SECURITIES AND EXCHANGE COMMISSION
			Washington, D.C.  20549
				FORM 10-K/A

Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

 X 	Annual  Report Pursuant to Section 13  or  15(d)  of  the 
        Securities Exchange Act of 1934

      For the fiscal year ended July 31, 1997 (No Fee Required)

   	Transition Report Pursuant to Section 13 or 15(d) of the 
	Securities Exchange Act of 1934 for the transition period 
        from        to         (No Fee Required)

			Commission File Number: 0-8174
				CONOLOG CORPORATION
(Exact name of registrant as specified in its charter)

DELAWARE                                         52-0853566
(State or other jurisdiction of                 (IRS Employer
 incorporation or organization)               Identification No.)

5 Columbia Road, Somerville, NJ  08876
(Address of principal executive office)           (Zip code)

 Issuer's telephone number, including area code: (908) 722-8081
Securities registered pursuant to Section 12(b) of the Act:

	Title of each class	Name of each exchange in which 
						registered
Common Stock, $1.00 par value          NASDAQ SmallCap Market
Redeemable Class A Warrants            NASDAQ SmallCap Market

Check whether the Issuer (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act 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

Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-K contained in this form, and no disclosure
will be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to the Form 10-K.   X 

The aggregate market value of the voting stock held by non-affiliates
of the Registrant based on the closing sale price of $2.812 on
December 16, 1997 was  $7,918,946

The number of shares outstanding of the Registrant's common stock
outstanding as of December 17, 1997 was 2,816,126

		DOCUMENTS INCORPORATED BY REFERENCE









				FORM 10-K/A
				JULY 31, 1997



 

Item 6.  SELECTED FINANCIAL DATA
                       Year Ended
                       July 31,
(in thousands, except   1997      1996     1995    1994    1993
per share amounts)                                     

Operations Summary:
Net sales and other     $1,123   $1,924   $2,091  $2,045  $1,486
income                         
                                                                
Net income (loss)       (3,810)     292    (537) (1,183)   (322)
                                                         
Income (loss)               
per share -primary       (2.41)    0.28   (0.12)  (0.27)  (0.07) 
                               
Income (loss) from                                    
continuing operations                                 
after                                                 
giving retroactive                                    
effect to a 1 for          -        -    (12.36) (27.22)  (7.41)
100 reverse stock                            
split on August
16, 1995
Balance Sheet                                         
Summary:               
 Total assets           $4,340   $3,928  $3,882  $3,739  $4,601
                                                      
                                                               
Long-term debt and                                    
capitalized lease           -        $5     $34  $3,830  $3,733
obligations

















Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF 
OPERATIONS AND FINANCIAL CONDITION
                                  
Results of Operations

     In order to summarize  the Company's  operating results  for
the past three years, the following tables indicate the percentage 
relationships of income and  expense  items in the  statements  of 
income and the percentage changes in those items for such years.



   Income & Expense Items as          Income &          Percentage
    a Percentage Of Revenues        Expense Items   Increase/Decrease
    From Operations
      For The Years Ended July 31

     1997    1996   1995                1996 to   1995 to    1994 to
                                          1997      1996      1995
    100.0%  100.0%  100.0%  Sales &       (41.6)%    (8.0)%      2.3%
                            other                                
                            income
     84.2%*  67.2*   92.2*  Cost of       (27.9)    (32.9)      (4.2)
                            products                             
                            sold
    182.9    49.2    43.8   Selling,     (117.0)      3.4        7.4
                            general &                            
                            administrative
      7.4     6.8    13.3   Interest      (38.0)    (51.8)     (23.4) 
                                                                
    274.4   123.2   149.3   Total costs    29.9     (23.0)      (3.3)
                            & expenses                            
   (174.4)  (23.2)  (49.3)  Income       (338.5)    (56.5)     (13.0)
                            (loss)                               
                            before
                            taxes
       .9     -     (23.5)  Income        494.2    (100.0)        -
                            taxes                                
                            (credits)
   (175.3)% (23.2)% (25.8)% Loss before  (339.0)%   (16.5)%    (13.0)%
                           extraordinary                          
                           item

*    Includes write-offs for obsolete or excess inventory which were
$28,101, $50,281 and $656,248 in 1997, 1996,and 1995 respectively.















Results of Operations

1997 Compared to 1996

     Total revenue decreased $801,076 or 42% from  $1,924,466  to 
$1,123,391 in 1997.  This decrease was attributable to  delays in  
the release of tone  protection  orders from the Bonneville Power 
Administration  and other customers. The Company attributes these 
delays to the budget constraints for various utilities and to the
pending  release  of the new advanced  tone  protection   device, 
the PTR-1500.  The Company essentially completed the   prototypes 
during  the  first  fiscal  quarter  ended October 31, 1997.  The
Company plans to ship prototypes to GE during November 1997. 

     Gross Margins, inclusive of inventory adjustments  for  the  
years ended July 31, 1997 and 1996  totaled  $177,910 & $632,185
representing 15.8% and 32.9% of revenues. Gross margins for 1997 
were lower than 1996 due to the lower utilization of the factory 
in fiscal 1997 over 1996.

