____________________________________________________________________________________________________________________________________________________________________________

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-QSB

(Mark  One)

[X]  QUARTERLY  REPORT  UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  FOR THE QUARTERLY PERIOD  ENDED  September 30,  2006.

[ ]  TRANSITION  REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF  1934  FOR  THE  TRANSITION  PERIOD  FROM  ______  TO  ________

COMMISSION FILE NO. 333-125678

PROBE MANUFACTURING, INC.

(Exact name of issuer as specified in its charter)

NEVADA                                              20-2675800

(State or other jurisdiction                                (I.R.S. Employer

of incorporation or organization)                            Identification No.)

25242 Arctic Ocean Dr., Lake Forest, CA        92630

(Address of principal executive offices)     (Zip Code)

Registrant's telephone number, including area code: (949) 206-6868

Securities  registered  under  Section  12(b)  of  the  Exchange  Act:     NONE.

Securities registered under Section 12(g) of the Exchange Act:

COMMON STOCK, PAR  VALUE  $0.001  PER  SHARE.

(Title of class)

Check whether the Issuer (1) filed all reports required to be filed by Section

13 or 15(d) of the Exchange Act during the past 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 ___

Indicate by check mark whether the registrant is a shell company (as defined by

Rule 12b-2 of the Exchange Act)   Yes ___ No X

As of September 30, 2006, the Issuer had 10,270,863 shares of common stock

outstanding.

Transitional Small Business Disclosure Format (check one): Yes ___ No X

PROBE MANUFACTURING, INC.

10-KSB

TABLE  OF  CONTENTS

PART I.  FINANCIAL  INFORMATION

--------------------------------

Item 1.  Financial  Statements.                                           

1-20

Item 2.  Management's  Discussion  and  Analysis  or  Plan  of  Operation.  

21

Item 3.  Controls  and  Procedures.                                         

27

PART II.  OTHER  INFORMATION

----------------------------

Item 1.  Legal  Proceedings.                                                

27

Item 2.  Unregistered Sales of Equity Securities and Use of  Proceeds.      

28

Item 3.  Defaults  Upon  Senior  Securities.                                

28

Item 4.  Submission  of  Matters  to  a  Vote  of  Security  Holders.       

28

Item 5.  Other  Information.                                               

28

Item 6.  Exhibits  and  Reports  on  Form  8-K.                             

28

ITEM 1.  FINANCIAL  STATEMENTS.

JASPERS + HALL, PC

CERTIFIED PUBLIC ACCOUNTANTS

9175 E Kenyon Avenue

Denver, CO 80237

303-796-0099

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

Probe Manufacturing, Inc.

Costa Mesa, CA

We have reviewed the accompanying balance sheet of Probe Manufacturing, Inc. as of September 30, 2006, and the related statements of operations for the three and nine month periods ended September 30, 2006 and cash flows for the nine month period ended September 30, 2006. These financial statements are the responsibility of the company’s management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the accompanying interim financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 1, conditions exist, which raise substantial doubt about the Company’s ability to continue as a going concern.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Jaspers + Hall, PC

November 13, 2006

See Accountants review report

See Accountants review report

See Accountants review report

PROBE MANUFACTURING, INC.

Notes to Financial Statements

Nine month period ended, September 30, 2006

Notes 1- GENERAL

The Company

Probe Manufacturing Industries, Inc. was incorporated on July 7, 1995. On April 21, 2005, the Company was redomiciled from California to Nevada and changed its name to Probe Manufacturing, Inc.  Probe Manufacturing, Inc. (the “Company” or “Probe”) is a leading provider of advanced electronics manufacturing services, or EMS, to original equipment manufacturers, or OEMs, primarily in the industrial and instrumentation, communication, semiconductor, automotive, medical, and military segments. This includes globally integrated end to end manufacturing solutions ranging from engineering printed circuit card assembly, cable assembly, enclosures, complete system integration and test, as well as global order fulfillment.

Going Concern

The financial statements have been prepared on a going concern basis, which contemplates continuity of operations, realization of assets and liquidation of liabilities in the normal course of business.  Although, the Company had a net profit of $160,318 for the nine month period ended, September 30, 2006, they had a working capital deficit of ($9,044) and a total stockholders deficit of ($727,279) as of September 30, 2006. The ability of the Company to operate as a going concern is dependent upon its ability (1) to obtain sufficient debt and/or equity capital and/or (2) and improving operational efficiencies such that the Company can operate until such time that it resumes generating sufficient positive cash flow from operations.

Management is taking the following steps to address this situation: (a) continue improving operational efficiencies by: (i) re-negotiating direct material cost with all of our suppliers, (ii) by improving all systems and processes across operations and streamlining production lines, (iii) we have moved into a more feasible facility;  (b) we have re-negotiated our lines of credit with agreement(s) that have more attractive terms, as well as increased our lines of credit with suppliers; (c) To increase revenue we’re acquiring new customers, and growing our business with existing customers.  We’re also charging our customers for all services rendered such as equipment programming, delivery and documentation, where in the past, we have often provided these services to our customers as part of the unit price;  (d)  Manage inventory levels, carrying costs and better utilize our supplier lines of credit, by implementing bonded inventory levels with our major suppliers, whereby they maintain stock at there facilities and deliver “Just-in-Time”,  however from time to time inventory levels may increase temporarily, due to scheduling issues and acquisition of new customers and / or products.  

The future success of the Company is likely dependent on its ability to attain additional capital to support growth and ultimately, upon its ability to attain future profitable operations.  There can be no assurance that the Company will be successful in obtaining such financing, or that it will attain sufficient positive cash flow from operations.  The successful outcome of these or any future activities cannot be determined at this time and there is no assurance that if achieved, the Company will have sufficient funds to execute their business plans or generate positive operating results. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern.

PROBE MANUFACTURING, INC.

Notes to Financial Statements

Nine month period ended, September 30, 2006

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

The Company follows United States generally accepted accounting principles. Certain of the principles involve selection among alternatives and choices of methods, which are described in the footnotes to the Company’s reviewed financial statements.  

Cash and Cash Equivalents

The Company maintains the majority of its cash accounts at a commercial bank. The total cash balance is insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $100,000 per commercial bank. For purposes of the statement of cash flows, the Company considers all cash and highly liquid investments with initial maturities of one year or less to be cash equivalents.

Table of Contents

Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Such estimates may be materially different from actual financial results. Significant estimates include the recoverability of long-lived assets, the collectibility of accounts receivable and valuation of inventory and reserves.

Accounts Receivable

The Company grants credit to its customers within the United States of America and does not require collateral. The Company’s ability to collect receivables is affected by economic fluctuations in the geographic areas and industries served by the Company.

Reserves for un-collectable amounts are provided, based on past experience and a specific analysis of the accounts, which management believes are sufficient. Although the Company expects to collect amounts due, actual collections may differ from the estimated amounts. As of September 30, 2006, the Company has a reserve for potentially un-collectable accounts of $44,465.

Five (5) customers accounted for approximately 89% of accounts receivable at September 30, 2006.  The Company’s trade accounts primarily represent unsecured receivables.  Historically, the Company’s bad debt write-offs related to these trade accounts have been insignificant.

Inventory

Inventories are valued at the lower of weighted average cost or market value.   Our industry experiences changes in technology, changes in market value and availability of the raw materials, as well as changing customer demand.  The Company makes provisions for estimated excess and obsolete inventories based on regular audits and cycle counts of our on-hand inventory levels and forecasted customer demands and at times additional provisions are made.  Any inventory write offs are charged to the reserve account. As of September 30, 2006, the Company had a reserve for potentially obsolete inventory of $400,898.  

Property and Equipment

Property and equipment, including renewals and betterments, are stated at cost. Assets held under capital leases are recorded at lease inception at the lower of the present value of the minimum lease payments or the fair market value of the related assets.  The Company follows the practice of capitalizing property and equipment purchased over $5000.  The cost of ordinary maintenance and repairs is charged to operations while renewals and replacements are capitalized.  Depreciation and amortization are computed on the straight-line method over the following estimated useful lives of the related assets, which range from three to twenty years, and are as follows:

Furniture and fixtures

3 to 7 years

Equipment

7 to 10 years

Vehicles

5 years

Leasehold improvements

2 years (life of the lease)

PROBE MANUFACTURING, INC.

Notes to Financial Statements

Nine month period ended, September 30, 2006

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued)

Long –Lived Assets

The Company’s management assesses the recoverability of its long-lived assets by determining whether the depreciation and amortization of long lived assets over their remaining lives can be recovered through projected undiscounted future cash flows. The amount of long lived asset impairment if any, is measured based on fair value and is charged to operations in the period in which long lived assets impairment is determined by management. There can be no assurance however, that market conditions will not change or demand for the Company’s services will continue, which could result in impairment of long-lived assets in the future.

Revenue Recognition

Revenue from product and services are recognized at the time goods are shipped or services are provided to the customer, with an appropriate provision for returns and allowances. Terms are generally FOB Origination with the right of inspection and acceptance. The company has not experienced a material amount of rejected or damaged product.

Fair Value of Financial Instruments

The carrying amount of accounts payable and accrued expenses are considered to be representative of their respective fair values because of the short-term nature of these financial instruments.

Other Comprehensive Income

The Company has no material components of other comprehensive income (loss) and accordingly, net loss is equal to comprehensive loss in all periods.

Net Profit / (Loss) per Common Share      

Basic profit / (loss) per share is computed on the basis of the weighted average number of common shares outstanding. For the period ended September 30, 2005, all of the Company's common stock equivalents were excluded from the calculation of diluted loss per common share because they were anti-dilutive, due to the Company's net loss in that year. At September 30, 2006 the company had outstanding common shares of        10,270,863. As of September 30, 2006 there were warrants outstanding to purchase 4,076,250 common shares which may dilute future earnings per share. Weighted average Common shares and equivalents at September 30, 2006 were 7,737,247 and 4,879,189 for the three month period ended and  nine month period ended respectively.

Segment Information

The Corporation operates primarily in a single operating segment, providing printed circuit boards and electronic assemblies.

Stock Based Compensation

SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123’) allows an entity to elect to continue to measure compensation cost under Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB No. 25”), but requires pro forma disclosures of net loss and loss per share as if the fair-valued-based method of accounting had been applied.  In accordance with SFAS 123, the Company elected to continue to measure compensation cost under APB No. 25, and comply with the pro forma disclosure requirements.

The Company has adopted for footnote disclosure purposes SFAS No. 123, which requires that company’s disclose the cost of stock-based employee compensation at the grant date based on the value of the award (the fair value method) and disclose this cost over the service period.  The value of the stock-based award is determined using a pricing model whereby compensation cost is the excess of the fair value of the award as determined by the model at grant date or other measurement date over the amount an employee must pay to acquire the stock.

Transactions in which goods or services are received from non-employees for the issuance of equity securities or stock-based awards are accounted for based on the fair value of the consideration received.  

