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

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

   X  Annual  Report Pursuant to Section 13  or  15(d)  of  the Securities
   Exchange Act of 1934
      For the fiscal year ended July 31, 1996  ( 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
Units consisting of two shares of Common Stock and
one Redeemable Class A Warrant                    NASDAQ SmallCap Market
Common Stock, $1.00 par value                     NASDAQ SmallCap Market
Redeemable Class A Warrants                       NASDAQ SmallCap Market

Check whether the Issuer (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the preceding
12 months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
                    Yes   X             No

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

The aggregate market value of the voting stock held by non-affiliates
   of the Registrant based on the closing sale price of $3.125 on
                  October 23, 1996 was  $ 1,544,612
                                  
  The number of shares outstanding of the Registrant's common stock
                             outstanding
                as of October 16, 1996  was 1,032,639
                                  
                 DOCUMENTS INCORPORATED BY REFERENCE
                         CONOLOG CORPORATION
                              FORM 10-K
                            JULY 31, 1996
                          TABLE OF CONTENTS

PART I
Item 1. BUSINESS    

Item 2. PROPERTIES  

Item 3. LEGAL PROCEEDINGS     

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

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

Item 6. SELECTED FINANCIAL DATA

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

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA    

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

PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS  

Item 11. EXECUTIVE COMPENSATION    

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
         MANAGEMENT     

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS    

PART IV
Item 14. EXHIBITS AND REPORTS 

SIGNATURES     


                               PART I




1. BUSINESS

General

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

History

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

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

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

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

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

     During  1987,  the  Company made the strategic  decision  to
redirect the Company's focus from military to commercial markets.
Since  that time, the Company has refocused on manufacturing  and
marketing its products for the commercial marketplace rather than
depend  on the military and defense-related markets.  The  effort
has  included the introduction of new products, the  redesign  of
existing   products  and  increased  advertising  and   marketing
efforts,  as  permitted by its limited financial resources.   The
percentage  of  revenues attributed to products manufactured  for
use in commercial applications increased from approximately 4% of
sales  in 1981 ($171,000) to approximately 75% of sales  in  1996
($1,443,000).  The decision to embark on this program entailed  a
major  design  effort,  including  the  coordination  of  outside
engineering  consultants to develop a complete line  of  products
aimed at the Company's target markets.  The primary emphasis was on
products for electric utilities, cogeneration of power,  gas  and
water  companies,  traffic control for departments  of  transport
(DOT)  and  airports  utilizing DSP (Digital  Signal  Processing)
technology.

     Testing of the Company's first commercial product group, the
Teleprotection Series PTR-1000, was under way in the latter  part
of  1992 by Bonneville Power Administration.  This detailed  test
permitted  the  Company  to "fine tune"  the  product  for  power
transmission  applications.  In March  1994,  the   PTR-1000  was
approved  for  use  by  such  utility  and  thereafter  by  other
utilities and municipalities.  To date, the Company has sold  and
delivered  over  450  PTR-1000  sets  to  14  utilities   and   3
municipalities, most of which are installed and in service.

     Following the  PTR-1000, in 1993, the Company introduced its
"98  Series"  Tone  Products for water, gas,  telephone  and  oil
companies,  waste water, traffic control and airports.   In  1994
the  Company  unveiled  the  Power Supply  Series  (allowing  the
various  utilities  to  power-up the  equipment  from  any  power
source), the "40 Series" for transmission of analog variable data
(water levels, gas pressures and temperature) and the Multiplexer
Series, which permits the transmission of up to 900 separate data
points,  again  using  a  telephone  line,  microwave  link,   or
satellite.   In 1994 the Company also introduced the "68  Series"
tone  products.   This  series  is  the  "98  Series"  repackaged
mechanically  specifically  for  customers  with  older   systems
wanting  to  upgrade to DSP technology without the expense  of  a
complete  mechanical installation.  The "68  Series"  offers  the
entire  line  offered by the "98 Series".  In 1995,  the  Company
introduced a stand alone "98 Series" transmitter and receiver for
field  installations and a wide range fiber optic  interface  for
the Iniven products.  The fiber optic interface is also available
as  a stand alone coupling device.  In 1996, the Company launched
its    industrial    grade   1200    Baud    Modem    for    data
transmission/communication.

     Due  to  the end of the cold war and the downsizing  of  the
American  military,  the  Company  experienced  unexpected  sharp
reductions  of  military contracts in fiscal 1993 (the  Company's
fiscal  year ends on July 31) resulting in a 50% decline  in  the
Company's sales for that year, down to $1,486,298 from $2,997,308
in  fiscal 1992.  The sales of new products could not replace the
decrease  in military sales.  The Company, however, continued  to
pursue  sales  as  aggressively as its available resources  would
permit.   Sales  in  fiscal 1994 increased to $2,044,860,  a  37%
increase over fiscal 1993.   Sales in fiscal 1995 were $2,090,933
a  2% increase over fiscal 1994.  Sales for the Fiscal year ended
July  31, 1996 were $1,924,466 as compared to $2,090,933 for  the
year  ended July 31, 1995.  Revenues from the Company's  military
product sales represented approximately 60%, 30% and 25% of sales
of  the  Company in fiscal 1994, 1995 and 1996, respectively,
reflecting the Company's emphasis on commercial sales and markets.

General Description

 Products

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

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

Present Status/Business Product Description

     The  Company is presently engaged and focused in  two  basic
market areas:

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

                         - As subcontractor to systems producers
                         - Foreign governments

          (B)  Commercial Sales (Under the tradename " INIVEN"  (a
               Division of Conolog))

                         - Direct sales to end users

                         - Sales to system assemblers

                         - Sales to contractors/installers

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

(A) Military Sales

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

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

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

(B) Commercial "INIVEN" Sales and Products

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

          (1)  PTR-1000 Teleprotection Series
               (Protective Tone Relaying Communications Terminal)

          (2)  Audio Tone & Telemetry Equipment
               (Audio   Tone  Control,  Telemetering   and   Data
               Transmission Systems), which includes Series "98",
               "68", "40" and "GEN-1".

          (3)  Multiplex Supervisory Control System

          (4)  Communication Link Multihead Fiber Optic Couplers
               and Industrial Grade 1200 Baud Modems.


(1) PTR-1000 Teleprotection Series

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

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

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

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

     The   PTR-1000  is  designed  for  global  use  by  electric
utilities and any entity generating power for its own consumption
with  resale  of  surplus power to an electric utility,  such  as
cities, municipalities, cooperatives and large corporations  that
find it more economical to generate their own electricity.

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

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

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

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

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

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

    Investor-owned
                                     
    Municipal Systems

    Cooperative Systems

    Federal, State and District systems.

     To  date , the Company has sold and delivered over 450  PTR-
     1000 sets to 14 utilities and 3 municipalities, most of which
     are installed and in service.

(2) Audio Tone and Telemetry Equipment

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

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

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


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

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

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

GEN-1 and GEN-1 Programmable Series

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

     Because  of the ease of use and installation, there is  much
GEN-1 type equipment installed and used in the United States by a
wide spectrum of diverse users.  Since the Company's  line has  a
distinct mechanical configuration, the Company designed its GEN-1
Programmable  units  and other improvements as  replacements  for
existing  units.   These  account for approximately  20%  of  the
Company's commercial sales. The Company's line of GEN-1 equipment
is  extensive and provides the user with the ability  to  perform
multiple  control  functions,  status  monitoring  as   well   as
continuous variable data monitoring, such as a level in a tank or
pressure gauge.

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

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

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

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

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

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

(3) Multiplex Supervisory (IM) Control System

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

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

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

(4) Fiber Optic Link and Data Modem

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

(C) Commercial Subcontract Manufacturing to Systems Producers

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


Recent Developments

Public Offering

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

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

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

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

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

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

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

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

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


STRATEGY

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

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


MARKETING AND SALES

       Prior to 1987, the Company had focused its sales and marketing
efforts on the military, primarily as a subcontractor to systems
producers and foreign governments.  As previously stated, this market
began to deteriorate during the 1970's and more rapidly during the
1980's, resulting in diminished sales and reduced prospects for the
Company. The Company made the strategic decision, in 1987,  to
redirect the Company's focus  and available resources from military
to commercial markets.