     Selling, General and  Administrative expenses increased from
$946,954 in 1996 to $2,054,630 in 1997 representing  an increase  
of 117%.  This increase is the result of the Company issuing 
359,500 shares of Common Stock to eight employees, incurring an 
additional $1,313,750 in salary expense.

     Interest expense totaled $82,932 for the year ended July 31, 
1997 compared to $133,652 for the year ended July 31, 1996.  This
decrease was a result of lower loan outstanding balances resulting  
from the pay-down of the credit facility during the year.

     As a result of the foregoing, the Company reported a net loss
before extraordinary item of $1,969,736 or  $1.24 per  share. This
compares to a net loss before extraordinary item of $443,622 or $.43
per share for the same period last year.


1996 Compared To 1995

     Revenues  for  the  year ended July 31,  1996  decreased  to
$1,924,466  from $2,090,933 for the twelve months  of  the  prior
year,  representing a decrease of 8.0%.  Revenues declined  as  a
result of a decline in sales in the military sector.  The Company
completed a large sale of switches to the military in Fiscal 1995
and did not have a comparable sale for Fiscal 1996.

     Gross  margins  for the year totaled $632,184 and  $163,194,
respectively,  representing  32.9 % and  7.8%,  respectively,  of
revenues.  Gross margins were higher in 1996 due to the  obsolete
inventory write-off in 1995.  Without the inventory write-off the
1996  and  1995  gross margin would have been  35,5%  and  39.3%,
respectively.  The gross margin  for 1996  was  lower  than  1995
without  the inventory write-off due to the fact that higher than 
normal discounts were offered and taken on two major sales.

     Selling, general and administrative expenses increased  from
$916,016 in 1995 to $946,954 in 1996, representing  an increase
of 3.4%.  These expenses increased as a result of an expansion of
the employment base and an increase in advertising and  promotion 
costs.

     Interest expense totaled  $133,652 for the year  ended  July
31, 1996 as compared to $277,440 in interest expense for the year
ended  July  31, 1995.  The Company reached a debt  restructuring
agreement  with the Bank during 1995 that resulted in  having  no
interest expense for the quarter ended April 30, 1996.



     As  a  result of the foregoing, the Company reported  a  net
income  of  $291,754,  or  $.28 per share.  The 1996 net profit was 
inclusive of  a debt compromise of $740,376, net of a tax benefit  
of $492,352.  This compares to a net loss of $537,290 or $.12 per
share for the same period last year (after retroactive effect  to
a  1  for  100  reverse  split  on  August  16,  1995  and  after
extraordinary item in 1996).

     As  of July 31, 1996 the Registrant's backlog of orders  was
approximately  $3.4 million, representing a mix of  military  and
commercial  telecommunication products.  The Company  anticipates
its  commercial shipments to grow as a percentage of total  sales
for the foreseeable future.


1995 Compared To 1994

     Total revenue increased $46,000, or 2.3%, from $2,045,000 in
1994 to $2,091,000 in 1995.  The increase  was attributable to an
expansion in the commercial sector  of  the  Company's  business,
which contributed  $1,422,000 or  68% to total revenues in  1995,
compared to $1,300,000 or 64% of total revenues in 1994.

     Costs of sales totaled $1,271,000 for the year ended July 31,
1995  as compared  to  $1,068,000 for the comparable period ended 
July 31,  1994,  representing  60.8%  and  52.2%  of net revenues, 
respectively.  Cost of sales increased as a result of product mix 
during the comparable years.

      A charge  of  $656,000 for inventory write-off was recorded
during the year.   This  amount  was  exclusively  due to certain
inventories purchased for military programs in prior periods that
were phased out.  There was a comparable  charge of  $945,000  in
fiscal 1994.

     The Company determined during the first quarter of 1995 that
there  was  not  sufficient  information  from  the  Government's
Defense-Electronic Supply Center ("DESC") facility to  permit the
Company to make a quantitative  determination  of  future  sales.
Inventory which totaled $656,000 was written off after management
made an analysis of  parts maintained for military and government
orders compared to  available  inventories. This amount consisted
of $318,000 for  raw materials, $249,000 for work in progress and
$89,000  for  finished goods.   There were  comparable charges of
$945,000 in the twelve month period ended  April 30,  1994.  This
analysis consisted of a study of the  forecasted  requisitions of
upcoming orders of the DESC, Conolog's principal defense customer.
On examination of prospective sales,  it was determined  that the 
government  had no  requirements  for Conolog's military products 
for at least the next twelve to eighteen months.

     As a result of the foregoing,  gross  profit margins totaled
$163,914 or 7.8% of sales for the fiscal year ended July 31, 1995
as compared to $32,330 or 1.6% of sales for the same twelve month
period in 1994. Exclusive of inventory  adjustments, gross profit
margins would have been 39% for the year  ended July 31, 1995 and
48% for the year ended July 31, 1994.

     Selling, General and Administrative Expense totaled $916,000
or 43.8% of revenues, as compared to $853,000 or 41.7% of revenues
for the comparable period last year.

     As a result of the foregoing, an operating loss of  $737,000
was realized for the year ended July 31, 1995  as compared  to an
operating loss of $821,000 for the same period last year.

