<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, 2001                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 4,572,184 shares of common stock outstanding at August 3,
2001.


                                       1
<PAGE>   2

                         PART I - FINANCIAL INFORMATION
                          ITEM 1: FINANCIAL STATEMENTS

                                  M~WAVE, INC.

                           CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                              DECEMBER 31            JUNE 30
                                                                                 2000                 2001
                                                                              ------------         ------------
<S>                                                                           <C>                  <C>
                                    ASSETS
CURRENT ASSETS:
    Cash and cash equivalents ........................................        $  1,230,999         $    849,606
    Accounts receivable, net of allowance for doubtful accounts,
     2000- $100,000: 2001- $100,000 ..................................          12,378,766           16,106,984
    Inventories ......................................................           8,859,795            2,503,294
    Refundable income taxes ..........................................                   0              613,445
    Deferred income taxes ............................................           1,118,242              803,181
    Prepaid expenses and other .......................................              47,688               72,214
                                                                              ------------         ------------
        Total current assets .........................................          23,635,490           20,948,724
PROPERTY, PLANT AND EQUIPMENT:
    Land, buildings and improvements .................................           6,488,057            7,487,222
    Machinery and equipment ..........................................           8,731,449           11,294,893
                                                                              ------------         ------------
        Total property, plant and equipment ..........................          15,219,506           18,782,115
    Less accumulated depreciation ....................................          (6,914,345)          (7,711,325)
                                                                              ------------         ------------
        Property, plant and equipment-net ............................           8,305,161           11,070,790
NOTE RECEIVABLE ......................................................             195,391              191,558
OTHER ASSETS .........................................................              54,915               53,550
                                                                              ------------         ------------
TOTAL ................................................................        $ 32,190,957         $ 32,264,622
                                                                              ============         ============

                     LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
    Accounts payable .................................................        $  6,516,541         $  5,085,885
    Accrued expenses .................................................           1,603,474            1,681,284
    Accrued income taxes .............................................             146,287                    0
    Current credit line debt .........................................           5,500,000            4,091,976
    Current portion of long-term debt ................................           3,229,580            3,391,187
                                                                              ------------         ------------
        Total current liabilities ....................................          16,995,882           14,250,332

DEFERRED INCOME TAXES ................................................             522,593              522,593
LONG-TERM DEBT .......................................................             166,506              137,123
STOCKHOLDERS' EQUITY:
    Preferred stock, $.01 par value; authorized, 1,000,000
      shares; no shares issued .......................................                   0                    0
    Common stock, $.01 par value; authorized, 10,000,000 shares
      6,179,112 shares issued and 4,572,184 shares outstanding
      at December 31, 2000, 6,179,112 shares issued and 4,572,184
      shares outstanding at June 30, 2001 ............................              30,895               30,895
    Additional paid-in capital .......................................           8,439,072            8,439,072
    Retained earnings ................................................           7,715,283           10,563,881
    Treasury stock:  1,606,928 shares, at cost .......................          (1,679,274)          (1,679,274)
                                                                              ------------         ------------
        Total stockholders' equity....................................          14,505,976           17,354,574
                                                                              ------------         ------------
TOTAL ................................................................        $ 32,190,957         $ 32,264,622
                                                                              ============         ============
</TABLE>

                 See notes to consolidated financial statements.


                                       2
<PAGE>   3

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


<TABLE>
<CAPTION>
                                                    Three months ended June 30,
                                                ---------------------------------
                                                    2000                2001
                                                ------------         ------------
<S>                                             <C>                  <C>
Net sales ..............................        $ 11,973,913         $ 15,448,962
Cost of goods sold .....................           9,541,214           13,103,481
                                                ------------         ------------
  Gross profit .........................           2,432,699            2,345,481

Operating expenses:
  General and administrative ...........             815,471              580,087
  Selling and marketing ................             367,954              457,304
                                                ------------         ------------
    Total operating expenses ...........           1,183,425            1,037,391
                                                ------------         ------------

  Operating income .....................           1,249,274            1,308,090

Other income (expense):
  Interest income ......................              18,051                8,000
  Interest expense .....................             (64,167)             (89,354)
  Rental income ........................              51,000               51,000
                                                ------------         ------------
    Total other income (expense) .......               4,884              (30,354)
                                                ------------         ------------