Since that time, the Company successfully refocused on manufacturing
and marketing its products for the commercial marketplace.  The effort
has included the introduction of new commercial products, the redesign
of existing products and increased advertising and marketing efforts,
as permitted by its limited financial resources. This program also
entailed a major design effort, including the coordination of outside
engineering consultants to develop a line of products aimed at the
Company'starget markets. Initial emphasis remains on products for
electric utilities, which  today represents the largest market.

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


Commercial - The Company markets the PTR-1000 by means of Company
sales     personnel,     through    independent     manufacturers
representatives, and through distributors, focusing mainly on the
largest utilities and co-generators.  In the United States  alone
there  are  over 500 large entities generating electricity  which
are  identified as investor-owned, municipal systems, cooperative
systems  and  federal, state and district systems.   The  Company
utilized a portion of the proceeds of the August 1995 Offering to
expand its sales efforts (including application engineering)  and
expand  sales to international markets.  The Company  markets  it
Gen-1  and Gen-1 Programmable Series, as well as its "98" Series,
"68"  Series  and  "40" Series, in the same way as  the  PTR-1000
except that the manufacturers representatives used by the Company
specialize  in selling to the diverse markets that  utilize  such
products. 
                                                      
OTHER MARKETS:  In addition to the INIVEN line, the Company continues
to sell a limited amount of military products, largely replacement
parts for radio and military guidance systems.  The Company
participates in bids for replacement parts.

Military  - The Company markets its military sales  directly
and through independent manufacturers sales representatives.


Competition

     The market for the Company's products is very competitive,
although the number of competitors is generally limited.  There are
several companies engaged in the manufacture of products of the type
produced by the Company, most of which are substantially larger and
have substantially greater name recognition or greater financial
resources and personnel. The market for the Company's products are
subject to rapid change, and there can be no assurance that the
Company will be able to keep up with this rate of change, given the
greater resources of some of its competition.  The Company believes
that the major competitive factors in the markets in which it
competes are technological change, price, functionality,
price/performance characteristics, quality, reliability and ongoing
service.  Competition is expected to continue and the Company's
ability to compete successfully in its markets depends, in part, upon
its ability to react to change. The Company would be adversely
affected if its competitors introduced technologically superior
products or offered these products at significantly lower prices than
the Companys products.

Largest Customers

      British Columbia Hydro and Power Authorty, Inc was the largest
customer for fiscal 1996, with  $380,000 in sales, or 19.7% of total
revenue. Sales  to  the  Company's major customer in fiscal  1995
(United States  Government) totaled $424,849 (20% of net sales).
During fiscal 1994, sales to the Company's only  major   customer
(Westinghouse  Electric  Corp.-Naval  Systems  Division)  totaled
$597,000  (29% of net sales).  During fiscal 1993, sales  to  the
Company's  single  major  customer (United  States  Government  -
various  agencies) totaled $688,146 (46% of net  sales).   During
fiscal 1992 sales to the Company's two major customers aggregated
$2,420,117  (81%  of net sales), of which $768,139  (26%  of  net
sales) was  to  Westinghouse  Electric  Corp.-Naval  Systems
Division,  and  $1,651,978 (55% of net sales) was to  the  United
States Government (various agencies).  None of such customers has
or  had  any material relationship other than business  with  the
Company.  

Raw Materials

 Inventory

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

Manufacturing

     Of the Company s 15,700 square feet that it occupies at 5
Columbia Road in Somerville, NJ, approximately 10,000 square feet are
dedicated to manufacturing.  The Company manufactures and assembles
the products it sells.  All assemblies are inspected and  tested by
the Company s quality, engineering and testing departments.  The
Company maintains test equipment and every product is burned-in
(i.e., each product is run at full power for 48 hours) and tested
prior to shipment. To accommodate peak demands the Company has
developed a number of subcontractors that assemble boards to the
Company s specifications.

     The Company's manufacturing and test equipment is limited and
has been utilized for several years.  If sales were to increase
substantially, the Company will be required either to invest in
additional manufacturing equipment or find alternative ways to
increase production.

Warranty and Service

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

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

Research and Development

 New Products

     Amounts  expended  by the Company in the last  three  fiscal
years  for  research  and development activities  have  not  been
substancial although the Company is constantly engaged in product
design  and development.  The Company utilized a portion  of  the
net  proceeds of the August 1995 Offering to design a fiber optic
digitizer  and a 1200 baud modem which can be sold as a  separate
product or jointly with the Company's products which will  enable
all   the  Company's  INIVEN products to transmit  directly  onto
fiber  optic cables, and thus open a new market for the Company's
products.   The  Company is also using a portion  of  the  August
1995 Offering  proceeds  to add designs to the PTR-1000 and other
products that  will  extend  its product  capability  to  handle
new data inputs not presently available. There can be no assurance
that the Company will be able to successfully develop and add
designs to its products.

Patents and Trademarks

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

Backlog

     
     As of July 31, 1996, the Company had a backlog of $3,400,000.
It is anticipated that this backlog will be filled during the
balance of fiscal  1997 and  the  1998  fiscal year ending 
July 31, 1998. Approximately 75%  of the Company's backlog relates
to government contracts and may be subject to cancellation under the
terms of such contracts. As  of July 31, 1995 and 1994, the Company
had a backlog  of approximately  $1,300,000 and $1,500,000,
respectively.

Governmental Regulation

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

Renegotiation

     No material portion of the Company s business has been subject
to renegotiation of profits at the election of the Government. During
1987, as a result of late deliveries, the Government canceled orders
aggregating $650,000.  

Seasonality

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

Foreign Sales
     
     During  fiscal  1996 the company had approximatley $380,000 in
foreign sales to British Columbia Hydro Power Authority, Inc. In fiscal
1995 the Company had foreign sales of $140,000 to the Government of Israel.
In fiscal 1994, the Company did not have any foreign sales.

Employees

     As of July 31, 1996, the Company employed 42 persons on a full-
time basis, including 2 in management,  3 in sales, 2 in clerical, 1
in  accounting, 1 in purchasing, 3 in engineering and 30 in
production.  The Company has enjoyed good labor relations. None of
the Company's employees are represented by a labor union or bound by
a collective bargaining agreement.  The Company has never suffered a
work stoppage.  The Company believes its future success will depend,
in part, on its continued ability to recruit and retain highly
skilled management, marketing and technical personnel.

Item 2. PROPERTIES

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

     The facility is encumbered by a lien, along with the Company's
other assets, securing  indebtedness incurred in connection with the
Credit Facility.  The Bank has deferred all payments of principal and
interest under the Chase Manhattan Note until April 16, 1997.  If the
Chase Manhattan Note is converted into 1,400,000 shares of Common
Stock, the lien on the Company facility will be released.  See
"Credit Facility" below.

Credit Facility

Background

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

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

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

     The  principal amount owing to the Bank at January 31,  1995
was  $3,789,000 and the unpaid accrued interest was $584,728. The
interest  rate  on the Credit Facility is 3/4% above  the  Bank's
publicly announced reference rate, which was 9.75% at January 31,
1995.

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

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

     The  Credit  Facility  contains various negative  covenants,
including  (a)  limitations on indebtedness, (b)  limitations  on
liens, (c) limitations on contingent obligations, (d) limitations
on   capital  expenditures,  (e)  prohibition  against   mergers,
consolidations, liquidation or dissolution, sale or lease of  all
or  a  substantial part of its property, business or assets,  (f)
limitations  on dividends and stock acquisitions, (g) limitations
on  investments, loans and advances, (h) prohibition  of  certain
prepayments, (i) limitations on leases, (j) prohibition  of  sale
and   leaseback   arrangements  and   (k)   prohibition   against
subordinated debts.

