<PAGE>   1
                       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 quarterly period ended JANUARY 31, 1999

[ ]      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 0-21053

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

          California                                             33-0268063
(State or other jurisdiction of                                (IRS Employer
incorporation or organization)                              Identification No.)


        1821 East Dyer Road, Santa Ana, CA               92705
      (Address of principal executive office)          (Zip Code)

                                 (949) 852-1000
              (Registrant's telephone number, including area code)


(Former name, former address and former fiscal year, if changed since last
report.)


         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

         The number of shares of Common Stock, $.01 par value, outstanding on
February 28, 1999, was 11,277,780.


<PAGE>   2
                                     PART I
                              FINANCIAL INFORMATION

ITEM 1.  Financial Statements.

              PROCOM TECHNOLOGY, INC. AND CONSOLIDATED SUBSIDIARIES
                      CONSOLIDATED CONDENSED BALANCE SHEETS

                                     ASSETS

<TABLE>
<CAPTION>
                                                                      JANUARY 31,              JULY 31,
                                                                         1999                   1998
                                                                     ------------           ------------
<S>                                                                  <C>                    <C>
                                                                      (UNAUDITED)          (UNAUDITED)(a)
Current assets:
  Cash ........................................................      $      2,000           $    660,000
  Short-term marketable securities, 
    held to maturity...........................................        24,209,000             22,785,000
  Accounts receivable, less allowance
    for doubtful accounts and sales
    returns of $2,121,000 and
    $1,329,000, respectively ..................................        14,005,000             17,115,000
  Inventories, net ............................................         8,016,000              9,528,000
  Deferred income taxes .......................................         1,827,000              1,852,000
  Prepaid expenses ............................................         1,430,000                748,000
  Other current assets ........................................           251,000                261,000
                                                                     ------------           ------------
          Total current assets ................................        49,740,000             52,949,000
Property and equipment, net ...................................         2,391,000              2,278,000
Other assets ..................................................         1,831,000              1,846,000
                                                                     ------------           ------------
          Total assets ........................................      $ 53,962,000           $ 57,073,000
                                                                     ============           ============


                       LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
  Line of credit ..............................................      $    645,000           $  1,583,000
  Accounts payable ............................................         9,728,000             12,501,000
  Accrued expenses and other current liabilities ..............         2,791,000              3,092,000
  Accrued compensation ........................................         1,084,000              1,321,000
  Deferred service revenues ...................................         1,437,000                931,000
  Income taxes payable ........................................             2,000                756,000
                                                                     ------------           ------------
          Total current liabilities ...........................        15,687,000             20,184,000
                                                                     ------------           ------------
          Total liabilities ...................................        15,687,000             20,184,000
                                                                     ------------           ------------

Commitments and contingencies 
Shareholders' equity:
  Preferred stock, $.01 par value;
    10,000,000 shares authorized, no
    shares issued and outstanding .............................              --                     --
  Common stock, $.01 par value;
    65,000,000 shares authorized,
    11,277,780 and 11,178,742, shares
    issued and outstanding,
    respectively ..............................................           113,000                112,000
  Additional paid in capital ..................................        17,594,000             17,659,000
  Retained earnings ...........................................        20,589,000             19,109,000
  Foreign currency translation ................................           (21,000)                 9,000
                                                                     ------------           ------------
          Total shareholders' equity ..........................        38,275,000             36,889,000
                                                                     ------------           ------------
      Total liabilities and shareholders' equity...............      $ 53,962,000           $ 57,073,000
                                                                     ============           ============
</TABLE>


The accompanying notes are an integral part of these consolidated balance
sheets. (a) See Note 4 for an explanation of the restated July 31, 1998
balances relating to the Company's pooling of interests with Gigatek.


                                       2
<PAGE>   3
              PROCOM TECHNOLOGY, INC. AND CONSOLIDATED SUBSIDIARIES
                 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                              QUARTERS ENDED                               SIX MONTHS ENDED
                                    -----------------------------------           -----------------------------------
                                     JANUARY 31,            JANUARY 31,           JANUARY 31,             JANUARY 31,
                                        1999                   1998                   1999                  1998
                                    ------------           ------------           ------------           ------------
                                    (UNAUDITED)           (UNAUDITED)(a)         (UNAUDITED)(a)         (UNAUDITED)(a)
<S>                                 <C>                    <C>                    <C>                    <C>         
Net sales ....................      $ 26,397,000           $ 24,448,000           $ 57,441,000           $ 56,177,000
Cost of sales ................        18,454,000             15,735,000             39,650,000             36,629,000
                                    ------------           ------------           ------------           ------------
     Gross profit ............         7,943,000              8,713,000             17,791,000             19,548,000

Selling, general and
  administrative
  expenses ...................         6,809,000              5,363,000             13,503,000             11,292,000
Research and development
  expenses ...................         1,280,000              1,098,000              2,565,000              2,378,000
                                    ------------           ------------           ------------           ------------

     Operating income ........          (146,000)             2,252,000              1,723,000              5,878,000

Other (income) expense
 Interest income .............           341,000                291,000                666,000                578,000
 Interest (expense) ..........           (25,000)               (23,000)               (56,000)               (48,000)
                                    ------------           ------------           ------------           ------------

Income before income taxes ...           170,000              2,520,000              2,333,000              6,408,000
Provision for income taxes ...            60,000                969,000                853,000              2,492,000
                                    ------------           ------------           ------------           ------------
     Net income ..............      $    110,000           $  1,551,000           $  1,480,000           $  3,916,000
                                    ============           ============           ============           ============

Net income per share:
 Basic .......................      $       0.01           $       0.14           $       0.13           $       0.35
                                    ============           ============           ============           ============
 Diluted .....................      $       0.01           $       0.14           $       0.13           $       0.35
                                    ============           ============           ============           ============

Shares used in per share
computation:
 Basic .......................        11,258,000             11,069,000             11,244,000             11,053,000
                                    ============           ============           ============           ============
 Diluted .....................        11,736,000             11,191,000             11,562,000             11,188,000
                                    ============           ============           ============           ============
</TABLE>


The accompanying notes are an integral part of these consolidated financial
statements. (a) See Note 4 for an explanation of the restated balances relating
to the Company's pooling of interests with Gigatek.


