8-K/A

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K/A

AMENDMENT NO. 1

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of Earliest

Event Reported): January 28, 2005

WJ COMMUNICATIONS, INC.

(Exact name of registrant as specified in its charter)

Commission file number 000-31337

DELAWARE	94-1402710
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	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)

Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

On February 3, 2005 the Company filed a Current Report on Form 8-K reporting under Item 2 the acquisition by the Company of Telenexus, Inc.  The description of the acquisition in Item 2.01 below is reprinted verbatim from Item 2 of the original Form 8-K for the convenience of the reader and such description has not been amended.  The purpose of this Form 8-K/A is solely to amend the Form 8-K filed on February 3, 2005 to include the financial information required by Item 9.01(a) Financial Statements and 9.02(b) Pro Forma Financial Information of Form 8-K which was omitted from the original filing and is being filed herewith within 71 days after the due date of the original Form 8-K filing as permitted by Form 8-K.

Item 2.01Completion of Acquisition or Disposition of Assets.

On January 28, 2005 (the “Closing Date”), WJ Communications, Inc (the “Company”) completed its acquisition of Telenexus, Inc. (“Telenexus”).  Pursuant to an Agreement and Plan of Merger, dated January 19, 2005 (the “Merger Agreement”), by and between the Company, WJ Newco, LLC (the “WJ Sub”), Telenexus and Richard J. Swanson, Wilfred K. Lau, David Fried, Kurt Christensen and Mark Sutton (together, the “Shareholders”), Telenexus merged with and into the WJ Sub (the “Merger”) effective on January 29, 2005.  The WJ Sub was the survivor in the Merger and is a wholly-owned subsidiary of the Company.  A copy of the press release issued by the Company on January 31, 2005 announcing the closing of the foregoing transaction is attached to this report as Exhibit 99.1.

Telenexus designs, develops, manufactures and markets radio frequency identification (“RFID”) reader products for a broad range of industries and markets.  By virtue of the Merger, the Company purchased through the WJ Sub all of the assets necessary for the conduct of the RFID business of Telenexus, consisting primarily of, and including, but not limited to RFID modules, baseband processing algorithms, applications software and realizations of several reader product designs.

The consideration paid by the Company on the Closing Date to the Shareholders (the “Closing Consideration”) in connection with the Merger consisted of cash in the amount of $3.0 million, which was paid out of the Company’s cash reserves on the Closing Date, and 2,333,333 shares of the Company’s Common Stock (the “Shares”).  Of the Closing Consideration, cash in the amount of $0.5 million and 333,333 shares of the Company’s Common Stock are being held in escrow with respect to any indemnification matter under the Merger Agreement.  The escrow described above is qualified by reference to the Escrow Agreement, a copy of which is attached as an exhibit to the Merger Agreement attached hereto as Exhibit 2.1 and incorporated by reference herein.

In addition to the Closing Consideration, the Shareholders may be entitled to further compensation of up to $5.0 million in cash and shares of the Company’s Common Stock if certain revenue targets are achieved by the Company by July 28, 2006 (together with the Closing Consideration, hereinafter referred to as the “Consideration”).  Two of the Shareholders, Richard J. Swanson and Wilred K. Lau also entered into three-year employment agreements with the Company.  A copy of their employment agreements is attached hereto as Exhibit 10.1 and 10.2, respectively.

The Consideration the Company paid to the Shareholders pursuant to the Merger Agreement was determined pursuant to arms’ length negotiations and the Company’s management relied on representations made by certain of the Shareholders and other documents and information provided to the Company.  The Company’s management considered various factors to determine the amount of consideration appropriate for consummation of the Merger, including, the relative value of the RFID business of Telenexus, the present and past use of the RFID assets by Telenexus in the conduct of its business, the future potential value of the RFID assets of Telenexus to the Company and the potential benefit of the transaction to the Company’s stockholders.  The Company intends to use the RFID assets of Telenexus to produce RFID products currently produced or under development by Telenexus and to develop additional commercially salable RFID products.

The Shares were issued to the Seller without registration under the Securities Act of 1933, as amended (the “Securities Act”) in reliance on Section 4(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder as transactions by an issuer not involving a public offering based on, among other factors, representations made by the Shareholders to the Company and the information made available to the Shareholders.  All but one of the Shareholders is restricted from selling the Shares in accordance with the Lock-up Agreement, a copy of which is attached hereto as Exhibit 4.1 and incorporated by reference herein.

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The summary of the transaction described above is qualified by reference to the Merger Agreement, a copy of which is attached hereto as Exhibit 2.1 and incorporated by reference herein

Item 9.01Financial Statements and Exhibits.

(a)           Financial Statements

The audited consolidated financial statements of the Seller for the year ended December 31, 2004, which are required by paragraph (a) of Item 9.01 of Form 8-K with respect to the acquisition of assets of the Seller by the Company, are filed as part of this Current Report on Form 8-K/A as Exhibit 99.2.

(b)           Pro Forma Financial Information

The pro forma financial information required by paragraph (b) of Item 9.01 of Form 8-K with respect to the acquisition is furnished as part of this Current Report on Form 8-K/A as Exhibit 99.3.

