SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
(Mark One):
| x | ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2005
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 0-5449
| A. | Full title of the plan and address of the plan, if different from that of the issuer named below: |
COMARCO, INC.
SAVINGS AND RETIREMENT PLAN
| B. | Name of issuer of the securities held pursuant to the plan and the address of its principal executive office: |
Comarco, Inc.
2 Cromwell
Irvine, CA 92618
COMARCO, INC.
SAVINGS AND RETIREMENT PLAN
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors
COMARCO, Inc.:
We have audited the accompanying statements of net assets available for benefits of the Comarco, Inc. Savings and Retirement Plan (the “Plan”) as of December 31, 2005 and 2004, and the related statements of changes in net assets available for benefits for the years ended December 31, 2005, 2004 and 2003. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2005 and 2004 and the changes in net assets available for benefits for the years ended December 31, 2005, 2004 and 2003 in conformity with accounting principles generally accepted in the United States of America.
Our audit of the Plan’s financial statements as of December 31, 2005 and the year then ended was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule - Schedule H, Line 4i- Schedule of Assets (Held at End of Year) is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The supplemental schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
|
|
/s/ Lesley, Thomas, Schwarz & Postma, Inc. |
Newport Beach, California June 26, 2006 |
COMARCO, INC.
SAVINGS AND RETIREMENT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
| | | | | | |
| | | December 31, |
| | | 2005 | | 2004 |
ASSETS | | | | | | |
Investments, at fair value (Note 3) | | $ | 18,767,000 | | $ | 17,498,000 |
| | | | | | |
Net assets available for benefits | | $ | 18,767,000 | | $ | 17,498,000 |
| | | | | | |
The accompanying notes are an integral part of these financial statements.
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COMARCO, INC.
SAVINGS AND RETIREMENT PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
| | | | | | | | | |
| | | Years ended December 31, |
| | | 2005 | | 2004 | | 2003 |
Net assets available for benefits, beginning of year | | $ | 17,498,000 | | $ | 17,069,000 | | $ | 13,599,000 |
| | | | | | | | | |
Additions: | | | | | | | | | |
Contributions: | | | | | | | | | |
Employer | | | 407,000 | | | 391,000 | | | 408,000 |
Employee | | | 692,000 | | | 619,000 | | | 685,000 |
Rollovers | | | 65,000 | | | 74,000 | | | 66,000 |
Interest and dividends | | | 683,000 | | | 108,000 | | | 91,000 |
Net realized and unrealized appreciation of investments | | | 963,000 | | | 668,000 | | | 2,968,000 |
Other income | | | 3,000 | | | 4,000 | | | — |
| | | | | | | | | |
Total additions | | | 2,813,000 | | | 1,864,000 | | | 4,218,000 |
| | | | | | | | | |
Deductions: | | | | | | | | | |
Plan distributions | | | 1,541,000 | | | 1,352,000 | | | 685,000 |
Administrative expenses (Note 4) | | | 3,000 | | | 83,000 | | | 63,000 |
| | | | | | | | | |
Total deductions | | | 1,544,000 | | | 1,435,000 | | | 748,000 |
| | | | | | | | | |
Net increase | | | 1,269,000 | | | 429,000 | | | 3,470,000 |
| | | | | | | | | |
Net assets available for benefits, end of year | | $ | 18,767,000 | | $ | 17,498,000 | | $ | 17,069,000 |
| | | | | | | | | |
The accompanying notes are an integral part of these financial statements.
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COMARCO, INC.
SAVINGS AND RETIREMENT PLAN
NOTES TO FINANCIAL STATEMENTS
| 1. | Description of the Plan |
The following description of the Comarco, Inc. Savings and Retirement Plan (Plan) provides only general information. Participants should refer to the Plan agreement for a more complete description of the Plan’s provisions.
General
The Plan is a defined contribution plan covering substantially all full-time employees of Comarco, Inc. and subsidiaries (“the Company” or “the Plan Sponsor”) who have at least 30 days of service and are age 18 or older. Employees are eligible to participate in the Plan on the first of the month following 30 days of service. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). For Plan purposes, all participants are employed in one of two separate business areas; Comarco, Inc. or Comarco Wireless Technologies, Inc. (“Wireless”).
Contributions
Employee contributions to the Plan may range from 1% to 20% of eligible earnings for participants of Comarco, Inc. and Wireless, subject to certain limitations. The Company contributes 100% of the first 5% of earnings that a participant contributes to the Plan. In addition, the Company may, at its discretion, make an additional contribution each year to the Plan. There were no discretionary contributions made to the Plan during each of the years in the three year period ended December 31, 2005. Contributions are subject to certain limitations.
