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

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, 1998 (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 $0.625 on
October 26, 1998 was $2,366,298

The number of shares outstanding of the Registrant's common stock outstanding
as of October 26, 1998 was 3,786,077

DOCUMENTS INCORPORATED BY REFERENCE










FORM 10-K

JULY 31, 1998

TABLE OF CONTENTS

PART I
Item 1. BUSINESS. . . . . . . . . . . . . . . . . . . . . . . . . . . .  3

Item 2. PROPERTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Item 3. LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . .  22

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. . . . . .  22

PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
        STOCKHOLDER MATTERS. . . . . . . . . . . . . . . . . . . . . .  22

Item 6. SELECTED FINANCIAL DATA. . . . . . . . . . . . . . . . . . . .  24

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
        AND FINANCIAL CONDITION. . . . . . . . . . . . . . . . . . . .  25

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. . . . . . . . . .  29

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
        AND FINANCIAL DISCLOSURE. . . . . . . . . . . . . . . . . . .   29

PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS. . . . . . . . . . . . . . . . . 29

Item 11. EXECUTIVE COMPENSATION, PROMOTERS AND CONTROL PERSONS:
         COMPLIANCE WITH SECTION 16 (A) OF THE EXCHANGE ACT. . . . . .  30

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
         MANAGEMENT. . . . . . . . . . . . . . . . . . . . . . . . . .  33

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. . . . . . . .  34

PART IV
Item 14. EXHIBITS AND REPORTS. . . . . . . . . . . . . . . . . . . . .  36

SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   39








PART I

BUSINESS

General

     Conolog Corporation, a Delaware Corporation (the  "Company"
or  "Conolog") is engaged in the design, manufacture (directly or
through subcontractors) and distribution of small electronic  and
electromagnetic   components  and  subassemblies   for   use   in
telephone,  radio  and microwave transmission and  reception  and
other  communication  areas that are used in  both  military  and
commercial  applications.  The Company's products  are  used  for
transceiving  various  quantities, data and  protective  relaying
functions in industrial, utility and other markets.

    Conolog acquired Atlas Design, a human resource company, in 
September 1998.  Atlas Design provides short and long term qualified
Engineering and technical staff to major companies as well as human
Resource consulting.  The Company plans to utilize the qualified 
engineering and technical staff in support of Conolog's longer
term contracts including the PTR1500 series.
 
History

     The  Company was organized in 1968 and was engaged primarily
in  the  design  and  manufacture of  electronic  components  and
systems for military applications.

     The  Company,  in July 1971, merged with DSI Systems,  Inc.,
then  engaged  in  the  development and manufacture  of  terminal
viewers for digital retrieval of microfilm.  Later that year, the
name was changed from DSI Systems, Inc. to Conolog Corporation.

     By  1980 it became apparent that the military segment of the
business  was  growing while the terminal viewer  segment  was  a
drain  on cash and other resources.  By the year end the terminal
viewer  business  was  discontinued and  the  inventory  relating
thereto  was written off, allowing the Company to concentrate  on
its military business.

     In  1981  the Company acquired one of its customers,  INIVEN
Corporation   ("INIVEN").   At  that  time,   the   Company   was
manufacturing,  on behalf of INIVEN, a line of  transmitters  and
receivers  used for controlling and transceiving the  measurement
of  the  flow of gases and  liquids, by gas and water  utilities,
for  controlling the flow of waste water and sewage and measuring
and controlling traffic.

     Since the 1980's, Conolog has been an active participant  in
providing   electromagnetic  wave  filters  for  major   military
programs,  such  as  the Patriot Missile, Hawk  Missile  and  Sea
Sparrow   Missile.   In  addition  to  these  projects,   Conolog
components  are  currently used by the  military  in  tanks,  the
Apache helicopters and the MK-50 torpedoes.

     During  1987,  the  Company made the strategic  decision  to
redirect the Company's focus from military to commercial markets.
Since  that time, the Company has refocused on manufacturing  and
marketing its products for the commercial marketplace rather than
depend  on the military and defense-related markets.  The  effort
has  included the introduction of new products, the  redesign  of
existing   products  and  increased  advertising  and   marketing
efforts,  as  permitted by its limited financial resources.   The
percentage  of  revenues attributed to products manufactured  for
use in commercial applications increased from approximately 4% of
sales  in 1981 ($171,000) to approximately 82% of sales  in  1998
($616,752).  The  decision to embark on this  program entailed  a
major  design  effort,  including  the  coordination  of  outside
engineering  consultants to develop a complete line  of  products
aimed at the Company s  target markets.  The primary emphasis was 
on products for  electric utilities, co-generation  of power,  gas  
and water companies, traffic control for departments of transport
(DOT)  and airports utilizing DSP (Digital Signal Processing)
technology.

     Testing of the Company's first commercial product group, the
Teleprotection Series PTR-1000, was under way in the latter  part
of  1992 by Bonneville Power Administration.  This detailed  test
permitted  the  Company  to "fine tune"  the  product  for  power
transmission  applications.  In March  1994,  the   PTR-1000  was
approved  for  use  by  such  utility  and  thereafter  by  other
utilities and municipalities.  To date, the Company has sold  and
delivered  approximately 1000 PTR-1000 sets to 14  utilities  and   
3 municipalities, most of which are installed and in service.

     Following the  PTR-1000, in 1993, the Company introduced its
"98  Series"  Tone  Products for water, gas,  telephone  and  oil
companies,  waste water, traffic control and airports.   In  1994
the  Company  unveiled  the  Power Supply  Series  (allowing  the
various  utilities  to  power-up the  equipment  from  any  power
source), the "40 Series" for transmission of analog variable data
(water levels, gas pressures and temperature) and the Multiplexer
Series, which permits the transmission of up to 900 separate data
points,  again  using  a  telephone  line,  microwave  link,   or
satellite.   In 1994 the Company also introduced the "68  Series"
tone  products.   This  series  is  the  "98  Series"  repackaged
mechanically  specifically  for  customers  with  older   systems
wanting  to  upgrade to DSP technology without the expense  of  a
complete  mechanical installation.  The "68  Series"  offers  the
entire  line  offered by the "98 Series".  In 1995,  the  Company
introduced a stand alone "98 Series" transmitter and receiver for
field  installations and a wide range fiber optic  interface  for
the Iniven products.  The fiber optic interface is also available
as  a  stand alone  coupling device.   The  Company  launched its 
industrial   grade  1200  Baud  Modem  for   data   transmission/
communication,  and  completed  the  PTR-1000  Systems   options.  
Throughout 1997 and 1998, the Company designed and is in the process  
of completing and building  the  PTR-1500  Quad  System, Protection
Equipment,  exclusively for the  General Electric Company ("GE"),
to be labeled GE-NS50 Series, for  worldwide sales as detailed in 
the agreement between GE and Conolog dated April 1, 1997.

     Due  to  the end of the cold war and the downsizing  of  the
American  military,  the  Company  experienced  unexpected  sharp
reductions  of  military contracts in fiscal 1993 (the  Company's
fiscal  year ends on July 31) resulting in a 50% decline  in  the
Company's sales for that year, down to $1,486,298 from $2,997,308
in  fiscal 1992.  The sales of new products could not replace the
decrease  in military sales.  The Company, however, continued  to
pursue  sales  as  aggressively as its available resources  would
permit.  Sales for the Fiscal year ended July  31, 1996 were
$1,924,466 as compared to $2,090,933  for the year ended July 31, 
1995. Sales in fiscal 1997  totaled  $1,123,390,  a 42% decrease 
from $1,924,466 for the same period in 1996, and sales for the 
year ended July 31, 1998 were $746,420, a 33.5% decrease for the
same period of 1997.

     In September 1998, the Company acquired the assets of Atlas 
Design, Inc., a human resource outsourcing company, to further
its strategy of mergers and acquisitions, and to assist in 
providing qualified engineering and technical staff in support
of Conolog's longer term contracts. (See Recent Developments)
 
     Also in September 1998, the Company completed a sale/leaseback
of its manufacturing facility.  This enables the Company to 
significantly reduce operating costs and increases the working
capital. (See Recent Developments)

  Revenues from the Company's  military product sales represented
approximately  23%, 14% and 5.6% of  sales  of  the  Company    in 
fiscal  1996, 1997  and  1998,  respectively, reflecting the 
Company's emphasis on commercial sales and markets.

General Description

 Products

     The  Company is engaged in the design and manufacture of (i)
transducers,  which  are electro-magnetic devices  which  convert
electrical  energy  into mechanical and other forms  of  physical
energy,  or  conversely convert mechanical  and  other  forms  of
physical  energy  into  electrical energy;  (ii)  digital  signal
processing  (DSP)  systems and electromagnetic wave  filters  for
differentiation among discreet audio and radio frequencies; (iii)
audio  transmitters  and modulators, for  the  transmission  over
telephone  lines, microwave circuits, or satellite, of electrical
signals  obtained from transducers, data generated in  electronic
code  form  or  by  computers  or other  similar  equipment  (not
manufactured   by   the  Company);  (iv)  audio   receivers   and
demodulators which are small systems which receive and decode the
signals from the audio transmitters and convert them into digital
codes  for  input  into  computers, teletypes  or  other  similar
equipment  (not  manufactured by the  Company)  or  convert  such
signals  into mechanical or other form of energy, such as opening
or  closing valves, or starting or stopping a motor; (v) magnetic
"networks" which are devices that permit the matching or coupling
of  different types of communication equipment together  or  many
identical  or  similar equipment together or  onto  telephone  or
other  transmission  lines so as not to cause  interference;  and
(vi)   analog  transmitters  and  receivers,  which  permit   the
coding/transmission  and  receiving/decoding  of   a   constantly
variable data, such as the water level in a tank, pressure  in  a
pipe or temperature, by actually displaying the exact information
at the receiving end in digital form for storing in a computer or
other devices, or by physically displaying the information  in  a
visual  fashion such  as a  numerical readout or meter, and (VII)
multiplexer supervisory controls, which enable  callers with high
volumes of supervisory data to transmit on fewer phone lines.

     Such  products  are  used in radio and other  transmissions,
telephones  and  telephone exchanges, air  and  traffic  control,
automatic  transmission  of data for utilities,  tele-printing  of
transmitted  data such as news and stock market  information  and
for  use  by  electric utilities in monitoring power transmission
lines  for  faults and/or failures. The Company's products may be 
used independently or in combination with other products to  form  
a system  type configuration,  whereby the Company's equipment is 
pre-assembled in a large  cabinet  with  other equipment   in   a
configuration that would provide the end user with protection  as
well as operational status displays.

Present Status/Business Product Description

     The  Company is presently engaged in four basic market segments:
          
          (A)  Commercial Sales (Under the trade-name " INIVEN" (a
               Division of Conolog))

	- Direct sales to end users

	- Sales to system assemblers

	- Sales to contractors/installers

              (B)  Military  Sales  - Direct contract  sales  to  the
               military

                         - As subcontractor to systems producers
                         - Foreign governments

          (C)  Commercial Sales - As Manufacturing  Subcontractor
               to Systems Producers.

	    (D)  Other Ventures -Short and long term qualified engineering 
               and technical services as well as human resource consulting
               (Under the trade name "Atlas Design")

(A) Military Sales

     Since  1992 the Company's engineering staff is dedicated to 
"INIVEN"  commercial  designs and does  not  engage  in  any  new
designs   for   military  applications.   The  Company   actively
participates  in  bids  only for parts the Company  has  designed
since  inception in 1968.  Presently there are approximately  400
designs  that  are  applicable  to  these military sales.  

  Military sales  are primarily for the Company's electromagnetic  
wave filters used in military radios, vehicles  (cars,  trucks or  
tanks),  portable  (backpack),  special signaling equipment   and   
exchanges  (as in  field command posts), weapon/missile  guidance 
and control (Patriot missile, Tomahawk, Pave-Paws), torpedo active 
signal recognition and differentiation mounted  in  the nose cone 
of the torpedo  (MK-30, Captor, MK-50 torpedoes),  ship  to  ship 
teletype signaling  filters  used  in deployment  of ships (UCC-1 
and UCC-4 systems) as  well as many other signaling  applications  
where  accurate  electromagnetic frequency control is required.

     The  Company  markets the above military sales directly  and
through  independent  manufacturing sales  representatives  on  a
commission basis.

