SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549

FORM 10-Q

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

FOR THE QUARTERLY PERIOD ENDED January 31,
2010

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 reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x     No
o

Indicate by
check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes x     No
o

Indicate by
check mark whether the registrant is a large accelerated filer, an accelerated
filer, or a non-accelerated filer. See definition of accelerated filer and
large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):

Large
accelerated filer o     Accelerated
filer o     Non-accelerated
filer o     Smaller
reporting company x

Indicate by
check mark whether the registrant is a shell company (as defined by Rule 12b-2
of the Exchange Act) Yes o     No x

The number of shares of common stock
outstanding as of March 15, 2010 was 6,965,039.

1

---



INDEX

|         |  |                                                                                                                |  |   
|-------- |  | -------------------------------------------------------------------------------------------------------------- |  | --
|PART I   |  | FINANCIAL INFORMATION                                                                                          |  |   
|         |  |                                                                                                                |  |   
|Item 1.  |  | CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)                                                       |  |   
|         |  |                                                                                                                |  |   
|         |  | Condensed Consolidated Balance Sheets as of January 31, 2010 and July
 31, 2009                                |  | 3 
|         |  |                                                                                                                |  |   
|         |  | Condensed Consolidated Statements of Operations for the three and six
 months ended January 31, 2010 and 2009  |  | 4 
|         |  |                                                                                                                |  |   
|         |  | Condensed Consolidated Statements of Cash Flows for the six months ended
 January 31, 2010 and 2009            |  | 5 
|         |  |                                                                                                                |  |   
|         |  | Notes to Condensed Consolidated Financial Statements                                                           |  | 6 
|         |  |                                                                                                                |  |   
|Item 2.  |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
 RESULTS OF OPERATIONS AND FINANCIAL CONDITION |  | 9 
|         |  |                                                                                                                |  |   
|Item 3   |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                     |  | 10
|         |  |                                                                                                                |  |   
|Item 4T. |  | CONTROLS AND PROCEDURES                                                                                        |  | 10
|         |  |                                                                                                                |  |   
|PART II  |  | OTHER
 INFORMATION                                                                                             |  |   
|         |  |                                                                                                                |  |   
|Item 1.  |  | LEGAL PROCEEDINGS                                                                                              |  | 11
|         |  |                                                                                                                |  |   
|Item 2.  |  | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS                                                    |  | 11
|         |  |                                                                                                                |  |   
|Item 3.  |  | DEFAULTS UPON SENIOR SECURITIES                                                                                |  | 11
|         |  |                                                                                                                |  |   
|Item 4.  |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                            |  | 11
|         |  |                                                                                                                |  |   
|Item 5.  |  | OTHER INFORMATION                                                                                              |  | 11
|         |  |                                                                                                                |  |   
|Item 6.  |  | EXHIBITS                                                                                                       |  | 11
|         |  |                                                                                                                |  |   
|         |  | SIGNATURES AND CERTIFICATIONS                                                                                  |  | 11

2

---



CONOLOG CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)

