<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON,  DC 20549



                                   FORM 10-Q



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



  For the quarter ended September 30, 1996       Commission File No.   0-19944
  ----------------------------------------       -----------------------------



                                M~WAVE, INC.
--------------------------------------------------------------------------------
           (Exact name of registrant as specified in its charter)




            DELAWARE                                           36-3809819
--------------------------------------------------------------------------------
(State or other jurisdiction of                              (I.R.S.  Employer
 incorporation or organization)                             identification No.)



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


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



Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 and 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.

Yes   X    No
    -----    -----

The registrant has 3,021,625 shares of common stock outstanding at November 6,
1996.

                                      1
<PAGE>   2
                        PART I - FINANCIAL INFORMATION
                         ITEM 1: FINANCIAL STATEMENTS
                                      
                                 M~WAVE, INC.

                         CONSOLIDATED BALANCE SHEETS
                                 (Unaudited)
<TABLE>
<CAPTION>
                                                                        DECEMBER 31,        SEPTEMBER 30,
                                                                           1995                1996
                                                                        -----------         -----------
                        ASSETS                                                      
<S>                                                                     <C>                 <C>
CURRENT ASSETS:                                                                     
    Cash and cash equivalents...................................        $ 2,403,747         $ 1,295,657
    Marketable securities.......................................          1,321,358                   0
    Accounts receivable, net of allowance                                            
      for doubtful accounts of $10,000..........................          4,106,494           2,927,930
    Inventories.................................................          3,462,200           2,660,952
    Refundable income taxes.....................................            639,112           1,342,781
    Deferred income taxes.......................................            154,682             506,321
    Prepaid expenses and other..................................            331,010              98,711
                                                                        -----------         -----------
        Total current assets....................................         12,418,603           8,832,352
PROPERTY, PLANT AND EQUIPMENT:                                                      
    Land, buildings and improvements............................          2,680,882           6,158,593
    Machinery and equipment.....................................         10,043,357          11,132,055
                                                                        -----------         -----------
        Total property, plant and equipment.....................         12,724,239          17,290,648
    Less accumulated depreciation...............................         (2,629,466)         (3,689,003)
                                                                        -----------         -----------
        Property, plant and equipment-net.......................         10,094,773          13,601,645
GOODWILL........................................................            873,636             797,299
OTHER ASSETS....................................................             20,811              25,071
                                                                        -----------         -----------
TOTAL...........................................................        $23,407,823         $23,256,367
                                                                        ===========         ===========
                                                                
                  LIABILITIES AND STOCKHOLDERS' EQUITY                           
CURRENT LIABILITIES:                                                                
    Accounts payable............................................        $ 1,734,831         $ 2,102,487
    Accrued expenses............................................          1,163,692           1,145,814
    Current portion of long-term debt...........................            409,338             307,605
                                                                        -----------         -----------
        Total current liabilities...............................          3,307,861           3,555,906
                                                                                    
DEFERRED INCOME TAXES...........................................            723,130             723,130
LONG-TERM DEBT..................................................             11,239           2,274,123
STOCKHOLDERS' EQUITY:                                                                    
    Preferred stock, $.01 par value; authorized, 1,000,000                          
      shares; no shares issued..................................                    
    Common stock, $.01 par value; authorized, 10,000,000 shares                     
      3,041,625 shares issued and 3,020,375 shares outstanding                      
      at December 31, 1995 and 3,021,625 shares outstanding     
      at September 30, 1996.....................................             30,404              30,416
    Additional paid-in capital..................................          7,488,422           7,492,472
    Retained earnings ..........................................         11,966,767           9,300,320
    Treasury stock:  20,000 shares, at cost.....................           (120,000)           (120,000)
                                                                        -----------         -----------
        Total stockholders' equity .............................         19,365,593          16,703,208
                                                                        -----------         -----------
TOTAL...........................................................        $23,407,823         $23,256,367
                                                                        ===========         ===========

</TABLE>
                                                                
                See notes to consolidated financial statements.



