SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-QSB

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

FOR THE
QUARTERLY PERIOD ENDED JANUARY 31, 2006

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

For the transition period
from ______________ to ____________________

Commission
file number 0-8174

Conolog
Corporation(Exact name
of registrant as specified in its charter)

|                                                |  |                                         
|----------------------------------------------- |  | ----------------------------------------
|Delaware                                        |  | 22-1847286                              
|                                                |  |                                         
|(State
  or other jurisdiction of organization) |  | (I. R. S. Employer
  Identification No.)

5
Columbia Road 
Somerville, NJ  08876(Address
of principal executive offices and zip code)

Registrants telephone
number, including area code: (908) 722-8081

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 report(s), and (2)
has been subject to such filing requirement for the past 90
days.   YES  xNO
 o

APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE PROCEEDING FIVE YEARS.

| |                                                                                                                                                                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Indicate
  by check mark whether the registrant has filed all documents and reports
  required to be filed by Sections 12, 13, or 15 (d) of the Securities Exchange
  Act of 1934 subsequently to the distribution of securities under a plan
  confirmed by a court.    YES  xNO
 o

APPLICABLE ONLY TO
CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the
issuers classes of common stock, as of the latest practicable date.

|                              |  |                                       
|----------------------------- |  | --------------------------------------
|                              |  | Shares Outstanding at
  March  1, 2006
|Class                         |  | (Inclusive of Treasury
  Stock)       
|                              |  |                                       
|Common Stock, $.001 par value |  | 7,422,847                             



---



INDEX

|          |                                                                                                                                                             | 
|--------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|PART I    | FINANCIAL INFORMATION                                                                                                                                       | 
|          |                                                                                                                                                             | 
|Item 1.   | CONSOLIDATED
  FINANCIAL STATEMENTS                                                                                                                         | 
|          |                                                                                                                                                             | 
|          | Condensed Consolidated
  Balance Sheets as of January 31, 2006 (Unaudited) and July 31, 2005 (Audited)                                                      | 
|          |                                                                                                                                                             | 
|          | Condensed Consolidated
  Statements of Operations for the Six months and Three months ended January
  31, 2006 (Unaudited) and January 31, 2005 (Unaudited) | 
|          |                                                                                                                                                             | 
|          | Condensed Consolidated
  Statements of Cash Flow for the Six months ended January 31, 2006 (Unaudited)
  and January 31, 2005 (Unaudited)                   | 
|          |                                                                                                                                                             | 
|          | Notes to Condensed
  Consolidated Financial Statements                                                                                                      | 
|          |                                                                                                                                                             | 
|Item 2.   | MANAGEMENTS
  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                                                                     | 
|          |                                                                                                                                                             | 
|Item 3.   | CONTROLS AND
  PROCEDURES                                                                                                                                   | 
|          |                                                                                                                                                             | 
|PART
  II | OTHER
  INFORMATION                                                                                                                                         | 
|          |                                                                                                                                                             | 
|Item 1.   | LEGAL PROCEEDINGS                                                                                                                                           | 
|          |                                                                                                                                                             | 
|Item 2.   | CHANGES IN SECURITIES,
  USE OF PROCEEDS AND ISSUER PURCHASE OF SECURITIES                                                                                  | 
|          |                                                                                                                                                             | 
|Item 3.   | DEFAULTS UPON SENIOR
  SECURITIES                                                                                                                           | 
|          |                                                                                                                                                             | 
|Item 4.   | SUBMISSION OF MATTERS
  TO A VOTE OF SECURITY HOLDERS                                                                                                       | 
|          |                                                                                                                                                             | 
|Item 5.   | OTHER INFORMATION                                                                                                                                           | 
|          |                                                                                                                                                             | 
|Item 6.   | EXHIBITS                                                                                                                                                    | 
|          |                                                                                                                                                             | 
|          | SIGNATURES AND
  CERTIFICATIONS                                                                                                                             | 

