SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q/A

AMENDMENT NO. 1

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 27, 2004

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 000-31337

WJ COMMUNICATIONS, INC.

(Exact name of registrant as specified in its charter)

	DELAWARE	94-1402710
	(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

	401 River Oaks Parkway, San Jose, California	95134
	(Address of principal executive offices)	(Zip Code)

(408) 577-6200
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes ý. No o.

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes o. No ý.

As of August 2, 2004 there were 60,816,346 shares outstanding of the registrant’s common stock, $0.01 par value.

EXPLANATORY NOTE

This Amendment No. 1 on Form 10-Q/A (“Amendment No. 1”) amends the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 27, 2004 filed on August 11, 2004, and is being filed solely for the purpose of amending and restating in its entirety Note 5 “Unaudited Pro Forma Results of Operations” to the unaudited financial statements in connection with the Company’s acquisition of certain assets from EiC and to update the signature pages and Exhibits 31.1, 31.2, 32.1 and 32.2. The remainder of our original Form 10-Q is unchanged. The restated Note 5 is a result of further review of pro forma accounting requirements to include certain historical costs of the acquired business previously eliminated from the pro forma results and to eliminate certain previous pro forma adjustments to revenue and costs for prospective business arrangements that had been applied to historical data. The previously reported financial results, statements of operations, comprehensive loss, balance sheet or cash flows are not affected by this Amendment No. 1. Except as otherwise expressly stated herein, this Amendment No. 1 continues to speak as of the date of our original Form 10-Q filing and does not reflect events occurring after the filing of the original Form 10-Q, or amend, modify or update in any way disclosures contained in the original Form 10-Q. All of the information contained in this Amendment No. 1 and our original Form 10-Q is subject to updating and supplementing as provided in reports filed by the Company with the Securities and Exchange Commission subsequent to the filing date of the original Form 10-Q.

WJ COMMUNICATIONS, INC.

QUARTERLY REPORT ON FORM 10-Q/A

THREE MONTHS AND SIX MONTHS ENDED JUNE 27, 2004

Amendment No. 1

TABLE OF CONTENTS

PART I	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 27, 2004 and June 29, 2003

	Condensed Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended June 27, 2004 and June 29, 2003

	Condensed Consolidated Balance Sheets at June 27, 2004 and December 31, 2003

	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 27, 2004 and June 29, 2003

	Notes to Condensed Consolidated Financial Statements

Item 4.	Controls and Procedures

PART II	OTHER INFORMATION

Item 6.	Exhibits and Reports on Form 8-K

	Signatures

PART I — FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

WJ COMMUNICATIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended						Six Months Ended
	June 27, 2004			June 29, 2003			June 27, 2004			June 29, 2003

Sales:
Semiconductor	$	7,105		$	3,510		$	13,742		$	9,013
Wireless	1,309			1,974			1,743			4,161
Fiber optics	—			—			—			1
Total sales	8,414			5,484			15,485			13,175

Cost of goods sold	3,308			3,571			6,503			8,370
Gross profit	5,106			1,913			8,982			4,805
Operating expenses:
Acquired in-process research and development	8,500			—			8,500			—
Research and development	4,085			4,281			8,142			8,749
Selling and administrative	2,941			2,687			5,775			5,398
Amortization of deferred stock compensation (*)	63			20			121			54
Recapitalization merger	—			35			—			772
Restructuring charges (reversals)	(430		)	—			(430		)	(21		)
Total operating expenses	15,159			7,023			22,108			14,952
Loss from operations	(10,053		)	(5,110		)	(13,126		)	(10,147		)
Interest income	155			195			320			414
Interest expense	(28		)	(38		)	(53		)	(50		)
Other income—net.	—			1,084			—			1,094
Loss before income taxes	(9,926		)	(3,869		)	(12,859		)	(8,689		)
Income tax benefit	—			(16		)	(6,542		)	(647		)
Net loss	$	(9,926	)	$	(3,853	)	$	(6,317	)	$	(8,042	)

Basic and diluted net loss per share	$	(0.16	)	$	(0.07	)	$	(0.11	)	$	(0.14	)
Basic and diluted average shares	60,254			56,354			59,832			56,434


(*) Amortization of deferred stock Compensation is excluded from the following expenses:
Research and development	$	46		$	10		$	92		$	31
Selling and administrative	17			10			29			23
	$	63		$	20		$	121		$	54

See notes to condensed consolidated financial statements.

