<PAGE>

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

                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, 2004 (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,
$0.01 par value NASDAQ SmallCap Market Class A Warrants - Traded Until
Expiration of August 30, 2002

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-KSB or any
amendment to the Form 10-KSB.

The aggregate market value of the voting stock held by non-affiliates of the
Registrant based on the closing sale price of $3.98 on October 19, 2004 was
$16,640,682.

The number of shares outstanding of the Registrant's common stock outstanding,
excluding treasury shares, as of October 19, 2004 was 4,181,076.





<PAGE>

DOCUMENTS INCORPORATED BY REFERENCE FORM 10-KSB
JULY 31, 2003

TABLE OF CONTENTS

<TABLE>
<S>                                                                          <C>
PART I

Item 1.    BUSINESS DEVELOPMENT AND BUSINESS..................................1

Item 2.    DESCRIPTION OF PROPERTY...........................................10

Item 3.    LEGAL PROCEEDINGS.................................................10

Item 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...............11

PART II

Item 5.    MARKET FOR REGISTRANT'S COMMON EQUITY AND
              RELATED STOCKHOLDER MATTERS....................................13

Item 6.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
              OPERATIONS AND FINANCIAL CONDITION.............................16

Item 7.    FINANCIAL STATEMENTS..............................................16

Item 8.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
              ACCOUNTING AND FINANCIAL DISCLOSURE............................16

Item 8A.   CONTROLS AND PROCEDURES...........................................16

PART III

Item 9.    DIRECTORS, EXECUTIVE OFFICERS.....................................17

Item 10.   EXECUTIVE COMPENSATION, PROMOTERS AND CONTROL PERSONS:
              COMPLIANCE WITH SECTION 16 (A) OF THE EXCHANGE ACT.............18

Item 11.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
              AND MANAGEMENT.................................................20

Item 12.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS....................20

PART IV

Item 13.   EXHIBITS AND REPORTS..............................................20

SIGNATURES...................................................................23
</TABLE>





<PAGE>

                           FORWARD LOOKING STATEMENTS

     This annual report on Form 10KSB contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995, as amended.
Forward-looking statements inherently involve risks and uncertainties that could
cause actual results to differ materially from those stated. Such statements are
subject to certain risks and uncertainties, including possible significant
variations in recognized revenue due to customer caused delays in installations
and competition from larger more well known, that could cause actual results to
differ materially from historical earnings and those presently anticipated or
projected. Furthermore, there can be no assurance that our sales will increase.
The Company does not assume any obligation to update the forward-looking
information and cautions readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made.

                                     PART I

GENERAL INFORMATION

     We are 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. Our products are used for transceiving
various quantities, data and protective relaying functions in industrial,
utility and other markets.

Item 1. BUSINESS DEVELOPMENT AND BUSINESS

     We were organized in 1968 and were engaged primarily in the design and
manufacture of electronic components and systems for military applications.

     In July 1971, we merged with DSI Systems, Inc., then engaged in the
development and manufacture of terminal viewers for digital retrieval of
microfilm. Later that year, we changed our name 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 us to concentrate on our
military business.

     In 1981 we acquired one of our customers, INIVEN Corporation ("INIVEN"). At
that time, we were 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, we have 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,
our components are currently used by the military in tanks, the Apache
helicopters and the MK-50 torpedoes.

     During 1987, we made a strategic decision to redirect our focus from
military to commercial markets. Since that time, we have refocused on
manufacturing and marketing our products for the commercial marketplace rather
than depend on the military and defense-related markets. Our primary emphasis
was on products for electric utilities, co-generation of power,





<PAGE>

gas and water companies, traffic control for departments of transport (DOT) and
airports utilizing DSP (Digital Signal Processing) technology.

     In September 1998, we acquired the assets of Atlas Design, Inc., a human
resource outsourcing company, to further our strategy of mergers and
acquisitions, and to assist in providing qualified engineering and technical
staff in support of our longer term contracts.

     Also in September 1998, we completed a sale/leaseback of our manufacturing
facility. This enabled us to significantly reduce our operating costs and
increases our working capital.

     In August 2000, we acquired Independent Computer Maintenance Corporation
("ICM"), a provider of installation, maintenance and troubleshooting services
for commercial and corporate computer systems and networks to businesses in the
greater New York metropolitan area.

     In January 2001, we acquired substantially all of the assets of Prime Time
Staffing Inc. and Professional Temp Solutions, Inc. These companies provided
permanent and temporary employees for the graphics design firms, book publishing
companies and engineering businesses.

     In October 2002, we ceased operating this business and entered into an
Agreement to rescind the Asset Purchase Agreement pursuant to which we acquired
ICM.

     In March 2004, we ceased operating our staffing business. The assets of the
wholly-owned subsidiary, Nologoc, Inc. trading as Atlas Design, were sold.

Products

     We are 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





<PAGE>

power transmission lines for faults and/or failures. Our products may be used
independently or in combination with other products to form a system type
configuration, whereby our 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

     We are engaged in three basic market segments:

     (A)  Commercial Sales (Under the trade name "INIVEN" (a Division of
          Conolog))

          o    Direct sales to end-users

          o    Sales to system assemblers

          o    Sales to contractors/installers

     (B)  Military Sales

          o    Direct contract sales to the military

          o    As subcontractor to systems producers

          o    Foreign governments

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

(A) Military Sales

     Military sales are primarily for our 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.

     Our military sales are received through independent sales representatives
who are paid a commission

B) Commercial "INIVEN" Sales and Products

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

     (1)  PTR and PDR Teleprotection Series (Protective Tone Relaying
          Communications Terminal, which includes the PTR-1000, PTR-1500 and
          PDR-2000.





<PAGE>

     (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 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 hundredth 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.

     The PTR-1500, 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:

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

     Existing installations not properly protected, improving efficiency and
     reducing 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.





<PAGE>

     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.

(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 our line has a distinct mechanical configuration, we designed our
GEN-1 Programmable units and other





<PAGE>

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 represent our 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.

     Sales of these products are made by the same agents who sell our 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 our customers and their need to switch
equipment from phone lines to fiber prompted us to design and introduce a
fiber-optic-coupler line to interface





<PAGE>

with the many different fiber heads. In addition to complete data interface
couplers we launched a series of 1200 Baud Modems (Industrial Grade) for
operation under the same environmental specifications in line with our 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, we 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.

                                  OUR STRATEGY

     Our strategy is to develop 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.

                               MARKETING AND SALES

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

     MILITARY - We market our military products directly and through independent
manufacturing sales representatives.

     COMMERCIAL - We market the PTR-1000, PTR-1500, PDR-2000 and all of our
INIVEN products by means of our 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.

     We market the Gen-1 and Gen-1 Programmable Series, as well as the "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 our products and staffing services is very competitive.
There are several companies engaged in providing the services and in the
manufacturing the products of the type produced by us, most of which are
substantially larger and have substantially greater name recognition or greater
financial resources and personnel. The major competitive factors include
availability of personnel, product quality, reliability, price, service and
delivery. Competition is expected to continue and intensify. The market is also
characterized by rapid technological





<PAGE>

changes and advances. We would be adversely affected if our competitors
introduced technology superior products or offered these products and services
at significantly lower prices than our products.

LARGEST CUSTOMERS

     Sales to our major customers during fiscal 2004 (Bonneville Power, Tucson
Power ) totaled $ 220,124 and $ 194560, respectively ( totaling 26% and 23% of
all sales, respectively. Sales to our major customers during fiscal
2003(Schering-Plough, Bonneville Power, Acme Industrial) totaled $274,431,
$197,210 and $194,027, respectively (totaling 18.4%, 13.2% and 12.9% of all
sales, respectively). None of these customers has or had any material
relationship other than business with the Company.

INVENTORY

Raw Materials

     We believe that we have adequate sources of raw materials available for use
in our business. Our 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.
We are not dependent upon any single supplier. We also purchase 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 we do not
foresee a significant shortage of raw materials in the future.

     In the past, we manufactured and held in our 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. As a result, we no longer manufacturer military products
in advance. Rather, we only schedule production as purchase orders are received.

MANUFACTURING

     The Company currently rents approximately 7,000 square feet of the facility
located at 5 Columbia Road, for a combination of manufacturing and office space.
The Company assembles, under normal workload conditions, the product it sells,
however, to accommodate the peak demands that occur from time to time we can
engage a number of subcontractors to assemble boards to our specifications. All
assemblies, however, are inspected and fully tested by the Company's quality,
engineering and testing departments. We maintain 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.

WARRANTY AND SERVICE

     We provide a twelve-year warranty on our 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 our warranty.

     In cases of defective products, the customer typically returns them to our
facility in Somerville, New Jersey. Our service personnel then replace or repair
the defective items and ship





<PAGE>

them back to the customer. Generally all servicing is completed at our plant and
customers are charged a fee for those service items that are not covered by the
warranty. We do not offer our customers any formal written service contracts.

RESEARCH AND DEVELOPMENT

New Products

     During fiscal 2000-2001, we invested approximately $25,000 to complete the
accessory modules of the PTR-1500 and extend the range of our Multiplexer
products. During fiscal 1999-2000 we invested approximately $1,705,257 for
product development and amortization of product costs.

