Form 10-Q


                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                   QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934


For Quarter Ended July 31, 1999                 Commission File Number 0-5449



                                  COMARCO, Inc.
             -----------------------------------------------------
             (Exact name of registrant as specified in its charter)

             CALIFORNIA                                     95-2088894
             ----------                                     ----------
(State or other jurisdiction of                          (I.R.S. Employer
 incorporation or organization)                        Identification Number)

1551 North Tustin Avenue, Suite 850, Santa Ana, California     92705
----------------------------------------------------------     -----
(Address of principal executive office)                      (Zip Code)

Registrant's telephone number, including area code         (714) 796-1808
                                                           --------------




Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  Registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                                                 Yes     X      No
                                                        ---          ---

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of August 31, 1999.

                          Common Stock,
                         $.10 Par Value                   4,354,910 Shares
                         --------------                   ----------------


<PAGE>

Index to Form 10-Q

                                                                     Page No.
Part I.        Financial Information


Condensed Consolidated Balance Sheets
    July 31, 1999 and January 31, 1999                                  1

Condensed Consolidated Statements of Income
    Quarters Ended and Two Quarters Ended July 31, 1999
     and July 31, 1998                                                  2

Condensed Consolidated Statements of Cash Flows
    Two Quarters Ended July 31, 1999 and July 31, 1998                  3

Condensed Consolidated Statements of Comprehensive Income
    Two Quarters Ended July 31, 1999 and July 31, 1998                  4

Notes to Condensed Consolidated Financial Statements                    5-7

Management's Discussion and Analysis of Financial
    Condition and Results of Operations                                 8-15



PART II.       OTHER INFORMATION

 Item 6.     Exhibits and Reports on Form 8-K                           16

 Signature                                                              17


<PAGE>


                         PART I - FINANCIAL INFORMATION

ITEM 1.       FINANCIAL STATEMENTS

                         COMARCO, Inc. and Subsidiaries
                      Condensed Consolidated Balance Sheets
<TABLE>


                                                      July 31, 1999              January 31, 1999
ASSETS                                                   (Unaudited)                     *

<S>                                                   <C>                        <C>
Current assets:
         Cash and cash equivalents                    $       6,874,000          $      3,220,000
         Short-term investments                               3,018,000                 2,775,000
         Accounts receivable, net                            17,004,000                23,151,000
         Inventory                                            4,994,000                 4,157,000
         Deferred tax asset                                   2,366,000                 2,112,000
         Other current assets                                   668,000                   575,000
                                                      -----------------          ----------------

Total current assets                                         34,924,000                35,990,000

Long-term investments                                           295,000                   526,000
Property and equipment, net                                   2,743,000                 2,424,000
Software development costs, net                               4,865,000                 4,185,000
Intangible assets, net                                        3,384,000                 3,587,000
Other assets                                                    566,000                   575,000
                                                      -----------------          ----------------

TOTAL ASSETS                                          $      46,777,000          $    47,287,000
                                                      =================          ================

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
         Accounts payable                             $       1,395,000          $      1,075,000
         Deferred revenue                                     2,880,000                 2,902,000
         Accrued liabilities                                  8,281,000                10,180,000
                                                      -----------------          ----------------

Total current liabilities                                    12,556,000                14,157,000

Deferred income taxes                                         2,107,000                 1,928,000
Minority interest                                                 9,000                     -

Stockholders' equity:
         Common stock, $.10 par value,
           33,750,000   shares   authorized,
           4,422,610  and  4,456,460  shares
           outstanding at July 31, 1999 and
           January 31, 1999, respectively                       442,000                   446,000
         Capital contributed in excess of par value           1,731,000                 2,795,000
         Other comprehensive income:
           Unrealized investment gains                           16,000                    16,000
         Retained earnings                                   29,916,000                27,945,000
                                                      -----------------          ----------------

Total stockholders' equity                                   32,105,000                31,202,000
                                                      -----------------          ----------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY            $      46,777,000          $     47,287,000
                                                      =================          ================

See accompanying notes to the condensed consolidated financial statements.

*The  condensed  consolidated  balance  sheet as of  January  31,  1999 has been
summarized  from the  Company's  audited  consolidated  balance sheet as of that
date.
</TABLE>


<PAGE>



                         COMARCO, Inc. and Subsidiaries
                   Condensed Consolidated Statements of Income
                                   (Unaudited)
<TABLE>


                                                      Quarter Ended                          Two Quarters Ended
                                                      -------------                          ------------------
                                         July 31, 1999          July 31, 1998       July 31, 1999        July 31, 1998
                                         -------------          -------------       -------------        -------------
<S>                                   <C>                   <C>                  <C>                  <C>
Revenues:
   Contract revenues                  $    13,829,000       $    14,647,000      $    27,161,000      $    29,041,000
   Product sales                            8,973,000             7,364,000           16,815,000           14,721,000
                                            ---------             ---------           ----------           ----------
                                           22,802,000            22,011,000           43,976,000           43,762,000
                                           ----------            ----------           ----------           ----------

Direct costs:
   Contract costs                           9,275,000             9,888,000           17,996,000           19,604,000
   Cost of product sales                    4,994,000             3,142,000            8,975,000            6,685,000
                                            ---------             ---------            ---------            ---------
                                           14,269,000            13,030,000           26,971,000           26,289,000

Indirect costs                              6,988,000             7,010,000           13,994,000           14,265,000
                                            ---------             ---------           ----------           ----------

                                           21,257,000            20,040,000           40,965,000           40,554,000
                                           ----------            ----------           ----------           ----------

Operating income                            1,545,000             1,971,000            3,011,000            3,208,000

Minority interest in earnings of
   subsidiary                                   9,000                  -                   9,000                 -
Net interest income                            97,000                95,000              177,000              213,000
                                               ------                ------              -------              -------