Terms in Connection with August 1995 Offering

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

     In  connection  with  the  August 1995  Offering,  the  Bank
received  from  the proceeds of such offering a cash  payment  of
$250,000  (the "Cash Amount").  The remaining debt, after  giving
effect  to  the  payment to the Cash Amount was  restructured  as
follows:  (1) $1,025,000 was structured as a five-year term  loan
(the  "Term Loan") bearing interest at the Bank's Reference  Rate
plus 125 basis points, to be amortized over 10 years; $50,000 per
year for the first two years, $100,000 per year in the third  and
fourth  years  and $112,500 in the fifth year.  After  the  fifth
year,  the  balance of the payments will be renegotiated  at  the
Bank's  option; and secured by the existing collateral;  and  (2)
All  debt owing to the Bank in excess of the Cash Amount and  the
Term  Loan was converted into 375,000 shares of Common  Stock  of
the Company (the "Bank Shares").

     The  Bank  Shares have full voting rights and carry  certain
antidilution  protection with respect to  any  reduction  in  the
exercise  price  of the Class A Warrants. The Bank  Shares  carry
piggyback  registration  rights  which  provide  that  upon   any
subsequent  offering  of  new registered  shares  (a  "Subsequent
Offering"),  the  Company must include  in  such  registration  a
portion  of Bank Shares equaling the lesser of 100% and  the  New
Share Percentage.   The New Share Percentage shall be a fraction,
the  numerator  of  which is the total number of  new  registered
shares  to  be  offered (excluding any of the Bank Shares  to  be
registered thereunder) and the denominator of which is the  total
number  of  common shares of the Company issued  and  outstanding
(including  the Bank Shares) immediately prior to the  Subsequent
Offering.  The Bank may at any time sell all or a portion of  the
Bank  Shares  in  one or more private transactions,  and  may  in
addition,  demand up to two registrations of any or  all  of  the
Bank Shares at any time after July 31, 1997.

     In  addition,  the  Bank  agreed  to  release  the  existing
guarantees of Messrs. Benou and Havasy on the effective  date  of
the  August  1995  Public  Offering.  Finally,  pursuant  to  the
restructured  Credit Facility the Bank was granted the  right  to
appoint  a  member  to  the Company's Board  of  Directors.   See
" Chase Manhattan Bank's Right To Appoint Director".

New  Terms  of  Credit Facility and Agreement  with  the  Selling
Securityholder

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

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

     The Company and CNL have entered into an agreement dated  as
of  September 12, 1996  (the "Agreement"), whereby CNL has agreed
to   loan   up  to  $2,500,000  to  the  Company  under   certain
circumstances (as described below) and the Company has agreed  to
file a registration statement (the "Registration Statement") with
the  Securities and Exchange Commission to register  the  375,000
shares  of  Common  Stock owned by the Bank and  the  1,  400,000
shares  of  Common  Stock  into which  the  Note  is  convertible
(collectively, the "Acquired Shares").

     The  proceeds  of the sale of the Acquired  Shares  will  be
applied  as follows:   the first $1,500,000 will be paid  to  CNL
for  the  payments  made  to  the Bank  pursuant  to  the  Option
Agreement; 50% of the balance, up to $2,500,000, will  be  loaned
to the Company (the "Loans") within five days of CNL's receipt of
the proceeds.

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

     The  Series  C  Preferred  will be non-voting  and  carry  a
cumulative dividend of 8% per annum which may be payable  by  the
issuance  of shares of Common Stock valued at $5.00 per share  up
to  a maximum of 40,000 shares per annum.  The Series C Preferred
will be convertible into common stock at the rate of one share of
common  stock  for each share of Series C Preferred  and  have  a
liquidating preference of $5.00 per share.

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

     Management believes that the foregoing transactions  benefit
the  Company and its stockholders. In the event CNL exercises its
option under the Option Agreement, exercises the conversion right
under  the  Agreement and the offering of the Acquired Shares  is
successful,  the  Company  has the  opportunity  to,  in  effect,
exchange  its  debt  for  Preferred  Stock  and   eliminate   the
Company's default under the Credit Facility.


Item 3. LEGAL PROCEEDINGS

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

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

      See Prospectus filed in connection with a stock offering
completed on August 1995.
           PART II

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

MARKET PRICE FOR COMMON STOCK AND CLASS A WARRANTS

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

     The   following  table  sets  forth,  for  the  periods
indicated, the high and low bid and asked quotations of  the
Common  Stock,  based  upon  information  supplied  by   the
National Quotation Bureau for the years 1993, 1994, 1995 and
the  first  two quarters of 1996. Such quotations  represent
inter-dealer  prices, without retail markups,  markdowns  or
commissions   and  may  not  necessarily  represent   actual
transactions.   The  Company effected  a  1-for-100  reverse
stock split on August 16, 1995.  As of October 9, 1996,  the
Company's  Common  Stock  was  held  by  approximately   843
shareholders of record.

                            Bid                     Asked
                                                 
                                                        
                      High       Low           High        Low
                                                             
                                                             
   1993                                                      
                                                             
   First Quarter      .08        .05           .25         .14
                                                             
   Second Quarter     .08        .05           .50         .14
                                                             
   Third Quarter      .08        .04           .50         .14
                                                             
   Fourth Quarter     .08        .04           .15         .14
                                                             
   1994                                                      
                                                             
   First Quarter      .05        .04           .15         .14
                                                             
   Second Quarter     .05        .03           .15         .125
                                                             
   Third Quarter      .05        .001          .15         .06
                                                             
   Fourth Quarter     .015       .001          .10         .05
                                                             
   1995                                                      
                                                             
   First Quarter      .02        .01           .10         .05
                                                             
   Second Quarter     .04        .01           .15         .05
                                                             
   
   
   

     The   following  table  sets  forth,  for  the  periods
indicated,  the  high and low prices of the Company's  Units
(which no longer trade), Common Stock and Warrants traded on
the  Nasdaq SmallCap Market for the third and fourth of 1995
and the first three quarters of 1996:


                  Units        Common  Stock        Warrants

                                                         
   1995      High     Low      High     Low       High     Low
                                                        
   Third                                                
   Quarter   18.5     14       8.50     5.75      4        2
                                                     
                                                        
   Fourth    19.25    14.75    9.25     6.25      3.25     1.25
   Quarter                                                
                                                       
                                                   
   1996                                                   
                                                        
   First     15       11       8.125    3.875      2        .9375
   Quarter                                                 
                                                        
   Second    11.25    11.25    6.5625   4.25       1.      1.0156
   Quarter                                                
                                                     
                                                        
   Third      __       ___     6.25     2.25       1.5      .50
   Quarter                                
   
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 nor does the Company anticipate that such
dividends will be paid in the foreseeable future. Rather, the
Company intends to apply any earnings to the expansion and
development of its business. Any payment of cash dividends on the
Common Stock in the future will be dependent upon the Company's
earnings, financial condition, capital requirements and other
factors which the Board of Directors deems relevant. Until such
time as the Credit Facility is paid in full, the Company is
restricted from issuing any dividends on its capital stock.

Item 6.  SELECTED FINANCIAL DATA
                       Year Ended
                       July 31,
(in thousands, except   1996       1995        1994     1993     1992
per share amounts)                                     

Operations Summary:
Net sales and other     $1,924    $2,091      $2,045   $1,486   $2,997
income                         
                                                                
Net income (loss)                                     
from                      294      (522)      (1,183)    (322)      72    
continuing operations
                                                         
Income (loss) from                                    
continuing operations                                 
per                      0.28      (0.12)      (0.27)   (0.07)   (0.16) 
share                                         
                                                              
Income (loss) from                                    
continuing operations                                 
after                                                 
giving retroactive                                    
effect to a 1 for                 (12.01)      (27.22)   (7.41)   1.60
100 reverse stock                            
split on August
16, 1995
Balance Sheet                                         
Summary:               
 Total assets          $3,928      $3,882       $3,739   $4,601   $4,586
                                                      
                                                               
Long-term debt and                                    
capitalized lease      $5         $34           $3,830   $3,733   $2,655
obligations

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

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


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

     1996    1995   1994                1996 to   1994 to    1993 to
                                          1995      1995      1994
    100.0%  100.0% 100.0%  Sales &       (8.0%)     2.3%      37.5%
                           other                                
                           income
    67.2%*   92.2*  98.4*  Cost of       (32.9)    (4.2)      203.6
                           products                             
                           sold
    49.2     44.2   41.7   Selling,       2.4       8.4         6.0
                           general &                            
                           administrat
                           ive
     6.8     12.1   17.7   Interest      (48.0)   (30.0)        7.8
                                                                
    123.2   148.5  157.8   Total costs   (23.6)    (3.8)       78.8
                           & expenses                           
    (23.2) (48.5) (57.8)   Income        (56.0)    (14.3)    (269.8)
                           (loss)                               
                           before
                           taxes
       -    (23.5)     -   Income        100.0    (100.0)     (96.4)
                           taxes                                
                           (credits)
   (23.2)% (25.0)% (57.8)% Loss before   (14.4)%   (55.9)%   (267.4)%
                           extraordinary                          
                           item

*    Includes write-offs for obsolete or excess inventories which were
$944,970, $656,248 and $50,281 for 1994, 1995 and 1996, respectively.


