SECURITIES
      AND EXCHANGE COMMISSION


WASHINGTON,
      DC 20549





FORM
              10-QSB/A
 AMENDMENT
              No. 1





QUARTERLY
      REPORT UNDER SECTION 13 OR 15(d)


OF
      THE
      SECURITIES EXCHANGE ACT OF 1934











For
                the quarter ended June 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  T   No





Indicate
                by check mark whether the Registrant is an
            
            Yes
            NoAccelerated
                filer (as defined by rule 12b-6 of the Act)
            
            £
            T





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




The
      registrant has 1,813,150 shares of common stock outstanding at August 10,
      2007.











**EXPLANATORY
            NOTE**
  This
            amendment on Form 10-QSB/A (the “Amendment”) amends M-Wave, Inc.’s quarterly
            report on Form 10-QSB/A for the quarter ended June 30, 2007, as initially
            filed
            with the Securities and Exchange Commission on August 14, 2007 (the “Form
            10-QSB”).
  The
            Company has expanded and enhanced the Controls and Procedures disclosure
            in Item
            3.
  The
            filing of this Amendment shall not be deemed an admission that the original
            Form
            10-QSB, when filed, included any untrue statement of material fact or
            omitted to
            state a material fact necessary to make a statement not
            misleading.
   M -WAVE,
      INC.





**CONTENTS**




PART
                    I.  FINANCIAL INFORMATIONItem
                    1.
                Financial
                    Statements:Consolidated
                    Balance Sheets as of June 30, 2007 and December
                    31, 2006 (unaudited)
                Page
                    3Consolidated
                    Statements of Operations for the Three Months
                    Ended June 30, 2007 and 2006 (unaudited)
                Page
                    4Consolidated
                    Statements of Operations for the Six Months Ended
                    June 30, 2007 and 2006 (unaudited)
                Page
                    5Consolidated
                    Statements of Cash Flows for the Six Months Ended
                    June 30, 2007 and 2006 (unaudited)
                Pages
                    6Notes
                    to Consolidated Financial Statements
                    (unaudited)
                Pages
                    8-14Item
                    2.
                Management’s
                    Discussion and Analysis of Financial
                    Condition and Results of Operations
                Pages
                    14-25Item
                    3
                Controls
                    and Procedures
                Page
                    25PART
                    II.  OTHER INFORMATIONItem
                    1
                Legal
                    Proceedings
                Page
                    26Item
                    2
                Unregistered
                    Sales of Equity Securities and Use of
                    Proceeds
                Page
                    26Item
                    3
                Defaults
                    Upon Senior Securities
                Page
                    26Item
                    4
                Submission
                    of Matters to a Vote of Security
                    Holders
                Page
                    26Item
                    5
                Other
                    Information
                Page
                    26Item
                    6
                Exhibits
                Page
                    26Signatures
                Page
                    27


2
 *Contents*




**Part
                  I - Financial Information****Item
                  1 - Financial Statements****M-Wave,
                  Inc.****CONSOLIDATED
                  BALANCE SHEETS****(unaudited)****June
                  30,**
              
              
              **December
                  31,****2007**
              
              
              **2006**ASSETSCURRENT
                  ASSETS:Cash
                  and cash equivalents
              
              $
              1,412,713
              
              
              $
              1,696,340Accounts
                  receivable, net of allowance for doubtful accounts,2007-
                  $80,000: 2006- $80,000
              
              
              1,009,042
              
              
              
              1,089,021Inventories,
                  net
              
              
              1,635,583
              
              
              
              1,348,004Prepaid
                  expenses and other assets
              
              
              361,486
              
              
              
              115,932Note
                  receivable, net
              
              
              0
              
              
              
              6,836Total
                  current assets
              
              
              4,418,823
              
              
              
              4,256,133EQUIPMENT:Equipment
              
              
              434,156
              
              
              
              434,156Less
                  accumulated depreciation
              
              
              (190,141
              )
              
              
              (145,607
              )Equipment,
                  net
              
              
              244,015
              
              
              
              288,549TOTAL
              
              $
              4,662,838
              
              
              $
              4,544,682LIABILITIES
                  AND STOCKHOLDERS' EQUITYCURRENT
                  LIABILITIES:Accounts
                  payable
              
              $
              1,405,668
              
              
              $
              1,449,083Accrued
                  expenses
              
              
              675,102
              
              
              
              277,746Note
                  payable
              
              
              22,000
              
              
              
              58,000Total
                  current liabilities
              
              
              2,102,770
              
              
              
              1,784,829COMMITTMENTS
                  AND CONTINGENCIESSTOCKHOLDERS'
                  EQUITY:Preferred
                  stock, $100 par value; Series A authorized, 30,000 shares;issued
                  and outstanding: 2007 and 2006: 12,500 shares
              
              
              656,800
              
              
              
              656,800Series
                  B authorized, 70,000 shares; issued and outstanding:2007
                  and 2006: 69,648 shares
              