Income before income taxes                  1,633,000             2,066,000            3,179,000            3,421,000

Income taxes                                  621,000               785,000            1,208,000            1,300,000
                                      ---------------       ---------------      ---------------      ---------------


Net income                            $     1,012,000       $     1,281,000      $     1,971,000      $     2,121,000
                                      ===============       ===============      ===============      ===============

Earnings per share:
   Basi                                     $     .23             $     .27            $     .45           $      .45
                                            =========             =========            =========            =========

   Diluted                                  $     .21             $     .25            $     .41           $      .42
                                            =========             =========            =========           ==========



See accompanying notes to the condensed consolidated financial statements.
</TABLE>


<PAGE>

                         COMARCO, Inc. and Subsidiaries
                 Condensed Consolidated Statements of Cash Flows
                                   (Unaudited)
<TABLE>

                                                                                    Two Quarters Ended

                                                                         July 31, 1999              July 31, 1998
                                                                         -------------              -------------
<S>                                                                  <C>                        <C>
Cash flows from operating activities:
    Net income                                                       $       1,971,000          $      2,121,000
    Adjustments to reconcile net income to net
     cash provided by operating activities:
       Depreciation and amortization                                         1,686,000                 1,348,000
       Gain on disposal of property and equipment                               (8,000)                   (4,000)
       Deferred income taxes                                                   (75,000)                      -
       Minority interest                                                         9,000                       -
       Provision for doubtful accounts receivable                               44,000                    44,000
       Net purchases of trading securities                                    (275,000)                 (767,000)
       Decrease (increase) in accounts receivable                            6,103,000                  (992,000)
       Decrease (increase) in inventory                                       (837,000)                  390,000
       Decrease (increase) in other current assets                             (93,000)                   99,000
       Decrease in other assets                                                  9,000                     4,000
       Increase in accounts payable                                            320,000                    58,000
       Decrease in deferred revenue                                            (22,000)                 (113,000)
       Decrease in accrued liabilities                                      (1,899,000)               (1,106,000)
                                                                     ------------------         ------------------

    Net cash provided by operating activities                                6,933,000                 1,082,000

Cash flows from investing activities:
    Proceeds from sales and maturities of investments                          263,000                   455,000
    Purchases of property and equipment                                       (895,000)                 (525,000)
    Software development costs                                              (1,579,000)               (1,579,000)
    Cost of acquisition of Industrial Technology
      intellectual property                                                       -                   (1,000,000)
                                                                     ------------------         -----------------

    Net cash used in investing activities                                   (2,211,000)               (2,649,000)

Cash flows from financing activities:
    Proceeds from issuance of common stock                                     880,000                    64,000
    Purchase of common stock                                                (1,948,000)                 (728,000)
                                                                     ------------------         -----------------

    Net cash used in financing activities                                   (1,068,000)                 (664,000)
                                                                     ------------------         -----------------

Net increase (decrease) in cash and cash equivalents                 $       3,654,000          $     (2,231,000)
                                                                     =================          =================


Supplemental  disclosures  of cash flow  information:
  Cash paid during the two quarters for:
       Interest                                                      $               -           $             -
       Income taxes                                                          2,050,000                 1,569,000


See accompanying notes to the condensed consolidated financial statements.
</TABLE>


<PAGE>

                         COMARCO, Inc. and Subsidiaries
            Condensed Consolidated Statements of Comprehensive Income
                                   (Unaudited)

<TABLE>

                                                     Quarter Ended                                Two Quarters Ended
                                                     -------------                                ------------------
                                              July 31, 1999         July 31, 1998         July 31, 1999        July 31, 1998
                                              -------------         -------------         -------------        -------------
  <S>                                         <C>                   <C>                   <C>                  <C>
  Net income                                  $   1,012,000         $   1,281,000         $   1,971,000        $   2,121,000

  Other comprehensive income:
      Unrealized holding gains on
         investments, net of tax                          -                     -                     -                    -
                                              -------------         -------------         -------------        -------------

  Comprehensive income                        $   1,012,000         $   1,281,000         $   1,971,000        $   2,121,000
                                              =============         =============         =============        =============



See accompanying notes to the condensed consolidated financial statements.

</TABLE>




<PAGE>
                         COMARCO, Inc. and Subsidiaries
              Notes to Condensed Consolidated Financial Statements
                         July 31, 1999 and July 31,1998
                                   (Unaudited)

1.       General

       The financial statements have been prepared without audit.  However, they
       reflect all adjustments  which in the opinion of management are necessary
       to fairly  state the  Company's  financial  position at July 31, 1999 and
       January 31, 1999,  the results of its  operations  for the quarters ended
       and two  quarters  ended July 31,  1999 and July 31,  1998,  and its cash
       flows for the two  quarters  ended July 31, 1999 and July 31,  1998.  The
       information has been prepared in accordance with Form 10-Q  instructions,
       but does not necessarily  include all information and footnotes  required
       by  generally  accepted  accounting  principles  for  complete  financial
       statements.  The results of the quarter ended and two quarters ended July
       31, 1999 are not necessarily indicative of the results to be obtained for
       the full fiscal year.


2.     Recent Developments

       In July 1999,  the Company  announced  that it was embarking on a plan to
       strengthen the Company's  focus on the wireless  communications  products
       business  area.  This plan involves  marketing the Company's  information
       technology  and staffing  services  segment's  product lines to potential
       buyers. Total revenues and operating income of the information technology
       and staffing services segment were $27.2 million and $1.2 million for the
       six months ended July 31, 1999, respectively,  and $58.0 million and $1.7
       million for the fiscal year ended  January 31,  1999,  respectively.  The
       Company has retained a financial advisor to explore options to market the
       information technology and staffing services segment's product lines. The
       Company  currently  expects the marketing  and selling  process to take a
       minimum of six to nine months,  and there can be no assurance that all of
       the information  technology and staffing services segment's product lines
       can be sold to a single or multiple buyers at acceptable valuations.


