##### Table of Contents

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



| | 
| | 





FORM 10-Q



|x |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- |  | ---------------------------------------------------------------------------------------



For the quarterly period ended



APRIL 30, 2003



OR

| ̈ |  | 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 0-5449





COMARCO, INC.

(Exact name of registrant as specified in its charter)



| | 
| | 



|California                        |  | 95-2088894         
|--------------------------------- |  | -------------------
|(State or other jurisdiction      |  | (I.R.S. Employer   
|of incorporation or organization) |  | Identification No.)



2 Cromwell, Irvine,
California 92618

(Address of principal executive offices and zip code)



(949) 599-7400

(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 (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  þ        No ̈



Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule
12b-2 of the Act).

Yes ̈No  þ



The registrant had 7,024,325 shares of common stock outstanding as of June 10, 2003.



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##### Table of Contents

COMARCO, INC. AND SUBSIDIARIES



QUARTERLY REPORT ON FORM 10-Q

FOR THE THREE MONTHS ENDED APRIL 30, 2003



TABLE OF CONTENTS



|                               |  |                                                                                                    |  | Page
|------------------------------ |  | -------------------------------------------------------------------------------------------------- |  | ----
|PART I  FINANCIAL INFORMATION |  |                                                                                                   
|                               |  |                                                                                                   
|ITEM 1.                        |  | FINANCIAL STATEMENTS                                                                               |  |     
|                               |  |                                                                                                   
|                               |  | Condensed Consolidated Balance Sheets as of April 30, 2003 and January 31, 2003                    |  | 3   
|                               |  |                                                                                                   
|                               |  | Condensed Consolidated Statements of Operations for the Three Months Ended April 30, 2003 and 2002 |  | 4   
|                               |  |                                                                                                   
|                               |  | Condensed Consolidated Statements of Cash Flows for the Three Months Ended April 30, 2003 and 2002 |  | 5   
|                               |  |                                                                                                   
|                               |  | Notes to Condensed Consolidated Financial Statements                                               |  | 6   
|                               |  |                                                                                                   
|ITEM 2.                        |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS              |  | 14  
|                               |  |                                                                                                   
|ITEM 3.                        |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                         |  | 19  
|                               |  |                                                                                                   
|ITEM 4.                        |  | CONTROLS AND PROCEDURES                                                                            |  | 20  
|                               | 
|PART II  OTHER INFORMATION    |  |                                                                                                   
|                               |  |                                                                                                   
|ITEM 1.                        |  | LEGAL PROCEEDINGS                                                                                  |  | 21  
|                               |  |                                                                                                   
|ITEM 2.                        |  | CHANGES IN SECURITIES                                                                              |  | 23  
|                               |  |                                                                                                   
|ITEM 3.                        |  | DEFAULTS UPON SENIOR SECURITIES                                                                    |  | 23  
|                               |  |                                                                                                   
|ITEM 4.                        |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                |  | 23  
|                               |  |                                                                                                   
|ITEM 5.                        |  | OTHER INFORMATION                                                                                  |  | 23  
|                               |  |                                                                                                   
|ITEM 6.                        |  | EXHIBITS AND REPORTS ON FORM 8-K                                                                   |  | 23  
|                               |  |                                                                                                   
|SIGNATURES                     |  |                                                                                                    |  | 24  





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##### Table of Contents

PART I  FINANCIAL INFORMATION



ITEM 1.    FINANCIAL STATEMENTS



COMARCO, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)



|                                                                                                                                                             |  | April 30, 2003 |        | January 31,2003
|------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -------------- | ------ | ---------------
|                                                                                                                                                             |  | (Unaudited)    |        |                
|ASSETS                                                                                                                                                       |  |                |        |                
|Current Assets:                                                                                                                                              |  |                |        |                
|Cash and cash equivalents                                                                                                                                    |  | $              | 23,708 |                
|Short-term investments                                                                                                                                       |  |                | 2,143  |                
|Accounts receivable, net                                                                                                                                     |  |                | 2,513  |                
|Inventory                                                                                                                                                    |  |                | 3,583  |                
|Deferred tax assets, net                                                                                                                                     |  |                | 2,748  |                
|Other current assets                                                                                                                                         |  |                | 1,348  |                
|                                                                                                                                                             |  |                |        |                
|Total current assets                                                                                                                                         |  |                | 36,043 |                
|Property and equipment, net                                                                                                                                  |  |                | 3,523  |                
|Software development costs, net                                                                                                                              |  |                | 5,865  |                
|Goodwill, net                                                                                                                                                |  |                | 2,393  |                
|Acquired intangible assets, net                                                                                                                              |  |                | 830    |                
|Other assets                                                                                                                                                 |  |                | 1,133  |                
|                                                                                                                                                             |  |                |        |                
|                                                                                                                                                             |  | $              | 49,787 |                
|                                                                                                                                                             |  |                |        |                
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                         |  |                |        |                
|Current Liabilities:                                                                                                                                         |  |                |        |                
|Accounts payable                                                                                                                                             |  | $              | 470    |                
|Deferred revenue                                                                                                                                             |  |                | 3,776  |                
|Accrued liabilities                                                                                                                                          |  |                | 5,544  |                
|                                                                                                                                                             |  |                |        |                
|Total current liabilities                                                                                                                                    |  |                | 9,790  |                
|Deferred compensation                                                                                                                                        |  |                | 2,143  |                
|Deferred tax liabilities, net                                                                                                                                |  |                | 877    |                
|Minority interest                                                                                                                                            |  |                | 542    |                
|Stockholders equity:                                                                                                                                        |  |                |        |                
|Preferred stock, no par value, 10,000,000 shares authorized, no shares outstanding at April 30, 2003 and January 31,
2003                                    |  |                |       |                
|Common stock, $0.10 par value, 50,625,000 shares authorized, 7,027,565 and 7,049,565 shares outstanding at April 30, 2003 and
January 31, 2003, respectively |  |                | 703    |                
|Additional paid-in capital                                                                                                                                   |  |                | 11,032 |                
|Retained earnings                                                                                                                                            |  |                | 24,700 |                
|                                                                                                                                                             |  |                |        |                
|Total stockholders equity                                                                                                                                   |  |                | 36,435 |                
|                                                                                                                                                             |  |                |        |                
|                                                                                                                                                             |  | $              | 49,787 |                
|                                                                                                                                                             |  |                |        |                





The accompanying notes are an integral part of these condensed consolidated financial statements.



3



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##### Table of Contents

COMARCO, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share amounts)



|                                                                                 |  | Three Months Ended April 30, |       
|-------------------------------------------------------------------------------- |  | ---------------------------- | ------
|                                                                                 |  | 2003                         |       
|Revenue                                                                          |  | $                            | 6,456 
|Cost of revenue                                                                  |  |                              | 3,954 
|                                                                                 |  |                              |       
|Gross profit                                                                     |  |                              | 2,502 
|Selling, general and administrative costs                                        |  |                              | 2,319 
|Engineering and support costs                                                    |  |                              | 1,544 
|                                                                                 |  |                              |       
|Operating loss                                                                   |  |                              | (1,361
|Other income, net                                                                |  |                              | 108   
|Minority interest in losses of subsidiary                                        |  |                              | 22    
|                                                                                 |  |                              |       
|Loss before income taxes and cumulative effect of change in accounting principle |  |                              | (1,231
|Income tax benefit                                                               |  |                              | (413  
|                                                                                 |  |                              |       
|Net loss before cumulative effect of change in accounting principle              |  | $                            | (818  
|Cumulative effect of change in accounting principle                              |  |                              |      
|                                                                                 |  |                              |       
|Net loss                                                                         |  | $                            | (818  
|                                                                                 |  |                              |       
|Net loss per share before cumulative effect of change in accounting principle:   |  |                              |       
|Basic                                                                            |  | $                            | (0.12 
|                                                                                 |  |                              |       
|Diluted                                                                          |  | $                            | (0.12 
|                                                                                 |  |                              |       
|Net loss per share:                                                              |  |                              |       
|Basic                                                                            |  | $                            | (0.12 
|                                                                                 |  |                              |       
|Diluted                                                                          |  | $                            | (0.12 
|                                                                                 |  |                              |       
|Weighted average common shares outstanding:                                      |  |                              |       
|Basic                                                                            |  |                              | 7,034 
|                                                                                 |  |                              |       
|Diluted                                                                          |  |                              | 7,034 
|                                                                                 |  |                              |       
|Common shares outstanding                                                        |  |                              | 7,028 
|                                                                                 |  |                              |       





The accompanying notes are an integral part of these condensed consolidated financial statements.