(c)           Exhibits

2.1	*	Agreement and Plan of Merger by and among WJ Communications, Inc., WJ Newco, LLC, Telenexus, Inc. and Richard J. Swanson, Wilfred K. Lau, David Fried, Kurt Christensen and Mark Sutton dated January 19, 2005. (Previously filed with the Securities and Exchange Commission on February 3, 2005 as Exhibit 2.1 to the Company’s Current Report on Form 8-K and incorporated by reference herein.).
4.1		Lock-up Agreement by Richard J. Swanson, Wilfred K. Lau, David Fried and Kurt Christensen dated January 28, 2005. (Previously filed with the Securities and Exchange Commission on February 3, 2005 as Exhibit 4.1 to the Company’s Current Report on Form 8-K and incorporated by reference herein.).
10.1	*	Employment Agreement by and between WJ Communications, Inc. and Richard J. Swanson dated January 28, 2005. (Previously filed with the Securities and Exchange Commission on February 3, 2005 as Exhibit 10.1 to the Company’s Current Report on Form 8-K and incorporated by reference herein.).
10.2	*	Employment Agreement by and between WJ Communications, Inc. and Wilfred K. Lau dated January 28, 2005.. (Previously filed with the Securities and Exchange Commission on February 3, 2005 as Exhibit 10.1 to the Company’s Current Report on Form 8-K and incorporated by reference herein.).
23.1	+	Consent of Davis, Clark and Company, independent accountants of Telenexus, Inc..
99.1		Press Release dated January 31, 2005 announcing that the Company had completed its acquisition of Telenexus, Inc. (Previously filed with the Securities and Exchange Commission on February 3, 2005 as Exhibit 99.1 to the Company’s Current Report on Form 8-K and incorporated by reference herein.).
99.2	+	Audited consolidated financial statements of Telenexus, Inc. for the year ended December 31, 2004.
99.3	+	Unaudited pro forma combined condensed financial statements giving effect to the combination of the Company and Telenexus, Inc.

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The following schedules, exhibits and annexes to the Merger Agreement have been omitted. The Company will furnish supplementally copies of the omitted schedules, exhibits and annexes to the Commission upon request.

Schedule 4.4	Capitalization of the Company
Schedule 4.5	No Conflict
Schedule 4.6	Consents
Schedule 4.7	Property
Schedule 4.8	Necessary Property and Condition of Property
Schedule 4.9	Litigation
Schedule 4.10	Compliance with Laws
Schedule 4.11	Conduct of Business
Schedule 4.12	Labor Matters
Schedule 4.13	Employee Benefit Plans
Schedule 4.15	Contracts
Schedule 4.16	Licenses and Permits
Schedule 4.17	Intellectual Property
Schedule 4.18	Insurance
Schedule 4.19	Financial Statements
Schedule 4.20	Undisclosed Liabilities
Schedule 4.21	Accounts Receivable
Schedule 4.22	Inventories
Schedule 4.23	Bank Accounts
Schedule 4.24	Product Liability and Warranty
Schedule 4.25	Indebtedness
Schedule 4.26	Taxes
Schedule 4.26(p)	List of Tax Returns Filed with respect to the Company
Schedule 4.27	Customers and Suppliers
Schedule 4.28	Related Party Transactions
Schedule 4.29	Brokers/Advisors
Schedule 4.30	Disclosure
	Supplement of the shareholders of Telenexus to Disclosure Schedules
Schedule 5.6	Consents
Exhibit I	Form of WJ Communications, Inc. Employee Confidential and Proprietary Information Agreement
Exhibit J	Form of Opinion of Counsel to Telenexus, Inc. and the shareholders of Telenexus, Inc.
Exhibit K	Form of Opinion of Counsel to WJ Communications, Inc. and WJ Newco, LLC

*              Confidential treatment has been requested for portions of this exhibit. Confidential portions of this exhibit have been redacted and have been separately filed with the Securities and Exchange Commission.

+              Filed herewith.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

WJ COMMUNICATIONS, INC.
By:	/s/  EPHRAIM KWOK
	Ephraim Kwok
	Chief Financial Officer
	(principal financial officer)

Dated:  April 15, 2005

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EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT AUDITORS

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-52408 and 333-66244) and Form S-3 (No. 333-120707) of WJ Communications, Inc. of our report dated January 13, 2005 relating to the financial statements of Telenexus, Inc. which appear in the Current Report on Form 8-K/A of WJ Communications, Inc. dated April 15, 2005.

/s/ DAVIS, CLARK AND COMPANY

Davis, Clark and Company

April 15, 2005

EX-99.2

Exhibit 99.2

TELENEXUS, INC.

December 31, 2004 and 2003

Financial Statements

TELENEXUS,  INC.

FINANCIAL STATEMENTS

December 31, 2004 and 2003

TABLE OF CONTENTS

		PAGE
Independent Auditor's Report		1
EXHIBITS
A	Balance Sheets, December 31, 2004 and 2003	2
B	Statements of Income, Fiscal Years Ended December 31, 2004 and 2003	4
C	Statements of Stockholders' Equity, Fiscal Years Ended December 31, 2004 and 2003	5
D	Statements of Cash Flows, Fiscal Years Ended December 31, 2004 and 2003	6
	Notes to Financial Statements	7

i

Davis, Clark and Company

Certified Public Accountants

A Professional Corporation

Independent Auditor's Report

Directors and Stockholders

Telenexus, Inc.

1909 N. Greenville Drive, Suite 200

Richardson, Texas  75081

                We have audited the accompanying balance sheets of Telenexus, Inc. as of December 31, 2004 and 2003, and the related statements of income, of stockholders' equity and of cash flows for the years then ended.  These financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these financial statements based on our audits.

                We conducted our audits in accordance with auditing standards generally accepted in the United States of America.  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

                In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Telenexus, Inc. as of December 31, 2004 and 2003, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

	/s/ Davis, Clark and Company, P.C.
January 13, 2005	DAVIS, CLARK AND COMPANY, P.C.
	Certified Public Accountants
	2705 Swiss Avenue
	Dallas, Texas 75204

Telenexus, Inc.

