<PAGE>
================================================================================


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q

                               -------------------
(Mark One)

[X]     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934

                              For the quarter ended

                                OCTOBER 31, 2001

                                       OR
[ ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934

         For the transition period from ______________ to ______________

                          Commission file number 0-5449

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

                              --------------------

             California                                       95-2088894
    (State or Other Jurisdiction                           (I.R.S. Employer
  of Incorporation or Organization)                       Identification No.)

                      2 Cromwell, Irvine, California 92618
               (Address of Principal Executive Offices) (Zip Code)



       Registrant's Telephone Number, Including Area Code: (949) 599-7400


--------------------------------------------------------------------------------

    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 [ ]

      As of December 13, 2001, there were 6,887,235 shares of Common Stock
outstanding.

================================================================================

<PAGE>

                         COMARCO, INC. AND SUBSIDIARIES

                          QUARTERLY REPORT ON FORM 10-Q
                                OCTOBER 31, 2001


                                TABLE OF CONTENTS




<TABLE>
<CAPTION>
                                                                                              Page
                                                                                              ----
<S>        <C>                                                                                <C>
PART I  -- FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS..........................................................        3

           Condensed Consolidated Balance Sheets as of October 31, 2001 and January 31,
               2001......................................................................        3

           Condensed Consolidated Statements of Income for the Three and Nine Months
               Ended October 31, 2001 and 2000...........................................        4

           Condensed Consolidated Statements of Cash Flows for the Nine Months
               Ended October 31, 2001 and 2000...........................................        5

           Notes to Condensed Consolidated Financial Statements..........................        6

ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
           OPERATIONS....................................................................       13

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK....................       20


PART II -- OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS.............................................................       20

ITEM 2.    CHANGES IN SECURITIES.........................................................       21

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES...............................................       21

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...........................       21

ITEM 5.    OTHER INFORMATION.............................................................       21

ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K..............................................       21

SIGNATURE................................................................................       22
</TABLE>



                                       2
<PAGE>

                         PART I -- FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                         COMARCO, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS


                                     ASSETS

<TABLE>
<CAPTION>
                                                    OCTOBER 31,      JANUARY 31,
                                                       2001              2001
                                                    -----------      -----------
                                                    (UNAUDITED)
<S>                                                 <C>              <C>
Current Assets:
    Cash and cash equivalents ................      $19,765,000      $24,903,000
    Short-term investments ...................        3,291,000        3,819,000
    Accounts receivable, net .................       10,838,000        8,418,000
    Inventory ................................        5,903,000        5,277,000
    Deferred tax asset .......................        1,683,000        2,133,000
    Other current assets .....................          841,000        1,746,000
                                                    -----------      -----------
        Total current assets .................       42,321,000       46,296,000

Property and equipment, net ..................        3,873,000        3,695,000
Software development costs, net ..............        9,594,000        7,249,000
Intangible assets, net .......................        7,680,000        8,381,000
Other assets .................................        1,146,000          430,000
                                                    -----------      -----------
                                                    $64,614,000      $66,051,000
                                                    ===========      ===========


                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
    Accounts payable .........................      $   482,000      $ 1,050,000
    Deferred revenue .........................        4,894,000        6,786,000
    Accrued liabilities ......................        7,142,000        9,364,000
                                                    -----------      -----------
        Total current liabilities ............       12,518,000       17,200,000

Deferred compensation ........................        3,291,000        3,918,000
Deferred income taxes ........................        2,287,000        1,406,000
Minority interest ............................          487,000           32,000
Stockholders' equity .........................       46,031,000       43,495,000
                                                    -----------      -----------
                                                    $64,614,000      $66,051,000
                                                    ===========      ===========
</TABLE>



  The accompanying notes are an integral part of these condensed consolidated
                             financial statements.



                                       3
<PAGE>

                         COMARCO, INC. AND SUBSIDIARIES
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                THREE MONTHS ENDED                     NINE MONTHS ENDED
                                                                    OCTOBER 31,                            OCTOBER 31,
                                                          -------------------------------       -------------------------------
                                                              2001               2000               2001               2000
                                                          ------------       ------------       ------------       ------------
<S>                                                       <C>                <C>                <C>                <C>
Revenue ............................................      $ 12,320,000       $ 13,153,000       $ 38,372,000       $ 35,202,000
Cost of sales ......................................         6,405,000          6,414,000         19,337,000         16,978,000
                                                          ------------       ------------       ------------       ------------
Gross profit .......................................         5,915,000          6,739,000         19,035,000         18,224,000
Selling, general and administrative costs ..........         2,873,000          3,236,000          9,733,000          9,132,000
Engineering and support costs ......................         1,630,000          1,239,000          4,287,000          3,568,000
                                                          ------------       ------------       ------------       ------------
Operating income before severance costs ............         1,412,000          2,264,000          5,015,000          5,524,000
Severance costs ....................................                --                 --                 --          1,325,000
                                                          ------------       ------------       ------------       ------------
Operating income ...................................         1,412,000          2,264,000          5,015,000          4,199,000
Other income .......................................           206,000            327,000            780,000            501,000
Minority interest ..................................           (18,000)            (2,000)           (44,000)            (4,000)
                                                          ------------       ------------       ------------       ------------
Income before income taxes .........................         1,600,000          2,589,000          5,751,000          4,696,000
Income tax expense .................................           590,000            946,000          2,120,000          1,715,000
                                                          ------------       ------------       ------------       ------------
Net income from continuing operations ..............         1,010,000          1,643,000          3,631,000          2,981,000
Net income (loss) from discontinued operations .....                --           (121,000)                --            378,000
                                                          ------------       ------------       ------------       ------------
Net income .........................................      $  1,010,000       $  1,522,000       $  3,631,000       $  3,359,000
                                                          ============       ============       ============       ============

Earnings per share -- continuing operations:
    Basic ..........................................      $       0.14       $       0.24       $       0.52       $       0.45
                                                          ============       ============       ============       ============
    Diluted ........................................      $       0.14       $       0.22       $       0.48       $       0.40
                                                          ============       ============       ============       ============

Earnings (loss) per share -- discontinued
    operations:
    Basic ..........................................      $         --       $      (0.02)      $         --       $       0.05
                                                          ============       ============       ============       ============
    Diluted ........................................      $         --       $      (0.02)      $         --       $       0.05
                                                          ============       ============       ============       ============

Earnings per share:
    Basic ..........................................      $       0.14       $       0.22       $       0.52       $       0.50
                                                          ============       ============       ============       ============
    Diluted ........................................      $       0.14       $       0.20       $       0.48       $       0.45
                                                          ============       ============       ============       ============
</TABLE>


  The accompanying notes are an integral part of these condensed consolidated
                             financial statements.



