SECURITIES
        AND EXCHANGE COMMISSION
 WASHINGTON,
        DC 20549
 
 FORM
        10-QSB
  
 QUARTERLY
        REPORT UNDER SECTION 13 OR 15(d)
 OF
        THE
        SECURITIES EXCHANGE ACT OF 1934
 
 
 For
                  the quarter ended September 30, 2006
              
              Commission
                  File No. 0-19944
 
 
 M~WAVE,
                  INC.(Exact
                  name of registrant as specified in its
                  charter)
 
 
 DELAWARE
              
              36-3809819(State
                  or other jurisdiction of Incorporation or organization)
              
              (I.R.S.
                  Employer identification No.)
 
 
 11533
                  Franklin Ave. Franklin Park, Illinois
              
              60131(Address
                  of principal executive offices)
              
              (Zip
                  Code)
 
 
 Registrant’s
                  telephone number including area code:
              
              (630)
                  562-5550
  Indicate
        by check mark whether the registrant (1) has filed all reports required to
        be
        filed by Section 13 and 15(d) of the Securities Exchange Act of 1934 during
        the
        preceding 12 months (or for such shorter period that the registrant was required
        to file such reports) and (2) has been subject to such filing requirements
        for
        the past 90 days.
 
 Yes x No o
 
 Indicate
                  by check mark whether the Registrant is an
              
              Yes
              NoAccelerated
                  filer (as defined by rule 12b-6 of the Act)
              
              o
              x
  Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Exchange Act). Yes o No x
  The
        registrant has 7,052,601 shares of common stock outstanding at November 10,
        2006.
  
  1
 
 **M-WAVE,
        INC.**
 
 **CONTENTS**
  PART
                  I.
              FINANCIAL
                  INFORMATIONItem
                  1.
              Financial
                  Statements:Consolidated
                  Balance Sheets as of September 30, 2006 and
                  December 31, 2005 (unaudited)
              Page
                  3Consolidated
                  Statements of Operations for the Three Months Ended
                  September 30, 2006 and 2005 (unaudited)
              Page
                  4Consolidated
                  Statements of Operations for the Nine Months Ended
                  September 30, 2006 and 2005 (unaudited)
              Page
                  5Consolidated
                  Statements of Cash Flows for the Nine Months Ended
                  September 30, 2006 and 2005 (unaudited)
              Pages
                  6Notes
                  to Consolidated Financial Statements (unaudited)
              Pages
                  7-19Item
                  2.
              Management’s
                  Discussion and Analysis of Financial
                  Condition and Results of Operations
              Pages
                  19-28Item
                  3
              Controls
                  and Procedures
              Page
                  28PART
                  II.
              OTHER
                  INFORMATIONItem
                  1
              Legal
                  Proceedings
              Page
                  29Item
                  2
              Unregistered
                  Sales of Equity Securities and Use of
                  Proceeds
              Page
                  29Item
                  3
              Defaults
                  Upon Senior Securities
              Page
                  29Item
                  4
              Submission
                  of Matters to a Vote of Security
                  Holders
              Page
                  29Item
                  5
              Other
                  Information
              Page
                  30Item
                  6
              Exhibits
              Page
                  30Signatures
              Page
                  31
  2
 *Contents*
 
 **Part
        I - Financial Information**
 **Item
        1 - Financial Statements**
 
 **M-Wave,
        Inc.**
 **CONSOLIDATED
        BALANCE SHEETS**
 **(unaudited)**
 
 **September
                  30,**
              
              **December
                  31,****2006**
              
              **2005**ASSETSCURRENT
                  ASSETS:Cash
                  and cash equivalents
              
              $
              1,848,122
              
              $
              247,731Accounts
                  receivable, net of allowance for doubtful accounts, 2006- $135,000:
                  2005-
                  $168,000
              
              $
              1,138,302
              
              $
              1,061,443Inventories,
                  net
              
              $
              1,036,192
              
              $
              2,191,013Prepaid
                  expenses and other assets
              
              $
              216,428
              
              $
              336,386Note
                  receivable, net
              
              $
              27,335
              
              $
              88,833Total
                  current assets
              
              $
              4,266,379
              
              $
              3,925,406EQUIPMENT:Equipment
              
              $
              364,156
              
              $
              392,708Less
                  accumulated depreciation
              
              
              ($119,194
              )
              
              ($81,317
              )Equipment,
                  net
              
              $
              244,962
              
              $
              311,391Land
                  held for sale
              
              $
              0
              
              $
              177,238TOTAL
              
              $
              4,511,341
              
              $
              4,414,035LIABILITIES
                  AND STOCKHOLDERS' EQUITY (DEFICIT)CURRENT
                  LIABILITIES:Accounts
                  payable
              
              $
              1,743,605
              
              $
              2,430,304Accrued
                  expenses
              
              $
              262,382
              
              $
              343,732Note
                  payable
              
              $
              0
              
              $
              1,599,208Total
                  current liabilities
              
              $
              2,005,987
              
              $
              4,373,244COMMITTMENTS
                  AND CONTINGENCIESLONG-TERM
                  DEBT, net of unamortized discount 2006-$0: 2005-$356,787
              
              $
              0
              
              $
              2,043,213COMMON
                  STOCK WARRANTS
              
              $
              0
              
              $
              239,017STOCKHOLDERS'
                  EQUITY (DEFICIT):Preferred
                  stock, $100 par value; Series A authorized, 30,000 shares; issued
                  and
                  outstanding: 2006 and 2005: 12,500 shares
              
              $
              656,800
              
              $
              656,800Series
                  B authorized, 70,000 shares; issued and outstanding: 2006-64,648
                  shares:
                  2005-0 shares
              
              $
              6,342,797
              
              $
              0Common
                  stock, $.005 par value; authorized, 20,000,000 shares; issued and
                  outstanding 2006: 7,052,601 shares; 2005 : 6,202,601
                  shares
              
              $
              43,942
              
              $
              39,692Additional
                  paid-in capital
              
              $
              14,071,394
              
              $
              12,558,653Accumulated
                  deficit
              
              
              ($16,324,409
              )
              
              ($13,211,414
              )Treasury
                  stock, at cost, 2006 and 2005: 1,735,815 shares
              
              
              ($2,285,170
              )
              
              ($2,285,170
              )Total
                  stockholders' equity (deficit)
              
              $
              2,505,354
              
              
              ($2,241,439
              )TOTAL
              
              $
              4,511,341
              
              $
              4,414,035
 
 See
        notes
        to consolidated financial statements
  3
 *Contents*
  **M-Wave,
        Inc.**
 **CONSOLIDATED
        STATEMENTS OF OPERATIONS**
 **(unaudited)**
 
 Three
                  Months Ended September 302006
              
              2005NET
                  SALES
              
              $
              2,597,939
              
              $
              3,589,809COST
                  OF GOODS SOLD
              
              
              2,006,869
              
              
              2,871,100Gross
                  profit
              
              
              591,070
              
              
              718,709OPERATING
                  EXPENSES:General
                  and administrative
              
              
              649,691
              
              
              1,339,936Selling
                  and marketing
              
              
              188,308
              
              
              236,173Total
                  operating expenses
              
              
              837,999
              
              
              1,576,109Operating
                  loss from continuing operations
              
              
              (246,929
              )
              
              (857,400
              )OTHER
                  INCOME (EXPENSE):Interest
                  income
              
              
              0
              
              
              308Interest
                  expense
              
              
              (10,165
              )
              
              (162,742
              )Impairment
                  of investment in available for sale securities
              
              
              0
              
              
              (150,000
              )Total
                  other income (expense)
              
              
              (10,165
              )
              
              (312,434
              )LOSS
                  FROM CONTINUING OPERATIONS
              
              
              (257,094
              )
              
              (1,169,834
              )Income
                  tax expense
              
              
              0
              
              
              71,328Loss
                  from continuing operations
              
              
              ($257,094
              )
              
              ($1,241,162
              )DISCONTINUED
                  OPERATIONS (Note 11)Loss
                  from discontinued operations, net of tax
              
              
              ($276,131
              )
              
              ($387,585
              )Net
                  loss
              
              
              ($533,225
              )
              
