SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
ANNUAL REPORT
Pursuant to Section 15(d) of the Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 1999
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.
Bentall Executive Centre
1551 North Tustin Avenue, Suite 840
Santa Ana, CA 92705
<PAGE>
COMARCO, INC.
SAVINGS AND RETIREMENT PLAN
FINANCIAL STATEMENTS
(Including Supplemental Schedule)
December 31, 1999 and 1998
(With Independent Auditors' Report Thereon)
<PAGE>
COMARCO, INC.
SAVINGS AND RETIREMENT PLAN
INDEX TO Financial Statements
AND SUPPLEMENTAL SCHEDULES
Page
----
Independent Auditors' Report 4
Statements of Net Assets Available for Plan Benefits
as of December 31, 1999 and 1998 5
Statements of Changes in Net Assets Available for Plan
Benefits for the Years Ended December 31, 1999, 1998 and 1997 6
Notes to Financial Statements 7
SUPPLEMENTAL SCHEDULE
Schedule 1 - Schedule of Assets Held for Investment Purposes 11
As of December 31, 1999
The additional schedules required under the Employee Retirement Income
Security Act of 1974 and regulations issued by the Department of Labor are
not presented because they are not applicable or are not a required
disclosure.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
COMARCO, Inc.:
We have audited the accompanying statements of net assets available for
plan benefits of the COMARCO, Inc. Savings and Retirement Plan (the "Plan")
as of December 31, 1999 and 1998, and the related statements of changes in
net assets available for plan benefits for each of the years in the
three-year period ended December 31, 1999. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. 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 plan benefits of the
Plan as of December 31, 1999 and 1998, and the changes in net assets
available for plan benefits for each of the years in the three-year period
ended December 31, 1999, in conformity with generally accepted accounting
principles.
Our audits of the Plan's financial statements as of December 31, 1999 and
1998, and for each of the years in the three-year period ended December 31,
1999 were made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The supplemental schedule of Assets Held for
Investment Purposes 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 audits 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.
KPMG LLP
McLean, Virginia
June 9, 2000
<PAGE>
COMARCO, INC.
SAVINGS AND RETIREMENT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
December 31, 1999 and 1998
<TABLE>
1999 1998
---- ----
<S> <C> <C>
ASSETS
Investments (Note 3) $ 26,871,000 $ 21,407,000
LIABILITIES
Fees payable (Note 5) - -
----------- -----------
Net assets available for plan benefits $ 26,871,000 $ 21,407,000
=========== ============
See accompanying notes to the financial statements.
</TABLE>
<PAGE>
COMARCO, INC.
SAVINGS AND RETIREMENT PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
Years Ended December 31, 1999, 1998 and 1997
<TABLE>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net assets available for plan benefits,
beginning of year $ 21,407,000 $ 18,265,000 $ 15,615,000
----------- ---------- ----------
Additions:
Contributions:
Employer 890,000 828,000 602,000
Employee 1,912,000 1,841,000 1,569,000
Rollovers 129,000 246,000 96,000
Interest and dividends 34,000 218,000 127,000
Realized and unrealized appreciation
of investments 4,339,000 2,356,000 2,445,000
----------- ---------- ----------
Total additions 7,304,000 5,489,000 4,839,000
----------- ---------- ----------
Deductions:
Plan distributions 1,516,000 2,241,000 2,082,000
Realized and unrealized depreciation
of investments 223,000 20,000 12,000
Administrative expenses (Note 5) 101,000 86,000 95,000
----------- ---------- ----------
Total deductions 1,840,000 2,347,000 2,189,000
----------- ---------- ----------
Net assets available for plan benefits,
end of year $ 26,871,000 $ 21,407,000 $ 18,265,000
=========== =========== ===========
See accompanying notes to the financial statements.
</TABLE>
<PAGE>
COMARCO, INC.
SAVINGS AND RETIREMENT PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 1999, 1998 and 1997
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. ("the Company"
or "the Plan Sponsor") who have at least three months of service and
are age 18 or older. It is subject to the provisions of the Employee
Retirement Income Security Act of 1974 (ERISA).