                                       4
<PAGE>

                         COMARCO, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                            NINE MONTHS ENDED OCTOBER 31,
                                                                           -------------------------------
                                                                               2001               2000
                                                                           ------------       ------------
<S>                                                                        <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income from continuing operations ...............................      $  3,631,000       $  2,981,000
Adjustments to reconcile net income from continuing operations to net
    cash provided by operating activities:
    Depreciation and amortization ...................................         4,127,000          3,298,000
    Gain on disposal of property and equipment ......................           (16,000)            (2,000)
    Tax benefit from exercise of stock options ......................           615,000          1,500,000
    Deferred income taxes ...........................................         1,331,000            657,000
    Provision for doubtful accounts receivable ......................           (31,000)            18,000
    Provision for obsolete inventory ................................           321,000            228,000
    Minority interest in earnings of subsidiary .....................            44,000              4,000
    Changes in operating assets and liabilities:
        Decrease (increase) in trading securities ...................           453,000           (665,000)
        Increase in accounts receivable .............................        (2,435,000)        (4,211,000)
        Increase in inventory .......................................          (947,000)          (884,000)
        Decrease in other assets ....................................           911,000            885,000
        Deferred compensation .......................................          (627,000)           666,000
        Increase (decrease) in current liabilities ..................        (3,510,000)         4,291,000
                                                                           ------------       ------------
Net cash provided by operating activities ...........................         3,867,000          8,766,000
                                                                           ------------       ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Proceeds from sales and maturities of investments ...............            72,000             11,000
    Purchases of property and equipment .............................        (1,675,000)        (1,528,000)
    Proceeds from sales of property and equipment ...................            20,000              2,000
    Investment in SwissQual .........................................        (1,073,000)                --
    Cash paid for acquisition of minority interest ..................          (118,000)                --
    Software development costs ......................................        (4,193,000)        (3,500,000)
                                                                           ------------       ------------
Net cash used in investing activities ...............................        (6,967,000)        (5,015,000)
                                                                           ------------       ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Net proceeds from issuance of common stock ......................           283,000          1,592,000
    Net proceeds from issuance of subsidiary common stock ...........           134,000             40,000
    Purchase and retirement of common stock .........................        (1,680,000)                --
                                                                           ------------       ------------
Net cash provided by (used in) financing activities .................        (1,263,000)         1,632,000
                                                                           ------------       ------------

Net increase (decrease) in cash and cash equivalents --
    continuing operations ...........................................        (4,363,000)         5,383,000
Net increase (decrease) in cash and cash equivalents --
    discontinued operations .........................................          (775,000)         7,939,000
                                                                           ------------       ------------

Net increase (decrease) in cash and cash equivalents ................        (5,138,000)        13,322,000

Cash and cash equivalents, beginning of period ......................        24,903,000          5,064,000
                                                                           ------------       ------------

Cash and cash equivalents, end of period ............................      $ 19,765,000       $ 18,386,000
                                                                           ============       ============

Supplemental disclosures of cash flow information:
    Cash paid for interest ..........................................      $         --       $         --
                                                                           ============       ============
    Cash paid for income taxes ......................................      $    994,000       $    500,000
                                                                           ============       ============
</TABLE>


  The accompanying notes are an integral part of these condensed consolidated
                             financial statements.



                                       5
<PAGE>

                         COMARCO, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


1.      ORGANIZATION

        COMARCO, Inc., through its wireless technologies subsidiary Comarco
Wireless Technologies, Inc. (collectively, "COMARCO" or the "Company"), is a
leading provider of advanced technology products and services for the wireless
Internet. COMARCO also designs and manufactures remote voice systems and mobile
power products for notebook computers, cellular telephones, and personal
organizers. COMARCO, Inc. is a California corporation that became a public
company in 1971 when it was spun-off from Genge Industries, Inc. Comarco
Wireless Technologies, Inc. ("CWT") was incorporated in the state of Delaware in
September 1993. During October 1999, the Company embarked on a plan to divest
its non-wireless businesses, which included the defense and commercial staffing
businesses. The divestiture plan was completed during November 2000.
Accordingly, the Company's continuing operations consist solely of the
operations of CWT.


2.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation:

        The interim condensed consolidated financial statements of COMARCO
included herein have been prepared without audit in accordance with accounting
principles generally accepted in the United States of America for interim
information and with the instructions for Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. The Company believes that the disclosures are adequate to make the
information presented not misleading when read in conjunction with the audited
consolidated financial statements included in the Company's Annual Report on
Form 10-K for the year ended January 31, 2001 and the Company's Quarterly
Reports on Form 10-Q for the prior quarters of the current fiscal year. The
financial information presented herein reflects all adjustments, consisting only
of normal recurring accruals, which are, in the opinion of management, necessary
for a fair presentation of the results for the interim periods presented. The
results for the three and nine months ended October 31, 2001 are not necessarily
indicative of the results to be expected for the year ended January 31, 2002.

Principles of Consolidation:

        The condensed consolidated financial statements of the Company include
the accounts of COMARCO, Inc., CWT, and wholly owned subsidiaries primarily
reported as discontinued operations. All material intercompany balances,
transactions, and profits have been eliminated.

Use of Estimates:

        The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

Reclassifications:

        Certain prior period balances have been reclassified to conform to the
current period presentation.

Stock Split:

        In October 2000, the Company effected a stock split of three shares for
every two shares of common stock outstanding. All references in the condensed
consolidated financial statements to the number of shares and to per share
amounts have been retroactively restated to reflect this stock split.



                                       6
<PAGE>

                         COMARCO, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


2.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recent Accounting Pronouncements:

        In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 141, "Business
Combinations," which was effective upon issuance. This statement requires that
the purchase method of accounting be used for all business combinations
initiated after June 30, 2001. The adoption of this standard is not expected to
have a material effect on the Company's financial condition, consolidated
results of operations or cash flows.

        In July 2001, the FASB issued SFAS No. 142, "Goodwill and Other
Intangible Assets," which is effective January 1, 2002. This statement requires
that goodwill and intangible assets with indefinite useful lives no longer be
amortized, but instead be tested for impairment. The Company has not yet
completed its analysis of the effect this standard will have on the Company's
financial condition, consolidated results of operations or cash flows.

        In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." This statement provides the accounting requirements for
retirement obligations associated with long-lived assets. SFAS No. 143 is
effective for fiscal years beginning after June 15, 2001, and early adoption is
permitted. The adoption of this standard is not expected to have a material
effect on the Company's financial condition, consolidated results of operations,
or cash flows.

        In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," which supersedes both SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of" and the accounting and reporting provisions of APB
Opinion No. 30, "Reporting the Results of Operations--Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions" for the disposal of a segment of a business
(as previously defined in that Opinion). SFAS No. 144 retains the fundamental
provisions in SFAS No. 121 for recognizing and measuring impairment losses on
long-lived assets held for use and long-lived assets to be disposed of by sale,
while also resolving significant implementation issues associated with SFAS No.
121. For example, SFAS No. 144 provides guidance on how a long-lived asset that
is used as part of a group should be evaluated for impairment, establishes
criteria for when a long-lived asset is held for sale, and prescribes the
accounting for a long-lived asset that will be disposed of other than by sale.
SFAS No. 144 retains the basic provisions of APB Opinion No. 30 on how to
present discontinued operations in the income statement but broadens that
presentation to include a component of an entity (rather than a segment of a
business). Unlike SFAS No. 121, an impairment assessment under SFAS No. 144 will
never result in a write-down of goodwill. Rather, goodwill is evaluated for
impairment under SFAS No. 142, "Goodwill and Other Intangible Assets."

