|                                                                                                      
|------------------------------------------------------------------------------------------------------
|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, 2009                                                               
|                                                                                                      
||_|          Transition
 Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|for the transition period from      to                                                                
|                                                                                                      
|Commission File Number: 0-8174                                                                        
|                                                                                                      
|CONOLOG CORPORATION                                                                                   
|(Exact name of registrant as specified in its charter)                                                

|                                                                                                                             |  |                                  
|---------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------
|DELAWARE                                                                                                                     |  | 22-1847286                       
|(State or other jurisdiction of incorporation or organization)                                                               |  | (IRS Employer Identification No.)
|                                                                                                                             |  |                                  
|5 Columbia Road, Somerville, NJ                                                                                              |  | 08876                            
|(Address of principal executive office)                                                                                      |  | (Zip code)                       
|                                                                                                                             |  |                                  
|Issuers telephone number, including area code:
 (908) 722-8081
 Securities registered pursuant to Section 12(b) of the Act:

|                              |  |                                          
|----------------------------- |  | -----------------------------------------
|Title of each class           |  | Name of each exchange in which registered
|Common Stock, $0.01 par value |  | NASDAQ Capital Markets                   

Indicate by check mark if the registrant is a well-known seasoned
    issuer, as defined in Rule 405 of the Securities Act. 
Yes|_|No |X|

Indicate by check mark if the registrant is not required to file
    reports pursuant to Section 13 or Section 15(d) of the Act. 
  Yes|_|No |X|

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.

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


|                            |                              
|--------------------------- | -----------------------------
|Large accelerated filer |_| | Accelerated filer |_|        
|Non-accelerated filer |X|   | Smaller reporting company |_|

The aggregate
  market value of the voting stock held by non-affiliates of the Registrant based
  on the closing sale price of $1.80 on November 11, 2009 was $4,233,521

The number of
shares outstanding of the Registrants common stock outstanding, excluding
treasury shares, as of November 11, 2009 was 3,180,846.

---

---



TABLE OF CONTENTS

|                                                                                                                       |  |   
|---------------------------------------------------------------------------------------------------------------------- |  | --
|PART I                                                                                                                 |  |   
|                                                                                                                       |  |   
|Item 1. BUSINESS                                                                                                       |  | 1 
|                                                                                                                       |  |   
|Item 2. DESCRIPTION OF PROPERTY                                                                                        |  | 8 
|                                                                                                                       |  |   
|Item 3. LEGAL PROCEEDINGS                                                                                              |  | 8 
|                                                                                                                       |  |   
|Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                            |  | 8 
|                                                                                                                       |  |   
|PART II                                                                                                                |  |   
|                                                                                                                       |  |   
|Item 5 MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS                                              |  | 9 
|                                                                                                                       |  |   
|Item 6. SELECTED FINANCIAL DATA                                                                                        |  | 10
|                                                                                                                       |  |   
|Item 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF RESULTS OF
 OPERATIONS AND FINANCIAL CONDITION                         |  | 10
|                                                                                                                       |  |   
|Item 8. FINANCIAL STATEMENTS                                                                                           |  | 14
|                                                                                                                       |  |   
|Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
 AND 
 FINANCIAL DISCLOSURE                        |  | 14
|                                                                                                                       |  |   
|Item 9A. CONTROLS AND PROCEDURES                                                                                       |  | 14
|                                                                                                                       |  |   
|PART III                                                                                                               |  |   
|                                                                                                                       |  |   
|Item 10. DIRECTORS, EXECUTIVE OFFICERS                                                                                 |  | 15
|                                                                                                                       |  |   
|Item 10A. EXECUTIVE COMPENSATION, PROMOTERS AND CONTROL PERSONS:
 COMPLIANCE WITH 
 SECTION 16 (A) OF THE EXCHANGE ACT |  | 17
|                                                                                                                       |  |   
|Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                                                |  | 18
|                                                                                                                       |  |   
|Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                                |  | 19
|                                                                                                                       |  |   
|Item 13. EXHIBITS                                                                                                      |  | 20
|                                                                                                                       |  |   
|Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES                                                                        |  | 21
|                                                                                                                       |  |   
|SIGNATURES                                                                                                             |  | 22

---



FORWARD LOOKING STATEMENTS

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

PART 1

GENERAL INFORMATIONWe are engaged in the design, production (directly
and/or through subcontractors) and distribution of small electronic and
electromagnetic components and sub-assemblies for use in telephone, radio and
microwave transmission and reception and other communication areas that are
used in both military and commercial applications. Our products are used for
transceiving various quantities, data and protective relaying functions in
industrial, utility and other markets.

ITEM 1 - BUSINESS

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

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

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

During 1987,
we made a strategic decision to redirect our focus from military to commercial
markets. Since that time, we have refocused on manufacturing and marketing our
products for the commercial marketplace rather than depend on the military and
defense-related markets. Our primary emphasis was on products for electric
utilities, co-generation of power, gas and water companies, traffic control for
departments of transport (DOT) and airports utilizing DSP (Digital Signal
Processing) technology.

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

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

During the
year ended July 31, 2001, we formed a wholly owned subsidiary, Lonogoc
Corporation. In August, 2000, Lonogoc Corporation purchased the assets of
Independent Computer Maintenance Corporation, which provided installation,
maintenance, and troubleshooting of computer systems and networks. On October
22, 2002, we entered

1

---



an agreement
to rescind the Asset Purchase Agreement between us and Independent Computer
Maintenance Corporation. Under the rescission agreement, Conolog and its
subsidiary agreed to transfer all assets previously purchased pursuant to the Asset
Purchase Agreement, to the extent they still exist, to the former seller. The
return of the purchase price paid for the assets was $600,000, $300,000 in cash
at closing, a note, which is secured by a first mortgage on a condominium, for
$150,000 bearing an interest rate of 7.5% of which will be paid over 24 months
in equal monthly installments of $6,750 per month beginning December 2002, and
an unsecured note receivable for $137,350 payable over 10 years beginning
December 2004 bearing an interest rate of 5%.

In March 2004,
we ceased operating our staffing business. The assets of our wholly-owned
subsidiary, Nologoc, Inc. trading as Atlas Design, were sold to the
subsidiarys Vice President. In consideration of the sale, we received $34,000
in cash.

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

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

PRESENT STATUS/BUSINESS PRODUCT DESCRIPTION

We are engaged
in three basic market segments:

| |    |                                                                           |   |                                       
| | -- | ------------------------------------------------------------------------- | - | --------------------------------------
| | 1) | Commercial
 Sales (Under the trade name INIVEN (a Division of Conolog))
| |    |                                                                          
| |    |                                                                           |  | Direct sales
 to end-users            
| |    |                                                                           |   |                                       
| |    |                                                                           |  | Sales to
 system assemblers           
| |    |                                                                           |   |                                       
| |    |                                                                           |  | Sales to
 contractors/installers      
| |    |                                                                           |   |                                       
| | 2) | Military
 Sales                                                          
| |    |                                                                          
| |    |                                                                           |  | Direct
 contract sales to military    
| |    |                                                                           |   |                                       
| |    |                                                                           |  | As
 subcontractor to systems producers
| |    |                                                                           |   |                                       
| |    |                                                                           |  | Foreign
 governments                  
| |    |                                                                           |   |                                       
| | 3) | Commercial
 Sales - As Manufacturing Subcontractor to Systems Producers. 

2

---



MILITARY SALES

Military sales
are primarily for our electromagnetic wave filters used in military radios,
vehicles (cars, trucks or tanks), portable (backpack), special signaling
equipment and exchanges (as in field command posts), ship to ship teletype
signaling filters used in deployment of ships (UCC-1 and UCC-4 systems) as well
as many other signaling applications where accurate electromagnetic frequency
control is required.

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

COMMERCIAL INIVEN SALES AND PRODUCTS

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

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

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

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

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

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

The PDR 2000
is an 8 channel high speed communication system for use in electric power
transmission protection schemes. Unique features include event recording,
on-board and remote programming, and ID (unit to unit identification on all
communications), Packet Forwarding (ability to forward information such as
trips and all events through indirect communication paths), password protection
and multiple communication ports.

The PTR/PDR
Teleprotection Series are 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/PDR
market is:

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

3

---



| |   |                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------
| |  | Existing
 installations not properly protected, improving efficiency and reducing down
 time.          
| |   |                                                                                                        
| |  | Existing
 installations for upgrading to PTR/PDR technology, again improving efficiency
 and down time.

Sales efforts
for the PTR/PDR 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.

In the United
States alone, there are over 500 large entities generating electricity. They
are:

| |   |                                     
| | - | ------------------------------------
| |  | Municipal
 Systems                  
| |   |                                     
| |  | Cooperative
 Systems                
| |   |                                     
| |  | Federal,
 State and District Systems
| |   |                                     
| |  | Audio Tone
 and Telemetry Equipment 

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

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

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

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

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

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

GEN-1 AND GEN-1 PROGRAMMABLE SERIESThe 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.

Since our line
has a distinct mechanical configuration, we designed our GEN-1 Programmable
units and other improvements as replacements for existing units.

4

---



Our 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/PDR market except that
manufacturers representatives specialize in selling to this diverse market.

98, 68 and
40 Series represent our latest designs in the audio tone equipment utilizing
the more advanced DSP technology, which provides high accuracy and long-term
stability. These features have allowed us to greatly improve the scope, density
and number of functions that can be performed on a single phone line, microwave
link or direct line.

Sales of these
products are made by the same agents who sell our GEN-1 products, but are also
directed to encompass more sophisticated users with larger amounts of data and
control points. The mechanical configuration of the 98 series is more
compact, permitting more equipment in a given space, while performing many more
functions when it is connected to the 40 Series. The 68 Series is the 98
Series repackaged mechanically specifically for customers with older systems
permitting them to upgrade their systems to DSP technology. The 40 Series,
when connected to the 98 or 68 in the same chassis, permits the continuous
monitoring of variable data.

Typical
applications for these products include transmission of the variable data (such
as volume, temperature, pressure and moisture) for water, gas, industrial
gases, oil, gasoline, transportation equipment and telephone exchanges, and for
use at airports, tunnels and bridges and for security and electricity systems.

MULTIPLEX SUPERVISORY (IM) CONTROL SYSTEMThis 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, we 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 our sales efforts for it are being conducted through its
existing independent manufacturers sales representatives.

FIBER OPTIC LINK AND DATA MODEMThe expansion of fiber lines by our customers and
their need to switch equipment from phone lines to fiber prompted us to design
and introduce a fiber-optic-coupler line to interface with the many different
fiber heads. In addition to complete data interface couplers we launched a
series of 1200 Baud Modems (Industrial Grade) for operation under the same
environmental specifications in line with our products.

OUR STRATEGYOur strategy is to develop new commercial markets
by continuing to develop new products and enhance existing products to improve
both our 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 our customers for more sophisticated and comprehensive products and
services.

5

---



MARKETING AND SALESIn general, our products are marketed through
telemarketing and customer contacts by our President and through independent
manufacturing sales representatives and distributors.

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

LARGEST CUSTOMERSOur major customers during fiscal 2009 and 2008:

| |                            |  |      |           |      |   |         | 
| | -------------------------- |  | ---- | --------- | ---- | - | ------- | 
| |                            |  | 2009 |           | 2008 |  
| |                            |  |      |           |      |  
| | Bonneville Power Authority |  | $    | 186,002   |      | $ | 183,270 | 
| | Wunderlich-Malec (NIPSCO)  |  |      | 112,575   |      |   | 233,735 | 
| | Surtek Industries          |  |      | 638,095   |      |   | 190,500 | 
| | Tucson Electric Power      |  |      | 66,535    |      |   | 148,632 | 
| | Defense Supply Command     |  |      | 75,740    |      |   | 31,756  | 
| |                            |  |      |           |      |  
| |                            |  |      |           |      |   |         | 
| |                            |  | $    | 1,078,947 |      | $ | 787,893 | 
| |                            |  |      |           |      |   |         | 

None of these
customers has or had any material relationship other than business with the
Company.

INVENTORY

RAW MATERIALSWe believe that we have adequate sources of raw
materials available for use in our business. Our products are assembled from a
variety of standard electronic components, such as integrated circuits,
transformers, transistors, passive components (i.e., resistors, capacitors and
inductors), diodes and assorted hardware, such as, printed circuit boards,
connectors and faceplates. We are not dependent upon any single supplier. We
also purchase a number of other electronic components and sub-assemblies from
various suppliers.

In the past,
we manufactured and held in our inventory finished products pursuant to the
military specifications and based upon the military forecast for future
quantities and delivery schedules. Widespread military procurements were
discontinued as a result of the end of the cold war and the downsizing of the
military establishment. Consequently, management made a decision to write off a
substantial amount of the military inventory in 2001 and 2002. As a result, we
no longer manufacture military products in advance. Rather, we only schedule
production as purchase orders are received.

MANUFACTURINGThe Company currently rents approximately 7,000
square feet of the facility located at 5 Columbia Road, for a combination of
manufacturing and office space. The Company assembles, under normal workload
conditions, the product it sells; however, to accommodate the peak demands that
occur from time to time, we can engage a number of subcontractors to assemble
boards to our specifications. All assemblies, however, are inspected and fully
tested by our quality, engineering and testing departments. We maintain test
equipment and every product is burned-in (i.e., each product is run at full
power for 48 hours) and tested prior to shipment.

6

---



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

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

RESEARCH AND DEVELOPMENT

New Products 

GlowWorm Fiber Optic Detector,
an independent standalone product for detection of fiber optic cable failures
without the need to cut the cable, will be introduced in January 2010.

The CM-100 platform, is the first of its kind,
direct substation hardened communication consolidator that fills the existing
gap in substation communications. The hardwired CM-100 will allow our existing
products, including the PDR-2000, to operate seamlessly over fiber optics
together with existing substation equipment. This system is in final testing
and will be ready for production in fiscal 2010.

During fiscal
year 2009 we have invested $368,331 in product development.

During fiscal
year 2008 we have invested $150,173 in product development.

During fiscal
years 2006 and 2007 we have invested $376,713 and $372,723, respectively, in
product development.

During fiscal
years 2004 and 2005, we invested $93,984 and $177,338, respectively, in product
development.

During fiscal
year 2002 and 2003, we invested approximately $800,000 and $0, respectively for
product development.

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

The Company
also developed a new platform for its GEN-1 products allowing for its use by
the Canadian utilities.

PATENTS AND TRADEMARKSWe do not have any patents covering any of our
present products. We do have registered trademarks and Copyrights for Conolog
and Iniven. We use the name INIVEN for our commercial products. We believe that
this name is recognized in our industry. We believe that our prospects are dependent
primarily on our ability to offer our customers high quality, reliable products
at competitive prices rather than on our ability to obtain and defend patents.
We do not believe that our INIVEN name is of material importance to the
Companys business.

GOVERNMENTAL REGULATIONOur manufacturing facilities are subject to
numerous existing and proposed federal and state regulations designed to
protect the environment, establish occupational safety and health standards and
cover other matters. We believe that our operations are in compliance with
existing regulations and we do not believe that such compliance has had or will
have any material effect upon our capital expenditures, earnings or competitive
position. With respect to military sales, we are not subject to any special
regulations. The products manufactured are done so in accordance with accepted
commercial practices.

7

---



EMPLOYEESAs of July 31, 2009, we employed 16 people on a
full-time basis, including two in management, two in sales, one clerical, one
in accounting, one in purchasing, six in engineering and quality control and
three in production. We have enjoyed good labor relations.

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

ITEM 2 - DESCRIPTION OF PROPERTY

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

ITEM 3 - LEGAL PROCEEDINGS

Meyers
Associates, L.P. v. Conolog Corporation, Supreme Court of the State of New
York, County of New York Index No. 600824/07.

On March 13,
2007, Meyers Associates, L.P. commenced an action against Conolog Corporation,
asserting that: (1) Conolog breached a purported contract it had with Meyers
pursuant to which it claims Meyers was to act as lead underwriter in connection
with a Regulation D securities offering for Conolog, and (2) Conolog
misappropriated a purported confidential list of potential investors. Conolog
denies the allegations in the complaint and intends to vigorously defend
against Meyerss claims.

