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 April 30, 1998                  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)

22800 Savi Ranch Parkway, Suite 214, Yorba Linda, California          92887
------------------------------------------------------------        --------
(Address of principal executive office)                             (Zip Code)

Registrant's telephone number, including area code               (714) 282-3832
                                                                 --------------


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 May 31, 1998.

                            Common Stock,
                           $.10 Par Value                   4,719,710 Shares
                           --------------                   ----------------



<PAGE>


Index to Form 10-Q

                                                                    Page No.
                                                                    --------
Part I.        Financial Information

 Condensed Consolidated Balance Sheets
     April 30, 1998 and January 31, 1998                               1

 Condensed Consolidated Statements of Income
     Quarters ended April 30, 1998 and April 30, 1997                  2

 Condensed Consolidated Statements of Cash Flows
     Quarters ended April 30, 1998 and April 30, 1997                  3

 Notes to Condensed Consolidated Financial Statements                  4-6

 Management's Discussion and Analysis of Financial
     Condition and Results of Operations                               7-12



PART II.       OTHER INFORMATION

Item 6.     Exhibits and Reports on Form 8-K                           13

Signature                                                              14



<PAGE>



                         PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS
<TABLE>

                         COMARCO, Inc. and Subsidiaries
                      Condensed Consolidated Balance Sheets

                                                                 April 30, 1998             January 31, 1998
ASSETS                                                             (Unaudited)                     *
<S>                                                              <C>                        <C> 
Current assets:
         Cash and cash equivalents                               $       6,741,000          $      5,256,000
         Short-term investments                                          3,567,000                 2,348,000
         Accounts receivable, net                                       17,189,000                17,815,000
         Inventory                                                       4,852,000                 5,247,000
         Deferred tax asset                                              1,383,000                 1,383,000
         Other current assets                                              841,000                   832,000
                                                                 -----------------          ----------------

Total current assets                                                    34,573,000                32,881,000

Long-term investments                                                    1,820,000                 2,364,000
Property and equipment, net                                              2,192,000                 2,240,000
Software development costs, net                                          3,411,000                 3,131,000
Intangible assets, net                                                   2,623,000                 2,660,000
Other assets                                                               615,000                   618,000
                                                                 -----------------          ----------------

TOTAL ASSETS                                                     $      45,234,000          $     43,894,000
                                                                 =================           ===============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
         Accounts payable                                        $         756,000          $        493,000
         Deferred revenue                                                1,842,000                 1,914,000
         Accrued liabilities                                             9,841,000                 9,537,000
                                                                 -----------------          ----------------

Total current liabilities                                               12,439,000                11,944,000
Deferred income taxes                                                    1,480,000                 1,480,000

Stockholders' equity:
         Common stock, $.10 par value,
           33,750,000 shares authorized, 4,719,210 and
           4,718,710  shares outstanding at April 30, 1998 and
           January 31, 1998, respectively                                  472,000                   472,000
         Capital contributed in excess of par value                      3,079,000                 3,074,000
         Retained earnings                                              27,764,000                26,924,000
                                                                 -----------------          ----------------

Total stockholders' equity                                              31,315,000                30,470,000
                                                                 -----------------          ----------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                       $      45,234,000          $     43,894,000
                                                                 =================          ================

See accompanying notes to the condensed consolidated financial statements.
*The  condensed  consolidated  balance  sheet as of  January  31,  1998 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
                                           April 30, 1998              April 30, 1997
                                           --------------              --------------
<S>                                    <C>                         <C>
Revenues:
   Contract revenues                   $       14,394,000          $       13,922,000
   Product sales                                7,357,000                   6,175,000
                                                ---------                   ---------
                                               21,751,000                  20,097,000
                                               ----------                  ----------

Direct costs:
   Contract costs                               9,716,000                   9,574,000
   Cost of product sales                        3,543,000                   2,265,000
                                                ---------                   ---------
                                               13,259,000                  11,839,000

Indirect costs                                  7,255,000                   6,605,000
                                                ---------                   ---------

                                               20,514,000                  18,444,000
                                               ----------                  ----------

Operating income                                1,237,000                   1,653,000