2

---



Conolog
Corporation and Subsidiaries 
Condensed Consolidated Balance Sheets

|                                                                      |  |                  |           |               |   |           | 
|--------------------------------------------------------------------- |  | ---------------- | --------- | ------------- | - | --------- | 
|ASSETS                                                               
|                                                                      |  | January 31, 2006 |           | July 31, 2005 |  
|                                                                      |  | (UnAudited)      |           | (Audited)     |  
|                                                                      |  |                  |           |               |  
|                                                                      |  |                  |           |               |   |           | 
|Current Assets                                                        |  |                  |           |               |   |           | 
|Cash and cash
  equivalents                                           |  | $                | 4,277,886 |               | $ | 4,471,072 | 
|Accounts
  Receivable - net allowance for doubtful accounts of $1,000 |  |                  | 23,688    |               |   | 89,194    | 
|Prepaid
  Expense                                                     |  |                  | 59,503    |               |   | 23,755    | 
|Current
  portion of note receivable                                  |  |                  | 14,864    |               |   | 14,864    | 
|Inventory                                                             |  |                  | 900,000   |               |   | 900,000   | 
|Other
  receivables                                                   |  |                  | 146,364   |               |   | 252,599   | 
|                                                                      |  |                  |           |               |   |           | 
|                                                                      |  |                  |           |               |   |           | 
|Total Current
  Assets                                                |  |                  | 5,422,305 |               |   | 5,751,484 | 
|                                                                      |  |                  |           |               |   |           | 
|                                                                      |  |                  |           |               |   |           | 
|Property, Plant and Equipment                                         |  |                  |           |               |   |           | 
|Machinery and
  equipment                                             |  |                  | 1,360,601 |               |   | 1,358,601 | 
|Furniture and
  fixtures                                              |  |                  | 423,342   |               |   | 423,342   | 
|Computer
  software                                                   |  |                  | 147,203   |               |   | 147,203   | 
|Leasehold
  improvements                                              |  |                  | 30,265    |               |   | 30,265    | 
|                                                                      |  |                  |           |               |   |           | 
|Toltal
  Property, Plant and Equipment                                |  |                  | 1,961,411 |               |   | 1,959,411 | 
|Less
  accumulated depreciation and amortization                      |  |                  | 1,892,603 |               |   | 1,868,405 | 
|                                                                      |  |                  |           |               |   |           | 
|Net Property,
  Plant & Equipment                                     |  |                  | 68,808    |               |   | 91,006    | 
|                                                                      |  |                  |           |               |   |           | 
|Other Assets                                                          |  |                  |           |               |   |           | 
|Inventory, net
  of current portion                                   |  |                  | 1,078,908 |               |   | 970,212   | 
|Research and
  Development Cost                                       |  |                  | 156,060   |               |   |          | 
|Note
  receivable, net of current portion                             |  |                  | 117,674   |               |   | 125,106   | 
|                                                                      |  |                  |           |               |   |           | 
|Total Other
  Assets                                                  |  |                  | 1,352,642 |               |   | 1,095,318 | 
|                                                                      |  |                  |           |               |   |           | 
|                                                                      |  |                  |           |               |   |           | 
|                                                                      |  |                  |           |               |   |           | 
|Total
Assets                                                          |  | $                | 6,843,755 |               | $ | 6,937,808 | 
|                                                                      |  |                  |           |               |   |           | 