On May 7,
2009, The Supreme Court of New York issued a Stipulation of Dismissal,
dismissing all claims asserted by Meyers Associates, with prejudice.

Allen Wolfson
v. Conolog Corporation, United States District Court for the Southern District
of New York, Case Number 08-cv-3790.

On April 22,
2008, Allen Wolfson filed an action against Conolog Corporation, asserting that
there was a breach of contract in connection with four consulting contracts
allegedly entered into with plaintiff and entities controlled by plaintiff.
On June 10, 2008, the company filed a motion to dismiss Plaintiffs complaint
on the grounds that the Court lacks personal jurisdiction over the Company or,
in the alternative, for Plaintiffs failure to state a claim upon which relief
can be granted. A Stipulation of Dismissal was issued during July 2009.

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

N/A

8

---



PART II

ITEM 5 - MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITRIES

MARKET PRICE FOR COMMON STOCK AND CLASS A
WARRANTS

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

|                   |  |               |       |     |   |      | 
|------------------ |  | ------------- | ----- | --- | - | ---- | 
|                   |  | Common
 Stock |      
|                   |  |               |       |     |   |      | 
|Fiscal
 Year 2009  |  | High          |       | Low |  
|                   |  |               |       |     |   |     
|                   |  |               |       |     |   |      | 
|First
 Quarter     |  | $             | 5.85  |     | $ | 1.85 | 
|second
 Quarter    |  | $             | 3.15  |     | $ | 1.25 | 
|Third
 Quarter     |  | $             | 3.00  |     | $ | 1.37 | 
|Fourth
 Quarter    |  | $             | 2.29  |     | $ | 1.15 | 
|                   |  |               |       |     |   |      | 
|                   |  | Common
 Stock |      
|                   |  |               |       |     |   |      | 
|Fiscal
 Year 2008* |  | High          |       | Low |  
|                   |  |               |       |     |   |     
|                   |  |               |       |     |   |      | 
|First
 Quarter     |  | $             | 11.12 |     | $ | 5.68 | 
|second
 Quarter    |  | $             | 7.36  |     | $ | 3.48 | 
|Third
 Quarter     |  | $             | 4.22  |     | $ | 2.80 | 
|Fourth
 Quarter    |  | $             | 3.16  |     | $ | 0.84 | 

|                                                                 
|-----------------------------------------------------------------
|                                                                 
|                                                                 
|* Represents
 retroactive application of 1:5 reverse stock split.

As of July 31,
2009, the Companys Common Stock was held by approximately 450 shareholders of
record. Our transfer agent is Continental Stock Transfer & Trust Company,
with offices at 17 Battery Place, 8th floor, New York, New York,
telephone number (212) 509-4000. As transfer agent for our shares of common
stock the transfer agent is responsible for all record-keeping and
administrative functions in connection with the common shares of stock.

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

9

---



EQUITY COMPENSATION PLAN INFORMATION

The following
table sets forth the information indicated with respect to our compensation
plans under which our common stock is authorized for issuance.

|                                                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                      |  |                          
|----------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -------------------- |  | -------------------------
|                                                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                      |  |                          
|                                                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                      |  | Number of securities     
|                                                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                      |  | remaining available for  
|                                                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  | Weighted average     |  | future issuance under    
|                                                            |  | Number of Securities to be issued                                                                                                                                                                                                                                                                                                                                                                                                                      |  | exercise price of    |  | equity compensation plans
|                                                            |  | upon exercise of outstanding                                                                                                                                                                                                                                                                                                                                                                                                                           |  | outstanding options, |  | (excluding securities    
|                                                            |  | options, warrants and rights                                                                                                                                                                                                                                                                                                                                                                                                                           |  | warrants and rights  |  | reflected in column (a)) 
|                                                            |  | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  | (b)                  |  | (c)                      
|                                                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                      |  |                          
|                                                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                      |  |                          
|Equity
 compensation plans approved by security holders     |  | On July 9,
 2002 our stockholders approved our 2002 Stock Option Plan under which up to
 190,000 shares of our common stock may be granted to our employees, directors
 and consultants. To date, no options have been granted under this plan. The
 exercise price of options granted under the 2002 Stock Option Plan will be
 the fair market value of our common stock on the date immediately preceding
 the date on which the option is granted. |  | N/A                  |  | 190,000                  
|                                                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                      |  |                          
|                                                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                      |  |                          
|Equity
 compensation plans not approved by security holders |  | N/A                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |                      |  |                          
|                                                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                      |  |                          
|                                                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                      |  |                          
|Total                                                       |  | 190,000                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |                      |  |                          
|                                                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                      |  |                          

ITEM 6  SELECTED FINANCIAL DATA

N/A

ITEM 7 - MANAGEMENTS DISCUSSION AND ANALYSIS OF RESULTS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Subsequent
Event:

The Company
entered into a Subscription Agreement (the Subscription Agreement), dated as
of August 3, 2009 ( the Closing Date), with three investors, pursuant to
which it sold an aggregate of One Million Dollars of its principal amount of
secured convertible notes (the Notes). On the Closing Date the Company
received gross proceeds of $500,000 and $500,000 (the Escrowed Funds) was
placed in escrow pursuant to an Escrow Agreement between the Company, the
Subscribers and Grushko & Mittman, as escrow agent. The Company paid the
placement agent in the transaction $50,000 in fees. Pursuant to the Subscription
Agreement, the Company had to file a preliminary proxy statement with the
Securities and Exchange Commission by September 2, 2009 seeking approval for
the transactions contemplated by the Subscription Agreement and the Company
must obtain approval of its shareholders within 90 days of the Closing Date
(125 days if the SEC reviews the proxy statement.). On

10

---



September 24,
2009, the Companys shareholders approved the transaction (the Shareholder
Approval) and the Escrowed Funds were released. After the payment of fees in
the amount of $50,000 to to the placement agent in the transaction, the Company
received net proceeds of $450,000 (prior to the deduction of other fees and
expenses related to the Offering).

The initial
interest rate of the Notes was 4% and after the Shareholder Approval, it became
8% per annum. Interest on the notes accrues from the date of the Closing Date
is payable quarterly, in arrears, commencing six months after the Closing Date
and on the maturity date of the Note. The Conversion Price of the Notes is the
lessor of $.78 (the Fixed Conversion Price) as may be adjusted (the Initial
Conversion Price). Commencing six months after the Closing Date, the
Conversion Price shall be the lessor of the Fixed Conversion Price or 75% of the
lowest three closing bid prices for the Companys common stock for the ten days
prior to when the Note is converted.

The Company
also issued the Subscribers Class A Warrants to purchase 2,564,103 shares of
the Companys Common Stock at $1.12 per share. The Class A warrants are
exercisable for a period beginning on August 3, 2009 and terminate on August 3,
2014.

Pursuant to
the Subscription Agreement, the Company also issued the Subscribers a total of
40,000 class B Warrants. The Class B Warrants entitles the Subscribers at any
time after the sooner of six months from the Closing Date or after the Company
obtains the Shareholder Approval, until July 3, 2012, to purchase up to
$4,000,000 of principal amount of the Companys 8% notes on the same terms as the
Notes. Upon the exercise of the Class B Warrants, the holder of the Class B
Warrant will be issued two Class C Warrants for Each share of the Companys
common stock that would be issued on the exercise date of the Class B Warrant
assuming the full conversion of the notes issued on such date. For each
$100,000 of principal of notes purchased pursuant to the Class B Warrants, the
Subscribers will surrender 1,000 Class B Warrants.

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

The Company
also entered into a Security Agreement pursuant to which it granted the
Subscribers a security interest in its assets. The security interest granted
pursuant to the Security Agreement will terminate when the Approval is obtained
or the Notes (including outstanding interest due thereon) are repaid.

In connection
with the transaction, the Company issued the placement agent (or its employees)
warrants to purchase 256,410 shares of the Companys common stock.

The issuance
and sale of the Notes and warrants pursuant to the Subscription Agreement was
made in reliance upon the exemption provided in Section 4(2) of the Securities
Act and Regulation D promulgated under the Securities Act. No form of general
solicitation or general advertising was conducted in connection of the Private
Placement. The issuance of the warrant to the selling agent (including its
employees and affiliates) was made in reliance upon the exemption provided in
Section 4(2) of the Securities Act.

RESULTS OF OPERATIONS

2009 COMPARED to 2008Product revenue for the fiscal year ended July 31,
2009 totaled $1,485,298 an increase of 21.7% or $264,305 from the product
revenue reported for the fiscal year ended July 31, 2008 of $1,220,993. The
Company attributes this increase in revenues to long-term contract awards
received during this fiscal year. Deliveries on these contracts began in early
2009.

Product cost
(Material and Direct labor) for the fiscal year ended July 31, 2009 amounted to
$470,392 or 31.7% of product revenues. Product cost for the fiscal year ended
July 31, 2008 amounted to $467,081 or 38.2% of product revenues. The Company
attributes the decrease in the current years product cost as a percentage of
revenue and corresponding increase in the current years Gross Profit of
$373,165 to the standardizing of costs to build our new PDR-2000 system and the
outsourcing of assemblies.

For fiscal
year ended July 31, 2009 the Company expensed $82,138 in obsolete inventory
parts. This compares to $112,171 of obsolete inventory parts expensed during
the fiscal year July 31, 2008.

11

---



Total
Operating expenses for fiscal July 31, 2009 were $2,672,943 a decrease of
$1,700,135 from $4,373,078 reported for fiscal July 31, 2008. The Company
attributes this decrease to forgiveness of Officers Salary, reduced legal fees
and a decrease in the value of stock compensation costs.

Other expenses
for the fiscal year ended July 31, 2009 decreased by $2,540,274 to $695,995
from $3,236,269 for fiscal July 31, 2008. Included in this current years
expense is a non-cash expense related to the induced conversion benefit of
$552,370; a non-cash interest expense related to conversion of debt for
$286,584 and the amortization of fees related to the conversion of debt for
$123,274.

As a result of
the foregoing, the Company reported a net loss applicable to common shares of
$2,354,032 or $0.98 per share for fiscal 2009, compared to a net loss
applicable to common shares of $6,967,606 or $23.49 per share (as restated for
the stock reversal for fiscal 2009).

2008 COMPARED to 2007Product revenue for the fiscal year ended July 31,
2008 totaled $1,220,993 an increase of 136% or $703,288 from the product
revenue reported for the fiscal year ended July 31, 2007 of $517,705. The
Company attributes this increase in revenues to new long-term contract awards
received during this fiscal year. Deliveries on these contracts began in early
2008.

Product cost
(Material and Direct labor) for the fiscal year ended July 31, 2008 amounted to
$467,081 or 38.2% of product revenues. Product cost for the fiscal year ended
July 31, 2007 amounted to $378,563 or 73.1% of product revenues. The Company
attributes the increase in the current years product cost of $88,518 and
corresponding increase in the current years Gross Profit of $614,770
(excluding the write down of obsolete inventory) to the standardizing of costs
to build our new PDR-2000 system. Outsourcing of assemblies and the continued
use of assembly standards under ISO-9000 also added to this lower cost.

For fiscal
year ended July 31, 2008 the Company, in compliance with its inventory management
policy, expensed $112,171 of cost relating to obsolete inventory parts. This
compares to $1,256,155 of obsolete inventory parts expensed during the fiscal
year July 31, 2007.

Total
Operating expenses for fiscal July 31, 2008 were $4,373,078 an increase of
$817,318 from $3,555,760 reported for fiscal July 31, 2007. The Company
attributes this increase to higher legal fees to defend against lawsuits and an
increase in the value of stock compensation costs, offset by reduced research
and develop costs and stock compliance costs.

Other expenses
for the fiscal year ended July 31, 2008 decreased by $391,136 to $3,348,754
from $3,739,890 for fiscal July 31, 2007. Included in this expense is a
non-cash expense related to the induced conversion benefit of $1,387,087; a
non-cash interest expense related to conversion of debt for $606,598; the
amortization of fees related to the conversion of debt for $504,740 and the
write off of discount on converted debt of $864,892.

As a result of
the foregoing, the Company reported a net loss applicable to common shares of
$6,967,606 or $4.70 per share for fiscal 2008, compared to a net loss
applicable to common shares of $8,121,067 or $12.78 per share (as restated for
stock reversal for fiscal 2007.

LIQUIDITY AND CAPITAL RESOURCESWorking capital at July 31, 2009 was $2,028,582
compared to $2,049,641 at year ended July 31, 2008.

Accounts
receivable have decreased from $360,846 at July 31, 2008 to $245,980 at July
31, 2009. This decrease of $114,866 is the result of delay by customers in
accepting shipments.

The Company
expects to meet its cash requirements for the next twelve months through
existing cash balances and cash generated from operations. However, we
anticipate that we may require additional financing to expand our operations.
We cannot guarantee that we will be able to obtain any additional financing or
that such additional financing, if available, will be on terms and conditions
acceptable to us. The inability to obtain additional financing

12

---



should it be
required will restrict our ability to grow and may reduce our ability to
continue to conduct business operations. If we are unable to obtain additional
financing, we will likely be required to curtail our development plans

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

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

INCOME RECOGNITIONRevenue is recorded in accordance with the
guidance of the SECs Staff Accounting Bulletin (SAB) No. 104, which supersedes
SAB No. 101.Revenue from product sales are recognized at the time of shipment
(when title has passed) upon fulfillment of acceptance terms; products are not
sold on a conditional basis. Therefore, when delivery has occurred the sale is
complete as long as the collection of the resulting receivable is probable.

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

INVENTORY VALUATIONS, COMPONENTS AND AGINGInventories are valued at the lower cost or
market. Determined by a first-in, first-out (FIFO) method.The Companys
products are used in radio and other transmissions, telephone and telephone exchanges,
air and traffic controls, automatic transmission of data for utilities,
tele-printing of transmission data such as news and stock market information
and for use by electric utilities in monitoring power transmissions lines for
faults and/or failures.

The Company
currently manufactures and supports over 400 products and assemblies that have
been in the market place since 1970. The Companys inventory represents
approximately 10,000 different components and 2,500 assemblies. The Company
presents its inventory in three categories, Finished Goods, Work-in-Process and
Raw Materials. Finished Goods represents products that have been completed in
connection with specific orders and are awaiting shipment. Finished Goods can
consist of produces like the PDR-2000, PTR-1500 and 1000, Gen 1, 98 and 68
series. Work-in-Process represents components that have been requisitioned from
the warehouse and are being assembled in the assembly areas. Depending on the
configurations required by a customer, products are completed and tested within
8 to 10 business days. Raw Materials represent components in their original
packaging stored in a secured warehouse area, and may consist, in part, of Face
plates, PC boards, Digital screen assemblies, Guide rails, Capacitors, Terminals,
Power supplies, Process ships, Chassis and racks, Relays, Keypads and
Resistors.

The Company
provides a twelve-year warranty on all commercial products and is required by
Government regulation to design and produce military products with a minimum 25-year
operating life in addition to shelf life.

Every
component, regardless of age, has been purchased to meet the above criteria and
may be used in any and all above said assemblies. Management believes that this
inventory, which is minimally adequate, is required to implement the Companys
commitments to military requirements for present and delivered orders.

13

---



The Company,
following inventory analysis and repeated annual testing, established a 3-year
rule for maintaining inventory, which requires a write-down policy for
inventory parts depending on their age. The inventory is tested annually
applying its 3-year rule and the Company classifies as current assets only that
amount of inventory it expects to realize in the next one-year operating cycles,
any balance of the inventory is classified as non-current. Any parts which have
not been used for 3 years are valued at zero. Any parts, written down to a zero
value under the 3-year rule, are maintained in inventory to satisfy the
requirements under our long-term warranty programs.