B) Commercial "INIVEN" Sales and Products

     "INIVEN" equipment is designed around four (4) core  product
      groups:

          (1)  PTR Teleprotection Series
               (Protective  Tone Relaying Communications Terminal, 
                which includes the PTR-1000 and the PTR-1500,under
                development and designed  exclusively for GE    to
                market.
          (2)  Audio Tone & Telemetry Equipment
               (Audio   Tone  Control,  Telemetering   and   Data
               Transmission Systems), which includes Series "98",
               "68", "40" and "GEN-1".
          (3)  Multiplex Supervisory Control System
          (4)  Communication Link Multihead Fiber Optic Couplers
               and Industrial Grade 1200 Baud Modems.

(1) PTR-1000 Teleprotection Series

     This  product  is designed for use exclusively  by  electric
power  generators (electric utilities and cogenerators) in  order
to  protect their transmission and distribution lines.  The  PTR-
1000,  by  monitoring  the  output  signal  of  the  transmission
equipment  in  less  than one hundred of a  second  protects  the
transmission and distribution lines.

     The PTR-1000 are installed in pairs, one unit at each end of
the  line.   Each unit is connected and in constant communication
with the other, as they continuously monitor the line for faults.
In  the  event of a fault occurring (such as a downed line  or  a
short  circuit) at either end and when confirmed by the receiving
PTR-1000  unit, the line is immediately isolated for  shut  down,
averting costly damage and downtime.

     The  PTR-1000  system  is composed of  a  transmitter,  dual
receivers,  a  logic  card (brain center and  controller  of  the
system),  relay  module, line interface module and  power  supply
module.   The  transmitters  at  each  end  are  independent  and
transmit  (continuously) the status (information being monitored)
at their end of the line.

     In  the event of a fault, the information is transmitted  to
the  PTR-1000 at the other end of the line and once confirmed  by
both  its  receivers  (this duality is designed  such  that  both
receivers  must agree before any action is taken), it will,  when
programmed to do so, isolate that end of the line. Generation and
distribution  of  electric power entails expensive  equipment  at
both   ends   of  the  line.   Faults  causing  interruption   of
transmission can cause costly replacement of failed equipment and
loss of revenue caused by downtime for repairs.

          The PTR-1500, designed exclusively for GE in accordance with 
a seven year agreement,  is a quad system and performs as 2 duals
or  4 singles  with many  unique  features such  as multiple line
operation, event recording with  date stamp with  optional analog
or digital transmission modes including optic fiber interface.

     The PTR Teleprotection Series is  designed  for  global  use  
by electric utilities and any entity generating power for its own 
consumption with  resale of surplus power to an electric utility,  
such   as  cities,   municipalities,   cooperatives  and  large  
corporations  that find it  more economical to generate their own
electricity.

    The PTR-1000 target market is worldwide, as follows:

    New   installations;  i.e.,  new  transmission  lines,   new
    distribution segments, for utilities and cogenerators.

    Existing  installations  not properly  protected,  improving
    efficiency and down time.

    Existing installations for upgrading to PTR-1000 technology,
    again improving efficiency and down time.

     Sales efforts for the PTR-1000 are presently being conducted
by   the  Company's  marketing  executives,  through  independent
manufacturers'  representatives and through distributors.   Sales
are   targeted  primarily  to  the  largest  utilities  and   co-
generators.

     According  to  McGraw-Hill, Inc. Electrical World  (Electric
Utilities  of  the  United States), in the United  States  alone,
there  are over 500 large entities generating electricity.   They
are:

    Investor-owned
                                     
    Municipal Systems

    Cooperative Systems

    Federal, State and District systems.

     To  date , the Company has sold and delivered approximately 1000
     PTR-1000 sets to 14  utilities  and 3  municipalities,  most of 
     which are installed and in service.



(2) Audio Tone and Telemetry Equipment

     For  many  years  there  has been a  need  for  a  modularly
independent system that would permit a user, from a distance,  to
control  functions  such as opening a valve,  starting  a  motor,
shutting  down  a compressor, changing a traffic signal,  control
landing  lights  at an airport, activate a hazard  warning  on  a
highway,   and  in return allow the user to receive  information,
such  as the liquid level in a tank, the pressure in a pipe,  the
rate of flow out of a compressor, the flow of traffic, the status
of  a  traffic  light,  airport lights, or  confirmation  that  a
command  was  performed.   Such information  is  transmitted  and
received  and the control functions are performed from a distance
utilizing telephone lines, microwave link or direct wire.

     These  applications,  by their nature, can  be  accomplished
with  slow  speed signaling systems composed of a transmitter  on
one  end  and a receiver on the other to carry out the  necessary
instructions   provided   by   the   transmitter.     Each    set
(transmitter/receiver combination) is called a channel.   Because
of  the  slow speed, up to 30 channels could be made to  transmit
and  receive  signals, in either direction on a single  telephone
line, microwave link or direct wired line at the same time.  This
parallel transmission permits each transmitter/receiver  pair  to
be independent of all the others.

     This   product   segment  includes  the   first   generation
equipment,  known  as GEN-1, followed by later generations  which
include  technological improvements and programmable capabilities
to include:


    GEN-1 Series - First  generation with electromagnetic modules 
     and first  generation  programmable modules without electro-
     magnetic modules.

    "98" and "68" Series - The  latest generation applies DSP and
     microprocessor technology with full programmability,  in the
     field or at the factory.

    "40" Series  -  Designed to function with the  "98"  or  "68" 
      series; transmits and receives variable analog data.

GEN-1 and GEN-1 Programmable Series

     The  diversity of applications for this equipment  makes  it
available for  a wide range of users who are not restricted to  a
single   industry.    Typical  industrial   uses   include:   the
measurement  of  water  and  gas,  waste  water,  gasoline,  oil,
traffic, and electricity.  Typical users include: utilities,  co-
generators, airports, navy yards, telephone companies, paper  and
pulp  processors and wherever remote control and data acquisition
is required.



     Because of the ease of use and installation, there is   much
GEN-1 type equipment installed and used in the United States by a
wide spectrum of diverse users.  Since the Company's  line has  a
distinct mechanical configuration, the Company designed its GEN-1
Programmable  units  and other improvements as  replacements  for
existing  units.   These  account for approximately  18%  of  the
Company's commercial sales. The Company's line of GEN-1 equipment
is  extensive and provides the user with the ability  to  perform
multiple  control  functions,  status  monitoring  as   well   as
continuous variable data monitoring, such as a level in a tank or
pressure gauge.

     Sales  for  this  line are primarily for the replacement  of
existing  installations and for expansion of these  installations
where   it  would  not  be  economical  to  install  the   latest
technology, which would not be mechanically compatible.

     Sales to this market are made in the same manner as the PTR-
1000   market   except   that    manufacturers'   representatives
specialize in selling to this diverse market.


"98," "68" and "40" Series

     These  series represent the Company's latest designs in  the
audio  tone equipment utilizing the more advanced DSP technology,
which  provides  high  accuracy and long term  stability.   These
features  have allowed the Company to greatly improve the  scope,
density and number of functions that can be performed on a single
phone line, microwave link or direct line.

     Given  this technology and the high-reliability and  quality
standards  of  the Company's products, the Company  began      in 
the first quarter of 1994 to offer a 12 year warranty for  all of  
its  commercial  products.  This  warranty  has  been   favorably
received  by  customers.   Based upon its  past  experience,  the 
Company  does not believe that its extended  warranty will result 
in any material repair or replacement expenses.

     Sales  of  these products are made by the same  agents  who
sell  the  Company s  GEN-1 products, but are  also  directed  to
encompass  more sophisticated users with larger amounts  of  data
and  control  points.  The mechanical configuration of  the  "98"
series  is  more compact, permitting more equipment  in  a  given
space,  while performing many more functions when it is connected
to  the  "40"  Series.   The  "68"  Series  is  the  "98"  Series
repackaged  mechanically specifically for  customers  with  older
systems  permitting  them  to  upgrade  their  systems   to   DSP
technology.  The "40" Series, when connected to the "98" or  "68"
in  the  same  chassis,  permits  the  continuous  monitoring  of
variable  data.  Typical applications for these products  include
transmission  of the variable data (such as volume,  temperature,
pressure  and moisture) for water, gas, industrial gases,  oil  ,
gasoline,  transportation equipment and telephone exchanges,  and
for  use  at  airports, tunnels and bridges and for security  and
electricity systems.

(3) Multiplex Supervisory (IM) Control System

     This  product  is  a response to the cost  and  scarcity  of
dedicated  phone  lines (connections whereby the  phone  link  is
dedicated  to  one subscriber), and enables customers  with  high
volumes  of supervisory data (where many functions are  monitored
from  a single site) to transmit data on fewer phone lines (i.e.,
with  more  data per channel, up to a maximum of 30 channels  per
line).

     Using  the  "98" DSP Series as its communications link,  the
Company  designed the Multiplexer Supervisory Control  System  to
handle   8   times   the  normal  capacity  per   channel.    The
microprocessor  based system allows a single  telephone  line  to
handle up to 900 data inputs.

     This  product line, because of its data density  capability,
may  be  utilized  for a very broad range of applications.   This
product  has only recently been introduced and the Company  sales
efforts   for  it  are  being  conducted  through  its   existing
independent manufacturers sales representatives.

(4) Fiber Optic Link and Data Modem

     The  expansion of fiber lines by the Company's customers and
their need to switch equipment from phone lines to fiber prompted
the Company to design and introduce a fiber-optic-coupler line to
interface  with the many different fiber heads.  In  addition  to
complete data interface couplers the Company launched a series of
1200  Baud Modems (Industrial Grade) for operation under the same
environmental specifications in line with the Company's products.

(C) Commercial Subcontract Manufacturing to Systems Producers

     Since  the downsizing of the American Military, the  Company
has  actively sought manufacturing subcontract orders to fill the
production   void  created  by  the  severe  drop   in   military
production.   In  June 1996 the Company  negotiated  and  entered
into  a  renewable  annual agreement with  the  General  Electric
Company,   GE  Electrical  Distribution  and  Control   and   its
participating  affiliated companies for the manufacture  of  sub-
systems, board assemblies and magnetic filters and other products
consistent  with  the Company's expertise.  The success  of  this
agreement  has  prompted  the  Company  to  pursue  other  system
producers  to  more  fully  utilize the  Company's  manufacturing
capacity.

On April 1, 1997, the Company signed an  exclusive   distribution
with the General Electric Company to develop and manufacture   an
advanced tone protection series product, the PTR 1500.  Under the
terms of the agreement, General Electric plans  to  market    the 
product world wide beginning in 1999. ( SEE: Recent Developments).




Recent Developments

The Company delivered the first production PTR 1500 series tone   
protection products to General Electric for evaluation in May 1998.
These units were part of the 7 year exclusive and renewable OEM 
Purchase Agreement with GE Power Management a subsidiary of General
Electric Corporation (GE).  The PTR-1500 will be marketed as the 
GE Model NS50 and will have many advanced features including quad
channels and optional addressable status and event recorders. The  
design of the prototypes for the PTR 1500 series were essentially  
completed  during  fiscal 1997 and  production boards were included 
in inventory at July 31, 1997. Upon acceptance by GE, the Company 
intends to commence shipping production units for delivery during 
fiscal 1999.

The Company's new INIVEN Multiplexer  was tested  for 2 way radio 
operation to  provide  8  analog  and 16 status    functions  bi-
directionally at a single site.  The  Company introduced this radio 
link product line in the second half of 1998.

In September 1998, the Company completed the sale of its building
resulting in $717,000 net proceeds to the Company.  The transaction
also provides for a three year rent-free lease to the Company of
approximately 38% of the total space.

Also in September 1998, the Company completed the acquisition of the
assets of Atlas Design, Inc. for $145,000 in cash.  Atlas Design provides
short and long term qualified engineering and technical staff to the
country's leading companies as well as human resource consulting. 
Atlas Design's integration with the Company will provide a pool of 
project engineering leaders and software designers in support of 
the Company's longer term contracts including the GE PTR-1500 series.

Both the sale of the building and the acquisition of Atlas Design, Inc.
is in line with the Company's expansion plan through acquisitions, mergers
and GE software support.

Public Offering, August 16, 1995

     On  August 16, 1995, the Company offered 235,750 Units  (the
"Units") at a price of $10.00 per  Unit.  Each Unit consisted  of
two  (2)  shares  of  Common Stock, par  value  $1.00  per  share
("Common  Stock"),  and one (1) Redeemable Class  A  Warrant  for
Common  Stock ("Class A Warrant").  The Common Stock and Class  A
Warrants  were  immediately detachable and separately  tradable.
Each Class A Warrant entitled the holder to purchase one share of
the  Company's  Common  Stock, at an  exercise  price  of  $6.00,
subject  to  adjustment, from August 17, 1996 through August  16,
2002 (extended from August 6, 1998).   The  Class  A Warrants are 
subject to redemption  by  the Company at anytime after August 17, 
1996 on not less than 30 days notice  at $.05 per  warrant, provided 
the average closing  price of the Common Stock for 20 consecutive 
trading days ending within 15 days prior to the notice exceeds $7.20 
per share.