                                       2
<PAGE>   3
                                 M~WAVE, Inc.
                    CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (Unaudited)


<TABLE>
<CAPTION>
                                                   Three months ended September 30,
                                                   --------------------------------
                                                      1995                1996
                                                   ----------          ------------
<S>                                                <C>                 <C>
Net sales................................          $5,868,340          $6,284,338
Cost of goods sold.......................           4,876,444           5,173,263
                                                   ----------          ----------
  Gross profit ..........................             991,896           1,111,075
                                         
Operating expenses:                      
  General and administrative.............             625,706             739,888
  Selling and marketing..................             616,079             394,900
  Research and development...............              91,271             185,998
                                                   ----------          ----------
    Total operating expenses.............           1,333,056           1,320,786
                                         
  Operating loss ........................            (341,160)           (209,711)
                                         
Other income (expense):                  
  Interest income........................             113,129             (22,315)
  Interest expense.......................             (10,667)            (47,053)
  Litigation settlement..................            (560,953)                  0
                                                   ----------          ----------
    Total other income (expense).........            (458,491)            (69,368)
                                         
    Loss before income taxes.............            (799,651)           (279,079)
                                         
Credit for income taxes..................            (302,652)            (73,784)
                                                   ----------          ----------

Net loss.................................          $ (496,999)         $ (205,295)
                                                   ==========          ==========

Net loss per share.......................          $    (0.16)         $    (0.07)

                                         
Weighted average shares..................           3,082,725           3,021,625


</TABLE>

                                         

                See notes to consolidated financial statements.



                                       3
<PAGE>   4
                                 M~WAVE, Inc.
                    CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (Unaudited)

<TABLE>
<CAPTION>
                                                 Nine months ended September 30,
                                                 -------------------------------
                                                     1995             1996
                                                 ------------      -------------
<S>                                               <C>              <C>
Net sales................................         $22,579,496      $18,881,864
Cost of goods sold.......................          16,858,857       18,818,169
                                                  -----------      -----------
  Gross profit...........................           5,720,639           63,695
                                         
Operating expenses:                      
  General and administrative.............           1,754,171        2,108,904
  Selling and marketing..................           1,461,186        1,318,085
  Research and development...............             339,909          491,925
                                                  -----------      -----------
    Total operating expenses.............           3,555,266        3,918,914
                                         
  Operating income (loss) ...............           2,165,373       (3,855,219)
                                         
Other income (expense):                  
  Interest income........................             367,596           25,193
  Interest expense.......................             (42,665)        (160,187)
  Litigation settlement..................            (560,953)               0
  Loss on disposal of assets.............                   0         (149,751)
                                                  -----------      -----------
    Total other income (expense).........            (236,022)        (284,745)
                                         
    Income (loss) before income  taxes...           1,929,351       (4,139,964)
                                         
Provision (credit) for income taxes......             780,420       (1,473,516)
                                                  -----------      -----------

Net income (loss)........................         $ 1,148,931      $(2,666,448)
                                                  ===========      ===========

Net income (loss) per share..............         $      0.37      $     (0.88)

                                         
Weighted average shares..................           3,073,754        3,021,261


</TABLE>

                See notes to consolidated financial statements.



                                       4
<PAGE>   5
                                 M~WAVE, INC.
                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (Unaudited)


<TABLE>
<CAPTION>
                                                                       Nine months ended September 30,
                                                                       -------------------------------
                                                                           1995             1996
                                                                       ------------     -------------
<S>                                                                     <C>             <C>
OPERATING ACTIVITIES:                                             
  Net income (loss)..............................................       $ 1,148,931     $(2,666,448)
  Adjustments to reconcile net income (loss) to net cash flows    
    from operating activities:                                    
      Depreciation and amortization..............................           843,811       1,135,874
      Deferred income taxes......................................           255,327        (351,639)
    Changes in assets and liabilities:                            
      Accounts receivable-trade..................................          (312,565)      1,178,564
      Insurance proceeds receivable..............................         1,564,129               0
      Inventories................................................          (951,622)        801,248
      Income taxes...............................................          (648,244)       (703,669)
      Prepaid expenses and other assets..........................          (104,087)        228,040
      Accounts payable...........................................          (165,808)        367,656
      Accrued expenses...........................................            16,451         (17,878)
                                                                        -----------     -----------
         Net cash flows from operating activities................         1,646,323         (28,252)
                                                                        -----------     -----------
                                                                  
