##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended
 APRIL 30, 2011
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from ______________ to ______________
 Commission file number 0-5449
 COMARCO, INC.
  
 California
(State or other jurisdiction 
of incorporation or organization)
    
    95-2088894
(I.R.S. Employer
Identification No.)
 
 
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 o þ




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##### 



COMARCO, INC. AND SUBSIDIARY
 QUARTERLY REPORT ON FORM 10-Q
FOR THE THREE MONTHS ENDED APRIL 30, 2011
 TABLE OF CONTENTS
 PagePART I  FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTS (Unaudited)Condensed Consolidated Balance Sheets as of April 30, 2011 and January 31, 2011
    
    
    3Condensed Consolidated Statements of Operations for the Three Months Ended April
30, 2011 and 2010
    
    
    4Condensed Consolidated Statements of Cash Flows for the Three Months Ended April
30, 2011 and 2010
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
    
    
    15ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    22ITEM 4. CONTROLS AND PROCEDURES
    
    
    22PART II  OTHER INFORMATIONITEM 1. LEGAL PROCEEDINGS
    
    
    23ITEM 1A. RISK FACTORS
    
    
    23ITEM 6. EXHIBITS
    
    
    23SIGNATURES
    
    
    24EX-31.1EX-31.2EX-32.1EX-32.2
  2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 ITEM 1.
    
    FINANCIAL STATEMENTS
 COMARCO, INC. AND SUBSIDIARY
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (Unaudited)
 (In thousands, except share amounts)
 April 30,
    
    
    January 31,2011
    
    

2011
(A)ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    3,703
    
    
    $
    6,381Accounts receivable due from customers, net of reserves of
$56 at April 30, 2011 and $53 at January 31, 2011,
respectively
    
    
    2,286
    
    
    
    3,550Accounts receivable due from suppliers, net of reserves of
$53 at April 30, 2011 and $67 at January 31, 2011,
respectively
    
    
    759
    
    
    
    724Inventory, net of reserves of $1,499 at April 30, 2011 and
$1,581 at January 31, 2011, respectively
    
    
    1,684
    
    
    
    1,521Other current assets
    
    
    240
    
    
    
    165Total current assets
    
    
    8,672
    
    
    
    12,341Property and equipment, net
    
    
    322
    
    
    
    420Total assets
    
    $
    8,994
    
    
    $
    12,761LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Accounts payable
    
    $
    4,216
    
    
    $
    5,180Accrued liabilities
    
    
    2,151
    
    
    
    2,762Line of credit
    
    
    
    
    
    
    1,000Total current liabilities
    
    
    6,367
    
    
    
    8,942Commitments and ContingenciesStockholders Equity:Preferred stock, no par value, 10,000,000 shares authorized;
no shares issued or outstanding at April 30, 2011 and
January 31, 2011
    
    
    
    
    
    
    Common stock, $0.10 par value, 50,625,000 shares
authorized; 7,343,869 shares issued and outstanding at
April 30, 2011 and January 31, 2011
    
    
    733
    
    
    
    733Additional paid-in capital
    
    
    15,370
    
    
    
    15,299Accumulated deficit
    
    
    (13,476
    )
    
    
    (12,213
    )Total stockholders equity
    
    
    2,627
    
    
    
    3,819Total liabilities and stockholders equity
    
    $
    8,994
    
    
    $
    12,761
 
 (A)
    
    Derived from the audited consolidated financial statements as of January 31,
2011.  3




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COMARCO, INC. AND SUBSIDIARY
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (Unaudited)
 (In thousands, except per share amounts)
 Three Months EndedApril 30,2011
    
    
    2010Revenue
    
    $
    2,949
    
    
    $
    7,514Cost of revenue
    
    
    2,773
    
    
    
    5,912Gross profit
    
    
    176
    
    
    
    1,602Selling, general, and administrative expenses
    
    
    950
    
    
    
    1,407Engineering and support expenses
    
    
    499
    
    
    
    9021,449
    
    
    