     The  costs  of the offering were deducted from the  proceeds
from the sale of stock.
     On  August  16, 1995, the Company effected a 1-  for  -  100
reverse  stock split of its Common Stock on all shares of  Common
Stock outstanding.

     On  August  16,  1995,  holders  of  19,360  shares  of  the
Company's  Series B Preferred Stock (including Robert  Benou  and
Arpad J. Havasy, officers and directors of the Company) converted
their shares of Series B Preferred Stock into 387,200(3,872 post-
split) shares of Common Stock.

     On  August  16,  1995, $381,533 of the $420,179  of  accrued
dividends  on the Series B Preferred Stock at December  31,  1994
were  converted into 76,307 shares of Common Stock (represents  a
$5.00 per share assigned value of Common Stock) and the remaining
dividends  due  to  such  holders (including  Messrs.  Benou  and
Havasy) were waived.

        On  August 16, 1995, accrued salaries through April 28, 1995
of  $309,109 owed by the Company to Mr. Benou were converted into
61,822  shares  of  Common Stock (represents a  $5.00  per  share
assigned value of Common Stock).

     On  August  16,  1995, in connection with  the  August  1995
Offering,  the  Bank exchanged their existing loan agreement  for
the following:

     (a)  $250,000 cash
     (b)  $1,025,000 five-year term loan
     (c)  375,000 common shares of the Company

     The  debt forgiveness of $1,232,728 on restructuring of  the
obligation less the tax benefit thereon is accounted  for  as  an
extraordinary gain to the Company.

Public Offering January 21, 1998

On January 21, 1998 the Company offered to the public 700,000 units 
(the Units) at a price of $5.00 per unit.  Each Unit consisted of one 
(1) share of Common Stock, par value $1.00 per share (Common Stock), 
and four (4) Redeemable Class A Warrants for Common Stock (Class A 
Warrants).  The Common Stock and Class A Warrants are detachable and 
trade separately.

Each Class A Warrant entitles the holder to purchase one (1) share of 
the Company's Common Stock, at a exercise price of $6.00, subject to 
adjustment, from January 22, 1998 through August 30, 2002.  The Class 
A Warrants are subject to redemption by the Company commencing the 
earlier of (i) 24 months from the date of the offering or (ii) 12 
months from the date of the offering, with the consent of the underwriter, 
on not less than thirty (30) days notice at $.05 per Class AWarrant, 
provided the average closing price of the Common Stock exceeds $7.20
per share for twenty (20) consecutive trading days ending within fifteen
(15) days prior to the notice.

On March 6, 1998, the Company raised an additional $110,055, net of 
expenses, from the sale of an over-allotment of 25,300 shares of the 
Company's common stock.

The offering raised $2,788,642 cash, net of offering costs.

STRATEGY

     The Company's strategy is to exploit new commercial  markets 
by  continuing  to  develop  new  products  and  enhance existing 
products  to  improve  both  its  market  share  and  competitive 
position.  Growth in commercial sales is expected to come through 
internal growth of  existing products,  new product introductions 
and the expansion of regional  markets to meet  the growing needs 
of   its  customers  for  more  sophisticated  and  comprehensive 
products  and  services.  The  Company  introduced  a fiber optic 
digitizer during fiscal  1996.  The  Company believes the largest 
growth  opportunity  remains  with  the  electric utility market, 
although it intends to reach other industrial and utility markets
such as railroad and waste water, respectively. The Company began
an  advertisement  program  during  1996  and devoted substantial 
resources as available for promotion.  The Company  intends    to  
participate in various trade  shows,  such  as  the     Utilities 
Communications Council and IEEE/PES during the forthcoming year.

The Company  will  continue  to seek out and broaden its  base of
manufacturer reps, other marketing  strategies and acquisitions
to  strengthen its market presence in both areas.

MARKETING AND SALES

     In general, the Company's products are marketed by means  of 
telemarketing and customer contacts by the Company's direct sales
force and through independent manufacturing sales representatives
and distributors.

     MILITARY -  The  Company markets its military sales directly 
and through independent manufacturing sales representatives.

     COMMERCIAL -  The  Company  markets the PTR-1000 by means of 
Company  Sales  personnel,  through  independent   manufacturers 
representatives, and through distributors, focusing mainly on the
largest utilities and co-generators.   In the United States alone 
there are over 500 large  entities  generating  electricity which 
are  identified as investor-owned, municipal systems, cooperative 
systems  and federal,  state and district  systems.   The Company 
intends  to  expand  its  sales  efforts  and  expand  sales  to 
international markets.  The Company markets its  Gen-1 and  Gen-1 
Programmable Series, as well as its "98" Series,  "68" Series and
"40"  Series,  in  the  same  way as the PTR-1000 except that the 
manufacturers  representatives  used by the Company specialize in 
selling to the diverse markets that utilize such products. 
    







Competition
     The market for the Company's  products is very  competitive.
There  are  several  companies  engaged  in  the  manufacture of 
products  of the type produced by the Company, most of which are 
substantially  larger  and  have  substantially  greater  name 
recognition  or greater  financial  resources  and personnel. The
major competitive factors include product quality and reliability
price, service and delivery. Competition is expected  to continue 
and  intensify.    The  market  is  also  characterized  by rapid 
technological  changes  and  advances.    The  Company  would  be 
adversely  affected  if  its  competitors  introduced  technology 
superior  products  or offered  these  products  at significantly 
lower prices than the Company's products.

Largest Customers

     Sales to the Company's major customer during fiscal 1998
(Bonneville Power Authority) totaled $205,868 (27.5% of all 
sales).  Sales to the Company's two major customers during 
fiscal 1997 (General Electric and Bonneville Power Authority)
totaled $255,500 and $200,000 respectively (22.7% and 17.8%, 
respectively of all sales).  Sales to the Company's major 
customer  in fiscal  1996 (B.C. Hydro-Canada) totaled $380,000 
(19.7% of all sales). None of such customers has or had any 
material relationship other than business with the Company.  

Raw Materials

 Inventory

     The  Company  believes that it has  adequate  sources of raw
materials  available  for use  in  its  business.  The  Company s 
products are  assembled from  a  variety  of  standard electronic 
components, such as integrated circuits, transformers, transistors, 
passive components ( i.e., resistors,  capacitors and inductors),
diodes and assorted  hardware  such  as  printed  circuit boards, 
connectors  and faceplates. The Company is not dependent upon any 
single supplier.   The Company  also  purchases a number of other 
electronic  components and sub-assemblies from various suppliers.  
There  has  been  no  material  increase  in the cost of most raw 
materials  and  the  Company  has  no  reason  to  anticipate any 
significant shortage of raw materials in the future.  The Company 
generally is required to maintain adequate amounts of raw material 
and parts inventories to meet delivery requirements  of customers 
and to assure itself of a continuous availability of these items.

     In  the  past  the  Company  manufactured  and held  in  its 
inventory   finished   products   pursuant   to   the    military  
specifications and based  upon the military   forecast for future 
quantities   and   delivery   schedules.   Widespread    military 
procurements were discontinued as a result of the end of the cold 
war  and  the  downsizing   of   the  military     establishment.
Consequently,  management  made  a decision  to   write off    a 
substantial amount of the  military   inventory.  As a result  of
the Company no longer manufacturers military product in   advance.
Rather, it only schedules   production  as  purchase  orders  are
received. 

During fiscal 1998, the Company wrote off $410,759 of its inventory
as obsolete.

Manufacturing

     Of the 15,700  square  feet  that  the  Company  occupies at 
5 Columbia Road in Somerville, NJ,  approximately  10,000  square
feet are dedicated to manufacturing. The Company assembles, under 
normal  workload  conditions,  all  the  product  it  sells.  To 
accommodate the  peak demands that occur from  time to  time  the 
Company  has  developed a  number of  subcontractors to  assemble
boards to the Company's specifications.  All assemblies, however,
are  inspected  and  fully  tested  by  the  Company's   quality, 
engineering and testing departments.  The Company maintains  test 
equipment and every product is burned-in  (i.e., each  product is 
run at full power for 48 hours) and tested prior to shipment. This 
control, together  with  design  reliability,  has  permitted the 
Company  to  offer  a  12-year  warranty  on  all  its commercial
products.

In September 1998 the Company sold the building and its improvements 
and is leasing back approximately 38% of the total space of the 
building in a three year rent-free lease.

Warranty and Service

     The Company provides a twelve year warranty on its  products
which covers  parts  and   labor.  The  Company, at  its  option,
repairs  or  replaces  products  that  are found defective during 
the       warranty   period   providing    proper      preventive   
maintenance  procedures have been  followed by customers. Repairs 
that  are  necessitated  by   misuse  of  such  products  are not 
covered by the Company's warranty.

     In cases  of  defective  products,  the  customer  typically
returns them to the Company's facility in Somerville, New Jersey.  
The  Company's  service  personnel  then  replace  or  repair the 
defective items and ship them back to the customer. Generally all 
servicing is  completed  at the Company's plant and customers are 
charged a fee for those service items that are not covered by the 
warranty.  The Company  does  not offer  its customers any formal 
written service contracts.

Research and Development

 New Products

     Prior to fiscal 1997, amounts  expended  by the  Company  in 
recent years  for  research  and development activities have  not  
been   material.  During fiscal 1997-98,  the  Company  invested 
approximately  $1 million for the design and development of the PTR 
1500  for  General Electric.   The   Company   completed the PTR-
1000  series  option  modules  and the standard  modules  of  the  
PTR-1500  Quad  Series  to be sold exclusively worldwide by GE as
its Model NS50.  The first prototypes were delivered in May 1998.
( See: Recent Developments).
    During 1996,  the Company invested  financial  resources  to  
design  a fiber optic  digitizer  and a 1200  baud modem  to  be    
sold separately or jointly with INIVEN products.    This product 
enables the Company's INIVEN products to transmit directly onto
fiber optic cables, and opens a new market for the Company's products. 
The Company intends to add designs that will extend its product   
capability to handle  new data  inputs  not presently available.     
There can be no assurance that the Company will be able to successfully 
develop and add designs to its products.

Patents and Trademarks

     The  Company does not have any patents covering any  of  its
present products.  The Company uses the trademark INIVEN for  its
commercial products.  The Company believes that such trademark is
recognized in the Company's industry.  The Company believes  that
its  prospects are dependent primarily upon its ability to  offer
its  customers  high  quality, reliable products  at  competitive
prices  rather  than on its ability to obtain and defend  patents
and  trademarks.  The Company does not believe  that  its  INIVEN
trademark is of material importance to the Company's business.

Backlog

      As  of  July 31,  1998,    the  Company  had  a  backlog  of 
approximately $1.4  million.  It is anticipated that this backlog  
will be filled during the  balance of calendar year 1998 and  the  
1999 fiscal year ending  July 31, 1999.  As of July 31, 1997 and  
1996, the Company had  a  backlog  of approximately   $2,900,000     
and $3,400,000, respectively.

The backlog of orders for the Company's PTR 1000 series of product
consists of multiple blanket contracts at fixed    prices  for the 
duration of the contract. There is no obligation or penalty if the 
contracts expire prior to additional orders being placed for the 
total value of the contract.

Governmental Regulation

     The Company's manufacturing facilities, in common with those
of  industry  generally,  are subject to  numerous  existing  and
proposed  Federal and state regulations designed to  protect  the
environment,  establish occupational safety and health  standards
and   cover  other  matters.   The  Company  believes  that   its
operations are in compliance with existing regulations  and  does
not  believe  that  such compliance has  had  or  will  have  any
material  effect  upon  its  capital  expenditures,  earnings  or
competitive  position.   With  respect  to  military  sales,  the
Company  is not subject to any special regulations.  The products
manufactured  are done so in accordance with accepted  commercial
practices.

Renegotiation

     No  material  portion  of the  Company's  business  has been
subject  to  renegotiation  of  profits  at  the  election of the 
Government since 1987.  

Seasonality

    The business of the Company is not seasonal, but is sensitive 
to general economic factors, such as interest rates, availability 
of  credit  for capital  purchases,  overall business climate and 
general   business  outlooks  that  historically  impact  capital 
purchase decisions.

Foreign Sales

     During  fiscal 1998 and 1997, the Company did not have any foreign
sales.  The company had approximately $380,000 in foreign sales to  
British Columbia  Hydro Power Authority, Inc.  during fiscal 1996. 