              ($1,628,747
              )Preferred
                  stock dividends
              
              
              ($83,504
              )
              $
              0Net
                  loss attributable to common shareholders
              
              
              ($616,729
              )
              
              ($1,628,747
              )BASIC
                  AND DILUTED LOSS PER COMMON SHAREContinuing
                  operations
              
              $
              (0.06
              )
              $
              (0.20
              )Discontinued
                  operations
              
              
              (0.04
              )
              
              (0.06
              )$
              (0.10
              )
              $
              (0.26
              )Weighted
                  average shares outstanding
              
              
              6,211,840
              
              
              6,201,690
 
 See
        notes
        to consolidated financial statements
  4
 *Contents*
  **M-Wave,
        Inc.**
 **CONSOLIDATED
        STATEMENTS OF OPERATIONS**
 **(unaudited)**
 
 Nine
                  Months Ended September 302006
              
              2005NET
                  SALES
              
              $
              7,176,776
              
              $
              14,112,653COST
                  OF GOODS SOLD
              
              
              5,380,916
              
              
              11,192,210Gross
                  profit
              
              
              1,795,860
              
              
              2,920,443OPERATING
                  EXPENSES:General
                  and administrative
              
              
              3,262,220
              
              
              3,351,501Selling
                  and marketing
              
              
              585,229
              
              
              765,682Total
                  operating expenses
              
              
              3,847,449
              
              
              4,117,183Operating
                  loss from continuing operations
              
              
              (2,051,589
              )
              
              (1,196,740
              )OTHER
                  INCOME (EXPENSE):Interest
                  income
              
              
              0
              
              
              6,510Interest
                  expense
              
              
              (414,012
              )
              
              (399,177
              )Impairment
                  of investment in available for sale securities
              
              
              0
              
              
              (150,000
              )Total
                  other income (expense)
              
              
              (414,012
              )
              
              (542,667
              )LOSS
                  FROM CONTINUING OPERATIONS
              
              
              (2,465,601
              )
              
              (1,739,407
              )Income
                  tax expense
              
              
              0
              
              
              71,328Loss
                  from continuing operations
              
              
              ($2,465,601
              )
              
              ($1,810,735
              )DISCONTINUED
                  OPERATIONS (Note 11)Loss
                  from discontinued operations, net of tax
              
              
              ($411,451
              )
              
              ($877,675
              )Net
                  loss
              
              
              ($2,877,052
              )
              
              ($2,688,410
              )Preferred
                  stock dividends
              
              
              ($235,943
              )
              $
              0Net
                  loss attributable to common shareholders
              
              
              ($3,112,995
              )
              
              ($2,688,410
              )BASIC
                  AND DILUTED LOSS PER COMMON SHAREContinuing
                  operations
              
              $
              (0.43
              )
              $
              (0.29
              )Discontinued
                  operations
              
              
              (0.07
              )
              
              (0.15
              )$
              (0.50
              )
              $
              (0.44
              )Weighted
                  average shares outstanding
              
              
              6,205,715
              
              
              5,985,344
  See
        notes
        to consolidated financial statements
  5
 *Contents*
 
 **M-Wave,
        Inc.**
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**
 **(unaudited)**
 
 Nine
                  Months Ended September 302006
              
              2005**OPERATING
                  ACTIVITIES:**Net
                  loss
              
              
              ($2,877,052
              )
              
              ($2,688,410
              )Adjustments
                  to reconcile net loss to net cash flows used in operating
                  activities:Loss
                  on disposal of property, plant, and equipment
              
              
              31,405
              
              
              110,000Depreciation
              
              
              58,710
              
              
              68,148Amortization
                  of intangible assets
              
              
              0
              
              
              17,500Amortization
                  of discount on note payable, bank
              
              
              0
              
              
              36,414Amortization
                  of discount on long-term debt
              
              
              356,787
              
              
              114,904Trade
                  debt forgiveness
              
              
              (323,772
              )
              
              0Stock
                  compensation recognized on options and warrants
              
              
              755,967
              
              
              12,000Provision
                  for inventory at net realizable value
              
              
              120,000
              
              
              0Fair
                  value adjustment to common stock warrants
              
              
              (4,993
              )
              
              0Impairment
                  of investment of available for sale securities
              
              
              0
              
              
              150,000Changes
                  in assets and liabilities, net of effects of acquired
                  business:Accounts
                  receivable
              
              
              (76,859
              )
              
              708,688Inventories
              
              
              1,034,821
              
              
              (1,273,868
              )Prepaid
                  expenses and other assets
              
              
              119,958
              
              
              (413,030
              )Accounts
                  payable
              
              
              (362,927
              )
              
              565,639Accrued
                  expenses
              
              
              (40,244
              )
              
              1,781Net
                  cash flows used in operating activities
              
              
              (1,208,199
              )
              
              (2,590,234
              )**INVESTING
                  ACTIVITIES:**Purchase
                  of equipment
              
              
              (21,448
              )
              
              (140,735
              )Proceeds
                  from sale of property, plant and equipment
              
              
              154,494
              
              
              0Repayments
                  on note receivable
              
              
              61,498
              
              
              0Acquisition
                  of business
              
              
              0
              
              
              (1,718,472
              )Net
                  cash flows provided by (used in) investing activities
              
              
              194,544
              
              
              (1,859,207
              )**FINANCING
                  ACTIVITIES:**Proceeds
                  from exercise of stock options and warrants
              
              
              527,000
              
              
              0Net
                  borrowings on note payable, bank
              
              
              0
              
              
              732,052Proceeds
                  from preferred stock issuance
              
              
              1,777,989
              
              
              3,150Payment
                  of preferred dividends
              
              
              (235,943
              )
              
              0Borrowings
                  on long-term debt from stockholders
              
              
              545,000
              
              
              2,400,000Net
                  cash flows provided by financing activities
              
              
              2,614,046
              
              
              3,135,202**NET
                  INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS**
              
              
              1,600,391
              
              
              (1,314,239
              )CASH
                  AND CASH EQUIVALENTS:Beginning
                  of period
              
              
              247,731
              
              
              1,321,445End
                  of period
              
              $
              1,848,122
              
              $
              7,206SUPPLEMENTAL
                  SCHEDULES OF NONCASH INVESTING AND FINANCING ACTIVITIES:Reclassification
                  of common stock warrants to stockholders' equity
              
              $
              290,494
              
              $
              0Conversion
                  of long-term debt to stockholders' equity
              
              
              4,564,808
              
              
              0Accrued
                  interest added to note payable balance
              
              
              20,601
              
              
              0Stock
                  warrants issued as discount on long-term debt and note
                  payable
              
              
              0
              
              
              515,480Acquisition
                  of Jayco Ventures, Inc:Purchase
                  price:Cash
                  purchase price
              
              $
              0
              
              $
              1,360,000Acquisition
                  costs paid
              
              
              0
              
              
              358,472$
              0
              
              $
              1,718,472Assets
                  acquired and liabilities assumed:Working
                  Capital
              
              $
              0
              
              $
              700,000Property
                  and equipment
              
              
              0
              
              
              100,000Goodwill
              
              
              0
              
              
              858,472Intangible
                  assets
              
              
              0
              
              
              60,000$
              0
              
              $
              1,718,472
 
 See
        notes
        to consolidated financial statements
  6
 *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 nine months ended September 30, 2006 are not
        necessarily indicative of the results that may be expected for the year ending
        December 31, 2006. 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, 2005.
  **2.** **Realization
        of Assets**
 
 On
        August
        25, 2006, the Company entered into an Agreement to sell its real property
        located at 544 Pine Street, Bensenville, Illinois for the purchase price
        of
        $170,000. The Company received proceeds of approximately $150,000, net of
        fees
        and closing costs.
 
