<PAGE>
     As filed with the Securities and Exchange Commission on September 12, 1997
                                                     Registration No. 333-______

--------------------------------------------------------------------------------
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   ----------

                                    FORM S-1
                             REGISTRATION STATEMENT
                                      UNDER
                           THE SECURITIES ACT OF 1933

                                   ----------

                               Conolog Corporation
                         (Name of issuer in its charter)

      Delaware                           3679                     52-0853566
(State or other juris-       (Primary Standard Industrial     (I.R.S. Employer
diction of organization)       Classification Code No.)      Identification No.)


                                 5 Columbia Road
                              Somerville, NJ 08876
                                 (908) 722-8081
          (Address and telephone number of principal executive offices)

                           Robert S. Benou, President
                               Conolog Corporation
                                 5 Columbia Road
                              Somerville, NJ 08876
                                 (908) 722-8081
            (Name, address and telephone number of agent for service)

                                   Copies to:

Stuart Neuhauser, Esq.                            Steven A. Morse, Esq.
Bernstein & Wasserman, LLP                        Lester Morse, P.C.
950 Third Avenue                                  111 Great Neck Road
New York, NY  10022                               Great Neck, NY 11021
(212) 826-0730                                    (516) 487-1446
(212) 371-4730 (Fax)                              (516) 487-1452 (Fax)


     Approximate date of proposed sale to the public: As soon as reasonably
practicable after the effective date of this Registration Statement.




<PAGE>




     If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis, pursuant to Rule 415 under the Securities Act of
1933, check the following box: |X|

     If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]

     If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

     If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

                         CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
=================================================================================================
                                                    Proposed          Proposed
      Title of Each                             Maximum Offering       Maximum         Amount of
Class of Securities to be        Amount to be      Price per          Aggregate      Registration
       Registered                 Registered      Security(1)      Offering Price         Fee
=================================================================================================
<S>                               <C>                <C>            <C>                <C>      
Units, each consisting of           805,000          $5.00           $4,025,000        $1,219.58
one (1) Share of Common
Stock, $1.00 par value per
Share and four (4) Class A
Warrants(2)
-------------------------------------------------------------------------------------------------

Common Stock, $1.00 par             805,000             --                   --               --
value
-------------------------------------------------------------------------------------------------

Class A Warrants                  3,220,000             --                   --               --
-------------------------------------------------------------------------------------------------

Common Stock, $1.00 par           3,220,000          $6.00          $19,320,000        $5,853.96
value underlying Class A
Warrants
-------------------------------------------------------------------------------------------------

Representative's Unit                70,000          $6.00             $420,000          $127.26
Purchase Option

-------------------------------------------------------------------------------------------------

Common Stock, $1.00 par              70,000             --                   --               --
value in Representative's
Unit Purchase Option
-------------------------------------------------------------------------------------------------

Class A Warrants in                 280,000             --                   --               --
Representative's Unit
Purchase Option
-------------------------------------------------------------------------------------------------
</TABLE>



                                       ii

<PAGE>



<TABLE>
<CAPTION>
=================================================================================================
                                                    Proposed          Proposed
      Title of Each                             Maximum Offering       Maximum         Amount of
Class of Securities to be        Amount to be      Price per          Aggregate      Registration
       Registered                 Registered      Security(1)      Offering Price         Fee
=================================================================================================
<S>                               <C>                <C>            <C>                <C>      
Common Stock, $1.00 par             280,000          $6.00           $1,680,000          $509.04
value underlying
Class A Warrants in
Representative's Unit
Purchase Option
-------------------------------------------------------------------------------------------------

Class A Warrants of               1,200,000           $.10             $120,000           $41.38
Selling Securityholders
-------------------------------------------------------------------------------------------------

Common Stock, $1.00 par           1,200,000          $5.00           $7,200,000        $2,181.60
value underlying Class A
Warrants of Selling
Securityholders
-------------------------------------------------------------------------------------------------

Total Registration and Fee                                          $32,765,000        $9,932.82
=================================================================================================
</TABLE>

----------

(1)  Estimated solely for purposes of calculating registration fee pursuant to

     Rule 457 under the Securities Act of 1933, as amended (the "Act"). Pursuant
     to Rule 416 under the Act, this Registration Statement covers such
     additional indeterminate number of shares of Common Stock as may be issued
     by reason of adjustments in the number of shares of Common Stock pursuant
     to anti-dilution provisions contained in the Warrant Agreement governing
     the Class A Warrants and the Representative's Unit Purchase Option. Because
     such additional shares of Common Stock will, if issued, be issued for no
     additional consideration, no registration fee is required.

(2)  Includes 105,000 Units included in the Representatives Over-Allotment
     Option.

     The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.


                                       iii


<PAGE>



                                EXPLANATORY NOTE

     This registration statement covers the primary offering of securities of
Conolog Corporation (the "Company") and the offering of other securities by
certain selling securityholders (the "Selling Securityholders"). The Company is
registering, under the primary prospectus (the "Primary Prospectus"), 805,000
Units, each Unit consisting of one (1) share of Common Stock and four (4) Class
A Warrants. The Selling Securityholders are registering, under an alternate
prospectus (the "Alternate Prospectus"), 1,200,000 Class A Warrants. The
Alternate Prospectus pages which follow the Primary Prospectus, contain certain
sections which are to be combined with all of the sections contained in the
Primary Prospectus, with the following exceptions: the front and back cover
pages, and the sections entitled "The Offering" and "Selling Securityholders."
In addition, the section entitled "Concurrent Sales" from the Alternate
Prospectus pages will be added to the Alternate Prospectus. Furthermore, all
references contained in the Alternate Prospectus to "the Offering" or "this
Offering" shall refer to the Company's offering under the Primary Prospectus.


                                       iv


<PAGE>



                               CONOLOG CORPORATION

                              CROSS REFERENCE SHEET
                          Between Items in Registration
                    Statement on Form S-1 and the Prospectus

   Item in Form S-1                 Prospectus Caption
   ----------------                 ------------------

1. Front of Registration            Forepart of Registration
   Statement and Outside Front      Statement and Outside Front
   Cover of Prospectus              Cover Page of Prospectus

2. Inside Front and Outside Back    Inside Front and Outside Back
   Cover Pages of Prospectus        Cover Page of Prospectus

3. Summary Information and Risk     Prospectus Summary; Risk Factors
   Factors

4. Use of Proceeds                  Use of Proceeds

5. Determination of Offering        Outside Front Cover Page of
   Price                            Prospectus; Risk Factors and Underwriting

6. Dilution                         Risk Factors

7. Selling Securityholders          Selling Securityholders

8. Plan of Distribution             Underwriting

9. Description of Securities        Description of Securities
   to be registered

10.Interests of Named Experts and   Legal Matters; Experts
   Counsel

11.Information with Respect to      Prospectus Summary; Business;
   the Registrant                   Management's Discussion and Analysis of
                                    Financial Condition and Results of Operation

12.Disclosure of Commission         Certain Transactions; Part II - Item 14
   Position on Indemnification
   for Securities Act Liabilities


                                        v


<PAGE>



Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such an offer, solicitation of sale would be unlawful
prior to registration or qualification under the securities laws of any State.

                 Subject to Completion, dated September 12, 1997

Prospectus

                               CONOLOG CORPORATION

                                  700,000 Units

     Conolog Corporation, a Delaware corporation ("Conolog" or the "Company") is
offering (the "Offering") 700,000 units (the "Units") at a price of $5.00 per
Unit. Each Unit consists of one (1) share of Common Stock, par value $1.00 per
share ("Common Stock") and four (4) Redeemable Class A Common Stock Purchase
Warrants ("Class A Warrants"). The Common Stock and Class A Warrants are
detachable and may trade separately immediately upon issuance. Each Class A
Warrant entitles the holder to purchase one (1) share of Common Stock, at an
exercise price of $6.00, subject to adjustment, at any time through August 16,
1998. The Class A Warrants are subject to redemption by the Company at any time
on not less than thirty (30) days notice at $.05 per Warrant, provided the
average closing price of the Common Stock exceeds $7.20 per share for twenty
(20) consecutive trading days ending within fifteen (15) days prior to the
notice. See "Description of Securities."

     The registration statement of which this prospectus forms a part also
covers the offering of 1,200,000 Class A Warrants owned by certain selling
securityholders (the "Selling Securityholders"), the resale of the Common Stock
underlying the Class A Warrants by the Selling Securityholders and the exercise
of the Class A Warrants by the transferees of the Selling Securityholders. The
securities held by the Selling Securityholders may be sold concurrently with or
after this Offering. These Class A Warrants are identical to the Class A
Warrants being offered by the Company. Sales of such securities or even the
potential of such sales at any time may have an adverse effect on the market
prices of the securities offered hereby. See "Selling Securityholders."

     The registration statement of which this prospectus forms a part covers the
3,220,000 shares of Common Stock issuable upon exercise of the Class A Warrants
offered by the Company (which includes the Class A Warrants included in the
over-allotment option), and the 280,000 shares of Common Stock issuable upon
exercise of the Class A Warrants included in the Representative's Unit Purchase
Option. See "Description of Securities."

     The Company's Common Stock and Class A Warrants are currently trading on

the Nasdaq SmallCap Market ("Nasdaq"). On _________, 1997, the closing price for
the Common Stock and Class A Warrants were $_______ and $______, respectively.


                                       vi


<PAGE>




     AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES A HIGH DEGREE OF
RISK. AN INVESTMENT IN THESE SECURITIES SHOULD BE CONSIDERED ONLY BY PERSONS
CAPABLE OF SUSTAINING THE LOSS OF THEIR ENTIRE INVESTMENT. SEE "RISK FACTORS"
WHICH BEGIN ON PAGE ___ AND "DILUTION".

     THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.


--------------------------------------------------------------------------------
                     Price to Public     Discounts and     Proceeds to the
                                         Commissions(1)       Company(2)
--------------------------------------------------------------------------------
Per Unit ..........       $5.00              $.50               $4.50
--------------------------------------------------------------------------------
Total (3) .........    $3,500,000          $350,000          $3,150,000
--------------------------------------------------------------------------------

(1) Does not include additional underwriting compensation to be paid by the
Company IAR Securities Corp. (the "Representative") in the form of (a) warrants
to purchase up to 70,000 Units, each Unit consisting of one (1) share of Common
Stock and four (4) Class A Warrants exercisable over a four year period
commencing one year from the date of this Prospectus at an exercise price of
$6.00 per Unit (the "Representative's Unit Purchase Option"), (b) a
non-accountable expense allowance (the "Non-Accountable Expense Allowance")
equal to three percent (3%) of the aggregate public offering price of the Units,
namely $105,000 (or $120,750 assuming exercise in full of the Over-Allotment
Option, as defined below), and (c) consulting fees of $70,000 payable to the
Representative in full at the closing of the public offering. The Company and
the Representative have agreed to indemnify one another against certain
liabilities arising under the Securities Act of 1933, as amended. See
"Underwriting."

(2) Before deducting expenses of this offering payable by the Company estimated
to be $400,000, including the Representative's Non-Accountable Expense Allowance
of $105,000 and the $70,000 financial consulting fee referred to above. After
deducting such expenses, the net proceeds to the Company will be approximately
$2,750,000. See "Use of Proceeds."



                                        1


<PAGE>



(3) The Company has granted the Representative an option to purchase up to
105,000 Units at any time before 45 days from the date hereof solely for
covering over-allotments (the "Over-Allotment Option"). If the Over-Allotment
Option is exercised in full the total price to the public will be $4,025,000,
the total discounts and commissions will be $402,500 and the estimated expenses
of the Offering will be $415,750. The net proceeds to the Company after
deducting the expenses of the Offering would then be $3,206,750. See "Use of
Proceeds."






                              IAR SECURITIES CORP.


               The date of this Prospectus is ____________, 1997.





















                                        2


<PAGE>



[Picture]













                                        3

<PAGE>



[Picture]














                                        4


<PAGE>



     The Securities are being offered subject to prior sale, when, as and if
delivered to and accepted by the Representative, and subject to certain other
conditions. The Representative reserves the right to withdraw, cancel or modify
such offer without notice and to reject orders in whole or in part. It is
expected that delivery of the Securities will be made on or about ___________,
1997.

     NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE
SECURITIES TO WHICH THIS PROSPECTUS RELATES OR AN OFFER TO OR SOLICITATION OF
ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.

     CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE UNITS, COMMON
STOCK AND/OR CLASS A WARRANTS, INCLUDING OVER-ALLOTMENT, STABILIZING AND
SHORT-COVERING TRANSACTIONS AND THE IMPOSITION OF PENALTY BIDS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."

                              AVAILABLE INFORMATION

     The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports and other information filed by the
Company can be inspected and copied (at prescribed rates) at the Commission's
Public Reference Section, 450 Fifth Street, N.W., Washington, D.C., as well as
the New York Regional Office, Seven World Trade Center, New York, New York, and
the Chicago Regional Office, Northwestern Atrium Center, 500 West Madison
Street, Chicago, Illinois. The Commission maintains a Web site on the Internet
(http://www.sec.gov) that contains reports, proxy and information statements and
other information regarding issuers that file electronically with the Commission
through the Electronic Data Gathering, Analysis, and Retrieval System (EDGAR).

     The Company has filed with the Commission a registration statement on Form
S-1 (herein together with all amendments and exhibits referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), of which this Prospectus forms a part. This Prospectus does
not contain all of the information set forth in the Registration Statement,
certain parts of which have been omitted in accordance with the rules and
regulations of the Commission. For further information, reference is made to the
Registration Statement.


                                        5

<PAGE>



                               PROSPECTUS SUMMARY

     This summary is qualified in its entirety by the more detailed information,
financial statements and notes thereto appearing elsewhere in this Prospectus.
In addition, unless otherwise indicated to the contrary, all information
appearing herein does not give effect to the exercise of (i) the Over-Allotment
Option; (ii) the Class A Warrants (including Class A Warrants included in the
Over-Allotment Option and those owned by the Selling Securityholders); (iii) the
outstanding Class A Warrants prior to the Effective Date; (iv) the
Representative's Unit Purchase Option; or (v) the 1995 Unit Purchase Option. See
"Description of Securities," "Bridge Financing," and "Underwriting."

The Company

     Conolog Corporation, a Delaware corporation (the "Company" or "Conolog")
was organized in 1968 and is engaged in the design, manufacture (directly or
through subcontractors) and distribution of small electronic and electromagnetic
components and subassemblies for use in telephone, radio and microwave
transmission and reception and other communication areas that are used in both
military and commercial applications. The Company's products are used for
transceiving various quantities, data and protective relaying functions in
industrial, utility and other markets.

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

     Since the 1980's, Conolog has been an active participant in providing
electromagnetic wave filters for major military programs, such as the Patriot

Missile, Hawk Missile and Sea Sparrow


                                        6

<PAGE>



Missile. In addition to these projects, Conolog components are currently used by
the military in tanks, the Apache helicopters and the MK-50 torpedoes.

     During 1987, the Company made the strategic decision to redirect the
Company's focus from military to commercial markets. Since that time, the
Company has refocused on manufacturing and marketing its products for the
commercial marketplace rather than depend on the military and defense related
markets. The effort has included the introduction of new products, the redesign
of existing products and increased advertising and marketing efforts, as
permitted by its limited financial resources. The percentage of revenues
attributed to products manufactured for use in commercial applications increased
from approximately 4% of sales in 1981 ($171,000) to approximately 77% of sales
in 1996 ($1,480,000). The decision to embark on this program entailed a major
design effort, including the coordination of outside engineering consultants to
develop a complete line of products aimed at the Company's target markets. The
emphasis was on products for electric utilities, cogeneration of power, gas and
water companies, traffic control for departments of transport (DOT) and airports
utilizing DSP (Digital Signal Processing) technology. DSP designs have long term
stability with minimum or no maintenance, allowing the Company to offer
customers a product line with a 12 year warranty - a first on the market.

     Testing of the Company's first commercial product group, the Teleprotection
Series PTR- 1000, was under way in the latter part of 1992 by Bonneville Power
Administration. This detailed test permitted the Company to "fine tune" the
product for power transmission applications. In March 1994, the PTR-1000 was
approved for use by such utility and thereafter by other utilities and
municipalities. To date, the Company has sold and delivered over 800 PTR-1000
sets to 18 utilities and 5 municipalities, most of which are installed and in
service.

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

The Company launched its industrial grade 1200 Baud Modem for data
transmission/communication, and completed the PTR-1000 System options. Through
1997, the Company designed and is in the process of completing and building the
PTR-1500 Quad System, Protection Equipment, exclusively for the General Electric
Company ("GE"), to be labeled GE-NS50 Series, for worldwide sales as detailed in
the agreement between GE and Conolog dated April 1, 1997.



                                        7

<PAGE>



     Due to the end of the cold war and the downsizing of the American military,
the Company experienced unexpected sharp reductions of military contracts in
fiscal 1993 (the Company's fiscal year end is July 31) resulting in a 50%
decline in the Company's sales for that year, down to $1,486,298 from $2,997,308
in fiscal 1992. The sales of new products could not replace the decrease in
military sales. The Company, however, continued to pursue sales as aggressively
as its available resources would permit. Sales in fiscal 1994 increased to
$2,044,860, a 37% increase over fiscal 1993. Sales in fiscal 1995 were
$2,090,933 a 2% increase over fiscal 1994. Sales in fiscal 1996 were $1,924,466
an 8% decrease from fiscal 1995. Sales for the first nine months ended April 30,
1997 totaled $978,979, a 35% decrease from $1,519,975 for the same period in
1996. Revenues from the Company's military product sales represented
approximately 60%, 30%, 23% and 18% of sales of the Company in fiscal 1994,
1995, 1996, and in the first nine months ended April 30, 1997, respectively,
reflecting the Company's emphasis on commercial sales and markets.

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

     The Company is presently engaged and focused in two basic market areas: (1)
Military sales via direct contract sales to the military, as subcontractor to
systems producers and to foreign governments; and (2) Commercial sales (under
the tradename " INIVEN" (A Division of Conolog)) via direct sales to end users,
sales to system assemblers and sales to contractors/installers. See "Business".

     On August 16, 1995, the Company completed an underwritten offering ("August
1995 Offering") of its securities by selling 235,750 Units ("Units"), each Unit
consisting of two (2) shares of Common Stock and one (1) Class A Warrant at a
price of $10.00 per Unit. The Company received net proceeds of $1,853,025.

     The Company's executive offices are located at 5 Columbia Road, Somerville,
New Jersey 08876, telephone (908) 722-8081.





                                        8

<PAGE>



Present Capitalization

Common Stock ..........................      2,799,736(1)

Class A Warrants ......................      1,135,750

Series A Preferred Stock ..............      155,000(2)

Series B Preferred Stock ..............      1,197(3)

Shareholders of Record ................      _____(4)


The Offering

Securities Offered By the
   Company ............................      700,000 Units, each Unit consisting
                                             of one (1) share of Common Stock,
                                             par value $1.00, and four (4) Class
                                             A Warrants. See "Descriptions of
                                             Securities."

Common Stock to be
Outstanding After Completion
of the Offering .......................      3,499,736

Class A Warrants to be Outstanding
After Completion of the Offering ......      5,135,750 (including 1,200,000
                                             being offered by the Selling
                                             Securityholders)

Terms of Class A Warrants .............      Each Class A Warrant entitles the
                                             holder to purchase one share of the
                                             Company's Common Stock at a price
                                             of $6.00, subject to adjustment, at
                                             any time through August 16, 1998.
                                             The Class A Warrants are subject to
                                             redemption by the Company at any
                                             time on not less than 30 days'
                                             notice at $.05 per Warrant,
                                             provided the average closing price
                                             of the Common Stock exceeds



----------

(1)  Does not include treasury stock. See "Financial Statements".

(2)  Each share of Series A Preferred Stock is convertible into 1 share of
     Common Stock upon payment of $1,200 per share. See "Description of
     Securities".

(3)  The shares of Series B Preferred Stock are convertible into an aggregate of
     239 shares of Common Stock. See "Description of Securities" and "Certain
     Transactions."

(4)  As of _________, 1997.



                                        9

<PAGE>



                                             $7.20 per share for 20 consecutive
                                             trading days ending within 15 days
                                             prior to the notice.


Nasdaq SmallCap Market Symbols ........      Common Stock --- CNLG;
                                             Class A Warrants --- CNLGW

Risk Factors ..........................      The securities are subject to a
                                             high degree of risk and substantial
                                             dilution. See "Risk Factors" and
                                             "Dilution."

Use of Proceeds .......................      The net proceeds of this Offering,
                                             estimated at $2,750,000, will be
                                             used to repay certain bridge
                                             financing, to complete the design,
                                             development and implementation of
                                             the PTR-1500 quad system and its
                                             related option modules, repayment
                                             of other indebtedness and for
                                             working capital purposes. See "Use
                                             of Proceeds."


Representative's Compensation .........      IAR Securities Corp. (the
                                             "Representative") will receive as
                                             compensation for its services in
                                             this Offering a ten percent (10%)
                                             discount on the purchase price of
                                             the Units, a three percent (3%)
                                             non-accountable expense allowance

                                             and an option to purchase Units
                                             equal to ten percent (10%) of the
                                             Units sold in this Offering. As
                                             part of the underwriting
                                             arrangements, the Company will
                                             enter into an agreement retaining
                                             the Representative as a financial
                                             consultant to the Company for a two
                                             (2) year period commencing as of
                                             the close of the sale of the Units
                                             offered hereby at an annual fee of
                                             $35,000, for a total of $70,000
                                             payable in full at the Closing of
                                             the Offering, and will pay an
                                             investment banking fee with respect
                                             to any transaction introduced by
                                             the Representative and consummated
                                             and a 4% warrant solicitation fee.
                                             See "Underwriting."





                                       10

<PAGE>



Summary Financial Information

     The summary financial information set forth below is derived from and
should be read in conjunction with the more detailed financial statements and
notes appearing elsewhere in this Prospectus.

<TABLE>
<CAPTION>
                                      NINE MONTHS ENDED APRIL 30                          YEAR ENDED JULY 31
                                      --------------------------    ---------------------------------------------------------------

                                           1997          1996       1996            1995         1994          1993          1992
                                           ----          ----       ----            ----         ----          ----          ----
                                      (unaudited)  (unaudited)
<S>                                  <C>           <C>           <C>           <C>           <C>           <C>           <C>        
Net sales and other income           $   978,979   $ 1,519,975   $ 1,924,466   $ 2,090,933   $ 2,044,860   $ 1,486,298   $ 2,997,308

Income (loss) from 
continuing operations                   (137,662)     (209,402)      293,552    (1,014,296)   (1,182,988)     (322,005)       72,026

Income (loss) from 
continuing operations historic              (.12)         (.20)          .28          (.12)         (.27)         (.07)          .02

Income (loss) from continuing 

operations per share, after 
giving effect to 1-for-100 
reverse  stock split in August 1995                                                 (12.01)       (27.22)        (7.41)         1.66

Pro forma income from continuing 
operations per share*                                                    .12

Total assets                           3,979,136     4,026,335     3,927,834     3,882,235     3,739,294     4,601,015     4,586,003

Long-term debt and capitalized 
lease obligations                              0       949,853         4,973        34,103     3,829,625     3,732,961     2,654,957
</TABLE>


*    After giving effect to 1,400,000 shares of Common Stock issuable in
     exchange for the unpaid amount of principal and interest due to the Bank.



                                       11

<PAGE>



                                               AT APRIL 30, 1997
                                  -------------------------------------------
                                     ACTUAL          ADJUSTMENT   AS ADJUSTED
                                  -----------        -----------  -----------

Working Capital                   $ 2,928,784   (1)  $ 2,750,000  $ 5,678,784

Total Assets                        3,979,136   (1)    2,403,354    6,382,490

Long-Term Liabilities                 - 0-                -0-          -0-

Stockholders' Equity                3,357,930   (1)   2,750,000     6,107,930


----------

(1) Reflects 700,000 shares of Common Stock included in the Units being offered
herewith; net proceeds to the Company are estimated to be $2,750,000 after
giving effect to Underwriter discounts and expenses of this offering.


                                       12


<PAGE>



                                  RISK FACTORS

     In making comparisons with other investments or in considering the success
of other investments, one should bear in mind that the success of any investment
depends upon many factors including opportunity, general economic conditions,
experience and competence of management. There is no representation that the
same positive factors are present in this Company which have been present in
like ventures that have been successful.

     Any person who is considering the purchase of the Securities offered herein
should carefully consider the adverse factors described below. Any one or more
of these factors could have a negative effect on the Company of such impact as
to cause the value of the Company's securities to be greatly diminished.

1. Working Capital; Stockholders' Equity; Prior Periods' Losses and Profits. At
April 30, 1997, the Company had working capital of $2,928,784 and stockholders'
equity of $3,357,930. The Company's continued existence is dependent upon it
successfully expanding its business and attaining profitable operations. The
Company reported losses of $137,662 and income of $293,552 and losses of
1,014,296 and $1,182,988 for the nine months ended April 30, 1997 and for the
years ended July 31,1996, 1995, 1994, respectively. The profits (losses)
reported included inventory write-offs of $0, $50,281, $656,248, and $944,970,
for the same periods, respectively. In addition, reported interest expense for
the same periods were $69,199, $131,854, $253,686, and $362,317, respectively.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations."

2. Risks Attendant to Expansion. The Company intends to utilize a portion of the
net proceeds of this Offering to hire employees, complete the PTR-1500 designing
and testing of mainframe, design, build and test of the option modules and event
recorders, complete the radio interface for the Company's tone and multiplex
products and market the Company's products. Like any business enterprise
operating in a specialized and competitive market, the Company is subject to
many business risks which include, but are not limited to, unforeseen marketing
and promotional expenses, unforeseen negative publicity and competition. Many of
the risks inherent in the Company's business may be unforeseeable or beyond the
control of management. There can be no assurance that the Company will
successfully market the Company's products or develop new products in a timely
or effective manner, which would materially adversely affect the Company's
operating results. See "Use of Proceeds" and "Business".

3. Minimal Sales Staff. The Company employs only 2 marketing executives. In
1995, the Company elected a Vice President of Marketing and Sales who introduced
a comprehensive advertising campaign for the major product lines in water/waste
water and utility publications appearing monthly. In addition, the Company has
signed up to attend the major shows pertaining to water, waster water and power
utilities. Although the response to these efforts have shown promise, the
success of the Company's future marketing efforts will depend on the market
environment and



                                       13

<PAGE>



the needs of the economy. See "Business of the Company -- Marketing and Sales"
and "Employees".

4. Reliance on Component Manufacturers. The Company is dependent on outside
suppliers for all of the subcomponent parts and raw materials necessary to
manufacture the Company's products. A shortage, delay in delivery, or lack of
availability of a given part could lead to manufacturing delays, which could
reduce sales until the problem is remedied. All electrical components of the
Company's products are standard stock items for which a replacement vendor can
be readily obtained. The Company is not dependent upon any single supplier. The
Company purchases some custom parts, primarily printed circuit boards. The
failure of a vendor of one of these customized components could cause a lengthy
delay in production, resulting in a loss of revenues. See "Business-Raw
Materials; Inventory" and "Manufacturing".

5. Dependence on Present Management. The success of the Company is dependent
upon the services of its current management, particularly Robert S. Benou, its
President and its key engineers. The Company has entered into an employment
agreement with Mr. Benou. However, if the employment by the Company of Mr. Benou
terminates, or he is unable to perform his duties, the Company may be
substantially affected. The Company intends on obtaining prior to the offering,
key man insurance on the life of Mr. Benou in the amount of $1,000,000, to be
payable to the Company. If the Company were to lose the services of any of its
other key employees, there is no assurance that the Company would be able to
locate and retain a qualified replacement. The prolonged lack of availability of
any current member of senior management, whether as a result of death,
disability or otherwise, could have an adverse effect upon the business of the
Company. See "Management".

6. Competition: Rapid Technological Change. The market for the Company's
products is very competitive. There are several companies engaged in the
manufacture of products of the type produced by the Company, most of which are
substantially larger and have substantially greater name recognition and greater
financial resources and personnel. The principal elements of competition in the
Company's markets include product quality and reliability, price, service and
delivery. Competition is expected to continue and intensify. The market is also
characterized by rapid technological changes and advances. The Company is an
insignificant factor in the industry. There can be no assurance that the Company
will be able to develop or acquire new products to keep the Company competitive
or stay competitive in general. Lack of market acceptance for the Company's
existing or new products, the Company's failure to introduce new products in a
timely or cost effective manner or its failure to increase functionability of
existing products or remain price competitive, would materially adversely affect
the Company's operating results. There can be no assurance that the Company will
be successful in its product development efforts. See "Business-Research and
Development; New Products" and "Competition".


7. Dependence on Large Customers. Sales to the Company's two major customers
during the nine month period ended April 30, 1997 (General Electric and
Bonneville Power Authority) totaled $203,602 and $200,000, respectively (21% and
20%, respectively of all sales). Sales to the


                                       14

<PAGE>



Company's major customer in fiscal 1996 (B.C. Hydro-Canada) totaled $401,000
(20% of all sales). Sales to the Company's major customer in fiscal 1995 (United
States Government) totaled $424,849 (20% of net sales). During fiscal 1994,
sales to the Company's major customer (Westinghouse Electric Corp. - Naval
Systems Division) totaled $597,000 (29% of net sales). None of such customers
has or had any material relationship other than business with the Company. See
"Business-Large Customers".

     The dependence on major customers subjects the Company to significant
financial risks in the operation of its business should a major customer
terminate, for any reason, its business relationship with the Company. In such
event the financial condition of the Company may be adversely affected and the
Company may be required to obtain additional financing, of which there can be no
assurance. The Company has taken into account the decreasing military budget of
the United States. See "Business-History." Currently less than 50% of the
Company's revenues are derived from the military and are expected to diminish as
a percentage of sales.

8. Defense Industry Downsizing - Historical Dependence on Government Contracts.
Recent world events have resulted in a decreased demand for defense related
products causing a general downsizing of the American defense industry. These
factors, along with federal budget constraints, have caused the Company to
realize order cancellations in the amount of $650,000 since 1990 and for another
$600,000 placed on a production hold pending specific releases. The Company's
ability to continue to attract and retain orders from defense contractors, which
as a group accounted for $442,627 in fiscal 1996 or 23% of the Company's total
revenue of $1,924,466, has been affected. The Government shutdown during the
last half of 1995 and early 1996 seriously aggravated an already deteriorating
situation impairing overall sales level growth. While the Company has changed
its strategy for growth by a conversion to primarily commercial business, there
can be no assurance that it will be completely successful in this objective.

9. Lack of Price Stability. The Company's sales to defense-related contractors
and manufacturers have historically occurred in a relatively stable price
environment. Pressure in defense spending may adversely affect prices and profit
margins in that market. While the Company believes that its planned expansion in
the commercial market will help it to better manage such a change in the defense
market, there can be no assurance that it will be completely successful in this
objective.

10. Dilution. Investors in this Offering will suffer immediate substantial
dilution of their investments, to the extent that the net tangible book value

per share of Common Stock upon completion of this Offering will be $1.73,
representing a dilution of $3.27 per share (65%) from the $5.00 offering price
of the shares. See "Dilution."

11. Determination of Offering Price. The public offering price of the Units and
the exercise price of the Class A Warrants do not bear any relationship to the
assets, book value or net worth of the Company or any other recognized criteria
of value. Neither the offering price of the Units nor


                                       15

<PAGE>



the exercise price of the Class A Warrants should be regarded as an indication
of the present or future value of the Company. See "Underwriting".

12. Redemption of Redeemable Warrants. The Class A Warrants are subject to
redemption by the Company at any time at a price of $.05 per Warrant if the
closing bid price for the Common Stock equals or exceeds $7.20 per share for any
20 trading days ending no earlier than the fifteenth trading day prior to the
date of the notice of redemption. In the event that the Warrants are called for
redemption by the Company, Warrantholders will have thirty (30) days during
which they may exercise their rights to purchase shares of Common Stock. If
holders of the Warrants elect not to exercise them upon notice of redemption
thereof, and the Warrants are subsequently redeemed prior to exercise, the
holders thereof would lose the benefit of the difference between the market
price of the underlying Common Stock as of such date and the exercise price of
such Warrants, as well as any possible future price appreciation in the Common
Stock. As a result of an exercise of the Warrants, existing Stockholders may be
diluted and the market price of the Common Stock may be adversely affected. If a
Warrantholder fails to exercise his rights under the Warrants prior to the date
set for redemption, then the Warrantholder will be entitled to receive only the
redemption price of $.05 per Warrant. Redemption of the Warrants could force the
holders to exercise the Warrants at a time when it may be disadvantageous to do
so or sell the Warrants at the then market value of the Warrants at the time of
redemption. If a current prospectus is not in effect, it is unlikely that the
Company would call the warrants for redemption. See "Risk Factors -- Current
Prospectus and State Blue Sky Registration Required to Exercise Class A
Warrants" and "Description of Securities -- Class A Warrants".