        The Company is required to adopt SFAS No. 144 no later than the year
beginning after December 15, 2001, and plans to adopt its provisions for the
quarter ending April 30, 2002. Management does not expect the adoption of SFAS
No. 144 for long-lived assets held for use to have a material impact on the
Company's financial statements because the impairment assessment under SFAS No.
144 is largely unchanged from SFAS No. 121. The provisions of SFAS No. 144
pertaining to assets held for sale or other disposal generally are required to
be applied prospectively after the adoption date to newly initiated disposal
activities. Therefore, management cannot determine the potential effects that
adoption of SFAS No. 144 will have on the Company's financial condition,
consolidated results of operations, or cash flows.


3.      STOCKHOLDERS' EQUITY

        During 1992, the Company's Board of Directors authorized a stock
repurchase program of up to 3.0 million shares of our common stock. From program
inception through October 31, 2001, the Company has repurchased approximately
2.4 million shares for an average price of $8.08 per share. During the third
quarter ended October 31, 2001, the Company repurchased 108,800 shares of common
stock in the open market for an average price of $13.31 per share. For the nine
months ending October 31, 2001, the Company repurchased 124,900 shares of common
stock in the open market for an average price of $13.46 per share.



                                       7
<PAGE>

                         COMARCO, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


4.      EARNINGS PER SHARE

        The Company calculates net income per share in accordance with SFAS No.
128, "Earnings Per Share." Under this statement, basic net income per share is
calculated by dividing net income by the weighted-average number of common
shares outstanding during the reporting period. Diluted net income per share
reflects the effects of potentially dilutive securities. The following tables
present reconciliations of the numerators and denominators of the basic and
diluted earnings per share computations for net income. In the tables below,
"Income" represents the numerator and "Shares" represent the denominator:

<TABLE>
<CAPTION>
                                                                 THREE MONTHS ENDED                  NINE MONTHS ENDED
                                                                     OCTOBER 31,                        OCTOBER 31,
                                                           -----------------------------       -----------------------------
                                                              2001              2000              2001              2000
                                                           -----------       -----------       -----------       -----------
<S>                                                        <C>               <C>               <C>               <C>
BASIC:
Net income from continuing operations ...............      $ 1,010,000       $ 1,643,000       $ 3,631,000       $ 2,981,000
Weighted average shares outstanding .................        7,002,000         6,831,000         7,040,000         6,677,000
                                                           -----------       -----------       -----------       -----------
Basic income per share from continuing
    operations ......................................      $      0.14       $      0.24       $      0.52       $      0.45
                                                           ===========       ===========       ===========       ===========

Net income (loss) from discontinued operations ......      $        --       $  (121,000)      $        --       $   378,000
Weighted average shares outstanding .................        7,002,000         6,831,000         7,040,000         6,677,000
                                                           -----------       -----------       -----------       -----------
Basic income (loss) per share from discontinued
    operations ......................................      $        --       $     (0.02)      $        --       $      0.05
                                                           ===========       ===========       ===========       ===========
Net income ..........................................      $ 1,010,000       $ 1,522,000       $ 3,631,000       $ 3,359,000
Weighted average shares outstanding .................        7,002,000         6,831,000         7,040,000         6,677,000
                                                           -----------       -----------       -----------       -----------
Basic income per share ..............................      $      0.14       $      0.22       $      0.52       $      0.50
                                                           ===========       ===========       ===========       ===========

DILUTED:
Net income from continuing operations ...............      $ 1,010,000       $ 1,643,000       $ 3,631,000       $ 2,981,000
Effect of subsidiary options ........................          (44,000)          (95,000)         (178,000)         (211,000)
                                                           -----------       -----------       -----------       -----------
Net income used in calculation of diluted
    income per share from continuing
    operations ......................................      $   966,000       $ 1,548,000       $ 3,453,000       $ 2,770,000
                                                           ===========       ===========       ===========       ===========

Weighted average shares outstanding .................        7,002,000         6,831,000         7,040,000         6,677,000
Effect of dilutive securities --
    stock options ...................................           86,000           220,000            96,000           293,000
                                                           -----------       -----------       -----------       -----------
Weighted average shares used in calculation
    of diluted income per share from
    continuing operations ...........................        7,088,000         7,051,000         7,136,000         6,970,000
                                                           ===========       ===========       ===========       ===========
Diluted income per share from continuing
    operations ......................................      $      0.14       $      0.22       $      0.48       $      0.40
                                                           ===========       ===========       ===========       ===========
</TABLE>



                                       8
<PAGE>

                         COMARCO, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


4.      EARNINGS PER SHARE (CONTINUED)

<TABLE>
<CAPTION>
                                                             THREE MONTHS ENDED                  NINE MONTHS ENDED
                                                                 OCTOBER 31,                        OCTOBER 31,
                                                       -----------------------------       -----------------------------
                                                          2001              2000              2001              2000
                                                       -----------       -----------       -----------       -----------
<S>                                                    <C>               <C>               <C>               <C>
Net income (loss) from discontinued
    operations ..................................      $        --       $  (121,000)      $        --       $   378,000
Effect of subsidiary options ....................               --                --                --                --
                                                       -----------       -----------       -----------       -----------
Net income (loss) used in calculation of
    diluted income per share from
    discontinued operations .....................      $        --       $  (121,000)      $        --       $   378,000
                                                       ===========       ===========       ===========       ===========

Weighted average shares outstanding .............        7,002,000         6,831,000         7,040,000         6,677,000
Effect of dilutive securities --
    stock options ...............................           86,000           220,000            96,000           293,000
                                                       -----------       -----------       -----------       -----------
Weighted average shares used in calculation
    of diluted income per share from
    discontinued operations .....................        7,088,000         7,051,000         7,136,000         6,970,000
                                                       ===========       ===========       ===========       ===========
Diluted income (loss) per share from
    discontinued operations .....................      $        --       $     (0.02)      $        --       $      0.05
                                                       ===========       ===========       ===========       ===========

Net income ......................................      $ 1,010,000       $ 1,522,000       $ 3,631,000       $ 3,359,000

Effect of subsidiary options ....................          (44,000)          (95,000)         (178,000)         (211,000)
                                                       -----------       -----------       -----------       -----------
Net income used in calculation of diluted
    income per share ............................      $   966,000       $ 1,427,000       $ 3,453,000       $ 3,148,000
                                                       ===========       ===========       ===========       ===========

Weighted average shares outstanding .............        7,002,000         6,831,000         7,040,000         6,677,000
Effect of dilutive securities --
    stock options ...............................           86,000           220,000            96,000           293,000
                                                       -----------       -----------       -----------       -----------
Weighted average shares used in calculation
    of diluted income per share .................        7,088,000         7,051,000         7,136,000         6,970,000
                                                       ===========       ===========       ===========       ===========
Diluted income per share ........................      $      0.14       $      0.20       $      0.48       $      0.45
                                                       ===========       ===========       ===========       ===========
</TABLE>


5.      INVENTORY

        Inventory consists of the following (dollars in thousands):