Participant Accounts
Each participant’s account is credited with the participant’s contribution and allocations of the Company’s matching contribution plus Plan earnings less Plan expenses not paid by the Company. Allocations are based on participant earnings or account balances, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s account.
Loans
Effective January 1, 2000, the Plan permits participants to obtain two loans from their account balances, subject to certain IRS limitations. The loans are repaid over fixed time periods covering up to 5 years (15 years for the purchase of a principal residence) with interest rates ranging from 6.0% to 9.0%. All loans are secured by the participant’s account balance.
Vesting
Participants are vested immediately in their voluntary contributions plus actual earnings thereon. Company contributions plus actual earnings thereon generally vest ratably over a four year period.
Exceptions to the vesting schedules for Comarco, Inc. and Wireless are the Company contributions that are invested in the Company’s Stock-100 Fund, which are immediately 100% vested. (The Stock 100 Fund is no longer an investment option for the participants).
During 2000 the Company underwent a divestiture of several major divisions. All participants who were employed in these divisions at the date of the divestiture were immediately 100% vested in all Company contributions.
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COMARCO, INC.
SAVINGS AND RETIREMENT PLAN
NOTES TO FINANCIAL STATEMENTS
Forfeited Amounts
At December 31, 2005 and 2004, forfeited non-vested accounts totaled $87,000 and $70,000, respectively. These accounts can be used to restore the accounts of former participants or reduce Plan expenses or Company contributions. In 2005, 2004, and 2003, Company contributions totaling $0, $78,000, and $165,000 were made from forfeited non-vested accounts, respectively. Also, in 2005, 2004, and 2003, Plan expenses were reduced by $0, $6,000, and $6,000 from forfeited non-vested accounts, respectively.
Payment of Benefits
On termination of service due to death, disability or retirement, a participant may elect to receive either a lump-sum amount equal to the value of his or her account, annual installments, or annuity payments if the participant was hired before January 1, 1989. Participants with accrued benefits greater than $5,000 may elect to delay receiving benefits until reaching age 70 1/2.
Investment Options
As of December 31, 2005, participant contributions to the Plan can be made to one of the twenty one investment options (ML Ret Preservation Trust, Loomis Sayles Bond Fund Admin, Lord Abbett Small Cap Value FD P, Hotchkis & Wiley Large Cap Value A, American Cap World Growth & Income R3, American Growth FD of Amer R3, American Income FD OF, Scudder Rreef Real Estate Sec, Scudder Dreman Small Cap Value FD A, Blackrock Govt Inc Port CL A, Oppenheimer Dev Mkts FD CL A, ML S&P 500 Index Fund CL I, Thornburg Inter Value FD A, Fidelity Adv Small Cap FD CL T, Davis NY Venture FD CL A, Davis Series Financial FD CL A, EV Worldwide Health Sciences, Seligman Comm & Info FD CL A, Calvert Income Fund, Allianz OCC Renaissance Fund A, or Comarco, Inc. common stock) as designated by the participant.
| 2. | Significant Accounting Policies |
Basis of Accounting
The Plan prepares its financial statements on the accrual basis of accounting.
Non Distributed Benefits
The Plan does not accrue non-distributed benefits related to participants who have withdrawn from the Plan, but recognizes such benefits as a deduction from net assets in the period in which such benefits are paid.
Investment Valuation and Income Recognition
The mutual funds and Comarco, Inc. common stock are valued at the quoted market prices. The common / collective trust fund is valued by a financial institution based on the quoted market values of the underlying investments held by the fund. The difference between cost and fair value of investments is recognized as a realized gain or loss at the date of disposition using the first-in, first-out method. Purchases and dispositions are recorded on a trade-date basis. Dividends are recorded on the ex-dividend date. Participant loans are valued at cost which approximates fair value.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and changes therein, and disclosure of contingent assets and liabilities. Actual results could differ from those estimates.
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COMARCO, INC.
SAVINGS AND RETIREMENT PLAN
NOTES TO FINANCIAL STATEMENTS
Contribution Funding
Participant contributions and employer matching contributions are funded on a bi-weekly basis.
