COMARCO Reports Second Quarter Earnings.

SANTA ANA, Calif.--(BUSINESS WIRE)--Aug. 18, 1999--

COMARCO Inc. (Nasdaq:CMRO) Wednesday announced results for its second quarter of fiscal year 2000 ended July 31, 1999.

Net income for the quarter was $1,012,000 or $.21 per share (diluted) compared with $1,281,000 or $.25 per share (diluted) reported in last year's second quarter. Revenues for the quarter were $22.8 million compared with $22.0 million last year.

For the first half of this year, COMARCO's net income was $2.0 million or $.41 per share (diluted) on revenues of $44.0 million. For the same period last year, the company earned $2.1 million or $.42 per share (diluted) on $43.8 million of revenue.

COMARCO will host a conference call at 11 a.m. PDT (2 p.m. EDT) on Wednesday, Aug. 18. To attend the conference, call 800/526-7151 and ask for the Comarco conference. A replay will be available until midnight the following day at 800/526-7141.

Last month COMARCO announced plans to strengthen the company's focus in the wireless communications sector. COMARCO has decided to sell the company's engineering and information technology, management and staffing services business. These non-wireless business units had revenues of $58 million in the company's fiscal year ended Jan. 31, 1999. COMARCO intends to use the proceeds from any sale to invest in growth initiatives for its core wireless communications business.

Don M. Bailey, chairman, chief executive officer and president of COMARCO stated, "We anticipate that this divestiture and focusing of the company's resources will result in enhanced shareholder value. We expect the selling process to take six to nine months."

Comarco Wireless, the company's wireless communications products business, had net income for the quarter of $639,000 or $.13 per share (diluted) compared with $933,000 or $.18 per share (diluted) in last year's second quarter. Revenues for the quarter were $9.0 million compared with $7.4 million last year.

For the first half of this year, Comarco Wireless' net income was $1,312,000 or $.27 per share (diluted) on revenues of $16.8 million. For the same period last year, Comarco Wireless earned $1,343,000 or $.26 per share (diluted) on $14.7 million of revenue.

Commenting on the company's wireless communications products business, Bailey continued: "COMARCO's level of sales for its test and measurement business for the quarter was lower than anticipated but was within its normal variation for this time of year. As has been reported widely in the financial and industry press, the wireless industry is currently experiencing significant quality of service perception problems resulting from increases in cellular usage due to new lower pricing programs from the telephone carriers.

"This industry condition could lead to increased demand for our equipment. COMARCO is currently releasing three new products that will enable carriers to significantly improve the quality of service experienced by their customers. In addition, we will be releasing another four products in the third and fourth quarter that should also boost sales in the later half of this year and next year.

"Our call box business experienced increased revenues in the quarter with the ramp-up of the Los Angeles, San Francisco, Santa Cruz and Sacramento area contracts. Sales for this business should continue to grow for the balance of the year.

"ChargeSource(TM), our new universal AC-DC power adapter, is gaining acceptance during its initial market trial. We continued to ship at the rate of 10,000 units per month during the quarter into retail and other channels. Using patented technology, ChargeSource(TM) can power and recharge notebook computers and cellular telephones, thus simplifying the needs of the traveling professional.

"COMARCO's financial position remained strong with $10 million in cash and investments as of July 31, 1999. Our days sales in receivables have been reduced significantly this year, resulting in increases in our cash. During the quarter we repurchased 70,000 shares of our stock. Including an additional purchase made in August, we have repurchased over 1.3 million shares during our seven-year buyback program."

For further information, contact Don Bailey at 714/796-1800 or the Shareholder Information Office at 714/796-1818. Our Web sites can be found at www.cmro.com and www.comarco.com.

COMARCO provides wireless communications products, including advanced wireless network evaluation equipment to the cellular and PCS industries worldwide, as well as information technology, management and staffing services, to the public and private sectors.

Except for historical information contained herein, the matters set forth in this news release are forward-looking statements that involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Potential risks and uncertainties include such factors as the level of sales of the company's wireless communications products; timely and cost-effective product development, foreign marketing, the level of competition for the company's products and services, the company's ability to meet contractual commitments with its customers, and the ability to meet the technical requirements of its customers. The company's ability to consummate the divestiture and the period necessary to complete any sale is subject to certain risks and uncertainties including receiving acceptable offers from qualified buyers, obtaining necessary approvals and finalizing the company's plan of divestiture. Investors are also directed to consider a more detailed description of risks and uncertainties facing the company discussed in documents filed by the company with the Securities and Exchange Commission. -0-

                             COMARCO Inc.

                   INTERIM STATEMENT FINANCIAL DATA
                          STATEMENT OF INCOME
             (Dollars in thousands Except Per Share Data)

                            Three Months Ended      Six Months Ended
                            July 31    July 31     July 31    July 31
                             1999       1998        1999       1998

STATEMENT OF INCOME

Revenue                     22,802     22,011      43,976     43,762

Direct costs                14,269     13,030      26,971     26,289
Indirect costs               6,988      7,010      13,994     14,265

Total operating costs       21,257     20,040      40,965     40,554

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

Net interest income             97         95         177        213
Minority interest
  in earnings                    9                      9

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

Income taxes                   621        785       1,208      1,300
  Tax rate                      38%        38%         38%        38%

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

Earnings per share
  Basic                  $    0.23  $    0.27   $    0.45  $    0.45
  Diluted                $    0.21  $    0.25   $    0.41  $    0.42

Weighted average shares
  of common stock
    Basic                4,396,000  4,714,000   4,425,000  4,716,000
    Diluted              4,745,000  5,130,000   4,804,000  5,100,000



SELECTED BALANCE                       July 31     Jan. 31    July 31
SHEET ITEMS                             1999        1999       1998

Cash and short-term
  investments                       $   9,892   $   5,995  $   6,551
Net accounts receivable                17,004      23,151     18,763
Inventory                               4,994       4,157      4,857
Current assets                         34,924      35,990     32,287
Long-term investments
  (highly liquid)                         295         526      1,498
Property and equipment, net             2,743       2,424      2,216
Capitalized software development        4,865       4,185      3,989
Intangible assets, net                  3,384       3,587      3,586
Total assets                           46,777      47,287     44,190
Short-term debt
Current liabilities                    12,556      14,157     10,783
Long-term debt
Total shareholders' equity             32,105      31,202     31,927


                             COMARCO Inc.

                   INTERIM STATEMENT FINANCIAL DATA
                          STATEMENT OF INCOME
             (Dollars in thousands Except Per Share Data)

                            Three Months Ended      Six Months Ended
                            July 31    July 31     July 31    July 31
                             1999       1998        1999       1998

Comarco Wireless Segment

Sales                        8,973      7,351      16,815     14,662
Cost of goods sold           4,994      3,142       8,975      6,638

Gross profit                 3,979      4,209       7,840      8,024

Selling, general
  & administrative           1,871      2,010       3,786      3,890
Engineering and support      1,084        718       1,963      2,003

Operating income             1,024      1,481       2,091      2,131
Minority interest
  in earnings                    9                      9

Income before income taxes   1,015      1,481       2,082      2,131

Income taxes                   376        548         770        788
Tax rate                        37%        37%         37%        37%

Net income               $     639  $     933   $   1,312  $   1,343

Earnings per share
  (applicable to
   Wireless segment)
    Basic                $    0.15  $    0.20   $    0.30  $    0.28
    Diluted              $    0.13  $    0.18   $    0.27  $    0.26