     During fiscal 2000-2001 we proceeded with the design of the PDR-2000 8
channel digital transfer trip communications product. During fiscal 2001-2002 we
invested approximately $774,757 to complete its design of the PDR-2000,
eight-channel digital transfer trip communications product.

     The Company also developed a new platform for its GEN1 products allowing
for its use by the Canadian utilities.

PATENTS AND TRADEMARKS

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

GOVERNMENTAL REGULATION

     Our manufacturing facilities 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. We believe
that our operations are in compliance with existing regulations and we do not
believe that such compliance has had or will have any material effect upon our
capital expenditures, earnings or competitive position. With respect to military
sales, we are not subject to any special regulations. The products manufactured
are done so in accordance with accepted commercial practices.

EMPLOYEES

     As of July 31, 2004, we employed 15 persons on a full-time basis, including
2 in management, 2 in sales, 1 in clerical, 1 in accounting, 1 in purchasing, 3
in engineering and 5 in production. We have enjoyed good labor relations.

     None of our employees are represented by a labor union or bound by a
collective bargaining agreement. We have never suffered a work stoppage. We
believe our future success will depend, in part, on our continued ability to
recruit and retain highly skilled management, marketing and technical personnel.
We hire on a regular basis approximately 125 contract employees.





<PAGE>

Item 2. DESCRIPTION OF PROPERTY

     Our principal executive offices are located at 5 Columbia Somerville, New
Jersey. The space consists of approximately 7,000 square feet of which
approximately 5,000 square feet is dedicated to manufacturing, production and
testing and approximately 2,000 square feet is dedicated to administrative and
storage needs. Our current monthly rent expense is $ 4,600.The executive office
houses both the manufacturing division and the temporary staffing division. In
the opinion of management, the space is adequately covered by insurance.

Item 3. LEGAL PROCEEDINGS

          None

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

     We held our Annual Meeting of Shareholders on July 13,2004. The following
individuals constituting all of the members of the Board of Directors were
elected:

<TABLE>
<CAPTION>
Name                   Number of Votes   Votes Withheld
----                   ---------------   --------------
<S>                       <C>                <C>
Robert S. Benou           2,157,109          23,935
Louis S. Massad           2,161,461          19,583
Marc R. Benou             2,155,149          25,895
Edward J. Rielly          2,161,461          19,583
Graham Bruce Edwards      2,161,611          19,433
</TABLE>

     At this meeting, our stockholders also approved a proposal to approve
possible issuance of the Corporation's Common Stock in connection with a private
placement to Laurus Master Fund Ltd. In an amount equal to more than 20% of the
Corporation's Common Stock as follows:

<TABLE>
<CAPTION>
  For     Against   Abstain
  ---     -------   -------
<S>       <C>        <C>
794,349   35,734     1,256
</TABLE>

     At this meeting, our stockholders also approved a proposal to authorize the
directors in their discretion to vote upon such other business as may properly
come before the meeting or any adjournment and/or adjournments thereof as
follows:

<TABLE>
<CAPTION>
   For      Against   Abstain
   ---      -------   -------
<S>         <C>        <C>
2,158,115   14,028     8,901
</TABLE>

     At this meeting, our stockholders also approved a proposal to select
Rosenberg Rich Baker Berman & Company as the Company's independent auditors for
the fiscal year ending July 31, 2004 as follows:

<TABLE>
<CAPTION>
   For      Against   Abstain
   ---      -------   -------
<S>          <C>       <C>
2,170,090    9,239     1,715
</TABLE>





<PAGE>

                                     PART II

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

               MARKET PRICE FOR COMMON STOCK AND CLASS A WARRANTS

Our Common Stock is traded on the Nasdaq SmallCap Market, under the symbol CNLG.

The following table sets forth, for the periods indicated, the high and low
prices of the Company's Common Stock traded on the Nasdaq SmallCap Market for
2003 and 2004.

<TABLE>
<CAPTION>
                    Common Stock
                    ------------
2003                 High    Low
----                 ----   ----
<S>                  <C>     <C>
   First Quarter     6.90    .60
   Second Quarter    3.70    .91
   Third Quarter     1.24    .73
   Fourth Quarter    1.30    .68
</TABLE>

<TABLE>
<CAPTION>
                    Common Stock
                    ------------
2004                 High    Low
----                 ----   ----
<S>                  <C>    <C>
   First Quarter     1.45   0.55
   Second Quarter    1.25   0.73
   Third Quarter     8.77    .60
   Fourth Quarter    7.88   1.65
</TABLE>

(b) As of October 19, 2004, the Company's Common Stock was held by approximately
740 shareholders of record. Our transfer agent is Continental Stock Transfer &
Trust Company, with offices at 17 Battery Place, 8th floor, New York, New York,
telephone number (212) 509-4000. As transfer agent for our shares of common
stock the transfer agent is responsible for all record-keeping and
administrative functions in connection with the common shares of stock.

(c) 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 shares. The Company anticipates that no such
dividends will be paid in the foreseeable future. Rather, the Company intends to
apply any earnings, if any, 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.





<PAGE>

                      EQUITY COMPENSATION PLAN INFORMATION

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
                                                                       Number of securities
                                                                       remaining available
                                                                       for future issuance
                        Number of securities                               under equity
                          to be issued upon      Weighted-average       compensation plans
                            exercise of          exercise price of    (excluding securities
                        outstanding options,   outstanding options,    reflected in column
                         warrants and rights   warrants, and rights            (a)
                                 (a)                    (b)                    (c)
-------------------------------------------------------------------------------------------
<S>                     <C>                         <C>               <C>
Equity compensation     On June 25, 2003,
plans approved by       our Stockholders
security holders        approved the
                        granting of 800,000
                        shares of our Common
                        Stock to our
                        directors and
                        officers. As of
                        October 21, 2004 all
                        such shares have
                        been granted.               $     4.49
-------------------------------------------------------------------------------------------
Equity compensation
plans not approved by          N/A
security holders
-------------------------------------------------------------------------------------------
Total                                               $3,592,000
-------------------------------------------------------------------------------------------
</TABLE>

Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION

     Subsequent to July 31, 2004, (1) the remaining principal balance of $
1,094,000 from the issuance of convertible debentures during the fiscal year
ended July 31, 2004, was converted into 1,032,075 common shares. (2)
Additionally, warrants expiring April 26,2011 were exercised resulting in the
issuance of 270,000 common shares in exchange for $ 429,300. The effect on
Stockholders' Equity, as of August 9, 2004 is an increase in the Equity balance
of $ 1,523,300, increasing Stockholders' Equity to $ 3,468,407, from its July
31, 2004 balance of $ 1,945,107.

     In order to summarize the Company's operating results for the past two
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.





<PAGE>

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Income & Expense Items as a Percentage Of   Income & Expense       Percentage
         Revenues From Operations                Items         Increase/Decrease
--------------------------------------------------------------------------------
     For The Year Ended July 31, 2004             2003            2003 to 2004
--------------------------------------------------------------------------------
<S>       <C>                                   <C>                 <C>
 100.0%   Product Sales & other Income           100.0%                0.0%
--------------------------------------------------------------------------------
  N/A     Service Sales & other Income            N/A                   --
--------------------------------------------------------------------------------
 (94.9%)  Product Cost of Revenue                (58.3%)              36.6%
--------------------------------------------------------------------------------
  N/A     Service Cost of Revenue                 N/A                   --
--------------------------------------------------------------------------------
          Selling, general &
(541.1%)  administrative                        (314.7%)            (216.4%)
--------------------------------------------------------------------------------
(126.8%)  Interest                                (0.3%)            (123.5%)
--------------------------------------------------------------------------------
(751.7%)  Total costs & expenses                (373.3%)            (378.4%)
--------------------------------------------------------------------------------
          Income (loss) before loss from
          discontinued operation & income
(651.7%)  taxes                                 (273.3%)            (378.4%)
--------------------------------------------------------------------------------
          Loss from discontinued
 (23.1%)  operation                              (20.7%)              (2.4%)
--------------------------------------------------------------------------------
   0.0%   Income taxes (credits)                  53.6%              (53.6%)
--------------------------------------------------------------------------------
(674.8%)  Net Loss                              (228.6%)            (446.2%)
--------------------------------------------------------------------------------
</TABLE>

                              RESULTS OF OPERATIONS

2004 Compared to 2003

(Comparison does not include Atlas Design, which provided placement services,
was sold during the fiscal year and is reported as a discontinued operation at
July 31, 2004 and 2003)

     Product revenue for the fiscal year ended July 31, 2004 totaled $963,008 a
increase of 59.4% or $358,744 from $604,264 reported for fiscal year ended July
31, 2003. The Company attributed the increase in product revenue to increased
orders for its Series PTR-1500 high speed communications system.

     Product cost for the fiscal year ended July 31, 2004 totaled $913,561 an
increase of 159% or $561,336 from $352,225 reported for fiscal year ended July
31, 2003. The Company attributes the increase in product cost to the increase in
sales of the PTR-1500 and to the write down of additional obsolete inventory in
the amount of $ 263,700.

     Gross profit for products for the years ended July 31, 2004 and July 31,
2003 totaled $49,447 and $252,039, respectively, representing 5.1% and 41.7% of
product revenue. The decrease in gross profit for products is attributed to the
product mix and the additional write down of obsolete inventory.