 **3.** **Inventories**
 
 Inventory
        is carried at the lower of cost (first-in, first-out) or market. Substantially
        all the Company’s inventories are in finished goods held for sales to customers
        supported by annual forecasts, firm purchase orders or contracts.
  7
 *Contents*
  **4.
        Business Product Lines**
  Sales
        by
        product line for the three and nine months ended September 30, 2006 and 2005
        consisted of the following:
 
 Three
                  months ended September 30,
              
              Nine
                  months ended September 30,2006
              
              2005
              
              2006
              
              2005Digital
              
              $
              2,295,876
              
              $
              1,571,175
              
              $
              6,080,061
              
              $
              5,851,918RF
              
              
              0
              
              
              1,960,589
              
              
              275,932
              
              
              8,033,760Non
                  PCB
              
              
              141,787
              
              
              0
              
              
              241,022
              
              
              0Other
              
              
              160,276
              
              
              58,045
              
              
              579,761
              
              
              226,975Total
                  sales
              
              $
              2,597,939
              
              $
              3,589,809
              
              $
              7,176,776
              
              $
              14,112,653
 
 Sales
        within the digital product line include ten key customers, which represented
        approximately 88% of sales in the third quarter of 2006 versus approximately
        79%
        of sales in the third quarter of 2005. Sales within the Company’s top ten
        digital customers for the third quarter of 2006 were approximately 63% above
        their sales levels during the third quarter of 2005. Year to date sales for
        these key customers represented approximately 88% of sales versus approximately
        60% of year to date sales in 2005. Prior year sales included sales to two
        former
        customers that were in the process of winding down programs during the first
        half of 2005. These sales represented approximately 23% of prior year to
        date
        sales. Year to date sales for the Company’s top ten digital customers were up
        53% compared to prior year to date sales.
 
 On
        October 21, 2005, the Company sold its radio frequency (“RF”) customer list to
        American Standard Circuits (“ASC”). The
        Company follows the provisions of SFAS 144 to identify and account for
        discontinued operations. In
        accordance with SFAS 144, these activities do not constitute a discontinued
        operation, primarily because discreet financial information is not available
        or
        reasonably determinable for this division of the business. Upon the sale
        of the
        RF customer list, the Company’s continuing operations consisted primarily of the
        digital product line.
 
 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.
        Other sales primarily represent tooling charges billed to customers for either
        new products or existing products that have gone through a revision, and
        commission revenues billed per our October 2005 agreement with ASC, pursuant
        to
        which the Company sold its RF product line but continues to assist ASC in
        transitioning the RF customers throughout 2006. The Company receives a
        commission on sales made by ASC until December 31, 2006.
 
 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.
  8
 *Contents*
  **5.
        Debt**
 
 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.
 
 On
        February 23, 2005 the Company issued $1,550,000 in aggregate principal amount
        of
        promissory notes and warrants to purchase an aggregate of 434,783 shares
        of
        common stock. The issuances were made to Mercator Momentum Fund, L.P., Monarch
        Pointe, Ltd., and M.A.G. Capital, LLC (formerly Mercator Advisory Group,
        LLC),
        all of which are affiliated entities. The warrants have a term of three years
        with an exercise price of $1.15 per share. The value of the warrants was
        determined using the Black-Scholes pricing model which calculated a value
        of
        approximately $497,000 based on a fair value price of the Company’s common stock
        of $1.14, assuming an expected life of 3 years, a risk-free interest rate
        of
        3.63%, volatility of 260.7%, and no dividend yield. When combined with the
        face
        value of the notes, these warrants resulted in a debt discount with an allocated
        fair value of approximately $376,000. This debt discount was expensed using
        the
        effective interest rate method. This debt discount, combined with the stated
        interest rate of 10%, resulted in an effective interest rate of approximately
        30%.
 
 On
        June
        16, 2005, the Company issued $2,400,000 in aggregate principal amount of
        promissory notes which amended the $1,550,000 in aggregate principal amount
        of
        promissory notes, dated February 23, 2005 in exchange for an additional
        aggregate principal amount of $850,000 (provided that the warrants issued
        in
        connection with the February 23, 2005 promissory notes were not cancelled
        and
        therefore remain outstanding). In connection with the issuance of notes,
        the
        Company issued 166,666 additional warrants to purchase our common stock. The
        issuances were made to Mercator Momentum Fund, L.P., Mercator Momentum Fund
        III,
        L.P., Monarch Pointe, Ltd., and M.A.G. Capital, LLC, all of which are affiliated
        entities. The warrants have a term of three years with an exercise price
        of
        $1.02 per share. The Company granted
        registration rights to the holders of the warrants, which rights are exercisable
        as of February 1, 2006. The
        value
        of the warrants was determined using the Black-Scholes pricing model which
        calculated a value of approximately $166,000 based on a fair value price
        of the
        Company’s common stock of $1.00, assuming an expected life of 3 years, a
        risk-free interest rate of 3.76%, volatility of 261.0%, and no dividend yield.
        When combined with the face value of the notes, these warrants result in
        a debt
        discount with an allocated fair value of approximately $139,000. The total
        debt
        discount of approximately $515,000 was expensed using the effective interest
        rate method. This debt discount, combined with the stated interest rate of
        10%,
        results in an effective interest rate of approximately 21%. At December 31,
        2005, the remaining unamortized debt discount was $356,787. The remaining
        unamortized debt discount was expensed during the first quarter of
        2006.
  9
 *Contents*
  On
        November 9, 2005, the Company announced that Mercator Momentum Fund III had
        purchased the revolving financing note from Silicon Valley Bank.
  At
        December 31, 2005, the total amount outstanding on the promissory notes was
        $2,400,000. The promissory notes accrued interest at 10% per annum and were
        originally due in total on August 23, 2007, prior to the conversion to equity
        described above.
  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.
 
 The
        amount of debt converted into the Series B Convertible Preferred Stock was
        comprised of the following amounts:
 
 Promissory
                  notes issued to MAG Capital
              
              $
              2,400,000Bank
                  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.
 
 **6.
        Equity**
 
 During
        the first quarter of 2006 the Company issued an aggregate of 45,648 share
        of
        Series B Convertible Preferred Stock which is 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.
  10
 *Contents*
  The
        Company also issued an additional 19,000 shares of Series B Preferred Stock
        in
        exchange for $1,900,000 which will be held in a reserve account to be released
        by a majority of the independent directors as appropriate to fund expenses
        of
        the company.
 
 The
        Company paid fees of approximately $122,000 in connection with the combination
        of debt to equity conversion and additional equity placement.
 
 The
        Series B stock is non-voting and is entitled to receive monthly dividends
        at an
        annual rate of 15%, subject to reduction to 9% after the Registration Statement
        is declared effective by the Securities and Exchange Commission. The Company
        is
        to use its best efforts to file a registration statement covering the shares
        of
        common stock underlying the Series B Convertible Preferred Stock (the
“Conversion Shares”), the shares of common stock underlying the Warrants (the
“Warrant Shares”), and the shares of common stock underlying the Series A
        Preferred Stock issued by the Company to the Purchasers on June 17, 2004.
        Mercator waived their dividend payments for the months of May, June, August,
        and
        September 2006. For the period ended September 30, 2006, the Company paid
        dividends on the Series B shares in the amount of approximately $236,000
        for the
        months March, April, and July 2006.
 
 During
        the first nine months of 2006, Mercator did not convert any shares of their
        preferred stock into common shares. As of September 30, 2006 there are 12,500
        Series A preferred shares outstanding and 64,648 Series B preferred shares
        outstanding.
 