WARRANTYThe Company provides a twelve-year warranty on its
products; the warranty covers parts and labor. The Company, at its option,
repairs or replaces products that are found defective during the warranty
period providing proper preventive maintenance procedures have been followed by
customers. Repairs necessitated by misuse of such products are not covered by
our warranty. In cases of defective products, the customer typically returns
them to the Companys facility in Somerville, New Jersey. The Companys service
personnel will replace or repair the defective items and ship them back to the
customer. All servicing is completed at the Companys main facility and
customers are charged a fee for those service items that are not covered by the
warranty. We do not offer our customers any formal written service contracts.

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

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial
statements of Conolog Corporation, together with notes and the Independent
Registered Public Accountants 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

ITEM 9A - CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

It is
managements responsibility to establish and maintain adequate internal control
over all financial reporting pursuant to Rule 13a-15 under the Securities
Exchange Act of 1934 (the Exchange Act). Our management, including our
principal executive officer and our principal financial officer, have reviewed
and evaluated the effectiveness of our disclosure controls and procedures as of
a within ninety (90) days of the filing date of this Form 10-K Annual Report.
Based upon their evaluation as of the end of the period covered by this report,
the Companys chief executive officer and chief financial officer concluded
that, the Companys disclosure controls and procedures are not effective to
ensure that information required to be included in the Companys periodic SEC
filings is recorded, processed, summarized, and reported within the time
periods specified in the SEC rules and forms.

The Companys
board of directors was advised by Bagell, Josephs, Levine & Company,
L.L.C., the Companys independent registered public accounting firm, that
during their performance of audit procedures for 2009 Bagell, Josephs, Levine
& Company, L.L.C. identified a material weakness as defined in Public
Company Accounting Oversight Board Standard No. 2 in the Companys internal
control over financial reporting.

14

---



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

Changes in Internal Control over Financial
Reporting

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

Managements Report on Internal Control over
Financial Reporting

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

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

ITEM 9B - OTHER INFORMATION

None

PART III

ITEM 10 - DIRECTORS, EXECUTIVE OFFICERS AND
CORPORATE GOVERNANCE

The following
table sets forth certain information regarding the officers and directors of
the Company as of October 23, 2009.

|                  |  |     |  |                                                                         
|----------------- |  | --- |  | ------------------------------------------------------------------------
|Name              |  | Age |  | Position                                                                
|                  |  |     |  |                                                                         
|Robert S.
 Benou  |  | 74  |  | Chairman,
 Chief Executive Officer, Chief Financial Officer and Director
|                  |  |     |  |                                                                         
|Marc R.
 Benou    |  | 40  |  | President, Chief
 Operating Officer, Secretary and Director             
|                  |  |     |  |                                                                         
|Louis S.
 Massad  |  | 72  |  | Director                                                                
|                  |  |     |  |                                                                         
|Edward J.
 Rielly |  | 40  |  | Director                                                                
|                  |  |     |  |                                                                         
|David M.
 Peison  |  | 40  |  | Director                                                                
|                  |  |     |  |                                                                         
|Thomas Fogg       |  | 72  |  | Officer,
 Vice President-Engineering                                    

15

---



Robert S, BenouRobert S. Benou has been the Companys Chairman
and Chief Executive Officer since May 1, 2001. He is also the Companys Chief
Financial Officer. From 1968 until May 1, 2001, he served as the Companys
President. Mr. Benou is responsible for material purchasing and inventory
control. From June 2001 until August 2005, Mr. Benou served as a director of
Henry Bros. Electronics, Inc. (formerly known as Diversified Security
Solutions, Inc.), a publicly held company that is a single-source/turn-key
provider of technology-based security solutions for medium and large companies
and government agencies. Mr. Benou is also served as a member of the Board of
Directors of eXegenics Inc. from February 2004 to December 2006. The common
stock of eXegenics Inc. is traded on the OTC Bulletin Board. 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.

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

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

Edward J. RiellyEdward J. Rielly has been a Director of the Company since January 1998. Mr.
Rielly is a Senior Application Developer with Household International, a
financial corporation. From March 2000 to November 2001, Mr. Rielly was a
Senior Consultant with Esavio Corporation. From February 1998 to February 2000,
Mr. Rielly was an Application Developer with Chubb Corporation. From 1993 to
1998, Mr. Rielly was an Application Developer with the United States Golf
Association. Mr. Rielly is a graduate of Lehigh University and holds a BS in
Computer Science.

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

David M. PeisonDavid M. Peison has been a Director of the Company since October 2004.
Since 2005, Mr. Peison has been vice president with the emerging markets
division of HSBC. From 2002 until 2005, Mr. Peison was with Deutsche Banks
global markets division in New York City. From 1992 to 2000, Mr. Peison was in
a Private Law Practice in Florida and New York City. Mr. Peison holds an MBA
from Emory University in Atlanta, Ga., a JD from The Dickinson School of Law of
Pennsylvania State University and is admitted to Florida, New York and
Massachusetts Bars. Mr. Peison obtained his BA degree from Lehigh University in
Bethlehem, Pa.

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

16

---



Audit CommitteeThe Companys Board of Directors has determined that David M. Peison is the
Audit Committees Financial Expert and that he is independent defined under
National Association of Securities Dealers Automated Quotations system.

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

Changes in Nominating Procedures

None

Section 16(a) ComplianceSection 16(a) of the Exchange Act, requires our directors and officers, and
persons who own more than 10% of our Common Stock, to file with the Securities
and Exchange Commission initial reports of beneficial ownership and reports of
changes in beneficial ownership of our Common Stock and other equity
securities. Our officers, directors and greater than 10% beneficial owners are
required by SEC regulation to furnish us with copies of all Section 16(a) forms
they file. To our knowledge, based solely on a review of the copies of such
reports furnished to us and written representations that no other reports were
required, during the fiscal year ended July 31, 2008, all Section 16(a) filing
requirements applicable to our officers, directors and greater than 10%
beneficial owners were complied with except that Form 4s for David Peison,
Edward Rielly, Robert Benou and Marc Benou were not timely files. These Forms
have since been filed..

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

ITEM 10 A- EXECUTIVE COMPENSATION

The following
table sets forth the total compensation paid to and accrued by each executive
officer during the prior three fiscal years.

|                         |  |                        |  |        |         |       |   |                          |     |                                                         |          |                                       |   |        |  |   |  |   |        | 
|------------------------ |  | ---------------------- |  | ------ | ------- | ----- | - | ------------------------ | --- | ------------------------------------------------------- | -------- | ------------------------------------- | - | ------ |  | - |  | - | ------ | 
|Annual Compensation      |  | Long-Term Compensation | 
|                         |  |                        | 
|                         |  |                        |  |        |         |       |   |                          |     |                                                         |          |                                       |   |        |  |   |  |   |        | 
|Name & Title             |  | Year-End
 July 31st    |  | Salary |         | Bonus |   | Restricted
 Stock
 Award |     | Closing Price
 On the Date of
 Restricted
 Stock
 Award |          | Securities
 Underlying
 Option/
 SARS |   | Other* | 
|                         |  |                        |  |        |         |       |   |                          |     |                                                         |          |                                       |   |        |  |   |  |   |        | 
|Robert Benou,
Chairman   |  | 2009                   |  | $      | 110,833 | (4)   | $ | 0                        |     |                                                         | 0        |                                       | $ | 0      |  |  |  | $ | 16,000 | 
|Chief Executive
 Officer |  | 2008                   |  | $      | 348,333 |       | $ | 70,000                   | (1) |                                                         | 237,500  | (3)                                   | $ | 0.67   |  |  |  | $ | 21,500 | 
|CFO and
 Director        |  | 2007                   |  | $      | 337,300 |       | $ | 150,000                  |     |                                                         | 144,000  |                                       | $ | 0.41   |  |  |  | $ | 18,000 | 
|                        
|                         |  |                        |  |        |         |       |   |                          |     |                                                         |          |                                       |   |        |  |   |  |   |        | 
|Marc Benou,
President    |  | 2009                   |  | $      | 208,516 |       | $ | 0                        |     |                                                         | 0        |                                       | $ | 0      |  |  |  | $ | 0      | 
|Chief Operating
 Officer |  | 2008                   |  | $      | 173,949 |       | $ | 40,000                   | (2) |                                                         | 237,000  | (3)                                   | $ | 0.67   |  |  |  | $ | 0      | 
|Secretary
 and Director  |  | 2007                   |  | $      | 143,625 |       | $ | 100,000                  |     |                                                         | 140,000  |                                       | $ | 0.41   |  |  |  | $ | 0      | 
|                         |  |                       
|                         |  |                        |  |        |         |       |   |                          |     |                                                         |          |                                       |   |        |  |   |  |   |        | 
|Thomas Fogg              |  | 2009                   |  | $      | 43,040  |       | $ | 0                        |     |                                                         | 0        |                                       | $ | 0      |  |  |  | $ | 0      | 
|Vice-President           |  | 2008                   |  | $      | 43,040  |       | $ | 0                        |     |                                                         | 25,000(3 | )                                     | $ | 0.67   |  |  |  | $ | 0      | 
|Engineering              |  | 2007                   |  | $      | 40,602  |       | $ | 0                        |     |                                                         | 10,000   |                                       | $ | 0.41   |  |  |  | $ | 0      | 
|                        

* Other
compensation consisted of a car allowance.

| |    |                                                                                                                                          
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------
| | 1. | The Company
 paid Robert Benous 2008 bonus by July 31, 2008.                                                                            
| |    |                                                                                                                                          
| | 2. | The Company
 paid Marc Benous bonus by July 31, 2008.                                                                                   
| |    |                                                                                                                                          
| | 3. | On May 21,
 2008, our stockholders approved the granting of 800,000 shares of our common
 stock to our directors, officers and employees.
| |    |                                                                                                                                          
| | 4. | During
 fiscal 2009, Robert Benou forgave $286,467 of his salary.                                                                        

17

---



Outstanding
equity awards at fiscal year end.

|             |  |                                                                          |  |                                                                            |  |                                                                                                             |  |                             |  |                          |  |                                                                    |  |                                                                          |  |                                                                                                                    |  |                                                                                                                                      | 
|------------ |  | ------------------------------------------------------------------------ |  | -------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------- |  | --------------------------- |  | ------------------------ |  | ------------------------------------------------------------------ |  | ------------------------------------------------------------------------ |  | ------------------------------------------------------------------------------------------------------------------ |  | ------------------------------------------------------------------------------------------------------------------------------------ | 
|Name         |  | Option Awards                                                            |  | Stock Awards                                                               | 
|             |  |                                                                          |  |                                                                            | 
|             |  | Number of
 Securities
 Underlying
 Unexercised
 Options (#)
 Exercisable |  | Number of
 Securities
 Underlying
 Unexercised
 Options (#)
 Unexercisable |  | Equity
 Incentive
 Plan
 Awards:
 Number of
 Securities
 Underlying
 of
 Unexercised
 Unearned
 Options (#) |  | Option
 Exercise
 Price ($) |  | Option
 Expiration
 Date |  | Number
 of
 Shares or
 Units of
 Stock
 That
 Have Not
 Vested (#) |  | Market
 Value of
 Shares or
 Units of
 Stock
 That
 Have Not
 Vested ($) |  | Equity
 Incentive
 Plan
 Awards:
 Number of
 Unearned
 Shares,
 Units or
 Other Rights
 That Have
 Not Vested
 (#) |  | Equity
 Incentive
 Plan
 Awards:
 Market or
 Payout
 Value of
 Unearned
 Shares,
 Units or
 Other Rights
 That Have
 Not Vested
 ($) | 
|             |  |                                                                          |  |                                                                            |  |                                                                                                             |  |                             |  |                          |  |                                                                    |  |                                                                          |  |                                                                                                                    |  |                                                                                                                                      | 
|Robert Benou |  | 0                                                                        |  | 0                                                                          |  | 0                                                                                                           |  | 0                           |  | 0                        |  | 221,000                                                            |  | 221,000                                                                  |  | 0                                                                                                                  |  | 0                                                                                                                                    | 
|             | 
|Marc Benou   |  | 0                                                                        |  | 0                                                                          |  | 0                                                                                                           |  | 0                           |  | 0                        |  | 230,000                                                            |  | 230,000                                                                  |  | 0                                                                                                                  |  | 0                                                                                                                                    | 

On July 9, 2002 our
stockholders approved our 2002 Stock Option Plan under which up to 190,000
shares of our common stock may be granted to our employees, directors and
consultants. To date, no options have been granted under this plan. The
exercise price of options granted under the 2002 Stock Option Plan will be the
fair market value of our common stock on the date immediately preceding the
date on which the option is granted.

EMPLOYMENT AGREEMENTSMr. Robert Benou is serving
under an employment agreement commencing June 1, 1997 and ending May 31, 2002,
which pursuant to its terms, renews for one-year terms until cancelled by
either the Company or Mr. Benou. Mr. Benous annual base salary as of July 31,
2009 was $397,300 and increases by $20,000 annually on June 1st of
each year. In addition, Mr. Benou is entitled to an annual bonus equal to 6% of
the Companys annual income before income tax provision as stated in its
annual Form 10-K. The employment agreement also entitles Mr. Benou to the use
of an automobile and to employee benefit plans, such as; life, health, pension,
profit sharing and other plans. Under the employment agreement, employment
terminates upon death or disability of the employee and the employee may be
terminated by the Company for cause.

Mr. Marc Benou is serving
under an employment agreement commencing June 1, 1997 and ending May 31, 2002,
which pursuant to its terms, renews for one-year terms until cancelled by
either the Company or Mr. Benou. Mr. Benous annual base salary as of July 31,
2009 was $203,700 and he receives annual increases of $12,000 on June 1st
of each year. Mr. Benou is entitled to an annual bonus equal to 3% of the
Companys annual income before income tax provision as stated in its annual
Form 10-K. The employment agreement also entitles Mr. Benou to the use of an
automobile and to employee benefit plans, such as; life, health, pension,
profit sharing and other plans. Under the employment agreement, employment is
terminated upon death or disability of the employee and employee may be
terminated by the Company for cause.

COMPENSATION OF DIRECTORSNo
director of the Company receives any cash compensation for his services as
such, but directors may receive stock options pursuant to the Companys stock
option plan and grants of the Companys common stock. Currently, the Company
has three directors who are not employees, Messrs. Louis Massad, David Peison
and Edward Rielly. The following table summarizes the compensation for our
non-employee directors for the fiscal year ended July 31, 2009.

ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT

The following table sets
forth, as of July 31, 2009, certain information with respect to the beneficial
ownership of our common stock by each stockholder known by us to be the
beneficial owner of more than 5% of our common

18

---



stock and by each of our
current directors and executive officers. Each person has sole voting and
investment power with respect to the shares of common stock, except as
otherwise indicated.

This table is prepared based
on information supplied to us by the listed security holders, any Schedules 13D
or 13G and Forms 3 and 4, and other public documents filed with the SEC.

Under the rules of the
Securities and Exchange Commission, a person is deemed to be a beneficial owner
of a security if that person has or shares voting power, which includes the
power to vote or direct the voting of the security, or investment power, which
includes the power to vote or direct the voting of the security. The person is
also deemed to be a beneficial owner of any security of which that person has a
right to acquire beneficial ownership within 60 days. Under the Securities and
Exchange Commission rules, more than one person may be deemed to be a
beneficial owner of the same securities, and a person may be deemed to be a
beneficial owner of securities as to which he or she may not have any pecuniary
beneficial interest.

Unless otherwise noted, the
address for each of the named individuals is c/o Conolog Corporation, 5
Columbia Road, Somerville, New Jersey 08876.

