Comarco (CMRO) DEF 14A Definitive proxy

SCHEDULE 14A INFORMATION

(RULE 14A-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

Filed by the Registrantx                            Filed by a Party other than the Registrant¨

Check the appropriate box:

¨ Preliminary Proxy Statement

¨ Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

x Definitive Proxy Statement

¨ Definitive Additional Materials

¨ Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12

COMARCO, INC.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box):

x No fee required.

¨ Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which transaction applies:

(2) Aggregate number of securities to which transaction applies:

(3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined):

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¨ Fee paid previously with preliminary materials.

¨ Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.

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COMARCO, INC.

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

To Be Held

June 20, 2006

To the Shareholders of COMARCO, Inc.:

The 2006 Annual Meeting of the Shareholders of COMARCO, Inc., a California corporation (the “Company”), will be held on June 20, 2006 at 10:00 o’clock, local time, at the Company’s corporate offices, which are located at 2 Cromwell Drive, Irvine, CA 92618 (949) 599-7400, for the following purposes:

1. To elect five Directors;

2. To approve the adoption of the Company’s 2005 Equity Incentive Plan.

3. To ratify the appointment by the Company’s Audit Committee of BDO Seidman, LLP as the Company’s independent registered public accounting firm for the fiscal year ending January 31, 2007; and

4. To transact such other business as may properly come before the meeting or any adjournment thereof.

Only holders of record of the Company’s Common Stock at the close of business on May 9, 2006 are entitled to notice of and to vote at the Annual Meeting.

The Board of Directors of the Company intends to present Don M. Bailey, Thomas A. Franza, Gerald D. Griffin, Jeffrey R. Hultman, and Erik H. van der Kaay as nominees for election as Directors at the Annual Meeting.

Each shareholder is cordially invited to attend and vote in person at the meeting. TO ASSURE REPRESENTATION AT THE MEETING, HOWEVER, SHAREHOLDERS ARE URGED TO COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE ENCLOSED POSTAGE PREPAID ENVELOPE. Shareholders who attend the meeting may still vote in person, even if they have previously voted by proxy.

BY ORDER OF THE BOARD OF DIRECTORS

Peggy L. Vessell, Secretary

Irvine, California

May 16, 2006

TABLE OF CONTENTS

	Page
GENERAL INFORMATION	1
VOTING RIGHTS	1
ELECTION OF DIRECTORS	2
BOARD MEETINGS AND COMMITTEES	4
CORPORATE GOVERNANCE	5
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE	9
INFORMATION CONCERNING EXECUTIVE OFFICERS	9
APPROVAL OF THE ADOPTION OF THE 2005 EQUITY INCENTIVE PLAN	14
EQUITY COMPENSATION PLAN INFORMATION	18
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION	18
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION	20
PERFORMANCE COMPARISON	20
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR 2007	21
AUDIT AND FINANCE COMMITTEE REPORT	23
SHAREHOLDER PROPOSALS FOR SUBMISSION AT 2007 ANNUAL MEETING	25
OTHER MATTERS	25
APPENDIX A

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COMARCO, INC.

2 Cromwell Drive

Irvine, CA 92618

(949) 599-7450

PROXY STATEMENT

For Annual Meeting of Shareholders

To Be Held

June 20, 2006

GENERAL INFORMATION

The Board of Directors (the “Board”) of COMARCO, Inc., a California corporation (the “Company”), furnishes this Proxy Statement in connection with the solicitation of proxies to be used at the 2006 Annual Meeting of Shareholders (the “Annual Meeting”) to be held on June 20, 2006 at 10:00 o’clock a.m., local time, at the Company’s corporate offices, which are located at 2 Cromwell Drive, Irvine, CA 92618, or any adjournment thereof, for the purposes set forth in the accompanying Notice of Annual Meeting. This Proxy Statement and the accompanying form of proxy are first being mailed to shareholders on or about May 16, 2006.

A shareholder giving a proxy has the power to revoke it at any time before it is exercised by (1) filing with the Secretary of the Company an instrument in writing revoking the proxy; (2) filing with the Secretary of the Company a duly executed proxy bearing a later date; or (3) attending the Annual Meeting and voting the shares in person. In the absence of such revocation, all shares represented by a properly executed proxy received in time for the Annual Meeting will be voted as specified therein.

The cost of preparing, assembling, printing and mailing this Proxy Statement and the accompanying form of proxy and the cost of soliciting proxies will be borne by the Company. The Company may make arrangements with various brokerage houses or other nominees to send proxy materials to the beneficial owners of stock and may reimburse them for their reasonable expenses in connection therewith.

The Company’s officers, employees and directors may supplement the original solicitation of proxies by telephone, facsimile, e-mail and personal contact. We will pay no additional compensation to such persons for any of these activities.

VOTING RIGHTS

The Company’s only outstanding class of voting securities is its Common Stock. Only shareholders of record at the close of business on May 9, 2006 will be entitled to vote at the Annual Meeting. At May 9, 2006, there were outstanding 7,428,767 shares of Common Stock. The holders of record of a majority of the outstanding shares of Common Stock entitled to vote at the Annual Meeting, present in person or by proxy, will constitute a quorum for the transaction of business. Each share is entitled to one vote, except that each shareholder is entitled to cumulate his shares in the election of Directors, provided that at least one shareholder has given notice, prior to the voting, of the shareholder’s intention to do so. If cumulative voting is in effect, each shareholder may cumulate votes for one or more candidates. To cumulate votes, a shareholder may vote for any one candidate a number of votes equal to the number of Directors to be elected multiplied by the number of shares held by the shareholder, or alternatively distribute any such votes among as many of the candidates as the shareholder thinks fit.

With respect to shares of Common Stock held by brokers in street name for the beneficial owners thereof, (1) the election of Directors and (2) ratification of the appointment of BDO Seidman as the Company’s independent registered public accounting firm for the fiscal year ending January 31, 2007 are “routine” matters upon which the brokers, as the holders of record, may vote these shares for which the beneficial owners have not provided them specific instructions. On the other hand, a broker is not entitled to vote shares held for a beneficial owner on certain

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non-routine items, such as the shareholder approval of the 2005 Equity Incentive Plan, absent instructions from the beneficial owner of such shares. Broker non-votes count for purposes of determining whether a quorum exists, but are not counted as shares present and entitled to be voted with respect to the proposal on which the broker has expressly not voted.

With respect to the election of directors, the five nominees each receiving the greatest number of votes at the Annual Meeting shall be elected a Director. Votes withheld will have no effect on the election of any Director.

An affirmative vote of the holders of a majority of shares of Common Stock present, or represented by proxy at the Annual Meeting, will be required to ratify the appointment of BDO Seidman, LLP as the Company’s registered public accounting firm. Abstentions count as votes cast and have the effect of a vote against the proposal.

An affirmative vote of the holders of a majority of shares of Common Stock present, or represented by proxy at the Annual Meeting, will be required to approve the 2005 Equity Incentive Plan. Abstentions count as votes cast and have the effect of a vote against the proposal.

Item 1 on Proxy Card

ELECTION OF DIRECTORS

Five Directors will be elected at the Annual Meeting. Upon the recommendation of the Nominating and Corporate Governance Committee, the Board nominated Don M. Bailey, Thomas A. Franza, Gerald D. Griffin, Jeffrey R. Hultman and Erik H. van der Kaay for election as Directors. Each nominee has consented to be named in the Proxy Statement as a nominee and has agreed to serve as a Director if elected. Each Director elected at the Annual Meeting will hold office until the next annual meeting of shareholders and until his successor is duly elected and qualified. It is intended that the shares represented by the enclosed proxy will be voted, unless otherwise instructed, for the election of the five nominees of the Board. While the Company has no reason to believe that any of the nominees will be unable to serve as a Director, it is intended that if such an event should occur, such shares will be voted for the remainder of the nominees and for such substitute nominee or nominees as may be selected by the Board, unless a shareholder withholds authority to vote his shares (i) for all of the nominees by so indicating on the enclosed proxy card or (ii) for any one or more of the nominees by checking their names in the space provided on such card, in which case his shares will not be voted for such nominee or nominees. If cumulative voting is in effect for the election of Directors, the proxy holders will have the discretion to cumulate votes as provided by California law (see “VOTING RIGHTS” above) and to distribute such votes among all or any of the nominees in such manner as they deem appropriate.

All of the nominees are currently serving as Directors of the Company. The term of office of each of the current Directors expires on the date of the Annual Meeting. All of the nominees were elected at the 2005 annual meeting of shareholders.

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THE BOARD RECOMMENDS A VOTE FOR EACH OF THE BOARD’S NOMINEES

The following table sets forth information concerning the nominees and is followed by a brief biography of each nominee.

Name	Age	Principal Occupation	Year First Elected Director	Other Public Company Directorships
Don M. Bailey	60	Chairman of the Board	1991	Chairman of the Board of Staar Surgical Company
Thomas A. Franza	63	President and Chief Executive Officer	1998	None
Gerald D. Griffin	71	Executive Consultant	1986	None
Jeffrey R. Hultman	66	Chief Executive Officer and Director of Network Installation Corporation	2000	Network Installation Corporation
Erik H. van der Kaay	66	Retired Chairman of the Board of Symmetricom, Inc.	2001	RF MicroDevices; TransSwitch Corp.; Ball Corporation

Mr. Bailey has served as Chairman of the Board of the Company since 1998 and has been employed by the Company since 1980. He also served as President and Chief Executive Officer of the Company from June 1990 to April 2000. From November 1988 until May 1990, he served as Senior Vice President of the Company. From January 1986 until October 1988, he served as Vice President, Corporate Development. From 1980 to 1986, Mr. Bailey served in various other positions with the Company. Mr. Bailey also serves as Chairman of the Board of Staar Surgical Company.

Mr. Franza has been President and Chief Executive Officer of the Company since April 2000. He is also currently President of Comarco Wireless Technologies, Inc. and Comarco Wireless International, Inc. Mr. Franza served as Executive Vice President of the Company from 1995 to April 2000, as Senior Vice President of the Company from 1992 to 1995, and before then, as a Vice President from 1990 until 1992. Mr. Franza joined the Company in 1985.

Mr. Griffin has been an executive consultant since 1992. From 1988 to 1992 Mr. Griffin was Managing Director of the Houston Office of Korn/Ferry International. From 1988 to 1998, Mr. Griffin was the non-executive Chairman of the Board of the Company. From 1986 to 1988, he was President and Chief Executive Officer of the Houston Chamber of Commerce. From 1982 to 1986, he was Director of NASA’s Johnson Space Center in Houston, Texas. Mr. Griffin currently serves on the board of directors of Bank of the Hills, N.A. and is a member of such board’s audit committee.

Mr. Hultman is currently the Chief Executive Officer and a Director of Network Installation Corporation (NIC), a company that designs, installs and deploys wireless technology and specialty communication systems, a position he has held since March 7, 2005. From November 2002 to May 2004, Mr. Hultman was CEO of EdgeFocus, Inc., a high speed wireless internet company. From 1998 to March 2002, Mr. Hultman was a partner in Big Bear Sports Ranch, a sports summer camp for school-age children. From 1991 through 1997, he was Chief Executive Officer of Dial Page, Inc., a provider of wireless telecommunications throughout the Southeastern United States. From 1987 through 1991, he was Chief Executive Officer of PacTel Cellular. Prior to 1987, Mr. Hultman was an executive with Pacific Bell.

Mr. van der Kaay is former Chairman of the Board of Symmetricom, Inc., a position he held from November 2002 to August 2003. From April 1998 to October 2002, he served as President and Chief Executive Officer of Datum, Inc. From 1990 to 1998, he held various positions with Allen Telecom, a leading supplier of wireless equipment to the global telecommunications infrastructure market. Mr. van der Kaay currently serves as a director of RF Micro Devices, TranSwitch Corporation, and Ball Corporation.

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No arrangement or understanding exists between any nominee and any other persons pursuant to which any nominee was or is to be selected as a director. No nominee has any family relationship with any other nominee or with any of the Company’s executive officers.

BOARD MEETINGS AND COMMITTEES

During the fiscal year ended January 31, 2006, the Company’s Board met 7 times. Each of the Company’s Directors attended at least 75% of the total number of meetings of the Board and the total number of meetings of the committees on which he served during the Company’s last fiscal year.

The Board, after consultation with the Nominating and Corporate Governance Committee, determined that Messrs. Griffin, Hultman and van der Kaay, who represent a majority of the members of the Board, are “independent,” as defined under the rules of the National Association of Securities Dealers, Inc., or the NASD. The standing committees of the Board are each comprised of independent directors under the rules of the NASD and consist of the following:

Name of Committee and Members	Primary Responsibilities	Number of Meetings in fiscal 2006
Audit and Finance Committee Gerald D. Griffin (Chair) Jeffrey R. Hultman Erik H. van der Kaay	•       Monitors the quality and integrity of the Company’s financial statements, accounting and financial reporting processes, internal controls, risk management and legal and regulatory compliance. •       Selects, determines the compensation of, evaluates and, when appropriate, replaces the Company’s independent auditor; pre-approves all audit and permitted non-audit services. •       Monitors the qualifications and independence of the independent auditor and performance of the Company’s independent auditor; reviews the scope and results of each fiscal year’s outside audit. •       Reviews all related party transactions.	7
Compensation Erik H. van der Kaay (Chair) Gerald D. Griffin Jeffrey R. Hultman	•       Reviews the Company’s executive compensation philosophy. •       Annually reviews and approves corporate goals and objectives relevant to the compensation of the CEO and evaluates the CEO’s performance in light of these goals. •       Reviews and determines the compensation of the Company’s executive officers, including the Company’s CEO, and key members of management. •       Administers the Company’s incentive and equity based-compensation plans. •       Reviews and assists the Board in establishing compensation policies for Directors and committees of the Board.	4
Nominating and Corporate Governance Jeffrey R. Hultman (Chair) Gerald D. Griffin Erik H. van der Kaay	•       Assists the board in identifying, evaluating and recommending candidates for election to the Board and its Committees. •       Establishes procedures and provides oversight for evaluating the Board and management. •       Develops, recommends and reassesses the Company’s corporate governance guidelines and overall corporate governance of the Company. •       Evaluates the size, structure and composition of the Board and its Committees.	2

The Company’s board has adopted written charters for the Audit and Finance Committee and the Nominating and Corporate Governance Committees setting forth the roles and responsibilities of each committee. Each of the charters is available on the Company’s website at www.comarco.com.