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##### Table of Contents

COMARCO, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)



|                                                                                                          |  | Three Months EndedApril 30, |       
|--------------------------------------------------------------------------------------------------------- |  | --------------------------- | ------
|                                                                                                          |  | 2003                        |       
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                                     |  |                             |       
|Net loss                                                                                                  |  | $                           | (818  
|Adjustments to reconcile net loss from continuing operations to net cash providedby operating activities: |  |                             |       
|Cumulative effect of change in accounting principle                                                       |  |                             |      
|Depreciation and amortization                                                                             |  |                             | 1,009 
|Tax benefit from exercise of stock options                                                                |  |                             |      
|Deferred income taxes                                                                                     |  |                             |      
|Provision for doubtful accounts receivable                                                                |  |                             | 10    
|Provision for obsolete inventory                                                                          |  |                             | (114  
|Minority interest in losses of subsidiary                                                                 |  |                             | (22   
|Changes in operating assets and liabilities:                                                              |  |                             |       
|Accounts receivable                                                                                       |  |                             | (470  
|Inventory                                                                                                 |  |                             | 187   
|Other assets                                                                                              |  |                             | 54    
|Accounts payable                                                                                          |  |                             | 160   
|Deferred revenue                                                                                          |  |                             | 223   
|Accrued liabilities                                                                                       |  |                             | (274  
|                                                                                                          |  |                             |       
|Net cash provided by (used in) operating activities                                                       |  |                             | (55   
|                                                                                                          |  |                             |       
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                                     |  |                             |       
|Purchases of property and equipment                                                                       |  |                             | (483  
|Software development costs                                                                                |  |                             | (785  
|Acquired intangible assets                                                                                |  |                             | (161  
|                                                                                                          |  |                             |       
|Net cash used in investing activities                                                                     |  |                             | (1,429
|                                                                                                          |  |                             |       
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                                     |  |                             |       
|Net proceeds from issuance of common stock                                                                |  |                             |      
|Purchase and retirement of common stock                                                                   |  |                             | (168  
|                                                                                                          |  |                             |       
|Net cash used in financing activities                                                                     |  |                             | (168  
|                                                                                                          |  |                             |       
|Net increase (decrease) in cash and cash equivalents  continuing operations                              |  |                             | (1,652
|Net decrease in cash and cash equivalents  discontinued operations                                       |  |                             | (27   
|                                                                                                          |  |                             |       
|Net increase (decrease) in cash and cash equivalents                                                      |  |                             | (1,679
|Cash and cash equivalents, beginning of period                                                            |  |                             | 25,387
|                                                                                                          |  |                             |       
|Cash and cash equivalents, end of period                                                                  |  | $                           | 23,708
|                                                                                                          |  |                             |       
|Supplemental disclosures of cash flow information:                                                        |  |                             |       
|Cash paid for interest                                                                                    |  | $                           |      
|                                                                                                          |  |                             |       
|Cash paid for income taxes                                                                                |  | $                           | 2     
|                                                                                                          |  |                             |       





The accompanying notes are an integral part of these condensed consolidated financial statements.



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##### Table of Contents

COMARCO, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)



|1. |  | Organization
|-- |  | ------------



Comarco, Inc., through its subsidiary Comarco Wireless Technologies, Inc. (collectively, Comarco or the Company), is a leading
provider of wireless test solutions for the wireless industry. Comarco also designs and manufactures emergency call box systems and mobile power products for notebook computers, cellular telephones, PDAs, and other handheld devices. Comarco Wireless
Technologies, Inc. (CWT) was incorporated in the state of Delaware in September 1993. During October 1999, the Company embarked on a plan to divest its non-wireless businesses, which included the defense and commercial staffing
businesses. The divestiture plan was completed during November 2000. Accordingly, the Companys continuing operations consist solely of the operations of CWT.



During the first quarter of fiscal 2003, the Comarco Board of Directors adopted a preferred stock rights plan. The plan is
designed to ensure that Comarcos shareholders receive fair and equal treatment in the event of any attempted takeover of Comarco, and to guard against partial tender offers, open market accumulations, and other tactics designed to gain control
of Comarco without paying all of Comarcos shareholders a fair price for their shares. Each preferred stock purchase right will entitle the holder to buy one one-one hundredth of a share of the Companys Series A Participating Preferred
Stock at an exercise price of $75. The rights will expire in 10 years.



|2. |  | Summary of Significant Accounting Policies
|-- |  | ------------------------------------------



Basis of Presentation:



The interim condensed consolidated financial statements of Comarco included herein have been prepared without audit in accordance with generally accepted
accounting principles for interim information and with the instructions for 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. The Company believes that the disclosures are adequate to make the information presented not misleading when read in conjunction with the audited consolidated financial statements included in the Companys
annual report on Form 10-K for the year ended January 31, 2003. The financial information presented herein reflects all adjustments, consisting only of normal recurring accruals, which are, in the opinion of management, necessary for a fair
presentation of the results for the interim periods presented. The results for the three months ended April 30, 2003 are not necessarily indicative of the results to be expected for the year ending January 31, 2004.



Stock-Based Compensation:



The Company grants stock options for a fixed number of shares to employees
with an exercise price equal to the fair value of the shares at the date of grant. The Company accounts for stock option grants using the intrinsic method in accordance with Accounting Principles Board (APB) Opinion No. 25,
Accounting for Stock Issued to Employees and FASB Interpretation No. 44 (FIN 44), Accounting for Certain Transactions Involving Stock-Based Compensation, an Interpretation of APB Opinion No. 25 and related
interpretations in accounting for its stock-based compensation plans. The Company has adopted the disclosure-only provisions of SFAS No. 123, Accounting for Stock-Based Compensation. Accordingly, no compensation expense is recognized for
the stock option grants. Had compensation cost for the Companys stock option plans been determined based on the fair value at the grant date for awards during the quarters ended April 30, 2003 and 2002 consistent with the provisions of SFAS
No. 123, the Companys Net Loss, Basic Loss Per Share, and Diluted Loss Per Share would have been reduced to the pro forma amounts as follows:



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##### Table of Contents

COMARCO, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)



|                                                                                                                                            |  | Three Months EndedApril 30, |      
|------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------- | -----
|                                                                                                                                            |  | 2003                        |      
|Net loss:                                                                                                                                   |  |                             |      
|As reported                                                                                                                                 |  | $                           | (818 
|Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related
tax effects |  |                             | (153 
|                                                                                                                                            |  |                             |      
|Pro forma                                                                                                                                   |  | $                           | (971 
|                                                                                                                                            |  |                             |      
|Loss per common share  basic:                                                                                                              |  |                             |      
|As reported                                                                                                                                 |  | $                           | (0.12
|Pro forma                                                                                                                                   |  |                             | (0.14
|Loss per common share  diluted:                                                                                                            |  |                             |      
|As reported                                                                                                                                 |  | $                           | (0.12
|Pro forma                                                                                                                                   |  |                             | (0.14



Principles of Consolidation:



The condensed consolidated financial statements of the
Company include the accounts of Comarco, Inc., CWT, and wholly owned subsidiaries primarily reported as discontinued operations. All material intercompany balances, transactions, and profits have been eliminated.



Use of Estimates:



The preparation of consolidated financial statements in conformity with accounting principles generally accepted in
the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial
statements and the reported amounts of revenue and expenses during the period reported. Actual results could differ from those estimates.



Certain accounting principles require subjective and complex judgments to be used in the preparation of financial statements. Accordingly, a different
financial presentation could result depending on the judgments, estimates, or assumptions that are used. Such estimates and assumptions include, but are not specifically limited to, those required in the valuation of long-lived assets, allowance for
doubtful accounts, and valuation allowances for deferred tax assets.