Shares of common stock which
an individual or group has a right to acquire within 60 days pursuant to the
exercise or conversion of options are deemed to be outstanding for the purpose
of computing the percentage ownership of such individual or group, but are not
deemed to be outstanding for the purpose of computing the percentage ownership
of any other person shown in the table. The applicable percentage of ownership
at July 31, 2009 is based on 1,841,491 shares issued and outstanding.

|                                                                                          |  |                                            |  |                   |  
|----------------------------------------------------------------------------------------- |  | ------------------------------------------ |  | ----------------- | -
|Name and
 Title                                                                           |  | Amount and Nature
 of Beneficial Ownership |  | Percent of
 Class |  
|                                                                                          |  |                                            |  |                   |  
|Robert S. Benou, Chairman,
 Chief Executive Officer
 Chief Financial Officer and Director |  | 382,667                                    |  | 20.80             | %
|Marc R. Benou, President,
 Chief Operating Officer,
 Secretary and Director               |  | 311,223                                    |  | 16.90             | %
|Louis Massad, Director                                                                    |  | 35,000                                     |  | 1.90              | %
|Edward J. Rielly, Director                                                                |  | 35,000                                     |  | 1.90              | %
|David M. Peison, Director                                                                 |  | 35,000                                     |  | 1.90              | %
|Thomas Fogg, Vice President
 -Engineering                                                 |  | 30,000                                     |  | 1.60              | %
|                                                                                          |  |                                            |  |                   |  
|All Officers and Directors
 as a Group (6 persons)                                        |  | 828,890                                    |  | 45.00             | %

ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND
DIRECTORS INDEPENENCE

Certain
relationships and Related Transactions

None

Board
determination of Independence

Messrs. Massad, Rielly and
Peison are each independent as that term is defined under the National
Association of Securities Dealers Automated Quotation system.

19

---



ITEM 13 - EXHIBITS

(a) Exhibits.

Index of Exhibits

|            |  |                                                                                                                                                                                                                                                                                                                                                                  
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description of Exhibits                                                                                                                                                                                                                                                                                                                                          
|            |  |                                                                                                                                                                                                                                                                                                                                                                  
|3.1         |  | Certificate of
 Incorporation - incorporated by reference to the Registrants Exhibit 3.01 to
 Registration Statement on Form S-1 (File No. 2-31302).                                                                                                                                                                                                            
|            |  |                                                                                                                                                                                                                                                                                                                                                                  
|3.1.1       |  | Certificate of Amendment of
 Certificate of Incorporation - incorporated by reference to Exhibit 3.02 to
 the Registrants Registration Statement on Form S-1 (File No. 2-31302).                                                                                                                                                                                
|            |  |                                                                                                                                                                                                                                                                                                                                                                  
|3.1.2       |  | Certificate of Amendment of
 Certificate of Incorporation incorporated by reference to Exhibit 4 to the
 Registrants Current Report on Form 8-K for July 1971.                                                                                                                                                                                                  
|            |  |                                                                                                                                                                                                                                                                                                                                                                  
|3.1.3       |  | Certificate of Ownership
 and Merger with respect to the merger of Data Sciences (Maryland) into the
 Registrant and the change of Registrants name from Data Sciences
 Incorporated to DSI Systems, Inc. - incorporated by reference to Exhibit
 3.03(a) to the Registrants Registration Statement on Form S-1 (File No.
 2-31302).                       
|            |  |                                                                                                                                                                                                                                                                                                                                                                  
|3.1.4       |  | Certificate of the
 Designation, Preferences and Relative, Participating, Option or Other Special
 Rights and Qualifications, Limitations or Restrictions thereof of the Series
 A Preferred Stock (par value $.50) of DSI Systems, Inc. - incorporated by
 reference to Exhibit 3.04 to the Registrants Registration Statement on Form
 S-1 (File No. 2-31302).
|            |  |                                                                                                                                                                                                                                                                                                                                                                  
|3.1.5       |  | Certificate of the
 Designation, Preferences and Relative, Participating, Option or Other Special
 Rights and Qualifications, Limitations or Restrictions thereof of the Series
 B Preferred Stock (par value $.50) of DSI Systems, Inc. - incorporated by
 reference to Exhibit 1 to the Registrants Current Report on Form 8-K for
 November 1972.            
|            |  |                                                                                                                                                                                                                                                                                                                                                                  
|3.1.6       |  | Certificate of Ownership
 and Merger respecting merger of Conolog Corporation into the Registrant and
 the changing of the Registrants name from DSI Systems, Inc. to Conolog
 Corporation - incorporated by reference to Exhibit 3 to the Registrants
 Current Report on Form 8-K for June 1975.                                                          
|            |  |                                                                                                                                                                                                                                                                                                                                                                  
|3.2         |  | Amended By-Laws -
 incorporated by reference to Exhibit 3(h) to the Registrants Annual Report
 on Form 10-K for the fiscal year ended July 31, 1981.                                                                                                                                                                                                            
|            |  |                                                                                                                                                                                                                                                                                                                                                                  
|4.1         |  | Specimen Certificate for
 shares of Common Stock (1)                                                                                                                                                                                                                                                                                                             
|            |  |                                                                                                                                                                                                                                                                                                                                                                  
|4.2         |  | Form of common Stock
 Purchase Warrant, dated January 19, 2006 (2)                                                                                                                                                                                                                                                                                               
|            |  |                                                                                                                                                                                                                                                                                                                                                                  
|4.3         |  | Form of Convertible Note,
 dated January 19, 2006 (2)                                                                                                                                                                                                                                                                                                            
|            |  |                                                                                                                                                                                                                                                                                                                                                                  
|4.4         |  | Form of Common Stock
 Purchase Warrant, dated March 12, 2007 (3)                                                                                                                                                                                                                                                                                                 
|            |  |                                                                                                                                                                                                                                                                                                                                                                  
|4.5         |  | Form of Convertible Note,
 dated March 12, 2007 (3)                                                                                                                                                                                                                                                                                                              
|            |  |                                                                                                                                                                                                                                                                                                                                                                  
|4.6         |  | Form of Brokers Common Stock
 Purchase Warrant, dated March 12, 2007 (3)                                                                                                                                                                                                                                                                                        
|            |  |                                                                                                                                                                                                                                                                                                                                                                  
|4.7         |  | Form of Notes as of August 3, 2009 (7)                                                                                                                                                                                                                                                                                                                           
|            |  |                                                                                                                                                                                                                                                                                                                                                                  
|4.8         |  | Form of Class A Warrants (7)                                                                                                                                                                                                                                                                                                                                     
|            |  |                                                                                                                                                                                                                                                                                                                                                                  
|4.9         |  | Form of Class B Warrants (7)                                                                                                                                                                                                                                                                                                                                     
|            |  |                                                                                                                                                                                                                                                                                                                                                                  
|4.10        |  | Form of Class C Warrants (7)                                                                                                                                                                                                                                                                                                                                     
|            |  |                                                                                                                                                                                                                                                                                                                                                                  
|10.1        |  | Employment Agreement dated
 June 1, 1997 between Robert Benou and Conolog Corporation (4)                                                                                                                                                                                                                                                                        
|            |  |                                                                                                                                                                                                                                                                                                                                                                  
|10.2        |  | Employment Agreement dated
 June 1, 1997 between Marc Benou and Conolog Corporation (4)                                                                                                                                                                                                                                                                          
|            |  |                                                                                                                                                                                                                                                                                                                                                                  
|10.3        |  | Conolog Corporation 2002
 Stock Option Plan (5)                                                                                                                                                                                                                                                                                                                  
|            |  |                                                                                                                                                                                                                                                                                                                                                                  
|10.4        |  | Subscription Agreement
 dated as of January 19, 2006, among Conolog Corporation and the subscribers
 named therein (2)                                                                                                                                                                                                                                           
|            |  |                                                                                                                                                                                                                                                                                                                                                                  
|10.5        |  | Form of Selling Agent
 Agreement, dated as of January 18, 2006 (2)                                                                                                                                                                                                                                                                                               

20

---



|     |  |                                                                                                                                              
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------
|10.6 |  | Subscription Agreement
 dated as of March 12, 2007 (3).                                                                                      
|     |  |                                                                                                                                              
|10.7 |  | Form of Subscription Agreement between Conolog
         Corporation and the subscribers named therein dated as of August 3,
         2009 (7)
|     |  |                                                                                                                                              
|10.8 |  | Security Agreement dated as of August 3, 2009
    (7)                                                                                        
|     |  |                                                                                                                                              
|14.1 |  | Code of Ethics(6)                                                                                                                            
|     |  |                                                                                                                                              
|21.1 |  | List of Subsidiaries*                                                                                                                        
|     |  |                                                                                                                                              
|31.1 |  | Rule 13a-14a/15d-14a
 Certification of Robert Benou (PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL
 FINANCIAL OFFICER)*                          
|     |  |                                                                                                                                              
|32.1 |  | Section 1350 Certification
 of Robert Benou(PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER)*                                    

|                           |  |                                                                                                                                                                    
|-------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
|__________________________
|                           |  |                                                                                                                                                                    
|*                          |  | Filed herewith                                                                                                                                                     
|(1)                        |  | Incorporated by reference
 to Registrants Registration Statement on Form S-1 (File No. 33-92424).                                                                 
|(2)                        |  | Incorporated by reference
 to Registrants Report on Form 8-K filed on January 25, 2006.                                                                           
|(3)                        |  | Incorporated by reference
 to Registrants Report on Form 8-K filed on March 14, 2007                                                                              
|(4)                        |  | Incorporated by reference to
 the Registrants Registration Statement on Form S-1 (File No. 0-8174) as
 filed on September 12, 1997.                               
|(5)                        |  | Incorporated by reference
 to the Registrants Proxy Statement pursuant to Section 14(a) of the
 Securities Exchange Act of 1934 filed on June 25, 2003.           
|(6)                        |  | Incorporated by reference to Registrants
       Annual Report on Form 10-KSB for the fiscal year ended July 31, 2003,
    filed with the SEC on November 14, 2003.
|(7)                        |  | Incorporated by reference to the Registrants
       Report on Form 8-K filed on August 6, 2009.                                                                   

ITEM 14 - PRINCIPAL ACCOUNTANT FEES AND SERVICES

Bagell, Josephs, Levine &
Company LLC was retained by the Company on September 21, 2004 to serve as its
independent registered public accountants. Prior to that date, Bagell, Josephs,
Levine & Company LLC did not perform any services nor receive any fees from
the Company.

Audit Fee 
Bagell Josephs Levine & Company LLC billed the Company in the aggregate
amount of $47,500 and $45,000 for professional services rendered for their
audit of our annual financial statements and their reviews of the financial
statements included in our Forms 10Q and 10-QSB for the years ended July 31,
2009 and 2008, respectively.

Audit-Related Fees 
No fees were billed for the years ended July 31, 2009 and 2008 for assurance
and related services by Bagell, Josephs, Levine & Company LLC that are
reasonably related to the performance of the audit or review of the Companys
financial statements and are not reported under the category Audit Fees
described above.

Tax Fees
No fees were billed for the years ended July 31, 2009 and 2008 for tax
compliance, tax advice, or tax planning services by Bagell, Josephs, Levine
& Company LLC that are reasonably related to the performance of the audit
or review of the Companys financial statements and are not reported under the
category Audit Fees described above.

All Other Fees
No fees were billed to the company by Bagell, Joseph, Levine & Company LLC
for the years ended July 31, 2009 and 2008 for services not described above.

It is the
policy of the Companys Board of Directors that all services other than audit,
review or attest services, must be pre-approved by the Board of Directors. All
of the services described above were approved by the Board of Directors.

21

---



SIGNATURES

In accordance
with Section 13 or 15(d) of the Exchange Act, the registrant caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.

Conolog Corporation

|                   |                                    |                     
|------------------ | ---------------------------------- | --------------------
|                   | By:                                | /s/ Robert
 S. Benou
|November 12,
 2009 | Chairman,
 Chief Executive Officer

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

|                   |  |                                                   
|------------------ |  | --------------------------------------------------
|November 12,
 2009 |  | /s/Robert S.
 Benou                               
|                   |  | Chairman,
 Chief Executive Officer and            
|                   |  | Chief
 Financial Officer                          
|                   |  |                                                   
|November 12,
 2009 |  | /s/Marc R.
 Benou                                 
|                   |  | President,
 Chief Operating Officer, Secretary and
|                   |  | Director                                          
|                   |  |                                                   
|November 12,
 2009 |  | /s/Edward J.
 Rielly                              
|                   |  | Director                                          
|                   |  |                                                   
|November 12,
 2009 |  | /s/David M.
 Peison                               
|                   |  | Director                                          

22

---



Conolog Corporation and Subsidiaries

Consolidated Financial Statements

July 31, 2009 and 2008

---



Annual Report on Form 10-K

Item 8Consolidated Financial Statements

July 31, 2009 and 2008

Conolog Corporation and Subsidiaries

Somerville, New Jersey

---



Form 10-K
Index to the Consolidated Financial Statements
Conolog Corporation and Subsidiaries
July 31, 2009 and 2008

|                                                                                            |  |          
|------------------------------------------------------------------------------------------- |  | ---------
|                                                                                            |  | Page     
|                                                                                            |  |          
|The
 following consolidated financial statements of the registrant are included in
 Item 8: |  |          
|                                                                                            |  |          
|Report Of Independent Registered Public
 Accounting Firm                                    |  | F-1      
|                                                                                            |  |          
|Consolidated Balance Sheets as of July 31,
 2009 and 2008                                   |  | F-2 - F-3
|                                                                                            |  |          
|Consolidated Statements of Operations for
 the years ended July 31, 2009 and 2008           |  | F-4      
|                                                                                            |  |          
|Consolidated Statement of Stockholders
 Equity for the yearsended July 31, 2009 and 2008   |  | F-5      
|                                                                                            |  |          
|Consolidated Statements of Cash Flows for
 the years ended July 31, 2009 and 2008           |  | F-6      
|                                                                                            |  |          
|Notes to Consolidated Financial Statements                                                  |  | F-7- F-20

---



BAGELL, JOSEPHS, LEVINE & COMPANY, L.L.C.
Certified Public Accountants
Suite J
406 Lippincott Drive
Marlton, New Jersey 08053
(856) 355-5900 Fax (856) 396-0022REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors
Conolog Corporation
Somerville, New Jersey

We
have audited the accompanying consolidated balance sheets of Conolog
Corporation and Subsidiaries (the Company) as of July 31, 2009 and 2008, and
the related consolidated statements of operations, stockholders equity and
cash flows for each of the years in the two year period ended July 31, 2009.
The Companys management is responsible for these consolidated financial statements.
Our responsibility is to express an opinion on these financial statements based
on our audits.

We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the companys internal control over financial
reporting. Accordingly, we express no such opinion. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, 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 consolidated financial position of Conolog Corporation
and Subsidiaries as of July 31, 2009 and 2008, and the consolidated results of
its operations and cash flows for each of the years in the two year period ended
July 31, 2009, in conformity with accounting principles generally accepted in
the United States of America.