Results of Operations

1996 Compared To 1995

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

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

     Selling, general and administrative expenses increased  from
$924,524  in  1995 to $946,954 in 1996, representing  an  increase
of 2.4%.  These expenses increased as a result of an  expansion
of  the  employment   base  and an increase  in  advertising  and
promotion costs.

     Interest expense totaled $134,854 for the year ended  July
31, 1996 as compared to $253,686 in interest expense for the year
ended  July  31, 1995.  The Company reached a debt  restructuring
agreement  with the Bank during 1995 that resulted in  having  no
interest expense for the quarter ended April 30, 1996.

     As  a  result of the foregoing, the Company reported  a  net
loss  of $293,552, or $.28 per share.  The 1996 net profit was inclusive
of  a debt compromise of $740,376, net of a tax benefit  of
$492,352.  This compares to a net loss of $522,044 or $.12  per
share for the same period last year (after retroactive effect  to
a  1  for  100  reverse  split  on  August  16,  1995  and  after
extraordinary item in 1996).

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


1995 Compared To 1994

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

     Costs of sales totaled $1,271,000 for the year ended July
31, 1995 as compared to $1,068,000 for the comparable period
ended July 31, 1994, representing 60.8% and 52.2% of net
revenues, respectively.  Cost of sales increased as a result of
product mix during the comparable years.
      A charge of $656,000 for inventory write-off was recorded
during the year.  This amount was exclusively due to certain
inventories purchased for military programs in prior periods that
were phased out. There was a comparable charge of $945,000 in
fiscal 1994.

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

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

     Selling, General and Administrative Expense totaled $925,000
or 44.2% of revenues, as compared to $ 853,000 or 41.7% of
revenues for the comparable period last year.

     As a result of the foregoing, an operating loss of $761,000
was realized for the year ended July 31, 1995 as compared to an
operating loss of $821,000 for the same period last year.

     Interest expense for the twelve months totaled $254,000
compared to $362,000 for the fiscal year ended July 31, 1994. The
Bank had agreed to fix the total interest owed as of January 31,
1995 and to keep the amount unchanged through August 16, 1995.
Accordingly, no interest expense was accrued from February 1,
1995 through July 31, 1995.

     As a result of the foregoing, the Company incurred a net
loss of $522,000 for the twelve months ended July 31, 1995,
compared to a net loss of $1,183,000 for the same period last
year. The loss in 1995 was reduced by the income tax benefit
derived from previously incurred operating losses not deducted.
The losses, as a result of the Registration, will be deductible
against forgiveness of indebtedness income.

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

1994 Compared to 1993

     Sales and other income increased $558,500, or 37.5% from
1993.  The increase was due to the concentration of marketing to
non-government customers, which began several years ago.
Government sales in fiscal 1994, as well as in fiscal 1993 were
approximately $700,000 per year.  In fiscal 1992 and earlier,
government sales exceeded $2,000,000 per year.

     During the quarters ended October 31, 1993, January 31, 1994
and April 30, 1994 not all government requisitions for
procurements had been posted at the government's Defense
Electronics Supply Center ( DESC ) facility in Dayton, Ohio.
Until all requisitions for future procurements were listed, the
Company could not determine which items would be phased out or
not procured at all.

     Based upon the open requisitions by DESC, during the last
quarter of the fiscal year, it was demonstrated that a much
reduced future for potential business existed.  Based on the
reduced potential quantities, the Company wrote off a
commensurate percentage of its related military inventory, which
amounted to $944,970.  In addition, the Company wrote off any
parts that had not been required for products for 4 years and for
which no orders had been received in the past 2 years and no
orders anticipated in the coming year.  On this basis, the
Company determined that the utility of these parts was zero.

     It has been the experience of the Company that when no
orders are received for a product for a period of 2 years, none
were received in the third or subsequent years.  The same is true
for any parts that had not been called for production for 4
years.  General parts are interchangeable and unless  they are
earmarked for a specific job, a 4 year life is considered normal.

     Costs of products sold is a distorted figure, 98.4%, since
approximately $945,000 of old inventory was written off.   Had
this write-off not occurred, the cost of sales would have been
52.2%.  Although this percentage was greater than normal, the
lack of available cash hampered management's ability to buy
product at more favorable prices.  Inventory was written off in
the last quarter of the fiscal year after an analysis was made of
parts in the stockroom that were at least four years old and for
which no orders had been received in the past two years.

     Selling, general and administrative costs increased $48,000
from 1993, or 6%, due primarily to increased salaries.

     Interest expense increased by $26,000, or 7.6%, due to an
increase in rates.  Approximately $483,000 of interest to the
Bank has been accrued but unpaid.  Under the new restructured
loan agreement, that interest was to be paid off beginning July
1995.


LIQUIDITY AND CAPITAL RESOURCES

     Working capital at June 30, 1996 was $1,914,981 compared  to
a  deficit  of  $2,229,171  at year ended  July  31,  1995.   The
improvement  in the working capital is the result of  the  August
1995  Offering,  as  described in more detail  under  Results  of
Operations.

     The  Company is technically in default of its bank  loan  to
the  Bank  due  to  non-payment of principal and  interest  since
January 1996.  However, the Bank has agreed to defer any payments
at this time since they have signed an Allonge Agreement with the
Company in September 1996 (see below).  The total debt is on  the
balance sheet as current as of July 31, 1996.  Interest has  been
accrued through July 31, 1996.

     Accounts receivable have increased from $171,541 at year-end
July  31,  1995 to $304,020 at July 31, 1996.  This increase  has
been  caused  by slower payment procedures by certain  Government
agencies,   a  smaller  discount  policy  currently  offered   to
customers  of normal sales and sales having been made to  several
customers  for  export  with  acceptance  at  destination,  which
historically extends the collection period.

     Management  feels  that  it  has  leased  or   acquired
sufficient  equipment to meet its capital expenditure  needs
for  the next year.  Obligations under capital leases  which
are  presently in effect are approximately $34,000  for  the
year  and  somewhat  less  thereafter.   Historically,   the
Company  has  always  leased equipment.   Its  annual  lease
obligations have ranged from $59,000 in 1993 to its  present
figure  of  $34,000.   The Company's liquidity  and  working
capital  have  been effected by these obligations  and  will
continue to be so since the operation is dependent upon  the
use of this equipment.

     For the past year, the Company's marketing emphasis has
been  directed  to the electric utility industry  since  its
Iniven  line  produces a variety of products used  by  them.
Most  of  the  products offered must be tested for  quality,
endurance,  etc.  for  a  period of time  by  the  potential
customer.   Management is of the opinion that  much  of  the
testing will be completed in the coming year and sales  will
be   forthcoming   from   the  results   of   these   tests.
Accordingly,  it is anticipated that sales and profits  will
be  higher in the next twelve months as compared to the past
twelve months.