Balance Sheets

December 31, 2004 and 2003

ASSETS
	2004			2003
Current
Cash and cash equivalents	$	130,755		$	68,244
Accounts receivable (net)	166,021			443,032
Inventories	157,018			3,019
Prepaid expenses	5,021			6,008
Total current assets	458,815			520,303
Fixed assets
Computer and equipment, at cost	230,044			197,356
Less: accumulated depreciation	(171,190		)	(153,718		)
Total fixed assets	58,854			43,638
Other assets:
Deposits	5,022			5,022
Total assets	$	522,691		$	568,963

The accompanying notes are an integral part of these statements.

2

EXHIBIT A

Telenexus, Inc.

Balance Sheets

December 31, 2004 and 2003

LIABILITIES AND STOCKHOLDERS' EQUITY
	2004		2003
Current liabilities
Cash overdraft	$	16,796	$	67,982
Accounts payable	53,031		98,221
Accrued expenses	90,967		5,491
Federal income taxes payable	5,716		0
Franchise taxes payable	1,922		0
Product warranty liability	6,755		6,197
Deferred federal income tax	9,500		98,828
Deferred franchise tax payable	0		15,329
Accrued interest	0		30,000
Deferred revenue	87,500		8,970
Total current liabilities	272,187		331,018
Long-term liabilities
Deferred federal income tax	68,060		10,947
Deferred franchise tax	9,823		0
Total long-term liabilities	77,883		10,947
Total liabilities	350,070		341,965
Stockholders' equity
Common stock ($0.01 par value, 1,000,000 shares authorized, 135,000 shares issued and outstanding)	1,350		1,350
Additional paid-in capital	4,850		4,850
Retained earnings	166,421		220,798
	172,621		226,998
Total liabilities and stockholders' equity	$	522,691	$	568,963

The accompanying notes are an integral part of these statements.

3

EXHIBIT B

Telenexus, Inc.

Statements of Income

Fiscal Years Ended December 31, 2004 and 2003

	2004			2003
Sales	$	2,463,454		$	2,162,875
Cost of goods sold	1,458,478			1,614,980
Gross margin	1,004,976			547,895
Operating expenses:
Selling, general and administrative	465,634			336,985
Professional fees (legal, accounting and consulting)	105,502			0
Bad debts	125,893			0
Research and development	413,307			0
Income (loss) from operations	(105,360		)	219,910
Other income (expense):
Interest income	900			323
Forgiveness of debt	20,000			0
Total other income	20,900			323
Income (loss) before income tax expense	(84,460		)	211,233
Provision for income tax expense (benefit)	(30,083		)	79,099
Net income (loss)	$	(54,377	)	$	132,134

The accompanying notes are an integral part of these statements.

4

EXHIBIT C

Telenexus, Inc.

Statements of Stockholders' Equity

Fiscal Years Ended December 31, 2004 and 2003

	Common Stock		Additional Paid-In Capital		Retained Earnings			Total
Balances, December 31, 2002	$	1,350	$	4,850	$	88,664		$	94,864
Net income for the year	0		0		132,134			132,134
Balances, December 31, 2003	1,350		4,850		220,798			226,998
Net (loss) for the year	0		0		(54,377		)	(54,377		)
Balances, December 31, 2004	$	1,350	$	4,850	$	166,421		$	172,621

The accompanying notes are an integral part of these statements.

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EXHIBIT D

Telenexus, Inc.

Statements of Cash Flows

Fiscal Years Ended December 31, 2004 and 2003

	2004			2003
Cash flows from operating activities:
Net income (loss) from operations	$	(54,377	)	$	132,134
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	17,472			18,746
(Increase) decrease in receivables	277,011			(239,095		)
(Increase) in inventories	(153,999		)	(326		)
(Increase) decrease in prepaid expenses	987			(6,008		)
Increase in accounts payable and accrued expenses	30,844			40,165
Forgiveness of debt	(20,000		)	0
Increase (decrease) in deferred income taxes	(37,721		)	79,100
Increase in federal and franchise income taxes payable	7,638			0
Increase (decrease) in deferred revenue	78,530			(4,530		)
Net cash provided by operating activities	146,385			20,186
Cash flows from investing activities:
Purchases of property and equipment	(32,688		)	(16,545		)
Net cash (used in) investing activities	(32,688		)	(16,545		)
Cash flows from financing activities:
Increase (decrease) in cash overdraft	(51,186		)	43,408
Payment of debt to stockholder	0			(10,000		)
Net cash provided by (used in) financing activities	(51,186		)	33,408
Increase in cash	62,511			37,049
Cash, beginning of year	68,244			31,195
Cash, end of year	$	130,755		$	68,244
Supplemental information:
Cash paid for income taxes	$	0		$	0
Cash paid for interest	$	10,000		$	0
Forgiveness of debt	$	20,000		$	0

The accompanying notes are an integral part of these statements.

6

Telenexus, Inc.

Notes to Financial Statements

December 31, 2004 and 2003

1.     Summary of Significant Accounting Policies

In fulfilling its responsibilities for the preparation of Telenexus, Inc.'s (the Company) financial statements and disclosures, Company management selects accounting principles generally accepted in the United States of America and adopts methods for their application.  The application of accounting principles requires the estimating, matching and timing of revenue and costs in the determination of income or loss.  It is also necessary for management to determine, measure and allocate Company resources and obligations within the financial process according to those principles.  Below is a summary of certain significant accounting policies selected by management.

A.   The Company is primarily engaged in the development and manufacture of RFID products.

B.    The Company uses the accrual basis of accounting.

C.    The Company uses the reserve method in accounting for bad debts.  Management periodically reviews accounts receivable on an account by account basis concentrating on accounts more than 90 days old.  Management considers the Company's past history with the customer, current contact information and the size of the account in evaluating the reserve requirements.  Accounts are written off when it appears collection efforts will not be successful.  At December 31, 2004 and 2003, the allowance for bad debts was $10,721 and $-0-, respectively.