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

NOVEMBER 12, 2009

F-1

---



CONOLOG CORPORATION AND SUBSIDARIESCONSOLIDATED BALANCE SHEETS
JULY 31, 2009 AND 2008

|                                             |  |      |            |   |      |   |            |  
|-------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | -
|ASSETS                                       |  |      |            |   |      |   |            |  
|                                             |  | 2009 |            |   | 2008 |  
|                                             |  |      |            |   |      |  
|Current
 Assets:                             |  |      |            |   |      |   |            |  
|Cash and cash equivalents                    |  | $    | 27,358     |   |      | $ | 680,647    |  
|Certificate of deposit                       |  |      | -          |   |      |   | 600,182    |  
|Accounts receivable, net of allowance        |  |      | 245,980    |   |      |   | 360,846    |  
|Prepaid expenses and consulting fees         |  |      | 70,843     |   |      |   | 46,367     |  
|Current portion of note receivable           |  |      | 14,864     |   |      |   | 14,864     |  
|Inventory                                    |  |      | 1,395,452  |   |      |   | 850,507    |  
|Other current assets                         |  |      | 551,937    |   |      |   | 568,529    |  
|                                             |  |      |            |   |      |   |            |  
|                                             |  |      |            |   |      |   |            |  
|Total Current Assets                         |  |      | 2,306,434  |   |      |   | 3,121,942  |  
|                                             |  |      |            |   |      |   |            |  
|                                             |  |      |            |   |      |   |            |  
|Property
 and equipment:                     |  |      |            |   |      |   |            |  
|Machinery and equipment                      |  |      | 1,357,053  |   |      |   | 1,357,053  |  
|Furniture and fixtures                       |  |      | 429,765    |   |      |   | 429,765    |  
|Automobiles                                  |  |      | 34,097     |   |      |   | 34,097     |  
|Computer software                            |  |      | 520,622    |   |      |   | 209,380    |  
|Leasehold improvements                       |  |      | 30,265     |   |      |   | 30,265     |  
|                                             |  |      |            |   |      |   |            |  
|Total property and
 equipment                |  |      | 2,371,802  |   |      |   | 2,060,560  |  
|Less: accumulated depreciation               |  |      | (1,975,098 | ) |      |   | (1,951,725 | )
|                                             |  |      |            |   |      |   |            |  
|Net Property and Equipment                   |  |      | 396,704    |   |      |   | 108,835    |  
|                                             |  |      |            |   |      |   |            |  
|                                             |  |      |            |   |      |   |            |  
|Other
 Assets:                               |  |      |            |   |      |   |            |  
|Deferred financing fees, net of amortization |  |      | 8,445      |   |      |   | 295,030    |  
|Note receivable, net of current portion      |  |      | 69,846     |   |      |   | 80,495     |  
|                                             |  |      |            |   |      |   |            |  
|                                             |  |      |            |   |      |   |            |  
|Total
 Other Assets                          |  |      | 78,291     |   |      |   | 375,525    |  
|                                             |  |      |            |   |      |   |            |  
|                                             |  |      |            |   |      |   |            |  
|TOTAL
 ASSETS                                |  | $    | 2,781,429  |   |      | $ | 3,606,302  |  
|                                             |  |      |            |   |      |   |            |  

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

F-2

---



CONOLOG CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JULY 31, 2009 AND 2008

|                                                                                                                                                                                                |   |           |             |   |      |           |             |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | --------- | ----------- | - | ---- | --------- | ----------- | -
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                            |   |           |             |   |      |           |             |  
|                                                                                                                                                                                                |   | 2009      |             |   | 2008 |          
|                                                                                                                                                                                                |   |           |             |   |      |          
|Current
 Liabilities:                                                                                                                                                                           |   |           |             |   |      |           |             |  
|Accounts payable                                                                                                                                                                                |   | $         | 217,456     |   |      | $         | 165,601     |  
|Accrued expenses                                                                                                                                                                                |   |           | 26,132      |   |      |           | 61,957      |  
|Current Convertible debenture, net of discount                                                                                                                                                  |   |           | 34,318      |   |      |           | 824,853     |  
|                                                                                                                                                                                                |   |           |             |   |      |           |             |  
|Total Current Liabilities                                                                                                                                                                       |   |           | 277,906     |   |      |           | 1,052,411   |  
|                                                                                                                                                                                                |   |           |             |   |      |           |             |  
|                                                                                                                                                                                                |   |           |             |   |      |           |             |  
|Non-Current
 Liabilities:                                                                                                                                                                       |   | $         | -           |   |      | $         | -           |  
|                                                                                                                                                                                                |   |           |             |   |      |           |             |  
|                                                                                                                                                                                                |   |           |             |   |      |           |             |  
|Total Liabilities                                                                                                                                                                               |   |           | 277,906     |   |      |           | 1,052,411   |  
|                                                                                                                                                                                                |   |           |             |   |      |           |             |  
|                                                                                                                                                                                                |   |           |             |   |      |           |             |  
|Stockholders
 Equity:                                                                                                                                                                          |   |           |             |   |      |           |             |  
|Preferred stock, par value $.50; Series A; 4% cumulative; 500,000
 shares authorized; 155,000 shares issued and outstanding at July 31, 2009 and
 2008, respectively.                           |   |           | 77,500      |   |      |           | 77,500      |  
|Preferred stock, par value $.50; Series B; $.90 cumulative; 500,000
 shares authorized; 1,197 shares issued and outstanding at July 31, 2009 and
 2008, respectively.                           |   |           | 597         |   |      |           | 597         |  
|Common stock, par value $0.01; 30,000,000 shares authorized;
 1,842,485 and 558,488* shares issued and outstanding at July 31, 2009 and
 2008 respectively including 2 shares held in treasury. |   |           | 18,425      |   |      |           | 5,574       | *
|Contributed capital                                                                                                                                                                             |   |           | 52,385,432  |   |      |           | 50,025,998  | *
|Accumulated deficit                                                                                                                                                                             |   |           | (49,173,964 | ) |      |           | (46,819,934 | )
|Treasury shares at cost                                                                                                                                                                         |   |           | (131,734    | ) |      |           | (131,734    | )
|Deferred compensation                                                                                                                                                                           |   |           | (672,733    | ) |      |           | (604,110    | )
|                                                                                                                                                                                                |   |           |             |   |      |           |             |  
|                                                                                                                                                                                                |   |           |             |   |      |           |             |  
|                                                                                                                                                                                                |   |           |             |   |      |           |             |  
|Total Stockholders Equity                                                                                                                                                                      |   |           | 2,503,523   |   |      |           | 2,553,891   |  
|                                                                                                                                                                                                |   |           |             |   |      |           |             |  
|                                                                                                                                                                                                |   |           |             |   |      |           |             |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                      | $ | 2,781,429 |             |   | $    | 3,606,302 |            
|                                                                                                                                                                                                |   |           |             |   |      |           |             |  

*Represents retroactive application of 1:5
reverse stock split.

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

F-3

---



CONOLOG CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JULY 31, 2009 AND 2008

|                                                      |  |      |            |      |  |   |            |  
|----------------------------------------------------- |  | ---- | ---------- | ---- |  | - | ---------- | -
|                                                      |  | 2009 |            | 2008 | 
|                                                      |  |      |            |      |  |  
|OPERATING REVENUES                                    |  |      |            |      |  |   |            |  
|Product revenue                                       |  | $    | 1,485,298  |      |  | $ | 1,220,993  |  
|                                                      |  |      |            |      |  |   |            |  
|                                                      |  |      |            |      |  |   |            |  
|Cost of product revenue                               |  |      |            |      |  |   |            |  
|Materials and labor used in production                |  |      | 470,392    |      |  |   | 467,081    |  
|Write down of obsolete inventory parts                |  |      | -          |      |  |   | 112,171    |  
|                                                      |  |      |            |      |  |   |            |  
|Total
 Cost of product revenue                        |  |      | 470,392    |      |  |   | 579,252    |  
|                                                      |  |      |            |      |  |   |            |  
|                                                      |  |      |            |      |  |   |            |  
|Gross
 Profit (Loss) from Operations                  |  |      | 1,014,906  |      |  |   | 641,741    |  
|                                                      |  |      |            |      |  |   |            |  
|Selling, general and administrative
 expenses         |  |      |            |      |  |   |            |  
|General and adminitsrative                            |  |      | 1,235,301  |      |  |   | 2,094,819  |  
|Stock compensation                                    |  |      | 715,242    |      |  |   | 1,319,400  |  
|Stock compliance                                      |  |      | 203,006    |      |  |   | 230,396    |  
|Research and development                              |  |      | 57,089     |      |  |   | 150,173    |  
|Professional fees                                     |  |      | 291,741    |      |  |   | 412,119    |  
|Marketing and trade shows                             |  |      | 170,564    |      |  |   | 166,171    |  
|                                                      |  |      |            |      |  |   |            |  
|Total selling, general and admintrative expenses      |  |      | 2,672,943  |      |  |   | 4,373,078  |  
|                                                      |  |      |            |      |  |   |            |  
|Loss
 Before Other Income (Expenses)                  |  |      | (1,658,037 | )    |  |   | (3,731,337 | )
|                                                      |  |      |            |      |  |   |            |  
|OTHER INCOME (EXPENSES)                               |  |      |            |      |  |   |            |  
|Interest expense                                      |  |      | (102,379   | )    |  |   | (77,922    | )
|Interest income                                       |  |      | 16,265     |      |  |   | 92,485     |  
|Other income                                          |  |      | 352,347    |      |  |   | 112,485    |  
|Induced
 conversion cost                              |  |      | (552,370   | )    |  |   | (1,387,087 | )
|Write off of
 discount on converted debt              |  |      | -          |      |  |   | (864,892   | )
|Amortization of
 deferred loan discount               |  |      | (286,584   | )    |  |   | (606,598   | )
|Amortization of
 deferred financing fees              |  |      | (123,274   | )    |  |   | (504,740   | )
|                                                      |  |      |            |      |  |   |            |  
|Total
 Other Income (Expense)                         |  |      | (695,995   | )    |  |   | (3,236,269 | )
|                                                      |  |      |            |      |  |   |            |  
|Loss before provision for income
 taxes               |  |      | (2,354,032 | )    |  |   | (6,967,606 | )
|Provision for
 income taxes                           |  |      | -          |      |  |   | -          |  
|                                                      |  |      |            |      |  |   |            |  
|NET LOSS APPLICABLE TO COMMON SHARES                  |  | $    | (2,354,032 | )    |  | $ | (6,967,606 | )
|                                                      |  |      |            |      |  |   |            |  
|NET LOSS PER BASIC AND DILUTED
 COMMON SHARE          |  | $    | (0.98      | )    |  | $ | (23.49     | )
|                                                      |  |      |            |      |  |   |            |  
|WEIGHTED
 AVERAGE NUMBER OF COMMON SHARES OUTSTANDING |  |      | 2,396,924  |      |  |   | 296,676    | *
|                                                      |  |      |            |      |  |   |            |  

*Represents retroactive application of 1:5
reverse stock split.

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

F-4

---



CONOLOG CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER EQUITY
FOR THE YEARS ENDED JULY 31, 2009 AND 2008

|                                                                                       |  |                 |  |                 |        |              |       |             |   |           |  |             |   |          |        |          |   |            |   |               |           |              |   |             |   |        |          |   |   |            |   |   |          |   |   |            |  
|-------------------------------------------------------------------------------------- |  | --------------- |  | --------------- | ------ | ------------ | ----- | ----------- | - | --------- |  | ----------- | - | -------- | ------ | -------- | - | ---------- | - | ------------- | --------- | ------------ | - | ----------- | - | ------ | -------- | - | - | ---------- | - | - | -------- | - | - | ---------- | -
|                                                                                       |  | Series A        |  | Series B        |        |              |       |             |   |           |  | Contributed |   |          |        |          |   |            |   |               |           | Total        |  
|                                                                                      
|                                                                                       |  | Preferred Stock |  | Preferred Stock |        | Common Stock |       | Contributed |   | Capital - |  | Accumulated |   | Treasury |        | Deferred |   | Prepaid    |   | Stockholders |          
|                                                                                      
|                                                                                       |  | Shares          |  | Amount          |        | Shares       |       | Amount      |   | Shares    |  | Amount      |   | Capital  |        | Warrants |   | Deficit    |   | Stock         |           | Compensation |   | Consulting  |   | Equity |         
|                                                                                       |  |                 |  |                 |        |              |       |             |   |           |  |             |   |          |        |          |   |            |   |               |           |              |   |             |   |        |          |   |   |            |   |   |          |   |   |            |  
|                                                                                       |  |                 |  |                 |        |              |       |             |   |           |  |             |   |          |        |          |   |            |   |               |           |              |   |             |   |        |          |   |   |            |   |   |          |   |   |            |  
|Balance at July 31, 2007                                                               |  | 155,000         |  | $               | 77,500 |              | 1,197 |             | $ | 597       |  | 193,824     | * | $        | 1,938  | *        | $ | 40,915,310 | * | $             | 3,857,593 |              | $ | (39,852,326 | ) | $      | (131,734 | ) | $ | (1,319,400 | ) | $ | (120,600 | ) | $ | 3,549,478  |  
|                                                                                       |  |                 |  |                 |        |              |       |             |   |           |  |             |   |          |        |          |   |            |   |               |           |              |   |             |   |        |          |   |   |            |   |   |          |   |   |            |  
|                                                                                       |  |                 |  |                 |        |              |       |             |   |           |  |             |   |          |        |          |   |            |   |               |           |              |   |             |   |        |          |   |   |            |   |   |          |   |   |            |  
|Conversion of convertible
 debenture                                                   |  |                 |  |                 |        |              |       |             |   |           |  | 149,018     | * |          | 1,490  | *        |   | 1,871,754  | * |               |           |              |   |             |   |        |          |   |   |            |   |   |          |   |   | 1,873,244  |  
|Shares issued for services
 to be provided                                             |  |                 |  |                 |        |              |       |             |   |           |  | 5,000       | * |          | 50     | *        |   | 19,840     | * |               |           |              |   |             |   |        |          |   |   |            |   |   | (19,890  | ) |   | 19,890     |  
|Induced conversion cost                                                                |  |                 |  |                 |        |              |       |             |   |           |  |             |   |          |        |          |   | 1,387,087  | * |               |           |              |   |             |   |        |          |   |   |            |   |   |          |   |   | 1,387,087  |  
|Sale of Equity                                                                         |  |                 |  |                 |        |              |       |             |   |           |  | 47,650      | * |          | 477    | *        |   | 1,333,723  | * |               |           |              |   |             |   |        |          |   |   |            |   |   |          |   |   | 1,334,200  |  
|Interest paid with stock                                                               |  |                 |  |                 |        |              |       |             |   |           |  | 7,001       | * |          | 70     | *        |   | 38,128     | * |               |           |              |   |             |   |        |          |   |   |            |   |   |          |   |   | 38,198     |  
|Common shares issued to
 officers, directors and employees for fiscal 2007             |  |                 |  |                 |        |              |       |             |   |           |  | 154,900     | * |          | 1,549  | *        |   | 602,561    | * |               |           |              |   |             |   |        |          |   |   | (604,110   | ) |   |          |   |   | -          |  
|Amortization officers,
 directors and employee compensation                            |  |                 |  |                 |        |              |       |             |   |           |  |             |   |          |        |          |   |            |   |               |           |              |   |             |   |        |          |   |   | 1,319,400  |   |   |          |   |   | 1,319,400  |  
|Net loss for the Year                                                                  |  |                 |  |                 |        |              |       |             |   |           |  |             |   |          |        |          |   |            |   |               |           |              |   | (6,967,606  | ) |        |          |   |   |            |   |   |          |   |   | (6,967,606 | )
|                                                                                       |  |                 |  |                 |        |              |       |             |   |           |  |             |   |          |        |          |   |            |   |               |           |              |   |             |   |        |          |   |   |            |   |   |          |   |   |            |  
|Balance at July 31, 2008                                                               |  | 155,000         |  | $               | 77,500 |              | 1,197 |             | $ | 597       |  | 557,393     | * | $        | 5,574  | *        | $ | 46,168,403 | * | $             | 3,857,593 |              | $ | (46,819,932 | ) | $      | (131,734 | ) | $ | (604,110   | ) | $ | (140,490 | ) | $ | 2,553,891  |  
|                                                                                       |  |                 |  |                 |        |              |       |             |   |           |  |             |   |          |        |          |   |            |   |               |           |              |   |             |   |        |          |   |   |            |   |   |          |   |   |            |  
|                                                                                       |  |                 |  |                 |        |              |       |             |   |           |  |             |   |          |        |          |   |            |   |               |           |              |   |             |   |        |          |   |   |            |   |   |          |   |   |            |  
|Conversion of convertible
 debenture                                                   |  |                 |  |                 |        |              |       |             |   |           |  | 636,571     |   |          | 6,366  |          |   | 907,443    |   |               |           |              |   |             |   |        |          |   |   |            |   |   |          |   |   | 913,809    |  
|Reversal of Shares issued
 for services to be provided                                 |  |                 |  |                 |        |              |       |             |   |           |  | (5,000      | ) |          | (50    | )        |   | (19,840    | ) |               |           |              |   |             |   |        |          |   |   |            |   |   | 19,890   |   |   | (19,890    | )
|Shares issued for services
 to be provided                                             |  |                 |  |                 |        |              |       |             |   |           |  | 25,500      |   |          | 255    |          |   | 47,430     |   |               |           |              |   |             |   |        |          |   |   |            |   |   | (47,685  | ) |   | 47,685     |  
|Induced conversion cost                                                                |  |                 |  |                 |        |              |       |             |   |           |  |             |   |          |        |          |   | 552,370    |   |               |           |              |   |             |   |        |          |   |   |            |   |   |          |   |   | 552,370    |  
|Interest paid with stock                                                               |  |                 |  |                 |        |              |       |             |   |           |  | 51,527      |   |          | 515    |          |   | 93,933     |   |               |           |              |   |             |   |        |          |   |   |            |   |   |          |   |   | 94,448     |  
|Reversal of Common shares
 issued to officers, directors and employees for fiscal 2009 |  |                 |  |                 |        |              |       |             |   |           |  | (144,000    | ) |          | (1,440 | )        |   | (560,160   | ) |               |           |              |   |             |   |        |          |   |   | 561,600    |   |   |          |   |   | -          |  
|Common shares issued to
 officers, directors and employees for fiscal 2009             |  |                 |  |                 |        |              |       |             |   |           |  | 720,494     |   |          | 7,205  |          |   | 1,338,260  |   |               |           |              |   |             |   |        |          |   |   | (1,345,465 | ) |   |          |   |   | -          |  
|Amortization officers,
 directors and employee compensation                            |  |                 |  |                 |        |              |       |             |   |           |  |             |   |          |        |          |   |            |   |               |           |              |   |             |   |        |          |   |   | 715,242    |   |   | 23,842   |   |   | 715,242    |  
|Net loss for the Year                                                                  |  |                 |  |                 |        |              |       |             |   |           |  |             |   |          |        |          |   |            |   |               |           |              |   | (2,354,032  | ) |        |          |   |   |            |   |   |          |   |   | (2,354,032 | )
|                                                                                       |  |                 |  |                 |        |              |       |             |   |           |  |             |   |          |        |          |   |            |   |               |           |              |   |             |   |        |          |   |   |            |   |   |          |   |   |            |  
|Balance at July 31, 2009                                                               |  | 155,000         |  | $               | 77,500 |              | 1,197 |             | $ | 597       |  | 1,842,485   |   | $        | 18,425 |          | $ | 48,527,839 |   | $             | 3,857,593 |              | $ | (49,173,964 | ) | $      | (131,734 | ) | $ | (672,733   | ) | $ | (144,443 | ) | $ | 2,503,523  |  
|                                                                                       |  |                 |  |                 |        |              |       |             |   |           |  |             |   |          |        |          |   |            |   |               |           |              |   |             |   |        |          |   |   |            |   |   |          |   |   |            |  