<TABLE>
<CAPTION>
                                                    OCTOBER 31,     JANUARY 31,
                                                       2001            2001
                                                    -----------     -----------
<S>                                                 <C>             <C>
Raw materials ..........................              $4,477          $4,695
Work in progress .......................                 654             363
Finished goods .........................                 772             219
                                                      ------          ------
                                                      $5,903          $5,277
                                                      ======          ======
</TABLE>



                                       9
<PAGE>

                         COMARCO, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


6.      SOFTWARE DEVELOPMENT COSTS, NET

        Software development costs consist of the following (dollars in
thousands):

<TABLE>
<CAPTION>
                                                     OCTOBER 31,    JANUARY 31,
                                                        2001           2001
                                                     -----------    -----------
<S>                                                  <C>            <C>
Capitalized software development costs .......        $ 16,778       $ 12,585
Less accumulated amortization ................          (7,184)        (5,336)
                                                      --------       --------
                                                      $  9,594       $  7,249
                                                      ========       ========
</TABLE>

        Capitalized software development costs for the three months ended
October 31, 2001 and 2000 totaled $1.4 million and $1.2 million, respectively.
Capitalized software development costs for the nine months ended October 31,
2001 and 2000 totaled $4.2 million and $3.5 million, respectively. Amortization
of software development costs for the three months ended October 31, 2001 and
2000 totaled $680,000 and $916,000, respectively. For the nine months ended
October 31, 2001 and 2000, amortization of software development costs totaled
$1.8 million and $2.4 million, respectively. Amortization of software
development costs has been reported in cost of sales in the accompanying
condensed consolidated financial statements.

7.      GOODWILL AND ACQUIRED INTANGIBLE ASSETS

        Goodwill and acquired intangible assets consist of the following
(dollars in thousands):

<TABLE>
<CAPTION>
                                                     OCTOBER 31,     JANUARY 31,
                                                        2001            2001
                                                     -----------     -----------
<S>                                                  <C>             <C>
Purchased technology .......................          $  1,790        $  1,790
Customer base ..............................               930             930
Goodwill ...................................             5,032           4,947
Other acquired intangible assets ...........             1,650           1,650
                                                      --------        --------
                                                      $  9,402        $  9,317
Less accumulated amortization ..............            (1,722)           (936)
                                                      ========        ========
                                                      $  7,680        $  8,381
                                                      ========        ========
</TABLE>

        Amortization of intangible assets for the three months ended October 31,
2001 and 2000 totaled $262,000 and $79,000, respectively. For the nine months
ended October 31, 2001 and 2000, amortization of intangibles totaled $786,000
and $236,000, respectively.

8.      BUSINESS SEGMENT INFORMATION

        The Company has two operating segments: wireless infrastructure and
wireless applications. Wireless infrastructure provides advanced technology
products and services to the wireless Internet. Wireless applications designs
and manufactures remote voice systems and mobile power products for notebook
computers, cellular telephones, and personal organizers.



                                       10
<PAGE>

                         COMARCO, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


8.      BUSINESS SEGMENT INFORMATION (CONTINUED)

        Performance measurement and resource allocation for the reportable
segments are based on many factors. The primary financial measures used are
revenue and gross profit. The revenue, gross profit, and gross margin
attributable to these segments are as follows (dollars in thousands):

<TABLE>
<CAPTION>
                            THREE MONTHS ENDED OCTOBER 31, 2001            THREE MONTHS ENDED OCTOBER 31, 2000
                         -------------------------------------------    -------------------------------------------
                            WIRELESS         WIRELESS                      WIRELESS         WIRELESS
                         INFRASTRUCTURE    APPLICATIONS      TOTAL      INFRASTRUCTURE    APPLICATIONS      TOTAL
                         --------------    ------------     --------    --------------    ------------     --------
<S>                      <C>               <C>              <C>         <C>               <C>              <C>
Revenue ............        $  6,931         $  5,389       $ 12,320       $  9,726         $  3,427       $ 13,153
Cost of sales ......           3,185            3,220          6,405          4,091            2,323          6,414
                            --------         --------       --------       --------         --------       --------
Gross profit .......        $  3,746         $  2,169       $  5,915       $  5,635         $  1,104       $  6,739
                            ========         ========       ========       ========         ========       ========
Gross margin .......            54.0%            40.2%          48.0%          57.9%            32.2%          51.2%
                            ========         ========       ========       ========         ========       ========
</TABLE>

<TABLE>
<CAPTION>
                             NINE MONTHS ENDED OCTOBER 31, 2001             NINE MONTHS ENDED OCTOBER 31, 2000
                         -------------------------------------------    -------------------------------------------
                            WIRELESS         WIRELESS                      WIRELESS         WIRELESS
                         INFRASTRUCTURE    APPLICATIONS      TOTAL      INFRASTRUCTURE    APPLICATIONS      TOTAL
                         --------------    ------------     --------    --------------    ------------     --------
<S>                      <C>               <C>              <C>         <C>               <C>              <C>
Revenue ............        $ 22,040         $ 16,332       $ 38,372       $ 25,210         $  9,992       $ 35,202
Cost of sales ......           9,487            9,850         19,337         10,132            6,846         16,978
                            --------         --------       --------       --------         --------       --------
Gross profit .......        $ 12,553         $  6,482       $ 19,035       $ 15,078         $  3,146       $ 18,224
                            ========         ========       ========       ========         ========       ========
Gross margin .......            57.0%            39.7%          49.6%          59.8%            31.5%          51.8%
                            ========         ========       ========       ========         ========       ========
</TABLE>

        Revenue by geographic area consists of the following (dollars in
thousands):

<TABLE>
<CAPTION>
                               THREE MONTHS ENDED          NINE MONTHS ENDED
                                   OCTOBER 31,                OCTOBER 31,
                             ----------------------      ----------------------
                               2001          2000          2001          2000
                             --------      --------      --------      --------
<S>                          <C>           <C>           <C>           <C>
North America .........      $ 11,087      $ 11,152      $ 35,757      $ 31,622
Europe ................            --           106            16           280
Asia ..................           116           307           970           314
Latin America .........         1,117         1,588         1,629         2,986
                             --------      --------      --------      --------
                             $ 12,320      $ 13,153      $ 38,372      $ 35,202
                             ========      ========      ========      ========
</TABLE>


9.      CONTINGENCIES

        COMARCO was named as a defendant in two lawsuits filed by Mobility
Electronics, Inc. ("Mobility").

        Mobility v. Targus Group International, Inc. ("Targus") and CWT was
filed on July 23, 2001. In addition to claims against Targus, the distributor of
the Company's mobile power adapter products, the lawsuit alleges that the
Company intentionally interfered with Mobility's rights under an exclusive
manufacturing agreement with Targus and misappropriated Mobility's trade
secrets.

        Targus markets and distributes the Company's 70-Watt AC ChargeSource
universal power adapter. As previously announced, the Company received an $8.6
million purchase order from Targus covering the 70-Watt AC adapter and a new DC
ChargeSource universal power adapter recently introduced by COMARCO. In its
complaint, Mobility contends that it currently has an exclusive contract to
manufacture DC power adapters for Targus. The Company understands that Targus
purchased DC power adapter products from Mobility and that Targus used and sold



                                       11
<PAGE>

                         COMARCO, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


9.      CONTINGENCIES (CONTINUED)

DC power adapter products from Mobility under a terminable, non-exclusive
license agreement between the Company and Targus involving patented COMARCO
technology. Prior to the filing of the lawsuit, the Company had terminated the
license agreement with Targus in accordance with the provisions of the license
agreement.