D.    Inventory  is  priced  at  the "lower  of  cost  or  market"  utilizing  the  "first-in, first-out" method.  The valuation of sub assemblies and finished goods includes the cost of component parts, labor and overhead.  The major classes of inventories are component parts, sub assemblies and finished products.

E.    Fixed assets are recorded at cost.  Assets are being depreciated using the straight-line method over estimated useful lives, ranging from 5-7 years.  The Company's capitalization policy is to capitalize all fixed asset purchases greater than $1,000.  Items below this threshold are expensed.

Depreciation expense was $17,472 and $18,746, for 2004 and 2003, respectively.

F.    The indirect method is used to prepare the Statement of Cash Flows.  For the purposes of this statement, the Company considers all highly liquid investments with a maturity of three months or less at the date of acquisition to be "cash equivalents".

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G.    Accounting estimates have been used in preparing these financial statements.  Major estimates consist of management's valuation of receivables and inventory, estimated of accrued expenses and lives used to depreciate fixed assets.  Procedures used in making accounting estimates are believed by management to be reasonable and have been consistently applied.

H.    The Company provides employees with compensated absence pay based generally on length of service.  At December 31, 2004, the Company had no liability for compensated absences.  At December 31, 2003, the liability for compensated absences was less than $300.

I.     The Company uses the asset and liability method of accounting for income taxes pursuant to SFAS No. 109, "Accounting for Income Taxes" ("SFAS 109").  Under the asset and liability method, deferred tax assets and liabilities are recognized based upon the expected future tax consequences of existing temporary differences between the financial reporting and the tax reporting basis of assets and liabilities using enacted statutory tax rates.  To the extent tax laws change, deferred tax assets and liabilities are adjusted, when necessary, in the period that the tax change is enacted.  Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized.  No valuation allowance was considered necessary.

Deferred tax assets and liabilities are determined based on the estimated future tax effects of temporary differences between the financial statement and tax basis of fixed assets and the use of the cash method of accounting for income reporting.  The Company converted to the accrual method of accounting for income tax reporting as of January 1, 2004.

J.     Shipping and handling costs are expensed as cost of goods sold.

K.    Advertising costs are expensed as incurred.

L.    The Company sells certain products to customers with a product warranty that provides repairs at no cost to the customer.  The length of the warranty term is generally one year.  The Company accrues its estimated exposure for warranty claims based on historical warranty claim costs.

8

M.   The Company recognizes revenue from product sales when the product is shipped.  Revenue from development contracts is recognized as follows:

a.     Cash received at signing is amortized straight line based on contract milestones achieved compared to total contract milestones.

b.    Contract revenue based on milestones is recognized when the milestone is achieved.

N.    Expenses relating to the achievement of contract milestones is expensed as incurred.  Research and development expenses relating to Telenexus product development is expensed as incurred.

2.     History

The Company was incorporated in the State of Texas in July 1989.  The Company's office is located in Richardson, Texas.

3.     Inventories

Inventories of the Company include the following at December 31, 2004 and 2003:

	2004		2003
Components	$	94,186	$	3,019
Sub assemblies	26,176		0
Finished goods	36,656		0
Total	$	157,018	$	3,019

4.Federal and State Income Taxes

	2004					2003
Total statutory rate	$	(28,716	)	(34.0	%)	$	71,819		34.0	%
Other	2,217			2.6		(2,339		)	(1.1	)
Federal	(26,499		)	(31.4	)	69,480			32.9
State	(3,584		)	(4.2	)	9,619			4.6
Total (benefit) expense	$	(30,083	)	(35.6	%)	$	79,099		37.5	%

9

Federal Income Taxes	2004			2003
Currently payable	$	5,716		$	0
Deferred	(32,215		)	69,480
Total (benefit) expense	$	(26,499	)	$	69,480

Deferred taxes are composed of the following:

Current assets	2004			2003
Net operating loss	$	0		$	909
Current liabilities
Inventory	$	10,772		$	0
Bad debts	3,644			0
Warranty	2,297			2,107
481(a) adjustment	(26,213		)	0
Cash basis of accounting	0			(100,935		)
Total	$	(9,500	)	$	(98,828	)
Long-term liabilities
Depreciation	$	12,294		$	10,947
481(a) adjustment	52,426			0
Franchise tax	3,340			0
	$	68,060		$	10,947
Franchise tax payable
Current	$	1,922		$	15,329
Long-term	$	9,823		$	0

        In 2004, the company converted from the cash basis of accounting to the accrual basis of accounting in computing federal income taxes because inventories became a significant factor in determining taxable income.  The 481(a) adjustment will be reported as income as follows:

2004	$	77,098
2005	$	77,098
2006	$	77,098
2007	$	77,098

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5.     Commitments and Contingencies

A.   The company is party to various claims, legal actions and complaints arising in the ordinary course of business.  In the opinion of Management, all such matters are of such kind, or involve such amounts, that an unfavorable disposition would not have a material affect on the financial position of the company.

B.    The company periodically maintains cash balances in excess of federally insured amounts.

C.    The company leases office space for use in its operations.  This lease is a three year lease expiring October 1, 2005.  The remaining noncancelable lease commitment is $45,195.  Rent expense was $65,281 and $65,281 in 2004 and 2003, respectively.

D.    The Company sub-leases an office space to a nonrelated party for $400 per month.  Rental income was $4,800 for 2004 and for 2003 and it was netted against rent expense.

E.    As part of several development contracts, the Company has various obligations to pay royalties and also to receive royalties on product sales.  None of these agreements had a material effect on these financial statements.

F.    The Company and its shareholders have entered into a definitive agreement to sell the company.  None of the provisions of this agreement have been reflected in these financial statements.

G.    A provision of one development contract is for the Company to receive 30,000 shares of the customer's common stock upon successful completion of the contract.  This contract was not complete as of December 31, 2004.