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

3

---



Conolog
Corporation and Subsidiaries 
Condensed Consolidated Balance Sheets

LIABILITIES AND
STOCKHOLDERS EQUITY

|                                                                                                                                                                                                     |  |                  |             |               |   |             |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------- | ----------- | ------------- | - | ----------- | -
|                                                                                                                                                                                                     |  | January 31, 2006 |             | July 31, 2005 |  
|                                                                                                                                                                                                     |  | (Unaudited)      |             | (Audited)     |  
|                                                                                                                                                                                                     |  |                  |             |               |  
|Current Liabilities                                                                                                                                                                                  |  |                  |             |               |   |             |  
|Accounts
  payable                                                                                                                                                                                   |  | $                | 39,479      |               | $ | 46,650      |  
|Accrued
  expenses                                                                                                                                                                                   |  |                  |             |               |   | 248,643     |  
|Accrued legal
  fees                                                                                                                                                                                 |  |                  |            |               |   | 175,000     |  
|                                                                                                                                                                                                     |  |                  |             |               |   |             |  
|                                                                                                                                                                                                     |  |                  |             |               |   |             |  
|Total Current
  Liabilities                                                                                                                                                                          |  |                  | 39,479      |               |   | 470,293     |  
|                                                                                                                                                                                                     |  |                  |             |               |   |             |  
|                                                                                                                                                                                                     |  |                  |             |               |   |             |  
|Non-Current Liabilities                                                                                                                                                                              |  |                  |             |               |   |             |  
|Convertible
  Denbenture                                                                                                                                                                             |  |                  | 1,250,000   |               |   |            |  
|                                                                                                                                                                                                     |  |                  |             |               |   |             |  
|                                                                                                                                                                                                     |  |                  |             |               |   |             |  
|Total
Liabilities                                                                                                                                                                                    |  |                  | 1,289,479   |               |   | 470,293     |  
|                                                                                                                                                                                                     |  |                  |             |               |   |             |  
|                                                                                                                                                                                                     |  |                  |             |               |   |             |  
|Stockholders Equity                                                                                                                                                                                 |  |                  |             |               |   |             |  
|                                                                                                                                                                                                     |  |                  |             |               |   |             |  
|Preferred
  stock, par value $.50; series A; 4% cumulative; 162,000 shares authorized;
  155,000 shares issued and outstanding                                                                       |  |                  | 77,500      |               |   | 77,500      |  
|                                                                                                                                                                                                     |  |                  |             |               |   |             |  
|Preferred stock,
  par value $.50; Series B; $.90 cumulative; 50,000 shares authorized; 1,197
  shares issued and outstanding                                                                        |  |                  | 597         |               |   | 597         |  
|                                                                                                                                                                                                     |  |                  |             |               |   |             |  
|Common stock,
  par value $.01; 20,000,000 shares authorized; 7,417,847 shares issued and
  outstanding at July 31, 2005 and January 31, 2006, respectively, including
  220 shares held in treasury |  |                  | 74,172      |               |   | 74,172      |  
|                                                                                                                                                                                                     |  |                  |             |               |   |             |  
|Contributed
  capital                                                                                                                                                                                |  |                  | 35,421,542  |               |   | 35,425,721  |  
|                                                                                                                                                                                                     |  |                  |             |               |   |             |  
|Retained
  (deficit)                                                                                                                                                                                 |  |                  | (29,879,898 | )             |   | (28,391,938 | )
|                                                                                                                                                                                                     |  |                  |             |               |   |             |  
|Treasury
  shares at cost                                                                                                                                                                            |  |                  | (131,734    | )             |   | (131,734    | )
|                                                                                                                                                                                                     |  |                  |             |               |   |             |  
|Deferred
  compensation                                                                                                                                                                              |  |                  |            |               |   | (547,750    | )
|                                                                                                                                                                                                     |  |                  |             |               |   |             |  
|Prepaid
  consulting                                                                                                                                                                                 |  |                  | (7,903      | )             |   | (39,053     | )
|                                                                                                                                                                                                     |  |                  |             |               |   |             |  
|                                                                                                                                                                                                     |  |                  |             |               |   |             |  
|Total
  Stockholders Equity                                                                                                                                                                         |  |                  | 5,554,276   |               |   | 6,467,515   |  
|                                                                                                                                                                                                     |  |                  |             |               |   |             |  
|                                                                                                                                                                                                     |  |                  |             |               |   |             |  
|Total
  Liabilities and Stockholders Equity                                                                                                                                                         |  | $                | 6,843,755   |               | $ | 6,937,808   |  
|                                                                                                                                                                                                     |  |                  |             |               |   |             |  