    2,309Operating loss
    
    
    (1,273
    )
    
    
    (707
    )Other income (expense), net
    
    
    10
    
    
    
    (19
    )Loss from continuing operations before income taxes
    
    
    (1,263
    )
    
    
    (726
    )Income tax benefit
    
    
    
    
    
    
    Net loss from continuing operations
    
    
    (1,263
    )
    
    
    (726
    )Loss from discontinued operations, net of income taxes
    
    
    
    
    
    
    (8
    )Net loss
    
    $
    (1,263
    )
    
    $
    (734
    )Basic and diluted loss per share:Net loss from continuing operations
    
    $
    (0.17
    )
    
    $
    (0.10
    )Net loss from discontinued operations
    
    
    
    
    
    
    $
    (0.17
    )
    
    $
    (0.10
    )Weighted average common shares outstanding:Basic
    
    
    7,344
    
    
    
    7,327Diluted
    
    
    7,344
    
    
    
    7,327Common shares outstanding
    
    
    7,344
    
    
    
    7,327
  4




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COMARCO, INC. AND SUBSIDIARY
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 (In thousands)
 Three Months EndedApril 30,2011
    
    
    2010CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
    
    $
    (1,263
    )
    
    $
    (734
    )Loss from discontinued operations
    
    
    
    
    
    
    8Adjustments to reconcile net loss from continuing
operations to net cash used in operating activities:Depreciation
    
    
    119
    
    
    
    193Stock-based compensation expense
    
    
    72
    
    
    
    55Loan origination fees
    
    
    53
    
    
    
    14Provision for doubtful accounts
    
    
    10
    
    
    
    17Provision for obsolete inventory
    
    
    (82
    )
    
    
    (33
    )Changes in operating assets and liabilities:Accounts receivable due from customers and suppliers
    
    
    1,219
    
    
    
    100Inventory
    
    
    (81
    )
    
    
    (212
    )Other assets
    
    
    (75
    )
    
    
    (205
    )Accounts payable
    
    
    (965
    )
    
    
    507Accrued liabilities
    
    
    (611
    )
    
    
    (687
    )Deferred rent
    
    
    
    
    
    
    (31
    )Net cash used in continuing operating activities
    
    
    (1,604
    )
    
    
    (1,008
    )Net cash used in discontinued operating activities
    
    
    
    
    
    
    (8
    )Net cash used in operating activities
    
    
    (1,604
    )
    
    
    (1,016
    )CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of property and equipment
    
    
    (21
    )
    
    
    (71
    )Net cash used in investing activities
    
    
    (21
    )
    
    
    (71
    )CASH FLOWS FROM FINANCING ACTIVITIES:Loan repayment
    
    
    (1,000
    )
    
    
    Loan origination fees
    
    
    (53
    )
    
    
    (56
    )Net cash used in financing activities
    
    
    (1,053
    )
    
    
    (56
    )Net decrease in cash and cash equivalents
    
    
    (2,678
    )
    
    
    (1,143
    )Cash and cash equivalents, beginning of period
    
    
    6,381
    
    
    
    10,127Cash and cash equivalents, end of period
    
    $
    3,703
    
    
    $
    8,984Supplemental disclosures of cash flow information:Cash paid for interest
    
    $
    12
    
    
    $
    14Cash paid for income taxes
    
    $
    
    
    
    $
    2
  5




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COMARCO, INC. AND SUBSIDIARY
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 1. Organization
 ® ®
 2. Summary of Significant Accounting Policies
 Future Operations, Liquidity and Capital Resources:
 ®
  Basis of Presentation:
  6




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COMARCO, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
  Cash and Cash Equivalents
  Principles of Consolidation
  Accounts Receivable due from Customers
  Accounts Receivable due from Suppliers
  Use of Estimates
    7




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COMARCO, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
  Fair Value of Financial Instruments
  Reclassifications
  3. Stock-Based Compensation
    Three Months EndedApril 30,2011
    