WJ COMMUNICATIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(Unaudited)

	Three Months Ended						Six Months Ended
	June 27, 2004			June 29, 2003			June 27, 2004			June 29, 2003

Net loss	$	(9,926	)	$	(3,853	)	$	(6,317	)	$	(8,042	)
Other comprehensive gain:
Unrealized holding gains(losses) on securities arising during the period net of reclassification adjustments	(11		)	—			(10		)	18

Comprehensive loss	$	(9,937	)	$	(3,853	)	$	(6,327	)	$	(8,024	)

See notes to condensed consolidated financial statements.

WJ COMMUNICATIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

	June 27, 2004			December 31, 2003

ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	27,069		$	10,900
Short-term investments	25,567			49,232
Receivables, net	5,906			4,559
Inventories	5,133			2,420
Other	1,451			1,983
Total current assets.	65,126			69,094

PROPERTY, PLANT AND EQUIPMENT, net	10,380			10,504

Goodwill	1,817			—
Other assets	414			222
	$	77,737		$	79,820

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:
Accounts payable	$	2,382		$	3,125
Accrued liabilities	3,749			3,556
Income taxes payable	1,931			—
Restructuring accrual	4,382			3,665
Total current liabilities	12,444			10,346

Restructuring accrual	19,682			21,961
Income tax accrual	1,565			10,490
Other long-term obligations	758			784

Total liabilities	34,449			43,581

STOCKHOLDERS’ EQUITY:
Common stock	609			577
Additional paid-in capital	193,497			180,163
Accumulated deficit	(150,435		)	(144,118		)
Deferred stock compensation	(364		)	(375		)
Other comprehensive loss	(19		)	(8		)
Total stockholders’ equity	43,288			36,239
	$	77,737		$	79,820

See notes to condensed consolidated financial statements.

WJ COMMUNICATIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Six Months Ended
	June 27, 2004			June 29, 2003
OPERATING ACTIVITIES:
Net loss	$	(6,317	)	$	(8,042	)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Depreciation and amortization	1,385			2,405
Acquired in-process research and development	8,500			—
Amortization of deferred financing costs	21			13
Net loss on disposal of property, plant and equipment	—			91
Gain on sale of product line	—			(1,084		)
Deferred income taxes	—			6,036
Restructuring	(430		)	(21		)
Amortization of deferred stock compensation	146			70
Stock based compensation.	—			50
Provision for (reduction in) allowance for doubtful accounts	49			(302		)
Write-off of uncollectible accounts to allowance	(5		)	(2		)
Amortization of discounts on short-term investments	132			43
Net changes in:
Receivables	(1,391		)	302
Inventories	(674		)	938
Other assets	713			1,173
Restructuring liabilities	(1,133		)	(1,016		)
Income taxes payable	(6,994		)	—
Accruals and accounts payable	(535		)	(297		)
Net cash provided by (used in) operating activities	(6,533		)	357

INVESTING ACTIVITIES:
Purchase of short-term investments	(33,977		)	(20,927		)
Proceeds from sale and maturities of short-term investments	57,328			33,647
Purchases of property, plant and equipment	(136		)	(547		)
Acquisition of EiC and related costs	(11,196		)	—
Proceeds on disposal of property, plant and equipment	—			7
Proceeds from sale of product line	—			181
Net cash provided by investing activities	12,019			12,361

FINANCING ACTIVITIES:
Payments on long-term borrowings	(65		)	(32		)
Repurchase of common stock	—			(526		)
Net proceeds from issuances of common stock	10,748			—
Net cash provided by (used in) financing activities	10,683			(558		)

Net increase in cash and cash equivalents	16,169			12,160
Cash and cash equivalents at beginning of period	10,900			43,524
Cash and cash equivalents at end of period	$	27,069		$	55,684

Other cash flow information:
Income taxes paid (refunded), net	$	452		$	(6,678	)
Interest paid	32			37
Issuance of common stock for EiC acquisition	2,484			—

See notes to condensed consolidated financial statements.