     Interest  expense  for  the  twelve  months totaled $277,440
compared to $362,000 for the fiscal year ended July 31, 1994. The
Bank had agreed to fix the total interest  owed  as of January 31,
1995 and to keep the  amount  unchanged  through  August 16, 1995.
Accordingly, no interest expense was accrued from February 1,1995
through July 31, 1995.

     As a result of the foregoing, the Company incurred a net loss
of $537,290 for the twelve months ended July 31, 1995, compared to
a net loss of $1,183,000 for the same period last year.  The loss
in  1995  was  reduced  by  the  income  tax benefit derived from 
previously incurred operating losses not deducted. The losses, as
a  result  of  the  Registration,  will  be  deductible  against 
forgiveness of indebtedness income.


     As  of  July 31, 1995  the Company's  backlog  totaled  $1.3 
million, consisting of a mix  of military  and  commercial  tele-
communication products, compared to $1.5 million at July 31,1994.  
The  Company anticipates  its commercial shipments to continue to 
grow as a percentage of total sales in the foreseeable future.


LIQUIDITY AND CAPITAL RESOURCES

     Working Capital at July 31, 1997 was $2,456,122 compared to
$1,806,318 at year ended July 31, 1996.  The improvement in the
working cpaital is the result of a planned inventory increase  of
$236,012.  This is primarily attributed to the building of the
PTR-1500 tone protection device.  The Company will be delivering
to the General Electric Company under contract prototype units
during Nobember 1997.  Production units are expected to be
delivered during the second quarter of fiscal 1998.













                           SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
	Conolog Corporation
	By:
December 18, 1997       /s/ Robert S. Benou
	President, Chief Executive
	Officer and Chairman of the Board

In accordance with the Exchange Act, this report has been signed
below by the following persons, on behalf of the registrant and
in the capacities and on the dates indicated.


December 18, 1997
	/s/Robert S. Benou
	President, Chief Executive Officer
	and Chairman of the Board

December 18, 1997       /s/Arpad J. Havasy
	Executive Vice President, Secretary,
	Treasurer and Director

December 18, 1997       /s/Marc R. Benou
	Vice President, Assistant Secretary and Director

December 18, 1997       /s/Louis S. Massad
	Director










































                           Annual Report on Form 10-K/A

                          Item 8, Item 14 (a)(1) and (2)

                               Financial Statements

                             Year Ended July 31, 1997

                               Conolog Corporation

                           Somerville, New Jersey  08876
















































			Form 10-K/A Item 14(a)(1) and (2)

			Index to the Financial Statements

                              Conolog Corporation

                                 July 31, 1997




The following financial statements of the registrant are included
in Item 14:

Balance Sheets - July 31, 1997 and 1996 ....................  F-2

Statements of Income - Years Ended July 31, 1997, 
     1996 and 1995 .........................................  F-3

Statements of Stockholders' Equity (Deficiency) - Years
     Ended July 31, 1997, 1996 and 1995 ....................  F-4

Statements of Cash Flows - Years Ended July 31,
     1997, 1996 and 1995 ...................................  F-5

Notes to Financial Statements ..............................  F-6-13

























			Independent Auditors' Report

Board of Directors
Conolog Corporation

We have audited the accompanying balance sheets of  Conolog
Corporation as of July 31, 1997  and 1996  and the  related 
statements of operations, stockholders' equity (deficiency)
and cash flows for each  of the three  years in  the period 
ended July 31, 1997.   These financial statements  are  the 
responsibility  of  the  Company's  management.    Our 
responsibility  is to express an opinion on these financial 
statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally  
accepted auditing standards.  Those standards require  that
we   plan  and  perform  the  audit  to  obtain  reasonable 
assurance about  whether the financial  statements are free
of material misstatement.    An audit includes examining on
a   test   basis   evidence   supporting  the  amounts  and 
disclosures  in  the  financial  statements.  An audit also 
includes  assessing  the  accounting  principles  used  and
significant  estimates  made  by  management,  as  well  as
evaluating  the  overall  financial statement presentation.
We believe  that our audits  provide a reasonable basis for
our opinion.

In our opinion,  the financial statements referred to above
present  fairly,  in  all  material respects, the financial
position of Conolog Corporation at July 31,  1997 and 1996,
and  the  results of  its operations and its cash flows for 
each of  the three years  in the period ended July 31, 1997
in conformity with generally accepted accounting principles.





Bridgewater, New Jersey
October 13, 1997, Except as to
Notes 11, 12, 13 which are
dated December 11, 1997

*  The financial statements have been restated due to imputed
     interest on unpaid officer's salaries, the effect of
     issuing Common Stock to certain employees and the addition
     to Contributed Capital for dividends not paid on Preferred
     Stock and the difference between negotiated and fair
     value of Common Stock issued in exchange for bank debt.
     (Notes 11, 12, 13). The primary loss per share was increased
     due to these transactions by $1.99 in 1997 and $.33 in 1995.