3.     Significant Accounting Policies - Per Share Information

       During the year ended January 31, 1998, the Company adopted  Statement of
       Financial  Accounting Standards No. 128, Earnings per Share, and computed
       basic and  diluted  net income per share  based on the  weighted  average
       number of shares of common stock and potential  common stock  outstanding
       during the period.  Potential  common stock,  for purposes of determining
       diluted  earnings  per share,  includes  the  effects of  dilutive  stock
       options.  The effect of such potential common stock is computed using the
       treasury  stock  method.  Comparative  earnings  per share data have been
       restated for prior periods.  Consolidated  net income of the Company used
       for diluted  earnings per share  purposes is diluted as a result of stock
       options issued by the Company's  subsidiaries  which enable their holders
       to obtain the  subsidiaries'  common stock.  Basic and diluted net income
       per share are calculated as follows:

<TABLE>

                                                 Quarter Ended                                Two Quarters Ended
                                                 -------------                                ------------------
                                        July 31, 1999           July 31, 1998           July 31, 1999         July 31, 1998
                                        -------------           -------------           -------------         -------------
   <S>                                   <C>                     <C>                     <C>                    <C>
   Basic:

   Net income                            $  1,012,000            $   1,281,000           $  1,971,000           $  2,121,000
   Weighted average shares
     outstanding                            4,396,000                4,714,000              4,425,000              4,716,000
                                         ------------            -------------           ------------           ------------

   Basic income per common
     share                               $        .23            $         .27           $        .45           $        .45
                                         ============            =============           ============           ============


   Diluted:

   Net income                            $  1,012,000            $   1,281,000           $  1,971,000           $  2,121,000

   Less - net income allocated
     to subsidiary dilutive stock
     options outstanding                      (35,000)                 (52,000)               (75,000)               (74,000)
                                         -------------           -------------           ------------           ------------

   Net income used in calculation
     of diluted income per
     common share                        $    977,000            $   1,229,000           $  1,896,000           $  2,047,000
                                         ============            =============           ============           ============


   Weighted average shares
     outstanding                            4,396,000                4,714,000              4,425,000              4,716,000

   Plus - common equivalent shares
     (determined using the "treasury
     stock" method representing shares
     issuable upon exercise
     of stock options                         184,000                  204,000                196,000                205,000
                                         ------------            -------------           ------------           ------------

   Weighted average number
     of shares used in calculation
     of diluted income per
     common share                           4,580,000                4,918,000              4,621,000              4,921,000
                                         ============            =============           ============           ============

 Diluted income per common
     share                               $        .21            $         .25         $          .41           $        .42
                                         ============            =============         ==============           ============
</TABLE>

4.     Business Segment Information

       The Company's  operations  have been  classified into two business areas:
       wireless  communications products and information technology and staffing
       services. The wireless communications  products area develops,  produces,
       and  markets a variety of  products  and  services  used in the  wireless
       communications industry. The information technology and staffing services
       area provides  services to Federal and local  government  and  commercial
       customers pursuant to established contracts. Corporate and other consists
       primarily of cash and cash equivalents, fixed assets, and other assets.

       Summarized  financial  information by business  segment for the first two
       quarters of Fiscal Year 2000 is as follows:

<TABLE>

                                          Wireless           Information
                                       Communications       Technology and           Corporate
                                          Products        Staffing Services          and Other       Total
                                          --------        -----------------          ---------       -----
       <S>                                  <C>               <C>                   <C>              <C>
       Revenues                             $16,815           $27,161                 -              $43,976
       Income before income taxes             2,082             1,178                 $(81)            3,179
       Identifiable assets                   20,254            14,549                11,974           46,777

</TABLE>

       Summarized  financial  information by business  segment for the first two
       quarters of Fiscal Year 1999 is as follows:

<TABLE>

                                          Wireless           Information
                                       Communications       Technology and           Corporate
                                          Products        Staffing Services          and Other       Total
                                          --------        -----------------          ---------       -----
       <S>                                <C>                 <C>                     <C>            <C>
       Revenues                           $14,662             $29,100                   -            $43,762
       Income before income taxes           2,131               1,233                   $57            3,421
       Identifiable assets                 20,151              14,757                 9,282           44,190
</TABLE>


5.     Commitments and Contingencies

       The Company is subject to legal  proceedings and claims that arise in the
       ordinary  course  of  business.  In the  opinion  of  management  and the
       Company's legal counsel, the amount of ultimate liability with respect to
       these actions will not materially  affect the financial  condition of the
       Company.

       The  Company  has a  multi-year  fixed  price  contract  for  which it is
       negotiating a contract modification.  The contract is scheduled to end on
       September 30, 1999, and the Company cannot complete the statement of work
       due to the U.S.  Government delays in providing required  equipment.  The
       Company has  submitted a request to the U.S.  Government  for  additional
       funding  of  approximately   $5.7  million  and  a  32-month   extension.
       Negotiations  are  ongoing,  and if  the  negotiations  are  successfully
       completed,  the  actual  modification  will not  occur  until  the end of
       September.  The Company believes that it has a meritorious position,  and
       if necessary,  the Company  intends to seek all remedies  available under
       Federal procurement laws.


6.     Reclassifications

       Certain reclassifications of prior year amounts have been made to conform
       to the current year presentation.