              
              6,842,797
              
              
              
              6,842,797Common
                  stock, $.005 par value; authorized, 200,000,000 shares;issued
                  and outstanding 2007: 1,813,150 shares; 2006:
                  1,763,150 shares
              
              
              11,236
              
              
              
              10,986Additional
                  paid-in capital
              
              
              14,378,985
              
              
              
              14,199,062Accumulated
                  deficit
              
              
              (17,044,580
              )
              
              
              (16,664,622
              )Treasury
                  stock, at cost, 2007 and 2006: 433,954 shares
              
              
              (2,285,170
              )
              
              
              (2,285,170
              )Total
                  stockholders' equity
              
              
              2,560,068
              
              
              
              2,759,853TOTAL
              
              $
              4,662,838
              
              
              $
              4,544,682See
                  notes to consolidated financial statements


3
 *Contents*




**M-Wave,
                Inc.****CONSOLIDATED
                STATEMENTS OF OPERATIONS****(unaudited)**Three
                Months Ended June 302007
            
            
            2006NET
                SALES
            
            $
            2,785,983
            
            
            $
            2,286,994COST
                OF GOODS SOLD
            
            
            2,073,619
            
            
            
            1,684,207Gross
                profit
            
            
            712,364
            
            
            
            602,787OPERATING
                EXPENSES:General
                and administrative
            
            
            554,937
            
            
            
            1,035,413Selling
                and marketing
            
            
            210,666
            
            
            
            191,111Total
                operating expenses
            
            
            765,603
            
            
            
            1,226,524LOSS
                FROM CONTINUING OPERATIONS
            
            
            (53,239
            )
            
            
            (623,737
            )Income
                from discontinued operations (note 9), net of tax
            
            $
            0
            
            
            $
            119,086Net
                loss
            
            $
            (53,239
            )
            
            $
            (504,651
            )Preferred
                stock dividends
            
            $
            0
            
            
            $
            (80,810
            )Net
                loss attributable to common shareholders
            
            $
            (53,239
            )
            
            $
            (585,461
            )BASIC
                AND DILUTED LOSS PER COMMON SHAREContinuing
                operations
            
            $
            (0.03
            )
            
            $
            (0.45
            )Discontinued
                operations
            
            
            -
            
            
            
            0.08$
            (0.03
            )
            
            $
            (0.38
            )Weighted
                average shares outstanding
            
            
            1,796,447
            
            
            
            1,550,650See
                notes to consolidated financial statements


4
 *Contents*




**M-Wave,
        Inc.**


**CONSOLIDATED
        STATEMENTS OF OPERATIONS**
 **(unaudited)**


Six
                Months Ended June 302007
            
            
            2006NET
                SALES
            
            $
            5,048,904
            
            
            $
            4,578,837COST
                OF GOODS SOLD
            
            
            3,774,015
            
            
            
            3,374,048Gross
                profit
            
            
            1,274,889
            
            
            
            1,204,789OPERATING
                EXPENSES:General
                and administrative
            
            
            1,231,115
            
            
            
            2,612,529Selling
                and marketing
            
            
            423,732
            
            
            
            396,922Total
                operating expenses
            
            
            1,654,847
            
            
            
            3,009,451Operating
                loss from continuing operations
            
            
            (379,958
            )
            
            
            (1,804,662
            )OTHER
                EXPENSE:Interest
                expense
            
            
            0
            
            
            
            (408,863
            )Total
                other expense
            
            
            0
            
            
            
            (408,863
            )Loss
                from continuing operations
            
            $
            (379,958
            )
            
            $
            (2,213,525
            )Loss
                from discontinued operations (note 9), net of tax
            
            $
            0
            
            
            $
            (130,303
            )Net
                loss
            
            $
            (379,958
            )
            
            $
            (2,343,828
            )Preferred
                stock dividends
            
            $
            0
            
            
            $
            (152,439
            )Net
                loss attributable to common shareholders
            
            $
            (379,958
            )
            
            $
            (2,496,267
            )BASIC
                AND DILUTED LOSS PER COMMON SHAREContinuing
                operations
            
            $
            (0.21
            )
            
            $
            (1.53
            )Discontinued
                operations
            
            
            -
            
            
            
            (0.08
            )$
            (0.21
            )
            
            $
            (1.61
            )Weighted
                average shares outstanding
            
            
            1,779,890
            
            
            
            1,550,650See
                notes to consolidated financial statements


5
 *Contents*




**M-Wave,
                Inc.****CONSOLIDATED
                STATEMENTS OF CASH FLOWS****(unaudited)**Six
                Months Ended June 302007
            
            
            2006**OPERATING
                ACTIVITIES:**Net
                loss
            
            $
            (379,958
            )
            
            $
            (2,343,828
            )Adjustments
                to reconcile net loss to net cash flowsused
                in operating activities:Loss
                on disposal of property, plant, and equipment
            