All amounts contributed to the Plan have been deposited with the Funding Agent, Merrill Lynch Trust Company, FSB. The following table presents the fair values of investments. Investments that represent 5% or more of the Plan’s net assets are separately identified.
| | | | | | | | | | | | |
Identity of Party and Description of Asset | | December 31, | |
| | 2005 | | | 2004 | |
| | Shares/ Units | | Fair Value | | | Shares/ Units | | Fair Value | |
Cash and Cash Equivalents: | | | | | | | | | | | | |
Cash | | — | | $ | — | | | — | | $ | 130,000 | |
| | | | | | | | | | | | |
Common/Collective Trust Fund: | | | | | | | | | | | | |
ML RET Preservation Trust | | 3,384,000 | | | 3,384,000 | * | | 3,977,000 | | | 3,977,000 | * |
| | | | | | | | | | | | |
Mutual Funds: | | | | | | | | | | | | |
Loomis Sayles Bond Fund Admin | | 30,000 | | | 399,000 | | | 17,000 | | | 238,000 | |
Lord Abbett Small Cap Value FD P | | 3,000 | | | 98,000 | | | 2,000 | | | 46,000 | |
Hotchkis & Wiley Large Cap Val | | 113,000 | | | 2,638,000 | * | | 113,000 | | | 2,552,000 | * |
American Cap World GR & INC | | 3,000 | | | 99,000 | | | — | | | 6,000 | |
American Growth FD of Amer R3 | | 93,000 | | | 2,844,000 | * | | 98,000 | | | 2,659,000 | * |
American Income FD OF | | 3,000 | | | 50,000 | | | — | | | 3,000 | |
Scudder Rreef Real Estate Sec | | 3,000 | | | 57,000 | | | 1,000 | | | 27,000 | |
Scudder Dreman Small Cap Value | | 23,000 | | | 762,000 | | | 13,000 | | | 438,000 | |
Blackrock Govt Inc Port CL A | | 65,000 | | | 707,000 | | | 70,000 | | | 779,000 | |
Oppenheimer Dev Mkts FD CL A | | 16,000 | | | 588,000 | | | 11,000 | | | 287,000 | |
ML S&P 500 Index Fund CL I | | 51,000 | | | 776,000 | | | 41,000 | | | 609,000 | |
Thornburg Inter Value FD A | | 70,000 | | | 1,646,000 | * | | 64,000 | | | 1,302,000 | * |
Fidelity Adv Small Cap FD CL T | | 108,000 | | | 2,641,000 | * | | 108,000 | | | 2,651,000 | * |
Davis NY Venture FD CL A | | 3,000 | | | 87,000 | | | 2,000 | | | 59,000 | |
Pimco Pea Renaissance FD CL A | | — | | | — | | | 2,000 | | | 45,000 | |
Davis Series Financial FD CL A | | — | | | 4,000 | | | — | | | — | |
EV Worldwide Health Sciences | | 2,000 | | | 18,000 | | | — | | | — | |
Seligman Comm & Info FD CL A | | — | | | 8,000 | | | — | | | — | |
Calvert Income Fund | | 1,000 | | | 18,000 | | | — | | | — | |
Allianz OCC Renaissance Fund A | | 6,000 | | | 137,000 | | | — | | | — | |
| | | | | | | | | | | | |
Total Mutual Funds | | | | | 13,577,000 | | | | | | 11,701,000 | |
Comarco, Inc. common stock | | 176,000 | | | 1,754,000 | * | | 185,000 | | | 1,595,000 | * |
Participant Loans | | | | | 52,000 | | | | | | 95,000 | |
| | | | | | | | | | | | |
Total Investments | | | | $ | 18,767,000 | | | | | $ | 17,498,000 | |
| | | | | | | | | | | | |
| * | Represents 5% or more of Plan net assets. |
6
COMARCO, INC.
SAVINGS AND RETIREMENT PLAN
NOTES TO FINANCIAL STATEMENTS
The Plan provides that all reasonable expenses for custodial costs and fees incurred for the benefit of the Plan are to be paid by the Plan to the extent that they are not paid by the Company.
The Internal Revenue Service has determined and informed the Company by letter dated October 14, 2005, that the Plan and all amendments adopted from September 25, 1995 to September 20, 2005, and the related trust are designed in accordance with the applicable sections of the Internal Revenue Code (IRC).
The Company intends to continue the Plan indefinitely but reserves the right at any time to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, participants would become 100% vested in their employer contributions.
Certain Plan investments are managed by Merrill Lynch Trust Company, FSB or its affiliate. Merrill Lynch Trust Company, FSB is the trustee as defined by the Plan and, therefore, these transactions qualify as party-in-interest transactions.