 Potentially
        dilutive common shares consist of the incremental common shares issuable
        upon
        conversion of convertible preferred shares, and the exercise of common stock
        options and warrants for all periods. For all periods ended September 30,
        2006
        and 2005, the basic and diluted shares reported are equal because the common
        share equivalents are anti-dilutive due to the net losses for each period.
        Below
        is a tabulation of the potentially dilutive securities:
 
 3
                  months ended September 30,
              
              9
                  months ended September 30,2006
              
              2005
              
              2006
              
              2005Weighted
                  average shares outstanding
              
              
              6,211,840
              
              
              6,201,690
              
              
              6,205,715
              
              
              5,985,344Options
                  in the money, net
              
              
              174,759
              
              
              117,771
              
              
              192,382
              
              
              162,807Warrants
                  in the money, net
              
              
              387,443
              
              
              2,525
              
              
              411,034
              
              
              17,584Preferred
                  shares convertible to Common
              
              
              8,183,291
              
              
              1,275,510
              
              
              8,183,291
              
              
              1,275,510Total
                  Outstanding and PotentiallyDilutive
                  shares
              
              
              14,957,333
              
              
              7,597,496
              
              
              14,992,422
              
              
              7,441,245
  11
 *Contents*
  With
        respect to the preferred shares convertible to common shares, the numbers
        of
        Conversion Shares and Warrant Shares that each of Mercator Momentum Fund,
        L.P.,
        Mercator Momentum Fund III, L.P., Monarch Pointe Fund, Ltd., and Mercator
        Advisory Group, LLC (each a “Purchaser” and collectively the “Purchasers”) may
        acquire at any time are subject to limitation in the Certificate of Designations
        and in the Warrants, respectively, so that the aggregate  number
        of
        shares of Common Stock of which such Purchaser and all persons affiliated
        with
        such Purchaser have beneficial ownership (calculated pursuant to Rule 13d-3
        of
        the Securities Exchange Act of 1934, as amended) does not at any time exceed
        9.99% of the Company's then outstanding Common Stock.
  The
        warrants to purchase a combined 601,449 shares had been previously recorded
        as a
        liability at the fair value of the warrants issued to M.A.G. Capital, LLC
        in
        conjunction with the promissory notes. At December 31, 2005, the fair value
        of
        these warrants was determined to be approximately $239,000. In accordance
        with
        SFAS 133 guidance, the Company is required to adjust the fair value of the
        warrants at each reporting period. For the nine months ended September 30,
        2006,
        the Company reduced interest expense by approximately $5,000 for the reduction
        in the warrants fair value.
 
 On
        March
        31, 2006, the Company received a waiver from M.A.G. Capital, LLC on all
        penalties and fees associated with the Company’s failure to register the warrant
        shares. As a result, the Company reclassified the value of these warrants
        from
        liabilities to equity.
 
 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 2,131,449 warrants were re-priced
        from between $1.02 and $1.27 per share to $0.62 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.
 
 During
        the third quarter of 2006, the Company’s Board of Directors amended the
        Purchaser’s maximum ownership percentage of the Company’s outstanding Common
        Stock from 9.99% to 19.99%. On September 29, 2006, M.A.G. Capital, LLC,
        exercised 850,000 of their warrants. The Company received proceeds of
        approximately $527,000. As of September 30, 2006, M.A.G. Capital, LLC still
        held
        1,281,449 warrants.
  **7.
        Litigation**
  12
 *Contents*
  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.
 
 **8.
        Adoption of Accounting Standard and Share-Based
        Compensation**
 
 Under
        M-Wave’s share-based long-term incentive compensation plans (“incentive plans”)
        M-Wave grants non-qualified stock options to certain employees.
 
 Shares
        available for future issuance to M-Wave’s employees under existing plans were
        139,111 shares at September 30, 2006.
 
 Effective
        January 1, 2006, we adopted Financial Accounting Standards Board (“FASB”)
        Statement No. 123 (revised), “Share-Based Payment” (“SFAS 123R”). Among its
        provisions, SFAS 123R requires us to recognize compensation expense for equity
        awards over the vesting period based on their grant-date fair value. Prior
        to
        the adoption of SFAS 123R, we utilized the intrinsic-value based method of
        accounting under APB Opinion No. 25, “Accounting for Stock Issued to Employees”
and related interpretations, and adopted the disclosure requirements of SFAS
        No.
        123, “Accounting for Stock-Based Compensation” (“SFAS 123”). Under the
        intrinsic-value based method of accounting, compensation expense for stock
        options granted to our employees was measured as the excess of the quoted
        market
        price of M-Wave’s common stock at the grant date over the amount the employee
        must pay for the stock. M-Wave’s policy is to grant M-Wave stock options at fair
        value on the date of grant and as a result no compensation expense was
        historically recognized for stock options.
 
 We
        adopted SFAS 123R in the first quarter of 2006 using the modified prospective
        approach. Under this transition method, the measurement and our method of
        amortization of costs for share-based payments granted prior to, but not
        vested
        as of January 1, 2006, would be based on the same estimate of the grant-date
        fair value and the same amortization method that was previously used in our
        SFAS
        123 pro forma disclosure. Results for prior periods have not been restated
        as
        provided for under the modified prospective approach. For equity awards granted
        after the date of adoption, we will amortize share-based compensation expense
        on
        a straight-line basis over the vesting term.
 
 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. Prior to the adoption of SFAS 123R, the effect of
        forfeitures on the pro forma expense amounts was recognized based on estimated
        forfeitures.
 
 The
        Company recognized share-based compensation expense of approximately $18,000
        and
        $471,000 in general and administrative expenses in the statement of operations
        for the three and nine months ended September 30, 2006 respectively. Basic
        and
        diluted earnings per share for the three and nine months ended September
        30,
        2006 would have been a loss of $0.10 per share and $0.43 per share, if the
        Company had not adopted SFAS 123R, compared to reported basic and diluted
        earnings per share of a loss of $0.10per share and $0.50 per share,
        respectively.
  13
 *Contents*
  The
        following table shows the effect on net income for the three and nine months
        ended September 30, 2005 had compensation expense been recognized based upon
        the
        estimated fair value on the grant date of awards, in accordance with SFAS
        123,
        as amended by SFAS No. 148 “Accounting for Stock-Based Compensation - Transition
        and Disclosure”:
  **Period****Ended
                  September 30, 2005****3
                  Months**
              
              **9
                  Months**Net
                  loss, as reported
              
              
              ($1,628,747
              )
              
              ($2,688,410
              )Add:
                  Total share-based employee compensation included in reported net
                  income,
                  net of taxes
              
              
              0
              
              
              0Less:  Total
                  share-based employee compensation determined under fair-value based
                  method
                  for all awards, net of taxes
              
              
              (291,233
              )
              
              (361,996
              )Pro
                  forma net loss
              
              
              ($1,919,980
              )
              
              ($3,050,406
              )
 
 Earnings
        per share as reported for basic and diluted was a loss of $0.26 per share
        for
        the three months ended September 30, 2005 and $0.45 per share for the nine
        months ended September 30, 2005. Pro forma Earnings per share for basic and
        diluted was a loss of $0.31 per share for the three months ended September
        30,
        2005 and $0.51 per share for the nine months ended September 30,
        2005.
 
 As
        of
        September 30, 2006, there was approximately $95,000 of total unrecognized
        compensation cost related to non-vested share-based compensation arrangements
        granted under the incentive plans. That cost is expected to be recognized
        over a
        weighted-average period of approximately 7.20 months.
 
 The
        fair
        value of M-Wave stock options was estimated at the date of grant using the
        Black-Scholes-Merton option-valuation model. The Company did not grant any
        options during the second or third quarter of 2006. The table below outlines
        the
        weighted average assumptions for options granted during the three and nine
        months ended September 30, 2006 and 2005:
  14
 *Contents*
 
 3
                  months ended September 30,
              
              9
                  months ended September 30,2006
              
              2005
              
              2006
              
              2005Weighted
                  Average Assumptions:Risk-free
                  interest rate
              
              
              0.00
              %
              
              4.09
              %
              
              4.50
              %
              
              4.03
              %Expected
                  term (in years)
              
              
              0.0
              
              
              5.0
              
              
              5.0
              
              
              5.0Expected
                  volatility
              
              
              0.0
              %
              
              292.8
              %
              
              275.5
              %
              
              295.3
              %Expected
                  dividend yield
              
              
              0
              %
              
              0
              %
              
              0
              %
              
              0
              %Fair
                  value
              
              $
              0.00
              
              $
              0.98
              
              $
              0.62
              
              $
              1.02
  The
        expected term of the options represents the estimated period of time until
        exercise and is based on historical experience of similar awards, giving
        consideration to the contractual terms, vesting schedules and expectations
        of
        future employee behavior. Expected stock price volatility is based on a
        combination of historical volatility of M-Wave’s stock. The risk-free interest
        rate is based on the implied yield available on U.S. Treasury zero-coupon
        issues
        with an equivalent remaining term.
  M-Wave
        stock options expire in 5 years and prior to the 2006 grant year were generally
        exercisable 50 percent in first year, and 25 percent in each of the next
        two
        years, with full vesting after three years. Beginning in 2006, new stock
        option
        grants generally vested immediately at grant date.
  The
        following table summarizes M-Wave option activity for employees during the
        nine
        months ended September 30, 2006:
  Options
              