            
            0
            
            
            
            24,167Depreciation
            
            
            44,534
            
            
            
            39,297Amortization
                of discount on long-term debt
            
            
            0
            
            
            
            356,787Trade
                debt forgiveness
            
            
            0
            
            
            
            (323,772
            )Stock
                compensation recognized on options and warrants
            
            
            92,173
            
            
            
            690,312Fair
                value adjustment to common stock warrants
            
            
            0
            
            
            
            (15,158
            )Changes
                in assets and liabilities:Accounts
                receivable
            
            
            79,979
            
            
            
            132,751Inventories
            
            
            (287,579
            )
            
            
            1,362,532Prepaid
                expenses and other assets
            
            
            (245,554
            )
            
            
            193,102Accounts
                payable
            
            
            (43,415
            )
            
            
            (1,019,452
            )Accrued
                expenses
            
            
            397,356
            
            
            
            (46,888
            )Net
                cash flows used in operating activities
            
            
            (342,463
            )
            
            
            (950,150
            )**INVESTING
                ACTIVITIES:**Purchase
                of equipment
            
            
            0
            
            
            
            (21,448
            )Proceeds
                from sale of property, plant and equipment
            
            
            0
            
            
            
            5,000Repayments
                on note receivable
            
            
            6,836
            
            
            
            40,999Net
                cash flows provided by investing activities
            
            
            6,836
            
            
            
            24,551





6
 *Contents*


**FINANCING
                ACTIVITIES:**Proceeds
                from exercise of stock options and warrants
            
            
            88,000
            
            
            
            0Net
                borrowings on note payable, bank
            
            
            0
            
            
            
            545,000Payments
                on short and long term debt
            
            
            (36,000
            )
            
            
            0Proceeds
                from preferred stock issuance
            
            
            0
            
            
            
            1,777,989Payment
                of preferred dividends
            
            
            0
            
            
            
            (152,439
            )Net
                cash flows provided by financing activities
            
            
            52,000
            
            
            
            2,170,550**NET
                (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS**
            
            
            (283,627
            )
            
            
            1,244,951CASH
                AND CASH EQUIVALENTS:Beginning
                of period
            
            
            1,696,340
            
            
            
            247,731End
                of period
            
            $
            1,412,713
            
            
            $
            1,492,682SUPPLEMENTAL
                SCHEDULES OF NONCASH INVESTING AND FINANCING ACTIVITIES:Reclassification
                of common stock warrants to stockholders' equity
            
            $
            0
            
            
            $
            270,163Conversion
                of long-term debt to stockholders' equity
            
            
            0
            
            
            
            4,564,808Accrued
                interest added to note payable balance
            
            
            0
            
            
            
            20,601See
                notes to consolidated financial statements


7
 *Contents*




**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 six months ended June 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 six months ended June 30, 2007 and 2006 consisted
      of the following:





Three
                months ended June 30,
            
            
            Six
                months ended June 30,2007
            
            
            2006
            
            
            2007
            
            
            2006Digital
            
            $
            1,941,931
            
            
            $
            1,802,479
            
            
            $
            3,657,035
            
            
            $
            3,778,668Non
                PCB
            
            
            769,679
            
            
            
            94,905
            
            
            
            1,227,394
            
            
            
            99,116Other
            
            
            74,373
            
            
            
            389,610
            
            
            
            164,475
            
            
            
            701,053Total
                sales
            
            $
            2,785,983
            
            
            $
            2,286,994
            
            
            $
            5,048,904
            
            
            $
            4,578,837





Sales
      within the digital product line include ten key customers, which represented
      approximately 92% of sales in the second quarter of 2007 versus approximately
      92% of sales in the second quarter of 2006.  Year to date sales for
      these key customers within the digital product line represented approximately
      94% of sales versus approximately 88% of year to date sales in
      2006.  Year to date sales for the Company’s top ten digital customers
      were up approximately 3% compared to prior year to date sales.


8
 *Contents*


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 93% of sales of Non PCB products
      in
      the second quarter of 2007 versus approximately 68% of sales in the second
      quarter of 2006.  Year to date sales for these key Non PCB customers
      represented approximately 92% of sales of non PCB products versus approximately
      69% of year to date sales in 2006.  Year to date sales for the
      Company’s top three Non PCB customers were up approximately 1,547% compared to
      prior year to date sales.





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 $83,000 in
      commissions and approximately $153,000 in sales to former RF customers during
      the second quarter of 2006.  Prior year to date sales included
      approximately $157,000 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, amending the Loan Document Purchase Agreements that Mercator purchased
      from Silicon Valley Bank on November 9, 2005.   Provisions of
      this amendment include elimination of certain provisions and conditions of
      the
      loan originally between the Company and Silicon Valley Bank, including financial
      covenants that existed under the original agreement.  As part of this
      amendment, all previous defaults that had existed under the original agreement
      were waived.