Contributions. Employee contributions to the Plan may range from 1% to
15% of eligible earnings and the Company contributes 100% of the first
3% of earnings that a participant contributes to the Plan with two
exceptions. At one location, the Company match is 5%. Employees at
another location are permitted to contribute up to 20% with no Company
match. All forfeitures of terminated participants' non-vested accounts
are used to offset Plan expenses. In addition, the Company may, at its
discretion, make an additional contribution each year to the Plan.
Participant Accounts. Each participant's account is credited with the
participant's contribution and 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. At December 31,
1999 and 1998, 904 and 717 participants, respectively, had assets in
the Plan.
Loans. Effective January 1, 1995, the Plan permits participants to
obtain 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 9% to 10%. All loans are secured by the
particpant's account balance.
Vesting. Participants are vested at all times in their voluntary
contributions and, in certain circumstances, the matching Company
contributions plus actual earnings thereon. Company contributions
generally vest over a 7 year graded vesting schedule. Exceptions to
this graded vesting are the Company contributions which 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).
Payment of Benefits. On termination of service, a participant may
elect to receive either a lump-sum amount equal to the value of his or
her account, annual installments, or monthly annuity payments.
Participants with accrued benefits greater than $5,000 may elect to
delay receiving benefits until reaching age 65.
Investment Options. Participant contributions to the Plan are made to
one of the eight investment options (Stable Value, Long Term Bond,
Small Cap Growth, Large Cap Growth, Large Cap Value, International,
Emerging Markets or Company Stock) as designated by the participant.
All investment options other than COMARCO shares are provided through
the Smith Barney TRAK program, and consist of fund shares.
2. Significant Accounting Policies
Basis of Accounting - The Plan prepares its financial statements
on the accrual basis of accounting.
Payment of Benefits - Benefits are recorded when paid.
Investment Valuation and Income Recognition - The Plan's
investments are stated at fair value in the accompanying
statements of net assets available for plan benefits except for
its investment in investment contracts (CGCM Stable Value Fund),
which are valued at their respective contract values. Fair value
is determined based on quoted market prices. 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.
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of additions
and deductions during the reporting period. Actual results could
differ from those estimates.
New Accounting Pronouncement - In September 1999, the American
Institute of Certified Public Accountants issued Statement of
Position 99-3, Accounting for and Reporting of Certain Defined
Contribution Plan Investments and Other Disclosure Matters (SOP
99-3) which simplifies the disclosure for certain investments.
The Plan adopted SOP 99-3 during the Plan year ended December
31, 1999. Accordingly, information previously required to be
disclosed about participant-directed fund investment programs is
not presented in the Plan's 1999 financial statements. The
Plan's 1998 and 1997 financial statements have been reclassified
to conform with the current year's presentation.
3. Investments
All amounts contributed to the Plan have been deposited with the Funding
Agent, SBS Trust. The following table presents the fair or contract values
of investments. Investments that represent 5% or more of the Plan's net
assets are separately identified.
<TABLE>
December 31, 1999 December 31, 1998
----------------- -----------------
Identity of Party and Carrying Carrying
Description of Asset Shares Amount Shares Amount
-------------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
Cash and Cash Equivalents:
SBS Short Term Investment Fund $ 19,000 $ 116,000
Mutual Funds:
CGCM Small Cap Growth Fund 225,000 *5,083,000 176,000 *2,972,000
CGCM Large Cap Growth Fund 224,000 *6,038,000 177,000 *3,993,000
CGCM Large Cap Value Fund 292,000 *3,428,000 249,000 *3,249,000
CGCM International Fund 151,000 *2,234,000 131,000 *1,506,000
CGCM Long Term Bond 94,000 694,000 114,000 1,002,000
CGCM Stable Value Fund 401,000 *4,517,000 354,000 *3,756,000
CGCM Emerging Market Fund 32,000 268,000 11,000 56,000
------- ------
Total Mutual Funds 22,262,000 16,534,000
---------- ----------
Participant Loans 287,000 268,000
COMARCO common stock 183,000 *4,303,000 187,000 *4,489,000
--------- ---------
Total Investments $ 26,871,000 $ 21,407,000
============ ==========
* Represents 5% or more of Plan Net Assets.