<PAGE>

     Selling, General and Administrative expense for the years ended July 31,
2004 and July 31, 2003 totaled $1,522,714 and $1,136,061, respectively. The
Company attributed the increase of $ 386,653 in selling, general and
administrative expense to a higher commission expense, additional trade show
costs and increased professional fees due to compliance with increased
regulations under the Sarbanes-Oxley Act.

     There are no Research and development expenses for the fiscal year ended
July 31, 2004. The development of the PDR 2000, a high speed communications
system for use in electric power transmission pilot protection schemes, was
completed during the year.

     The Company's interest income for the fiscal year ended July 31, 2004
totaled $7,034 compared to $13,711 for fiscal year ended July 31, 2003. The
totals for fiscal years 2004 and 2003 include interest income derived from the
Company's interest bearing accounts through several banks. The decrease in
interest income reflects the company's proactive purchasing policy of seeking
benefits through purchasing agreements.

     The Company's interest expense for the fiscal year ended July 31, 2004
totaled $1,220,960, compared to $ 17,432 for fiscal year ended July 31, 2003.
The company's interest expense for fiscal 2004 includes $ 1,200,000 of
detachable warrants issued with a convertible debt having a beneficial
conversion option. The value assigned to these warrants was recorded as interest
expense and not amortized. The Company's interest expense for fiscal 2003 was
due to interest payments on the Company's line of credit through Unity Bank; the
maturity date of this line of credit is December 17, 2003.

     As a result of the foregoing, the Company reported a net loss from
continuing operations of $ 6,275,886 or $ 4.08 per share for fiscal 2004,
compared to a net loss from continuing operations of $ 1,256,405 or $ 1.38 per
share for fiscal 2003.

     The net loss from discontinued operations for fiscal year ended July 31,
2004 totaled $222,404 and $ 124,708 for fiscal year ended July 31, 2003. The
discontinued operations were a result of the sale of the Company's Atlas Design
subsidiary. The decision to sell the component was based on the intensely
competitive and highly fragmented nature of the placement services business.

2003 Compared to 2002

(Comparison does not include Atlas Design, which was sold during the fiscal year
and is reported as a discontinued operation at July 31, 2004 and 2003)

     Product revenue for the fiscal year ended July 31, 2003 totaled $604,264 a
decrease of 25.8% or $210,423 from $814,687 reported for fiscal year ended July
31, 2002. The Company attributed the decrease in product revenue to a decline in
the Company's military sales during fiscal 2003.

     Product cost for the fiscal year ended July 31, 2003 totaled $352,225 a
decrease of 73.9% or $997,151 from $1,349,376 reported for fiscal year ended
July 31, 2002. The Company attributes the decrease in product cost to the write
off of obsolete inventory from fiscal 2002 totaling $1,294,323.

     Service cost for the fiscal year ended July 31, 2003 totaled $527,562 a
decrease of 13.7% or $84,050 from $611,612 reported for fiscal year ended July
31, 2002. The Company attributes the





<PAGE>

decrease in service cost to a decrease in sales brought about by the loss of two
customers to larger staffing firms.

     Gross profit for products for the years ended July 31, 2003 and July
31,2002 totaled $252,039 and $(534,689), respectively, representing 41.7% and
(66%)of product revenue. The increase in gross profit for products is attributed
to the write off of obsolete inventory for fiscal 2002 totaling $1,294,323.

     Gross profit for services for the years ended July 31, 2003 and July
31,2002 totaled $255,633 and $261,714, respectively, representing 32.6% and 30%
of service revenue. The decrease in gross profit for services of $6,081 is a
result of the increase in placements of positions that realize a lower profit
margin and a decrease in managerial positions that possess a high-end margin.

     Selling, General and Administrative expense for the years ended July
31,2003 and July 31, 2002 totaled $1,584,988 and $1,813,587, respectively. The
Company attributed the decrease of $228,599 in selling, general and
administrative expense to a reduction of payroll from the layoff of two
employees and a decrease in employee benefits.

     Research and development for fiscal 2002 totaled $774,757, as a result of
the final stages of development of the PDR2000. There are no R&D expenses for
the fiscal year ended July 31, 2003.

     The Company's interest income for the fiscal year ended July 31, 2003
totaled $13,711 compared to $1,652 for fiscal year ended July 31, 2002. The
totals for fiscal years 2003 and 2002 include interest income derived from the
Company's interest bearing accounts through Unity Bank.

     The Company's interest expense for the fiscal year ended July 31, 2003
totaled $(17,432), compared to $(11,684) for fiscal year ended July 31, 2002.
The Company's interest expense for both fiscal 2003 and 2002 was due to interest
payments on the Company's line of credit through Unity Bank; the maturity date
of this line of credit is December 17, 2003.

     As a result of the foregoing, the Company reported a net loss from
continuing operations of $(1,376,683) or $(1.51) per share for fiscal
2003,compared to a net loss from continuing operations of $(3,103,410) or
$(8.18) per share for fiscal 2002.

     The net loss from discontinued operations for fiscal year ended July
31,2003 totaled $(28,876) or $0 per share and for fiscal year ended July 31,
2002 totaled $18,516 or $(0.05) per share. The discontinued operations were a
result of the Rescission of the Asset Purchase Agreement for the Company's
former computer sales and manufacturing company.

LIQUIDITY AND CAPITAL RESOURCES

     Working capital at July 31, 2004 was $285,360 compared to $630,316 at year
ended July 31, 2003. The decrease in the working capital is attributable to the
issuance of convertible debentures, of which the proceeds were partially used
for general and administrative expenses.

     Accounts receivable have increased from $88,778 as of July 31, 2003 to
$148,171 at July 31, 2004. This increase of $59,393 is the result of increased
sales during the 4th quarter.





<PAGE>

     The Company expects 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.

CRITICAL ACCOUNTING POLICIES

     The Company's consolidated financial statements have been prepared in
conformity with generally accepted accounting principles in the United States of
America, which require management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities, at the date of the financial statements and reported
amount of revenues and expenses during the reporting period. Actual results
could differ from those estimates. Management uses its best judgement in valuing
these estimates and may, as warranted, solicit external professional advice and
other assumptions believed to be reasonable. The following critical accounting
policies, some of which are impacted significantly by judgements, assumptions
and estimates, affect the Company's consolidated financial statements.

Income Recognition

     Revenue for product sales are recognized at the time of shipment, products
are not sold on a conditional basis. Therefore, when delivery has occurred the
sale is complete as long as the collection of the resulting receivable is
probable.

     Revenue for services provided under time and material contracts are
recognized as services are provided by the temporary, contract or leased
employees. Revenue from direct placements or "fixed fee contracts" is recognized
at the time the candidate begins the first full day after the completion of a
30-day contingency period. Revenue from permanent placements, which are also
considered fixed fee contracts, is recognized at the time the candidate begins
the first full day after the completion of a required amount of temporary hours
as stipulated in the Temp to Perm contract.

Receivables and Allowance for Doubtful Accounts

     The preparation of financial statements requires our management to make
estimates and assumptions relating to the collectivity of our accounts
receivable. Management specifically analyzes historical bad debts, customer
credit worthiness, current economic trends and changes in our customer payment
terms when evaluating the adequacy of the allowance for doubtful accounts. The
Company has a concentration risk in trade accounts receivable with significant
sales to the government and local agencies. The credit evaluation process has
mitigated the credit risk, such losses have been minimal, and within management
expectations.





<PAGE>

Inventory Valuations

     Inventories are valued at the lower cost or market. Determined by a
first-in, first-out ("FIFO") method. Management reviews inventory for
salability.

Warranty

     The Company provides a twelve-year warranty on its products; the warranty
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 necessitated by
misuse of such products are not covered by our 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
will replace or repair the defective items and ship them back to the customer.
All servicing is completed at the Company's main facility and customers are
charged a fee for those service items that are not covered by the warranty. We
do not offer our customers any formal written service contracts.

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.

Item 7. Financial Statements

     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-KSB.

Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

On September 13, 2004, Rosenberg Rich Baker Berman & company resigned and
provided written notice to the Company that the auditor-client relationship had
ceased. The Company filed a Form 8-K wherein it stated: "The reports of
Rosenberg Rich Baker Berman & Company on the consolidated financial statements
of the Company and its subsidiaries for the Company's last two fiscal years did
not Contain an adverse opinion or a disclaimer of opinion." On September 21,
2004, the Company engaged Bagell, Josephs & Company, LLC as the independent
accountant for the Registrant to audit the Company's financial statements.

Item 8A. CONTROLS AND PROCEDURES





<PAGE>

     The Company maintains disclosure controls and procedures designed to ensure
that the information the Company must disclose in its filings with the
Securities and Exchange Commission is recorded, processed, summarized and
reported on a timely basis. The Company's Chief Executive Officer, Chief
Financial Officer and its Chief Operating Officer have reviewed and evaluated
the Company's disclosure controls and procedures as defined in Rules 13a-15(e)
and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") as of the end of the period covered by this report (the
"Evaluation Date"). Based on such evaluation, such officers have concluded that,
as of the Evaluation Date, the Company's disclosure controls and procedures are
effective in bringing to their attention on a timely basis material information
relating to the Company required to be included in the Company's periodic
filings under the Exchange Act.