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





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




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




9
 *Contents*




Promissory
                notes issued to MAG Capital
            
            $
            2,400,000Bank
                notes purchased by MAG Capital
            
            $
            1,619,808MAG
                debt financing first quarter
            
            $
            545,000Total
                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.  Amounts outstanding on the note payable at June 30, 2007 are
      $22,000 and are collateralized by the equipment with a depreciated cost of
      approximately $56,000.




**4.  Equity**





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





The
      Company also issued an additional 19,000 shares of Series B Preferred Stock
      in
      exchange for $1,900,000 which 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 June 30, 2007, there was approximately $1,000,000
      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 three and six
      months ended June 30, 2007.


10
 *Contents*


During
      the first six months of 2007 and 2006, Mercator did not convert any shares
      of
      their preferred stock into common shares. As of June 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 June 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 June 30,
            
            
            6
                months ended June 30,2007
            
            
            2006
            
            
            2007
            
            
            2006Weighted
                average shares outstanding
            
            
            1,796,447
            
            
            
            1,550,650
            
            
            
            1,779,890
            
            
            
            1,550,650Options
                in the money, net
            
            
            31,706
            
            
            
            83,566
            
            
            
            50,228
            
            
            
            50,228Warrants
                in the money, net
            
            
            59,014
            
            
            
            60,326
            
            
            
            82,013
            
            
            
            31,419Total
                Outstanding and PotentiallyDilutive
                shares
            
            
            1,887,167
            
            
            
            1,694,542
            
            
            
            1,912,131
            
            
            
            1,632,297





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





**5.  Litigation**





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





**6.  Share-Based
      Compensation**





The
      Company has a stock option plan that authorizes the granting of options to
      officers, key employees and directors to purchase the Company’s common stock at
      prices equal to or above the market value of the stock at the date of
      grant.  Under this plan, substantially all shares authorized under the
      plan have been granted as of June 30, 2007.  The exercise price of all
      employee and director options granted in 2007 and 2006 were above fair market
      value.




11
 *Contents*





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 June 30, 2007 and 2006
      respectively.  For the six months ended June 30, 2007 and 2006
      respectively, the Company issued 11,592 and 166,331 options,
      respectively.  These grants were priced at $3.41 and $2.72
      respectively.  There were no options exercised or forfeited during the
      three and six months ended June 30, 2007 and 2006, respectively.




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





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





Total
      common stock warrants outstanding at June 30, 2007 were 354,113, and were all
      exercisable at June 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.




12
 *Contents*





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 March 31, 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 June 30, 2007 and December 31, 2006 is below:





2007
            
            
            2006Accounts
                Receivable
            
            $
            3,000
            
            
            $
            65,000Total
                assets
            
            $
            3,000
            
            
            $
            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.


13
 *Contents*
  The
      net
      loss from discontinued operations for the three and six months ended June,
      2007
      and 2006 are as follows:





Three
                Months Ended June 30,
            
            
            Six
                Months Ended June 30,2007
            
            
            2006
            
            
            2007
            
            
            2006Net
                sales
            
            $
            -
            
            
            $
            256,000
            
            
            $
            -
            
            
            $
            831,000Cost
                of goods sold
            
            
            -
            
            
            
            322,000
            
            
            
            -
            
            
            
            1,090,000Gross
                (loss)/profit
            
            
            -
            
            
            
            (66,000
            )
            
            
            -
            
            
            
            (259,000
            )Operating
                income/(expenses)
            
            
            -
            
            
            
            185,000
            
            
            
            -
            
            
            
            124,000Income/(loss)
                from Discontinued operations
            
            $
            -
            
            
            $
            119,000
            
            
            $
            -
            
            
            $
            (135,000
            )





The
      loss
      from discontinued operations resulted in a decrease to the basic and diluted
      loss per common share of approximately $0.00 and $0.08 for the three months
      ended June 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 $0.08 for the six months ended
      June
      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.
 
 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.




14
 *Contents*





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




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




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




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





**Significant
      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
      FusionTM 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 Los Cruces, New Mexico.




15
 *Contents*





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 be a publicly traded and reporting company following the closing
      of the transaction.





As
      consideration for the merger transaction, the outstanding equity securities
      of
      SunFuels will be exchanged for equity securities of
      M-Wave.  Specifically, outstanding SunFuels Common Stock, Series A
      Convertible Preferred Stock, options and warrants will be exchanged for Company
      Common Stock, Series C Convertible Preferred Stock, options and warrants,
      respectively.  As a result, the holders of such SunFuels equity
      securities will own approximately 87.2% of the Common Stock of the Company,
      on a
      fully-diluted basis, assuming (i) the completion of the SunFuels Series A
      Convertible Preferred Stock financing described below and (ii) conversion or
      exercise of all convertible or exercisable securities of the Company that will
      be outstanding after the completion of the merger.  Similarly, all of
      the outstanding Blue Sun membership interests not already owned by SunFuels
      will
      be exchanged for shares of Company Common Stock.  As a result, the
      holders of such Blue Sun membership interests will own approximately 3.8% of
      the
      Common Stock of the Company, as so calculated on a fully-diluted
      basis.  The currently outstanding shares of M-Wave Common Stock will
      remain outstanding and, following the exchange of SunFuels and Blue Sun equity
      securities for M-Wave equity securities, the currently outstanding shares,
      warrants and options of M-Wave will represent approximately 8.0% of the
      outstanding shares, warrants, and options of the Company, as so calculated
      on a
      fully-diluted basis.