WJ COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the three month and six month periods ended June 27, 2004 are not necessarily indicative of the results that may be expected for the year ending December 31, 2004.

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements of WJ Communications, Inc. (the “Company”) for the fiscal year ended December 31, 2003, which are included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 29, 2004.

The balance sheet at December 31, 2003 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

STOCK-BASED COMPENSATION — The Company accounts for stock-based compensation granted to employees and directors under the intrinsic value method as defined in Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees.”

As required under Statement of Financial Accounting Standards No. 123 (“SFAS 123”), “Accounting for Stock-Based Compensation,” and SFAS 148, “Accounting for Stock-Based Compensation Transition and Disclosure,” the pro forma effects of stock-based compensation on net income (loss) and net earnings (loss) per common share have been estimated at the date of grant as if the Company had accounted for such awards under the fair value method of SFAS123 using the Black-Scholes option-pricing model.

The following table illustrates the effect on net loss and net loss per share had compensation cost for all of the Company’s stock option plans been determined based upon the fair value at the grant date for awards under these plans, and amortized to expense over the vesting period of the awards consistent with the methodology prescribed under SFAS 123 (in thousands, except per share amounts):

	Three Months Ended						Six Months Ended
	June 27, 2004			June 29, 2003			June 27, 2004			June 29, 2003

Reported net loss	$	(9,926	)	$	(3,853	)	$	(6,317	)	$	(8,042	)
Add: Total stock-based employee compensation expense included in reported net loss	79			28			146			70
Deduct: Total stock-based employee compensation expense under fair value based method for all awards	(1,395		)	(575		)	(2,176		)	(1,166		)
Pro forma net loss	$	(11,242	)	$	(4,400	)	$	(8,347	)	$	(9,138	)

Net loss per basic and diluted share
As reported	$	(0.16	)	(0.07		)	(0.11		)	(0.14		)
Pro forma	$	(0.19	)	(0.08		)	(0.14		)	(0.16		)

2. ORGANIZATION AND OPERATIONS OF THE COMPANY

WJ Communications, Inc. (formerly Watkins-Johnson Company, the “Company”) was founded in 1957 in Palo Alto, California. The Company was originally incorporated in California and reincorporated in Delaware in August 2000. For more than 45 years, the Company developed and manufactured radio frequency (“RF”) microwave devices for government electronics and space communications systems used for intelligence gathering and communication. In 1996, the Company began to develop commercial applications for its military technologies. The Company’s current operations design, develop and market innovative, high-performance products for both current and next generation wireless and broadband cable networks, defense and homeland security systems and radio frequency identification (“RFID”) systems worldwide. The Company’s products are comprised of advanced, highly functional RF semiconductors, components and integrated assemblies which address the RF challenges of these various systems.

In June 2004, the Company completed its acquisition of the wireless infrastructure business and associated assets from EiC Corporation, a California corporation and EiC Enterprises Limited (together “EiC”). EiC designs, develops, manufactures and sells proprietary radio frequency integrated circuits (“RFICs”) primarily for wireless communications products. The Company believes that the addition of EiC’s technical expertise further enhances its strategy of offering customers a leading infrastructure RFIC product portfolio.

3. ACQUISITION

On June 18, 2004, the Company completed its acquisition of the wireless infrastructure business and associated assets from EiC. The aggregate purchase price was $13.7 million which included payments of cash of $10.0 million, the issuance of 737,000 shares of the Company’s common stock valued at $2.5 million and acquisition costs of $1.2 million (including $700,000 paid to a related party for investment banking services in connection with the acquisition). In connection with the acquisition, $1.5 million in cash and 294,118 shares of common stock have been held in escrow as security against certain financial contingencies. The outstanding balance of the escrow account less any properly noticed unpaid or contested amounts will be distributed within five days after March 31, 2005. The Company has agreed to file a registration statement no later than six months after the closing registering for resale by the seller of up to 442,882 shares of the Company’s common stock issued in the acquisition. In addition to the closing consideration, EiC may be entitled to further consideration of up to $14.0 million in cash and shares of the Company’s common stock if certain revenue and gross margin targets are achieved by March 31, 2005 and March 31, 2006. The fair value of the Company’s common stock was determined based on the average closing price per share of the Company’s common stock over a 5-day period beginning two trading days before and ending two trading days after the amended terms of the acquisition were agreed to and announced (June 21, 2004). The acquisition was accounted for using the purchase method of accounting in accordance with SFAS No. 141, Business Combinations (“SFAS No. 141”), and accordingly the Company’s consolidated financial statements from June 18, 2004 include the impact of the acquisition. The allocation of the purchase price for this acquisition, as of the date of the acquisition, is as follows (in thousands):