INVESTING ACTIVITIES:                                             
  Purchase of property, plant and equipment......................        (4,405,968)     (4,566,409)
  Redemption of marketable securities............................                 0       1,321,358
  Collection of notes receivable.................................           451,533               0
                                                                        -----------     -----------
         Net cash flows from investing activities................        (3,954,435)     (3,245,051)
                                                                        -----------     -----------
                                                                  
FINANCING ACTIVITIES:                                             
  Common stock issued upon exercise of stock options.............           156,781           4,062
  Payments on long term debt.....................................          (400,000)       (400,000)
  Mortgage debt incurred.........................................                         2,571,345
  Payments on capital leases.....................................           (19,888)        (10,194)
                                                                        -----------     -----------
         Net cash flows from financing activities................          (263,107)      2,165,213
                                                                        -----------     -----------

NET DECREASE IN CASH AND CASH EQUIVALENTS........................        (2,571,219)     (1,108,090)
                                                                  
CASH AND CASH EQUIVALENTS - Beginning of period..................         6,868,823       2,403,747
                                                                        -----------     -----------
CASH AND CASH EQUIVALENTS - End of period........................       $ 4,297,604     $ 1,295,657
                                                                        ===========     ===========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:                

    Cash paid during the period for interest.....................       $    64,000     $   160,187
    Cash paid during the period for income taxes.................       $ 1,079,500

 
</TABLE>


                See notes to consolidated financial statements.



                                       5
<PAGE>   6


                                  M~WAVE, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

     1.   BASIS OF PRESENTATION

            The accompanying unaudited consolidated financial statements
       have been prepared in accordance with generally accepted
       accounting principles for interim financial information and with
       the instructions to Form 10-Q.  Accordingly, they do not include
       all of the information and footnotes required by generally
       accepted accounting principles for complete financial statements.
       In the opinion of management, all adjustments necessary for a fair
       presentation have been included.  For further information, refer
       to the consolidated financial statements contained in the Annual
       Report on Form 10-K for the year ended December 31, 1995 filed
       March 29, 1996.

     2.   BUSINESS

            M~Wave, through its wholly-owned subsidiaries, Poly Circuits
       Inc. and P C Dynamics Corporation (collectively, the "Company"),
       manufactures microwave frequency components and high frequency
       circuit boards on Teflon-based laminates for commercial and
       military wireless communication applications.  In 1995, the
       Company established a division that does contract assembly work
       for customers.

     4.   INVENTORIES

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

     5.   DEBT

            The Company has borrowed $2,571,000 at September 30, 1996
       against a total financing commitment of $2,954,000 for the
       construction of the new P C Dynamics Corporation facility in
       Frisco, Texas.  Interest on this mortgage debt is at  1/2% over
       prime rate.  The loan is payable in monthly installments of
       principal and interest beginning October 1996 and ending in
       October 2001.

            The Company has repaid the $500,000 short term debt it had
       incurred at June 30, 1996. The Company has a  $2,000,000 line of
       credit to fund the working capital needs of the Company.  The note
       is due May 31, 1997. Interest on this debt is at  1/2% over prime
       rate.

     6.   LITIGATION

            The Company is a party to various actions and proceedings
       related to its normal business operations.  The Company



                                       6
<PAGE>   7

       believes that the outcome of this litigation will not have a
       material adverse effect on the financial position or results of
       operations of the Company.

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

            The Company believes that this action is without merit. On
       January 5, 1996, the Company filed a motion to dismiss the
       complaint.  On April 26, 1996, this motion to dismiss was denied.
       In June 1996, the Plaintiff moved for class certification.  This
       motion has been briefed and a decision is pending.