                                       3
<PAGE>   4
              PROCOM TECHNOLOGY, INC. AND CONSOLIDATED SUBSIDIARIES
                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                                  SIX MONTHS ENDED
                                                                         -----------------------------------
                                                                          JANUARY 31,            JANUARY 31,
                                                                             1999                   1998
                                                                         ------------           ------------
                                                                        (UNAUDITED)(a)         (UNAUDITED)(a)
<S>                                                                      <C>                    <C>         
Cash flows from operating activities:
  Net income                                                             $  1,480,000           $  3,916,000
    Adjustments to reconcile net
      income to net cash
      provided by
      operating activities:
    Depreciation and amortization                                             736,000                169,000
    Changes in assets and
      liabilities:
         Accounts receivable                                                3,110,000              1,827,000
         Inventories                                                        1,512,000                (71,000)
         Deferred income taxes                                                 25,000                   --
         Prepaid expenses                                                    (682,000)               237,000
         Other current assets                                                  10,000                 27,000
         Other assets                                                          45,000                 (1,000)
         Accounts payable                                                  (2,773,000)            (2,950,000)
         Accrued expenses                                                    (301,000)               319,000
         Accrued compensation                                                (237,000)               (96,000)
         Deferred service revenue                                             506,000                   --
         Income taxes payable                                                (754,000)               383,000
                                                                         ------------           ------------
            Net cash provided by (used in)
             operating activities                                           2,677,000              3,760,000
                                                                         ------------           ------------
Cash flows from investing activities:
  Acquisitions, net of cash acquired                                         (247,000)                  --
  Purchase of property and equipment                                         (745,000)              (268,000) 
                                                                         ------------           ------------
             Net cash provided by (used in)
               investing activities                                          (992,000)              (268,000) 
                                                                         ------------           ------------

Cash flows from financing activities:
  Principal payments for capital
    lease obligations                                                            --                     --
  Borrowings on line of credit                                               (938,000)                  --
  Payments made on line of credit                                                --                  (60,000)    
  Repurchases of common stock                                                 (92,000)                  --
  Stock options, exercises, and
    related tax benefits                                                      141,000                142,000
                                                                         ------------           ------------
            Net cash provided by
              (used in) financing
              activities                                                     (889,000)                82,000
                                                                         ------------           ------------
    Effect of exchange rate changes                                           (30,000)                  --
                                                                         ------------           ------------
    Increase (decrease) in cash                                               766,000              3,574,000
Cash and marketable commercial paper  at beginning of
   period                                                                  23,445,000             18,895,000
                                                                         ------------           ------------
Cash and marketable commercial paper  at end of period                   $ 24,211,000           $ 22,469,000
                                                                         ============           ============
   Supplemental disclosures of cash flow information: Cash paid
  during the periods for:

    Interest                                                             $     57,000           $       --
    Income taxes                                                         $  2,275,000           $  1,428,000
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements. (a) See Note 4 for an explanation of the restated balances relating
to the Company's pooling of interests with Gigatek.


                                       4
<PAGE>   5
                     PROCOM TECHNOLOGY, INC. AND SUBSIDIARY

              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                            FOR THE SIX MONTHS ENDED
                      JANUARY 31, 1999 AND JANUARY 31, 1998

NOTE 1.  GENERAL.

         The accompanying financial information is unaudited, but in the opinion
of management, reflects all adjustments (which include only normally recurring
adjustments) necessary to present fairly the financial position of Procom
Technology, Inc. and its consolidated subsidiary (the "Company") as of the dates
indicated and the results of operations for the periods then ended. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to the rules and regulations of the Securities and
Exchange Commission. While the Company believes that the disclosures are
adequate to make the information presented not misleading, the financial
information should be read in conjunction with the audited financial statements,
and notes thereto for the three years ended July 31, 1998 included in the
Company's Report on Form 10-K for fiscal 1998. Results for the interim periods
presented are not necessarily indicative of the results for the entire year.

NOTE 2.  EARNINGS PER SHARE.

         Net income (loss) per share has been computed in accordance with
Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS
128"). SFAS 128 replaced the previously reported primary and fully diluted
earnings per share with basic and diluted earnings per share. Unlike primary
earnings per share, basic earnings per share excludes any dilutive effects of
options and convertible securities. Diluted earnings per share is very similar
to the previously reported fully diluted earnings per share. For the periods
presented, basic net income per share was based on the weighted average number
of shares of common stock outstanding during the period. For the same periods,
diluted net income per share further included the effect of dilutive stock
options outstanding during the period using the treasury stock method.

NOTE 3.  RECENT ACCOUNTING PROUNOUNCEMENTS.

         In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" ("SFAS 130"). SFAS 130 requires that all items that are required to be
recognized under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same prominence as
other financial statements. SFAS 130 will be adopted by the Company for its
fiscal 1999. Adoption of this pronouncement is not expected to have a material
impact on the Company's financial statements. During this quarter, the only
difference between reported net income and comprehensive net income is a $26,000
foreign currency translation adjustment.

         Also in June 1997, the FASB issued Statement of Financial Accounting
Standards No. 131, "Disclosures About Segments of an Enterprise and Related
Information" ("SFAS 131"). SFAS 131 replaces Statement of Financial Accounting
Standards No. 14 and changes the way public companies report segment
information. SFAS 131 is effective for fiscal years beginning after December 15,
1997 and will be adopted by the Company for its fiscal 1999 which commenced
August 1, 1998.

