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Comarco Announces $1.5 Million Loan From And Sale Of $1.0 Million Of Common Stock To Institutional Investor

LAKE FOREST, Calif., Feb. 12, 2013 /PRNewswire/ -- Comarco, Inc. (OTC: CMRO.PK), announced today that, on Monday, February 11, 2013, it has consummated a $2.5 million debt and equity financing transaction with Elkhorn Partners Limited Partnership ("Elkhorn"), an existing shareholder of the Company.  In that transaction, Elkhorn has made a $1.5 million secured loan to the Company maturing on November 30, 2014, and has purchased a total of 6,250,000 shares of our common stock, at a price of $0.16 per share, generating an additional $1.0 million of cash for the Company. 

As a result of the sale to Elkhorn of the 6,250,000 shares of Company common stock, Elkhorn's ownership has increased to approximately 49%, from approximately 9%, of the Company's outstanding shares, making Elkhorn the Company's largest shareholder.

The Company has used approximately $2.1 million of the proceeds from these transactions to repay the entire principal amount of and all interest on a $2.0 million secured six month term loan that the Company had obtained from Broadwood Partners L.P. at the end of July 2012.  The anticipated sale of 3 million shares of Company common stock to Broadwood, the proceeds of which were to have been used to repay the Broadwood loan, was not consummated. 

The balance of the proceeds from the Elkhorn loan and equity transactions are expect to be used by the Company primarily for working capital purposes. 

Elkhorn Loan and Security Agreements

The $1.5 million loan made to us by Elkhorn bears interest at 7% for the first 12 months of the loan, increasing to 8.5% thereafter and continuing until the loan is paid in full.  The loan matures on November 30, 2014; however, the Company has the right, at its option, to prepay the Elkhorn Loan, in whole or in part, without penalty or premium. 

Under the terms of the Elkhorn loan, if and to the extent the Company does not repay the loan in full by its maturity date (or upon acceleration of the loan after the occurrence of an event of default), then, Elkhorn will have the right, at its option (but not the obligation), to convert the then unpaid balance of the loan, in whole or in part, into shares of Company common stock at a conversion price of $0.25 per share, which will be subject to possible adjustment on certain events, such as stock splits, stock dividends and any reclassifications of the Company's outstanding shares, certain mergers and, subject to certain exceptions, sales by the Company of shares of its common stock at a price lower than $0.25 per share.  The conversion price of $0.25 per share represents a premium of more than 70% over the average of the closing prices of the Company's shares in the over-the-counter market for the five trading days preceding the making of the loan by Elkhorn to the Company.

The payment of, and the performance by the Company of its other obligations to Elkhorn with respect to, the loan are secured by first priority security interests granted to Elkhorn in substantially all of the assets of the Company and its wholly-owned subsidiary, Comarco Wireless Technologies, Inc. ("CWT"), and a pledge of all of CWT's shares by the Company to Elkhorn.

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