F-1







		     Conolog Corporation
                        Balance Sheets

                                                July 31,
                                           1997        1996
                                       ---------    ---------
                                              RESTATED
ASSETS                                        --------

Current Assets
     Cash                               $503,217     $178,213
     Accounts Receivable - less
     allowances of $6,000 and 
     $14,000 in 1997 and 1996, 
     respectively                        109,571      304,020
     Inventories
        Finished Goods                 1,705,782    1,494,289
        Work-in-process                  498,070      129,675
        Materials and supplies           969,940    1,313,816
                                      ----------   ----------
                                       3,173,792    2,937,780


     Other Current Assets                 44,085       43,517
     Deferred offering costs             113,813         -
                                       ----------   ----------
                                       3,944,478    3,463,530

Property, Plant and Equipment
     Land and improvements                34,524       34,524
     Building and improvements           663,630      659,477
     Machinery and equipment           1,291,838    1,289,578
     Furniture and Equipment             336,001      330,735
                                      ----------   ----------
                                       2,325,993    2,314,314
less allowance for depreciation
    and amortization                   1,938,188    1,880,408
                                      ----------   ----------

                                         387,805      433,906
Other Assets                               7,469       30,398
                                      ----------   ----------

TOTAL ASSETS                          $4,339,752   $3,927,834
                                      ==========   ========== 













                                              July 31,
                                          1997           1996
                                        --------       --------
LIABILITIES                                     RESTATED
                                                --------
Current Liabilities
     Notes Payable - Bank                $   -         $ 1,012,500
     Notes Payable - Other                916,235             -   
     Accounts Payable                     188,510          280,629
     Accrued Payroll                       15,645           39,811 
     Accrued Interest                      17,374           64,699
     Bridge Loan                          200,000             -    
     Other Accrued Expenses               146,791          115,723
     Current Maturities of                  3,802           33,282
       capitalized lease obligations                  
                                         ---------      -----------
Total Current Liabilities              $1,488,357       $1,546,644

Other Liabilities
     Capitalized lease obligations, 
      less current maturities                 -              4,973
                                         ---------       ----------
									         

STOCKHOLDERS' EQUITY (DEFICIENCY)

     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, issued 
       and outstanding 1,197 shares           597              597
     Common Stock, par value $1.00; 
       20,000,000 shares authorized; 
       issued 2,803,473 shares in 1997 
       and 1,035,186 in 1996, including 
       8,776 shares held in Treasury    2,803,473        1,035,186
     Contributed Capital                7,034,008        4,512,204
     Retained Earnings (Deficit)       (6,932,449)      (3,117,536)
     Treasury Shares at Cost             (131,734)        (131,734)
                                       -----------      -----------
Total Stockholders' Equity (Deficiency) 2,851,395        2,376,217
                                       ----------       -----------
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
                                       $4,339,752       $3,927,834
                                       ==========       ==========








F-2


				Conolog Corporation
			   Statements of Operations
                                   RESTATED
                                   --------

                                    Year Ended July 31,
                                  1997	    1996        1995
                               ----------  ----------  -----------
Sales and other income        $ 1,123,390  $1,924,466  $ 2,090,933

Costs and Expenses:
   Cost of Products sold          917,379   1,242,001    1,270,771
   Selling, general and
     administrative             2,054,630     946,954      916,016
   Interest                        82,932     133,652      277,440
   Write-off obsolete or
     excess inventories            28,101      50,281      656,248
                                ---------   ---------    ---------
                                3,083,042   2,372,888    3,120,475

Loss Before Income Taxes and
   Extraordinary Items         (1,959,652)   (448,422)  (1,029,542)

Income taxes (benefit)             10,084         200     (492,252)
                                ---------    ---------   ----------
Net Loss before Extraordinary
   Items                       (1,969,736)   (448,622)    (537,290)

Extraordinary Items            (1,841,000)    740,376            -
                                ---------    ---------    ---------
Net Income (Loss)             $(3,810,736)  $ 291,754    $(537,290)
                              ===========   =========    ==========
Earnings Per Share:
(Loss)from Operations-Per Share $   (1.24)  $    (.43)   $  (12.36)
Income(Loss) after Extraordinary
        Item - Per Share        $   (2.41)  $     .28    $  (12.36)
Net Income (Loss) Per Share
     - Primary                  $   (2.41)  $     .28    $  (12.36)
     - Fully Diluted            $   (2.41)  $     .25    $  (12.36)
                                ==========  ==========   ==========










See notes to the financial statements







F-3			



                    Conolog Corporation
         Statement of Stockholders' Equity (Deficiency)
                        RESTATED                         
                        --------

                        Series A        Series B                
                        Preferred       Preferred       Common  Contributed
                        Stock           Stock           Stock   Capital        

Balance @ July 31,
     1994               $ 77,500        $ 10,661   $   52,239   $ 952,994  

Prior Period Adjustment     -               -            -           -

Net loss for the year       -               -            -           - 

Dividends                   -               -            -        500,719
                        --------        --------    ---------   ---------    
Balance @ July 31,
     1995                 77,500          10,661       52,239   1,453,773

Public Stock Offering       -            (10,064)     982,947   3,448,642

Net Income for the year     -               -            -           -    

Dividends                   -               -            -       (390,211)
                        --------        --------     ---------   ---------
Balance @ July 31,
     1996                 77,500             597    1,035,186   4,512,204

Debt to Equity
     conversion             -                -      1,408,787   1,563,377

Additional shares issued
     to employees           -                -        359,500     954,250

Net loss for the year       -                -           -           -   

Dividends                   -                -           -          4,177
                        ---------        --------   ---------    --------- 