    
    2010Total stock-based compensation expense
    
    $
    71
    
    
    $
    55Impact on basic and diluted earnings per share
    
    
    0.01
    
    
    
    0.01
 8




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COMARCO, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
       Outstanding AwardsNumber of
    
    
    Weighted-AverageShares
    
    

Exercise/Grant PriceBalance, January 31, 2011
    
    
    1,121,428
    
    
    $
    2.80Awards granted
    
    
    75,000
    
    
    
    0.31Awards canceled or expired
    
    
    (57,976
    )
    
    
    2.83Awards exercised
    
    
    
    
    
    
    Balance, April 30, 2011
    
    
    1,138,452
    
    
    $
    2.63
  9




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COMARCO, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
 Awards Outstanding
    
    
    Awards ExercisableWeighted-Avg.Range of
    
    
    Number
    
    
    Remaining
    
    
    Weighted-Avg.
    
    
    Number
    
    
    Weighted-Avg.Exercise/Grant Prices
    
    
    Outstanding
    
    
    Contractual Life
    
    
    Exercise/Grant Price
    
    
    Exercisable
    
    
    Exercise/Grant Price$
    0.30 to 4.90
    
    
    
    924,452
    
    
    
    6.4
    
    
    $
    1.20
    
    
    
    252,038
    
    
    $
    1.376.19 to 9.89
    
    
    
    144,000
    
    
    
    3.5
    
    
    
    7.63
    
    
    
    140,250
    
    
    
    7.6710.43 to 11.60
    
    
    
    60,000
    
    
    
    4.0
    
    
    
    10.72
    
    
    
    60,000
    
    
    
    10.7215.07
    
    
    
    10,000
    
    
    
    0.2
    
    
    
    15.07
    
    
    
    10,000
    
    
    
    15.071,138,452
    
    
    5.8 years
    
    
    
    2.63
    
    
    
    462,288
    
    
    
    4.79
  4. Discontinued Operations
 Call Box
  Wireless Test Solutions
    5. Loss Per Share
  10




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COMARCO, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
 6. Customer and Supplier Concentrations
  Three Months Ended April 30,2011
    
    
    2010Total revenue
    
    $
    2,949
    
    
    
    100
    %
    
    $
    7,514
    
    
    
    100
    %Customer concentration:Dell Inc. and affiliates
    
    $
    371
    
    
    
    13
    %
    
    $
    
    
    
    
    Lenovo Information Products Co., Ltd.
    
    $
    1,354
    
    
    
    46
    %
    
    $
    1,805
    
    
    
    24
    %Targus Group International, Inc.
    
    
    1,161
    
    
    
    39
    %
    
    
    5,638
    
    
    
    75
    %$
    2,886
    
    
    
    98
    %
    
    $
    7,443
    
    
    
    99
    %
  Three Months EndedApril 30,2011
    
    
    2010North America
    
    $
    1,411
    
    
    $
    5,597Europe
    
    
    10
    
    
    
    55Asia
    
    
    1,528
    
    
    
    1,862$
    2,949
    
    
    $
    7,514
  April 30, 2011
    
    
    January 31, 2011Total gross accounts receivable due
from customers
    
    $
    2,342
    
    
    
    100
    %
    
    $
    3,603
    
    
    
    100
    %Customer concentration:Dell Inc. and affiliates
    
    $
    649
    
    
    
    28
    %
    
    $
    434
    
    
    
    12
    %Lenovo Information Products Co., Ltd.
    
    
    1,395
    
    
    
    60
    %
    
    
    2,683
    
    
    
    74
    %Targus Group International, Inc.
    
    
    217
    
    
    
    9
    %
    
    
    471
    
    
    
    13
    %$
    2,261
    
    
    
    97
    %
    
    $
    3,588
    
    
    
    99
    %
  11




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COMARCO, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
  April 30, 2011
    
    
    January 31, 2011Total gross accounts receivable
due from suppliers
    
    $
    812
    
    
    
    100
    %
    
    $
    791
    
    
    
    100
    %Customer concentration:Edac Power Electronics Co.Ltd
    
    $
    479
    
    
    
    59
    %
    
    $
    532
    
    
    
    67
    %Flextronics Electronics
    
    
    121
    
    
    
    15
    %
    
    
    99
    
    
    
    13
    %Zheng Ge Electrical Co., Ltd.
    