    Income before income  taxes ........           1,254,158            1,277,736

Provision for income taxes .............             495,791              505,113
                                                ------------         ------------

Net income .............................        $    758,367         $    772,623
                                                ============         ============

Weighted average shares outstanding                4,561,684            4,572,184

Basic earnings per share                        $       0.17         $       0.17

Diluted shares outstanding                         4,561,684            4,600,895

Diluted earnings per share                      $       0.17         $       0.17
</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,
                                                ---------------------------------
                                                    2000                 2001
                                                ------------         ------------
<S>                                             <C>                  <C>
Net sales ..............................        $ 17,346,098         $ 37,975,082
Cost of goods sold .....................          14,139,450           30,692,535
                                                ------------         ------------
  Gross profit .........................           3,206,648            7,282,547

Operating expenses:
  General and administrative ...........           1,150,795            1,465,334
  Selling and marketing ................             549,313              928,333
                                                ------------         ------------
    Total operating expenses ...........           1,700,108            2,393,667
                                                ------------         ------------

  Operating income .....................           1,506,540            4,888,880

Other income (expense):
  Interest income ......................              37,890               27,335
  Interest expense .....................            (115,235)            (307,312)
  Rental income ........................             102,000              102,000
                                                ------------         ------------
    Total other income (expense) .......              24,655             (177,977)
                                                ------------         ------------

    Income before income  taxes ........           1,531,195            4,710,903

Provision for income taxes .............             605,309            1,862,305
                                                ------------         ------------

Net income .............................        $    925,886         $  2,848,598
                                                ============         ============


Weighted average shares outstanding                4,553,836            4,572,184

Basic earnings per share                        $       0.20         $       0.62

Diluted shares outstanding                         4,553,836            4,622,937

Diluted earnings per share                      $       0.20         $       0.62
</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,
                                                                              -------------------------------
                                                                                  2000                2001
                                                                              -----------         -----------
<S>                                                                           <C>                 <C>
OPERATING ACTIVITIES:
  Net income .........................................................        $   925,886         $ 2,848,598
  Adjustments to reconcile net income to net cash flows
    from operating activities:
      Depreciation and amortization ..................................            513,000             796,980
      Deferred income taxes ..........................................                  0             315,061
      Reserve for notes receivable ...................................            430,000                   0
    Changes in assets and liabilities:
      Accounts receivable-trade ......................................         (3,497,196)         (3,728,218)
      Inventories ....................................................         (4,745,514)          6,356,501
      Income taxes ...................................................            605,307            (759,732)
      Prepaid expenses and other assets ..............................            (59,777)            (19,328)
      Accounts payable ...............................................          3,764,093          (1,430,656)
      Accrued expenses ...............................................            344,580              77,810
                                                                              -----------         -----------
         Net cash flows (used in) provided by operating activities ...        $(1,719,621)        $ 4,457,016
                                                                              -----------         -----------

INVESTING ACTIVITIES:
  Purchase of property, plant and equipment ..........................           (271,723)         (3,562,609)
                                                                              -----------         -----------
         Net cash flows used in investing activities .................        $  (271,723)        $(3,562,609)

FINANCING ACTIVITIES:
  Common stock issued upon exercise of stock options .................             47,125                   0
  Credit line debt ...................................................          1,500,000          (1,408,024)
  Net payments on short and  long term debt ..........................           (180,781)                  0
  Net borrowings on short and  long term debt ........................                  0             132,224
                                                                              -----------         -----------
         Net cash flows provided by (used in) financing activities ...        $ 1,366,344         $(1,275,800)
                                                                              -----------         -----------

NET DECREASE IN CASH AND CASH EQUIVALENTS ............................        $  (625,000)        $  (381,393)

CASH AND CASH EQUIVALENTS - Beginning of period ......................        $ 2,586,885         $ 1,230,999
                                                                              -----------         -----------
CASH AND CASH EQUIVALENTS - End of period ............................        $ 1,961,885         $   849,606
                                                                              ===========         ===========


SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

    Cash paid during the period for interest .........................        $   115,235         $   307,312
    Income tax payments ..............................................        $         0         $ 2,307,933
</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, consisting
only of normal recurring adjustments, 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, 2000 filed March 22,
2001.

