months of 1996, $3.3 million for
the new P C Dynamics facility in Texas.

     The Company has a mortgage loan of $2,727,000 for the facility at P C
Dynamics Corporation in Frisco, Texas.  Interest on this mortgage loan is at
1/2 % over the prime rate.  The loan is payable in monthly installments of
principal and interest and is due in October 2001.

     The Company has a $2,000,000 line of credit available based on 80% of the
eligible accounts receivable to fund the working capital needs of the Company.
The agreement expires May 31, 1998 and is renewable annually at the mutual
consent of the Company and the lender.  No balance was outstanding under the
line at June 30, 1997.

     As of June 30, 1997, the company has $2,727,000 of debt and $2,343,000 of
cash and cash equivalents.  Management believes that funds generated from
operations, coupled with the Company's cash and investment balances and its
capacity for debt will be sufficient to fund current business operations. The
Company's ability to fund its activities is directly dependent upon its sales
and its ability to improve its manufacturing processes.




                                      13

<PAGE>   14

INFLATION

     Management believes inflation has not had a material effect on the
Company's operation or on its financial position.

FOREIGN CURRENCY TRANSACTIONS

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

ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS

     As a supplier to microwave manufacturers, the Company is dependent upon
the success of its customers in developing and successfully marketing end-user
microwave systems. The Company is currently working on several development
programs for its customers.  The development of commercial applications for
microwave systems and the timing and size of production schedules for these
programs is uncertain and beyond the control of the Company.  There can be no
assurance that these development programs will have a favorable impact on the
Company's operating results.  Although management believes some of these
products and programs may ultimately develop into successful commercial
applications, such developments could result in periodic fluctuations in the
Company's operating results.  As a result of these considerations, the Company
has historically found it difficult to project operating results.

     The Company expects that a small number of customers will continue to
account for a substantial majority of its sales and that the relative dollar
amount and mix of products sold to any of these customers can change
significantly from year to year.  There can be no assurance that the Company's
major customers will continue to purchase products from the Company at current
levels, or that the mix of products purchased will be in the same ratio. The
loss of one or more of the Company's major customers or a change in the mix of
product sales could have a material adverse effect on the Company.

     In addition, future results may be impacted by a number of other factors,
including the Company's dependence on suppliers and subcontractors for
components; the Company's ability to respond to technical advances; successful
award of contracts under bid; design and production delays; cancellation or
reduction of contract orders; the Company's effective utilization of existing
and new manufacturing resources; and pricing pressures by key customers.

     The Company's future success is highly dependent upon its ability to
manufacture products that incorporate new technology and are priced
competitively.  The market for the Company's products is characterized by rapid
technology advances and industry-wide competition.  This competitive
environment has resulted in downward pressure on gross margins.  In addition,
the

                                      14

<PAGE>   15

Company's business has evolved towards the production of relatively smaller
quantities of more complex products, the Company expects that it will at times
encounter difficulty in maintaining its past yield standards.  There can be no
assurance that the Company will be able to develop technologically advanced
products or that future pricing actions by the Company and its competitors will
not have a material adverse effect on the Company's results of operations.
















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                         PART II - OTHER INFORMATION

ITEM 1:  LEGAL PROCEEDINGS

     The Company and Joseph Turek have been named as defendants in Lionheart
Partners, Inc., as general partner of Lionheart USA Micro Cap Value, L.P. v.
M~Wave, Inc. and Joseph Turek, which was filed on or about November 17, 1995 in
the United States District Court for the Northern District of Illinois.  The
case was filed as a purported class action on behalf of all persons who
purchased common stock of the Company between August 8, 1995 and October 18,
1995.  The complaint alleges that the defendants made materially false and
misleading statements and failed to correct public representations which had
become materially false and misleading regarding the Company's revenues and
earnings.  The complaint asserts claims under Sections 10(b) and 20 of the
Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder and seeks
compensatory damages in an unspecified amount.

     On April 25, 1997, the plaintiffs and the defendants entered into a
settlement agreement which resolves all of the claims arising out of this
action, except as to claims of class members who opt out of the settlement.
This settlement received court approval on July 8, 1997. The settlement
provides for a $150,000 payment to the plaintiff class plus administrative fees
not to exceed $20,000.  The Company's contribution to the settlement would be
approximately $85,000.

ITEM 4:  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

(a)  The Company's Annual Meeting of Stockholders was held on June 4, 1997.

(b)  At the Company's Annual Meeting of Stockholders, the stockholders
     reelected to the Company's Board of Directors Mr. Joseph Turek.  Mr. Turek
     is a class II Director and will serve a three year term ending upon the
     election of Class II Directors at the 2000 annual meeting of stockholders. 
     The aggregate number of votes cast for, against or withheld, for the
     election of Mr. Turek was as follows: 2,689,327 for, 0 against and 116,750
     withheld.

     The Board of Directors of the Company is composed of the Class II
     Director named above, one Class III Director (Lavern D. Kramer) whose term
     expires at the 1998 annual meeting of stockholders, and two Class I
     Directors (Eric C. Larson and Timothy A. Dugan) whose term expires at the
     1999 annual meeting of stockholders.

(c)  At the Company's Annual Meeting of Stockholders, the stockholders
     ratified the appointment of Deloitte & Touche LLP as auditors of the
     Company for the 1997 calendar year. The aggregate number of votes cast
     for, against or withheld,


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<PAGE>   17

     for the ratification of Deloitte & Touche LLP as auditors was 2,793,227, 
     4,325 and 8,525, respectively.

(d)  At the Company's Annual Meeting of Stockholders, the stockholders
     approved an amendment and restatement of the Company's 1992 Stock Option
     Plan (1) to increase the aggregate number of shares of Common Stock of the
     Company available for the exercise of options granted under the Plan from
     500,000 to 750,000 and (2) to increase the limit on the number of shares
     as to which options may be granted to any grantee in any calendar year
     from 75,000 to 215,000. The aggregate number of votes cast for, against or
     withheld for the amendment and restatement of the 1992 Stock Option Plan
     was 2,168,867, 215,195 and 422,015, respectively.

ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits

     27   Financial Data

(b)  The Company did not file a report on Form 8-K during the quarter.
















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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: August 7, 1997                            /s/    PAUL H. SCHMITT
                                                ---------------------------
                                                       Paul H. Schmitt

                                                  Chief Financial Officer












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<PAGE>   19

                                EXHIBIT INDEX
Exhibit
  No                             Description
-------     -------------------------------------------------------


  27        Financial Data




















                                      19