The
      merger transaction is subject to the approval by the stockholders of M-Wave
      and
      SunFuels and the members of Blue Sun, receipt of all required consents, receipt
      of all regulatory approvals, and other customary closing
      conditions.  Holders of a majority of the outstanding shares of each
      class of stock of SunFuels and holders of approximately 48% of the outstanding
      shares of Common Stock of M-Wave and 100% of the outstanding shares of each
      class of preferred stock of M-Wave have agreed to vote 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.





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


16
 *Contents*
  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**.**





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 June 30, 2007.





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





**Net
      Sales**





Net
      sales
      were approximately $2,786,000 for the three months ended June 30, 2007 versus
      approximately $2,287,000 during the three months ended June 30, 2006, an
      increase of approximately $499,000 or 21.8%.  Sales within our digital
      product line increased approximately $140,000 during the second quarter of
      2007,
      an increase of approximately 8% of prior year second quarter
      sales.     Sales to our top ten digital customers were
      approximately $1,791,000 during the three months ended June 30, 2007, an
      increase of approximately $138,000 compared to the three months ended June
      30,
      2006.  Sales amongst our top ten digital customers represented
      approximately 92% of sales within this product line for the three months ended
      June 30, 2007 compared to approximately 92% of sales within this product line
      for the three months ended June 30, 2006.


17
 *Contents*
  Sales
      within our non-PCB product line were approximately $770,000 for the three months
      ended June 30, 2007, approximately $675,000 above sales for the three months
      ended June 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 second 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 June 30, 2007 were approximately $74,000,
      approximately $316,000 below other revenues recorded in the three months ended
      June 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
      $153,000.  Commissions for the three months ended June 30, 2007 were
      approximately $15,000, a decrease of approximately $68,000 versus commissions
      recorded in the three months ended June 30, 2006.  Tooling revenues
      were approximately $73,000 for the three months ended June 30, 2007, a decrease
      of approximately $47,000 versus tooling revenues recorded in the three months
      ended June 30, 2006.





**Gross
      Profit and Cost of Goods Sold**





The
      Company’s gross profit for the three months ended June 30, 2007 was
      approximately $712,000, or 25.6% of net sales, compared to a gross profit of
      approximately $603,000, or 26.4% of net sales, for the three months ended June
      30, 2006.  Increased sales levels was the primary driver of increased
      margin dollars, while lower commissions recorded attributed to the slight
      decrease in margin percentage.  Margins within our digital product
      line increased by approximately 0.3% over the prior year as we continue to
      focus
      sales efforts on our higher margin customers.


18
 *Contents*
  **Operating
      Expenses**





General
      and administrative expenses were approximately $555,000 or 19.9% of net sales
      in
      the second quarter of 2007 compared to approximately $1,035,000 or 45.2% of
      net
      sales in the second quarter of 2006, a decrease of approximately
      $480,000.





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 second quarter of 2006, payroll
      related expenses decreased approximately $45,000.   Professional
      services, which include legal, auditing, and consulting fees, decreased
      approximately $25,000 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 $54,000 in the second quarter of
      2007 compared to approximately $353,000 during the second quarter of 2006,
      a
      decrease of approximately $299,000.  We recorded no stock compensation
      expenses during the second quarter of 2007 compared to approximately $121,000
      for the second quarter 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.  Other
      operating expenses increased approximately $10,000 during the second quarter
      of
      2007 compared to the second quarter of 2006.  These expenses include
      travel, telephone, insurance, depreciation, and rent.





Selling
      and marketing expenses were approximately $211,000 or 7.6% of net sales in
      the
      second quarter of 2007 compared to approximately $191,000 or 8.3% of net sales
      in the second 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 second
      quarter of 2006, commission paid to independent sales organizations increased
      by
      approximately $5,000 due to higher sales levels; payroll-related expenses
      increased by approximately $10,000. Costs related to our Singapore office
      increased by approximately $6,000; other sales expenses, including travel
      related expenses decreased by approximately $1,000 in the second quarter of
      2007
      compared to the second quarter of 2006.





**Operating
      Loss**





Operating
      loss from continuing operations was approximately $53,000 in the second quarter
      of 2007 compared to an operating loss of approximately $624,000 in the second
      quarter of 2006. The decrease in operating loss of approximately $571,000 was
      primarily related to lower administrative expenses of approximately $480,000
      described above combined with increased gross profit attributable to higher
      sales levels.