6.     Related Parties

The Company's two majority stockholders combined own approximately 95% of Crosspoint Solutions, Inc. d.b.a. XPS, Inc.  During 2004 and 2003, the Company had sales of $-0- and $5,890, respectively to Crosspoint Solutions, Inc.  During 2004 and 2003, the Company had purchases of $20,000 and $-0-, respectively, from Crosspoint Solutions, Inc.

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7.     Concentration of Risk

Concentration of accounts receivable and revenue as of and for the year ended December 31, 2004 included:

	Accounts Receivable				Revenue
	Amount		Percent		Amount		Percent
Company A	$	0	0.0	%	$	850,053	34.5	%
Company B	77,168		49.3	%	421,209		17.1	%
Company C	79,983		45.2	%	725,563		29.5	%

Concentrations of accounts payable and expense as of and for the year ended December 31, 2004 included:

	Accounts Payable				Expense
	Amount		Percent		Amount		Percent
Company 1	$	20,240	38.2	%	$	167,640	12.9	%
Company 2	14,700		27.7	%	0		0.0	%

Concentrations of accounts receivable and revenue as of and for the year ended December 31, 2003 included:

	Accounts Receivable				Revenue
	Amount		Percent		Amount		Percent
Company A	$	362,354	81.8	%	$	1,108,523	51.1	%
Company B	64,805		14.6	%	387,769		17.9	%
Company C	8,350		1.9	%	525,239		24.2	%

Concentrations of accounts payable and expense as of and for the year ended December 31, 2004 included:

	Accounts Payable				Expense
	Amount		Percent		Amount		Percent
Company 1	$	19,986	35.6	%	$	100,058	7.1	%
Company 2	0		0.0	%	148,240		10.1	%

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8.     Accrued Interest

Accrued interest at December 31, 2003 represented amounts due to an unrelated third party for a loan made and repaid in 1996.  The Company paid $10,000 in interest in 1996 and disputed $30,000 in interest claimed by the lender.  In December 2004, the Company settled this dispute by paying $10,000 in interest and the lender forgave $20,000.

9.     Lines of Business

The Company manufactured and sold products and also had contracts to develop RFID products for independent third parties in 2004 and 2003.  The percentage of sales for these lines of business are as follows:

	2004		2003
Product sales	44.0	%	60	%
Development contracts	56.0	%	40.0	%

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EX-99.3

Exhibit 99.3

UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION

INTRODUCTORY NOTE

On January 28, 2005 (the “Closing Date”), WJ Communications, Inc (the “Company”) completed its acquisition of Telenexus, Inc. (“Telenexus”).  Pursuant to an Agreement and Plan of Merger, dated January 19, 2005 (the “Merger Agreement”), by and between the Company, WJ Newco, LLC (the “WJ Sub”), Telenexus and Richard J. Swanson, Wilfred K. Lau, David Fried, Kurt Christensen and Mark Sutton (together, the “Shareholders”), Telenexus merged with and into the WJ Sub (the “Merger”) effective on January 29, 2005.  The WJ Sub was the survivor in the Merger and is a wholly-owned subsidiary of the Company.  Telenexus designs, develops, manufactures and markets radio frequency identification (“RFID”) reader products for a broad range of industries and markets.  By virtue of the Merger, the Company purchased through the WJ Sub all of the assets necessary for the conduct of the RFID business of Telenexus, consisting primarily of, and including, but not limited to RFID modules, baseband processing algorithm technology, applications software and realizations of several reader product designs.  The consideration paid by the Company on the Closing Date to the Shareholders (the “Closing Consideration”) in connection with the Merger consisted of cash in the amount of $3.0 million, which was paid out of the Company’s cash reserves on the Closing Date, and 2,333,333 shares of the Company’s Common Stock (the “Shares”) valued at $8.2 million at the Closing Date.  Of the Closing Consideration, cash in the amount of $0.5 million and 333,333 shares of the Company’s Common Stock are being held in escrow with respect to any indemnification matter under the Merger Agreement.  In addition to the Closing Consideration, the Shareholders may be entitled to further compensation of up to $2.5 million in cash and up to 833,333 shares of the Company’s Common Stock if the Company achieves certain revenue targets by July 28, 2006 (together with the Closing Consideration, hereinafter referred to as the “Consideration”).  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 (January 31, 2005).  Two of the Shareholders, Richard J. Swanson and Wilred K. Lau also entered into three-year employment agreements with the Company.

The following unaudited pro forma combined condensed financial information gives effect to the acquisition by the Company of the Telenexus, Inc. and the assumptions and adjustments to reflect the preliminary allocation of the purchase price described in the accompanying notes to the unaudited pro forma combined condensed financial information. The amounts contained in the preliminary purchase price allocation may change as more detailed analysis is completed, additional information on the fair values of Telenexus’ tangible and intangible assets and liabilities becomes available and all direct acquisition costs are finalized.  Specifically, the Company has not completed its evaluation of the underlying legal performance obligations of certain of Telenexus’ engineering development contracts and the associated deferred revenue liability in accordance with Emerging Issues Task Force (“EITF”) 01-3 “Accounting in a Business Combination for Deferred Revenue of an Acquiree.”  Also, prior to the acquisition, the Company and Telenexus had entered into an agreement to jointly design, develop and produce a Personal Computer Memory Card International Association (“PCMCIA”) Type II Multi-Protocol RFID reader.  The Company has not completed its valuation for the effective settlement of this preexisting executory contract and the associated reacquired right to the use of its technology in accordance with EITF 04-1 “Accounting for Preexisting Relationships between the Parties to a Business Combination.”  The purchase price allocations are expected to be finalized in the second quarter of 2005.