Property and equipment	$	1,124
Inventory	2,038
In-process research and development	8,500
Developed technology	200
Goodwill	1,817
Total purchase price	$	13,679

3. ACQUISITION (continued)

The acquisition was accounted for as a purchase transaction, and accordingly, the assets of EiC were recorded at their estimated fair values at the date of the acquisition. With the exception of the goodwill and acquired in-process research and development (“IPRD”), the identified intangible assets will be amortized on a straight-line basis over their estimated useful lives, with a weighted average life of approximately five years. The amounts contained in the purchase price allocation may change as additional information becomes available regarding the assets acquired. In particular, the Company has a 60 day evaluation period for the inventory acquired. The purchase price allocations are expected to be finalized in the third quarter of 2004.

A portion of the purchase price, $8.7 million, was allocated to developed and core technology and in-process research and development (“IPRD”). Developed and core technology and IPRD were identified and valued through extensive interviews, analysis of data provided by EiC Corporation concerning developmental products, their stage of development, the time and resources needed to complete them, their expected income generating ability, target markets and associated risks. The income approach method was the primary technique utilized in valuing the developed and core technology and IPRD. Under the income approach, fair value reflects the present value of the projected cash flows that are expected to be generated by the products incorporating the current technologies.

Developmental projects that reached technological feasibility were classified as developed and core technology, and the $200,000 value assigned to developed technology was capitalized to be amortized using the straight-line method over a weighted-average period of five years. Developmental projects that had not reached technological feasibility, and had no future alternative uses were classified as IPRD. The $8.5 million value allocated to projects that were identified as IPRD was charged to acquired in-process research and development in the accompanying unaudited condensed consolidated statements of operations for the three and six months ended June 27, 2004. The value assigned to IPRD comprises the following projects: 12V heterojunction bipolar transistor (“HBT”) power amplifiers ($1.5 million) and 28V HBT high power amplifiers ($7.5 million).

The nature of the efforts required to develop the acquired IPRD into commercially viable products principally relate to the completion of all planning, designing, prototyping, verification and testing activities that are necessary to establish that the products can be produced to meet their design specifications, including functions, features and technical performance requirements.

In valuing the IPRD, the Company considered, among other factors, the importance of each project to the overall development plan, the projected incremental cash flows from the projects when completed and any associated risks. The projected incremental cash flows were discounted back to their present value using an after-tax discount rate of 25%. This discount rate was determined after consideration of the Company’s weighted average cost of capital and the weighted average return on assets. Associated risks include the inherent difficulties and uncertainties in completing each project and thereby achieving technological feasibility, anticipated levels of market acceptance and penetration, market growth rates and risks related to the impact of potential changes in future target markets.

As part of the acquisition, the Company entered into a sublease with EiC Corporation for 28,160 square feet of space at their facility in Fremont, California. This sublease expires in December 2004 and then converts into a month to month lease thereafter. The minimum future sublease payments are $118,000.

4. GOODWILL AND INTANGIBLE ASSETS

In connection with the acquisition of the wireless infrastructure business and associated assets from EiC, the Company recorded $1.8 million of goodwill. This goodwill was based upon the values assigned to the transactions at the time they were announced in June 2004 in accordance with SFAS No. 142, Goodwill and Other Intangible Assets (“SFAS No. 142”). The changes in the carrying value of goodwill for the six months ended June 27, 2004 are as follows (in thousands):

Fiscal year:
Balance as of December 31, 2003	$	0
Purchased goodwill	1,817
Balance as of June 27, 2004	$	1,817

Intangible assets are recorded at cost, less accumulated amortization. Intangible assets as of June 27, 2004 consist of purchased technology of $200,000. Amortization is computed using the straight-line method over a weighted-average period of five years for purchased technology. The Company expects that annual amortization of acquired intangible assets to be as follows (in thousands):