19
 *Contents*
  **Interest
      Income**





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





**Interest
      Expense**




We
      recorded no interest expense during the second quarter of 2007 or
      2006.




**Preferred
      Stock Dividends**





We
      did
      not record any preferred stock dividends in the second quarter of 2007,
      primarily due to the waiver of dividend payments by our preferred
      stockholder.  The Company recorded approximately $81,000 in preferred
      dividend expense during the second quarter of 2006 related to the issuance
      of
      Series B preferred stock to M.A.G. Capital, LLC, and its affiliates, in March
      2006.





**RESULTS
      FOR THE SIX MONTHS ENDED June 30, 2007 COMPARED TO THE SIX MONTHS ENDED June
      30,
      2006**





**Net
      Sales**





Net
      sales
      were approximately $5,049,000 for the six months ended June 30, 2007 versus
      approximately $4,579,000 during the six months ended June 30, 2006, an increase
      of approximately $470,000 or 10.3%.  Sales within our digital product
      line decreased approximately $122,000 during the first six months of 2007,
      a
      decrease of approximately 3%.  Sales to our top ten digital customers
      were approximately $3,427,000 during the six months ended June 30, 2007, an
      increase of approximately $109,000 compared to the six months ended June 30,
      2006.  Sales amongst our top ten digital customers represented
      approximately 94% of sales within this product line for the six months ended
      June 30, 2007 compared to approximately 88% of sales within this product line
      for the six months ended June 30, 2006.





Sales
      within our non-PCB product line were approximately $1,227,000 for the six months
      ended June 30, 2007, approximately $1,128,000 above sales for the six months
      ended June 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 six 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.


20
 *Contents*
  Other
      revenues for the six months ended June 30, 2007 were approximately $164,000,
      approximately $537,000 below other revenues recorded in the six months ended
      June 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 six months ended June 30, 2007 were
      approximately $32,000, a decrease of approximately $125,000 versus commissions
      recorded in the six months ended June 30, 2006.  Tooling revenues were
      approximately $166,000 for the six months ended June 30, 2007, a decrease of
      approximately $72,000 versus tooling revenues recorded in the six months ended
      June 30, 2006.





**Gross
      Profit and Cost of Goods Sold**





The
      Company’s gross profit for the six months ended June 30, 2007 was approximately
      $1,275,000, or 25.3% of net sales, compared to a gross profit of approximately
      $1,205,000, or 26.3% of net sales, for the six months ended June 30,
      2006.  Increased sales levels was the primary driver of increased
      margin dollars, while lower commissions recorded 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 $1,231,000 or 24.4% of net sales
      in the first six months of 2007 compared to approximately $2,613,000 or 57.0%
      of
      net sales in the first six months of 2006, a decrease of approximately
      $1,382,000.


21
 *Contents*
  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 six months of 2006, payroll
      related expenses decreased approximately $57,000.   Professional
      services, which include legal, auditing, and consulting fees, increased
      approximately $18,000 in the first six months of 2007 compared to prior year
      expenses.  Public company related costs such as investor relations,
      Sarbanes-Oxley expenses, and board and committee fees were approximately
      $178,000 in the first six months of 2007 compared to approximately $836,000
      during the second quarter of 2006, a decrease of approximately
      $658,000.  We recorded stock compensation expenses of approximately
      $92,000 during the first six months of 2007 compared to approximately $690,000
      for the first six 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.  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 $87,000 during the first six months of 2007 compared
      to
      the first six months of 2006.  These expenses include travel,
      telephone, insurance, depreciation, and rent.





Selling
      and marketing expenses were approximately $424,000 or 8.4% of net sales in
      the
      first six months of 2007 compared to approximately $397,000 or 8.7% of net
      sales
      in the first six months of 2006, an increase of approximately
      $27,000.  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 six 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 $27,000. Costs related to our Singapore office increased by
      approximately $12,000; other sales expenses, including travel related expenses
      decreased by approximately $11,000 in the first six months of 2007 compared
      to
      the first six months of 2006.





**Operating
      Loss**





Operating
      loss from continuing operations was approximately $380,000 in the first six
      months of 2007 compared to an operating loss of approximately $1,805,000 in
      the
      first six months of 2006. The decrease in operating loss of approximately
      $1,425,000 was primarily related to lower administrative expenses of
      approximately $1,382,000 described above combined with increased gross profit
      attributable to higher sales levels.





**Interest
      Income**





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





**Interest
      Expense**




We
      recorded no interest expense during the first six months of 2007, compared
      to
      approximately $409,000 during the first six 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 $15,000 related to the
      re-valuation of warrants during the first quarter of 2006.