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CORPORATE GOVERNANCE

Executive Sessions of Independent Directors

It is the policy of the Board that the Company’s independent directors meet separately without management directors at least twice each year, before or after regularly scheduled Board meetings, to discuss such matters as the independent directors consider appropriate. During the fiscal year ended January 31, 2006, the Company’s independent directors met separately 5 times. In 2004, the Board appointed Mr. Jeffrey Hultman Lead Director. As Lead Director, he is the presiding director at these meetings.

Shareholder and Interested Party Communications with the Board of Directors

Shareholders who desire to communicate with the Company regarding any matter pertinent to the Company’s business or affairs may do so by writing (not via email) to the Chairman of the Board at 2 Cromwell Drive, Irvine, CA 92618, Attention: Chairman of the Board.

The Company also has established a Compliance Hotline operated by CCBN (an independent company) as a means of receiving and directing concerns from employees and any other persons relating to complaints regarding any accounting, internal audit controls or auditing matters. Confidential, anonymous reports of accounting and audit concerns may be made 24 hours a day, seven days a week. Communications may be confidential or anonymous, and may be communicated by calling the Compliance Hotline at: (800) 792-8138.

In addition, anyone who has a concern about the conduct of the Company or any of its officers or employees, or about the Company’s accounting, internal controls, disclosure controls and procedures, auditing, compensation and governance matters may communicate that concern directly to the Audit and Finance Committee, the Nominating and Corporate Governance Committee, or the Compensation Committee, as appropriate in light of the specific concern involved. Any concerns relating to accounting, internal controls, disclosure controls and procedures, auditing, corporate conduct or conduct of any corporate officer or employee shall be forwarded to the Chair of the Audit and Finance Committee. The Company’s policies prohibit retaliation or adverse action against anyone for raising or helping to resolve an integrity concern.

The Company has a policy that each member of the Board should make every reasonable effort to attend each annual meeting of shareholders.

Shareholder Recommendations of Director Candidates

The Nominating and Corporate Governance Committee considers candidates for nomination as director proposed by any shareholder of the Company. Any shareholder of the Company is entitled to recommend a candidate for nomination by submitting, not less than 60 nor more than 90 days prior to the annual meeting of shareholders at which directors are to be elected, the name of the candidate to: Corporate Secretary, Comarco, Inc., 2 Cromwell Drive, Irvine, CA 92618. Any shareholder recommendation is forwarded to the Chairman of the Nominating and Corporate Governance Committee.

The Nominating and Corporate Governance Committee encourages selection of directors who will contribute to the Company’s overall corporate goals of technology leadership, effective execution, high customer satisfaction, superior employee working environment, and creation and preservation of shareholder value. At a minimum, candidates recommended by the Nominating and Corporate Governance Committee must possess the highest personal and professional ethics, integrity and values, and be committed to representing the long-term interests of the Company’s shareholders.

In evaluating the suitability of individual candidates for election or re-election to the Board, the Nominating and Corporate Governance Committee considers many factors, including (1) the candidate’s understanding of technology, manufacturing, sales and marketing, finance and other elements relevant to the Company’s business, (2) the candidate’s educational and professional background, experience as a director of a public company and past performance as a board member and (3) familiarity with current corporate governance,

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account and similar issues impacting public companies (4) consistency with the other provisions of the Nominating and Corporate Governance Committee Charter relating to the composition of the Board and eligibility for Board membership. Additionally, in determining whether to recommend a director for re-election, the Nominating and Corporate Governance Committee takes into account the director’s past attendance at, and participation in, meetings of the Board and its committees and contributions to their activities.

A shareholder must provide the following supporting information to recommend a candidate for nomination: name, age, business and residence addresses, principal occupation or employment, the number of shares of the Company’s common stock held by the candidate, a resume of his or her business and educational background, the information that would be required under SEC rules in a proxy statement soliciting proxies for the election of such nominee as a director, and a signed consent of the candidate to serve as a director, if nominated and elected. The Nominating and Corporate Governance Committee, after reviewing this information, will determine whether the candidate meets the qualifications for committee-recommended candidates, including the objectives for the composition of the Board as a whole. The Nominating and Corporate Governance Committee does not evaluate any candidate for nomination as director any differently because the candidate was recommended by a shareholder.

Code of Ethics for Senior Financial Officers

The Audit and Finance Committee has adopted a Code of Ethics for Senior Financial Officers to promote and provide for the honest and ethical conduct by the Company’s Senior Financial Officers, as well as for full, fair, accurate and timely financial management and reporting. The Company’s Senior Financial Officers include the Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer or Controller and Treasurer. The Company expects all of these financial officers to act in accordance with the highest standards of professional integrity, to provide full and accurate disclosure in reports and other documents filed with the SEC and other regulators and in any public communications, to comply with all applicable laws, rules and regulations and to deter wrongdoing. A complete copy of the Code of Ethics for Senior Financial Officers is available on the Company’s website at www.comarco.com.

Non-Employee Director Compensation

Each non-employee Director of the Company receives the following compensation as a director:

Board Participation	Retainer Fee
Annual - all members	$	24,000
Attendance at each Board Meeting	$	2,000
If Attendance is Telephonic	$	1,000
Attendance at each Committee Meeting	$	1,250
Additional Committee Chair Fee Per Meeting	$	750

Mr. Franza and Mr. Bailey receive no compensation other than that received as officers of the Company.

Under the Company’s Director Stock Option Plan, non-qualified stock options may be granted to non-employee directors. The number of shares authorized for issuance shares under the plan is 637,500 shares. Under the plan, the option exercise price is the fair market of a share of Common Stock, which is determined by the closing price of a share of the Company’s Common Stock on the date of the grant. Options vest in equal annual increments of 25% over the four-year period following their grant date, provided that on and after the second anniversary of a Director’s election to the Board, all unvested options previously granted are accelerated and all options granted thereafter become exercisable six months following the date of grant. In fiscal year ended January 31, 2006, each non-employee Director of the Company received 7,500 stock options from the Director Stock Option Plan.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information concerning the beneficial ownership of the Company’s Common Stock as of May 9, 2006 by:

• each member of the Company’s Board;

• each of the Company’s executive officers named in the “Summary Compensation Table” included in the “Executive Compensation” section of this Proxy Statement;

• all Directors and executive officers as a group; and

• each person or entity known to the Company that beneficially owns more than 5% of the Company’s Common Stock.

Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission, or SEC. Unless otherwise indicated below, the address of each beneficial owner is c/o Comarco, Inc., 2 Cromwell Drive, Irvine, California, 92618. Unless otherwise indicated below, the Company believes that each of the persons listed in the table (subject to applicable community property laws) has the sole power to vote and to dispose of the shares listed opposite the shareholder’s name.

The percentages of Common Stock beneficially owned are based on 7,428,767 shares of Common Stock outstanding at May 9, 2006.

Name and Address of Beneficial Owner	Number of Shares Beneficially Owned	Percent of Class
Don M. Bailey (1)	179,938	2.38	%
Thomas A. Franza (2)	233,721	3.07	%
Gerald D. Griffin (3)	73,573	*
Jeffrey R. Hultman (4)	51,500	*
Erik van der Kaay (5)	46,500	*
Daniel R. Lutz (2)	53,328	*
Gregory W. Maton (2)	18,000	*
John McMunn (2)	5,000	*
Thomas J. Schmidt (2)	10,000	*
All Directors and Executive Officers as a group (11 persons) (6)	750,234	9.34	%

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T. Rowe Price Associates (7) T. Rowe Price Small-Cap Value Fund 100 East Pratt Street Baltimore, MD 21202	711,800	9.6	%
Grueber & McBaine (8) 50 Osgood Place, Penthouse San Francisco, CA 94133	690,624	9.3	%
Dimensional Fund Advisors, Inc. (9) 1299 Ocean Avenue 11th Floor Santa Monica, CA 90401	307,346	4.1	%
Laurence W. Lytton (10) 28 Sherwood Place Scarsdale, NY 10583	325,813	4.4	%
Special Situations Funds (11) Austin W. Marxe and David M. Greenhouse 153 East 53rd St. 55th Floor New York, NY 10022	1,044,294	14.1	%
Elkhorn Partners Limited Partnership (12) P. O. Box 818 Elkhorn, NE 68022	686,298	9.2	%

* Indicates less than one percent of the outstanding shares of Common Stock.

(1) Includes 115,750 shares that Mr. Bailey has the right to acquire within 60 days of May 9, 2006, by stock option exercise.

(2) Includes shares subject to options beneficially owned and exercisable within 60 days of May 9, 2006 by the following persons: Mr. Franza — 147,644 shares; Mr. Lutz — 50,000 shares; Mr. Maton — 15,000 shares; Mr. McMunn – 5,000; and Mr. Schmidt —10,000 shares;

(3) Includes 66,500 shares that Mr. Griffin has a right to acquire within 60 days of May 9, 2006, by stock option exercise.

(4) Includes 51,500 shares that Mr. Hultman has a right to acquire within 60 days of May 9, 2006, by stock option exercise.

(5) Includes 41,500 shares that Mr. van der Kaay has a right to acquire within 60 days of May 9, 2006, by stock option exercise.

(6) Includes an aggregate of 574,144 shares held by the Company’s executive officers and Directors that are subject to options exercisable within 60 days of May 9, 2006.

(7) Based on a Schedule 13G (Amendment 13) filed with the SEC on February 14, 2006.

(8) Based on a Schedule 13G (Amendment 3) filed with the SEC on February 6, 2006 on behalf of Grueber & McBaine Capital Management, LLC (GMCM) and certain reporting persons. GMCM is a registered investment advisor. Jon Gruber and J. Patterson McBaine are managers, controlling persons and portfolio managers of GMCM and constitute a group with GMCM and the other reporting persons.

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(9) Based on a Schedule 13G filed with the SEC by Dimensional Fund Advisors, Inc. on February 1, 2006. Dimensional Fund Advisors is an investment advisor and furnishes advice to four investment companies and serves as investment manager to certain other commingled funds.

(10) Based on a Schedule 13G (Amendment 2) filed with the SEC on behalf of Laurence W. Lytton on December 23, 2005.

(11) Based on a Form 4 filed with the SEC by Austin Marxe and David Greenhouse on February 21, 2006 with respect to shares owned by various Special Situations funds.

(12) Based on a Schedule 13D (Amendment 4) filed with the SEC on behalf of Elkhorn Partners Limited Partnership on May 5, 2006.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Pursuant to Section 16(a) of the Securities Exchange Act of 1934 and the rules issued thereunder, the Company’s executive officers, Directors and persons that own more than 10% of the Company’s Common Stock are required to file with the SEC reports of ownership and changes in ownership of Common Stock and furnish the Company copies of all such reports. The Company believes that, during the fiscal year ended January 31, 2006, its executive officers, Directors and persons that owned more than 10% of the Company’s Common Stock complied with the Section 16(a) reporting requirements on a timely basis, based on the reports received by the Company or written certifications received by the Company from its executive officers and directors.

INFORMATION CONCERNING EXECUTIVE OFFICERS

The following table sets forth information at May 9, 2006 concerning the executive officers of the Company (other than Messrs. Bailey and Franza, whose biographical information appears in the table under the Election of Directors section above) and its principal subsidiary, Comarco Wireless Technologies, Inc.

Name	Age	Position
Sebastian E. Gutierrez	44	Vice President, Comarco Wireless Technologies, Inc.
Daniel R. Lutz	42	Vice President and Chief Financial Officer of the Company and Comarco Wireless Technologies, Inc.
Gregory W. Maton	58	Sr. Vice President, Comarco Wireless Technologies, Inc.
John McMunn	56	Vice President, Comarco Wireless Technologies, Inc.
Bahram Nazardad	50	Vice President, Comarco Wireless Technologies, Inc.
Thomas J. Schmidt	43	Vice President, Comarco Wireless Technologies, Inc.
Peggy L. Vessell	61	Vice President, Comarco Wireless Technologies, Inc. and Corporate Secretary, the Company, Inc.

Mr. Gutierrez joined Comarco Wireless Technologies in 1996 as Director of Business Development and was promoted to Vice President of the Company’s Call Box Division in 1998. Before joining the Company, he spent eight years at Pacific Bell from 1987 to 1996 working in various management positions as a member of their Accelerated Management Program. He also held engineering positions at TRW’s Space and Technology Division from 1984 to 1987.

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Mr. Lutz joined the Company as Vice President and Chief Financial Officer in June 2000. He also serves as Vice President and Chief Financial Officer of Comarco Wireless Technologies, Inc. From February 1997 to December 1999, Mr. Lutz served as a Vice President of Sunstone Hotel Investors, Inc., formerly a publicly traded real estate investment trust. Prior to Sunstone, Mr. Lutz was a manager with Ernst & Young LLP. He is also a Certified Public Accountant in the state of California.

Mr. Maton joined Comarco Wireless Technologies as Sr. Vice President of Wireless Test Solutions in October 2002. From 1988 to 2002, Mr. Maton was Executive Board Director, Executive Vice President, Business Director, and Sales & Marketing Director at Racal. From 1969 to 1988, Mr. Maton held various management positions at Marconi Instruments Ltd.

Mr. McMunn joined Comarco Wireless Technologies as Vice President of Supply Chain Management in October 2004. Mr. McMunn has more than 15 years of senior management experience. From 2002 to 2004 Mr. McMunn was Vice President of Transceiver Operation for Picolight. From 1999 to 2002, he was the President and General Manager of the Test and Measurement division of Xyratex. From 1996 to 1999, Mr. McMunn was Director of Test and Process Engineering at Western Digital.

Mr. Nazardad joined Comarco Wireless Technologies as Vice President of Corporate Quality in February 2005. Prior to this position from 1999 to 2004, he was responsible for Quality Engineering, Quality Systems, and Configuration Management at Powerwave Technologies Inc. From 1994 to 1999, he was Director of Quality & Reliability at Valor Electronics. From 1984 to 1994, Mr. Nazardad was with Northern Telecom holding several management positions.

Mr. Schmidt joined the Company April 2004 as the new head of ChargeSource mobile power products operations. Mr. Schmidt has more than 15 years of senior management experience and joins Comarco Wireless Technologies from The Sandstone Group where he was a Managing Partner from 2002 to 2004. Prior to this position, Mr. Schmidt co-founded and was a Managing Partner at ideaEdge Ventures, a venture management company. From 1999 to 2000, Mr. Schmidt also served as the President and Chief Executive Officer of Gateway, Inc.’s Information Appliances Division. From 1995 through 1999, Mr. Schmidt served as the General Manager of two divisions of AlliedSignal, Inc., the Hardware Product Group and the Airsupply Operations.