              Shares
              
              Weighted
                  Average
                Exercise
                  Price
                per
                  Share
              
              Weighted
                  Average
                Remaining
                  Contractural
                Term
                  (years)
              
              Aggregate
                Intrinsic
                ValueOutstanding
                  at January 1, 2006
              
              
              1,199,517
              
              $
              1.14Granted
              
              
              665,323
              
              
              0.68Exercised
              
              
              -
              
              
              0Forfeited
                  or expired
              
              
              (27,650
              )
              
              7.61Outstanding
                  at September, 2006
              
              
              1,837,190
              
              $
              0.88
              
              
              3.07
              
              $
              16,200Exercisable
                  at September 30, 2006
              
              
              1,781,217
              
              $
              0.87
              
              
              3.07
              
              $
              15,513
  The
        aggregate intrinsic value in the table above is before income taxes, based
        on
        M-Wave’s closing stock price of $0.66 as of the last business day of the period
        ended September 30, 2006.
  15
 *Contents*
  **9.
        Taxes**
 
 Management
        believes that the Company has adequate net operating loss carry forwards
        available that, if utilized, would offset any taxable income generated by
        the
        Company throughout the remainder of 2006.
 
 **10.
        Reclassifications**
 
 Certain
        items in the 2005 financials have been reclassified to conform to the 2006 presentation
        which treats the DBS division as discontinued operations.
 
 **11.
        Discontinued Operations**
 
 On
        February 25, 2005 M-Wave, Inc. through its wholly owned subsidiary, M-Wave
        DBS,
        Inc., an Illinois corporation purchased substantially all of the assets of
        Jayco
        Ventures Inc. (JVI), for cash of approximately $1,360,000.
 
 M-Wave
        DBS, Inc. was initially reconstituted a distributor, virtual manufacturer
        and
        global supplier to the Digital Broadcasting Satellite (DBS) industry that
        includes a growing number of proprietary product lines including the TrunkLine
        Millenium® commercial SMATV head end gear, JVI L-Band passive splitters and
        multi-switches, Treadclip plastic fasteners, Signaloc® meters used in DBS
        installations and the Kompressor® universal RF connector line.
 
 The
        purchase price was allocated to the assets acquired and liabilities assumed
        as
        of September 30, 2005, was as follows:
 
 Working
                  Capital
              
              $
              700,000Property
                  and Equipment
              
              
              100,000Intangible
                  assets
              
              
              60,000Goodwill
              
              
              858,472$
              1,718,472
 
 Accounts
        receivable and inventories were recorded at the net realizable value. Equipment
        was recorded at an appraised value and was to be depreciated over an economic
        useful life of five years. Intangible assets consisted primarily of patents
        and
        customer lists which were recorded based on an appraised value and were to
        be
        amortized over an economic useful life of two years. Goodwill represents
        the
        excess of purchase price over the assets acquired of approximately $500,000,
        plus additional acquisition costs incurred by the Company for professional
        fees
        and the assumption of liabilities specific to key suppliers of approximately
        $358,000. The total purchase price as previously reported as of December
        31,
        2005 was approximately $1,718,000.
  16
 *Contents*
  After
        attempts to finance and establish the business through July 2005, the Company
        determined the assets and business could not be re-established, and in December
        2005 determined to discontinue M-Wave DBS, Inc., formerly reported as the
        DBS
        segment. In connection with that change, substantially all employees of DBS
        were
        terminated in December 2005,  and
        the
        remaining assets located in warehouses in California and Florida were moved
        to
        the Company’s Franklin Park location until the inventory will be completely
        liquidated.
 
 M-Wave
        DBS, Inc. operated as a wholly owned Illinois subsidiary. The Company's
        remaining core business continues to be printed circuit board and related
        custom
        component business is known informally as M-Wave EMG [Electro-Mechanical
        Group].
        Concurrently, Robert Duke serves as President-EMG division.
 
 The
        Company follows the provisions of SFAS 144 to identify and account for
        discontinued operations. The Company carries assets and liabilities related
        to
        its discontinued DBS operations on its balance sheet as they continue efforts
        to
        liquidate these assets and satisfy these liabilities in an orderly manner.
        These
        assets are carried at their net book value which approximates its estimated
        net
        realizable value less estimated costs to sell these assets, and are included
        with assets from continuing operations in the accompany consolidated balance
        sheet. These liabilities are carried at their net book value which approximates
        the full amount of consideration necessary to settle these obligations. The
        approximate carrying value of these assets and liabilities at September 30,
        2006
        and December 31, 2005 is below:
  2006
              
              2005Accounts
                  Receivable
              
              $
              76,000
              
              $
              308,000Inventory
              
              
              169,000
              
              
              1,832,000Prepaid
                  Expenses
              
              
              4,000
              
              
              230,000Total
                  assets
              
              $
              249,000
              
              $
              2,370,000Accounts
                  Payable
              
              $
              0
              
              $
              1,232,000Accrued
                  Expenses
              
              
              0
              
              
              6,000Total
                  Liabilities
              
              $
              0
              
              $
              1,238,000
 
 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. Moreover, it stated that Jason Cohen, its former divisional
        president, terminated, by mutual agreement with the Company, his employment
        contract.
  The
        Company is actively pursuing collections on outstanding accounts receivable
        from
        its former DBS customers and is in the process of executing its strategic
        plans
        to liquidate the DBS inventory. 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 approximates the current carrying vale 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.
  17
 *Contents*
  The
        net
        loss from discontinued operations for the three and nine months ended September
        30, 2006 and 2005 are as follows:
 
 3
                  Months Ended September 30,
              
              9
                  Months Ended September 30,2006
              
              2005
              
              2006
              
              2005Net
                  sales
              
              $
              67,000
              
              $
              1,393,000
              
              $
              1,071,000
              
              $
              2,460,000Cost
                  of goods sold
              
              
              269,000
              
              
              1,250,000
              
              
              1,532,000
              
              
              2,176,000Gross
                  (loss)/profit
              
              
              (202,000
              )
              
              143,000
              
              
              (461,000
              )
              
              284,000Operating
                  income/(expenses)
              
              
              (74,000
              )
              
              (531,000
              )
              
              50,000
              
              
              (1,162,000
              )Income/(loss)
                  from Discontinued operations
              
              $
              (276,000
              )
              $
              (388,000
              )
              $
              (411,000
              )
              $
              (878,000
              )
 
 The
        loss
        from discontinued operations resulted in an increase to the basic and diluted
        loss per common share of approximately $0.04 and $0.06 for the three months
        ended September 30, 2006 and 2005. The loss from discontinued operations
        resulted in an increase to the basic and diluted loss per common share of
        approximately $0.07 and $0.15 for the nine months ended September 30, 2006
        and
        2005 respectively.
 
 **12.
        New Accounting Pronouncements**
 
 In
        June
        2006, the FASB issued Interpretation No. 48 (FIN 48), Accounting for Uncertainty
        in Income Taxes - an interpretation of SFAS 109, Accounting for Income Taxes.
        FIN 48 prescribes a recognition threshold and measurement attribute for the
        financial statement recognition and measurement of a tax position taken or
        expected to be taken in a tax return. FIN 48 developed a two-step process
        to
        evaluate a tax position and also provides guidance on derecognition,
        classification, interest and penalties, accounting in interim periods,
        disclosure, and transition. This interpretation is effective for the Company's
        fiscal year ending December 31, 2007. Management has not yet determined the
        impact that adoption will have on the Company’s financial statements.
  18
 *Contents*
  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.
 