Net interest income                               118,000                     135,000
                                                  -------                     -------

Income before income taxes                      1,355,000                   1,788,000

Income taxes                                      515,000                     679,000
                                                  -------                     -------

Net income                             $          840,000          $        1,109,000
                                       ==================          ==================

Earnings per share
   Basic                               $              .18          $              .23
                                       ==================          ==================

   Diluted                             $              .17          $              .21
                                       ==================          ==================


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


<PAGE>


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

                                                                          Quarter Ended
                                                             April 30, 1998             April 30, 1997
                                                             --------------             --------------
<S>                                                       <C>                        <C>
Cash flows from operating activities:
    Net income                                            $         840,000          $      1,109,000
    Adjustments to reconcile net income to net
     cash provided (used) by operating activities:
       Depreciation and amortization                                597,000                   533,000
       Provision for doubtful accounts receivable                    22,000                    10,000
       Net purchases of trading securities                         (762,000)                 (168,000)
       Decrease (increase) in accounts receivable                   604,000                (2,076,000)
       Decrease (increase) in inventory                             395,000                  (300,000)
       Increase in other current assets                              (9,000)                 (131,000)
       Decrease (increase) in other assets                            3,000                  (175,000)
       Increase in accounts payable                                 263,000                   196,000
       Increase (decrease) in deferred revenue                      (72,000)                   46,000
       Increase (decrease) in other current liabilities             304,000                  (405,000)
                                                          -----------------          -----------------

    Net cash provided (used) by operating activities              2,185,000                (1,361,000)

Cash flows from investing activities:
    Purchases of investments                                            -                  (1,204,000)
    Sales of investments                                             87,000                   464,000
    Purchases of property and equipment                            (221,000)                 (408,000)
    Software development costs                                     (571,000)                 (468,000)
    Cost of acquisition of Cubic, net of cash acquired                  -                  (1,720,000)
                                                          ------------------         -----------------

    Net cash used in investing activities                          (705,000)               (3,336,000)

Cash flows from financing activities:
    Proceeds from issuance of common stock                            5,000                    97,000
    Purchase of common stock                                            -                    (693,000)
                                                          ------------------         -----------------

    Net cash provided (used) by financing activities                  5,000                  (596,000)
                                                          -----------------          -----------------

Net increase (decrease) in cash and cash equivalents      $       1,485,000          $     (5,293,000)
                                                          =================          =================


Supplemental disclosures of cash flow information:
  Cash paid during the quarter for:
       Interest                                           $             -            $             -
       Income taxes                                                  39,000                    10,000

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


<PAGE>


                         COMARCO, Inc. and Subsidiaries
              Notes to Condensed Consolidated Financial Statements
                        April 30, 1998 and April 30,1997
                                   (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 April 30, 1998 and
       January 31, 1998 and the results of its operations and cash flows for the
       quarters  ended April 30, 1998 and April 30, 1997.  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  April  30,  1998  are  not  necessarily
       indicative of the results to be obtained for the full fiscal year.


2.     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
                                                            April 30, 1998            April 30, 1997
                                                            --------------            --------------
       <S>                                                  <C>                       <C>
       Basic:
   
         Net income                                         $     840,000             $    1,109,000

         Weighted average shares outstanding                    4,719,000                  4,786,000
                                                                ---------                  ---------

         Basic income per common share                      $         .18             $          .23
                                                                =========                  =========

         Diluted:

         Net income                                         $     840,000             $    1,109,000

         Less - net income allocated to subsidiary
           dilutive stock options outstanding                     (22,000)                   (62,000)
                                                                ---------                  ---------

         Net income used in calculation of diluted
           income per share                                 $     818,000             $    1,047,000
                                                             ============              =============


         Weighted average shares outstanding                    4,719,000                  4,786,000

         Plus - common equivalent shares  (determined
         using the "treasury stock" method representing
         shares issuable upon exercise of stock options           206,000                    307,000
                                                                  -------                    -------
 
         Weighted average number of shares used in
           calculation of diluted income per common
           share                                                4,925,000                  5,093,000
                                                                =========                  =========


         Diluted income per common share                    $         .17             $          .21
                                                             ============              =============
</TABLE>