The pro forma adjustments are based on management’s estimates of the value of the tangible and intangible assets acquired including an independent valuation of intangible assets. The unaudited pro forma combined condensed balance sheet is based on the audited historical balance sheet of the Company and Telenexus as of December 31, 2004, and has been prepared to reflect the acquisition as if the acquisition had been consummated on that date. The unaudited pro forma combined condensed statement of operations combine the audited results of operations of the Company and Telenexus for the year ended December 31, 2004 as if the acquisition had occurred on January 1, 2004. The unaudited pro forma combined condensed statement of operations for the year ended December 31, 2004 are based on the historical audited results of the Company and Telenexus. The unaudited pro forma combined condensed statement of operations has been prepared excluding acquired in-process research and development of $3.4 million.

The unaudited pro forma condensed combined financial information consisting of the unaudited pro forma combined condensed balance sheet, the unaudited pro forma combined condensed statement of operations, and the accompanying notes should be read in conjunction with the historical consolidated financial statements and notes of WJ Communications, Inc. which can be found in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 30, 2005. Telenexus’ historical consolidated financial statements for the year ended and as of December 31, 2004 are included elsewhere in this Form 8-K/A filing as Exhibit 99.2. Reclassifications have been made to the historical consolidated statements of operations of Telenexus for the year ended December 31, 2004 to conform to the Company’s presentation.

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

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WJ COMMUNICATIONS, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET

AS OF DECEMBER 31, 2004

(In thousands)

	Historical					Pro Forma
	WJCI			Telenexus		Adjustments			Combined
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	24,392		$	131	$	(3,000	)(a)	$	21,523
Short-term investments	18,732			—		—			18,732
Receivables – net	6,841			166		—			7,007
Inventories	5,148			157		(45		)(b)	5,260
Other	3,183			5		(23		)(d)	3,165
Total current assets	58,296			459		(3,068		)	55,687
PROPERTY, PLANT AND EQUIPMENT, net	9,679			59		43		(b)	9,781
Goodwill	1,368			—		5,664		(b)	7,032
Other assets	390			5		2,040		(b)	2,435
	$	69,733		$	523	$	4,679		$	74,935
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	2,633		$	53	$	—		$	2,686
Accrued expenses	810			91		193		(d)	1,094
Accrued professional services	797			—		—			797
Accrued payroll and profit sharing	1,498			—		—			1,498
Accrued workers’ compensation	538			—		—			538
Cash overdraft	—			17		—			17
Income tax payable	—			8		—			8
Deferred income tax liability	1,946			9		(9		)(b)	1,946
Restructuring accrual	3,350			—		—			3,350
Deferred revenue	—			87		(37		)(c)	50
Product warranty liability	—			7		(7		)(b)	—
Total current liabilities	11,572			272		140			11,984
OTHER LONG-TERM OBLIGATIONS	16,864			78		(78		)(b)	16,864
COMMITMENTS AND CONTINGENCIES	—			—		—			—
STOCKHOLDERS’ EQUITY:
Common stock	629			1		(1		)(e)	652
						23		(f)
Treasury stock	(18		)	—		—			(18		)
Additional paid-in capital	194,262			5		(5		)(e)	202,429
						8,167		(f)
Accumulated earnings (deficit)	(153,199		)	167		(54		)(e)	(156,599		)
						(113		)(c)
						(3,400		)(b)
Deferred stock compensation	(365		)	—		—			(365		)
Other comprehensive loss	(12		)	—		—			(12		)
Total stockholders’ equity	41,297			173		4,617			46,087
	$	69,733		$	523	$	4,679		$	74,935

See notes to unaudited pro forma combined condensed financial information.

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WJ COMMUNICATIONS, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2004

(In thousands, except per share amounts)

	Historical						Pro Forma
	WJCI			Telenexus			Adjustments			Combined
Sales	$	32,336		$	2,463		$	(113	)(a)	$	34,686
Cost of goods sold	15,278			1,458			(84		)(a)	16,686
							34		(b)
Gross profit	17,058			1,005			(63		)	18,000
Operating expenses:
Research and development	17,044			413			84		(a)	17,541
Selling and administrative	12,454			697			—			13,151
Acquired in-process research & development	8,500			—			—			8,500
Amortization of intangible assets	—			—			287		(c)	287
Amortization of deferred stock compensation(*)	243			—			—			243
Restructuring reversals	(3,845		)	—			—			(3,845		)
Total operating expenses	34,396			1,110			371			35,877
Loss from operations	(17,338		)	(105		)	(434		)	(17,877		)
Interest income	682			1			(43		)(d)	640
Interest expense	(104		)	—			—			(104		)
Other income – net	5			20			—			25
Loss before income taxes	(16,755		)	(84		)	(477		)	(17,316		)
Income tax benefit	7,674			30			—			7,704
Net loss	$	(9,081	)	$	(54	)	$	(477	)	$	(9,612	)
Basic and diluted net loss per share	$	(0.15	)							$	(0.15	)
Basic and diluted average shares	60,397						2,333		(e)	62,730
(*) Amortization of deferred stock compensation excluded from the following expenses:
Research and development	$	194								$	194
Selling and administrative	49									49
	$	243								$	243

See notes to unaudited pro forma combined condensed financial information.