Balance @ July 31,
     1997               $ 77,500        $    597  $ 2,803,473  $7,034,008














												
                    Conolog Corporation
         Statement of Stockholders' Equity (Deficiency)
                        RESTATED
                        --------
                                                          Total
                             Retained                 Stockholders
                             Earnings      Treasury      Equity
                             (Deficit)       Stock     (Deficiency)

Balance @ July 31,
     1994                 $ (2,383,794)   $ (131,734) $ (1,422,134)

Prior Period Adjustment         18,949          -           18,949

Net loss for the year         (537,290)         -         (537,290)

Dividends                     (500,779)         -             -            
                           ------------   -----------   -----------
Balance @ July 31,
     1995                   (3,402,914)     (131,734)   (1,940,475)

Public Stock Offering             -             -        4,421,525

Net Income for the year        291,754          -          291,754

Dividends                       (6,376)         -         (396,587)
                           ------------     ---------   -----------
Balance @ July 31,
     1996                   (3,117,536)     (131,734)    2,376,217

Debt to Equity
     conversion                   -             -        2,972,164

Additional shares issued
     to employees                 -             -        1,313,750

Net loss for the year       (3,810,736)         -       (3,810,736)
               
Dividends                       (4,177)         -             -
                           ------------     ---------   -----------
Balance @ July 31,
     1997                  $(6,932,449)    $(131,734)   $2,851,395













See Notes to Financial Statements

F-4




                                        Conolog Corporation
				     Statements of Cash Flows
                                             RESTATED
                                             --------
						Year Ended July 31,
                                           1997         1996         1995
                                        -----------  ----------  ------------
Cash Flows From Operating Activities
  Net Income (Loss)                    $(3,810,736) $  291,754  $  (537,290)
  Adjustments to Reconcile Net Income
     to Net Cash Provided (Used) by
     Operating Activities
  Prior Period Adjustment                     -           -          18,949     
  Common stock base compensation         1,313,750        -            -
  Debt Retirement Cost                   1,841,000        -            -
  Deferred income taxes                       -        492,352     (492,352)
  Depreciation and amortization             57,781      64,994       60,396
  Gain on disposition of equipment            -         (3,420)        -
  Provision for losses on accounts
     receivable                             (8,000)      9,000         -
(Increase) Decrease in Operating Assets
  Accounts receivable                      202,449    (141,479)      74,529
  Inventories                             (236,012)   (339,653)     392,058
  Other current assets                        (568)    (17,834)      (3,394)
Increase (Decrease) in Operating Liabilities
  Accounts payable                         (92,119)     (7,001)      12,330
  Accrued expenses and other liabilities    78,241  (1,066,379)     413,781
                                        -----------  ----------   ----------
       Net Cash Used by Operating Activities
                                          (654,214)   (717,666)     (60,993)
Cash Flows From Investing Activities
  Purchase of property, plant and equipment
                                           (11,680)    (43,163)     (19,625)
  Proceeds from sale of equipment             -         18,666         -
                                        -----------  ----------     --------
       Net Cash Used in Investing Activities
                                           (11,680)    (24,497)     (19,625)
Cash Flows From Financing Activities
  Deferred offering costs                 (113,813)     86,154      (86,154)
  Increase from public stock offering         -      4,421,525          -
  Proceeds from borrowings                 916,235        -             -
  Increase (Decrease) in bridge loan       200,000    (200,000)     200,000
  Repayments of long-term borrowings       (34,453) (2,836,008)     (38,681)
  (Increase) reduction in other assets      22,929     (20,580)         325
  Dividends paid                              -       (396,587)         -
  Increase (Decrease) in due to officers      -       (161,705)      17,302
                                        ----------   ----------     --------
       Net Cash Provided by Financing
         Activities                       990,898      892,799       92,792
                                        ----------   ----------     --------
Net Increase in Cash                      325,004      150,636       12,174
Cash at Beginning of Period               178,213       27,577       15,403
                                        ----------   ----------     --------
Cash at End of Period                   $ 503,217    $ 178,213     $ 27,577
                                        ==========   ==========    =========



SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
  Cash paid during the year for
     Interest Paid                       $  77,349   $ 772,773    $ 102,816
     Taxes Paid                          $  10,084   $     125    $      50

SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
   Capitalized lease stock obligations incurred for use of
     equipment                           $   -        $     -     $  56,550
  Additional common stock was issued upon conversion of
     $1,131,164 of long-term debt and accrued interest payable




See notes to the financial statements


F-5










































			CONOLOG CORPORATION
		NOTES TO THE FINANCIAL STATEMENTS


	
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

     The  principal  business  activity  of  Conolog  Corporation
     (the "Company") is the design, manufacturing and distribution
     of  small  electronic  and  electromagnetic  components  and 
     subassemblies  for  use  in  telephone,  radio  and microwave
     transmission and  reception and  other  communication  areas.
     The Company's  products  are used  for  transceiving  various
     quantities,  data  and  protective   relaying  functions   in 
     industrial,  utility  and   other  markets.    The  Company's
     customers   include  primarily  industrial  customers,  which
     include power companies and various branches of the military.