NOTE 4.  ACQUISITION OF PERA AG AND GIGATEK SRL.

         In November 1998, the Company acquired the outstanding stock of Pera
AG, a Swiss distributor/reseller of high end storage solutions. The Company paid
$22,000 and issued 28,500 shares in exchange for 100% of the outstanding stock
of Pera. The acquisition of Pera will be treated as a purchase for accounting
purposes, and Pera's financial statements and results of operations will be
consolidated with those of the Company for periods beginning after November 6,


                                       5
<PAGE>   6
1998. Pera's contribution to consolidated revenues and results of operations is
negligible.

         In January 1999, the Company acquired 100% of the outstanding common
stock of Gigatek, Srl, an Italian distributor of high end networking solutions,
in exchange for the issuance of 51,100 shares of the Company' common stock. The
acquisition of Gigatek is treated as a pooling of interests for accounting
purposes, and the revenues and results of operations of Gigatek are combined
with those of the Company for each of the quarters and six months presented
herein. The Company believes that all applicable conditions to account for the
acquisition as a pooling of interests have been satisfied. The Company expects
that periods prior to July 31, 1997 will not be restated as a result of the
Gigatek acquisition because the impact on such periods is, in the opinion of the
Company, immaterial, except that an adjustment to reflect the acquisition of
Gigatek's net worth will be made to the retained earnings balance on August 1,
1997.

         A schedule of the contribution by Gigatek to consolidated net sales,
operating income, net income, and intercompany transactions follows.

<TABLE>
<CAPTION>
                                    QUARTERS ENDED                            SIX MONTHS ENDED
                            --------------------------------           --------------------------------
                            JANUARY 31,          JANUARY 31,           JANUARY 31,          JANUARY 31,
                                1999                 1998                  1999                 1998
                            -----------          -----------           -----------          -----------
<S>                         <C>                  <C>                   <C>                  <C>        
Net sales (US$)             $ 2,468,000          $   934,000           $ 3,111,000          $ 1,372,000
Operating income                236,000              (57,000)              142,000             (172,000)
Net income                       92,000              (44,000)               46,000             (152,000)
Intercompany sales               67,000              116,000               137,000              174,000
</TABLE>

Note 5.  OTHER MATTERS.

         See Legal Proceedings in Item 1 Part II of this Report on Form 10-Q for
a description of the claim of Miradco against the Company, for which trial is
currently set in late March, 1999. 


                                       6
<PAGE>   7
Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations.

General

OVERVIEW

         This Report on Form 10-Q contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Such forward-looking statements include, but
are not limited to, comments regarding the Company's revenue, revenue mix,
product pricing, gross margins, increased promotional, advertising, research and
development spending, and the expanded marketing efforts of the Company. Actual
results could differ materially from those projected in the forward-looking
statements as a result of important factors including, without limitation,
competitive product introductions, price competition, any failure or delay in
the Company's ability to develop and introduce new products, the failure of any
significant customer, adverse economic conditions generally and other factors
set forth in the Company's filings with the Securities and Exchange Commission,
including the Company's Report on Form 10-K for the year ended July 31, 1998.

         The Company was formed in 1987. The Company began producing aftermarket
disk drive upgrade products for computer products sold by other manufacturers,
and such upgrade products continue to be an important area of focus of the
Company's business. In fiscal 1994, the Company introduced its CD server and
array product line while continuing to provide a broad line of disk drive
upgrade products. In addition, during fiscal 1994, the Company began utilizing
computer resellers and VARs as its primary sales channel instead of mass
merchants and national distributors and commenced shipment of its first RAID
arrays and fault tolerant, high performance storage servers.

         The Company generally records sales upon product shipment. The Company
presently maintains agreements with many of its computer resellers, VARs and
distributors that allow limited returns (including stock balancing) and price
protection privileges. The Company has in the past experienced high return
rates. The Company maintains reserves for anticipated returns (including stock
balancing) and price protection privileges. These reserves are adjusted at each
financial reporting date to state fairly the anticipated returns (including
stock balancing) and price protection claims relating to each reporting period.
Generally, the reserves will increase as sales and corresponding returns
increase. In addition, under a product evaluation program established by the
Company, computer resellers, VARs, distributors and end users generally are able
to purchase products on a trial basis and return the products within a specified
period if they are not satisfied. Evaluation units are not recorded as sales
until the customer has paid for such units.

         A majority of the Company's sales are denominated in U.S. dollars. With
the acquisitions of companies in Germany, Switzerland and Italy, the Company
believes that adverse fluctuations in foreign exchange rates could, in the
future, have a material adverse effect on the Company's results of operations or
financial condition. Among other things, fluctuations in exchange rates could
cause the Company's products to become relatively more expensive to end users in
a particular country, leading to a reduction of sales in that country, and
foreign exchange rate fluctuations may cause the Company's assets, sales and
results of operations to be adversely impacted in the future.

         Historically, the Company's gross margins have experienced significant
volatility. The Company's gross margins vary significantly by product line, and,
therefore, the Company's overall gross margin varies with the mix of products
sold by the Company. The Company's markets are also characterized by intense
competition and declining average unit selling prices as products mature over
the course of the relatively short life cycle of individual products, which have
often ranged from six to twelve months. In addition, the Company's gross margins
may be adversely affected by availability and price increases associated with
key products and components from the Company's suppliers, some of which have
been in the past, and may in the future be in short supply, and inventory
obsolescence resulting from older generation products or the unexpected
discontinuance of third party components. 


                                       7
<PAGE>   8
Finally, the Company's margins vary with the mix of its distribution channels
and with general economic conditions.