    
    122
    
    
    
    15
    %
    
    
    122
    
    
    
    15
    %$
    722
    
    
    
    89
    %
    
    $
    753
    
    
    
    95
    %
    7. Inventory
  April 30,
    
    
    January 31,2011
    
    
    2011Raw materials
    
    $
    1,055
    
    
    $
    875Finished goods
    
    
    629
    
    
    
    646$
    1,684
    
    
    $
    1,521
  8. Warranty Arrangements
  12




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COMARCO, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
  April 30,2011
    
    
    2010Beginning balance
    
    $
    310
    
    
    $
    4,759Accruals for product safety recall costs
    
    
    350
    
    
    
    Accruals for warranties issued during the period
    
    
    54
    
    
    
    105Utilization
    
    
    (590
    )
    
    
    (433
    )$
    124
    
    
    $
    4,431
  9. Line of Credit
    10. Commitments and Contingencies
 Purchase Commitments with Suppliers
  13




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COMARCO, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
  Executive Severance Commitments
  Letter of Credit
  Legal Contingencies
   11. Subsequent Events
   14




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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 our unaudited
interim condensed consolidated financial statements and the related notes and other financial
information appearing elsewhere in this quarterly report on Form 10-Q .
 Forward-Looking Statements
   ®
  15




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Basis of Presentation
  Executive Summary
 ® ®
  
    
    On January 25, 2011 the Company received written notification from Targus Group
International, Inc. (Targus) of its non-renewal of the Strategic Product Development and
Supply Agreement (the Targus Agreement). Although Targus confirmed its desire to continue
a business relationship with Comarco in its written notification, the nature of our future
business relationship remains unclear. At this time, future sales to Targus are uncertain.
Approximately 75 percent of our revenue for the first quarter of fiscal 2011 was from sales
to Targus.
    
    On April 30, 2010, the United States Consumer Product Safety Commission (CPSC)
announced a product safety recall (the Recall) concerning approximately 500,000 units of
our ChargeSource 90-watt universal AC power adapter sold to our distributer, Targus, from
June 2009 through March 2010. Currently, approximately 155,000 total units have been
returned from the distribution channel and approximately 4,000 units have been returned from
consumers. We have established a recall website and hotline to enable consumers to determine
if they have a unit subject to the Recall. We have established a process to replace and
repair the affected units. Due to the Recall, we have accrued a $0.4 million, $0.3 million
and $4.0 million charge to cost of revenue in the first quarter of fiscal 2012, the fourth
quarter of fiscal 2011 and fiscal 2010, respectively, as an estimate of the cost to replace
the affected units and $0.6 million charge to selling, general and administrative costs in
the fourth quarter of fiscal 2010 expected to be incurred related to the Recall. Actual
amounts may differ materially from our current estimates based on many factors, including
the number of qualifying 90-watt universal power adapters returned to Comarco by Targus and
their customers, primarily consumer electronics retailers and end-user consumers in
connection with the Recall. Also, the estimate is based on Comarcos assessment of Targus
and Comarcos respective obligations regarding returned product. As of the filing date of
this report, Targus and Comarco have not reached full agreement with respect to such matters
and, in the event that agreement is not reached on certain matters, it could result in a
material increase in the costs of the Recall to Comarco. As a result, the actual amounts
incurred by Comarco as a result of the Recall may differ materially from the amount of
reserves Comarco established as a result of the Recall. However, the Company believes that
it has accrued for substantially all of its material financial obligations with respect to
the Recall.
    
    On June 30, 2009, we announced that we were selected by Dell Inc. to provide an
innovative 90 watt DC adapter for use in automobiles and airplanes. We began shipping this
product in the latter part of May 2010 and revenue from sales to Dell totaled $0.4 million
during the first quarter of fiscal 2012.
    