Reclassifications:



Certain prior period
balances have been reclassified to conform to the current period presentation.



|3. |  | Recent Accounting Pronouncements
|-- |  | --------------------------------



In June 2002, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 146,
Accounting for Exit or Disposal Activities. SFAS No. 146 addresses the recognition, measurement, and reporting of costs associated with exit and disposal activities, including restructuring activities. SFAS No. 146 also addresses
recognition of certain costs related to terminating a contract that is not a capital lease, costs to consolidate facilities or relocate employees and termination of benefits provided to employees that are involuntarily terminated under the terms of
a one-time benefit arrangement that is not an ongoing benefit arrangement or an individual deferred compensation contract. SFAS No. 146 is effective for exit or disposal activities that are initiated after December 31, 2002. The Company adopted the
provisions of SFAS No. 146 as of



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##### Table of Contents

COMARCO, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)



February 1, 2003, and such adoption has not had a material effect on the Companys results of operations or
financial position.



In October 2002, the Emerging Issues Task
Force (EITF) issued EITF Issue No. 00-21, Revenue Arrangements with Multiple Deliverables. The EITF indicated that this guidance is effective for revenue arrangements entered into in fiscal periods beginning after June 15,
2003. The provisions of EITF Issue No. 00-21 are not expected to have a material effect on the Companys results of operations or financial position because the Companys qualifying arrangements are treated in a manner consistent with the
stated provisions.



In November 2002, the FASB issued
Interpretation No. 45, Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others, an interpretation of FASB Statements No. 5, 57 and 107 and a rescission of FASB
Interpretation No. 34. This Interpretation elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under guarantees issued. The Interpretation also clarifies that a guarantor
is required to recognize, at inception of a guarantee, a liability for the fair value of the obligation undertaken. The initial recognition and measurement provisions of the Interpretation are applicable to guarantees issued or modified after
December 31, 2002. The Company adopted the disclosure provisions of the Interpretation effective February 1, 2003. While the Company has various indemnity obligations included in contracts entered into in the normal course of business, the
obligations are primarily in the form of indemnities that could result in increases in future costs but do not represent significant commitments or contingent liabilities of the indebtedness of others.



In December 2002, the FASB issued SFAS No. 148, Accounting for
Stock-Based Compensation  Transition and Disclosure, an amendment of FASB Statement No. 123. SFAS No. 148 amends SFAS No. 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition for a
voluntary change to the fair value method of accounting for stock-based employee compensation. In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial
statements. Certain of the disclosure modifications are required for fiscal years ending after December 15, 2002 and are included in the notes to the accompanying condensed consolidated financial statements.



In January 2003, the FASB issued Interpretation No. 46, Consolidation
of Variable Interest Entities, an interpretation of ARB No. 51. This Interpretation addresses the consolidation by business enterprises of variable interest entities as defined in the Interpretation. The Interpretation applies immediately to
variable interests in variable interest entities created after January 31, 2003, and to variable interests in variable interest entities obtained after January 31, 2003. The application of this Interpretation is not expected to have a material
effect on the Companys results of operations or financial position. The Interpretation requires certain disclosures in financial statements issued after January 31, 2003 if it is reasonably possible that we will consolidate or disclose
information about variable interest entities when the Interpretation becomes effective. The Company has no variable interest entities, which would require disclosure or consolidations under this Interpretation.



|4. |  | Stockholders Equity
|-- |  | --------------------



During 1992, our Board of Directors authorized a stock repurchase program of up to 3.0 million shares of the Companys common stock. From program
inception through April 30, 2003, the Company has repurchased approximately 2.6 million shares for an average price of $8.22 per share. During the first quarter ended April 30, 2003, the Company repurchased 22,200 shares of common stock in the open
market for an average price of $7.65 per share.



|5. |  | ChargeSource Product Recall
|-- |  | ---------------------------



In cooperation with the Consumer Products Safety Commission, on March 20, 2003, Comarco voluntarily initiated a product safety recall of its ChargeSource
AC power adapters. This product safety recall impacts



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##### Table of Contents

COMARCO, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)



approximately 125,000 units that were sold in fiscal 2003. Comarco and Targus Group International
(Targus), the Companys exclusive distributor of ChargeSource products, entered into an agreement to address the impact of the recall action. Under the terms of the agreement Comarco issued a $3.2 million credit to Targus in fiscal
2003 in consideration of a full release. Additionally, the Company accrued $554,000 in costs related to the recall action.



The following table presents a reconciliation of the use of the product recall accrual (in thousands):



|Product RecallLiability 1/31/03 |  | Adjustments |  | Payments |  | Product RecallLiability4/30/03
|------------------------------- |  | ----------- |  | -------- |  | ------------------------------
|$554                            |  | $          |  | $39      |  | $515                          
|                                |  |             |  |          |  |                               



The product recall
liability is included in accrued liabilities in the accompanying condensed consolidated balance sheets. The Company believes that the balance remaining as of April 30, 2003 is adequate to cover additional product recall costs expected to be
incurred.



Additionally, of the $3.2 million credit issued to
Targus in the fourth quarter of fiscal 2003, returns totaling $1.3 million have been made through April 30, 2003.



|6. |  | Loss Per Share
|-- |  | --------------



The Company calculates net income (loss) per share in accordance with SFAS No. 128, Earnings Per Share. Under SFAS No. 128, basic net
income (loss) per share is calculated by dividing net income (loss) by the weighted-average number of common shares outstanding during the reporting period. Diluted net income (loss) per share reflects the effects of potentially dilutive securities.
Since the Company incurred a net loss for the first quarter ended April 30, 2003 and April 30, 2002, basic and diluted net loss per share were the same because 24,889 and 58,789 dilutive securities, respectively, were not included because
the effect would have been antidilutive. The following tables present reconciliations of the numerators and denominators of the basic and diluted loss per share computations for net loss. In the tables below, Net Loss represents the
numerator and Shares represents the denominator (in thousands, except per share amounts):



|                                                                                            |  | Three Months EndedApril 30, |      
|------------------------------------------------------------------------------------------- |  | --------------------------- | -----
|                                                                                            |  | 2003                        |      
|Basic and Diluted:                                                                          |  |                             |      
|Net loss before cumulative effect of change in accounting principle                         |  | $                           | (818 
|Weighted average shares outstanding                                                         |  |                             | 7,034
|                                                                                            |  |                             |      
|Basic and diluted loss per share before cumulative effect of change in accounting principle |  | $                           | (0.12
|                                                                                            |  |                             |      
|                                                                                            |  |                            
|Cumulative effect of change in accounting principle                                         |  | $                           |     
|Weighted average shares outstanding                                                         |  |                             | 7,034
|                                                                                            |  |                             |      
|Basic and diluted loss per share from cumulative effect of change in accounting principle   |  | $                           |     
|                                                                                            |  |                             |      
|                                                                                            |  |                            
|Net loss                                                                                    |  | $                           | (818 
|Weighted average shares outstanding                                                         |  |                             | 7,034
|                                                                                            |  |                             |      
|Basic and diluted loss per share                                                            |  | $                           | (0.12
|                                                                                            |  |                             |      



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##### Table of Contents

COMARCO, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)



|7. |  | Inventory
|-- |  | ---------



Inventory consists of the following (in thousands):



|                 |  | April 30,2003 |       | January 31,2003
|---------------- |  | ------------- | ----- | ---------------
|Raw materials    |  | $             | 2,369 |                
|Work in progress |  |               | 74    |                
|Finished goods   |  |               | 1,140 |                
|                 |  |               |       |                
|                 |  | $             | 3,583 |                
|                 |  |               |       |                



|8. |  | Software Development Costs, Net
|-- |  | -------------------------------



Software development costs consist of the following (in thousands):



|                                       |  | April 30,2003 |        |   | January 31,2003 |  
|-------------------------------------- |  | ------------- | ------ | - | --------------- | -
|Capitalized software development costs |  | $             | 6,991  |   |                 | $
|Less: accumulated amortization         |  |               | (1,126 | ) |                 |  
|                                       |  |               |        |   |                 |  
|                                       |  | $             | 5,865  |   |                 | $
|                                       |  |               |        |   |                 |  



Capitalized software
development costs for the quarters ended April 30, 2003 and 2002 totaled $0.8 million and $1.1 million, respectively. Amortization of software development costs for the quarters ended April 30, 2003 and 2002 totaled $478,000 and
$906,000, respectively, and have been reported in cost of revenue in the accompanying condensed consolidated financial statements.