<PAGE>


ITEM 2.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
              FINANCIAL CONDITION


              Except  for  the  historical  information  contained  herein,  the
              matters discussed in this Form 10-Q are forward-looking statements
              within the meaning of Section 21E of the  Securities  Exchange Act
              of 1934,  as amended,  and Section  27A of the  Securities  Act of
              1933, as amended, that involve risks and uncertainties. The actual
              results that the Company  achieves may differ  materially from any
              forward-looking  projections due to such risks and  uncertainties.
              Words  such as  "believes,"  "anticipates,"  "expects,"  "future,"
              "intends,"  and  similar  expressions  are  intended  to  identify
              forward-looking  statements  but are not the  exclusive  means  of
              identifying  such  statements.   A  more  complete  discussion  of
              business risks is included in the Company's  Annual Report on Form
              10-K for the year ended January 31, 1999.

              Recent Developments

              In July 1999,  the Company  announced  that it was  embarking on a
              plan  to   strengthen   the   Company's   focus  on  the  wireless
              communications   products   business  area.   This  plan  involves
              marketing  the  Company's  information   technology  and  staffing
              services  segment's  product  lines  to  potential  buyers.  Total
              revenues and operating  income of the  information  technology and
              staffing  services segment were $27.2 million and $1.2 million for
              the six  months  ended  July 31,  1999,  respectively,  and  $58.0
              million and $1.7  million  for the fiscal  year ended  January 31,
              1999,  respectively.  The Company has retained a financial advisor
              to  explore  options  to market  the  information  technology  and
              staffing  services  segment's product lines. The Company currently
              expects the marketing and selling process to take a minimum of six
              to nine  months,  and  there can be no  assurance  that all of the
              information  technology and staffing  services  segment's  product
              lines can be sold to a single  or  multiple  buyers at  acceptable
              valuations.


       (a)    Results of Operations

              During the second quarter of Fiscal Year 2000 (year ending January
              31, 2000),  the Company  recorded total revenues of $22.8 million,
              up 3.6% from the  revenues  of $22.0  million  for the  comparable
              period  of the  prior  fiscal  year.  Revenues  for the  first two
              quarters  of  Fiscal  Year 2000 of $44.0  million  are up .5% from
              revenues of $43.8 million for the  comparable  period of the prior
              fiscal year. Increased year-to-year revenues are primarily due to:

              o   sales of  the  Company's   wireless   communications products,
                  specifically  sales  of callbox  and  power  adapter products,
                  offset by lower sales of test and measurement equipment;
              o   increase in information technology  services  activity  of 13%
                  year-to-year;
              partially offset by:
              o   completion of the  Company's   contract  at  Reagan Washington
                  National Airport,  which   expired  September 30,  1998;  this
                  contract  contributed  $4.0  million of  revenue  in the prior
                  year's first two quarters.

              Total  direct  costs of $14.3  million  for the second  quarter of
              Fiscal Year 2000 were up $1.3 million,  or 10%, from $13.0 million
              for the second  quarter of Fiscal Year 1999.  Direct costs for the
              first two  quarters of Fiscal Year 2000 of $27.0  million  were up
              $.7 million, or 2.7%, from $26.3 million for the comparable period
              of the prior  fiscal  year.  The  increases  relate  to  increased
              revenue activity in the Company's wireless communications products
              business, as discussed below.

              Total  indirect  costs of $7.0  million for the second  quarter of
              Fiscal Year 2000 were flat from the prior year's  second  quarter.
              Indirect  costs for the first two  quarters of Fiscal Year 2000 of
              $14.0 million were down $.3 million,  or 2.1%,  from $14.3 million
              for  the   comparable   period  of  the  prior  fiscal  year.  The
              year-to-date  decrease  was due to reduced  indirect  costs of the
              wireless communications products business, as discussed below.

              Net interest income  (interest  income less interest  expense) for
              the second  quarter of Fiscal Year 2000  amounted  to $97,000,  as
              compared to $95,000 for the comparable  period of the prior fiscal
              year.  Net  interest  income for the first two  quarters of Fiscal
              Year 2000  amounted to  $177,000,  as compared to $213,000 for the
              comparable  period  of the prior  fiscal  year.  The  year-to-year
              decrease was  principally  due to a reduction in cash available to
              invest   (excludes   investments   in   the   Company's   deferred
              compensation plan for executives) from an average of $8 million in
              the first two  quarters  of Fiscal Year 1999 to an average of $7.6
              million in the first two quarters of Fiscal Year 2000.

              The  Company's  effective  tax rate for the first two  quarters of
              Fiscal Year 2000 was 38%, the same as the comparable period of the
              prior fiscal year.

              Net income of $1.0  million for the second  quarter of Fiscal Year
              2000 was down from $1.3 million for the  comparable  period of the
              prior year.  Net income of $2.0 million for the first two quarters
              of Fiscal Year 2000 was down from $2.1 million for the  comparable
              period of the prior year


              Wireless Communications Products

              Wireless  communications products revenues increased 21.6% to $9.0
              million  for the  second  quarter  of  Fiscal  Year 2000 from $7.4
              million  for the  comparable  period  of the  prior  fiscal  year.
              Revenues  increased  14.3%  to $16.8  million  for the  first  two
              quarters of Fiscal Year 2000 from $14.7 million for the comparable
              period  of  the  prior  fiscal  year.  This  increase  was  due to
              increased  sales of the  Company's  emergency  callbox  and  power
              adapter  products,  offset by reduced  revenues  from its test and
              measurement  products.   Summary  operating  results  for  Comarco
              Wireless Technologies, Inc., the Company's wireless communications
              products subsidiary, are as follows:
<TABLE>
                                              Two Quarters Ended    Two Quarters Ended
                                                 July 31, 1999         July 31, 1998
                                                 -------------         -------------
                 <S>                                <C>                  <C>
                 Revenues                           $16,815,000          $14,662,000
                 Cost of product sales                8,975,000            6,638,000
                                                      ---------            ---------

                 Gross margin                         7,840,000            8,024,000
                 Gross margin percentage                46.6%                 54.7%