    Revenue for the first quarter of fiscal 2012 decreased to $2.9 million compared to $7.5
million for the first quarter of fiscal 2011. The decrease is primarily attributable to
decreased shipments to Targus.
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##### Table of Contents




    
    Late in the third quarter of fiscal 2011, we took action to significantly reduce
expenses. These actions included a significant reduction in both personnel and other
expenses across all departments.
    
    Reducing our product costs is important to our continuing efforts to improve our margins
and we are continually in negotiations with our contract manufacturers in this regard.
    
    We are focused on preserving our cash balances by monitoring expenses, identifying costs
savings, and investing only in those development programs and products that we believe will
most likely contribute to our profitability.
 Critical Accounting Policies
   Results of Operations
  Revenue
 Three Months Ended April 30,2011
    
    
    2010(In thousands)% of
    
    
    
    
    
    
    % of
    
    
    
    2011 over 2010Revenue
    
    
    
    
    
    
    Revenue
    
    
    
    % ChangeRevenue
    
    $
    2,949
    
    
    
    100
    %
    
    $
    7,514
    
    
    
    100
    %
    
    
    (61
    %)Operating loss
    
    $
    (1,273
    )
    
    
    
    
    
    $
    (707
    )Loss from continuing operations
    
    $
    (1,263
    )
    
    
    
    
    
    $
    (726
    )
 17




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Revenue by Geographic Region
 Three Months Ended April 30,2011
    
    
    2010
    
    
    2011 over 2010(In thousands)
    
    
    
    % ChangeRevenue:North America
    
    $
    1,411
    
    
    $
    5,597
    
    
    
    (75
    %)Europe
    
    
    10
    
    
    
    55
    
    
    
    (82
    %)Asia
    
    
    1,528
    
    
    
    1,862
    
    
    
    (18
    %)$
    2,949
    
    
    $
    7,514
    
    
    
    (61
    %)
 Revenue by Customer
 Three Months Ended April 30,2011
    
    
    2010
    
    
    2011 over 2010(In thousands)
    
    
    
    % ChangeRevenue:Dell
    
    $
    371
    
    
    $
    
    
    
    
    100
    %Lenovo
    
    $
    1,354
    
    
    $
    1,805
    
    
    
    (25
    %)Targus
    
    
    1,161
    
    
    
    5,638
    
    
    
    (79
    %)Other
    
    
    63
    
    
    
    71
    
    
    
    (11
    %)$
    2,949
    
    
    $
    7,514
    
    
    
    (61
    %)
 Revenue
  Cost of Revenue and Gross Margin
 Three Months Ended April 30,2011
    
    
    2010(In thousands)% of
    
    
    
    
    
    
    % of
    
    
    
    2011 over 2010Total
    
    
    
    
    
    

Total
    
    
    
    % ChangeCost of revenue:Product costs
    
    $
    1,480
    
    
    
    53
    %
    
    $
    5,002
    
    
    
    85
    %
    
    
    (70
    %)Accrued product recall costs
    
    $
    350
    
    
    
    13
    %
    
    $
    
    
    
    
    
    
    
    
    100
    %Fixed supply chain overhead
    
    
    422
    
    
    
    15
    %
    
    
    796
    
    
    
    13
    %
    
    
    (47
    %)Inventory reserve and scrap
charges
    
    
    521
    
    
    
    19
    %
    
    
    
    
    
    
    
    
    
    
    100
    %Freight, expedite, and
other charges
    
    
    
    
    
    
    
    
    
    
    114
    
    
    
    2
    %
    
    
    (100
    %)$
    2,773
    
    
    
    100
    %
    
    $
    5,912
    
    
    
    100
    %
    
    
    (53
    %)
 Three Months Ended April 30,
    
    
    2011 over 20102011
    
    
    2010
    
    

ppt ChangeGross margin
    
    
    6
    %
    
    
    21
    %
    
    
    (15
    )
  18




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Operating Costs and Expenses
 Three Months Ended April 30,2011
    