Ms. Vessell joined the Company in 1987 and has served as Vice President of Administration for Comarco Wireless Technologies since 2000 and Corporate Secretary of the Company since 2001. From 1995 to 2000, Ms. Vessell served as Director of Administration where she oversaw Comarco Wireless Technologies’ Health and Welfare Programs and Employee Relations. From 1987 to 1995, Ms. Vessell held various Accounting and Human Resource positions.

There are no family relationships among any of the Company’s executive officers.

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EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets forth compensation information for the periods indicated for the Company’s Chief Executive Officer and the four most highly compensated executive officers at the end of the last fiscal year whose salary and bonus exceeded $100,000. These individuals are referred to as the named executive officers.

Annual Compensation		Long Term Compensation
Name and Principal Position	Fiscal Year	Salary ($)(1)	Bonus ($)	Shares of Common Stock Underlying Options #		All Other Compensation ($)(2)
Thomas A. Franza President & Chief Executive Officer	2006 2005 2004	350,916 337,400 327,600	302,000 0 0	0 25,000 25,000		10,500 10,250 10,000
Don M. Bailey Chairman of the Board	2006 2005 2004	75,000 75,000 75,000	0 0 0	0 7,500 7,500		10,500 10,250 10,000
Daniel R. Lutz Vice President & Chief Financial Officer	2006 2005 2004	216,930 206,000 200,000	115,000 0 0	0 0 20,000		10,500 (3) 39,696 10,000
Gregory Maton Sr. Vice President Comarco Wireless Technologies, Inc.	2006 2005 2004	225,000 216,300 210,000	110,000 0 0	(4) 16,500 0 0	*	10,500 10,250 10,000
John McMunn (5) Vice President Comarco Wireless Technologies, Inc.	2006 2005 2004	190,000 175,000 0	90,000 0 0	0 20,000 0		9,413 337 0
Thomas J. Schmidt (6) Vice President Comarco Wireless Technologies, Inc.	2006 2005 2004	256,667 187,500 0	0 0 0	0 20,000 0		10,500 8,990 0

Notes:

(1) “Salary” includes base salary and compensation deferred during the current year.

(2) “All Other Compensation” consists primarily of the Company’s matching contributions to its 401(k) plan.

(3) Includes vacation payouts for Mr. Lutz in fiscal 2005 of $29,513.

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(4) Options granted under the 2005 Plan, respectively, subject to shareholder approval of the 2005 Plan.

(5) Mr. McMunn joined the Company in fiscal 2005.

(6) Mr. Schmidt joined the Company in fiscal 2005.

Option Grants in Fiscal Year Ended January 31, 2006

The following table sets forth information concerning options granted in fiscal year ended January 31, 2006 to each of the Company’s named executive officers.

	Individual Grants
Name	Number of Securities Underlying Options Granted(1)	% of Total Options Granted to Employees in Fiscal 2006		Exercise Price(2)		Expiration Date	Potential Realizable Value at Assumed Rates of Price Appreciation for Option Term(3)
							5%		10%
Gregory Maton	16,500	24	%	$	8.64	12/6/2015	$	89,655	$	227,204

(1) The options vest in equal annual increments of 25% over a four-year period following their date of grant. . Options granted under the 2005 Plan, respectively, subject to shareholder approval of the 2005 Plan.

(2) Represents the fair market value of an underlying share of Common Stock on the date of grant

(3) Represents the potential realizable value assuming the stated rates of price appreciation compounded annually for the entire ten-year term, with the aggregate exercise price deducted from the final appreciated value. Such annual rates of appreciation are for illustrative purposes only, are based on requirements of the SEC, and do not reflect the Company’s estimate of future stock appreciation. No assurance can be given that such rates of appreciation, or any appreciation, will be achieved.

Aggregated Option Exercises and Fiscal Year-End Option Values

The following table sets forth information with respect to the Company’s named executive officers concerning the exercisable and unexercisable stock options held as of January 31, 2006. There were no option exercises by the named executive officers in fiscal year ended January 31, 2006.

Name	Shares Acquired on Exercise	Value Realized	Number of Underlying Options at January 31, 2006		Value of In-The-Money Options at January 31, 2006(1)
			Exercisable	Un-exercisable	Exercisable		Un-exercisable
Thomas A. Franza	0	0	147,644	37,500	$	170,357	$	176,250
Don M. Bailey	0	0	153,250	10,750	$	137,045	$	50,508
Daniel R. Lutz	0	0	50,000	10,000	$	40,100	$	37,650
Thomas J. Schmidt	0	0	10,000	10,000	$	17,225	$	51,675
Gregory W. Maton	0	0	15,000	21,500	$	45,975	$	68,208
John McMunn	0	0	5,000	15,000	$	18,975	$	56,925

(1) These values are calculated using the January 31, 2006 closing price of Common Stock on the Nasdaq National Market of $11.845 per share, less the exercise price of the options, multiplied by the number of shares to which the options relate.

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Severance Agreements

The Company and each of Messrs. Franza and Lutz are parties to a severance agreement that provides that if, within 24 months following a change of control of the Company, he is terminated or constructively terminated without cause, or ceases to be employed by the Company for reasons other than because of death, disability or retirement, then he is entitled to receive a lump sum cash payment equal to two-times the sum of his annual base salary plus his annual incentive compensation bonus that would be payable assuming 100% satisfaction of all performance goals thereunder. In addition, each of Messrs. Franza and Lutz would be entitled to continued participation and coverage under the Company’s health plans and insurance program and the acceleration of all of his options and restricted stock, if any. Each severance agreement has a term that continues until three years after any notice of non-renewal or termination is given by the executive or the Company.

The Company and Mr. Maton are parties to a severance agreement that is substantially similar to the severance agreements with Messrs. Franza and Lutz, except that Mr. Maton is entitled to a lump sum cash payment equal to the sum of his annual base salary plus his annual incentive compensation bonus that would be payable assuming 100% satisfaction of all performance goals thereunder.

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Item 2 on Proxy Card

APPROVAL OF THE ADOPTION OF THE 2005 EQUITY INCENTIVE PLAN

We are requesting that the shareholders approve the Company’s 2005 Equity Incentive Plan (the “2005 Plan”), which was adopted by the Board on December 7, 2005 and subsequently amended and restated by the Board on March 20, 2006, subject to shareholder approval, to expand the types of awards that can be granted thereunder.

The 2005 Plan is being presented for shareholder approval because the Company’s 1995 Stock Option Plan has expired and, accordingly, no further options may be granted thereunder. The Company operates in a competitive marketplace in which success depends on its ability to attract and retain employees of the highest caliber. One of the tools the Board regards as essential in addressing these human resource challenges is a competitive equity incentive program. The Board proposes to adopt the 2005 Plan to enable the Company to provide appropriate equity incentives to its employees, directors and consultants.

The proposal to approve the adoption of the 2005 Plan will require approval by a majority of the votes cast by the holders of the shares of Common Stock voting in person or by proxy at the Annual Meeting. Withholding authority to vote for approval of the 2005 Plan will have the effect of a vote against the approval of the adoption of the 2005 Plan.

A summary of the 2005 Plan is set forth below. The discussion below is qualified in its entirety by reference to the 2005 Plan, a copy of which, as amended, is attached asAppendix A to this proxy statement.

Purpose. The 2005 Plan is intended to retain and reward highly qualified employees (including contract employees, consultants, and directors) and encourage their ownership of Common Stock.

Administration. The Board has designated the Compensation Committee (the “Committee”) to administer the 2005 Plan. Subject to the provisions of the 2005 Plan, the Committee has discretion to determine the employee, consultant or director to receive an award, the form of award and any acceleration or extension of an award. Further, the Committee has complete authority to interpret the 2005 Plan, to prescribe, amend and rescind rules and regulations relating to it, to determine the terms and provisions of the respective award agreements (which need not be identical), and to make all other determinations necessary or advisable for the administration of the 2005 Plan.

Eligibility. Awards may be granted to any employee of or consultant to one or more of the Company and its subsidiaries or to directors of the Company or of any board of directors (or similar governing authority) of any subsidiary.

Shares Subject to the 2005 Plan. The shares issued or to be issued under the 2005 Plan are authorized but unissued shares of the Company’s common stock (the “Common Stock”). The maximum number of shares of Common Stock which may be issued or made subject to awards under the 2005 Plan is 450,000. As of May 9, 2006, the Company has previously granted non-qualified options to two executive officers, Gregory Maton and Bahram Nazardad and one non-officer employee to purchase 16,500, 22,000 and 11,000 shares under the 2005 Plan, respectively, subject to shareholder approval. These option grants provide that they will terminate if the shareholders do not approve the 2005 Plan. The 2005 Plan contains the following limitations on the certain types of awards:

• No more than 25% of the shares of Common Stock covered by the 2005 Plan may be covered by options or other awards issued to any one person in any one calendar year.

• No “qualified performance-based award” (described below) may cover more than 450,000 shares or their cash equivalent at the date of grant of the award.

Types of Awards. Awards under the 2005 Plan may include Incentive Stock Options, Nonstatutory Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units and Performance Units, Qualified Performance-Based Awards, and Stock Grants. Each award will be evidenced by an instrument in such form as the Committee may prescribe, setting forth applicable terms such as the exercise price and term of any option or

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applicable forfeiture conditions or performance requirements for any Restricted Stock or Restricted Stock Units. Except as noted below, all relevant terms of any award will be set by the Committee in its discretion.

• Nonstatutory Stock Options and Incentive Stock Options (together, “Stock Options”) are rights to purchase Common Stock of the Company. A Stock Option may be immediately exercisable or become exercisable in such installments, cumulative or non-cumulative, as the Committee may determine. A Stock Option may be exercised by the recipient giving written notice to the Company, specifying the number of shares with respect to which the Stock Option is then being exercised, and accompanied by payment of an amount equal to the exercise price of the shares to be purchased. The purchase price may be paid by cash, check, any other lawful means authorized by the Committee, or through and under the terms and conditions of any formal cashless exercise program authorized by the Company.

Incentive Stock Options may be granted only to eligible employees of the Company or any parent or subsidiary corporation and must have an exercise price of not less than 100% of the fair market value of the Company’s Common Stock on the date of grant (110% for Incentive Stock Options granted to any 10% stockholder of the Company). In addition, the term of an Incentive Stock Option may not exceed 10 years (five years, if granted to any 10% stockholder. Nonstatutory Stock Options must have an exercise price of not less than 100% of the fair market value of the Company’s Common Stock on the date of grant and the term of any Nonstatutory Stock Option may not exceed 10 years. In the case of an Incentive Stock Option, the amount of the aggregate fair market value of Common Stock (determined at the time of grant) with respect to which Incentive Stock Options are exercisable for the first time by an employee during any calendar year (under all such plans of his or her employer corporation and its parent and subsidiary corporations) may not exceed $100,000.

• Stock Appreciation Rights (“SARs”) are rights to receive (without payment to the Company) cash, property or other forms of payment, or any combination thereof, as determined by the Committee, based on the increase in the value of the number of shares of Common Stock specified in the SAR. The base price (above which any appreciation is measured) will in no event be less than the fair market value of the Company’s stock on the date of grant of the SAR or, if the SAR is granted in tandem with a Stock Option (that is, so that the recipient has the opportunity to exercise either the Stock Option or the SAR, but not both), the exercise price under the associated Stock Option.

• Awards of Restricted Stock are grants or sales of Common Stock which are subject to a risk of forfeiture, such as a requirement of the continued performance of services for stated term or the achievement of individual or Company performance goals. Except as otherwise provided in the 2005 Plan or the applicable award documentation for Restricted Stock, at all times prior to lapse of any forfeiture restrictions applicable to the award, the recipient shall have all of the rights of a stockholder of the Company, including the right to vote, and the right to receive any dividends with respect to, the shares of Restricted Stock. However, the Committee may determine at the time of the award, to permit or require the payment of cash dividends to be deferred, or reinvested in additional Restricted Stock to the extent shares are available for issuance under the 2005 Plan.

• Awards of Restricted Stock Units and Performance Units are grants of rights to receive either shares of Common Stock (in the case of Restricted Stock Units) or the appreciation over a base value (as specified by the Committee) of a number of shares of Common Stock (in the case of Performance Stock Units) subject to satisfaction of service or performance requirements established by the Committee in connection with the award. Such awards may include the right to the equivalent to any dividends on the shares covered by the award, which amount may in the discretion of the Committee be deferred and paid if and when the award vests.

• Qualified Performance-Based Awards are awards which include performance criteria intended to satisfy Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). Section 162(m) of the Code limits the Company’s federal income tax deduction for compensation to certain specified senior executives to $1 million dollars, but excludes from that limit “performance-based compensation.” Qualified Performance-Based Awards may be in the form of Stock Options, Restricted Stock, Restricted Stock Units or Performance Units, but in each case will be subject to satisfaction of one of the following criteria, either individually, alternatively or in any combination, applied to either the Company as a whole or to a business unit or affiliate, either individually, alternatively, or in any combination, and measured either annually or cumulatively over a period of years, on an absolute basis or relative to a pre-established target, to previous years’ results or to a designated comparison group, in each case as specified by the Committee in the award:

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cash flow (before or after dividends)	earnings per share (including, without limitation, earnings before interest, taxes, depreciation and amortization)
stock price	return on equity
stockholder return or total stockholder return	return on capital (including without limitation return on total capital or return on invested capital)
return on investment	return on assets or net assets
market capitalization	economic value added
debt leverage (debt to capital)	revenue
sales or net sales	backlog
income, pre-tax income or net income	operating income or pre-tax profit
operating profit, net operating profit or economic profit	gross margin, operating margin or profit margin
return on operating revenue or return on operating assets	cash from operations
operating ratio	operating revenue
market share improvement	general and administrative expenses
customer service	new production introductions
product line enhancements	strategic acquisitions

Qualified Performance-Based Awards in the form of Stock Options must have an exercise price which is not less than 100% of the fair market value of the Company’s Common Stock on the date of grant. No payment or other amount will be available to a recipient of a Qualified Performance-Based Award except upon the Committee’s determination that particular goal or goals established by the Committee for the criteria (from among those specified above) selected by the Committee have been satisfied.