13. Current Prospectus and State Blue Sky Registration Required to Exercise
Class A Warrants. Purchasers of Class A Warrants will have the right to exercise
the Class A Warrants only if a current prospectus relating to the shares
underlying the Class A Warrants is then in effect and only if such shares are
qualified for sale under applicable state securities laws of the states in which
the various holders of the Class A Warrants reside. There is no assurance that
the Company will be able to keep this Prospectus covering such shares current.
Moreover, the Company may decide not to seek or may not be able to obtain
qualification of the issuance of its Common Stock in all of the states in which
the ultimate purchasers of Class A Warrants may reside. The Class A Warrants may
be deprived of any value if a current prospectus covering the shares issuable

upon exercise thereof is not kept effective or if such shares are not registered
in the states in which holders of the Class A Warrants reside. See "Description
of Securities -- Class A Warrants".

14. Restrictions on Marketmaking Activities During Warrant Solicitation. To the
extent that the Representative solicits the exercise of Class A Warrants, the
Representative may be prohibited pursuant to the requirements of Regulation M
under the Exchange Act from engaging in marketmaking activities during such
solicitation and for a period of up to five days preceding such solicitation. As
a result, the Representative may be unable to continue to provide a market for
the Company's securities during certain periods while the Class A Warrants are
exercisable. The Representative is not obligated to act as a marketmaker. See
"Underwriting".



                                       16

<PAGE>



15. "Penny Stock" Regulations; Risk of Low-Priced Securities. The Securities and
Exchange Commission (the "Commission") has adopted regulations which generally
define "penny stock" to be an equity security that has a market price (as
defined in the regulations) of less than $5.00 per share, subject to certain
exceptions. On the Effective Date, the Securities will initially be exempt from
the definition of "penny stock". If, however, the Securities offered hereby are
removed from Nasdaq, the Company's Securities may be subject to rules of the
Commission that impose additional sales practice requirements on broker-dealers
effecting transactions in penny stocks. In most instances, unless the purchaser
is either (i) an institutional accredited investor, (ii) the issuer, (iii) a
director, officer, general partner or beneficial owner of more than 5% of any
class of equity security of the issuer of the penny stock that is the subject of
the transaction, or (iv) an established customer of the broker-dealer, the
broker-dealer must make a special suitability determination for the purchaser of
such securities and have received the purchaser's prior written consent to the
transaction. Additionally, for any transaction involving a penny stock, the
rules of the Commission require, among other things, the delivery, prior to the
transaction, of a disclosure schedule prepared by the Commission relating to the
penny stock market and the risks associated therewith. The broker-dealer also
must disclose the commissions payable to both the broker-dealer and its
registered representative and current quotations for the securities. Finally,
among other requirements, monthly statements must be sent to the purchaser of
the penny stock disclosing recent price information for the penny stock held in
the purchaser's account and information on the limited market in penny stocks.
Consequently, the penny stock rules may restrict the ability of broker-dealers
to sell the Common Stock or Class A Warrants and may affect the ability of
purchasers in this Offering to sell the Common Stock in the secondary market.

16. Restricted Shares of Common Stock Eligible for Future Sale. Immediately
prior to the sale of the Shares hereunder, the Company had an aggregate
2,799,736 shares of its Common Stock issued and outstanding, 330,356 of which
are "restricted securities," which may be sold only in compliance with Rule 144

under the Securities Act of 1933, as amended. Rule 144 provides, in essence,
that a person holding restricted securities for a period of one year after
payment therefor may sell, in brokers' transactions or to market makers, an
amount not exceeding 1% of the outstanding class of securities being sold, or
the average weekly reported volume of trading of the class of securities being
sold over a four-week period, whichever is greater, during any three-month
period. (Persons who are not affiliates of the Company and who have held their
restricted securities for at least two years are not subject to the volume or
transaction limitations.) Any such sales could have a material adverse effect on
the market price for the Common Stock, should a trading market develop. All of
the Company's officers and directors have agreed not to sell or transfer any
shares of Common Stock prior to __________, 1998, without the prior written
consent of the Representative. See "Underwriting."

17. Representative's Unit Purchase Option. In connection with this Offering, the
Company will sell to the Representative, for nominal consideration, a warrant to
purchase an aggregate of 70,000 Units each Unit consisting of one (1) share of
the Company's Common Stock and four (4) Class A Warrants (the "Representative's
Unit Purchase Option"). The Representative's Unit Purchase Option will be
exercisable commencing one year after the Effective Date and ending four years
after such


                                       17

<PAGE>



date, at a price of $6.00 per unit, subject to certain adjustments. The holders
of the Representative's Unit Purchase Option will have the opportunity to profit
from a rise in the market price of the Company's securities, without assuming
the risk of ownership. The Company may find it more difficult to raise
additional capital if it should be needed for the business of the Company while
the Representative's Unit Purchase Option is outstanding. At any time when the
holders thereof might be expected to exercise them, the Company would probably
be able to obtain additional capital on terms more favorable than those provided
by the Representative's Unit Purchase Option. See "Underwriting."

18. Potential Need for Additional Financing. The Company believes that the funds
to be raised in this offering, together with the projected revenues of the
Company, will be sufficient to enable the Company to pursue both its present and
its proposed business activities for the ensuing twelve months. There can be no
assurance that such funds will, in fact, be sufficient or that conditions and
circumstances described herein may not result in subsequent cash requirements by
the Company. In the event of such developments, attaining additional financing
under such conditions may not be possible, or even if additional capital may be
otherwise available, the terms on which such capital may be available may not be
commercially feasible or advantageous. See "Use of Proceeds".

19. Governmental Regulation. The Company's manufacturing facilities, in common
with those of the industry generally, are subject to numerous existing and
proposed Federal and state regulations designed to protect the environment,
establish occupational safety and health standards and many other matters. The

Company believes that its operations are in compliance with existing regulations
and does not believe that said compliance has had or will have any material
effect upon its capital expenditures, earnings or competitive position. See
"Business-Governmental Regulation."

20. Dependence on Qualified Personnel. Because of the technological nature of
the Company's business, the Company is dependent upon its ability to attract and
retain technologically qualified personnel. There is significant competition for
technologically qualified personnel and the Company may not be successful in
recruiting such qualified personnel. See "Management."

21. Broad Discretion in Application of Proceeds. Approximately $1,077,565, or
39.18%, of the estimated $2,750,000 of the net proceeds will be applied to
working capital and general corporate purposes. Accordingly, the Company will
have broad discretion as to the application of such proceeds without prior
shareholder approval. In addition, the management of the Company has broad
discretion to adjust the application and allocation of the net proceeds of this
offering, including funds received upon exercise of outstanding warrants, in
order to address changed circumstances and opportunities. As a result of the
foregoing, the success of the Company will be substantially dependent upon the
discretion and judgment of the management of the Company with respect to the
application and allocation of the net proceeds hereof. See "Use of Proceeds."

22. Additional Authorized Shares Available for Issuance May Adversely Affect the
Market. The Company is authorized to issue 20,000,000 shares of its Common
Stock, $1.00 par value. After the sale of the Units offered hereby, there will
be a total of 3,499,736 shares of Common Stock


                                       18

<PAGE>



issued and outstanding (not including treasury stock, See "Financial
Statements"). However, the total number of shares of Common Stock issued and
outstanding does not include the exercise of up to 1,135,750 Class A Warrants to
purchase up to 1,135,750 shares of the Company's Common Stock issued in 1995,
the 1995 Unit Purchase Option to purchase up to 41,000 shares of Common Stock
and 20,500 Class A Warrants to purchase 20,500 shares of Common Stock, the
exercise of up to 2,800,000 Class A Warrants included in the Units offered to
investors in this Offering to purchase 2,800,000 shares of Common Stock, the
Representative's option to purchase up to 70,000 shares of Common Stock and
280,000 Class A Warrants to purchase 280,000 shares of Common Stock, the
Representative's Over-Allotment Option of 105,000 Units consisting of 105,000
shares of Common Stock and 420,000 Class A Warrants to purchase 420,000 shares
of Common Stock and the 1,200,000 shares of Common Stock issuable upon exercise
of the 1,200,000 Class A Warrants being offered by the Selling Securityholders
(assuming the Selling Securityholders exercise their right to convert the
Convertible Bridge Notes (see "Bridge Financing"). After reserving a total of
6,072,250 shares of Common Stock for issuance upon the exercise of all the
warrants to purchase Common Stock, the Company will have at least 10,428,014
shares of authorized but unissued capital stock available for issuance without

further shareholder approval (of which 155,239 has been reserved for conversion
of all of the Company's Series A and Series B Preferred Stock outstanding). In
addition, the Company is authorized to issue 2,000,000 shares of Preferred Stock
(of which 156,197 is outstanding prior to this Offering). See "Description of
Securities." Pursuant to the terms of the Underwriting Agreement, the Company's
officers, directors, and principal stockholders have agreed not to sell any of
their shares of capital stock for a period of twelve (12) months following the
date of this Prospectus without the prior written consent of the Representative.
Also, the Company has agreed not to issue any additional securities for a period
of twelve (12) months following the date of this Prospectus without the prior
written consent of the Representative. The sale of a significant number of these
shares in the public market may adversely affect prevailing market prices of the
Company's securities following this offering.

23. No Common Stock Dividends. The Company has not paid any dividends on its
Common Stock and does not anticipate paying dividends on its Common Stock in the
foreseeable future. The future payment of dividends is directly dependent upon
future earnings of the Company, its financial requirements and other factors to
be determined by the Company's Board of Directors. For the foreseeable future,
it is anticipated that any earnings which may be generated from the Company's
operations will be used to finance the growth of the Company even if the
Company's operations are profitable. See "Dividends".



                                       19


<PAGE>



                                 USE OF PROCEEDS

     The net proceeds to be received by the Company from the sale of the Units
being offered hereby, after the deduction of the underwriting discounts and the
expenses of this offering, are estimated at $2,750,000 ($3,206,750 if the
Representative's Over-Allotment Option is exercised). The Company will not
receive any proceeds from the sale of securities by the Selling Securityholders.

     The Company intends to allocate the net proceeds of this offering in the
approximate amounts set forth below:

                                                       Approximate Percentage
                                    Approximate Amount     of Net Proceeds
                                    ------------------ ----------------------

Repayment of Bridge Debt(1)                 $156,200          5.68%

Design, Research and Development(2)         $600,000         21.82%

Repayment of Other Debt(3)                  $916,235         33.32%

Working Capital(4)                        $1,077,565         39.18%
                                          ----------         ------

Total                                     $2,750,000           100%







--------

(1)  Represents payment of bridge financing consisting of promissory notes
     bearing interest at 8% per annum which are payable on the earlier of (a)
     December 31, 1997 or (b) the date on which this Offering closes. The
     Company used the proceeds of the bridge financing to pay certain expenses
     in connection with this offering and for working capital purposes. See
     "Bridge Financing", and "Selling Securityholders". This amount assumes the
     conversion of the Convertible Bridge Notes. See "Bridge Financing." This
     amount includes approximately $6,200 in accrued interest on the Bridge
     Notes.

(2)  Represents funds used to complete the design, development and
     implementation of the PTR-1500 quad system and its related option modules.

(3)  Represents payment of debt obligation due to CNL Holdings, Inc. bearing
     interest at the rate of 4% per annum. $ 916,235 was loaned to the Company
     between March and June 1997. The Company used the proceeds of such loans

     for the design and development of the PTR-1500 and for working capital
     purposes.

(4)  Working Capital will be used for general corporate purposes such as
     salaries and purchase of inventory, marketing expansion, research and
     product development. Assumes conversion of the Convertible Bridge Notes.
     See "Bridge Financing."


                                       20

<PAGE>



     The amounts set forth above are estimates. The actual amount expended to
finance any category of expenses may be increased or decreased by the Company's
Board of Directors, at its sole discretion, if a reapportionment or redirection
of funds is deemed to be in the best interests of the Company.

     Any additional proceeds received from the purchase of additional Units by
the Underwriters to cover over-allotments or from the exercise of the Class A
Warrants will be added to the Company's working capital.

     Pending use as set forth above, the Company will invest the net proceeds of
the offering in short-term interest bearing investment grade securities.













                                       21


<PAGE>



                                 CAPITALIZATION

     The following table sets forth the capitalization of the Company as of
April 30, 1997 as adjusted to give effect to the shares of Common Stock offered
in this Registration. This table should be read in conjunction with the
Financial Statements and Notes thereto appearing elsewhere in this Registration
Statement.

<TABLE>
<CAPTION>

                                                                                AT APRIL 30, 1997
                                                                    ---------------------------------------------------
                                                                    ACTUAL           ADJUSTMENTS            AS ADJUSTED
                                                                    ------           -----------            -----------
<S>                                                              <C>               <C>                      <C>         
STOCKHOLDERS' EQUITY:
Preferred Stock, par value $.50; Series A;
 4% cumulative; 162,000 shares authorized,
 155,000 shares issued and outstanding                           $    77,500           $      --            $     77,500

Preferred Stock, par value $.50; Series B;
 $.90 cumulative; 50,000 shares authorized;
1197 shares issued and outstanding                                       598                  --                     598

Preferred Stock, par value $5.00, 2,000,000 shares 
authorized after offering (-0- shares before offering)

Common Stock, par value $1.00 authorized 20,000,000 shares;
issued 2,443,973 shares including 8,776 shares held in 
Treasury before offering; after offering 3,499,736(1)              2,443,973       (1)   700,000               3,143,973

Additional paid in capital                                         4,124,013       (1) 2,050,000               6,174,013

Retained earnings (deficit)                                       (3,156,420)                 --              (3,156,420)

Treasury stock                                                      (131,734)                 --                (131,734)
                                                                 -----------                                ------------

TOTAL STOCKHOLDERS'
EQUITY                                                             3,357,930                  --               6,107,930
                                                                 -----------                                ------------

TOTAL CAPITALIZATION                                             $ 3,357,930                  --            $  6,107,930
                                                                 ===========                                ============
</TABLE>


----------
(1)  Reflects 700,000 shares of Common Stock included in the Units being offered

     herewith; net proceeds to the Company are estimated at $2,750,000 after
     giving effect to Underwriters discounts and expenses of the Offering.




                                       22

<PAGE>



Bridge Financing

     In December 1996 and January 1997, the Company obtained bridge financing
from seven (7) lenders in the amount of $200,000. These lenders are the
individuals identified in this Prospectus as "Selling Securityholders." In
exchange for making the loans to the Company, each Selling Securityholder
received two (2) promissory notes (the "Bridge Notes"). Certain Bridge Notes are
in the aggregate principal amount of $150,000 (the "Principal Bridge Notes") and
the other Bridge Notes are in the aggregate principal amount of $50,000 (the
"Convertible Bridge Notes"). Each of the Bridge Notes bears interest at the rate
of eight percent (8%) per annum. The Bridge Notes are due and payable upon the
earlier of (i) December 31, 1997 or (ii) the date on which this offering closes.
The Company intends to use a portion of the net proceeds of the offering to
repay the Bridge Notes. See "Use of Proceeds." The Convertible Bridge Notes are
convertible into a total of 1,200,000 Class A Warrants. The proceeds of the
bridge financing were used by the Company to pay certain expenses in connection
with this offering and to increase working capital. Each Class A Warrant
contained in the Convertible Bridge Notes is identical to the Class A Warrants
offered hereby.

     The registration statement, of which this Prospectus is a part, also covers
the offering of the Class A Warrants that may be acquired by the Selling
Securityholders in the bridge financing, as well as the Common Stock issuable
upon exercise of the Class A Warrants by the Selling Securityholders or their
transferees.

     The Company's agreement with the Selling Securityholders provided that the
Company would include in its registration statement a prospectus covering the
Class A Warrants owned by the Selling Securityholders and the underlying Common
Stock. See "Selling Securityholders."


                                    DIVIDENDS

     Holders of Common Stock are entitled to receive such dividends as may be
declared by the Board of Directors of the Company. To date, the Company has
neither declared nor paid any dividends on its Common Stock nor does the Company
anticipate that such dividends will be paid in the foreseeable future. Rather,
the Company intends to apply any earnings to the expansion and development of
its business. Any payment of cash dividends on the Common Stock in the future
will be dependent upon the Company's earnings, financial condition, capital
requirements and other factors which the Board of Directors deems relevant. See

"Risk Factors- No Common Stock Dividends" and "Description of Securities."



                                       23

<PAGE>



                                    DILUTION

     Prior to this offering, there were 2,799,736 shares of the Company's Common
Stock outstanding. As of April 30, 1997, the net tangible book value of the
Company was $3,301,007. The net tangible book value per share of the Company,
immediately prior to this offering is, therefore, $1.18. Net tangible book value
per share represents the amount of the Company's tangible assets (total assets
less total liabilities and intangible assets) divided by the number of shares of
Common Stock outstanding.

     After giving effect to the sale of the Units offered hereby and after
receipt of the estimated net proceeds therefrom, without giving any effect to
the exercise of the Representative's Over-Allotment Option, and assuming the
conversion of $150,000 in Convertible Bridge Notes (See "Bridge Financing"), the
pro forma net tangible book value of the Company would be $1.73 per share.
Investors in this Offering, therefore, will sustain an immediate dilution to the
extent of $3.27 per share of Common Stock purchased. Dilution represents the
difference between the offering price of the shares and the net tangible book
value per share immediately after completion of the offering. The following
table illustrates this dilution:

   Offering price per share............................   $5.00
   Net tangible book value per share before Offering...   $1.18
   Increase per share attributable to the Offering.....   $ .55
   Net tangible book value per share after Offering....   $1.73
   Dilution per share to new investors.................   $3.27

     The following table sets forth the percentage of equity to be purchased by
investors in this Offering compared to the percentage of equity to be owned by
the current shareholders, and the comparative amounts paid for the shares of
Common Stock by the investors in this Offering as compared to the total
consideration paid by the present stockholders. The table assumes the conversion
of $150,000 in Convertible Bridge Notes.

                                                                 Percentage of
                          Shares    Percentage of      Total        Total
                       Purchased     Total Shares  Consideration Consideration
New Investors             700,000            20%    $ 3,500,000      34.8%
Present Stockholders    2,799,736            80%    $ 6,567,986      65.2%
                      -----------   -----------     -----------     -----
      Total             3,499,736           100%    $10,067,986       100%




                                       24

<PAGE>



Selected Financial Information

     The summary financial information set forth below is derived from and
should be read in conjunction with the more detailed financial statements and
notes appearing elsewhere in this Prospectus.


<TABLE>
<CAPTION>
                                      NINE MONTHS ENDED APRIL 30                          YEAR ENDED JULY 31
                                      --------------------------    ---------------------------------------------------------------

                                           1997          1996       1996            1995         1994          1993          1992
                                           ----          ----       ----            ----         ----          ----          ----
                                      (unaudited)  (unaudited)
<S>                                  <C>           <C>           <C>           <C>           <C>           <C>           <C>        
Net sales and other income           $   978,979   $ 1,519,975   $ 1,924,466   $ 2,090,933   $ 2,044,860   $ 1,486,298   $ 2,997,308

Income (loss) from 
continuing operations                   (137,662)     (209,402)      293,552    (1,014,296)   (1,182,988)     (322,005)       72,026

Income (loss) from 
continuing operations historic              (.12)         (.20)          .28          (.12)         (.27)         (.07)          .02

Income (loss) from continuing 
operations per share, after 
giving effect to 1-for-100 
reverse  stock split in August 1995                                                 (12.01)       (27.22)        (7.41)         1.66

Pro forma income from continuing 
operations per share*                                                    .12

Total assets                           3,979,136     4,026,335     3,927,834     3,882,235     3,739,294     4,601,015     4,586,003

Long-term debt and capitalized 
lease obligations                              0       949,853         4,973        34,103     3,829,625     3,732,961     2,654,957
</TABLE>


*    After giving effect to 1,400,000 shares of Common Stock issuable in
     exchange for the unpaid amount of principal and interest due to the Bank.



                                       25

<PAGE>




                                               AT APRIL 30, 1997
                                  -------------------------------------------
                                     ACTUAL          ADJUSTMENT   AS ADJUSTED
                                  -----------        -----------  -----------

Working Capital                   $ 2,928,784   (1)  $ 2,750,000  $ 5,678,784

Total Assets                        3,979,136   (1)    2,403,354    6,382,490

Long-Term Liabilities                 - 0-                -0-          -0-

Stockholders' Equity                3,357,930   (1)   2,750,000     6,107,930


----------

(1) Reflects 700,000 shares of Common Stock included in the Units being offered
herewith; net proceeds to the Company are estimated to be $2,750,000 after
giving effect to Underwriter discounts and expenses of this offering.










                                       26


<PAGE>



                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS

Results of Operations

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


<TABLE>
<CAPTION>

Income & Expense Items as a Percentage    Income &                                       Percentage
      of Revenue from Operations        Expense Items                                 Increase/Decrease
--------------------------------------  -------------                 ------------------------------------------------
  Years Ended July 31,
-----------------------
 1996     1995     1994                                               1995 to 1996       1994 to 1995     1993 to 1994
-----------------------                                               ------------------------------------------------
<C>      <C>      <C>                   <S>                             <C>                  <C>             <C>  
100.0%   100.0%   100.0%                Sales & other                    (8.00)%              2.2%            37.5%
------  -------   ------                income                          ------              ------            ----
                                        

 67.20*   92.20*   98.40*               Cost of products                (32.90)              (4.20)          203.6
                                        sold

 49.20    44.20    41.70                Selling, general                  2.40                8.40             6.0
                                        & administrative

  6.80    12.10    17.70                Interest                        (48.00)             (30.0)             7.8
------  -------   ------                                                ------              ------            ----

123.20  (148.50)  157.80                Total costs &                   (23.60)             ( 3.80)           78.8
------  -------   ------                expenses                        ------              ------            ----
                                        

(23.20)  (48.50)  (57.80)               Income (loss)                   (56.00)             (14.30)         (269.8)
                                        before taxes

    --   (23.50)      --                Income taxes                   (100.00)                              (96.4)
------  -------   ------                (credits)                       ------              ------            ----
                                        

(23.20)% (25.0)%  (57.8)%               Income (loss)                   (14.40)%            (14.3)%         (267.4)%
                                        before
                                        extraordinary
                                        item

</TABLE>


----------

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



                                       27

<PAGE>



QUARTER AND NINE MONTHS ENDED APRIL 30, 1997 COMPARED TO 1996

A summary of income, costs and expenses for the quarter and nine months ended
April 30, 1997 and corresponding period of the previous year follows:



                              For the Quarter          For the Nine Months
                              Ended April 30,             Ended April 30,
                      --------------------------   --------------------------
                           1997           1996          1997           1996
                      -----------    -----------   -----------    -----------
Revenues              $   111,393    $   529,802   $   978,979    $ 1,519,975
Costs and Expenses        219,583        432,555     1,126,525      1,729,477
                      -----------    -----------   -----------    -----------
Net Income/(loss)
after Taxes, before
extraordinary item    $  (108,190)   $    97,247   $  (147,546)   $  (209,502)
                      ===========    ===========   ===========    ===========


Revenues for the quarter ended April 30, 1997 totaled $111,393, representing a
decrease of 79% or $418,409 from the $529,802 reported for the same quarter a
year ago. Revenues decreased largely as a result of non-release of several
orders from the various major power companies as well as the absence of new
commercial orders and releases against existing military contracts by the US
government.

Gross margin for the quarter totaled $59,240 representing 53% of revenues as
compared to $346,266 or 65% of revenues for the quarter ended April 30, 1996.
The decrease in gross margin is primarily attributed to the labor inefficiencies
resulting from reduced levels of factory utilization. The Company was able to
partially offset some of these losses by shifting its internal resources to new
product development. Prior to this quarter the Company engaged outside
contractors almost exclusively to complete its product development. During the
current quarter the Company used to a greater extent its captive resources
including design, engineering and production. Historically, the Company has used
part time, temporary factory personnel and outside contractors to adjust its

workforce for large changes in production demands.

Selling, general and administrative expenses decreased from $214,019 to $140,466
for the quarter, representing a decrease of $73,553 as compared to 1996. These
savings are the direct result of downsizing initiatives to offset the decreased
production levels experienced during the quarter.

Interest expense decreased from $35,000 to $17,080 or $17,920 for the quarter
ended April 30, 1997 over the same period of 1996.



                                       28

<PAGE>



As a result of the foregoing, the Company reported a net loss of $108,190, or
$0.04 per share for the quarter compared to net income of $97,247 or $0.10 per
share.

Revenues for the nine months ended April 30, 1997 totaled $978,979 versus
$1,519,975 for the same period last year. The lower revenues were attributable
to continued delays in the release of certain commercial orders, including The
Bonneville Power Administration and the absence of new orders and releases from
the US Government. The order backlog for Bonneville was $1.3 million at April
30, 1997. The Company believes that the delay in release of certain PTR-1000
series orders were due to the forthcoming release of a new PTR-1500 Series Tone
Protection product being developed for the General Electric Company to private
label and market worldwide. The new product was originally scheduled to be
released during the summer of 1997. As a result of limited financial resources,
this program was delayed by approximately six months; the expected release date
for the PTR-1500 is early 1998.

Gross margin for the period totaled $450,481 as compared to $562,540 for the
period ended April 30, 1996, representing 46% and 37% of revenues, respectively.
Gross margins improved as a result of generally higher pricing for special items
requiring limited quantities and fast turnaround.

Selling, general and administrative expenses totaled $518,944 as compared to
$653,571. This decline of $134,627 results from cost cutting initiatives to
reduce administrative and general expenses, especially with respect to personnel
reductions and downsizing.

As a result of the foregoing, operating loss totaled $68,463 as compared to
$91,031.

Interest expense for the nine months totaled $69,199 as compared to $118,371 for
the prior nine month period.

As a result of the foregoing, the Company realized a net loss of $147,546 or
$.06 per share as compared to net income of $530,874 or $.51 per share. The net
income for the nine months ended April 30, 1996 included $740,376, net of tax

benefit of $492,392, in extraordinary items, representing $.72 per share.

1996 Compared to 1995

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


                                       29

<PAGE>



price of the Common Stock for 20 consecutive trading days ending within 15 days
prior to the notice exceeds $7.20 per share.

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

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

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

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

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

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

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

     The debt forgiveness of $1,232,728 on restructuring of the obligation less

the tax benefit thereon is accounted for as an extraordinary gain to the
Company.

     Revenues for the year ended July 31, 1996 decreased to $1,924,416 from
$2,090,933 for the year ended July 31, 1995 representing a decrease of 8%.
Revenues declined as a result of a decline in sales in the military sector. The
Company completed a large sale of switches to the military in fiscal 1996 and
did not have a comparable sale for fiscal 1995.

     Gross margins for the year totaled $632,1841 and $163,194, respectively,
representing 32.9% and 7.8% of revenues. Gross margins were higher in 1996 due
to the obsolete inventory write-off in 1995. Without the inventory write-off the
1996 and 1995 gross margin would have been 35.5% and 39.3% respectively. The
gross margin for 1996 was lower than 1995 without the inventory write-off due to
the fact that the higher than normal discounts were offered and taken on two
major sales.



                                       30

<PAGE>



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

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

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

     Without the debt compromise and the related tax benefit in 1996 there would
have been a loss of $446,824 or $.43 per share.

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

1995 Compared to 1994

     Total revenue increased $46,000, or 2.2% from $2,045,000 in 1994 to
$2,091,000 in 1995. The increase was attributable to an expansion in the

commercial sector of the Company's business, which contributed $1,422,000 or 68%
of total revenues in 1995, compared to $1,300,000 or 64% of total revenues in
1994.

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

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

     The Company determined during the first quarter of 1995 that there was not
sufficient information from the Government's Defense-Electronic Supply Center
("DESC") facility to permit the Company to make a quantitative determination for
future sales. Inventory which totaled $656,000 was written off after management
made an analysis of parts maintained for military and government orders compared
to available inventories. This amount consisted of $318,000 for raw materials,
$249,000 for work in progress and $89,000 for finished goods. There were
comparable


                                       31

<PAGE>



charges of $945,000 in the twelve month period ended April 30, 1994. This
analysis consisted of a study of the forecasted requisitions of upcoming orders
of the DESC, Conolog's principle defense customer. On examination of prospective
sales, it was determined that the government has no requirements for Conolog's
military products for at least the next twelve to eighteen months.

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

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

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

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

February 1, 1995 through July 31, 1995.

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

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

1994 Compared to 1993

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

     During the quarters ended October 31, 1993, January 31, 1994 and April 30,
1994 not all government requisitions for procurements had been posted at the
government's Defense Electronics


                                       32

<PAGE>



Supply Center ("DESC") facility in Dayton, Ohio. Until all requisitions for
future procurements are listed, the Company could not determine which items
would be phased out or not procured at all.

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

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

     Costs of products sold is a distorted figure, 98.4%, since approximately
$945,000 of old inventory was written off. Had this write-off not occurred, the

cost of sales would have been 52.2%. Although this percentage is greater than
normal, the lack of available cash has hampered management's ability to buy
product at more favorable prices. Inventory was written off in the last quarter
of the fiscal year after an analysis was made of parts in the stockroom that
were at least four years old and for which no orders had been received in the
past two years.

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

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

Financial Condition, Liquidity and Capital Resources

Financial Condition, Liquidity and Capital Resources at April 30, 1997

Inventories increased $294,800 from July 31, 1996, including approximately
$258,734 for the PTR-1500 Series product.

Accounts receivable decreased $137,193 to $166,827 reflecting lower sales during
the current quarter.

Working Capital at April 30, 1997 was $2,928,784 compared to $1,914,981 at July
31, 1996.



                                       33

<PAGE>



The Company received $200,000 in net proceeds from a bridge financing. The
bridge financing was evidenced by two promissory notes executed by each investor
that aggregated $150,000 ("Principal Bridge Notes") and $50,000 ("Convertible
Bridge Notes"), respectively. The Principal Bridge Notes are payable on the
earlier of December 31, 1997 or upon closing of the next public offering. The
Convertible Bridge Notes contain the same terms as with respect toThe Principal
Bridge Notes, except that same is convertible into 1,200,000 Class A Warrants.
See "Bridge Financing." The funds received from the bridge financing were used
to reduce overdue payables and resume the product development of the PTR-1500
Series Project.

During the quarter ended April 30, 1997 the Company received $74,735 in loans
from CNL Holdings, Inc.

The Company presently meets its cash requirements through existing cash
balances, cash generated from operations, and loans secured in private
transactions.


1996 Compared to 1995

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

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

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

     Management felt that it had leased or acquired sufficient equipment to meet
its capital expenditure needs for the next year. Obligations under capital
leases which were in effect were approximately $34,000 for the year and somewhat
less thereafter. Historically, the Company has always leased equipment. Its
annual lease obligations have ranged from $59,000 in 1993 to its 1996 figure of
$34,000. The Company's liquidity and working capital have been effected by these
obligations and will continue to be so since the operation is dependent upon the
use of this equipment.

     For the past year, the Company's marketing emphasis has been directed to
the utility industry since its Iniven line produces a variety of products used
by them. Most of the products offered must


                                       34

<PAGE>



be tested for quality, endurance, etc. for a period of time by the potential
customer. Management is of the opinion that much of the testing will be
completed in the coming year and sales will be forthcoming from the results of
these tests. Accordingly, it is anticipated that sales and profits will be
higher in the next twelve months as compared to the past twelve months.

1995 Compared to 1994

     At July 31, 1995, the Company had a working capital deficit of $2,229,000
and a shareholder deficit of $1,944,000. The Company increased its liquidity on
August 24, 1995, through the sale of common stock in a public offering. The net
proceeds received from the August 1995 Offering were approximately $1,527,000,
which caused working capital to increase by that amount. In addition, the

shareholders' deficit of $1,944,000 changed to a surplus of approximately
$3,100,000 as a result of the proceeds of the stock offering and the
restructuring of the bank loan permitted by the additional equity.

     During the fiscal year, the Company decreased its inventory from $2,990,000
to $2,600,000. The decrease in inventory was caused primarily by a $656,000
writedown of certain of the Company's slow-moving military products, partially
offset by increased requirements in stocking levels for commercial parts. The
Company increased its sales and marketing efforts late in the year as part of
its strategy to improve its revenues. The increase in operating expenses
resulting from these efforts adversely affected the liquidity of the Company.
The Company plans to continue to accelerate its sales, marketing and research
and development efforts at increased levels for the foreseeable future.