|                                                                                                                                                                        |  |                  |             |               |   |             |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------- | ----------- | ------------- | - | ----------- | -
|                                                                                                                                                                        |  | January 31, 2010 |             | July 31, 2009 |  
|                                                                                                                                                                        |  |                  |             |               |  
|ASSETS                                                                                                                                                                  |  |                  |             |               |   |             |  
|Current Assets:                                                                                                                                                         |  |                  |             |               |   |             |  
|Cash and cash equivalents                                                                                                                                               |  | $                | 547,890     |               | $ | 27,358      |  
|Accounts receivable, net of allowance                                                                                                                                   |  |                  | 63,260      |               |   | 245,980     |  
|Prepaid expenses                                                                                                                                                        |  |                  | 42,680      |               |   | 70,843      |  
|Prepaid service agreements                                                                                                                                              |  |                  | 498,200     |               |   |            |  
|Current portion of note receivable                                                                                                                                      |  |                  | 14,864      |               |   | 14,864      |  
|Inventory                                                                                                                                                               |  |                  | 1,484,351   |               |   | 1,395,452   |  
|Other current assets                                                                                                                                                    |  |                  | 328,546     |               |   | 551,937     |  
|                                                                                                                                                                        |  |                  |             |               |   |             |  
|Total
 Current Assets                                                                                                                                                   |  |                  | 2,979,791   |               |   | 2,306,434   |  
|                                                                                                                                                                        |  |                  |             |               |   |             |  
|                                                                                                                                                                        |  |                  |             |               |   |             |  
|Property and equipment:                                                                                                                                                 |  |                  |             |               |   |             |  
|                                                                                                                                                                        |  |                  |             |               |   |             |  
|Net
 Property and Equipment                                                                                                                                             |  |                  | 420,765     |               |   | 396,704     |  
|                                                                                                                                                                        |  |                  |             |               |   |             |  
|                                                                                                                                                                        |  |                  |             |               |   |             |  
|Other Assets:                                                                                                                                                           |  |                  |             |               |   |             |  
|Other non-current assets                                                                                                                                                |  |                  | 223,411     |               |   |            |  
|Deferred financing fees, net of amortization                                                                                                                            |  |                  | 134,539     |               |   | 8,445       |  
|Note receivable, net of current portion                                                                                                                                 |  |                  | 68,239      |               |   | 69,846      |  
|                                                                                                                                                                        |  |                  |             |               |   |             |  
|Total
 Other Assets                                                                                                                                                     |  |                  | 426,189     |               |   | 78,291      |  
|                                                                                                                                                                        |  |                  |             |               |   |             |  
|                                                                                                                                                                        |  |                  |             |               |   |             |  
|TOTAL
 ASSETS                                                                                                                                                           |  | $                | 3,826,745   |               | $ | 2,781,429   |  
|                                                                                                                                                                        |  |                  |             |               |   |             |  
|                                                                                                                                                                        |  |                  |             |               |   |             |  
|LIABILITIES
 AND STOCKHOLDERS EQUITY                                                                                                                                   |  |                  |             |               |   |             |  
|                                                                                                                                                                        |  |                  |             |               |   |             |  
|Current Liabilities:                                                                                                                                                    |  |                  |             |               |   |             |  
|Accounts payable                                                                                                                                                        |  | $                | 117,875     |               | $ | 217,456     |  
|Accrued expenses                                                                                                                                                        |  |                  | 10,097      |               |   | 26,132      |  
|Derivative Liability                                                                                                                                                    |  |                  | 557,466     |               |   |             |  
|Current Convertible debenture, net of discount                                                                                                                          |  |                  |            |               |   | 34,318      |  
|                                                                                                                                                                        |  |                  |             |               |   |             |  
|Total
 Current Liabilities                                                                                                                                              |  |                  | 685,438     |               |   | 277,906     |  
|                                                                                                                                                                        |  |                  |             |               |   |             |  
|                                                                                                                                                                        |  |                  |             |               |   |             |  
|Non-Current
 Liabilities:                                                                                                                                               |  |                  |             |               |   |             |  
|                                                                                                                                                                        |  |                  |             |               |   |             |  
|Convertible debenture, net of discount                                                                                                                                  |  | $                | 45,132      |               |   |            |  
|                                                                                                                                                                        |  |                  |             |               |   |             |  
|Total
 Liabilities                                                                                                                                                      |  |                  | 730,570     |               |   | 277,906     |  
|                                                                                                                                                                        |  |                  |             |               |   |             |  
|                                                                                                                                                                        |  |                  |             |               |   |             |  
|Stockholders Equity:                                                                                                                                                   |  |                  |             |               |   |             |  
|Preferred stock, par value
 $.50; Series A; 4% cumulative; 500,000 shares authorized;155,000 shares
 issued and outstanding                                             |  |                  | 77,500      |               |   | 77,500      |  
|Preferred stock, par value
 $.50; Series B; $.90 cumulative; 500,000 500,000 shares authorized; 1,197
 shares issued and outstanding                                    |  |                  | 597         |               |   | 597         |  
|Common stock, par value $0.01; 30,000,000 shares authorized;
 4,468,787 and 1,842,485 shares issued and outstanding at January 31, 2010 and
 July 31, 2009 respectively |  |                  | 44,688      |               |   | 18,425      |  
|Contributed capital                                                                                                                                                     |  |                  | 60,705,267  |               |   | 52,385,432  |  
|Accumulated deficit                                                                                                                                                     |  |                  | (57,600,143 | )             |   | (49,173,964 | )
|Treasury shares at cost - 2 shares                                                                                                                                      |  |                  | (131,734    | )             |   | (131,734    | )
|Deferred compensation                                                                                                                                                   |  |                  |            |               |   | (672,733    | )
|                                                                                                                                                                        |  |                  |             |               |   |             |  
|                                                                                                                                                                        |  |                  |             |               |   |             |  
|Total
 Stockholders Equity                                                                                                                                             |  |                  | 3,096,175   |               |   | 2,503,523   |  
|                                                                                                                                                                        |  |                  |             |               |   |             |  
|                                                                                                                                                                        |  |                  |             |               |   |             |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                              |  | $                | 3,826,745   |               | $ | 2,781,429   |  
|                                                                                                                                                                        |  |                  |             |               |   |             |  