        During October 2001, the three parties to the lawsuit entered into a
settlement agreement and, on November 26, 2001, the lawsuit was dismissed with
prejudice.

        Mobility v. COMARCO No. CIV011489PHXMHM was filed on August 10, 2001.
This lawsuit alleges that the Company, through the manufacture and sale of its
70-Watt AC ChargeSource universal power adapter, infringed upon a patent
purchased by Mobility on August 6, 2001.

        COMARCO's management believes that Mobility's infringement claim against
the Company is without merit and intends to vigorously defend the lawsuit.

        The Company is from time to time involved in various legal proceedings
incidental to the conduct of our business. We believe that the outcome of all
other such pending legal proceedings will not in the aggregate have a material
adverse effect on our business, financial condition, or results of operations.



                                       12
<PAGE>

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

        The following discussion and analysis should be read in conjunction with
the condensed consolidated financial statements and notes thereto included
elsewhere in this quarterly report on Form 10-Q. This report includes
"forward-looking statements" that are subject to risks, uncertainties, and other
factors that could cause actual results or outcomes to differ materially from
those contemplated by the forward-looking statements. Forward-looking statements
in this release are generally identified by words such as "believes,"
"anticipates," "plans," "expects," "will," "would," and similar expressions that
are intended to identify forward-looking statements. A number of important
factors could cause our results to differ materially from those indicated by
these forward-looking statements, including, among others, the impact of
perceived or actual weakening of economic conditions on customers' and
prospective customers' spending on our products and services; quarterly
fluctuations in our revenue or other operating results; failure to meet
financial expectations of analysts and investors, including failure from
significant reductions in demand from earlier anticipated levels; potential
difficulties in the assimilation of operations, strategies, technologies,
personnel and products of acquired companies and technologies; risks related to
market acceptance of our products and our ability to meet contractual and
technical commitments with our customers; activities by us and others regarding
protection of intellectual property; and competitors' release of competitive
products and other actions. Further information on potential factors that could
affect our financial results are included in risks detailed from time to time in
our Securities and Exchange Commission filings, including without limitation our
quarterly reports on Form 10-Q for the prior quarters of the current fiscal year
and our annual report of Form 10-K for the year ended January 31, 2001.

        Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance, or achievements. Moreover, neither any other
person nor we assume responsibility for the accuracy and completeness of the
forward-looking statements. We undertake no obligation to revise or update
publicly any forward-looking statements for any reason.

OVERVIEW

        COMARCO, Inc., through its wireless technologies subsidiary Comarco
Wireless Technologies, Inc. (collectively, "COMARCO," or the "Company"), is a
leading provider of advanced technology products and services for the wireless
Internet. COMARCO also designs and manufactures remote voice systems and mobile
power products for notebook computers, cellular telephones, and personal
organizers. COMARCO, Inc. is a California corporation that became a public
company in 1971 when it was spun-off from Genge Industries, Inc. Comarco
Wireless Technologies, Inc. ("CWT") was incorporated in the State of Delaware in
September 1993. During October 1999, we embarked on a plan to divest our
non-wireless businesses, which included the defense and commercial staffing
businesses. The divestiture plan was completed during November 2000.
Accordingly, our continuing operations consist solely of the operations of CWT.

RESULTS OF OPERATIONS -- CONTINUING OPERATIONS

        We have two reportable operating segments: wireless infrastructure and
wireless applications.

Wireless Infrastructure

        This operating segment designs and manufactures advanced technology
hardware and software tools for use by wireless carriers, equipment vendors, and
others. These tools are used by radio frequency ("RF") engineers, professional
technicians, and others to design, deploy, and optimize wireless networks, and
to test and measure the Quality of Service once the wireless networks are
deployed. The wireless infrastructure segment is also a provider of engineering
services that assist the wireless carriers, equipment vendors, and others in all
phases of the wireless network lifecycle.



                                       13
<PAGE>

Wireless Applications

        This operating segment designs and manufactures remote voice systems and
mobile power products for notebook computers, cellular telephones, and personal
organizers. Remote voice systems currently include various call box products
that provide emergency communication over existing wireless networks. In
addition to the call box products, we provide system installation and long-term
maintenance services. Currently, approximately 14,000 call boxes are installed,
the majority of which are serviced and maintained under long-term agreements.

        The wireless applications segment also includes the ChargeSource 70-watt
universal AC power adapter, our second-generation mobile power system that
powers and charges most laptop computers, cellular telephones, handheld devices,
and portable printers. This product is currently distributed by Targus Group
International ("Targus"). The ChargeSource product offering has been expanded
with the newly designed DC ChargeSource universal power adapter. The DC adapter
allows the traveling professional to use all of their existing ChargeSource
SmartTips on the road or in the air. The new device connects to the in-seat
power outlet available on most major airlines or the cigarette lighter plug
found in cars today. The new ChargeSource DC adapter began shipping during the
third quarter of the current fiscal year. This new product is also being
distributed by Targus.

        The following table sets forth certain items as a percentage of revenue
from our condensed consolidated statements of income for the three and nine
months ended October 31, 2001 and 2000. The table and discussion that follows
provide information which management believes is relevant to an assessment and
understanding of our condensed consolidated results of operations and financial
condition. The discussion should be read in conjunction with the condensed
consolidated financial statements and accompanying notes thereto included
elsewhere herein.

<TABLE>
<CAPTION>
                                                                   PERCENTAGE OF REVENUE
                                                      -----------------------------------------------
                                                       THREE MONTHS ENDED         NINE MONTHS ENDED
                                                           OCTOBER 31,                OCTOBER 31,
                                                      --------------------       --------------------
                                                       2001          2000         2001          2000
                                                      ------        ------       ------        ------
<S>                                                   <C>           <C>          <C>           <C>
Revenue ........................................       100.0%        100.0%       100.0%        100.0%
Cost of sales ..................................        52.0          48.8         50.4          48.2
                                                      ------        ------       ------        ------
Gross margin ...................................        48.0          51.2         49.6          51.8
Selling, general and administrative costs ......        23.3          24.6         25.4          25.9
Engineering and support costs ..................        13.2           9.4         11.2          10.2
                                                      ------        ------       ------        ------
Operating income before severance costs ........        11.5          17.2         13.0          15.7
Severance costs ................................          --            --           --           3.8
                                                      ------        ------       ------        ------
Operating income ...............................        11.5          17.2         13.0          11.9
Other income ...................................         1.7           2.5          2.0           1.4
Minority interest ..............................        (0.2)           --         (0.1)           --
                                                      ------        ------       ------        ------
Income before income taxes .....................        13.0          19.7         14.9          13.3
Income tax expense .............................         4.8           7.2          5.5           4.8
                                                      ------        ------       ------        ------
Net income from continuing operations ..........         8.2%         12.5%         9.4%          8.5%
                                                      ======        ======       ======        ======
</TABLE>



                                       14
<PAGE>

COMPARISON OF THE THREE MONTHS ENDED OCTOBER 31, 2001 TO THE THREE MONTHS ENDED
OCTOBER 31, 2000

CONSOLIDATED

Revenue

        Total revenue for the third quarter of fiscal 2002, which ended October
31, 2001, decreased 6.3 percent to $12.3 million compared to the third quarter
of fiscal 2001. As discussed below, the decrease is attributable to decreased
sales from our wireless infrastructure segment, partially offset by an increase
in sales from our wireless applications segment.