Additionally, during the first quarter of fiscal 2004, fully amortized software development costs totaling $3.2 million and the corresponding
accumulated amortization were retired.



|9. |  | Goodwill and Acquired Intangible Assets, Net
|-- |  | --------------------------------------------



Goodwill and acquired intangible assets consist of the following (in thousands):



|                               |  | April 30,2003 |       |   | January 31,2003 |  
|------------------------------ |  | ------------- | ----- | - | --------------- | -
|Goodwill                       |  | $             | 2,796 |   |                 | $
|Less: accumulated amortization |  |               | (403  | ) |                 |  
|                               |  |               |       |   |                 |  
|                               |  | $             | 2,393 |   |                 | $
|                               |  |               |       |   |                 |  
|                               |  |              
|Acquired intangible assets     |  | $             | 1,613 |   |                 | $
|Less: accumulated amortization |  |               | (783  | ) |                 |  
|                               |  |               |       |   |                 |  
|                               |  | $             | 830   |   |                 | $
|                               |  |               |       |   |                 |  



Amortization of
definite lived acquired intangible assets for the quarters ended April 30, 2003 and 2002 totaled $38,000 and $88,000, respectively. The Company ceased amortizing goodwill beginning February 1, 2002 upon adoption of SFAS No. 142.



10



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##### Table of Contents

COMARCO, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)



|10. |  | Business Segment Information
|--- |  | ----------------------------



The Company has two reportable operating segments: wireless test solutions and wireless applications. Wireless test solutions designs and manufactures
hardware and software tools for use by wireless carriers, equipment vendors, and others. Radio frequency engineers, professional technicians, and others use these tools to design, deploy, and optimize wireless networks, and to verify the performance
of the wireless networks once deployed.



Wireless applications
designs and manufactures call box systems and mobile power products for notebook computers, cellular telephones, PDAs, and other handheld devices. Call box systems provide emergency communication over existing wireless networks. In addition to the
call box products, the Company provides system installation and long-term maintenance services. Currently, approximately 14,000 CWT call boxes are installed, the majority of which are serviced and maintained under long-term agreements, which expire
at various times through February, 2011.



Performance
measurement and resource allocation for the reportable segments are based on many factors. The primary financial measures used are revenue and gross profit. The revenue, gross profit, gross margin, and total assets attributable to these segments are
as follows (in thousands):



|                |  | Three Months Ended April 30, 2003 |       
|--------------- |  | --------------------------------- | ------
|                |  | Wireless TestSolutions            |       
|Revenue         |  | $                                 | 1,855 
|Cost of revenue |  |                                   | 1,189 
|                |  |                                   |       
|Gross profit    |  | $                                 | 666   
|                |  |                                   |       
|Gross margin    |  |                                   | 35.9  
|                |  |                                   |       
|Total assets    |  | $                                 | 15,851
|                |  |                                   |       
|                | 
|                |  | Three Months Ended April 30, 2002 |       
|                |  | Wireless TestSolutions            |       
|Revenue         |  | $                                 | 3,108 
|Cost of revenue |  |                                   | 2,177 
|                |  |                                   |       
|Gross profit    |  | $                                 | 931   
|                |  |                                   |       
|Gross margin    |  |                                   | 29.9  
|                |  |                                   |       
|Total assets    |  | $                                 | 27,039
|                |  |                                   |       



Revenue by geographic
area consisted of the following (in thousands):



|              |  | Three Months EndedApril 30,
|------------- |  | ---------------------------
|              |  | 2003                       
|North America |  | $                          
|Europe        |  |                            
|Asia          |  |                            
|Latin America |  |                            
|              |  |                            
|              |  | $                          
|              |  |                            



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COMARCO, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)



|11. |  | Contingencies
|--- |  | -------------



Comarco was named as a defendant in two lawsuits filed by Mobility Electronics, Inc. (Mobility), and subsequently the Company filed two
actions against Mobility and affiliates as further discussed below.



Mobility commenced proceedings for patent infringement against the Company and CWT with respect to CWTs ChargeSource power supply products (the Mobility Action). The Company was first served with Mobilitys amended
complaint on August 10, 2001. In addition to asserting that the Company and CWT have infringed a Mobility patent, the amended complaint seeks declaratory judgment that three of CWTs power-supply related patents are either invalid or not
infringed by power supplies produced or to be produced by Mobility. The Company and CWT moved for dismissal of the amended complaint in its entirety. The motion was denied, but the Court indicated that based on the results of discovery the Court may
grant a renewed motion to dismiss the declaratory judgment claim. The Company and CWT believe that they have meritorious defenses with respect to Mobilitys patent and declaratory judgment causes of actions.



On June 21, 2002, CWT filed an action for patent infringement against the
Xtend Micro Products, Inc. (Xtend) and its parent entity, iGo Corporation (iGo). CWT alleges that certain patents owned by CWT are infringed by Xtends PowerXtender and AC Adapter power supply products as well as other power supply and power adapter
products and related accessories. On July 15, 2002, Xtend and iGo answered the complaint denying the allegations in CWTs complaint and asserting a number of affirmative defenses. Xtend and iGo have indicated in court filings that they
will seek to have this case transferred to and consolidated with the Mobility Action because this case involves two of the patents involved in the Mobility Action, and Mobility and iGo have recently merged into a single corporate entity. CWT
believes that its case against Xtend and iGo is meritorious and that CWT has valid grounds for opposing any motion to consolidate this case with the Mobility Action that may be filed by Xtend and/or iGo.



On January 31, 2003, CWT filed an action for patent infringement against
Mobility Electronics, Inc., Hipro Electronics Co. Ltd., and iGo Corporation with regard to a universal power adapter called Juice. Defendant Hipro manufactures Juice for Mobility, which in turn offers it for sale through its wholly owned
subsidiary iGo Corporation. On February 27, 2003, Mobility and iGo answered the complaint while Hipro filed a motion to dismiss based on lack of personal jurisdiction and improper service.



On March 4, 2003, CWT filed a Motion for Preliminary Injunction seeking to
enjoin Mobility, Hipro, and iGo from making, using, selling or offering for sale the Juice product. The Court has set a June 11, 2003 hearing date for both CWTs Motion for Preliminary Injunction and Hipros Motion to Dismiss.
The parties participated in a settlement conference before a United States Magistrate Judge on May 20, 2003 without reaching a settlement.



CWT believes that its case against Mobility, Hipro, and iGo Corp is meritorious. As described above, this action has been consolidated for purposes of
discovery with the Mobility Arizona Action.



Los Angeles County
Service Authority for Freeway Emergencies (LASAFE) filed an action against CWT on June 10, 2002, relating to two contracts between LASAFE and CWT concerning call box systems manufactured by CWT, upgraded by CWT to comply with the
Americans with Disabilities Act (ADA), and maintained by CWT until its contractual obligations to provide maintenance expired. On August 2, 2002, LASAFE filed a first amended complaint. The complaint includes eight counts. In the first
five counts LASAFE alleges CWT breached its contractual obligations and implied warranties by failing to properly maintain and repair the call box systems and failing to provide certain deliverables to LASAFE. In the last three counts LASAFE alleges
that a patent owned by CWT should be assigned to LASAFE, and CWT should compensate LASAFE because an LASAFE employee is the true inventor of the invention claimed in the patent. The complaint seeks an unspecified amount of actual and punitive
damages, ownership of the patent, an order that CWT specifically perform its obligations under the contracts, recovery of attorneys fees, and an audit to determine the number of allegedly infringing call boxes.



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COMARCO, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)



On August 16, 2002, CWT filed an answer and a motion to dismiss the first five counts founded in
state contract and warranty law on the grounds that the Federal District Court lacks jurisdiction over the state law claims, which was subsequently granted. The Court has set a scheduling order and has set a trial date of February 3, 2004. CWT
believes that it has meritorious defenses with respect to all of LASAFEs claims.