3.     Business Segment Information

       The Company's  operations  have been  classified into two business areas:
       wireless  communications  products and outsourced staffing services.  The
       wireless communications  products area develops,  produces, and markets a
       variety of products  and  services  used in the  wireless  communications
       industry.  The  outsourced  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
       quarter of Fiscal Year 1999 is as follows:
<TABLE>

                                                  Wireless      Outsourced Staffing
                                              Communications    Services and Other     Corporate
                                                 Products           Revenues           and Other        Total
                                                 --------           --------           ---------        ----- 
          <S>                                  <C>                 <C>                 <C>            <C>       
          Revenues                              7,311              14,440                -            21,751
          Income before income taxes              650                 607                 98           1,355
          Identifiable assets                  17,146              11,282              6,806          45,234
</TABLE>


       Summarized  financial  information  by  business  segment  for the  first
       quarter of Fiscal Year 1998 is as follows:
<TABLE>

                                                 Wireless      Outsourced Staffing
                                              Communications    Services and Other     Corporate
                                                 Products           Revenues           and Other        Total
                                                 --------           --------           ---------        ----- 
          <S>                                  <C>                 <C>                 <C>            <C>
          Revenues                              6,018              14,079                 -           20,097
          Income before income taxes            1,129                 580                  79          1,788
          Identifiable assets                  13,822               8,962              16,776         39,560
</TABLE>


4.     Reclassifications

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


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, 1998.

       (a)    Results of Operations

              During the first quarter of Fiscal Year 1999 (year ending  January
              31, 1999),  the Company  recorded total revenues of $21.8 million,
              up 8.5% from the  revenues  of $20.1  million  for the  comparable
              period of a year  earlier.  Increased  year-to-year  revenues  are
              primarily due to:
                o sales of the Company's wireless communications products;
                o increase in engineering services activity of 16% year-to-year;
              partially offset by:
                o reduced activity on the Company's contract at the Los  Angeles
                  County Airports.

              Total  direct  costs of $13.3  million  for the first  quarter  of
              Fiscal Year 1999 are up $1.5 million, or 12.7%, from $11.8 million
              for the first quarter of Fiscal Year 1998. The increase relates to
              the increased  revenue  activity,  particularly from the Company's
              wireles  communications products  business (as discussed  below in
              wireless communications products section).

              Total  indirect  costs of $7.3  million  for the first  quarter of
              Fiscal Year 1999 are up $.7 million,  or 10.6%,  from $6.6 million
              for the first  quarter  of  Fiscal  Year  1998.  The  increase  is
              principally from the Company's  wireless  communications  products
              business, and results from increased product development costs and
              increased selling, general and administrative costs.

              Net interest income  (interest  income less interest  expense) for
              the first  quarter of Fiscal Year 1999  amounted to  $118,000,  as
              compared to $135,000 for the comparable period of the prior fiscal
              year.  The  decrease is  principally  due to a  reduction  in cash
              available  to invest  from an average of $14  million in the first
              quarter of Fiscal  Year 1998 to an  average of $11  million in the
              first quarter of Fiscal Year 1999.

              The  Company's  effective tax rate for the first quarter of Fiscal
              Year 1998 is 38%, the same as the  comparable  period of the prior
              fiscal year.

              Net income of $.8  million  for the first  quarter of Fiscal  Year
              1999 is down from $1.1  million for the  comparable  period of the
              prior year due to the increased  product  development and selling,
              general  and  administrative   costs  incurred  for  the  wireless
              communications products business.