PROBE MANUFACTURING, INC.

Notes to Financial Statements

Nine month period ended, September 30, 2006

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued)

Income Taxes

The Company accounts for income taxes under SFAS No. 109, which requires the asset and liability approach to accounting for income taxes.  Under this method, deferred tax assets and liabilities are measured based on differences between financial reporting and tax bases of assets and liabilities measured using enacted tax rates and laws that are expected to be in effect when differences are expected to reverse.  The net profit reported in the first , second and 3^rd quarters of 2006 are offset by previous losses.  As of December 30, 2005, the company had a net operating loss carry forward of ($889,545). The company has not booked any deferred tax asset as a result.

NOTE 3 - INVENTORY

Inventories at September 30, 2006 by major classification were comprised of the following:

NOTE 4 – PROPERTY AND EQUIPMENT

Property and equipment were comprised of the following at September 30, 2006:

NOTE 5 – LINES OF CREDIT

The Company had a revolving line of credit (the “Line”) with a financial institution, which allowed them to borrow a maximum of $1,100,000 based on 80% of eligible accounts receivable, as defined.  Borrowings under the Line, bore interest at prime (4.25% plus 10.5% per annum) were secured by substantially all of the Company’s assets and was personally guaranteed by the stockholders.  In March 2004 the Line was restructured into a term loan in the amount of $500,000. Terms of the Note were: (1) monthly installment payments of $5,000, (2) interest at the rate of 4% plus the prime rate by the agent  (3) secured by accounts receivable (4) with a discount provision of $200,000 after timely payments of the first $300,000.  In December 2004, the note was restructured into a new line of credit and discounted by $200,000. This new line of credit allows the Company to borrow a maximum of $100,000 based on 80% of eligible accounts receivables, payable in monthly installments of $5,000 plus interest at the rate of 4% plus the prime-lending rate.  This Note was paid in full on March 10, 2006.

 The Company had an additional, lines of credit in the amount of $875,000, with related parties, secured by assets of the company.  Borrowings under the Line of credit bear interest at the rate of 20% (12% paid in cash and 8% paid in common stock in the company) per annum.  As of September 30, 2006 the Company had an outstanding balance against this line of credit in the amount of $655,000.  The company also had a short term demand note with an employee bearing interest at the rate of 15% in the amount of $50,000.  These notes were converted to Term Notes Payable, with an effective date of  June 30, 2006, with interest rates of 12% per annum and a 36 month amortization, with a balloon payments of $714,802 at 18 months.

PROBE MANUFACTURING, INC.

Notes to Financial Statements

Nine month period ended, September 30, 2006

NOTE 6 - CAPITAL LEASE OBLIGATIONS

The Company is a lessee of certain equipment under capital leases that expire on various dates through April 2008.  Terms of the original leases call for monthly payments ranging from $314 to $9,163, at implicit rates of interest ranging from 8.6% to 25.0% per annum (the incremental borrowing rate).  Subsequently, the remaining leases were negotiated to settled amounts and carry no provisions for interest. The assets and liabilities under capital leases are recorded at lease inception at the lower of the present value of the minimum lease payments or the fair market value of the related assets.  The assets are depreciated over their estimated useful lives.

Minimum future lease payments under current lease agreements at September 30, 2006 are as follows:

PROBE MANUFACTURING, INC.

Notes to Financial Statements

Nine month period ended, September 30, 2006

NOTE 7 –  NOTES PAYABLE

A) Note payable –  secured by deed of trust, 12% interest, originally due on

September 2006 to Ashford Capital Transition Fund I, LP, and was subsequently extended to March 2006.

The balance of  Note $456,000was paid in full on March 10, 2006

B) Note Payable number 2029052, dated March 10, 2006  – related party, unsecured, 12% interest, and ten monthly payments in the amount of $3,650 plus accrued interest. 1^st payment due on April 10,2006.  Payable to Kambiz Mahdi.  As of September 30, 2006 note balance is $21,600

C) Note Payable number 2029051, dated March 10, 2006  – related party, unsecured, 12% interest, and ten monthly payments in the amount of $3,650 plus accrued interest. 1^st payment due on April 10,2006.  Payable to Reza Zarif.

As of September 30, 2006 Note balance is $21,600

D) Note Payable number 2029054, dated March 10, 2006  – related party, Special use, line of credit in the amount of $45,000, unsecured, 20% interest (10% paid in Cash and 10% paid in Company stock),  due May 10, 2007.  As of September 30, 2006 the outstanding balance was $29,649. Payable to Kambiz Mahdi, This note was converted to a Term Note Payable, with an effective date of September 30, 2006, Un-secured, At 12% interest rate, with a 36 month amortization, payments of $1,001 and a balloon payment of $16,588 on April 15, 2008

E) Note Payable number 2029053, dated March 10, 2006  – related party, Special use, line of credit in the amount of $45,000, unsecured, 20% interest (10% paid in Cash and 10% paid in Company stock),  due May 10, 2007.  As of September 30, 2006 the outstanding balance was $29,649.  Payable to Reza Zarif, This note was converted to a Term Note Payable, with an effective date of  September 30, 2006, Un-secured, At 12% interest rate, with a 36 month amortization, payments of $1,001 and a balloon payment of $16,588 on April 15, 2008

F) Note Payable number 2029055, dated March 10, 2006  –  Special use, line of credit in the amount of $90,000, unsecured, 12% interest paid in Cash., due May 10, 2007.  As of September 30, 2006 the outstanding balance was $59,298.  Payable to Frank Kavanaugh, This note was converted to a Term Note Payable, with an effective date of  September 30, 2006, Un-secured , At 12% interest rate, with a 36 month amortization, payments of $1,996 and a balloon payment of $33,068 on April 15, 2008.

G) Note Payable – number 2401010 – related party, unsecured, 20% interest (10% paid in Cash and 10% paid in Company stock) due on May 10, 2007, Payable to Kambiz Mahdi.  This note was converted to a Term Note Payable, with an effective date of  September 30, 2006, Un-secured, At 12% interest rate, with a 36 month amortization, payments of $7,871 and a balloon payment of $130,366 on April 15, 2008.   As of September 30, 2006 the outstanding balance was $233,005.

H) Note Payable – number 2401000 – related party, unsecured, 20% interest (10% paid in Cash and 10% paid in Company stock)  due on May 10, 2007, Payable to Reza Zarif.  This note was converted to a Term Note Payable, with an effective date of  September 30, 2006, Un-secured, At 12% interest rate, with a 36 month amortization, payments of $7,871 and a balloon payment of $130,366 on April 15, 2008.   As of September 30, 2006 the outstanding balance was $233,005.

PROBE MANUFACTURING, INC.

Notes to Financial Statements

Nine month period ended, September 30, 2006

NOTE 7 – NOTES PAYABLE - Continued

I)  Note Payable – Number 2020000 – related party.  This Note was an operating line of credit, secured by the assets of the company,   Borrowings under this Line of credit was at an interest rate of 20% (12% paid in cash and 8% paid in common stock in the company) per annum.   As of September 30, 2006 the Company had an outstanding balance against this line of credit in the amount of $75,000, Payable to Rufina Paniego.  This note was converted to a Term Note Payable, with an effective date of  September 30, 2006, Un-secured , At 12% interest rate, with a 36 month amortization, payments of $2,491 and a balloon payment of $41,257 on April 15, 2008

J)  Note Payable – Number 2029000 – related party.  This Note was an operating line of credit, secured by the assets of the company,   Borrowings under this Line of credit was at an interest rate of 20% (12% paid in cash and 8% paid in common stock in the company) per annum.   As of September 30, 2006 the Company had an outstanding balance against this line of credit in the amount of $150,000, Payable to eFund Capital Partners.  This note was converted to a Term Note Payable, with an effective date of  September 30, 2006, Un-secured , At 12% interest rate, with a 36 month amortization, payments of $4,982 and a balloon payment of $82516 on April 15, 2008

K)  Note Payable – Number 2029010 –   This Note was an operating line of credit, secured by the assets of the company,   Borrowings under this Line of credit was at an interest rate of 20% (12% paid in cash and 8% paid in common stock in the company) per annum.   As of September 30, 2006 the Company had an outstanding balance against this line of credit in the amount of $140,000, Payable to Benner Exemption Trust.  This note was converted to a Term Note Payable, with an effective date of  September 30, 2006, Un-secured , At 12% interest rate, with a 36 month amortization, payments of $4,650 and a balloon payment of $77,014 on April 15, 2008

L)  Note Payable – Number 2029030 –   This Note was an operating line of credit, secured by the assets of the company,   Borrowings under this Line of credit was at an interest rate of 20% (12% paid in cash and 8% paid in common stock in the company) per annum.   As of September 30, 2006 the Company had an outstanding balance against this line of credit in the amount of $140,000, Payable to Ed Lassiter.  This note was converted to a Term Note Payable, with an effective date of  September 30, 2006, Un-secured , At 12% interest rate, with a 36 month amortization, payments of $ $1,660 and a balloon payment of $57,398 on April 15, 2008

M)  Note Payable – Number 2029020 –   This Note was an operating line of credit, secured by the assets of the company,   Borrowings under this Line of credit was at an interest rate of 20% (12% paid in cash and 8% paid in common stock in the company) per annum.   As of September 30, 2006 the Company had an outstanding balance against this line of credit in the amount of $50,000, Payable to William Duncan.  This note was converted to a Term Note Payable, with an effective date of  September 30, 2006, Un-secured , At 12% interest rate, with a 36 month amortization, payments of $4,650 and a balloon payment of $77,014 on April 15, 2008.

N) Note Payable - Number 2029040 -   This Note was an operating line of credit, un-secured,   Borrowings under this Line of credit was at an interest rate of 15%  per annum.   As of June 30, 2006 the Company had an outstanding balance against this line of credit in the amount of $50,000, payable to Hoa Mai.  This note was converted to a Term Note Payable in the amount of $50,000 with an effective date of  June 30, 2006 The note is un-secured  at 12% interest rate, with a 36 month amortization, payments of $1,660.72 and a balloon payment of $27,505.19 on April 15, 2008.

O) Note Payable – Number 2028000 –   This Note was an operating line of credit, secured by the assets of the company,   Borrowings under this Line of credit was at an interest rate of 12%  per annum.   As of June 30, 2006 the Company had an outstanding balance against this line of credit in the amount of $100,000, payable to Ashford Transition Fund, LP.  This note was converted to a Term Note Payable in the amount of $100,000, with an effective date of  June 30, 2006.  The note is un-secured  at 12% interest rate, with a 36 month amortization, payments of $3,321.43 and a balloon payment of $55,010.37 on April 15, 2008.

Other Long-Term Debt

Other long-term debt consists of settlements reached with various vendors ranging from $1,400 to $120,000 with payment terms from two to five years in the total amount of $265,573.   Monthly installment payments to these vendors range from $70 to $2,500.   As of September 30, 2006 the outstanding balance was $67,358

.