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WJ COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION

1.BASIS OF PRESENTATION

On January 28, 2005 (the “Closing Date”), WJ Communications, Inc (the “Company”) completed its acquisition of Telenexus, Inc. (“Telenexus”).  Pursuant to an Agreement and Plan of Merger, dated January 19, 2005 (the “Merger Agreement”), by and between the Company, WJ Newco, LLC (the “WJ Sub”), Telenexus and Richard J. Swanson, Wilfred K. Lau, David Fried, Kurt Christensen and Mark Sutton (together, the “Shareholders”), Telenexus merged with and into the WJ Sub (the “Merger”) effective on January 29, 2005.  The WJ Sub was the survivor in the Merger and is a wholly-owned subsidiary of the Company.  Telenexus designs, develops, manufactures and markets radio frequency identification (“RFID”) reader products for a broad range of industries and markets.  By virtue of the Merger, the Company purchased through the WJ Sub all of the assets necessary for the conduct of the RFID business of Telenexus, consisting primarily of, and including, but not limited to RFID modules, baseband processing algorithm technology, applications software and realizations of several reader product designs.  The consideration paid by the Company on the Closing Date to the Shareholders (the “Closing Consideration”) in connection with the Merger consisted of cash in the amount of $3.0 million, which was paid out of the Company’s cash reserves on the Closing Date, and 2,333,333 shares of the Company’s Common Stock (the “Shares”) valued at $8.2 million at the Closing Date.  Of the Closing Consideration, cash in the amount of $0.5 million and 333,333 shares of the Company’s Common Stock are being held in escrow with respect to any indemnification matter under the Merger Agreement.  In addition to the Closing Consideration, the Shareholders may be entitled to further compensation of up to $2.5 million in cash and up to 833,333 shares of the Company’s Common Stock if the Company achieves certain revenue targets by July 28, 2006 (together with the Closing Consideration, hereinafter referred to as the “Consideration”).  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 (January 31, 2005).  Two of the Shareholders, Richard J. Swanson and Wilred K. Lau also entered into three-year employment agreements with the Company.

The unaudited pro forma combined condensed preliminary financial information gives effect to the acquisition by the Company of the Telenexus, Inc. and the assumptions and adjustments to reflect the allocation of the purchase price described in the accompanying notes to the unaudited pro forma combined condensed financial information. The amounts contained in the preliminary purchase price allocation may change as more detailed analysis is completed, additional information on the fair values of Telenexus’ tangible and intangible assets and liabilities becomes available and all direct acquisition costs are finalized.  Specifically, the Company has not completed its evaluation of the underlying legal performance obligations of certain of Telenexus’ engineering development contracts and the associated deferred revenue liability in accordance with Emerging Issues Task Force (“EITF”) 01-3 “Accounting in a Business Combination for Deferred Revenue of an Acquiree.”  Also, prior to the acquisition, the Company and Telenexus had entered into an agreement to jointly design, develop and produce a Personal Computer Memory Card International Association (“PCMCIA”) Type II Multi-Protocol RFID reader.  The Company has not completed its valuation for the effective settlement of this preexisting executory contract and the associated reacquired right to the use of its technology in accordance with EITF 04-1 “Accounting for Preexisting Relationships between the Parties to a Business Combination.”  The purchase price allocations are expected to be finalized in the second quarter of 2005.

The pro forma adjustments are based on management’s estimates of the value of the tangible and intangible assets acquired including an independent valuation of intangible assets. The unaudited pro forma combined condensed balance sheet is based on the audited historical balance sheet of the Company and Telenexus as of December 31, 2004, and has been prepared to reflect the acquisition as if the acquisition had been consummated on that date. The unaudited pro forma combined condensed statement of operations combine the audited results of operations of the Company and Telenexus for the year ended December 31, 2004 as if the acquisition had occurred on January 1, 2004. The unaudited pro forma combined condensed statement of operations for the year ended December 31, 2004 are based on the historical audited results of the Company and Telenexus. The unaudited pro forma combined condensed statement of operations has been prepared excluding acquired in-process research and development of $3.4 million.

The unaudited pro forma condensed combined financial information consisting of the unaudited pro forma combined condensed balance sheet, the unaudited pro forma combined condensed statement of operations, and the accompanying notes should be read in conjunction with the historical consolidated financial statements and notes of WJ Communications, Inc. which can be found in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 30, 2005. Telenexus’ historical consolidated financial statements for the year ended and as of December 31, 2004 are included elsewhere in this Form 8-K/A filing as Exhibit 99.2. Reclassifications have been made to the historical consolidated statements of operations of Telenexus for the year ended December 31, 2004 to conform to the Company’s presentation.

The unaudited pro forma condensed combined financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and certain footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles (GAAP) have been condensed or omitted pursuant to such rules and regulations. However the Company believes that the disclosures are adequate to make the information not misleading.

2.PURCHASE PRICE ALLOCATION

The unaudited pro forma combined condensed financial information reflect a preliminary purchase price of approximately $11.4 million for the net assets acquired from Telenexus. 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 (January 31, 2005). The total purchase price of Telenexus, Inc. is as follows (in thousands):

Cash	$	3,000
Fair value of WJ Communications, Inc. common stock	8,190
Acquisition costs	216
Total purchase price	$	11,406

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In accordance with SFAS No. 141, Business Combinations (“SFAS No. 141”), the total preliminary purchase price was allocated to the tangible and intangible assets acquired and liabilities assumed based upon their respective estimated fair values at the acquisition date with the excess purchase price allocated to goodwill. The valuation of the identifiable intangible assets acquired reflects management’s estimates based on, among other factors, a valuation of the intangible assets prepared by an independent third party.  The following table summarizes the components of the total preliminary purchase price and the allocation (in thousands):

Net tangible assets	$	302
In-process research and development	3,400
Amortizable intangible assets:
Developed technology	40
Customer relationships	900
Trademarks and trade names	700
Non-competition agreements	400
Goodwill	5,664
Total purchase price	$	11,406