2.   BUSINESS

     M~Wave, Inc. through its wholly owned subsidiary Poly Circuits, Inc., is a
value-added service provider of high performance printed circuit boards used in
a variety of telecommunications applications for wireless and internet
communications. M~Wave satisfies its customers needs for high performance
printed circuit boards by using its 30,000 square foot manufacturing facility
located in Bensenville, Illinois and by outsourcing and coordinating the
manufacture of such boards by unaffiliated manufacturers located primarily in
the Far East ("Virtual Manufacturing").

     The Company began Virtual Manufacturing during 2000 by developing
subcontracting relationships with Global manufacturers. The Company typically
begins the Virtual Manufacturing process by manufacturing prototypes and
pre-production printed circuits at its manufacturing facility. The Company often
works closely with customer personnel during this stage to finalize fabrication
details and guidelines for circuit boards. As customers' requirements for
circuit boards develop into higher volumes, the Company subcontracts the
manufacture of the circuit boards to Global manufacturers. The Company continues
to monitor the production and quality control of the circuit boards and works
with its customers and Global manufacturers throughout the Virtual Manufacturing
process. The Company believes that Virtual Manufacturing allows the Company to
satisfy a broader range of its customers' printed circuit board requirements
without incurring substantial capital expenditures for plant, property and
equipment.

     The Company is adding new levels of capacity and organizing its core
manufacturing processes to accommodate the Virtual Manufacturing

                                       6

<PAGE>   7

process. The Company has purchased a 50,000 square foot facility in West Chicago
to enable the Company to provide quick-turn, prototypes to customers and to
manufacture pre-production printed circuit boards for specific customer
applications. These process capabilities are an essential part of the Virtual
Manufacturing process and the Company's ability to attract new customers.

     In addition, the Company produces customer specified bonded assemblies
consisting of a printed circuit board bonded in some manner to a metal carrier
or pallet. One bonding technique used by the Company is Flexlink (TM), a
patented process granted to the Company in 1993. The Company developed an
enhanced version called Flexlink II(TM) in 1996.

     The Company's printed circuit boards and bonded assemblies are used in
wireless communication systems and other devices and equipment operating in the
microwave frequency spectrum of 800 MHz and above. These devices and equipment
include cellular power amplifiers, global positioning satellite systems and
personal communication networks. Many of the Company's printed circuit boards
are Teflon(TM) based and are advantageous for microwave systems because of their
extremely low power losses, coupled with stable, predictable electrical
characteristics.

     The production of Teflon(TM) based printed circuit boards and bonded
assemblies is technologically demanding due to the precise requirements of their
end-use applications and the miniaturization of the microwave frequency
components. To meet these technological demands, the Company has developed
manufacturing processes and designs, which reduce the cost and increase the
manufacturability and reliability of customer systems. Additionally, the Company
emphasizes quality engineering and design support for its customers. The Company
is subject to stringent technical evaluation and ISO certification by many of
its customers.

     The Company markets its products through Company personnel supported by
approximately 18 independent sales organizations. The Company's base of
approximately 100 customers represents a highly sophisticated group of
purchasers.

     Segments within the commercial markets have experienced growth in recent
years due to: (i) increased efficiency of microwave systems; (ii) a commercial
market based upon increasing acceptance of microwave frequency products; (iii) a
continuing need to upgrade systems based upon microwave technology; and (iv)
crowding of the available frequency spectrum below 800 MHz. The Company's
strategy is to increase sales of its commercial products to support the growth
of its customers in these industry segments.

                                       7

<PAGE>   8

3.   INVENTORIES

     Inventories are carried at the lower of first-in, first-out (FIFO) cost or
market. Substantially all the Company's inventories are in work in process.

4.   DEBT

     The Company has a mortgage loan of $1,510,000 for the facility at P C
Dynamics Corporation in Frisco, Texas. Interest is at the prime rate (6.75% at
June 30, 2001) plus 1/2%. The loan is payable in monthly installments of
principal and interest and is due in October 2001.