     New  Terms  of Credit Facility and Agreement  with  the
Selling Securityholder

     The  principal  amount  owing to  the  Bank  under  the
Company's  Credit Facility at July 30, 1996  was  $1,012,500
and  the unpaid accrued interest was $52,988.  The Bank  and
the  Company  have  entered  into  the  Conolog  Corporation
Allonge,  dated as of September 11, 1996, pursuant to  which
the  Amended  and Restated Term Note dated as of  August  2,
1995  between  the  Company and the Bank  (the  "Note")  was
amended  to permit the conversion by the Bank of the  unpaid
principal  and  interest due under the Note  into  1,400,000
shares of the Company's Common Stock on or before April  16,
1997.  The conversion right may be exercised by the Bank  or
its  assignee.   The  Bank  has  deferred  all  payments  of
principal and interest under the Note until April 16, 1997.

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

     The  Company  and  CNL have entered into  an  agreement
dated  as of September 12, 1996  (the "Agreement"),  whereby
CNL has agreed to loan up to $2,500,000 to the Company under
certain  circumstances (as described below) and the  Company
has   agreed   to   file  a  registration   statement   (the
"Registration Statement") with the Securities  and  Exchange
Commission  to register the 375,000 shares of  Common  Stock
owned  by the Bank and the 1,400,000 shares of Common Stock
into  which  the  Note  is  convertible  (collectively,  the
"Acquired Shares").

     The proceeds of the sale of the Acquired Shares will be
applied  as follows:   the first $1,500,000 will be paid  to
CNL for the payments made to the Bank pursuant to the Option
Agreement;  50%  of the balance, up to $2,500,000,  will  be
loaned  to  the Company (the "Loans") within  five  days  of
CNL's receipt of the proceeds.

     Each  loan will be evidenced by a Note bearing interest
at  the rate of 4% per annum and will be due 12 months  from
the  date of such Loan.  At maturity, the Company will  have
the  option  to  pay each Loan, together  with  all  accrued
interest  thereon,  by issuing shares  of  a  new  Series  C
Preferred Stock (the "Series C Preferred") having a value of
$5.00 per share for purposes of such repayment.
     The  Series C Preferred will be non-voting and carry  a
cumulative dividend of 8% per annum which may be payable  by
the  issuance of shares of Common Stock valued at $5.00  per
share  up  to  a  maximum of 40,000 shares per  annum.   The
Series C Preferred will be convertible into common stock  at
the  rate  of  one share of common stock for each  share  of
Series  C  Preferred  and have a liquidating  preference  of
$5.00 per share.

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

     Management  believes  that the  foregoing  transactions
benefit  the Company and its stockholders. In the event  CNL
exercises  its option under the Option Agreement,  exercises
the conversion right under the Agreement and the offering of
the  Acquired  Shares  is successful, the  Company  has  the
opportunity  to, in effect, exchange its debt for  Preferred
Stock  and  eliminate the Company's default under the Credit
Facility.




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.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The financial statements of Conolog Corporation, together
with notes and the Independent Auditors Report, are set forth
immediately following Item 14 of this Form 10-K.

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

     None

                            PART III

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

                           MANAGEMENT

Directors and Executive Officers

     The following table sets forth certain information regarding
the  officers  and directors of the Company as of July 31, 1996.

NAME AGE          POSITION

Robert S. Benou      62            President and Director

Arpad J. Havasy      60            Executive Vice President,
                                   Secretary, Treasurer and
                                   Director

Louis S. Massad      59            Director

Marc  R.  Benou      29            Vice President,  Assistant
                                   Secretary and Director
 
Thomas Fogg          61            Vice President-Engineering

Al   Vnencak         49            Vice  President-Sales  and
                                   Marketing

   

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

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

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

     Marc  R. Benou joined the Company in 1991 and is responsible
for  material, purchasing and inventory control.  In March  1995,
he was elected Vice President, Assistant Secretary and a Director
 .   Mr. Benou attended Lehigh and High Point University and holds
a BS degree in Psychology and a BS in Business Administration and
Management.   Marc R. Benou is the son of Robert  S.  Benou,  the
Company's President.

     Thomas  R. Fogg joined the Company in 1976 as Chief Engineer
responsible for analog and guidance projects.  Since  1986,  when
he  became Vice President-Engineering, he led the design team  in
the  development of the Company's commercial products.  Mr.  Fogg
holds a BSEE degree from Lafayette College and a MSEE degree from
Rutgers  University.  Mr. Fogg is a fellow of  the  Institute  of
Electrical and Electronic Engineers and has published articles on
delay equalization and the use of crystal resonators.

     Al Vnencak joined the Company in 1991 and is responsible for
Iniven  product  sales and marketing.  In  October  1995  he  was
elected  Vice  President  of Sales and  Marketing.   Mr.  Vnencak
received  his electronics training while in the US Navy with  the
7th  Fleet  and was awarded a meritorious service medal  for  his
activities.  Prior to joining the Company Mr. Vnencak was  system
engineering  manager and director of international sales  for  21
years with RFL Industries, Inc.


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


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

Item 11. EXECUTIVE COMPENSATION

Executive Compensation

     The   following  table  sets  forth  the  cash  compensation
(consisting  entirely of salary) paid (or  accrued  for)  by  the
Company  to  its  President,  the only  executive  officer  whose
aggregate  remuneration exceeded $100,000 in each of the
three Company's fiscal years ended July 31, 1996, 1995 and 1994:

                      Summary Compensation Table

                         Annual Compensation         Long Term Compensation

Name and                             Other Annual        
Principal   Fiscal                   Compensation
Posititon   Year-End  Salary  Bonus                  Awards   Payouts

             1996    $150,000
Robert
Benou,
President    1995    $150,000

             1994    $170,000
    

_________________


     The  Company  did  not  grant any  stock  options  or  stock
appreciation rights during the fiscal year ended July 31, 1996 to
any  of its officers, directors or employees. As of July 31, 1996
none   of  them  had  any  outstanding  stock  options  or  stock
appreciation  rights.  Furthermore, none of them received  awards
under  long-term incentive plans that are stock based during  the
three  fiscal years referred to above.  However, these and  other
benefits  may be adopted in the future if they are authorized  by
the Board of Directors.

Incentive Stock Option Plan

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

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

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

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



Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT

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

      Name and             Amount and
      Address  of          Nature of        Percentage of Outstanding Shares (1)
   Beneficial Owner   Beneficial Ownership   Before Offering  After Offering (6)


     Robert S. Benou (2)     1,904,614 (2)        78.3% (3)    5.3% (3)

     Arpad J. Havasy (2)        33,397             3.2%        1.4

     Chase Manhattan Bank(4) 1,775,000            72.9          -
     270 Park Avenue
     New York, NY  10017

     CNL Holdings, Inc.(5)   1,775,000            72.9          -
     750 Lexington Ave.
     New York, NY  10022
     
     Marc R. Benou (2)       -

     Louis Massad  (2)       -

     Thomas Fogg   (2)             200               *          *

 All Directors and Officers
 as a Group (5 persons)      1,938,211 (3)          81.5%(3)    6.7%

(1)  Does not include treasury stock.  See "Financial
     Statements".  Does not include possible issuance of (i)
     1,135,750 shares of Common stock issuable upon exercise of
     1,135,750 Class A Warrants, (ii) 41,000 shares of Common
     Stock issuable upon exercise of a Unit Purchase Option
     issued to the Public Offering Underwriter and (iii) 20,500
     shares of Common Stock issuable upon exercise of Class A
     Warrants contained in such Unit Purchase Option.

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

(3)  This amount includes 1,775,000 shares which CNL Holdings,
Inc. (the "Selling Securityholder") has the option to purchase
from the Chase Manhattan Bank (the "Bank") of which 375,000
shares are presently owned by the Bank and 1,400,000   shares
may be acquired by conversion of the Chase Manhattan Note.  Mr.
Benou has the sole power to vote in the event the Selling
Securityholder exercises its option to purchase the shares of
Common Stock and execises the conversion rights of the Chase
Manhattan Note.  See "Business - Credit Facility - New Terms of
Credit Facility and Agreement with the Selling Securityholder."


(4)  See "Business - Credit Facility."  This amount includes
conversion of the Chase Manhattan Note into 1,400,000 shares of
Common    Stock.