     There have not been any changes in the Company's internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
that occurred during the Company's most recently completed fiscal quarter that
have materially affected, or are reasonably likely to materially affect, the
Company's internal control over financial reporting.

                                    PART III

Item 9. 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 October 27, 2004.

<TABLE>
<CAPTION>
NAME               AGE   POSITION
----               ---   --------
<S>                 <C>  <C>
Robert S. Benou     69   Chairman, Chief Executive Officer,
                         Chief Financial Officer and Director
Marc R. Benou       36   President, Chief Operating Officer,
                         Secretary and Director
Louis S. Massad     66   Director
Edward J. Rielly    36   Director
Thomas Fogg         68   Officer, Vice President-Engineering
</TABLE>

     Robert S. Benou has been the Company's Chairman and Chief Executive Officer
since May 1, 2001. He is also the Company's Chief Financial Officer. From 1968
until May 1, 2001, he served as the Company's President. Mr. Benou is
responsible for new product development and supervision of sales and marketing.
Since June 2001, Mr. Benou has served as a director of Diversified Security
Solutions, Inc., a publicly held company that is a single-source/turn-key
provider of technology-based security solutions for medium and large companies
and government agencies. Mr. Benou is also a member of Diversified Security
Solutions' audit committee. 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.





<PAGE>

     Marc R. Benou has been the Company's President and Chief Operating Officer
since May 1, 2001. Mr. Benou joined the Company in 1991 and is responsible for
material purchasing and inventory control. From March 1995 until May 1, 2001, he
served as Vice President. Mr. Benou has been on the company's Board and has
served as the Company's assistant secretary since March 1995. Mr. Benou attended
Lehigh and High Point University and holds a BS degree in Business
Administration and Management. Marc R. Benou is the son of Robert S. Benou, the
Company's Chairman and Chief Executive Officer.

     Louis S. Massad has been a Director of the Company since April 1995. Mr.
Massad was Chief Financial Officer and a Director of Diversified Security
Solutions, Inc. from 2000 until August 2003. From 1997 to 2000, Mr. Massad was a
consultant to Diversified Security Solutions, Inc. From 1986 to 1997, Mr. Massad
was a Vice President, Chief Financial Officer and Director of Computer Power
Inc. Mr. Massad holds a BS and MS degree from Cairo University (Egypt) and an
MBA from Long Island University, New York.

     Edward J. Rielly has been a Director of the Company since January 1998. Mr.
Rielly is a Senior Application Developer with Household International, a
financial corporation. From March 2000 to November 2001, Mr. Rielly was a Senior
Consultant with Esavio Corporation. From February 1998 to February 2000, Mr.
Rielly was an Application Developer with Chubb Corporation. 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.

     Thomas R. Fogg joined the Company in 1976 as Chief Engineer responsible for
analog and guidance projects. Since 1986, Mr. Fogg has served as 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.

     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 anytime by the Board, until the meeting of
directors immediately following the annual meeting of stockholders and until
their successors are appointed and qualified.

Audit Committee.

     The Company's Board of Directors has determined that Louis Massad is the
Audit Committee's Financial Expert.

     The Company has a standing Audit Committee, the members of which are, Louis
Massad and Edward J. Rielly.

Section 16(a) Compliance.

     Section 16(a) of the Exchange Act, requires our directors and officers, and
persons who own more than 10% of our Common Stock, to file with the Securities
and Exchange Commission initial reports of beneficial ownership and reports of
changes in beneficial ownership of our Common Stock and other equity securities.
Our officers, directors and greater than 10% beneficial owners are required by
SEC regulation to furnish us with copies of all Section 16(a) forms they file.
To our knowledge, based solely on a review of the copies of such reports
furnished to us and written representations that no other reports were required,
during the fiscal year ended July 31, 2004, all Section 16(a) filing
requirements applicable to our officers,





<PAGE>

directors and greater than 10% beneficial owners were complied with, except
that, as a result of inadvertent oversight, Forms 4 for Messrs. Marc Benou,
Robert Benou, Rielly and Fogg were not timely filed. These have since been
filed.

Code of Ethics.

     The Corporation has adopted a Code of Ethics. This Code is publicly
available on the Company's internet website www.conolog.com.

Item 10. EXECUTIVE COMPENSATION

     The following table sets forth the total compensation paid to, accrued and
forgiven by each executive officer during fiscal 2004.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                    Annual                  Long Term
                                 Compensation             Compensation
                              -----------------    -------------------------
                                                                   Closing
                                                                  Price of
                                                                   Common
                                                                Stock on the
                                                                 Date of the   Securities
                              Fiscal               Restricted    Restricted    Underlying
                               Year-                  Stock         Stock        Options
Name and Principal Position     End     Salary       Awards        Award*       /SARS (#)
---------------------------   ------   --------    ----------   ------------   ----------
<S>                            <C>     <C>           <C>            <C>             <C>
Robert Benou,                  2004    $312,000*     390,000        $4.49           0
Chairman, Chief                2003    $291,666*           0        $0.00           0
Executive Officer,             2002    $271,000*      90,000        $7.00           0
Chief Financial Officer
and Director
Marc Benou, President,         2004    $ 98,500**    340,000        $4.49           0
Chief Operating                2003    $ 91,000**          0        $0.00           0
Officer, Secretary and         2002    $ 83,500**     70,200        $7.00           0
Director
</TABLE>

     * For the fiscal year ended July 31, 2002, Robert Benou forgave $142,499
of his salary. For the fiscal years ended July 31, 2004 and 2003, Robert Benou
forgave his entire salary for such fiscal years.

     **For the fiscal year ended July 31, 2002, Marc Benou forgave $2,773 of his
salary. For the fiscal year ended July 31, 2003, Marc Benou forgave $54,644 of
his salary and for the fiscal year ended July 31, 2004, Mr. Benou forgave
$63,500 of his salary.





<PAGE>

     Note: During the fiscal years ended July 31, 2004, 2003 and 2002, Robert
Benou received Other Compensation in the form of a car allowance amounting to $
12,780 in each of the above mentioned fiscal years.

     The options granted during the fiscal year ended July 31, 2001 were granted
under the 2000/2001 Stock Option Plan, were exercisable at $1.60 per share and
have all been exercised.

                              EMPLOYMENT AGREEMENTS

     Mr. Robert Benou is serving under an employment agreement commencing June
1, 1997 and ending May 31, 2002, which pursuant to its terms, renews for
one-year terms until cancelled by either the Company or Mr. Benou. Mr. Benou's
annual base salary is $310,000 and increases by $20,000 annually. 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-KSB. 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 the employee may be terminated by the Company for
cause.

     Mr. Marc Benou is serving under an employment agreement commencing June 1,
1997 and ending May 31, 2002, which pursuant to its terms, renews for one-year
terms until cancelled by either the Company or Mr. Benou. Mr. Benou's base
salary is $98,000 and he receives annual increases of $6,000. 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-KSB. 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 is terminated upon death or
disability of the employee and employee may be terminated by the Company for
cause.

Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth, as of September 15, 2004, certain
information with respect to the beneficial ownership of our common stock by each
stockholder known by us to be the beneficial owner of more than 5 % of our
common stock and by each of our current directors and executive officers. Each
person has sole voting and investment power with respect to the shares of common
stock, except as otherwise indicated. Information relating to beneficial
ownership of common stock by our principal stockholders and management is based
upon information furnished by each person using "beneficial ownership" concepts
under the rules of the Securities and Exchange Commission. Under these rules a
person is deemed to be a beneficial owner of a security if that person has or
shares voting power, which includes the power to vote or direct the voting of
the security or investment power, which includes the power to vote or direct the
voting of the security. The person is also deemed to be a beneficial owner of
any security of which that person has a right to acquire beneficial ownership
within 60 days. Under the Securities and Exchange Commission rules, more than
one person may be deemed to be a beneficial owner of the same securities and a
person may be deemed to be a beneficial owner of securities as to which he or
she may not have any pecuniary beneficial interest.

     The applicable percentage of ownership is based on 4,181,076 shares of our
Common Stock issued and outstanding as of October 19, 2004.





<PAGE>

<TABLE>
<CAPTION>
-------------------------------------------------------------------
      Name and Address        Amount and Nature of
    of Beneficial Owner       Beneficial Ownership   % of Ownership
-------------------------------------------------------------------
<S>                                  <C>                 <C>
Robert S. Benou                      250,000              7.27%
Chairman, CEO, CFO and
Director
-------------------------------------------------------------------
Marc R. Benou                        223,786              6.51%
President, COO, Secretary
and Director
-------------------------------------------------------------------
Louis Massad, Director                11,500                  *
-------------------------------------------------------------------
Thomas Fogg, Vice president           20,000                  *
-Engineering
-------------------------------------------------------------------
Edward J. Rielly, Director             5,000                  *
-------------------------------------------------------------------
All Executive Officers and           510,286             14.22%
Directors as a Group
(5 Persons)
-------------------------------------------------------------------
                                                                  * Less than 1%
</TABLE>

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

Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Robert Benou, our Chairman, Chief Executive Officer and Chief Financial
Officer has made a series of non-recourse loans to the Company totaling
$326,428. The Company repaid $158,000 of the total balance during the fiscal
year ended July 31, 2004. Of the remaining amount, $91,000 has been forgiven by
Mr. Benou, leaving a balance of $77,428 for the fiscal year ended July 31, 2004.
Each loan bears an interest rate of 4.00% and must be paid by the Company one
year from the date the loan is made.