Certain Plan investments were managed by Smith Barney Corporate Trust Company (“SBS Trust”) and Consulting Group Capital Markets (“CGCM”), an investment division of SBS Trust. SBS Trust was the trustee of the Plan for plan year ending December 31, 2003 and CGCM is a division of the trustee, and therefore, SBS Trust and CGCM qualify as parties-in-interest to the Plan in regard to these transactions.
| 8. | Risks and Uncertainties |
The Plan provides for various investment options in any combination of stocks, bonds, fixed-income securities, mutual funds, and other investment securities. Investment securities are exposed to various risks, such as interest rate, market, and credit. Due to the level of risk associated with certain investment securities and the level of uncertainty related to changes in the value of investment securities, it is at least reasonably possible that changes in risks in the near term would materially affect participants’ account balances, the amounts reported in the statements of net assets available for benefits and the statements of changes in net assets available for benefits.
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Schedule 1
COMARCO, INC.
SAVINGS AND RETIREMENT PLAN
Supplemental Schedule
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
December 31, 2005
FEIN: 95-2088894
Plan Number: 001
| | | | | | | | | | |
| (a) | | (b) | | (c) | | (d) | | (e) |
| | | Identity of issue,
borrower, lessor, or
similar party | | Description of investment including maturity date, rate of interest, collateral, par or maturity value | | Cost | | Fair Value |
* | | Merrill Lynch | | ML RET Preservation Trust, 3,383,757 shares | | | ** | | $ | 3,384,000 |
| | Loomis Sayles | | Loomis Sayles Bond Fund Admin, 29,562 shares | | | ** | | | 399,000 |
| | Lord Abbett | | Lord Abbett Small Cap Value FD P, 3,456 shares | | | ** | | | 98,000 |
| | Hotchkis & Wiley | | Hotchkis & Wiley Large Cap Value A, 113,018 shares | | | ** | | | 2,638,000 |
| | American Funds | | American Cap World GR & INC R3, 2,705 shares | | | ** | | | 99,000 |
| | American Funds | | American Growth FD of Amer R3, 93,250 shares | | | ** | | | 2,844,000 |
| | American Funds | | American Income FD OF, 2,786 shares | | | ** | | | 50,000 |
| | Scudder | | Scudder Rreef Real Estate Sec, 2,763 shares | | | ** | | | 57,000 |
| | Scudder | | Scudder Dreman Small Cap Value FD A, 23,400 shares | | | ** | | | 762,000 |
| | Blackrock | | Blackrock Govt Inc Port CL A, 65,207 shares | | | ** | | | 707,000 |
| | Oppenheimer | | Oppenheimer Dev Mkts FD CL A, 16,188 shares | | | ** | | | 588,000 |
* | | Merrill Lynch | | ML S&P 500 Index Fund CL I, 50,743 shares | | | ** | | | 776,000 |
| | Thomburg | | Thornburg Inter Value FD A, 70,155 shares | | | ** | | | 1,646,000 |
| | Fidelity | | Fidelity Adv Small Cap FD CL T, 107,522 shares | | | ** | | | 2,641,000 |
| | Davis | | Davis NY Venture FD CL A, 2,582 shares | | | ** | | | 87,000 |
| | Davis | | Davis Series Financial FD CL A, 94 shares | | | ** | | | 4,000 |
| | Eaton Vance | | EV Worldwide Health Sciences, 1,558 shares | | | ** | | | 18,000 |
| | Seligman | | Seligman Comm & Info FD CL A, 305 shares | | | ** | | | 8,000 |
| | Calvert | | Calvert Income Fund, 1,066 shares | | | ** | | | 18,000 |
| | Allianz | | Allianz OCC Renaissance Fund A, 6,406 shares | | | ** | | | 137,000 |
* | | Comarco, Inc. | | Comarco, Inc. common stock | | | ** | | | 1,754,000 |
| | | | 175,749 shares | | | | | | |
* | | Plan Participants | | Participant Loans | | $ | 0 | | | 52,000 |
| | | | Various dates and rates of 6.0% to 9.0% | | | | | | |
| | | | | | | | | | |
| | | | Total Investments | | | | | $ | 18,767,000 |
| | | | | | | | | | |
| ** | Historical cost information is not required for participant directed investment funds |
See accompanying Report of Independent Registered Public Accounting Firm and notes to financial statements.
8
COMARCO, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Administrator has duly caused this annual report to be signed by the undersigned thereunto duly authorized.
|
COMARCO, INC. SAVINGS AND RETIREMENT PLAN |
|
/s/ THOMAS A. FRANZA |
| Thomas A. Franza |
| President and Chief Executive Officer |
| Comarco, Inc. |
June 28, 2006
9
INDEX TO EXHIBITS
| | |
Exhibit
Number | | Description |
| 23.1 | | Consent of Independent Registered Public Accounting Firm — Lesley, Thomas, Schwarz & Postma, Inc. * |
10