                                       7
<PAGE>   8
     ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                      CONDITION AND RESULTS OF OPERATIONS

     RESULTS FOR THE QUARTER ENDED SEPTEMBER 30, 1996 COMPARED TO THE
     QUARTER ENDED SEPTEMBER 30, 1995

     NET SALES

          Net sales were $6,284,000 for the third quarter ended September
     30, 1996, an increase of $416,000 or 7.1% above the third quarter of
     1995. This increase is primarily attributable to increased shipments
     to one of the Company's larger customers, which was partially offset
     by decreased shipments to existing customers.

     GROSS PROFIT AND COST OF GOODS SOLD

          Gross profit increased to $1,111,000 in the third quarter of
     1996 from $992,000 in the third quarter of 1995. This increase is
     primarily attributable to increased shipments to one of the Company's
     larger customers, and a shift in product mix.  The third quarter of
     1996 included sales adjustments for pricing and returns of $135,000
     and manufacturing scrap and rework of $488,000. The Company has made
     operational changes designed to enhance its quality control and
     ability to manufacture highly complex products; however, there can
     be no assurance as to when, or if, these changes will result in
     improved manufacturing processes. Future production problems would
     continue to adversely impact the Company's gross margins and
     profitability, which would also result in decreased liquidity and
     adversely affect the Company's financial position. The Company
     anticipates lower sales and a loss in the fourth quarter of 1996.

     OPERATING EXPENSES

          General and administrative expenses were $740,000 or 11.8% of
     net sales in the third quarter of 1996 compared to $626,000 or 10.7%
     of net sales in the third quarter of 1995.  On April 15, 1996 the
     Company engaged a consulting firm to provide consulting services
     with respect to the Company's operations, which services resulted in
     additional expenses of $252,000 in the third quarter of 1996.
     General and administrative expenses consist primarily of salaries
     and benefits, professional services, depreciation of office
     equipment, computer systems and occupancy expenses.

          Selling and marketing expenses were $395,000 or 6.3% of net
     sales in the third quarter of 1996 compared to $616,000 or 10.5% of
     net sales in the third quarter of 1995. Sales commission expense was
     2.5% of net sales in the third quarter of 1996 compared to 6.4% of
     net sales in the third quarter of 1995.  The third quarter of 1995 
     included a $200,000 adjustment for commission expenses relating to 
     sales in the first half of 1995.  Selling and marketing expenses 
     include the cost of salaries, advertising and promoting the Company's 
     products, and commissions paid to independent sales organizations.

                                      8
<PAGE>   9

          Research and development expenses which relate primarily to the
     assembly operations were $186,000 or 3.0% of net sales in the third
     quarter of 1996 compared to $91,000 or 1.6% of net sales in the
     third quarter of 1995.  Research and development costs are expensed
     as they are incurred.

     OPERATING LOSS

          Operating loss was $210,000 in the third quarter of 1996
     compared to an operating loss of $341,000 in the third quarter of
     1995, a decrease of $131,000. The change in operating income
     reflects primarily the changes in net sales, gross profit and cost
     of goods sold and operating expenses as discussed above. The change
     in operating loss can be summarized as follows:

<TABLE>
     <S>                                <C>

     Increase in net sales              $ 70,000
     Increase in gross margin             49,000
     Decrease in operating expenses       12,000
                                        --------

     Decrease in operating loss         $131,000

</TABLE>

     OTHER INCOME (EXPENSE)

          Interest expense increased to $47,000 in the third quarter of
     1996 from $11,000 in the second quarter of 1995 because of the
     mortgage debt and the line of credit borrowings during 1996.  There
     was no interest income in the third quarter of 1996 due to the
     disposal of the Company's $1.3 million of marketable securities
     during the quarter and an adjustment of interest income recorded in
     the first half of 1996.  Also included in other income and expense
     is a non-recurring charge in the third quarter of 1995 of
     approximately $561,000 relating to the settlement of litigation with
     Comptek.