                                     PART IV

Item 13. EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits.

     See  index of exhibits annexed hereto.

(b)  Reports on form 8K

     See Securities and Exchange Commission internet web site

                                Index of Exhibits

<TABLE>
<CAPTION>
Exhibit No.   Description of Exhibits
-----------   -----------------------
<S>           <C>
3.1           Certificate of Incorporation - incorporated by reference to the
              Registrant's Exhibit 3.01 to Registration Statement on Form S-1
              (File No. 2-31302).
</TABLE>





<PAGE>

<TABLE>
<S>           <C>
3.1.1         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).

3.1.2         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.

3.1.3         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).

3.1.4         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).

3.1.5         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.

3.1.6         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.

3.2           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.

4.1           Specimen Certificate for shares of Common Stock (1)

10.1          Employment Agreement dated June 1, 1997 between Robert Benou and
              Conolog Corporation (2)

10.2          Employment Agreement dated June 1, 1997 between Marc Benou and
              Conolog Corporation (2)

10.3          Conolog Corporation 2002 Stock Option Plan (3)

14.1          Code of Ethics(4)

21.1          List of Subsidiaries*

31.1          Rule 13a-14a/15d-14a Certification of Robert Benou*

31.2          Rule 13a-14a/15d-14a Certification of Marc Benou*
</TABLE>





<PAGE>

<TABLE>
<S>           <C>
32.1          Section 1350 Certification of Robert Benou*

32.2          Section 1350 Certification of Marc Benou*
</TABLE>

--------
*    Filed herewith

(1)  Incorporated by reference to Registrant's Registration Statement on Form
     S-1 (File No. 33-92424).

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

(3)  Incorporated by reference to the Registrant's Proxy Statement pursuant to
     Section 14(a) of the Securities Exchange Act of 1934 filed on June 25,
     2003.

(4)  Incorporated by reference to Registrant's Annual Report on Form 10-KSB for
     the fiscal year ended July 31, 2003, filed with the SEC on November 14,
     2003.

                                   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: /s/ Robert S. Benou
                                            ------------------------------------
October 28, 2004                        Chairman, Chief Executive Officer

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 28, 2004                        /s/ Robert S. Benou
                                        ----------------------------------------
                                        Chairman, Chief Executive Officer and
                                        Chief Financial Officer


October 28, 2004                        /s/ Marc R. Benou
                                        ----------------------------------------
                                        President, Chief Operating Officer,
                                        Secretary and Director


October 28, 2004                        /s/ Louis S. Massad
                                        ----------------------------------------
                                        Director


October 28, 2004                        /s/ Edward J. Rielly
                                        ----------------------------------------
                                        Director




<PAGE>

                      Conolog Corporation and Subsidiaries

                        Consolidated Financial Statements

                                  July 31, 2004





<PAGE>

                           Annual Report on Form 10-K

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

                        Consolidated Financial Statements

                            Year Ended July 31, 2004

                      Conolog Corporation and Subsidiaries

                             Somerville, New Jersey





<PAGE>

                       Form 10-K - Item 14 (a) (1) and (2)
                 Index to the Consolidated Financial Statements
                      Conolog Corporation and Subsidiaries
                                  July 31, 2004

<TABLE>
<CAPTION>
                                                                         Page
                                                                      ----------
<S>                                                                   <C>
The following consolidated financial statements of the registrant
   are included in Item 14:

   Independent Auditors' Report....................................   F-1 - F2

   Consolidated Balance Sheet......................................   F-3 - F-4

   Consolidated Statements of Operations...........................   F-5

   Consolidated Statements of Stockholders' Equity.................   F-6

   Consolidated Statements of Cash Flows...........................   F-7 - F-8

   Notes to the Consolidated Financial Statements..................   F-9 - F-16
</TABLE>





<PAGE>

                        BAGELL, JOSEPHS & COMPANY, L.L.C.
                          Certified Public Accountants

                               High Ridge Commons
                                 Suites 400-403
                           200 Haddonfield Berlin Road
                           Gibbsboro, New Jersey 08026
                        (856) 346-2828 Fax (856) 346-2882

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors
Conolog Corporation
Somerville, New Jersey

We have audited the accompanying consolidated balance sheet of Conolog
Corporation and Subsidiaries (the "Company") as of July 31, 2004 and the related
consolidated statements of operations, changes in stockholders' equity, and cash
flows for the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards of the Public
Company Accounting Oversight Board (United States). 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
audit provides a reasonable basis for our opinions.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Conolog Corporation
and its Subsidiaries as of July 31, 2004, and the results of its operations,
changes in stockholders' equity, and cash flows for the year then ended in
conformity with accounting principles generally accepted in the United States of
America.

BAGELL, JOSEPHS & COMPANY, L.L.C.
BAGELL, JOSEPHS & COMPANY, L.L.C.
Certified Public Accountants
Gibbbsboro, New Jersey

October 21, 2004

               MEMBER OF: AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS
                          NEW JERSEY SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS
                          PENNSYLVANIA INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS
                          NEW YORK STATE SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS


                                                                             F-1





<PAGE>

                          Independent Auditors' Report

To the Board of Directors of
Conolog Corporation and Subsidiaries

We have audited the accompanying consolidated statements of operations, cash
flows and stockholders' equity of Conolog Corporation and Subsidiaries for the
year ended July 31, 2003. 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 the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits 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 consolidated financial statements referred to above present
fairly, in all material respects, the results of its operations and its cash
flows for the year then ended, in conformity with accounting principles
generally accepted in the United States of America.

                                           Rosenberg Rich Baker Berman & Company

Bridgewater, New Jersey
November 3, 2003


                                                                             F-2





<PAGE>

                      Conolog Corporation and Subsidiaries
                           Consolidated Balance Sheet
                                  July 31, 2004

<TABLE>
<S>                                                                      <C>
                                     ASSETS
Current Assets

   Cash                                                                  $1,119,768
   Accounts receivable - net allowance for doubtful accounts of $1,000      148,171
   Note receivable                                                               --
   Current portion of note receivable                                         7,920
   Inventory                                                                500,000
   Other current assets                                                      44,099
                                                                         ----------

         Total Current Assets                                             1,819,958
                                                                         ----------

Property, Plant and Equipment
      Machinery and equipment                                             1,328,898
      Furniture and fixtures                                                409,459
      Computer software                                                     147,203
      Leasehold improvements                                                 30,265
                                                                         ----------
                                                                          1,915,825
      Less accumulated depreciation and amortization                      1,821,215
                                                                         ----------
                                                                             94,610

Inventory                                                                 1,424,417

Note receivable, net of current portion                                     140,720
                                                                         ----------

         Total Assets                                                    $3,479,705
                                                                         ==========
</TABLE>

See notes to the consolidated financial statements.


                                                                             F-3





<PAGE>

                      Conolog Corporation and Subsidiaries
                           Consolidated Balance Sheet
                                  July 31, 2004

<TABLE>
<S>                                                                      <C>
                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities

      Accounts payable                                                   $    209,575
      Accrued expenses                                                         66,734
      Loan from officer                                                        77,427
      Accrued legal fees                                                       74,417
      Accrued payroll                                                          12,445
      Convertible debt                                                      1,094,000
                                                                         ------------

         Total Current Liabilities                                          1,534,598
                                                                         ------------

Stockholders' Equity:

   Preferred stock, par value $.50; Series A; 4% cumulative; 162,000
      shares authorized; 155,000 shares issued and outstanding                 77,500

   Preferred stock, par value $.50; Series B; $.90 cumulative; 50,000
      shares authorized; 1,197 shares issued and outstanding                      597

   Common stock, par value $0.01; 20,000,000 shares authorized; issued
       2,879,001 shares, including 220 shares held in treasury                 28,795

   Contributed capital                                                     25,895,647

   Contributed capital - warrants                                           1,599,401

   Retained (deficit)                                                     (25,400,429)

   Treasury shares at cost                                                   (131,734)

   Prepaid consulting                                                        (124,670)
                                                                         ------------

         Total Stockholders' Equity                                         1,945,107
                                                                         ------------

         Total Liabilities and Stockholders' Equity                      $  3,479,705
                                                                         ============
</TABLE>

See notes to the consolidated financial statements.