Fiscal year:
2004	$	20
2005	40
2006	40
2007	40
2008	40
2009	20
Total amortization	$	200

5. UNAUDITED PRO FORMA RESULTS OF OPERATIONS (RESTATED)

In connection with the EiC acquisition, the Company reported certain unaudited pro forma financial data in Note 5 to the Condensed Consolidated Financial Statements contained in the Company’s Form 10-Q for the quarterly period ended June 27, 2004. Subsequent to the filing of the Form 10-Q, management has determined to amend and restate its previously reported Note 5 unaudited pro forma results of operations. The pro forma information in this Note 5 has been amended and restated to correctly include certain historical costs of the acquired business previously eliminated from the pro forma results and to eliminate certain previous pro forma adjustments to revenue and costs for prospective business arrangements that had been applied to historical data.

The following unaudited pro forma consolidated financial data represents the combined results of operations as previously reported and as restated as if EiC’s wireless infrastructure business had been combined with the Company at the beginning of the respective period. This pro forma financial data includes the straight line amortization of intangibles over their respective estimated useful lives and excludes the write-off of IPRD of $8.5 million (in thousands, except per share amounts):

	Three Months Ended
	June 27, 2004						June 29, 2003
	As previously reported			As restated			As previously reported			As restated

Net sales	$	9,480		$	9,302		$	6,234		$	6,096
Loss from operations	$	(2,359	)	$	(3,359	)	$	(5,942	)	$	(6,696	)
Net loss	$	(2,260	)	$	(3,260	)	$	(4,712	)	$	(5,426	)

Basic net loss per share	$	(0.04	)	$	(0.05	)	$	(0.08	)	$	(0.10	)
Basic average shares	60,910			60,910			57,091			57,091

Diluted net loss per share	$	(0.04	)	$	(0.05	)	$	(0.08	)	$	(0.10	)
Diluted average shares	60,910			60,910			57,091			57,091

	Six Months Ended
	June 27, 2004						June 29, 2003
	As previously reported			As restated			As previously reported			As restated

Net sales	$	17,871		$	17,267		$	14,613		$	14,399
Loss from operations	$	(6,165	)	$	(7,833	)	$	(12,261	)	$	(13,692	)
Net income (loss)	$	591		$	(1,127	)	$	(10,213	)	$	(11,615	)

Basic net income (loss) per share	$	0.01		$	(0.02	)	$	(0.18	)	$	(0.20	)
Basic average shares	60,528			60,528			57,171			57,171

Diluted net income (loss) per share	$	0.01		$	(0.02	)	$	(0.18	)	$	(0.20	)
Diluted average shares	67,576			60,528			57,171			57,171

The unaudited pro forma results of operations is presented for illustrative purposes only and is not intended to represent what the Company’s results of operations would have been if the acquisition had occurred on those dates or to project the Company’s results of operations for any future period. Since the Company and EiC were not under common control or management for any period presented, the unaudited pro forma results of operations may not be comparable to, or indicative of, future performance. These results do not reflect any additional costs or cost savings resulting from the acquisition.

6. RECLASSIFICATIONS

Certain amounts for 2003 have been reclassified to conform with the 2004 presentation. Such reclassifications did not have any impact on net loss or stockholders’ equity.

7. INVENTORIES

Inventories are stated at the lower of cost, using average-cost basis, or market. Cost of inventory items is based on purchase and production cost including labor and overhead. Write-downs, when required, are made to reduce excess inventories to their estimated net realizable values. Such estimates are based on assumptions regarding future demand and market conditions. If actual conditions become less favorable than the assumptions used, an additional inventory write-down may be required. Inventories at June 27, 2004 and December 31, 2003 consisted of the following (in thousands):

	June 27, 2004		December 31, 2003
Finished goods	$	2,330	$	1,257
Work in progress	2,226		647
Raw materials and parts	577		516
	$	5,133	$	2,420

8. CONCENTRATION OF CREDIT RISK

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash, cash equivalents, short-term investments and trade receivables. The Company maintains cash in bank deposit accounts, which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts. The Company invests in a variety of financial instruments such as money market funds, commercial paper and high quality corporate bonds, and, by policy, limits the amount of credit exposure with any one financial institution or commercial issuer. At June 27, 2004, Richardson Electronics, Lucent Technologies and Celestica represented 46%, 16% and 10% of the total accounts receivable balance, respectively. At December 31, 2003, Richardson Electronics, Lucent Technologies and Celestica represented 61%, 10% and 10% of total accounts receivable balance, respectively. The accounts receivable percentage attributable to Lucent Technologies includes the accounts receivable from their manufacturing subcontractors. The Company performs ongoing credit evaluations and maintains an allowance for doubtful accounts based upon the expected collectibility of receivables.