Employees

     As of July 31, 1998,  the Company employed  20 persons  on a 
full-time basis,  including  2 in management,   1 in sales,  1 in 
clerical, 1 in  accounting, 1 in purchasing, 3 in engineering and 
11 in production.   The Company has enjoyed good labor relations. 
None of the Company's  employees are represented by a labor union 
or bound  by a collective bargaining agreement.   The Company has 
never suffered a work stoppage.   The Company believes its future
success will depend, in part, on its continued ability to recruit
and retain highly  skilled  management,  marketing  and technical 
personnel.


Item 2. PROPERTIES

     The  Company  owned  facility,  which  management  considers 
adequate for  the  Company's present  requirements, is located at 
5 Columbia  Road,  Somerville, NJ.   This  facility is  used  for 
manufacturing,  sales  and  its  executive  offices and comprises 
15,700 square feet.


In September 1998, the Company sold the building and improvements
in a sale/leaseback transaction in which the Company is leasing 
approximately 38% of the total space in a three year rent-free lease.

Credit Facility

Background
     
     On  October  25, 1994, the Company and Chase Manhattan  Bank
(as successor by mergers with Manufacturers Hanover Trust Company
and Chemical Bank) (the "Bank") restructured the Company's credit
facility   ("Credit Facility") between the Company and  the  Bank
that had been in effect since April 5, 1989.







     Under  the restructured terms the Credit Facility  had  been
extended as follows:

          (i)       Interest on the  Credit  Facility  was    to             
           accrue but  not  be payable until    July 31,   1995.   
           Beginning on that  date, interest payments were to be  
           made  in  arrears  on  the  last day  of each  month,    
           with  all unpaid interest previously accrued becoming 
           due  and payable on November 30, 1995.
          
          (ii)       All  principal  on the Credit  Facility  and
            other  amounts owing to the Bank would become due and
            payable November 30, 1995.

     The  principal amount owing to the Bank at January 31,  1995
was  $3,789,000 and the unpaid accrued interest was $584,728. The
interest  rate  on the Credit Facility  was 9.75% at   January 31,
1995.

     To secure  payment under  the  Credit  Facility, the Company
granted the Bank a first priority lien on all accounts receivable, 
inventory, equipment and general intangibles  of  the Company and 
a lien on the Company's real property located  at 5 Columbia Road, 
Somerville, New Jersey 08876.

     Payment of liabilities of the Company to the Bank under  the
Credit Facility was guaranteed  by Robert S. Benou, President  of
Company, to the extent of $965,000 and Arpad J. Havasy, Executive
Vice  President  of the Company, to the extent of  $492,500,  and
each  had  pledged all of his Common Stock and Series B Preferred
Stock to the Bank to secure their respective guarantees.

Terms in Connection with August 1995 Offering

     In connection with the August 1995 Offering the Bank and  the 
Company agreed to restructure the Credit Facility as follows:

The  Bank  received  from  the proceeds  of such  offering a cash  
payment  of $250,000  (the "Cash Amount").   The  remaining debt, 
after  giving effect  to   the  payment  to the  Cash  Amount was
restructured as follows: (1) $1,025,000 was structured as a five-
year term  loan (the  "Term Loan") bearing interest at the Bank's 
Reference  Rate plus  125  basis points,  to be amortized over 10 
years; $50,000 per year for the first two years, $100,000 per year 
in the third  and fourth  years  and  $112,500 in the fifth year.  
After  the  fifth year, the balance  of the  payments  was  to be
renegotiated  at  the Bank's  option; and secured by the existing 
collateral;  and (2) all  debt owing to the Bank in excess of the 
Cash Amount and  the Term  Loan was converted into 375,000 shares 
of Common  Stock  of the Company (the "Bank Shares").

In addition,  the Bank   released   the   existing     guarantees 
of Messrs. Benou and Havasy on the effective  date of the  August  
1995 Public  Offering.  Finally,  pursuant  to  the restructured  
1996 Credit Facility the Bank was granted the  right  to appoint  
a  member  to  the Company's Board  of  Directors

     The  debt forgiveness of $1,232,728 on restructuring of  the
obligation less the tax benefit thereon is accounted  for  as  an
extraordinary gain to the Company.

Credit Facility and Agreement with CNL Holdings, Inc.

     The  principal amount owing to the Bank under the  Company's
Credit  Facility at June 30, 1996 and amended as of January 1,1997
was  $1,012,500 and the unpaid accrued interest was $48,850.  The 
Bank  and  the  Company  entered  into  the  Conolog  Corporation   
Allonge  (dated  as of  September 11, 1996) pursuant to which the  
Amended  and   Restated  Term Note  dated   as of  August 2, 1995 
between the Company and the Bank (the  "Note") was further amended 
to  permit the  conversion  by  the Bank  of the  unpaid principal 
and  interest  due  under  the Note into  1,400,000 shares  of the 
Company's Common Stock and provided for conversion to be exercised 
by the Bank or its assignee.     The Bank deferred all payments of 
principal and interest under the Note until April 16, 1997.

     Subsequently,  on  September  12,  1996  the  bank  and  CNL 
Holdings, Inc., a private investor group,  entered into an  Option  
and Purchase, Sale and Assignment  Agreement dated as of September
12,  1996  (the "Option  Agreement").   Under the Option Agreement  
the  Bank       granted  an option  to CNL to purchase  all of the 
Bank's interest in (i)the Amended and Restated Term Loan Agreement 
dated as  of  August  2,  1995  between  the Company and the Bank,
(ii) the Note and (iii) the 375,000 shares of the Company's Common
Stock owned by  the Bank.    CNL paid $150,000 to the Bank for the 
option, which  had an exercise  price of $1,500,000  (a balance of 
$1,350,000) and an expiration date of April 15, 1997.

     As part of the aforementioned transaction,    CNL     agreed
to   loan   up  to  $2,500,000  to  the  Company  under   certain
circumstances (as described below) and the Company    agreed   to
file a registration statement (the "Registration Statement") with
the  Securities and Exchange Commission to register  the  375,000
shares  of  Common  Stock owned by the Bank and  the    1,400,000
shares  of  Common  Stock  into which  the  Note  is  convertible
(collectively, the "Acquired Shares").  As of January 21, 1998
CNL Holdings, Inc. had loaned the Company $916,235 which was repaid
at the closing of the Company's public offering.

Each CNL loan carried interest at the rate of 4% per annum and became 
due 12 months from the date of such Loan.  At maturity, the Company had 
the option to pay each Loan, together with all accrued interest thereon, 
or by issuing shares of a new Series C Preferred Stock  (the  "Series C 
Preferred") having a value of $5.00 per share for purposes of such 
repayment.

Had the Series C Preferred been issued, it would have been non-voting and
carried a cumulative dividend of 8% per annum which would 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.  The Series C Preferred would have been convert-
ible into common stock at the rate of one share of common stock for each
share of Series C Preferred and had a liquidating preference of $5.00 per
share.

The Agreement also provided that for the two year period commencing on the 
issuance of any shares of Series C Preferred (the "Registration Period") CNL 
may have elected to include its Series C Preferred in any post-effective
amendment to the Registration Statement or any new registration statement
under the Securities Act of 1933, as amended.   In addition, the Agreement
also provided that during the Registration Period, CNL may have given notice
to the Company to the effect that it desired to register its shares under
the Act for public distribution in which case the Company would file a post
-effective amendment to a then current registration statement or a new
registration statement.   

     Management believes that these transactions benefited the Company and its 
stockholders.  The exercise by CNL of its option under the Option Agreement 
converted the Remaining Debt Claim. The Company had the opportunity to, in 
effect, exchange its debt for equity and eliminated the Company's default
under the Credit Facility.   

Bridge Loan

In December 1996 and January 1997, the Company obtained Bridge financing from 
seven (7) lenders in the amount of $200,000.  These lenders were the 
individuals 
identified as "Selling Security holders." In exchange for making the loans to 
the Company, each Selling Security holder received two  (2) promissory notes 
(the "Bridge Notes").    Certain Bridge Notes were in the aggregate principal 
amount of $150,000 (the  "Principal Bridge Notes") and the other Bridge Notes 
were in the aggregate principal amount of  $50,000  (the "Convertible Bridge 
Notes").   Each of the Bridge Notes bore interest at the rate of eight percent 
(8%) per annum.

The Bridge Notes were due and payable upon the earlier of (i) January 31, 1999 
or  (ii) the date on which the next public offering closed.   The Convertible 
Bridge Notes were convertible into a total of 1,200,000 Class A Warrants.  The 
proceeds of the bridge financing were used by the Company to pay certain 
expenses in connection with this offering and to increase working capital.  
Each Class A Warrant contained in the Convertible Bridge Notes was identical
to the Class A Warrants offered therein.

The Company's agreement with the Selling Security holders provided that the 
Company would include in its registration statement a prospectus covering the 
Class A Warrants owned by the Selling Security holders. 

On September 12, 1997 the Company filed a Registration Statement on Form S-1 
with the Securities and Exchange Commission.   This statement covered the 
primary offering of securities of the Company and the offering of other 
securities by certain selling Security Holders.  The Company registered, under 
a primary Prospectus 805,000 Units, each Unit consisting of one (1) share of 
common stock and four (4) Class A warrants.    The selling Security Holders 
registered, under an alternate prospectus, 1,200,000 Class A warrants. 

The costs were subsequently deducted from the proceeds of the sale of stock.

The Bridge loans were repaid on January 28, 1998 at the closing of the 
Company's Public Offering.




Item 3. LEGAL PROCEEDINGS

The  Company  is  not  subject  to  any  material  pending  legal
proceedings.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

During the fiscal quarter ended January 31, 1997,  shareholders
of  the Company  approved  an amendment  to the  Certificate of 
Incorporation to increase the total number of authorized shares 
of all classes of  stock from 6,500,000 (of which 500,000 shares 
were classified as  Preferred  Stock  and  6,000,000  shares are 
classified  as  Common  Stock) to  22,000,000  shares  of which 
2,000,000 shares are classified  as  Preferred  Stock  and 
20,000,000 shares are classified as Common Stock.
    
       PART II

Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS

MARKET PRICE FOR COMMON STOCK AND CLASS A WARRANTS

     The Company's  Common Stock and  Warrants  are thinly traded
on  the Nasdaq SmallCap Market, under the symbols CNLG and CNLGW, 
respectively. Prior to the August 1995 Offering, the Common Stock
was traded on the OTC Bulletin Board.

        The following table sets forth, for the periods indicated,
the high and  low prices  of the Company's Units (which no longer
trade), Common  Stock and Warrants traded on the  Nasdaq SmallCap 
Market for 1996, 1997 and the first, second and third quarters of 
1998.  As of October 22, 1998, the Company's Common Stock was held 
by approximately 817 shareholders of record.

                  Units        Common  Stock        Warrants
                                                         
             High     Low      High     Low       High     Low
   1996                                                   
                                                        
   First     15.00    11.00     8.125    3.875     2.00     .9375
   Quarter                                                 
                                                        
   Second    11.25    11.25    6.5625   4.25       1.00    1.0156
   Quarter                                                
                                                     
   Third      __       ___     6.25     2.25       1.50     .5625
   Quarter                                

   Fourth     __       ___     3.875    2.375      1.25      .50
   Quarter





   1997

   First      ___     ____     5.875     3.00        .9375   .625
   Quarter

   Second     ___     ____      6.125    2.375      1.000    .375
   Quarter

   Third      ___     ____      5.675    2.250       .875    .250
   Quarter
 
   Fouth
   Quarter    ___     ____      4.250    2.500      1.000    .250



   1998
   First 
   Quarter    ___     ____      6.00     2.000      2.1875    .4375

   Second
   Quarter    ___     ____      3.875    1.375      1.000     .375

   Third
   Quarter    ___     ____      2.00     0.4375     0.4375    .0625

DIVIDENDS

Holders of Common Stock are entitled to receive such dividends as
may be declared by the Board of Directors of the Company. To date,
the  Company has  neither declared  nor paid any dividends on its 
Common  Stock or on its Preferred A or Preferred B share.     The 
Company anticipate that no such dividends will  be  paid  in  the  
foreseeable  future.  Rather, the Company intends to  apply   any 
earnings to the expansion and development of its  business.   Any 
payment of cash dividends on any of its securities in  the future  
will  be dependent    upon the future  earnings  of  the Company,  
including  its financial condition, capital requirement and other 
factors which the  Board  of Directors  deems relevant 




















Item 6.  SELECTED FINANCIAL DATA
                       Year Ended
                       July 31,
(in thousands, except   1998 	    1997      1996     1995    1994   
per share amounts)                                     

Operations Summary:
Net sales and other     $746     $1,123   $1,924   $2,091  $2,045
income                         
                                                                