                                                                             F-4





<PAGE>

                      Conolog Corporation and Subsidiaries
                      Consolidated Statements of Operations

<TABLE>
<CAPTION>
                                                             Year Ended July 31,
                                                          -------------------------
                                                              2004         2003
                                                          -----------   -----------
<S>                                                       <C>           <C>
Product revenue                                           $   963,008   $   604,264

Costs of product revenue                                      913,561       352,225
                                                          -----------   -----------
Gross Profit                                                   49,447       252,039
                                                          -----------   -----------
Operating Expenses
   Selling, general and administrative                      1,522,714     1,136,061
   Stock based compensation                                 3,592,000       443,135
   Impairment of goodwill                                          --       322,338
                                                          -----------   -----------
         Total Operating Expenses                           5,114,714     1,901,534
                                                          -----------   -----------

Loss Before Other Income (Expense)                         (5,065,267)   (1,649,495)
                                                          -----------   -----------

Other Income (Expense)
      Interest income                                           7,034        13,711
      Interest expense                                     (1,220,960)      (17,432)
      Other Expense                                                --       (18,148)
      Other Income                                              3,307        91,000
                                                          -----------   -----------
         Total Other Income (Expense)                      (1,210,619)       69,131
                                                          -----------   -----------

Loss From Continuing Operations
   Before Income Taxes                                     (6,275,886)   (1,580,364)
Benefit from Income Taxes                                          --       323,959
                                                          -----------   -----------

Loss From Continuing Operations                            (6,275,886)   (1,256,405)

Discontinued Operations:
   Loss From Discontinued Operations (Net of
      income tax benefit of $0)                               (94,515)     (149,154)

   (Loss) Gain From Disposal of Discontinued Operations
      (Net of income tax expense of $0)                      (127,889)       24,446
                                                          -----------   -----------

Net Loss                                                  $(6,498,290)  $(1,381,113)
                                                          ===========   ===========

Loss Per Common Share - Continuing Operations             $     (4.08)  $     (1.38)
                                                          ===========   ===========
Income Per Common Share - Discontinuing Operations        $     (0.14)  $     (0.13)
                                                          ===========   ===========
</TABLE>

See notes to the consolidated financial statements.


                                                                             F-5





<PAGE>

                      Conolog Corporation and Subsidiaries
                 Consolidated Statement of Stockholders' Equity

<TABLE>
<CAPTION>
                                             Series A    Series B                             Contributed     Retained
                                             Preferred   Preferred    Common    Contributed     Capital-      Earnings
                                               Stock       Stock       Stock      Capital       Warrants      (Deficit)
                                             ---------   ---------   --------   -----------   -----------   ------------
<S>                                           <C>           <C>      <C>        <C>            <C>          <C>
Balance at July 31, 2002                      $77,500       $597     $ 49,805   $20,494,003    $       --   $(17,512,666)

Forgiveness of salary by officer                   --         --           --        95,000            --             --
Common shares issued to employees                  --         --       15,253       650,094            --             --
Common shares issued to consultants                --         --          925        27,223            --             --
Common shares issued for commissions               --         --            6           270            --             --
Shares issued for services to be provided          --         --        3,100       248,900            --             --
Forgiveness of salary by Employees                 --         --           --       247,622            --             --
Effect of 1-for-10 reverse stock Split             --         --      (56,090)       56,090            --             --
Write-off of subscription Receivable               --         --           --       (93,750)           --             --
Amortization of consultant services                --         --           --            --            --             --
Net loss for the year                              --                                    --            --     (1,381,113)
Dividends                                          --         --           --         4,180            --         (4,180)
                                              -------       ----     --------   -----------    ----------   ------------

Balance at July 31, 2003                      $77,500       $597     $ 12,999   $21,729,632    $       --   $(18,897,959)
                                              -------       ----     --------   -----------    ----------   ------------

Common shares issued to Directors             $    --       $ --     $  8,000   $ 3,584,000    $       --   $         --
Common shares issued to Consultants                --         --            5           527            --             --
Issuance of warrants with convertible debt         --         --           --            --     1,200,000             --
Conversion of debt                                 --         --        1,000       105,000            --             --
Common shares and warrants
   issued in subscription agreement                --         --        4,791       284,308       399,401             --
Shares issued for services to Be provided          --         --        2,000       188,000            --             --
Amortization of consultant Services                --         --           --            --            --             --
Amortization of deferred Compensation              --         --           --            --            --             --
Net loss for the year                              --         --           --            --            --     (6,498,290)
Dividends                                          --         --           --         4,180            --         (4,180)
                                              -------       ----     --------   -----------    ----------   ------------
Balance at July 31, 2004                      $77,500       $597     $ 28,795   $25,895,647    $1,599,401   $(25,400,429)
                                              =======       ====     ========   ===========    ==========   ============

<CAPTION>
                                                                                        Consultant       Total
                                             Treasury    Subscription     Deferred     Services to   Stockholders'
                                               Stock      Receivable    Compensation   be Provided       Equity
                                             --------    ------------   ------------   -----------   -------------
<S>                                          <C>           <C>           <C>            <C>           <C>
Balance at July 31, 2002                     $(131,734)    $(93,750)     $       --     $ (70,196)    $ 2,813,559

Forgiveness of salary by officer                    --           --              --            --          95,000
Common shares issued to employees                   --           --        (222,212)           --         443,135
Common shares issued to consultants                 --           --              --            --          28,148
Common shares issued for commissions                --           --              --            --             276
Shares issued for services to be provided           --           --              --      (252,000)             --
Forgiveness of salary by Employees                  --           --              --            --         247,622
Effect of 1-for-10 reverse stock Split              --           --              --            --              --
Write-off of subscription Receivable                --       93,750              --            --              --
Amortization of consultant services                 --           --              --       253,738         253,738
Net loss for the year                               --           --              --            --      (1,381,113)
Dividends                                           --           --              --            --              --
                                             ---------     --------      ----------     ---------     -----------

Balance at July 31, 2003                     $(131,734)    $     --      $ (222,212)    $ (68,458)    $ 2,500,365
                                             ---------     --------      ----------     ---------     -----------

Common shares issued to Directors            $      --     $     --      $       --     $      --     $ 3,592,000
Common shares issued to Consultants                 --           --              --            --             532
Issuance of warrants with convertible debt          --           --              --            --       1,200,000
Conversion of debt                                  --           --              --            --         106,000
Common shares and warrants
   issued in subscription agreement                 --           --              --            --         688,500
Shares issued for services to Be provided           --           --              --      (190,000)             --
Amortization of consultant Services                 --           --              --       133,788         133,788
Amortization of deferred Compensation               --           --         222,212            --         222,212
Net loss for the year                               --           --              --            --      (6,498,290)
Dividends                                           --           --              --            --              --
                                             ---------     --------      ----------     ---------     -----------
Balance at July 31, 2004                     $(131,734)    $     --      $       --     $(124,670)    $ 1,945,107
                                             =========     ========      ==========     =========     ===========
</TABLE>

See notes to the consolidated financial statements.


                                                                             F-6





<PAGE>

                      Conolog Corporation and Subsidiaries
                      Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                       Year Ended July 31,
                                                                    -------------------------
                                                                        2004          2003
                                                                    -----------   -----------
<S>                                                                 <C>           <C>
Cash Flows From Operating Activities
      Continuing Operations Net Loss                                $(6,275,886)  $(1,256,405)
      Adjustments to Reconcile Net Loss to Net Cash (Used in)
         Provided by Operating Activities
      Net (loss) gain on sale of subsidiaries                          (127,889)       24,446
      Impairment of goodwill                                                 --       322,338
      Common stock for commissions and consulting                           593            --
      Common stock base compensation                                  3,592,000       443,135
      Amortization of prepaid consulting expense                        133,788       253,738
      Amortization of deferred compensation                             222,212
      Warrants issued with convertible debt                           1,200,000            --
      Depreciation                                                       41,255        57,394
(Increase) Decrease in Operating Assets
      Accounts receivable                                              (114,639)      (22,070)
      Inventories                                                        24,711       281,802
      Other current assets                                              (19,959)        2,433
      Other assets                                                           --          (300)
      Deferred income taxes                                             323,959      (123,662)
Increase (Decrease) in Operating Liabilities
      Accounts payable                                                   97,263        54,120
      Accrued expenses and other liabilities                               (189)        1,095
                                                                    -----------   -----------
         Net Cash (Used in) Provided by Continuing Operations          (902,781)       38,064
                                                                    -----------   -----------

Discontinued Operations
      Net (loss)                                                        (94,515)     (149,154)
      Change in net assets of discontinued operations                   230,995      (443,419)
                                                                    -----------   -----------
         Cash Provided by (Used in) Discontinued Operations             136,480      (592,573)
                                                                    -----------   -----------
         Net Cash Used in Operating Activities                         (766,301)     (554,509)
                                                                    -----------   -----------

Cash Flows From Investing Activities
   Purchase of equipment and leasehold improvements                          --        (8,900)
                                                                    -----------   -----------
         Net Cash Used in Investing Activities                               --        (8,900)
                                                                    -----------   -----------

Cash Flows From Financing Activities
   Repayment of line of credit                                         (250,000)           --
   Proceeds from loan from officer                                       44,498            --
   Proceeds from issuance of convertible debentures                   1,200,000            --
   Proceeds from issuance of stock and warrants                         688,500            --
   Proceeds from other loan                                                  --       123,928
   Proceeds from note receivable                                         97,629        42,539
   Proceeds from sale of subsidiary                                      34,000       300,000
                                                                    -----------   -----------
         Net Cash Provided by Financing Activities                    1,814,627       466,467
                                                                    -----------   -----------
Net Increase (Decrease) in Cash and Equivalents                       1,048,326       (96,942)
Cash and Equivalents at Beginning of Period                              71,442       168,384
                                                                    -----------   -----------
Cash and Equivalents at End of Period                               $ 1,119,768   $    71,442
                                                                    ===========   ===========
</TABLE>

See notes to the consolidated financial statements.