                 Indirect costs*                      5,749,000            5,893,000
                                                      ---------            ---------

                 Operating income                   $ 2,091,000          $ 2,131,000
                                                     ==========           ==========

              *Indirect  costs  include  selling,   general  and  administrative
              expenses as well as research and development expenses.
</TABLE>

              The decreased  gross margin  percentage is due to greater sales of
              the Company's  emergency callbox systems and market trial sales of
              the Company's  universal power adapter  product,  which have lower
              gross margins than the test and measurement and revenue  assurance
              product families,  which made up a greater  percentage of wireless
              communications  products  sales  in  Fiscal  Year  1999.  Sales of
              callbox  systems  were up 28% for the first two quarters of Fiscal
              Year 2000 over the  comparable  period of the prior  fiscal  year,
              while sales of test and  measurement  products  were down 19% from
              the prior fiscal year.  Additionally,  there were no power adapter
              sales in the first two  quarters of Fiscal Year 1999.  The Company
              believes that sales of emergency  callbox systems will continue to
              exceed prior year levels for the  remainder of Fiscal Year 2000 as
              it completes  performance on several callbox upgrade  contracts in
              California.  Test and measurement product sales should increase in
              the second half of Fiscal Year 2000 compared to first half results
              due to anticipated upgraded product offerings,  although there can
              be no assurances in this regard.

              The  decrease in  indirect  costs of $.2 million for the first two
              quarters  of Fiscal  Year 2000 from the  comparable  period of the
              prior  fiscal year was  partially  a result of reduced  sustaining
              engineering and product support costs as product lines mature,  as
              well as slightly  decreased  selling,  general and  administrative
              costs.

              Operating  income as a  percentage  of revenues  was 11.4% for the
              second  quarter  of Fiscal  Year 2000,  compared  to 20.2% for the
              comparable period of the prior fiscal year.  Operating income as a
              percentage  of  revenues  was 12.4% for the first two  quarters of
              Fiscal Year 2000,  compared to 14.5% for the comparable  period of
              the prior fiscal year.  These  decreases were primarily due to the
              lower  gross  income  due to a  larger  mix of  the  lower  margin
              emergency  callbox  systems and universal  power adapter  products
              than in the prior year's first two quarters, as discussed above.

              The Company is continuing its product  development  program in its
              wireless  communications  products  business.  In accordance  with
              Financial  Accounting Standard No. 86, Accounting for the Costs of
              Computer Software to be Sold, Leased, or Otherwise  Marketed,  the
              Company  capitalized  $1,579,000  during the first two quarters of
              Fiscal  Year 1999 and the first two  quarters of Fiscal Year 2000.
              Corresponding amounts amortized were $899,000 and $721,000, in the
              first two quarters of Fiscal Year 2000 and 1999, respectively.

              The Company's  future wireless  products  prospects will depend in
              part on its ability to enhance the  functionality  of its existing
              products in a timely and  cost-effective  manner and to  identify,
              develop, and achieve market acceptance of new products.  There can
              be no  assurance  that  the  Company  will be able to  respond  to
              technological  advances,  changes  in  customer  requirements,  or
              changes in regulatory requirements or industry standards,  and any
              significant  delays in  development,  introduction  or shipment of
              products, or achievement of acceptable product costs, could have a
              material  adverse  effect  on the  Company's  business,  operating
              results and financial condition.

              The Company's orders for wireless communications products totalled
              $7.5 million for the second  quarter of Fiscal Year 2000,  up from
              $7.4  million  from  the   comparable   prior   period.   For  the
              twelve-month periods ended July 31, 1999 and 1998, orders received
              were $36.8 million and $28.0 million, respectively. Because of the
              long sales  cycle  involved  in  selling  the  Company's  wireless
              products and the high unit sales price,  the Company believes that
              orders are best analyzed by looking at a twelve-month time period,
              as orders can fluctuate significantly from quarter to quarter. The
              value of unfilled  orders at July 31, 1999 totalled $13.7 million,
              of which $4.8 million relates to long-term maintenance  contracts,
              and $4.7 million relates to the Company's contracts to upgrade the
              callbox  systems for Los Angeles  County and the San Francisco Bay
              areas of  California.  The Company  currently  expects to complete
              performance  on these  upgrade  contracts in Fiscal Year 2000.  An
              additional $2.6 million of deferred  revenue has been recorded for
              anticipated customer warranty obligations.

              The   Company   has    experienced    fluctuations   in   wireless
              communications  products  activity in each of the past five years,
              with  greater  sales in the  second  half of its  fiscal  year and
              lesser  amounts in the first  half,  although  this trend has been
              declining  over the same  five  years.  This  trend may or may not
              continue  as the  Company  broadens  its  wireless  communications
              products  offerings.  The  nature of the  wireless  communications
              products business is inherently  unpredictable;  sales and profits
              may  fluctuate   significantly   from  quarter  to  quarter;   and
              therefore,  period-to-period  comparisons of its operating results
              are not  necessarily  meaningful  and such  comparisons  cannot be
              relied upon as indicators of future performance.