On November 7, 2002, LASAFE filed a complaint in state court alleging the five causes of action that were dismissed in the federal court action referenced in the above paragraph. Specifically, LASAFE alleges that CWT
breached its contractual obligations and implied warranties by failing to properly maintain and repair the call box systems and failing to provide certain deliverables to LASAFE, and seeks over $1 million in damages. On January 9, 2003, CWT filed
its answer and a cross-complaint asserting causes of action for breach of contract and breach of the implied covenant of good faith and fair dealing based on LASAFEs failure to pay CWT all monies due under a contract with LASAFE and
LASAFEs conduct during the course of the contract. LASAFE has not yet responded to CWTs cross-complaint. The Court has set a trial date of April 5, 2004. CWT believes that it has meritorious defenses to LASAFEs claims and believes
that LASAFE will have significant difficulties proving causation and damages on its claims for breach of implied warranties.



The Company is from time to time involved in various legal proceedings incidental to the conduct of our business. We believe that the outcome of all other
such pending legal proceedings will not in the aggregate have a material adverse effect on our financial condition and operating results.



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##### Table of Contents

|ITEM  2. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|-------- |  | -------------------------------------------------------------------------------------



The following discussion and analysis should be read in conjunction with the condensed consolidated financial statements and notes thereto included
elsewhere in this quarterly report on Form 10-Q. This report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology
such as may, will, should, expect, plan, anticipate, believe, estimate, predict, potential or continue, the negative
of such terms, or other comparable terminology. These statements are only predictions. Actual events or results may differ materially. Important factors which may cause actual results to differ materially from the forward-looking statements are
described in the section entitled Risk Factors in Part I, Item 1 of the our report on Form 10-K for the year ended January 31, 2003, and other risks identified from time to time in our filings with the Securities and Exchange Commission,
press releases, and other communications.



Although we believe
that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Moreover, neither any other person nor we assume responsibility for the accuracy
and completeness of the forward-looking statements. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.



Overview



Comarco, Inc., through its subsidiary Comarco Wireless Technologies, Inc. (collectively, Comarco, or the Company), is a leading
provider of field test applications for the wireless industry. Comarco also designs and manufactures emergency call box systems and mobile power products for notebook computers, cellular telephones, PDAs, and other handheld devices. During October
1999, we embarked on a plan to divest our non-wireless businesses, which included the defense and commercial staffing businesses. The divestiture plan was completed during November 2000. Accordingly, our continuing operations consist solely of the
operations of Comarco Wireless Technologies, Inc. (CWT).



Results of Operations  Continuing Operations



We have two reportable operating segments: wireless test solutions and wireless applications.



Wireless Test Solutions



Our wireless test solutions business designs and manufactures hardware and software tools for use by wireless carriers, equipment vendors, and others. Radio frequency engineers, professional technicians, and others use these field test
applications to design, deploy, and optimize wireless networks, and to verify the performance of the wireless networks once deployed. The downturn in the wireless industry has reduced overall demand for our wireless test solutions products, and
continues to make it difficult for us to forecast our wireless test solutions operations for fiscal 2004.



Wireless Applications



Our wireless applications business designs and manufactures emergency call box systems and mobile power products for notebook computers, cellular telephones, PDAs, and other handheld devices. Our call box products provide emergency
communication over existing wireless networks. In addition to the call box products, we provide system installation and long-term maintenance services. Currently, we have approximately 14,000 call boxes installed, the majority of which are serviced
and maintained under long-term agreements.



The wireless
applications business also includes the ChargeSource family of mobile power products. Our current offering of ChargeSource products consist of a 70-watt universal AC power adapter, our second-generation mobile power system. By simply changing the
compact SmartTips connected to the end of the charging cable, the



14



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universal AC power adapter is capable of charging and powering multiple target devices, including most notebook
computers, cellular telephones, PDAs, and other handheld devices. During the third quarter of fiscal 2002, the ChargeSource product offering was expanded with the introduction of the 70-watt universal DC power adapter. This universal DC power
adapter allows traveling professionals to use all their existing ChargeSource SmartTips on the road or in the air. This device connects to the in-seat power outlet available on most major airlines or the cigarette lighter plug found in automobiles.
Targus Group International (Targus) currently distributes both of these products.



Until recently, most current notebook computers required no more than 70 watts of power to operate. However, the personal computer industry is currently transitioning to notebook computers with increasing power
requirements. As the power requirement increases, so does the size of the original equipment of the manufacturer (OEM) AC charger sold with the notebook computer. To address this industry wide trend, we have developed a family of
ChargeSource products that are compatible with all legacy, current and future notebook computers. These new ChargeSource products are able to deliver up to 120 watts of power in a very small form factor. The new ChargeSource family of products,
which are expected to begin shipping during the second quarter of fiscal 2004, consist of the following:



| | · |  | 120-Watt Universal AC/DC Adapter  A universal adapter capable of charging most notebook computers requiring up to 120 watts of power, as well as cell phones, PDAs, and
other handheld devices. This adapter is used in the office, home, hotel, as well as the automobile and airplane.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · |  | 120-Watt Universal DC Adapter  A universal adapter capable of charging most notebook computers requiring up to 120 watts of power, as well as cell phones, PDAs, and
other handheld devices. This adapter is used in the automobile and airplane.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · |  | 60-Watt Hour Universal Battery  This universal battery is used to charge and power all notebook computers, cell phones, PDAs, and other handheld devices.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| | · |  | 20-Watt AC/DC Adapter  Designed for those individuals who do not travel with a notebook computer, but have a need for a universal adapter that can charge cell phones,
PDAs, DVD players, digital cameras and camcorders, and other handheld devices. This adapter is used in the office, home, hotel, as well as the automobile and airplane.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Our new ChargeSource products are compatible with existing Smart Tips and are backwards compatible with the 70-Watt
adapters.



In cooperation with the Consumer Products Safety
Commission, on March 20, 2003, Comarco voluntarily initiated a product safety recall of its ChargeSource AC power adapters. This product safety recall impacts approximately 125,000 units that were sold in fiscal 2003. Comarco and Targus entered into
an agreement to address the impact of the recall action. Under the terms of the agreement Comarco issued a $3.2 million credit to Targus in fiscal 2003 in consideration of a full release. Additionally, the Company accrued $554,000 in costs related
to the recall action.



Of the $3.2 million credit issued to
Targus in the fourth quarter of fiscal 2003, returns totaling $1.3 million have been made through April 30, 2003. Additionally, of the $554,000 in costs accrued related to the recall, the Company has paid $39,000 in related costs through April 30,
2003. The Company believes that the balance remaining as of April 30, 2003 is adequate to cover additional product recall costs expected to be incurred.



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The following table sets forth certain items as a percentage of revenue from our condensed consolidated
statements of operations for the three months ended April 30, 2003 and 2002. The table and discussion that follows provides information which management believes is relevant to an assessment and understanding of our condensed consolidated results of
operations and financial condition. The discussion should be read in conjunction with the condensed consolidated financial statements and accompanying notes thereto included elsewhere herein.



|                                                                    |  | Three Months Ended April 30, |   
|------------------------------------------------------------------- |  | ---------------------------- | --
|                                                                    |  | 2003                         |   
|Revenue                                                             |  | 100.0                        | % 
|Cost of revenue                                                     |  | 61.3                         |   
|                                                                    |  |                              |   
|Gross profit                                                        |  | 38.7                         |   
|                                                                    |  |                             
|Selling, general and administrative costs                           |  | 35.9                         |   
|Engineering and support costs                                       |  | 23.9                         |   
|                                                                    |  |                              |   
|Operating loss                                                      |  | (21.1                        | ) 
|Other income, net                                                   |  | 1.7                          |   
|Minority interest in losses of subsidiary                           |  | 0.3                          |   
|                                                                    |  |                              |   
|Loss before income taxes                                            |  | (19.1                        | ) 
|Income tax benefit                                                  |  | (6.4                         | ) 
|                                                                    |  |                              |   
|Net loss before cumulative effect of change in accounting principle |  | (12.7                        | )%
|                                                                    |  |                              |   



Consolidated



Revenue



Total revenue for the first quarter of fiscal 2004, which ended April 30, 2003, was $6.5 million compared to $7.8 million
for the first quarter of fiscal 2003, a decrease of $1.3 million or 16.9 percent. As discussed below, the decrease is attributable to decreased sales of our wireless test solutions products, as well as our exit from our engineering services business
during the second quarter of fiscal 2003.