     The Company has an installment loan of $196,000 collateralized by
ertain fixed assets of the Company. Interest on this loan is at the prime
ate. The loan is payable in monthly installments of principal and interest
nd is due in October 2004.

     The Company has a Land Acquisition loan, for the purpose of financing the
acquisition of certain property in West Chicago, Illinois, of $1,509,000
collateralized by certain assets of the Company. Interest on this loan is at the
prime rate. Interest is due monthly. The loan is due on September 30, 2001.

     The Company has an Equipment loan, for the purpose of financing equipment
for the facility in West Chicago, Illinois, of $313,000 collateralized by
certain assets of the Company. Interest on this loan is at the prime rate.
Interest is due monthly. The loan is due on September 30, 2001.

     The Company has a $10,000,000 line of credit available based on 80% of the
eligible accounts receivable and 50% of eligible inventory to fund the working
capital needs of the Company. Interest is at the prime rate (6.75% at June 30,
2001) plus 1/2%. The agreement expires May 15, 2002 and is renewable annually at
the mutual consent of the Company and the lender. The outstanding balance under
the line of credit at June 30, 2001 was $4,092,000.

5.   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.

6.   SUBSEQUENT EVENT

     The Company completed financing of $8.1 million from the Illinois
Development Finance Authority's 2001 maximum limit on tax-exempt private


                                       8

<PAGE>   9

activity bonds to finance its facility in West Chicago, Illinois on July 26,
2001. The bond will replace approximately $1,822,000 of our current debt, which
has an interest rate of 6.75%. The interest on the bond is set weekly; the
current rate for the week ending August 1, 2001 was 2.85%.


7.   RECENT ACCOUNTING PRONOUNCEMENTS


SFAS NO. 141 "BUSINESS COMBINATIONS", AND SFAS 142, "GOODWILL AND INTANGIBLE
ASSETS"

On July 20, 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) 141, Business Combinations,
and SFAS 142, Goodwill and Intangible Assets. SFAS 141 is effective for all
business combinations completed after June 30, 2001. SFAS 142 is effective for
fiscal years beginning after December 15, 2001; however, certain provisions of
this Statement apply to goodwill and other intangible assets acquired between
July 1, 2001 and the effective date of SFAS 142.

Although it is still reviewing the provisions of these Statements, management's
preliminary assessment is that these Statements will not have a material impact
on the Company's financial position or results of operations.


SFAS NO. 133 "ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES"

On January 1, 2001, the Company adopted Statement of Financial Accounting
Standards SFAS 133, "Accounting for Derivative Instruments and Hedging
Activities" (SFAS No. 133") as amended, which requires that all derivative
instruments be recognized in the financial statements. For the third quarter
ending September 30, 2001, the Company will enter into a $3,930,000 interest
rate swap agreement to manage its exposure to fluctuations in interest rates.

The adoption of SFAS No. 133 will not have a material impact on the Company's
financial position or results of operations.


                                       9
<PAGE>   10


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

RESULTS FOR THE QUARTER ENDED JUNE 30, 2001 COMPARED TO THE QUARTER ENDED
JUNE 30, 2000

NET SALES

     Net sales were $15,449,000 for the second quarter ended June 30, 2001, an
increase of $3,475,000 or 29% above the second quarter of 2000. The increase in
net sales is directly related to "Virtual Manufacturing." Virtual Manufacturing
accounted for approximately $13,113,000 of net sales in the second quarter of
2001 compared to $9,716,000 of net sales in the second quarter of 2000.

     Net sales to Lucent were $13,321,000 in the second quarter of 2001 compared
to $10,537,000 in the second quarter of 2000. $5,300,000 of the net sales in the
second quarter of 2001 relates to the complete and final settlement of one
program with Lucent.

     Lucent accounted for 86% of the Company's net sales for the second quarter
ended June 30, 2001 compared to 88% in the second quarter of 2000.