                                                                             F-7





<PAGE>

                      Conolog Corporation and Subsidiaries
               Consolidated Statements of Cash Flows - (Continued)

                SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Cash paid during the year for:

<TABLE>
<CAPTION>
                                                             Year Ended July 31,
                                                             -------------------
                                                               2004       2003
                                                             --------   --------
<S>                                                          <C>        <C>
   Interest                                                  $ 12,294   $ 17,432

Noncash investing and financing activities:

   Conversion of debentures                                   106,000         --

   Common stock issued for prepaid consulting services        124,670    252,000

   Forgiveness of loan from officer                                --     91,000

   Notes payable issued for sale of ICM                            --    287,350

   Write-off of subscription receivable                            --     93,750
</TABLE>

See notes to the consolidated financial statements.


                                                                             F-8





<PAGE>

                      Conolog Corporation and Subsidiaries
                 Notes to the Consolidated Financial Statements
                                  July 31, 2004

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Nature of Organization

          Conolog Corporation (the "Company") is in the business of design,
          manufacturing and distribution of small electronic and electromagnetic
          components and subassemblies for use in telephone, radio and microwave
          transmissions 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.

          The Company formed a wholly owned Subsidiary, Nologoc Corporation. In
          September 1998, Nologoc Corporation purchased the assets of Atlas
          Design, Incorporated. In January, 2001, Nologoc Corporation purchased
          the assets of Prime Time Staffing, Incorporated and Professional Temp
          Solutions Incorporated. Atlas Design, Prime Time Staffing and
          Professional Temp Solutions provide short-term and long-term qualified
          engineering and technical staff, as well as human resource consulting
          to various industries. In March 2004 the Company ceased operating its
          staffing business. The assets of the Company's wholly-owned
          subsidiary, Nologoc, Inc. trading at Atlas Design, were sold to the
          Company's vice-president of operations of Atlas Design.

          During the year ended July 31, 2000, the Company formed a wholly owned
          Subsidiary, Lonogoc Corporation. In August, 2000, Lonogoc Corporation
          purchased the assets of Independent Computer Maintenance Corporation
          ("ICM") and was operating under the trade name, "ICM". "ICM" provides
          installation, maintenance, and troubleshooting of computer systems and
          networks. In October 2002, the Company rescinded the asset purchase
          agreement with Independent Computer Maintenance Corporation ("ICM")
          and discontinued its operations.

     Principles of Consolidation

          The consolidated financial statements include the accounts of Conolog
          Corporation and its wholly owned subsidiaries. All significant
          intercompany balances and transactions have been eliminated.

     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 valued at the lower of cost (determined on a first-in,
          first-out basis) or 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. Depreciation and amortization was $41,255 and $57,394
          for the years ended July 31, 2004 and 2003, respectively. Repairs and
          maintenance expenditures which do not extend the useful lives of the
          related assets are expensed as incurred.


                                                                             F-9





<PAGE>

                      Conolog Corporation and Subsidiaries
          Notes to the Consolidated Financial Statements - (Continued)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued

     Research and Development

          Research and Development costs are expensed as incurred.

     Revenue Recognition

          Revenue from product sales are recognized at the time of shipment;
          products are not sold on a conditional basis. Therefore, when delivery
          has occurred the sale is complete as long as the collection of the
          resulting receivable is probable.

          Revenue from services provided under time and material contracts are
          recognized as services are provided by the temporary, contract or
          leased employees. Revenue from direct placements or "fixed fee
          contracts" is recognized at the time the candidate begins the first
          full day after the completion of a 30-day contingency period. Revenue
          from permanent placements, which are also considered fixed fee
          contracts, is recognized at the time the candidate begins the first
          full day after the completion of a required amount of temporary hours
          as stipulated in the Temp to Perm contract. Revenue from services is
          included loss from discontinued operations on the Consolidated
          Statement of Operations.

     Advertising Costs

          Advertising costs are charged to operations when incurred. Advertising
          expense was $6,994 and $9,941 for the years ended July 31, 2004 and
          2003, respectively.

     Shipping and Handling Costs

          Shipping and handling costs are expensed as incurred and amounted to
          $25,627 and $16,770 for the years ended July 31, 2004 and 2003,
          respectively.

     Securities Issued for Services

          The Company accounts for common stock issued for services by reference
          to the fair market value of the Company's stock on the date of stock
          issuance. Compensation, consulting and commission expense is recorded
          at the fair market value of the stock issued.

     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 on Fair Value Estimates

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


                                                                            F-10





<PAGE>

                      Conolog Corporation and Subsidiaries
          Notes to the Consolidated Financial Statements - (Continued)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued

     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.

     Loss Per Share of Common Stock

          Loss per share of common stock is computed by dividing net loss (after
          dividends on preferred shares) by the weighted average number of
          shares of Common Stock outstanding during the year. The preferred
          dividends are not reflected in arriving at the net loss as they are
          not material and would have no effect on earning per share available
          to common shareholders. The number of weighted average shares used in
          the computations were 1,537,801 and 917,349 for 2004 and 2003
          respectively. The effect of assuming the exchange of Series A
          Preferred Stock and Series B Preferred Stock in 2004 and 2003 would be
          anti-dilutive. The following transactions occurred after July 31,
          2004, which, had they taken place during fiscal 2004, would have
          changed the number of shares used in the computations of earnings per
          share: (1) $1,094,000 debenture was converted into 1,032,075 common
          shares were issued; (2) 270,000 common shares were issued as a result
          of warrants being exercised.

     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 disclosure 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.

INVENTORY

     At July 31, 2004 inventory consisted of the following:

<TABLE>
<S>                         <C>
     Finished goods         $  783,348
     Work-in-process            14,790
     Raw materials           1,126,279
                            ----------
                            $1,924,417
                            ==========
</TABLE>

Inventory of $1,424,417 was classified as non-current as only the amount the
Company expects to realize in the next operating cycle has been classified as
current.


                                                                            F-11





<PAGE>

                      Conolog Corporation and Subsidiaries
          Notes to the Consolidated Financial Statements - (Continued)

IMPAIRMENT OF GOODWILL

     Goodwill is assigned to specific reporting units and is reviewed for
     possible impairment at least annually or more frequently upon the
     occurrence of an event or when circumstances indicate that a reporting
     unit's carrying amount is greater than its fair value. During the year
     ended July 31, 2003, the Company determined that the carrying amount of the
     goodwill exceeded its fair value, which was estimated based on the present
     value of expected future cash inflows. Accordingly, a goodwill impairment
     loss of $322,338 was recognized during the year ended July 31, 2003.

OPERATING LEASE COMMITMENTS

     The Company leases their facilities and various equipment under operating
     leases. Total rental expense for all operating leases of the Company
     amounted to approximately $54,302 and $36,256 during the years ended July
     31, 2004 and 2003, respectively. The Company currently leases its
     facilities on a month-to-month basis.

INCOME TAXES

     The income tax (benefit) is comprised of the following:

<TABLE>
<CAPTION>
                                               July 31,
                                           ----------------
                                           2004     2003
                                           ----   ---------
<S>                                         <C>   <C>
     Current Income Taxes
        Federal                             $--   $      --
        State                                --    (323,959)
                                            ---   ---------
                                            $--   $(323,959)
                                            ===   =========
</TABLE>

     In 1998, the State of New Jersey enacted legislation allowing emerging
     technology and/or biotechnology companies to sell their unused New Jersey
     Net Operating Loss ("NOL") Carryover and Research and Development Tax
     Credits ("R&D" Credits) to corporate taxpayers in New Jersey. During fiscal
     year ended July 31, 2003, the Company entered into an agreement under which
     it sold a portion of its NOL carryover. The total estimated proceeds of
     this transaction was recorded as a benefit in the accompanying financial
     statements.

     A reconciliation between taxes computed at the federal statutory rate and
     the effective tax rate follows:

<TABLE>
<CAPTION>
                                              July 31,
                                           -------------
                                            2004    2003
                                           -----   -----
<S>                                        <C>     <C>
     Federal statutory tax rate             34.0%   34.0%
     Valuation Allowance on Net
        Operating Loss Carryover           (34.0)  (15.0)
     Permanent and other differences                  --
                                           -----   -----
                                              --%   19.0%
                                           =====   =====
</TABLE>


                                                                            F-12





<PAGE>

                      Conolog Corporation and Subsidiaries
          Notes to the Consolidated Financial Statements - (Continued)

INCOME TAXES, Continued

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

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

At July 31, 2004, the Company has net operating loss carryforwards for federal
and state income tax purposes of approximately $32,900,000, which is available
to offset future Federal and State taxable income, if any. The federal and state
net operating loss carryforwards expire as follows:

<TABLE>
<CAPTION>
                                        Federal        State
                                      -----------   -----------
<S>                                   <C>           <C>
2007                                  $        --   $ 2,740,000
2008                                           --     3,270,000
2010                                           --        90,000
2011                                           --     6,400,000
2013                                      250,000            --
2014                                    1,230,000            --
2015                                      960,000            --
2017                                      550,000            --
2018                                    1,660,000            --
2019                                      860,000            --
2020                                    2,140,000            --
2021                                    2,650,000            --
2022                                    3,150,000            --
2023                                      550,000            --
2024                                    6,400,000            --
                                      -----------   -----------
                                      $20,400,000   $12,500,000
                                      ===========   ===========
</TABLE>

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

<TABLE>
<CAPTION>
                                                           Federal      State
                                                        -----------   ---------
<S>                                                     <C>           <C>
Net operating losses and tax credit carryforwards       $ 5,710,000   $ 750,000
Less: valuation allowance                                (5,710,000)   (750,000)
                                                        -----------   ---------
   Net Deferred Tax Assets                              $        --   $      --
                                                        ===========   =========
</TABLE>

The net change in the valuation allowance for the year ended July 31, 2004 was
approximately $1,340,000.