 **Item
        2:**
 
 **MANAGEMENT'S
        DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
        OPERATIONS**
  We
        are a
        value added service provider of high performance printed circuit boards used
        in
        a variety of digital and high frequency communications applications for a
        variety of telecommunications and industrial electronics applications. We
        satisfy our customers’ requirements for telecommunications and industrial
        electronics printed circuit boards, either rigid, flexible or bonded, by
        directly booking orders, supervising and inspecting outsourced manufacture
        of
        such boards through our global base of production partners located in China
        and
        Southeast Asia, and domestically, through pre-screened production
        partners.
  Our
        business model is referred to as Virtual Manufacturing. Through Virtual
        Manufacturing we contractually supply a wide range of printed circuit board
        needs of our customers, creating a “pipeline” between those customers and
        production that covers early prototypes and pilot production, directly into
        mass
        production, offering one seamless source. We deliver products when our customers
        need them through consignment inventory control, demand pull, just in time,
        in
        plant storehouses, supplier or vendor managed inventory and other supply-chain
        programs.
  We
        began
        Virtual Manufacturing during 2000 by developing subcontracting relationships
        with predominately Asian global manufacturers, from our base in Singapore.
        In
        virtual manufacturing, we assume many of the pre and post-production services
        of
        a manufacturer, while outsourcing the physical processes either adjunct to
        our
        personnel or in relatively close proximity to assure the highest quality
        fulfillment.
  Our
        manufacturing partners maintain most certificates for quality, environmental
        and
        safety, including ISO, QS, UL, CE and others. We and 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.
  19
 *Contents*
  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 extended our product lines to include custom or engineered electronic
        products and certain commodities sourced from Asia on behalf of existing
        accounts. These products are procured on a pan-Asian basis and cover a broad
        range of components that include LED’s, wire bonding services, harnesses,
        extruded housing products, plastics, metals, assemblies, 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 though
        midsize
        firms with little presence or capability in Asia that elect us as their
        procurement partners.
 
 **RESULTS
        FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006 COMPARED TO THE THREE MONTHS
        ENDED
        SEPTEMBER 30, 2005**
 
 **Net
        Sales**
 
 Net
        sales
        were approximately $2,598,000 for the quarter ended September 30, 2006 versus
        approximately $3,590,000 during the third quarter of 2005, a decrease of
        approximately $992,000 or 27.6%. The sales within our RF business was the
        primary factor in the sales decline, with RF sales down approximately $1,961,000
        during the third quarter of 2006 compared to the third quarter of 2005 due
        to
        the sale of the RF business in October 2005. Sales within our digital product
        line increased approximately $725,000 during the third quarter of 2006, an
        increase of approximately 46% of prior year third quarter sales with stronger
        sales reported across all of our top digital customers. Sales within our
        non-PCB
        product line were approximately $142,000 above revenues for the third quarter
        of
        2005 due to the introduction of the non-PCB products into our business at
        the
        end of 2005. As this line grows, we expect to achieve long-term revenues
        to
        approach those currently experienced within our digital product line. Other
        revenues for the third quarter of 2006 were approximately $102,000 above
        other
        revenues recorded in the third quarter of 2005. Primary drivers in the increase
        were VAP commissions of approximately $38,000 and tooling revenues that were
        approximately $60,000 above the third quarter of 2005. Pursuant to our sale
        of
        the RF product line in October 2005, we receive commissions on shipments
        made to
        these customers in 2006 as we continue to assist in the transition of these
        customers.
 
 The
        non-PCB sales recorded in the third quarter were the result of our ongoing
        efforts to effectively grow our core business into other products that we
        initiated during the latter half of 2005. We continue to focus our efforts
        on
        growing our core business and customer base, primarily by concentrating efforts
        on expanding our customer base within our digital product line. In addition,
        we
        are expanding our global sourcing efforts beyond printed circuit boards into
        other product lines such as extrusions, wire harnesses, castings, spinning’s,
        etc. Sourcing of these additional product lines, initially to our existing
        customer base, we believe will improve our operating results by providing
        increased profits on these products than we experienced with our former RF
        product line.
  20
 *Contents*
  **Gross
        Profit and Cost of Goods Sold**
 
 The
        Company’s gross profit for the third quarter of 2006 was approximately $591,000,
        or 22.7% of net sales, compared to a gross profit of approximately $719,000,
        or
        20.0% of net sales, for the third quarter of 2005. The sale of our RF business
        in October 2005 was the primary factor in the decline in gross profit dollars,
        and increase in our gross profit margins, as the RF business typically
        represented higher volume, lower margin mix when compared to the digital
        product
        line. Margins within our digital product line decreased by approximately
        1.7%
        over the prior year as we continue to focus sales efforts on our higher margin
        customers.
 
 **Operating
        Expenses**
 
 General
        and administrative expenses were approximately $650,000 or 25.0% of net sales
        in
        the third quarter of 2006 compared to approximately $1,340,000 or 37.3% of
        net
        sales in the third quarter of 2005, a decrease of approximately $690,000.
 
 General
        and administrative expenses consist primarily of salaries and benefits,
        professional services, depreciation of office, equipment and computer systems
        and occupancy expenses. In comparison to the third quarter of 2005, payroll
        related expenses decreased approximately $20,000 due to lower headcount and
        salary reductions taken in the fourth quarter of 2005. Professional services,
        which include legal, auditing, and consulting fees, decreased approximately
        $390,000 in 2006 compared to prior year expenses. Charges related to special
        projects were approximately $32,000 in the third quarter of 2006 compared
        to
        approximately $40,000 during the third quarter of 2005, a decrease of
        approximately $8,000. These expenses include fees related to our successful
        appeal of our Nasdaq de-listing, fees paid to our Special Committee,
        professional fees related to fairness opinions, and legal fees related to
        corporate development activity as we continue to review strategic options
        including the sale or merger of all or part of the Company as described in
        previous filings. Public company related costs such as investor relations,
        Sarbanes-Oxley expenses, and board and committee fees were approximately
        $59,000
        in the third quarter of 2006 compared to approximately $57,000 during the
        third
        quarter of 2005, an increase of approximately $2,000 during the third quarter
        of
        2006. We recorded stock compensation expenses during the third quarter of
        2006
        of approximately $66,000 compared to $0 for the third quarter of 2005 related
        to
        Board of Director and employee stock option grants as required by the new
        SFAS123R reporting requirements. We recorded a loss on the sale of our
        Bensenville land during the third quarter of 2006 of approximately $7,000.
        During the third quarter of 2005 we had recorded a loss on the sale of our
        Bensenville building of approximately $110,000. Other operating expenses
        decreased approximately $237,000 during the third quarter of 2006 compared
        to
        the third quarter of 2005 primarily due to lower operating costs at our new
        Franklin Park facility.
  21
 *Contents*
  Selling
        and marketing expenses were approximately $188,000 or 7.2% of net sales in
        the
        third quarter of 2006 compared to approximately $236,000 or 6.6% of net sales
        in
        the third quarter of 2005. Selling and marketing expenses include the cost
        of
        salaries, advertising and promotion of the Company’s products, and commissions
        paid to independent sales organizations. In comparison to the third quarter
        of
        2006, commission paid to independent sales organizations decreased approximately
        $35,000; payroll-related expenses decreased approximately $10,000 due to
        headcount and pay reductions. Costs related to our Singapore office increased
        approximately $3,000 during the third quarter related to increased staffing
        levels and operational costs of the office that was established during the
        prior
        year. Other sales expenses, including travel related expenses decreased
        approximately $6,000 in the third quarter of 2006 versus 2005.
 
 **Operating
        Loss**
 
 Operating
        loss from continuing operations was approximately $247,000 in the third quarter
        of 2006 compared to an operating loss of approximately $857,000 in the third
        quarter of 2005. The decrease in operating loss of approximately $610,000
        was
        primarily related to lower selling and administrative expenses of approximately
        $738,000 described above.
 
 **Interest
        Income**
 
 We
        recorded no interest income during the third quarter of 2006 or 2005.
 