Revenue Recognition

     Sales are recognized when  the products  are shipped.  Sales
     under  certain  fixed-price-type contracts,  where  progress
     payments are received, are recognized when work is performed,
     under the percentage-of-completion method, in accordance with
     Statement of  Position 81.1,  Accounting  for Performance of
     Construction Type  and Certain Production-Type
     contracts.


Inventories

    Inventories  are stated  principally at average cost which is
    not in excess of market.

Property, Plant and Equipment

     Property,  plant and equipment  are  carried at  cost,   less
     allowances for depreciation and amortization.    Depreciation
     and amortization are  computed by  the  straight-line  method
     over the estimated useful lives of the assets.

Income (Loss) Per Share of Common Stock
     Income  (loss)  per share  of common  stock is  computed  by 
     dividing  net earnings  (loss) (after dividends on preferred
     shares)  by the weighted  average number of shares of Common
     Stock  outstanding during the year.   The effect of assuming 
     the exchange of the Series A Preferred Stock  and the Series
     B Preferred Stock in 1997 and 1995 would be anti-dilutive.

F-6










Income Taxes

     Deferred income taxes have been provided  for in  accordance
     with Statement No, 109 of the Financial Accounting Standards
     Board.  Deferred income taxes arise from  timing differences
     resulting  from  income  and  expense  items  reported  for
     financial  accounting and tax purposes in different periods.
     Deferred  taxes  are  classified as  current  or noncurrent,
     depending on the classification of the assets and liabilities
     to which they related.   Deferred taxes arising from  timing
     differences  that are  not  related to an asset or liability
     are  classified as  current or  noncurrent  depending on the
     periods  in which the  timing  differences  are  expected to
     reverse.

Use of Estimates

     The preparation of financial  statements in conformity  with
     generally accepted accounting principles requires management
     to make  estimates and  assumptions that affect the reported
     amounts  of  assets  and  liabilities  and  disclosures  of
     contingent  assets  and  liabilities  at  the  date  of  the
     financial statements and  the reported  amounts of  revenues
     and expenses during the  reporting period.   Actual  results
     could differ from those estimates.

(2)  WRITE-OFF OF OBSOLETE OR EXCESS INVENTORIES

     During 1997, the Company recorded a write-off of obsolete or
     excess  inventories of $28,101.   During  1996 and 1995, the
     Company  recorded  a  write-off of  obsolete  or  excess
     inventories of $50,281 and $656,248, respectively.

     This  inventory  write-off  was  military  related.      In
     management's  opinion  these items will not be reordered in
     the foreseeable future.

(3) NOTES PAYABLE - BANK

     On September 11, 1996  the  Company entered into an  allonge
     agreement with the bank,  whereby  the bank may  at any time
     before  April 15,  1997  convert the  then unpaid amount  of
     principal  and  interest  due under the Amended and Restated
     Term  Notes  dated  as  of  August 2,  1995  in the original
     principal amount of $1,025,000 into 1,400,000 shares of  the
     Company's Common Stock (the "Note Shares").

     On September 12,  1996,  the bank entered into an option and
     purchase,  sale  and  assignment  agreement   (the  "Option
     Agreement")  with CNL Holdings, Inc  (CNL)  whereby the bank
     would sell the Note Shares referred to above, along with the
     375,000  common shares of the Company it currently owns (the
     "Bank Shares") for $1,500,000 to CNL.

   F-7

     
Note 3 - Notes Payable -Bank (Continued)

     On September 12, 1996  CNL entered  into an  agreement  with
     the Company whereby the Company would  use its best  efforts
     to file a  Registration  Statement  with  the Securities and
     Exchange Commission covering the 375,000 Bank Shares and the
     1,400,000 Note Shares  (collectively the "Acquired Shares").
     Such  Registration  Statement shall be declared effective as
     soon as possible after the filing thereof,  and kept current
     and  effective for  a period of two years or until such time
     as all shares registered pursuant  therewith have  been sold
     or otherwise transferred.    The proceeds of the sale of the
     Acquired  Shares  shall be  applied  as follows:   The first
     $1,500,000 shall be paid  to reimburse CNL for payments made
     to the bank pursuant to the Option Agreement.  Fifty percent
     of the balance of  the proceeds not  to  exceed  $2,500,000,
     shall be loaned  to the Company by CNL.   The balance of the
     proceeds belong to CNL.   The  amounts loaned by  CNL to the
     Company shall  be evidenced  by notes  which  shall  be  due
     twelve months after making such loan and shall bear interest
     at the rate of 4% per annum.   At maturity of the loans, the
     Company  will have  the option to repay the loan balance and
     accrued  interest by issuing  a new Series C Preferred Stock
     (the  "Preferred Stock")  valued  at  $5.00  per share.  The
     Preferred  Stock  will  be  non-voting  and  will  carry  a
     cumulative dividend of 8% per annum, which may be payable by
     the  issuance of shares of common stock valued at  $5.00 per
     share up to a maximum of 40,000 shares per annum.