Cost of Sales and Gross Margin

        Total cost of sales was $6.4 million for the third quarters of both
fiscal 2002 and 2001. As a percentage of revenue, gross margin for the third
quarter of fiscal 2002 was 48.0 percent as compared to 51.2 percent for the
third quarter of the prior fiscal year. As discussed below, the decrease in
gross margin is attributable to lower sales from our wireless infrastructure
segment partially offset by an improved contribution from increased sales from
our wireless applications segment.

Selling, General and Administrative Costs

        Selling, general and administrative costs for the third quarter of
fiscal 2002 were $2.9 million compared to $3.2 million for the third quarter of
fiscal 2001, a decrease of $0.4 million or 11.2 percent. Excluding costs
attributable to EDX Engineering, Inc. ("EDX"), which was acquired on December 7,
2000, selling, general and administrative costs for the third quarter of 2002
decreased $0.7 million in comparison to the corresponding quarter of the prior
fiscal year. This decrease was driven by lower third quarter sales in comparison
to the prior fiscal year, as well as enterprise-wide cost reductions that were
put in place during the preceding 12 months. These cost reductions include the
elimination of direct sales and marketing efforts for our ChargeSource mobile
power products, closing the sales and support office in London and reorganizing
our call box business resulting in a significant reduction of indirect costs. As
a percentage of revenue, selling, general and administrative costs decreased to
23.3 percent from 24.6 percent for the third quarter of the prior fiscal year.

Engineering and Support Costs

        Engineering and support costs, net of capitalized software development
costs, for the third quarter of fiscal 2002 were $1.6 million compared to $1.2
million for the third quarter of fiscal 2001, an increase of $0.4 million or
31.6 percent. Excluding costs attributable to EDX, gross engineering and support
costs for the third quarter of fiscal 2002 were $2.8 million compared to $2.4
million for the third quarter of fiscal 2001, an increase of $0.4 million or
14.2 percent. This increase is primarily due to continued investment in our
product development programs, which include GPRS and 1XRTT products (2.5G
technologies), as well as 3G scanners. Capitalized software development costs,
which totaled $1.4 million and $1.2 million for the three months ended October
31, 2001 and 2000, respectively, partially offsets the increase in gross
engineering costs. The increase in capitalized software development costs is
consistent with our ongoing development programs.

Other Income

        Other income, consisting primarily of interest income, decreased
$121,000 to $206,000 for the three months ended October 31, 2001 from $327,000
for the three months ended October 31, 2000. The decrease was primarily due to
lower interest rates during the third quarter of fiscal 2002.

Income Tax Expense

        The effective tax rate for the quarters ended October 31, 2001 and 2000
was 36.5 percent, applied on pre-tax income before minority interest expense.



                                       15
<PAGE>

WIRELESS INFRASTRUCTURE

<TABLE>
<CAPTION>
                                                          THREE MONTHS ENDED
                                                              OCTOBER 31,
                                                      -------------------------
                                                        2001             2000
                                                      --------         --------
                                                        (DOLLARS IN THOUSANDS)
<S>                                                   <C>              <C>
Revenue ......................................        $  6,931         $  9,726
Cost of sales ................................           3,185            4,091
                                                      --------         --------
Gross profit .................................        $  3,746         $  5,635
                                                      ========         ========
Gross margin .................................            54.0%            57.9%
                                                      ========         ========
</TABLE>

Revenue

        Revenue from our wireless infrastructure segment for the third quarter
of fiscal 2002 was $6.9 million compared to $9.7 million for the third quarter
of fiscal 2001, a decrease of $2.8 million or 28.7 percent. This decrease was
attributable to decreased sales of our test and measurement products partially
offset by increased sales of our engineering services. Our new order flow for
test and measurement products was negatively impacted by the tragic events of
September 11. Additionally, during fiscal 2001, a national wireless carrier
purchased a significant number of baseLINE systems, our Quality of Service
competitive benchmarking system. These sales were not expected to recur in the
current fiscal year. In April 2001, we were awarded a $6.6 million contract to
provide network optimization services. Revenue from this contract resulted in
increased sales of engineering services in the third quarter of fiscal 2002 in
comparison to the third quarter of fiscal 2001.

Cost of Sales and Gross Margin

        Cost of sales from our wireless infrastructure segment in the third
quarter of fiscal 2002 was $3.2 million compared to $4.1 million for the third
quarter of fiscal 2001, a decrease of approximately $0.9 million or 22.1
percent. As a percentage of revenue, gross margin decreased to 54.0 percent from
57.9 percent in the third quarter of the prior fiscal year. The decrease in
gross margin is attributable to decreased absorption of fixed costs due to lower
sales of our test and measurement products.


WIRELESS APPLICATIONS

<TABLE>
<CAPTION>
                                                          THREE MONTHS ENDED
                                                              OCTOBER 31,
                                                      -------------------------
                                                        2001             2000
                                                      --------         --------
                                                        (DOLLARS IN THOUSANDS)
<S>                                                   <C>              <C>
Revenue ......................................        $  5,389         $  3,427
Cost of sales ................................           3,220            2,323
                                                      --------         --------
Gross profit .................................        $  2,169         $  1,104
                                                      ========         ========
Gross margin .................................            40.2%            32.2%
                                                      ========         ========
</TABLE>

Revenue

        Revenue from our wireless applications segment for the third quarter of
2002 was $5.4 million compared to $3.4 million for the third quarter of 2001, an
increase of approximately $2.0 million or 57.3 percent. The increase was
attributable to increased sales of the ChargeSource 70-watt universal AC power
adapter, our second-generation mobile power system that began shipping during
the fourth quarter of fiscal 2001, and the introduction of the new ChargeSource
DC adapter that began shipping during the third quarter of fiscal 2002.

Cost of Sales and Gross Margin

        Cost of sales from our wireless applications segment for the third
quarter of fiscal 2002 was $3.2 million compared to $2.3 million for the third
quarter of fiscal 2001, an increase of $0.9 million or 38.6 percent. As a
percentage of revenue, gross margin increased to 40.2 percent from 32.2 percent
in the third quarter of the prior fiscal year. The



                                       16
<PAGE>

increases in cost of sales and gross margin are attributable to sales of the
ChargeSource 70-watt universal AC power adapter, our second-generation mobile
power system that went into production during the fourth quarter of fiscal 2001,
as well as our newly developed ChargeSource DC adapter that went into production
during the third quarter of the current fiscal year.