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

4

---



Conolog Corporation  
Condensed Consolidated Statement of Operations
(Unaudited)

|                                                                |  |                      |           |                    |   |           |   |      |            |   |   |           |  
|--------------------------------------------------------------- |  | -------------------- | --------- | ------------------ | - | --------- | - | ---- | ---------- | - | - | --------- | -
|                                                                |  | For the Three Months |           | For the Six Months |  
|                                                                |  | Ended January 31,    |           | Ended January 31,  |  
|                                                                |  |                      |           |                    |  
|                                                                |  | 2006                 |           | 2005               |   | 2006      |   | 2005 |           
|                                                                |  |                      |           |                    |   |           |   |      |           
|                                                                |  |                      |           |                    |   |           |   |      |            |   |   |           |  
|Product Revenue                                                 |  | $                    | 66,275    |                    | $ | 69,040    |   | $    | 254,213    |   | $ | 248,680   |  
|Cost of product revenue                                         |  |                      | 57,303    |                    |   | 71,495    |   |      | 140,789    |   |   | 197,543   |  
|                                                                |  |                      |           |                    |   |           |   |      |            |   |   |           |  
|                                                                |  |                      |           |                    |   |           |   |      |            |   |   |           |  
|Gross
Profit                                                    |  |                      | 8,972     |                    |   | (2,455    | ) |      | 113,424    |   |   | 51,137    |  
|                                                                |  |                      |           |                    |   |           |   |      |            |   |   |           |  
|Selling, general and administrative                             |  |                      | 844,616   |                    |   | 544,446   |   |      | 1,663,848  |   |   | 937,296   |  
|                                                                |  |                      |           |                    |   |           |   |      |            |   |   |           |  
|                                                                |  |                      |           |                    |   |           |   |      |            |   |   |           |  
|Loss from
  operations                                          |  |                      | (835,644  | )                  |   | (546,901  | ) |      | (1,550,424 | ) |   | (886,159  | )
|                                                                |  |                      |           |                    |   |           |   |      |            |   |   |           |  
|                                                                |  |                      |           |                    |   |           |   |      |            |   |   |           |  
|Other Income (Expenses)                                         |  |                      |           |                    |   |           |   |      |            |   |   |           |  
|Interest
  income                                               |  |                      | 33,517    |                    |   | 4,831     |   |      | 58,286     |   |   | 7,303     |  
|Interest
  expense                                              |  |                      |           |                    |   |          |   |      |           |   |   |          |  
|                                                                |  |                      |           |                    |   |           |   |      |            |   |   |           |  
|Total other
  income (expense)                                  |  |                      | 33,517    |                    |   | 4,831     |   |      | 58,286     |   |   | 7,303     |  
|                                                                |  |                      |           |                    |   |           |   |      |            |   |   |           |  
|                                                                |  |                      |           |                    |   |           |   |      |            |   |   |           |  
|Loss from continuing operations,
  before                       |  |                      |           |                    |   |           |   |      |            |   |   |           |  
|Income
taxes                                                    |  |                      | (802,127  | )                  |   | (542,070  | ) |      | (1,492,138 | ) |   | (878,856  | )
|Benefit from Income Taxes                                       |  |                      |          |                    |   | 29,223    |   |      |           |   |   | 246,723   |  
|                                                                |  |                      |           |                    |   |           |   |      |            |   |   |           |  
|                                                                |  |                      |           |                    |   |           |   |      |            |   |   |           |  
|Loss from continuing operations                                 |  |                      | (802,127  | )                  | $ | (512,847  | ) | $    | (1,492,138 | ) | $ | (632,133  | )
|                                                                |  |                      |           |                    |   |           |   |      |            |   |   |           |  
|                                                                |  |                      |           |                    |   |           |   |      |            |   |   |           |  
|                                                                |  |                      |           |                    |   |           |   |      |            |   |   |           |  
|Loss per share from continuing
  operations                     |  | $                    | (0.11     | )                  | $ | (0.12     | ) | $    | (0.20      | ) | $ | (0.16     | )
|                                                                |  |                      |           |                    |   |           |   |      |            |   |   |           |  
|                                                                |  |                      |           |                    |   |           |   |      |            |   |   |           |  
|                                                                |  |                      |           |                    |   |           |   |      |            |   |   |           |  
|                                                                |  |                      |           |                    |   |           |   |      |            |   |   |           |  
|Weighted Average Number of Shares of
  Common Stock Outstanding |  |                      | 7,417,854 |                    |   | 4,242,487 |   |      | 7,417,854  |   |   | 3,887,530 |  
|                                                                |  |                      |           |                    |   |           |   |      |            |   |   |           |  

