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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
ANNUAL REPORT
Pursuant to Section 15(d) of the Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 2003
A. Full title of the plan and address of the plan, if different from that of the issuer named below:
COMARCO, Inc.
SAVINGS AND RETIREMENT PLAN
B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:
COMARCO, Inc.
2 Cromwell
Irvine, CA 92618
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COMARCO, INC.
SAVINGS AND RETIREMENT PLAN
Financial Statements and Schedules
December 31, 2003 and 2002
(With Independent Auditors’ Report Thereon)
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SAVINGS AND RETIREMENT PLAN
INDEX TO FINANCIAL STATEME NTS AND SUPPLEMENTAL SCHEDULES
Page | ||
4 | ||
Statements of Net Assets Available for Benefits – December 31, 2003 and 2002 | 5 | |
6 | ||
7 | ||
SUPPLEMENTAL SCHEDULES | ||
Schedule 1 – Schedule H, Line 4i – Schedule of Assets (Held at End of Year) – December 31, 2003 | 11 | |
12 | ||
13 |
All other schedules are omitted because they are not required or applicable pursuant to ERISA and Department of Labor regulations.
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The Board of Directors
COMARCO, Inc.:
We have audited the accompanying statement of net assets available for benefits of the COMARCO, Inc. Savings and Retirement Plan (the “Plan”) as of December 31, 2003 and 2002 and the related statement of changes in net assets available for benefits for the years then ended. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of the COMARCO, Inc. Savings and Retirement Plan for the year ended December 31, 2001 were audited by other auditors whose report dated June 28, 2002, expressed an unqualified opinion on these statements.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2003 and 2002 and the changes in net assets available for benefits for the years then ended in conformity with accounting principles generally accepted in the United States of America.
Our audit of the Plan’s financial statements as of December 31, 2003 and the year then ended was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedules - Schedule H, Line 4i- Schedule of Assets (Held at End of Year), and Schedule H, Line 4i- Schedule of Assets (Acquired and Disposed of Within the Year) are presented for the purpose of additional analysis and are not a required part of the basic financial statements but are supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The supplemental schedules have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole.
Lesley, Thomas, Schwarz & Postma, Inc.
Newport Beach, California
June 16, 2004
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SAVINGS AND RETIREMENT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
December 31, 2003 and 2002
2003 | 2002 | |||||
ASSETS | ||||||
Investments, at fair value (Note 3) | $ | 17,069,000 | $ | 13,599,000 | ||
Net assets available for benefits | $ | 17,069,000 | $ | 13,599,000 | ||
See accompanying notes to the financial statements.
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SAVINGS AND RETIREMENT PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
Years Ended December 31, 2003, 2002 and 2001
2003 | 2002 | 2001 | |||||||
Net assets available for benefits, beginning of year | $ | 13,599,000 | $ | 17,837,000 | $ | 19,524,000 | |||
Additions: | |||||||||
Contributions: | |||||||||
Employer | 408,000 | 520,000 | 677,000 | ||||||
Employee | 685,000 | 841,000 | 1,036,000 | ||||||
Rollovers | 66,000 | 53,000 | 30,000 | ||||||
Interest and dividends | 91,000 | 87,000 | 90,000 | ||||||
Net realized and unrealized appreciation of investments | 2,968,000 | 0 | 0 | ||||||
Total additions | 4,218,000 | 1,501,000 | 1,833,000 | ||||||
Deductions: | |||||||||
Plan distributions | 685,000 | 1,894,000 | 2,214,000 | ||||||
Administrative expenses (Note 4) | 63,000 | 68,000 | 58,000 | ||||||
Net realized and unrealized depreciation of investments | 0 | 3,777,000 | 1,248,000 | ||||||
Total deductions | 748,000 | 5,739,000 | 3,520,000 | ||||||
Net assets available for benefits, end of year | $ | 17,069,000 | $ | 13,599,000 | $ | 17,837,000 | |||
See accompanying notes to the financial statements
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SAVINGS AND RETIREMENT PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2003, 2002 and 2001
1. Description of the Plan
The following description of the COMARCO, Inc. Savings and Retirement Plan (Plan) provides only general information. Participants should refer to the Plan agreement for a more complete description of the Plan’s provisions.