PROBE MANUFACTURING, INC.

Notes to Financial Statements

Nine month period ended, September 30, 2006

NOTE 8 – COMMITMENTS AND CONTIGENCIES

Operating Rental Leases

The Company leased its office and warehouse facilities in Costa Mesa, California from stockholders under an operating lease that required minimum monthly payments of $19,790. The building was sold on March 10, 2006 and as result, the company is under a new rental agreement which is based on month to month for a maximum of six months at a monthly rate of $30,580, consisting of Base rent of $24,068 and additional operating expenses of $6,512.   Our rental agreement expired on September 10, 2006.

On September 11, 2006 we entered into a sublease agreement for office and manufacturing space with Quantum Fuels System Technologies Worldwide, Inc. for two years with an option to renew for three years at a monthly rate $8, 027.00.  The new facility is located at 25242 Artic Ocean Drive, Lake Forest, CA 92630.

       Litigation

The Company may be involved from time to time in various claims, lawsuits, and disputes with third parties, action involving allegations or discrimination or breach of contract actions incidental in the normal operations of the business.  

As of  September 30, 2006 we have the following legal proceedings and legal settlements:

1.     Cadence has a judgment against us for $98,000 which was entered by the Superior Court Santa Clara County, California in September 2, 2003.  The judgment was due to lack of payment by Probe to Cadence after Probe purchased the license to use its Alegro software program.  Due to economic conditions after September 11^th the market for the use of this product disappeared and Probe was not able to resale the services.  Consequently, Probe was not able to generate any revenues from reselling of the software and could not pay Cadence.  On August 9^th 2004 we have entered into a payment agreement with the Cadence in which we pay them $2,500 a month until such time the debt is paid off and the balance due to Cadence under the agreement was $16,053 as of September 30, 2006.

2. We currently owe the Internal Revenue Service $98,427 for past tax liabilities.  We  negotiated a settlement with the IRS and have entered into a payment plan with them in which we pay the IRS $3,000 per month.  All payments to date are current.  The balance is included in other long-term debt.

We believe that there are no other claims or litigation pending, the outcome of which could have a material adverse effect on our financial condition or operating results.  However, if litigation should arise and the company was to receive an unfavorable ruling, there is a possibility that it would have a material adverse impact on our financial condition, results of operations, or liquidity of the period in which the ruling occurs, or future periods.

PROBE MANUFACTURING, INC.

Notes to Financial Statements

Nine month period ended, September 30, 2006

NOTE 9 – CAPITAL STOCK TRANSACTIONS

1)

On May 20th, 2004, the Company’s Board of Directors and shareholders approved the following capital stock transactions:

a.

An amendment to the Articles of Incorporation of the Company, increasing the number of authorized shares to 110,000,000, 100,000,000 shares of which will be common stock  and 10,000,000  shares of which shall be preferred stock.

b.

an amendment to the Articles of Incorporation of the Company authorizing a new series of Preferred stock, which shall be designated as Series A, and shall consist of 440 shares.

2)

On December 31, 2004, the Company’s Board of Directors and shareholders approved the following capital stock transactions:

a.

an amendment to the Articles of Incorporation of the Company authorizing a new series of Preferred stock, which shall be designated as Series B, and shall consist of 20,000 shares.

3)

On April 21, 2005, the Company’s Board of Directors and shareholders approved the following capital stock transactions:

a.

The Company re-domiciled in the state of Nevada, whereby increasing the number of authorized common shares to 200,000,000 and designating a par value of $.001 per share.

4)

On May 25, 2006, the Company’s Board of Directors and shareholders approved the following capital stock transactions:

a.

an amendment to the Articles of Incorporation of the Company authorizing a new series of Preferred stock, which shall be designated as Series C, and shall consist of 15,000 shares.

Common Stock transactions:

1)

In May of  2004 the company issued 4,000,000 shares to its founders.

2)

In May of 2004 the company entered into an agreement with eFund Capital Partners, LLC whereby eFund invested $200,000 and agreed to provide strategic assistance to the company.  In exchange, the company gave eFund Capital Partners, 2,000,000 shares of common stock and 200 shares of Series A Convertible Preferred Stock.

3)

In December 2004 the company cancelled 3,500,000 previously issued to founders and 1,500,000 shares previously issued efund, for a total of 5,000,000 shares.

4)

From June 16, 2004 to April 1, 2005 the Company sold  2,221,250 shares of common stock Private Placement Memorandum at $.80 per Share to 49  individuals generating net proceeds of $1,777,000.  

5)

In December of 2004 the Company  issues 106,875 shares of common stock at $.80 per share, as compensation in the amount of $85,500.

6)

During 2005 the company issued 31,118 shares of common stock, in lieu of interest payments at $.80 per share for a total of $24,894.

7)

In February 2006 the company issued 21,675 shares of common stock, in lieu of interest payments at $.80 per share for a total of $17,340.

8)

In May 2006 the company issued 14,003 shares of common stock, in lieu of interest payments at $.80 per share for a total of $11,202.

9)

On May 25, 2006, The Company issued 500,000 shares of common stock at .10 cents (Market value of shares on that date), for a total of $50,000.00,  to compensate its directors for the past two years of service through a stock grant pursuant to Form S-8 in the following amounts:

Name                                                     Amount of Common Stock to be issued

Kambiz Mahdi                                                              100,000

Reza Zarif                                                                     100,000

Barrett Evans                                                                100,000

Jeffrey Conrad

100,000

Dennis Benner

100,000

PROBE MANUFACTURING, INC.

Notes to Financial Statements

Nine month period ended, September 30, 2006

COMMON STOCK

Our Articles of Incorporation authorize us to issue 200,000,000 shares of common stock, par value $0.001 per share. As of  September 30, 2006 and December 31, 2005 there were 10,270,863 and 3,359,243 shares of common stock issued and outstanding, respectively. All outstanding shares of common stock are, and the common stock to be issued in this offering will be, fully paid and non-assessable.  Each share of our common stock has identical rights and privileges in every respect. The holders of our common stock are entitled to vote upon all matters submitted to a vote of our shareholders and are entitled to one vote for each share of common stock held. There are no cumulative voting rights.

The holders of our common stock are entitled to share equally in dividends and other distributions that our Board of Directors may declare from time to time out of funds legally available for that purpose, if any, after the satisfaction of any prior rights and preferences of any outstanding preferred stock. If we liquidate, dissolve or wind up, the holders of shares of common stock will be entitled to share ratably in the distribution of all of our assets remaining available for distribution after satisfaction of all our liabilities and our obligations to holders of our outstanding preferred stock.

PREFERRED STOCK

Our Articles of Incorporation authorize us to issue 10,000,000 shares of preferred stock.  We authorized 440 as Series A Convertible Preferred Stock and have authorized 20,000 shares of Series B Convertible Preferred Stock.  On May 25^th, 2006 the Articles of Incorporation were amended, authorizing 15,000 shares Series C Convertible Preferred Stock.

Preferred Series A

As of  June 30, 2006, there were 440 shares of Convertible A Preferred Stock outstanding, with a stated value of $1,000. Each share is convertible into 0.1% percent of the shares of our common stock outstanding at the date of conversion. The shares shall convert election of the holder, The holder of the Convertible A Preferred Stock, has the right to vote, with the holders of common stock, on any matter to which the common stock holders are entitled to vote, the number of shares of common stock into which the Convertible A Preferred Stock is convertible. If we are liquidated, distribute our assets, dissolve or wind-up, the holders of Convertible A Preferred Stock shall receive the greater of (i) $2,500 per share of Convertible A Preferred Stock they hold at the time of such Liquidation, or (ii) their pro rata share of the total value of our assets and funds to be distributed, assuming the Convertible A preferred stock is converted to common stock.  On August 14, 2006 the holders, converted 440 shares of the Preferred Series A for 4,544,188 shares of the company’s common stock.

Preferred Series B

As of March 31, 2006 there were 12,500 shares of Series B Convertible stock outstanding, with a stated value of $100. Each share of Series B Stock shall be converted into a number of shares of common stock that is equal to each share being divided by the average of the 3 lowest intraday bids in the twenty (20) days prior to conversion multiplied by 100 (1 divided by x, multiplied by 100), or 125 shares per Series B, whichever is greater. The minimum conversion price which Series B shareholders shall be to convert their Series B shares to common stock shall be $0.10.  The Series B Stock shall have voting rights and voting will be on an as converted basis, with class votes for the election of directors, any transaction in which control of the Company is transferred in which the per share price consideration received by Purchaser is less than Nine (3) times the Purchase Price, the sale of the Company of all or substantially all of its assets, liquidation or winding up of the Company and any amendment to the Company’s By-Laws or Articles of Incorporation in a manner adverse to Series B Stock. In the event of any voluntary or involuntary liquidation, distribution of assets (other than the payment of dividends), dissolution or winding-up of the Company, Series B Stock shall have preferential rights to the Company’s common stock (the “Common Stock”) whereby Series B Stock shall get two times (2x) return on its capital.  Once Series B Stock has recouped its two times (2x) return on capital then Series B Stock shall participate, on a pro rata basis, based on the number of shares of  the Company’s common stock (the “Common Stock”) into which the Series B Stock are convertible at the time of the liquidation, distribution of assets, dissolution or winding-up.

Exchange of Preferred Series B to Preferred Series C

On May 25^th the Board of Directors approved the exchange of Series B Convertible Preferred Stock for Series C No-Par, Convertible Preferred Stock for its Series B stockholders.  After the exchange took place Series B Convertible Preferred Stock was cancelled.  The Series C Convertible Preferred Stock carries the same rights as Series B Convertible Preferred Stock except that Series C Convertible Preferred Stock can be redeemed by the Company.  At any time, the Company may, in its sole discretion, redeem some or all of the outstanding shares of Series C Stock at a “Redemption Price” equal to the greater $120.00 per share for the first year from the date of this Certificate and after which the Redemption Price shall increase by twelve percent (12%) per year until all outstanding shares of Series C have been redeemed.  To redeem Series C Stock, the Company, at least five (5) days prior to the date on which it desires to redeem such stock (the “Redemption Date”), shall send the applicable holder of Series C Stock a notice of the redemption, provided, however, that failure to give such notice or any defect therein or in the mailing thereof shall not affect the validity of the proceedings for the redemption of any shares of Series C Stock.  Such notice shall state:  (i) the Redemption Date; (ii) the Redemption Price; and (iii) the number of shares of Series C Stock to be redeemed.  Furthermore, the holders of Series C Convertible Preferred Stock shall receive one A Warrant and one B warrant for every share of common stock received from converting a share of Series C Convertible Preferred stock of the Company’s A and B Warrants pursuant to the terms and conditions of the Company’s Series A and B warrant agreement as amended

Preferred Series C

As of June 30,2 006 there were 14,040 shares of Convertible C Preferred Stock outstanding.   Originally as filed on May 25, 2006 each share of Series C Stock shall be converted into a number of shares of Common Stock that is equal to each share being divided by the average of the 3 lowest intraday bids in the twenty (20) days prior to conversion or $0.10, which ever is greater, multiplied by 100 (1 divided by x, multiplied by 100), or 125 shares per Series C, whichever is greater. However, on August 07, 2006 the terms of Series C were amended as follows: Each share of Series C Stock shall be converted into a number of shares of Common Stock that is equal to each share being divided $0.80 multiplied by 100 (1 divided by $0.80, multiplied by 100).

