<PAGE>

                       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 September 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 4,476,297 shares of common stock outstanding at November 7,
2001.


                                       1




<PAGE>


                         PART I - FINANCIAL INFORMATION
                          ITEM 1: FINANCIAL STATEMENTS

                                  M-WAVE, INC.

                      CONDENSED CONSOLIDATED BALANCE SHEET
                                   (Unaudited)

                                             DECEMBER 31,         SEPTEMBER 30,
                                                 2000                 2001
                                             ------------         ------------
                                     ASSETS
CURRENT ASSETS:
    Cash and cash equivalents..............  $  1,230,999         $  1,148,663
    Accounts receivable, net of allowance
      for doubtful accounts, 2000-
      $100,000: 2001- $100,000.............    12,378,766           10,835,295
    Inventories............................     8,859,795            2,510,611
    Refundable income taxes................             0              583,624
    Deferred income taxes..................     1,118,242              645,651
    Prepaid expenses and other.............        47,688               66,956
                                             ------------         ------------
        Total current assets...............    23,635,490           15,790,800
PROPERTY, PLANT AND EQUIPMENT:
    Land, buildings and improvements.......     6,488,057            8,056,035
    Machinery and equipment................     8,731,449           12,305,571
                                             ------------         ------------
        Total property, plant and equipment    15,219,506           20,361,606
    Less accumulated depreciation..........    (6,914,345)          (8,109,815)
                                             ------------         ------------
        Property, plant and equipment-net..     8,305,161           12,251,791
NOTE RECEIVABLE............................       195,391              191,558
OTHER ASSETS...............................        54,915              354,750
                                             ------------         ------------
TOTAL......................................  $ 32,190,957         $ 28,588,899
                                             ============         ============

    LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
    Accounts payable.......................  $  6,516,541         $  3,043,263
    Accrued expenses.......................     1,603,474            1,214,219
    Accrued income taxes...................       146,287                    0
    Current credit line debt...............     5,500,000            1,355,161
    Current portion of long-term debt......     3,229,580            2,813,267
                                             ------------         ------------
        Total current liabilities..........    16,995,882            8,425,910

DEFERRED INCOME TAXES......................       522,593              522,593
LONG-TERM DEBT.............................       166,506            2,275,333
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 4,476,297 shares
      outstanding at September 30, 2001            30,895               30,895
    Additional paid-in capital.............     8,439,072            8,439,072
    Retained earnings .....................     7,715,283           11,042,746
    Treasury stock, at cost, 1,606,928
      shares at December 31, 2000, and
      1,702,815 shares at September
      30, 2001.............................    (1,679,274)          (2,147,650)
                                             ------------         ------------
        Total stockholders' equity ........    14,505,976           17,365,063
                                             ------------         ------------
TOTAL......................................  $ 32,190,957         $ 28,588,899
                                             ============         ============


                                       2

                 See notes to consolidated financial statements.




<PAGE>

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


                                             Three months ended September 30,
                                             ---------------------------------
                                                 2000                 2001
                                             ------------         ------------

Net sales..................................  $ 18,122,341         $  8,611,111
Cost of goods sold.........................    15,046,305            6,934,527
                                             ------------         ------------
  Gross profit.............................     3,076,036            1,676,584

Operating expenses:
  General and administrative...............       597,633              579,071
  Selling and marketing....................       491,662              265,041
                                             ------------         ------------
    Total operating expenses...............     1,089,295              844,112
                                             ------------         ------------

  Operating income.........................     1,986,741              832,472

Other income (expense):
  Interest income..........................        41,456               25,523
  Interest expense.........................      (104,711)            (102,679)
  Rental income............................        51,000               17,000
                                             ------------         ------------
    Total other income (expense)                  (12,255)             (60,156)
                                             ------------         ------------

    Income before income  taxes............     1,974,486              772,316

Provision for income taxes.................       780,551              293,451
                                             ------------         ------------

Net income.................................  $  1,193,935         $    478,865
                                             ============         ============

Weighted average shares outstanding             4,567,732            4,544,689

Basic earnings per share                     $       0.26         $       0.11

Diluted shares outstanding                      4,567,732            4,570,031

Diluted earnings per share                   $       0.26         $       0.10

                 See notes to consolidated financial statements.