                                                                            F-13





<PAGE>

                      Conolog Corporation and Subsidiaries
          Notes to the Consolidated Financial Statements - (Continued)

LOAN FROM OFFICER

     Loan from officer represents advances made by an officer of the company.
     The advances are due one year after the date of receipt and bear interest
     at a rate of 4% per annum. Total advances made by the officer during the
     year were $202,500. Repayments to the officer were $158,000. The balance
     due to the officer at July 31, 2004 was $77,427.

     During 2003, the Company adopted the provisions of SFAS 145, "Rescission of
     FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and
     Technical Corrections." This statement rescinds SFAS 4, "Reporting Gains
     and Losses from Extinguishment of Debt" wherein the FASB determined that
     gains and losses from debt extinguishments were to be recorded as
     extraordinary items. Accordingly, other income for the year ended July 31,
     2003 includes $91,000 of gain related to the forgiveness of loans from an
     officer.

PROFIT SHARING PLAN

     The Company sponsors a qualified profit sharing plan that covers
     substantially all full time employees. Contributions to the plan are
     discretionary and determined annually by management. No contributions to
     the plan were made during the years ended July 31, 2004 and 2003.

     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.

SHAREHOLDERS' EQUITY

     On January 10, 2003, the Board of Directors authorized a 1 for 10 reverse
     stock split of the Company's $.01 par value common stock.

     The Series A Preferred Stock provides 4% cumulative dividends, which were
     $108,383 ($0.70 per share) in arrears at July 31, 2004. In addition, each
     share of Series A Preferred Stock may be exchanged for one share of Common
     Stock upon surrender of the Preferred Stock and payment of $48,000 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 $0.90 per
     share, which were $35,616 ($29.76 per share) in arrears at July 31, 2004.
     In addition, each share of Series B Preferred Stock is convertible into
     .005 of one share of Common Stock.

     The Company has reserved 155,059 shares of Common Stock for Series A and B
     Preferred Stock.

     On July 29, 2004, the Company entered into a subscription agreement with a
     group of investors for common stock and warrants to purchase shares of
     common stock. The Company sold to the investors 479,000 shares of common
     stock and 200,000 warrants with an exercise price of $1.84, which expire on
     July 30,2029. The Company received $688,500 in exchange for the shares and
     warrants. The warrants were valued using the Black-Scholes option valuation
     model with a resulting allocation of the aggregate proceeds from the
     subscription attributable to the warrants of $399,401. The following
     assumptions were utilized to value the warrants: price per share of common
     stock of $1.84; expected life of five years; expected volatility of 149%; a
     risk free interest rate of 3.7%; and an expected yield of 0.0%.


                                                                            F-14





<PAGE>

                      Conolog Corporation and Subsidiaries
          Notes to the Consolidated Financial Statements - (Continued)

SHAREHOLDERS' EQUITY (Continued)

     A summary of the Company's warrant activity is as follows:

<TABLE>
<CAPTION>
                                           Year Ended July 31, 2004
                                           ------------------------
                                                         Weighted-
                                                          average
                                             Number of   exercise
                                             Warrants      price
                                             ---------   ---------
<S>                                           <C>          <C>
     Balance at July 31, 2003                      --         --
     Issued                                   470,000      $1.69
     Forfeited                                     --         --
                                              -------      -----
     Balance at July 31, 2004                 470,000      $1.69
                                              =======      =====
</TABLE>

CONVERTIBLE DEBENTURES

     On April 26, 2004, the Company entered into a Securities Purchase Agreement
     with an investor, whereby the Company issued and sold to the investor, in a
     private placement, a $1,200,000 principal amount Secured Convertible Term
     Note and a warrants to purchase 270,000 shares of common stock. The
     principal amount of the note is repayable at the rate of $50,000 per month,
     plus accrued interest, if any, commencing on May 1, 2005 and may be paid at
     the investors' option in cash or shares of the Company's common stock at
     the conversion rate of $1.06.

     The 270,000 warrants expire April 26, 2011 and have a weighted average
     exercise price of 1.59. The warrants were valued using the Black-Scholes
     option valuation model with a resulting allocation to interest expense of
     $1,200,000. The following assumptions were utilized to value the warrants:
     price per share $4.55; expected life of seven years; expected volatility of
     151%; a risk free interest rate of 3.4%; and an expected yield of 0.0%.

     During the year ended July 31, 2004, $106,000 of principal was converted
     into 100,000 common shares.

MAJOR CUSTOMERS

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

<TABLE>
<CAPTION>
                  Sales to Major   Number of   Percentage of
     Year Ended      Customers     Customers       Total
     ----------   --------------   ---------   -------------
<S>                  <C>               <C>         <C>
        2004         $414,684          2           49.0%
        2003         $665,668          3           44.5%
</TABLE>

STOCK OPTION PLAN

     2002 Stock Option Plan

          On April 23, 2002, the Board of Directors of the Company adopted the
          2002 Stock Option Plan ("the 2002 Plan"). Under the 2002 Plan, the
          Company may grant up to 190,000 shares of common stock as either
          incentive stock options under Section 422A of the Internal Revenue
          Code or nonqualified stock options. Subject to the terms of the 2002
          Plan, options may be granted to eligible persons at any time and under
          such terms and conditions as determined by the 2002 Stock Option
          Committee (`the Committee"). Unless otherwise determined by the
          Committee, each stock option shall terminate no later than ten years
          (or such shorter time as may be fixed by the Committee) after the date
          in which it was granted. The exercise price for incentive stock
          options must be at least one hundred percent (100%) of the fair market
          value of common stock as determined on the date of the grant. 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.


                                                                            F-15





<PAGE>

                      Conolog Corporation and Subsidiaries
          Notes to the Consolidated Financial Statements - (Continued)

STOCK OPTION PLAN (Continued)

     As of July 31, 2004, there had been no shares granted under the 2002 Plan.

PREPAID CONSULTING

     The Company issued 200,599 shares of common stock to various consultants
     for services. 200,000 of the shares issued were for services that extend
     into the future and are amortized monthly over the period of the agreement.
     599 of the shares issued were for services performed in fiscal year 2004
     and were expensed in value at the date of the agreement, as there was no
     readily determinable value for the consulting services provided or to be
     provided. The Company accounted for the prepaid value of consulting
     services in accordance with EITF 00-18, Accounting Recognition for Certain
     Transactions Involving Equity Instruments Granted to Other Than Employees.

DISCONTINUED OPERATIONS

     On October 22, 2002, the Company entered an agreement to rescind the Asset
     Purchase Agreement between Conolog and Independent Computer Maintenance
     Corporation ("ICM"). Under the rescission agreement, the Company and ICM
     agreed to transfer all assets previously purchased pursuant to the Asset
     Purchase Agreement to the extent they still exist to Natony Corp., the
     former seller. The return of purchase price paid for the assets was
     $600,000, $300,000 in cash, at closing, a note receivable for $150,000
     payable over 24 monthly in equal installments of $6,750 beginning December
     31, 2002 and a note receivable of $142,340 ($150,000 less fees of $7,660)
     unsecured and payable over 10 years beginning December 2004 bearing an
     interest rate of 5% per annum. The outstanding balance of the $142,340 note
     receivable at July 31, 2004 is $148,640 which includes $6,300 of the
     accrued interest. Net sales of ICM were $0 and $116,687 for the years ended
     July 31, 2004 and 2003, respectively.

     On April 30, 2004, the Company sold the assets of its' wholly owned
     subsidiary, Nologoc Corporation, T/A Atlas Design, Incorporated. The
     decision to sell the component was based on the intensely competitive and
     highly fragmented nature of the placement services business. The subsidiary
     was sold to the Company's vice-president of operations of Atlas Design. The
     Company received $34,000 of proceeds and recorded a loss from the disposal
     of $127,889. Net sales of Atlas Design, Incorporated were $439,174 and
     $783,195 for the years ended July 31, 2004 and 2003, respectively.

SUBSEQUENT EVENTS

     The Company did not meet its minimum financial requirement of $2,500,000 in
     Stockholders' Equity for continued listing on the NASDAQ Small Cap Market.
     This deficiency was cured subsequent to July 31, 2004 when (1) the
     remaining principal balance of $1,904,000 from the issuance of convertible
     debentures during the fiscal year ended July 31, 2004, was converted into
     1,032,075 common shares (2) Additionally, warrants expiring April 26, 2011
     were exercised resulting in the issuance of 270,000 common shares in
     exchange for $429,300. The effect on Stockholders' Equity, as of August 9,
     2004 is an increase in the Equity balance of $1,523,300, increasing
     Stockholders' Equity to $3,468,407, from its July 31, 2004 balance of
     $1,945,107.


                                                                            F-16