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

3

---



CONOLOG CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statement of Operations
(Unaudited)

|                                                            |  |                                           |            |                                         |   |           |   |      |            |   |   |           |  
|----------------------------------------------------------- |  | ----------------------------------------- | ---------- | --------------------------------------- | - | --------- | - | ---- | ---------- | - | - | --------- | -
|                                                            |  | For the
 Three Months 
 Ended Janaury 31, |            | For the
 Six Months 
 Ended Janaury 31, |  
|                                                            |  | 2010                                      |            | 2009                                    |   | 2010      |   | 2009 |           
|                                                            |  |                                           |            |                                         |   |           |   |      |           
|OPERATING REVENUES                                          |  |                                           |            |                                         |   |           |   |      |            |   |   |           |  
|Product revenue                                             |  | $                                         | 111,920    |                                         | $ | 488,959   |   | $    | 580,016    |   |   | 945,640   |  
|                                                            |  |                                           |            |                                         |   |           |   |      |            |   |   |           |  
|Cost of product revenue                                     |  |                                           |            |                                         |   |           |   |      |            |   |   |           |  
|Cost of goods sold                                          |  |                                           | 97,107     |                                         |   | 130,331   |   |      | 293,990    |   |   | 234,363   |  
|                                                            |  |                                           |            |                                         |   |           |   |      |            |   |   |           |  
|Total Cost of product revenue                               |  |                                           | 97,107     |                                         |   | 130,331   |   |      | 293,990    |   |   | 234,363   |  
|                                                            |  |                                           |            |                                         |   |           |   |      |            |   |   |           |  
|                                                            |  |                                           |            |                                         |   |           |   |      |            |   |   |           |  
|Gross Profit (Loss) from Operations                         |  |                                           | 14,813     |                                         |   | 358,628   |   |      | 286,026    |   |   | 711,277   |  
|                                                            |  |                                           |            |                                         |   |           |   |      |            |   |   |           |  
|Selling, general and administrative expenses                |  |                                           |            |                                         |   |           |   |      |            |   |   |           |  
|General and administrative (includes non-cash stock grants) |  |                                           | 2,002,097  |                                         |   | 507,610   |   |      | 2,751,999  |   |   | 880,684   |  
|Research and development                                    |  |                                           | 30,915     |                                         |   | 1,720     |   |      | 51,323     |   |   | 27,380    |  
|Professional fees                                           |  |                                           | 194,533    |                                         |   | 55,852    |   |      | 317,967    |   |   | 121,953   |  
|Marketing and trade shows                                   |  |                                           | 76,416     |                                         |   | 48,947    |   |      | 135,962    |   |   | 103,350   |  
|                                                            |  |                                           |            |                                         |   |           |   |      |            |   |   |           |  
|Total selling, general and administrative expenses          |  |                                           | 2,303,961  |                                         |   | 614,129   |   |      | 3,257,251  |   |   | 1,133,367 |  
|                                                            |  |                                           |            |                                         |   |           |   |      |            |   |   |           |  
|Loss Before Other Income (Expenses)                         |  |                                           | (2,289,148 | )                                       |   | (255,501  | ) |      | (2,971,225 | ) |   | (422,090  | )
|                                                            |  |                                           |            |                                         |   |           |   |      |            |   |   |           |  
|OTHER INCOME (EXPENSES)                                     |  |                                           |            |                                         |   |           |   |      |            |   |   |           |  
|Interest expense                                            |  |                                           | (470,531   | )                                       |   | (14,140   | ) |      | (3,558,855 | ) |   | (69,274   | )
|Interest income                                             |  |                                           | 556        |                                         |   | 2,483     |   |      | 1,416      |   |   | 13,812    |  
|Other Income                                                |  |                                           |           |                                         |   | 355,267   |   |      |           |   |   | 355,267   |  
|Change in Fair Market value of derivatives                  |  |                                           | (853,134   | )                                       |   |          |   |      | (1,678,621 | ) |   |          |  
|Induced conversion cost                                     |  |                                           | (118,993   | )                                       |   | (25,406   | ) |      | (150,201   | ) |   | (205,911  | )
|Amortization                                                |  |                                           | (33,634    | )                                       |   | (168,774  | ) |      | (69,045    | ) |   | (337,548  | )
|                                                            |  |                                           |            |                                         |   |           |   |      |            |   |   |           |  
|Total Other Income (Expense)                                |  |                                           | (1,475,736 | )                                       |   | 149,430   |   |      | (5,455,306 | ) |   | (243,654  | )
|                                                            |  |                                           |            |                                         |   |           |   |      |            |   |   |           |  
|Loss before provision for income taxes                      |  |                                           | (3,764,884 | )                                       |   | (106,071  | ) |      | (8,426,531 | ) |   | (665,744  | )
|Provision for income taxes                                  |  |                                           |           |                                         |   |          |   |      |           |   |   |          |  
|                                                            |  |                                           |            |                                         |   |           |   |      |            |   |   |           |  
|NET LOSS                                                    |  | $                                         | (3,764,884 | )                                       | $ | (106,071  | ) | $    | (8,426,531 | ) | $ | (665,744  | )
|Preferred stock dividends                                   |  | $                                         | (1,045     | )                                       | $ |          |   | $    | (2,090     | ) | $ |          |  
|                                                            |  |                                           |            |                                         |   |           |   |      |            |   |   |           |  
|NET LOSS APPLICABLE TO COMMON SHARES                        |  | $                                         | (3,765,929 | )                                       | $ | (106,071  | ) | $    | (8,428,621 | ) | $ | (665,744  | )
|                                                            |  |                                           |            |                                         |   |           |   |      |            |   |   |           |  
|NET LOSS PER BASIC AND DILUTED COMMON SHARE                 |  | $                                         | (0.99      | )                                       | $ | (0.03     | ) | $    | (2.93      | ) | $ | (0.21     | )
|                                                            |  |                                           |            |                                         |   |           |   |      |            |   |   |           |  
|WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING        |  |                                           | 3,798,852  |                                         |   | 3,127,079 |   |      | 2,879,293  |   |   | 3,123,736 |  
|                                                            |  |                                           |            |                                         |   |           |   |      |            |   |   |           |  