Net income (loss)                                     
from                  (1,765)    (3,810)     292     (537) (1,183)
continuing operations
                                                         
Income (loss) from                                    
continuing operations                                 
per primary             (.54)     (2.41)    0.28     (0.12) (0.27)
share                                         
                                                              
Income (loss) from                                    
continuing operations                                 
after                                                 
giving retroactive                                    
effect to a 1 for         - 		 -        -     (12.36)(27.22)
100 reverse stock                            
split on August
16, 1995
Balance Sheet                                         
Summary:               
 Total assets       $4,819       $4,340    $3,928   $3,882  $3,739
 Long-term debt and                                    
capitalized lease      	 -         	  -        $5      $34  $3,830
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
     1998   1997    1996                1997 to     1996 to   1995 to    
                                        1998        1997      1996     
    100.0%  100.0% 100.0%   Sales &      (33.6%)   (41.6%)    (8.0%)      
                            other                                
                            income
    126.0%*  84.2%* 67.2*   Cost of       (0.5)    (27.9)    (32.9)
                            products                             
                            sold
    207.4   182.9   49.2    Selling,     (24.6)   (117.0)      3.4
                            general &                            
                            administrat
                            ive
      3.0     7.4    6.8    Interest     (72.9)    (38.0)    (51.8)
                                                                
    336.5   274.4  123.2    Total costs  (18.5)     29.9     (23.0) 
                            & expenses                            
   (236.5) (174.4) (23.2)   Income        (9.9)   (338.5)    (56.5)
                            (loss)                               
                            before
                            taxes
        -      .9     -     Income       (98.0)    494.2    (100.0)
                            taxes                                
                            (credits)
   (236.5)%(175.3)%(23.2)%  Loss before  (10.4)%          (339.0)%   (16.5)%
                            extraordinary                          
                            item

*    Includes write-offs for obsolete or excess inventory which were
$410,759, $28,101, and $50,281 in 1998, 1997,and 1996 respectively.














Results of Operations

1998 Compared to 1997

     Total revenue decreased $376,970 or 33% from $1,123,391 to 
$746,420 in 1998.  This decrease was attributable, in part, to
delays in the release of tone protection orders from the Bonneville
Power Authority and other utilities customers which the Company
attributes to budget constraints and the delay in the release of
its new advanced PTR1500 tone protection system.  The Company
shipped its PTR1500 prototype to the General Electric Company (GE)
in May 1998 for extensive electrical and environmental tests.  As
a result of these tests, the Company has agreed to and is presently
redesigning some modules to accommodate modifications requested by
GE to expand the product's range.  The Company plans to ship the
expanded prototypes in late 1998 and production models by the end
of the third quarter ending April 30, 1999.

1998 Compared to 1997 (Continued)

     Gross Margins, exclusive of inventory adjustments  for  the  
years ended July 31, 1998 and 1997 totaled $216,462 and $206,011
representing 29% and 18% of revenues. Gross margins for 1998 were
higher than 1997 due to efficiencies in lower operating costs.

     Selling, General and  Administrative expenses decreased from
$2,054,630 in 1997 to $1,548,446 in 1998 representing  a decrease  of
24.6% or $506,184. This decrease is attributable to less shares of
common stock being issued as compensation.

     Interest expense totaled $22,447 for the year ended July 31, 
1998 compared to $82,932 for the year ended July 31, 1997.  This
decrease was a result of the debt repayment from proceeds of the 
Company's Public Offering.

     As a result of the foregoing, the Company reported a net loss
of $1,765,390 or  $0.54 per  share. This compares to a net loss of 
$3,810,736 or $1.24 per share for the same period last year.

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   outstanding  loan    balances 
resulting from the paydown 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 $448,622 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.

LIQUIDITY AND CAPITAL RESOURCES

     Working capital at July 31, 1998 was $4,192,541 compared  to
$2,456,121 at year ended  July  31, 1997.  The improvement in the
working capital is primarily attributable to higher cash reserves
and lower debt due to the Company's Public Offering.

     Accounts receivable have decreased from $109,571 at year-end
July  31, 1997 to $44,477 at July 31, 1998.  This   decrease  of 
$65,094 is the result of lower average sales for fiscal 1998 
versus 1997.

     The Company plans to meet its cash requirements for the next 
twelve months through existing cash balances and cash generated from
operations . In  addition, the Company believes that it can obtain 
financing  from institutional investors secured by its assets, if 
necessary.      

Inflation

     Management  believes that the results of operations have not
been  affected  by  inflation  and  management  does  not  expect 
inflation  to  have a significant effect on its operations in the
future.


Y2K Issues

     The company has contracted a Y2K solution provider to review
its mainframe computer system for Y2K issues and to upgrade the
computer system to be Y2K compliant.  The Company anticipates that
the upgrade will be completed by fiscal year end July 31, 1999.
The Company is also in the process of contacting all of its major
suppliers to request  representations that their systems are or
will be Y2K compliant.  The Company is in the process of determining
the impact, if any, that third parties who are not Y2K compliant may
have on its operations.

	Management estimates that the cost of its Y2K compliance program
will be $5,000; In the event that this upgrade will not be ready, the
Company has a contingency plan that is not Y2K reliant.

	The Company's entire product line is not date sensitive and the
Company presently believes that there are no potential product-related
implications that may result from Y2K issues.






Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The financial  statements  of Conolog Corporation,  together

with notes and the Independent Auditors  Report,  are  set  forth
immediately following Item 14 of this Form 10-K.

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE

     None

                            PART III

Item 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

                           MANAGEMENT

Directors and Executive Officers

     The following table sets forth certain information regarding
the  officers  and directors of the Company as of July 31, 1998.

NAME AGE          POSITION

Robert S. Benou      64            President and Director

Arpad J. Havasy      62            Executive Vice President,
                                   Secretary, Treasurer and
                                   Director

Louis S. Massad      61            Director

Marc  R.  Benou      31            Vice President,  Assistant
                                   Secretary and Director
 
Edward J. Rielly     31            Director

Thomas Fogg          63            Vice President-Engineering


     Robert  S.  Benou has served as President and a Director  of
the  Company  since 1968.  Mr. Benou is responsible for  military
products,  new product development and supervision of  sales  and
marketing.  Mr. Benou is a graduate of Victoria College and holds
a BS degree from Kingston College, England and a BSEE from Newark
College  of  Engineering,  in addition to  industrial  management
courses  at Newark College of Engineering.   Robert S.  Benou  is
the father of Marc R. Benou.

     Arpad  J. Havasy has served as the Company's Executive  Vice
President  and Director since 1968.  Mr. Havasy is a graduate  of
Electromos  E's Gepeszeti Technikum (Hungary) and the  University
of  Budapest.   In addition, Mr. Havasy has attended  courses  at
both  Rutgers University and the American Management Association.
Mr. Havasy is on total disability.

     Louis  S.  Massad has been a Director of the  Company  since
April  1995.  Mr. Massad has been Vice President, Chief Financial
Officer  and  Director of Computer Power Inc.  since  1986.   Mr.
Massad holds a BS and MS degree from Cairo University (Egypt) and
an MBA from Long Island University, New York.

      Marc  R. Benou joined the Company in 1991 and is responsible
for  material, purchasing and inventory control.  In March  1995,
he was elected Vice President, Assistant Secretary and a Director.
Mr. Benou attended Lehigh and High Point University and holds
a BS degree in Psychology and a BS in Business Administration and
Management.   Marc R. Benou is the son of Robert  S.  Benou,  the
Company's President.
     
     Thomas  R. Fogg joined the Company in 1976 as Chief Engineer
responsible for analog and guidance projects.  Since  1986,  when
he  became Vice President-Engineering, he led the design team  in
the  development of the Company's commercial products.  Mr.  Fogg
holds a BSEE degree from Lafayette College and a MSEE degree from
Rutgers  University.  Mr. Fogg is a fellow of  the  Institute  of
Electrical and Electronic Engineers and has published articles on
delay equalization and the use of crystal resonators.

     Edward J. Rielly has been a Director of the Corporation since 
January 1998.  Mr. Rielly is an Application Developer with Chubb & Son.
From 1993 to 1998, Mr. Rielly was an Application Developer with the
United States Golf Association.  Mr. Rielly is a graduate of Lehigh
University and holds a BS in Computer Science.

     Directors hold  office  until  the  annual  meeting  of  the
Company's stockholders  and  the  election  and  qualification of
their successors.  Officers hold  office,  subject  to removal at
any time by the Board, until the meeting of directors immediately
following  the  annual  meeting  of  stockholders and until their
successors are appointed and qualified.

     Section 16 (a) Beneficial Ownership Reporting Requirements
     There were no delinquent or untimely filers during the fiscal
year.

Item 11. EXECUTIVE COMPENSATION

Executive Compensation

     The   following  table  sets  forth  the  cash  compensation
(consisting  entirely of salary) paid (or  accrued  for)  by  the
Company  to  its  President,  the only  executive  officer  whose
aggregate  remuneration exceeded $100,000 in each of the
three Company's fiscal years ended July 31, 1998, 1997 and 1996:







                      Summary Compensation Table

                    Annual Compensation      Long Term Compensation

Name and                             Other Annual        
Principal   Fiscal                   Compensation
Position   Year-End  Salary       Bonus (1)        Awards   Payouts

             1998    $170,000        0               0         0  
Robert
Benou,
President    1997    $150,000        0               0         0

             1996    $150,000        0               0         0
    
_________________

Incentive Stock Option Plan

     On May 15, 1995, the  Board  of  Directors  of  the  Company
adopted and on August 14, 1995,  the  shareholders  approved  the
Conolog Corporation 1995/1996  Stock  Option  Plan  ( the "Option
Plan").  The Option Plan is designed to  permit  the  Company  to
grant either incentive  stock  options  under Section 422A of the
Internal Revenue Code  (the "Code") or nonqualified stock options.
Under the Option Plan,  a  Stock  Option  Committee  (the "Option
Committee") of the  Board  is  authorized  to  grant  options  to
purchase up to 200,000 shares of stock to key employees, officers, 
directors  and  consultants of the Company.  The Option Committee 
administers the Option Plan and designates the optionee's, the type
of  options to be granted (i.e., nonqualified or incentive  stock 
options),  the  number of shares subject to the options, and  the 
terms  and  conditions  of each option.  The terms and conditions 
include the exercise price, date of grant, and date  of  exercise 
of each option.  An employee may, at the discretion of the Option
Committee, be permitted to exercise an option and make payment by 
giving a personal note.

     Incentive  stock options may only be granted to employees of
the Company and not to  directors  or  consultants who are not so
employed.  The exercise price for incentive stock options must be
at least one  hundred  percent (100%) of the fair market value of
the  Common Stock  as  determined  by the Option Committee on the
date of grant. All incentive stock options  under the Option Plan
must be granted within ten (10) years from  the  date of adoption
of the Option Plan and each option  must  be exercised, if at all,
within ten (10) years of the date  of  grant. In no event may any
employee  be  given  incentive  stock  options whereby more  than
$100,000 of options become exercisable  for  the first time in a
single  calendar  year.   All  incentive  stock  options must  be
exercised by an option within three (3) months  after termination
of the optionee's employment, unless such  termination  is  as  a
result  of  death, disability or retirement.   In  the  event  an
optionee's  employment  is  terminated  as  a  result of death or
disability, such optionee or his designated beneficiary  shall be
entitled to exercise any and all options for a  period  of twelve
(12) months after such termination.  If an  optionee's employment
is terminated as a result of  retirement,  the  optionee shall be
entitled to exercise his options for a period of twenty four (24)
months following such termination.

     Nonqualified  stock options  under  the  Option   Plan   are 
generally  subject  to  the  same  rules   as   discussed   above. 
Nonqualified stock  options  may, however,  also  be  granted  to
directors and  consultants,  whether  or not such individuals are
employees of the Company.    The  exercise price for nonqualified
stock options may not be granted at less than eighty-five percent
(85%)  of  the  fair  market  value  of the shares on the date of
grant.

     No incentive stock  options  or non-qualified  options  have
been granted.

EMPLOYMENT AGREEMENTS

     The  Company has  entered into a 5-year employment agreement
commencing June 1, 1997 and ending May 31, 2002, with Robert Benou.
Under his employment  agreement,  Mr. Benou will receive an annual
base salary of  $150,000 for the first  year of employment with an
increase of $20,000 beginning November 1997 and every   profitable
year thereafter.  In addition, Mr. Benou  is  entitled     to   an  
annual  bonus equal to 6% of the Company's annual "income   before
income  tax provision" as stated in  its annual Form 10-K.     The 
employment agreement also entitles Mr. Benou  to  the  use of   an 
automobile and to employee benefit plans, such as  life,   health,  
pension,  profit sharing and other plans.

