<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.
13
<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.
14
<PAGE> 15
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
15
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000883842
<NAME> M-WAVE, INC.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,295,657
<SECURITIES> 0
<RECEIVABLES> 2,927,930
<ALLOWANCES> 0
<INVENTORY> 2,660,952
<CURRENT-ASSETS> 8,832,352
<PP&E> 17,290,648
<DEPRECIATION> (3,689,003)
<TOTAL-ASSETS> 23,256,367
<CURRENT-LIABILITIES> 3,555,906
<BONDS> 2,274,123
<COMMON> 30,416
0
0
<OTHER-SE> 16,792,792
<TOTAL-LIABILITY-AND-EQUITY> 23,256,367
<SALES> 18,861,864
<TOTAL-REVENUES> 0
<CGS> 18,818,169
<TOTAL-COSTS> 3,918,914
<OTHER-EXPENSES> (284,745)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (4,139,964)
<INCOME-TAX> (1,473,516)
<INCOME-CONTINUING> (2,666,448)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,666,448)
<EPS-PRIMARY> (0.88)
<EPS-DILUTED> 0
</TABLE>