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

5

---



Conolog Corporation
Condensed Consolidated Statements of Cash Flows 
For the Six Months Ended January 31, 2006 and 2005(Unaudited)

|                                                                                |  |      |            |      |   |           |  
|------------------------------------------------------------------------------- |  | ---- | ---------- | ---- | - | --------- | -
|                                                                                |  | 2006 |            | 2005 |  
|                                                                                |  |      |            |      |  
|Cash Flows from Operating Activities:                                           |  |      |            |      |   |           |  
|Net Loss                                                                        |  | $    | (1,492,138 | )    | $ | (632,133  | )
|                                                                                |  |      |            |      |   |           |  
|Adjustments to reconcile net loss to
  net cash (used in) operating activities: |  |      |            |      |   |           |  
|Depreciation                                                                    |  |      | 24,198     |      |   | 24,352    |  
|Amortization
  of deferred compensation                                         |  |      | 547,750    |      |   |           |  
|Amortization
  of prepaid consulting expense                                    |  |      | 31,150     |      |   | (124,535  | )
|Common stock
  issued for services                                              |  |      |           |      |   | 284,850   |  
|Changes in assets and liabilities:                                              |  |      |            |      |   |           |  
|(Increase)
  decrease in accounts receivable                                    |  |      | 65,506     |      |   | 114,062   |  
|(Increase)
  decrease in other receivables                                      |  |      | 106,235    |      |   | 2,478     |  
|(Increase)
  decrease in inventories                                            |  |      | (108,696   | )    |   | (12,241   | )
|(Increase)
  decrease in other current assets                                   |  |      | (35,749    | )    |   | (267,099  | )
|(Increase) in
  deferred research and development                               |  |      | (156,060   | )    |   |          |  
|(Increase)
  decrease in other assets                                           |  |      | 7,432      |      |   |          |  
|Increase (decrease)
  in accounts payable                                       |  |      | (7,171     | )    |   | (108,198  | )
|Increase
  (decrease) in accrued and other liabilities                          |  |      | (423,643   | )    |   | (152,766  | )
|                                                                                |  |      |            |      |   |           |  
|Net cash (used
in) operating activities                                         |  |      | (1,441,186 | )    |   | (871,230  | )
|                                                                                |  |      |            |      |   |           |  
|Cash Flows from Investing Activities:                                           |  |      |            |      |   |           |  
|Purchase of
  equipment                                                         |  |      | (2,000     | )    |   | (20,000   | )
|                                                                                |  |      |            |      |   |           |  
|Net cash (used
in) investing activities                                         |  |      | (2,000     | )    |   | (20,000   | )
|                                                                                |  |      |            |      |   |           |  
|Cash Flows From Financing Activities:                                           |  |      |            |      |   |           |  
|                                                                                |  |      |            |      |   |          |  
|Repayment of
  loan from Officer                                                |  |      |            |      |   | (75,000   | )
|Proceeds from
  issuance of Stock for warrants                                  |  |      |           |      |   | 429,300   |  
|Proceeds from
  convertible debenture                                           |  |      | 1,250,000  |      |   |          |  
|                                                                                |  |      |            |      |   |           |  
|Net cash
provided by financing activities:                                      |  |      | 1,250,000  |      |   | 354,300   |  
|                                                                                |  |      |            |      |   |           |  
|                                                                                |  |      |            |      |   |           |  
|                                                                                |  |      |            |      |   |           |  
|Net Increase (Decrease) In Cash and
  Cash Equivalents                          |  |      | (193,186   | )    |   | (536,930  | )
|                                                                                |  |      |            |      |   |           |  
|Cash and Cash Equivalents at Beginning
  of Period                              |  |      | 4,471,072  |      |   | 1,119,767 |  
|                                                                                |  |      |            |      |   |           |  
|                                                                                |  |      |            |      |   |           |  
|Cash and Equivalents at End of Period                                           |  | $    | 4,277,886  |      | $ | 582,837   |  
|                                                                                |  |      |            |      |   |           |  
|Supplemental Disclosure of Cash Flow                                            |  |      |            |      |   |           |  
|Cash paid
  during the period- Interest expense                                 |  | $    |           |      | $ |          |  
|Non-cash
  activities - Common stock for services                               |  | $    |           |      | $ | 284,850   |  
|Non-cash
  activities - Conversation of debentures                              |  | $    |           |      |   | 1,094,000 |  