RESULTS OF OPERATIONS

         The following table sets forth the Company's statement of operations
data as a percentage of net sales for the periods indicated.


<TABLE>
<CAPTION>
                                                     THREE MONTHS ENDED                   SIX MONTHS ENDED
                                               -----------------------------        ----------------------------
                                               JANUARY 31,        JANUARY 31,       JANUARY 31,       JANUARY 31,
                                                  1999               1998              1999              1998
                                               ----------         ----------        ----------        ----------
                                               (UNAUDITED)        (UNAUDITED)       (UNAUDITED)       (UNAUDITED)
<S>                                            <C>                <C>               <C>               <C>   
Net sales .............................             100.0%             100.0%            100.0%            100.0%

Cost of sales .........................              69.9               64.4              69.0              65.2
                                               ----------         ----------        ----------        ----------
  Gross profit ........................              30.1               35.6              31.0              34.8
Selling, general and administrative
  expenses ............................              25.8               21.9              23.5              20.1
Research and development expenses......               4.9                4.5               4.5               4.2
                                               ----------         ----------        ----------        ----------
  Operating income (loss) .............              (0.6)               9.2               3.0              10.5
Interest income and (expense), net ....               1.2                1.1               1.1                .9
                                               ----------         ----------        ----------        ----------
  Income (loss) before income
    taxes .............................               0.6               10.3               4.1              11.4
Provision (benefit) for income
  taxes ...............................               0.2                4.0               1.5               4.4
                                               ----------         ----------        ----------        ----------
 Net income (loss) ....................               0.4%               6.3%              2.6%              7.0%
                                               ==========         ==========        ==========        ==========
</TABLE>

QUARTER AND SIX MONTHS ENDED JANUARY 31, 1999 COMPARED TO QUARTER AND SIX MONTHS
ENDED JANUARY 31, 1998

GENERAL COMMENTS

         Results of operations for the quarters ended October 31, 1997, January
31, 1998 and October 31, 1998 have been restated to give effect to the Gigatek
acquisition accounted for as a pooling of interests. See Note 4 to the
Consolidated Condensed Financial Statements for January 31, 1999.

         Net Sales

         Net sales increased 8.0% from $24.4 million for the quarter ended
January 31, 1998 to $26.4 million for the quarter ended January 31, 1999, but
declined 15.0% compared to net sales of $31.0 million for the most recent
quarter ended October 31, 1998. The increase over sales for the same quarter one
year ago was due primarily to the inclusion of revenues from the acquisitions of
Megabyte, Invincible, Gigatek and Pera completed by the Company during the past
year. The additional revenue generated by the acquisitions was offset, however,
by a significant decrease in sales of CD servers and arrays during the quarter
ended January 31, 1999. The reduction from sales for the October 1998 quarter
was primarily due to a significant decrease in sales of CD servers and arrays as
well as reduced industry wide demand for the Company's disk drive upgrade
subsystems for desktop computers, combined with the effect of significant price
erosion which occurred during the quarter. Net sales were also affected by seven
fewer selling days during the quarter as a result of the holidays and the
Company's relocation of its corporate headquarters from Irvine, California to
Santa Ana, California during which time the Company saw reduced productivity.
The Company expects to see a continued weakness in the demand for its upgrade
disk drive storage products and CD-ROM Network Storage Solutions throughout the
balance of fiscal 1999. For the quarter ended January 31, 1999, sales of the
Company's 


                                       8
<PAGE>   9
"Intelligent Network Storage Products", which comprise CD servers and arrays and
RAID storage systems, comprised approximately 55% of net sales, and sales of
disk drive storage upgrade products comprised approximately 45% of net sales.
International sales increased significantly as the Company saw a larger portion
of its net sales come from Europe, where its recent acquisitions are
headquartered. International sales increased from $1.8 million, or approximately
7.7% of net sales, in the quarter ended January 31, 1998 to $13.5 million, or
approximately 50.9% of net sales, for the quarter ended January 31, 1999 due
primarily to the inclusion of the revenues of Megabyte, Pera and Gigatek and the
reduced US sales of Procom's CD servers and arrays. Net sales for the six months
ended January 31, 1999 increased 4.8% to $57.4 million from $54.8 million for
the six months ended January 24, 1998. The reduced growth in sales for the six
month period was caused by and affected by the factors set forth above.

         Gross Profit

         The Company's gross margins decreased from 35.6% of net sales for the
quarter ended January 31, 1998 to 30.1% of net sales for the quarter ended
January 31, 1999, while gross margins decreased from 34.8% of net sales for the
six months ended January 24, 1998 to 31.0% of net sales for the six months ended
January 31, 1999. These decreases were primarily the result of the inclusion of
the revenues of Megabyte and Gigatek, which have historically experienced lower
margins, and to a lesser extent, reductions in sales of CD servers and arrays.
In addition, the Company realized higher margins on increased sales of disk
drive upgrade products for notebook computers and RAID storage products, and
such increases more than offset the effect of competition and price erosion
typical in the disk drive upgrade industry.

         Selling, General and Administrative Expenses

         Selling, general and administrative expenses increased from $5.4
million, or 21.9% of net sales for the quarter ended January 31, 1998 to $6.8
million, or 25.8% of net sales for the quarter ended January 31, 1999. Selling,
general and administrative expenses increased from $11.3 million, or 20.1% of
net sales for the six months ended January 31, 1998 to $13.5 million, or 23.5%
of net sales for the six months ended January 31, 1999. The dollar increase in
selling, general and administrative expenses for the second quarter of fiscal
1999 compared to the same quarter in fiscal 1998 was primarily a result of
relocation and increased rent expenses as the Company moved its corporate
headquarters during the quarter, increased marketing and co-operative
advertising costs, increased personnel and related costs necessary to support
the Company's operating plans, and the administrative costs of the Company's
recent acquisitions, offset by reductions in advertising costs and sales
commissions, due to the reduction in net sales. The dollar increase for the six
month period in fiscal 1999 was primarily the result of increased co-operative
advertising costs, and increased personnel and related costs necessary to
support the Company's growth plans. The Company anticipates that the dollar
amount of its selling, general and administrative expenses will increase as the
Company expands its efforts to penetrate certain sales channels and regions,
makes strategic acquisitions, and continues to strengthen and upgrade its
existing management information and telecommunications systems.