(5)  Includes 375,000 shares presently owned by Chase Manhattan
Bank and 1,400,000 shares of Common Stock issuable upon
conversion of the Chase Manhattan Note, all of which are subject
to an option to purchase by CNL Holdings, Inc., the Selling
Securityholder.  See "Business - Credit Facility" and "Selling
Securityholder and Plan of Distribution."

(6)  Assumes the sale of 1,775,000 shares of Common Stock by the
Selling Securityholder.


     * Less than 1%


Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Chase Manhattan Bank's Right to Appoint Director

     Under  the  terms of the Credit Facility, the Bank  has  the
right,  for a period of three years through August 16,  1998,  to
nominate one person to serve on the Company's Board of Directors,
and  upon  such  nomination  the  Board  shall  take  the  action
necessary to cause the Bank's nominee to be elected to the Board.
If  the  Bank  does not exercise this right, it  may  appoint  an
advisor, who will be entitled to attend all meeting of the  Board
of  Directors. To date, the Bank has not exercised either  right.
See "Business - Credit Facility".

                      CERTAIN TRANSACTIONS

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

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

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

     As of April 30, 1995, Messrs. Benou and Havasy have advanced
$139,196 to the Company for working capital purposes.  No  formal
repayment plan or interest charges have been established at  this
time.   In  addition,  the  officers have  not  been  paid  their
salaries since August 1, 1992.

     On August 16, 1995, accrued salaries of $309,109 owed by the
Company to Mr. Benou were converted into 61,822 shares of  Common
Stock

     Payment  of the Company's liabilities to the Bank under  the
Credit  Facility were guaranteed by Mr. Benou to  the  extent  of
$965,000  and  Mr.  Havasy  to the  extent  of  $492,000.   Their
respective guarantees were secured by a pledge to the Bank of all
Common Stock and Series B Preferred Stock owned by each of  them.
As  a  result of the August 1995 Offering, the Bank released  the
guarantees.

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

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



     Section  145 further provides that indemnification shall  be
provided if the party in question is successful on the merits.

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

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

;


                             PART IV
                                
Item 14. EXHIBITS AND REPORTS ON FORM 8-K
(a)Financial Statements

Balance Sheets as of July 31, 1996 and 1995                      F-2
Statements of Income  for the years ended July 31, 1996 and 1995
                                                                 F-3
Statements of Stockholders' Equity ( Deficiency )for the years
ended July 31,1996 ,1995 and 1994                                F-4
Statements of Cash Flows for the years ended July 31, 1995 and
1994                                                             F-5
Notes to Financial Statements                                    F-6

     Index of Exhibits
Item 16.  Exhibits.

Exhibit No.Description of Exhibit

1(a)*       Form of Underwriting Agreement

1(b)*       Form of Selected Dealer Agreement

            1(c)*                   Form   of   Agreement   Among
            Underwriters

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

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

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

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

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

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

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

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

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

 (b)*       Specimen Certificate for Class A Warrant

 (c)*       Form of Warrant Agreement

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

 (e)*       Form  of Financial Consulting Agreement

 5.**       Opinion of Bernstein & Wasserma on legality of securities
            being registered.

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

10.2  *     Conolog Corporation 1995/1996 Stock Option Plan.

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

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

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



*    Incorporated  by reference to the Registrant's  Registration
Statement on Form S-1 (33-92424).
**  To be filed by Amendment.
***  Incorporated  by reference to the Registrant's  Registration
Statement file on Form S-1 (File No 0-8174) as filed on  October
16, 1996




(b) Reports on Form 8-K
               None
                           SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
                                           Conolog Corporation
                                               By:
October  24, 1996                          /s/ Robert S. Benou
                                 President, Chief Executive
Officer and
                                          Chairman of the Board

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


October 24, 1996
                                   /s/Robert S. Benou
                                   President, Chief Executive
Officer
                                   and Chairman of the Board

October 24, 1996                   /s/Arpad J. Havasy
                                   Executive Vice President,
Secretary,
                                   Treasurer and Director

October 24, 1996                   /s/Marc R. Benou
                                   Vice President,Assistant
Secretary                          and Director

October 24, 1996                   /s/Louis S. Massad
                                   Director

_______________________________

                            Conolog Corporation

                            Financial Statements

                               July 31, 1996


                         Annual Report on Form 10-K

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

                            Financial Statements

                          Year Ended July 31, 1996




                            Conolog Corporation

                           Somerville, New Jersey

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

               Index to the Financial Statements

                      Conolog Corporation

                         July 31, 1996






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

 Balance Sheets - July 31, 1996 and 1995                 F-2

 Statements of Income -Years Ended July 31, 1996,
  1995 and 1994                                          F-3

 Statements of Stockholders' Equity (Deficiency) -Years
  Ended July 31, 1996, 1995 and 1994                     F-4

 Statements of Cash Flows -Years Ended
  July 31, 1996, 1995 and 1994                           F-5

 Notes to Financial Statements                          F-6-10




 

              Independent Auditors' Report


Board of Directors
Conolog Corporation


We  have  audited  the  accompanying  balance  sheets  of
Conolog  Corporation at July 31, 1996 and 1995,  and  the
related   statements  of  income,  stockholders'   equity
(deficiency) and cash flows for each of the  three  years
in  the  period  ended  July 31, 1996.   These  financial
statements  are  the  responsibility  of  the   Company's
management.  Our responsibility is to express an  opinion
on these financial statements based on our audits.

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

In  our  opinion,  the financial statements  referred  to
above  present  fairly,  in all  material  respects,  the
financial  position of Conolog Corporation  at  July  31,
1996 and 1995, and the results of its operations and  its
cash  flows  for each of the three years  in  the  period
ended July 31, 1996 in conformity with generally accepted
accounting principles.




Bridgewater, New Jersey
October 8, 1996

                         Conolog Corporation
                            Balance Sheets
 
                                                
                                                      July 31,
                                                              
                                                  1996         1995
Assets                                                        
                                                              
Current Assets                                                       
                                                              
  Cash                                        $  178,213    $  27,577
                                                              
  Accounts receivable - less allowances of       304,020      171,541
  $14,000 and $10,000 in 1996 and 1995,
  respectively
                                                              
  Inventories:                                                        
    Finished goods                             1,494,289      529,812

    Work-in-process                              129,675      831,410
                                                              
    Materials and supplies                     1,313,816    1,236,905
                               

                                               2,937,780    2,598,127
                                      
                                                              
                                                  43,517       25,683
  Other current assets
                                                              
  Deferred tax asset                                   -      492,352
                                                              
  Deferred offering costs                              -       86,154

                                                              
                                               3,463,530    3,401,434
                                                                 

Property, plant and equipment                                        
                                                              
  Land and improvements                           34,524       34,524
                                                              
  Building and improvements                      659,477      651,977
                                                              
  Machinery and equipment                      1,289,578    1,298,844
                                                                
  Furniture and fixtures                         330,735      304,472
                                                                   
                                                              
                                               2,314,314    2,289,817
                                                                
  Less allowance for depreciation and          1,880,408    1,820,922
  amortization                                                    
                                                                     
                                                 433,906      468,895

                                                              
Other assets                                      30,398       11,906
                                                              
                                                                     
                                                              
       Total Assets                         $  3,927,834  $ 3,882,235
                                                                 



                                                
                                                      July 31,
                                                              
                                                  1996         1995

Liabilities                                                   
                                                              
Current liabilities                                                  
                                                              
  Note payable - bank                       $  1,012,500  $ 3,798,000

  Accounts payable                               280,629      287,630
                                                              
  Accrued payroll                                 41,716      499,761
                                                              
  Accrued interest                                64,699      654,618
                                                              
  Bridge loan                                          -      200,000
                                                              
  Other accrued expenses                         115,723      135,936
                                                              
  Current maturities of capitalized lease         33,282       54,660
  obligations
                                                              
                                                                     
                                                              
       Total current liabilities               1,548,549    5,630,605
                                                              
Other liabilities                                                    
                                                              
  Capitalized lease obligations, less              4,973       34,103
  current maturities
                                                              
  Due to officers                                      -      161,705
                                                              
                                                   4,973      195,808
                                                              
                                                                     
                                                              
Stockholders' equity (deficiency)                                    
                                                              