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

6

---



Note 1  Unaudited Financial Statements

These
consolidated financial statements should be read in conjunction with the
audited financial statements included in the Annual Report on Form 10-KSB for
the year ended July 31, 2005. Since certain information and footnote
disclosures normally included in condensed financial statements prepared in
accordance with generally accepted accounting principles have been omitted
pursuant to the instructions to Form 10-QSB of Regulation S-B as promulgated by
the Securities and Exchange Commission, these condensed consolidated financial
statements specifically refer to the footnotes to the consolidated financial
statements of the Company as of July 31, 2005. In the opinion of management,
these unaudited interim consolidated financial statements reflect all
adjustments and disclosures necessary for a fair statement of the financial
position and results of operations and cash flows of the Company for the
interim periods presented. Such adjustments consisted only of those of a normal
recurring nature. Results of operations for the six months ended January 31,
2006 should not necessarily be taken as indicative of the results of operations
that may be expected for the fiscal year ending July 31,2005.

Note 2  Subsequent Events

No
events of a material nature

ITEM 2  MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

A
summary of income, costs and expenses for the current quarter and corresponding
quarter of the previous year follows:

|                                                          |  |               |            |      |   |           |  
|--------------------------------------------------------- |  | ------------- | ---------- | ---- | - | --------- | -
|                                                          |  | January
  31, |           
|                                                          |  |               |           
|                                                          |  | 2006          |            | 2005 |  
|                                                          |  |               |            |      |  
|Product Revenues                                          |  | $             | 254,213    |      | $ | 248,680   |  
|Costs and expenses                                        |  |               | 1,804,637  |      |   | 1,134,839 |  
|                                                          |  |               |            |      |   |           |  
|Net Loss
  from Continuing Operations before Income Taxes |  |               | (1,550,424 | )    |   | (886,159  | )
|                                                          |  |               |            |      |   |           |  
|                                                          |  |               |            |      |   |           |  
|Benefit from
  Income Taxes                               |  |               | 0          |      |   | 246,723   |  
|Other income
  (expense)                                  |  |               | 58,286     |      |   | 7,303     |  
|                                                          |  |               |            |      |   |           |  
|                                                          |  |               |            |      |   |           |  
|Net (Loss)                                                |  | $             | (1,492,138 | )    | $ | (632,133  | )
|                                                          |  |               |            |      |   |           |  

FOR THE THREE AND SIX MONTHS ENDED JANUARY
31, 2006

Product
revenues for the three months ended January 31, 2006 totaled $ 66,275
representing a net decrease of 4% or $ 2,765 from $ 69,040 reported for the
same three-month period last year. The Companys Iniven division reported an
increase of $ 23,699 in commercial sales of its PDR2000 and PTR1500 systems
that was offset by a decrease of $26,464 in military contract orders. Product
revenues for the six months ended January 31, 2006 totaled $ 254,213
representing a net increase of 2% or $ 5,533. from $ 248,680 reported for the
six-month period last year.

Product
Cost for the three months ended January 31, 2006 totaled $ 57,303 or 86.5% of
product revenue. Product cost for the period decreased 19.8% or $ 14,192 as
compared to the three months ended January 31, 2005. Product Cost decreased as
a result of a combination of factors including outsourcing and semi-automation.
Product cost for the six months ended January 31, 2006 totaled $ 140,789 or
55.4% of product revenue. Product cost for the six-month period decreased 28.7%
or $ 56,754 as compared to the six-month period ended January 31, 2005.

Gross
profit for products for the three months ended January 31, 2006 amounted to $
8,972 or 13.5% of product revenue as compared to a loss of $ 2,455 or 3.6% of
product revenue for the three months ended January 31, 2005.The Company
attributes this increase in gross profit for products directly to the improved
product cost. Gross Profit for the six month period amounted to $ 113,424 or
44.6% of product revenue compared to $ 51,137 or 20.5% of product revenue for
the six months ended January 31, 2005.