     INCOME TAXES

          In the third quarter of 1995 the Company had an effective tax
     credit of 37.8%. In the third quarter of 1996, the Company had an
     effective tax credit of 26.4%.

                                      9
<PAGE>   10


     RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THE
     NINE MONTHS ENDED SEPTEMBER 30, 1995

     NET SALES

          Net sales were $18,882,000 for the nine months ended September
     30, 1996, a decrease of $3,697,000 or 16.4% below the first nine
     months of 1995. The decrease primarily reflects a slowdown in orders
     from the Company's largest customers as well as production problems
     which resulted in higher than expected sales returns. The reduction
     in orders from key accounts began in 1995 and is continuing in 1996.

     GROSS PROFIT(LOSS) AND COST OF GOODS SOLD

          Gross profit decreased to $64,000 in the first nine months of
     1996 from $5,721,000 in the first nine months of 1995. This decrease
     is primarily attributable to reduced shipments to the Company's
     largest customers, a shift in product mix, and production problems.
     The decrease in gross profit includes sales adjustments for pricing
     and returns of $1,084,000 and inventory writedowns of $1,910,000 and
     $665,000 relating to manufacturing scrap and rework and inventory
     obsolescence, respectively.  The Company has made operational
     changes designed to enhance its quality control and ability to
     manufacture highly complex products; however, there can be no
     assurance as to when, or if, these changes will result in improved
     manufacturing processes.  Future production problems would continue
     to adversely impact the Company's gross margins and profitability,
     which would also result in decreased liquidity and adversely affect
     the Company's financial position.

     OPERATING EXPENSES

          General and administrative expenses were $2,109,000 or 11.2% of
     net sales for the first nine months of 1996 compared to $1,754,000
     or 7.8% of net sales for the first nine months of 1995. On April 15,
     1996 the Company engaged a consulting firm to provide consulting
     services with respect to the Company's operations, which services
     resulted in additional expenses of $466,000 for the first nine
     months of 1996. General and administrative expenses consist
     primarily of salaries and benefits, professional services,
     depreciation of office equipment, computer systems and occupancy
     expenses.

          Selling and marketing expenses were $1,318,000 or 7.0% of net
     sales for the first nine months of 1996 compared to $1,461,000 or
     6.5% of net sales for the first nine months of 1995. Sales
     commission expense was 3.0% of net sales for the first nine months
     of 1996 and 1995. Selling and marketing expenses include the cost
     of salaries, advertising and promoting the Company's products, and
     commissions paid to independent sales organizations.


                                       10
<PAGE>   11


          Research and development expenses relating primarily to the 
     assembly operations were $492,000 or 2.6% of net sales for the first 
     nine months of 1996 compared to $340,000 or 1.5% of net sales for the
     first nine months of 1995.  Research and development costs are
     expensed as they are incurred.

     OPERATING INCOME(LOSS)

          Operating loss was ($3,855,000) for the first nine months of
     1996 compared to operating income of $2,165,000 or 9.6% of net sales
     for the first nine months of 1995, a decrease of $6,020,000. The
     change in operating income reflects primarily the changes in net
     sales, gross profit and cost of goods sold and operating expenses as
     discussed above. The change in operating income can be summarized as
     follows:


<TABLE>
                  <S>                             <C>
                  Decrease in net sales           $(  935,000)
                  Decrease in gross margin         (4,722,000)
                  Increase in operating expenses     (364,000)
                                                  ------------

                  Decrease in operating income    $(6,021,000)
</TABLE>


     OTHER INCOME (EXPENSE)

          Interest income declined to $25,000 for the first nine months
     of 1996 from $368,000 for the first nine months of 1995 because a
     substantial portion of the Company's marketable securities and cash
     equivalents have been liquidated over the past year.  Interest
     expense increased to $160,000 for the first nine months of 1996 from
     $43,000 for the first nine months of 1995 because of the mortgage
     debt and the line of credit borrowings during 1996. Also included in
     other income and expense is a non-recurring charge in the third
     quarter of 1995 of approximately $561,000 relating to the settlement
     of litigation with Comptek.