</TABLE>
4. Investment Contracts
The Stable Value option is a blend of individual investment contracts
(purchased by COMARCO and which all matured in 1997) and the Consulting
Group Capital Markets (CGCM) Stable Value Fund. The contracts are included
in the financial statements at contract value, which approximates fair
value. Contract value represents contributions made under the contract,
plus earnings, less administrative expenses. Investment contracts in the
Stable Value Fund are considered fully benefit responsive as they provide
reasonable access to the fund by the Plan's participants with a liquidity
guarantee. There are no reserves against contract value for credit risk of
the contract issuer or otherwise. The average yield and crediting interest
rate were 6.13%, 6.30%, and 5.10% for the years ended December 31, 1999,
1998, and 1997, respectively. The crediting interest rate is based upon an
agreed upon formula with the issuer.
5. Expenses of the Plan
The Plan provides that all reasonable expenses for custodial costs and fees
incurred for the benefit of the Plan are to be paid by the Plan to the
extent they are not paid by the Company. Total Plan expenses of
approximately $101,000, $86,000, and $95,000 in 1999, 1998 and 1997
respectively, were paid by the Plan. Plan expenses accrued as of December
31, 1999 and 1998 were $0.
6. Income Tax Status
The Internal Revenue Service has determined and informed the Company by
letter dated February 9, 1995, that the Plan and related trust are designed
in accordance with applicable sections of the Internal Revenue Code (IRC).
The Plan has been amended since receiving the determination letter.
However, the Plan administrator believes that the Plan is designed and is
currently being operated in compliance with the applicable requirements of
the IRS.
7. Plan Termination
The Company intends to continue the plan indefinitely, but reserves the
right at any time to terminate the Plan subject to the provisions of ERISA.
Upon termination of the Plan, a participant's fund share shall become 100%
vested and shall become payable in accordance with the "payment of
benefits" article of the Plan.
<PAGE>
COMARCO, INC.
SAVINGS AND RETIREMENT PLAN
Schedule of Assets Held for Investment Purposes
As of December 31, 1999
<TABLE>
Identity of issue, Description of investment including
borrower, lessor maturity date, rate of interest, Contract or
or similar party collateral, par or maturity value Fair Value
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
* SBS TRUST Short Term Investment Fund $ 19,199
* CGCM Consulting Group Cap Mkts Fund 93,913 shares 694,015
of Long Term Bond Investments Fund
* CGCM Consulting Group Cap Mkts Fund 292,247 shares 3,428,052
of Large Cap Value Equity Investments Fund
* CGCM Consulting Group Cap Mkts Fund 151,161 shares 2,234,160
of International Equity Investments Fund
* CGCM Consulting Group Cap Mkts Fund 31,974 shares 267,938
of Emerging Market Equity Investments Fund
* CGCM Consulting Group Cap Mkts Fund 224,472 shares 6,038,286
of Large Cap Growth Equity Investments Fund
* CGCM Consulting Group Cap Mkts Fund 224,998 shares 5,082,708
of Small Cap Growth Equity Investments Fund
* CGCM Consulting Group Cap Mkts Fund 401,120 shares 4,516,606
of Stable Value Investments Fund
* COMARCO, Inc. COMARCO, Inc. common stock 4,303,320
183,120 shares, quote $23.50
* Plan Participants Participant Loans 286,923
COMARCO, Inc.
Various dates and rates of 9% to 10% -----------
$26,871,207
==========
* Party in interest
See accompanying Independent Auditors' Report.
</TABLE>
<PAGE>
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
BY:
Thomas A. Franza
President & Chief Executive Officer
COMARCO, Inc.
DATE: June 28, 2000