                                       3



<PAGE>

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


                                              Nine months ended September 30,
                                             ---------------------------------
                                                 2000                 2001
                                             ------------         ------------

Net sales..................................  $ 35,468,439         $ 46,586,193
Cost of goods sold.........................    29,185,755           37,627,062
                                             ------------         ------------
  Gross profit.............................     6,282,684            8,959,131

Operating expenses:
  General and administrative...............     1,748,428            2,044,405
  Selling and marketing....................     1,040,975            1,193,374
                                             ------------         ------------
    Total operating expenses...............     2,789,403            3,237,779
                                             ------------         ------------

  Operating income.........................     3,493,281            5,721,352

Other income (expense):
  Interest income..........................        79,346               52,858
  Interest expense.........................      (219,946)            (409,991)
  Rental income............................       153,000              119,000
                                             ------------         ------------
    Total other income (expense)                   12,400             (238,133)
                                             ------------         ------------

    Income before income  taxes............     3,505,681            5,483,219

Provision for income taxes.................     1,385,860            2,155,756
                                             ------------         ------------

Net income.................................  $  2,119,821         $  3,327,463
                                             ============         ============

Weighted average shares outstanding             4,558,502            4,562,918

Basic earnings per share                     $       0.46         $       0.73

Diluted shares outstanding                      4,558,502            4,597,892

Diluted earnings per share                   $       0.46         $       0.72

                 See notes to consolidated financial statements.


                                       4


<PAGE>


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



                                              Nine months ended September 30,
                                             ---------------------------------
                                                 2000                 2001
                                             ------------         ------------
OPERATING ACTIVITIES:
  Net income...............................  $  2,119,821         $  3,327,463
  Adjustments to reconcile net income
    to net cash flows from operating
    activities:
      Depreciation and amortization........  $    845,500         $  1,195,470
      Deferred income taxes................  $    131,442         $    472,591
      Reserve for notes receivable.........  $    446,692         $          0
    Changes in assets and liabilities:
      Accounts receivable-trade............   ($4,432,709)        $  1,543,471
      Inventories..........................   ($4,325,724)        $  6,349,184
      Income taxes.........................  $  1,254,416            ($729,911)
      Prepaid expenses and other assets....      ($77,246)           ($315,270)
      Accounts payable.....................  $  4,930,223          ($3,473,278)
      Accrued expenses.....................  $  1,152,070            ($389,255)
                                             ------------         ------------
         Net cash flows provided by
           operating activities............  $  2,044,485         $  7,980,465
                                             ------------         ------------

INVESTING ACTIVITIES:
  Purchase of property, plant and equipment     ($554,485)         ($5,142,100)
  Proceeds from notes receivable...........  $      3,308         $          0
                                             ------------         ------------
         Net cash flows used in
           investing activities............     ($551,177)         ($5,142,100)

FINANCING ACTIVITIES:
  Common stock issued upon exercise of
    stock options..........................  $     90,437         $          0
  Net borrowings (payments) on credit
    line debt..............................  $  1,500,000          ($4,144,839)
  Proceeds on issuance of long term debt...  $          0           $3,472,972
  Payments on long term debt...............     ($271,172)         ($1,780,458)
  Purchase of treasury stock...............  $          0            ($468,376)
                                             ------------         ------------
         Net cash flows provided by
           (used in) financing activities..  $  1,319,265          ($2,920,701)
                                             ------------         ------------

NET INCREASE (DECREASE) IN CASH AND
  CASH EQUIVALENTS.........................  $  2,812,573             ($82,336)

CASH AND CASH EQUIVALENTS - Beginning
  of period................................  $  2,586,885         $  1,230,999
                                             ------------         ------------
CASH AND CASH EQUIVALENTS - End of period..  $  5,399,458         $  1,148,663
                                             ============         ============


Supplemental Disclosures of Cash Flow Information:

    Cash paid during the period for interest.$    219,946         $    409,991
    Income tax payments......................$          0         $  2,414,033


                 See notes to consolidated financial statements.


                                       5


<PAGE>






                                   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-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 and digital applications. 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.


                                       6


<PAGE>


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


                                       7


<PAGE>



     commercial products to support the growth of its customers in these
     industry segments.

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 $1,435,000 for the facility at P C
     Dynamics Corporation in Frisco, Texas. Interest is at the prime rate (6.00%
     at September 30, 2001) plus 1/2%. The loan is payable in monthly
     installments of principal and interest and is due in October 2001. The
     Company sold the facility at P C Dynamics in Frisco, Texas on November 8,
     2001. The mortgage loan was paid in full from the proceeds of the sale.

          The Company has an installment loan of $181,000 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 arranged bond financing of $8,100,000 from the
     Illinois Development Finance Authority to finance its facility in West
     Chicago, Illinois. Through September 30, 2001 the Company has financed
     $3,473,000. As of September 30, 2001, interest on the bond was 2.57%.

          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 (6.00%
     at September 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 September 30, 2001 was
     $1,355,000.

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.