• A Stock Grant is a grant of shares of Common Stock not subject to restrictions or other forfeiture conditions. Stock Grants may be awarded only in recognition of significant contributions to the success of the Company or its affiliates, in lieu of compensation otherwise already due, or in other limited circumstances which the Committee deems appropriate.

Effect of Termination of Employment or Association. Unless the Committee determines otherwise in connection with any particular award under the 2005 Plan, Stock Options and SARs will generally terminate one year following the recipient’s termination of employment or other association on account of disability (within the meaning of Section 22(e)(3) of the Code) or death and three (3) months following the recipient’s termination of employment or other association in other circumstances. The effect of termination on other awards will depend on the terms of those awards.

Transferability. In general, no award under the 2005 Plan may be transferred by the recipient and during the life of the recipient all rights under an award may be exercised only by the recipient or his or her legal representative. However, the Committee may approve the transfer, without consideration, of an award of a Nonstatutory Option or Restricted Stock to a family member.

Effect of Significant Corporate Event. In the event of any change in the outstanding shares of Common Stock through merger, consolidation, sale of all or substantially all the property of the Company, reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split, or other distribution with respect to such shares of Common Stock, an appropriate and proportionate adjustment will be made in (i) the maximum numbers and kinds of shares subject to the 2005 Plan and the Prior Plan limits, (ii) the numbers and kinds of shares or other securities subject to the then outstanding awards, (iii) the exercise or hurdle price for each share or other unit of any other securities subject to then outstanding Stock Options or SARs (without change in the aggregate purchase or hurdle price as to which Stock Options or SARs remain exercisable), and (iv) the repurchase price of each share of Restricted Stock then subject to a risk of forfeiture in the form of a Company repurchase right. In the event of a change in control, awards subject only to the requirement of continued employment or other service will generally continue to vest in accordance with their terms, unless the recipient’s employment or other association is terminated by the Company or an Affiliate (other than for cause) within one year of the change of control (in which event they will fully vest on such termination); awards subject to performance criteria will generally vest in full on the change of control but only as to a pro rata portion of the shares subject to the award (and the balance will then be

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forfeited). Upon dissolution or liquidation of the Company, other than as part of an acquisition or similar transaction, each outstanding Stock Option or SAR shall terminate, but the participant shall have the right, immediately prior to the dissolution or liquidation, to exercise the Stock Option or SAR to the extent exercisable on the date of dissolution or liquidation.

Amendments to the 2005 Plan. The Board may amend or modify the 2005 Plan at any time subject to the rights of holders of outstanding awards on the date of amendment or modification; provided, however, that the Board may not, without the approval of shareholders, reprice outstanding awards.

Summary of Tax Consequences. The following is a brief and general discussion of the United States federal income tax consequences to recipients of awards granted under the 2005 Plan. This summary is not comprehensive and is based upon laws and regulations in effect on January 1, 2006. Such laws and regulations are subject to change. This summary is intended for the information of shareholders considering how to vote and not as tax guidance to participants in the 2005 Plan. Participants in the 2005 Plan should consult their own tax advisors as to the tax consequences of participation.

• NonstatutoryStockOptions. Generally, there are no federal income tax consequences to the participants upon grant of Nonstatutory Stock Options. Upon the exercise of such an Option, the participant will recognize ordinary income in an amount equal to the amount by which the fair market value of the Common Stock acquired upon the exercise of such Option exceeds the exercise price, if any. A sale of Common Stock so acquired will give rise to a capital gain or loss equal to the difference between the fair market value of the Common Stock on the exercise and sale dates.

• IncentiveStockOptions. Except as noted at the end of this paragraph, there are no federal income tax consequences to the participant upon grant or exercise of an Incentive Stock Option. If the participant holds shares of Common Stock purchased pursuant to the exercise of an Incentive Stock Option for at least two years after the date the Option was granted and at least one year after the exercise of the Option, the subsequent sale of Common Stock will give rise to a long-term capital gain or loss to the participant and no deduction will be available to the Company. If the participant sells the shares of Common Stock within two years after the date an Incentive Stock Option is granted or within one year after the exercise of an Option, the participant will recognize ordinary income in an amount equal to the difference between the fair market value at the exercise date and the Option exercise price, and any additional gain or loss will be a capital gain or loss. Some participants may have to pay alternative minimum tax in connection with exercise of an Incentive Stock Option, however.

• RestrictedStock. A participant will generally recognize ordinary income on receipt of an award of Restricted Stock when his or her rights in that award become substantially vested, in an amount equal to the amount by which the then fair market value of the Common Stock acquired exceeds the price he or she has paid for it, if any. Recipients of Restricted Stock may, however, within 30 days of receiving an award of Restricted Stock, choose to have any applicable risk of forfeiture disregarded for tax purposes by making an “83(b) election.” If the participant makes an 83(b) election, he or she will have to report compensation income equal to the difference between the value of the shares and the price paid for the shares, if any, at the time of the transfer of the Restricted Stock.

• StockAppreciationRights. A participant will generally recognize ordinary income on receipt of cash or other property pursuant to the exercise of an award of Stock Appreciation Rights.

• RestrictedStockUnits,PerformanceUnitsandStockGrants. A participant will generally recognize ordinary income on receipt of any shares of Common Stock, cash or other property in satisfaction of any of these awards under the 2005 Plan.

• PotentialDeferredCompensation. For purposes of the foregoing summary of federal income tax consequences, we assumed that no award under the 2005 Plan will be considered “deferred compensation” as that term is defined for purposes of recent federal tax legislation governing nonqualified deferred compensation arrangements, Section 409A of the Code, or, if any award were considered to any extent to constitute deferred compensation, its terms would comply with the requirements of that legislation (in general, by limiting any flexibility in the time of payment). For example, the award of an SAR at less than 100% of the market value of the Company’s Common Stock, would constitute deferred compensation. If an award includes deferred compensation, and its

17

terms do not comply with the requirements of the legislation, then any deferred compensation component of an award under the 2005 Plan will be taxable when it is earned and vested (even if not then payable) and the recipient will be subject to a 20% additional tax.

• Section 162(m)LimitationsontheCompany’sTaxDeduction. In general, whenever a recipient is required to recognize ordinary income in connection with an award, the Company will be entitled to a corresponding tax deduction. However, the Company will not be entitled to deductions in connection with awards under the 2005 Plan to certain senior executive officers to the extent that the amount of deductible income in a year to any such officer, together with his or her other compensation from the Company exceeds the $1 million dollar limitation of Section 162(m) of the Code. Compensation which qualifies as “performance-based” is not subject to this limitation, however.

Awards to Particular Officers, Etc. The future benefits or amounts that will be received under the 2005 Plan by or allocated to each of (i) the officers listed in the Summary Compensation Table, (ii) each of the nominees for election as a director, (iii) all directors of the company who are not executive officers of the company as a group, (iv) all present executive officers of the Company as a group, and (v) all employees of the Company, including all other current officers, as a group are not determinable. The Company has previously granted non-qualified options to two executive officers, Gregory Maton and Bahram Nazardad and one non-officer employee to purchase 16,500, 22,000 and 11,000 shares under the 2005 Plan, respectively, subject to shareholder approval. These option grants provide that they will terminate if the shareholders do not approve the 2005 Plan.

THE BOARD RECOMMENDS A VOTE FOR THE APPROVAL OF THE ADOPTION OF THE 2005

EQUITY INCENTIVE PLAN

EQUITY COMPENSATION PLAN INFORMATION

The following table provides information as of May 9, 2006 with respect to shares of Common Stock that may be issued under the Company’s equity compensation plans.

Plan Category	Number of Securities to be Issued Upon Exercise of Outstanding Options, warrants and Rights	Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights		Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding securities reflected in the first column)
Equity compensation plans approved by security holders	861,520	$	12.43	8,125
Equity compensation plans not approved by security holders	0		0	0
Total	861,520	$	12.43	8,125

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

The Compensation Committee of the Board (the “Compensation Committee”) administers the Company’s executive compensation program and establishes the salaries of the Company’s executive officers. The Compensation Committee consists of only non-employee Directors, who are appointed by the Board.

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Compensation Philosophy

The general philosophy of the Compensation Committee is to provide executive compensation designed to enhance shareholder value, including annual compensation, consisting of salary and bonus awards, and long-term compensation, consisting of stock options. To this end, the Compensation Committee designs compensation plans and incentives to link the financial interests of the Company’s executive officers to the interests of its shareholders, to encourage support of the Company’s long-term goals, to tie executive compensation to the Company’s performance, to attract, motivate and retain talented leadership and to encourage significant ownership of the Company’s common stock by executive officers.

In making decisions affecting executive compensation, the Compensation Committee reviews the nature and scope of the executive officer’s responsibilities as well as his or her effectiveness in supporting the Company’s short and long-term goals. The Compensation Committee also considers the compensation practices of other United States and international corporations that compete with the Company as well as various professional compensation surveys. Based upon these and other factors which it considers relevant, and in light of the Company’s overall long-term performance, the Committee has considered it appropriate, and in the best interest of the shareholders, to set the overall executive compensation so as to compete with companies in the comparison group to enable the Company to continue to attract, retain and motivate the highest level of executive personnel.

There are two primary types of compensation provided to the Company’s executive officers:

• Annual compensation, which includes a base salary intended to provide a stable annual salary at a level consistent with individual contributions, and annual performance bonuses intended to link officers’ compensation to the Company’s performance.

• Long-term compensation, which includes stock option awards, to encourage actions to maximize long-term shareholder value.

Annual Compensation

Base Salary

Consistent with its stated philosophy, the Compensation Committee aims to position base salaries for the Company’s executive officers annually at levels that are consistent within the industry, with consideration of the performance of the Company, individual performance of each executive and the executive’s scope of responsibility in relation to other officers and key executives within the Company. In selected cases, other factors may also be considered.

Annual Incentive Bonuses

The Company’s Incentive Bonus Plan provides for the payment of cash bonuses based on the Company’s performance in relation to predetermined objectives and individual executive performance for the year then ended. Prior to the beginning of fiscal year 2006, the Compensation Committee established objectives related to the Company’s earnings, revenue and long-term growth and shareholder value. Based on the Company’s performance during fiscal year 2006 against these objectives, bonuses were paid under the Incentive Bonus Plan as reported in the summary compensation table elsewhere in this proxy statement.

Long-Term Compensation—Equity Based Compensation

The Compensation Committee is committed to long-term incentive programs for executives that promote the long-term growth of the Company. The Compensation Committee believes that the management employees should be rewarded with a proprietary interest in the Company to promote and enhance long-term performance and to attract, motivate and retain qualified and capable executives.

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The Compensation Committee grants to executive officers options to purchase shares of the Company’s common stock under the Company’s 1995 stock option plan that was adopted by the Company and its shareholders in 1995, which expired by its terms in May 2005. The Board has adopted the 2005 Equity Incentive Plan, subject to shareholder approval. In fiscal year ended January 31, 2006, the Compensation Committee granted 16,500 non-qualified options to Gregory Maton and 22,000 non-qualified options to Bahram Nazardad subject to shareholder approval.

Compensation of Chief Executive Officer

During fiscal year 2006, the Company’s Chief Executive Officer received a base annual salary of $350,916, which represents a 4% increase over the annual base salary paid to the Chief Executive Officer during fiscal 2005.

The Company’s Chief Executive Officer is eligible to participate in all of the Company’s long-term incentive programs. During fiscal 2006 the Chief Executive Officer received no stock options to purchase shares of the Company’s common stock as shown on the Summary Compensation Table. The Summary Compensation Table includes additional information regarding the other compensation and benefits paid to the Company’s Chief Executive Officer.

Internal Revenue Code Section 162(m)

The Compensation Committee also considers the potential impact of Section 162(m) of the Internal Revenue Code of 1986, as amended (“Section 162(m)”). Section 162(m) disallows a tax deduction for any publicly held Company for individual compensation exceeding $1 million in any taxable year for the Chief Executive Officer and the other senior executive officers, other than compensation that is performance-based under a plan that is approved by the shareholders of the Company and that meets certain other technical requirements. Based on these requirements, the Compensation Committee has determined that Section 162(m) will not prevent the Company from receiving a tax deduction for any of the compensation paid to executive officers.

Submitted on May 16, 2006 by the members of the Compensation Committee.

Erik van der Kaay, Chairman

Gerald D. Griffin

Jeffrey R. Hultman

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

None of the Company’s executive officers currently serves on the compensation committee of any other company or board of directors of any other company of which any member of our Compensation Committee is an executive officer.

PERFORMANCE COMPARISON

Set forth below is a line graph comparing the cumulative total shareholders return on the Company Common Stock against the cumulative total return of the Russell 2000 Composite Stock Index and a peer group of companies discussed below (the “Peer Group”) for the periods indicated. The presentation assumes $100 was invested on January 31, 2001 in the Company’s Common Stock, the Russell 2000 Composite Stock Index, and the common stock of the Peer Group.

The Peer Group consists of five companies of similar business focus as the Company. The returns of each company within the Peer Group have been averaged assuming an equal dollar investment in each company at the beginning of the time period or at the time they became publicly traded. Dividends paid by those peer companies that pay dividends are assumed to be reinvested at the end of the ex-dividend month without any transaction cost.

The Peer Group consists of LLC International, Inc., Agilent Technologies, Inc., Wireless Facilities, Inc., LM Ericsson Telephone Co., and Ascom. The following graph depicts the relative performance of the Company in relation to the Peer Group and to the Russell 2000 Stock index for the periods indicated.

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	1/31/2001	1/31/2002	1/31/2003	1/31/2004	1/31/2005	1/31/2006
Comarco	100	61.66	37.80	54.28	43.49	64.26
Peer Group	100	35.61	14.57	38.64	27.74	28.38
Russell 2000 Index	100	96.40	75.32	119.02	129.35	153.78

Item 3 on Proxy Card

RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

FIRM FOR FISCAL 2007

The Audit Committee has appointed BDO Seidman, LLP as the Company’s independent registered public accounting firm for the fiscal year ending January 3l, 2007, and has requested the Board to submit this appointment for ratification by our shareholders at the Annual Meeting.

A representative of BDO Seidman, LLP is expected to be present at the Annual Meeting, will have the opportunity to make a statement if he or she desires to do so, and will be available to respond to appropriate questions from shareholders.

In the event that the shareholders do not ratify the appointment of BDO Seidman, LLP as the Company’s registered public accounting firm for the fiscal year ending January 31, 2007, the appointment will be reconsidered by the Audit Committee. Even if the appointment is ratified by the shareholders, the Audit Committee in its discretion may dismiss BDO Seidman, LLP as the Company’s independent registered public accounting firm and appoint a different independent accounting firm at any time during the year if the Audit Committee believes that such a change would be in the best interests of the Company and its shareholders.