General. The Plan is a defined contribution plan covering substantially all full-time employees of COMARCO, Inc. and subsidiaries (“the Company” or “the Plan Sponsor”) who have at least 30 days of service and are age 18 or older. Employees are eligible to participate in the Plan on the first of the month following 30 days of service. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). For Plan purposes, all participants are employed in one of two separate business areas; COMARCO, Inc. or Comarco Wireless Technologies, Inc. (“Wireless”).
Contributions. Employee contributions to the Plan may range from 1% to 20% of eligible earnings for participants of COMARCO, Inc. and Wireless, subject to certain limitations. The Company contributes 100% of the first 5% of earnings that a participant contributes to the Plan. In addition, the Company may, at its discretion, make an additional contribution each year to the Plan. There were no discretionary contributions made to the Plan during each of the years in the three-year period ended December 31, 2003. Contributions are subject to certain limitations.
Participant Accounts. Each participant’s account is credited with the participant’s contribution and allocations of the Company’s matching contribution plus Plan earnings less Plan expenses not paid by the Company. Allocations are based on participant earnings or account balances, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s account.
Loans. Effective January 1, 2000, the Plan permits participants to obtain two loans from their account balances, subject to certain IRS limitations. The loans are repaid over fixed time periods covering up to 5 years (15 years for the purchase of a principal residence) with interest rates ranging from 6.0% to 9.0%. All loans are secured by the participant’s account balance.
Vesting. Participants are vested immediately in their voluntary contributions plus actual earnings thereon. Company contributions plus actual earnings thereon generally vest ratably over a four year period.
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1. Description of the Plan (Continued)
Exceptions to the vesting schedules for COMARCO, Inc. and Wireless are the Company contributions that are invested in the Company’s Stock-100 Fund, which are immediately 100% vested. (The Stock 100 Fund is no longer an investment option for the participants).
During 2000 the Company underwent a divestiture of several major divisions. All participants who were employed in these divisions at the date of the divestiture were immediately 100% vested in all Company contributions.
Forfeited Amounts. At December 31, 2003 and 2002, forfeited non-vested accounts totaled $100,000 and $217,000, respectively. These accounts can be used to restore the accounts of former participants, or reduce Plan expenses or company contributions. Also, in 2003, 2002, and 2001, plan expenses were reduced by $6,000, $12,000, and $27,000 from forfeited non-vested accounts, respectively.
Payment of Benefits. On termination of service due to death, disability or retirement, a participant may elect to receive either a lump-sum amount equal to the value of his or her account, annual installments, or monthly annuity payments. Participants with accrued benefits greater than $5,000 may elect to delay receiving benefits until reaching age 70 1/2.
Investment Options. Participant contributions to the Plan are made to one of the eleven investment options (Multi SEC Fixed Income Fund, Large Cap Value Equity Fund, Small Cap Value Equity Fund, International Fixed Income Fund, International Equity Fund, Emerging Market Equity Fund, Large Cap Growth Equity Fund, Small Cap Growth Equity Fund, Stable Value Fund, S&P 500 Index Fund or COMARCO, Inc. common stock) as designated by the participant. All investment options other than COMARCO, Inc. common stock are provided through the Smith Barney TRAK program and consist of fund shares and units.
2. Significant Accounting Policies
Basis of Accounting - The Plan prepares its financial statements on the accrual basis of accounting.
Non Distributed Benefits – The Plan does not accrue non-distributed benefits related to participants who have withdrawn from the Plan, but recognizes such benefits as a deduction from net assets in the period in which such benefits are paid.