     On  January  31,  1997,  the  Bank  and Conolog entered into
     Amendment  No.  1  to  the  Option  and  Purchase,  Sale and
     Assignment Agreement  dated September 12, 1996.  The amended
     Option  Agreement now provides that on or before February 5,
     1997,  CNL will  purchase  from  the  Bank for an  aggregate
     purchase price of  $600,000 no  less than (i) 133,333 shares
     of Common Stock for $399,999, subject to the approval of IAR
     Securities  Corp.  and  (ii)  $200,001  of  the  Debt  Claim
     represented by the note.   CNL  thereafter may  exercise the
     remainer of the option on or  before  April  15,  1997.   In
     addition,  CNL may purchase from the  Bank additional shares
     of Common Stock owned by the Bank at the price o f $3.00 per
     share and portions of the Debt Claim from time to time.   On
     February 3,  1997,  CNL paid the Bank $600,000  consummating
     the purchase of the  above  200,000 shares.   On January 31,
     1997,  $200,001  of  the  Debt  to  the  Bank  was  adjusted
     resulting in all accrued interest in the amount o f $106,298
     being reduced and the remaining being applied to principal.

     On March 26, 1997, CNL completed the exercise of the "Option
     Agreement"  with the  Bank effectively eliminating all debts
     and liens with the Bank.






F-8



(4) NOTES PAYABLE - OTHER

     CNL Holdings,  Inc.  loaned the Company  $916,235.   The note
     will be due during the fiscal year  July 31, 1998 and shall bear
     interest at the rate of 4%  per annum.  The loans are payable
     in cash  or Series C Preferred Stock at  $5.00 per share to a
     maximum of 40,000 shares per annum.

     There is no relationship between  CNL Holdings Inc. and the
     Company except as specifically detailed above.

(5) BRIDGE LOAN

     The Company received $200,000 in net  proceeds from  several
     investors  in a private  placement.   Each investor received
     two Promissory Notes.   The first Promissory Note is payable
     on the earlier of  January 31,  1999  or the  closing of the
     Company's next public offering;  (the "First Note")  and the
     Second Note  (the "Second Note"),  plus accrued interest for
     the First Note,  is payable  on the  earlier of  January 31,
     1999 or the closing of the  Company's next public  offering,
     or  convertible at  the option  of the holder into Preferred
     Stock  Purchase  Warrants  to  purchase  shares  of Series D
     Preferred Stock,  which are new Preferred  Stock  securities
     contemplated  to be  offered in  the next  public  offering.
     At the  time the  next  registration  statement is  declared
     effective  by the  Securities  and Exchange Commission,  the
     Bridge Loan holders may exercise their respective  option to
     convert the Second Note into Class A Warrants.  The interest
     rate for the First Note is eight percent (8%) per annum.

     The  Company has granted  the lenders a security interest in
     the property  located at  5 Columbia  Road,  Somerville,  NJ
     (collateral).

(6) LEASES

     The Company  leases  automobiles,  machinery and  equipment,
     and office furniture and fixtures under leases which  expire
     over the next three years.  The rental payments are based on
     minimum  rentals  and  charges  for  mileage  in  excess  of
     specified  amounts  for  the  automobiles.   The  leases for
     machinery and equipment and furniture and fixtures contain a
     bargain  purchase option exercisable after the initial lease
     term.

     Property, plant and equipment include the following amounts
     for leases that have been capitalized.

                                                July 31,
                                           1997          1996
    Machinery and Equipment             $ 303,574     $ 303,574
    Less allowance for amortization       273,538       263,832
                                        ---------     ---------
                                        $  30,036      $ 39,742

                                        =========      ========
F-9


     Lease amortization is included in depreciation expense.

     Future  minimum  payments,  by year and  in the  aggregate,
     under capital leases consisted of the following as of July
     31, 1997.

     1998
     ----
     Total minimum lease payments               $ 4,208
     Less amounts representing interest             406
                                                -------
     Present value of net minimum lease payments  3,802
     Less current maturities of capitalized
        lease obligations                         3,802
                                                -------
     Long-term capitalized lease obligations    $     0

     The Company  leases various  equipment under  noncancellable
     operating  leases  expiring  through  July  2000.   Future
     minimum  rental  payments  under the above  leases  are  as
     follows:

     Year Ended July 31,
     -------------------
          1998                  $ 4,808
          1999                    4,808
          2000                    4,808
                                -------
                                $14,424
                                =======
     Total rental expense for all operating leases of the Company
     amounted to approximately $7,659, $10,353, and $11,447 during
     the years ended July 31, 1997, 1996 and 1995, respectively.

(7) CAPITAL STOCK

     The Series A  Preferred Stock provides  4%  ($.02  per share)
     cumulative dividends, which were $86,800 in arrears at  July
     31, 1997. In addition, each share of Series A Preferred Stock
     may be exchanged for one share of Common Stock upon surrender
     of  the  Preferred Stock and the payment of $1,200 per share.
     The Company may redeem the Series A Preferred Stock at $.50
     per share plus accrued and unpaid dividends.

     The Series B  Preferred Stock provides  cumulative dividends
     of  $.90 per share which were $27,937 in arrears at July 31,
     1997.    In addition, each five shares of Series B Preferred
     Stock  is  convertible  into 1  share of  Common Stock.  The
     Company may redeem  the Series B  Preferred Stock at $15 per
     share plus accrued and unpaid dividends.

     The Company has reserved  155,392 shares of Common Stock for
     Series A and B Preferred Stock.