              The  Company  faces  additional  risk  factors in  developing  its
              wireless  communications  products  business,  including:  foreign
              marketing,    capital   requirements,    technical   requirements,
              employees,  competition,  and proprietary information.  A negative
              impact to any of these risk factors could have a material  adverse
              effect on the Company's business, operating results, and financial
              condition.  Foreign  marketing risks include:  the need for export
              licenses; tariffs and other potential trade restrictions;  changes
              in laws  governing the  imposition of duties,  quotas,  taxes,  or
              other  charges  relating to the import or export of its  products;
              and changes in foreign  currency  exchange  rates which can impact
              customers' demand for the Company's  products and their ability to
              pay for the Company's products.  Other companies having a presence
              or doing business overseas may have advantages over the Company in
              these  areas.  Certain  components  used  by  the  Company  in its
              existing  products are only available from a single  supplier or a
              limited  number of  suppliers,  and the  inability of any of these
              suppliers  to  fulfill  Company  requirements  may  result  in  an
              interruption of production.  Access to the technical design of air
              interface  devices is essential for the Company to anticipate  and
              develop compatible wireless  communications  products;  therefore,
              the inability to obtain such  technical  designs on a timely basis
              would have a direct  impact on product  design and  schedule.  The
              Company's  future  success  also  depends  in  large  part  on the
              continued  service  of its key  personnel,  and on its  ability to
              continue to attract  and retain  qualified  employees,  especially
              highly skilled engineers,  for whom competition in the industry is
              intense.  In  addition,  the  ability  of the  Company  to compete
              successfully depends upon a number of factors,  including the rate
              at which  customers  accept the  Company's  products  in  overseas
              markets,  product quality and performance,  experienced  sales and
              marketing  personnel,   rapid  development  of  new  products  and
              features,  evolving industry standards,  and the number and nature
              of the Company's  competitors.  There can be no assurance that the
              Company will be able to compete  successfully  in the future.  The
              Company relies on a combination of trade secrets,  copyrights, and
              contractual rights to protect its intellectual property. There can
              be no  assurance  that  the  steps  taken by the  Company  will be
              adequate  to protect  its  technology;  in  addition,  the laws of
              certain foreign  countries in which the Company's  products may be
              sold do not protect the Company's  intellectual property rights to
              the same extent as do the laws of the United States.


              Information Technology and Staffing Services

              In July 1999,  the Company  announced  that it was  embarking on a
              plan  to   strengthen   the   Company's   focus  on  the  wireless
              communications   products   business  area.   This  plan  involves
              marketing  the  Company's  information   technology  and  staffing
              services  segment's product lines to potential buyers. The Company
              has retained a financial  advisor to explore options to market the
              information  technology and staffing services segment. The Company
              currently  expects the  marketing  and  selling  process to take a
              minimum of six to nine months,  and there can be no assurance that
              all of the information  technology and staffing services segment's
              product  lines  can be sold to a  single  or  multiple  buyers  at
              acceptable valuations.

              Revenues  provided by the  Company's  information  technology  and
              staffing services business area decreased 5.5%, from $14.6 million
              in the second  quarter of Fiscal Year 1999 to $13.8 million in the
              second  quarter of Fiscal Year 2000.  Revenues  from this business
              area decreased 6.5%, from $29.1 million for the first two quarters
              of Fiscal Year 1999 to $27.2 million for the first two quarters of
              Fiscal Year 2000.  Revenues in this business area  decreased  from
              66.4% of the Company's total revenues in the first two quarters of
              Fiscal Year 1999 to 61.8% of the Company's  total  revenues in the
              first  two   quarters  of  Fiscal  Year  2000.   The  decrease  in
              period-to-period  revenue was principally due to the completion of
              the  Company's  contract at Reagan  Washington  National  Airport,
              which  expired on September 30, 1998.  This  contract  contributed
              $4.0 million of revenue in the prior  year's  first two  quarters.
              The Company  decided not to pursue the  recompete of this contract
              since  it was  marginally  profitable,  and  it  would  have  been
              unprofitable if reawarded to the Company.

              Sales  to the  U.S.  Government  as  well as to  government  prime
              contractors were 34% and 39% of the Company's total revenue during
              the  first  two   quarters   of  Fiscal   Years   1999  and  2000,
              respectively.  In  the  course  of  the  Company's  business,  its
              government contracts are periodically opened for competition.  The
              Company  plans  to  aggressively   compete  for  work  opened  for
              competition  to the  extent  possible  and to  selectively  pursue
              certain  high  value  contract  procurements.   There  can  be  no
              assurance  that the Company  will be selected and awarded the work
              associated  with any of its future  proposals.  The Company has no
              recompetitions  of major  contracts  for the next  two  years.  In
              addition,  government  agencies may terminate  their  contracts in
              whole or in part at their  convenience.  Government  agencies  may
              remove  funding  previously  provided or may not  exercise  option
              periods.  Therefore, there can be no assurance that the Government
              will fund the portions of existing contracts that are unfunded, or
              that the  governmental  agencies  will  exercise any options.  The
              Company  has a  multi-year  fixed price  contract  for which it is
              negotiating a contract modification.  The contract is scheduled to
              end on September  30, 1999,  and the Company  cannot  complete the
              statement  of work  due to U.S.  Government  delays  in  providing
              required  equipment.  The Company  has  submitted a request to the
              U.S.  Government  for  additional  funding of  approximately  $5.7
              million and a 32-month extension. Negotiations are ongoing, and if
              the   negotiations   are   successfully   completed,   the  actual
              modification  will  not  occur  until  the end of  September.  The
              Company  believes  that  it  has a  meritorious  position,  and if
              necessary,  the  Company  intends to seek all  remedies  available
              under Federal procurement laws.


              Operating income (revenues less direct costs,  indirect costs, and
              depreciation  and  amortization)  for  information  technology and
              staffing  services is up from  $578,000  in the second  quarter of
              Fiscal Year 1999 to $695,000 in the second  quarter of Fiscal Year
              2000.  Operating  income for  information  technology and staffing
              services  is down from  $1,233,000  in the first two  quarters  of
              Fiscal Year 1999 to $1,178,000 in the first two quarters of Fiscal
              Year  2000.  The  decrease  in  the  year-to-year  comparison  was
              primarily due to lower operating income for information technology
              services,   partially  offset  by  higher  operating  income  from
              commercial staffing services.