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

4

---



|                                                           
|-----------------------------------------------------------
|CONOLOG CORPORATION AND SUBSIDIARIES                       
|Condensed
 Consolidated Statement of Cash Flows (Unaudited)
|For the Six Months Ended January 31, 2010
 and 2009        

|                                                                    |  |      |            |      |   |          |  
|------------------------------------------------------------------- |  | ---- | ---------- | ---- | - | -------- | -
|                                                                    |  | 2010 |            | 2009 |  
|                                                                    |  |      |            |      |  
|                                                                    |  |      |            |      |   |          |  
|CASH FLOWS
 FROM OPERATING ACTIVITIES                               |  |      |            |      |   |          |  
|Net loss                                                            |  | $    | (8,426,531 | )    | $ | (665,924 | )
|Adjustments to reconcile net loss to net cash used in
 operations:  |  |      |            |      |   |          |  
|Depreciation                                                        |  |      | 8,000      |      |   | 4,000    |  
|Stock based compensation                                            |  |      | 2,054,433  |      |   | 42,510   |  
|Change in Fair Market value of derivatives                          |  |      | 1,678,621  |      |   |         |  
|Induced conversion cost                                             |  |      | 150,201    |      |   | 205,911  |  
|Amortization and interest discount on convertible debt and warrants |  |      | 3,601,572  |      |   | 337,548  |  
|Stock issued interest                                               |  |      | 6,433      |      |   |         |  
|Changes in assets and liabilities                                   |  |      |            |      |   |          |  
|Decrease in accounts receivable                                     |  |      | 182,720    |      |   | 62,585   |  
|(Increase) decrease in accounts receivable - other                  |  |      |           |      |   | 16,592   |  
|Decrease
     (increase) in prepaid expenses                        |  |      | 36,143     |      |   | (348,358 | )
|(Increase) in inventories                                           |  |      | (88,899    | )    |   | (236,548 | )
|Increase (decrease) in accounts payable                             |  |      | (99,581    | )    |   | 22,703   |  
|(Decrease) in accrued expenses                                      |  |      | (47,196    | )    |   | (615     | )
|                                                                    |  |      |            |      |   |          |  
|Net cash used
 in operations                                        |  |      | (944,084   | )    |   | (559,596 | )
|                                                                    |  |      |            |      |   |          |  
|CASH FLOWS
 FROM INVESTING ACTIVITIES                               |  |      |            |      |   |          |  
|Purchase of property and equipment                                  |  |      | (32,061    | )    |   |         |  
|Redemption of certificates of deposit                               |  |      |            |      |   | 600,182  |  
|                                                                    |  |      |            |      |   |          |  
|Net cash used in investing activities                               |  |      | (32,061    | )    |   | 600,182  |  
|                                                                    |  |      |            |      |   |          |  
|CASH FLOWS
 FROM FINANCING ACTIVITIES                               |  |      |            |      |   |          |  
|Proceeds from issuance of stock                                     |  |      | 1,000,000  |      |   |         |  
|Proceeds from exercise of warrants                                  |  |      | 635,070    |      |   |         |  
|Payments of financing fees related to convertible debentures        |  |      | (140,000   | )    |   |          |  
|Proceeds from note receivable                                       |  |      | 1,607      |      |   | 7,433    |  
|                                                                    |  |      |            |      |   |          |  
|Net cash provided by financing activities                           |  |      | 1,496,677  |      |   | 7,433    |  
|                                                                    |  |      |            |      |   |          |  
|NET
 INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS               |  |      | 520,532    |      |   | 48,019   |  
|CASH AND
 CASH EQUIVALENTS - BEGINNING OF YEAR                      |  |      | 27,358     |      |   | 680,647  |  
|                                                                    |  |      |            |      |   |          |  
|CASH AND
 CASH EQUIVALENTS - END OF YEAR                            |  |      | 547,890    |      |   | 728,666  |  
|                                                                    |  |      |            |      |   |          |  
|SUPPLEMENTAL
 DISCLOSURE OF CASH FLOW INFORMATION:                  |  |      |            |      |   |          |  
|CASH PAID
 DURING THE YEAR FOR:                                     |  |      |            |      |   |          |  
|Interest expense                                                    |  | $    |           |      | $ | 7,931    |  
|                                                                    |  |      |            |      |   |          |  
|Income Taxes                                                        |  |      |           |      |   |         |  
|                                                                    |  |      |            |      |   |          |  
|SUPPLEMENTAL
 DISCLOSURE OF NONCASH ACTIVITIES:                     |  |      |            |      |   |          |  
|Debt converted to equity                                            |  | $    | 748,550    |      | $ | 350,892  |  
|                                                                    |  |      |            |      |   |          |  
|Common stock issued for
 services to be provided                    |  | $    | 506,200    |      | $ |         |  
|                                                                    |  |      |            |      |   |          |  
|Common stock (cancelled)
 issued for services to be provided        |  | $    |           |      | $ | (19,890  | )
|                                                                    |  |      |            |      |   |          |  
|Common stock (cancelled)
 issued for deferred compensation          |  | $    |           |      | $ | (561,210 | )
|                                                                    |  |      |            |      |   |          |  
|Common stock issued for
 accrued interest                           |  | $    | 26,328     |      | $ | 61,342   |  
|                                                                    |  |      |            |      |   |          |  