     The Company has no material commitments for capital expenditures as of the
date hereof. The Company anticipates, however, acquiring additional equipment
and fixtures (for example, test equipment and manufacturing equipment) and may
consider a subcontractor for increased manufacturing volume in the future, as
increased requirements may dictate. The Company has begun to evaluate a number
of make-or-buy operations in order to assure adequate resources for future
production.

Inflation

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

1994 Compared to 1993

     The Company was not able to meet its commitment made under the restructured
loan agreement dated November 1993. However, the Bank agreed to further
restructure the Credit Facility and extend the payments of principal and
interest. Interest on the loans accrued but were not to be payable until July
31, 1995. Beginning on that date, interest payments were to be made in arrears
on the last day of each month, with all unpaid interest previously accrued
becoming due and


                                       35

<PAGE>



payable on November 30, 1995. All principal on the loans became due and payable
on November 30, 1995. The additional extension was granted after the Company
prepared projections for the forthcoming year. These projections indicated a
certain amount of profitability but not enough cash flow to begin payment of
principal within the fiscal year 1995.

     Working capital at July 31, 1994 was $2,086,000 compared to $3,275,000 in
1993. The drop in working capital was primarily due to a write-off of inventory
for military sales, which management feels will not materialize. The working

capital ratio at 1994 was 2.75% compared to 4.9% at 1993.

     Management was encouraged by the increase in sales to its non-military
customers. Had projections been realized, the Company should have begun to turn
around and produce a profit in the coming year. Cash flow should have been
sufficient to meet the Company's current obligations.

Credit Facility and Agreement with CNL Holdings, Inc.

     The principal amount owing to the Bank under the Company's Credit Facility
at July 31, 1996 was $1,012,500 and the unpaid accrued interest was $57,196. The
Bank and the Company entered into the Conolog Corporation Allonge, dated as of
September 11, 1996, pursuant to which the Amended and Restated Term Note dated
as of August 2, 1995 between the Company and the Bank (the "Note") was amended
to permit the conversion by the Bank of the unpaid principal and interest due
under the Note into 1,400,000 shares of the Company's Common Stock on or before
April 16, 1997. The conversion right was exercisable by the Bank or its
assignee. The Bank had deferred all payments of principal and interest under the
Note until April 16, 1997.

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

     The Company and CNL entered into an agreement (which was amended as
described below) dated as of September 12, 1996 (the "CNL Agreement"), whereby
CNL agreed to loan up to $2,500,000 to the Company under certain circumstances
(as described below).

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



                                       36

<PAGE>



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

repayment.

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

     On January 31, 1997, the Bank and the Company entered into Amendment No. 1
to the Conolog Corporation Allonge dated September 11, 1996 (the "Allonge")
(which previously amended the Amended and Restated Term Note dated as of August
2, 1995 between the Company and the Bank(previously defined as the"Note")). The
original Allonge provided that the Bank may convert the entire unpaid principal
and interest due under the Note ("Debt Claim") into 1,400,000 shares of Common
Stock of the Company at any time on or before April 15, 1997. The amended
Allonge provided the Bank the right to convert all or, if it so desires, only a
portion of the Debt Claim. The number of shares issuable upon conversion of a
portion of the Debt Claim was to be calculated on the basis of 1 share for each
$3.00 of the Debt Claim being converted with the balance of the 1,400,000 shares
to be issued when all of the Debt Claim has been converted.

     On January 31, 1997, the Bank and CNL entered into Amendment No. 1 to the
Option Agreement. The amended Option Agreement required CNL, on or before
February 5, 1997, to purchase from the Bank for an aggregate purchase price of
$600,000, no less than (i) 133,333 shares of Common Stock for $399,999 and (ii)
$200,001 of the Debt Claim represented by the Note. CNL purchased such Common
Stock and portion of the Debt Claim on February 5, 1997. CNL had the right to
exercise the remainder of the option on or before April 15, 1997. CNL had the
right to purchase from the Bank additional shares of Common Stock owned by the
Bank at the price of $3.00 per share and portions of the Debt Claim from time to
time. CNL purchased such Common Stock and portion of the Debt Claim on February
5, 1997.

     On January 31, 1997, the Company and CNL entered into an Amendment to the
CNL Agreement. The amended CNL Agreement provided that in the event not all of
the Debt Claim was converted into shares of Common Stock by the Bank prior to
CNL's acquisition of the Note, CNL would promptly convert the remaining portion
of the Debt Claim into shares of Common Stock in accordance with the Note. In
addition, the proceeds of the sale of the Acquired Shares were to be applied as
follows: First to reimburse CNL for payments made to the Bank pursuant to Option
Agreement; 50% of the balance, up to $2,500,000, to be loaned to the Company
within five days of CNL's receipt of the proceeds.

     The balance under the option (as of March 15, 1997) was $750,000(evidencing
an option to purchase 241,667 shares of Common Stock and the Note, convertible
into 1,333,333 shares of


                                       37

<PAGE>




Common Stock). On March 26, 1997, CNL exercised a portion of its option to
purchase shares of Common Stock, by purchasing a portion of the principal amount
of the Note ($720,000) and converted such portion of the Note into 240,000
shares of Common Stock at $3.00 per share, leaving a balance due under the
option at $30,000. On March 27, 1997, CNL exercised the remaining portion of the
option in consideration of $30,000. On such date, the remaining portion of the
Note was converted into 1,093,333 shares of Common Stock, the Bank transferred
241,667 shares of Common Stock to CNL and the Debt Claim was extinguished.

     Management believes that the foregoing transactions benefited the Company
and its stockholders. The exercise by CNL of its option under the Option
Agreement converted the remaining Debt Claim, the Company had the opportunity
to, in effect, exchange its debt for equity and eliminated the Company's default
under the Credit Facility. To date, $916,235 has been loaned to the Company by
CNL. See "Use of Proceeds."








                                       38


<PAGE>



                           MARKET PRICE FOR SECURITIES

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

     The following table sets forth, for the periods indicated, the high and low
bid and asked quotations of the Common Stock, based upon information supplied by
the National Quotation Bureau for the year 1994, and the first two quarters of
1995. Such quotations represent inter-dealer prices, without retail markups,
markdowns or commissions and may not necessarily represent actual transactions.
The Company effected a 1-for-100 reverse stock split on August 16, 1995. As of
_________, 1997, the Company's Common Stock was held by approximately ___
shareholders of record.



                                           Bid                        Asked
                                   ------------------          -----------------
                                   High           Low          High          Low
                                   ------------------          -----------------
1994
----

First Quarter                       .05           .04           .15          .14

Second Quarter                      .05           .03           .15         .125

Third Quarter                       .05          .001           .15          .06

Fourth Quarter                     .015          .001           .10          .05

1995
----

First Quarter                       .02           .01           .10          .05

Second Quarter                      .04           .01           .15          .05







                                       39

<PAGE>




     The following table sets forth, for the periods indicated, the high and low
prices of the Company's Units (which no longer trade), Common Stock and Class A
Warrants traded on the Nasdaq SmallCap Market for the third and fourth quarters
of 1995, all of 1996 and first two quarters of 1997.

<TABLE>
<CAPTION>
                                        Units                         Common Stock                    Class A Warrant
                                -------------------               --------------------             --------------------
1995                            High            Low               High             Low             High             Low
----                            ----            ---               ----             ---             ----             ---
<S>                             <C>             <C>               <C>              <C>              <C>              <C>
Third Quarter                   18.5            14                8.50             5.75             4                2

Fourth Quarter                  19.25           14.75             9.25             6.25             3.25             1.25


1996
----

First Quarter                   15              11                8.125            3.875            2                 .9375

Second Quarter                  11.25           11.25             6.5625           4.25             1.5              1.0156

Third Quarter                      --              --             6.25             2.25             1.5               .5625

Fourth Quarter                     --              --             3.875            2.375            1.25              .50


1997
----

First Quarter                      --              --             5.875            3                 .9375            .625

Second Quarter                     --              --             6.125            2.375            1                 .375
</TABLE>





                                       40


<PAGE>



                                    BUSINESS

General

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

History

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

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

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

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

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

     During 1987, the Company made the strategic decision to redirect the
Company's focus from military to commercial markets. Since that time, the
Company has refocused on manufacturing and marketing its products for the
commercial marketplace rather than depend on the military and defense-related
markets. The effort has included the introduction of new products, the redesign
of existing products and increased advertising and marketing efforts, as
permitted by its limited financial resources. The percentage of revenues
attributed to products manufactured for use in commercial applications increased

from approximately 4% of sales in 1981 ($171,000) to approximately 77% of sales
in 1996 ($1,480,000). The decision to embark on this program entailed a major
design effort, including the


                                       41

<PAGE>



coordination of outside engineering consultants to develop a complete line of
products aimed at the Company's target markets. The emphasis was on products for
electric utilities, cogeneration of power, gas and water companies, traffic
control for departments of transport (DOT) and airports utilizing DSP (Digital
Signal Processing) technology. DSP designs have long term stability with minimum
or no maintenance, allowing the Company to offer customers a product line with a
12 year warranty - a first on the market.

     Testing of the Company's first commercial product group, the Teleprotection
Series PTR-1000, was under way in the latter part of 1992 by Bonneville Power
Administration. This detailed test permitted the Company to "fine tune" the
product for power transmission applications. In March 1994, the PTR-1000 was
approved for use by such utility and thereafter by other utilities and
municipalities. To date, the Company has sold and delivered over 800 PTR-1000
sets to 18 utilities and 5 municipalities, most of which are installed and in
service.

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

     Due to the end of the cold war and the downsizing of the American military,
the Company experienced unexpected sharp reductions of military contracts in
fiscal 1993 (the Company's fiscal year end is July 31) resulting in a 50%
decline in the Company's sales for that year, down to $1,486,298 from $2,

997,308 in fiscal 1992. The sales of new products could not replace the decrease
in military sales. The Company, however, continued to pursue sales as
aggressively as its available resources would permit. Sales in fiscal 1994
increased to $2,044,860, a 37% increase over fiscal 1993. Sales in fiscal 1995
were $2,090,933 a 2% increase over fiscal 1994. Sales in fiscal 1996 were
$1,924,466 an 8% decrease from fiscal 1995. Sales for the first nine months
ended April 30, 1997, totaled $978,979, a 35% decrease from $1,519,975 for the
same period in 1996. Revenues from the Company's military product sales
represented approximately 60%, 30%, 23% and 18% of sales of the Company in
fiscal 1994, 1995, 1996, and in the first nine months ended April 30, 1997,
respectively, reflecting the Company's emphasis on commercial sales and markets.


                                       42

<PAGE>



General Description; Products

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

     Such products are used in radio and other transmissions, telephones and
telephone exchanges, air and traffic control, automatic transmission of data for
utilities, teleprinting of transmitted data such as news and stock market
information and for use by electric utilities in monitoring power transmission
lines for faults and/or failures. The Company's products are used by customers
engaged in or manufacturing equipment for the activities described. The
Company's products may be used independently or in combination with other
products to form a system type configuration, whereby the Company's equipment is

pre-assembled in a large cabinet with other equipment in a configuration that
would provide the end user with protection as well as operational status
displays.

Present Status/Business Product Description

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

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

                                - As subcontractor to systems producers

                                - Foreign governments

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

                                - Direct sales to end users



                                       43

<PAGE>



                                - Sales to system assemblers

                                - Sales to contractors/installers

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

(A) Military Sales

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

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

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


(B) Commercial "INIVEN" Sales and Products

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

               (1)  PTR Teleprotection Series (Protective Tone Relaying
                    Communications Terminal, which includes the PTR- 1000 and
                    the PTR-1500 designed exclusively for GE).

               (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.




                                       44

<PAGE>



(1) PTR-1000 Teleprotection Series

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

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

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

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

of failed equipment and loss of revenue caused by downtime for repairs.

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

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

     The PTR Teleprotection Series target market is worldwide, as follows:

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

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


                                       45

<PAGE>



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

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

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

o    Investor-owned

o    Municipal Systems

o    Cooperative Systems

o    Federal, State and District systems.

     The Company intends to utilize a portion of the net proceeds of this
Offering to provide it with capital which it can use to expand its sales
efforts, expand sales to international markets and complete the design,
engineering and testing of the PTR-1500 option modules and the PTR-1000
enchancements. To date, the Company has sold and delivered over 800 PTR-1000

sets to 18 utilities and 5 municipalities, most of which are installed and in
service.

(2) Audio Tone and Telemetry Equipment

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

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


                                       46

<PAGE>



     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:


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

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

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

GEN-1 and GEN-1 Programmable Series

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


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

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

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

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

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


                                       47

<PAGE>



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

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

tunnels and bridges and for security and electricity systems.

     The Company intends to utilize a portion of the net proceeds of this
offering to expand this line of products to include radio as a transmission
line, and design, produce and sell a line of fiber optic interface equipment and
to expand sales for new applications and new installations, including foreign
sales.

(3) Multiplex Supervisory (IM) Control System

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

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

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

     A portion of the net proceeds of this offering will be used by the Company
to complete the next design phase to couple the multiplexer directly onto fiber
optic cable and 8 line applications and add radio as a communication link.




                                       48

<PAGE>



(4) Fiber Optic Link and Data Modem

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

(C) Commercial Subcontract Manufacturing to Systems Producers

     Since the downsizing of the American Military, the Company has actively
sought manufacturing subcontract orders to fill the production void created by
the severe drop in military production. In June 1996 the Company negotiated and
entered into a renewable annual agreement with the General Electric Company, GE

Electrical Distribution and Control and its participating affiliated companies
for the manufacture of sub-systems, board assemblies and magnetic filters and
other products consistent with the Company's expertise. The success of this
agreement has prompted the Company to pursue other system producers to more
fully utilize the Company's manufacturing capacity.

Competition

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

Marketing and Sales

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

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

     Commercial - The Company markets the PTR-1000 by means of Company sales
     personnel, through independent manufacturers representatives, and through
     distributors, focusing mainly on the largest utilities and co-generators.
     In the United States alone there are over 500 large entities generating
     electricity which are identified as investor-owned, municipal systems,
     cooperative systems and federal, state and district systems. The Company
     intends to utilize a


                                       49

<PAGE>



     portion of the proceeds of this Offering to expand its sales efforts and
     expand sales to international markets. The Company markets it Gen-1 and
     Gen-1 Programmable Series, as well as its "98" Series, "68" Series and "40"
     Series, in the same way as the PTR-1000 except that the manufacturers
     representatives used by the Company specialize in selling to the diverse
     markets that utilize such products. The Company intends to utilize a
     portion of the net proceeds of this Offering for international sales.


Largest Customers


     Sales to the Company's two major customers during the nine month period
ended April 30, 1997 (General Electric and Bonneville Power Authority) totaled
$203,602 and $200,000, respectively (21% and 20%, respectively of all sales).
Sales to the Company's major customer in fiscal 1996 (B.C. Hydro-Canada )
totaled $401,000 (20% of all sales). Sales to the Company's major customer in
fiscal 1995 (United States Government) totaled $424,849 (20% of net sales).
During fiscal 1994, sales to the Company's major customer (Westinghouse Electric
Corp. - Naval Systems Division) totaled $597,000 (29% of net sales). None of
such customers has or had any material relationship other than business with the
Company. See "Business-Large Customers".

Raw Materials; Inventory

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

     In the past the Company manufactured and held in its inventory finished
products pursuant to the military's specifications and based upon the military's
forecast for future quantities and delivery schedules. When those military
procurements were discontinued as a result of the end of the cold war and the
downsizing of the military establishment, the Company wrote off large portions
of its military inventory. The Company no longer manufactures inventory to meet
forecasts but only to fill specific orders. Therefore, the Company does not
anticipate any future large inventory build-ups or write-downs from military
products.



                                       50

<PAGE>



Manufacturing

     Of the 15,700 square feet that the Company occupies at 5 Columbia Road in
Somerville, NJ, approximately 10,000 square feet are dedicated to manufacturing.
The Company assembles, under normal workload conditions, all the products it
sells. To accommodate the peak demands that occur from time to time the Company
has developed a number of subcontractors to assemble boards to the Company's

specifications. All assemblies, however, are inspected and fully tested by the
Company's quality, engineering and testing departments. The Company maintains
test equipment and every product is burned-in (i.e., each product is run at full
power for 48 hours) and tested prior to shipment. This control, together with
design reliability, has permitted the Company to offer a 12-year warranty on all
its commercial products.

Research and Development; New Products

     Amounts expended by the Company in the last three fiscal years for research
and development activities have not been material although the Company is
currently engaged in product design and development. The Company utilized a
portion of the net proceeds of the August 1995 Offering to design a fiber optic
digitizer and a 1200 baud modem which can be sold as a separate product or
jointly with the Company's products which will enable all the Company's INIVEN
products to transmit directly onto fiber optic cables, and thus open a new
market for the Company's products. In addition, the Company completed the
PTR-1000 series option modules and the standard modules of the PTR-1500 Quad
Series to be sold exclusively worldwide by GE as its Model NS50. The Company
also intends to utilize a portion of this Offering proceeds to add designs that
will extend its product capability to handle new data inputs not presently
available. There can be no assurance that the Company will be able to
successfully develop and add designs to its products.

Patents and Trademarks

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

Backlog

     As of July 31, 1996 and 1995, the Company had a backlog of approximately
$3,400,000 and $1,300,000. As April 30, 1997, the Company had a backlog of
$2,600,000. It is anticipated that this backlog will be filled during the
balance of the 1998 fiscal year ending July 31, 1998. Approximately 75% of the
Company's backlog relates to government contracts and may be subject to
cancellation under the terms of such contacts.



                                       51

<PAGE>








Foreign Operations

     During fiscal 1994 the Company had no foreign sales. In fiscal 1996 and
1995 the Company had foreign sales of $401,000 to B.C. Hydron-Canada and
$140,000 to the Government of Israel, respectively. In the nine months ended
April 30, 1997, the Company had no foreign sales.

Governmental Regulation

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

Employees

     As of April 30, 1997, the Company employed 31 persons, including 2 in
management, 2 in sales, 2 in clerical, 1 in accounting, 1 in purchasing, 3 in
engineering and 20 in production. The Company has enjoyed good labor relations
and has suffered no work stoppage.

Properties

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


                                       52


<PAGE>



                                   MANAGEMENT

Directors and Executive Officers

     The following table sets forth certain information regarding the officers
and directors of the Company as of the Effective Date.

NAME                   AGE    POSITION

Robert S. Benou        62     President and Director

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

Louis S. Massad        59     Director

Marc R. Benou          29     Vice President, Assistant Secretary and
                              Director

Thomas Fogg            61     Vice President-Engineering


     The term of each director expires at the time of the next annual meeting of
stockholders. Each officer holds office at the pleasure of the Board of
Directors. The Company has no "significant" employees other than the executive
officers. There are no arrangements or understandings pursuant to which either
of the directors or officers was selected as such.

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

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

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

     Marc R. Benou joined the Company in 1991 and is responsible for material,
purchasing and inventory control. In March 1995, he was elected Vice President,
Assistant Secretary and a Director.



                                       53

<PAGE>



     Mr. Benou attended Lehigh and High Point University and holds a BS degree
     in Psychology and a BS in Business Administration and Management. Marc R.
     Benou is the son of Robert S. Benou, the Company's President.

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




                                       54

<PAGE>



Executive Compensation

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


<TABLE>
<CAPTION>

-------------------------------------------------------------------------------------------------------------------------

                           Summary Compensation Table

-------------------------------------------------------------------------------------------------------------------------

                                           Annual Compensation               Long Term Compensation
-------------------------------------------------------------------------------------------------------------------------
                                                             Other
Name and             Fiscal Year-                            Annual
Principal            End                                     Comp-
Position                              Salary      Bonus      ensation            Awards         Payouts
-------------------------------------------------------------------------------------------------------------------------

                                                                         Restricted

                                                                         Stock       Options/    SALTIP    All Other
                                                                         Awards      SARS        Payouts   Compensation
-------------------------------------------------------------------------------------------------------------------------
<S>                  <C>            <C>          <C>        <C>          <C>         <C>         <C>       <C>
Robert Benou,        1996           $150,000
President (1)
-------------------------------------------------------------------------------------------------------------------------
                     1995           $150,000
-------------------------------------------------------------------------------------------------------------------------
                     1994           $170,000
-------------------------------------------------------------------------------------------------------------------------
</TABLE>


----------

(1)  See "Certain Relationships and Related Transactions".


     The Company did not grant any stock options or stock appreciation rights
during the fiscal year ended July 31, 1997 to any of its officers, directors or
employees. As of July 31, 1997 none of them had any outstanding stock options or
stock appreciation rights. Furthermore, none of them received awards under
long-term incentive plans that are stock based during the three fiscal years
referred to above. However, these and other benefits may be adopted in the
future if they are authorized by the Board of Directors.

Stock Option Plan

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


                                       55

<PAGE>



Company. The Option Committee administers the Option Plan and designates the
optionees, the type of options to be granted (i.e., nonqualified or incentive
stock options), the number of shares subject to the options, and the terms and
conditions of each option. The terms and conditions include the exercise price,
date of grant, and date of exercise of each option. An employee may, at the
discretion of the Option Committee, be permitted to exercise an option and make
payment by giving a personal note.

     Incentive stock options may only be granted to employees of the Company and

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

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

     No incentive stock options or nonqualified options have been granted.

Employment Agreements

     The Company has entered into 5-year employment agreement commencing June 1,
1997 and ending May 31, 2002, with Robert Benou. Under his employment agreement,
Mr. Benou will receive an annual base salary of $150,000 for the first year of
employment with an increase of $20,000 per annum each year thereafter. In
addition, Mr. Benou is entitled to an annual bonus equal to 6% of the Company's
annual "income before income tax provision" as stated in its annual Form 10-K.
The employment agreement also entitles him to the use of an automobile and to
employee benefit plans, such as life, health, pension, profit sharing and other
plans. Under the employment agreement, employment terminates upon death or
disability of the employee and employee may be terminated by the Company for
cause. The Company intends to maintain a $1 million life insurance policy on the
life of Robert Benou. Reference is hereby made to the Employment Agreement which
has been filed as an exhibit to the Registration Statement of which this
Prospectus forms a part.



                                       56

<PAGE>




     The Company has entered into 5-year employment agreement commencing June 1,

1997 and ending May 31, 2002, with Marc Benou. Under his employment agreement,
Mr. Benou will receive an annual base salary of $55,000 for the first year of
employment with an increase of $6,000 per annum each year thereafter. In
addition, Mr. Benou is entitled to an annual bonus equal to 3% of the Company's
annual "income before income tax provision" as stated in its annual Form 10-K.
The employment agreement also entitles him to the use of an automobile and to
employee benefit plans, such as life, health, pension, profit sharing and other
plans. Under the employment agreement, employment terminates upon death or
disability of the employee and employee may be terminated by the Company for
cause. Reference is hereby made to the Employment Agreement which has been filed
as an exhibit to the Registration Statement of which this Prospectus forms a
part.


Representative's Right to Appoint Director

     The Underwriting Agreement between the Company and the Representative
provides that for three years after the completion of this Offering, the
Representative will have the right to nominate one person to serve on the
Company's Board of Directors, and upon such nomination the Board shall take the
action necessary to cause the Representative's nominee to be elected to the
Board. If the Representative does not exercise this right, it may appoint an
advisor, who will be entitled to attend all meeting of the Board of Directors.
To date, the Representative has not advised the Company as to whether it intends
to exercise either right. See "Underwriting".



                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

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

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

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

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



                                       57

<PAGE>




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

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

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

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

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

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

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




                                       58

<PAGE>



                             PRINCIPAL SHAREHOLDERS

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


<TABLE>
<CAPTION>

             Name and                           Amount and
            Address of                           Nature of            Percentage of Outstanding Shares(1)                After
         Beneficial Owner                   Beneficial Ownerhip                 Before Offering                        Offering
         ----------------                   -------------------       --------------------------------                 --------
<S>                                               <C>                                <C>                                 <C>  
Robert S. Benou (2)                               200,039                            7.15%                               5.72%
Arpad J. Havasy (2)                                50,117                            1.79%                               1.43%
Marc R. Benou (2)                                  45,000                            1.61%                               1.29%
Louis S. Massad (2)                                10,000                             .36%                                .26%
Thomas Fogg (2)                                    25,200                             .90%                                .72%


All Directors and Officers as A Group (5 persons) 330,356                           11.81%                               9.42%
</TABLE>








----------

(1)  Does not include treasury stock. See "Financial Statements".

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





                                       59

<PAGE>




                            DESCRIPTION OF SECURITIES

Capitalization

     The authorized capital stock of the Company consists of 20,000,000 shares
of Common Stock and 2,000,000 shares of Preferred Stock. Prior to this Offering,
the Company had 2,799,736 shares of Common Stock outstanding (not including
treasury stock), 155,000 shares of Series A Preferred Stock outstanding (162,000
authorized) and 1,197 shares of Series B Preferred Stock outstanding (50,000
authorized).

Common Stock

     The Company had 2,799,736 shares of Common Stock outstanding prior to the
Offering (not including treasury stock).

     Holders of the Common Stock are entitled to one vote for each share in the
election of directors and in all other matters to be voted on by the
stockholders. There is no cumulative voting in the election of directors. The
By-laws of the Company require that only a majority of the issued and
outstanding shares of Common Stock must be represented to constitute a quorum
and to transact business at a stockholders meeting.

     Holders of Common Stock are entitled to receive such dividends as may be
declared from time to time by the Board of Directors with respect to the Common
Stock out of funds legally available therefor and, in the event of liquidation,
dissolution or winding up of the Company, to share ratably in all assets
remaining after payment of liabilities and payments to holders of Preferred
Stock. (See "Preferred Stock" below.) There are presently no plans to pay
dividends with respect to the shares of Common Stock. See "Dividends". The
holders of Common Stock have no preemptive or conversion rights and are not
subject to further calls or assessments. There are no redemption or sinking fund
provisions applicable to the Common Stock. The Common Stock currently
outstanding is, and the Common Stock issuable upon exercise of the Class A
Warrants and Class B Warrants (described below) after payment of the applicable
exercise price will, when issued, be validly issued, fully paid and
nonassessable.

Preferred Stock

     The Company is authorized to issue 2,000,000 shares of Preferred Stock,
issuable in series, of which there are outstanding 155,000 shares of Series A
Preferred Stock, $.50 par value (162,000 authorized) and 1,197 shares of Series
B Preferred Stock, $.50 par value (50,000 authorized).

Series A Preferred Stock

     Holders of Series A Preferred Stock are entitled to receive, out of funds
legally available therefor, dividends at the rate of 4% per annum ($.02 per
share) of the par value thereof. The Series A Preferred



                                       60

<PAGE>



Stock has no voting rights. Series A Preferred Stock ranks senior to all other
capital stock of the Company and upon dissolution, holders of such shares are
entitled to receive 100% of the par value thereof and all accrued and unpaid
dividends prior to any payment to any holder of capital stock of the Company. In
addition, each share of Series A Preferred Stock may be exchanged for one (1)
share of Common Stock upon surrender of the Series A Preferred Stock and payment
of $1,200 per share. The Company may redeem the Series A Preferred Stock at $.50
per share plus accrued and unpaid dividends. As of April 30, 1997, there was
$87,600 in accrued and unpaid dividends.

Series B Preferred Stock

     Holders of Series B Preferred Stock are entitled to receive, out of funds
legally available therefor, dividends at the rate of $.90 per share. The Series
B Preferred Stock has no voting rights. Series B Preferred stock ranks senior to
all capital stock of the Company but junior to the Series A Preferred Stock, and
upon dissolution, holders of such shares are entitled to receive 100% of the par
value thereof and all accrued and unpaid dividends prior to any payment to any
holder of capital stock of the Company but after payment to the holders of
Series A Preferred Stock. In addition, each share of Series B Preferred Stock is
convertible into .20 shares of Common Stock. As a result of the 1-for-100
reverse split on the Effective Date, the total number of shares of Common Stock
that may be issued upon conversion of the Series B Preferred Stock is 239. The
Company may redeem the Series B Preferred Stock at $15.00 per share plus accrued
and unpaid dividends. As of April 30, 1997, there was $25,743 in accrued and
unpaid dividends.

General

     The Board of Directors has the authority to issue Preferred Stock in one or
more series and to fix the rights, voting rights, terms of redemption,
redemption prices, liquidation preferences and the number of shares constituting
any series or the designation of such series, without further vote or action by
the stockholders. The issuance of Preferred Stock may have the effect of
delaying, deferring or preventing a change in control of the Company without
further action by the stockholders and may adversely affect the voting and other
rights of the holders of Common Stock. At present, the Company has no other
plans to issue any additional shares of Preferred Stock.

Class A Warrants

     In connection with the August 1995 Offering and with bridge financing that
preceded such offering, the Company issued 1,135,750 Class A Warrants. Each
Class A Warrant entitles the holder thereof to purchase one share of Common
Stock at an exercise price of $6.00 from August 17, 1996 until August 16, 1998,
subject to certain adjustments. The Class A Warrants may be exercised in whole
or in part. In connection with this Offering, the Company will issue 2,800,000

additional Class A Warrants.

     The Class A Warrants were issued under a warrant agreement dated as of
August 16, 1995 (as amended on _____________________ , 1997, the "Warrant
Agreement") between the Company and Continental Stock Transfer & Trust Company
(the "Warrant Agent"). The following is a general summary of certain provisions



                                       61

<PAGE>



contained in the Warrant Agreement and is qualified in its entirety by reference
to the Warrant Agreement, a copy of which has been filed as an exhibit to the
Registration Statement, of which this Prospectus is a part.

     The Board of Directors of the Company has the right to amend the terms of
the Warrant Agreement at its discretion to, among other things, reduce the
exercise price or extend the exercise period of the Class A Warrants; provided
however, that no amendment adversely affecting the rights of the holders of
Class A Warrants may be made without the approval of the holders of a majority
of the affected Class A Warrants.

     At any time during the exercise period the Company has the right to redeem
all the Class A Warrants at a price of $.05 per Class A Warrant upon not less
than 30 days' prior written notice; provided that before any redemption of Class
A Warrants can take place, the average closing price of the Company's Common
Stock as reported on Nasdaq shall have been $7.20 per share for 20 consecutive
trading days ending within 15 days prior to the date on which notice of
redemption is sent.

     In order for a holder to exercise his or her Class A Warrants, and as
required in the Warrant Agreement, there must be a current registration
statement on file with the Securities and Exchange Commission and various state
securities commissions to continue registration of the shares of Common Stock
underlying such warrants. The Company will be required to file post-effective
amendments when events require such amendments. There can be no assurance that
the registration statement can be kept current. If it is not kept current for
any reason, the Class A Warrants will not be exercisable and will be deprived of
any value. The Company has agreed to use its best efforts to maintain a current
registration statement to permit the issuance of the Common Stock upon exercise
of the Class A Warrants.

     Holders of the Class A Warrants will be protected against dilution of the
interest represented by the underlying shares of Common Stock upon the
occurrence of certain events, including, but not limited to, stock dividends,
stock-splits, reclassifications and mergers. In the event of the complete
liquidation and dissolution of the Company, the Class A Warrants terminate.
Holders of the Class A Warrants will not have voting power and will not be
entitled to dividends. In the event of liquidation, dissolution or winding up of
the Company, holders of the Class A Warrants will not be entitled to participate

in the Company's assets.

     Pursuant to the Underwriting Agreement, the Company has agreed to pay to
the Representative and/or any registered broker-dealer which is a member of the
National Association of Securities Dealers, Inc. ("NASD") a commission equal to
four percent of the exercise price of each Class A Warrant exercised provided:
(1) at least one year has elapsed from the date of this Prospectus, (2) the
market price for the Common Stock is greater than the exercise price of the
Class A Warrants; (3) the Representative or such other NASD broker-dealer member
has solicited the holder to exercise the Class A Warrant with such solicitation
being confirmed in writing by each holder; and (4) the compensation arrangements
were disclosed to the holder at the time of exercise, such disclosure being
confirmed in writing by said holder. The commission is further conditioned upon
the Company's Warrant Agent being furnished by the Representative or NASD
broker-dealer member with a certificate stating that:



                                       62

<PAGE>



     (i)  the Class A Warrants exercised were not held in a discretionary
          account;

     (ii) the Representative or the NASD member did not, within 10 business days
          immediately preceding the solicitation of the exercise of the Class A
          Warrant or the date of such exercise, bid for or purchase the Common
          Stock of the Company or any securities of the Company immediately
          convertible into or exchangeable for the Common Stock (including the
          Class A Warrants) or otherwise engage in any activity that would be
          prohibited by Regulation M under the Securities Exchange Act of 1934,
          as amended, to one engaged in a distribution of the Company's
          securities; and

     (iii) in connection with the solicitation, the Representative and/or the
          NASD member disclosed to the person exercising the Class A Warrant the
          compensation it would receive upon exercise of the Class A Warrant.