          (b) Financial Condition

              The   Company   signed  a  loan  agreement  with a bank  effective
              September 26, 1994,  which was amended effective  August 21, 1998.
              The loan  agreement  consists  of  a $10 million  revolving credit
              facility, which  expires  June 30, 2000.  The  credit  facility is
              unsecured  provided  that the Company maintains certain covenants.
              Currently,  management  anticipates  that cash flow will remain at
              a level  which will  enable the  Company  to avoid  utilizing  the
              credit  facility  except  to  support  letters  of   credit    and
              acquisition  financing,  and  that the  Company  will  be  able to
              purchase  investments on a  regular basis.  The Company's cash and
              investment  balances averaged $7.6 million (includes highly liquid
              long-term investments with maturities of 12 to 36 months, excludes
              investments  in  the  Company's  deferred  compensation  plan  for
              executives)  during  the first two  quarters  of Fiscal Year 2000.
              However,  maintaining  such cash  balances  is  predicated  on the
              Company maintaining  its business  base and is subject to the cost
              of financing new contracts,  acquisitions,  geographic  expansion,
              product development costs, and stock re-purchases.

              During the first two quarters of Fiscal Year 2000,  the  Company's
              average  days'  sales  in  accounts   receivable  have  decreased,
              primarily due to  collections  from several  significant  wireless
              communications  products customers as well as improved collections
              from information technology services customers.

              Several additional key factors indicating the Company's  financial
              condition include:
<TABLE>

                                            July 31, 1999         January 31, 1999
                                            -------------         ----------------
              <S>                         <C>                    <C>
              Current ratio                          2.78                    2.54
              Working capital             $    22,368,000        $     21,833,000
              Book value per share                  $7.26                   $7.00
</TABLE>


              The Company continued to demonstrate  solid financial  strength in
              the above  financial  factors  during  the first two  quarters  of
              Fiscal Year 2000 due to continued profitable activity.

              During the first two  quarters  of Fiscal  Year 2000,  the Company
              generated $6.9 million of cash flows from operating activities, up
              sharply  from the $1.1  million  from the prior  year's  first two
              quarters.  This  increase  is  primarily  due to  strong  accounts
              receivable collections during the current fiscal year.

              The Company has a significant  commitment for capital expenditures
              at July 31,  1999 for  Comarco  Wireless  Technologies,  Inc.  The
              Company  has  developed  and  intends to  continue  to develop new
              product line extensions for the wireless communications  industry.
              This product development program is expected to be funded from the
              Company's  current working  capital.  The amounts  capitalized and
              amortized  in  the  Company's  wireless   communications  products
              business in accordance with Financial  Accounting Standard No. 86,
              Accounting for the Costs of Computer Software to be Sold,  Leased,
              or  Otherwise   Marketed,   totaled   $1,579,000   and   $899,000,
              respectively, in the first two quarters of Fiscal Year 2000.

              The  Company's   Board  of  Directors   has   authorized  a  stock
              re-purchase  program  of up to  1,500,000  shares.  As of July 31,
              1999,  the Company  has  re-purchased  and  retired  approximately
              1,308,000  shares of which 97,600 shares with a purchase  price of
              $1,948,000  was purchased in the first two quarters of Fiscal Year
              2000.  Over  the term of the  program,  which  began in 1992,  the
              average  price paid per share  re-purchased  under the program was
              $10.12.  Subsequent  to July 31, 1999  and  through  September 14,
              1999, the Company has re-purchased another 75,200  shares  for  an
              aggregate amount of $1,494,000.

              The Company is subject to legal  proceedings and claims that arise
              in the ordinary course of business.  In the opinion of management,
              the amount of ultimate  liability  with  respect to these  actions
              will not materially affect the financial  condition of the Company
              (see  Note 5 of the  Notes  to  Condensed  Consolidated  Financial
              Statements).

              The  Company  believes  that its cash  flow  from  operations  and
              available  bank  borrowings  will be  sufficient  to  satisfy  the
              current and anticipated capital requirements for operations.


       Year 2000

              Many computer  systems and software  products  currently in use by
              businesses  and government  organizations  are coded to accept two
              digits,  rather  than four,  to specify  the year.  Such  computer
              systems and software products will be unable to properly interpret
              dates  beyond  the  year  1999,   which  could  lead  to  business
              disruptions  (the  "Year 2000  Issue").  The  Company's  technical
              personnel  are in the process of assessing  the impact of the Year
              2000 Issue on the Company's products and services.

              The Company has  established  a two-phase  program to complete its
              year 2000 efforts.  The first phase includes  planning,  inventory
              and assessment;  the final phase consists of correction,  testing,
              deployment,  and  acceptance.  The Company has divided its efforts
              into the  categories of internal  information  systems,  products,
              non-IT systems,  business partners,  and customers.  The status of
              each with respect to the Company's  two-phase process is addressed
              below.


              Information Systems

              The  Company has  received  letters or has  completed  remediation
              whereby all of its accounting and manufacturing  software has been
              determined  to be year 2000  compliant.  The Company is completing
              its inventory of computers and computer  peripheral  equipment and
              has determined that a few older units are not year 2000 compliant.
              These units will be  replaced  as part of the regular  replacement
              program  this year.  Remediation  efforts on the  readiness of the
              Company's  internal   information   systems  are  expected  to  be
              completed by October 1999.


              Products

              The  Company  has  assessed  the  year  2000   compliance  of  its
              software-based products along with the associated components.  The
              following detailed actions have been taken to date:

              Test and  measurement/revenue  assurance  products - Most software
              programs have been determined to be year 2000 compliant. For those
              requiring remediation, a detailed upgrade program has been sent to
              each  customer,  and the effort is being  coordinated  through the
              Company's normal upgrade program.