*Represents retroactive application of 1:5 reverse stock split.

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

F-5

---



CONOLOG CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JULY 31, 2009 AND 2008

|                                                                   |  |      |            |      |   |            |  
|------------------------------------------------------------------ |  | ---- | ---------- | ---- | - | ---------- | -
|                                                                   |  | 2009 |            | 2008 |  
|                                                                   |  |      |            |      |  
|CASH FLOWS FROM OPERATING ACTIVITIES                               |  |      |            |      |   |            |  
|Net loss                                                           |  | $    | (2,354,032 | )    | $ | (6,967,606 | )
|Adjustments to reconcile net loss to net
 cash used in operations: |  |      | -          |      |   |            |  
|Depreciation                                                       |  |      | 23,373     |      |   | 24,000     |  
|Amortization of deferred compensation                              |  |      | 715,242    |      |   | 1,319,400  |  
|Amortization of prepaid consulting expense                         |  |      | 43,732     |      |   | 120,600    |  
|Write off of discount on converted debt                            |  |      | 77,500     |      |   | 864,892    |  
|Induced conversion cost                                            |  |      | 552,370    |      |   | 1,387,087  |  
|Amortization of deferred loan discount                             |  |      | 286,584    |      |   | 606,598    |  
|Amortization of deferred financing fees                            |  |      | 123,274    |      |   | 504,740    |  
|Write down of obsolete inventory parts                             |  |      | 82,138     |      |   | 112,171    |  
|Changes in assets and liabilities                                  |  |      | -          |      |   |            |  
|(Increase) decrease in accounts receivable                         |  |      | 114,866    |      |   | (296,078   | )
|(Increase) decrease in prepaid expenses                            |  |      | (24,476    | )    |   | (24,157    | )
|(Increase) in inventories                                          |  |      | (627,083   | )    |   | (423,824   | )
|(Increase) decrease in other current assets                        |  |      | 16,592     |      |   | (123,393   | )
|Increase in accounts payable and accrued
 expenses                 |  |      | 17,042     |      |   | 104,213    |  
|                                                                   |  |      |            |      |   |            |  
|Net cash used in operations                                        |  |      | (952,878   | )    |   | (2,791,357 | )
|                                                                   |  |      |            |      |   |            |  
|CASH FLOWS FROM INVESTING ACTIVITIES                               |  |      |            |      |   |            |  
|Purchase of
     property and equipment                            |  |      | (311,242   | )    |   | -          |  
|Purchase of certificates of deposit                                |  |      | -          |      |   | (3,697,670 | )
|Redemption of certificates of deposit                              |  |      | 600,182    |      |   | 5,134,818  |  
|                                                                   |  |      |            |      |   |            |  
|Net cash used in investing activities                              |  |      | 288,940    |      |   | 1,437,148  |  
|                                                                   |  |      |            |      |   |            |  
|CASH FLOWS FROM FINANCING ACTIVITIES                               |  |      |            |      |   |            |  
|Proceeds from issuance of stock and
 warrants                      |  |      | -          |      |   | 1,334,200  |  
|Proceeds from note receivable                                      |  |      | 10,649     |      |   | 13,645     |  
|                                                                   |  |      |            |      |   |            |  
|Net cash provided by financing activities                          |  |      | 10,649     |      |   | 1,347,845  |  
|                                                                   |  |      |            |      |   |            |  
|NET (DECREASE) IN CASH AND CASH EQUIVALENTS                        |  |      | (653,289   | )    |   | (6,364     | )
|CASH AND CASH EQUIVALENTS - BEGINNING OF
 YEAR                     |  |      | 680,647    |      |   | 687,011    |  
|                                                                   |  |      |            |      |   |            |  
|CASH AND CASH EQUIVALENTS - END OF YEAR                            |  |      | 27,358     |      |   | 680,647    |  
|                                                                   |  |      |            |      |   |            |  
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW
 INFORMATION:                 |  |      |            |      |   |            |  
|CASH PAID DURING THE YEAR FOR:                                     |  |      |            |      |   |            |  
|Interest expense                                                   |  | $    | 7,931      |      | $ | 15,323     |  
|                                                                   |  |      |            |      |   |            |  
|Income Taxes                                                       |  | $    | -          |      | $ | -          |  
|                                                                   |  |      |            |      |   |            |  
|SUPPLEMENTAL DISCLOSURE OF NONCASH
 ACTIVITIES:                    |  |      |            |      |   |            |  
|Debt converted to equity                                           |  | $    | 913,809    |      | $ | 1,873,244  |  
|                                                                   |  |      |            |      |   |            |  
|Common stock issued for serices to be
 provided                    |  | $    | 47,685     |      | $ | 19,890     |  
|                                                                   |  |      |            |      |   |            |  
|Common stock issued for deferred
 compensation                     |  | $    | 1,345,465  |      | $ | 604,110    |  
|                                                                   |  |      |            |      |   |            |  
|Common stock issued for accrued interest                           |  | $    | 94,448     |      | $ | 38,198     |  
|                                                                   |  |      |            |      |   |            |  

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

F-6

---



CONOLOG CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JULY 31, 2009 AND 2008

|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE 1- | NATURE OF ORGANIZATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | Conolog
 Corporation (the Company) is in the business of design, manufacturing and
 distribution of small electronic and electromagnetic components and
 subassemblies for use in telephone, radio and microwave transmissions and
 reception and other communication areas. The Companys products are used for
 transceiving various quantities, data and protective relaying functions in
 industrial, utility and other markets. The Companys customers include
 primarily industrial customers, which include power companies, and various
 branches of the military.                                                                                                                                                                                         
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | The Company
 formed a wholly owned Subsidiary, Nologoc Corporation. In September 1998,
 Nologoc Corporation purchased the assets of Atlas Design, Incorporated. In
 January, 2001, Nologoc Corporation purchased the assets of Prime Time
 Staffing, Incorporated and Professional Temp Solutions Incorporated. Atlas
 Design, Prime Time Staffing and Professional Temp Solutions provide
 short-term and long-term qualified engineering and technical staff, as well
 as human resource consulting to various industries. In March 2004 the Company
 ceased operating its staffing business. The assets of the Companys
 wholly-owned subsidiary, Nologoc, Inc. trading as Atlas Design, were sold to
 the Companys vice-president of operations of Atlas Design.
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|NOTE 2- | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | Principles of Consolidation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        | The
 consolidated financial statements include the accounts of Conolog Corporation
 and its wholly owned subsidiaries. All significant intercompany balances and
 transactions have been eliminated.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | Cash and Equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        | For the
 purpose of the statements of cash flows, cash equivalents include time
 deposits, certificates of deposit and all highly liquid debt instruments with
 original maturities of twelve months or less. The Company maintains cash and
 cash equivalents balances at financial institutions and are insured by the
 Federal Deposit Insurance Corporation up to $250,000. At times during the
 year, balances in certain bank accounts may exceed the FDIC insured limits.                                                                                                                                                                                                                                                                                      
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | Certificates of Deposits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|        | At July 31,
 2008, the Company had one six month certificate of deposit totaling $600,182,
 with interest at a rate of 4.3% which matured September 2008. At July 31,
 2009 the Company did not have a certificate of deposit.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | Inventories                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        | Inventories
 are valued at the lower of cost (determined on a first-in, first-out basis)
 or market.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | Property, Plant and Equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        | Property,
 plant and equipment are carried at cost, less allowances for depreciation.
 Depreciation is computed by the straight-line method over the estimated
 useful lives of the assets. Depreciation was $23,373 and $24,000 for the
 years ended July 31, 2009 and 2008, respectively. Repairs and maintenance
 expenditures which do not extend the useful lives of the related assets are
 expensed as incurred.                                                                                                                                                                                                                                                                                                                                               

F-7

---



CONOLOG CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JULY 31, 2009 AND 2008

|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE 2- | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        | (CONTINUED)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|        | Research and Development                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | Research and
 Development costs are expensed as incurred. Research and Development costs
 were $57,089 and $150,173 for the years ended July 31, 2009 and 2008
 respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|        | Revenue Recognition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        | Revenue is
 recorded in accordance with the guidance of the SECs Staff Accounting
 Bulletin (SAB) No. 104, which supersedes SAB No. 101. Revenue from product
 sales are recognized at the time of shipment (when title and risks and
 rewards of ownership have passed) upon fulfillment of acceptance terms;
 products are not sold on a conditional basis. Therefore, when delivery has
 occurred the sale is complete as long as the collection of the resulting
 receivable is probable.                                                                                                                                                              
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|        | Receivables and Allowance for Doubtful Accounts                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|        | The
 preparation of financial statements requires our management to make estimates
 and assumptions relating to the collectivity of our accounts receivable.
 Management specifically analyzes historical bad debts, customer credit
 worthiness, current economic trends and changes in our customer payment terms
 when evaluating the adequacy of the allowance for doubtful accounts. The
 Company has a concentration risk in trade accounts receivable with
 significant sales to the government and local agencies. The credit evaluation
 process has mitigated the credit risk, such losses have been minimal, and
 within management expectations.
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|        | Other Current Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|        | In 1998, the
 State of New Jersey enacted legislation allowing emerging technology and/or
 biotechnology companies to sell their unused New Jersey Net Operating Loss
 (NOL) Carryover and Research and Development Tax Credits (R&D
 Credits) to corporate taxpayers in New Jersey. During fiscal years ended July
 31, 2009 and 2008, the Company entered into agreements to sell its unused
 NOLs. Other current assets at July 31, 2009 and 2008 represent the gross proceeds
 to be received under such contracts.                                                                                                                                
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|        | Advertising / Public Relations Costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|        | Advertising/Public
 Relations costs are charged to operations when incurred. These expenses were
 $37,521 and $41,795 for the years ended July 31, 2009 and 2008, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|        | Shipping and Handling Costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        | Shipping and
 handling costs are expensed as incurred and amounted to $30,583 and $17,491
 for the years ended July 31, 2009 and 2008, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|        | Securities Issued for Services                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|        | The Company
 accounts for common stock issued for compensation services of Officers,
 Directors and employees by reference to the fair market value of the
 Companys stock on the date of stock issuance.                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|        | Fair Value of Financial Instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        | The carrying
 amounts of cash, accounts receivable, other current assets, accounts payable
 and accrued expenses approximates fair value because of the short maturity of
 these instruments.                                                                                                                                                                                                                                                                                                                                                                                                                                                               

F-8

---



CONOLOG CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JULY 31, 2009 AND 2008

|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE 2- | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        | (CONTINUED)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|        | Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        | Income taxes
 are provided for the tax effects of transactions reported in the financial
 statements and consist of taxes currently due plus deferred taxes related
 primarily to differences between the bases of assets and liabilities for
 financial and income tax reporting. The deferred tax assets and liabilities
 represent the future tax return consequences of those differences, which will
 either be taxable or deductible when the assets and liabilities are recovered
 or settled. Deferred taxes also are recognized for operating losses that are
 available to offset future federal and state income taxes.                                                          
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|        | Loss Per Share of Common Stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|        | Loss per
 share of common stock is computed by dividing net loss (after dividends on
 preferred shares) by the weighted average number of shares of Common Stock
 outstanding during the year. The preferred dividends are not reflected in
 arriving at the net loss as they are not material and would have no effect on
 earnings per share available to common shareholders. The number of weighted
 average shares used in the computations was 2,396,924 and 296,676 (adjusted
 for a 1:5 reverse stock split) for 2009 and 2008 respectively. The effect of
 assuming the exchange of Series A Preferred Stock and Series B Preferred
 Stock in 2009 and 2008 would be anti-dilutive.
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|        | Anti-dilutive shares are not
 included in the calculation of Earnings per Share.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

F-9

---



CONOLOG CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JULY 31, 2009 AND 2008

|        |                                                                                                       
|------- | ------------------------------------------------------------------------------------------------------
|NOTE 2- | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                                                            
|        | (CONTINUED)                                                                                           
|        |                                                                                                       
|        | Loss Per Share of Common Stock (Continued)                                                            
|        | The effect
 of assuming the exercise of outstanding warrants at July 31, 2009 would be
 anti-dilutive.
|        |                                                                                                       
|        | The
 following is a reconciliation of the computation for basic and diluted EPS:                      

| |                                                                 |  |                |            |                |   |            |  
| | --------------------------------------------------------------- |  | -------------- | ---------- | -------------- | - | ---------- | -
| |                                                                 |  | July 31,
 2009 |            | July 31,
 2008
| |                                                                 |  |                |            |               
| | Net Loss                                                        |  | $              | (2,354,032 | )              | $ | (6,967,606 | )
| |                                                                 |  |                |            |                |   |            |  
| |                                                                 |  |                |            |                |   |            |  
| | Weighted-average common shares 
   outstanding (Basic)          |  |                | 2,396,924  |                |   | 296,676    | *
| | Weighted-average common stock 
   equivalents:                  |  |                |            |                |   |            |  
| | Stock options                                                   |  |                | -          |                |   | -          |  
| | Warrants                                                        |  |                | -          |                |   | -          |  
| |                                                                 |  |                |            |                |   |            |  
| |                                                                 |  |                |            |                |   |            |  
| | Weighted-average common shares
 outstanding (Diluted)           |  |                | 2,396,924  |                |   | 296,676    | *
| |                                                                 |  |                |            |                |   |            |  
| | *Represents retroactive application of 1:5 reverse stock split. |  |                |            |                |   |            |  

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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.