     In connection with the August 1995 Offering, the Company agreed to pay a
similar solicitation fee to the underwriter of the August 1995 Offering and/or a
NASD broker-dealer who solicited the exercise of a Class A Warrant issued in
connection with the August 1995 Offering.

Transfer Agent/Warrant Agent

     The Company's transfer agent for the Common Stock and, Class A Warrants is
Continental Stock Transfer & Trust Company, 2 Broadway, New York, New York
10004. Continental Stock Transfer & Trust Company also serves as the Warrant
Agent for the Class A Warrants.



                        SHARES AVAILABLE FOR FUTURE SALE

     Immediately prior to the sale of the Common Stock hereunder, the Company
had an aggregate of 2,799,736 shares of its Common Stock issued and outstanding,
350,356 of which are "restricted securities," which may be sold only in
compliance with Rule 144 under the Securities Act of 1933, as amended. Rule 144
provides, in essence, that a person holding restricted securities for a period
of one year after payment therefor may sell, in brokers' transactions or to
market makers, an amount not exceeding 1% of the outstanding class of securities
being sold, or the average weekly reported volume of trading of the class of
securities being sold over a four-week period, whichever is greater, during any
three-month period. (Persons who are not affiliates of the Company and who had
held their restricted securities for at least two years are not subject to the
volume or transaction limitations.) Any such sales could have a material adverse
effect on the market price for the Common Stock, should a trading market
develop.



                                       63


<PAGE>



                                  UNDERWRITING

     Subject to the terms and conditions set forth in the Underwriting Agreement
by and between the Company and the Representative ("Underwriting Agreement"),
the Company has agreed to sell to the Underwriters, as set forth below, for whom
IAR Securities Corp. is the Representative, on a firm commitment basis, a total
of 700,000 Units, each unit consisting of one (1) share of Common Stock and four
(4) Class A Warrants.

        Underwriters                        Number of Units
        ------------                        ---------------

IAR Securities Corp. ..................      __________

___________________ ...................      __________

           Total ......................         700,000

     The Company has agreed to sell the Units to the Representative at a
discount of ten percent of the public offering price thereof. The Company has
also agreed to pay the Representative a nonaccountable expense allowance in the
amount of 3% of the offering price of the Units, including the Units purchased
pursuant to the Over-Allotment Option. In addition, the Company has agreed to
pay all costs of issuance of the Units, including blue sky fees and related
counsel fees, but not including fees and expenses of the Representative's
counsel. The Company estimates that it will incur costs of $225,000 in
connection with this Offering, not including the Representative's 3%
non-accountable expense allowance and the $70,000 financial consulting fee
payable to the Representative. As part of the underwriting arrangements, the
Company will enter into a contract to retain the Representative as a financial
consultant to the Company for a two-year period commencing as of the close of
the sale of the Securities offered hereby at an annual fee of $35,000, for a
total of $70,000, payable in full at the closing of this offering. The Company
has agreed to pay the Representative an investment banking fee for future
consummated transactions of the Company, if any, introduced by the
Representative, including mergers, acquisitions and joint ventures, during the
five years following the completion of the Offering equal to 5% of the first
$4,000,000 of consideration involved in the transaction, 4% of the next
$1,000,000, 3% of the next $1,000,000, and 2% of the excess, if any, over
$6,000,000.

     The Company has agreed to indemnify the Representative against certain
liabilities which may be incurred in connection with this offering, including
certain civil liabilities under the Securities Act of 1933, as amended, and
where such indemnification is not available, to contribute to the payments the
Representative may be required to make in respect of such liabilities.

     The Underwriting Agreement further provides that for three years after the
completion of this Offering, the Representative will have the right to nominate
one person to serve on the Company's Board of Directors, and upon such

nomination the Board shall take the action necessary to cause the
Representative's nominee to be elected to the Board. If the Representative does
not exercise this right, it may appoint an advisor, who will be entitled to
attend all meetings of the Board of Directors.



                                       64

<PAGE>



     The Company and its officers, directors and principal stockholders have
agreed not to issue, sell, offer to sell or otherwise dispose of any shares of
the Company's Common Stock, or securities convertible into Common Stock, owned
by them, for a period of twelve (12) months from the date of this Prospectus
without the prior written consent of the Representative.

     The Company has granted the Representative an Over-Allotment Option, which
is exercisable for 45 days from the date hereof, to purchase up to an aggregate
of 105,000 additional Units, all at the offering price, less the underwriting
discount, set forth on the cover page of this Prospectus. The Representative may
exercise the Over-Allotment Option solely for the purpose of covering
over-allotments incurred in the sale of shares Units offered hereby.

     The Representative has advised the Company that sales to certain dealers
may be made at a public offering price less a concession not in excess of _%.
The Representative does not intend to confirm sales of more than one percent of
the Units offered hereto to any accounts over which it exercises discretionary
authority.

     The public offering price of the Units do not bear any relationship to the
assets or book value, net worth or other criteria of value of or applicable to
the Company.

     The Underwriters may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation M
under the Securities Exchange Act of 1934, as amended. Over-allotment involves
syndicate sales in excess of the offering size, which creates a syndicate short
position. Stabilizing transactions permit bids to purchase the underlying
security so long as the stabilizing bids do not exceed a specific maximum.
Syndicate covering transactions involve purchases of the Company's securities in
the open market after the distribution has been completed in order to cover
syndicate short positions. Penalty bids permit the Underwriter to reclaim a
selling concession from a syndicate member when the securities originally sold
by such syndicate member are purchased in a syndicate covering transaction to
cover syndicate short positions. Such stabilizing transactions, syndicate
covering transactions and penalty bids may cause the price of the securities to
be higher than they would otherwise be in the absence of such transactions.

     The Company has agreed, upon completion of this offering, to sell to the
Representative or its nominee, for $.001 per option, the Representative's Unit
Purchase Option to purchase 70,000 Units each Unit consisting of one (1) share

of Common Stock and four (4) Class A Warrants. The Representative's Unit
Purchase Option will be exercisable for a four-year term, commencing one year
after the date of this Prospectus, at an exercise price of $6.00 per Unit, 120%
of the public offering price of the Units. The Representative's Unit Purchase
Option will be restricted from exercise, sale, transfer, assignment or
hypothecation (except to officers of the Representative or of any other
broker-dealer which participates in this Offering) for a period of one year from
the date of this Prospectus. The Representative's Unit Purchase Option also
provides that on two occasions, upon the request of the Representative or
holders of a majority interest in the Representative's Unit Purchase Option or
the underlying securities, at any time during the four-year period commencing
one year after the Effective Date, the Company will prepare and file a
post-effective amendment or new registration statement permitting the sale of
the



                                       65

<PAGE>



Representative's Unit Purchase Option and/or the underlying securities and use
its best efforts to keep the registration statement effective for a nine-month
period following the effective date of such post-effective amendment or new
registration statement. The Company will bear the cost of the first such
registration statement, but the holders will bear all costs incident to the
second such registration statement. If the Company files a registration
statement relating to an equity offering under the provisions of the Securities
Act at any time during the five-year period commencing on the date of this
Prospectus, the holders of the Representative's Unit Purchase Option or
underlying securities will have the right, subject to certain conditions, to
include in such registration statement, at the Company's expense, all or part of
the underlying securities at the request of the holders. The number of Units
covered by the Representative's Unit Purchase Option and the exercise price are
subject to adjustment upon certain events to prevent dilution.

     For the life of the Representative's Unit Purchase Option, the holders
thereof will have the opportunity to profit from a rise in the market price of
the Securities with a resulting dilution in the interests of other stockholders.
The Representative's registration rights may result in substantial expense to
the Company at a time when it may not be able to afford such expense and may
impede future financing. The Company may find that the terms on which it could
obtain additional capital may be adversely affected while the Representative's
Unit Purchase Option is outstanding.

     The Company has also agreed to pay the Representative a warrant
solicitation fee equal to 4% of the Class A Warrant exercise price for any of
the publicly held Class A Warrants, when exercised, at any time commencing one
year after the date of this Prospectus, provided that the Representative or any
NASD member firm has solicited such exercise, as evidenced in writing signed by
the warrant holder, and that (a) the market price of the Common Stock on the
date that any such Class A Warrant is exercised is greater than the exercise

price of the Class A Warrant; (b) prior specific written approval for exercise
is received from the customer if the Class A Warrant is held in a discretionary
account; (c) disclosure of this compensation arrangement is made prior to or
upon the exercise of such Class A Warrant; (d) solicitation of the exercise is
not in violation of Regulation M of the Exchange Act; and (e) solicitation of
the exercise is in compliance with NASD Notice to Members 81-38. In addition,
unless granted an exemption by the Commission from Regulation M under the
Exchange Act, the Representative will be prohibited from engaging in any market
making activities or solicited brokerage activities with respect to the
Company's Securities for the period up to five business days prior to any
solicitation of the exercise of any Class A Warrant until the later of the
termination of such solicitation activity or the termination (by waiver or
otherwise) of any right the Representative may have to receive a fee for the
exercise of the Class A Warrants following such solicitation. As a result, the
Representative may be unable to continue to provide a market for the Company's
Securities during certain periods while the Warrants are exercisable.



                                       66


<PAGE>



                             SELLING SECURITYHOLDERS

     The Registration Statement of which this Prospectus is a part also relates
to the offer and sale of 1,200,000 Class A Warrants issuable upon exercise of
the Convertible Bridge Notes and the shares of Common Stock underlying such
Class A Warrants (the "Selling Securityholder's Securities") by the Selling
Securityholders or their transferees. See "Bridge Financing." All of such Class
A Warrants are expected to become tradeable on or about the date of this
Prospectus. Sales of the Class A Warrants being offered by Selling
Securityholders or the Common Stock underlying the Class A Warrants, or even the
potential of such sales, would likely have an adverse effect on the market
prices of the Securities being offered for sale by the Company.

     The following table sets forth the beneficial ownership of the securities
of the Company held by each person who is a Selling Securityholder and by all
Selling Securityholders as a group prior to this Offering and after this
Offering, assuming all of the Class A Warrants owned by the Selling
Securityholders are sold.

                                           Class A        Percent of Class A
                                        Warrants Owned      Warrants Owned
                                     Prior to     After   Prior to     After
Name of Beneficial Owner             Offering   Offering  Offering   Offering
------------------------             --------   --------  --------   --------
Ekistics, Inc. ....................   300,000       0       12.84%       0%
Blue Star Group Investment, Ltd. ..   696,000       0       29.80%       0%
James Solakian ....................   120,000       0        5.14%       0%
Bruce Ungerleider .................    30,000       0        1.28%       0%
Harold Yordy ......................    27,000       0        1.16%       0%
Michael Yordy .....................    27,000       0        1.16%       0%

      Total ....................... 1,200,000       0       51.37%       0%

     None of the Selling Securityholders are affiliated with the Company in any
capacity, has had any business relationship with the Company at any time nor
owned any of the Company's Common Stock beneficially or of record prior to this
Offering.

     The securities offered thereby may be sold from time to time directly by
the Selling Securityholders. Alternatively, the Selling Securityholders may from
time to time offer such securities through underwriters, dealers or agents. The
distribution of securities by the Selling Securityholders may be effected in one
or more transactions that may take place on the over-the-counter market,
including ordinary broker's transactions, privately-negotiated transactions or
through sales to one or more broker-dealers for resale of such securities as
principals, at market prices prevailing at the time of sale, at prices related
to such prevailing market prices or at negotiated prices. Usual and customary or
specifically negotiated brokerage fees or commissions may be paid by the Selling
Securityholders in connection with




                                       67

<PAGE>



such sales of securities. The Selling Securityholders and intermediaries through
whom such securities are sold may be deemed "underwriters" within the meaning of
the Act with respect to the securities offered, and any profits realized or
commissions received may be deemed underwriting compensation.

     At the time a particular offer of securities is made by or on behalf of a
Selling Securityholder, to the extent required, a prospectus will be distributed
which will set forth the number of securities being offered and the terms of the
offering, including the name or names of any underwriters, dealers or agents, if
any, the purchase price paid by any underwriter for securities purchased from
the Selling Securityholder and any discounts, commissions or concessions allowed
or reallowed or paid to dealers, and the proposed selling price to the public.

     Under the Exchange Act, and the regulations thereto, any person engaged in
a distribution of the securities of the Company offered by the Selling
Securityholders may not simultaneously engage in market-making activities with
respect to such securities of the Company during the applicable "cooling off"
period (up to 5 days) prior to the commencement of such distribution. In
addition, and without limiting the foregoing, the Selling Securityholders will
be subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including without limitation, Regulation M, in
connection with transactions in such securities, which provisions may limit the
timing of purchase and sales of such securities by the Selling Securityholders.

                                LEGAL PROCEEDINGS

     The Company is not a party to any legal proceedings.

                                  LEGAL MATTERS

     The validity of the securities offered hereby has been passed upon for the
Company by Bernstein & Wasserman, LLP, 950 Third Avenue, New York, New York
10022. Bernstein & Wasserman, LLP has served, and continues to serve, as counsel
to the Representative on matters unrelated to this Offering. Certain legal
matters in connection with this offering will be passed upon for the
Representative by Lester Morse, P.C., 111 Great Neck Road, Great Neck, NY 11021.

                                     EXPERTS

     The financial statements of Conolog Corporation have been included herein
and in the Registration Statement in reliance upon the report of Rosenberg Rich
Baker Berman & Company, independent certified public accounts, appearing
elsewhere herein and upon the authority of said firm as experts in accounting
and auditing.




                                       68


<PAGE>


                        Index to the Financial Statements



Independent Auditors' Report .....................................    F-2

Balance Sheets - April 30, 1997 (Unaudited) and
   July 31, 1996 and 1995 ........................................    F-3a, F-3b

Statements of Income - Nine Months Ended April 30,
   1997 and 1996 (Unaudited) and Years Ended July 31, 1996,
   1995 and 1994 .................................................    F-4

Statements of Stockholders' Equity (Deficiency) - Nine Months
   Ended April 30, 1997 (Unaudited) and Years Ended July 31,
   1996, 1995 and 1994 ...........................................    F-5

Statements of Cash Flows - Nine Months Ended April 30, 1997
   and 1996 (Unaudited) and Years Ended July 31, 1996, 1995
   and 1994 ......................................................    F-6

Notes to Financial Statements - April 30, 1997 (Unaudited) and
   July 31, 1996, 1995 and 1994 ..................................    F-7-14




                                                                             F-1


<PAGE>

                      Rosenberg Rich Baker Berman & Company

                                  [LETTERHEAD]
            

                          Independent Auditors' Report


Board of Directors
Conolog Corporation


We have audited the accompanying balance sheets of Conolog Corporation at July
31, 1996 and 1995, and the related statements of income, stockholders' equity
(deficiency) and cash flows for each of the three years in the period ended July

31, 1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Conolog Corporation at July 31,
1996 and 1995, and the results of its operations and its cash flows for each of
the three years in the period ended July 31, 1996 in conformity with generally
accepted accounting principles. Furthermore, it is our opinion that the
schedules referred to above present fairly the information set forth therein in
compliance with the applicable accounting regulation of the Securities and
Exchange Commission.




                                    /s/ Rosenberg  Rich  Baker  Berman & Company
                                    --------------------------------------------



Maplewood, New Jersey
October 8, 1996, except as to Note 5, which date is September 5, 1997



                                                                             F-2


<PAGE>



                               Conolog Corporation
                                 Balance Sheets


<TABLE>
<CAPTION>
                                                                                     April 30,            July 31,
                                                                                  --------------   ------------------------
                                                                                      1997            1996         1995
                                                                                  --------------   ---------     ----------
                                                                                   (Unaudited)
<S>                                                                               <C>              <C>           <C>
             Assets
Current Assets
     Cash                                                                         $   93,660       $  178,213    $   27,577
     Accounts receivable - less allowances of $14,000
       in 1997 and 1996 and $10,000 in 1995                                          166,827          304,020       171,541

     Inventories                                                                   3,232,580        2,937,780     2,598,127

     Other current assets                                                             56,923           43,517        25,683
     Deferred tax asset                                                                 --               --         492,352
     Deferred offering costs                                                            --               --          86,154
                                                                                  ----------       ----------    ----------

                                                                                   3,549,990        3,463,530     3,401,434
                                                                                  ----------       ----------    ----------

Property, Plant and Equipment
     Land and improvements                                                            34,524           34,524        34,524
     Building and improvements                                                       665,327          659,477       651,977
     Machinery and equipment                                                       1,289,578        1,289,578     1,298,844
     Furniture and fixtures                                                          336,266          330,735       304,472
     Auto                                                                              3,340             --            --
                                                                                  ----------       ----------    ----------
                                                                                   2,329,035        2,314,314     2,289,817
     Less allowance for depreciation and amortization                              1,923,272        1,880,408     1,820,922
                                                                                  ----------       ----------    ----------

                                                                                     405,763          433,906       468,895
                                                                                  ----------       ----------    ----------

Other assets                                                                          23,383           30,398        11,906
                                                                                  ----------       ----------    ----------

             Total Assets                                                         $3,979,136       $3,927,834    $3,882,235
                                                                                  ==========       ==========    ==========
</TABLE>



                                                                            F-3a

See notes to the financial statements.

<PAGE>


<TABLE>
<CAPTION>
                                                                                     April 30,            July 31,
                                                                                  --------------   ------------------------
                                                                                      1997            1996         1995
                                                                                  --------------   ---------     ----------
                                                                                   (Unaudited)
<S>                                                                               <C>              <C>           <C>
           Liabilities
Current Liabilities
   Notes payable                                                                  $    74,735    $ 1,012,500    $ 3,798,000
   Accounts payable                                                                    95,400        280,629        287,630
   Accrued payroll                                                                    115,778         41,716        499,761
   Accrued interest                                                                     6,133         64,699        654,618
   Bridge loans                                                                       200,000           --          200,000
   Other accrued expenses                                                             120,977        115,723        135,936
   Current maturities of capitalized lease obligations                                  8,184         33,282         54,660
                                                                                  -----------    -----------    -----------

           Total Current Liabilities                                                  621,207      1,548,549      5,630,605
                                                                                  -----------    -----------    -----------

Other Liabilities
   Capitalized lease obligations, less current maturities                                --            4,973         34,103
   Due to officers                                                                       --             --          161,705
                                                                                  -----------    -----------    -----------
                                                                                         --            4,973        195,808
                                                                                  -----------    -----------    -----------

Stockholders' Equity (Deficiency)
   Preferred Stock, par value $.50; Series A; 4% cumulative; 
     162,000 shares authorized; 155,000 shares issued and
     outstanding                                                                       77,500         77,500         77,500
   Preferred Stock, par value $.50; Series B; $.90 cumulative;
     50,000 shares authorized; issued and outstanding 1,197 
     shares at April 30, 1997, 1,197 shares in 1996 and 21,321 in
     1995                                                                                 597            597         10,661
   Preferred stock par value $5.00, 2,000,000 shares authorized,
   0 shares outstanding                                                                   --             --            --
   Common Stock, par value $1.00; 20,000,000 shares 
     authorized; issued 2,443,973 at April 30, 1997, issued 
     1,035,186 shares in 1996 and 52,239 in 1995, including
     8,776 shares held in Treasury                                                  2,443,973      1,035,186         52,239
   Additional Paid-In Capital                                                       4,124,013      4,401,636        952,994
   Retained Earnings (Deficit)                                                     (3,156,420)    (3,008,873)    (2,905,838)
   Treasury Shares at Cost                                                           (131,734)      (131,734)      (131,734)
                                                                                  -----------    -----------    -----------

     Total Stockholders' Equity (Deficiency)                                        3,357,929      2,374,312     (1,944,178)
                                                                                  -----------    -----------    -----------

           Total Liabilities and Stockholders' Equity                             $ 3,979,136    $ 3,927,834    $ 3,882,235
                                                                                  ===========    ===========    ===========
</TABLE>

                                                                            F-3b


See notes to the financial statements.


<PAGE>



                               Conolog Corporation
                              Statements of Income




<TABLE>
<CAPTION>
                                                        Nine Months Ended April 30,                  Year Ended July 31,
                                                        ---------------------------     -------------------------------------------
                                                           1997            1996            1996            1995            1994
                                                        -----------     -----------     -----------     -----------     -----------
                                                               (Unaudited)
<S>                                                     <C>             <C>             <C>             <C>             <C>        
Sales and other income                                  $   978,979     $ 1,519,975     $ 1,924,466     $ 2,090,933     $ 2,044,860
                                                        -----------     -----------     -----------     -----------     -----------

Costs and Expenses:
     Cost of products sold                                  528,498         957,435       1,242,001       1,270,771       1,067,560
     Selling, general and administrative                    518,944         653,571         946,954         924,524         852,951
     Interest                                                69,199         118,371         131,854         253,686         362,317
     Write-off of obsolete or excess
       inventories                                             --              --            50,281         656,248         944,970
                                                        -----------     -----------     -----------     -----------     -----------

                                                          1,116,641       1,729,377       2,371,090       3,105,229       3,227,798
                                                        -----------     -----------     -----------     -----------     -----------

Loss Before Income Taxes and
  Extraordinary Items                                      (137,662)       (209,402)       (446,624)     (1,014,296)     (1,182,938)

Income taxes (benefit)                                        9,884             100             200        (492,252)             50
                                                        -----------     -----------     -----------     -----------     -----------

Net Loss Before Extraordinary Items                        (147,546)       (209,502)       (446,824)       (522,044)     (1,182,988)

Extraordinary Item (Net of Tax Benefit of $492,392)             --          740,376         740,376            --              --
                                                        -----------     -----------     -----------     -----------     -----------

Net Income (Loss)                                       $  (147,546)    $   530,874     $   293,552     $  (522,044)    $(1,182,988)
                                                        ===========     ===========     ===========     ===========     ===========

Earnings (Loss) Per Share Before Extra-
  ordinary Item                                                (.12)           (.20)           (.43)           (.12)           (.27)

Extraordinary Item                                             --               .71             .71            --              --

Earnings (Loss) Per Share                                      (.12)            .51             .28            (.12)           (.27)
</TABLE>




See notes to the financial statements.
                                                                             F-4

<PAGE>



                               Conolog Corporation
                 Statement of Stockholders' Equity (Deficiency)
                Nine Months Ended April 30, 1997 (Unaudited) and
                    Years Ended July 31, 1996, 1995 and 1994


<TABLE>
<CAPTION>
                                                                                                                          Total
                                  Series A      Series B                   Additional       Retained                   Stockholders'
                                 Preferred     Preferred       Common       Paid-in         Earnings      Treasury        Equity
                                   Stock         Stock          Stock       Capital         (Deficit)      Stock       (Deficiency)
                                -----------   -----------    -----------   -----------    -----------    -----------   -----------
<S>                             <C>           <C>            <C>           <C>            <C>            <C>           <C>         
Balance at July 31, 1993        $    77,500   $    10,661    $    52,239   $   952,994    $(1,200,806)   $  (131,734)  $  (239,146)

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

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

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

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

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

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

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

Additional stock issued                --            --        1,408,787      (277,623)          --             --       1,131,164

Net loss for the period                --            --             --            --         (147,546)          --        (147,546)
                                -----------   -----------    -----------   -----------    -----------    -----------   -----------

Balance at April 30, 1997       $    77,500   $       597    $ 2,443,973   $ 4,124,013    $(3,156,419)   $  (131,734)  $ 3,357,930
  (Unaudited)                   ===========   ===========    ===========   ===========    ===========    ===========   ===========
</TABLE>



See notes to the financial statements.

                                                                             F-5

<PAGE>


                               Conolog Corporation
                            Statements of Cash Flows

<TABLE>
<CAPTION>
                                                             Nine Months Ended April 30,             Year Ended July 31,
                                                             --------------------------    -----------------------------------------
                                                                1997           1996            1996          1995           1994
                                                             -----------    -----------    -----------    -----------    -----------
                                                                    (Unaudited)
<S>                                                         <C>            <C>            <C>            <C>            <C>        
Cash Flows From Operating Activities
  Net Income (Loss)                                         $  (147,546)   $   530,874    $   293,552    $  (522,044)   $(1,182,988)
     Adjustments to Reconcile Net Income to
       Net Cash Provided (Used) by  Operating
       Activities
     Deferred income taxes                                         --             --          492,352       (492,352)          --
     Depreciation and amortization                               42,864         46,347         64,994         60,396         57,529
     Gain on disposition of equipment                              --             --           (3,420)          --             --
     Provision for losses on accounts
       receivables                                                 --             --            9,000           --          (28,561)
  (Increase) Decrease in Operating Assets
     Accounts receivable                                        137,193       (208,304)      (141,479)        74,529        (58,051)
     Inventories                                               (294,800)      (257,374)      (339,653)       392,058        874,989
     Other current assets                                        (6,387)        (5,941)       (17,834)        (3,394)        22,555
  Increase (Decrease) in Operating Liabilities
     Accounts payable                                          (185,229)       (81,359)        (7,001)        12,330         38,459
     Accrued expenses and other liabilities                      20,744       (618,819)    (1,068,177)       417,484        398,239
                                                            -----------    -----------    -----------    -----------    -----------
       Net Cash Provided (Used) by
         Operating Activities                                  (433,161)      (594,576)      (717,666)       (60,993)       122,171
                                                            -----------    -----------    -----------    -----------    -----------
Cash Flows From Investing Activities
  Purchase of property, plant and equipment                     (14,721)       (23,284)       (43,163)       (19,625)       (44,675)
  Proceeds from sale of equipment                                  --             --           18,666           --             --
                                                            -----------    -----------    -----------    -----------    -----------
       Net Cash Used in Investing Activities                    (14,721)       (23,284)       (24,497)       (19,625)       (44,675)
                                                            -----------    -----------    -----------    -----------    -----------
Cash Flows From Financing Activities
  Deferred offering costs                                          --             --           86,154        (86,154)          --
  Increase from public stock offering                              --        4,409,839      4,421,525           --             --
  Proceeds from long-term borrowings                               --             --             --             --           75,000
  Increase (Decrease) in bridge loan                            200,000       (200,000)      (200,000)       200,000           --
  Repayments of long-term borrowings                         (1,042,571)    (2,773,147)    (2,836,008)       (38,681)       (53,098)
  (Increase) reductions in other assets                            --             --          (20,580)           325         20,672
  Dividends paid                                                   --         (384,903)      (396,587)          --             --
  Increase (decrease) in due to officers                           --         (161,705)      (161,705)        17,302       (137,333)
  Issuance of common stock                                    1,408,787           --
  Additional paid-in capital                                   (277,622)          --

  From investors                                                 74,735           --
                                                            -----------    -----------    -----------    -----------    -----------
       Net Cash Provided (Used) by
         Financing Activities                                   363,329        890,084        892,799         92,792        (94,759)
                                                            -----------    -----------    -----------    -----------    -----------
Net Increase (Decrease) in Cash                                 (84,553)       272,224        150,636         12,174        (17,263)
Cash at Beginning of Period                                     178,213         27,577         27,577         15,403         32,666
                                                            -----------    -----------    -----------    -----------    -----------
Cash at End of Period                                       $    93,660    $   299,801    $   178,213    $    27,577    $    15,403
                                                            ===========    ===========    ===========    ===========    ===========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
  Cash paid during the year for:
     Interest paid                                          $    12,365    $     9,564    $   772,773    $   102,816    $    90,917
     Taxes paid                                             $    17,324    $       --     $       125    $        50    $        50
SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES     
  Capitalized lease obligations incurred for                $       --     $       --     $       --     $    56,550    $       -- 
  use of equipment                                         
</TABLE>


See notes to the financial statements.
                                                                             F-6


<PAGE>


                               Conolog Corporation
                        Notes to the Financial Statements
           April 30, 1997 (Unaudited) and July 31, 1996, 1995 and 1994



(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

     Basis of Presentation
         In the opinion of management, the preceding unaudited financial
         statements contain all adjustments (consisting of normal recurring
         accruals) necessary for a fair presentation of the financial condition
         of the Company as of April 30, 1997 and the results of its operations
         for the nine months ended April 30, 1997 and 1996.

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

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

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

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

     Income Taxes
         Deferred income taxes have been provided for in accordance with
         Statement No. 109 of the Financial Accounting Standards Board. Deferred

         income taxes arise from timing differences resulting from income and
         expense items reported for financial accounting and tax purposes in
         different periods. Deferred taxes are classified as current or
         noncurrent, depending on the classification of the assets and
         liabilities to which they relate. Deferred taxes arising from timing
         differences that are not related to an asset or liability are
         classified as current or noncurrent depending on the periods in which
         the timing differences are expected to reverse.



                                                                             F-7


<PAGE>


                               Conolog Corporation
                        Notes to the Financial Statements
           April 30, 1997 (Unaudited) and July 31, 1996, 1995 and 1994



(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     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.

(2)  INVENTORIES AT APRIL 30, 1997 (UNAUDITED), JULY 31, 1996 AND JULY 31, 1995
     CONSIST OF THE FOLLOWING:


                                       April 30,               July 31,
                                      ----------     ---------------------------
                                         1997            1996            1995
                                      ----------      ----------      ----------
                                     (Unaudited)

Materials and supplies                $               $1,313,816      $1,236,905
Work in process                                          129,675         831,410
Finished goods                                         1,494,289         529,812
                                      ----------      ----------      ----------

                                      $3,232,580      $2,937,780      $2,598,127
                                      ==========      ==========      ==========

(3)  NOTES PAYABLE (UNAUDITED)

     Bank
         The principal amount owing to the Bank under the Company's Credit
         Facility at July 31, 1996 was $1,012,500 and the unpaid accrued
         interest was $57,196. The Bank and the Company entered into the Conolog
         Corporation Allonge, dated as of September 11, 1996, pursuant to which
         the Amended and Restated Term Note dated as of August 2, 1995 between
         the Company and the Bank (the "Note") was amended to permit the
         conversion by the Bank of the unpaid principal and interest due under
         the Note into 1,400,000 shares of the Company's Common Stock on or
         before April 16, 1997. The conversion right was exercisable by the Bank
         or its assignee. The Bank had deferred all payments of principal and
         interest under the Note until April 16, 1997.

         The Bank and CNL Holdings, Inc. ("CNL") entered into an Option and

         Purchase, Sale and Assignment Agreement (which was amended as described
         below) dated as of September 12, 1996 (the "Option Agreement"). Under
         the original Option Agreement the Bank granted an option to CNL to
         purchase all of the Bank's interest in (i) the Amended and Restated
         Term Loan Agreement dated as of August 2, 1995 between the Company and
         the Bank, (ii) the Note and (iii) the 375,000 shares of the Company's
         Common Stock owned by the Bank. CNL paid $150,000 to the Bank for the
         option, which had an exercise price of $1,500,000 and an expiration
         date of April 15, 1997.


                                                                             F-8

<PAGE>


                               Conolog Corporation
                        Notes to the Financial Statements
           April 30, 1997 (Unaudited) and July 31, 1996, 1995 and 1994


(3)  NOTES PAYABLE (Continued)

     Bank
         The Company and CNL entered into an agreement (which was amended as
         described below) dated as of September 12, 1996 (the "CNL Agreement"),
         whereby CNL agreed to loan up to $2,500,000 to the Company under
         certain circumstances (as described below).

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

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

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

         On January 31, 1997, the Bank and the Company entered into Amendment
         No. 1 to the Conolog Corporation Allonge dated September 11, 1996 (the
         "Allonge") (which previously amended the Amended and Restated Term Note

         dated as of August 2,1995 between the Company and the Bank (previously
         defined as the "Note")). The original Allonge provided that the Bank
         may convert the entire unpaid principal and interest due under the Note
         ("Debt Claim") into 1,400,000 shares of Common Stock of the Company at
         any time on or before April 15, 1997. The amended Allonge provided the
         Bank the right to convert all or, if it so desires, only a portion of
         the Debt Claim. The number of shares issuable upon conversion of a
         portion of the Debt Claim was to be calculated on the basis of 1 share
         for each $3.00 of the Debt Claim being converted with the balance of
         the 1,400,000 shares to be issued when all of the Debt Claim has been
         converted.