              Emergency  callboxes - The  technology  acquired from GTE has been
              determined  to  be  substantially  year  2000  compliant.  Changes
              required  are  minimal.  The  Company has  assessed  the year 2000
              reliability of the technology  acquired from Cubic  Communications
              and determined that some problems may exist.  Substantially all of
              the installed base is in the process of being upgraded, which will
              eliminate any potential  Year 2000 Issue for these  callboxes.  At
              this  time,  the  Company  does not  believe  that it will incur a
              material  liability in regard to possible  year 2000 problems from
              systems previously sold by Cubic Communications.

              Other  Software  Products - Over the years,  the  Company has been
              associated with a modest number of software products.  A review of
              commercial  products  has  been  completed  for  their  year  2000
              exposure.  The Company  concluded that Year 2000 Issues related to
              these products are minimal and that required  remediation  efforts
              are insignificant.

              The  Company's  program to assess and correct any Year 2000 Issues
              with its products is well  underway, and  upgrade  programs are or
              will be  in  place during 1999 to coordinate the efforts involved.
              Efforts are being coordinated through the Company's normal upgrade
              channels,  and at this  time no  additional  resources  need to be
              assigned to the effort.


              Non-IT Systems

              Non-IT   systems    include    embedded    technology    such   as
              micro-controllers.  The Company's  assessment  indicated  that the
              equipment  utilized  in its  manufacturing  process  is  not  date
              dependent. The Company has assessed the impact of non-IT issues on
              its other office equipment (telephone systems, copiers,  facsimile
              machines,  etc.)  and  facility  infrastructure  for  which  it is
              responsible.  Responses  are being  received  from the  respective
              vendors, and the Company does not expect any significant issues in
              this area.  The Company will continue to assess non-IT systems and
              expects substantial resolution by October 1999.


              Business Partners

              Business partners include, but are not limited to: suppliers,  the
              Company's  bank,  insurance  and benefit  providers,  and property
              management  firms.  The  Company's  operations  are  dependent  to
              varying degrees on the readiness of these and other partners.  The
              Company   has   issued   questionnaires   to   or   has   received
              correspondence  from  most of the  currently  identified  business
              partners.  To date, the responses  received  indicate that many of
              the Company's  business partners are actively  addressing the Year
              2000 Issue. The Company is continuing to pursue responses in order
              to complete its  evaluation.  By October 1999, the Company expects
              to have  identified and developed  contingency  plans for business
              partners  that cannot give adequate  assurances  that they will be
              year 2000 ready.


              Customers

              The Company is  contacting  its  customers  to assess the state of
              their  readiness  and  the  potential   impact  on  the  Company's
              operations.  The Company's main concern is  principally  with U.S.
              and state and local  government  entities.  The primary concern is
              that there will be delays in  contract  payments  to the  Company,
              which would require a temporary increase in working capital funded
              from  bank  borrowings.  The  Company  has  substantial  borrowing
              capacity available under its current line of credit, which extends
              to June 2000.  The Company will continue to evaluate the cash flow
              impact of Year 2000  Issues  and  develop  additional  contingency
              financing plans, if required.

              The Company  will use both  internal  and  external  resources  to
              ensure  that it is year 2000 ready.  The Company has not  deferred
              any significant information technology projects as a result of the
              year 2000  effort.  The total cost of the program is being  funded
              through  operating cash flows.  The total cost associated with the
              year 2000 effort is not  expected to be material to the  Company's
              consolidated results of operations and financial position.

              Although the Company's  year 2000 efforts are intended to minimize
              the adverse effects of the Year 2000 Issue on the its business and
              operations,  the actual  effects  of the Issue and the  success or
              failure of the Company's  efforts  described above cannot be known
              until the year 2000. Therefore, in the opinion of management,  the
              most reasonable likely worst case scenario is the possibility that
              the Company's  major business  partners,  other  material  service
              providers,   or  customers  will  not  adequately   address  their
              respective  Year 2000  Issues in a timely  manner,  the  effect of
              which  could  have a  material  adverse  effect  on the  Company's
              business, results of operations, and financial condition.

              The Company will be developing  contingency  plans with respect to
              this most likely worst case scenario as additional  information is
              obtained from both  business  partners and  customers.  Such plans
              will not be finalized until the latter part of calendar year 1999.



              QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

              The  Company  is  exposed  to market  risk,  including  changes in
              interest rates and currency  exchange  rates. As of July 31, 1999,
              the  Company  had no accounts  receivable  denominated  in foreign
              currencies. The Company's standard terms require foreign customers
              to pay for the  Company's  products with U.S.  dollars.  For those
              orders  denominated in foreign  currencies,  the Company may limit
              its exposure to losses from foreign  currency  transactions by the
              purchase of forward foreign exchange  contracts.  Such activity to
              date has been insignificant.

              The  Company's  interest  rate risk is  limited  to  approximately
              $295,000 of  available-for-sale  investments  as of July 31, 1999.
              These  investments  are high-grade  municipal debt securities with
              maturities  from one to five years  which are  subject to interest
              rate fluctuations.

<PAGE>

PART II - OTHER INFORMATION


ITEM 6.       EXHIBITS AND REPORTS ON FORM 8-K

       (a)    Exhibits

              The following exhibits are included herewith:

              ll.  Schedule of Computation of Net Income Per Share

       (b)    Reports on Form 8-K

              On July 22, 1999,  the Company filed a Current  Report on Form 8-K
              reporting  the   announcement  of  a  strategic  plan  to  enhance
              shareholder   value  by  marketing   the   Company's   information
              technology  and  staffing  services  segment's  product  lines and
              enclosing its press release of July 7, 1999 to that effect.


<PAGE>
                                    SIGNATURE



Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.




                                 COMARCO, Inc.
                       ---------------------------------
                                  (Registrant)




September 14, 1999





               --------------------------------------------------
                                 Thomas P. Baird
                             Chief Financial Officer
              (Authorized Officer and Principal Financial Officer)