Cost of Revenue and Gross Margin



Total cost of revenue for the first quarter of fiscal
2004 was $4.0 million compared to $5.0 million for the first quarter of fiscal 2003, a decrease of approximately $1.0 million or 20.6 percent. As a percentage of revenue, gross margin increased to 38.7 percent from 35.9 percent for the first quarter
of the prior fiscal year. The increase is primarily due to maintaining a higher cost structure during the first quarter of fiscal 2003 in support of completing our remaining contractual obligations to our engineering services customers.



Selling, General and Administrative Costs



Selling, general, and administrative costs for the first quarter of fiscal
2004 and 2003 were $2.3 million. During prior fiscal years, we reduced our indirect cost structure in response to a broad downturn in the wireless industry and the resulting reduced demand for our wireless test solutions products. As a result,
our selling, general, and administrative expenses were flat in comparison to the prior fiscal year. As a percentage of revenue, selling, general and administrative costs were 35.9 percent and 30.1 percent for the quarters ended April 30,
2003 and 2002, respectively, due to the relative fixed nature of our current cost structure and a reduced revenue base.



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##### Table of Contents

For at least the balance of fiscal 2004, quarterly selling, general, and administrative costs are
expected to fluctuate due to increasing revenue levels and the timing of legal costs incurred in addressing the legal matters discussed in the section entitled Legal Proceedings in Part II, Item 1 of this report on Form 10-Q.



Engineering and Support Costs



The Company capitalizes costs incurred for the development of software
embedded in our wireless test solutions products that will be sold when technological feasibility has been established. These capitalized costs are subject to an ongoing assessment of recoverability based on anticipated future revenue and changes in
hardware and software technologies. Costs that are capitalized include direct labor and related overhead. Engineering and support costs for the first quarter of fiscal 2004 and 2003 are as follows (in thousands):



|                                       |  | Three Months EndedApril 30, |      
|-------------------------------------- |  | --------------------------- | -----
|                                       |  | 2003                        |      
|Engineering                            |  | $                           | 1,884
|Less: Capitalized software development |  |                             | (782 
|Support Costs                          |  |                             | 442  
|                                       |  |                             |      
|                                       |  | $                           | 1,544
|                                       |  |                             |      



Engineering and
support costs, net of capitalized software development costs, for the first quarter of fiscal 2004 were $1.5 million compared to $1.4 million for the prior fiscal quarter, an increase of approximately $0.1 million. Gross engineering
and support costs, before reduction for capitalized software development costs, decreased $0.2 million in comparison to the first quarter of fiscal 2003. This decrease is primarily due to reduced staffing of our product support function.
Capitalized software development costs decreased $0.3 million resulting in an increase in engineering and support costs, net of capitalized software development costs, of $0.1 million for the first quarter of fiscal 2004 in comparison to
the prior fiscal quarter. The reduction of capitalized software development costs during the first quarter of fiscal 2004 is consistent with our strategy of lowering the cost structure in support of our wireless test solutions business, whereby we
discontinued certain software development projects and focused our available resources on the development of a single flexible product platform, Seven.Five.



Other Income



Other income consists primarily of interest income.



Income Tax Expense



The effective tax rates for the quarters ended April 30, 2003 and 2002 were 33.6 percent and 36.9 percent, respectively.



Wireless Test Solutions



|                |  | Three Months Ended April 30, |      
|--------------- |  | ---------------------------- | -----
|                |  | 2003                         |      
|                |  | (In thousands)               |      
|Revenue         |  | $                            | 1,855
|Cost of revenue |  |                              | 1,189
|                |  |                              |      
|Gross profit    |  | $                            | 666  
|                |  |                              |      
|Gross margin    |  |                              | 35.9 
|                |  |                              |      



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##### Table of Contents

Revenue



Wireless test solutions revenue for the first quarter of fiscal 2004 was $1.9 million compared to $3.1 million for the first quarter of fiscal 2003, a
decrease of $1.3 million or 40.3 percent. This decrease reflects the reduced demand for our legacy 2G wireless test solutions products, as well as engineering services, which we ceased providing during the second quarter of fiscal 2003. Revenue from
engineering services for the first quarter of fiscal 2003 totaled approximately $450,000.



Cost of Revenue and Gross Margin



Cost of revenue from our wireless test solutions business for the first quarter of fiscal 2004 was $1.2 million compared to $2.2 million for the first quarter of fiscal 2003, a decrease of approximately $1.0 million
or 45.4 percent. Excluding the cost of revenue attributable to engineering services, which totaled approximately $0.7 million, the gross margin for the first quarter of fiscal 2003 was 43.8 percent. Accordingly, as a percentage of revenue, gross
margin for the first quarter of fiscal 2004 decreased to 35.9 percent from 43.8 percent for the corresponding period of the prior fiscal year. The decrease in cost of revenue was due to decreased sales volumes of our hardware and software tools, as
well as decreased amortization of capitalized software development costs. Amortization of software development costs for the first quarter ended April 30, 2003 and 2002 totaled $0.5 million and $0.9 million, respectively. The decrease in gross
margin was primarily due to decreased absorption of fixed costs attributable to lower product sales.



Wireless Applications



|                |  | Three Months EndedApril 30, |      
|--------------- |  | --------------------------- | -----
|                |  | 2003                        |      
|                |  | (In thousands)              |      
|Revenue         |  | $                           | 4,601
|Cost of revenue |  |                             | 2,765
|                |  |                             |      
|Gross profit    |  | $                           | 1,836
|                |  |                             |      
|Gross margin    |  |                             | 39.9 
|                |  |                             |      



Revenue



Wireless applications revenue for the first quarter of 2004 was $4.6 million
compared to $4.7 million for the first quarter of 2003, a decrease of approximately $0.1 million or 1.2 percent. This decrease was due to a $0.3 million decrease in sales of our ChargeSource products partially offset by a $0.2 million increase in
sales of our call box products and services. For the first quarter of fiscal 2004, call box revenue was generated from both the sales of products and providing maintenance services under long-term contracts and totaled $0.5 million and $1.2 million,
respectively. Sales of call box products tend to fluctuate from quarter to quarter while revenue from the long-term maintenance contracts are relatively comparable quarter to quarter.



Cost of Revenue and Gross Margin



Wireless applications cost of revenue for the first quarter of fiscal 2004 and 2003 was $2.8 million. As a percentage of revenue, gross margin was
comparable at 39.9 percent versus 39.8 percent for the corresponding period of the prior fiscal year.



Liquidity and Capital Resources



Our financial position remains strong, with cash and cash equivalents of $23.7 million at April 30, 2003.



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Cash Flows from Operating Activities



We used cash from operations of $0.1 million for the first quarter of fiscal 2004 compared to $2.4 million of cash generated
from operations for the corresponding period of the prior fiscal year. The net income from continuing operations before non-cash charges of depreciation and amortization was approximately $0.2 million. This cash generated was offset by an increase
in accounts receivable of approximately $0.5 million, primarily due to reduced collections from Targus, our ChargeSource product distributor, as a result of the $3.2 million credit issued in the fourth quarter of fiscal 2003. The increase in cash
generation for the first quarter of fiscal 2003 was primarily due to significant collections of accounts receivable partially offset by the net loss for the quarter. Accounts receivable decreased $4.1 million to $5.6 million at April 30, 2002 from
$9.7 million at January 31, 2002, primarily due to significantly lower revenue generated by our wireless test solutions business for the first quarter of fiscal 2003.



Cash Flows from Investing Activities



Net cash used in investing activities was $1.4 million for the first quarter of fiscal 2004 and 2003. In both periods, capital expenditures for property
and equipment and software development constituted substantially all of our cash used in investing activities. The development of software is critical to our products currently under development.