On August 14, 2006, the holders of Preferred Series C elected to convert their shares into common stock.

As a result 14, 040 shares of  Preferred Series C were converted into 1,755,000 shares of common stock.

Our Board of Directors has the authority to issue additional shares of preferred stock in one or more series, and fix for each series, the designation of, and number of shares to be included in, each such series. Our Board of Directors is also authorized to set the powers, privileges, preferences, and relative participating, optional or other rights, if any, of the shares of each such series and the qualifications, limitations or restrictions of the shares of each such series.

Unless our Board of Directors provides otherwise, the shares of all series of preferred stock will rank on parity with respect to the payment of dividends and to the distribution of assets upon liquidation. Any issuance by us of shares of our preferred stock may have the effect of delaying, deferring or preventing a change of our control or an unsolicited acquisition proposal. The issuance of preferred stock also could decrease the amount of earnings and assets available for distribution to the holders of common stock or could adversely affect the rights and powers, including voting rights, of the holders of common stock.

PROBE MANUFACTURING, INC.

Notes to Financial Statements

Nine month period ended, September 30, 2006

WARRANTS

Series A - Common Stock Warrants:

We currently have 407,625 Series A Warrants issued and outstanding.  Each warrant gives the holder the right to purchase  5 shares of common stock at $1.00 per share.  The Series A Warrants will expire on November 15, 2007.

Series B - Common Stock Warrants

We currently have 407,625 Series B Warrants issued and outstanding.  Each warrant gives the holder the right to purchase  5 shares of common stock at $1.50  per share.  The Series B Warrants will expire on

on May 15, 2008.

Warrants Activity for the Period and Summary of Outstanding Warrants

From June 16, 2004 to April 1, 2005 the Company sold 222,125 common stock units pursuant to a Private Placement Memorandum at $8.00 per unit to 49 individuals generating net proceeds of $1,777,000.  The Company also issued 10,000 units of common stock for compensation.  On August 14, 2006, 14,040 shares of preferred series C were converted into 1,755,000 shares of the company’s, common stock.

Each Unit consists of ten (10) shares of common stock.  In addition, each unit entitles the holder to purchase a total of 10 shares of Probe Common Stock through the exercise of Warrants as follows: Class A Warrants, for 5 shares at a price of $2.00 per share which would expire on November 16, 2005, which has been subsequently extended by 12 months to November 15, 2006; and, Class B Warrants, for 5 shares at a price of $3.00 per share which would expire on May 16, 2005, which was subsequently extended to May 15, 2007.  As of September 30, 2006, no warrants were exercised.

A summary of warrant activity for the quarter ended September 30, 2006 is as follows:

PROBE MANUFACTURING, INC.

Notes to Financial Statements

Nine month period ended, September 30, 2006

NOTE 10 – RELATED PARTY TRANSACTIONS

The Company leased its 35,000 sq/ft facility for $19,700 per month from Kambiz Mahdi, Reza Zarif and Pacific Sail Bay Trust.   Kambiz Mahdi was the former Chief Executive Officer and a Director of the company.  Reza Zarif is the Chief Executive Officer and a Director of the company.   Pacific Sail Bay Trust is managed by Frank Kavanaugh.  Frank Kavanaugh is also the managing member of Ashford Capital, LLC, and the managing partner of Ashford Transition Fund, L.P.  Furthermore, Mr. Kavanaugh was a director of the company from July 2004 to December 2004, however, he is no longer a member of the Board of Directors. Total payments made for the nine month period ended, September 30, 2006 was $59,100. The Building was sold on March 10, 2006 and as a result, the company is under a new rental agreement with Mitchell / Fitch, LLC.  (in the same facility) which is based on month to month for a maximum of nine month at a monthly rate of $30,580, consisting of Base rent of $24,068 and additional operating expenses of $6,512.  The company moved form that facility on September 10, 2006.

Jeffrey Conrad provides legal services for the company and receives a monthly retainer of $2,500 and is one of the company directors.  Jeffrey Conrad is also a venture partner of eFund Capital Partners, LLC.  Mr. Conrad jointly has authority regarding the portfolio management decisions with respect to the shares of common stock owned by eFund Capital Partners, LLC. Mr. Conrad may be deemed to have dispositive and voting power over the shares of the common stock owned by the selling security holder.  However, Mr. Conrad does not have the right to receive dividends from or the proceeds from the sale of such common stock by the selling shareholder and they disclaim any beneficial ownership of such shares of common stock.  eFund Capital Partners, LLC received their shares pursuant to an investment agreement with us in April of 2004. Total payments through September 30, 2006 were $6,500.

South Coast Marketing, LLC is associated with eFund Capital Partners and administrates SB-2 filing fees. Total payments made for the Nine month period ended, September 30, 2006 were $4,073.60.

In May of 2004 the company entered into an agreement with eFund Capital Partners, LLC whereby eFund invested $200,000 and agreed to provide strategic assistance to the company.  In exchange, the company gave eFund Capital Partners, 2,000,000 shares of common stock and 200 shares of Series A Convertible Preferred Stock. The managing members of eFund Capital Partners, LLC are Barrett Evans and Jeffrey Conrad. Mr. Evans and Mr. Conrad jointly have authority regarding the portfolio management decisions with respect to the shares of common stock owned by the selling security holder.  Mr. Evans and Mr. Conrad may be deemed to have dispositive and voting power over the shares of the common stock owned by the selling security holder.  However, Mr. Evans and Mr. Conrad do not have the right to receive dividends from or the proceeds from the sale of such common stock by the selling shareholder and  disclaim any beneficial ownership of such shares of common stock.  Mr. Evans and Mr. Conrad have both been directors of the company since May 2004.

PROBE MANUFACTURING, INC.

Notes to Financial Statements

Nine month period ended, September 30, 2006

NOTE 10 – RELATED PARTY TRANSACTIONS - Continued

In December of 2004 the company issued eFund Capital Partners, LLC 3,500 shares of Series B Convertible Preferred Stock pursuant to a Series B Convertible Preferred Stock Purchase Agreement.  The company received $350,000 as consideration. The managing members of eFund Capital Partners, LLC are Barrett Evans and Jeffrey Conrad. Mr. Evans and Mr. Conrad jointly have authority regarding the portfolio management decisions with respect to the shares of common stock owned by the selling security holder.  Mr. Evans and Mr. Conrad may be deemed to have dispositive and voting power over the shares of the common stock owned by the selling security holder.  However, Mr. Evans and Mr. Conrad do not have the right to receive dividends from or the proceeds from the sale of such common stock by the selling shareholder and they disclaim any beneficial ownership of such shares of common stock.  Mr. Evans and Mr. Conrad have both been directors of the company since May 2004.

In December of 2004 the company issued Kambiz Mahdi 4,500 shares of Series B Convertible Preferred Stock pursuant to a Series B Convertible Preferred Stock Purchase Agreement.  The company received $450,000 as consideration.   Kambiz Mahdi is a Director of the company .  Mr. Mahdi has dispositive and voting power over his shares and claims beneficial ownership of them.  He is all the rights pursuant to such ownership.

In December of 2004 the company issued Reza Zarif 4,500 shares of Series B Convertible Preferred Stock pursuant to a Series B Convertible Preferred Stock Purchase Agreement.  The company received $450,000 as consideration.  Reza Zarif is the Chief Executive Officer and a Director of the company.  Mr. Zarif has dispositive and voting power over his shares and claims beneficial ownership of them.  He is all the rights pursuant to such ownership.

On December 31, 2004, Ashford Capital, LLC, eFund Capital Partners, LLC each returned 750,000 shares of common stock to the company for cancellation and Kambiz Mahdi and Reza Zarif each returned 1,750,000 shares to the company for cancellation.  This was done to reduce the number of outstanding shares to be in line with the valuation of $.80/per share.

On May 25, 2006 the holders of Series B Convertible Preferred Stock exchanged their stock for Series C Convertible Preferred Stock.  Pursuant to the exchange Reza Zarif, our CEO, received 4,500 shares of Series C; Kambiz Mahdi received 4,500 shares of Series C; and eFund Capital Partners, LLC received 5,040 shares of

Series C.  Original as filed on May 25, 2006 each share of Series C Stock shall be converted into a number of shares of Common Stock that is equal to each share being divided by the average of the 3 lowest intraday bids in the twenty (20) days prior to conversion or $0.10, which ever is greater, multiplied by 100 (1 divided by x, multiplied by 100), or 125 shares per Series C, whichever is greater. However, on August 07, 2006 the terms of Series C were amended as follows: Each share of Series C Stock shall be converted into a number of shares of Common Stock that is equal to each share being divided $0.80 multiplied by 100 (1 divided by $0.80, multiplied by 100).

PROBE MANUFACTURING, INC.

Notes to Financial Statements

Nine month period ended, September 30, 2006

NOTE 11 – RELATED PARTY DEBT

On January 1, 2005, the Company entered into a credit line agreement with eFund Capital Partners, LLC for $150,000.  This is an interest only line of credit.  There are no scheduled principal payments due other than on March 22, 2007, when the entire outstanding balance plus any accrued and unpaid interest will be due and payable in full.  Interest will accrue at the rate of 20% per annum payable as follows: (a) 12% will be paid on a monthly basis in US dollars based on the average outstanding balance of the previous month and (b) 8% will be paid in common stock of the company at the end of each quarter based on the average outstanding balance for the previous quarter.  The interest due will be converted to our common stock at the price of $0.80 per share. This transaction is no less favorable than if the Company had entered into it on an arms length basis with an unrelated third party because the Company was not aware of any other creditors willing to provide a loan for 20% or less interest.  There is currently an outstanding balance of $150,000 as of September 30, 2006.  Total payments made during the nine months ended September 30, 2006 consisted of $0 in principal and $7,466.57 in interest and $2,958.91.42 in common stock with accrued interest payable of  $4,471.23 at September 30, 2006.  This note was converted to a Term Note Payable, with an effective date of  September 30, 2006, Un-secured, At 12% interest rate, with a 36 month amortization, payments of $4982.14 and a balloon payment of $82,515.56 on April 15, 2008. Interest paid for June and July of 2006 was paid at the original rate.