F-10

---



CONOLOG CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JULY 31, 2009 AND 2008

|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE 2- | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|        | (CONTINUED)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        | Recent Accounting Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|        | In February
 2007 the FASB issued Financial Accounting Standards No. 159, The Fair Value
 Option for Financial Assets and Financial Liabilities  including an
 amendment of FASB Statement No. 115 effective for financial statements issued
 for fiscal years beginning after November 15, 2007. This Statement permits
 entities to choose to measure many financial instruments and certain other
 items at fair value. The Company does not expect FAS 159 to have a material
 impact on its results or financial statements.             
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        | Also in
 February 2007 the FASB issued Financial Accounting Standards No. 160,
 Noncontrolling Interests in Consolidated Financial Statements- an amendment
 of ARB No. 51 effective for financial statements issued for fiscal years
 beginning after December 15, 2008.. The Company does not expect FAS 160 to
 have a material impact on its results or financial statements.                                                                                                                                                              
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        | In March
 2008 the FASB issued Financial Accounting Standards No. 161, Disclosures
 about Derivative Instruments and Hedging Activities  an amendment of FASB
 No.133 effective for financial statements issued for fiscal years beginning
 after November 15, 2007.. This Statement requires enhanced disclosures about
 an entitys derivatives and hedging activities and thereby improves the
 transparence of financial reporting. The Company does not expect FAS 161 to
 have a material impact on its results or financial statements.
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        | In May 2009
 the FASB issued Financial Accounting Standards No. 165, Subsequent Events,
 effective for financial statements issued for fiscal years beginning after
 June 15, 2009. The objective of this Statement is to establish principles and
 requirements for subsequent events. The Company does not expect FAS 165 to
 have a material impact on its results or financial statements.                                                                                                                                                 
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        | In June 2009
 the FASB issued Financial Accounting Standards No. 166, Accounting for
 Transfer of Financial Assets, an amendment of FASB Statement No. 140. The
 Company does not expect FAS 165 to have a material impact on its results or
 financial statements.                                                                                                                                                                                                                                                                            
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        | In June 2009
 the FASB issued Financial Accounting Standards No. 167, Amendments to FASB
 Interpretation No. 46(R). The Company does not expect FAS 165 to have a
 material impact on its results or financial statements.                                                                                                                                                                                                                                                                                                                     
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        | In June 2009
 the FASB issued Financial Accounting Standards No. 168, The FASB Accounting
 Standards Codification and the Hierarchy of GAAP, a replacement of FASB No.
 162. The Company does not expect FAS 165 to have a material impact on its
 results or financial statements.                                                                                                                                                                                                                                                            

F-11

---



CONOLOG CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JULY 31, 2009 AND 2008

|        |                                                     
|------- | ----------------------------------------------------
|NOTE 3- | INVENTORY                                           
|        |                                                     
|        | Inventory
 consisted of the following as of July 31,

| |                 |  |      |           |      |   |        
| | --------------- |  | ---- | --------- | ---- | - | -------
| |                 |  | 2009 |           | 2008
| |                 |  |      |           |     
| | Finished
 Goods |  | $    | 841,098   |      | $ | 560,903
| | Work-in-process |  |      | 38,368    |      |   | 32,033 
| | Raw
 materials  |  |      | 515,986   |      |   | 257,571
| |                 |  |      |           |      |   |        
| |                 |  | $    | 1,395,452 |      | $ | 850,507
| |                 |  |      |           |      |   |        

|         |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|-------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE 4-  | RENTAL COMMITMENTS                                                                                                                                                                                                                                                                                                                                                                                                                       
|         | Total rental
 expense for all operating leases of the Company amounted to approximately
 $55,680 and $55,680 during the years ended July 31, 2009 and 2008,
 respectively. The Company currently leases its facilities on a month-to-month
 basis.                                                                                                                                                                                       
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|NOTE 5-  | DEFERRED FINANCING FEES                                                                                                                                                                                                                                                                                                                                                                                                                  
|         | The Company
 has deferred financing fees of $8,445 and $295,030 for July 31, 2009 and
 2008, respectively. These deferred financing fees will be amortized over the
 life of the loans. Amortization expense for these fees for the years ended
 July 31, 2009 and 2008 were $123,274 and $504,740 respectively.                                                                                                                         
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|NOTE 6-  | DEFERRED COMPENSATION                                                                                                                                                                                                                                                                                                                                                                                                                    
|         | Pursuant to
 the Corporation 2008 Stock Incentive Plan, 720,494 common shares of Company
 stock were issued to current Officers, Directors and Employees during fiscal
 2009. These shares were recorded at a value of $1,345,465 and will be
 expensed during the July 31, 2010 fiscal year.                                                                                                                                            
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|NOTE 7-  | NOTE RECEIVABLE                                                                                                                                                                                                                                                                                                                                                                                                                          
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|         | The Company
 entered into an Agreement to Rescind Asset Purchase Agreement, dated October
 22, 2002. This Agreement requires the repayment of $148,640, consisting of
 principal and interest accrued to July 31, 2004. Payments of $1,607
 (principal of $1,239 and interest at 5% of $368) begin December 30, 2004 and
 will continue monthly until the full balance is repaid. The balance of this
 Note at July 31, 2009 was $84,710.
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|NOTE 8 - | OTHER CURRENT ASSETS                                                                                                                                                                                                                                                                                                                                                                                                                     
|         | The income
 tax (benefit) is comprised of the following:                                                                                                                                                                                                                                                                                                                                                                                 

F-12

---



CONOLOG CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JULY 31, 2009 AND 2008

In 1998, the
State of New Jersey enacted legislation allowing emerging technology and/or
biotechnology companies to sell their unused New Jersey Net Operating Loss
(NOL) Carryover and Research and Development Tax Credits (R&D Credits)
to corporate taxpayers in New Jersey. During fiscal year ended July 31, 2009,
the Company entered into an agreement under which it will sell $551,937 of its
NOL carryover. The total net proceeds of this transaction will amount to
approximately $486,000 and a portion is recorded as other income in the
accompanying financial statements.

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

The temporary
differences causing deferred tax benefits are primarily due to net operating
loss carry forwards. The Company has established a valuation allowance at the
full value of the deferred tax asset.

At July 31,
2009 and 2008, the Company has net operating loss carryforwards for federal and
state income tax (Book) purposes of approximately $49,000,000 and $46,800,000
respectively, which is available to offset future Federal and State taxable
income through 2029.

There was no
provision for income taxes for the year ended July 31, 2009 and July 31, 2008.

|                            |  |      |             |      |   |             |  
|--------------------------- |  | ---- | ----------- | ---- | - | ----------- | -
|                            |  | 2009 |             | 2008 |  
|                            |  |      |             |      |   |             |  
|Deferred tax
 asset         |  |      |             |      |   |             |  
|                            |  | $    | 17,150,000  |      | $ | 16,380,000  |  
|Less:
 Valuation
 allowance |  | $    | (17,150,000 | )    | $ | (16,380,000 | )
|                            |  |      |             |      |   |             |  
|                            |  |      |             |      |   |             |  
|                            |  |      | -           |      |   | -           |  

|                            | 
|--------------------------- | 
|NOTE 9- PROFIT SHARING PLAN

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Company
 sponsors a qualified profit sharing plan that covers substantially all full
 time employees. Contributions to the plan are discretionary and determined
 annually by management. No contributions to the plan were made during the
 years ended July 31, 2009 and 2008.                                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | The Plan
 also provides an employee savings provision (401(k) plan whereby eligible
 participating employees may elect to contribute up to the maximum allowed
 under the IRS code to an investment trust. For tax year 2009 this maximum
 allowable deferred contribution was $16,500 ($21,500 for employee over age 59
 1⁄2). The Company made matching contributions to the plan of $98,893 and
 $180,619 for the fiscal years ended July 31, 2009 and 2008 respectively.

F-13

---



CONOLOG CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JULY 31, 2009 AND 2008

NOTE 10- STOCKHOLDERS EQUITY

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Series A
 Preferred Stock provides 4% cumulative dividends, which were $123,883 ($0.80
 per share) in arrears at July 31, 2009. In addition, each share of Series A
 Preferred Stock may be exchanged for one share of Common Stock upon surrender
 of the Preferred Stock and payment of $48,000 per share. The Company may
 redeem the Series A Preferred Stock at $.50 per share plus accrued and unpaid
 dividends.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | The Series B
 Preferred Stock provides cumulative dividends of $0.90 per share, which were
 $41,016 ($34.27 per share) in arrears at July 31, 2009. In addition, each
 share of Series B Preferred Stock is convertible into .005 of one share of
 Common Stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | On January
 19, 2006, pursuant to a Subscription Agreement, the Company sold and issued
 to three Subscribers Convertible Notes having an aggregate principal balance
 of $1,250,000 which are convertible into 1,000,000 shares of common stock at
 a conversion price of $1.25 per share, and warrants to purchase 1,000,000
 shares of common stock at a price of $0.9579 per share. The Warrants are
 exercisable as of April 19, 2006 and terminate on the fifth year anniversary
 date. Interest payable on these notes accrues at a rate of 5% per annum. The
 convertible notes and warrants have been recorded in compliance with APB-14.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | The
 $1,250,000 of proceeds attributed to the Convertible Debenture are recorded
 based upon their relative fair value. The value assigned to the warrants of $401,363
 has been recorded as a discount to the convertible debenture. Additionally,
 the warrants valued at $0.9579 per share represents a Beneficial Conversion
 feature calculated at their intrinsic value and amounted to $46,157. This
 beneficial conversion feature has been recorded as a discount to the
 convertible debenture. This aggregate discount to the debt of $447,520 will
 be amortized over the life of the debt using the effective interest method.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | At a Special
 Meeting of the shareholders held on August 2, 2006 a proposal to amend the
 Certificate of Incorporation to give effect to a one-for-six reverse stock
 split of the common stock of the Company was approved by the stockholders.
 The reverse split was effected on August 4, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | Pursuant to a Subscription Agreement
 dated January 19, 2006, the Company sold and issued to three Subscribers
 Convertible Notes having an aggregate principal balance of $1,250,000 which
 as a result of the reverse split are convertible into 166,667 (the Note
 Shares) post split shares of (post 1-for-6 stock reverse split) common stock
 at a post split conversion price of $7.50, and warrants to purchase 166,668
 shares of (post 1-for-6 stock reverse split) common stock at a post split
 exercise price of $5.7474 per share (the Conversion Price). Pursuant to an
 agreement dated as of September 28, 2006, between the Company and the selling
 shareholders who were parties to the January 19, 2006 Subscription Agreement
 (the Subscribers), the Company reduced the warrant exercise price of
 warrants held by the Subscribers to $1.25 so long as such warrants were
 exercised by October 31, 2006, after which time the warrant exercise price
 would revert to $5.7474, subject to adjustment as provided in the warrants.
 Pursuant to an agreement between the Company and First Montauk Securities
 Corp. (the placement agent in the private placement with the selling
 shareholders who were parties to the January 19, 2006 Subscription Agreement)
 the Company reduced the exercise price of warrants issued to First Montauk
 Securities Corp. and/or its transferees to $1.25. As of January 31, 2007 all
 of the Subscribers and some of the First Montauk Securities Corp. warrants,
 amounting to 191,667 warrants were exercised at a conversion price of $1.25
 per share. The Company received a Gross amount of $239,584 for these
 warrants.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | As permitted
 by the January 19, 2006 Subscription Agreement, on November 30th,
 the Company reduced the Conversion Price to $1.10 per share. Any shares in
 excess of the Notes Shares will not be registered under the Securities Act of
 1933, as amended, and, therefore, may not be offered for sale, pledged or
 hypothecated in the absence of an effective registration statement or an
 opinion of counsel reasonably satisfactory to the Company that such
 registration is not required.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

F-14

---



CONOLOG CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JULY 31, 2009 AND 2008

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In January
 2007, the Company reduced the original conversion prices of their outstanding
 debentures from $7.50 to $1.10. Subsequent to the reduction in the conversion
 price the debt holders exercised their rights to convert. The incremental
 consideration of the shares issued in the conversion was valued at $2,705,457
 and recorded as induced conversion costs in the accompanying statement of
 operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | In
 connection with this conversion, the amortization of deferred loan costs of
 $174,147 and the amortization of deferred loan discount of $363,610 were
 fully written off.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | On March 12, 2007 we completed a private placement of an
 aggregate of $2,825,000, principal amount, of Convertible Debentures with
 eight investors. The Convertible Debentures are convertible into an aggregate
 of 1,412,500 shares of the common stock of the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | The
 Conversion Price of the Convertible Debentures is $2.00 per share. The
 investors have also received warrants to purchase an aggregate of 1,412,500
 shares of the Companys common stock at an exercise price of $2.88 per share,
 exercisable beginning at any time on the sooner of September 8, 2007 or the
 date the Companys stockholders approves the issuance of the Companys common
 stock issuable on conversion of the Convertible Debentures (if such approval
 is required by the applicable rules of the Nasdaq) through the fifth
 anniversary of the issuance. In addition, the selling agent (including
 certain of its employees and affiliates) was granted a warrant to acquire
 282,500 shares of the Companys common stock. The Company received net
 proceeds of $2,487,500. The private placement was approved by the Companys
 shareholders, as required by applicable Nasdaq rules, on May 15, 2007.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | On
 September 7, 2007, the Companys Board of Directors voted unanimously to
 adjust the original conversion price of their outstanding debentures from
 $2.00 to $1.40 resulting in the reduction in Notes payable of $1,246,171.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | On December
 26, 2007, the Companys Board of Directors voted unanimously to further
 adjust the original conversion price of their outstanding debentures from $1.40
 to $1.05. There has been no reduction in Notes payable as of this filing.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | On
 June 12, 2008, the Companys Board of Directors voted unanimously to adjust
 the original conversion price of their outstanding debentures from $4.20
 (post reversal) to $1.20 resulting in the reduction in Notes payable of
 $627,071.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | On November
 2, 2007, the Company issued and sold in a private placement (the Private
 Placement), an aggregate of 953,000 shares of common stock (the Common
 Shares) at a purchase price of $1.40 per share, and warrants to purchase
 476,500 shares of the Companys common stock, which are exercisable for a
 period commencing six months from November 2, 2007 for five years to November
 2, 2012, at an exercise price of $1.66 per share (the Subscriber Warrants).
 From the sale of the Common Shares, the Company received net proceeds of
 $1,163,268 after deducting attorneys fees, printing fees and other
 miscellaneous fees related to the Private Placement.                                                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | On March 20,
 2008 Conolog received a Nasdaq Staff Deficiency Letter stating that, as the
 bid price of the Companys common stock has closed below the minimum $1.00
 per share requirement for continued listing on the Nasdaq Capital Market set
 forth in Marketplace Rule 4310(c)(4), in accordance with Marketplace Rule
 4310(c) (8)(D), the Company will be provided 180 calendar days, or until
 September 16, 2008, to regain compliance. If at any time before September 16,
 2008, the bid price of the Companys stock closes at $1.00 per share or more
 for a minimum of 10 consecutive business days Nasdaq will provide written
 notification that the Company complies with the rule.                                                                                                                                                                                                                                

F-15

---



CONOLOG CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JULY 31, 2009 AND 2008

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | On May 21,
 2008, a Special Meeting of the Companys shareholders approved a proposed
 amendment to the companys certificate of incorporation to effect a
 one-for-four reverse split of the Companys common stock which was
 subsequently approved by the Companys board of directors.                                                                                                                                                                                                                                                                        
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | On June 25,
 2008 Conolog received a Nasdaq Notification Letter stating that the bid price
 of the Companys common stock has closed above the minimum $1.00 per share
 requirement for at least 10 consecutive trading days and accordingly has
 regained compliance with Marketplace Rule 4310 (c) (4).                                                                                                                                                                                                                                                         
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | On August
 26, 2008 Conolog received a Nasdaq Staff Deficiency Letter stating that, as
 the bid price of the Companys common stock has closed below the minimum
 $1.00 per share requirement for continued listing on the Nasdaq Capital
 Market set forth in Marketplace Rule 4310(c)(4), in accordance with
 Marketplace Rule 4310(c) (8)(D), the Company was provided 180 calendar days,
 or until February 23, 2009, to regain compliance. During that period the
 Company regained compliance and was provided with notification of compliance
 from NASDAQ.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | On February
 25, 2009, a the Annual Meeting of the Companys shareholders approved a
 proposed amendment to the companys certificate of incorporation to effect a
 one-for-five reverse split of the Companys common stock which was
 subsequently approved by the Companys board of directors.                                                                                                                                                                                                                                                                