Selling,
general and administrative expenses increased by $ 300,170 for the three months
ended January 31, 2006 as compared to the three months ended January 31,
2005.This increase over the three month period ended January 31, 2006 is
primarily the result of an increase in the non-cash Stock Compensation expense
which the Company incurred as a result of issuing an aggregate of 350,000
shares of its common stock to its directors, employees and officers. Selling,
general and administrative expenses increased by $ 726,552 for the six months
ended January 31, 2006 as compared to the six months ended January 31, 2005.

7

---



As a result of
the foregoing, the Company reported a net loss from continuing operations of ($
802,127) or ($0.11) per share compared to a Loss of ($ 512,847) or ($0.12) per
share for the three months ended January 31, 2006 and 2005, respectively. The
Company reported a net loss from continuing operations of ($1,492,138) or ($
0.20) per share compared to a Loss of ($ 632,133) or ($ 0.16) per share for the
six months ended January 31, 2006 and 2005, respectively.

LIQUIDITY AND FINANCIAL CONDITION

Inventories
from the Companys product segment increased from $1,870,212 at July 31, 2005
to $1,978,908 for the quarter ended January 31, 2006, an increase of $ 108,696,
which is primarily attributed to the introduction of the Companys CM-100
product line.

Accounts
Receivable decreased to $ 23,688 for the six months ended January 31, 2006 from
$89,194 as of July 31, 2005. The decrease is attributed to reduced sales.

The
Company expects to meet its cash requirements for the next 12 months through
existing cash balances and cash generated from operations.

STATEMENT REGARDING PRESENT OPERATIONS

There
were no material changes in the nature of the operations of the Registrant
during the three months ended January 31, 2006. Detailed information is
contained in the Registrants annual report on Form 10-KSB for the fiscal year
ended July 31, 2005.

FORWARD LOOKING STATEMENTS

This
quarterly report contains certain forward-looking statements within the
meaning of Section 27A of The Securities Act of 1933, as amended and section
21E of The Securities Act of 1934, as amended. Such Statements are subject to
certain risks and uncertainties, including, among other things, significant
variations in recognizing revenue due to customer-caused delays, and intense competition
from more well known companies, that could cause actual results to differ
materially from historical earnings and those presently anticipated or
projected. The Company wishes to caution readers not to place undue reliance on
any such forward-looking statements, which speak only as of the date made. The
Company wishes to advise readers that the factors listed above, among other
factors, could affect the Companys financial performance and could cause the
Companys actual results for future periods to differ materially from any
opinions or statements expressed with respect to future periods in any current
statements. The Company does not undertake, and specifically declines any
obligations, to publicly release the results of any revisions, which may be
made to any forward-looking statements to reflect events or circumstances after
the date of such statements or to reflect the occurrence of unanticipated
events.

ITEM 3  CONTROLS AND PROCEDURES

(a)
Evaluation of disclosure controls and procedures

Pursuant
to Rule 13a-15 under the Securities Exchange Act of 1934, the Company carried
out an evaluation, under the supervision and with the participation of the
Companys management, including the Companys principal executive officer and
principal financial officer, of the effectiveness of the design and operation
of the Companys disclosure controls and procedures (as defined under Rule
13a-15 (e) under the Securities Exchange Act of 1934) as of the end of the
period covered by this report. Based upon that evaluation, the Companys
principal executive officer and principal financial officer concluded that the
Companys disclosure controls and procedures are effective for gathering,
analyzing and disclosing the information we are required to disclose under the
Securities and Exchange Act of 1934.

(b)
Changes in internal controls

There
have been no significant changes in the Companys internal controls or, to its
knowledge, in other factors that could significantly affect internal controls
subsequent to the date the Company carried out its evaluation.