GROSS PROFIT AND COST OF GOODS SOLD

     The Company's gross profit for the second quarter of 2001 was $2,345,000
compared to $2,433,000 for the second quarter of 2000. Gross Margin decreased to
approximately 15% in the second quarter of 2001 from approximately 20% in the
second quarter of 2000. $5,300,000 of the net sales in the second quarter of
2001 relates to the complete and final settlement of one program with Lucent.
This transaction was recorded at approximately inventory value. Thus the
adjusted gross margin excluding the $5,300,000 in net sales and costs was
approximately 23%.

OPERATING EXPENSES

     General and administrative expenses were $580,000 or 3.8% of net sales in
the second quarter of 2001 compared to $815,000 or 6.8% of net sales in the
second quarter of 2000. General and administrative expenses consist primarily of
salaries and benefits, professional services, depreciation of office equipment,
computer systems and occupancy expenses. The Company recorded a reserve of
$400,000 in the second quarter of 2000 relating to the promissory note from
Performance Interconnect Corporation. Payroll related expenses were up $60,000
due to additional employees. Professional services, which include legal and
auditing fees, were up $95,000.


                                       10

<PAGE>   11

     Selling and marketing expenses were $457,000 or 3.0% of net sales in the
second quarter of 2001 compared to $368,000 or 3.1% of net sales in the second
quarter of 2000. Selling and marketing expenses include the cost of salaries,
advertising and promoting the Company's products, and commissions paid to
independent sales organizations. Commissions paid to independent sales
organizations were up $91,000.

OPERATING INCOME

     Operating income was $1,308,000 or 8.5% of net sales in the second quarter
of 2001 compared to an operating income of $1,249,000 or 10.4% of net sales in
the second quarter of 2000, an increase of $59,000. 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:

Increase in net sales                                 $ 706,000

Decrease in gross margin                               (793,000)
Decrease in operating expenses                          146,000
                                                      ---------

Increase in operating income                          $  59,000

INTEREST INCOME

     Interest income from short-term investments was $8,000 in the second
quarter of 2001 compared to $18,000 in the second quarter of 2000. Rental income
from the P C Dynamics facility was $51,000 in the second quarter of 2001 and the
second quarter of 2000.

INTEREST EXPENSE

     Interest expense, primarily related to the Company's mortgage obligation on
its P C Dynamics facility and short-term credit facility was $89,000 in the
second quarter of 2001 compared to $64,000 in the second quarter of 2000.

INCOME TAXES

     In the second quarter of 2001 and the second quarter of 2000 the Company
had an effective tax credit rate of 39.5%.


                                       11
<PAGE>   12


RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 2001 COMPARED TO THE SIX MONTHS ENDED
JUNE 30, 2000

NET SALES

     Net sales were $37,975,000 for the six months ended June 30, 2001, an
increase of $20,629,000 or 119% above the first six months of 2000. The increase
in net sales is directly related to "Virtual Manufacturing." Virtual
Manufacturing accounted for approximately $33,557,000 of net sales in the six
months ended June 30, 2001 compared to $13,835,000 of net sales for the first
six months of 2000.

     Net sales to Lucent were $33,524,000 for the six months ended June 30, 2001
compared to $14,948,000 for the first six months of 2000.

     Lucent accounted for 88% of the Company's net sales for the six months
ended June 30, 2001 compared to 86% for the first six months of 2000.

GROSS PROFIT AND COST OF GOODS SOLD

     The Company's gross profit for the six months ended June 30, 2001 was
$7,283,000 compared to $3,207,000 for the first six months of 2000. Gross Margin
increased to approximately 19.2% for the six months ended June 30, 2001 from
approximately 18.5% in the first six months of 2000. $5,300,000 of the net sales
in the first six months of 2001 relates to the complete and final settlement of
one program with Lucent. This transaction was recorded at approximately
inventory value. Thus the adjusted gross margin excluding the $5,300,000 in net
sales and costs was approximately 22.3%. The increase is a result of increased
sales and improved efficiencies and the Company's decision to adopt Virtual
Manufacturing.

OPERATING EXPENSES

     General and administrative expenses were $1,465,000 or 3.9% of net sales
for the six months ended June 30, 2001 compared to $1,151,000 or 6.6% of net
sales in the first six months of 2000. General and administrative expenses
consist primarily of salaries and benefits, professional services, depreciation
of office equipment, computer systems and occupancy expenses. Payroll related
expenses were up $428,000 due to additional employees. Professional services,
which include legal and auditing fees, were up $201,000.