Under  the employment agreement, employment terminates upon death 
or disability of the  employee and employee may be  terminated by 
the Company for cause.  The  company  intends  to  maintain  a $1
million life insurance policy  on the life of Robert Benou.  

     The  Company  has entered into a 5-year employment agreement
commencing  June 1, 1997 and ending May 31, 2002, with Marc Benou.
Under his employment  agreement, Mr. Benou will receive an annual
base salary of $55,000  for  the first year of employment with an
increase of $6,000 beginning June 1998 and every year thereafter.  

Mr. Benou  is  entitled  to  an  annual bonus equal to 3% of  the 
Company's annual "income before income tax  provision" as  stated 
in its annual Form 10-K.  The employment  agreement also entitles 
him to the use of an automobile and to  employee  benefit  plans, 
such as life, health, pension,  profit  sharing  and other plans.  
Under the employment agreement, employment terminated upon  death
or disability of the employee and employee  may  be terminated by
the Company for cause.  








On March 12, 1998, the Company entered into a five year employment 
with Dina Stellwagen to serve as Corporate Development Manager.  
Base salary is $50,000 per annum with annual increases of $4,000.
The agreement calls for the Corporate Development Manager to receive
a quarterly bonus of 5,000 shares of Common Stock that have not been
registered and eligible for sale under Rule 144 code.  The employment  
agreement also entitles her to the use of an automobile and to reimburse
her for all ordinary and necessary business expenses. Eligibility for 
all employee benefit  plans, such as life, health, pension, profit 
sharing and other plans is provided under the agreement, however, the 
Company is not obligated to establish or maintain any of the afore-
mentioned executive plans.  Upon termination without cause, the agree-
ment provides for severance compensation equal to 2.99 times the 
average annual compensation.


Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT

     The  following table sets forth the beneficial ownership  of
outstanding shares of Common Stock of the Company as of the  date
hereof  by any person who, to the knowledge of the Company,  owns
beneficially more than 5% of the outstanding Common Stock, by all
directors  of the Company, and by the directors and  officers  of
the Company as a group.
        

      Name and             Amount and        
      Address  of          Nature of                  After
   Beneficial Owner(1)  Beneficial Ownership        Offering

     Robert S. Benou        220,000                    5.8%

     Arpad J. Havasy         55,000                    1.5%
     
     Marc R. Benou           45,000            	       1.2%

     Louis Massad             5,000                     .1%

     Edward J. Rielly           500            		  .0%
 All Directors and Officers
 as a Group (5 persons)        325,500                 8.6%  

 (1)  The address for these individuals is c/o Conolog
Corporation, 5 Columbia Road, Somerville, New Jersey 08876.











 
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

                      CERTAIN TRANSACTIONS
     On August 16, 1995, the Company effected a 1-for-100 reverse
stock  split  of its Common Stock on all shares of  Common  Stock
outstanding as of that date.

     On  August  16,  1995,  holders  of  19,360  shares  of  the
Company's  Series B Preferred Stock (Robert Benou  and  Arpad  J.
Havasy,  officers and directors of the Company)  converted  their
shares  of Series B Preferred Stock into 387,200 shares of Common
Stock (3,872 post-split shares).

     On  August  16,  1995, $381,533 of the $420,179  of  accrued
dividends  on the Series B Preferred Stock at December  31,  1994
were  converted  into  76,306 shares  of  Common  Stock  and  the
remaining  dividends  due  to  such holders  (Messrs.  Benou  and
Havasy) were waived.

On August 16, 1995, accrued salaries of $309,109 owed by the
Company to Mr. Benou were converted into 61,822 shares of  Common
Stock
     Payment  of the Company's liabilities to the Bank under  the
Credit  Facility were guaranteed by Mr. Benou to  the  extent  of
$965,000  and  Mr.  Havasy  to the  extent  of  $492,000.   Their
respective guarantees were secured by a pledge to the Bank of all
Common Stock and Series B Preferred Stock owned by each of  them.
As  a  result of the August 1995 Offering, the Bank released  the
guarantees.

     Article Eighth of the Company's Certificate of Incorporation
provides that the Company shall, to the full extent permitted  by
Section  145 of the Delaware General Corporation Law, as  amended
from  time  to time, indemnify all persons whom it may  indemnify
pursuant thereto.

     Section  145 of the General Corporation Law of the State  of
Delaware authorizes a corporation to provide indemnification to a
director,   officer,  employee  or  agent  of  the   corporation,
including attorneys' fees, judgments, fines and amounts  paid  in
settlement, actually and reasonably incurred by him in connection
with such action, suit or proceeding, if such party acted in good
faith  and  in a manner he reasonably believed to be  in  or  not
opposed  to  the  best  interests of the corporation,  and,  with
respect  to  any criminal action or proceeding, had no reasonable
cause  to  believe  his  conduct was unlawful  as  determined  in
accordance with the statute, and except that with respect to  any
action  which  results in a judgment against the  person  and  in
favor of the corporation the corporation may not indemnify unless
a  court  determines  that the person is  fairly  and  reasonably
entitled to the indemnification.
     Section  145 further provides that indemnification shall  be
provided if the party in question is successful on the merits.





     Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors,
officers  and controlling persons of the Registrant  pursuant  to
the  foregoing  provisions, or otherwise, the  Company  has  been
advised  that  in  the  opinion of the  Securities  and  Exchange
Commission  such  indemnification is  against  public  policy  as
expressed  in  the  Act and is, therefore, unenforceable.   If  a
claim  for  indemnification against such liabilities (other  than
the  payment  by the Company of expenses incurred or  paid  by  a
director,  officer or controlling person in connection  with  the
securities  being  registered) the Company will,  unless  in  the
opinion of its counsel the matter has been settled by controlling
precedent,  submit  to  a court of appropriate  jurisdiction  the
question  whether  such indemnification by it is  against  public
policy as expressed in the Act and will be governed by the  final
adjudication of such issue.

     The  Company  has  adopted a policy that  transactions  with
affiliated entities or persons will be on terms no less favorable
than  could  be  obtained from unrelated  parties  and  that  all
transactions  between  the Company and its  officers,  directors,
principal  shareholders and affiliates  will  be  approved  by  a
majority of the Company's Board of Directors.


FORWARD LOOKING STATEMENTS

     The foregoing contains certain forward looking statements.
Due to the uncertainties associated with doing business with
governmental entities and the release of backlog orders and
competition in a business characterized by rapid technologic
changes and advances, actual results may differ materially from
any such forward looking statements.























                             PART IV

Item 14. EXHIBITS AND REPORTS ON FORM 8-K

(a)Financial Statements

Balance Sheets as of July 31, 1998 and 1997                      F-2-3
Statements of Operations for the years ended 
   July 31, 1998 and 1997  						     F-4
                                                              
Statements of Stockholders' Equity for the years
   ended July 31, 1998 , 1997 and 1996                           F-5-6
Statements of Cash Flows for the years ended July 31, 1998 and
   1997                                                          F-7-8
Notes to Financial Statements                                    F-9 to-17
     
Index of Exhibits


Item 16.  Exhibits - None.

Exhibit No. Description of Exhibit

1(a)*       Form of Underwriting Agreement

1(b)*       Form of Selected Dealer Agreement

            1(c)*                   Form   of   Agreement   Among
            Underwriters

            3(a)                  Certificate of Incorporation  -
            incorporated   by   reference  to  the   Registrant's
            Exhibit  3.01 to Registration Statement on  Form  S-1
            (File No. 2-31302).

                (b)                 Certificate of  Amendment  of
            Certificate   of  Incorporation  -  incorporated   by
            reference   to   Exhibit  3.02  to  the  Registrant's
            Registration  Statement on  Form  S-1  (File  No.  2-
            31302).

                (c)                 Certificate of  Amendment  of
            Certificate   of   Incorporation   incorporated    by
            reference  to  Exhibit 4 to the Registrant's  Current
            Report on Form 8-K for July 1971.

                (d)                 Certificate of Ownership  and
            Merger  with  respect to the merger of Data  Sciences
            (Maryland)  into  the Registrant and  the  change  of
            Registrant's  name from "Data Sciences  Incorporated"
            to  "DSI  Systems, Inc." - incorporated by  reference
            to  Exhibit  3.03(a) to the Registrant's Registration
            Statement on Form S-1 (File No. 2-31302).




                   (e)                   Certificate    of    the
            Designation,      Preferences      and      Relative,
            Participating,  Option or Other  Special  Rights  and
            Qualifications,  Limitations or Restrictions  thereof
            of  the Series A Preferred Stock (par value $.50)  of
            DSI  Systems,  Inc. - incorporated  by  reference  to
            Exhibit   3.04   to  the  Registrant's   Registration
            Statement on Form S-1 (File No. 2-31302).


                   (f)                   Certificate    of    the
            Designation,      Preferences      and      Relative,
            Participating,  Option or Other  Special  Rights  and
            Qualifications,  Limitations or Restrictions  thereof
            of  the Series B Preferred Stock (par value $.50)  of
            DSI  Systems,  Inc. - incorporated  by  reference  to
            Exhibit 1 to the Registrant's Current Report on  Form
            8-K for November 1972.

                (g)                 Certificate of Ownership  and
            Merger respecting merger of Conolog Corporation  into
            the  Registrant and the changing of the  Registrant's
            name   from   "DSI   Systems,   Inc."   to   "Conolog
            Corporation" - incorporated by reference  to  Exhibit
            3  to the Registrant's Current Report on Form 8-K for
            June 1975.

                (h)                Amended By-Laws - incorporated
            by  reference  to  Exhibit 3(h)  to the  Registrant's
            Annual Report on Form 10-K for the fiscal year  ended
            July 31, 1981.

4(a)*       Specimen   Certificate for shares of Common Stock

 (b)*       Specimen Certificate for Class A Warrant

 (c)*       Form of Warrant Agreement

 (d)*       Form of Representative's  Unit Purchase Option

 (e)*       Form  of Financial Consulting Agreement

 
10.1        Credit  Facility  documents between  Manufacturers Hanover
            Trust Company and  the Registrant  pursuant to which Registrant
            obtained  a  Credit  Facility  for $4,000,000  -  incorporated  
            by reference   to   Exhibit  6A-D  to  the  Registrant's
            Current Report on Form 8-K dated April 5, 1989.

10.2  *     Conolog Corporation 1995/1996 Stock Option Plan.

10.3 ***    Option  and  Purchase, Sale and Assignment Agreement,
            dated  as  of  September 12, 1996 by and between  The
            Chase Manhattan Bank and CNL Holdings, Inc.



10.4 ***    Irrevocably Proxy dated as of September 12,  1996  by
            and   between   CNL   Holdings,  Inc.   and   Conolog
            Corporation.

10.5 ***    Agreement  dated September 12, 1996  by  and  between
            CNL Holdings, Inc. and Conolog Corporation.

10.5 (A)**  Amendment No. 1 dated January 31, 1997 to Conolog Corporation
            Allonge.

10.6        Agreement with General Electric Company dated April 1, 1997
            incorporated by reference to the Company s  Form 10-Q for the 
            quarter ended April 30, 1997.

10.7****    Employment Agreement dated June 1, 1997 between Robert
            Benou and Conolog Corporation

10.8****    Employment Agreement dated June 1, 1997 between Marc Benou
            and Conolog Corporation

10.9*****   Employment Agreement dated March 1, 1998 between Dina Stellwagen
            and Conolog Corporation
___________________

*    Incorporated  by reference to the Registrant's  Registration
Statement on Form S-1 (33-92424).

**  Filed by Amendment to the Registrant's Registration Statement 
file on Form S-1 (File No. 0-8184) as filed on October 16, 1996.


***  Incorporated  by reference to the Registrant's  Registration
Statement file on Form S-1 (File No 0-8174) as filed on  October
16, 1996

****  Incorporated by reference to the Registrant's Registration
Statement on Form S-1 (File No. 0-8174) as filed on September 12, 
1997



(b) Reports on Form 8-K
               None















                           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:
October 29, 1998	/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.