         On January 31, 1997, the Bank and CNL entered into Amendment No. 1 to
         the Option Agreement. The amended Option Agreement required CNL, on or
         before February 5, 1997, to purchase from the Bank for an aggregate
         purchase price of $600,000, no less than (i) 133,333 shares of Common
         Stock for $399,999 and (ii) $200,001 of the Debt Claim represented by
         the Note. CNL purchased such Common Stock and portion of the Debt Claim
         on February 5, 1997. CNL had the right to exercise the remainder of the
         option on or before April 15, 1997. CNL had the right to purchase from
         the Bank additional shares of Common Stock owned by the Bank at the
         price of $3.00 per share and portions of the Debt Claim from time to
         time. CNL purchased such Common Stock and portion of the Debt Claim on
         February 5, 1997.




                                                                             F-9

<PAGE>


                               Conolog Corporation
                        Notes to the Financial Statements
           April 30, 1997 (Unaudited) and July 31, 1996, 1995 and 1994


(3)  NOTES PAYABLE

     Bank
         On January 31, 1997, the Company and CNL entered into an Amendment to
         the CNL Agreement. The amended CNL Agreement provided that in the event
         not all of the Debt Claim was converted into shares of Common Stock by
         the Bank prior to CNL's acquisition of the Note, CNL would promptly
         convert the remaining portion of the Debt Claim into shares of Common
         stock in accordance with the Note. In addition, the proceeds of the
         sale of the Acquired Shares were to be applied as follows: First to
         reimburse CNL for payments made to the Bank pursuant to Option
         Agreement; 50% of the balance, up to $2,500,000, to be loaned to the
         Company within five days of CNL's receipt of the proceeds.

         The balance under the option (as of Mach 15, 1997) was $750,000
         (evidencing an option to purchase 241,667 shares of Common Stock and

         the Note, convertible into 1,333,333 shares of Common Stock). On March
         26, 1997, CNL exercised a portion of its option to purchase shares of
         Common Stock, by purchasing a portion of the principal amount of the
         Note ($720,000) and converted such portion of the Note into 240,000
         shares of Common Stock at $3.00 per share, leaving a balance due under
         the option at $30,000. On March 27, 1997, CNL exercised the remaining
         portion of the option in consideration of $30,000. On such date, the
         remaining portion of the Note was converted into 1,093,333 shares of
         Common Stock, the Bank transferred 241,667 shares of Common Stock to
         CNL and the Debt Claim was extinguished.

         As of April 30, 1997, $74,735 had been loaned to the Company by CNL.
         Subsequent to April 30, 1997 an additional $841,500 had been loaned to
         the Company by CNL.

     Bridge Loans
         In December 1996 and January 1997, the Company obtained bridge
         financing from seven (7) lenders in the amount of $200,000. In exchange
         for making the loans to the Company, each lender received two (2)
         promissory notes. Certain Notes are in the aggregate principal amount
         of $150,000 and the other Notes are in the aggregate principal amount
         of $50,000. Each of the Notes bears interest at the rate of eight
         percent (8%) per annum. The Notes are due and payable upon the earlier
         of (i) December 31, 1997 or (ii) the date on which the proposed stock
         offering closes. The Company intends to use a portion of the net
         proceeds of the proposed offering to repay the Notes.

(4)  DUE TO OFFICERS

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

(5)  CAPITAL STOCK

     The Series A Preferred Stock provides 4% ($.02 per share) cumulative
     dividends, which were $87,600 in arrears at April 30, 1997. In addition,
     each share of Series A Preferred Stock may be exchanged for one share of
     Common Stock upon surrender of the Preferred Stock and payment of $1,200
     per share. The Company may redeem the Series A Preferred Stock at $.50 per
     share plus accrued and unpaid dividends.

                                                                            F-10

<PAGE>


                               Conolog Corporation
                        Notes to the Financial Statements
           April 30, 1997 (Unaudited) and July 31, 1996, 1995 and 1994




(5)  CAPITAL STOCK (Continued)

     The Series B Preferred Stock provides cumulative dividends of $.90 per
     share which were $25,743 in arrears at April 30, 1997. In addition, each
     five shares of Series B Preferred Stock is convertible into .20 shares of
     Common Stock. The Company may redeem the Series B Preferred Stock at $15 
     per share plus accrued and unpaid dividends.

(6)  WRITE-OFF OF OBSOLETE OR EXCESS INVENTORIES

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

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

(7)  INCOME TAXES

     Income taxes are comprised of the following:

<TABLE>
<CAPTION>
                                                 April 30,                                   July 31,
                                               --------------        ---------------------------------------------------------
                                                   1997                  1996                  1995                 1994
                                               --------------        --------------       ---------------       --------------
                                                (Unaudited)
<S>                                           <C>                  <C>                   <C>                   <C>            
Deferred Income Taxes (Benefit)               $             -      $              -      $      (492,352)      $             -
Current Income Taxes
     Federal                                            9,684                     -                     -                    -
     State                                                200                   200                   100                   50
                                               --------------        --------------       ---------------       --------------
                                              $         9,884      $            200      $      (492,252)      $            50
                                               ==============        ==============       ===============       ==============
</TABLE>

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

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

     2000, $26,300 in 2001 and $64,900 in 2002.

     The above net operating loss created a deferred tax asset that has been
     fully reserved. The amount is $1,185,209. The Federal income taxes accrued
     at April 30, 1997 is the result of the corporation being subject to the
     alternative minimum tax rules.




                                                                            F-11

<PAGE>


                               Conolog Corporation
                        Notes to the Financial Statements
           April 30, 1997 (Unaudited) and July 31, 1996, 1995 and 1994



(8)  EXTRAORDINARY ITEM

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

(9)  LEASES

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

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

                                                       July 31,
                                          -----------------------------------
                                               1996                1995
                                          ---------------     ---------------

     Machinery and equipment              $       303,574     $       322,239
     Less allowance for amortization              263,832             248,013
                                          ---------------     ---------------

                                          $        39,742     $        74,226
                                          ===============     ===============

     Lease amortization is included in depreciation expense.


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


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


                                                                            F-12


<PAGE>


                               Conolog Corporation
                        Notes to the Financial Statements
           April 30, 1997 (Unaudited) and July 31, 1996, 1995 and 1994



(9)  LEASES (Continued)

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


     Year Ended July 31,
     -------------------
             1997                                             $        7,659
             1998                                                      4,808
             1999                                                      4,808
                                                              --------------
                                                              $       17,275
                                                              ==============

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

(10) MAJOR CUSTOMERS AND EXPORT SALES

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



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


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

(11) SUBSEQUENT EVENTS (UNAUDITED)

     On or about September 11, 1997, the Company filed with the SEC a
     Registration Statement to sell and issue 700,000 units consisting of one
     share of Common Stock and four redeemable Class A Common Stock Purchase
     Warrants.

     All costs associated with this offering will be deferred and deducted from
     the proceeds from the sale of stock. If the Company does not complete this
     offering, such costs will be charged to expense.

     The Registration Statement also covers the offering of 1,200,000 Class A
     Warrants owned by certain selling security holders, the resale of the
     Common Stock underlying the Class A Warrants and the exercise of the Class
     A Warrants by the transferees of the selling security holders. The Company
     will not receive any of the proceeds from the sale of the securities of the
     selling security holders.


                                                                            F-13

<PAGE>


                               Conolog Corporation
                        Notes to the Financial Statements
           April 30, 1997 (Unaudited) and July 31, 1996, 1995 and 1994


(11) SUBSEQUENT EVENTS (UNAUDITED) (Continued)

     The expenses of the offering are estimated to be $400,000, with the
     proceeds of approximately $2,750,000 going to the Company.

     During the quarter ended April 30, 1997, the Company obtained bridge
     financing in the amount of $200,000. In exchange for making the loans to
     the Company, the Company executed in favor of the lenders two promissory
     notes. Certain bridge notes are in the aggregate principal amount of
     $150,000, and the other bridge notes are in the aggregate principal amount
     of $50,000. Each of the bridge notes bears interest at the rate of 8% per

     annum. The bridge notes are due and payable upon the earlier of (i)
     December 31, 1997 or (ii) the date of which the offering closes.



                                                                            F-14

<PAGE>


     No dealer, salesman or other person has been authorized to give any
information or to make any representations not contained in this Prospectus and
if given or made, such information or representations must not be relied upon as
having been authorized by the Company or any Underwriter. Neither the delivery
of this Prospectus nor any sale made hereunder shall under any circumstances
create any implication that there has been no change in the affairs of the
Company since the date hereof. This Prospectus does not constitute an offer to
sell or a solicitation of an offer to buy any of the securities offered hereby
in any jurisdiction to any person to make such offer or solicitation in such
jurisdiction.

                                 ---------------


                                TABLE OF CONTENTS


                                                                          Page
                                                                          ----
Prospectus Summary.....................................................
The Offering...........................................................
Summary Financial
  Information..........................................................
Risk Factors...........................................................
Use Of Proceeds........................................................
Capitalization.........................................................
Bridge Financing.......................................................
Dividends..............................................................
Selected Financial Information.........................................
Management's Discussion and
 Analysis of Financial
 Condition and Results of
 Operations............................................................
Market Price for Securities ...........................................
Business...............................................................
Management.............................................................
Certain Relationships
 and Related Transactions..............................................
Principal Shareholders.................................................
Description of
 Securities............................................................
Shares Available for
 Future Sales..........................................................
Underwriting...........................................................

Selling Securityholders................................................
Legal Proceedings......................................................
Legal Matters..........................................................
Experts................................................................
Financial Statements...................................................


                                 ---------------


Until ________________,1997 (25 days after the date of this Prospectus), all
dealers effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.



                                  700,000 UNITS


                               CONOLOG CORPORATION


                                 ---------------

                                   PROSPECTUS

                                 ---------------


                              IAR Securities Corp.


                                 ______ __, 1997



                                 ---------------




<PAGE>




                   Subject to Completion, dated _____ __, 1997

Alternate Prospectus

                               CONOLOG CORPORATION

                1,200,000 Class A Common Stock Purchase Warrants

     The securities offered hereby consist of 1,200,000 Class A Common Stock
Purchase Warrants ("Class A Warrants"), of Conolog Corporation, a Delaware
corporation ("Conolog" or the "Company") which have been issued to certain
non-affiliated persons (the "Selling Securityholders"). Each Class A Warrant
entitles the holder to purchase one share of the Company's Common Stock, at an
exercise price of $6.00, subject to adjustment, at any time through August 16,
1998. The Class A Warrants are subject to redemption by the Company at any time
on not less than 30 days' notice at $.05 per Warrant, provided the average
closing price of the Common Stock for 20 consecutive trading days ending within
15 days prior to the notice exceeds $7.20 per share. See "Description of
Securities".

     The Class A Warrants offered by this Prospectus may be sold from time to
time by the Selling Securityholders or their transferees. No underwriting
arrangements have been entered into by the Selling Securityholders. The
distribution of the securities by the Selling Securityholders may be effected in
one or more transactions that may take place on the over-the-counter market
including ordinary broker's transactions, privately negotiated transactions or
through sales to one or more dealers for resale of such securities as principals
at market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. Usual and customary or
specially negotiated brokerage fees may be paid by the Selling Securityholders
in connection with sales of such securities.

     On the date hereof the Company commenced a public offering of 700,000
Units, each Unit consisting of one (1) share of Common Stock and four (4) Class
A Warrants. See "Concurrent Sales."

     The Company will not receive any of the proceeds for the sale of securities
by the Selling Securityholders. All costs incurred in the registration of the
securities of the Selling Securityholders are being borne by the Company. See
"Selling Securityholders."

     The Company's Common Stock and Class A Warrants are currently trading on
the Nasdaq SmallCap Market ("Nasdaq"). On _________, 1997, the closing price for
the Common Stock and Class A Warrants were $_______ and $______, respectively.

     AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES A HIGH DEGREE OF
RISK. AN INVESTMENT IN THESE SECURITIES SHOULD BE CONSIDERED ONLY BY THOSE
PERSONS CAPABLE OF SUSTAINING THE LOSS OF THEIR ENTIRE INVESTMENT. SEE "RISK
FACTORS" WHICH BEGIN ON PAGE _____ AND "DILUTION."



                                       A-1

<PAGE>



     THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.


           The date of this Prospectus is _____________________, 1997





                                       A-2


<PAGE>



                                CONCURRENT SALES

     On the date of this Prospectus, a registration statement under the
Securities Act with respect to an underwritten public offering (the "Offering")
of securities by the Company was declared effective by the Securities and
Exchange Commission ("SEC"), and the Company commenced the sale of the
securities offered thereby. The securities consist of 700,000 Units, each unit
consisting of one (1) share of Common Stock and (4) Class A Warrants (without
giving effect to the Over-Allotment Option granted to the Representative of the
Offering). Sales of securities under this Prospectus by the Selling
Securityholders or even the potential of such sales may have an adverse effect
on the market price of the Company's securities.

                             SELLING SECURITYHOLDERS

     This registration statement, of which this Prospectus forms a part, also
covers the registration of 1,200,000 Class A Warrants. All of such securities
are expected to become tradeable on or about the date of this Prospectus. Sales
of the Class A Warrants being offered by the Selling Securityholders hereby or
the Common Stock underlying the Class A Warrants or even the potential of such
sales, would likely have an adverse effect on the market prices of the
securities being offered for sale by the Company.

     The following table sets forth the beneficial ownership of the securities
of the Company held by each person who is a Selling Securityholder and by all
Selling Securityholders as a group prior to this Offering and after this
Offering, assuming all of the Class A Warrants owned by the Selling
Securityholders are sold.


<TABLE>
<CAPTION>
                                                                 Class A          Percent of Class A
                                                             Warrants Owned         Warrants Owned
                                                             --------------         --------------
                                                         Prior to         After   Prior to      After
                                                         Offering       Offering  Offering    Offering
                                                         --------       --------  --------    --------
Name of Beneficial Owner
------------------------
<S>                                                     <C>                 <C>    <C>           <C>
Ekistics, Inc. ......................................     300,000           0      12.84%        0%
Blue Star Group Investment, Ltd. ....................     696,000           0      29.80%        0%
James Solakian ......................................     120,000           0       5.14%        0%
Bruce Ungerleider ...................................      30,000           0       1.28%        0%
Harold Yordy ........................................      27,000           0       1.16%        0%
Michael Yordy .......................................      27,000           0       1.16%        0%

       Total ........................................   1,200,000           0      51.37%        0%
</TABLE>


     None of the Selling Securityholders are affiliated with the Company in any
capacity, has had any business relationship with the Company at any time nor
owned any of the Company's Common Stock beneficially or of record prior to this
Offering.


                                       A-3

<PAGE>



     The securities offered thereby may be sold from time to time directly by
the Selling Securityholders. Alternatively, the Selling Securityholders may from
time to time offer such securities through underwriters, dealers or agents. The
distribution of securities by the Selling Securityholders may be effected in one
or more transactions that may take place on the over-the-counter market,
including ordinary broker's transactions, privately-negotiated transactions or
through sales to one or more broker-dealers for resale of such securities as
principals, at market prices prevailing at the time of sale, at prices related
to such prevailing market prices or at negotiated prices. Usual and customary or
specifically negotiated brokerage fees or commissions may be paid by the Selling
Securityholders in connection with such sales of securities. The Selling
Securityholders and intermediaries through whom such securities are sold may be
deemed "underwriters" within the meaning of the Act with respect to the
securities offered, and any profits realized or commissions received may be
deemed underwriting compensation.

     At the time a particular offer of securities is made by or on behalf of a
Selling Securityholder, to the extent required, a prospectus will be distributed
which will set forth the number of securities being offered and the terms of the
offering, including the name or names of any underwriters, dealers or agents, if
any, the purchase price paid by any underwriter for securities purchased from
the Selling Securityholder and any discounts, commissions or concessions allowed
or reallowed or paid to dealers, and the proposed selling price to the public.

     Under the Exchange Act, and the regulations thereto, any person engaged in
a distribution of the securities of the Company offered by the Selling
Securityholders may not simultaneously engage in market-making activities with
respect to such securities of the Company during the applicable "cooling off"
period (up to 5 days) prior to the commencement of such distribution. In
addition, and without limiting the foregoing, the Selling Securityholders will
be subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including without limitation, Regulation M, in
connection with transactions in such securities, which provisions may limit the
timing of purchase and sales of such securities by the Selling Securityholders.

                              PLAN OF DISTRIBUTION

     The securities offered hereby may be sold from time to time directly by the
Selling Securityholders. Alternatively, the Selling Securityholders may from
time to time offer such securities through underwriters, dealers or agents. The
distribution of securities by the Selling Securityholders may be effected in one

or more transactions, privately-negotiated transactions or through sales to one
or more broker-dealers for resale of such shares as principals, including the
Representative, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices. Usual and
customary or specifically negotiated brokerage fees or commissions may be paid
by the Selling Securityholders in connection with such sales of securities. The
Selling Securityholders and intermediaries through whom such securities are sold
may be deemed "underwriters" within the meaning of the Securities Act with
respect to the securities offered, and any profits realized or commissions
received may be deemed underwriting compensation.



                                       A-4

<PAGE>



     At the time of particular offer of securities is made by or on behalf of a
Selling Securityholder, to the extent required, a Prospectus will be distributed
which will set forth the number of shares being offered and the terms of the
offering, including the name or names of any underwriters, dealers or agents, if
any, the purchase price paid by any underwriter for shares purchased from the
Selling Securityholder and the discounts, commissions or concessions allowed or
reallowed or paid to dealers, and the proposed selling price to the public.





                                       A-5


<PAGE>



     No dealer, salesman or other person has been authorized to give any
information or to make any representations not contained in this Prospectus and
if given or made, such information or representations must not be relied upon as
having been authorized by the Company or any Underwriter. Neither the delivery
of this Prospectus nor any sale made hereunder shall under any circumstances
create any implication that there has been no change in the affairs of the
Company since the date hereof. This Prospectus does not constitute an offer to
sell or a solicitation of an offer to buy any of the securities offered hereby
in any jurisdiction to any person to make such offer or solicitation in such
jurisdiction.


                                 ---------------


                                TABLE OF CONTENTS

                                                                         Page
                                                                         ----

Prospectus Summary.....................................................
The Offering...........................................................
Summary Financial
  Information..........................................................
Risk Factors...........................................................
Use of Proceeds of Company Offering....................................
Capitalization.........................................................
Bridge Financing.......................................................
Dividends..............................................................
Selected Financial Information.........................................
Management's Discussion and
Analysis of Financial
 Condition and Results of
 Operations............................................................
Market Price for Securities............................................
Business...............................................................
Management.............................................................
Certain Relationships
 and Related Transactions..............................................
Principal Shareholders.................................................
Description of
 Securities............................................................
Shares Available for
 Future Sales..........................................................
Concurrent Sales.......................................................
Selling Securityholders................................................
Plan of Distribution...................................................
Legal Proceedings......................................................
Legal Matters..........................................................
Experts................................................................

Financial Statements...................................................


                                 ---------------


Until        , 1997 (25 days after the date of this Prospectus), all dealers 
effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.




                           1,200,000 CLASS A WARRANTS


                               CONOLOG CORPORATION


                                 ---------------

                                   PROSPECTUS

                                 ---------------






                                _______ __, 1997



                                 ---------------




<PAGE>






                                     PART II
                     INFORMATION NOT REQUIRED IN PROSPECTUS


Item 13.   Other Expenses of Issuance and Distribution.

           The estimated expenses in connection with this offering are as
           follows:

           SEC filing fee .....................................  $     9,932.82
           Nasdaq filing fee ..................................  $     7,500.00
           NASD filing fee ....................................  $     3,776.50
           Printing and engraving* ............................  $    40,000.00
           Transfer Agent Fees*  ..............................  $     2,500.00
           Legal fees and expenses* ...........................  $    90,000.00
           Accounting fees and expenses* ......................  $    25,000.00
           Blue Sky fees and expenses*  .......................  $    30,000.00
           Miscellaneous expenses* ............................  $    16,290.68
                                                                 --------------

                     Total ....................................  $   225,000.00

-----------
*    Indicates expenses that have been estimated for the purpose of filing.


Item 14. Indemnification of Directors and Officers.

     Indemnification is provided for in Article Eighth of the Company's
Certificate of Incorporation and such provisions are incorporated herein by
reference.

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

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


     Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such


                                      II-1

<PAGE>



indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. If a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person in connection with the
securities being registered) the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

Item 15. Recent Sales of Unregistered Securities.

     There were no underwriting discounts and commissions paid in connection
with the issuance of any shares of Common Stock within the last three (3) years
prior to the date of this Registration Statement other than those paid to I.A.
Rabinowitz & Co., the underwriter of the August 1995 Offering.

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

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

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

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

     On August 16, 1995, Chase Manhattan Bank converted approximately $3,000,000
of debt into 375,000 shares of Common Stock.

     Between February and March, 1997, all of the principal amount of The Chase
Manhattan Note was converted into 1,400,000 shares of Common Stock and issued to
CNL Holdings, Inc., the holder of the option to purchase such Note. See
"Management's Discussion and Analysis of Financial Condition and Results of

Operations-Credit Facility."

     In June 1997, the Company issued 360,000 shares of Common Stock to eight
individuals, all of whom are employees of the Company, as follows: Robert Benou
(200,000), Arpad Havasy (50,000), Marc Benou (50,000) Thomas Fogg (25,000), Dina
Stellwagen (20,000), Louis Massad (10,000), Mary Ann Edwards (2,500) and Albert
S. Lenhardt (2,000).




                                      II-2


<PAGE>



Item 16. Exhibits.

Exhibit No.               Description of Exhibit
-----------               ----------------------

      1(aa)*              Form of Underwriting Agreement

      1(b)(b)*            Form of Selected Dealer Agreement.

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

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

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

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

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

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

       (g)                Certificate of Ownership and Merger respecting merger
                          of Conolog Corporation into the Registrant and the
                          changing of the Registrant's name from "DSI Systems,

                          Inc." to "Conolog Corporation" - incorporated by
                          reference to Exhibit 3 to the Registrant's Current
                          Report on Form 8-K for June 1975.

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

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

       (b)**              Specimen Certificate for Class A Warrant



                                      II-3

<PAGE>



       (c)**              Warrant Agreement between Conolog Corporation and 
                          Continental Stock Transfer & Transfer Co.

      (cc)****            Amendment No. 1 to Warrant Agreement

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

      (ee)*               Form of Financial Consulting Agreement

    5.1****               Opinion of Bernstein & Wasserman on legality of 
                          securities being registered.

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

   10.2**                 Conolog Corporation 1995/1996 Stock Option Plan.

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

   10.3(A)*****           Amendment No. 1 dated January 3, 1997 to Option and 
                          Purchase, Sale and Assignment Agreement (dated as of 
                          September 12, 1996), by and between The Chase 
                          Manhattan Bank and CNL Holdings, Inc.

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


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

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

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

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

   23.1 ****              Consent of Bernstein & Wasserman (included in Exhibit 
                          No. 5)

   23.2*                  Consent of Rosenberg Rich Baker Berman & Company,  
                          Independent Certified Public Accountants.

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


                                      II-4

<PAGE>



***    Incorporated by reference to the Registrant's Registration Statement on
       Form S-1 (333-14247).
****   To be filed by amendment.
*****  Incorporated by reference to Registrant's Form 8-K filed 
       February 4, 1997.




                                      II-5


<PAGE>



Item 17. Undertakings.

     (a) The undersigned registrant hereby undertakes to provide to the
Representative at the closing specified in the Underwriting Agreement,
certificates in such denominations and registered in such names as required by
the Representative to permit prompt delivery to each purchaser.

     (b) Rule 415 Offering

     The undersigned registrant will:

     1. File, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to:

          (i) Include any prospectus required by Section 10(a)(3) of the
     Securities Act;

          (ii) Reflect in the prospectus any facts or events arising after the
     effective date of this registration statement (or the most recent
     post-effective amendment thereto), which, individually or in the aggregate,
     represent a fundamental change in the information set forth in the
     registration statement;

          (iii) Include any material information with respect to the plan of
     distribution not previously disclosed in this registration statement or any
     material change to such information in this registration statement.

     2. For determining liability under the Securities Act, treat each such
post-effective amendment as a new registration statement relating to the
securities offered, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering.

     3. File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.

     (c) Filings Incorporating Subsequent Exchange Act Documents by Reference.

     The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing with a employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
herein and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

     (d) Indemnification

     Insofar as indemnification for liabilities arising under the Securities Act

may be permitted to directors, officers or controlling persons of the Registrant
pursuant to the provisions referred to in Item 24 of this Registration Statement
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the


                                      II-6

<PAGE>



payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.

     (e) Rule 430A

     The undersigned Registrant hereby undertakes that:

     (1) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in the form of a
prospectus filed by the registrant under Rule 424(b)(1) or (4) or 497(h) under
the Securities Act as part of this Registration Statement as of the time the
Commission declared it effective.

     (2) For purposes of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new Registration Statement for the securities offered in the
Registration Statement, and that the offering of the securities at that time as
the initial bona fide offering of those securities.

     (f) Request of Acceleration of Effective Date

     The Registrant may elect to request acceleration of the Registration
Statement under Rule 461 of the 1933 Act.


                                      II-7


<PAGE>



                                   SIGNATURES


     Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-1 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of New
York, State of New York, on the 11th day of September, 1997.


                                         CONOLOG CORPORATION


                                        /s/ Robert S. Benou
                                        -----------------------------
                                        By: Robert S. Benou
                                            President, Director, Chief
                                            Executive Officer, Chief
                                            Financial Officer and Comptroller


     Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

       Signature                 Title                              Date
       ---------                 -----                              ----

/s/Robert S. Benou      President, Director, Chief            September 11, 1997
---------------------   Executive Officer, Chief           
Robert S. Benou         Financial Officer and Comptroller  


/s/Arpad J. Havasy      Executive Vice President,             September 11, 1997
---------------------   Secretary, Treasurer and 
Arpad J. Havasy         Director                 


/s/ Marc R. Benou       Vice President,                       September 11, 1997
---------------------   Assistant Secretary and 
Marc R. Benou           Director                


/s/ Louis S. Massad     Director                              September 11, 1997
---------------------
Louis S. Massad


                                      II-8
[{"type": "S-1", "sequence": "1", "description": "REGISTRATION STATEMENT", "secsgml_size_bytes": 285172}]
{"company-data": {"conformed-name": "CONOLOG CORP", "cik": "0000023503", "assigned-sic": "3679", "irs-number": "520853566", "state-of-incorporation": "DE", "fiscal-year-end": "0731"}, "filing-values": {"form-type": "S-1", "act": "33", "file-number": "333-35489", "film-number": "97679421"}, "business-address": {"street1": "5 COLUMBIA RD", "city": "SOMERVILLE", "state": "NJ", "zip": "08876", "phone": "9087228081"}, "mail-address": {"street1": "5 C0LUMBIA ROAD", "city": "SOMERVILLE", "state": "NJ", "zip": "08876-3588"}, "former-company": [{"former-conformed-name": "DSI SYSTEMS INC", "date-changed": "19751218"}, {"former-conformed-name": "DATA SCIENCES INC", "date-changed": "19751218"}, {"former-conformed-name": "MICROSEARCH SYSTEMS INC", "date-changed": "19690115"}]}
As filed with the Securities and Exchange Commission on September 12, 1997
                                                     Registration No. 333-______

--------------------------------------------------------------------------------
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   ----------

                                    FORM S-1
                             REGISTRATION STATEMENT
                                      UNDER
                           THE SECURITIES ACT OF 1933

                                   ----------

                               Conolog Corporation
                         (Name of issuer in its charter)

      Delaware                           3679                     52-0853566
(State or other juris-       (Primary Standard Industrial     (I.R.S. Employer
diction of organization)       Classification Code No.)      Identification No.)

                                 5 Columbia Road
                              Somerville, NJ 08876
                                 (908) 722-8081
          (Address and telephone number of principal executive offices)

                           Robert S. Benou, President
                               Conolog Corporation
                                 5 Columbia Road
                              Somerville, NJ 08876
                                 (908) 722-8081
            (Name, address and telephone number of agent for service)

                                   Copies to:

Stuart Neuhauser, Esq.                            Steven A. Morse, Esq.
Bernstein & Wasserman, LLP                        Lester Morse, P.C.
950 Third Avenue                                  111 Great Neck Road
New York, NY  10022                               Great Neck, NY 11021
(212) 826-0730                                    (516) 487-1446
(212) 371-4730 (Fax)                              (516) 487-1452 (Fax)

     Approximate date of proposed sale to the public: As soon as reasonably
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis, pursuant to Rule 415 under the Securities Act of
1933, check the following box: |X|

     If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]

     If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

     If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

                         CALCULATION OF REGISTRATION FEE
=================================================================================================
                                                    Proposed          Proposed
      Title of Each                             Maximum Offering       Maximum         Amount of
Class of Securities to be        Amount to be      Price per          Aggregate      Registration
       Registered                 Registered      Security(1)      Offering Price         Fee
=================================================================================================
Units, each consisting of           805,000          $5.00           $4,025,000        $1,219.58
one (1) Share of Common
Stock, $1.00 par value per
Share and four (4) Class A
Warrants(2)
-------------------------------------------------------------------------------------------------

Common Stock, $1.00 par             805,000             --                   --               --
value
-------------------------------------------------------------------------------------------------

Class A Warrants                  3,220,000             --                   --               --
-------------------------------------------------------------------------------------------------

Common Stock, $1.00 par           3,220,000          $6.00          $19,320,000        $5,853.96
value underlying Class A
Warrants
-------------------------------------------------------------------------------------------------

Representative's Unit                70,000          $6.00             $420,000          $127.26
Purchase Option

-------------------------------------------------------------------------------------------------

Common Stock, $1.00 par              70,000             --                   --               --
value in Representative's
Unit Purchase Option
-------------------------------------------------------------------------------------------------

Class A Warrants in                 280,000             --                   --               --
Representative's Unit
Purchase Option
-------------------------------------------------------------------------------------------------
ii
=================================================================================================
                                                    Proposed          Proposed
      Title of Each                             Maximum Offering       Maximum         Amount of
Class of Securities to be        Amount to be      Price per          Aggregate      Registration
       Registered                 Registered      Security(1)      Offering Price         Fee
=================================================================================================
Common Stock, $1.00 par             280,000          $6.00           $1,680,000          $509.04
value underlying
Class A Warrants in
Representative's Unit
Purchase Option
-------------------------------------------------------------------------------------------------

Class A Warrants of               1,200,000           $.10             $120,000           $41.38
Selling Securityholders
-------------------------------------------------------------------------------------------------

Common Stock, $1.00 par           1,200,000          $5.00           $7,200,000        $2,181.60
value underlying Class A
Warrants of Selling
Securityholders
-------------------------------------------------------------------------------------------------

Total Registration and Fee                                          $32,765,000        $9,932.82
=================================================================================================
----------

(1)  Estimated solely for purposes of calculating registration fee pursuant to

     Rule 457 under the Securities Act of 1933, as amended (the "Act"). Pursuant
     to Rule 416 under the Act, this Registration Statement covers such
     additional indeterminate number of shares of Common Stock as may be issued
     by reason of adjustments in the number of shares of Common Stock pursuant
     to anti-dilution provisions contained in the Warrant Agreement governing
     the Class A Warrants and the Representative's Unit Purchase Option. Because
     such additional shares of Common Stock will, if issued, be issued for no
     additional consideration, no registration fee is required.

(2)  Includes 105,000 Units included in the Representatives Over-Allotment
     Option.

     The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.

                                       iii
EXPLANATORY NOTE

     This registration statement covers the primary offering of securities of
Conolog Corporation (the "Company") and the offering of other securities by
certain selling securityholders (the "Selling Securityholders"). The Company is
registering, under the primary prospectus (the "Primary Prospectus"), 805,000
Units, each Unit consisting of one (1) share of Common Stock and four (4) Class
A Warrants. The Selling Securityholders are registering, under an alternate
prospectus (the "Alternate Prospectus"), 1,200,000 Class A Warrants. The
Alternate Prospectus pages which follow the Primary Prospectus, contain certain
sections which are to be combined with all of the sections contained in the
Primary Prospectus, with the following exceptions: the front and back cover
pages, and the sections entitled "The Offering" and "Selling Securityholders."
In addition, the section entitled "Concurrent Sales" from the Alternate
Prospectus pages will be added to the Alternate Prospectus. Furthermore, all
references contained in the Alternate Prospectus to "the Offering" or "this
Offering" shall refer to the Company's offering under the Primary Prospectus.