On January 1, 2005 the Company entered into a credit line agreement with Rufina V. Paniego for $75,000.  This is an interest only line of credit.  There are no scheduled principal payments due other than on March 22, 3007, when the entire outstanding balance plus any accrued and unpaid interest will be due and payable in full.  Interest will accrue at the rate of 20% per annum payable as follows: (a) 12% will be paid on a monthly basis in US dollars based on the average outstanding balance of the previous month and (b) 8% will be paid in common stock of the company at the end of each quarter based on the average outstanding balance for the previous quarter.  The Interest due will be converted to our common stock at the price of $0.80 per share. This transaction is no less favorable than if the Company had entered into it on an arms length basis with an unrelated third party because the Company was not aware of any other creditors willing to provide a loan for 20% or less interest. There is currently an outstanding balance of $75,000 as of September 30, 2006.  Rufina Paniego is the wife of Reza Zarif who is the Company’s founder, COO and director. Total payments made during the nine months ended September 30, 2006 consisted of $0 in principal and $3,783.39 in interest and $1,497.45 in common stock with accrued interest payable of $2,235.62 at September 30, 2006. This note was converted to a Term Note Payable, with an effective date of  September 30, 2006, Un-secured, At 12% interest rate, with a 36 month amortization, payments of $2,491.07 and a balloon payment of $41,257.78 on April 15, 2008. Interest paid for June and July of 2006 was paid at the original rate.

 Note Payable number 2029052, dated March 10, 2006  – related party, unsecured, 12% interest, and ten monthly payments in the amount of $3,650 plus accrued interest. 1^st payment due on April 10,2006.  Payable to Kambiz Mahdi.  As of September 30, 2006 note balance is $21,600

 Note Payable number 2029051, dated March 10, 2006  – related party, unsecured, 12% interest, and ten monthly payments in the amount of $3,650 plus accrued interest. 1^st payment due on April 10,2006.  Payable to Reza Zarif.

As of September 30, 2006 Note balance is $21,600

 Note Payable number 2029054, dated March 10, 2006  – related party, Special use, line of credit in the amount of $45,000, unsecured, 20% interest (10% paid in Cash and 10% paid in Company stock),  due May 10, 2007.  As of September 30, 2006 the outstanding balance was $29,649. Payable to Kambiz Mahdi, This note was converted to a Term Note Payable, with an effective date of September 30, 2006, Un-secured, At 12% interest rate, with a 36 month amortization, payments of $1,001 and a balloon payment of $16,588 on April 15, 2008

 Note Payable number 2029053, dated March 10, 2006  – related party, Special use, line of credit in the amount of $45,000, unsecured, 20% interest (10% paid in Cash and 10% paid in Company stock),  due May 10, 2007.  As of September 30, 2006 the outstanding balance was $29,649.  Payable to Reza Zarif, This note was converted to a Term Note Payable, with an effective date of  September 30, 2006, Un-secured, At 12% interest rate, with a 36 month amortization, payments of $1,001 and a balloon payment of $16,588 on April 15, 2008.

PROBE MANUFACTURING, INC.

Notes to Financial Statements

Nine month period ended, September 30, 2006

NOTE 11 – RELATED PARTY DEBT  - Continued

Note Payable – number 2401010 – related party, unsecured, 20% interest (10% paid in Cash and 10% paid in Company stock) due on May 10, 2007, Payable to Kambiz Mahdi.  This note was converted to a Term Note Payable, with an effective date of  September 30, 2006, Un-secured, At 12% interest rate, with a 36 month amortization, payments of $7,871 and a balloon payment of $130,366 on April 15, 2008.   As of September 30, 2006 the outstanding balance was $233,005.

Note Payable – number 2401000 – related party, unsecured, 20% interest (10% paid in Cash and 10% paid in Company stock)  due on May 10, 2007, Payable to Reza Zarif.  This note was converted to a Term Note Payable, with an effective date of  September 30, 2006, Un-secured, At 12% interest rate, with a 36 month amortization, payments of $7,871 and a balloon payment of $130,366 on April 15, 2008.   As of September 30, 2006 the outstanding balance was $233,005.

NOTE 12 – SUBSEQUENT EVENTS

On November 10, 2006, our Board of Directors  voted to extend the exercise date of the Series A and Series B Warrants held by our shareholders by one year.  Therefore, the new expiration date for Series A will be November 15, 2007 and Series B shall be May 15, 2008.  Furthermore, the Board has voted to lower the strike prices of the warrant.  The new purchase price for shares under the Amended Series A Warrant Agreement shall be $1.00 per share and $1.50 per share for shares under the Amended Series B Warrant Agreement.

ITEM 2.  MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OR  PLAN  OF  OPERATION.  

MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATION

We intend that our forward-looking statements be subject to the safe harbors created by the Exchange Act. The forward-looking statements are generally accompanied by words such as “intend,” “anticipate,” “believe,” “estimate,” “expect” and other similar words and statements and variations or negatives of these words. Our forward-looking statements are based on current expectations, forecasts and assumptions and are subject to risks, uncertainties and changes in condition, significance, value and effect, including those discussed under the heading “Risk Factors” in this report filed with the Securities and Exchange Commission. Such risks, uncertainties and changes in condition, significance, value and effect could cause our actual results to differ materially from our anticipated outcomes. Although we believe that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate. Therefore, we can give no assurance that the results implied by these forward-looking statements will be realized. The inclusion of forward-looking information should not be regarded as a representation by our company or any other person that the future events, plans or expectations contemplated by Probe Manufacturing, Inc. will be achieved. We disclaim any intention or obligation to update or revise any forward-looking statements contained in the documents incorporated by reference herein, whether as a result of new information, future events or otherwise.

Overview

We provide a range of manufacturing and integrated supply chain services to companies who design and market electronic products. Our revenue is generated from sales of our services primarily to customers in the industrial, automotive, semi-conductor and medical devise manufacturers. As a result of the services we perform for our customers, we are impacted by our customer’s ability to appropriately predict market demand for their products. While we work with our customers to understand their demand needs, we are removed from the actual end-market served by our customers. Consequently, determining future trends and estimates of activity can be very difficult.

Summary of Results:

Key performance indicators

Inventory turns are calculated as the ratio of cost of material compared to the average inventory for the quarter. Despite substantial increase in revenues, in the three month ended September 2006 our inventory turns were about 5.2 which is about 30% higher than the same period in 2005, and  for the nine month period ended September 2006, our inventory turns were 5.4 slightly higher than the same period in 2005.  

Days Sales in Backlog is calculated based on our back log divided by average daily sales during the quarter.  For the three month ended September 30 2006, Days Sales in Backlog have decreased to 94 days from 122 days in the same period in 2005.  For the nine month ended September 2006 the Days Sales in Backlog have decreased to 98 days from 124 days in the same period in 2005. The decrease is primarily due to slow down in orders from existing customers in the 4^th quarter 2006 and 1^st quarter of 2007.

Days Receivables Outstanding is calculated as the ratio of average accounts payable during the quarter compared to average daily sales for quarter, this has improved as a result in improved collection efforts.

Days Payable Outstanding is calculated as the ratio of average accounts payable during the quarter compared to daily cost of sales for the same quarter.

Plan of Operation

The financial statements have been prepared on a going concern basis, which contemplates continuity of operations, realization of assets and liquidation of liabilities in the normal course of business.  Although the  Company had a net profit of $160,263, for the nine month period ended, September 30, 2006, they had stock holders deficit of ($727,279) and a working capital deficit of of ($9,044).  The ability of the Company to operate as a going concern is dependent upon its ability (1) to obtain sufficient debt and/or equity capital and/or (2) and improving operational efficiencies such that the Company can operate until such time that it resumes generating sufficient positive cash flow from operations.

Management is taking the following steps to address this situation: (a) continue improving operational efficiencies by: (i) re-negotiating direct material cost with all of our suppliers, (ii) by improving all systems and processes across operations and streamlining production lines, (iii) we have moved into a more feasible facility;  (b) we have re-negotiated our lines of credit with agreement(s) that have more attractive terms, as well as increased our lines of credit with suppliers; (c) To increase revenue we’re acquiring new customers, and growing our business with existing customers.  We’re also charging our customers for all services rendered such as equipment programming, delivery and documentation, where in the past, we have often provided these services to our customers as part of the unit price;  (d)  Manage inventory levels, carrying costs and better utilize our supplier lines of credit, by implementing bonded inventory levels with our major suppliers, whereby they maintain stock at there facilities and deliver “Just-in-Time”,  however from time to time inventory levels may increase temporarily, due to scheduling issues and acquisition of new customers and / or products.  

The future success of the Company is likely dependent on its ability to attain additional capital to support growth and ultimately, upon its ability to continue to attain future profitable operations.  There can be no assurance that the Company will be successful in obtaining such financing, or that it will continue to attain positive cash flow from operations.  The successful outcome of these or any future activities cannot be determined at this time and there is no assurance that if achieved, the Company will have sufficient funds to execute their business plans or generate positive operating results. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern.

Critical Accounting Policies

The Company follows United States generally accepted accounting principles. Certain of the principles involve selection among alternatives and choices of methods, which are described in the footnotes to the Company’s reviewed consolidated financial statements.  

Cash and Cash Equivalents

The Company maintains the majority of its cash accounts at a commercial bank. The total cash balance is insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $100,000 per commercial bank. For purposes of the statement of cash flows, the Company considers all cash and highly liquid investments with initial maturities of one year or less to be cash equivalents.

Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Such estimates may be materially different from actual financial results. Significant estimates include the recoverability of long-lived assets, the collectibility of accounts receivable and valuation if inventory and reserves.

Accounts Receivable

The Company, grants credit to its customers within the United States of America and does not require collateral. The Company’s ability to collect receivables is affected by economic fluctuations in the geographic areas and industries served by the Company.

The Company’s trade accounts primarily represent unsecured receivables.  Historically, the Company’s bad debt write-offs related to these trade accounts have been insignificant.

Reserves for un-collectable amounts are provided, based on past experience and a specific analysis of the accounts, which management believes is sufficient. Although the Company expects to collect amounts due, actual collections may differ from the estimated amounts.  As of September 30, 2006, the Company has a reserve for potentially un-collectable accounts of $44,465.

Five (5) customers accounted for approximately 89% of accounts receivable at September 30, 2006.  The Company’s trade accounts primarily represent unsecured receivables.  Historically, the Company’s bad debt write-offs related to these trade accounts have been insignificant.

Inventory

Inventories are stated at the lower of weighted average cost or market. Probe Manufacturing’s industry is characterized by rapid technological change, short-term customer commitments and rapid changes in demand, as well as any other lower of cost or market considerations. Probe Manufacturing makes provisions for estimated excess and obsolete inventory based on regular reviews of inventory quantities on hand and the latest forecasts of product demand and production requirements from customers. Provisions for excess and obsolete inventory are also impacted by Probe Manufacturing’s contractual arrangements with their customers including their ability or inability to re-sell such inventory to them.  As of September 30, 2006, the Company had a reserve for potentially obsolete inventory, of $400,898.