 **Interest
        Expense**
  We
        recorded approximately $10,000 in interest expense during the third quarter
        of
        2006, compared to approximately $163,000 during the third quarter of 2005.
        Primary factor in the decrease in interest expense related to our conversion
        of
        our debt to equity in March 2006. Included in prior year interest expense
        was
        approximately $53,000 in non-cash interest expense recorded in the third
        quarter
        of 2005. The 2005 expenses are related to the amortization on warrants issued
        to
        Silicon Valley Bank of approximately $12,000 related to the financing agreement,
        and approximately $41,000 related to the amortization of long-term debt discount
        during the third quarter of 2005.
  22
 *Contents*
  **Other
        Income/Expense**
 
 The
        Company recorded approximately $84,000 in preferred dividend expense during
        the
        third quarter of 2006 related to its issuance of Series B preferred stock
        to
        M.A.G. Capital, LLC, and its affiliates, in March 2006. We did not record
        any
        other income/expense in the third quarter of 2005.
 
 **Income
        Taxes**
 
 During
        the third quarter of 2006 and 2005, the Company recorded no income tax expense.
 
 **RESULTS
        FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 COMPARED TO THE NINE MONTHS
        ENDED
        SEPTEMBER 30, 2005**
 
 **Net
        Sales**
 
 Net
        sales
        were approximately $7,177,000 for the nine months ended September 30, 2006
        versus approximately $14,113,000 during the first nine months of 2005, a
        decrease of approximately $6,936,000 or 49.1%. The sales within of our RF
        business was the primary factor in the sales decline, with RF sales down
        approximately $7,758,000 in the nine months of 2006 versus 2005 due to the
        sale
        of the RF business in October 2005. The increase in sales of our digital
        products was approximately $230,000 during the first nine months of 2006
        compared to 2005. In the prior year, we recorded sales to two former customers
        that were winding down programs. Prior year revenues for these two former
        customers were approximately $1,345,000 in the first nine months of 2005.
        Sales
        to our remaining customer base increased by approximately $1,115,000 during
        the
        first nine months of 2006, or approximately 53% above prior year sales levels
        with these existing customers, with stronger sales reported across the board
        of
        our digital product line. Sales within our non-PCB product line were
        approximately $251,000 for the first nine months of 2006 due to the introduction
        of these products into our business at the end of 2005. As this line grows,
        we
        expect to achieve long-term revenues to approach those currently experienced
        within our digital product line. Other revenues for the first nine months
        of
        2006 were approximately $353,000 above other revenues recorded in the first
        nine
        months of 2005. Primary drivers in the increase were VAP commissions of
        approximately $193,000 and tooling revenues of approximately $123,000 above
        prior year levels. Pursuant to our sale of the RF product line in October
        2005,
        we receive commissions on shipments made to these customers in 2006 as we
        continue to assist in the transition of these customers.
  23
 *Contents*
  **Gross
        Profit and Cost of Goods Sold**
 
 The
        Company’s gross profit for the first nine months of 2006 was approximately
        $1,796,000, or 25.0% of Net Sales, compared to a gross profit of approximately
        $2,920,000, or 20.7% of Net Sales, for the first nine months of 2005. The
        sale
        of our RF business in October 2005 was the primary factor in the decline
        in
        gross profit dollars, and increase in our profit margins, as the RF business
        typically represented higher volume, lower margin mix when compared to the
        digital product line.
 
 **Operating
        Expenses**
 
 General
        and administrative expenses were approximately $3,262,000 or 45.5% of net
        sales
        in the first nine months of 2006 compared to approximately $3,352,000 or
        23.7%
        of net sales in the first nine months of 2005, a decrease of approximately
        $90,000.
 
 General
        and administrative expenses consist primarily of salaries and benefits,
        professional services, depreciation of office, equipment and computer systems
        and occupancy expenses. In comparison to the first nine months of 2005, payroll
        related expenses decreased $235,000 due to lower headcount and salary reductions
        taken in the fourth quarter of 2005. Professional services, which include
        legal,
        auditing, and consulting fees, decreased approximately $469,000 in 2006 compared
        to prior year expenses. Charges related to special projects were approximately
        $700,000 for the first nine months of 2006 compared to approximately $105,000
        for the first nine months of 2005, an increase of approximately $595,000.
        These
        expenses include fees related to our successful appeal of our Nasdaq de-listing,
        fees paid to our Special Committee, professional fees related to fairness
        opinions on potential transactions, and legal fees related to continued
        corporate development activity as we continue to explore various strategic
        options, including the sale or merger of all or part of the Company as described
        in previous filings. Public related costs such as investor relations,
        Sarbanes-Oxley expenses, and board and committee fees were approximately
        $227,000 for the first nine months of 2006 compared to approximately $233,000
        for the first nine months of 2005, a decrease of approximately $6,000. We
        recorded stock compensation expenses during the first nine months of 2006
        of
        approximately $755,000 compared to $0 for the first nine months of 2005.
        Approximately $471,000 of stock compensation was related to Board of Director
        and employee stock option grants as required by the new SFAS123R reporting
        requirements, while the remaining $285,000 in stock compensation expense
        was
        related to the re-pricing of previously issued warrants on debt issued to
        MAG
        Capital, LLC when we converted our debt to equity earlier in 2006. We recorded
        losses on asset sales during the first nine months of 2006 of approximately
        $31,000 compared to approximately $110,000 during the first nine months of
        2005,
        a decrease of approximately $69,000. Other expenses decreased approximately
        $661,000 during the first nine months of 2006 primarily related to reduced
        operating costs for our new Franklin Park facility.
  24
 *Contents*
  Selling
        and marketing expenses were approximately $585,000 or 8.1% of net sales in
        the
        first nine months of 2006 compared to approximately $766,000 or 5.4% of net
        sales in the first nine months of 2005. 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 2005, commission paid to independent sales organizations decreased
        approximately $119,000; payroll-related expenses decreased approximately
        $89,000
        due to headcount and pay reductions. Costs related to our Singapore office
        increased approximately $41,000 during the first nine months of 2006 related
        to
        the full year impact of additional support staff as well as the full year
        impact
        of operational costs of the office that was established during the prior
        year.
        Travel related expenses decreased approximately $14,000 in the first nine
        months
        of 2006 versus 2005.
 
 **Operating
        Loss**
 
 Operating
        loss from continuing operations was approximately $2,052,000 in the first
        nine
        months of 2006 compared to an operating loss of approximately $1,197,000
        in the
        first nine months of 2005. Primary factors to the increased operating loss
        include the following; reduction of sales and gross profit dollars pursuant
        to
        the sale of our RF product line in October 2005; special project costs related
        to corporate development and stock compensation increased by approximately
        $595,000 and $756,000 in the first nine months of 2006 respectively compared
        to
        the prior period as discussed in the operating expense section above.
 
 **Interest
        Income**
 
 We
        recorded no interest income during the first nine months of 2006. Interest
        income of approximately $7,000 was recorded in the first nine months of 2005
        related to income received on our interest bearing bank accounts.
 
 **Interest
        Expense**
 
 Interest
        expense was approximately $414,000 in the first nine months of 2006, primarily
        related to the financing costs with Mercator versus approximately $399,000
        in
        the first nine months of 2005. The Company recorded non-cash interest expense
        of
        approximately $357,000 in the first nine months of 2006 related to expensing
        of
        the unamortized portion of Long Term Debt due to the conversion to equity
        compared to $151,000 in the first nine months of 2005. The 2005 expenses
        are
        related to the amortization on warrants to Silicon Valley Bank for approximately
        $36,000 related to the financing agreement, and approximately $115,000 related
        to the amortized discount recognized related to our issuance of long-term
        debt
        in 2005.
  25
 *Contents*
  **Other
        Income/Expense**
 
 The
        Company recorded approximately $236,000 in preferred dividend expense during
        the
        first nine months of 2006 related to its issuance of Series B preferred stock
        to
        M.A.G. Capital, LLC, and its affiliates in March 2006. We did not record
        any
        other income/expense in the first nine months of 2005.
 
 **Income
        Taxes**
 
 During
        the first nine months of 2006 and 2005, the Company recorded no income tax
        expense.
 
 **Liquidity
        and Capital Resources**
 
 Net
        cash
        used by operations was approximately $1,208,000 for the first nine months
        of
        2006 compared to approximately $2,590,000 used by operations for the first
        nine
        months of 2005.
 
 Accounts
        Receivable increased approximately $77,000 due to increased sales levels
        during
        the third quarter. Inventories decreased approximately $1,155,000 related
        to
        decreased activity in “RF” and the ongoing liquidation of DBS inventory.
        Accounts Payable decreased approximately $363,000 primarily due to the decreased
        activity in “RF” and DBS businesses.
 