  Preferred stock, par value $.50; series A;      77,500       77,500
  4% cumulative; 162,000 shares authorized;
  155,000 shares issued and outstanding
                                                              
  Preferred stock, par value $.50; series B;         597       10,661
  $.90 cumulative; 50,000 shares  authorized;
  issued and outstanding 1,167 shares in 1996
  and 21,321 in 1995
                                                              
  Common stock, par value $1.00; 6,000,000     1,035,186       52,239
  shares authorized; issued 1,035,186 shares
  in 1996 and 52,239 in 1995, including 8,776
  shares held in treasury
                                                              
  Additional paid-In capital                   4,401,636      952,994

  Retained earnings (deficit)                 (3,008,873)  (2,905,838)
                                                             
  Treasury shares at cost                       (131,734)    (131,734)

    Total stockholders' equity (deficiency)    2,374,312   (1,944,178)

                                                              
Total liabilities and stockholders'equity   $  3,927,834  $ 3,882,235









                         Conolog Corporation
                         Statements of Income

                                   
                                           Year Ended July 31,
                                                              
                                    1996          1995         1994

Sales and other income         $ 1,924,466  $  2,090,933  $ 2,044,860

Costs and expenses:

  Cost of products sold          1,242,001     1,270,771    1,067,560

   Selling, general and             946,954       924,524      852,951
  administrative

   Interest                         131,854       253,686      362,317

   Write-off of obsolete or          50,281       656,248      944,970
  excess inventories

                                  2,371,090     3,105,229    3,227,798

Loss before income taxes and      (446,624)   (1,014,296)  (1,182,938)
xtraordinary items                                        

Income taxes (benefit)                 200      (492,252)          50

Net loss before extraordinary     (446,824)     (522,044)  (1,182,988)
items                                                       

Extraordinary item                 740,376             -            -

Net income (loss)                $ 293,552    $ (522,044) $(1,182,988)


Earnings (loss) per share of     $     .28    $    (.12)    $   (.27)
common stock

<TABLE>

<CAPTION>
                                      Conolog Corporation
                        Statement of Stockholders' Equity (Deficiency)

<S>           <C>       <C>          <C>         <C>         <C>         <C>          <C>
              Series A  Series B     Common      Additional  Retained    Treasury        Total
              Preferred Preferred    Stock        Paid-in    Earnings     Stock       Stockholders'
                Stock     Stock                   Capital    (Deficit)                   Equity
                                                                                      (Deficiency)

Balance at     $77,500   $10,661      $52,239      $952,994  $(1,200,806) $(131,734)   $(239,146)
July 31, 1993

Net loss for         -         -           -          -       (1,182,988)     -       (1,182,988)
the year

Balance at      77,500    10,661       52,239       952,994   (2,383,794)  (131,734)  (1,422,134)
July 31, 1994     

Net loss for         -         -           -          -        (522,044)         -      (522,044)
the year

Balance at      77,500    10,661       52,239       952,994  (2,905,838)  (131,734)   (1,944,178)
July 31, 1995               

Public stock         -   (10,064)     982,947     3,448,642    (396,587)         -     4,024,938
offering

Net income for       -         -           -          -         293,552          -       293,552
the year

Balance at     $77,500   $   597     $1,035,186  $4,401,636  $(3,008,873) $(131,734)  $2,374,312
July 31, 1996
</TABLE>

                         Conolog Corporation
                       Statements of Cash Flows

                                              Year Ended July 31,
                                                            
                                         1996       1995       1994

Cash Flows From Operating Activities

  Net Income (Loss)                  $  293,552  $(522,044)  $(1,182,988)

  Adjustments to Reconcile Net
  Income to Net Cash Provided
  (Used) by  Operating Activities
                                                            
  Deferred income taxes                 492,352   (492,352)           -

  Depreciation and amortization          64,994     60,396        57,529
  Gain on disposition of equipment       (3,420)        -             -

  Provision for losses on accounts        9,000         -        (28,561)
  receivables                                                     

  (Increase) decrease in operating
  assets
                                                            
  Accounts receivable                  (141,479)    74,529       (58,051)

  Inventories                          (339,653)   392,058       874,989

  Other current assets                  (17,834)    (3,394)       22,555

 Increase (decrease) in operating
 liabilities

  Accounts payable                       (7,001)    12,330        38,459

  Accrued expenses and other         (1,068,177)   417,484       398,239
  liabilities                                                       

Net cash provided (used) by            (717,666)   (60,993)      122,171
operating activities                                               


Cash Flows From Investing Activities

  Purchase of property, plant and       (43,163)   (19,625)      (44,675)
  equipment                                                   
                                                            
  Proceeds from sale of equipment        18,666         -             -
                                                            
Net cash used in investing              (24,497)   (19,625)     (44,675)
Activities                                                


Cash flows from financing activities                              

  Deferred offering costs                86,154    (86,154)          -

  Increase from public stock offering 4,421,525         -            -


  Proceeds from long-term borrowings         -          -        75,000
                                                            
  Increase (decrease) in bridge loan   (200,000)   200,000           -

  Repayments of long-term borrowings (2,836,008)   (38,681)     (53,098)

  (Increase) reductions in other        (20,580)       325       20,672
  assets                                     
                                                            
  Dividends paid                       (396,587)        -            -
                                          
                                                            
  Increase (decrease) in due to        (161,705)    17,302     (137,333)
  officers                                                    
                                                            
Net cash provided (used) by             892,799     92,792      (94,759)
financing activities


Net increase (decrease) in cash         150,636     12,174      (17,263)

Cash at beginning of period              27,577     15,403       32,666
                                                            
Cash at end of period                 $ 178,213   $ 27,577     $ 15,403
                                            
                                                            
                                                                  

SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION

  Cash paid during the year for:

  Interest paid                       $ 772,773   $102,816     $ 90,917

  Taxes paid                          $     125   $     50     $     50

SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES

  Capitalized lease obligations       $      -    $ 56,550     $     -
  incurred for use of equipment                              


SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

  Revenue Recognition
    Sales  are  generally  recognized when the products  are  shipped.
    Sales  under  certain fixed-price-type contracts,  where  progress
    payments are received, are recognized when work is performed.

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

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

  Income (Loss) Per Share of Common Stock
    Income  (loss) per share of common stock is computed  by  dividing
    net  earnings (loss) (after dividends on preferred shares) by  the
    weighted  average  number  of shares of Common  Stock  outstanding
    during  the  year.   The effect of assuming the  exchange  of  the
    Series  A  Preferred Stock and Series B Preferred  Stock  in  1996
    would be anti-dilutive.

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

  Use of Estimates
    The   preparation  of  financial  statements  in  conformity  with
    generally  accepted accounting principles requires  management  to
    make  estimates  and assumptions that affect the reported  amounts
    of  assets and liabilities and 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.




NOTES PAYABLE - BANK

  On  August  16,  1995, the Bank exchanged debt obligations  for  (a)
  250,000  cash;  (b) $1,205,000 Five-year term loan and  (c)  375,000
  shares of Common Stock.

  The  five-year term loan of $1,025,000 bears interest at the  Bank's
  refinance rate, plus 1 1/4% to be amortized as follows:
    - eight  (8)  quarterly  payments of  $12,500,  beginning  October
       1995 through July 1997,
    - eight  (8)  quarterly  payments of  $25,000,  beginning  October
       1997 through July 1999,
    - three  (3)  quarterly  payments of  $28,125,  beginning  October
       1999 and ending April 2000,
    - a balloon payment of $640,625, due July 2000.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  As  a  result  of  the  above transaction, the  Company  realized  a
  $1,232,728 gain on debt compromise.  In addition, the Bank  released
  the  existing guarantees of Messrs. Benou and Havasy on the  Closing
  Date.

  At  July  31, 1996, the Company was in default with the  bank.   The
  company  is  negotiating  the  total  bank  debt  to  equity.   (See
  Subsequent Events Note.)

DUE TO OFFICERS

  Effective July 31, 1995 interest has been accrued from inception  on
  these  advances  at  the cumulative rate of 12% of  the  outstanding
  balances.   Total  accrued interest on these advances,  included  in
  accrued  interest  in  the  accompanying  financial  statements,  is
  $7,563 and $65,889 for the years ended at July 31, 1996 and 1995.