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

5

---



CONOLOG CORPORATION AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE SIX MONTHS ENDED JANUARY 31, 2010
(Unaudited)

Note 1  Unaudited Financial Statements

The condensed unaudited
interim consolidated financial statements included herein have been prepared,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. The condensed consolidated financial statements and notes
are presented as permitted on Form 10-Q and do not contain information included
in the Companys annual statements and notes. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States of America
have been condensed or omitted pursuant to such rules and regulations, although
the Company believes that the disclosures are adequate to make the information
presented not misleading. It is suggested that these condensed consolidated
financial statements be read in conjunction with the July 31, 2009 audited
consolidated financial statements and the accompanying notes thereto.

These condensed unaudited
consolidated financial statements reflect all adjustments, including normal
recurring adjustments, which, in the opinion of management, are necessary to
present fairly the operations and cash flows for the period presented. Results
of operations for the six months ended January 31, 2010 should not necessarily
be taken as indicative of the results of operations that may be expected for
the fiscal year ending July 31, 2010.

The Company has filed an 8-K,
on March 22, 2010 regarding non-reliance for the 10-Q for the period October
31, 2009. Adjustments to the October 31, 2010 10-Q relate to the accounting for
derivative liability on convertible debt and warrants. All accounting
adjustments for these convertible debentures and warrants have been property
recorded for the six month period ended January 31, 2010. .

Note 2  Conversion of Debt

On September 8, 2008, the
Company reduced the exercise price of the warrants issued in connection with
the Subscription Agreement, dated March 12, 2007 (the Subscription
Agreement), from $1.20 per share to $0.50 per share. As a result of the
reduction of the warrant exercise price, pursuant to Section 12 (b) of the
Subscription Agreement, the conversion price of the Convertible Notes issued in
connection with the Subscription Agreement is now $0.50 per share. Any shares
in excess of the shares that already have been registered for sale on conversion
of the Notes will not be registered under the Securities Act of 1933, as
amended, and, therefore, may not be offered for sale, pledged or hypothecated
in the absence of an effective registration statement or an opinion of counsel
reasonably satisfactory to the Company that such registration is not required.

On March 9, 2009 the Maturity
Date of the Convertible debt was extended from March 11, 2009 to August
31,2009. In addition, from the date of March 9, 2009 until immediately after
the Maturity Date, the holders may convert at a conversion rate of 75% of the
average closing bid prices for the five trading days preceding the date of the
Conversion Notice.

As a result of the above
reductions in exercise and conversion prices, for the three months ended
October 31, 2009 investors have converted $37,950 of debt for 46,592 common
stock shares. The Company has recognized an Induced Conversion cost related to
these conversions of $31,208 for the three months ended October 31, 2009.

The Company entered into a
Subscription Agreement (the Subscription Agreement), dated as of August 3,
2009 (the Closing Date), with three investors, pursuant to which it sold an
aggregate of One Million Dollars of its principal amount of secured promissory
notes (the Notes). On the Closing Date the Company received gross proceeds of
$500,000 and $500,000 (the Escrowed Funds) was placed in escrow pursuant to
an Escrow Agreement between the Company, the Subscribers and the escrow agent.
Pursuant to the Subscription Agreement, the Company was required to file a
preliminary proxy statement with the Securities and Exchange Commission by
September 2, 2009 seeking approval for the transactions contemplated by the
Subscription Agreement and the Company was obtained approval of its
shareholders on September 24, 2009.