 Net
        cash
        provided by investing activities was approximately $195,000 primarily reflecting
        the sale of our Bensenville land during the third quarter of 2006 for net
        proceeds of approximately $150,000 and repayment of notes receivable for
        the
        first nine months of 2006 of approximately $61,000 compared to investing
        activities used in 2005 of approximately $1,859,000. Capital expenditures
        were
        approximately $21,000 in the first nine months of 2006 compared to approximately
        $141,000 in the first nine months of 2005. Prior year activity was primarily
        related to the acquisition of the Jayco business in February 2005 of
        approximately $1,718,000.
 
 Net
        cash
        provided by financing activities was approximately $2,614,000 during the
        first
        nine months of 2006, primarily through the issuance of our Series B preferred
        stock during the first quarter and MAG’s warrant exercise during the third
        quarter. Net cash provided by financing activities in 2005 was approximately
        $3,135,000 related to the issuance of long-term debt of $2,400,000 and increases
        in our former credit facility of approximately $732,000 during the nine months
        of 2005.
  26
 *Contents*
  Currently
        the Company is committed to growing its core business, as it relates to the
        continuing operations of its digital product line and introduction of non-PCB
        products that we initiated during the fourth quarter of 2005. The Company’s
        Special Committee is also reviewing strategic options including the sale
        or
        merger of all or part of the Company. However, if the Company is unable to
        secure adequate financing to grow its core business, or if the Special Committee
        does not approve a suitable strategic option, the Company may be forced to
        modify its strategic growth plan.
 
 Our
        ability to fund working capital will depend on our future performance, which
        is
        subject to general economic conditions, financial conditions, our customers,
        actions of our domestic and international competitors, and other factors
        that
        are beyond our control. Our ability to fund operating activities is also
        dependent upon our ability to effectively manage our expenses in relation
        to
        revenues, and our ability to access external sources of financing.
 
 The
        Company incurred substantial special project costs during the first nine
        months
        of 2006 related to special committee fees, professional fees, legal, audit
        and
        cost for merger and acquisition activity as detailed in the above comments.
        These costs are anticipated to continue until an appropriate strategic option
        can be successfully implemented. We believe the funding received in the first
        quarter combined with the funding provided by the warrant exercise during
        the
        third quarter will be adequate to cover additional strategic costs anticipated
        through the remainder of the year.
 
 Based
        upon the current level of operations and anticipated growth, restructuring
        of
        its business focusing on higher margin product lines, placement of equity
        and
        debt financing during the past year, we believe that future cash flows from
        operations will be adequate to meet our anticipated liquidity requirements
        through the next fiscal year.
 
 **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 2006, if the Company is unable to
        pass
        through those increases under its present contracts.
  27
 *Contents*
 
 **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.
 
 **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, except
        as
        discussed in the next paragraph below, in timely alerting them to material
        information relating to the Company required to be included in our periodic
        filings with the Securities and Exchange Commission. 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,
        except
        as discussed in the next paragraph below.
  28
 *Contents*
  As
        previously reported in the Company’s annual report on Form 10-KSB for the year
        ended December 31, 2005, the Company has a material weakness within its internal
        control framework relating to the preparation and timeliness of financial
        reporting, in connection with the adequacy of segregation of duties. The
        Company
        attributes this material weakness to limited personnel resources. Though
        the
        Company has implemented levels of supervisory reviews from time to time,
        and
        employs a temporary workforce from time to time, there can be no assurance
        that
        these measures can definitively prevent transactional errors from occurring
        or
        provide the necessary accounting and financial reporting support to the
        Company’s accounting and finance department.
 
 **(b)** ***Changes
        in internal controls*** **.** There
        was no change in the Company's internal control over financial reporting
        during
        the three and nine months ended September 30, 2006 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**
 
 (a)
        The
        Company’s Annual Meeting of Stockholders was held on October 31,
        2006.
  29
 *Contents*
  (b)
        At
        the Company’s Annual Meeting of Stockholders, the Stockholders reelected to the
        Company’s Board of Directors Mr. Joseph A. Turek. Mr. Turek is a Class II
        Director and will serve a term ending upon the election of Class II Directors
        at
        the 2008 Annual Meeting of Stockholders. The aggregate number of votes cast
        for,
        against, or withheld, for the election of Mr. Turek was as follows: 5,468,604
        for, 0 against, and 351,193 withheld.
 
 (c)
        At
        the Company’s Annual Meeting of Stockholders, the Stockholders ratified the
        appointment of McGladrey & Pullen, LLP as auditors of the Company for the
        2006 calendar year. The aggregate number of votes cast for, against, or
        abstained, for the ratification of McGladrey & Pullen LLP as auditors were
        as follows: 5,703,413 for, 73,061 against, and 43,323 abstained.
 
 (d)
        At
        the Company’s Annual Meeting of Stockholders, the Stockholders approved the
        amendment to the Company’s Certificate of Incorporation to effect a reverse
        split of the Company’s issued and outstanding common stock, par value $0.005 per
        share, of between a one-for-two and one-for-ten reverse stock split in the
        discretion of the Board of Directors. The aggregate number of votes cast
        for,
        against, or abstained, for the amendment of the Company’s Certificate of
        Incorporation was as follows: 5,620,195 for, 197,672 against, and 1,930
        abstained.
 
 (e)
        At
        the Company’s Annual Meeting of Stockholders, the Stockholders approved the
        amendment to the Company’s Certificate of Incorporation to increase the amount
        of the Company’s authorized Common Stock, par value $0.005 per share, from
        twenty million shares (20,000,000) to two hundred million shares (200,000,000).
        The aggregate number of votes cast for, against, or abstained, for the amendment
        of the Company’s Certificate of Incorporation was as follows: 5,173,512 for,
        498,269 against, and 148,016 abstained.
 
 **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.
  30
 *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:
                  November 13, 2006
              
              
              /s/
                  Jeff FiglewiczJeff
                  FiglewiczChief
                  Financial Officer
  31
 *Contents*
 
 **Exhibit
                  Index****Exhibit****No.**
              
              **Description**
              
              **Location**3.1
              
              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
              
              2
  32
 *Contents*
  10.3
              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
              
              310.6
              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
              Employment
                  Agreement dated February 25, 2005 between M-Wave DBS, Inc. and
                  Joshua
                  Blake
              
              510.11
              Promissory
                  Note dated February 23, 2005 issued by M-Wave, Inc. to Mercator
                  Momentum
                  Fund, L.P.
              
              510.12
              Promissory
                  Note dated February 23, 2005, issued by M-Wave, Inc. to Monarch
                  Pointe
                  Fund, L.P.
              
              510.13
              Warrant
                  , dated February 23, 2005 issued by M-Wave, Inc. to Mercator Momentum
                  Fund, L.P.
              
              510.14
              Warrant
                  to dated February 23, 2005 issued by M-Wave, Inc, to Monarch Pointe
                  Fund,
                  L.P.
              
              510.15
              Warrant
                  dated February 23, 2005, issued by M-Wave, Inc. to M.A.G. Capital,
                  LLC
              
              510.16
              Non-statutory
                  Stock Option Agreement dated December 31, 2004 between Company
                  and Gordhan
                  Patel
              
              6
  33
 *Contents*
 10.17
              Amendment
                  to 2003 Stock Incentive Plan
              
              710.18
              Sale
                  of real property located at 215 Park Street Bensenville,
                  Illinois
              
              810.19
              Asset
                  sale and transition agreement dated October 21, 2005 between the
                  Company
                  and American Standard Circuits
              
              810.20
              Agreement
                  with the Mercator Momentum Fund III amending Loan Document Purchase
                  Agreements it acquired from Silicon Valley Bank on November 9,
                  2005
              
              910.21
              Agreement
                  with Ocean Park Advisors, LLC for financial consulting services
                  and B.
                  Riley & Co. for service regarding financial fairness opinion of
                  potential merger candidates
              
              1131.1
              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
                  Herewith32.1
              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
  34
 *Contents*
 (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 February 13, 2006






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