THE BOARD RECOMMENDS A VOTE FOR THE RATIFICATION OF APPOINTMENT OF BDO SEIDMAN, LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING JANUARY 31, 2007

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Audit Fees

The aggregate fees incurred and payable to BDO Seidman, LLP for professional services rendered in connection with the audit and quarterly reviews of the Company’s financial statements during the fiscal year ending January 31, 2006 were approximately $270,000. The aggregate fees incurred and payable to BDO Seidman, LLP for professional services rendered in connection with the audit and third quarter review of the Company’s financial statements during fiscal year 2005 were $205,000.

Additionally, KPMG LLP has billed the Company $30,000 for the re-issuance of KPMG’s audit opinion on and consent relating to the Company’s consolidated financial statements for the fiscal year ended January 31, 2004, which are included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2006.

Audit-Related Fees

No audit-related fees were paid to BDO Seidman, LLP or KPMG, LLP for fiscal years ended January 31, 2006 and January 31, 2005 respectively.

Tax Fees

The aggregate fees incurred and payable to KPMG, LLP for professional services rendered during the fiscal years ended January 31, 2006 and January 31, 2005 in connection with tax advice, return preparation and planning were $61,755 and $76,565 respectively. The aggregate bills incurred and payable to Ernst & Young, LLP for professional services rendered for the year ending January 31, 2006 in connection with tax advice, return preparation and planning were $26,207.

All Other Fees

No other fees were paid to BDO Seidman, LLP or KPMG LLP during the fiscal years ended January 31, 2006 and January 31, 2005 respectively.

Indemnification

In connection with KPMG LLP’s re-issuance of their audit opinion and consent relating to the Company’s consolidated financial statements for the fiscal year ended January 31, 2004 in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2006, the Company has agreed to indemnify and hold KMPG LLP harmless against legal costs and expenses incurred by KPMG LLP in the successful defense of any legal action or proceeding that arises as a result of KPMG LLP’s consent to the inclusion (or incorporation by reference) of its audit report on the Company’s past financial statements included (or incorporated by reference) in the Company’s Annual Report on Form 10-K for the Company’s fiscal year ended January 31, 2006 and certain registration statements filed by the Company under the federal securities laws.

Change in Independent Registered Public Accounting Firm

On September 21, 2004, the Audit Committee approved the dismissal of KPMG LLP as the Company’s independent registered public accounting firm, and appointed BDO Seidman, LLP as the Company’s new independent registered public accounting firm.

KPMG LLP’s reports on the Company’s consolidated financial statements as of and for the fiscal year ended January 31, 2004, the last fiscal year audited by KPMG LLP, did not contain an adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles.

During the fiscal year ended January 31, 2004, or fiscal year 2004, there were no disagreements between the Company and KPMG LLP on any matter of accounting principles or practices, financial statement disclosure, or

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auditing scope or procedure which, if not resolved to KPMG LLP’s satisfaction, would have caused KPMG LLP to make reference to the matter of the disagreement in connection with its reports.

During the fiscal year ended January 31, 2004, or fiscal year 2004, none of the reportable events required to be disclosed under Item 304(a)(1)(v) of SEC Regulation S-K has occurred, except that as the Company has previously disclosed, KPMG LLP identified the following internal control issues that KPMG LLP considered to be material weaknesses (as defined under standards established by the American Institute of Certified Public Accountants):

• a lack of suitable documentation or analysis of reserves for contingencies which consider the application of the “probable” and “reasonably estimable” criteria of Statement of Financial Accounting Standards (“FASB”) No. 5 “Accounting for Contingencies.”

• a lack of suitable documentation or analysis to support the Company’s estimate of the percentage of wireless test system revenues which should be deferred for first year maintenance.

• a failure to follow the subsequent event rules with respect to Company’s bonus accruals.

During the fiscal year ended January 31, 2004 and the subsequent interim period prior to KPMG LLP’s dismissal, the Company did not consult with BDO Seidman, LLP regarding any of the matters or events required to be disclosed under applicable SEC regulations.

The Company has provided KPMG LLP and BDO Seidman, LLP with a copy of this disclosure.

AUDIT AND FINANCE COMMITTEE REPORT

The Board has determined that each member of the Audit and Finance Committee is an “independent director,” as defined under the rules of the NASD and Rule 10A-3(b) of the Exchange Act. The Board has determined that Mr. van der Kaay is an “audit committee financial expert,” as defined in Item 401(h) of Regulation S-K. In accordance with the written charter of the Audit and Finance Committee adopted by the Board, the Audit and Finance Committee assists the Board in fulfilling its responsibility for management oversight of the quality and integrity of the accounting, auditing, and financial reporting practices of the Company.

It is not the duty or responsibility of the Audit and Finance Committee to conduct auditing or accounting reviews or procedures. In performing their oversight responsibility, members of the Audit and Finance Committee rely without independent verification on the information provided to them and on the representations made by management and the independent accountants. Accordingly, the Audit and Finance Committee’s oversight does not provide an independent basis to determine that management has maintained appropriate accounting and financial reporting principles or appropriate internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. Furthermore, the Audit and Finance Committee’s considerations and discussions do not assure that the audit of the Company’s financial statements has been carried out in accordance with generally accepted auditing standards or that the financial statements are presented in accordance with generally accepted accounting principles.

The Audit and Finance Committee discussed and reviewed with the Company’s independent registered public accounting firm all communications required by generally accepted auditing standards, including those described in Statement on Auditing Standards No. 61, as amended, “Communication with Audit Committees”, and with and without management present, discussed and reviewed the results of the independent auditors’ examination of the Company’s financial statements. The Committee received from the independent auditors the written disclosure and letter required by Independence Standards Board Standard No. 1 and discussed with the independent auditors, their independence.

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The Audit and Finance Committee reviewed the audited financial statements of the Company as of and for the year ended January 31, 2006, with the Company’s management and independent auditors. Management has the responsibility for the preparation of the financial statements and the independent auditors have the responsibility for the examination of those statements.

Based on the above-mentioned review and discussions with management and the independent auditors, the Audit and Finance Committee recommended to the Board that the Company’s financial statements be included in its Annual Report on Form 10-K for the year ended January 31, 2006, for filing with the SEC.

Submitted by the Audit and Finance Committee

Gerald D. Griffin, Chairman

Erik H. van der Kaay, Member

Jeffrey A. Hultman, Member

THE BOARD RECOMMENDS A VOTE FOR THE RATIFICATION OF APPOINTMENT OF BDO

SEIDMAN, LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

FOR THE FISCAL YEAR ENDING JANUARY 31, 2007

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SHAREHOLDER PROPOSALS FOR SUBMISSION AT 2007 ANNUAL MEETING

If a shareholder desires to submit a proposal at the Company’s 2007 Annual Meeting of Shareholders to be included in the proxy statement for that meeting, such proposal must be received by the Corporate Secretary in writing at the Company’s corporate office no later than January 16, 2007. The proposal must also comply with applicable regulations in order to be included in the Proxy Statement for that meeting. If a shareholder notifies the Company in writing prior to April 1, 2007 that he or she intends to present a proposal at the Company’s 2007 Annual Meeting of Shareholders, the proxy-holders designated by the Board may exercise their discretionary voting authority with regard to the shareholder’s proposal only if the Company’s proxy statement discloses the nature of the shareholder’s proposal and the proxyholder’s intentions with respect to the proposal. If the stockholder does not notify the Company by such date, the proxyholders may exercise their discretionary voting authority with respect to the proposal without such discussion in the proxy statement.

OTHER MATTERS

The Board of the Company does not know of any matter to be acted upon at the meeting other than the matters described above. If other matters properly come before the meeting, the holders of the proxies will vote on such matters in accordance with their judgment.

The Company’s 2006 Annual Report to Shareholders is enclosed with this Proxy Statement.

IN ORDER TO AVOID ADDED EXPENSE OR ADDITIONAL SOLICITATION OF PROXIES, YOU ARE URGED TO DATE, SIGN AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED, TO WHICH NO POSTAGE NEED BE AFFIXED.

BY ORDER OF THE BOARD OF DIRECTORS

Peggy L. Vessell, Secretary

Irvine, California

May 16, 2006

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TABLE OF CONTENTS

APPENDIX A

COMARCO, INC.

2005 EQUITY INCENTIVE PLAN

1.	Purpose	2
2.	Definitions	2
3.	Term of the Plan	5
4.	Stock Subject to the Plan	5
5.	Administration	5
6.	Authorization of Grants	5
7.	Specific Terms of Awards	7
8.	Adjustment Provisions	11
9.	Change of Control	12
10.	Settlement of Awards	12
11.	Reservation of Stock	14
12.	Limitation of Rights in Stock; No Special Service Rights	14
13.	Unfunded Status of Plan	14
14.	Nonexclusivity of the Plan	14
15.	Termination and Amendment of the Plan	15
16.	Notices and Other Communications	15
17.	Governing Law	15

COMARCO, INC.

2005 Equity Incentive Plan

1. Purpose

This Plan is intended to encourage ownership of Stock by employees, consultants and directors of the Company and its Affiliates and to provide additional incentive for them to promote the success of the Company’s business. The Plan is intended to be an incentive stock option plan within the meaning of Section 422 of the Code, but not all Awards are required to be Incentive Options. This Plan constitutes an amendment, restatement and continuation in its entirety of the Company’s 2005 Employee Stock Option Plan retroactive to the date of the Board’s approval of that option plan on December 7, 2005 and shall take account of and govern any options granted under that option plan.

2. Definitions

As used in this Plan, the following terms shall have the following meanings:

2.1Accelerate,Accelerated, andAcceleration, means: (a) when used with respect to an Option or Stock Appreciation Right, that as of the time of reference the Option or Stock Appreciation Right will become exercisable with respect to some or all of the shares of Stock for which it was not then otherwise exercisable by its terms; (b) when used with respect to Restricted Stock or Restricted Stock Units, that the Risk of Forfeiture otherwise applicable to the Stock or Units shall expire with respect to some or all of the shares of Restricted Stock or Units then still otherwise subject to the Risk of Forfeiture; and (c) when used with respect to Performance Units, that the applicable Performance Goals shall be deemed to have been met as to some or all of the Units.

2.2Acquisition means a merger or consolidation of the Company with or into another person or the sale, transfer, or other disposition of all or substantially all of the Company’s assets to one or more other persons in a single transaction or series of related transactions.

2.3Affiliate means any corporation, partnership, limited liability company, business trust, or other entity controlling, controlled by or under common control with the Company.

2.4Award means any grant or sale pursuant to the Plan of Options, Stock Appreciation Rights, Performance Units, Restricted Stock, Restricted Stock Units, or Stock Grants.

2.5AwardAgreement means an agreement between the Company and the recipient of an Award, setting forth the terms and conditions of the Award.

2.6Board means the Company’s Board of Directors.

2.7ChangeofControl means the occurrence of any of the following after the date of the approval of the Plan by the Board:

(a) an Acquisition, unless securities possessing more than 50% of the total combined voting power of the survivor’s or acquiror’s outstanding securities (or the securities of any parent thereof) are held by a person or persons who held securities possessing more than 50% of the total combined voting power of the Company’s outstanding securities immediately prior to that transaction, or

(b) any person or group of persons (within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended and in effect from time to time) directly or indirectly acquires, including but not limited to by means of a merger or consolidation, beneficial ownership (determined pursuant to Securities and Exchange Commission Rule 13d-3 promulgated under the said Exchange Act) of securities possessing more than 20% of the total combined voting power of the Company’s outstanding securities, other than (i) the Company or an Affiliate, (ii) an employee benefit plan of the Company or any of its Affiliates, (iii) a trustee or other fiduciary holding securities

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under an employee benefit plan of the Company or any of its Affiliates, or (iv) an underwriter temporarily holding securities pursuant to an offering of such securities, or

(c) over a period of 36 consecutive months or less, there is a change in the composition of the Board such that a majority of the Board members (rounded up to the next whole number, if a fraction) ceases, by reason of one or more proxy contests for the election of Board members, to be composed of individuals who either (i) have been Board members continuously since the beginning of that period, or (ii) have been elected or nominated for election as Board members during such period by at least a majority of the Board members described in the preceding clause (i) who were still in office at the time that election or nomination was approved by the Board.

2.8Code means the Internal Revenue Code of 1986, as amended from time to time, or any successor statute thereto, and any regulations issued from time to time thereunder.

2.9Committee means any committee of the Board delegated responsibility by the Board for the administration of the Plan, as provided in Section 5 of the Plan. For any period during which no such committee is in existence “Committee” shall mean the Board and all authority and responsibility assigned to the Committee under the Plan shall be exercised, if at all, by the Board.

2.10Company means Comarco, Inc., a corporation organized under the laws of the State of California.

2.11CoveredEmployee means an employee who is a “covered employee” within the meaning of Section 162(m) of the Code.

2.12GrantDate means the date as of which an Option is granted, as determined under Section 7.1(a).

2.13IncentiveOption means an Option which by its terms is to be treated as an “incentive stock option” within the meaning of Section 422 of the Code.

2.14MarketValue means a value established by the Committee on the basis of actual transactions on or about the Grant Date or other relevant date in stock on any established securities market on which the Stock is then readily tradable, or in the absence of such transactions, the value of a share of stock on the relevant date as determined by the Committee.

2.15NonstatutoryOption means any Option that is not an Incentive Option.

2.16Option means an option to purchase shares of Stock.

2.17Optionee means a Participant to whom an Option shall have been granted under the Plan.

2.18Participant means any holder of an outstanding Award under the Plan.

2.19PerformanceCriteria means the criteria that the Committee selects for purposes of establishing the Performance Goal or Performance Goals for a Participant for a Performance Period. The Performance Criteria used to establish Performance Goals are limited to: (i) cash flow (before or after dividends), (ii) earnings per share (including, without limitation, earnings before interest, taxes, depreciation and amortization), (iii) stock price, (iv) return on equity, (v) stockholder return or total stockholder return, (vi) return on capital (including, without limitation, return on total capital or return on invested capital), (vii) return on investment, (viii) return on assets or net assets, (ix) market capitalization, (x) economic value added, (xi) debt leverage (debt to capital), (xii) revenue, (xiii) sales or net sales, (xiv) backlog, (xv) income, pre-tax income or net income, (xvi) operating income or pre-tax profit, (xvii) operating profit, net operating profit or economic profit, (xviii) gross margin, operating margin or profit margin, (xix) return on operating revenue or return on operating assets, (xx) cash from operations, (xxi) operating ratio, (xxii) operating revenue, (xxiii) market share improvement, (xxiv) general and administrative expenses or (xxv) customer service.