October 29, 1998
	/s/Robert S. Benou
	President, Chief Executive Officer
	and Chairman of the Board

October 29, 1998	/s/Arpad J. Havasy
	Executive Vice President, Secretary,
	Treasurer and Director

October 29, 1998	/s/Marc R. Benou
	Vice President, Assistant Secretary and Director

October 29, 1998	/s/Louis S. Massad
	Director































				  Annual Report on Form 10-K


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



			          Financial Statements



			       Year Ended July 31, 1998





		     	         Conolog Corporation



				Somerville, New Jersey  08876






































				Form 10-K Item 14(a)(1) and (2)
                      Index to the Financial Statements
      		         Conolog Corporation
     		                  July 31, 1998



The following financial statements of the registrant are included in

Item 14:

Balance Sheets - July 31, 1998 and 1997 .........................  F-2-3

Statements of Operations - Years Ended July 31, 1998, 
     1997 and 1996 .............................................   F-4

Statements of Stockholders' Equity (Deficiency) - Years
     Ended July 31, 1998, 1997 and 1996 .........................  F-5-6

Statements of Cash Flows - Years Ended July 31, 1998,
     1997 and 1996 .. . . .......................................  F-7-8

Notes to Financial Statements .................................... F-9-17




































			Independent Auditors' Report
To the Board of Directors
Conolog Corporation


We have audited the accompanying balance sheets of  Conolog
Corporation as of July 31, 1998  and 1997  and the  related 
statements of operations, stockholders' equity (deficiency)
and cash flows for each  of the three  years in  the period 
ended July 31, 1998.   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,  1998 and 1997,
and  the  results of  its operations and its cash flows for 
each of  the three years  in the period ended July 31, 1998
in conformity with generally accepted accounting principles.



/s/Rosenberg Rich Baker Berman & Company
Bridgewater, New Jersey
October 9, 1998






F-1



	    	          Conolog Corporation
                         Balance Sheets

                                                July 31,
                                           1998        1997
                                        ---------    ---------
ASSETS

Current Assets
     Cash and equivalents            $ 1,108,581  $   503,217
     Accounts receivable - less
     allowances of $6,000 in
     1998 and 1997                        44,477      109,571      
     Inventories
        Finished goods                   905,939    1,705,782    
        Work-in-process                1,205,450      498,070      
        Materials and supplies         1,098,879      969,940    
                                      ----------   ----------
                                       3,210,268    3,173,792


     Other current assets                 36,347       44,085       

     Deferred offering costs                   -      113,813

                                       ----------   ----------
                                       4,399,673    3,944,478

Property, Plant and Equipment
     Land and improvements                34,524       34,524
     Building and improvements           700,461      663,630
     Machinery and equipment           1,328,218    1,291,838
     Furniture and fixtures              341,607      336,001
                                      ----------   ----------
                                       2,404,810    2,325,993
Less allowance for depreciation
    and amortization                   1,994,822    1,938,188
                                      ----------   ----------
                                         409,988      387,805
Other assets                               9,803        7,469
                                      ----------   ----------
TOTAL ASSETS                         $ 4,819,464  $ 4,339,752
                                      ==========   ========== 

See notes to financial statements









F-2

                                              July 31,
                                          1998           1997
                                        --------       --------
LIABILITIES

Current Liabilities
     Notes payable - other              $       -      $   916,235
     Accounts payable                      60,845          188,510
     Accrued payroll                       30,950           15,645 
     Accrued interest                           -           17,374 
     Bridge loan                                -          200,000  
     Other accrued expenses               115,337          146,791
     Current maturities of                      -            3,802
       capitalized lease obligations                  
                                         ---------      -----------
Total Current Liabilities               $  207,132     $ 1,488,357
						    ----------      -----------
Stockholders' Equity

     Preferred Stock, par value $.50; 
       Series A; 4% cumulative;162,000 
       shares authorized; 155,000 shares 
       issued and outstanding               77,500          77,500
     Preferred Stock, par value $.50; 
       Series B; $.90 cumulative;
       50,000 shares authorized, 1197 
       shares issued and outstanding           597             597
     Common Stock, par value $1.00; 
       20,000,000 shares authorized; 
       issued 3,724,773 shares in 1998 
       and 2,803,473 in 1997, including 
       8,776 shares held in Treasury     3,724,773       2,803,473
     Contributed Capital                 9,643,215       7,034,008
     Retained Earnings (Deficit)        (8,702,019)     (6,932,449)
     Treasury Shares at Cost              (131,734)       (131,734)
                                        -----------     -----------
Total Stockholders' Equity               4,612,332       2,851,395
                                         ----------     -----------
Total Liabilities and Stockholders' Equity
                                       $ 4,819,464     $ 4,339,752      
                                        ==========      ==========




See notes to the financial statements










F-3

				Conolog Corporation
			   Statements of Operations


                                                 July 31,
                                     1998            1997           1996
                                 ------------    ------------   ------------
Sales and other income		    $  746,420     $ 1,123,390    $ 1,924,466
					   ------------    ------------   ------------
Costs and Expenses:
   Cost of products sold	        529,958        917,379	1,242,001
   Selling, general and
     administrative		      1,548,446      2,054,630	  946,954
   Interest                            22,447         82,932        133,652
   Write-off obsolete or
     excess inventories		        410,759         28,101	   50,281
                                  ------------   ------------   ------------
                                    2,511,610      3,083,042      2,372,888
				          ------------   ------------   ------------
Loss Before Income Taxes and
   Extraordinary Items             (1,765,190)    (1,959,652)      (448,422)

Income taxes 		                  200         10,084	      200
                                  ------------   ------------   ------------
Net Loss before Extraordinary
   Items                           (1,765,390)    (1,969,736)       (448,622)

Extraordinary Items                         -     (1,841,000)        740,376
                                  ------------   ------------    ------------
Net Income (Loss)                 $(1,765,390)   $(3,810,736)     $  291,754
                                  ============   ============    ============
(Loss) from Continuing
   Operations Per Share           $      (.54)   $     (1.24)     $     (.43)
           
(Loss) Net Income Per Share
    - Basic (loss) earnings
      per share              	    $      (.54)   $     (2.41)     $      .28
    - Diluted (loss) earning
      per share                   $      (.54)   $     (2.41)     $      .25
                                  











See notes to the financial statements
			


F-4
                    Conolog Corporation
         Statement of Stockholders' Equity (Deficiency)
					
                                        
                        Series A        Series B                    
                        Preferred       Preferred       Common  Contributed
                          Stock           Stock         Stock     Capital

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


Public stock offering          -               -      725,300      2,045,777
Additional shares issued
     to employees              -               -       55,000         80,100
Additional shares issued
     to consultant             -               -      141,000        429,150
Debt to equity conversion      -               -            -         50,000
Net loss for the year          -               -            -              -
Dividends                      -               -            -          4,180
                       ---------        --------    ---------      ---------
Balance @ July 31,
     1998               $ 77,500        $    597  $ 3,724,773      $9,643,215
                       =========       =========  ===========      ==========










F-5






                    Conolog Corporation
         Statement of Stockholders' Equity (Deficiency)

					

                         	Total
Retained                    Stockholders'
Earnings        Treasury       Equity
                        	(Deficit)        Stock       (Deficiency)
			  		-------------   -----------  --------------
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
Public stock offering                    -             -        2,771,077
Additional shares issued to
     employees                           -             -          121,500
Additional shares issued to
     consultant                          -             -          570,150
Debt to Equity Conversion                -             -           50,000
Net Loss for the year           (1,765,390)            -       (1,751,790)
Dividends       	                  (4,180)            -                -
					 ------------     ---------      -----------
Balance @ July 31,		 $(8,702,019)     $(131,734)     $4,612,332
     1998                      ============     ==========     ==========












See notes to the financial statements




F-6

Conolog Corporation				             
Statements of Cash Flows
								       July 31,
                                           1998         1997         1996
                                        -----------  ----------  ------------
Cash Flows From Operating Activities
  Net (Loss)Income                   $(1,765,390)  $(3,810,736) $  291,754
  Adjustments to Reconcile Net (Loss)
     Income to Net Cash Used by
     Operating Activities
  Debt retirement cost	                       -     1,841,000           -
  Common stock base compensation         135,100     1,313,750           - 
  Common stock for consulting fees       570,150             -           -  
  Deferred income taxes                        -             -     492,352
  Depreciation and amortization           56,634        57,781      64,994
  Gain on disposition of equipment             -             -      (3,420)
  Provision for losses on accounts
     receivable                                -        (8,000)      9,000
(Increase)Decrease in Operating Assets
  Accounts receivable                     65,094       202,449    (141,479)
  Inventories                            (36,476)     (236,012)   (339,653)
  Other current assets                     7,738          (568)    (17,834)
Increase(Decrease) in Operating Liabilities
  Accounts payable                      (127,665)      (92,119)     (7,001)
  Accrued expenses and other liabilities (33,523)       78,241  (1,066,379)
                                       ----------    ---------- -----------
       Net Cash Used by Operating Activities
                                      (1,128,338)     (654,214)   (717,666)
                                      -----------     ---------  ----------
Cash Flows From Investing Activities  
  Purchase of property, plant and equipment
                                         (78,817)      (11,680)    (43,163)
  Proceeds from sale of equipment              -             -      18,666
                                        ----------    ---------   ---------
       Net Cash Used in Investing Activities
                                          (78,817)     (11,680)    (24,497)
                                        ----------     --------    --------
Cash Flows From Financing Activities
  Deferred offering costs                 113,813     (113,813)     86,154
  Increase from public stock offering   2,771,077            -   4,421,525
  (Repayments)proceeds from borrowings   (916,235)     916,235           -
  Increase (Decrease) in bridge loan     (150,000)     200,000    (200,000)
  Repayments of long-term borrowings       (3,802)     (34,453) (2,836,008)
  (Increase)reductions in other assets     (2,334)      22,929     (20,580)
  Dividends paid                                -            -    (396,587)
  Increase (Decrease) in due to officers        -            -    (161,705)
                                        ---------   -----------  ----------
       Net Cash Provided by Financing
         Activities                     1,812,519      990,898     892,799 
                                        ----------  -----------  ----------
Net Increase in Cash and Equivalents      605,364      325,004     150,636
Cash and Equivalents at Beginning 
     of Period                            503,217      178,213      27,577
                                        -----------  ----------   ---------
Cash and Equivalents at End of Period  $1,108,581    $ 503,217   $ 178,213
                                        =========    ==========  ==========
F-7




SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

  Cash paid(received) during the year for:

     Interest                          $  39,821     $  77,349   $ 772,773
     Taxes                             $  (9,520)    $  10,084   $     125

SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
 On January 21, 1998, the Company satisfied a $50,000 Bridge Loan with the
 conversion of the loan to 1.2 million Class A Warrants.



























See notes to the financial statements













F-8

				Conolog Corporation
			Notes to the Financial Statements

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Organization

     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.

Cash and Equivalents
     For the purpose of the statements of cash flows, cash 
     equivalents include time deposits, certificates of deposit
     and all highly liquid debt instruments with original 
     maturities of three months or less.

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.

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.

Advertising Costs
     Advertising costs are charges to operations when incurred.

Income Taxes
     Income taxes are provided for the tax effects of transactions
     reported in the financial statements and consist of taxes
     currently due plus deferred taxes related primarily to 
     differences between the bases of assets and liabilities for
     financial and income tax reporting.  The deferred tax assets
     and liabilities represent the future tax return consequences
     of those differences, which will either be taxable or deductible
     when the assets and liabilities are recovered or settled.  
     deferred taxes also are recognized for operating losses that
     are available to offset future federal and state income taxes.
 F-9
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued

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 number of shares used
     in the computations were 3,251,150, 1,581,218 and 1,041,978
     for 1998, 1997 and 1996, respectively. The effect of assuming
     the exchange of the warrants, Series A Preferred Stock and
     Series B Preferred Stock in 1997 and 1996 would be anti-
     dilutive. 
     
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.

CONCENTRATIONS OF BUSINESS AND CREDIT RISK
     
     At times throughout the year, the Company may maintain certain
     bank accounts in excess of FDIC insured limits.

     The Company provides credit in the normal course of business.
     The Company performs ongoing credit evaluations of its customers
     and maintains allowances for doubtful accounts based on factors
     surrounding the credit risk of specific customers, historical
     trends, and other information.

NOTES PAYABLE - OTHER

     CNL Holdings, Inc. loaned the Company $916,235. The notes were 
     due during the fiscal year July 31, 1998 and bore interest at 
     the rate of 4%  per annum.  The loans were payable in cash or 
     Series C Preferred Stock, at the Company's option at $5.00 per  
     share.  Interest was payable in Common Stock up to a maximum of  
     40,000 shares per annum.  On January 21, 1998, the Company paid 
     CNL Holdings, Inc. $916,235 plus accrued interest of $25,421 in 
     cash.  This effectively eliminated all debts and liens with CNL 
     Holdings, Inc.