     Selling and marketing expenses were $928,000 or 2.4% of net sales for the
six months ended June 30, 2001 compared to $549,000 or 3.2% of net sales in the
first six months of 2000. Selling and marketing expenses include the cost of
salaries, advertising and promoting the Company's products, and commissions


                                       12

<PAGE>   13

paid to independent sales organizations. Commissions paid to independent sales
organizations were up $302,000.

OPERATING INCOME

     Operating income was $4,889,000 or 12.9% for the six months ended June 30,
2001 compared to an operating income of $1,507,000 or 8.7% of net sales in the
first six months of 2000, an increase of $3,382,000. 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:

Increase in net sales                                 $3,814,000

Increase in gross margin                                 262,000
Increase in operating expenses                          (694,000)
                                                      ----------

Increase in operating income                          $3,382,000

INTEREST INCOME

     Interest income from short-term investments was $27,000 for the six months
ended June 30, 2001 compared to $38,000 in the first six months of 2000. Rental
income from the P C Dynamics facility was $102,000 for the six months ended June
30, 2001 and the first six months of 2000.

INTEREST EXPENSE

     Interest expense, primarily related to the Company's mortgage obligation on
its P C Dynamics facility and short-term credit facility was $307,000 for the
six months ended June 30, 2001 compared to $115,000 in the first six months of
2000.

INCOME TAXES

     For the six months ended June 30, 2001 and the first six months of 2000 the
Company had an effective tax credit rate of 39.5%.

LIQUIDITY AND CAPITAL RESOURCES

     Net cash provided from operations was $4,457,000 for the six months ended
June 30, 2001 compared to using ($1,720,000) for the first six months of 2000.
Accounts receivables increased $3,728,000. Inventories decreased $6,357,000.
$5,300,000 of the reduction relates to the final settlement of one program with
Lucent that was recorded at approximately inventory value. Accounts payable
decreased $1,431,000. Depreciation and amortization was $797,000.


                                       13

<PAGE>   14

     Capital expenditures mainly relating to the new West Chicago facility were
$3,563,000 for the six months ended June 30, 2001. Capital expenditures to
improve manufacturing processes were $272,000 in the first six months of 2000.

     The Company has a mortgage loan of $1,510,000 for the facility at P C
Dynamics Corporation in Frisco, Texas. Interest is at the prime rate (6.75% at
June 30, 2001) plus 1/2%. The loan is payable in monthly installments of
principal and interest and is due in October 2001.

     The Company has an installment loan of $196,000 collateralized by certain
fixed assets of the Company. Interest on this loan is at the prime rate. The
loan is payable in monthly installments of principal and interest and is due in
October 2004.

     The Company has a Land Acquisition loan, for the purpose of financing the
acquisition of certain property in West Chicago, Illinois, of $1,509,000
collateralized by certain assets of the Company. Interest on this loan is at the
prime rate. Interest is due monthly. The loan is due on September 30, 2001.

     The Company has an Equipment loan, for the purpose of financing equipment
for the facility in West Chicago, Illinois, of $313,000 collateralized by
certain assets of the Company. Interest on this loan is at the prime rate.
Interest is due monthly. The loan is due on September 30, 2001.

     The Company has a $10,000,000 line of credit available based on 80% of the
eligible accounts receivable and 50% of eligible inventory to fund the working
capital needs of the Company. Interest is at the prime rate (6.75% at June 30,
2001) plus 1/2%. The agreement expires May 15, 2001 and is renewable annually at
the mutual consent of the Company and the lender. The outstanding balance under
the line of credit at June 30, 2001 was $4,092,000.

     As of June 30, 2001, the Company has $7,620,000 of debt and $850,000 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 completed financing of $8.1 million from the Illinois
Development Finance Authority's 2001 maximum limit on tax-exempt private
activity bonds to finance its facility in West Chicago, Illinois on July 26,
2001. The bond will replace approximately $1,822,000 of our current debt, which
has an interest rate of 6.75%. The interest on the bond is set weekly; the
current rate for the week ending August 1, 2001 was 2.85%.