The Company did receive the
Escrowed Funds. Shareholder Approval was obtained and the amount of the Note
was decrease to $500,000 and the Escrowed Funds were not returned to the
Subscribers

The initial interest rate of
the Notes is 4% per annum and upon the shareholder Approval the interest rate
became 8% per annum. Interest accrues from the date of the Closing Date and is
be payable quarterly, in arrears, commencing six

6

---



months after the Closing Date
and on the maturity date of the Note. The Conversion Price of the Notes is $.78
(the Fixed Conversion Price) as may be adjusted (the Initial Conversion
Price). Commencing six months after the Closing Date, the Conversion Price
shall be the Fixed Conversion Price or 75% of the lowest three closing bid
prices for the Companys common stock for the ten days prior to when the Note
is converted.

The Company also issued the
Subscribers Class A Warrants to purchase 1,282,051 shares of the Companys
Common Stock at $1.12 per share. The Class A warrants are exercisable for a
period beginning on August 3, 2009 and terminate on August 3, 2014. Pursuant to
the Subscription Agreement, the Company also issued the Subscribers a total of
40,000 class B Warrants.

The Class B Warrants entitle
the Subscribers after September 24, 2009 until July 3, 2012, to purchase up to
$4,000,000 of principal amount of the Companys 8% notes on the same terms as
the original Notes and 40,000 warrants (exercisable in 1,000 blocks) to
purchase 128,205 shares of the Companys Common Stock, per 1,000 Warrants, at a
per share purchase price equal to 105 % of the closing bid price of the
Companys common stock or the exercise price of the Class A Warrants. For each
$100,000 of principal of notes purchased pursuant to the Class B Warrants,the
Subscribers will surrender 1,000 Class B Warrants.

The Notes cannot be converted
to the extent such conversion would cause the Subscriber, together with such
holders affiliates, to beneficially own in excess of 4.99% of the of the
Companys outstanding common stock immediately following such conversion.

The Company paid the selling
agent for this transaction, a cash fee of $100,000 (10% of the aggregate gross
proceeds received by the Company) and issued warrants to purchase 256,410
shares of the Companys common stock ( 20% of the shares issuable to the
subscribers upon conversion of the Notes). Fees paid to the selling agent will
be amortized over the term of the subscription agreement.

At a Special Meeting of Shareholders
held on September 24, 2009, the Shareholder Approval was obtained. As a result,
the Escrowed Funds were released and after the payment of fees in the amount of
$50,000 to the placement agent for the transaction. The Company received net
proceeds of $450,000 (prior to the deduction of other fees and expenses related
to the Offering).

At the Special Meeting of
Shareholders held on September 24, 2009, Shareholder approval was obtained for
the Companys 2009 Restrictive Stock Incentive Plan.

On September 28, 2009, the
Company entered into an Advisory Service Agreement with Garden State Securities
Inc. (GSS) to perform certain Advisory and Business services. The Board of
Directors has approved the Company to issue 200,000 restricted common shares to
GSS.

On October 21, 2009, two
holders of the Companys outstanding Convertible Notes dated August 3, 2009
converted principal amounts of $221,256 and interest amounts of $3,855 and were
issued a total of 288,605restricted common shares. On January 29, 2010, two
holders of the Companys Convertible Notes dated August 3, 2009 converted
additional principal amounts of $489,344 and interest amounts of $19,895.25 and
were issued a total of 652,872 restricted common shares. At January 31, 2010
the remaining balance on these debentures amounted to $ 289,400, net of
discount of $ 313,199.

On November 30, 2009, the
Company filed a Preliminary Prospectus, Form S-1, subject to completion. This
prospectus relates to the public offering of up to 635,070 shares of common
stock, par value $0.01 per share, of Conolog Corporation, by the selling
stockholder, which is issuable upon exercise of class A warrants with an
exercise price of $1.12. The number of shares being registered is 33% of the
shares held by non-affiliates of the company. The Form S-1 went effective as of
December 11, 2009.

On December 29, 2009 the
Company reduced the class A warrant exercise price for the 635,070 warrants
registered on Form S-1 to $1.00 per Class A Warrant. The balance of the Class A
Warrants was reduced to an exercise price of $0.01 per warrant.

During January 2010, the
635,070 class A warrants which were registered and reduced to a $1.00 exercise
price were exercised for 635,070 shares of common stock.

7

---



Note 3  Major Customers

The Companys
revenues from four customers accounted for $418,860 or 73% of total revenues in
the six months ended January 31, 2010. Each of these four customers accounted
for 10% or more of total revenues, which is the definition of a major customer.
Accounts receivable from these same four customers at January 31, 2010 amounted
to $49,793 of 77.5% of total accounts receivable.

Note 4  2009 Stock Incentive Plan

In accordance
with the Companys 2009 Stock Incentive Plan, 735,000 shares of common stock
were issued to officers, employees and directors of the Company at an aggregate
market value of $1,381,800. Stock compensation expense for the six months ended
January 31, 2010 and 2009 were $2,054,443 and $42,510 respectively. This non-cash
expense was recorded in General and Administrative costs on the Condensed
Consolidated Statements of Operations.