         Research and Development

         Research and development expenses increased from $1.1 million, or 4.5%
of net sales for the quarter ended January 31, 1998, to $1.3 million, or 4.8% of
net sales for the quarter ended January 31, 1999. Research and development
expenses increased from $2.4 million, or 4.2% of net sales for the six months
ended January 31, 1998 to $2.6 million, or 4.5% of net sales for the six months
ended January 31, 1999. The increases were primarily due to continued increases
in additional hardware developers and software programmers to develop additional
products and enhance existing product features. The Company anticipates that the
dollar amount of its research and development expenses will continue to
increase, and also may increase as a percentage of net sales, with the expected
addition of dedicated engineering resources to develop new product categories.
These additions are being made to increase the likelihood that the Company's
products will be compatible with a wide 


                                       9
<PAGE>   10
range of hardware platforms and network topologies and to further develop
NetFORCE products, the Company's proprietary client/server management storage
architecture. In addition, the Company intends to continue to update software
drivers to ensure that the Company's CD servers and arrays function with a
variety of hardware platforms and network operating systems.

         Interest Income and Expense

         During each of the quarters and six month periods ending January 31,
1998 and January 31, 1999, the Company invested its available cash in investment
grade commercial paper with maturities of less than 180 days. Because the
Company's investable cash position increased somewhat in the current quarter and
six month period compared to the same periods one year ago, even though interest
rates softened in those same periods. As a result, interest income for the
second quarter and six months of fiscal 1999 was $341,000 and $666,000,
respectively, compared to $291,000 and $578,000 for the same periods in fiscal
1999. Interest expense in fiscal 1999 includes relatively small amounts of
interest paid on lines of credits maintained by the Company's foreign
subsidiaries.

         Income Taxes

         The Company's effective tax rates for each of the two quarters ended
January 31, 1999 and 1998 ranged between 35.3% and 38.5% of pretax income, which
approximate the federal and state statutory rates with modest reductions for
benefits resulting from the Company's use of its foreign sales corporation
("FSC") and benefits accruing from the increases in research and development
activity, causing increased research and development credits.

General comments

         The Company's results of operations have in the past varied
significantly and are likely in the future to vary significantly as a result of
a number of factors, including the mix of products sold, the volume and timing
of orders received during the period, the timing of new product introductions by
the Company and its competitors, product line maturation, the impact of price
competition on the Company's average selling prices, the availability and
pricing of components for the Company's products, changes in distribution
channel mix and product returns or price protection charges from customers. Many
of these factors are beyond the Company's control. Although the Company has
experienced growth in sales in some recent periods, there can be no assurance
that the Company will experience growth in the future or be profitable on an
operating basis in any future period. In addition, due to the short product life
cycles that characterize the Company's markets, a significant percentage of the
Company's sales each quarter may result from new products or product
enhancements introduced in that quarter. Since the Company relies on new
products and product enhancements for a significant percentage of sales, failure
to continue to develop and introduce new products and product enhancements or
failure of these products or product enhancements to achieve market acceptance
could have a material adverse effect on the Company's business, financial
condition and results of operations. Historically, as the Company has planned
and implemented new products, it has experienced unexpected reductions in sales
and gross profit of older generation products as customers have anticipated new
products. These reductions have in the past given and could continue to give
rise to charges for obsolete or excess inventory, returns of older generation
products by computer resellers, VARs and distributors or substantial price
protection charges. From time to time, the Company has experienced and may in
the future experience inventory obsolescence resulting from the unexpected
discontinuance of third party components, such as disk drives, included in the
Company's products. To the extent the Company is unsuccessful in managing
product transitions, the Company may experience a material adverse effect on the
Company's business, financial condition and results of operations.

         The Company also has seen significant reduced demand and revenues for
its CD servers and some notebook upgrade disk drive products during the quarter
ended January 31, 1999, and is currently analyzing the market demands and
opportunities for those products in the future while transitioning existing
users to more complex information access solutions 


                                       10
<PAGE>   11
such as CD-FORCE and NetFORCE where possible.

         The Company has embarked on a strategy to acquire other entities that
it believes are complementary to the Company's products, markets or services.
The Company does not have significant experience in managing the acquisition
process or the operations of newly acquired acquisition targets. While the
Company believes that its recent acquisitions have helped position the Company
for long-term growth, especially in Europe, each of the acquisitions brings
unique and sometimes costly challenges to resolve or overcome. There can be no
assurance that the Company's acquisition strategy will be successful, or that
the Company will be successful in managing the acquisition target after the
acquisition is completed. To the extent the Company is unsuccessful in either
the acquisition process or in managing the acquisition target, there could be a
material adverse effect on the Company's business, financial condition and
results of operations.