9. STOCKHOLDERS’ EQUITY

On January 28, 2004, the Company completed a secondary underwritten public offering of 2,000,000 shares of common stock at $5.75 per share, resulting in net proceeds of $10.1 million.

In March 2003, the Company’s Board of Directors (the “Board”) authorized the repurchase of up to $2.0 million of the Company’s common stock. In October 2003, the Board approved an additional $2.0 million to expand its existing share repurchase program increasing the total amount authorized to $4.0 million. Purchases under the stock repurchase program may be made in the open market, through block trades or otherwise. Depending on market conditions and other factors, these purchases may be commenced or suspended at any time or from time-to-time without prior notice. During the year ended December 31, 2003, $2.8 million was utilized to purchase 1,340,719 shares of the Company’s common stock at a weighted average purchase price of $2.08 per share. All of the purchases were made on the Nasdaq National Market at prevailing open market prices using general corporate funds. The repurchases reduced the Company’s cash and interest income during the period and correspondingly reduced the number of the Company’s outstanding shares of common stock. This stock repurchase program ended as of the annual shareholder meeting on July 22, 2004. On July 27, 2004 the Company announced that its Board of Directors has authorized the repurchase of up to $2.0 million of the Company’s common stock. The new program is effective immediately and replaces all previous plans.

STOCK OPTION PLANS—During 2000, the Company’s “2000 Stock Incentive Plan” and “2000 Non-Employee Director Stock Compensation Plan” (collectively the “Plans”) were adopted and approved by the Board and the Company’s stockholders. Under the Plans, the Company may grant incentive awards in the form of options to purchase shares of the Company’s common stock, restricted shares, common stock and stock appreciation rights to participants, which include non-employee directors, officers and employees of and consultants to the Company and its affiliates. On May 22, 2002, the Board approved the adoption of an amendment to the Company’s “2000 Stock Incentive Plan” to increase the number of shares of common stock authorized for issuance from 16,500,000 to 19,000,000 shares. This plan amendment did not affect any other terms of the “2000 Stock Incentive Plan.” On May 29, 2003, the Board approved the adoption of an amendment to the Company’s “2000 Non-Employee Director Compensation Plan” to increase the number of shares of common stock authorized for issuance from 570,000 to 800,000, which was approved by the Company’s stockholders on July 15, 2003 at the Company’s Annual Meeting of Stockholders. Also on May 29, 2003, the Board approved the adoption of a second amendment to the Company’s “2000 Stock Incentive Plan” so that options granted to employees under the “2000 Stock Incentive Plan” will qualify as performance-based compensation under Internal Revenue Code Section 162(m) and thereby not be subject to a deduction limitation. Particularly, the amendment to the “2000 Stock Incentive Plan” provides that no employee or prospective employee shall be granted one or more options within any fiscal year which in the aggregate are for the purchase of more than 3,000,000 shares. The total number of shares of common stock authorized for issuance pursuant to the Plans is 19,800,000 shares.

On May 23, 2001, the Company’s Board of Directors approved the adoption of the Company’s 2001 Employee Stock Incentive Plan (the “Plan”). The Plan may grant incentive awards in the form of options to purchase shares of the Company’s common stock, restricted shares, common stock and stock appreciation rights to participants, which include employees which are not officers and directors of the Company and its affiliates and consultants to the Company and its affiliates. The total number of shares of common stock reserved and available for grant under the Plan is 2,000,000 shares. Shares subject to award under the Plan may be authorized and unissued shares or may be treasury shares. Stock options may include incentive stock options, nonqualified stock options or both, in each case, with or without stock appreciation rights.

As of June 27, 2004 the number of shares available for future grants under the above plans was 4,106,121. Stock options may include incentive stock options, nonqualified stock options or both, in each case, with or without stock appreciation rights.