                                       iv
CONOLOG CORPORATION

                              CROSS REFERENCE SHEET
                          Between Items in Registration
                    Statement on Form S-1 and the Prospectus

   Item in Form S-1                 Prospectus Caption
   ----------------                 ------------------

1. Front of Registration            Forepart of Registration
   Statement and Outside Front      Statement and Outside Front
   Cover of Prospectus              Cover Page of Prospectus

2. Inside Front and Outside Back    Inside Front and Outside Back
   Cover Pages of Prospectus        Cover Page of Prospectus

3. Summary Information and Risk     Prospectus Summary; Risk Factors
   Factors

4. Use of Proceeds                  Use of Proceeds

5. Determination of Offering        Outside Front Cover Page of
   Price                            Prospectus; Risk Factors and Underwriting

6. Dilution                         Risk Factors

7. Selling Securityholders          Selling Securityholders

8. Plan of Distribution             Underwriting

9. Description of Securities        Description of Securities
   to be registered

10.Interests of Named Experts and   Legal Matters; Experts
   Counsel

11.Information with Respect to      Prospectus Summary; Business;
   the Registrant                   Management's Discussion and Analysis of
                                    Financial Condition and Results of Operation

12.Disclosure of Commission         Certain Transactions; Part II - Item 14
   Position on Indemnification
   for Securities Act Liabilities

                                        v
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such an offer, solicitation of sale would be unlawful
prior to registration or qualification under the securities laws of any State.

                 Subject to Completion, dated September 12, 1997

Prospectus

                               CONOLOG CORPORATION

                                  700,000 Units

     Conolog Corporation, a Delaware corporation ("Conolog" or the "Company") is
offering (the "Offering") 700,000 units (the "Units") at a price of $5.00 per
Unit. Each Unit consists of one (1) share of Common Stock, par value $1.00 per
share ("Common Stock") and four (4) Redeemable Class A Common Stock Purchase
Warrants ("Class A Warrants"). The Common Stock and Class A Warrants are
detachable and may trade separately immediately upon issuance. Each Class A
Warrant entitles the holder to purchase one (1) share of Common Stock, at an
exercise price of $6.00, subject to adjustment, at any time through August 16,
1998. The Class A Warrants are subject to redemption by the Company at any time
on not less than thirty (30) days notice at $.05 per Warrant, provided the
average closing price of the Common Stock exceeds $7.20 per share for twenty
(20) consecutive trading days ending within fifteen (15) days prior to the
notice. See "Description of Securities."

     The registration statement of which this prospectus forms a part also
covers the offering of 1,200,000 Class A Warrants owned by certain selling
securityholders (the "Selling Securityholders"), the resale of the Common Stock
underlying the Class A Warrants by the Selling Securityholders and the exercise
of the Class A Warrants by the transferees of the Selling Securityholders. The
securities held by the Selling Securityholders may be sold concurrently with or
after this Offering. These Class A Warrants are identical to the Class A
Warrants being offered by the Company. Sales of such securities or even the
potential of such sales at any time may have an adverse effect on the market
prices of the securities offered hereby. See "Selling Securityholders."

     The registration statement of which this prospectus forms a part covers the
3,220,000 shares of Common Stock issuable upon exercise of the Class A Warrants
offered by the Company (which includes the Class A Warrants included in the
over-allotment option), and the 280,000 shares of Common Stock issuable upon
exercise of the Class A Warrants included in the Representative's Unit Purchase
Option. See "Description of Securities."

     The Company's Common Stock and Class A Warrants are currently trading on

the Nasdaq SmallCap Market ("Nasdaq"). On _________, 1997, the closing price for
the Common Stock and Class A Warrants were $_______ and $______, respectively.

                                       vi
AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES A HIGH DEGREE OF
RISK. AN INVESTMENT IN THESE SECURITIES SHOULD BE CONSIDERED ONLY BY PERSONS
CAPABLE OF SUSTAINING THE LOSS OF THEIR ENTIRE INVESTMENT. SEE "RISK FACTORS"
WHICH BEGIN ON PAGE ___ AND "DILUTION".

     THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

--------------------------------------------------------------------------------
                     Price to Public     Discounts and     Proceeds to the
                                         Commissions(1)       Company(2)
--------------------------------------------------------------------------------
Per Unit ..........       $5.00              $.50               $4.50
--------------------------------------------------------------------------------
Total (3) .........    $3,500,000          $350,000          $3,150,000
--------------------------------------------------------------------------------

(1) Does not include additional underwriting compensation to be paid by the
Company IAR Securities Corp. (the "Representative") in the form of (a) warrants
to purchase up to 70,000 Units, each Unit consisting of one (1) share of Common
Stock and four (4) Class A Warrants exercisable over a four year period
commencing one year from the date of this Prospectus at an exercise price of
$6.00 per Unit (the "Representative's Unit Purchase Option"), (b) a
non-accountable expense allowance (the "Non-Accountable Expense Allowance")
equal to three percent (3%) of the aggregate public offering price of the Units,
namely $105,000 (or $120,750 assuming exercise in full of the Over-Allotment
Option, as defined below), and (c) consulting fees of $70,000 payable to the
Representative in full at the closing of the public offering. The Company and
the Representative have agreed to indemnify one another against certain
liabilities arising under the Securities Act of 1933, as amended. See
"Underwriting."

(2) Before deducting expenses of this offering payable by the Company estimated
to be $400,000, including the Representative's Non-Accountable Expense Allowance
of $105,000 and the $70,000 financial consulting fee referred to above. After
deducting such expenses, the net proceeds to the Company will be approximately
$2,750,000. See "Use of Proceeds."

                                        1
(3) The Company has granted the Representative an option to purchase up to
105,000 Units at any time before 45 days from the date hereof solely for
covering over-allotments (the "Over-Allotment Option"). If the Over-Allotment
Option is exercised in full the total price to the public will be $4,025,000,
the total discounts and commissions will be $402,500 and the estimated expenses
of the Offering will be $415,750. The net proceeds to the Company after
deducting the expenses of the Offering would then be $3,206,750. See "Use of
Proceeds."

                              IAR SECURITIES CORP.

               The date of this Prospectus is ____________, 1997.

                                        2
[Picture]

                                        3
[Picture]

                                        4
The Securities are being offered subject to prior sale, when, as and if
delivered to and accepted by the Representative, and subject to certain other
conditions. The Representative reserves the right to withdraw, cancel or modify
such offer without notice and to reject orders in whole or in part. It is
expected that delivery of the Securities will be made on or about ___________,
1997.

     NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE
SECURITIES TO WHICH THIS PROSPECTUS RELATES OR AN OFFER TO OR SOLICITATION OF
ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.

     CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE UNITS, COMMON
STOCK AND/OR CLASS A WARRANTS, INCLUDING OVER-ALLOTMENT, STABILIZING AND
SHORT-COVERING TRANSACTIONS AND THE IMPOSITION OF PENALTY BIDS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."

                              AVAILABLE INFORMATION

     The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports and other information filed by the
Company can be inspected and copied (at prescribed rates) at the Commission's
Public Reference Section, 450 Fifth Street, N.W., Washington, D.C., as well as
the New York Regional Office, Seven World Trade Center, New York, New York, and
the Chicago Regional Office, Northwestern Atrium Center, 500 West Madison
Street, Chicago, Illinois. The Commission maintains a Web site on the Internet
(http://www.sec.gov) that contains reports, proxy and information statements and
other information regarding issuers that file electronically with the Commission
through the Electronic Data Gathering, Analysis, and Retrieval System (EDGAR).

     The Company has filed with the Commission a registration statement on Form
S-1 (herein together with all amendments and exhibits referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), of which this Prospectus forms a part. This Prospectus does
not contain all of the information set forth in the Registration Statement,
certain parts of which have been omitted in accordance with the rules and
regulations of the Commission. For further information, reference is made to the
Registration Statement.

                                        5
PROSPECTUS SUMMARY

     This summary is qualified in its entirety by the more detailed information,
financial statements and notes thereto appearing elsewhere in this Prospectus.
In addition, unless otherwise indicated to the contrary, all information
appearing herein does not give effect to the exercise of (i) the Over-Allotment
Option; (ii) the Class A Warrants (including Class A Warrants included in the
Over-Allotment Option and those owned by the Selling Securityholders); (iii) the
outstanding Class A Warrants prior to the Effective Date; (iv) the
Representative's Unit Purchase Option; or (v) the 1995 Unit Purchase Option. See
"Description of Securities," "Bridge Financing," and "Underwriting."

The Company

     Conolog Corporation, a Delaware corporation (the "Company" or "Conolog")
was organized in 1968 and is engaged in the design, manufacture (directly or
through subcontractors) and distribution of small electronic and electromagnetic
components and subassemblies for use in telephone, radio and microwave
transmission and reception and other communication areas that are used in both
military and commercial applications. The Company's products are used for
transceiving various quantities, data and protective relaying functions in
industrial, utility and other markets.

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

     Since the 1980's, Conolog has been an active participant in providing
electromagnetic wave filters for major military programs, such as the Patriot

Missile, Hawk Missile and Sea Sparrow

                                        6
Missile. In addition to these projects, Conolog components are currently used by
the military in tanks, the Apache helicopters and the MK-50 torpedoes.

     During 1987, the Company made the strategic decision to redirect the
Company's focus from military to commercial markets. Since that time, the
Company has refocused on manufacturing and marketing its products for the
commercial marketplace rather than depend on the military and defense related
markets. The effort has included the introduction of new products, the redesign
of existing products and increased advertising and marketing efforts, as
permitted by its limited financial resources. The percentage of revenues
attributed to products manufactured for use in commercial applications increased
from approximately 4% of sales in 1981 ($171,000) to approximately 77% of sales
in 1996 ($1,480,000). The decision to embark on this program entailed a major
design effort, including the coordination of outside engineering consultants to
develop a complete line of products aimed at the Company's target markets. The
emphasis was on products for electric utilities, cogeneration of power, gas and
water companies, traffic control for departments of transport (DOT) and airports
utilizing DSP (Digital Signal Processing) technology. DSP designs have long term
stability with minimum or no maintenance, allowing the Company to offer
customers a product line with a 12 year warranty - a first on the market.

     Testing of the Company's first commercial product group, the Teleprotection
Series PTR- 1000, was under way in the latter part of 1992 by Bonneville Power
Administration. This detailed test permitted the Company to "fine tune" the
product for power transmission applications. In March 1994, the PTR-1000 was
approved for use by such utility and thereafter by other utilities and
municipalities. To date, the Company has sold and delivered over 800 PTR-1000
sets to 18 utilities and 5 municipalities, most of which are installed and in
service.

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

The Company launched its industrial grade 1200 Baud Modem for data
transmission/communication, and completed the PTR-1000 System options. Through
1997, the Company designed and is in the process of completing and building the
PTR-1500 Quad System, Protection Equipment, exclusively for the General Electric
Company ("GE"), to be labeled GE-NS50 Series, for worldwide sales as detailed in
the agreement between GE and Conolog dated April 1, 1997.

                                        7
Due to the end of the cold war and the downsizing of the American military,
the Company experienced unexpected sharp reductions of military contracts in
fiscal 1993 (the Company's fiscal year end is July 31) resulting in a 50%
decline in the Company's sales for that year, down to $1,486,298 from $2,997,308
in fiscal 1992. The sales of new products could not replace the decrease in
military sales. The Company, however, continued to pursue sales as aggressively
as its available resources would permit. Sales in fiscal 1994 increased to
$2,044,860, a 37% increase over fiscal 1993. Sales in fiscal 1995 were
$2,090,933 a 2% increase over fiscal 1994. Sales in fiscal 1996 were $1,924,466
an 8% decrease from fiscal 1995. Sales for the first nine months ended April 30,
1997 totaled $978,979, a 35% decrease from $1,519,975 for the same period in
1996. Revenues from the Company's military product sales represented
approximately 60%, 30%, 23% and 18% of sales of the Company in fiscal 1994,
1995, 1996, and in the first nine months ended April 30, 1997, respectively,
reflecting the Company's emphasis on commercial sales and markets.

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

     The Company is presently engaged and focused in two basic market areas: (1)
Military sales via direct contract sales to the military, as subcontractor to
systems producers and to foreign governments; and (2) Commercial sales (under
the tradename " INIVEN" (A Division of Conolog)) via direct sales to end users,
sales to system assemblers and sales to contractors/installers. See "Business".

     On August 16, 1995, the Company completed an underwritten offering ("August
1995 Offering") of its securities by selling 235,750 Units ("Units"), each Unit
consisting of two (2) shares of Common Stock and one (1) Class A Warrant at a
price of $10.00 per Unit. The Company received net proceeds of $1,853,025.

     The Company's executive offices are located at 5 Columbia Road, Somerville,
New Jersey 08876, telephone (908) 722-8081.

                                        8
Present Capitalization

Common Stock ..........................      2,799,736(1)

Class A Warrants ......................      1,135,750

Series A Preferred Stock ..............      155,000(2)

Series B Preferred Stock ..............      1,197(3)

Shareholders of Record ................      _____(4)

The Offering

Securities Offered By the
   Company ............................      700,000 Units, each Unit consisting
                                             of one (1) share of Common Stock,
                                             par value $1.00, and four (4) Class
                                             A Warrants. See "Descriptions of
                                             Securities."

Common Stock to be
Outstanding After Completion
of the Offering .......................      3,499,736

Class A Warrants to be Outstanding
After Completion of the Offering ......      5,135,750 (including 1,200,000
                                             being offered by the Selling
                                             Securityholders)

Terms of Class A Warrants .............      Each Class A Warrant entitles the
                                             holder to purchase one share of the
                                             Company's Common Stock at a price
                                             of $6.00, subject to adjustment, at
                                             any time through August 16, 1998.
                                             The Class A Warrants are subject to
                                             redemption by the Company at any
                                             time on not less than 30 days'
                                             notice at $.05 per Warrant,
                                             provided the average closing price
                                             of the Common Stock exceeds

----------

(1)  Does not include treasury stock. See "Financial Statements".

(2)  Each share of Series A Preferred Stock is convertible into 1 share of
     Common Stock upon payment of $1,200 per share. See "Description of
     Securities".

(3)  The shares of Series B Preferred Stock are convertible into an aggregate of
     239 shares of Common Stock. See "Description of Securities" and "Certain
     Transactions."

(4)  As of _________, 1997.

                                        9
$7.20 per share for 20 consecutive
                                             trading days ending within 15 days
                                             prior to the notice.

Nasdaq SmallCap Market Symbols ........      Common Stock --- CNLG;
                                             Class A Warrants --- CNLGW

Risk Factors ..........................      The securities are subject to a
                                             high degree of risk and substantial
                                             dilution. See "Risk Factors" and
                                             "Dilution."

Use of Proceeds .......................      The net proceeds of this Offering,
                                             estimated at $2,750,000, will be
                                             used to repay certain bridge
                                             financing, to complete the design,
                                             development and implementation of
                                             the PTR-1500 quad system and its
                                             related option modules, repayment
                                             of other indebtedness and for
                                             working capital purposes. See "Use
                                             of Proceeds."

Representative's Compensation .........      IAR Securities Corp. (the
                                             "Representative") will receive as
                                             compensation for its services in
                                             this Offering a ten percent (10%)
                                             discount on the purchase price of
                                             the Units, a three percent (3%)
                                             non-accountable expense allowance

                                             and an option to purchase Units
                                             equal to ten percent (10%) of the
                                             Units sold in this Offering. As
                                             part of the underwriting
                                             arrangements, the Company will
                                             enter into an agreement retaining
                                             the Representative as a financial
                                             consultant to the Company for a two
                                             (2) year period commencing as of
                                             the close of the sale of the Units
                                             offered hereby at an annual fee of
                                             $35,000, for a total of $70,000
                                             payable in full at the Closing of
                                             the Offering, and will pay an
                                             investment banking fee with respect
                                             to any transaction introduced by
                                             the Representative and consummated
                                             and a 4% warrant solicitation fee.
                                             See "Underwriting."

                                       10
Summary Financial Information

     The summary financial information set forth below is derived from and
should be read in conjunction with the more detailed financial statements and
notes appearing elsewhere in this Prospectus.
NINE MONTHS ENDED APRIL 30                          YEAR ENDED JULY 31
                                      --------------------------    ---------------------------------------------------------------

                                           1997          1996       1996            1995         1994          1993          1992
                                           ----          ----       ----            ----         ----          ----          ----
                                      (unaudited)  (unaudited)
Net sales and other income           $   978,979   $ 1,519,975   $ 1,924,466   $ 2,090,933   $ 2,044,860   $ 1,486,298   $ 2,997,308

Income (loss) from 
continuing operations                   (137,662)     (209,402)      293,552    (1,014,296)   (1,182,988)     (322,005)       72,026

Income (loss) from 
continuing operations historic              (.12)         (.20)          .28          (.12)         (.27)         (.07)          .02

Income (loss) from continuing 

operations per share, after 
giving effect to 1-for-100 
reverse  stock split in August 1995                                                 (12.01)       (27.22)        (7.41)         1.66

Pro forma income from continuing 
operations per share*                                                    .12

Total assets                           3,979,136     4,026,335     3,927,834     3,882,235     3,739,294     4,601,015     4,586,003

Long-term debt and capitalized 
lease obligations                              0       949,853         4,973        34,103     3,829,625     3,732,961     2,654,957
*    After giving effect to 1,400,000 shares of Common Stock issuable in
     exchange for the unpaid amount of principal and interest due to the Bank.

                                       11
AT APRIL 30, 1997
                                  -------------------------------------------
                                     ACTUAL          ADJUSTMENT   AS ADJUSTED
                                  -----------        -----------  -----------

Working Capital                   $ 2,928,784   (1)  $ 2,750,000  $ 5,678,784

Total Assets                        3,979,136   (1)    2,403,354    6,382,490

Long-Term Liabilities                 - 0-                -0-          -0-

Stockholders' Equity                3,357,930   (1)   2,750,000     6,107,930

----------

(1) Reflects 700,000 shares of Common Stock included in the Units being offered
herewith; net proceeds to the Company are estimated to be $2,750,000 after
giving effect to Underwriter discounts and expenses of this offering.

                                       12
RISK FACTORS

     In making comparisons with other investments or in considering the success
of other investments, one should bear in mind that the success of any investment
depends upon many factors including opportunity, general economic conditions,
experience and competence of management. There is no representation that the
same positive factors are present in this Company which have been present in
like ventures that have been successful.

     Any person who is considering the purchase of the Securities offered herein
should carefully consider the adverse factors described below. Any one or more
of these factors could have a negative effect on the Company of such impact as
to cause the value of the Company's securities to be greatly diminished.

1. Working Capital; Stockholders' Equity; Prior Periods' Losses and Profits. At
April 30, 1997, the Company had working capital of $2,928,784 and stockholders'
equity of $3,357,930. The Company's continued existence is dependent upon it
successfully expanding its business and attaining profitable operations. The
Company reported losses of $137,662 and income of $293,552 and losses of
1,014,296 and $1,182,988 for the nine months ended April 30, 1997 and for the
years ended July 31,1996, 1995, 1994, respectively. The profits (losses)
reported included inventory write-offs of $0, $50,281, $656,248, and $944,970,
for the same periods, respectively. In addition, reported interest expense for
the same periods were $69,199, $131,854, $253,686, and $362,317, respectively.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations."

2. Risks Attendant to Expansion. The Company intends to utilize a portion of the
net proceeds of this Offering to hire employees, complete the PTR-1500 designing
and testing of mainframe, design, build and test of the option modules and event
recorders, complete the radio interface for the Company's tone and multiplex
products and market the Company's products. Like any business enterprise
operating in a specialized and competitive market, the Company is subject to
many business risks which include, but are not limited to, unforeseen marketing
and promotional expenses, unforeseen negative publicity and competition. Many of
the risks inherent in the Company's business may be unforeseeable or beyond the
control of management. There can be no assurance that the Company will
successfully market the Company's products or develop new products in a timely
or effective manner, which would materially adversely affect the Company's
operating results. See "Use of Proceeds" and "Business".

3. Minimal Sales Staff. The Company employs only 2 marketing executives. In
1995, the Company elected a Vice President of Marketing and Sales who introduced
a comprehensive advertising campaign for the major product lines in water/waste
water and utility publications appearing monthly. In addition, the Company has
signed up to attend the major shows pertaining to water, waster water and power
utilities. Although the response to these efforts have shown promise, the
success of the Company's future marketing efforts will depend on the market
environment and

                                       13
the needs of the economy. See "Business of the Company -- Marketing and Sales"
and "Employees".

4. Reliance on Component Manufacturers. The Company is dependent on outside
suppliers for all of the subcomponent parts and raw materials necessary to
manufacture the Company's products. A shortage, delay in delivery, or lack of
availability of a given part could lead to manufacturing delays, which could
reduce sales until the problem is remedied. All electrical components of the
Company's products are standard stock items for which a replacement vendor can
be readily obtained. The Company is not dependent upon any single supplier. The
Company purchases some custom parts, primarily printed circuit boards. The
failure of a vendor of one of these customized components could cause a lengthy
delay in production, resulting in a loss of revenues. See "Business-Raw
Materials; Inventory" and "Manufacturing".

5. Dependence on Present Management. The success of the Company is dependent
upon the services of its current management, particularly Robert S. Benou, its
President and its key engineers. The Company has entered into an employment
agreement with Mr. Benou. However, if the employment by the Company of Mr. Benou
terminates, or he is unable to perform his duties, the Company may be
substantially affected. The Company intends on obtaining prior to the offering,
key man insurance on the life of Mr. Benou in the amount of $1,000,000, to be
payable to the Company. If the Company were to lose the services of any of its
other key employees, there is no assurance that the Company would be able to
locate and retain a qualified replacement. The prolonged lack of availability of
any current member of senior management, whether as a result of death,
disability or otherwise, could have an adverse effect upon the business of the
Company. See "Management".

6. Competition: Rapid Technological Change. The market for the Company's
products is very competitive. There are several companies engaged in the
manufacture of products of the type produced by the Company, most of which are
substantially larger and have substantially greater name recognition and greater
financial resources and personnel. The principal elements of competition in the
Company's markets include product quality and reliability, price, service and
delivery. Competition is expected to continue and intensify. The market is also
characterized by rapid technological changes and advances. The Company is an
insignificant factor in the industry. There can be no assurance that the Company
will be able to develop or acquire new products to keep the Company competitive
or stay competitive in general. Lack of market acceptance for the Company's
existing or new products, the Company's failure to introduce new products in a
timely or cost effective manner or its failure to increase functionability of
existing products or remain price competitive, would materially adversely affect
the Company's operating results. There can be no assurance that the Company will
be successful in its product development efforts. See "Business-Research and
Development; New Products" and "Competition".

7. Dependence on Large Customers. Sales to the Company's two major customers
during the nine month period ended April 30, 1997 (General Electric and
Bonneville Power Authority) totaled $203,602 and $200,000, respectively (21% and
20%, respectively of all sales). Sales to the

                                       14
Company's major customer in fiscal 1996 (B.C. Hydro-Canada) totaled $401,000
(20% of all sales). Sales to the Company's major customer in fiscal 1995 (United
States Government) totaled $424,849 (20% of net sales). During fiscal 1994,
sales to the Company's major customer (Westinghouse Electric Corp. - Naval
Systems Division) totaled $597,000 (29% of net sales). None of such customers
has or had any material relationship other than business with the Company. See
"Business-Large Customers".

     The dependence on major customers subjects the Company to significant
financial risks in the operation of its business should a major customer
terminate, for any reason, its business relationship with the Company. In such
event the financial condition of the Company may be adversely affected and the
Company may be required to obtain additional financing, of which there can be no
assurance. The Company has taken into account the decreasing military budget of
the United States. See "Business-History." Currently less than 50% of the
Company's revenues are derived from the military and are expected to diminish as
a percentage of sales.

8. Defense Industry Downsizing - Historical Dependence on Government Contracts.
Recent world events have resulted in a decreased demand for defense related
products causing a general downsizing of the American defense industry. These
factors, along with federal budget constraints, have caused the Company to
realize order cancellations in the amount of $650,000 since 1990 and for another
$600,000 placed on a production hold pending specific releases. The Company's
ability to continue to attract and retain orders from defense contractors, which
as a group accounted for $442,627 in fiscal 1996 or 23% of the Company's total
revenue of $1,924,466, has been affected. The Government shutdown during the
last half of 1995 and early 1996 seriously aggravated an already deteriorating
situation impairing overall sales level growth. While the Company has changed
its strategy for growth by a conversion to primarily commercial business, there
can be no assurance that it will be completely successful in this objective.

9. Lack of Price Stability. The Company's sales to defense-related contractors
and manufacturers have historically occurred in a relatively stable price
environment. Pressure in defense spending may adversely affect prices and profit
margins in that market. While the Company believes that its planned expansion in
the commercial market will help it to better manage such a change in the defense
market, there can be no assurance that it will be completely successful in this
objective.

10. Dilution. Investors in this Offering will suffer immediate substantial
dilution of their investments, to the extent that the net tangible book value

per share of Common Stock upon completion of this Offering will be $1.73,
representing a dilution of $3.27 per share (65%) from the $5.00 offering price
of the shares. See "Dilution."

11. Determination of Offering Price. The public offering price of the Units and
the exercise price of the Class A Warrants do not bear any relationship to the
assets, book value or net worth of the Company or any other recognized criteria
of value. Neither the offering price of the Units nor

                                       15
the exercise price of the Class A Warrants should be regarded as an indication
of the present or future value of the Company. See "Underwriting".

12. Redemption of Redeemable Warrants. The Class A Warrants are subject to
redemption by the Company at any time at a price of $.05 per Warrant if the
closing bid price for the Common Stock equals or exceeds $7.20 per share for any
20 trading days ending no earlier than the fifteenth trading day prior to the
date of the notice of redemption. In the event that the Warrants are called for
redemption by the Company, Warrantholders will have thirty (30) days during
which they may exercise their rights to purchase shares of Common Stock. If
holders of the Warrants elect not to exercise them upon notice of redemption
thereof, and the Warrants are subsequently redeemed prior to exercise, the
holders thereof would lose the benefit of the difference between the market
price of the underlying Common Stock as of such date and the exercise price of
such Warrants, as well as any possible future price appreciation in the Common
Stock. As a result of an exercise of the Warrants, existing Stockholders may be
diluted and the market price of the Common Stock may be adversely affected. If a
Warrantholder fails to exercise his rights under the Warrants prior to the date
set for redemption, then the Warrantholder will be entitled to receive only the
redemption price of $.05 per Warrant. Redemption of the Warrants could force the
holders to exercise the Warrants at a time when it may be disadvantageous to do
so or sell the Warrants at the then market value of the Warrants at the time of
redemption. If a current prospectus is not in effect, it is unlikely that the
Company would call the warrants for redemption. See "Risk Factors -- Current
Prospectus and State Blue Sky Registration Required to Exercise Class A
Warrants" and "Description of Securities -- Class A Warrants".

13. Current Prospectus and State Blue Sky Registration Required to Exercise
Class A Warrants. Purchasers of Class A Warrants will have the right to exercise
the Class A Warrants only if a current prospectus relating to the shares
underlying the Class A Warrants is then in effect and only if such shares are
qualified for sale under applicable state securities laws of the states in which
the various holders of the Class A Warrants reside. There is no assurance that
the Company will be able to keep this Prospectus covering such shares current.
Moreover, the Company may decide not to seek or may not be able to obtain
qualification of the issuance of its Common Stock in all of the states in which
the ultimate purchasers of Class A Warrants may reside. The Class A Warrants may
be deprived of any value if a current prospectus covering the shares issuable

upon exercise thereof is not kept effective or if such shares are not registered
in the states in which holders of the Class A Warrants reside. See "Description
of Securities -- Class A Warrants".

14. Restrictions on Marketmaking Activities During Warrant Solicitation. To the
extent that the Representative solicits the exercise of Class A Warrants, the
Representative may be prohibited pursuant to the requirements of Regulation M
under the Exchange Act from engaging in marketmaking activities during such
solicitation and for a period of up to five days preceding such solicitation. As
a result, the Representative may be unable to continue to provide a market for
the Company's securities during certain periods while the Class A Warrants are
exercisable. The Representative is not obligated to act as a marketmaker. See
"Underwriting".

                                       16
15. "Penny Stock" Regulations; Risk of Low-Priced Securities. The Securities and
Exchange Commission (the "Commission") has adopted regulations which generally
define "penny stock" to be an equity security that has a market price (as
defined in the regulations) of less than $5.00 per share, subject to certain
exceptions. On the Effective Date, the Securities will initially be exempt from
the definition of "penny stock". If, however, the Securities offered hereby are
removed from Nasdaq, the Company's Securities may be subject to rules of the
Commission that impose additional sales practice requirements on broker-dealers
effecting transactions in penny stocks. In most instances, unless the purchaser
is either (i) an institutional accredited investor, (ii) the issuer, (iii) a
director, officer, general partner or beneficial owner of more than 5% of any
class of equity security of the issuer of the penny stock that is the subject of
the transaction, or (iv) an established customer of the broker-dealer, the
broker-dealer must make a special suitability determination for the purchaser of
such securities and have received the purchaser's prior written consent to the
transaction. Additionally, for any transaction involving a penny stock, the
rules of the Commission require, among other things, the delivery, prior to the
transaction, of a disclosure schedule prepared by the Commission relating to the
penny stock market and the risks associated therewith. The broker-dealer also
must disclose the commissions payable to both the broker-dealer and its
registered representative and current quotations for the securities. Finally,
among other requirements, monthly statements must be sent to the purchaser of
the penny stock disclosing recent price information for the penny stock held in
the purchaser's account and information on the limited market in penny stocks.
Consequently, the penny stock rules may restrict the ability of broker-dealers
to sell the Common Stock or Class A Warrants and may affect the ability of
purchasers in this Offering to sell the Common Stock in the secondary market.

16. Restricted Shares of Common Stock Eligible for Future Sale. Immediately
prior to the sale of the Shares hereunder, the Company had an aggregate
2,799,736 shares of its Common Stock issued and outstanding, 330,356 of which
are "restricted securities," which may be sold only in compliance with Rule 144

under the Securities Act of 1933, as amended. Rule 144 provides, in essence,
that a person holding restricted securities for a period of one year after
payment therefor may sell, in brokers' transactions or to market makers, an
amount not exceeding 1% of the outstanding class of securities being sold, or
the average weekly reported volume of trading of the class of securities being
sold over a four-week period, whichever is greater, during any three-month
period. (Persons who are not affiliates of the Company and who have held their
restricted securities for at least two years are not subject to the volume or
transaction limitations.) Any such sales could have a material adverse effect on
the market price for the Common Stock, should a trading market develop. All of
the Company's officers and directors have agreed not to sell or transfer any
shares of Common Stock prior to __________, 1998, without the prior written
consent of the Representative. See "Underwriting."

17. Representative's Unit Purchase Option. In connection with this Offering, the
Company will sell to the Representative, for nominal consideration, a warrant to
purchase an aggregate of 70,000 Units each Unit consisting of one (1) share of
the Company's Common Stock and four (4) Class A Warrants (the "Representative's
Unit Purchase Option"). The Representative's Unit Purchase Option will be
exercisable commencing one year after the Effective Date and ending four years
after such

                                       17
date, at a price of $6.00 per unit, subject to certain adjustments. The holders
of the Representative's Unit Purchase Option will have the opportunity to profit
from a rise in the market price of the Company's securities, without assuming
the risk of ownership. The Company may find it more difficult to raise
additional capital if it should be needed for the business of the Company while
the Representative's Unit Purchase Option is outstanding. At any time when the
holders thereof might be expected to exercise them, the Company would probably
be able to obtain additional capital on terms more favorable than those provided
by the Representative's Unit Purchase Option. See "Underwriting."

18. Potential Need for Additional Financing. The Company believes that the funds
to be raised in this offering, together with the projected revenues of the
Company, will be sufficient to enable the Company to pursue both its present and
its proposed business activities for the ensuing twelve months. There can be no
assurance that such funds will, in fact, be sufficient or that conditions and
circumstances described herein may not result in subsequent cash requirements by
the Company. In the event of such developments, attaining additional financing
under such conditions may not be possible, or even if additional capital may be
otherwise available, the terms on which such capital may be available may not be
commercially feasible or advantageous. See "Use of Proceeds".

19. Governmental Regulation. The Company's manufacturing facilities, in common
with those of the industry generally, are subject to numerous existing and
proposed Federal and state regulations designed to protect the environment,
establish occupational safety and health standards and many other matters. The

Company believes that its operations are in compliance with existing regulations
and does not believe that said compliance has had or will have any material
effect upon its capital expenditures, earnings or competitive position. See
"Business-Governmental Regulation."