Property and Equipment

Property and equipment, including renewals and betterments, are stated at cost. Assets held under capital leases are recorded at lease inception at the lower of the present value of the minimum lease payments or the fair market value of the related assets.  The Company follows the practice of capitalizing property and equipment purchased over $1,250.  The cost of ordinary maintenance and repairs is charged to operations while renewals and replacements are capitalized.  In 3rd quarter 2006, we capitalized $146,085 due to lease hold improvement as a result of our move to new facilities in Lake Forest, California.

Long –Lived Assets

The Company’s management assesses the recoverability of its long-lived assets by determining whether the depreciation and amortization of long lived assets over their remaining lives can be recovered through projected undiscounted future cash flows. The amount of long lived asset impairment if any, is measured based on fair value and is charged to operations in the period in which long lived assets impairment is determined by management. There can be no assurance however, that market conditions will not change or demand for the Company’s services will continue, which could result in impairment of long-lived assets in the future.

Revenue Recognition

Revenue from product and services are recognized at the time goods are shipped or services are provided to the customer, with an appropriate provision for returns and allowances. Terms are generally FOB Origination with the right of inspection and acceptance. The company has not experienced a material amount of rejected or damaged product.

Fair Value of Financial Instruments

The carrying amount of accounts payable and accrued expenses are considered to be representative of their respective fair values because of the short-term nature of these financial instruments.

Other Comprehensive Income

We had no material components of other comprehensive income (loss) and accordingly, net loss is equal to comprehensive loss in all periods.

Net Profit / (Loss) per Common Share      

Basic profit / (loss) per share is computed on the basis of the weighted average number of common shares outstanding. For the period nine month period ended September 30, 2005, all of the Company's common stock equivalents were excluded from the calculation of diluted loss per common share because they were anti-dilutive, due to the Company's net loss in that year. At September 30, 2006 the company had outstanding common shares of 10,270,863. As of September 30, 2006 there were warrants outstanding to purchase 4,076,250 common shares which may dilute future earnings per share. Diluted, weighted average Common shares and equivalents as of September 30, 2006 were 11,813,497 and 8,940,507 for the three month period ended and nine month period ended respectively.

Income Taxes

We account for income taxes under SFAS No. 109, which requires the asset and liability approach to accounting for income taxes.  Under this method, deferred tax assets and liabilities are measured based on differences between financial reporting and tax bases of assets and liabilities measured using enacted tax rates and laws that are expected to be in effect when differences are expected to reverse.  The net profit reported in the nine month period ended September 30, 2006 is offset by previous losses.

Results of Operations

For the three month period ended September 30, 2006 we generated a net profit of $40,325 compared to net losses of ($217,844) for the same period in 2005.  For the nine month period ended September 30, 2006 we generated a net profit of $160,318 compared to net losses of ($539,528) for the same period in 2005.

In the three month ended September 30, 2006 our revenue increased by 70% to $2,551,236 compared to the same period in 2005. In the nine month period ended September 30, 2006 our revenue increased by 66% to 7,313,672 compared to the same period in 2005.  

In the three month period ended September 30, 2006 our cost of goods sold, was reduced to 76% from 78% in the same period in 2005.  In the nine month period ended September 30, 2006 our cost of goods sold, was reduced to 75% from 81% in the same period in 2005.  

In three month period ended September 30, 2006 our gross margins increased to 24% from 21% in the same period in 2005.  In nine month period ended September 30, 2006 our gross margins increased to 25% from 19% in the same period in 2005.  

In the three month period ended September 30, 2006 our SG&A cost was reduced to 20% from 33% compared to the same period in 2005. In the nine month period ended September 30, 2006 our SG&A cost was reduced to 20% from 30% compared to the same period in 2005.

Our improvements in performance in the three month and nine month periods ended September 30, 2006 are primarily due to increase in revenue and  continuation of process improvement efforts initiated in the 4th quarter 2005.  We anticipate a slow down in sales in the  4th quarter 2006 and 1st quarter of 2007 due to customer reduction in re-orders and one of our major customers moving high volume business to low cost regions.  

The following table summarizes certain items in the statements of operations as a percentage of net sales. The financial information and the discussion below should be read in conjunction with the accompanying financial statements and notes thereto.

Net Sales 

Our net sales increased by 70% to $2,551,236  in three month period ending September 30, 2006 compared to the same period in 2005 due to increase in the number of customers and increased orders from existing customers.  

Major Customers

Our top 5 customers accounted for approximately 86% of net sales for the three month period ended September 30, 2006, compared to approximately 85% in the same period in 2005.  We believe that our ability to grow depends on increasing sales to existing customers and on successfully attracting new customers. Customer contracts can be canceled and volume levels can be changed or delayed. The timely replacement of delayed, canceled or reduced orders with new business cannot be ensured. In addition, we cannot assume that any of our current customers will continue to utilize our services. Consequently, our results of operations may be materially adversely affected.

Gross Profit 

Our Gross profit could vary from period to period and is affected by a number of factors, including product mix, production efficiencies, component availability and costs, pricing, competition, customer requirements and unanticipated restructuring or inventory charges.  In three month period ended September 30, 2006 our gross profits increased to 24% from 21% in the same period in 2005. Our gross profit percentage increased to 25% in the nine month period ending September 30, 2006, an increase of 31% compared to the same period in 2005 primarily due to increased revenue and improved operational efficiencies.   

Selling, General and Administrative (SG&A) Expenses 

We issued 500,000 shares of common stock, valued at $.10  ($50,000) to our Board of Directors for the past two years of service.  However, SG&A expenses decreased from 33% to 20% for the three months ended September 30, 2006 compared to the same period in 2005.  SG&A expenses decreased from 31% to 20% for the nine months ended September 30, 2006 compared to the same period in 2005.  This decrease in percentage is mainly due to higher revenue levels in the 2^nd quarter of 2006.    

Net Income/ (Loss) from operations

In the three months ended September 30, 2006, our net income from operations was 4% compare to net losses of (12%) for the same period ending 2005 and in the nine months ended September 30, 2006, our net income from operations was 6% compare to net losses of (11%) for the same period ending 2005.   The increase in net profits was due, primarily to increased revenue and continued operational efficiencies.  

Liquidity and Capital Resources: 

We generated net cash from operating activities of $160,318 during the nine month period ended September 30, 2006 compared to negative (539,528) in the same period in 2005.  

The following is a summary of certain obligations and commitments as of r, 2005 for continuing operations:

Off-balance Sheet Arrangement

We currently have no off-balance sheet arrangements.

Subsidiaries

None.

ITEM 3.  CONTROLS AND PROCEDURES.

Our  management evaluated, with the participation of our Chief Executive Officer and  our  Chief  Financial Officer, the effectiveness of our disclosure controls and  procedures  as of the end of the period covered by this Quarterly Report on Form 10-QSB. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures are effective to ensure that information we are required to disclose in reports that we  file  or  submit  under the Securities Exchange Act of 1934 (i) is recorded, processed,  summarized  and  reported  within  the  time  periods  specified  in Securities  and Exchange Commission rules and forms, and (ii) is accumulated and communicated  to  our  management, including our Chief Executive Officer and our Chief  Financial  Officer,  as  appropriate  to allow timely decisions regarding required  disclosure.  Our  disclosure  controls  and procedures are designed to provide  reasonable  assurance  that  such  information  is  accumulated  and communicated  to  our management. Our disclosure controls and procedures include components  of  our  internal  control  over  financial  reporting. Management's assessment of the effectiveness of our internal control over financial reporting is  expressed  at  the level of reasonable assurance that the control system, no matter  how  well  designed  and  operated, can provide only reasonable, but not absolute,  assurance  that  the  control  system's  objectives  will  be  met.

There  was  no  change  in  our  internal  control over financial reporting that occurred  during  our  last  fiscal  quarter  that  materially  affected,  or is reasonably  likely  to  materially  affect,  our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

As of  September 30, 2006 we have the following legal proceedings and legal settlements:

1.     Cadence has a judgment against us for $98,000 which was entered by the Superior Court Santa Clara County, California in September 2, 2003.  The judgment was due to lack of payment by Probe to Cadence after Probe purchased the license to use its Alegro software program.  Due to economic conditions after September 11^th the market for the use of this product disappeared and Probe was not able to resale the services.  Consequently, Probe was not able to generate any revenues from reselling of the software and could not pay Cadence.  On August 9^th 2004 we have entered into a payment agreement with the Cadence in which we pay them $2,500 a month until such time the debt is paid off and the balance due to Cadence under the agreement was $16,053 as of September 30, 2006.

2. We currently owe the Internal Revenue Service $98,427 for past tax liabilities.  We  negotiated a settlement with the IRS and have entered into a payment plan with them in which we pay the IRS $3,000 per month.  All payments to date are current.  The balance is included in other long-term debt.

While we are currently able to service any and all payment obligation to the creditors, if we are unable in the future to service any payments, anyone of the creditors may instigate foreclosure proceedings against us.  If we are unable to satisfy our obligations, we could be forced into bankruptcy.

We believe that there are no other claims or litigation pending, the outcome of which could have a material adverse effect on our financial condition or operating results.  However, if litigation should arise and the company was to receive an unfavorable ruling, there is a possibility that it would have a material adverse impact on our financial condition, results of operations, or liquidity of the period in which the ruling occurs, or future periods.

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.

Not Applicable.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

During the third quarter of 2006 our shareholders voted affirmatively to reelect our four directors Reza Zarif, our Chief Executive Officer, Barrett Evans, our interim Chief Financial Officer, Kambiz Mahdi, and Jeffrey Conrad.  Furthermore, our shareholders voted to approve the sale of common stock to Quantum Fuel System Technologies Worldwide, Inc. representing 19.99% of our common stock then outstanding in consideration for $100,000 cash, 1,000,000 in rent and engineering credits and a royalty free license to their alternative energy engine technologies.

ITEM 5.  OTHER INFORMATION.

None.

ITEM  6.  EXHIBITS AND REPORTS ON FORM 8-K.

EXHIBIT

NUMBER  DESCRIPTION

-------------------

3.1 Articles of Incorporation (included as exhibit 3.1 to the Form SB-2/A filed on June 10, 2005 and incorporated herein by reference).

3.2 Bylaws (included as exhibit 3.2 to the Form SB-2/A filed on June 10, 2005 and incorporated herein by reference).

4.1  Certificate of Designation for Series A Convertible Preferred Stock, dated May 20, 2004 (included as exhibit 4.1 to the Form SB-2/A filed on June 10, 2005 and incorporated herein by reference).

4.2 Certificate of Designation for Series B Convertible Preferred Stock dated December 31, 2004 (included as exhibit 4.2 to the Form SB-2/A filed on June 10, 2005 and incorporated herein by reference).

4.3  Sample Series A Warrant Purchase Agreement (included as exhibit 4.3 to the Form SB-2/A filed on September 26, 2005 and incorporated herein by reference).