8

---



PART II - OTHER INFORMATION

1. Legal Proceedings  None

2. Unregistered Sales of Equity Securities and Use of Proceeds  N/A

3. Defaults upon Senior Securities - None

4. Submission of Matters to a Vote of Security Holders - None

5. Other Information 

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | As
  previously reported on Forms 8-K and 8-K/A filed with the Securities and
  Exchange Commission, the Company completed the sale of convertible notes (the
  Notes Offering) having an aggregate principal balance of $1,250,000
  pursuant to a Subscription Agreement dated January 19, 2006 (the
  Subscription Agreement), which are convertible into 1,000,000 shares of the
  Companys common stock at $1.25 per share. Pursuant to the Subscription
  Agreement, the Company also issued warrants to the investors to purchase
  1,000,000 shares of the Companys common stock at $.9579 per share.                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | First
  Montauk Securities Corp. acted as the selling agent in the Notes Offering.
  The Company paid First Montauk Securities Corp. $125,000 (10% of the
  principal amount of the convertible debentures sold in the Notes Offering)
  and issued First Montauk Securities Corp. warrant(s) to acquire 200,000
  shares of the Companys common stock (20% of the aggregate number of shares
  of the Companys common stock that the subscribers would receive if they,
  immediately after the closing of the sale of the notes, converted the entire
  principal amount of their notes) on the same terms and conditions as the warrants
  issued to the Subscribers.                                                                                                                             
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | The issuance
  and sale of the common stock and warrants pursuant to the Subscription
  Agreement was made in reliance upon the exemption provided in Section 4(2) of
  the Securities Act of 1933, as amended (the Securities Act) and Regulation
  D promulgated under the Securities Act. No form of general solicitation or
  general advertising was conducted in connection with the Notes Offering. The
  issuance of the warrant to the selling agent was made in reliance upon the
  exemption provided in Section 4(2) of the Securities Act. Each of the
  warrants and the notes issued pursuant to the Subscription Agreement contain
  restrictive legends preventing the sale, transfer or other disposition of
  such notes and warrants, unless registered under the Securities Act.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | Pursuant to
  the Subscription Agreement, the Company is required to register the resale of
  the securities issuable upon conversion of the notes and the exercise of the
  warrants under the Securities Act.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

6. Exhibits

| |  |                                                                                                                                                                                                                                                                           |                                                                                                
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------
| |  | Exhibit Number Description                                                                                                                                                                                                                                               
| |  |                                                                                                                                                                                                                                                                          
| |  | 10.1                                                                                                                                                                                                                                                                      | Form of
  Subscription Agreement * +                                                           
| |  | 10.2                                                                                                                                                                                                                                                                      | Form of
  Warrant +                                                                            
| |  | 10.3                                                                                                                                                                                                                                                                      | Form of
  Convertible Note +                                                                   
| |  | 10.4                                                                                                                                                                                                                                                                      | Form of
  Selling Agreement * +                                                                
| |  | 31 (1)                                                                                                                                                                                                                                                                    | Rule 13a-14(a) 15d-14(a) Certification of
  Chief Executive Officer and Chief Financial Officer
| |  | 31 (2)                                                                                                                                                                                                                                                                    | Rule
  13a-14(a) 15d-14(a) Certification of Chief Operating Officer, President and
  Secretary 
| |  | 32                                                                                                                                                                                                                                                                        | Section 1350
  Certification                                                                   
| |  |                                                                                                                                                                                                                                                                          
| |  | * Schedules
  and attachments to this Exhibit have been omitted in accordance with Item
  601(b) of Regulation S-B. The Company agrees to furnish supplementally a copy
  of all omitted schedules and exhibits to the Securities and Exchange
  Commission upon request.
| |  | +
  Incorporated by reference to the 8-K filed with the Securities and Exchange
  Commission on January 25, 2006.                                                                                                                                                        

9

---



SIGNATURES

In
accordance with the requirements of the Exchange Act, the Registrants caused
this report to be signed on its behalf by the undersigned, thereunto and duly
authorized

CONOLOG CORPORATION

|                       |                          |                                                   
|---------------------- | ------------------------ | --------------------------------------------------
|Date: March
  15, 2006 | By /s/
  Robert S. Benou
|                       |                          | Chairman,
  Chief Executive Officer,              
|                       |                          | Chief
  Financial Officer and Treasurer           
|                       |                         
|Date: March
  15, 2006 | By /s/ Marc
  R. Benou  
|                       |                          | Chief
  Operating Officer, President and Secretary

10

---