F-10
BRIDGE LOAN

     The Company received $200,000 in net proceeds from several
     investors in a private placement.    Each investor received
     two  (2)  Promissory  Notes.  Promissory Notes (the  "First
     Note") totaling $150,000 was due and payable on the earlier
     of  January 31, 1999  or the  closing  of the Company's next
     public offering.  The Second Convertible Note (the  "Second
     Note"),  totaling  $50,000 plus accrued interest was payable
     on  the  earlier  of January 31, 1999 or the closing of the
     Company's next public offering,  or convertible at the time
     the next Registration  Statement was declared  effective  by
     the Securities and Exchange Commission and at the option of
     the selling security holders into  a total  of  1.2 million
     Class A Warrants.  Each Class A Warrant  contained  in  the
     Second Note  is  identical  to the Company's currently out-
     standing Class A Warrants.    On January 21, 1998,  at the 
     closing  of the Company's public offering,  $150,000 plus 
     accrued interest of $13,306 was paid in cash in full settle-
     ment of the First Note.  The Second Note was satisfied with
     the 1.2 million Class A Warrants issued on January 21, 1998. 

LEASES

     The Company leases various equipment under operating leases.
     The future minimum rental payments under the operating leases
     that have initial or remaining lease terms in excess of one
     year as of July 31, 1998 are as follows:
 

     Year Ended July 31, 
       1999 $ 4,808
       2000   4,808	
             -------	
            $ 9,616
  	       =======   
     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, 1998, 1997 and 1996.

INCOME TAXES

     The income tax provision is comprised of the following:

                                                   July 31
                                        1998         1997          1996
    						  --------    ---------     -----------
     Current Income Taxes
        Federal                             -        9,884               -
        State                             200          200             200
                                     ---------    ---------      ----------
                                     $    200     $ 10,084        $    200
                                     =========    =========      ==========



F-11
INCOME TAXES, Continued
     A reconciliation between taxes computed at the federal statutory
     rate and the effective tax rate follows:

						        July 31,

						1998		1997		1996
						----		----		----
     Federal statutory tax rate     (34.0)%	(34.0)%	(34.0)%
     Valuation Allowance on Net
       Operating Loss Carryover	 34.0        34.0        34.0
     Permanent and other differences    -          .5           -
						-----		-----		-----
						    - %	  0.5 %	    - %
						=====		=====		=====

     Deferred taxes are recognized for temporary differences between
     the bases of assets and liabilities for financial statement and
     income tax purposes.

     The temporary differences causing deferred tax benefits are 
     primarily due to net operating loss carry forwards.

     At July 1, 1998, the Company has net operating loss carry
     forwards for federal and state income tax purposes of 
     approximately $4,710,000 and $3,863,000, respectively, which
     are available to offset future Federal and State taxable income,
     if any.  The federal and state net operating loss carry
     forwards expire as follows:

						Federal	State
	2001				  $	      -   $	  706,241
	2002					      - 	  897,997
   	2004					      -	  542,540
	2005					      -	1,716,222
	2008				    	253,276	        -
	2009				    1,232,010		  -
	2010					957,538		  -
	2012					550,752		  -
	2013				    1,716,424		  -
					   ----------   -----------
					  $ 4,710,000   $ 3,863,000
					  ===========   ===========
     At July 31, 1998 the Company has available unused general 
     business credits that may provide future tax benefits and
     expire as follows:

					   Amount
     2000				$  12,100
     2001				   26,300
     2002				   64,900
					---------
					$ 103,300	
					=========
F-12


INCOME TAXES, Continued

     The Company's deferred tax asset is comprised of the following
     temporary differences:

						Federal		State
						-------		-----
	Net operating losses and tax
        credit carry forwards		$ 1,704,562		$  231,768
      Less: valuation allowance	 (1,704,562)	  (231,768)
						------------	-----------
		Net Deferred Tax Assets	$         -		$	   -
						============	===========

     The net change in the valuation allowance increased by approximately
	$607,000.


PROFIT SHARING PLAN

     The Company sponsors a qualified profit sharing plan that covers
     substantially all full time employees.  Contribution to the plan
     are discretionary and determined annually by management.

     The Plan also provides an employee savings provision (401(k) plan
     whereby eligible participating employees may elect to contribute 
     up to 15% of their compensation to an investment trust.  The Company
     contributes $2 for every $1 of the participant's elective contribution,
     up to 6% of the participant's compensation.

     The total expense for the above plan amounted to $52,721, $28,531,
     and $29,603 for the years ended July 31, 1998, 1997 and 1996
     respectively.


CAPITAL STOCK

     The Series A  Preferred Stock provides  4%  ($.02  per share)
     cumulative dividends, which may be exchanged for one share of 
     Common Stock upon surrender of the Preferred Stock and 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 $29,017 in arrears at July 31,
     1998.    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-13

WARRANTS
     The Company issued common stock purchase warrants separately
     and as part of the previous offerings as follows:

						Exercise	Original	Extended	
				Number of	Price Per	Expiration	Expiration
     Date of Grant	Shares	Share		Date		Date
     -------------      ---------   ----------  ----------  -----------
	08/16/95		1,135,750	$6.00		08/16/98	08/16/2002
	01/21/98		2,901,200	$6.00		08/30/2002	    -
	01/21/98		1,200,000	$5.25		01/21/2001	    -		


MAJOR CUSTOMERS 

     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
    ----------                  ---------   ---------    -----------
       1998                     $ 205,868       1            28
       1997                       625,134       3            57
       1996                       401,840       1            21



COMMITMENTS AND CONTINGENCIES

  Employment Agreements
	On June 1, 1997 the Company entered into an employment agreement
      with Robert Benou to serve as the Company's President for a period
      of five years.  Base salary under the agreement is $150,000 per
   	annum with annual increases of $20,000 beginning November 1997
	and every profitable year thereafter.  The agreement also calls
	for an annual bonus equal to 6% of the Company's income before
	income taxes as stated in its annual Form 10-K.  Employee benefit
	plans, such as life, health, pension and other plans are provided
	under the agreement.  The Company will also provide reimbursement
	of ordinary and necessary business expenses and a monthly car
	allowance.  A noncompetion/nonsolicitation restriction applies
	for one year after termination of employment.  Upon termination
	without cause, the agreement provides for severance compensation
	equal to 2.99 times the average annual compensation.









F-14

COMMITMENTS AND CONTINGENCIES (Continued)

  Employment Agreements (Continued)

	The Vice President of the Company entered into an employment
	agreement on June 1, 1997.  The agreement is for a period of
	five years expiring May 31, 2002.  Pursuant to the terms of the
	agreement, the officer is to receive a base salary of $55,000
	for the period June 1, 1997 through May 31, 1998 and an increase
	of $6,000 per annum for each twelve month period thereafter.  The
	agreement also calls for an annual bonus equal to 3% of the
	Company's income before taxes as stated in its annual Form 10-K.
	The Vice President is entitled to participate in all general
	pension, profit-sharing, life, medical, disability and other
	insurance and executive benefit plans at any time in effect for 
	executives of the Company, however, the Company is not obligated
	to establish or maintain any of the aforementioned executive
	benefit plans.  The Company will also provide an automobile for
	the use of the Vice President and reimburse him for all ordinary
      and necessary business expenses.  A noncompetition/nonsolicitation
	restriction applies six months after termination of employment.
	Upon termination without cause the agreement provides for severance
      compensation equal to 2.99 times the average compensation paid by 
      the Company.
	
	On March 1, 1998, the Company entered into an employment agreement
	with a Company executive to serve as a Corporate Development Manager
	for a period of five years.  Base salary under the agreement is $50,000
	per annum with annual increases of $4,000.  The agreement calls for
	the Corporate Development Manager to receive a quarterly bonus of
	5,000 shares of Conolog Corporation stock that have not been
	registered and eligible for sale under Rule 144 code.  Eligibility
	for all general pension, profit-sharing, life, medical disability 
	and other insurance and executive benefit plans is provided under
	the agreement, however, the Company is not obligated to establish	
	or maintain any of the aforementioned executive plans.  The Company
	will also provide an automobile for the use of the Corporate 
	Development Manager and reimburse her for all ordinary and necessary
	business expenses.  Upon termination without cause, the agreement 
	provides for severance compensation equal to 2.99 times the average
	annual compensation.

  Consulting Agreements
	In February of 1998 the Company entered into a management and 
	financial consulting agreement with Warren Schreiber ("Schreiber"},
	whereby Schreiber would act as a consultant to the Company.  In
	consideration of such services, Schreiber was granted 75,000 shares
	of common stock of the Company upon commencement of the contract.
	Additionally, for the duration of the agreement, Schreiber is to
	receive 25,000 shares of the Company's common stock on the last
	day of March, June, September and December of each year.  Under
	the agreement, termination may occur by either party with or
	without cause at any time upon 60 days prior written notice.

  

F-15
Stock Option Plan
	On May 15, 1995, the Board of Directors of the Company adopted and
	on August 14, 1995, the shareholders approved the Conolog Corporation
	1995/1996 Stock Option Plan (the "Option Plan").  The Option Plan is
	designed to permit the Company to grant either incentive stock options
	under Section 422A of the Internal Revenue Code (the "Code") or 
	nonqualified stock options.  Under the Option Plan, the Board is
	authorized to grant options to purchase up to 200,000 shares of 
	stock to key employees, officers, directors and consultants of the
	Company.

	Incentive stock options may only be granted to employees of the
	Company and not to directors or consultants who are not so employed.
	The exercise price for incentive stock options must be at least
	one hundred percent (100%) of the fair market value of the common
	stock as determined on the date of the grant.  All incentive stock
	options under the Option Plan must be granted within ten (10) years
	from the date of adoption of the Option Plan and each option must
	be exercised, if at all, within ten (10) years of the date of the
	grant.  In no event may any employee be given incentive stock options
	whereby more than $100,000 of options become exercisable for the 
	first time in a single calendar year.  All incentive stock options
	must be exercised by an optionee within three(3) months after termination
	of the optionee's employment, unless such termination is a result of
	death, disability or retirement.  In the event of an optionee's
	employment is terminated as a result of death or disability, such
	optionee or his designated beneficiary shall be entitled to exercise
	any and all options for a period of twelve (12) months after such
	a termination.  If an optionee's employment is terminated as a result
	of retirement, the optionee shall be entitled to exercise his options
	for a period of twenty four (24) months following such termination.

	Nonqualified stock options under the Option Plan are generally subject
	to the same rules as discussed above.  Nonqualified stock options
	may, however, also be granted to directors and consultants, whether
	or not such individuals are employees of the Company.  The exercise
	price for nonqualified stock options may be granted at less than 
	eighty-five percent (85%) of the fair market value of the shares on
	the date of grant.
	
	No incentive stock options or nonqualified options have been granted.

COMMON STOCK ISSUED TO EMPLOYEES

	In February 1998 the Company issued 45,000 shares of the Company's
	common stock, as additional remuneration to certain employees.

	Compensation expense was recorded at the average fair value of the
	stock at the time of issuance, $121,500 ($2.70 per share).

	In accordance with the employment agreement between the Company and
	one of their executives the Company issued 10,000 shares of common
	stock during fiscal year ended July 31, 1998.  Compensation expense
	was recorded at the average fair value of the stock at the time of
	issuance, $13,600 ($1.36 per share)
F-16

COMMON STOCK ISSUED TO EMPLOYEES (Continued)

	In July 1997 the Company issued 359,500 shares of common stock to
	several employees.  Compensation expense was recorded at the average
	fair value of the stock at the time of issuance, $1,313,750 ($3.66
	per share).

FAIR VALUE OF FINANCIAL INSTRUMENTS

	The carrying amounts of cash, accounts receivable, other current assets,
	accounts payable and accrued expenses approximates fair value because
	of the short maturity of these instruments.

   Limitations

	Fair value estimates are made at a specific point in time, based on 
	relevant market information and information about the financial instru-
	ment.  These estimates are subjective in nature and involve uncertain-
      ties and matters of significant judgment and therefore cannot be 
	determined with precision.  Changes in assumptions could significantly
	affect the estimates.

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, 1996 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.

      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.  The total value placed upon this transaction was $1,841,000
     (1,400,000 x $1.315).

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

SUBSEQUENT EVENTS
     Sales of Real Estate
	
      In September 1998 the Company completed the sale of its land and 
      building resulting in approximately $725,000 net proceeds to the 
      Company.  The transaction also provides for a three year rent-free 
      lease to the Company of approximately 38% of the total space of 
      the building.

   Acquisition of Atlas Design, Inc.
	
	In September1998, the Company acquired the assets of Atlas Design,
	Inc.  Atlas Design, Inc. provides short and long term qualified
	engineering and technical services as well as human resource consulting.
F-17