LIQUIDITY AND CAPITAL RESOURCES

         In November 1994, the Company instituted a revolving line of credit
with Finova Capital ("Finova"). The facility was amended in November 1996 to
provide the Company with up to $20.0 million in working capital loans, based
upon the Company's accounts receivable and inventory levels. The line of credit
accrues certain commitment fees, unused facility fees and interest on
outstanding amounts at the lender's prime rate (8.5% at January 31, 1998) plus
1.5%. Finova also makes available to the Company various flooring commitments
pursuant to which the Company may finance the purchase of up to $13.0 million in
inventory (less any amounts outstanding in working capital loans) from certain
of the Company's vendors who have credit arrangements with Finova. As of January
31, 1999, there was no balance outstanding under the credit facility, and $3.1
million outstanding under the flooring arrangements. The agreement governing the
credit facility requires the Company to maintain certain financial covenants
(including the maintenance of working capital of at least $500,000), minimum
levels of tangible net worth and minimum levels of liquidity. As of January 31,
1999, the Company was in compliance with the covenants of the Finova line of
credit. The initial term of the line of credit expired on November 29, 1997, but
automatically renews for successive one year periods unless terminated by either
party within a specified period in advance of the automatic renewal date. In
addition, the Company maintains a small line of credit for Megabyte's and
Gigatek's cash management needs.

         Subsequent to July 31, 1998, the Company's Board of Directors approved
an open market stock repurchase program. Pursuant to the program, the Company is
authorized to effect repurchases of up to $2 million in shares of its common
stock. The Company expects that it will make such repurchases from time to time,
when it determines that such repurchases are the best available use of the
Company's available cash, given the price of the Company's stock and the
interest income the Company would otherwise earn on the Company's available
cash. The Company intends to make any repurchases subject to an ongoing buyback
program, and currently does not intend to repurchase more shares than the number
of shares which are issued pursuant to employee stock option exercises or other
employee stock purchase programs. During the quarter ended October 31, 1998, the
Company repurchased approximately 19,000 shares at a total cost of approximately
$92,000. No repurchases were made during the quarter ended January 31, 1999,
although repurchases have been made pursuant to the buyback program subsequent
to such date.

         The Company has recently acquired an 8.5 acre parcel of land in Irvine,
California, where it will develop a corporate headquarters facility, which the
Company expects will be ready for occupancy in the year 2000. The cost of the
land, together with the currently estimated cost to construct the facility,
would approximate $14-15 million. The Company is considering various development
and financing options, and believes that it will have the capital resources
available to it to finance and complete the building during the next two years.

         As of January 31, 1999, the Company had cash balances of $ 24.4 million
and $16.2 million of availability under its line of credit. The Company believes
that these cash balances and available credit under its existing lines of credit
will be sufficient to 


                                       11
<PAGE>   12
meet anticipated cash requirements for at least the next twelve months. The
Company will continue to acquire fixed assets and make expenditures to support
its growth. In addition, in fiscal 1998, the Company completed two acquisitions
utilizing its own cash and common stock, and in the quarter ended January 31,
1999, the Company completed two additional acquisitions utilizing its own cash
and common stock. The Company has made cash advances to continue the operations
of the entities acquired during fiscal 1998 and during this quarter, of
approximately $5 million. Additional advances may be necessary in the future in
order to continue the orderly operation of the entities acquired. The Company
has had discussions concerning potential acquisitions with various businesses
which have or offer products and technologies that are complementary to those of
the Company. The Company may acquire additional businesses in the future. There
can be no assurance that any such potential acquisitions could or will be
completed. In the event the Company's plans, including the development of the
corporate headquarters or the funds expended in the stock buyback program,
require more capital than is presently anticipated, the Company's remaining cash
balances may be consumed and additional sources of liquidity such as debt or
equity financings may be required to meet working capital needs. There can be no
assurance that additional capital beyond the amounts currently forecast by the
Company will not be required nor that any such required additional capital will
be available on reasonable terms, if at all, at such time or times as required
by the Company.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS

INTEREST RATE RISK

         The Company's exposure to market risk for changes in interest rates
relates primarily to the increase or decrease in the amount of interest income
the Company can earn on its investment portfolio. The Company does not use
derivative financial instruments in its investment portfolio. The Company
invests in high-credit quality issuers and, by policy, limits the amount of
credit exposure to any one issuer. As stated in its policy, the Company ensures
the safety and preservation of its invested principal funds by limiting default
risk, market risk and reinvestment risk. The Company mitigates default risk by
investing in safe and high-credit quality securities and by constantly
positioning its portfolio to respond appropriately to a significant reduction in
a credit rating of any investment issuer, guarantor or depository. The portfolio
includes only marketable securities with active secondary or resale markets to
ensure portfolio liquidity.

FOREIGN CURRENCY EXCHANGE RISK

         The Company transacts business in various foreign countries, but only
has significant assets deployed outside the United States in Germany. The
Company has effected intercompany advances and sold goods to Megabyte
denominated in U.S. dollars, and those amounts are subject to currency
fluctuation, and require constant revaluation on the Company's financial
statements. The Company does not operate a hedging program to mitigate the
effect of a significant rapid change in the value of the German mark compared to
the U.S. dollar. If such a change did occur, the Company's would have to take
into account a currency exchange gain or loss in the amount of the change in the
U.S. dollar denominated balance of the amounts outstanding at the time of such
change. While the Company does not believe such a gain loss is likely, and would
not likely be material, there can be no assurance that such a loss would not
have an adverse material effect on the Company's results of operations or
financial condition.