              Wireless Communications Products

              Wireless  communications products revenues increased 21.7% to $7.3
              million  for the  first  quarter  of  Fiscal  Year  1999 from $6.0
              million for the comparable  period of the prior fiscal year.  This
              increase  is due to  increased  sales of the  Company's  emergency
              callbox systems.  Summary  operating  results for Comarco Wireless
              Technologies, Inc., the Company's wireless communications products
              subsidiary, are as follows:
<TABLE>

                                                       Quarter Ended           Quarter Ended
                                                      April 30, 1998          April 30, 1997
                                                      --------------          --------------
                    <S>                                 <C>                    <C>             
                    Revenues                            $7,311,000             $6,018,000
                    Cost of product sales                3,496,000              2,189,000
                                                         ---------              ---------

                    Gross income                         3,815,000              3,829,000
                    Gross income percentage                52.2%                   63.6%

                    Indirect costs*                      3,165,000              2,700,000
                                                         ---------              ---------

                    Operating income                    $  650,000             $1,129,000
                                                          ========             ==========
</TABLE>

              *Indirect  costs  include  selling,  general,  and  administrative
              expenses  as well  as  sustaining  engineering  and  research  and
              development expenses.

              The decreased  gross income  percentage is due to greater sales of
              the Company's emergency callbox systems, which  have  lower  gross
              margins than the field  measurement and revenue  assurance product
              families.  The Company's current projections indicate that product
              sales  other  than  emergency  callbox  systems  may not  increase
              significantly over prior periods for the first half of Fiscal Year
              1999,  while  comparisons  for the second half of Fiscal Year 1999
              are  expected to be more  favorable  due to  anticipated  upgraded
              product  offerings,  although  there can be no  assurances in this
              regard.

              The  increase  in  indirect  costs of $.5  million  for the  first
              quarter  of Fiscal  Year 1999  over the  comparable  period of the
              prior  fiscal  year is  principally  a result of  increased  costs
              incurred in the Company's product development  program, as well as
              increased selling,  general and administrative  costs.  Sustaining
              engineering  and research and development  expenses  increased $.3
              million to $1.2 million from the first quarter of Fiscal Year 1998
              to the first quarter of Fiscal Year 1999,  while selling,  general
              and administrative  expenses increased $.2 million to $2.0 million
              from the first quarter of Fiscal Year 1998 to the first quarter of
              Fiscal Year 1999.

              Operating income as a percentage of revenues is 8.9% for the first
              quarter of Fiscal Year 1998,  compared to 18.8% for the comparable
              period of the prior fiscal year. This decrease is primarily due to
              the lower  gross  income due to a larger  mix of the lower  margin
              emergency callbox systems than in the prior year first quarter, 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  $571,000 and $468,000,  respectively,  during
              the first  quarters of Fiscal  Years 1999 and 1998,  respectively.
              Corresponding   amounts  amortized  were  $291,000  and  $250,000,
              respectively.

              In May 1998,  the Company  completed the purchase of  intellectual
              property and related  software assets from Industrial  Technology,
              Inc.  The  acquired   technology   includes  software  suited  for
              automating  the  comparison of digital speech quality over diverse
              cellular, PCS, and other wireless networks. The Company intends to
              use the  acquired  technology  to enhance its  network  evaluation
              family of products.

              The Company's future product  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
              $5.2 million for the first quarter of Fiscal Year 1999,  down from
              $6.1  million  from  the   comparable   prior   period.   For  the
              twelve-month  periods  ended  April  30,  1998  and  1997,  orders
              received  were  $26.6  million  and $38.9  million,  respectively.
              Included in the amount for the twelve  months ended April 30, 1997
              is  $10  million  of  long-term   maintenance   service   business
              associated  with the  purchase  of the GTE callbox  product  line.
              Because of the long sales cycle involved in selling these 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 April 30, 1998 totalled $15.6 million,
              of which $8.4 million relates to long-term maintenance  contracts,
              and $3.8 million relates to the Company's  contract to upgrade the
              Los Angeles  County  callbox  system to comply with the  Americans
              with Disabilities Act's requirements for use by hearing and speech
              impaired  individuals.  The Company currently expects the majority
              of the Los Angeles  County  contract to be performed at the end of
              Fiscal  Year 1999 and into Fiscal Year 2000.  An  additional  $1.8
              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 four 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  four  years.  This  trend may or may not
              continue as the Company broadens its product 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  single or a limited
              number of suppliers,  and the inability by any of these  suppliers
              to fulfill Company  requirements  may result in an interruption in
              production. Access to 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.