4.4  Sample Series B Warrant Purchase Agreement (included as exhibit 4.4 to the Form SB-2/A filed on September 26, 2005 and incorporated herein by reference).

4.5 Sample Amended Series A Warrant Purchase Agreement (included as exhibit 4.5 to the Form SB-2/A filed on November 25, 2005 and incorporated herein by reference

4.6 Sample Amended Series B Warrant Purchase Agreement (included as exhibit 4.6 to the Form SB-2/A filed on November 25, 2005 and incorporated herein by reference).

4.6 Certificate of Designation for Series C Convertible Preferred Stock dated May 25, 2006 (included as exhibit 4.1 to Form 8-K filed on June 14, 2006 and incorporated herein by reference).

4.7 Amended Certificate of Designation for Series C Convertible Preferred Stock dated August 7, 2006 (included as exhibit 4.1 to Form 8-K filed on August 14, 2006 and incorporated herein by reference).

10.1  Lease  Agreement between Probe Manufacturing, Inc. (F.K.A. Probe Manufacturing Industries, Inc. and Reza Zarif and Kambiz Mahdi, dated May 2, 1997 (included as exhibit 10.1 to the Form SB-2/A filed on June 10, 2005 and incorporated herein by reference).  

10.2 Consulting  Agreement  between  Probe Manufacturing Industries and Anthony Reed dated December 31, 2004 (included as exhibit 10.2 to the Form SB-2/A filed on June 10, 2005 and incorporated herein by reference).

10.3  Legal retainer agreement between Probe Manufacturing, Inc. and Jeffrey Conrad dated (included as exhibit 10.3 to the Form SB-2/A filed on June 10, 2005 and incorporated herein by reference).

10.4 Line of Credit agreement between Probe Manufacturing, Inc. and eFund Capital Partners, LLC dated January 1, 2005 (included as exhibit 10.4 to the Form SB-2/A filed on June 10, 2005 and incorporated herein by reference).

10.5 Line of Credit agreement between Probe Manufacturing, Inc. and Ashford Capital, LLC dated January 1, 2005 (included as exhibit 10.5 to the Form SB-2/A filed on June 10, 2005 and incorporated herein by reference).

10.6 Line of Credit agreement between Probe Manufacturing, Inc. and Benner Exemption Trust dated March 8, 2005 (included as exhibit 10.6 to the Form SB-2/A filed on June 10, 2005 and incorporated herein by reference).

10.7 Line of Credit agreement between Probe Manufacturing, Inc. and Edward Lassiter dated March 22, 2005 (included as exhibit 10.7 to the Form SB-2/A filed on June 10, 2005 and incorporated herein by reference).

10.8 Line of Credit agreement between Probe Manufacturing, Inc. and Rufina V. Paniego dated January 1, 2004  (included as exhibit 10.8 to the Form SB-2/A filed on June 10, 2005 and incorporated herein by reference).

10.9 Promissory Note between Probe Manufacturing, Inc and Ashford Transitional Fund, L.P. dated September 20, 2004 (included as exhibit 10.9 to the Form SB-2/A filed on June 10, 2005 and incorporated herein by reference).

10.10 Engagement Letter between Probe Manufacturing, Inc. and eFund Capital Partners, LLC dated May 20, 2004 (included as exhibit 10.10 to the Form SB-2/A filed on June 10, 2005 and incorporated herein by reference).

10.11 Series A Convertible Preferred Stock Purchase Agreement with eFund Capital Partners, LLC dated May 20, 2004 (included as exhibit 10.11 to the Form SB-2/A filed on June 10, 2005 and incorporated herein by reference).

10.12 Series A Convertible Preferred Stock Purchase Agreement with Reza Zarif dated May 20, 2004 (included as exhibit 10.12 to the Form SB-2/A filed on June 10, 2005 and incorporated herein by reference).

10.13 Series A Convertible Preferred Stock Purchase Agreement with Kambiz Mahdi dated May 20, 2004. (included as exhibit 10.13 to the Form SB-2/A filed on June 10, 2005 and incorporated herein by reference).

10.14 Series B Convertible Preferred Stock Purchase Agreement with eFund Capital Partners, LLC dated December 31, 2004 (included as exhibit 10.14 to the Form SB-2/A filed on June 10, 2005 and incorporated herein by reference).

10. 15 Series B Convertible Preferred Stock Purchase Agreement with Reza Zarif dated December 31, 2004 (included as exhibit 10.15 to the Form SB-2/A filed on June 10, 2005 and incorporated herein by reference).

10.16 Series B Convertible Preferred Stock Purchase Agreement with Kambiz Mahdi dated December 31, 2004 (included as exhibit 10.16 to the Form SB-2/A filed on June 10, 2005 and incorporated herein by reference).

10.17 Agreement to Cancel and Return shares of common stock between Probe and eFund Capital Partners, LLC, Ashford Capital, LLC, Reza Zarif, Kambiz Mahdi, dated December 31, 2004 (included as exhibit 10.17 to the Form SB-2/A filed on June 10, 2005 and incorporated herein by reference).

10.18 Promissory note with eFund Capital Partners, LLC dated October 12, 2004 (included as exhibit 10.18 to the Form SB-2/A filed on June 10, 2005 and incorporated herein by reference).

10.19 Promissory note with Rufina V. Paniego dated July 1, 2004 (included as exhibit 10.19 to the Form SB-2/A filed on June 10, 2005 and incorporated herein by reference).

10.20 Sample purchase order agreement with Celerity, Inc (included as exhibit 10.20 to the Form SB-2/A filed on September 26, 2005 and incorporated herein by reference).

10.21 Sample purchase order agreement with Newport Corporation (included as exhibit 10.21 to the Form SB-2/A filed on September 26, 2005 and incorporated herein by reference).

10.22 Sample purchase order agreement with Asymtek Corporation (included as exhibit 10.22 to the Form SB-2/A filed on September 26, 2005 and incorporated herein by reference).

10.23 Sample purchase order agreement with Jetline Engineering Corporation (included as exhibit 10.23 to the Form SB-2/A filed on September 26, 2005 and incorporated herein by reference).

10.24 Sample purchase order agreement with our supplier Future Active, Inc (included as exhibit 10.24 to the Form SB-2/A filed on September 26, 2005 and incorporated herein by reference).

10.25 Sample purchase order agreement with our supplier Arrow Electronics, Inc. (included as exhibit 10.25 to the Form SB-2/A filed on September 26, 2005 and incorporated herein by reference).

10.26 Lease Agreement between Probe Manufacturing, Inc. and Mitchell Fitch, LLC, dated November 15, 2005  (included as Exhibit 10.26 to the Form 10-KSB filed on April 14, 2006 and incorporated herein by reference).

10.27 Employment Agreement with Reza Zarif, Chief Executive Officer of Probe Manufacturing, Inc. (included as exhibit 10.1 to Form 8-K filed on June 14, 2006 and incorporated herein by reference).

10.27 Series C Convertible Preferred Exchange Agreement with eFund Capital Partners, LLC (included as exhibit 10.2 to Form 8-K filed on June 14, 2006 and incorporated herein by reference).

10.28 Series C Convertible Preferred Exchange Agreement with Reza Zarif (included as exhibit 10.3 to Form 8-K filed on June 14, 2006 and incorporated herein by reference).

10.29 Series C Convertible Preferred Exchange Agreement with Kambiz Mahdi (included as exhibit 10.4 to Form 8-K filed on June 14, 2006 and incorporated herein by reference).

10.30 Amended Series C Convertible Preferred Exchange Agreement with eFund Capital Partners, LLC (included as exhibit 10.1 to Form 8-K filed on August 14, 2006 and incorporated herein by reference).

10.31 Amended Series C Convertible Preferred Exchange Agreement with Reza Zarif (included as exhibit 10.2 to Form 8-K filed on August 14, 2006 and incorporated herein by reference).

10.32 Amended Series C Convertible Preferred Exchange Agreement with Kambiz Mahdi (included as exhibit 10.3 to Form 8-K filed on August 14, 2006 and incorporated herein by reference).

10.33 Amended Line of Credit agreement between Probe Manufacturing, Inc. and Kambiz Mahdi dated August 10, 2006 (included as exhibit 10.1 to the Form 8-K filed on August 23, 2006 and incorporated herein by reference).

10.34 Amended Line of Credit agreement between Probe Manufacturing, Inc. and Reza Zarif dated August 10, 2006 (included as exhibit 10.2 to the Form 8-K filed on August 23, 2006 and incorporated herein by reference).

10.35 Amended Line of Credit agreement between Probe Manufacturing, Inc. and Frank Kavanaugh dated August 10, 2006 (included as exhibit 10.3 to the Form 8-K filed on August 23, 2006 and incorporated herein by reference).

10.36 Amended Line of Credit agreement between Probe Manufacturing, Inc. and Kambiz Mahdi dated August 10, 2006 (included as exhibit 10.4 to the Form 8-K filed on August 23, 2006 and incorporated herein by reference).

10.37 Amended Line of Credit agreement between Probe Manufacturing, Inc. and Reza Zarif dated August 10, 2006 (included as exhibit 10.5 to the Form 8-K filed on August 23, 2006 and incorporated herein by reference).

10.38 Amended Line of Credit agreement between Probe Manufacturing, Inc. and Rufina Paniego dated August 10, 2006 (included as exhibit 10.6 to the Form 8-K filed on August 23, 2006 and incorporated herein by reference).

10.39 Amended Line of Credit agreement between Probe Manufacturing, Inc. and eFund Capital Partners, LLC dated August 10, 2006 (included as exhibit 10.7 to the Form 8-K filed on August 23, 2006 and incorporated herein by reference).

10.40 Amended Line of Credit agreement between Probe Manufacturing, Inc. and Benner Exemption Trust dated August 10, 2006 (included as exhibit 10.8 to the Form 8-K filed on August 23, 2006 and incorporated herein by reference).

10.41 Amended Line of Credit agreement between Probe Manufacturing, Inc. and Ed Lassiter dated August 10, 2006 (included as exhibit 10.9 to the Form 8-K filed on August 23, 2006 and incorporated herein by reference).

10.42 Amended Line of Credit agreement between Probe Manufacturing, Inc. and William Duncan dated August 10, 2006 (included as exhibit 10.10 to the Form 8-K filed on August 23, 2006 and incorporated herein by reference).

10.43 Amended Line of Credit agreement between Probe Manufacturing, Inc. and Hoa Mai dated August 10, 2006 (included as exhibit 10.11 to the Form 8-K filed on August 23, 2006 and incorporated herein by reference).

10.44 Amended Line of Credit agreement between Probe Manufacturing, Inc. and Ashford Transition Fund dated August 10, 2006 (included as exhibit 10.12 to the Form 8-K filed on August 23, 2006 and incorporated herein by reference).