Note 5  Warrant and Conversion liabilities

Secured
promissory notes in the amount of $1,000,000 were issued on August 3, 2009 and
the 2,564,102 Class A common stock purchase warrant issued with these notes
contain a provisions where the conversion and exercise price may reset. This
provision creates a derivative and is separately accounted for as a liability
at fair value. At March 6, 2010, all outstanding notes and warrants have been
converted.

Note 6 -
Loss Per Share of Common Stock

Loss per share
of common stock is computed by dividing net loss (after dividends on preferred
shares) by the weighted average number of shares of Common Stock outstanding
during the year. The preferred dividends are not reflected in arriving at the
net loss as they are not material and would have no effect on earnings per
share available to common shareholders. The number of weighted average shares
used in the computations includes 1,929,032 common stock purchase warrants
recorded at a $0.01 value. The effect of assuming the exchange of Series A
Preferred Stock and Series B Preferred Stock in 2009 and 2008 would be
anti-dilutive.

Note 6  Subsequent Events

On February
14, 2010, one investor converted an additional principal amount of $100,000 and
interest amounting to $4,208 for 133,601 common shares. After this transaction
the remaining balance on these debentures amounted to $189,400. On March 8,
2010, one investor converted the remaining principal balance of $189,400 and
interest amounting to $6,792 for 251,528 common shares.

During
February 2010, 1,926,265 Class A Warrants ($0.01) were exercised on a Cashless
basis for 1,926,265 shares of common stock. After these transactions, the
remaining Class A Warrants amounted to 2,767.

On February
25, 2010, three investors converted 10,000 Class B Warrants for $1,000,000.
Under the terms of the Class B warrants, The Company issued new interest
bearing convertible debentures totaling $1,000,000 with interest at 8%. These
new debentures can be converted into restricted common shares equal to $1.00
per share.

On February 26, 2010, the Company received a comment letter from
    the Securities and Exchange Commission. The Company is addressing any comments
it believes are inapplicable.

8

---



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

FOR THE THREE AND SIX
MONTHS ENDED January 31, 2010.

Product
revenues for the three and six months ended January 31, 2010 decreased by
$377,039 and $365,624 over the same three and six month periods the prior year.
The entire decrease occurred during the three month period ended January 31,
2010. The Company attributes this decrease to the delay in receiving customer
orders until late in the quarter.

Product
cost (Materials and Labor) increased during the six month period ended January
31, 2010 by $59,627, offset by a decrease during the three month period ended
January 31, 2010 of $33,324. Management attributes this six month increase to
an increase in fixed labor cost off-set by a sales shift to newer, upgraded
systems which bear a higher cost.

Gross
Profit for the six months ended January 31, 2010 and 2009 amounted to $286,026
and $711,277 respectively. This decrease of $425,251 was directly related to
the delay in receiving and shipping customer orders which primarily occurred
during the three months ended January 31, 2010 when the Gross Profit decreased
by $343,815.

Total
Selling, general and administrative expenses for the six months ended January
31, 2010 and 2009 amounted to $3,257,251 and $1,133,547 respectively. This
increase of $2,123,884 included the amortization of a non-cash expense of
$2,054,443for the 2009 annual stock incentive grant to employees, officers and
directors.

Other
non-cash non-operating expenses for the current six month period totaled
$5,455,306 and consisted primarily of expenses related to recording of equity
derivatives on debt amounting to $5,306,521; and induced conversion cost of
$150,201. Non-cash non-operating expenses recorded for the three month period
ended January 31, 2010 amounted to $1,456,397.

As
a result of the foregoing, the Company reported a net loss from operations of
($8,426,531) or ($2.93) per share compared to a loss of ($665,744) or ($ .99)
per share for the six months ended January 31, 2010 and 2009, respectively.
Loss per share of common stock included the weighted average of 1,929,032
common stock purchase warrants for the six months ended January 31, 2010.

LIQUIDITY AND
FINANCIAL CONDITION

Inventories
from the Companys product segment increased from $1,395,452 at July 31, 2009
to $1,484,351 for the six months ended January 31, 2010, an increase of
$88,899.

Accounts
Receivable-trade decreased to $63,260 for the six months ended January 31, 2010
from $245,980 as of July 31, 2009.

The
Company expects to meet its cash requirements for the next twelve months
through existing cash balances and cash generated from operations. At January
31, 2010 new non-cancelable orders for over $822,000 had been received for
delivery during the year. On February 8, 2010 Conolog received $323,526 from
sale of New Jersey State NOLs. In addition, on February 26th and
March 3rd a total of $1,000,000 was received from existing
investors. The Company also anticipates additional financing during the next 9
months of up to $3,000,000 from current investors.

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.

9

---



ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK.