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

|                         |  |                              |       |                   |       |                                   |  |   |        | 
|------------------------ |  | ---------------------------- | ----- | ----------------- | ----- | --------------------------------- |  | - | ------ | 
|                         |  |                              |       | Year End July 31, |       | Weighted
 average
 Exercise Price
|                         |  | Number of
 Original Warrants |       | 2008              |       | 2009                              | 
|                         |  |                              |       |                  
|                         |  |                              | 1 X 4 |                   | 1 X 5 |                                  
|                         |  |                              |       |                   |       |                                   |  |  
|Balance st July 31, 2004 |  | 470,000                      |       |                   |       |                                   |  | $ | 1.69   | 
|Exercised September 2004 |  | (270,000                     | )     |                   |       |                                   |  | $ | 1.59   | 
|                         |  |                              |       |                   |       |                                   |  |   |        | 
|                         |  | 200,000                      |       | 8,333             |       | 1,667                             |  | $ | 202.80 | 
|                         |  |                              |       |                   |       |                                   |  |   |        | 
|                         |  |                              |       |                   |       |                                   |  |   |        | 
|Issued February 2005     |  | 958,549                      |       |                   |       |                                   |  | $ | 1.25   | 
|Exercised February 2005  |  | (200,000                     | )     |                   |       |                                   |  | $ | 1.84   | 
|                         |  |                              |       |                   |       |                                   |  |   |        | 
|                         |  | 758,549                      |       | 31,606            |       | 6,321                             |  | $ | 150.00 | 
|                         |  |                              |       |                   |       |                                   |  |   |        | 
|Issued July 2005         |  | 1,440,000                    |       | 60,000            |       | 12,000                            |  | $ | 40.56  | 
|                         |  |                              |       |                   |       |                                   |  |   |        | 
|Issued January 2006      |  | 1,200,000                    |       |                   |       |                                   |  | $ | 0.96   | 
|Exercised February 2007  |  | (1,191,667                   | )     |                   |       |                                   |  |   |        | 
|                         |  |                              |       |                   |       |                                   |  |   |        | 
|                         |  | 8,333                        |       | 2,083             |       | 417                               |  | $ | 25.00  | 
|                         |  |                              |       |                   |       |                                   |  |   |        | 
|Issued March 2007        |  |                              |       | 423,750           |       | 84,750                            |  | $ | 57.60  | 
|Issued November 2007     |  |                              |       | 119,125           |       | 23,825                            |  | $ | 33.20  | 
|                         |  |                              |       |                   |       |                                   |  |   |        | 
|                         |  |                              |       |                   |       |                                   |  |   |        | 
|Balance July 31,         |  |                              |       | 644,897           |       | 128,979                           |  | $ | 3.83   | 
|                         |  |                              |       |                   |       |                                   |  |   |        | 

| |                                                                                                                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | NOTE -11 CONVERTIBLE DEBENTURES                                                                                                                                                                                                                                           
| |                                                                                                                                                                                                                                                                           
| | On March 12,
 2007 a private placement of an aggregate of $2,825,000, principal amount, of
 Convertible Debentures was placed with eight investors. The Convertible
 Debentures are convertible into an aggregate of 1,412,500 shares of the
 common stock of the Company.
| |                                                                                                                                                                                                                                                                           
| | The balance of any un-converted note with simple
    and unpaid interest (at 6%) will mature on March 12, 2009.                                                                                                                                                           

F-16

---



CONOLOG CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JULY 31, 2009 AND 2008

The Conversion Price of the Convertible Debentures is $2.00 per
share. The investors have also received warrants to purchase an Aggregate of
1,412,500 shares of the Companys common stock at an exercise price of $2.88
per share, exercisable beginning at any time on the sooner of September 8, 2007
or the date the Companys stockholders approves the issuance of the Companys
common stock issuable on conversion of the Convertible Debentures (if such
approval is required by the applicable rules of the Nasdaq) through the fifth
anniversary of the issuance. In addition, the selling agent (including certain
of its employees and affiliates) was granted a warrant to acquire 282,500
shares of the Companys common stock.

The Company received net proceeds of
$2,487,500.

On September
7, 2007, the Companys Board of Directors voted unanimously to adjust the
original conversion price of their outstanding debentures from $2.00 to $1.40
resulting in the reduction in Notes payable of $ 1,246,171.

On December
26, 2007, the Companys Board of Directors voted unanimously to further adjust
the original conversion price of their outstanding debentures from $1.40 to
$1.05. There has been no reduction in Notes payable as of this filing. On June
12, 2008, the Companys Board of Directors voted unanimously to adjust the
original conversion price of their outstanding debentures from $4.20 (post
reversal) to $1.20 resulting in the reduction in Notes payable of $627,071.

On September
8, 2008, The Company has reduced the exercise price of the warrants issued in connection
with the Subscription Agreement, dated March 12, 2007 (the Subscription
Agreement), from $1.20 per share to $0.50 per share. As a result of the
reduction of the warrant exercise price, pursuant to Section 12 (b) of the
Subscription Agreement, the conversion price of the Convertible Notes issued in
connection with the Subscription Agreement is now $0.50 per share. Any shares
in excess of the shares that already have been registered for sale on
conversion of the Notes will not be registered under the Securities Act of
1933, as amended, and, therefore, may not be offered for sale, pledged or
hypothecated in the absence of an effective registration statement or an
opinion of counsel reasonably satisfactory to the Company that such
registration is not required. As a result of the above reductions in exercise
and conversion prices, as of October 15, 2008 investors have converted $285,042
of debt for 570,084 common stock shares. The Company recognized an Induced
Conversion cost related to these conversions of approximately $180,500.

On March 9,
2009, the Company and holders of its outstanding Convertible Notes agreed that
the Maturity Date of the Notes shall be August 31, 2009; the holders of the
Notes may convert any principal amount or interest remaining on the Note at an
applied conversion rate equal to the lessor of (A) the Fixed Conversion Price
or (B) seventy-five percent of the average closing bid price of the Common
Stock for the five trading days preceding the date of Notice of Conversion.

The balance of
these Convertible debentures at July 31, 2009 was $ 37,950. This final note was
converted on August 18, 2009.

|         |                                                                                                    
|-------- | ---------------------------------------------------------------------------------------------------
|NOTE 12- | MAJOR CUSTOMERS                                                                                    
|         |                                                                                                    
|         | The
 following summarizes sales to major customers (each 10% or more of net sales)
 by the Company:

|           |  |                |           |                           |   |                      |  |                      |  |  |      |   | 
|---------- |  | -------------- | --------- | ------------------------- | - | -------------------- |  | -------------------- |  |  | ---- | - | 
|Year Ended |  | Total
 Revenue |           | Sales to Major
 Customers |   | Number of
 Customers |  | Percentage of
 Total | 
|           |  |                |           |                           |   |                      |  |                      | 
|2009       |  | $              | 1,485,298 |                           | $ | 946,672              |  | 3                    |  |  | 63.7 | % | 
|2008       |  | $              | 1,220,993 |                           | $ | 756,137              |  | 4                    |  |  | 61.9 | % | 

F-17

---



CONOLOG CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JULY 31, 2009 AND 2008

|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|-------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE 13- | STOCK OPTION PLAN                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|         | 2002 Stock Option Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|         | On April 23,
 2002, the Board of Directors of the Company adopted the 2002 Stock Option
 Plan (the 2002 Plan). Under the 2002 Plan, the Company may grant up to
 190,000 shares of common stock as either incentive stock options under
 Section 422A of the Internal Revenue Code or nonqualified stock options.
 Subject to the terms of the 2002 Plan, options may be granted to eligible
 persons at any time and under such terms and conditions as determined by the
 2002 Stock Option Committee (the Committee). Unless otherwise determined by
 the Committee, each stock option shall terminate no later than ten years (or
 such shorter time as may be fixed by the Committee) after the date in which
 it was granted. The exercise price for incentive stock options must be at
 least one hundred percent (100%) of the fair market value of common stock as
 determined on the date of the grant. The exercise price for nonqualified
 stock options may not be granted at less than eighty-five percent (85%) of
 the fair market value of the shares on the date of grant.
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|         | As of July
 31, 2009 and 2008, there had been no shares granted under the 2002 Plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|NOTE 14- | SECURITIES ISSUED FOR SERVICES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|         | During
 fiscal year July 31, 2009, the Company issued 25,500 shares of common stock
 to a consultant for services. These shares were for services that extend into
 the future and are amortized against invoices billed by the consultants for
 actual services rendered in fiscal year 2010.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|         | During
 fiscal year July 31, 2008, the Company issued 25,000 shares of common stock
 to a consultant for services. These shares were for services that extend into
 the future and are amortized against invoices billed by the consultants for
 actual services rendered in fiscal year 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|         | These
 services will be performed in fiscal year 2010 and expensed at their fair
 value of consideration received at the date of the agreement in accordance
 with EITF 00-18 Accounting Recognition for Certain Transactions Involving
 Equity Instruments Granted to Other Than Employees.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|NOTE 15- | CONTINGENCIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|         | Meyers
 Associates, L.P. v. Conolog Corporation, Supreme Court of the State of New
 York, County of New York Index No. 600824/07.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|         | On March 13, 2007, Meyers
 Associates, L.P. commenced an action against Conolog Corporation, asserting
 that: (1) Conolog breached a purported contract it had with Meyers pursuant
 to which it claims Meyers was to act as lead underwriter in connection with a
 Regulation D securities offering for Conolog, and (2) Conolog misappropriated
 a purported confidential list of potential investors. Conolog denies the
 allegations in the complaint and intends to vigorously defend against
 Meyerss claims.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

F-18

---



CONOLOG CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JULY 31, 2009 AND 2008

|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|-------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|         | On May 7,
 2009, The Supreme Court of New York issued a Stipulation of Dismissal,
 dismissing all claims asserted by Meyers Associates, with prejudice.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|         | Allen
 Wolfson v. Conolog Corporation, United States District Court for the Southern
 District of New York, Case Number 08-cv-3790.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|         | On April 22, 2008, Allen
 Wolfson filed an action against Conolog Corporation, asserting that there was
 a breach of contract in connection with four consulting contracts allegedly
 entered into with plaintiff and entities controlled by plaintiff. On June
 10, 2008, the company filed a motion to dismiss Plaintiffs complaint on the
 grounds that the Court lacks personal jurisdiction over the Company or, in
 the alternative, for Plaintiffs failure to state a claim upon which relief
 can be granted. A Stipulation of Dismissal was issued during July 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|NOTE 16 | RECLASSIFICATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|         | Certain
 reclassifications have been made to the July 31, 2008 consolidated financial
 statements to conform to the 2009 presentation. These had no effect on net
 loss or cash flow for the year ended July 31, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|NOTE 17- | SUBSEQUENT EVENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|         | Conolog
 Corporation (the Company) entered into a Subscription Agreement (the
 Subscription Agreement), dated as of August 3, 2009 ( the Closing Date),
 with three investors, pursuant to which it sold an aggregate of One Million
 Dollars of its principal amount of secured promissory notes (the Notes). On
 the Closing Date the Company received gross proceeds of $500,000 and $500,000
 (the Escrowed Funds) was placed in escrow pursuant to an Escrow Agreement
 between the Company, the Subscribers and Grushko & Mittman, as escrow
 agent. Pursuant to the Subscription Agreement, the Company must file a
 preliminary proxy statement with the Securities and Exchange Commission by
 September 2, 2009 seeking approval for the transactions contemplated by the
 Subscription Agreement and the Company must obtain approval of its
 shareholders within 90 days of the Closing Date (125 days if the SEC reviews
 the proxy statement.). Provided shareholder approval is obtained (the
 Shareholder Approval), the Company will receive the Escrowed Funds. In the
 event that the Shareholder Approval is not obtained (Shareholder
 Rejection), the amount of the Note will decrease to $500,000 and the
 Escrowed Funds will be returned to the Subscribers. The initial interest rate
 of the Notes is 4% per annum and upon the shareholder Approval or a Rejection
 the interest rate will be 8% per annum. Interest shall accrue from the date
 of the Closing Date and shall be payable quarterly, in arrears, commencing
 six months after the Closing Date and on the maturity date of the Note. The
 Conversion Price of the Notes is the lessor of $.78 (the Fixed Conversion
 Price) as may be adjusted (the Initial Conversion Price). Commencing six
 months after the Closing Date, the Conversion Price shall be the lessor of
 the Fixed Conversion Price or 75% of the lowest three closing bid prices for
 the Companys common stock for the ten days prior to when the Note is
 converted.
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|         | The Company
 also issued the Subscribers Class A Warrants to purchase 1,282,051 shares of
 the Companys Common Stock at $1.12 per share. The Class A warrants are
 exercisable for a period beginning on August 3, 2009 and terminate on August
 3, 2014. Pursuant to the Subscription Agreement, the Company also issued the
 Subscribers a total of 40,000 class B Warrants.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|         | The Class B
 Warrants entitles the Subscribers at any time after the sooner of six months
 from the Closing Date or after the Company obtains the Approval until July 3,
 2012, to purchase up to $4,000,000 of principal amount of the Companys 8%
 notes on the same terms as the Notes and 1,000 warrants to purchase 128,205
 shares of the Companys Common Stock at a per share purchase price equal to
 the lessor of 105 % of the closing bid price of the Companys common stock or
 the exercise price of the Class A Warrants.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

F-19

---



CONOLOG CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JULY 31, 2009 AND 2008

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | For each
 $100,000 of principal of notes purchased pursuant to the Class B Warrants, the
 Subscribers will surrender 1,000 Class B Warrants.                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | The Notes
 cannot be converted to the extent such conversion would cause the Subscriber,
 together with such holders affiliates, to beneficially own in excess of
 4.99% of the of the Companys outstanding common stock immediately following
 such conversion.The Company also entered into a Security Agreement pursuant
 to which it granted the Subscribers a security interest in its assets.The
 security interest granted pursuant to the Security Agreement will terminate
 when the Approval is obtained or the Notes, including outstanding interest
 due thereon) are repaid.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | The Company
 paid Garden State Securities, Inc., the selling agent for this transaction, a
 cash fee of $100,000 (10% of the aggregate gross proceeds received by the
 Company) and issued Garden State (or its employees) warrants to purchase
 256,410 shares of the Companys common stock (20% the shares issuable to the
 subscribers upon conversion of the Notes).                                                                                                                                                                                                                  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | Immediately
 after the closing for the sale of the Notes, 1,841,491 shares of the
 Companys common stock were issued and outstanding.                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | At a Special
 Meeting of Shareholders held on September 24, 2009, the Shareholder Approval
 was obtained. As a result, the Escrowed Funds were released and after the
 payment of fees in the amount of $50,000 to Garden State Securities, Inc.,
 the placement agent for the transaction, the Company received net proceeds of
 $450,000 (prior to the deduction of other fees and expenses related to the
 Offering).                                                                                                                                                                   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | At the
 Special Meeting of Shareholders held on September 24, 2009, Shareholder
 approval was obtained for the Companys 2009 Restrictive Stock Incentive
 Plan.                                                                                                                                                                                                                                                                                                                                                                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | On September
 28, 2009, the Company entered into an Advisory Service Agreement with Garden
 State Securities Inc. (GSS) to perform certain Advisory and Business
 services. The Board of Directors has approved the Company to issue 200,000
 restricted common shares to GSS.                                                                                                                                                                                                                                                                                                             
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | On October
 21, 2009, Two holders of the Companys outstanding Convertible Notes dated
 August 3, 2009 converted principal amounts of $221,256 and interest amounts
 of $3,855 and issued a total of 288,605 restricted common shares.                                                                                                                                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | After the
 above transactions, 3,180,846 shares of the Companys common stock were
 issued and outstanding.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

F-20

---