10.45 Employee Profit Sharing Plan (included as exhibit 10.13 to the Form 8-K filed on August 23, 2006 and incorporated herein by reference).

10.46 Probe Manufacturing 2006 Employee Incentive Stock Option Plan (included as exhibit 10.14 to the Form 8-K filed on August 23, 2006 and incorporated herein by reference).

16.1 Letter from Michael Johnson & Company, LLC dated January 04, 2006 (included as exhibit 10.20to the Form SB-2/A filed on September 26, 2005 and incorporated herein by reference).

14.1 Code of Ethics filed (included as Exhibit 14.1 to the Form 10-KSB filed on April 14, 2006 and incorporated herein by reference).

16.1 Letter from Michael Johnson & Company, LLC dated January 04, 2006 (included as exhibit 10.20to the Form SB-2/A filed on September 26, 2005 and incorporated herein by reference).

21.1  List  of  Subsidiaries (included as Exhibit 21.1 to the Form 10-KSB filed on April 14, 2006 and incorporated herein by reference).

23.1  Consent of Jaspers + Hall, PC - Independent Auditors to the Form 10-K filed

March  21,  2006, (included as Exhibit 23.1 to the Form 10-KSB filed on April 14, 2006 and incorporated herein by reference).

23.2 Report of Independent Registered Public Accounting Firm regarding the audit

of  Probe Manufacturing,  Inc.  for the  year  ended  December 31, 2004, (included as Exhibit 23.2 to the Form 10-KSB filed on April 14, 2006 and incorporated herein by reference).

31.1 Certification of the Chief Executive Officer pursuant to Section 302 of the

Sarbanes-Oxley  Act  of  2002.

31.2 Certification of the Chief Financial Officer pursuant to Section 302 of the

Sarbanes-Oxley  Act  of  2002.

32.1  Certification  of  Officers pursuant to 18 U.S.C. Section 1350, as adopted

pursuant  to  Section  906  of  the  Sarbanes-Oxley  Act  of  2002.

Reports  Filed  on  Form  8-K

On  August 23, 2006,  we  filed  an  8-K  regarding the following promissory notes and special lines of credit which were changed to term promissory notes effective June 30, 2006 and that have a 12% interest rate with a 36 month amortization a balloon payments on April 15, 2008.  Furthermore, we instituted an employee profit sharing plan and an employee incentive stock option plan:

1). Note Payable number 2029054, dated March 10, 2006  – related party, Special use, line of credit in the amount of $45,000, unsecured, 20% interest (10% paid in Cash and 10% paid in Company stock),  due May 10, 2007.  As of June 30, 2006 the outstanding balance was $29,649, payable to Kambiz Mahdi, This note was converted to a Term Note Payable $30,155.58 with an effective date of  June 30, 2006 The note is un-secured at 12% interest rate, with a 36 month amortization, payments of $1,001 and a balloon payment of $16,588 on April 15, 2008.

2). Note Payable number 2029053, dated March 10, 2006  – related party, special use, line of credit in the amount of $45,000, unsecured, 20% interest (10% paid in Cash and 10% paid in Company stock),  due May 10, 2007.  As of June 30, 2006 the outstanding balance was $29,649, payable to Reza Zarif. This note was converted to a Term Note Payable in the amount of 30,155.58 with an effective date of  June 30, 2006, The note is un-secured, At 12% interest rate, with a 36 month amortization, payments of $1,001 and a balloon payment of $16,588.70 on April 15, 2008.

3). Note Payable number 2029055, dated March 10, 2006  – related party, special use, line of credit in the amount of $90,000, unsecured, 12% interest paid in Cash., due May 10, 2007.  As of June 30, 2006 the outstanding balance was $59,298, payable to Frank Kavanaugh, This note was converted to a Term Note Payable  in the amount of $60,113 with an effective date of  June 30, 2006.  The note is un-secured  at 12% interest rate, with a 36 month amortization, payments of $1,996 and a balloon payment of $33,068 on April 15, 2008.

4). Note Payable – number 2401010 – related party, unsecured, 20% interest (10% paid in Cash and 10% paid in Company stock) due on May 10, 2007, payable to Kambiz Mahdi.  This note was converted to a Term Note Payable in the amount of 236,986.04 with an effective date of June 30, 2006.  The note is un-secured, At 12% interest rate, with a 36 month amortization, payments of $7,871 and a balloon payment of $130,366 on April 15, 2008.

5). Note Payable – number 2401000 – related party, unsecured, 20% interest (10% paid in Cash and 10% paid in Company stock)  due on May 10, 2007, payable to Reza Zarif.  This note was converted to a Term Note Payable in the amount payable of $236,986.04 with an effective date of  June 30, 2006.  The note is un-secured, at 12% interest rate, with a 36 month amortization payments of $7,871 and a balloon payment of $130,366 on April 15, 2008.

6). Note Payable – Number 2020000 – related party.  This Note was an operating line of credit, secured by the assets of the company,   Borrowings under this Line of credit was at an interest rate of 20% (12% paid in cash and 8% paid in common stock in the company) per annum.   As of June 30, 2006 the Company had an outstanding balance against this line of credit in the amount of $75,000, payable to Rufina Paniego.  This note was converted to a Term Note Payable in the amount of $75,000 with an effective date of  June 30, 2006.  The note is un-secured  at 12% interest rate, with a 36 month amortization, payments of $2,491 and a balloon payment of $41,257 on April 15, 2008

7). Note Payable – Number 2029000 – related party.  This Note was an operating line of credit, secured by the assets of the company,   Borrowings under this Line of credit was at an interest rate of 20% (12% paid in cash and 8% paid in common stock in the company) per annum.   As of June 30, 2006 the Company had an outstanding balance against this line of credit in the amount of $150,000, payable to eFund Capital Partners.  This note was converted to a Term Note Payable in the $150,000 with an effective date of  June 30, 2006 The note is un-secured at 12% interest rate, with a 36 month amortization, payments of $4,982 and a balloon payment of $82516 on April 15, 2008

8). Note Payable – Number 2029010 – related party.  This Note was an operating line of credit, secured by the assets of the company,   Borrowings under this Line of credit was at an interest rate of 20% (12% paid in cash and 8% paid in common stock in the company) per annum.   As of June 30, 2006 the Company had an outstanding balance against this line of credit in the amount of $140,000, payable to Benner Exemption Trust.  This note was converted to a Term Note Payable in the amount of $140,000 with an effective date of  June 30, 2006.  The note is un-secured  at 12% interest rate, with a 36 month amortization, payments of $4,650 and a balloon payment of $77,014 on April 15, 2008.

9). Note Payable – Number 2029030 – related party.  This Note was an operating line of credit, secured by the assets of the company,   Borrowings under this Line of credit was at an interest rate of 20% (12% paid in cash and 8% paid in common stock in the company) per annum.   As of June 30, 2006 the Company had an outstanding balance against this line of credit in the amount of $140,000, payable to Ed Lassiter.  This note was converted to a Term Note Payable in the amount of $140,000 with an effective date of  June 30, 2006.  The note is un-secured  at 12% interest rate, with a 36 month amortization payments of $4,650 and a balloon payment of $77,014.52 on April 15, 2008.

10). Note Payable - Number 2029020 -   This Note was an operating line of credit, secured by the assets of the company,   Borrowings under this Line of credit was at an interest rate of 20% (12% paid in cash and 8% paid in common stock in the company) per annum.   As of June 30, 2006 the Company had an outstanding balance against this line of credit in the amount of $50,000, payable to Bill Duncan.  This note was converted to a Term Note Payable in the amount of $50,000 with an effective date of  June 30, 2006. The note is un-secured at 12% interest rate, with a 36 month amortization, payments of $1,660.72 and a balloon payment of $27,505.19 on April 15, 2008

11). Note Payable - Number 2029040 -   This Note was an operating line of credit, un-secured,   Borrowings under this Line of credit was at an interest rate of 15%  per annum.   As of June 30, 2006 the Company had an outstanding balance against this line of credit in the amount of $50,000, payable to Hoa Mai.  This note was converted to a Term Note Payable in the amount of $50,000 with an effective date of  June 30, 2006 The note is un-secured  at 12% interest rate, with a 36 month amortization, payments of $1,660.72 and a balloon payment of $27,505.19 on April 15, 2008.

12) Note Payable – Number 2028000 –   This Note was an operating line of credit, secured by the assets of the company,   Borrowings under this Line of credit was at an interest rate of 12%  per annum.   As of June 30, 2006 the Company had an outstanding balance against this line of credit in the amount of $100,000, payable to Ashford Transition Fund, LP.  This note was converted to a Term Note Payable in the amount of $100,000, with an effective date of  June 30, 2006.  The note is un-secured  at 12% interest rate, with a 36 month amortization, payments of $3,321.43 and a balloon payment of $55,010.37 on April 15, 2008.

As of August 14, 2006 all outstanding Series A and Series C Convertible Preferred Stock were converted to common stock by the holders of the preferred stock.  Therefore, the Company no longer has any outstanding preferred stock.   

On August 21, 2006 we instituted its profit sharing plan for employee which was approved by the board of directors in January, 2006.  Pursuant to the plan the employees will be entitled to receive ten percent of the net profits before taxes.  The Profit sharing pool will be paid out in 2 payments; 1) 40% of the accrued pool is paid on December 15^th of the current year, 2) The Balance will be paid on March 31 of the following year, after the final year end audit adjustments are completed.  

On August 21, 2006 the Company instituted its 2006 Employee Incentive Stock Option Plan whereby two percent of the outstanding shares of the Company’s common stock, Outstanding Common Shares, shall be available for grant under this Plan.  The Exercise Price of an Incentive Stock Option shall be lesser of the established Fair Market Value or $.80  at the time of Grant; provided that the Exercise Price of an Incentive Stock Option granted to a holder of more than 10% of the outstanding Shares shall be 110% of the Fair Market Value of the Shares on the date of grant. The term of an Incentive Stock Option granted under this Plan shall be established by the Committee at the date of grant and shall not exceed 10 years from the date of grant for all Incentive Stock Options; provided however, in the case of an Incentive Stock Option with an Exercise Price set at 1 10% of Fair Market Value, the term of such Incentive Stock Option shall not exceed 7 years from the date of grant.

On September 21, 2006, we filed an 8-k regarding a sublease agreement for office and manufacturing space with Quantum Fuels System Technologies Worldwide, Inc. for two years with an option to renew for three years at a monthly rate $8, 027.00.  The new facility is located at 25242 Artic Ocean Drive, Lake Forest, CA 92630.

SIGNATURES

In accordance with the requirements of the Exchange Act, the Registrant has caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

Date:  November 14, 2006           

Probe Manufacturing,  Inc.

/s/  Reza Zarif

 -----------------------

Reza Zarif

Chief  Executive Officer

Dated:  November 14, 2006

 /s/  Barrett Evans

________________

Barrett Evans

Interim Chief Financial Officer