COMPARISON OF THE NINE MONTHS ENDED OCTOBER 31, 2001 TO THE NINE MONTHS ENDED
OCTOBER 31, 2000

CONSOLIDATED

Revenue

        Total revenue for the nine months ended October 31, 2001, increased 9.0
percent to $38.4 million compared to the corresponding period of the prior
fiscal year. As discussed below, the increase is attributable to increased sales
from our wireless applications segment, partially offset by a decrease in sales
from our wireless infrastructure segment.

Cost of Sales and Gross Margin

        Total cost of sales for the nine months ended October 31, 2001 increased
13.9 percent to $19.3 million compared to the corresponding period of fiscal
2001. As a percentage of revenue, gross margin was 49.6 percent as compared to
51.8 percent for the nine months ended October 31, 2000. As discussed below, the
decrease in gross margin is attributable to lower sales from our wireless
infrastructure segment partially offset by an improved contribution from
increased sales from our wireless applications segment.

Selling, General, and Administrative Costs

        Selling, general, and administrative costs for the nine months ended
October 31, 2001 were $9.7 million compared to $9.1 million for the
corresponding period of the prior fiscal year, an increase of $0.6 million or
6.6 percent. Excluding costs attributable to EDX, selling, general, and
administrative costs for the nine months ended October 31, 2001 decreased by
$0.6 million in comparison to the corresponding period of the prior fiscal year.
This decrease was driven by lower sales in the third quarter of fiscal 2002, as
well as enterprise-wide cost reductions discussed above. As a percentage of
revenue, total selling, general, and administrative costs were consistent at
25.4 percent and 25.9 percent for the nine months ended October 31, 2001 and
2000, respectively.

Engineering and Support Costs

        Engineering and support costs, net of capitalized software development
costs, for the nine months ended October 31, 2001 were $4.3 million compared to
$3.6 million for the nine months ended October 31, 2000, an increase of $0.7
million or 20.2 percent. Excluding costs attributable to EDX, gross engineering
and support costs for the nine months ended October 31, 2001 were $8.0 million
compared to $7.0 million for the nine months ended October 31, 2000, an increase
of $1.0 million or 12.2 percent. This increase is primarily due to continued
investment in our product development programs, which include GPRS and 1XRTT
products (2.5G technologies), as well as 3G scanners. Capitalized software
development costs, which totaled $4.2 million and $3.5 million for the nine
months ended October 31, 2001 and 2000, respectively, partially offset the
increase in gross engineering costs. The increase in capitalized software
development costs is consistent with our ongoing development programs.

Severance Costs

        During the nine months ended October 31, 2000 and in conjunction with
the disposition of the Company's non-wireless businesses, COMARCO was required
to record a $1.3 million charge to continuing operations for costs related to
severance agreements for the Company's outgoing corporate staff. No comparable
costs were incurred during the nine months ended October 31, 2001.



                                       17
<PAGE>

Other Income

        Other income, consisting primarily of interest income, increased
$279,000 to $780,000 for the nine months ending October 31, 2001 from $501,000
for the nine months ended October 31, 2000. The increase was primarily due to
higher invested cash balances during the first half of fiscal 2002.


Income Tax Expense

        The effective tax rate for the nine months ended October 31, 2001 and
2000 was 36.5 percent, applied on pre-tax income before minority interest
expense.


WIRELESS INFRASTRUCTURE

<TABLE>
<CAPTION>
                                                           NINE MONTHS ENDED
                                                              OCTOBER 31,
                                                      -------------------------
                                                        2001             2000
                                                      --------         --------
                                                        (DOLLARS IN THOUSANDS)
<S>                                                   <C>              <C>
Revenue ......................................        $ 22,040         $ 25,210
Cost of sales ................................           9,487           10,132
                                                      --------         --------
Gross profit .................................        $ 12,553         $ 15,078
                                                      ========         ========
Gross margin .................................            57.0%            59.8%
                                                      ========         ========
</TABLE>

Revenue

        Revenue from our wireless infrastructure segment for the nine months
ended October 31, 2001 was $22.0 million compared to $25.2 million for the nine
months ended October 31, 2000, a decrease of $3.2 million or 12.6 percent.
Excluding revenue attributable to EDX, the decrease in revenue was $4.5 million
or 17.7 percent. This decrease was attributable to decreased sales of our test
and measurement products. As previously discussed, our business was disrupted
during the third quarter of fiscal 2002 and our new order flow for test and
measurement products was negatively impacted. Additionally, during fiscal 2001,
a national wireless carrier purchased a significant number of baseLINE systems,
our Quality of Service competitive benchmarking system. These sales were not
expected to recur in the current fiscal year.

Cost of Sales and Gross Margin

        Cost of sales from our wireless infrastructure segment in the nine
months ended October 31, 2001 was $9.5 million compared to $10.1 million for the
nine months ended October 31, 2000, a decrease of approximately $0.6 million or
6.4 percent. As a percentage of revenue, gross margin decreased to 57.0 percent
from 59.8 percent for the nine months ended October 31, 2000. The decrease in
gross margin is attributable to decreased absorption of fixed costs due to lower
sales of our test and measurement products.


WIRELESS APPLICATIONS

<TABLE>
<CAPTION>
                                                           NINE MONTHS ENDED
                                                              OCTOBER 31,
                                                      -------------------------
                                                        2001             2000
                                                      --------         --------
                                                       (DOLLARS IN THOUSANDS)
<S>                                                   <C>              <C>
Revenue ......................................        $ 16,332         $  9,992
Cost of sales ................................           9,850            6,846
                                                      --------         --------
Gross profit .................................        $  6,482         $  3,146
                                                      ========         ========
Gross margin .................................            39.7%            31.5%
                                                      ========         ========
</TABLE>



                                       18
<PAGE>

Revenue

        Revenue from our wireless applications segment for the nine months ended
October 31, 2001 was $16.3 million compared to $10.0 million for the nine months
ended October 31, 2000, an increase of approximately $6.3 million or 63.5
percent. The increase was attributable to increased sales of the ChargeSource
70-watt universal AC power adapter, our second-generation mobile power system
that began shipping during the fourth quarter of fiscal 2001, and the
introduction of the new ChargeSource DC adapter that began shipping during the
third quarter of fiscal 2002.

Cost of Sales and Gross Margin

        Cost of sales from our wireless applications segment for the nine months
ended October 31, 2001 was $9.9 million compared to $6.8 million for the nine
months ended October 31, 2000, an increase of $3.0 million or 43.9 percent. As a
percentage of revenue, gross margin increased to 39.7 percent from 31.5 percent
for the nine months ended October 31, 2001. The increases in cost of sales and
gross margin are attributable to sales of the ChargeSource 70-watt universal AC
power adapter, our second-generation mobile power system that went into
production during the fourth quarter of fiscal 2001, as well as our newly
developed ChargeSource DC adapter that went into production during the third
quarter of fiscal 2002.


LIQUIDITY AND CAPITAL RESOURCES

        Cash and cash equivalents were $19.8 million at October 31, 2001
compared to $24.9 million at January 31, 2001, a decrease of $5.1 million. The
$5.1 million decrease is primarily due to investments made in software
development, property and equipment, a minority interest in SwissQual AG
("SwissQual"), and the purchase and retirement of $1.7 million of common stock,
partially offset by cash provided by operations.