Investment Valuation and Income Recognition - The mutual funds are recorded at the quoted market prices. The common / collective trust fund is valued by a financial institution based on the quoted market values of the underlying investments held by the fund. The difference between cost and fair value of investments is recognized as a realized gain or loss at the date of disposition using the first-in, first-out method. Purchases and dispositions are recorded on a trade-date basis. Dividends are recorded on the ex-dividend date. Participant loans are valued at cost, which approximates fair value.
Use of Estimates - The preparation of 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 changes therein, and disclosure of contingent assets and liabilities. Actual results could differ from those estimates.
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3. Investments
All amounts contributed to the Plan have been deposited with the Funding Agent, Smith Barney Corporate Trust. The following table presents the fair values of investments. Investments that represent 5% or more of the Plan’s net assets are separately identified.
December 31, 2003 | December 31, 2002 | |||||||||
Identity of Party and Description of Asset | Shares/Units | Fair Value | Shares/ Units | Fair Value | ||||||
Cash and Cash Equivalents: | ||||||||||
Short Term Investment Fund | $ | 5,000 | $ | 5,000 | ||||||
Common / Collective Trust Fund: | ||||||||||
Stable Value Fund | 332,000 | *4,664,000 | 322,000 | *4,323,000 | ||||||
Mutual Funds: | ||||||||||
Multi SEC Fixed Income Fund | 89,000 | 681,000 | 80,000 | 628,000 | ||||||
Large Cap Value Equity Fund | 238,000 | *2,364,000 | 237,000 | *1,863,000 | ||||||
Small Cap Value Equity Fund | 7,000 | 101,000 | 1,000 | 8,000 | ||||||
International Fixed Income Fund | 15,000 | 125,000 | 19,000 | 145,000 | ||||||
International Equity Fund | 115,000 | *1,042,000 | 108,000 | *704,000 | ||||||
Emerging Market Equity Fund | 27,000 | 210,000 | 26,000 | 131,000 | ||||||
Large Cap Growth Equity Fund | 230,000 | *2,562,000 | 223,000 | *1,800,000 | ||||||
Small Cap Growth Equity Fund | 207,000 | *2,649,000 | 195,000 | *1,698,000 | ||||||
S&P 500 Index Fund | 43,000 | 484,000 | 79,000 | 378,000 | ||||||
Total Mutual Funds | 10,218,000 | 7,355,000 | ||||||||
COMARCO, Inc. common stock | 187,000 | *2,059,000 | 201,000 | *1,736,000 | ||||||
Participant Loans | 123,000 | 180,000 | ||||||||
Total Investments | $ | 17,069,000 | $ | 13,599,000 | ||||||
* | Represents 5% or more of Plan Net Assets. |
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4. Expenses of the Plan
The Plan provides that all reasonable expenses for custodial costs and fees incurred for the benefit of the Plan are to be paid by the Plan to the extent that they are not paid by the Company. Total Plan expenses of approximately $63,000, $68,000, and $58,000 in 2003, 2002 and 2001 respectively, were paid by the Plan.
5. Income Tax Status
The Internal Revenue Service has determined and informed the Company by letter dated February 9, 1995, that the Plan and related trust are designed in accordance with applicable sections of the Internal Revenue Code (IRC). The Plan has been amended since receiving the determination letter. However, the Plan Administrator believes that the Plan is designed and is currently being operated in compliance with the applicable requirements of the IRC.
6. Plan Termination
The Company intends to continue the plan indefinitely but reserves the right at any time to terminate the Plan subject to the provisions of ERISA. In the event of plan termination, participants would become 100% vested in their employer contributions.
7. Parties-in-Interest
Certain Plan investments are managed by Smith Barney Corporate Trust Company (“SBS Trust”) and Consulting Group Capital Markets (“CGCM”), an investment division of SBS Trust. SBS Trust is the trustee of the Plan and CGCM is a division of the trustee, and therefore, SBS Trust and CGCM qualify as parties-in-interest to the Plan in regard to these transactions.