20. Dependence on Qualified Personnel. Because of the technological nature of
the Company's business, the Company is dependent upon its ability to attract and
retain technologically qualified personnel. There is significant competition for
technologically qualified personnel and the Company may not be successful in
recruiting such qualified personnel. See "Management."

21. Broad Discretion in Application of Proceeds. Approximately $1,077,565, or
39.18%, of the estimated $2,750,000 of the net proceeds will be applied to
working capital and general corporate purposes. Accordingly, the Company will
have broad discretion as to the application of such proceeds without prior
shareholder approval. In addition, the management of the Company has broad
discretion to adjust the application and allocation of the net proceeds of this
offering, including funds received upon exercise of outstanding warrants, in
order to address changed circumstances and opportunities. As a result of the
foregoing, the success of the Company will be substantially dependent upon the
discretion and judgment of the management of the Company with respect to the
application and allocation of the net proceeds hereof. See "Use of Proceeds."

22. Additional Authorized Shares Available for Issuance May Adversely Affect the
Market. The Company is authorized to issue 20,000,000 shares of its Common
Stock, $1.00 par value. After the sale of the Units offered hereby, there will
be a total of 3,499,736 shares of Common Stock

                                       18
issued and outstanding (not including treasury stock, See "Financial
Statements"). However, the total number of shares of Common Stock issued and
outstanding does not include the exercise of up to 1,135,750 Class A Warrants to
purchase up to 1,135,750 shares of the Company's Common Stock issued in 1995,
the 1995 Unit Purchase Option to purchase up to 41,000 shares of Common Stock
and 20,500 Class A Warrants to purchase 20,500 shares of Common Stock, the
exercise of up to 2,800,000 Class A Warrants included in the Units offered to
investors in this Offering to purchase 2,800,000 shares of Common Stock, the
Representative's option to purchase up to 70,000 shares of Common Stock and
280,000 Class A Warrants to purchase 280,000 shares of Common Stock, the
Representative's Over-Allotment Option of 105,000 Units consisting of 105,000
shares of Common Stock and 420,000 Class A Warrants to purchase 420,000 shares
of Common Stock and the 1,200,000 shares of Common Stock issuable upon exercise
of the 1,200,000 Class A Warrants being offered by the Selling Securityholders
(assuming the Selling Securityholders exercise their right to convert the
Convertible Bridge Notes (see "Bridge Financing"). After reserving a total of
6,072,250 shares of Common Stock for issuance upon the exercise of all the
warrants to purchase Common Stock, the Company will have at least 10,428,014
shares of authorized but unissued capital stock available for issuance without

further shareholder approval (of which 155,239 has been reserved for conversion
of all of the Company's Series A and Series B Preferred Stock outstanding). In
addition, the Company is authorized to issue 2,000,000 shares of Preferred Stock
(of which 156,197 is outstanding prior to this Offering). See "Description of
Securities." Pursuant to the terms of the Underwriting Agreement, the Company's
officers, directors, and principal stockholders have agreed not to sell any of
their shares of capital stock for a period of twelve (12) months following the
date of this Prospectus without the prior written consent of the Representative.
Also, the Company has agreed not to issue any additional securities for a period
of twelve (12) months following the date of this Prospectus without the prior
written consent of the Representative. The sale of a significant number of these
shares in the public market may adversely affect prevailing market prices of the
Company's securities following this offering.

23. No Common Stock Dividends. The Company has not paid any dividends on its
Common Stock and does not anticipate paying dividends on its Common Stock in the
foreseeable future. The future payment of dividends is directly dependent upon
future earnings of the Company, its financial requirements and other factors to
be determined by the Company's Board of Directors. For the foreseeable future,
it is anticipated that any earnings which may be generated from the Company's
operations will be used to finance the growth of the Company even if the
Company's operations are profitable. See "Dividends".

                                       19
USE OF PROCEEDS

     The net proceeds to be received by the Company from the sale of the Units
being offered hereby, after the deduction of the underwriting discounts and the
expenses of this offering, are estimated at $2,750,000 ($3,206,750 if the
Representative's Over-Allotment Option is exercised). The Company will not
receive any proceeds from the sale of securities by the Selling Securityholders.

     The Company intends to allocate the net proceeds of this offering in the
approximate amounts set forth below:

                                                       Approximate Percentage
                                    Approximate Amount     of Net Proceeds
                                    ------------------ ----------------------

Repayment of Bridge Debt(1)                 $156,200          5.68%

Design, Research and Development(2)         $600,000         21.82%

Repayment of Other Debt(3)                  $916,235         33.32%

Working Capital(4)                        $1,077,565         39.18%
                                          ----------         ------

Total                                     $2,750,000           100%

--------

(1)  Represents payment of bridge financing consisting of promissory notes
     bearing interest at 8% per annum which are payable on the earlier of (a)
     December 31, 1997 or (b) the date on which this Offering closes. The
     Company used the proceeds of the bridge financing to pay certain expenses
     in connection with this offering and for working capital purposes. See
     "Bridge Financing", and "Selling Securityholders". This amount assumes the
     conversion of the Convertible Bridge Notes. See "Bridge Financing." This
     amount includes approximately $6,200 in accrued interest on the Bridge
     Notes.

(2)  Represents funds used to complete the design, development and
     implementation of the PTR-1500 quad system and its related option modules.

(3)  Represents payment of debt obligation due to CNL Holdings, Inc. bearing
     interest at the rate of 4% per annum. $ 916,235 was loaned to the Company
     between March and June 1997. The Company used the proceeds of such loans

     for the design and development of the PTR-1500 and for working capital
     purposes.

(4)  Working Capital will be used for general corporate purposes such as
     salaries and purchase of inventory, marketing expansion, research and
     product development. Assumes conversion of the Convertible Bridge Notes.
     See "Bridge Financing."

                                       20
The amounts set forth above are estimates. The actual amount expended to
finance any category of expenses may be increased or decreased by the Company's
Board of Directors, at its sole discretion, if a reapportionment or redirection
of funds is deemed to be in the best interests of the Company.

     Any additional proceeds received from the purchase of additional Units by
the Underwriters to cover over-allotments or from the exercise of the Class A
Warrants will be added to the Company's working capital.

     Pending use as set forth above, the Company will invest the net proceeds of
the offering in short-term interest bearing investment grade securities.

                                       21
CAPITALIZATION

     The following table sets forth the capitalization of the Company as of
April 30, 1997 as adjusted to give effect to the shares of Common Stock offered
in this Registration. This table should be read in conjunction with the
Financial Statements and Notes thereto appearing elsewhere in this Registration
Statement.
AT APRIL 30, 1997
                                                                    ---------------------------------------------------
                                                                    ACTUAL           ADJUSTMENTS            AS ADJUSTED
                                                                    ------           -----------            -----------
STOCKHOLDERS' EQUITY:
Preferred Stock, par value $.50; Series A;
 4% cumulative; 162,000 shares authorized,
 155,000 shares issued and outstanding                           $    77,500           $      --            $     77,500

Preferred Stock, par value $.50; Series B;
 $.90 cumulative; 50,000 shares authorized;
1197 shares issued and outstanding                                       598                  --                     598

Preferred Stock, par value $5.00, 2,000,000 shares 
authorized after offering (-0- shares before offering)

Common Stock, par value $1.00 authorized 20,000,000 shares;
issued 2,443,973 shares including 8,776 shares held in 
Treasury before offering; after offering 3,499,736(1)              2,443,973       (1)   700,000               3,143,973

Additional paid in capital                                         4,124,013       (1) 2,050,000               6,174,013

Retained earnings (deficit)                                       (3,156,420)                 --              (3,156,420)

Treasury stock                                                      (131,734)                 --                (131,734)
                                                                 -----------                                ------------

TOTAL STOCKHOLDERS'
EQUITY                                                             3,357,930                  --               6,107,930
                                                                 -----------                                ------------

TOTAL CAPITALIZATION                                             $ 3,357,930                  --            $  6,107,930
                                                                 ===========                                ============
----------
(1)  Reflects 700,000 shares of Common Stock included in the Units being offered

     herewith; net proceeds to the Company are estimated at $2,750,000 after
     giving effect to Underwriters discounts and expenses of the Offering.

                                       22
Bridge Financing

     In December 1996 and January 1997, the Company obtained bridge financing
from seven (7) lenders in the amount of $200,000. These lenders are the
individuals identified in this Prospectus as "Selling Securityholders." In
exchange for making the loans to the Company, each Selling Securityholder
received two (2) promissory notes (the "Bridge Notes"). Certain Bridge Notes are
in the aggregate principal amount of $150,000 (the "Principal Bridge Notes") and
the other Bridge Notes are in the aggregate principal amount of $50,000 (the
"Convertible Bridge Notes"). Each of the Bridge Notes bears interest at the rate
of eight percent (8%) per annum. The Bridge Notes are due and payable upon the
earlier of (i) December 31, 1997 or (ii) the date on which this offering closes.
The Company intends to use a portion of the net proceeds of the offering to
repay the Bridge Notes. See "Use of Proceeds." The Convertible Bridge Notes are
convertible into a total of 1,200,000 Class A Warrants. The proceeds of the
bridge financing were used by the Company to pay certain expenses in connection
with this offering and to increase working capital. Each Class A Warrant
contained in the Convertible Bridge Notes is identical to the Class A Warrants
offered hereby.

     The registration statement, of which this Prospectus is a part, also covers
the offering of the Class A Warrants that may be acquired by the Selling
Securityholders in the bridge financing, as well as the Common Stock issuable
upon exercise of the Class A Warrants by the Selling Securityholders or their
transferees.

     The Company's agreement with the Selling Securityholders provided that the
Company would include in its registration statement a prospectus covering the
Class A Warrants owned by the Selling Securityholders and the underlying Common
Stock. See "Selling Securityholders."

                                    DIVIDENDS

     Holders of Common Stock are entitled to receive such dividends as may be
declared by the Board of Directors of the Company. To date, the Company has
neither declared nor paid any dividends on its Common Stock nor does the Company
anticipate that such dividends will be paid in the foreseeable future. Rather,
the Company intends to apply any earnings to the expansion and development of
its business. Any payment of cash dividends on the Common Stock in the future
will be dependent upon the Company's earnings, financial condition, capital
requirements and other factors which the Board of Directors deems relevant. See

"Risk Factors- No Common Stock Dividends" and "Description of Securities."

                                       23
DILUTION

     Prior to this offering, there were 2,799,736 shares of the Company's Common
Stock outstanding. As of April 30, 1997, the net tangible book value of the
Company was $3,301,007. The net tangible book value per share of the Company,
immediately prior to this offering is, therefore, $1.18. Net tangible book value
per share represents the amount of the Company's tangible assets (total assets
less total liabilities and intangible assets) divided by the number of shares of
Common Stock outstanding.

     After giving effect to the sale of the Units offered hereby and after
receipt of the estimated net proceeds therefrom, without giving any effect to
the exercise of the Representative's Over-Allotment Option, and assuming the
conversion of $150,000 in Convertible Bridge Notes (See "Bridge Financing"), the
pro forma net tangible book value of the Company would be $1.73 per share.
Investors in this Offering, therefore, will sustain an immediate dilution to the
extent of $3.27 per share of Common Stock purchased. Dilution represents the
difference between the offering price of the shares and the net tangible book
value per share immediately after completion of the offering. The following
table illustrates this dilution:

   Offering price per share............................   $5.00
   Net tangible book value per share before Offering...   $1.18
   Increase per share attributable to the Offering.....   $ .55
   Net tangible book value per share after Offering....   $1.73
   Dilution per share to new investors.................   $3.27

     The following table sets forth the percentage of equity to be purchased by
investors in this Offering compared to the percentage of equity to be owned by
the current shareholders, and the comparative amounts paid for the shares of
Common Stock by the investors in this Offering as compared to the total
consideration paid by the present stockholders. The table assumes the conversion
of $150,000 in Convertible Bridge Notes.

                                                                 Percentage of
                          Shares    Percentage of      Total        Total
                       Purchased     Total Shares  Consideration Consideration
New Investors             700,000            20%    $ 3,500,000      34.8%
Present Stockholders    2,799,736            80%    $ 6,567,986      65.2%
                      -----------   -----------     -----------     -----
      Total             3,499,736           100%    $10,067,986       100%

                                       24
Selected Financial Information

     The summary financial information set forth below is derived from and
should be read in conjunction with the more detailed financial statements and
notes appearing elsewhere in this Prospectus.
NINE MONTHS ENDED APRIL 30                          YEAR ENDED JULY 31
                                      --------------------------    ---------------------------------------------------------------

                                           1997          1996       1996            1995         1994          1993          1992
                                           ----          ----       ----            ----         ----          ----          ----
                                      (unaudited)  (unaudited)
Net sales and other income           $   978,979   $ 1,519,975   $ 1,924,466   $ 2,090,933   $ 2,044,860   $ 1,486,298   $ 2,997,308

Income (loss) from 
continuing operations                   (137,662)     (209,402)      293,552    (1,014,296)   (1,182,988)     (322,005)       72,026

Income (loss) from 
continuing operations historic              (.12)         (.20)          .28          (.12)         (.27)         (.07)          .02

Income (loss) from continuing 
operations per share, after 
giving effect to 1-for-100 
reverse  stock split in August 1995                                                 (12.01)       (27.22)        (7.41)         1.66

Pro forma income from continuing 
operations per share*                                                    .12

Total assets                           3,979,136     4,026,335     3,927,834     3,882,235     3,739,294     4,601,015     4,586,003

Long-term debt and capitalized 
lease obligations                              0       949,853         4,973        34,103     3,829,625     3,732,961     2,654,957
*    After giving effect to 1,400,000 shares of Common Stock issuable in
     exchange for the unpaid amount of principal and interest due to the Bank.

                                       25
AT APRIL 30, 1997
                                  -------------------------------------------
                                     ACTUAL          ADJUSTMENT   AS ADJUSTED
                                  -----------        -----------  -----------

Working Capital                   $ 2,928,784   (1)  $ 2,750,000  $ 5,678,784

Total Assets                        3,979,136   (1)    2,403,354    6,382,490

Long-Term Liabilities                 - 0-                -0-          -0-

Stockholders' Equity                3,357,930   (1)   2,750,000     6,107,930

----------

(1) Reflects 700,000 shares of Common Stock included in the Units being offered
herewith; net proceeds to the Company are estimated to be $2,750,000 after
giving effect to Underwriter discounts and expenses of this offering.

                                       26
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS

Results of Operations

     In order to summarize the Company's operating results for the past three
years, the following tables indicate the percentage relationships of income and
expense items in the statements of income and the percentage changes in those
items for such years.
Income & Expense Items as a Percentage    Income &                                       Percentage
      of Revenue from Operations        Expense Items                                 Increase/Decrease
--------------------------------------  -------------                 ------------------------------------------------
  Years Ended July 31,
-----------------------
 1996     1995     1994                                               1995 to 1996       1994 to 1995     1993 to 1994
-----------------------                                               ------------------------------------------------
100.0%   100.0%   100.0%                Sales & other                    (8.00)%              2.2%            37.5%
------  -------   ------                income                          ------              ------            ----
                                        

 67.20*   92.20*   98.40*               Cost of products                (32.90)              (4.20)          203.6
                                        sold

 49.20    44.20    41.70                Selling, general                  2.40                8.40             6.0
                                        & administrative

  6.80    12.10    17.70                Interest                        (48.00)             (30.0)             7.8
------  -------   ------                                                ------              ------            ----

123.20  (148.50)  157.80                Total costs &                   (23.60)             ( 3.80)           78.8
------  -------   ------                expenses                        ------              ------            ----
                                        

(23.20)  (48.50)  (57.80)               Income (loss)                   (56.00)             (14.30)         (269.8)
                                        before taxes

    --   (23.50)      --                Income taxes                   (100.00)                              (96.4)
------  -------   ------                (credits)                       ------              ------            ----
                                        

(23.20)% (25.0)%  (57.8)%               Income (loss)                   (14.40)%            (14.3)%         (267.4)%
                                        before
                                        extraordinary
                                        item
----------

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

                                       27
QUARTER AND NINE MONTHS ENDED APRIL 30, 1997 COMPARED TO 1996

A summary of income, costs and expenses for the quarter and nine months ended
April 30, 1997 and corresponding period of the previous year follows:

                              For the Quarter          For the Nine Months
                              Ended April 30,             Ended April 30,
                      --------------------------   --------------------------
                           1997           1996          1997           1996
                      -----------    -----------   -----------    -----------
Revenues              $   111,393    $   529,802   $   978,979    $ 1,519,975
Costs and Expenses        219,583        432,555     1,126,525      1,729,477
                      -----------    -----------   -----------    -----------
Net Income/(loss)
after Taxes, before
extraordinary item    $  (108,190)   $    97,247   $  (147,546)   $  (209,502)
                      ===========    ===========   ===========    ===========

Revenues for the quarter ended April 30, 1997 totaled $111,393, representing a
decrease of 79% or $418,409 from the $529,802 reported for the same quarter a
year ago. Revenues decreased largely as a result of non-release of several
orders from the various major power companies as well as the absence of new
commercial orders and releases against existing military contracts by the US
government.

Gross margin for the quarter totaled $59,240 representing 53% of revenues as
compared to $346,266 or 65% of revenues for the quarter ended April 30, 1996.
The decrease in gross margin is primarily attributed to the labor inefficiencies
resulting from reduced levels of factory utilization. The Company was able to
partially offset some of these losses by shifting its internal resources to new
product development. Prior to this quarter the Company engaged outside
contractors almost exclusively to complete its product development. During the
current quarter the Company used to a greater extent its captive resources
including design, engineering and production. Historically, the Company has used
part time, temporary factory personnel and outside contractors to adjust its

workforce for large changes in production demands.

Selling, general and administrative expenses decreased from $214,019 to $140,466
for the quarter, representing a decrease of $73,553 as compared to 1996. These
savings are the direct result of downsizing initiatives to offset the decreased
production levels experienced during the quarter.

Interest expense decreased from $35,000 to $17,080 or $17,920 for the quarter
ended April 30, 1997 over the same period of 1996.

                                       28
As a result of the foregoing, the Company reported a net loss of $108,190, or
$0.04 per share for the quarter compared to net income of $97,247 or $0.10 per
share.

Revenues for the nine months ended April 30, 1997 totaled $978,979 versus
$1,519,975 for the same period last year. The lower revenues were attributable
to continued delays in the release of certain commercial orders, including The
Bonneville Power Administration and the absence of new orders and releases from
the US Government. The order backlog for Bonneville was $1.3 million at April
30, 1997. The Company believes that the delay in release of certain PTR-1000
series orders were due to the forthcoming release of a new PTR-1500 Series Tone
Protection product being developed for the General Electric Company to private
label and market worldwide. The new product was originally scheduled to be
released during the summer of 1997. As a result of limited financial resources,
this program was delayed by approximately six months; the expected release date
for the PTR-1500 is early 1998.

Gross margin for the period totaled $450,481 as compared to $562,540 for the
period ended April 30, 1996, representing 46% and 37% of revenues, respectively.
Gross margins improved as a result of generally higher pricing for special items
requiring limited quantities and fast turnaround.

Selling, general and administrative expenses totaled $518,944 as compared to
$653,571. This decline of $134,627 results from cost cutting initiatives to
reduce administrative and general expenses, especially with respect to personnel
reductions and downsizing.

As a result of the foregoing, operating loss totaled $68,463 as compared to
$91,031.

Interest expense for the nine months totaled $69,199 as compared to $118,371 for
the prior nine month period.

As a result of the foregoing, the Company realized a net loss of $147,546 or
$.06 per share as compared to net income of $530,874 or $.51 per share. The net
income for the nine months ended April 30, 1996 included $740,376, net of tax

benefit of $492,392, in extraordinary items, representing $.72 per share.

1996 Compared to 1995

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

                                       29
price of the Common Stock for 20 consecutive trading days ending within 15 days
prior to the notice exceeds $7.20 per share.

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

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

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

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

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

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

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

     The debt forgiveness of $1,232,728 on restructuring of the obligation less

the tax benefit thereon is accounted for as an extraordinary gain to the
Company.

     Revenues for the year ended July 31, 1996 decreased to $1,924,416 from
$2,090,933 for the year ended July 31, 1995 representing a decrease of 8%.
Revenues declined as a result of a decline in sales in the military sector. The
Company completed a large sale of switches to the military in fiscal 1996 and
did not have a comparable sale for fiscal 1995.

     Gross margins for the year totaled $632,1841 and $163,194, respectively,
representing 32.9% and 7.8% of revenues. Gross margins were higher in 1996 due
to the obsolete inventory write-off in 1995. Without the inventory write-off the
1996 and 1995 gross margin would have been 35.5% and 39.3% respectively. The
gross margin for 1996 was lower than 1995 without the inventory write-off due to
the fact that the higher than normal discounts were offered and taken on two
major sales.

                                       30
Selling, general and administrative expenses increased from $924,524 in
1995 to $946,954 in 1996, representing an increase of 2.4%. These expenses
increased as a result of an expansion of the employment base and an increase in
advertising and promotion costs.

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

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

     Without the debt compromise and the related tax benefit in 1996 there would
have been a loss of $446,824 or $.43 per share.

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

1995 Compared to 1994

     Total revenue increased $46,000, or 2.2% from $2,045,000 in 1994 to
$2,091,000 in 1995. The increase was attributable to an expansion in the

commercial sector of the Company's business, which contributed $1,422,000 or 68%
of total revenues in 1995, compared to $1,300,000 or 64% of total revenues in
1994.

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

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

     The Company determined during the first quarter of 1995 that there was not
sufficient information from the Government's Defense-Electronic Supply Center
("DESC") facility to permit the Company to make a quantitative determination for
future sales. Inventory which totaled $656,000 was written off after management
made an analysis of parts maintained for military and government orders compared
to available inventories. This amount consisted of $318,000 for raw materials,
$249,000 for work in progress and $89,000 for finished goods. There were
comparable

                                       31
charges of $945,000 in the twelve month period ended April 30, 1994. This
analysis consisted of a study of the forecasted requisitions of upcoming orders
of the DESC, Conolog's principle defense customer. On examination of prospective
sales, it was determined that the government has no requirements for Conolog's
military products for at least the next twelve to eighteen months.

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

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

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

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

February 1, 1995 through July 31, 1995.

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

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

1994 Compared to 1993

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

     During the quarters ended October 31, 1993, January 31, 1994 and April 30,
1994 not all government requisitions for procurements had been posted at the
government's Defense Electronics

                                       32
Supply Center ("DESC") facility in Dayton, Ohio. Until all requisitions for
future procurements are listed, the Company could not determine which items
would be phased out or not procured at all.

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

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

     Costs of products sold is a distorted figure, 98.4%, since approximately
$945,000 of old inventory was written off. Had this write-off not occurred, the

cost of sales would have been 52.2%. Although this percentage is greater than
normal, the lack of available cash has hampered management's ability to buy
product at more favorable prices. Inventory was written off in the last quarter
of the fiscal year after an analysis was made of parts in the stockroom that
were at least four years old and for which no orders had been received in the
past two years.

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

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

Financial Condition, Liquidity and Capital Resources

Financial Condition, Liquidity and Capital Resources at April 30, 1997

Inventories increased $294,800 from July 31, 1996, including approximately
$258,734 for the PTR-1500 Series product.

Accounts receivable decreased $137,193 to $166,827 reflecting lower sales during
the current quarter.

Working Capital at April 30, 1997 was $2,928,784 compared to $1,914,981 at July
31, 1996.

                                       33
The Company received $200,000 in net proceeds from a bridge financing. The
bridge financing was evidenced by two promissory notes executed by each investor
that aggregated $150,000 ("Principal Bridge Notes") and $50,000 ("Convertible
Bridge Notes"), respectively. The Principal Bridge Notes are payable on the
earlier of December 31, 1997 or upon closing of the next public offering. The
Convertible Bridge Notes contain the same terms as with respect toThe Principal
Bridge Notes, except that same is convertible into 1,200,000 Class A Warrants.
See "Bridge Financing." The funds received from the bridge financing were used
to reduce overdue payables and resume the product development of the PTR-1500
Series Project.

During the quarter ended April 30, 1997 the Company received $74,735 in loans
from CNL Holdings, Inc.

The Company presently meets its cash requirements through existing cash
balances, cash generated from operations, and loans secured in private
transactions.

1996 Compared to 1995

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

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

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

     Management felt that it had leased or acquired sufficient equipment to meet
its capital expenditure needs for the next year. Obligations under capital
leases which were in effect were approximately $34,000 for the year and somewhat
less thereafter. Historically, the Company has always leased equipment. Its
annual lease obligations have ranged from $59,000 in 1993 to its 1996 figure of
$34,000. The Company's liquidity and working capital have been effected by these
obligations and will continue to be so since the operation is dependent upon the
use of this equipment.

     For the past year, the Company's marketing emphasis has been directed to
the utility industry since its Iniven line produces a variety of products used
by them. Most of the products offered must

                                       34
be tested for quality, endurance, etc. for a period of time by the potential
customer. Management is of the opinion that much of the testing will be
completed in the coming year and sales will be forthcoming from the results of
these tests. Accordingly, it is anticipated that sales and profits will be
higher in the next twelve months as compared to the past twelve months.

1995 Compared to 1994

     At July 31, 1995, the Company had a working capital deficit of $2,229,000
and a shareholder deficit of $1,944,000. The Company increased its liquidity on
August 24, 1995, through the sale of common stock in a public offering. The net
proceeds received from the August 1995 Offering were approximately $1,527,000,
which caused working capital to increase by that amount. In addition, the

shareholders' deficit of $1,944,000 changed to a surplus of approximately
$3,100,000 as a result of the proceeds of the stock offering and the
restructuring of the bank loan permitted by the additional equity.

     During the fiscal year, the Company decreased its inventory from $2,990,000
to $2,600,000. The decrease in inventory was caused primarily by a $656,000
writedown of certain of the Company's slow-moving military products, partially
offset by increased requirements in stocking levels for commercial parts. The
Company increased its sales and marketing efforts late in the year as part of
its strategy to improve its revenues. The increase in operating expenses
resulting from these efforts adversely affected the liquidity of the Company.
The Company plans to continue to accelerate its sales, marketing and research
and development efforts at increased levels for the foreseeable future.

     The Company has no material commitments for capital expenditures as of the
date hereof. The Company anticipates, however, acquiring additional equipment
and fixtures (for example, test equipment and manufacturing equipment) and may
consider a subcontractor for increased manufacturing volume in the future, as
increased requirements may dictate. The Company has begun to evaluate a number
of make-or-buy operations in order to assure adequate resources for future
production.

Inflation

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

1994 Compared to 1993

     The Company was not able to meet its commitment made under the restructured
loan agreement dated November 1993. However, the Bank agreed to further
restructure the Credit Facility and extend the payments of principal and
interest. Interest on the loans accrued but were not to be payable until July
31, 1995. Beginning on that date, interest payments were to be made in arrears
on the last day of each month, with all unpaid interest previously accrued
becoming due and

                                       35
payable on November 30, 1995. All principal on the loans became due and payable
on November 30, 1995. The additional extension was granted after the Company
prepared projections for the forthcoming year. These projections indicated a
certain amount of profitability but not enough cash flow to begin payment of
principal within the fiscal year 1995.

     Working capital at July 31, 1994 was $2,086,000 compared to $3,275,000 in
1993. The drop in working capital was primarily due to a write-off of inventory
for military sales, which management feels will not materialize. The working

capital ratio at 1994 was 2.75% compared to 4.9% at 1993.

     Management was encouraged by the increase in sales to its non-military
customers. Had projections been realized, the Company should have begun to turn
around and produce a profit in the coming year. Cash flow should have been
sufficient to meet the Company's current obligations.

Credit Facility and Agreement with CNL Holdings, Inc.

     The principal amount owing to the Bank under the Company's Credit Facility
at July 31, 1996 was $1,012,500 and the unpaid accrued interest was $57,196. The
Bank and the Company entered into the Conolog Corporation Allonge, dated as of
September 11, 1996, pursuant to which the Amended and Restated Term Note dated
as of August 2, 1995 between the Company and the Bank (the "Note") was amended
to permit the conversion by the Bank of the unpaid principal and interest due
under the Note into 1,400,000 shares of the Company's Common Stock on or before
April 16, 1997. The conversion right was exercisable by the Bank or its
assignee. The Bank had deferred all payments of principal and interest under the
Note until April 16, 1997.

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

     The Company and CNL entered into an agreement (which was amended as
described below) dated as of September 12, 1996 (the "CNL Agreement"), whereby
CNL agreed to loan up to $2,500,000 to the Company under certain circumstances
(as described below).

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

                                       36
Each loan was to be evidenced by a Note bearing interest at the rate of 4%
per annum to be due 12 months from the date of such Loan. At maturity, the
Company will have the option to pay each Loan, together with all accrued
interest thereon, by issuing shares of a new Series C Preferred Stock (the
"Series C Preferred") having a value of $5.00 per share for purposes of such

repayment.

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

     On January 31, 1997, the Bank and the Company entered into Amendment No. 1
to the Conolog Corporation Allonge dated September 11, 1996 (the "Allonge")
(which previously amended the Amended and Restated Term Note dated as of August
2, 1995 between the Company and the Bank(previously defined as the"Note")). The
original Allonge provided that the Bank may convert the entire unpaid principal
and interest due under the Note ("Debt Claim") into 1,400,000 shares of Common
Stock of the Company at any time on or before April 15, 1997. The amended
Allonge provided the Bank the right to convert all or, if it so desires, only a
portion of the Debt Claim. The number of shares issuable upon conversion of a
portion of the Debt Claim was to be calculated on the basis of 1 share for each
$3.00 of the Debt Claim being converted with the balance of the 1,400,000 shares
to be issued when all of the Debt Claim has been converted.

     On January 31, 1997, the Bank and CNL entered into Amendment No. 1 to the
Option Agreement. The amended Option Agreement required CNL, on or before
February 5, 1997, to purchase from the Bank for an aggregate purchase price of
$600,000, no less than (i) 133,333 shares of Common Stock for $399,999 and (ii)
$200,001 of the Debt Claim represented by the Note. CNL purchased such Common
Stock and portion of the Debt Claim on February 5, 1997. CNL had the right to
exercise the remainder of the option on or before April 15, 1997. CNL had the
right to purchase from the Bank additional shares of Common Stock owned by the
Bank at the price of $3.00 per share and portions of the Debt Claim from time to
time. CNL purchased such Common Stock and portion of the Debt Claim on February
5, 1997.

     On January 31, 1997, the Company and CNL entered into an Amendment to the
CNL Agreement. The amended CNL Agreement provided that in the event not all of
the Debt Claim was converted into shares of Common Stock by the Bank prior to
CNL's acquisition of the Note, CNL would promptly convert the remaining portion
of the Debt Claim into shares of Common Stock in accordance with the Note. In
addition, the proceeds of the sale of the Acquired Shares were to be applied as
follows: First to reimburse CNL for payments made to the Bank pursuant to Option
Agreement; 50% of the balance, up to $2,500,000, to be loaned to the Company
within five days of CNL's receipt of the proceeds.

     The balance under the option (as of March 15, 1997) was $750,000(evidencing
an option to purchase 241,667 shares of Common Stock and the Note, convertible
into 1,333,333 shares of

                                       37
Common Stock). On March 26, 1997, CNL exercised a portion of its option to
purchase shares of Common Stock, by purchasing a portion of the principal amount
of the Note ($720,000) and converted such portion of the Note into 240,000
shares of Common Stock at $3.00 per share, leaving a balance due under the
option at $30,000. On March 27, 1997, CNL exercised the remaining portion of the
option in consideration of $30,000. On such date, the remaining portion of the
Note was converted into 1,093,333 shares of Common Stock, the Bank transferred
241,667 shares of Common Stock to CNL and the Debt Claim was extinguished.

     Management believes that the foregoing transactions benefited the Company
and its stockholders. The exercise by CNL of its option under the Option
Agreement converted the remaining Debt Claim, the Company had the opportunity
to, in effect, exchange its debt for equity and eliminated the Company's default
under the Credit Facility. To date, $916,235 has been loaned to the Company by
CNL. See "Use of Proceeds."

                                       38
MARKET PRICE FOR SECURITIES

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

     The following table sets forth, for the periods indicated, the high and low
bid and asked quotations of the Common Stock, based upon information supplied by
the National Quotation Bureau for the year 1994, and the first two quarters of
1995. Such quotations represent inter-dealer prices, without retail markups,
markdowns or commissions and may not necessarily represent actual transactions.
The Company effected a 1-for-100 reverse stock split on August 16, 1995. As of
_________, 1997, the Company's Common Stock was held by approximately ___
shareholders of record.