                                       14
<PAGE>   15

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 the Company's largest customer or a change in the mix of product sales
would 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 the "Virtual Manufacturing" process; and
pricing pressures by key customers.


                                       15

<PAGE>   16

     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 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.

     The Company is dependent upon unaffiliated foreign companies for the
manufacture of printed circuit boards as part of its Virtual Manufacturing
process. The Company's arrangements with manufacturers are subject to the risks
of doing business abroad, such as import duties, trade restrictions, production
delays due to unavailability of parts or components, transportation delays, work
stoppages, foreign currency fluctuations, political instability and other
factors which could have an adverse effect on the Company's business, financial
condition and results of operations. The Company believes that the loss of any
one or more of its suppliers would not have a long term material adverse effect
on its business, financial condition and results of operations because other
manufacturers would be able to increase production to fulfill its requirements.
However, the loss of certain suppliers, could, in the short term adversely
affect its business until alternative supply arrangements were secured.

     Although the Company has experienced substantial growth in revenue in the
last year and intends to continue to grow rapidly, there can be no assurance
that the growth experienced by the Company will continue or that the Company
will be able to achieve the growth contemplated by its business strategy. The
Company's ability to continue to grow may be affected by various factors, many
of which are not within the Company's control, including competition in the
telecommunications industry. This growth has placed, and is expected to continue
to place, significant demands on all aspects of the Company's business.
Including its administrative, technical and financial personnel and systems. The
company's future operating results will substantially depend on the ability of
its officers and key employees to manage such anticipated growth, to attract and
retain additional highly qualified management, technical and financial
personnel, and to implement and/or improve its technical, administrative,
financial control and reporting systems.


                                       16
<PAGE>   17


                           PART II - OTHER INFORMATION

ITEM 1: LEGAL PROCEEDINGS

     None

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

(a)  The Company's Annual Meeting of Stockholders was held on June 19, 2001.

(b)  At the Company's Annual Meeting of Stockholders, the Stockholders reelected
     to the Company's Board of Directors Messrs. Lavern D. Kramer and Gary L.
     Castagna. Messrs. Kramer and Castagna are class III Directors and will
     serve a term ending upon the election of Class III Directors at the 2004
     Annual Meeting of Stockholders. The aggregate number of votes cast for,
     against or withheld, for the election of Mr. Kramer was as follows:
     4,419,661 for, 0 against and 6,485 withheld. The aggregate number of votes
     cast for, against or withheld, for the election of Mr. Castagna was as
     follows: 4,409,171 for, 0 against and 16,975 withheld.

(c)  The Board of Directors is divided into three classes, each of whose members
     serve for a staggered three-year term. The Board is comprised of one Class
     I Director (Gregory E. Meyer) whose term expires at the 2002 Annual Meeting
     of Stockholders, two Class II Director (Joseph A. Turek and Donald A.
     Lepore) whose term expires at the 2003 Annual Meeting of Stockholders and
     two Class III Directors (Lavern D. Kramer and Gary L. Castagna) whose term
     expires at the 2001 Annual Meeting of Stockholders.

(d)  At the Company's Annual Meeting of Stockholders, the Stockholders ratified
     the appointment of Grant Thornton LLP as auditors of the Company for the
     2001 calendar year. The aggregate number of votes cast for, against or
     withheld, for the ratification of Grant Thornton LLP as auditors was
     4,418,386, 2,700 and 5,060, respectively.




                                       17
<PAGE>   18



ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits
         10.19    Employment agreement dated June 2, 2001 between the Company
                  and Robert Duke

         10.20    Loan Agreement








                                       18
<PAGE>   19



                                    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 3, 2001                         /s/  PAUL H. SCHMITT
                                                 ------------------------------
                                                  Paul H. Schmitt
                                                  Chief Financial Officer








                                       19
<PAGE>   20

                                  EXHIBIT INDEX


EXHIBIT
  NO.                                      DESCRIPTION
-------        ---------------------------------------------------------------
10.19          Employment agreement dated June 2, 2001 between the Company and
               Robert Duke

10.20          Loan Agreement


                                       20