Cash Flows from Financing Activities



Net cash used in financing activities for the first quarter of fiscal 2004
consisted of $168,000 that was used to repurchase 22,200 shares of the Companys common stock in the open market for an average purchase price of $7.65. From program inception in 1992 through April 30, 2003, the Company has repurchased
approximately 2.6 million shares for an average price of $8.22 per share. Net cash used in financing activities for the first quarter of fiscal 2003 consisted of $278,000 that was used to repurchase 26,200 shares of the Companys common stock
in the open market for an average price of $10.62 per share under our share repurchase program. Proceeds from the sale of common stock issued through employee and director stock option plans generated $121,000 during the first quarter of fiscal
2003.



We believe that our existing cash and cash equivalent
balances will provide us sufficient funds to satisfy our cash requirements for at least the next twelve months. In addition to our cash and cash equivalent balances, we derive a portion of our liquidity from our cash flows from operations.



Critical Accounting Policies



We have identified the following accounting as critical policies to our
company: revenue recognition, capitalized software development costs, accounts receivable, inventory, income taxes, valuation of goodwill, and valuation of long-lived assets. These critical accounting policies have been applied during the first
quarter of fiscal 2004 consistent with the prior periods and the year ended January 31, 2003.



For further information, refer to the discussion of critical accounting policies included in Managements Discussion and Analysis in the Companys annual report on Form 10-K for the year ended January 31,
2003.



ITEM 3.    
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



Currency Risk



The Company is exposed to the
risk of changes in currency exchange rates. As of April 30, 2003, we had no material accounts receivable denominated in foreign currencies. Our standard terms require customers to pay for our products and services in U.S. dollars. For those orders
denominated in foreign currencies, we may limit our exposure



19



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to losses from foreign currency transactions through forward foreign exchange contracts. To date, sales denominated in
foreign currencies have not been significant and we have not entered into any foreign exchange contracts.



Interest Rate Sensitivity



The primary objective of our investment activities is to preserve principal while at the same time maximizing the income we receive from our investments without significantly increasing risk. Some of the securities that we have invested in
may be subject to market risk. This means that a change in prevailing interest rates may cause the principal amount of the investment to fluctuate. For example, if we hold a security that was issued with a fixed interest rate at the then-prevailing
rate and the prevailing interest rate later rises, the principal amount of our investment will probably decline in value. To minimize this risk, we maintain a significant portion of our cash balances in money market funds. In general, money market
funds are not subject to interest rate risk because the interest paid on such funds fluctuates with the prevailing interest rate.



We do not hold any derivative financial instruments.



Our cash and cash equivalents have maturities dates of three months or less and the fair value approximates the carrying value in our financial
statements.



Equity Price Risk



Our short-term investments consist primarily of balances maintained in a
non-qualified deferred compensation plan funded by our executives and directors. We value these investments using the closing market value for the last day of each month. These investments are subject to market price volatility. We reflect these
investments on our balance sheet at their market value, with the unrealized gains and losses excluded from reported operations. We have also invested in equity instruments of SwissQual, a privately held company. We evaluate whether any decline in
value of certain public and non-public equity investments is other than temporary.



Due to the inherent risk associated with some of our investments, and in light of current stock market conditions, we may incur future losses on the sales, write-downs, or write-offs of our investments. We do not
currently hedge against equity price changes.



ITEM
4.    
CONTROLS AND PROCEDURES



Within the
90 days prior to the date of this report, an evaluation was performed, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and
operation of our disclosure controls and procedures pursuant to the Securities Exchange Act of 1934, as amended, Rule 13a-14c. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls
and procedures are effective. There have been no significant changes in our internal controls or in other factors that could significantly affect internal controls subsequent to the date the evaluation was performed.



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PART II  OTHER INFORMATION



ITEM 1.    
LEGAL PROCEEDINGS



Mobility Electronics, Inc.
v. Comarco, Inc. and Comarco Wireless Technologies, Inc.,

Case No. CIV-01-1489-PHX-MHM, U.S. District Court for the District of Arizona
(Mobility Arizona Action):



Mobility Electronics,
Inc. (Mobility) commenced proceedings as to U. S. Patent No. 5,347,211 (the 211 Patent) for patent infringement against the Company and Comarco Wireless Technologies, Inc. (CWT) with respect to CWTs
ChargeSource power supply products. The Company was first served with Mobilitys amended complaint filed August 10, 2001. In addition to asserting that the Company and CWT have infringed the 211 patent, the amended complaint seeks
declaratory judgment that three of CWTs power supply related patents are either invalid or not infringed by power supplies produced or to be produced by Mobility. The three CWT patents are U. S. Patent Nos. 6,091,611 (the 611
Patent), 6,172,884 (the 884 patent), and 5,838,554 (the 554 patent). The Company and CWT believe that they have meritorious defenses with respect to the 211 patent and Mobilitys declaratory
judgment causes of actions.



A Scheduling Conference was held
on December 18, 2002. Following that Conference, the Court entered its Scheduling Order granting the parties until June 15, 2004 to conduct discovery, and until June 30, 2004 to file dispositive motions. Following resolution of any dispositive
motions, or following the deadline for filing if no such motions are filed, the Court will hold a status hearing for purposes of selecting a firm trial date and related pre-trial deadlines.



On October 28, 2002, the California District Court hearing the matter of
Comarco Wireless Technologies, Inc. v. Xtend Micro Products, Inc. and iGo Corporation, former Case No. SACV 02-640 AHS (ANx) (discussed below), ordered the California Action transferred to the District of Arizona. The Arizona Court on January
31, 2003, further ordered the action consolidated with the Mobility Arizona Action for purposes of discovery.



Also, as discussed below, CWT recently filed a separate suit in Arizona against Mobility and two affiliated entities alleging infringement of
Comarcos 611 and 884 Patents (CWT Arizona Action). The CWT Arizona Action has been consolidated for purposes of discovery with the Mobility Arizona Action.



Comarco Wireless Technologies, Inc. v. Xtend Micro Products, Inc. and iGo Corporation,

Case No. 02:2201 PHX MHM, U.S. District Court for the District of Arizona (formerly, SACV 02-640 AHS (ANx), U.S. District Court for the Central District of California,
Southern Division):



On June 21, 2002, CWT filed this action
for patent infringement against Xtend Micro Products, Inc. (Xtend) and its parent entity, iGo Corporation (iGo). CWT alleges that its 611 and 884 patents are infringed by Xtends PowerXtender and AC Adapter power supply products as well as other
power supply and power adapter products and related accessories. On July 15, 2002, Xtend and iGo answered the complaint denying the allegations in CWTs complaint and asserting a number of affirmative defenses.



In September, 2002, Defendants moved to transfer this action to the Arizona
District Court for purpose of consolidation with the Mobility Arizona Action because this case involved two overlapping patents, and because defendants iGo/Xtend were acquired by and merged into a wholly-owned subsidiary of Mobility. On October 28,
2002 the California District Court granted the Motion and Ordered that the case be transferred to the District of Arizona.



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##### Table of Contents

On January 31, 2003, the Arizona Court adopted its Scheduling Order for the case and separately ordered
that the case be consolidated for purposes of discovery with the Mobility Arizona Action. Pursuant to the Scheduling Order, the parties have until June 15, 2004 to conduct discovery, and dispositive motions are to be filed by June 30, 2004. The
Court will hold a status conference following resolution of any dispositive motions or, if none are filed, following the passing of the June 30, 2004 deadline. At that time, the Court will adopt a firm trial date and set related pre-trial deadlines.



Comarco Wireless Technologies, Inc. v. Mobility Electronics, Inc., Hipro
Electronics Co., Ltd., and iGo Corporation,

Case No. 03:202 PHX MHM, United States District Court, District of Arizona



On January 31, 2003, CWT filed this action for infringement of its 611
and 884 Patents with regard to a universal power adapter, called Juice. Defendant Hipro manufactures Juice for Mobility, which in turn offers it for sale through its wholly owned subsidiary, iGo Corp. On February 27, 2003, Mobility
and iGo answered the complaint while Hipro filed a motion to dismiss based on lack of personal jurisdiction and improper service.