F-10





(8) EXTRAORDINARY ITEM

     On August 16,  1995 the Company's Bank debt was restructured
     resulting  in debt  forgiveness of $1,232,728.  This created
     a deferred tax asset at  July 31,  1995 of  $492,352.   When
     the debt forgiveness occurred,  the Company  wrote  off  its
     deferred tax asset against the forgiveness of debt, resulting
     in extraordinary income of $740,376.

     The cost of debt retirement (See Note 13) of $1,841,000, which
     occurred in 1997, is considered an extraordinary item with no
     tax effect due to the non-deductability of this expense.

(9) INCOME TAXES

     Income taxes are comprised of the following:

                                                July 31
                                        1997         1996        1995
     Deferred Income Taxes (Benefit) $   -        $    -       $ (492,352)
     Current Income Taxes
        Federal                         9,884          -             -
        State                             200          200            100
                                     ---------    ---------     ----------
                                     $ 10,084     $    200     $ (492,252)
                                     ========     =========    ===========

     Taxable  income differs from financial statement  income due
     to the effect of non-deductible  permanent  tax differences.
     These  permanent  tax  differences  include  officer's  life
     insurance premiums and non-deductible entertainment expenses.

     At July 31, 1997 the Company has a net operating loss carry-
     forward of approximately $3,966,750 for financial  reporting
     purposes and approximately $2,443,000 for tax purposes which
     is available of offset future Federal  taxable income.   For
     Federal purposes,  $253,000  of the  carryforward expires in
     2008,  $1,232,000  expires in  2009 and  $957,000 expires in
     2010.   For state purposes the carryforward is approximately
     $1,604,000,  $706,000  expires in 2001 and  $898,000 expires
     in 2002.  Also at July 31, 1995  the Company  has unused tax
     credits  available  of  approximately  $103,000  of  which
     $12,100 expires in 2000, $26,300 in 2001 and $64,900 in 2002.

     The above net operating loss created deferred tax asset that
     has been fully reserved.  The amount is $1,329,286.








F-11






(10)MAJOR CUSTOMERS AND EXPORT SALES

     The following summarized sales to major customers (each 10%
     or more of net sales) by the Company.

                                Sales to
                                Major       Number of    Percentage
    Year Ended                  Customers   Customers    of Total
    ----------                  ---------   ---------    -----------
       1997                     $ 625,134       3            57
       1996                       401,840       1            21
       1995                       424,849       1            20


     During  1997 the Company had no export sales.  During 1996
     the Company had export sales of $401,840 and none and 1995.


(11) ACCRUED PAYROLL
At July 31, 1995 the Company had Accrued Payroll to an officer in the amount
of $492,775.  During the year ended July 31, 1996 this amount was paid down 
by a cash payment of $150,000 and $309,109 which was converted into common
stock.  The Company made an adjustment in the amount of $55,691 for discounted
payroll/imputed interest.

The amount was adjusted as follows:
	Prior Period	$ 47,183
	7/31/95		   8,508
                        --------
                        $ 55,691
                        ========

On the above accrued payroll the Company made an adjustment for imputed
interest.  The adjustment was as follows:

	Prior Period	$ 28,234
	7/31/95		  23,754
        7/31/96            1,797
	7/31/97		   1,906
                        --------
                        $ 55,691

(12) COMMON STOCK ISSUED TO EMPLOYEES

At July 31, 1997 the Company issued 359,500 shares of common stock to
eight employees.  Two employees sold 4,500 shares of common stock and
$18,000 was charged to salary expense.  An adjustment was to record
compensation as employees did not pay for the stock.  The fair value
of the stock used at that time was $1,295,750 ($3.65 per share).  The
effect on income was an increase in the loss by $1,295,750 or $.80
per share, and a corresponding increase in net operating loss carry-
forward for financial reporting purposes.

F-12




(13) CONTRIBUTED CAPITAL

During the years additional capital was contributed through the accumulation
of unpaid dividends on Preferred Stock, Series A & B.
Dividends which were not paid were considered as contributed capital and
amounts to $114,745 through July 31, 1997.

In addition to the above, During the year ended July 31, 1997, the Bank
converted 1,400,000 shares of Common Stock it was holding using a value
negotiated between Conolog and the Bank.  The difference between the fair
value and the negotiated value was $1.315 and was considered to be
contributed capital and an extraordinary expense called Debt Retirement
Cost (see Footnote, Extraordinary Item).  The total value placed upon
this transaction was $1,841,000. (1,400,000 shares X $1.315).  The effect
on primary loss per share was an increase of $1.16.

(14) SUBSEQUENT EVENTS

     On September  12,  1997  the  Company  filed a Registration
     Statement (S-1) with the Securities and Exchange Commission.
     This statement covers the primary offering of securities by
     the Company and the offering of other securities by certain
     selling security  holders.    The Company  is  registering,
     under the primary prospectus 805,000 Units, each consisting
     of one  (1)  share of  Common Stock  and four  (4)  Class A
     Warrants.  The selling  security  holders  are  registering
     under an alternate prospectus 1,200,000 Class A Warrants.

     At July 31, 1997 all  costs  associated  with this offering
     were deferred.  These  costs  will  be  deducted  from  the
     proceeds from the sale of stock.


F-13