    
    2010(In thousands)% of
    
    
    
    
    
    
    % of
    
    
    
    2011 over 2010Revenue
    
    
    
    
    
    
    Revenue
    
    
    
    % ChangeOperating expenses:Selling, general, and
administrative expenses,
excluding corporate overhead
    
    $
    172
    
    
    
    6
    %
    
    $
    404
    
    
    
    5
    %
    
    
    (57
    %)Corporate overhead
    
    
    778
    
    
    
    26
    %
    
    
    1,003
    
    
    
    13
    %
    
    
    (22
    %)Engineering and support expenses
    
    
    499
    
    
    
    17
    %
    
    
    902
    
    
    
    12
    %
    
    
    (45
    %)$
    1,449
    
    
    
    49
    %
    
    $
    2,309
    
    
    
    31
    %
    
    
    (37
    %)
    Other income (expense), net
  Income Tax Benefit
  19




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##### Table of Contents



Liquidity and Capital Resources
  Three Months Ended April 30,2011
    
    
    2010(in thousands)Cash used in:Operating activities
    
    $
    (1,604
    )
    
    $
    (1,016
    )Investing activities
    
    
    (21
    )
    
    
    (71
    )Financing activities
    
    
    (1,053
    )
    
    
    (56
    )
 Operating Activities
   Investing Activities
 ®
 Financing Activities; Credit Facility
     20




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##### Table of Contents



Future Operations and Liquidity Requirements for the Next 12 Months
   
    
    Our future business relationship with Targus, if any.
    
    Our ability to reduce inventory commitments in response to reduced Targus sales.
    
    Our ability to borrow against our credit facility based on our compliance with
certain financial covenants or as a result of changes in our borrowing base due to
fluctuations in our eligible receivables.
    
    Whether we incur costs and expenses as a result of the Recall in excess of the
reserves we established for the Recall, including as a result of reaching an agreement
with Targus concerning the respective obligations of the parties regarding returned
products.
    
    The outcome of litigation with our contract manufacturer of the Bronx product, the
subject product under the Recall.
    
    The ability of our contract manufacturers of our ChargeSource® products to
manufacture our products at the level currently anticipated, and the ability of our
ChargeSource® products to meet any required specifications.
    
    The timing of the development, delivery or release of our ChargeSource® products.
  21




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##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
   Changes in Internal Control Over Financial Reporting
  (1)
    
    pertain to the maintenance of records that in reasonable detail accurately and
fairly reflect the transactions and dispositions of the assets of the issuer;(2)
    
    provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the issuer are being made
only in accordance with authorizations of management and directors of the issuer; and(3)
    
    provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the issuers assets that could have a
material effect on the financial statements.
  22




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##### Table of Contents



PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
 Chicony Power Technology Co. Ltd. (Chicony) vs. Comarco, Inc., Case No. 30-2011 Superior
Court of California.
  
 ITEM 1A. RISK FACTORS
  
 ITEM 6. EXHIBITS
 31.1
    
    
    Certification of Principal Executive Officer Pursuant to Section 302 of
the Sarbanes-Oxley Act of 200231.2
    
    
    Certification of Principal Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    
    Certification of Principal Executive Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    
    Certification of Principal Financial Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
 23




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##### Table of Contents



SIGNATURES
  COMARCO, INC.Date: June 14, 2011
    /s/ FREDRIK TORSTENSSONFredrik TorstenssonInterim President and Chief Executive Officer
(Principal Executive Officer)Date: June 14, 2011
    /s/ ALISHA K. CHARLTONAlisha K. CharltonVice President and Chief Accounting Officer
(Principal Financial and Accounting Officer) 24




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##### Table of Contents



EXHIBIT INDEX
 Exhibit
    
    Description31.1
    
    
    Certification of Principal Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 200231.2
    
    
    Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 200232.1
    
    
    Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley
Act of 200232.2
    
    
    Certification of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
 25