22
 *Contents*
  **Preferred
      Stock Dividends**





We
      did
      not record any preferred stock dividends in the first six months of 2007,
      primarily due to the waiver of dividend payments by our preferred
      stockholder.  The Company recorded approximately $152,000 in preferred
      dividend expense during the first six months of 2006 related to the issuance
      of
      Series B preferred stock to M.A.G. Capital, LLC, and its affiliates, in March
      2006.





**Liquidity
      and Capital Resources**





Net
      cash
      used by operations was approximately $342,000 for the first six months of 2007
      compared to approximately $950,000 used by operations for the first six months
      of 2006.





Accounts
      Receivable decreased approximately $80,000 due to improved collections.
      Inventories increased approximately $288,000 related to higher inventory levels
      to support increased sales levels. Accounts Payable decreased approximately
      $43,000 primarily due to the payments to suppliers in the normal course of
      business.





Net
      cash
      provided by investing activities was approximately $7,000 for the first six
      months of 2007 compared to approximately $25,000 in the first six months of
      2006.   Capital expenditures were $0 in the first six months of
      2007 compared to approximately $21,000 in the first six months of
      2006.





Net
      cash
      provided by financing activities was approximately $52,000 during the first
      six
      months of 2007, primarily through 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 six months of 2006 was
      approximately $2,171,000 related to borrowings of approximately $545,000 and
      issuance of preferred stock of approximately $1,778,000.





Currently
      the Company is committed to growing its core business, as it relates to the
      continuing operations of its digital product line and other non-PCB components
      and assemblies. The Company also announced a merger agreement with SunFuels,
      Inc. and Blue Sun Biodiesel LLC on January 26th 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.


23
 *Contents*


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 are 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.
      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.


24
 *Contents*
  **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.
 
 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.
  25
 *Contents*


***b)******Changes
      in internal controls*****.** There was no change in the
      Company's internal control over financial reporting during the three and six
      months ended June 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.


26
 *Contents*




**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:  October
                  22, 2007
              /s/   Jeff
                  FiglewiczJeff
                  FiglewiczChief
                  Financial Officer





**Exhibit
                Index****Exhibit****No.**
            **Description**
            **Location**2.1
            Agreement
                and Plan of Merger, dated January 26, 2007, by and between M-Wave,
                Inc.,
                Ocean
                Merger Sub Inc., Sunfuels Inc., and Blue Sun Biodiesel
                LLC
            123.1
            Certificate
                of Incorporation of the Company
            13.2
            Bylaws
                of the Company
            13.3
            Certificate
                of Designations for Series A Convertible Preferred Stock
            43.4
            Certificate
                of Designations for Series B Convertible Preferred Stock
            104.1
            Specimen
                Common Stock Certificate
            310.1
            2003
                Stock Incentive Plan
            210.2
            Warrant
                to Purchase Stock dated March 31, 2004 by and between
                the Company and Silicon Valley Bank
            210.3
            Employment
                Agreement dated July 28, 2004 between the Company
                and Jim Mayer
            310.4
            Employment
                Agreement dated July 28, 2004 between the Company
                and Joe Turek
            310.5
            Employment
                Agreement dated May 1, 2004 between the Company
                and Robert Duke
            3


27
 *Contents*




10.6
              Subscription
                  Agreement date June 28, 2004 between the Company and Mercator Advisory
                  Group
              310.7
              Stock
                  Registration Rights Agreement date June 28, 2004 between the Company
                  and
                  Mercator Advisory Group
              310.8
              Non-statutory
                  Stock Option Agreement date July 28, 2004 between the Company and
                  Jim
                  Mayer
              310.9
              Asset
                  Purchase Agreement, dated February 25, 2005 by and between Jayco
                  Ventures,
                  Inc. and M-Wave DBS, Inc.
              510.10
              Promissory
                  Note dated February 23, 2005 issued by M-Wave, Inc. to Mercator
                  Momentum
                  Fund, L.P.
              510.11
              Promissory
                  Note dated February 23, 2005, issued by M-Wave, Inc. to Monarch
                  Pointe
                  Fund, L.P.
              510.12
              Warrant
                  , dated February 23, 2005 issued by M-Wave, Inc. to Mercator Momentum
                  Fund, L.P.
              510.13
              Warrant
                  to dated February 23, 2005 issued by M-Wave, Inc, to Monarch Pointe
                  Fund,
                  L.P.
              510.14
              Warrant
                  dated February 23, 2005, issued by M-Wave, Inc. to M.A.G. Capital,
                  LLC
              510.15
              Non-statutory
                  Stock Option Agreement dated December 31, 2004 between Company
                  and Gordhan
                  Patel
              610.16
              Amendment
                  to 2003 Stock Incentive Plan
              710.17
              Sale
                  of real property located at 215 Park Street Bensenville,
                  Illinois
              810.18
              Asset
                  sale and transition agreement dated October 21, 2005 between the
                  Company
                  and American Standard Circuits
              810.19
              Agreement
                  with the Mercator Momentum Fund III amending Loan Document Purchase
                  Agreements it acquired from Silicon Valley Bank on November 9,
                  2005
              9