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2.20PerformanceGoals means, for a Performance Period, the written goal or goals established by the Committee for the Performance Period based upon the Performance Criteria. The Performance Goals may be expressed in terms of overall Company performance or the performance of a division, business unit, subsidiary, or an individual. either individually, alternatively or in any combination, applied to either the Company as a whole or to a business unit or Affiliate, either individually, alternatively or in any combination, and measured either quarterly, annually or cumulatively over a period of years, on an absolute basis or relative to a pre-established target, to previous years’ results or to a designated comparison group, in each case as specified by the Committee. The Committee will, in the manner and within the time prescribed by Section 162(m) of the Code in the case of Qualified Performance-Based Awards, objectively define the manner of calculating the Performance Goal or Goals it selects to use for such Performance Period for such Participant. To the extent consistent with Section 162(m) of the Code, the Committee may appropriately adjust any evaluation of performance against a Performance Goal to exclude any of the following events that occurs during a performance period: (i) asset write-downs, (ii) litigation, claims, judgments or settlements, (iii) the effect of changes in tax law, accounting principles or other such laws or provisions affecting reported results, (iv) accruals for reorganization and restructuring programs and (v) any extraordinary, unusual, non-recurring or non-comparable items (A) as described in Accounting Principles Board Opinion No. 30, (B) as described in management’s discussion and analysis of financial condition and results of operations appearing in the Company’s Annual Report to stockholders for the applicable year, or (C) publicly announced by the Company in a press release or conference call relating to the Company’s results of operations or financial condition for a completed quarterly or annual fiscal period.

2.21PerformancePeriod means the one or more periods of time, which may be of varying and overlapping durations, selected by the Committee, over which the attainment of one or more Performance Goals will be measured for purposes of determining a Participant’s right to, and the payment of, a Performance Unit.

2.22PerformanceUnit means a right granted to a Participant under Section 7.5, to receive cash, Stock or other Awards, the payment of which is contingent on achieving Performance Goals established by the Committee.

2.23Plan means this 2005 Equity Incentive Plan of the Company, as amended from time to time, and including any attachments or addenda hereto.

2.24QualifiedPerformance-BasedAwards means Awards intended to qualify as “performance-based compensation” under Section 162(m) of the Code.

2.25RestrictedStock means a grant or sale of shares of Stock to a Participant subject to a Risk of Forfeiture.

2.26RestrictedStockUnits means rights to receive shares of Stock at the close of a Restriction Period, subject to a Risk of Forfeiture.

2.27RestrictionPeriod means the period of time, established by the Committee in connection with an Award of Restricted Stock or Restricted Stock Units, during which the shares of Restricted Stock are subject to a Risk of Forfeiture described in the applicable Award Agreement.

2.28RiskofForfeiture means a limitation on the right of the Participant to retain Restricted Stock or Restricted Stock Units, including a right in the Company to reacquire shares of Restricted Stock at less than their then Market Value, arising because of the occurrence or non-occurrence of specified events or conditions.

2.29Stock means common stock of the Company, and such other securities as may be substituted for Stock pursuant to Section 8.

2.30StockAppreciationRight means a right to receive any excess in the Market Value of shares of Stock (except as otherwise provided in Section 7.2(c)) over a specified exercise price.

2.31StockGrant means the grant of shares of Stock not subject to restrictions or other forfeiture conditions.

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2.32TenPercentOwner means a person who owns, or is deemed within the meaning of Section 422(b)(6) of the Code to own, stock possessing more than 10% of the total combined voting power of all classes of stock of the Company (or any parent or subsidiary corporations of the Company, as defined in Sections 424(e) and (f), respectively, of the Code). Whether a person is a Ten Percent Owner shall be determined with respect to an Option based on the facts existing immediately prior to the Grant Date of the Option.

3. Term of the Plan

Unless the Plan shall have been earlier terminated by the Board, Awards may be granted under this Plan at any time in the period commencing on December 7, 2005 and ending immediately prior to December 7, 2015. Awards granted pursuant to the Plan within that period shall not expire solely by reason of the termination of the Plan. Awards of Options granted prior to stockholder approval of the Plan may not be exercised prior to the receipt of such approval.

4. Stock Subject to the Plan

At no time shall the number of shares of Stock issued pursuant to or subject to outstanding Awards granted under the Plan (including pursuant to Incentive Options), nor the number of shares of Stock issued pursuant to Incentive Options, exceed four hundred and fifty thousand (450,000) shares of Stock;subject, however, to the provisions of Section 8 of the Plan. For purposes of applying the foregoing limitation, if any Option or Stock Appreciation Right expires, terminates, or is cancelled for any reason without having been exercised in full, or if any other Award is forfeited by the recipient or repurchased at less than its Market Value, the shares not purchased by the Optionee or which are forfeited by the recipient or repurchased shall again be available for Awards to be granted under the Plan. In addition, settlement of any Award shall not count against the foregoing limitations except to the extent settled in the form of Stock.

5. Administration

The Plan shall be administered by the Committee;provided, however, that at any time and on any one or more occasions the Board may itself exercise any of the powers and responsibilities assigned the Committee under the Plan and when so acting shall have the benefit of all of the provisions of the Plan pertaining to the Committee’s exercise of its authorities hereunder.Subject to the provisions of the Plan, the Committee shall have complete authority, in its discretion, to make or to select the manner of making all determinations with respect to each Award to be granted by the Company under the Plan including the employee, consultant or director to receive the Award and the form of Award. In making such determinations, the Committee may take into account the nature of the services rendered by the respective employees, consultants, and directors, their present and potential contributions to the success of the Company and its Affiliates, and such other factors as the Committee in its discretion shall deem relevant. Subject to the provisions of the Plan, the Committee shall also have complete authority to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to it, to determine the terms and provisions of the respective Award Agreements (which need not be identical), and to make all other determinations necessary or advisable for the administration of the Plan. The Committee’s determinations made in good faith on matters referred to in the Plan shall be final, binding and conclusive on all persons having or claiming any interest under the Plan or an Award made pursuant hereto.

6. Authorization of Grants

6.1Eligibility. The Committee may grant from time to time and at any time prior to the termination of the Plan one or more Awards, either alone or in combination with any other Awards, to

(a) any employee of or consultant to one or more of the Company and its Affiliates (including any such employee or consultant who is also a member of the Board or any board of directors (or similar governing authority) of any Affiliate), and

(b) any non-employee member of the Board or of any board of directors (or similar governing authority) of any Affiliate.

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However, only employees of the Company, and of any parent or subsidiary corporations of the Company, as defined in Sections 424(e) and (f), respectively, of the Code, shall be eligible for the grant of an Incentive Option. Further, in no event shall the number of shares of Stock covered by Options or other Awards granted to any one person in any one calendar year exceed 25% of the aggregate number of shares of Stock subject to the Plan.

6.2GeneralTermsofAwards. Each grant of an Award shall be subject to all applicable terms and conditions of the Plan (including but not limited to any specific terms and conditions applicable to that type of Award set out in the following Section), and such other terms and conditions, not inconsistent with the terms of the Plan, as the Committee may prescribe. No prospective Participant shall have any rights with respect to an Award, unless and until such Participant has executed an agreement evidencing the Award, delivered a fully executed copy thereof to the Company, and otherwise complied with the applicable terms and conditions of such Award.

6.3EffectofTerminationofEmployment,Etc. Unless the Committee shall provide otherwise with respect to any Award, if the Participant’s employment or other association with the Company and its Affiliates ends for any reason, including because of the Participant’s employer ceasing to be an Affiliate, (a) any outstanding Award of the Participant, other than an Option or SAR, shall be forfeited or otherwise subject to return to or repurchase by the Company on the terms specified in the applicable Award Agreement and (b) any outstanding Option or SAR of the Participant shall cease to be exercisable in any respect not later than whichever of the following may apply:

(1) one year following the termination of Optionee’s employment or other association with the Company and its Affiliates on account of disability (within the meaning of Section 22(e)(3) of the Code);

(2) one year following the Optionee’s death, in the event the Optionee dies while still employed or associated with the Company or its Affiliate or within three (3) months following his or her termination of employment or association; and

(3) unless (1) or (2) applies or becomes applicable, three (3) months (twelve (12) months in the case of nonemployee directors) following his or her termination of employment or association with the Company and its Affiliates for any other reason, including because of the Optionee’s employer ceasing to be an Affiliate.

For the period an Option or SAR remains exercisable following any termination of employment or association with the Company and its Affiliates, such Option or SAR shall be exercisable only to the extent exercisable at the date of that event. Military or sick leave or other bona fide leave shall not be deemed a termination of employment or other association,provided that it does not exceed the longer of ninety (90) days or the period during which the absent Participant’s reemployment rights, if any, are guaranteed by statute or by contract.

6.4Non-TransferabilityofAwards. Except as otherwise provided in this Section 6.4, Awards shall not be transferable, and no Award or interest therein may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. All of a Participant’s rights in any Award may be exercised during the life of the Participant only by the Participant or the Participant’s legal representative. However, the Committee may, at or after the grant of an Award of a Nonstatutory Option, or shares of Restricted Stock, provide that such Award may be transferred by the recipient to a family member;provided, however, that any such transfer is without payment of any consideration whatsoever and that no transfer shall be valid unless first approved by the Committee, acting in its sole discretion. For this purpose, “family member” means any child, stepchild, grandchild, parent, stepparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, any person sharing the employee’s household (other than a tenant or employee), a trust in which the foregoing persons have more than fifty (50) percent of the beneficial interests, a foundation in which the foregoing persons (or the Participant) control the management of assets, and any other entity in which these persons (or the Participant) own more than fifty (50) percent of the voting interests.

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7. Specific Terms of Awards

7.1Options.

(a)DateofGrant. The granting of an Option shall take place at the time specified in the Award Agreement. Only if expressly so provided in the applicable Award Agreement shall the Grant Date be the date on which the Award Agreement shall have been duly executed and delivered by the Company and the Optionee.

(b)ExercisePrice. The price at which shares of Stock may be acquired under each Option shall be not less than 100% of the Market Value of Stock on the Grant Date, or not less than 110% of the Market Value of Stock on the Grant Date in the case of any Incentive Option granted to an Optionee is a Ten Percent Owner.

(c)OptionPeriod. No Option may be exercised on or after the tenth anniversary of the Grant Date, or on or after the fifth anniversary of the Grant Date in the case of any Incentive Option granted to an Optionee is a Ten Percent Owner.

(d)Exercisability. An Option may be immediately exercisable or become exercisable in such installments, cumulative or non-cumulative, as the Committee may determine. In the case of an Option not otherwise immediately exercisable in full, the Committee may Accelerate such Option in whole or in part at any time;provided, however, that in the case of an Incentive Option, any such Acceleration of the Option would not cause the Option to fail to comply with the provisions of Section 422 of the Code or the Optionee consents to the Acceleration.

(e)MethodofExercise. An Option may be exercised by the Optionee giving written notice, in the manner provided in Section 16, specifying the number of shares with respect to which the Option is then being exercised. The notice shall be accompanied by payment in an amount equal to the exercise price of the shares to be purchased in the form of (i) cash or check payable to the order of the Company or (ii) any other lawful means authorized by the Committee (including exercise for the net number of shares available or delivery to the Company of shares of Stock having a Market Value equal to the exercise price of the shares to be purchased). As long as the Stock is traded on an established market, if authorized by the Committee, payment of any exercise price may also be made through and under the terms and conditions of any formal cashless exercise program authorized by the Company entailing the sale of the Stock subject to an Option in a brokered transaction (other than to the Company). Receipt by the Company of such notice and payment in any authorized or combination of authorized means shall constitute the exercise of the Option. Within thirty (30) days thereafter but subject to the remaining provisions of the Plan, the Company shall deliver or cause to be delivered to the Optionee or his agent a certificate or certificates for the number of shares then being purchased. Such shares shall be fully paid and nonassessable.

(f)LimitonIncentiveOptionCharacterization. An Incentive Option shall be considered to be an Incentive Option only to the extent that the number of shares of Stock for which the Option first becomes exercisable in a calendar year do not have an aggregate Market Value (as of the date of the grant of the Option) in excess of the “current limit”. The current limit for any Optionee for any calendar year shall be $100,000minus the aggregate Market Value at the date of grant of the number of shares of Stock available for purchase for the first time in the same year under each other Incentive Option previously granted to the Optionee under the Plan, and under each other incentive stock option previously granted to the Optionee under any other incentive stock option plan of the Company and its Affiliates, after December 31, 1986. Any shares of Stock which would cause the foregoing limit to be violated shall be deemed to have been granted under a separate Nonstatutory Option, otherwise identical in its terms to those of the Incentive Option.

(g)NotificationofDisposition. Each person exercising any Incentive Option granted under the Plan shall be deemed to have covenanted with the Company to report to the Company any disposition of such shares prior to the expiration of the holding periods specified by Section 422(a)(1) of the Code and, if and to the extent that the realization of income in such a disposition imposes upon the Company federal, state, local or other withholding tax requirements, or any such withholding is required to secure for the Company an otherwise available tax deduction, to remit to the Company an amount in cash sufficient to satisfy those requirements.

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7.2StockAppreciationRights.

(a)TandemorStand-Alone. Stock Appreciation Rights may be granted in tandem with an Option (at or, in the case of a Nonstatutory Option, after, the award of the Option), or alone and unrelated to an Option. Stock Appreciation Rights in tandem with an Option shall terminate to the extent that the related Option is exercised, and the related Option shall terminate to the extent that the tandem Stock Appreciation Rights are exercised.

(b)ExercisePrice. Stock Appreciation Rights shall have an exercise price of not less than the Market Value of the Stock on the date of award, or in the case of Stock Appreciation Rights in tandem with Options, the exercise price of the related Option.

(c)OtherTerms. Except as the Committee may deem inappropriate or inapplicable in the circumstances, Stock Appreciation Rights shall be subject to terms and conditions substantially similar to those applicable to a Nonstatutory Option. In addition, an SAR related to an Option which can only be exercised during limited periods following a Change of Control may entitle the Participant to receive an amount based upon the highest price paid or offered for Stock in any transaction relating to the Change of Control or paid during the thirty (30) day period immediately preceding the occurrence of the Change of Control in any transaction reported in the stock market in which the Stock is normally traded.