Cash Flows from Operating Activities

        Cash provided by operating activities is primarily derived from the sale
of the Company's products and from providing engineering services. Cash provided
by operating activities was $3.9 million and $8.8 million for the nine months
ended October 31, 2001 and 2000, respectively.

        Cash provided by operating activities during the nine months ended
October 31, 2001 was primarily a result of the Company's net income from
continuing operations before non-cash charges, a tax benefit on stock options
exercised of $0.6 million, and a net change in deferred income taxes of $1.3
million offset by a decrease in current liabilities and an increase in accounts
receivable. The $3.5 million decrease in current liabilities was primarily due
to $1.5 million in prepaid sales that were recognized as revenue during the nine
months ended October 31, 2001, as well as income tax payments and the timing of
payments of trade accounts payable. Cash provided by operating activities during
the nine months ended October 31, 2000 was primarily a result of the Company's
net income from continuing operations before non-cash charges, a tax benefit on
stock options exercised of $1.5 million, a decrease in other assets, and an
increase in current liabilities, offset by an increase in accounts receivable
and inventory.

Cash Flows from Investing Activities

        Cash used in investing activities was $7.0 million and $5.0 million for
the nine months ended October 31, 2001 and 2000, respectively. Investing
activities for the nine months ended October 31, 2001 and 2000 consisted
primarily of cash paid for property and equipment in support of the Company's
growth and for the development of software to be used in products currently
under development. The Company intends to continue to invest aggressively in a
software development program designed to bring new products and services for the
wireless communications industry to market in a timely manner. This software
development program is expected to be funded with current cash balances and cash
provided by operating activities.

        On July 31, 2001, the Company acquired an 18% equity stake in SwissQual
for $1.0 million in cash. Based in Zuchwil, Switzerland, SwissQual is a
developer of Quality of Service ("QoS") systems and software for measuring,
monitoring, and optimizing the quality of mobile, fixed, and IP based voice and
data communications. Under this



                                       19
<PAGE>

alliance, COMARCO and SwissQual will jointly develop, sell and support wireless
network QoS and optimization products and services for the European marketplace.
In addition to expanding COMARCO's access to European wireless carriers,
SwissQual will provide domain expertise and development guidance in the
evolution of 2.5G and 3G system test solutions.

Cash Flows from Financing Activities

        Cash provided by financing activities for the nine months ended October
31, 2001 consisted of $0.3 million from the sales of common stock issued through
the Company's employee and director stock option plans, and $0.1 million from
the sales of common stock issued through the Company's subsidiary stock option
plan, offset by the repurchase of 124,900 shares of the Company's common stock
in the open market for approximately $1.7 million. Cash provided by financing
activities for the nine months ended October 31, 2000 consisted primarily of
$1.6 million from sales of common stock issued through the Company's employee
and director stock option plans.

        During 1992, the Company's Board of Directors authorized a stock
repurchase program of up to three million shares of common stock. From program
inception through October 31, 2001, the Company has repurchased approximately
2,400,000 shares for an average per share price of $8.08 per share. For the nine
months ended October 31, 2001, 124,900 shares were repurchased. Subsequent to
October 31, 2001, the Company repurchased an additional 78,800 shares in the
open market, bringing the total number of shares repurchased to approximately
2,490,000 shares for an average per share price of $8.20 per share.

        The Company maintained a $10 million unsecured revolving credit facility
("Credit Facility"). The Credit Facility expired in June 2001 and was not
renewed by the Company. The Company will negotiate new terms with the bank when
deemed necessary.

        The Company believes that current cash balances and cash provided by
operating activities will be sufficient to satisfy the Company's working capital
and capital expenditure requirements for the next twelve months. Future
acquisitions, if any, may be funded through the use of current cash balances or
long-term borrowings and the issuance of additional equity or debt securities.

ITEM 3. 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 October 31, 2001, 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 and services
with U.S. dollars. For those orders denominated in foreign currencies, the
Company may limit its exposure to losses from foreign currency transactions
through the purchase of forward foreign exchange contract.


                          PART II -- OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS

        COMARCO was named as a defendant in two lawsuits filed by Mobility
Electronics, Inc. ("Mobility").

        Mobility v. Targus Group International, Inc. ("Targus") and Comarco
Wireless Technologies, Inc. ("CWT") No. CV2001-012640 was filed on July 23, 2001
in the Arizona Superior Court for Maricopa County, Arizona. In addition to
claims against Targus, the distributor of the Company's mobile power adapter
products, the lawsuit alleges that the Company intentionally interfered with
Mobility's rights under an exclusive manufacturing agreement with Targus and
misappropriated Mobility's trade secrets.

        Targus markets and distributes the Company's 70-Watt AC ChargeSource
universal power adapter. As previously announced, the Company received an $8.6
million purchase order from Targus covering the 70-Watt AC



                                       20
<PAGE>

adapter and a new DC ChargeSource universal power adapter recently introduced by
COMARCO. In its complaint, Mobility contends that it currently has an exclusive
contract to manufacture DC power adapters for Targus. The Company understands
that Targus purchased DC power adapter products from Mobility and that Targus
used and sold DC power adapter products from Mobility under a terminable,
non-exclusive license agreement between the Company and Targus involving
patented COMARCO technology. Prior to the filing of the lawsuit, the Company had
terminated the license agreement with Targus in accordance with the provisions
of the license agreement.

        During October 2001, the three parties to the lawsuit entered into a
settlement agreement and, on November 26, 2001, the lawsuit was dismissed with
prejudice.

        Mobility v. COMARCO No. CIV011489PHXMHM was filed on August 10, 2001.
This lawsuit alleges that the Company, through the manufacture and sale of its
70-Watt AC ChargeSource universal power adapter, infringed upon a patent
purchased by Mobility on August 6, 2001.

        COMARCO's management believes that Mobility's infringement claim against
the Company is without merit and intends to vigorously defend the lawsuit.

        The Company is from time to time involved in various legal proceedings
incidental to the conduct of our business. We believe that the outcome of all
other such pending legal proceedings will not in the aggregate have a material
adverse effect on our business, financial condition, or results of operations.



ITEM 2. CHANGES IN SECURITIES

        Not applicable.


ITEM 3. DEFAULTS UPON SENIOR SECURITIES

        Not applicable.


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        Not applicable.


ITEM 5. OTHER INFORMATION

        Not applicable.


ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

  (a)   Exhibits:


           11       Schedule of Computation of Net Income Per Share


  (b)   Report on Form 8-K:

               None.



                                       21
<PAGE>

                                    SIGNATURE

   Pursuant to the requirements of Section 13 or 15(d) 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, in the City of Irvine,
State of California, on December 13, 2001.

                                             COMARCO, INC.


                                             By: /s/ Daniel R. Lutz
                                                 -------------------------------
                                                     Daniel R. Lutz
                                                     Vice President and
                                                     Chief Financial Officer



                                       22
<PAGE>

                                 EXHIBIT INDEX


<TABLE>
<CAPTION>
EXHIBIT
NUMBER              DESCRIPTION
-------             -----------
<S>                 <C>
  11                Schedule of Computation of Net Income Per Share
</TABLE>