                                       8



<PAGE>



6.        SUBSEQUENT EVENT

          The Company completed the sale of their facility located in Frisco,
     Texas on November 8, 2001, proceeds of the sale were used to satisfy the
     mortgage and pay down the line of credit.





                                       9



<PAGE>


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

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

NET SALES

     Net sales were $8,611,000 for the third quarter ended September 30, 2001, a
decrease of $9,511,000 or 53% below the third quarter of 2000. The decrease in
net sales is directly related to a drop in demand. Virtual Manufacturing
accounted for approximately $7,527,000 of net sales in the third quarter of 2001
compared to $16,166,000 of net sales in the third quarter of 2000.

     Net sales to Lucent were $4,779,000 in the third quarter of 2001 compared
to $14,179,000 in the third quarter of 2000. Net sales to Celestica were
$2,749,000 in the third quarter of 2001 compared to $2,497,000 in the third
quarter of 2000. On September 1, 2001, Lucent transitioned a segment of their
manufacturing operations at Columbus, Ohio to Celestica. Celestica is based in
Toronto, Canada. On September 1, 2001, Lucent also transferred most of their
open purchase orders with the Company to Celestica.

     Lucent accounted for 56% of the Company's net sales for the third quarter
ended September 30, 2001 compared to 78% in the third quarter of 2000. Celestica
accounted for 32% of the Company's net sales for the third quarter ended
September 30, 2001 compared to 14% in the third quarter of 2000.

GROSS PROFIT AND COST OF GOODS SOLD

     The Company's gross profit for the third quarter of 2001 was $1,677,000
compared to $3,076,000 for the third quarter of 2000. Gross Margin increased to
approximately 20% in the third quarter of 2001 from approximately 17% in the
third quarter of 2000. The increase in gross margin is a result of improved
efficiencies.

OPERATING EXPENSES

     General and administrative expenses were $579,000 or 6.7% of net sales in
the third quarter of 2001 compared to $598,000 or 3.3% of net sales in the third
quarter 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
$45,000 due to additional employees. Professional services, which include legal
and auditing fees, were down $14,000.



                                       10


<PAGE>



     Selling and marketing expenses were $265,000 or 3.1% of net sales in the
third quarter of 2001 compared to $492,000 or 2.7% of net sales in the third
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 down $238,000.

OPERATING INCOME

     Operating income was $832,000 or 9.7% of net sales in the third quarter of
2001 compared to an operating income of $1,987,000 or 11.0% of net sales in the
third quarter of 2000, a decrease of $1,155,000. The changes in operating income
reflect primarily the changes in net sales, gross profit and cost of goods sold
and operating expenses as discussed above. The change in operating income can be
summarized as follows:

Decrease in net sales                                              ($1,615,000)

Increase in gross margin                                               215,000
Increase in operating expenses                                         245,000
                                                                  ------------

Decrease in operating income                                       ($1,155,000)

INTEREST INCOME

     Interest income from short-term investments was $26,000 in the third
quarter of 2001 compared to $41,000 in the third quarter of 2000. Rental income
from the P C Dynamics facility was $17,000 in the third quarter of 2001 compared
to $51,000 in the third 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 $103,000 in the
third quarter of 2001 compared to $105,000 in the third quarter of 2000.

         INCOME TAXES

     In the third quarter of 2001 had an effective tax rate of 38% compared to
39.5% in the third quarter of 2000.



                                       11



<PAGE>


RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO THE NINE MONTHS
ENDED SEPTEMBER 30, 2000

NET SALES

     Net sales were $46,586,000 for the nine months ended September 30, 2001, an
increase of $11,118,000 or 31% above the first nine months of 2000. The increase
in net sales is directly related to "Virtual Manufacturing." Virtual
Manufacturing accounted for approximately $42,458,000 of net sales in the nine
months ended September 30, 2001 compared to $30,534,000 of net sales for the
first nine months of 2000.

     Net sales to Lucent were $38,303,000 for the nine months ended September
30, 2001 compared to $29,128,000 for the first nine months of 2000. Net sales to
Celestica were $4,194,000 for the nine months ended September 30, 2001 compared
to $2,497,000 for the first nine months of 2000. On September 1, 2001, Lucent
transitioned a segment of their manufacturing operations at Columbus, Ohio to
Celestica. Celestica is based in Toronto, Canada. On September 1, 2001, Lucent
also transferred most of their open purchase orders with the Company to
Celestica


     Lucent accounted for 82.2% of the Company's net sales for the nine months
ended September 30, 2001 compared to 81.9% for the first nine months of 2000.
Celestica accounted for 9.0% of the Company's net sales for the nine months
ended September 30, 2001 compared to 7.0% for the first nine months of 2000.