7.3RestrictedStock.

(a)PurchasePrice. Shares of Restricted Stock shall be issued under the Plan for such consideration, in cash, other property or services, or any combination thereof, as is determined by the Committee.

(b)IssuanceofCertificates. Each Participant receiving a Restricted Stock Award, subject to subsection (c) below, shall be issued a stock certificate in respect of such shares of Restricted Stock. Such certificate shall be registered in the name of such Participant, and, if applicable, shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Award substantially in the following form:

The transferability of this certificate and the shares represented by this certificate are subject to the terms and conditions of Comarco, Inc. 2005 Equity Incentive Plan and an Award Agreement entered into by the registered owner and Comarco, Inc. Copies of such Plan and Agreement are on file in the offices of Comarco, Inc.

(c)EscrowofShares. The Committee may require that the stock certificates evidencing shares of Restricted Stock be held in custody by a designated escrow agent (which may but need not be the Company) until the restrictions thereon shall have lapsed, and that the Participant deliver a stock power, endorsed in blank, relating to the Stock covered by such Award.

(d)RestrictionsandRestrictionPeriod. During the Restriction Period applicable to shares of Restricted Stock, such shares shall be subject to limitations on transferability and a Risk of Forfeiture arising on the basis of such conditions related to the performance of services, Company or Affiliate performance or otherwise as the Committee may determine and provide for in the applicable Award Agreement. Any such Risk of Forfeiture may be waived or terminated, or the Restriction Period shortened, at any time by the Committee on such basis as it deems appropriate.

(e)RightsPendingLapseofRiskofForfeitureorForfeitureofAward. Except as otherwise provided in the Plan or the applicable Award Agreement, at all times prior to lapse of any Risk of Forfeiture applicable to, or forfeiture of, an Award of Restricted Stock, the Participant shall have all of the rights of a stockholder of the Company, including the right to vote, and the right to receive any dividends with respect to, the shares of Restricted Stock. The Committee, as determined at the time of Award, may permit or require the payment of cash dividends to be deferred and, if the Committee so determines, reinvested in additional Restricted Stock to the extent shares are available under Section 4.

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(f)LapseofRestrictions. If and when the Restriction Period expires without a prior forfeiture of the Restricted Stock, the certificates for such shares shall be delivered to the Participant promptly if not theretofore so delivered.

7.4RestrictedStockUnits.

(a)Character. Each Restricted Stock Unit shall entitle the recipient to a share of Stock at a close of such Restriction Period as the Committee may establish and subject to a Risk of Forfeiture arising on the basis of such conditions relating to the performance of services, Company or Affiliate performance or otherwise as the Committee may determine and provide for in the applicable Award Agreement. Any such Risk of Forfeiture may be waived or terminated, or the Restriction Period shortened, at any time by the Committee on such basis as it deems appropriate.

(b)FormandTimingofPayment. Payment of earned Restricted Stock Units shall be made in a single lump sum following the close of the applicable Restriction Period. At the discretion of the Committee, Participants may be entitled to receive payments equivalent to any dividends declared with respect to Stock referenced in grants of Restricted Stock Units but only following the close of the applicable Restriction Period and then only if the underlying Stock shall have been earned. Unless the Committee shall provide otherwise, any such dividend equivalents shall be paid, if at all, without interest or other earnings.

7.5PerformanceUnits.

(a)Character. Each Performance Unit shall entitle the recipient to the value of a specified number of shares of Stock, over the initial value for such number of shares, if any, established by the Committee at the time of grant, at the close of a specified Performance Period to the extent specified Performance Goals shall have been achieved.

(b)EarningofPerformanceUnits. The Committee shall set Performance Goals in its discretion which, depending on the extent to which they are met within the applicable Performance Period, will determine the number and value of Performance Units that will be paid out to the Participant. After the applicable Performance Period has ended, the holder of Performance Units shall be entitled to receive payout on the number and value of Performance Units earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding Performance Goals have been achieved.

(c)FormandTimingofPayment. Payment of earned Performance Units shall be made in a single lump sum following the close of the applicable Performance Period. At the discretion of the Committee, Participants may be entitled to receive any dividends declared with respect to Stock which have been earned in connection with grants of Performance Units which have been earned, but not yet distributed to Participants. The Committee may permit or, if it so provides at grant require, a Participant to defer such Participant’s receipt of the payment of cash or the delivery of Stock that would otherwise be due to such Participant by virtue of the satisfaction of any requirements or goals with respect to Performance Units. If any such deferral election is required or permitted, the Committee shall establish rules and procedures for such payment deferrals.

7.6StockGrants. Stock Grants shall be awarded solely in recognition of significant contributions to the success of the Company or its Affiliates, in lieu of compensation otherwise already due and in such other limited circumstances as the Committee deems appropriate. Stock Grants shall be made without forfeiture conditions of any kind.

7.7QualifiedPerformance-BasedAwards.

(a)Purpose. The purpose of this Section 7.7 is to provide the Committee the ability to qualify Awards as “performance-based compensation” under Section 162(m) of the Code. If the Committee, in its discretion, decides to grant an Award as a Qualified Performance-Based Award, the provisions of this Section 7.7 will control over any contrary provision contained in the Plan. In the course of granting any Award, the Committee may specifically designate the Award as intended to qualify as a Qualified Performance-Based Award. However, no

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Award shall be considered to have failed to qualify as a Qualified Performance-Based Award solely because the Award is not expressly designated as a Qualified Performance-Based Award, if the Award otherwise satisfies the provisions of this Section 7.7 and the requirements of Section 162(m) of the Code and the regulations promulgated thereunder applicable to “performance-based compensation.”

(b)Authority. All grants of Awards intended to qualify as Qualified Performance-Based Awards and determination of terms applicable thereto shall be made by the Committee or, if not all of the members thereof qualify as “outside directors” within the meaning of applicable IRS regulations under Section 162 of the Code, a subcommittee of the Committee consisting of such of the members of the Committee as do so qualify. Any action by such a subcommittee shall be considered the action of the Committee for purposes of the Plan.

(b)Applicability. This Section 7.7 will apply only to those Covered Employees, or to those persons who the Committee determines are reasonably likely to become Covered Employees in the period covered by an Award, selected by the Committee to receive Qualified Performance-Based Awards. The Committee may, in its discretion, grant Awards to Covered Employees that do not satisfy the requirements of this Section 7.7.

(c)DiscretionofCommitteewithRespecttoQualifiedPerformance-BasedAwards. Options may be granted as Qualified Performance-Based Awards in accordance with Section 7.1, except that the exercise price of any Option intended to qualify as a Qualified Performance-Based Award shall in no event be less that the Market Value of the Stock on the date of grant. With regard to other Awards intended to qualify as Qualified Performance-Based Awards, such as Restricted Stock, Restricted Stock Units, or Performance Units, the Committee will have full discretion to select the length of any applicable Restriction Period or Performance Period, the kind and/or level of the applicable Performance Goal, and whether the Performance Goal is to apply to the Company, a Subsidiary or any division or business unit or to the individual. Any Performance Goal or Goals applicable to Qualified Performance-Based Awards shall be objective, shall be established not later than ninety (90) days after the beginning of any applicable Performance Period (or at such other date as may be required or permitted for “performance-based compensation” under Section 162(m) of the Code) and shall otherwise meet the requirements of Section 162(m) of the Code, including the requirement that the outcome of the Performance Goal or Goals be substantially uncertain (as defined in the regulations under Section 162(m) of the Code) at the time established.

(d)PaymentofQualifiedPerformance-BasedAwards. A Participant will be eligible to receive payment under a Qualified Performance-Based Award which is subject to achievement of a Performance Goal or Goals only if the applicable Performance Goal or Goals period are achieved within the applicable Performance Period, as determined by the Committee. In determining the actual size of an individual Qualified Performance-Based Award, the Committee may reduce or eliminate the amount of the Qualified Performance-Based Award earned for the Performance Period, if in its sole and absolute discretion, such reduction or elimination is appropriate.

(e)MaximumAwardPayable. The maximum Qualified Performance-Based Award payment to any one Participant under the Plan for a Performance Period is the number of shares of Stock set forth in Section 4 above, or if the Qualified Performance-Based Award is paid in cash, that number of shares multiplied by the Market Value of the Stock as of the date the Qualified Performance-Based Award is granted.

(f)LimitationonAdjustmentsforCertainEvents. No adjustment of any Qualified Performance-Based Award pursuant to Section 8 shall be made except on such basis, if any, as will not cause such Award to provide other than “performance-based compensation” within the meaning of Section 162(m) of the Code.

7.8AwardstoParticipantsOutsidetheUnitedStates. The Committee may modify the terms of any Award under the Plan granted to a Participant who is, at the time of grant or during the term of the Award, resident or primarily employed outside of the United States in any manner deemed by the Committee to be necessary or appropriate in order that the Award shall conform to laws, regulations, and customs of the country in which the Participant is then resident or primarily employed, or so that the value and other benefits of the Award to the Participant, as affected by foreign tax laws and other restrictions applicable as a result of the Participant’s residence or employment abroad, shall be comparable to the value of such an Award to a Participant who is resident or primarily employed in the United States. The Committee may establish supplements to, or amendments, restatements, or alternative versions of the Plan for the purpose of granting and administrating any such modified

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Award. No such modification, supplement, amendment, restatement or alternative version may increase the share limit of Section 4.

8. Adjustment Provisions

8.1AdjustmentforCorporateActions. All of the share numbers set forth in the Plan reflect the capital structure of the Company as of the date of the Board’s initial adoption of the Plan. Subject to Section 8.2, if subsequent to that date the outstanding shares of Stock (or any other securities covered by the Plan by reason of the prior application of this Section) are increased, decreased, or exchanged for a different number or kind of shares or other securities, or if additional shares or new or different shares or other securities are distributed with respect to shares of Stock, through merger, consolidation, sale of all or substantially all the property of the Company, reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split, or other similar distribution with respect to such shares of Stock, an appropriate and proportionate adjustment will be made in (i) the maximum numbers and kinds of shares provided in Section 4, (ii) the numbers and kinds of shares or other securities subject to the then outstanding Awards, (iii) the exercise price for each share or other unit of any other securities subject to then outstanding Options and Stock Appreciation Rights (without change in the aggregate purchase price as to which such Options or Rights remain exercisable), and (iv) the repurchase price of each share of Restricted Stock then subject to a Risk of Forfeiture in the form of a Company repurchase right.

8.2TreatmentinAcquisitions. Subject to any provisions of then outstanding Awards granting greater rights to the holders thereof, in the event of an Acquisition in which outstanding Awards are not Accelerated in full pursuant to Section 9, any then outstanding Awards shall nevertheless Accelerate to the extent not assumed or replaced by the successor or acquiring entity or parent thereof by comparable Awards referencing shares of the capital stock of the successor or acquiring entity or parent thereof, and thereafter (or after a reasonable period following the Acquisition, as determined by the Committee) terminate. As to any one or more outstanding Awards, however, the Committee may also, either in advance of an Acquisition or at the time thereof and upon such terms as it may deem appropriate, provide for the Acceleration of such outstanding Awards or in lieu thereof provide for the termination of the Award in exchange for a cash payment in an amount equal to the difference between the Market Value of the shares of Stock covered by the Award and the aggregated exercise price (if any) of the Award. Each outstanding Award that is assumed in connection with an Acquisition, or is otherwise to continue in effect subsequent to the Acquisition, will be appropriately adjusted, immediately after the Acquisition, as to the number and class of securities and other relevant terms in accordance with Section 8.1.

8.3DissolutionorLiquidation. Upon dissolution or liquidation of the Company, other than as part of an Acquisition or similar transaction, each outstanding Option and SAR shall terminate, but the Optionee or SAR holder (if at the time in the employ of or other associated with the Company or any of its Affiliates) shall have the right, immediately prior to the dissolution or liquidation, to exercise the Option or SAR to the extent exercisable on the date of dissolution or liquidation.

8.4AdjustmentofAwardsUpontheOccurrenceofCertainUnusualorNonrecurringEvents. In the event of any corporate action not specifically covered by the preceding Sections, including but not limited to an extraordinary cash distribution on Stock, a corporate separation or other reorganization or liquidation, the Committee may make such adjustment of outstanding Awards and their terms, if any, as it, in its sole discretion, may deem equitable and appropriate in the circumstances.

8.5RelatedMatters. Any adjustment in Awards made pursuant to this Section 8 shall be determined and made, if at all, by the Committee and shall include any correlative modification of terms, including of Option exercise prices, rates of vesting or exercisability, Risks of Forfeiture, applicable repurchase prices for Restricted Stock, and Performance Goals and other financial objectives which the Committee may deem necessary or appropriate so as to ensure the rights of the Participants in their respective Awards are not substantially diminished nor enlarged as a result of the adjustment and corporate action other than as expressly contemplated in this Section 8. No fraction of a share shall be purchasable or deliverable upon exercise, but in the event any adjustment hereunder of the number of shares covered by an Award shall cause such number to include a fraction of a share, such number of shares shall be adjusted to the nearest smaller whole number of shares. No adjustment of an Option exercise price per share pursuant to this Section 8 shall result in an exercise price which is less than the par value of the Stock.

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9. Change of Control

Except as otherwise provided below, upon the occurrence of a Change of Control:

(a) any and all Options and Stock Appreciation Rights not already exercisable in full shall continue to vest and become exercisable after the Change of Control in accordance with the terms of the Plan and the applicable Award Agreement;provided, however, that such Options and Stock Appreciation Rights shall Accelerate in full upon any termination of the Participant’s employment or other association with the Company and its Affiliates (or any successor thereto) by the Company or its Affiliate (or any successor), other than for cause, within one year following the Change of Control and;

(b) any Restricted Stock and Restricted Stock Units still subject to a Risk of Forfeiture at the date of the Change of Control which Risk is not based on achievement of Performance Goals shall continue to vest after the Change of Control in accordance with the terms of the Plan and the applicable Award Agreement;provided, however, that such Restricted Stock and Restricted Stock Units shall Accelerate in full upon any termination of the Participant’s employment or other association with the Company and its Affiliates (or any successor thereto) by the Company or its Affiliate (or any successor), other than for cause, within one year following the Change of Control; and

(c) all outstanding Awards of Restricted Stock and Restricted Stock Units conditioned on the achievement of Performance Goals and the target payout opportunities attainable under outstanding Performance Units shall be deemed to have been satisfied as of the effective date of the Change of Control as to a pro rata number of shares based on the assumed achievement of all relevant Performance Goals and the length of time within the Performance Period which has elapsed prior to the Change of Control and the balance forfeited. All such Awards of Performance Units, Restricted Stock Units shall be paid to the extent earned to Participants in accordance with their terms within thirty (30) days following the effective date of the Change of Control.