CAPITAL STOCK

  The   Series  A  Preferred  Stock  provides  4%  ($.02  per   share)
  cumulative  dividends,  which  were  $83,700  ($.54  per  share)  in
  arrears  at  July  31, 1996.  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  $12.00  per
  share.  The Company may redeem the Series A Preferred Stock at  $.50
  per share plus accrued and unpaid dividends.

  The  Series B Preferred Stock provides cumulative dividends of  $.90
  per  share which were $426,860 ($366 per share) in arrears  at  July
  31,  1996.  In addition, each share of Series B Preferred  Stock  is
  convertible  into  392  shares of Common Stock.    The  Company  may
  redeem  the  Series B Preferred Stock at $15 per share plus  accrued
  and unpaid dividends.

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





WRITE-OFF OF OBSOLETE OR EXCESS INVENTORIES

  During  1996, the Company recorded a write-off of obsolete or excess
  inventories of $50,281.  During 1995 and 1994, the Company  recorded
  a  write-off  of  obsolete  or excess inventories  of  $656,248  and
  $944,970, respectively.

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

INCOME TAXES

Income taxes are comprised of the following:

                                                   July 31,
                                        1996        1995       1994

Deferred Income Taxes (Benefit)     $      -    $(492,352)   $     -

  Current Income Taxes
     Federal                               -           -           -
     State                                200         100          50

                                     $    200   $(492,252)   $     50

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

  At  July  31, 1996 the Company has a net operating loss carryforward
  of  approximately  $2,968,000 for financial reporting  purposes  and
  approximately  $3,025,000 for tax purposes  which  is  available  to
  offset   future  Federal  taxable  income.   For  Federal  purposes,
  $490,000  of the carryforward expires in 2003, $346,000  expires  in
  2008,   $1,232,000  expires in 2009 and $957,000  expires  in  2010.
  For  state  purposes  the carryforward is approximately  $2,187,000;
  $57,000  expires  in 2000, $1,232,000 expires in 2001  and  $898,000
  expires  in  2002.   Also, at July 31, 1995 the Company  has  unused
  tax  credits  available of approximately $103,300 of  which  $12,100
  expires in 2000, $26,300 in 2001 and $64,900 in 2002.

  The  above  net operating loss created deferred tax asset  that  has
  been fully reserved.  The amount is $1,185,209.

EXTRAORDINARY ITEM

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

LEASES

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

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

                                                  July 31,
                                             1996         1995

     Machinery and equipment             $  303,574    $ 322,239

     Less allowance for amortization        263,832      248,013

                                         $   39,742    $  74,226

  Lease amortization is included in depreciation expense.

  Future  minimum  payments,  by  year and  in  the  aggregate,  under
  capital leases consisted of the following as of July 31, 1996:

                                                         
     1997                                              $  33,719
                                                         
     1998                                                  5,050
                                                         
     Total minimum lease payments                         38,769
                                                         
     Less amounts representing interest                    (514)
                                                         
     Present value of net minimum lease payments          38,255
                                                         
     Less, current maturities of capitalized lease        33,282
     obligations
                                                         
     Long-term capitalized lease obligations           $   4,973

  The Company leases various equipment under noncancellable operating
  leases expiring through July 2000.  Future minimum rental payments
  under the above leases are follows:
                                                         
          Year Ended July 31,                                    
                                                         
          1997                                         $   7,659
                                                         
          1998                                             4,808
                                                         
          1999                                             4,808
                                                         
                                                       $  17,275

  Total  rental  expense  for  all operating  leases  of  the  Company
  amounted  to approximately $10,353, $11,447 and $16,850  during  the
  years ended July 31, 1996, 1995 and 1994, respectively.







MAJOR CUSTOMERS AND EXPORT SALES

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

                                                         
   Year Ended                Sales to     Number of    Percentage
                               Major      Customers        of
                             Customers                   Total
                                
                                                         
     1996                   $ 401,840         1            21
                                                         
     1995                     424,849         1            20
                                                         
     1994                     597,000         1            29

  During 1996 the Company had export sales of $401,840.  In  1995  and
  1994 the Company did not have any export sales.

SUBSEQUENT EVENTS

  On   September  11,  1996,  the  Company  entered  into  an  allonge
  agreement  with  the bank whereby the bank may at  any  time  before
  April  15,  1997  convert the then unpaid amount  of  principal  and
  interest  due under the Amended and Restated Term Note dated  as  of
  August  2, 1995 in the original principal amount of $1,025,000  into
  1,400,000   shares  of  the  Company's  Common  Stock  (the   "Notes
  Shares").   The outstanding balance of the note and unpaid  interest
  as of August 26, 1996 was $1,077,988.

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

  On September 12, 1996   CNL  entered  into  an  agreement  with  the
                    Company  whereby the Company would  use  its  best
                    efforts to file a Registration Statement with  the
                    Securities  and Exchange Commission  covering  the
                    375,000 Bank Shares and the 1,400,000 Note  Shares
                    (collectively   the  "Acquired   Shares").    Such
                    Registration Statement shall be declared effective
                    as  soon as possible after the filing thereof, and
                    kept  current  and effective for a period  of  two
                    years  or until such time as all shares registered
                    pursuant  therewith have been  sold  or  otherwise
                    transferred.   The proceeds of  the  sale  of  the
                    Acquired  Shares shall be applied as follows:  The
                    first  $1,500,000 shall be paid to  reimburse  CNL
                    for  payments  made to the bank  pursuant  to  the
                    Option Agreement.  Fifty percent of the balance of
                    the  proceeds, not to exceed $2,500,000, shall  be
                    loaned to the Company by CNL.  The balance of  the
                    proceeds belong to CNL.  The amounts loaned by CNL
                    to  the Company shall be evidenced by notes  which
                    shall be due twelve months after making such  loan
                    and  shall  bear interest at the rate  of  4%  per
                    annum.  At maturity of the loans, the Company will
                    have  the  option  to repay the loan  balance  and
                    accrued  interest  by  issuing  a  new  Series   C
                    Preferred Stock (the "Preferred Stock") valued  at
                    $5.00 per share.  The Preferred Stock will be non-
                    voting and will carry a cumulative dividend of  8%
                    per annum, which may be payable by the issuance of
                    shares  of common stock valued at $5.00 per  share
                    up to a maximum of 40,000 shares per annum.
[ARTICLE] 5
<TABLE>
<S>                             <C>
[PERIOD-TYPE]                   12-MOS
[FISCAL-YEAR-END]                          JUL-31-1996
[PERIOD-END]                               JUL-31-1996
[CASH]                                         178,213
[SECURITIES]                                         0
[RECEIVABLES]                                  314,020
[ALLOWANCES]                                    10,000
[INVENTORY]                                  2,937,780
[CURRENT-ASSETS]                             3,463,530
[PP&E]                                       2,314,314
[DEPRECIATION]                               1,880,408
[TOTAL-ASSETS]                               3,927,834
[CURRENT-LIABILITIES]                        1,548,549
[BONDS]                                              0
[PREFERRED-MANDATORY]                                0
[PREFERRED]                                     78,097
[COMMON]                                     5,436,822
[OTHER-SE]                                 (3,008,873)
[TOTAL-LIABILITY-AND-EQUITY]                 3,927,834
[SALES]                                      1,924,466
[TOTAL-REVENUES]                             1,924,466
[CGS]                                        1,242,001
[TOTAL-COSTS]                                1,292,282
[OTHER-EXPENSES]                               946,954
[LOSS-PROVISION]                                50,281
[INTEREST-EXPENSE]                             131,854
[INCOME-PRETAX]                              (446,624)
[INCOME-TAX]                                       200
[INCOME-CONTINUING]                          (446,824)
[DISCONTINUED]                                       0
[EXTRAORDINARY]                                740,376
[CHANGES]                                            0
[NET-INCOME]                                   293,552
[EPS-PRIMARY]                                      .28
[EPS-DILUTED]                                      .28
</TABLE>