COMARCO Inc. Reports Operating Results (10-Q)

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Dec 15, 2011
COMARCO Inc. (CMRO, Financial) filed Quarterly Report for the period ended 2011-10-31.

Comarco Inc. has a market cap of $1.26 million; its shares were traded at around $0 with and P/S ratio of 0.04. Comarco Inc. had an annual average earning growth of 57.7% over the past 5 years.

Highlight of Business Operations:

We have a history of net losses and our future is dependent upon our ability to achieve, and sustain, overall profitability. We have experienced substantial pre-tax losses from continuing operations for the nine months ended October 31, 2011 and 2010 totaling $3.9 million and $2.1 million, respectively. Our future is highly dependent on our ability to achieve, and sustain, overall profitability. To accomplish this, we must increase the sales volumes of our ChargeSource® products from the levels achieved during fiscal 2012.

Revenue for the three and nine months ended October 31, 2011 decreased by $3.2 million, or 59 percent, and $18.7 million, or 72 percent, compared to the corresponding periods of fiscal 2011. The decrease is attributable to the loss of Targus as a customer during fiscal 2012. As previously discussed, on January 25, 2011, we received written notification from Targus of its non-renewal of the Strategic Product Development and Supply Agreement. Additionally, revenue to Lenovo decreased during the three and nine months ended October 31, 2011 by $0.3 million and $1.6 million, compared to the corresponding periods of the prior fiscal year. The decrease was due, primarily, to a drop in Lenovos business customer demand. Offsetting this decrease, revenue to Dell increased by $0.2 million and $0.6 million for the three and nine months ended October 31, 2011 compared to the comparable periods of the prior fiscal year.

Cost of revenue for the three and nine months ended October 31, 2011 decreased by $2.8 million, or 60 percent, and $14.4 million, or 67 percent, respectively, compared to the corresponding periods of fiscal 2011. These decreases are primarily attributable to the decreases in sales for the three and nine months ended October 31, 2011 compared to the comparable prior year periods. During the first quarter of fiscal 2012, we recorded an additional accrual of $350,000 for our product Recall, however $103,000 of that amount was recovered in the third quarter due to a payment received from Targus pursuant to our Settlement Agreement. No similar costs were incurred in the comparable periods of the prior fiscal year. During the three and nine months ended October 31, 2011, our fixed supply chain overhead costs decreased by $0.4 million and $1.1 million or 47 percent and 43 percent, respectively, when compared to the fixed supply chain overhead costs in the comparable prior year periods. These decreases are a result of measures taken late in the third quarter of fiscal 2011 to reduce personnel and other costs across all departments. Additionally, during the second quarter of fiscal 2012 we accrued a charge of $380,000 relating to a settlement reached with a supplier relating to purchase commitments made to support the Targus business. There are no similar charges in the comparable prior year periods. During the first quarter of fiscal 2012 we incurred scrap charges of $0.5 million relating to Manhattan product components that we procured from a supplier during the first quarter of fiscal 2012. The Manhattan product was previously sold to Targus and we have reserved for those components that can only be used in that product. During the third quarter of fiscal 2012 we incurred scrap charges of $0.2 million relating to reserves taken against slow-moving inventory. We did not incur any similar charges during the comparable periods of fiscal 2011. During the nine months ended October 31, 2011 we incurred freight expedite and other charges of $0.7 million. These costs were incurred to expedite delivery of Manhattan units to Targus. We had no similar costs in the corresponding periods of the current year.

As of October 31, 2011 we had negative working capital of approximately $0.2 million. In order for us to conduct our business for the next twelve months and to continue operations thereafter and be able to discharge our liabilities and commitments in the normal course of business, we must increase sales, reduce operating expenses, and potentially raise additional funds, through either debt and/or equity financing to meet our working capital needs. Although the Company is currently seeking other forms of financing, we cannot be certain we will be able to secure additional financing on terms acceptable to us, or at all.

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