              Outsourced Staffing Services and Other Revenue

              Revenues  provided by the Company's  outsourced  staffing services
              business  area  increased  2.1%,  from $14.1  million in the first
              quarter of Fiscal Year 1998 to $14.4  million in the first quarter
              of Fiscal Year 1999. Revenues in this business area decreased from
              70.1% of the  Company's  total  revenues  in the first  quarter of
              Fiscal Year 1998 to 66.4% of the Company's  total  revenues in the
              first   quarter   of   Fiscal   Year   1999.   The   increase   in
              period-to-period  revenue  is due to an  increase  in  engineering
              services activity on contracts with the U.S. Government  partially
              offset by a decrease in activity on the Company's  contract at the
              Los Angeles County Airports.

              Sales  to the  U.S.  Government  as  well as to  government  prime
              contractors were 34% and 34% of the Company's total revenue during
              the first quarters of Fiscal Years 1998 and 1999, respectively. In
              the course of the Company's business, its government contracts are
              periodically  opened for  competition.  In March 1998, the Company
              announced  the  award of a  contract  with an  award  value of $75
              million to continue to provide engineering and management services
              to the U.S.  Navy at  Crane,  Indiana.  The  Company's  management
              services  contract at Reagan  Washington  National Airport ends on
              September  30,  1998.  The  Company  has decided not to pursue the
              recompete  of  this  contract.  This  contract's  annual  revenues
              approximate $8.8 million, it has been marginally  profitable,  and
              it would be  unprofitable  if reawarded to the Company.  Two other
              multi-year  government  contracts  are  scheduled to end in Fiscal
              year 1999 with annual revenues of approximately $3.8 million.  The
              Company  plans  to  aggressively   compete  for  work  opened  for
              competition  to the  extent  possible  and to  selectively  pursue
              certain  high  value  Government  procurements.  There  can  be no
              assurance  that the Company  will be selected and awarded the work
              associated  with  any  of  its  future  proposals.   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.

              Operating income (revenues less direct costs,  indirect costs, and
              depreciation and amortization) for outsourced staffing services is
              up from  $580,000  in the first  quarter  of  Fiscal  Year 1998 to
              $607,000 in the first quarter of Fiscal Year 1999. The increase is
              primarily  due to higher  revenues  for  engineering  and  airport
              services,   partially   offset  by  lower  operating  income  from
              commercial staffing due to the cost of opening additional offices.

       (b)    Financial Condition

              The  Company  signed  a  loan  agreement  with  a  bank  effective
              September 26, 1994,  which was last amended  effective  August 15,
              1997. The loan agreement  consists of (1) an $8 million  revolving
              credit facility,  which expires May 31, 1999, and (2) a $5 million
              guidance line of credit,  which expired May 31, 1998.  The Company
              is currently  negotiating a restructuring of its credit facilities
              and expects the renewed facilities to be in place in approximately
              sixty days. The revolving credit facility and the guidance line of
              credit  are  unsecured  provided  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 $11 million (includes highly liquid
              long-term  investments  with maturities of 12 to 36 months) during
              the first quarter of Fiscal Year 1999.  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  quarter  of Fiscal  Year  1999,  the  Company's
              average days' sales in accounts  receivable  decreased,  primarily
              due to collections of several significant  international  customer
              balances during the quarter.

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

                                              April 30, 1998       January 31, 1998
                                              --------------       ----------------
                    <S>                      <C>                    <C>
                    Current ratio                        2.78                   2.75
                    Working capital          $     22,134,000       $     20,937,000
                    Book value per share                $6.64                  $6.46
</TABLE>

              The Company continued to demonstrate  solid financial  strength in
              the above  financial  factors  during the first  quarter of Fiscal
              Year 1999 due to continued profitable activity.

              The Company has a significant  commitment for capital expenditures
              at April 30,  1998 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   $571,000   and   $291,000,
              respectively, in the first quarter of Fiscal Year 1999.

              The  Company's   Board  of  Directors   has   authorized  a  stock
              re-purchase  program of up to  1,500,000  shares.  As of April 30,
              1998,  the Company  has  re-purchased  and  retired  approximately
              929,000  shares.  The  average  price paid per share  re-purchased
              under the program was $6.55.

              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.

              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.


<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

              None.






<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)




June 12, 1998




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