8. Risks and Uncertainties
The Plan provides for various investment options in any combination of stocks, bonds, fixed-income securities, mutual funds, and other investment securities. Investment securities are exposed to various risks, such as interest rate, market, and credit. Due to the level of risk associated with certain investment securities and the level of uncertainty related to changes in the value of investment securities, it is at least reasonably possible that changes in risks in the near term would materially affect participants’ account balances and the amounts reported in the statements of net assets available for benefits and the statements of changes in net assets available for benefits.
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COMARCO, INC.
SAVINGS AND RETIREMENT PLAN
Supplemental Schedule
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
December 31, 2003
FEIN: 95-2088894
Plan Number: 001
(a) | (b) Identity of issue, | (c) Description of investment including maturity date, rate of interest, collateral, | (d) Cost | (e) Fair Value | ||||||
* | SBS TRUST | Short Term Investment Fund | ** | $ | 5,000 | |||||
* | CGCM | Consulting Group Cap Mkts Fund 88,860 shares of Multi SEC Fixed Income Fund | ** | 681,000 | ||||||
* | CGCM | Consulting Group Cap Mkts Fund 238,081 shares of Large Cap Value Equity Investments Fund | ** | 2,364,000 | ||||||
* | CGCM | Consulting Group Cap Mkts Fund 7,101 shares of Small Cap Value Equity Investments Fund | ** | 101,000 | ||||||
* | CGCM | Consulting Group Cap Mkts Fund 15,004 shares of International Fixed Income Investments Fund | ** | 125,000 | ||||||
* | CGCM | Consulting Group Cap Mkts Fund 115,180 shares of International Equity Investments Fund | ** | 1,042,000 | ||||||
* | CGCM | Consulting Group Cap Mkts Fund 27,479 shares of Emerging Market Equity Investments Fund | ** | 210,000 | ||||||
* | CGCM | Consulting Group Cap Mkts Fund 229,563 shares of Large Cap Growth Equity Investments Fund | ** | 2,562,000 | ||||||
* | CGCM | Consulting Group Cap Mkts Fund 206,798 shares of Small Cap Growth Equity Investments Fund | ** | 2,649,000 | ||||||
* | CGCM | Consulting Group Cap Mkts Fund 332,179 units of Stable Value Investments Fund | ** | 4,664,000 | ||||||
* | CGCM | Consulting Group Cap Mkts Fund 42,773 shares of S&P 500 Index Investments Fund | ** | 484,000 | ||||||
* | COMARCO, Inc. | COMARCO, Inc. common stock 187,223 shares | ** | 2,059,000 | ||||||
* | Plan Participants | Participant Loans COMARCO, Inc. Various dates and rates of 6.0% to 9% | $ | 0 | 123,000 | |||||
Total Investments | $ | 17,069,000 | ||||||||
* | Party-in-interest |
** | Historical cost information is not required for participant directed investment funds |
See accompanying Independent Auditors’ Report and notes to financial statements.
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COMARCO, INC.
SAVINGS AND RETIREMENT PLAN
Supplemental Schedule
Schedule H, Line 4i - Schedule of Assets (Acquired and Disposed of Within the year)
December 31, 2003
FEIN: 95-2088894
Plan Number: 001
(a) Identity of issue, or similar party | (b) Description of investment including maturity date, rate of interest, collateral, par or maturity value | (c) Cost of | (d) Proceeds of Dispositions | |||||
Participant Loans | Loans @ 6.0% to 9.0% | $ | 0 | $ | 0 |
See accompanying Independent Auditors’ Report and notes to financial statements.
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Pursuant to the requirements of the Securities Exchange Act of 1934, the Administrator has duly caused this annual report to be signed by the undersigned thereunto duly authorized.
COMARCO, Inc. SAVINGS AND RETIREMENT PLAN | ||
BY: | /s/Thomas A. Franza | |
Thomas A. Franza | ||
President & Chief Executive Officer | ||
COMARCO, Inc. |
DATE: June 28, 2004
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