10. NET LOSS PER SHARE CALCULATION

Per share amounts are computed based on the weighted average number of basic and diluted (dilutive stock options) common and common equivalent shares outstanding during the respective periods. The net loss per share calculation is as follows (in thousands, except per share amounts):

	Three Months Ended						Six Months Ended
	June 27, 2004			June 29, 2003			June 27, 2004			June 29, 2003

Net loss	$	(9,926	)	$	(3,853	)	$	(6,317	)	$	(8,042	)

Denominator for basic net loss per share:
Weighted average shares outstanding	60,267			54,416			59,851			56,503
Less weighted average shares subject to repurchase	(13		)	(62		)	(19		)	(69		)
Weighted average shares outstanding	60,254			56,354			59,832			56,434

Denominator for diluted net loss per share:
Weighted average shares outstanding	60,254			56,354			59,832			56,434
Effect of dilutive stock options	—			—			—			—
Diluted weighted average common shares	60,254			56,354			59,832			56,434

Basic and diluted loss per share	$	(0.16	)	$	(0.07	)	$	(0.11	)	$	(0.14	)

The incremental shares from the assumed exercise of 13,912,586 and 15,426,737 stock options for the periods ended June 27, 2004 and June 29, 2003, respectively, were not included in computing the diluted per share amounts because the effect of such assumed conversion and issuance would be anti-dilutive as the Company recorded a net loss for both periods.

11. RESTRUCTURING CHARGES

During fiscal 2002 and 2001, the Company recorded significant restructuring charges representing the direct costs of exiting certain product lines or businesses and the costs of downsizing its business. Such charges were established in accordance with EITF 94-3 and Staff Accounting Bulletin No. 100, “Restructuring and Impairment Charges.” These charges include workforce reductions, consolidation of excess facilities and asset impairments as detailed in Note 10 of the Company’s Annual Report on Form 10-K as of December 31, 2003.

During the quarter ended June 27, 2004, the Company decided to delay the closure of its internal wafer fabrication facility for a minimum of three months as management assesses the integration of the EiC acquisition into existing operations. As such, the additional three months of rent and facility costs will be incurred as an operating expense which resulted in an approximate $430,000 reduction in the lease loss accrual which was recorded in the three and six months ended June 27, 2004.

The following table summarizes restructuring accrual activity recorded during the years 2003, 2002 and 2001 and the six months ended June 27, 2004, respectively (in thousands):

	Workforce Reduction			Lease Loss			Asset Impairment			Total

Total charge	$	786		$	34,880		$	8,364		$	44,030
Additional charge (reversals)	(21		)	(184		)	151			(54		)
Non-cash charges	—			(5,470		)	(8,515		)	(13,985		)
Cash payments	(512		)	(3,853		)	—			(4,365		)
Balance at December 31, 2003	253			25,373			—			25,626

Reversals	—			(430		)	—			(430		)
Non-cash charges	—			18			—			18
Cash payments	(168		)	(982		)	—			(1,150		)
Balance at June 27, 2004	$	85		$	23,979		$	—		$	24,064

Of the accrued restructuring charge at June 27, 2004, the Company expects $4.3 million of the lease loss and the remaining severance of $85,000 to be paid out over the next twelve months. As such, these amounts are recorded as current liabilities and the remaining $19.7 million to be paid out over the remaining life of the lease of approximately seven years is recorded as a long-term liability.

12. BUSINESS SEGMENT REPORTING

As an integrated telecommunications products provider, the Company currently has one reportable segment. The Company’s Chief Operating Decision Maker (“CODM”) is the CEO. While the Company’s CODM monitors the sales of various products, operations are managed and financial performance evaluated based upon the sales and production of multiple products employing common manufacturing and research and development resources; sales and administrative support; and facilities. This allows the Company to leverage its costs in an effort to maximize return. Management believes that any allocation of such shared expenses to various products would be impractical, and currently does not make such allocations internally.