YEAR 2000 PREPAREDNESS INFORMATION

         The Year 2000 issue is the result of computer programs,
microprocessors, and embedded date reliant systems using two digits rather than
four to define the applicable year. If such programs are not corrected, date
data concerning the Year 2000 could cause many systems to fail, lock up or
generate erroneous results. The Company considers a product to be "Year 2000
compliant" if the product's performance and functionality are unaffected by
processing of dates prior to, during and after the Year 2000, but only if all
products (for example hardware, software and firmware) used with the product
properly exchange 


                                       12
<PAGE>   13
accurate date data with it. The Company believes that as data storage devices,
its hard drive products are transparent to Year 2000 requirements, and rely
primarily on software found in operating systems and applications to function
properly. After significant testing, the Company believes its current hard drive
and CD-ROM products are Year 2000 compliant, although other products previously
sold by the Company may not be Year 2000 compliant. In September 1998, the
Company began to offer a limited Year 2000 warranty on products sold by the
Company after that date. Previous to September 1998, the Company did not offer
any such warranty on any of its products. The Company believes that it may be
possible that litigation may be brought against vendors, including the Company,
of all component products of systems that are unable to properly manage data
related to the Year 2000. The Company's agreements with customers and end users,
both for products sold before and after September 1998, typically contain
provisions designed to limit the Company's liability for such claims. It is
possible, however, that these measures will not provide protection from
liability claims, as a result of existing or future federal, state or local laws
or ordinances or unfavorable judicial decisions. Any such claims, with or
without merit, could result in a material adverse effect on the Company's
business, financial condition and results of operations, customer satisfaction
issues and potential lawsuits.

        The Company is identifying Year 2000 dependencies in its primary
accounting software, and other systems, equipment, and processes and is
implementing changes to such systems, updating or replacing such equipment, and
modifying such processes to make them Year 2000 compliant. The Company is now
assessing its internal Year 2000 issues and is in the process of remediation of
the critical systems. While management believes the Company's current accounting
software systems appear to be Year 2000 compliant, the Company intends to
upgrade those systems during fiscal 1999, and will insure that Year 2000
compliance is a major factor in the selection of the appropriate accounting
software package. The Company has also initiated formal communications with many
of its significant suppliers and financial institutions to evaluate their Year
2000 compliance plans and state of readiness and to determine whether any Year
2000 issues will impede the ability of such suppliers to continue to provide
goods and services to the Company. As a general matter, the Company is
vulnerable to any failure by its key suppliers to remedy their own Year 2000
issues, which could delay shipments of essential components, thereby disrupting
or halting the Company's manufacturing operations. Further, the Company also
relies, both domestically and internationally, upon governmental agencies,
utility companies, telecommunication service companies and other service
providers outside of the Company's control. There is no assurance that such
suppliers, governmental agencies, financial institutions, or other third parties
will not suffer business disruption caused by a Year 2000 issue, and there is
little practical opportunity for the Company to test or require Year 2000
compliance from many of those large agencies, companies or providers. Such
failures could have a material adverse effect on the Company's business,
financial condition and results of operations. Additionally, the Company is
communicating with its large customers to determine the extent to which the
Company is vulnerable to those third parties' failure to remedy their own Year
2000 issues.

        The Company anticipates that its internal systems, equipment and
processes will be substantially Year 2000 compliant by the end of June 1999. A
formal budget has not been established, and the cost to the Company of achieving
Year 2000 compliance is evolving; however, it is not currently expected to have
a material effect on the Company's financial condition or results of operations.
The Company has to date spent approximately $100,000 to upgrade computer
hardware to insure Year 2000 compliance, and that amount will be capitalized and
depreciated over the useful life of the asset, expected to be 3 years. The
Company anticipates that the cost of Year 2000 compliant software (including the
upgraded accounting software noted above) and hardware could exceed $1 million,
and is not likely to exceed $2.0 million, (excluding the costs of the Year 2000
compliance problems associated with the Company's vendors, customers, financial
institutions and government agencies noted above) although the Company believes
that a significant amount of the total expenditures would be capitalized and
depreciated over the useful life of the applicable asset, such as computer
hardware or software replaced to keep pace with technological advances. The
Company estimates that Year 2000 compliance charges will be paid from existing
Company working capital, and that the total Year 2000 compliance budget is


                                       13
<PAGE>   14
approximately 50% of the Company's total IT expenditures. While the Company
currently expects that the Year 2000 issue will not pose significant internal
operational problems, delays in the Company's remediation efforts, or a failure
to fully identify all Year 2000 dependencies in the systems, equipment or
processes of the Company or its vendors, customers or financial institutions
could have material adverse consequences, including delays in the manufacture,
delivery or sale of products. Therefore, the Company is considering the
development of contingency plans along with its remediation efforts for
continuing operations in the event such problems arise.


                                       14
<PAGE>   15
                                     PART II
                                OTHER INFORMATION

Item 1.  Legal Proceedings.

         As previously reported in the Company's filings with the Securities and
Exchange Commission, the Company and one of its executives are defendants in an
action filed in Orange County Superior Court by Miradco International
Corporation, a private company based in Newport Beach, California, consisting of
two principals ("Miradco"), which alleges that the Company and the executive
breached an alleged oral contract with Miradco or that the Company and/or the
executive misrepresented that a contract existed with Miradco. In its complaint,
Miradco has asserted that it is entitled to receive 280,000 shares of the
Company's Common Stock, which Miradco contends have a value in excess of $5.6
million, as payment for financial and other advisory services allegedly rendered
to the Company by Miradco. During discovery in the legal action, Miradco has
claimed that it is entitled to receive up to 7% of the Company's Common Stock,
with a minimum of 280,000 shares. In addition, in its complaint, Miradco also
seeks an award of punitive damages. The Company vigorously denies the existence
of any oral contract with Miradco, and believes any oral contract claim of
Miradco and the suit are without merit. The Company intends to continue to
defend itself vigorously in this action. The Company expects that it will incur
significant additional legal expenses relating to this claim in the quarter
ended April 30, 1999 and for the rest of fiscal 1999. Trial has been set
initially for March 1999. While the Company believes that Miradco's claims are
without merit, there can be no assurance about the outcome of this case, nor the
effect it may have on the financial condition or results of operations of the
Company. If the claims of Miradco were held to be valid, a judgment for a
significant amount could be entered against the Company, and such judgment could
have a material adverse effect on the Company's results of operations and
financial condition.