GROSS PROFIT AND COST OF GOODS SOLD

     The Company's gross profit for the nine months ended September 30, 2001 was
$8,959,000 compared to $6,283,000 for the first nine months of 2000. Gross
Margin increased to approximately 19.2% for the nine months ended September 30,
2001 from approximately 17.7% in the first nine months of 2000. $5,300,000 of
the net sales in the first nine 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 21.7%. 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 $2,044,000 or 4.4% of net sales
for the nine months ended September 30, 2001 compared to $1,748,000 or 4.9% of
net sales in the first nine months of 2000. General and administrative expenses


                                       12


<PAGE>



consist primarily of salaries and benefits, professional services, depreciation
of office equipment, computer systems and occupancy expenses. Payroll related
expenses were up $447,000 due to additional employees. Professional services,
which include legal and auditing fees, were up $205,000.

     Selling and marketing expenses were $1,193,000 or 2.6% of net sales for the
nine months ended September 30, 2001 compared to $1,041,000 or 2.9% of net sales
in the first nine months 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 $64,000.

OPERATING INCOME

     Operating income was $5,721,000 or 12.3% for the nine months ended
September 30, 2001 compared to an operating income of $3,493,000 or 9.8% of net
sales in the first nine months of 2000, an increase of $2,228,000. 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                                             $  1,969,000

Increase in gross margin                                               707,000
Increase in operating expenses                                        (448,000)
                                                                  ------------

Increase in operating income                                      $  2,228,000

INTEREST INCOME

     Interest income from short-term investments was $53,000 for the nine months
ended September 30, 2001 compared to $79,000 in the first nine months of 2000.
Rental income from the P C Dynamics facility was $119,000 for the nine months
ended September 30, 2001 compared to $153,000 in the first nine 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 $410,000 for the
nine months ended September 30, 2001 compared to $220,000 in the first nine
months of 2000.



                                       13


<PAGE>





INCOME TAXES

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

LIQUIDITY AND CAPITAL RESOURCES

     Net cash flows provided by operations was $7,980,000 for the nine months
ended September 30, 2001 compared to providing $2,044,000 for the first nine
months of 2000. Accounts receivables decreased $1,543,000. Inventories decreased
$6,349,000. $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 $3,473,000. Depreciation and amortization was $1,195,000.

     Capital expenditures mainly relating to the new West Chicago facility were
$5,142,000 for the nine months ended September 30, 2001. Capital expenditures to
improve manufacturing processes were $554,000 in the first nine months of 2000.
The Company plans to spend approximately $2,000,000 in the fourth quarter of
2001 and $3,000,000 in 2002 on capital expenditures mainly relating to the West
Chicago facility.

     The Company has a mortgage loan of $1,435,000 for the facility at P C
Dynamics Corporation in Frisco, Texas. Interest is at the prime rate (6.00% at
September 30, 2001) plus 1/2%. The loan is payable in monthly installments of
principal and interest and is due in October 2001. The Company sold the facility
at P C Dynamics in Frisco, Texas on November 8, 2001. The mortgage loan was paid
in full from the proceeds of the sale.

     The Company has an installment loan of $181,000 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 arranged financing of $8,100,000 from the Illinois
Development Finance Authority to finance its facility in West Chicago, Illinois.
Through September 30, 2001 the Company has financed $3,473,000. As of September
30, 2001 interest on the bond was 2.57%.

     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 (6.00% at September
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 September 30, 2001 was $1,355,000.



                                       14



<PAGE>



     As of September 30, 2001, the Company has $6,444,000 of debt and $1,149,000
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 $8,100,000 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
replaced approximately $2,865,000 of our current debt, which had an interest
rate of 6.00%. The interest on the bond is set weekly; the current rate for the
week ending October 20, 2001 was 2.25%.

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


                                       15


<PAGE>



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.

     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 intends to continue to grow its revenues, 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



                                       16


<PAGE>



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.



                                       17



<PAGE>


                           PART II - OTHER INFORMATION

ITEM 1:   LEGAL PROCEEDINGS

      None



                                       18




<PAGE>



ITEM 6:   EXHIBITS AND REPORTS ON FORM 8-K

      None



                                       19





<PAGE>



                                    SIGNATURE

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

                                                     M~WAVE,INC.

Date: November 9, 2001                       /s/   PAUL H. SCHMITT
                                             ---------------------------------
                                                   Paul H. Schmitt
                                                   Chief Financial Officer



                                       20



<PAGE>


                                  EXHIBIT INDEX


EXHIBIT
  NO.                                     DESCRIPTION
-------        ---------------------------------------------------------------
                     None







                                       21