With the exception of the goodwill and acquired in-process research and development (“IPRD”), the identified intangible assets consisting of existing technology, customer relationships, trademarks and trade names and non-competition agreements will be amortized on a straight-line basis over their estimated useful lives, with a weighted average life of approximately eight years. In accordance with SFAS No. 142, Goodwill and Other Intangible Assets (“SFAS No. 142”), goodwill of $5.7 million will not be amortized and will be tested for impairment at least annually or whenever events or changes in circumstances indicate that the carrying value may not be recoverable in accordance with the Company’s policy on impairment analysis. The amounts contained in the purchase price allocation may change as more detailed analysis is completed, additional information on the fair values of Telenexus’ tangible and intangible assets and liabilities becomes available and all direct acquisition costs are finalized.  Specifically, the Company has not completed its evaluation of the underlying legal performance obligations of certain of Telenexus’ engineering development contracts and the associated deferred revenue liability in accordance with Emerging Issues Task Force (“EITF”) 01-3 “Accounting in a Business Combination for Deferred Revenue of an Acquiree.”  Also, prior to the acquisition, the Company and Telenexus had entered into an agreement to jointly design, develop and produce a Personal Computer Memory Card International Association (“PCMCIA”) Type II Multi-Protocol RFID reader.  The Company has not completed its valuation for the effective settlement of this preexisting executory contract and the associated reacquired right to the use of its technology in accordance with EITF 04-1 “Accounting for Preexisting Relationships between the Parties to a Business Combination.”  The preliminary purchase price allocations are expected to be finalized in the second quarter of 2005. In addition to the Closing Consideration, the Shareholders may be entitled to further compensation of up to $2.5 million in cash and up to 833,333 shares of the Company’s Common Stock if the Company achieves certain revenue targets by July 28, 2006.  Any change in the fair value of the net assets of Telenexus or any additional consideration to the Shareholders will change the amount of the purchase price allocable to goodwill.

A portion of the purchase price, $3.4 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 Telenexus 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 $40,000 value assigned to developed technology was capitalized to be amortized using the straight-line method over a weighted-average period of fourteen months. Developmental projects that had not reached technological feasibility, and had no future alternative uses were classified as IPRD. The $3.4 million value allocated to projects that were identified as IPRD would be charged to the consolidated statement of operations on the acquisition date and is reflected in the pro forma combined condensed balance sheet as an addition to accumulated deficit. The pro forma combined condensed statement of operations do not include the IPRD of $3.4 million as it is considered a non-recurring charge.  The value assigned to IPRD comprises the following projects:  multi-protocol readers ($1.3 million), Smart readers ($900,000) and Class 3 readers ($1.2 million).  The value of these projects was determined by estimating the discounted net cash flows from the sale of the products resulting from the completion of the projects, reduced by the portion of the revenue attributable to developed technology and the percentage of completion of the project.

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Products based on multi-protocol reader (‘MPR”) technology are capable of reading tags of different classes (e.g., Class 0, Class 0+, Class 1, and Gen 2 tags) with a single reader.  The hardware realization of the MPR products is based on a hardware stack consisting of an interface board, a control board, a radio frequency (“RF”) board and an antenna.  A modular construction technique is employed such that differing combinations of boards can be used to produce different products.  For example, the same antenna, RF board, and control board can be used with one interface board to provide an Ethernet connection to the host computer, or a different interface board to provide a serial interface to the host.  Similarly, different RF boards can be used to provide one, two or four antenna ports for reading tags without changing the control board or interface board.  This novel modular construction technique is a part of the MPR technology approach.

Smart reader technology is an extension of the MPR Technology.  This technology provides an operating system (e.g., Linux, Windows® CE) in the embedded microprocessor on the interface board.  With the previous RFID technologies, the host computer provided virtually every command to the reader.  With Smart reader technology, the embedded controller can host middleware applications.  These applications can take high-level commands from the host and then provide most of the lower-level commands internal to the reader.  Thus relieving much of the command and processing burden from the host computer.

Class 3 tags are fundamentally different from the Class 0, 0+ and 1 tags in that they are battery assisted.  This makes them more powerful and capable, and provides longer read range, but at the expense of battery life and cost.  They are more appropriate for tracking higher-value assets.  The air-interface protocol is different for the Class 3 readers and tags, and to date is not standardized (as is the case for Class 0 and 1 tags).

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.  The estimated aggregate cost to complete these projects was $938,000, $1.3 million and $857,000, respectively which is expected to occur during our second quarter of 2005 through our fourth quarter of 2006.

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.

The Company has currently not identified any pre-acquisition contingencies where a liability is probable and the amount of the liability can be reasonably estimated.  If information becomes available to us prior to the end of the purchase price allocation period, which would indicate that a liability is probable and the amount can be reasonably estimated, such items will be included in the purchase price allocation.

3.PRO FORMA ADJUSTMENTS

The following adjustments have been reflected in the unaudited pro forma combined condensed balance sheet as of December 31, 2004:

(a)To adjust cash and cash equivalents for the cash consideration paid by the Company as part of the acquisition.

(b)To reflect the purchase price allocation described above.

(c)To eliminate pre-acquisition transactions between the Company and Telenexus.

(d)To record estimated transaction costs associated with the acquisition.

(e)To eliminate historical stockholders’ equity of Telenexus.

(f)To record the 2,333,333 shares of the Company’s common stock issued as part of the acquisition.

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The following adjustments have been reflected in the unaudited pro forma combined condensed statement of operations for the year ended December 31, 2004:

(a)To eliminate pre-acquisition transactions between the Company and Telenexus.

(b)To amortize acquired developed technology of $40,000 resulting from the acquisition using the straight-line method over a weighted-average period of fourteen months.

(c)To amortize intangible assets of $2.0 million resulting from the acquisition of Telenexus using the straight-line method over a weighted-average period of approximately eight years.

(d)To reflect the decrease in interest income resulting from the use of $3.0 million cash to consummate the Telenexus acquisition.  A 1.4% interest rate was used to determine the reduction in interest income which approximates the average rate of return on cash and investments of the Company for 2004.

(e)Represents the adjustment to the weighted-average number of shares outstanding for the year ended December 31, 2004 after the issuance of 2,333,333 shares of the Company’s common stock in the Telenexus acquisition.

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