None of the foregoing shall apply, however, (i) in the case of a Qualified Performance-Based Award specifically designated as such by the Committee at the time of grant (except to the extent allowed by Section 162(m) of the Code), (ii) in the case of any Award pursuant to an Award Agreement requiring other or additional terms upon a Change of Control (or similar event), or (iii) if specifically prohibited under applicable laws, or by the rules and regulations of any governing governmental agencies or national securities exchanges.

10. Settlement of Awards

10.1InGeneral. Options and Restricted Stock shall be settled in accordance with their terms. All other Awards may be settled in cash, Stock, or other Awards, or a combination thereof, as determined by the Committee at or after grant and subject to any contrary Award Agreement. The Committee may not require settlement of any Award in Stock pursuant to the immediately preceding sentence to the extent issuance of such Stock would be prohibited or unreasonably delayed by reason of any other provision of the Plan.

10.2ViolationofLaw. Notwithstanding any other provision of the Plan or the relevant Award Agreement, if, at any time, in the reasonable opinion of the Company, the issuance of shares of Stock covered by an Award may constitute a violation of law, then the Company may delay such issuance and the delivery of a certificate for such shares until (i) approval shall have been obtained from such governmental agencies, other than the Securities and Exchange Commission, as may be required under any applicable law, rule, or regulation and (ii) in the case where such issuance would constitute a violation of a law administered by or a regulation of the Securities and Exchange Commission, one of the following conditions shall have been satisfied:

(a) the shares are at the time of the issue of such shares effectively registered under the Securities Act of 1933; or

(b) the Company shall have determined, on such basis as it deems appropriate (including an opinion of counsel in form and substance satisfactory to the Company) that the sale, transfer, assignment, pledge,

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encumbrance or other disposition of such shares or such beneficial interest, as the case may be, does not require registration under the Securities Act of 1933, as amended or any applicable State securities laws.

The Company shall make all reasonable efforts to bring about the occurrence of said events.

10.3CorporateRestrictionsonRightsinStock. Any Stock to be issued pursuant to Awards granted under the Plan shall be subject to all restrictions upon the transfer thereof which may be now or hereafter imposed by the charter, certificate or articles, and by-laws, of the Company.

10.4InvestmentRepresentations. The Company shall be under no obligation to issue any shares covered by any Award unless the shares to be issued pursuant to Awards granted under the Plan have been effectively registered under the Securities Act of 1933, as amended, or the Participant shall have made such written representations to the Company (upon which the Company believes it may reasonably rely) as the Company may deem necessary or appropriate for purposes of confirming that the issuance of such shares will be exempt from the registration requirements of that Act and any applicable state securities laws and otherwise in compliance with all applicable laws, rules and regulations, including but not limited to that the Participant is acquiring the shares for his or her own account for the purpose of investment and not with a view to, or for sale in connection with, the distribution of any such shares.

10.5Registration. If the Company shall deem it necessary or desirable to register under the Securities Act of 1933, as amended or other applicable statutes any shares of Stock issued or to be issued pursuant to Awards granted under the Plan, or to qualify any such shares of Stock for exemption from the Securities Act of 1933, as amended or other applicable statutes, then the Company shall take such action at its own expense. The Company may require from each recipient of an Award, or each holder of shares of Stock acquired pursuant to the Plan, such information in writing for use in any registration statement, prospectus, preliminary prospectus or offering circular as is reasonably necessary for that purpose and may require reasonable indemnity to the Company and its officers and directors from that holder against all losses, claims, damage and liabilities arising from use of the information so furnished and caused by any untrue statement of any material fact therein or caused by the omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made. In addition, the Company may require of any such person that he or she agree that, without the prior written consent of the Company or the managing underwriter in any public offering of shares of Stock, he or she will not sell, make any short sale of, loan, grant any option for the purchase of, pledge or otherwise encumber, or otherwise dispose of, any shares of Stock during the 180 day period commencing on the effective date of the registration statement relating to the underwritten public offering of securities. Without limiting the generality of the foregoing provisions of this Section 10.5, if in connection with any underwritten public offering of securities of the Company the managing underwriter of such offering requires that the Company’s directors and officers enter into a lock-up agreement containing provisions that are more restrictive than the provisions set forth in the preceding sentence, then (a) each holder of shares of Stock acquired pursuant to the Plan (regardless of whether such person has complied or complies with the provisions of clause (b) below) shall be bound by, and shall be deemed to have agreed to, the same lock-up terms as those to which the Company’s directors and officers are required to adhere; and (b) at the request of the Company or such managing underwriter, each such person shall execute and deliver a lock-up agreement in form and substance equivalent to that which is required to be executed by the Company’s directors and officers.

10.6PlacementofLegends;StopOrders;etc. Each share of Stock to be issued pursuant to Awards granted under the Plan may bear a reference to the investment representation made in accordance with Section 10.4 in addition to any other applicable restriction under the Plan and the terms of the Award and to the fact that no registration statement has been filed with the Securities and Exchange Commission in respect to such shares of Stock. All certificates for shares of Stock or other securities delivered under the Plan shall be subject to such stock transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations, and other requirements of any stock exchange upon which the Stock is then listed, and any applicable federal or state securities law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.

10.7TaxWithholding. Whenever shares of Stock are issued or to be issued pursuant to Awards granted under the Plan, the Company shall have the right to require the recipient to remit to the Company an amount

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sufficient to satisfy federal, state, local or other withholding tax requirements if, when, and to the extent required by law (whether so required to secure for the Company an otherwise available tax deduction or otherwise) prior to the delivery of any certificate or certificates for such shares. The obligations of the Company under the Plan shall be conditional on satisfaction of all such withholding obligations and the Company shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the recipient of an Award. However, in such cases Participants may elect, subject to the approval of the Committee, acting in its sole discretion, to satisfy an applicable withholding requirement, in whole or in part, by having the Company withhold shares to satisfy their tax obligations. Participants may only elect to have Shares withheld having a Market Value on the date the tax is to be determined equal to the minimum statutory total tax which could be imposed on the transaction. All elections shall be irrevocable, made in writing, signed by the Participant, and shall be subject to any restrictions or limitations that the Committee deems appropriate.

11. Reservation of Stock

The Company shall at all times during the term of the Plan and any outstanding Awards granted hereunder reserve or otherwise keep available such number of shares of Stock as will be sufficient to satisfy the requirements of the Plan (if then in effect) and the Awards and shall pay all fees and expenses necessarily incurred by the Company in connection therewith.

12. Limitation of Rights in Stock; No Special Service Rights

A Participant shall not be deemed for any purpose to be a stockholder of the Company with respect to any of the shares of Stock subject to an Award, unless and until a certificate shall have been issued therefor and delivered to the Participant or his agent. Any Stock to be issued pursuant to Awards granted under the Plan shall be subject to all restrictions upon the transfer thereof which may be now or hereafter imposed by the Certificate of Incorporation and the By-laws of the Company. Nothing contained in the Plan or in any Award Agreement shall confer upon any recipient of an Award any right with respect to the continuation of his or her employment or other association with the Company (or any Affiliate), or interfere in any way with the right of the Company (or any Affiliate), subject to the terms of any separate employment or consulting agreement or provision of law or corporate charter, certificate or articles, or by-laws, to the contrary, at any time to terminate such employment or consulting agreement or to increase or decrease, or otherwise adjust, the other terms and conditions of the recipient’s employment or other association with the Company and its Affiliates.

13. Unfunded Status of Plan

The Plan is intended to constitute an “unfunded” plan for incentive compensation, and the Plan is not intended to constitute a plan subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended. With respect to any payments not yet made to a Participant by the Company, nothing contained herein shall give any such Participant any rights that are greater than those of a general creditor of the Company. In its sole discretion, the Committee may authorize the creation of trusts or other arrangements to meet the obligations created under the Plan to deliver Stock or payments with respect to Options, Stock Appreciation Rights and other Awards hereunder,provided, however, that the existence of such trusts or other arrangements is consistent with the unfunded status of the Plan.

14. Nonexclusivity of the Plan

Neither the adoption of the Plan by the Board nor the submission of the Plan to the stockholders of the Company shall be construed as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including without limitation, the granting of stock options and restricted stock other than under the Plan, and such arrangements may be either applicable generally or only in specific cases.

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15. Termination and Amendment of the Plan

The Board may at any time terminate the Plan or make such modifications of the Plan as it shall deem advisable. Unless the Board otherwise expressly provides, no amendment of the Plan shall affect the terms of any Award outstanding on the date of such amendment.

The Committee may amend the terms of any Award theretofore granted, prospectively or retroactively, provided that the Award as amended is consistent with the terms of the Plan. Also within the limitations of the Plan, the Committee may modify, extend or assume outstanding Awards or may accept the cancellation of outstanding Awards or of outstanding stock options or other equity-based compensation awards granted by another issuer in return for the grant of new Awards for the same or a different number of shares and on the same or different terms and conditions (including but not limited to the exercise price of any Option). Furthermore, the Committee may at any time (a) offer to buy out for a payment in cash or cash equivalents an Award previously granted or (b) authorize the recipient of an Award to elect to cash out an Award previously granted, in either case at such time and based upon such terms and conditions as the Committee shall establish.

Notwithstanding the foregoing, however, neither the Board nor the Committee shall reduce the exercise price of any outstanding Option or SAR, or the purchase price of any Restricted Stock, or cancel and reissue any Award at a lower exercise or purchase price, unless such action is approved by the shareholders of the Company or results from the application of the adjustment provisions of Article 8 of the Plan. In addition, no amendment or modification of the Plan by the Board, or of an outstanding Award by the Committee, shall impair the rights of the recipient of any Award outstanding on the date of such amendment or modification or such Award, as the case may be, without the Participant’s consent;provided, however, that no such consent shall be required if (i) the Board or Committee, as the case may be, determines in its sole discretion and prior to the date of any Change of Control that such amendment or alteration either is required or advisable in order for the Company, the Plan or the Award to satisfy any law or regulation, including without limitation the provisions of Section 409A of the Code or to meet the requirements of or avoid adverse financial accounting consequences under any accounting standard, or (ii) the Board or Committee, as the case may be, determines in its sole discretion that such amendment or alteration is not reasonably likely to significantly diminish the benefits provided under the Award, or that any such diminution has been adequately compensated.

16. Notices and Other Communications

Any notice, demand, request or other communication hereunder to any party shall be deemed to be sufficient if contained in a written instrument delivered in person or duly sent by first class registered, certified or overnight mail, postage prepaid, or telecopied with a confirmation copy by regular, certified or overnight mail, addressed or telecopied, as the case may be, (i) if to the recipient of an Award, at his or her residence address last filed with the Company and (ii) if to the Company, at its principal place of business, addressed to the attention of its Treasurer, or to such other address or telecopier number, as the case may be, as the addressee may have designated by notice to the addressor. All such notices, requests, demands and other communications shall be deemed to have been received: (i) in the case of personal delivery, on the date of such delivery; (ii) in the case of mailing, when received by the addressee; and (iii) in the case of facsimile transmission, when confirmed by facsimile machine report.

17. Governing Law

The Plan and all Award Agreements and actions taken thereunder shall be governed, interpreted and enforced in accordance with the laws of the State of California without regard to the conflict of laws principles thereof.

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PROXY

COMARCO, INC.

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR

THE ANNUAL MEETING OF SHAREHOLDERS CALLED FOR JUNE 20, 2006

The undersigned shareholder(s) of COMARCO, Inc. (the “Company”) a California corporation, having received the Notice of Annual Meeting of Shareholders and Proxy Statement dated May 12, 2006, hereby appoints, Don M. Bailey and Peggy L. Vessell as Proxies, each with the power to appoint a substitute, and hereby authorizes them to represent the undersigned at the Annual Meeting of Shareholders of COMARCO, Inc. to be held on June 20, 2006 at 10:00 AM at the Company’s Offices at 2 Cromwell; Irvine California, 92618 and at any adjournments thereof, and to vote all shares of Common Stock which the undersigned would be entitled to vote thereat on all matters set forth below, as described in the accompanying Proxy Statement:

(continued and to be signed on the reverse side)

	(continued from other side)
1.	ELECTION OF DIRECTORS:		4	IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
	¨ FOR all nominees listed below	¨ WITHHOLD AUTHORITY to vote for all nominees listed below
	(INSTRUCTION: To withhold authority to vote for an individual nominee, mark the box next to the nominee’s name below. Names not marked will receive a vote FOR)			In the event the Directors are to be elected by cumulative voting, the Proxies will have the discretion to cumulate votes and to distribute such votes among all nominees (or if authority to vote for any nominee or nominees has been withheld, among the remaining nominees, if any) in whatever manner they deem appropriate.
	¨ Don M. Bailey,¨ Thomas A. Franza,¨ Erik H. van der Kaay
	¨ Gerald D. Griffin,¨ Jeffrey R. Hultman
2	TO APPROVE THE ADOPTION OF THE COMPANY’S 2005 EQUITY INCENTIVE PLAN.,AND
	¨FOR        ¨ AGAINST        ¨ ABSTAIN			THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ALL OF THE DIRECTORS NOMINATED BY THE BOARD.
3	TO RATIFY THE APPOINTMENT BY THE COMPANY’S AUDIT COMMITTEE OF BDO SEIDMAN, LLP AS THE COMPANY’S INDEPENDENT REGISTER PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING JANUARY 31, 2007; and
	¨ FOR        ¨ AGAINST         ¨ ABSTAIN		PLEASE MARK SIGN, SIGN, DATE AND RETURN THIS PROXY IN THE ACCOMPANYING PREPAID ENVELOPE
				Dated: _______________________________, 2006
				______________________________________________________
				______________________________________________________
				(Signature)
				______________________________________________________
				(Signature)
				(Please sign exactly as name appears hereon. When shares are held by joint tenants, both should sign. When signing as attorney, executor, administrator trustee or guardian, please set forth your full title. If signer is a corporation, please sign the full corporate name by President or other authorized officer. If a partnership, please sign in partnership name by authorized person.)