On March 4, 2003, CWT filed a Motion for Preliminary Injunction seeking to enjoin Mobility, Hipro, and iGo from making, using, selling or offering for
sale the Juice product. The Court has set a June 11, 2003 hearing date for both CWTs Motion for Preliminary Injunction and Hipros Motion to Dismiss. The parties participated in a settlement conference before a United States
Magistrate Judge on May 20, 2003 without reaching a settlement.



CWT believes that its case against Mobility, Hipro and iGo Corp is meritorious. As described above, this action has been consolidated for purposes of discovery with the Mobility Arizona Action.



Los Angeles County Service Authority for Freeway Emergencies v. Comarco Wireless
Technologies, Inc.,

Case No. SACV 02-567 AHS (ANx), U.S. District Court for the Central District of California, Southern Division:



Los Angeles County Service Authority for Freeway Emergencies
(LASAFE) filed this action against CWT on June 10, 2002, relating to two contracts between LASAFE and CWT concerning Call Box Systems manufactured by CWT, upgraded by CWT to comply with the Americans with Disabilities Act
(ADA) and maintained by CWT until its contractual obligations to provide maintenance expired. On August 2, 2002, LASAFE filed a first amended complaint (hereafter, the complaint). The complaint includes eight counts. In the
first five counts LASAFE alleges CWT breached its contractual obligations and implied warranties by failing to properly maintain and repair the call box system and failing to provide certain deliverables to LASAFE. In the last three counts LASAFE
alleges that U.S. Patent No. 6,035,187 owned by CWT and entitled Apparatus and Method for Improved Emergency Call Box (the 187 Patent) should be assigned to LASAFE, and CWT should compensate LASAFE, because an LASAFE
employee is the true inventor of the invention claimed in the 187 Patent. The complaint seeks an unspecified amount of actual and punitive damages, ownership of the 187 patent, an order that CWT specifically perform its obligations under
the contracts, recovery of attorneys fees, and an audit to determine the number of allegedly infringing call boxes.



On August 16, 2002, CWT filed an answer and a motion to dismiss the first five counts founded in state contract and warranty law on the grounds that the
Federal District Court lacks jurisdiction over the state law claims, which was subsequently granted. The Court has set a scheduling order and has set a trial date of February 3, 2004. CWT believes that it has meritorious defenses with respect to all
of LASAFEs claims.



Los Angeles County Service Authority for
Freeway Emergencies v. Comarco Wireless Technologies, Inc.,

Case No. No. BC 284897, California Superior Court for the County of Los Angeles:



On November 7, 2002, LASAFE filed a complaint in state court
alleging the five causes of action that were dismissed in the federaal court action referenced in the above paragraph. Specifically, LASAFE alleges that CWT



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##### Table of Contents

breached its contractual obligations and implied warranties by failing to properly maintain and repair the call box
systems and failing to provide certain deliverables to LASAFE, and seeks over $1 million in damages. On January 9, 2003, CWT filed its answer and a cross-complaint asserting causes of action for breach of contract and breach of the implied covenant
of good faith and fair dealing based on LASAFEs failure to pay CWT all monies due under a contract with LASAFE and LASAFEs conduct during the course of the contract. LASAFE has not yet responded to CWTs cross-complaint. The Court
has set a trial date of April 5, 2004. CWT believes that it has meritorious defenses to LASAFEs claims and believes that LASAFE will have significant difficulties proving causation and damages on its claims for breach of implied warranties.



We are from time to time involved in various legal proceedings
incidental to the conduct of our business. We believe that the outcome of all other such pending legal proceedings will not in the aggregate have a material adverse effect on our financial condition and operating results.



ITEM 2.    
CHANGES IN SECURITIES



None.



ITEM 3.    
DEFAULTS UPON SENIOR SECURITIES



None.



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



None.



ITEM 5.    
OTHER INFORMATION



None.



ITEM 6.    
EXHIBITS AND REPORTS ON FORM 8-K



(a)    Exhibits:



11        Schedule of Computation of Net Loss Per Share



(b)    Report on Form 8-K:



None.



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##### Table of Contents

SIGNATURES



Pursuant to the
requirements of Section 13 or 15(d) 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.



|                     |  |  |  |  |  | COMARCO, INC.          
|-------------------- |  |  |  |  |  | -----------------------
|                     |  |  | 
|Date:  June 10, 2003 |  |  |  |  |  | /s/    Thomas A. Franza
|                     |  |  |  |  |  |                        
|                     |  |  | 
|                     |  |  |  |  |  |                        
|                     |  |  | 
|Date:  June 10, 2003 |  |  |  |  |  | /s/    Daniel R. Lutz  
|                     |  |  |  |  |  |                        





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##### Table of Contents

Certification of Chief Executive Officer

Pursuant to Section 302 of the

Sarbanes-Oxley Act of 2002



In connection with this quarterly report on Form 10-Q of Comarco, Inc. I, Thomas A. Franza,
Chief Executive Officer of Comarco, Inc., certify, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, that:



| | 1. |  | I have reviewed this quarterly report on Form 10-Q of Comarco, Inc.;
| | -- |  | --------------------------------------------------------------------



| | 2. |  | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. |  | Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition,
results of operations, and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4. |  | The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-1 and
15d-14) for the registrant and we have:
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this quarterly report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b) |  | evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the
Evaluation Date); and
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c) |  | presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 5. |  | The registrants other certifying officers and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit committee of the
registrants board of directors (or persons performing the equivalent function):
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of internal controls which could adversely affect the registrants ability to record, process, summarize, and report
financial data and have identified for the registrants auditors any material weaknesses in internal controls; and
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b) |  | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls; and
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



| | 6. |  | The registrants other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors
that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                     | 
|-------------------- | 
|Date:  June 10, 2003 | 
|                     | 



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##### Table of Contents

Certification of Chief Executive Officer

Pursuant to Section 906 of the

Sarbanes-Oxley Act of 2002



In connection with this quarterly report on Form 10-Q of Comarco, Inc. I, Thomas A. Franza,
Chief Executive Officer of Comarco, Inc., certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:



| | 1. |  | The report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
| | -- |  | ---------------------------------------------------------------------------------------------------------------------



| | 2. |  | The information contained in this report fairly presents, in all material respects, the financial condition and results of operations of Comarco, Inc.
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------

|
|



|                     | 
|-------------------- | 
|Date:  June 10, 2003 | 
|                     | 



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##### Table of Contents

Certification of Chief Financial Officer

Pursuant to Section 302 of the

Sarbanes-Oxley Act of 2002



In connection with this quarterly report on Form 10-Q of Comarco, Inc. I, Daniel R. Lutz,
Chief Financial Officer of Comarco, Inc., certify, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, that:



| | 1. |  | I have reviewed this quarterly report on Form 10-Q of Comarco, Inc.;
| | -- |  | --------------------------------------------------------------------



| | 2. |  | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. |  | Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition,
results of operations, and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4. |  | The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-1 and
15d-14) for the registrant and we have:
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this quarterly report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b) |  | evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the
Evaluation Date); and
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | d) |  | presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 5. |  | The registrants other certifying officers and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit committee of the
registrants board of directors (or persons performing the equivalent function):
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c) |  | all significant deficiencies in the design or operation of internal controls which could adversely affect the registrants ability to record, process, summarize, and report
financial data and have identified for the registrants auditors any material weaknesses in internal controls; and
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | d) |  | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls; and
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



| | 6. |  | The registrants other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors
that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                     | 
|-------------------- | 
|Date:  June 10, 2003 | 
|                     | 



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##### Table of Contents

Certification of Chief Financial Officer

Pursuant to Section 906 of the

Sarbanes-Oxley Act of 2002



In connection with this quarterly report on Form 10-Q of Comarco, Inc. I, Daniel R. Lutz,
Chief Financial Officer of Comarco, Inc., certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:



| | 1. |  | The report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
| | -- |  | ---------------------------------------------------------------------------------------------------------------------



| | 2. |  | The information contained in this report fairly presents, in all material respects, the financial condition and results of operations of Comarco, Inc.
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



|                     | 
|-------------------- | 
|Date:  June 10, 2003 | 
|                     | 





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