         The Company is from time to time involved in other litigation related
to its ordinary operations, such as collection actions and vendor disputes. The
Company does not believe that the resolution of any such other existing claim or
lawsuit will have a material adverse affect on the Company's business, results
of operations or financial condition.


Item 2.  Changes in Securities and Use of Proceeds.

         Not applicable.

Item 3.  Defaults Upon Senior Securities.

         Not applicable.

Item 4.  Submission of  Matters to a Vote of Security Holders.

         The annual meeting of shareholders was held on January 21, 1999. The
shareholders elected the following six directors to hold office until the next
annual meeting and until their successors are elected and qualified:

<TABLE>
<CAPTION>
                                                                            NUMBER OF VOTES 
                                                                       -------------------------
                                                                          FOR            AGAINST
                                                                       ---------         -------
<S>                                                                    <C>               <C>    
         Alex Razmjoo.............................................     9,671,310         270,831
         Nick Shahrestany.........................................     9,673,045         269,096
         Frank Alaghband..........................................     9,673,045         269,096
         Dom Genovese.............................................     9,672,370         269,771
         Alex Aydin...............................................     9,673,045         269,096
         David Blake..............................................     9,672,370         269,771
</TABLE>


         In addition, the shareholders approved the following proposals:

<TABLE>
<CAPTION>
                                                                                            NUMBER OF VOTES 
                                                                      -------------------------------------------------------
                                                                         FOR          AGAINST         ABSTAIN        BROKER
                                                                      ----------     ----------     ----------     ----------
                                                                                                                    Non-Votes
<S>                                                                   <C>            <C>            <C>            <C>
An Amendment of the Company's 1995 Stock Option Plan to increase
the number of shares reserved for issuance thereunder by 600,000
shares to an aggregate of 1,590,000 shares.                            7,134,265      1,260,878         19,280      1,527,718

To establish the 1999 Employee Stock Purchase Plan and to
reserve 250,000 shares for issuance pursuant to the plan.              7,831,915        570,843         11,665      1,527,718

The appointment of Arthur Andersen & Company, L.L.P. as the
independent auditors of the Company for 1998.                          9,928,340          7,081          6,720              0
</TABLE>

Item 5.  Other Information.

         Not applicable.

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

(a)      See Exhibit Index. No Statement re Computation of Per Share Earnings is
         included, because the computation can be clearly determined from
         material contained in this Report. See the Consolidated Statements of
         Operations, and the Notes thereto.

(b)      A Report on Form 8-K/A was filed on January 11, 1999. The Report
         included as an Exhibit financial statements dated March 31, 1998 of
         Invincible Technologies Corporation, a Massachusetts corporation
         ("ITC"). The Company had acquired the assets and assumed certain
         liabilities of ITC in June 1998.


                                       15
<PAGE>   16
                                   SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Irvine, County of
Orange, State of California, on the 17th day of March, 1999.

                                       PROCOM TECHNOLOGY, INC.


                                       By:  /s/   Alex Razmjoo
                                            ------------------------------------
                                            Alex Razmjoo
                                            Chairman, President and
                                            Chief Executive Officer

         Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this Report on Form 10-Q has been signed below by the following persons
in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
         SIGNATURE                                           TITLE                               DATE
         ---------                                           -----                               ----
<S>                                       <C>                                               <C>


    /s/       Alex Razmjoo                Chairman of the Board, President                  March 17, 1998
--------------------------------------    and Chief Executive Officer (Principal
              Alex Razmjoo                Executive Officer)                    
                                          


    /s/        Alex Aydin                 Executive Vice President, Finance                 March 17, 1998
--------------------------------------    and Administration (Principal Financial Officer)
               Alex Aydin                 


    /s/      Frederick Judd               Vice President, Finance and                       March 17, 1998
--------------------------------------    General Counsel (Principal Accounting Officer)
             Frederick Judd               
</TABLE>


                                       16
<PAGE>   17
                                INDEX TO EXHIBITS

<TABLE>
<CAPTION>
                                                                                                                  SEQUENTIALLY
EXHIBIT                                                                                                               NUMBER
NUMBER                                   DESCRIPTION                                                                    PAGE
-------                                  -----------                                                              ------------
<S>         <C>                                                                                                   <C>
   3.1+     Amended and Restated Articles of Incorporation of the Company.......................................
   3.2+     Amended and Restated Bylaws of the Company..........................................................
  10.1+     Form of Indemnity Agreement between the Company and each of its executive officers and directors....
  10.2+     Form of Amended and Restated Procom Technology, Inc. 1995 Stock Option Plan.........................
  10.3+     Amended and Restated Executive Employment Agreement, dated as of October 28, 1996, between the
            Company and Alex Razmjoo............................................................................
  10.4+     Amended and Restated Executive Employment Agreement, dated as of October 28, 1996, between the
            Company and Frank Alaghband.........................................................................
  10.5+     Amended and Restated Executive Employment Agreement, dated as of October 28, 1996, between the
            Company and Alex Aydin..............................................................................
  10.6+     Amended and Restated Executive Employment Agreement, dated as of October 28, 1996, between the
            Company and Nick Shahrestany........................................................................
  10.7+     Form of Registration Rights Agreement...............................................................
  10.8+     Lease, dated February 10, 1992, between 2181 Dupont Associates and the Company, as amended..........
  10.9+     Loan and Security Agreement, dated November 18, 1994, by and between the Company and FINOVA Capital
            Corporation, as amended.............................................................................
  11.1+     Statement re: Computation of Earnings Per Share.....................................................
  21.1+     List of Subsidiaries................................................................................
  27.1      Financial Data Schedule.............................................................................
</TABLE>

----------

+  Previously filed


                                       17