N/A

ITEM 4T  CONTROLS AND PROCEDURES

Evaluation of
Disclosure Controls and Procedures

It is managements responsibility to establish and maintain adequate
internal control over all financial reporting pursuant to Rule 13a-15 under the
Securities Exchange Act of 1934 (the Exchange Act). Our management, including
our principal executive officer and our principal financial officer, have
reviewed and evaluated the effectiveness of our disclosure controls and
procedures as of the filing date of Form 10-K Annual Report. Based
upon their evaluation as of January 31, 2010, the end of the period covered by
this 10Q report, the Companys chief executive officer and chief financial
officer concluded that, the Companys disclosure controls and procedures are not
effective to ensure that information required to be included in the Companys
periodic SEC filings is recorded, processed, summarized, and reported within
the time periods specified in the SEC rules and forms.

The Companys
board of directors was advised by Management, that during their review of audit
procedures for fiscal 2009 Management identified a material weakness in the
Companys internal control over financial reporting.

The deficiency
consisted primarily of inadequate staffing and supervision that could lead to
the untimely identification and resolution of accounting and disclosure matters
and failure to perform timely and effective reviews. However, the size of the
Company prevents us from being able to employ sufficient resources to enable us
to have adequate segregation of duties within our internal control system.
Management is required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures.

Changes in Internal Control over Financial
Reporting

There were no
changes in our internal control over financial reporting that occurred during
the period covered by this Quarterly Report on Form 10Q that have materially
affected, or are reasonably likely to materially affect our internal control
over financial reporting.

Managements Report on Internal Control over
Financial Reporting

Our management
is responsible for establishing and maintaining adequate internal control over
financial reporting and for the assessment of the effectiveness of internal
control over financial reporting. Our internal control system was designed to
provide reasonable assurance to our management and Board of Directors regarding
the preparation and fair presentation of published financial statements. Our
management assessed the effectiveness of our internal control over financial
reporting as of July 31,2009. In making this assessment, it used the criteria
set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in Internal Control  Integrated Framework.Based
on our assessment our management has concluded that our control and procedures
were not effective as of the end of the period covered by this Report due to
the existence of the significant internal control deficiencies described below.

The deficiency
consisted primarily of inadequate staffing and supervision that could lead to
the untimely identification and resolution of accounting and disclosure matters
and failure to perform timely effective reviews. This annual report does not
include an attestation report of the Companys registered accounting firm
regarding internal control over financial reporting. Managements report was
not subject to attestation by the Companys registered public accounting firm
pursuant to temporary rules of the Securities and Exchange Commission.

10

---



PART II - OTHER
INFORMATION

Item 1. Legal Proceedings  A Promissory Note dated
October 22, 2002 from Natony Corp. and Independent Computer Maintenance, LLC to
Conolog Corporation came into default during November 2009. The Company is
currently filing for a judgment seeking full payment and penalty against the
makers.

Item 2. Unregistered Sales of Equity Securities and Use
of Proceeds: During the quarter ended January 31, 2010, two Note Holders
exercised conversion rights to convert $489,344 principal and $19,895.25 of
interest to 538,442 unregistered shares of common stock. In connection with the
foregoing, the Company relied upon the exemption from securities registration
afforded by Rule 506 of Regulation D as promulgated by the SEC under the
Securities Act of 1933, as amended (the Securities Act) an/or Section 4(2) of
the Securities Act. No advertising or general solicitation was employed in
offering the securities. The offerings and sales were made to a limited number of
persons, all of whom were accredited investors, and transfer was restricted by
the Company in accordance with the requirements of the Securities Act of 1933.

Item 3. Defaults upon Senior Securities  None

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

At
a Special Meeting of Shareholders held on September 24, 2009, the Shareholder
Approval was obtained. As a result, the Escrowed Funds related to the August 3rd
Subscription Agreement were released and after the payment of fees in the
amount of $50,000 to Garden State Securities, Inc., the placement agent for the
transaction, the Company received net proceeds of $450,000 (prior to the
deduction of other fees and expenses related to the Offering).

At
the Special Meeting of Shareholders held on September 24, 2009, Shareholder
approval was obtained for the Companys 2010 Restrictive Stock Incentive Plan.

ITEM 5. Other Information  None

ITEM 6. Exhibits

|                |  |                                                                                                                          
|--------------- |  | -------------------------------------------------------------------------------------------------------------------------
|Exhibit
 Number |  | Description                                                                                                              
|                |  |                                                                                                                          
|31.1            |  | Certification
 of Chief Executive Officer pursuant to Section 302 of the Sarbanes Oxley Act                              
|31.2            |  | Certification
 of Chief Financial Officer pursuant to Section 302 of the Sarbanes Oxley Act                              
|32              |  | Certification
 of Chief Executive Officer and Chief Financial Officer pursuant to Section 906
 of the Sarbanes Oxley Act.

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
 22, 2010 | By /s/
 Robert S. Benou                 | 
|                      |                                         | 
|                      | Robert S.
 Benou                       
|                      | Chairman,
 Chief Executive Officer,    
|                      | (Principal
 Executive Officer)         
|                      | Chief
 Financial Officer and Treasurer,
|                      | (Chief
 Accounting Officer)            

11

---