During the year ended December 31, 2001, the Company’s larger customers began to outsource a greater percentage of their manufacturing. As such, the Company believes it is more meaningful in terms of concentration of risk and historic comparisons to combine the sales to manufacturing subcontractors with the end customer who ultimately controls product demand. Sales to individual customers representing greater than 10% of Company consolidated sales during at least one of the periods presented (in thousands):

	Three Months Ended				Six Months Ended
	June 27, 2004		June 29, 2003		June 27, 2004		June 29, 2003

Richardson Electronics Ltd (1).	$	3,978	$	1,426	$	7,774	$	4,864
Lucent Technologies, Inc. (2)	1,296		1,962		1,722		3,994
Celestica.	1,034		117		2,128		264

(1) Richardson Electronics Ltd. is the sole worldwide distributor of the Company’s complete line of RF semiconductor products.

(2) Includes sales to Lucent Technologies, Inc. and sales to its manufacturing subcontractors.

Sales to unaffiliated customers by geographic area are as follows (in thousands):

	Three Months Ended				Six Months Ended
	June 27, 2004		June 29, 2003		June 27, 2004		June 29, 2003

United States	$	5,557	$	3,237	$	10,084	$	8,978
Export sales from United States:
Europe	645		532		1,358		1,453
China	798		560		1,563		694
Other	1,414		1,155		2,480		2,050
Total	$	8,414	$	5,484	$	15,485	$	13,175

Long-lived assets located outside of the United States are insignificant.

13. INCOME TAXES

The Company in accordance with SFAS No. 5 “Accounting for Contingencies” has established certain reserves for income tax contingencies. These reserves relate to various tax years subject to audit by tax authorities including the Company’s Federal tax filings for 1996 to 2000 which are currently under examination.

Based on information received from the Internal Revenue Service related to their examination, the Company determined that certain reserves were no longer required. Accordingly, during the six months ended June 27, 2004, the Company reduced this reserve from $10.5 million to $4.0 million which resulted in an income tax benefit of $6.5 million. Of the remaining $4.0 million, the Company expects that $2.4 million will be paid within the next twelve months and, as such, has classified it as a current liability on Condensed Consolidated Balance Sheet at June 27, 2004.

Item 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

In order to ensure that the information required to be disclosed in this report is recorded, processed, summarized and reported on a timely basis, we have adopted disclosure controls and procedures. We conducted an evaluation (the “Evaluation”), under the supervision and with the participation of our Chief Executive Officer (“CEO”) and interim Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures (“Disclosure Controls”) as of the end of the period covered by this report. Based on the Evaluation, our CEO and CFO concluded that our Disclosure Controls were effective as of the end of the period covered by this report.

Changes in Internal Control

We have also evaluated our internal control over financial reporting (as defined in Rule 13a-15(e) under the Exchange Act), and there have been no changes in our internal control over financial reporting during the most recent fiscal quarter that have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

CEO and CFO Certifications

In Exhibits 31.1 and 31.2 of this report there are Certifications of the CEO and the interim CFO. The Certifications are required in accordance with Section 302 of the Sarbanes-Oxley Act of 2002 (the Section 302 Certifications). This Item of this report, which you are currently reading is the information concerning the Evaluation referred to in the Section 302 Certifications and this information should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented.

PART II — OTHER INFORMATION

Item 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

The exhibits listed on the following index to exhibits are filed as part of this Form 10-Q/A.

Exhibit Number		Exhibit Description

31.1		Certification of Michael R. Farese, Chief Executive Officer, pursuant to Rule 13a-14 of the Securities Exchange Act of 1934.

31.2		Certification of Rainer N. Growitz, Vice President of Finance and Corporate Secretary (interim Chief Financial Officer), pursuant to Rule 13a-14 of the Securities Exchange Act of 1934.

32.1		Certification of Michael R. Farese, Ph.D., Principal Executive Officer, Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002

32.2		Certification of Rainer N. Growitz, Principal Financial Officer, Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Jose, State of California, on the 3rd day of September 2004.

		WJ COMMUNICATIONS, INC.
		(Registrant)


Date	September 3, 2004	By:	/s/ MICHAEL R. FARESE, Ph.D.
			Michael R. Farese, Ph.D.
			President and Chief Executive Officer
			(principal executive officer)


Date	September 3, 2004	By:	/s/ RAINER N. GROWITZ
			Rainer N. Growitz
			Interim Chief Financial Officer
			Vice President of Finance and Corporate Secretary
			(principal financial officer)