28
 *Contents*


10.20
              Subscription
                  Agreement by and among: M-Wave, Inc.; Mercator Momentum Fund, LP;
                  Mercator
                  Momentum Fund III, LP; Monarch Pointe Fund, Ltd.; and M.A.G. Capital,
                  LLC
                  dated March 1, 2006.
              1010.21
              Registration
                  Rights Agreement by and among: M-Wave, Inc.; Mercator Momentum
                  Fund, LP;
                  Mercator Momentum Fund III, LP; Monarch Pointe Fund, Ltd.; and
                  M.A.G.
                  Capital, LLC dated March 1, 2006.
              1010.22
              Amendment
                  modifying the terms of existing warrants held by Mercator Momentum
                  Fund,
                  LP; Mercator Momentum Fund III, LP; Monarch Pointe Fund, Ltd.;
                  and M.A.G.
                  Capital, LLC, dated March 1, 2006.
              1010.23
              Sale
                  of real property located at 544 Pine Street Bensenville,
                  Illinois
              1310.24
              Subscription
                  Agreement by and among: M-Wave, Inc.; Mercator Momentum Fund, LP;
                  Mercator
                  Momentum Fund III, LP; Monarch Pointe Fund, Ltd.; and M.A.G. Capital,
                  LLC
                  dated December 29, 2006.
              1110.25
              Registration
                  Rights Agreement by and among: M-Wave, Inc.; Mercator Momentum
                  Fund, LP;
                  Mercator Momentum Fund III, LP; Monarch Pointe Fund, Ltd.; and
                  M.A.G.
                  Capital, LLC dated December 29, 2006.
              1110.26
              Exercise
                  Agreement, dated January 26, 2007, between M-Wave, Inc. and MAG
                  Capital,
                  LLC, Mercator Momentum Fund, LP, Mercator Momentum Fund III, LP,
                  and
                  Monarch Pointe Fund, Ltd.
              1210.27
              Form
                  of Voting Agreement between SunFuels, Inc. and certain of the shareholders
                  of M-Wave, Inc.
              1210.28
              Asset
                  Purchase Agreement, dated July 20, 2007, by and among M-Wave, Inc.,
                  M-Wave
                  International, LLC, Joseph Turek, and Robert Duke
              1431.1
              Certification
                  of the CEO Pursuant to Sections 302 of the Sarbanes-Oxley
                  Act
              Filed
                  Herewith31.2
              Certification
                  of the CFO Pursuant to Sections 302 of the Sarbanes-Oxley
                  Act
              Filed
                  Herewith
 
 29
 *Contents*
 
 32.1
              Certification
                  pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                  906 of
                  the Sarbanes-Oxley Act
              Filed
                  Herewith32.2
              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 Registrants Registration
                  Statement on Form S-1 (Registration No. 33-45499)(2)
              Incorporated
                  herein by reference to the applicable exhibit to the Registrant's
                  Annual
                  Report on Form 10K for the year ended December 31, 2003(3)
              Incorporated
                  herein by reference to the applicable exhibit to the Registrant's
                  Quarterly Report on Form 10-QSB for the quarter ended June 30,
                  2004(4)
              Incorporated
                  herein by reference to Appendix B to the Registrant's Definitive
                  Proxy
                  Statement filed July 6, 2004(5)
              Incorporated
                  herein by reference to the applicable exhibit to the Registrant's
                  form 8-K
                  filed March 2, 2005(6)
              Incorporated
                  herein by reference to the applicable exhibit to the Registrant's
                  Annual
                  Report on Form 10-KSB for the year ended December 31, 2004(7)
              Incorporated
                  herein by reference to Appendix A  to the Registrant's Proxy
                  Statement filed April 29, 2005(8)
              Incorporated
                  herein by reference to the applicable exhibit to the Registrant's
                  form 8-K
                  filed October 5, 2005(9)
              Incorporated
                  herein by reference to the applicable exhibit to the Registrant's
                  form 8-K
                  filed February 2, 2006(10)
              Incorporated
                  herein by reference to the applicable exhibit to the Registrant's
                  form 8-K
                  filed March 7, 2006(11)
              Incorporated
                  herein by reference to the applicable exhibit to the Registrant's
                  form 8-K
                  filed January 4, 2007(12)
              Incorporated
                  herein by reference to the applicable exhibit to the Registrant's
                  form 8-K
                  filed February 1, 2007
  30
 *Contents*
 (13)
              Incorporated
                  herein by reference to the applicable exhibit to the Registrant's
                  Annual
                  Report on Form 10-KSB for the year ended December 31, 2006(14)
              Incorporated
                  herein by reference to the applicable exhibit to the Registrant's
                  form 8-K
                  filed July 20, 2007






31