     LOSS ON DISPOSAL OF ASSETS

          The loss of $150,000 relates to unusable equipment disposed of
     at the P C Dynamics location in the first quarter of 1996.

     INCOME TAXES

          For the first nine months of 1995 the Company had an effective
     tax rate of 40.4%. For the first nine months of 1996, the Company
     had an effective tax credit of 35.6%.

     LIQUIDITY AND CAPITAL RESOURCES

          Net cash provided/(used) from operations was ($28,000) for the
     first nine months of 1996 compared to $1,646,000 for the first nine
     months of 1995. A reduction of inventories and accounts receivable 
     and increases in accounts payable offset the first nine months of 
     1996 loss from operations.


                                       11
<PAGE>   12


          Capital expenditures of $4.6 million in the first nine months
     of 1996, compared with $4.4 million in the first nine months of
     1995, include $3.4 million for the new P C Dynamics facility in
     Texas. The estimated cost to complete this facility is $0.4 million.
     The construction expenditures were partially financed through
     mortgage borrowings of $2.6 million against a total financing
     commitment of $2.95 million. Except for completion of the P C
     Dynamics facility and expenditures required to improve its
     manufacturing processes, the Company presently has no plans for
     additional capital expenditures.

          On January 10, 1996, the Company obtained a construction loan
     from American National Bank and Trust Company of Chicago in the
     amount of $2,160,000 to finance the rebuilding of the facility in
     Frisco, Texas. The loan is payable in monthly installments of
     principal and interest beginning October 1996 and ending in October
     2001.

          On March 31, 1996, the Company obtained a construction loan
     from American National Bank and Trust Company that permits
     borrowings up to $794,000 to finance the rebuilding of the facility
     in Frisco, Texas. As of September 30, 1996, $411,000 was
     outstanding. The loan is payable in monthly installments of
     principal and interest beginning October 1996 and ending in October
     2001.

          As of September 30, 1996, the Company has $2,582,000 of debt
     and $1,296,000 of cash and cash equivalents.

          The Company has a $2,000,000 line of credit as of September 30,
     1996. Management believes that funds generated from operations,
     coupled with the Company's cash and investment balances and its
     capacity for debt will be sufficient to fund current business
     operations. The Company's ability to fund its activities is directly
     dependent upon its sales, its ability to improve its manufacturing
     processes, the effective utilization of the Company's manufacturing
     resources and the Company's ability to access external sources of
     financing. The Company anticipates additional debt financing during
     the next twelve months.  There can be no assurances that such
     additional debt financing can be obtained and, if obtained, at
     reasonable terms.

     INFLATION

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

     FOREIGN CURRENCY TRANSACTIONS

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


                                       12
<PAGE>   13


     ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS

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

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

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

          The Company's future success is highly dependent upon its
     ability to manufacture products that incorporate new technology and
     are priced competitively.  The market for the Company's products is
     characterized by rapid technology advances and industry-wide
     competition.  This competitive environment has resulted in downward
     pressure on gross margins.  In addition, the Company's business has
     evolved towards the production of relatively smaller quantities of
     more complex products, the Company expects that it will at times
     encounter difficulty in maintaining its yield standards.  There can
     be no assurance that the Company will be able to develop
     technologically advanced products or that future pricing actions by
     the Company and its competitors will not have a material adverse effect 
     on the Company's results of operations.


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<PAGE>   14

                         PART II - OTHER INFORMATION

     ITEM 1:  LEGAL PROCEEDINGS

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

            The Company believes that this action is without merit. On
       January 5, 1996, the Company filed a motion to dismiss the
       complaint.  On April 26, 1996, this motion to dismiss was denied.
       In June 1996, the plaintiff moved for class certification. This
       motion has been briefed and a decision is pending.


     ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K


     (b)  The Company did not file any reports on Form 8-K during
          the third quarter of 1996.




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                                   SIGNATURE

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

     Date: November 13, 1996             /s/    PAUL H. SCHMITT
                                         -----------------------------
                                                Paul H. Schmitt
                   
                                            Chief Financial Officer





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