                                           Bid                        Asked
                                   ------------------          -----------------
                                   High           Low          High          Low
                                   ------------------          -----------------
1994
----

First Quarter                       .05           .04           .15          .14

Second Quarter                      .05           .03           .15         .125

Third Quarter                       .05          .001           .15          .06

Fourth Quarter                     .015          .001           .10          .05

1995
----

First Quarter                       .02           .01           .10          .05

Second Quarter                      .04           .01           .15          .05

                                       39
The following table sets forth, for the periods indicated, the high and low
prices of the Company's Units (which no longer trade), Common Stock and Class A
Warrants traded on the Nasdaq SmallCap Market for the third and fourth quarters
of 1995, all of 1996 and first two quarters of 1997.
Units                         Common Stock                    Class A Warrant
                                -------------------               --------------------             --------------------
1995                            High            Low               High             Low             High             Low
----                            ----            ---               ----             ---             ----             ---
Third Quarter                   18.5            14                8.50             5.75             4                2

Fourth Quarter                  19.25           14.75             9.25             6.25             3.25             1.25

1996
----

First Quarter                   15              11                8.125            3.875            2                 .9375

Second Quarter                  11.25           11.25             6.5625           4.25             1.5              1.0156

Third Quarter                      --              --             6.25             2.25             1.5               .5625

Fourth Quarter                     --              --             3.875            2.375            1.25              .50

1997
----

First Quarter                      --              --             5.875            3                 .9375            .625

Second Quarter                     --              --             6.125            2.375            1                 .375
40
BUSINESS

General

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

History

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

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

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

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

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

     During 1987, the Company made the strategic decision to redirect the
Company's focus from military to commercial markets. Since that time, the
Company has refocused on manufacturing and marketing its products for the
commercial marketplace rather than depend on the military and defense-related
markets. The effort has included the introduction of new products, the redesign
of existing products and increased advertising and marketing efforts, as
permitted by its limited financial resources. The percentage of revenues
attributed to products manufactured for use in commercial applications increased

from approximately 4% of sales in 1981 ($171,000) to approximately 77% of sales
in 1996 ($1,480,000). The decision to embark on this program entailed a major
design effort, including the

                                       41
coordination of outside engineering consultants to develop a complete line of
products aimed at the Company's target markets. The emphasis was on products for
electric utilities, cogeneration of power, gas and water companies, traffic
control for departments of transport (DOT) and airports utilizing DSP (Digital
Signal Processing) technology. DSP designs have long term stability with minimum
or no maintenance, allowing the Company to offer customers a product line with a
12 year warranty - a first on the market.

     Testing of the Company's first commercial product group, the Teleprotection
Series PTR-1000, was under way in the latter part of 1992 by Bonneville Power
Administration. This detailed test permitted the Company to "fine tune" the
product for power transmission applications. In March 1994, the PTR-1000 was
approved for use by such utility and thereafter by other utilities and
municipalities. To date, the Company has sold and delivered over 800 PTR-1000
sets to 18 utilities and 5 municipalities, most of which are installed and in
service.

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

     Due to the end of the cold war and the downsizing of the American military,
the Company experienced unexpected sharp reductions of military contracts in
fiscal 1993 (the Company's fiscal year end is July 31) resulting in a 50%
decline in the Company's sales for that year, down to $1,486,298 from $2,

997,308 in fiscal 1992. The sales of new products could not replace the decrease
in military sales. The Company, however, continued to pursue sales as
aggressively as its available resources would permit. Sales in fiscal 1994
increased to $2,044,860, a 37% increase over fiscal 1993. Sales in fiscal 1995
were $2,090,933 a 2% increase over fiscal 1994. Sales in fiscal 1996 were
$1,924,466 an 8% decrease from fiscal 1995. Sales for the first nine months
ended April 30, 1997, totaled $978,979, a 35% decrease from $1,519,975 for the
same period in 1996. Revenues from the Company's military product sales
represented approximately 60%, 30%, 23% and 18% of sales of the Company in
fiscal 1994, 1995, 1996, and in the first nine months ended April 30, 1997,
respectively, reflecting the Company's emphasis on commercial sales and markets.

                                       42
General Description; Products

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

     Such products are used in radio and other transmissions, telephones and
telephone exchanges, air and traffic control, automatic transmission of data for
utilities, teleprinting of transmitted data such as news and stock market
information and for use by electric utilities in monitoring power transmission
lines for faults and/or failures. The Company's products are used by customers
engaged in or manufacturing equipment for the activities described. The
Company's products may be used independently or in combination with other
products to form a system type configuration, whereby the Company's equipment is

pre-assembled in a large cabinet with other equipment in a configuration that
would provide the end user with protection as well as operational status
displays.

Present Status/Business Product Description

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

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

                                - As subcontractor to systems producers

                                - Foreign governments

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

                                - Direct sales to end users

                                       43
- Sales to system assemblers

                                - Sales to contractors/installers

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

(A) Military Sales

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

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

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

(B) Commercial "INIVEN" Sales and Products

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

               (1)  PTR Teleprotection Series (Protective Tone Relaying
                    Communications Terminal, which includes the PTR- 1000 and
                    the PTR-1500 designed exclusively for GE).

               (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.

                                       44
(1) PTR-1000 Teleprotection Series

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

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

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

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

of failed equipment and loss of revenue caused by downtime for repairs.

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

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

     The PTR Teleprotection Series target market is worldwide, as follows:

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

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

                                       45
o    Existing installations for upgrading to PTR technology, again improving
     efficiency and down time.

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

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

o    Investor-owned

o    Municipal Systems

o    Cooperative Systems

o    Federal, State and District systems.

     The Company intends to utilize a portion of the net proceeds of this
Offering to provide it with capital which it can use to expand its sales
efforts, expand sales to international markets and complete the design,
engineering and testing of the PTR-1500 option modules and the PTR-1000
enchancements. To date, the Company has sold and delivered over 800 PTR-1000

sets to 18 utilities and 5 municipalities, most of which are installed and in
service.

(2) Audio Tone and Telemetry Equipment

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

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

                                       46
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:

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

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

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

GEN-1 and GEN-1 Programmable Series

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

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

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

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

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

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

                                       47
Given this technology and the high-reliability and quality standards of the
Company's products, the Company has recently (first quarter 1994) started to
offer a 12 year warranty for all of its commercial products. This warranty has
been favorably received by customers. Based upon its past experience, the
Company does not believe that its extended warranty will result in any material
repair or replacement expenses.

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

tunnels and bridges and for security and electricity systems.

     The Company intends to utilize a portion of the net proceeds of this
offering to expand this line of products to include radio as a transmission
line, and design, produce and sell a line of fiber optic interface equipment and
to expand sales for new applications and new installations, including foreign
sales.

(3) Multiplex Supervisory (IM) Control System

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

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

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

     A portion of the net proceeds of this offering will be used by the Company
to complete the next design phase to couple the multiplexer directly onto fiber
optic cable and 8 line applications and add radio as a communication link.

                                       48
(4) Fiber Optic Link and Data Modem

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

(C) Commercial Subcontract Manufacturing to Systems Producers

     Since the downsizing of the American Military, the Company has actively
sought manufacturing subcontract orders to fill the production void created by
the severe drop in military production. In June 1996 the Company negotiated and
entered into a renewable annual agreement with the General Electric Company, GE

Electrical Distribution and Control and its participating affiliated companies
for the manufacture of sub-systems, board assemblies and magnetic filters and
other products consistent with the Company's expertise. The success of this
agreement has prompted the Company to pursue other system producers to more
fully utilize the Company's manufacturing capacity.

Competition

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

Marketing and Sales

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

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

     Commercial - The Company markets the PTR-1000 by means of Company sales
     personnel, through independent manufacturers representatives, and through
     distributors, focusing mainly on the largest utilities and co-generators.
     In the United States alone there are over 500 large entities generating
     electricity which are identified as investor-owned, municipal systems,
     cooperative systems and federal, state and district systems. The Company
     intends to utilize a

                                       49
portion of the proceeds of this Offering to expand its sales efforts and
     expand sales to international markets. The Company markets it Gen-1 and
     Gen-1 Programmable Series, as well as its "98" Series, "68" Series and "40"
     Series, in the same way as the PTR-1000 except that the manufacturers
     representatives used by the Company specialize in selling to the diverse
     markets that utilize such products. The Company intends to utilize a
     portion of the net proceeds of this Offering for international sales.

Largest Customers

     Sales to the Company's two major customers during the nine month period
ended April 30, 1997 (General Electric and Bonneville Power Authority) totaled
$203,602 and $200,000, respectively (21% and 20%, respectively of all sales).
Sales to the Company's major customer in fiscal 1996 (B.C. Hydro-Canada )
totaled $401,000 (20% of all sales). Sales to the Company's major customer in
fiscal 1995 (United States Government) totaled $424,849 (20% of net sales).
During fiscal 1994, sales to the Company's major customer (Westinghouse Electric
Corp. - Naval Systems Division) totaled $597,000 (29% of net sales). None of
such customers has or had any material relationship other than business with the
Company. See "Business-Large Customers".

Raw Materials; Inventory

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

     In the past the Company manufactured and held in its inventory finished
products pursuant to the military's specifications and based upon the military's
forecast for future quantities and delivery schedules. When those military
procurements were discontinued as a result of the end of the cold war and the
downsizing of the military establishment, the Company wrote off large portions
of its military inventory. The Company no longer manufactures inventory to meet
forecasts but only to fill specific orders. Therefore, the Company does not
anticipate any future large inventory build-ups or write-downs from military
products.

                                       50
Manufacturing

     Of the 15,700 square feet that the Company occupies at 5 Columbia Road in
Somerville, NJ, approximately 10,000 square feet are dedicated to manufacturing.
The Company assembles, under normal workload conditions, all the products it
sells. To accommodate the peak demands that occur from time to time the Company
has developed a number of subcontractors to assemble boards to the Company's

specifications. All assemblies, however, are inspected and fully tested by the
Company's quality, engineering and testing departments. The Company maintains
test equipment and every product is burned-in (i.e., each product is run at full
power for 48 hours) and tested prior to shipment. This control, together with
design reliability, has permitted the Company to offer a 12-year warranty on all
its commercial products.

Research and Development; New Products

     Amounts expended by the Company in the last three fiscal years for research
and development activities have not been material although the Company is
currently engaged in product design and development. The Company utilized a
portion of the net proceeds of the August 1995 Offering to design a fiber optic
digitizer and a 1200 baud modem which can be sold as a separate product or
jointly with the Company's products which will enable all the Company's INIVEN
products to transmit directly onto fiber optic cables, and thus open a new
market for the Company's products. In addition, the Company completed the
PTR-1000 series option modules and the standard modules of the PTR-1500 Quad
Series to be sold exclusively worldwide by GE as its Model NS50. The Company
also intends to utilize a portion of this Offering proceeds to add designs that
will extend its product capability to handle new data inputs not presently
available. There can be no assurance that the Company will be able to
successfully develop and add designs to its products.

Patents and Trademarks

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

Backlog

     As of July 31, 1996 and 1995, the Company had a backlog of approximately
$3,400,000 and $1,300,000. As April 30, 1997, the Company had a backlog of
$2,600,000. It is anticipated that this backlog will be filled during the
balance of the 1998 fiscal year ending July 31, 1998. Approximately 75% of the
Company's backlog relates to government contracts and may be subject to
cancellation under the terms of such contacts.

                                       51
Foreign Operations

     During fiscal 1994 the Company had no foreign sales. In fiscal 1996 and
1995 the Company had foreign sales of $401,000 to B.C. Hydron-Canada and
$140,000 to the Government of Israel, respectively. In the nine months ended
April 30, 1997, the Company had no foreign sales.

Governmental Regulation

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

Employees

     As of April 30, 1997, the Company employed 31 persons, including 2 in
management, 2 in sales, 2 in clerical, 1 in accounting, 1 in purchasing, 3 in
engineering and 20 in production. The Company has enjoyed good labor relations
and has suffered no work stoppage.

Properties

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

                                       52
MANAGEMENT

Directors and Executive Officers

     The following table sets forth certain information regarding the officers
and directors of the Company as of the Effective Date.

NAME                   AGE    POSITION

Robert S. Benou        62     President and Director

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

Louis S. Massad        59     Director

Marc R. Benou          29     Vice President, Assistant Secretary and
                              Director

Thomas Fogg            61     Vice President-Engineering

     The term of each director expires at the time of the next annual meeting of
stockholders. Each officer holds office at the pleasure of the Board of
Directors. The Company has no "significant" employees other than the executive
officers. There are no arrangements or understandings pursuant to which either
of the directors or officers was selected as such.

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

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

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

     Marc R. Benou joined the Company in 1991 and is responsible for material,
purchasing and inventory control. In March 1995, he was elected Vice President,
Assistant Secretary and a Director.

                                       53
Mr. Benou attended Lehigh and High Point University and holds a BS degree
     in Psychology and a BS in Business Administration and Management. Marc R.
     Benou is the son of Robert S. Benou, the Company's President.

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

                                       54
Executive Compensation

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

                           Summary Compensation Table

-------------------------------------------------------------------------------------------------------------------------

                                           Annual Compensation               Long Term Compensation
-------------------------------------------------------------------------------------------------------------------------
                                                             Other
Name and             Fiscal Year-                            Annual
Principal            End                                     Comp-
Position                              Salary      Bonus      ensation            Awards         Payouts
-------------------------------------------------------------------------------------------------------------------------

                                                                         Restricted

                                                                         Stock       Options/    SALTIP    All Other
                                                                         Awards      SARS        Payouts   Compensation
-------------------------------------------------------------------------------------------------------------------------
Robert Benou,        1996           $150,000
President (1)
-------------------------------------------------------------------------------------------------------------------------
                     1995           $150,000
-------------------------------------------------------------------------------------------------------------------------
                     1994           $170,000
-------------------------------------------------------------------------------------------------------------------------
----------

(1)  See "Certain Relationships and Related Transactions".

     The Company did not grant any stock options or stock appreciation rights
during the fiscal year ended July 31, 1997 to any of its officers, directors or
employees. As of July 31, 1997 none of them had any outstanding stock options or
stock appreciation rights. Furthermore, none of them received awards under
long-term incentive plans that are stock based during the three fiscal years
referred to above. However, these and other benefits may be adopted in the
future if they are authorized by the Board of Directors.

Stock Option Plan

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

                                       55
Company. The Option Committee administers the Option Plan and designates the
optionees, the type of options to be granted (i.e., nonqualified or incentive
stock options), the number of shares subject to the options, and the terms and
conditions of each option. The terms and conditions include the exercise price,
date of grant, and date of exercise of each option. An employee may, at the
discretion of the Option Committee, be permitted to exercise an option and make
payment by giving a personal note.

     Incentive stock options may only be granted to employees of the Company and

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

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

     No incentive stock options or nonqualified options have been granted.

Employment Agreements

     The Company has entered into 5-year employment agreement commencing June 1,
1997 and ending May 31, 2002, with Robert Benou. Under his employment agreement,
Mr. Benou will receive an annual base salary of $150,000 for the first year of
employment with an increase of $20,000 per annum each year thereafter. In
addition, Mr. Benou is entitled to an annual bonus equal to 6% of the Company's
annual "income before income tax provision" as stated in its annual Form 10-K.
The employment agreement also entitles him to the use of an automobile and to
employee benefit plans, such as life, health, pension, profit sharing and other
plans. Under the employment agreement, employment terminates upon death or
disability of the employee and employee may be terminated by the Company for
cause. The Company intends to maintain a $1 million life insurance policy on the
life of Robert Benou. Reference is hereby made to the Employment Agreement which
has been filed as an exhibit to the Registration Statement of which this
Prospectus forms a part.

                                       56
The Company has entered into 5-year employment agreement commencing June 1,

1997 and ending May 31, 2002, with Marc Benou. Under his employment agreement,
Mr. Benou will receive an annual base salary of $55,000 for the first year of
employment with an increase of $6,000 per annum each year thereafter. In
addition, Mr. Benou is entitled to an annual bonus equal to 3% of the Company's
annual "income before income tax provision" as stated in its annual Form 10-K.
The employment agreement also entitles him to the use of an automobile and to
employee benefit plans, such as life, health, pension, profit sharing and other
plans. Under the employment agreement, employment terminates upon death or
disability of the employee and employee may be terminated by the Company for
cause. Reference is hereby made to the Employment Agreement which has been filed
as an exhibit to the Registration Statement of which this Prospectus forms a
part.

Representative's Right to Appoint Director

     The Underwriting Agreement between the Company and the Representative
provides that for three years after the completion of this Offering, the
Representative will have the right to nominate one person to serve on the
Company's Board of Directors, and upon such nomination the Board shall take the
action necessary to cause the Representative's nominee to be elected to the
Board. If the Representative does not exercise this right, it may appoint an
advisor, who will be entitled to attend all meeting of the Board of Directors.
To date, the Representative has not advised the Company as to whether it intends
to exercise either right. See "Underwriting".

                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

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

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

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

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

                                       57
On August 16, 1995, accrued salaries of $309,109 owed by the Company to Mr.
Benou were converted into 61,822 shares of Common Stock.

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

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

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

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

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

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

                                       58
PRINCIPAL SHAREHOLDERS

     The following table sets forth the beneficial ownership of outstanding
shares of Common Stock of the Company as of the date hereof by any person who,
to the knowledge of the Company, owns beneficially more than 5% of the
outstanding Common Stock, by all directors of the Company, and by the directors
and officers of the Company as a group.
Name and                           Amount and
            Address of                           Nature of            Percentage of Outstanding Shares(1)                After
         Beneficial Owner                   Beneficial Ownerhip                 Before Offering                        Offering
         ----------------                   -------------------       --------------------------------                 --------
Robert S. Benou (2)                               200,039                            7.15%                               5.72%
Arpad J. Havasy (2)                                50,117                            1.79%                               1.43%
Marc R. Benou (2)                                  45,000                            1.61%                               1.29%
Louis S. Massad (2)                                10,000                             .36%                                .26%
Thomas Fogg (2)                                    25,200                             .90%                                .72%

All Directors and Officers as A Group (5 persons) 330,356                           11.81%                               9.42%
----------

(1)  Does not include treasury stock. See "Financial Statements".

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

                                       59
DESCRIPTION OF SECURITIES

Capitalization

     The authorized capital stock of the Company consists of 20,000,000 shares
of Common Stock and 2,000,000 shares of Preferred Stock. Prior to this Offering,
the Company had 2,799,736 shares of Common Stock outstanding (not including
treasury stock), 155,000 shares of Series A Preferred Stock outstanding (162,000
authorized) and 1,197 shares of Series B Preferred Stock outstanding (50,000
authorized).

Common Stock

     The Company had 2,799,736 shares of Common Stock outstanding prior to the
Offering (not including treasury stock).

     Holders of the Common Stock are entitled to one vote for each share in the
election of directors and in all other matters to be voted on by the
stockholders. There is no cumulative voting in the election of directors. The
By-laws of the Company require that only a majority of the issued and
outstanding shares of Common Stock must be represented to constitute a quorum
and to transact business at a stockholders meeting.

     Holders of Common Stock are entitled to receive such dividends as may be
declared from time to time by the Board of Directors with respect to the Common
Stock out of funds legally available therefor and, in the event of liquidation,
dissolution or winding up of the Company, to share ratably in all assets
remaining after payment of liabilities and payments to holders of Preferred
Stock. (See "Preferred Stock" below.) There are presently no plans to pay
dividends with respect to the shares of Common Stock. See "Dividends". The
holders of Common Stock have no preemptive or conversion rights and are not
subject to further calls or assessments. There are no redemption or sinking fund
provisions applicable to the Common Stock. The Common Stock currently
outstanding is, and the Common Stock issuable upon exercise of the Class A
Warrants and Class B Warrants (described below) after payment of the applicable
exercise price will, when issued, be validly issued, fully paid and
nonassessable.

Preferred Stock

     The Company is authorized to issue 2,000,000 shares of Preferred Stock,
issuable in series, of which there are outstanding 155,000 shares of Series A
Preferred Stock, $.50 par value (162,000 authorized) and 1,197 shares of Series
B Preferred Stock, $.50 par value (50,000 authorized).

Series A Preferred Stock

     Holders of Series A Preferred Stock are entitled to receive, out of funds
legally available therefor, dividends at the rate of 4% per annum ($.02 per
share) of the par value thereof. The Series A Preferred

                                       60
Stock has no voting rights. Series A Preferred Stock ranks senior to all other
capital stock of the Company and upon dissolution, holders of such shares are
entitled to receive 100% of the par value thereof and all accrued and unpaid
dividends prior to any payment to any holder of capital stock of the Company. In
addition, each share of Series A Preferred Stock may be exchanged for one (1)
share of Common Stock upon surrender of the Series A Preferred Stock and payment
of $1,200 per share. The Company may redeem the Series A Preferred Stock at $.50
per share plus accrued and unpaid dividends. As of April 30, 1997, there was
$87,600 in accrued and unpaid dividends.

Series B Preferred Stock

     Holders of Series B Preferred Stock are entitled to receive, out of funds
legally available therefor, dividends at the rate of $.90 per share. The Series
B Preferred Stock has no voting rights. Series B Preferred stock ranks senior to
all capital stock of the Company but junior to the Series A Preferred Stock, and
upon dissolution, holders of such shares are entitled to receive 100% of the par
value thereof and all accrued and unpaid dividends prior to any payment to any
holder of capital stock of the Company but after payment to the holders of
Series A Preferred Stock. In addition, each share of Series B Preferred Stock is
convertible into .20 shares of Common Stock. As a result of the 1-for-100
reverse split on the Effective Date, the total number of shares of Common Stock
that may be issued upon conversion of the Series B Preferred Stock is 239. The
Company may redeem the Series B Preferred Stock at $15.00 per share plus accrued
and unpaid dividends. As of April 30, 1997, there was $25,743 in accrued and
unpaid dividends.

General

     The Board of Directors has the authority to issue Preferred Stock in one or
more series and to fix the rights, voting rights, terms of redemption,
redemption prices, liquidation preferences and the number of shares constituting
any series or the designation of such series, without further vote or action by
the stockholders. The issuance of Preferred Stock may have the effect of
delaying, deferring or preventing a change in control of the Company without
further action by the stockholders and may adversely affect the voting and other
rights of the holders of Common Stock. At present, the Company has no other
plans to issue any additional shares of Preferred Stock.

Class A Warrants

     In connection with the August 1995 Offering and with bridge financing that
preceded such offering, the Company issued 1,135,750 Class A Warrants. Each
Class A Warrant entitles the holder thereof to purchase one share of Common
Stock at an exercise price of $6.00 from August 17, 1996 until August 16, 1998,
subject to certain adjustments. The Class A Warrants may be exercised in whole
or in part. In connection with this Offering, the Company will issue 2,800,000

additional Class A Warrants.

     The Class A Warrants were issued under a warrant agreement dated as of
August 16, 1995 (as amended on _____________________ , 1997, the "Warrant
Agreement") between the Company and Continental Stock Transfer & Trust Company
(the "Warrant Agent"). The following is a general summary of certain provisions

                                       61
contained in the Warrant Agreement and is qualified in its entirety by reference
to the Warrant Agreement, a copy of which has been filed as an exhibit to the
Registration Statement, of which this Prospectus is a part.

     The Board of Directors of the Company has the right to amend the terms of
the Warrant Agreement at its discretion to, among other things, reduce the
exercise price or extend the exercise period of the Class A Warrants; provided
however, that no amendment adversely affecting the rights of the holders of
Class A Warrants may be made without the approval of the holders of a majority
of the affected Class A Warrants.

     At any time during the exercise period the Company has the right to redeem
all the Class A Warrants at a price of $.05 per Class A Warrant upon not less
than 30 days' prior written notice; provided that before any redemption of Class
A Warrants can take place, the average closing price of the Company's Common
Stock as reported on Nasdaq shall have been $7.20 per share for 20 consecutive
trading days ending within 15 days prior to the date on which notice of
redemption is sent.

     In order for a holder to exercise his or her Class A Warrants, and as
required in the Warrant Agreement, there must be a current registration
statement on file with the Securities and Exchange Commission and various state
securities commissions to continue registration of the shares of Common Stock
underlying such warrants. The Company will be required to file post-effective
amendments when events require such amendments. There can be no assurance that
the registration statement can be kept current. If it is not kept current for
any reason, the Class A Warrants will not be exercisable and will be deprived of
any value. The Company has agreed to use its best efforts to maintain a current
registration statement to permit the issuance of the Common Stock upon exercise
of the Class A Warrants.

     Holders of the Class A Warrants will be protected against dilution of the
interest represented by the underlying shares of Common Stock upon the
occurrence of certain events, including, but not limited to, stock dividends,
stock-splits, reclassifications and mergers. In the event of the complete
liquidation and dissolution of the Company, the Class A Warrants terminate.
Holders of the Class A Warrants will not have voting power and will not be
entitled to dividends. In the event of liquidation, dissolution or winding up of
the Company, holders of the Class A Warrants will not be entitled to participate

in the Company's assets.

     Pursuant to the Underwriting Agreement, the Company has agreed to pay to
the Representative and/or any registered broker-dealer which is a member of the
National Association of Securities Dealers, Inc. ("NASD") a commission equal to
four percent of the exercise price of each Class A Warrant exercised provided:
(1) at least one year has elapsed from the date of this Prospectus, (2) the
market price for the Common Stock is greater than the exercise price of the
Class A Warrants; (3) the Representative or such other NASD broker-dealer member
has solicited the holder to exercise the Class A Warrant with such solicitation
being confirmed in writing by each holder; and (4) the compensation arrangements
were disclosed to the holder at the time of exercise, such disclosure being
confirmed in writing by said holder. The commission is further conditioned upon
the Company's Warrant Agent being furnished by the Representative or NASD
broker-dealer member with a certificate stating that:

                                       62
(i)  the Class A Warrants exercised were not held in a discretionary
          account;

     (ii) the Representative or the NASD member did not, within 10 business days
          immediately preceding the solicitation of the exercise of the Class A
          Warrant or the date of such exercise, bid for or purchase the Common
          Stock of the Company or any securities of the Company immediately
          convertible into or exchangeable for the Common Stock (including the
          Class A Warrants) or otherwise engage in any activity that would be
          prohibited by Regulation M under the Securities Exchange Act of 1934,
          as amended, to one engaged in a distribution of the Company's
          securities; and

     (iii) in connection with the solicitation, the Representative and/or the
          NASD member disclosed to the person exercising the Class A Warrant the
          compensation it would receive upon exercise of the Class A Warrant.

     In connection with the August 1995 Offering, the Company agreed to pay a
similar solicitation fee to the underwriter of the August 1995 Offering and/or a
NASD broker-dealer who solicited the exercise of a Class A Warrant issued in
connection with the August 1995 Offering.

Transfer Agent/Warrant Agent

     The Company's transfer agent for the Common Stock and, Class A Warrants is
Continental Stock Transfer & Trust Company, 2 Broadway, New York, New York
10004. Continental Stock Transfer & Trust Company also serves as the Warrant
Agent for the Class A Warrants.

                        SHARES AVAILABLE FOR FUTURE SALE

     Immediately prior to the sale of the Common Stock hereunder, the Company
had an aggregate of 2,799,736 shares of its Common Stock issued and outstanding,
350,356 of which are "restricted securities," which may be sold only in
compliance with Rule 144 under the Securities Act of 1933, as amended. Rule 144
provides, in essence, that a person holding restricted securities for a period
of one year after payment therefor may sell, in brokers' transactions or to
market makers, an amount not exceeding 1% of the outstanding class of securities
being sold, or the average weekly reported volume of trading of the class of
securities being sold over a four-week period, whichever is greater, during any
three-month period. (Persons who are not affiliates of the Company and who had
held their restricted securities for at least two years are not subject to the
volume or transaction limitations.) Any such sales could have a material adverse
effect on the market price for the Common Stock, should a trading market
develop.

                                       63
UNDERWRITING

     Subject to the terms and conditions set forth in the Underwriting Agreement
by and between the Company and the Representative ("Underwriting Agreement"),
the Company has agreed to sell to the Underwriters, as set forth below, for whom
IAR Securities Corp. is the Representative, on a firm commitment basis, a total
of 700,000 Units, each unit consisting of one (1) share of Common Stock and four
(4) Class A Warrants.

        Underwriters                        Number of Units
        ------------                        ---------------

IAR Securities Corp. ..................      __________

___________________ ...................      __________

           Total ......................         700,000

     The Company has agreed to sell the Units to the Representative at a
discount of ten percent of the public offering price thereof. The Company has
also agreed to pay the Representative a nonaccountable expense allowance in the
amount of 3% of the offering price of the Units, including the Units purchased
pursuant to the Over-Allotment Option. In addition, the Company has agreed to
pay all costs of issuance of the Units, including blue sky fees and related
counsel fees, but not including fees and expenses of the Representative's
counsel. The Company estimates that it will incur costs of $225,000 in
connection with this Offering, not including the Representative's 3%
non-accountable expense allowance and the $70,000 financial consulting fee
payable to the Representative. As part of the underwriting arrangements, the
Company will enter into a contract to retain the Representative as a financial
consultant to the Company for a two-year period commencing as of the close of
the sale of the Securities offered hereby at an annual fee of $35,000, for a
total of $70,000, payable in full at the closing of this offering. The Company
has agreed to pay the Representative an investment banking fee for future
consummated transactions of the Company, if any, introduced by the
Representative, including mergers, acquisitions and joint ventures, during the
five years following the completion of the Offering equal to 5% of the first
$4,000,000 of consideration involved in the transaction, 4% of the next
$1,000,000, 3% of the next $1,000,000, and 2% of the excess, if any, over
$6,000,000.

     The Company has agreed to indemnify the Representative against certain
liabilities which may be incurred in connection with this offering, including
certain civil liabilities under the Securities Act of 1933, as amended, and
where such indemnification is not available, to contribute to the payments the
Representative may be required to make in respect of such liabilities.

     The Underwriting Agreement further provides that for three years after the
completion of this Offering, the Representative will have the right to nominate
one person to serve on the Company's Board of Directors, and upon such

nomination the Board shall take the action necessary to cause the
Representative's nominee to be elected to the Board. If the Representative does
not exercise this right, it may appoint an advisor, who will be entitled to
attend all meetings of the Board of Directors.

                                       64
The Company and its officers, directors and principal stockholders have
agreed not to issue, sell, offer to sell or otherwise dispose of any shares of
the Company's Common Stock, or securities convertible into Common Stock, owned
by them, for a period of twelve (12) months from the date of this Prospectus
without the prior written consent of the Representative.

     The Company has granted the Representative an Over-Allotment Option, which
is exercisable for 45 days from the date hereof, to purchase up to an aggregate
of 105,000 additional Units, all at the offering price, less the underwriting
discount, set forth on the cover page of this Prospectus. The Representative may
exercise the Over-Allotment Option solely for the purpose of covering
over-allotments incurred in the sale of shares Units offered hereby.

     The Representative has advised the Company that sales to certain dealers
may be made at a public offering price less a concession not in excess of _%.
The Representative does not intend to confirm sales of more than one percent of
the Units offered hereto to any accounts over which it exercises discretionary
authority.

     The public offering price of the Units do not bear any relationship to the
assets or book value, net worth or other criteria of value of or applicable to
the Company.

     The Underwriters may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation M
under the Securities Exchange Act of 1934, as amended. Over-allotment involves
syndicate sales in excess of the offering size, which creates a syndicate short
position. Stabilizing transactions permit bids to purchase the underlying
security so long as the stabilizing bids do not exceed a specific maximum.
Syndicate covering transactions involve purchases of the Company's securities in
the open market after the distribution has been completed in order to cover
syndicate short positions. Penalty bids permit the Underwriter to reclaim a
selling concession from a syndicate member when the securities originally sold
by such syndicate member are purchased in a syndicate covering transaction to
cover syndicate short positions. Such stabilizing transactions, syndicate
covering transactions and penalty bids may cause the price of the securities to
be higher than they would otherwise be in the absence of such transactions.

     The Company has agreed, upon completion of this offering, to sell to the
Representative or its nominee, for $.001 per option, the Representative's Unit
Purchase Option to purchase 70,000 Units each Unit consisting of one (1) share

of Common Stock and four (4) Class A Warrants. The Representative's Unit
Purchase Option will be exercisable for a four-year term, commencing one year
after the date of this Prospectus, at an exercise price of $6.00 per Unit, 120%
of the public offering price of the Units. The Representative's Unit Purchase
Option will be restricted from exercise, sale, transfer, assignment or
hypothecation (except to officers of the Representative or of any other
broker-dealer which participates in this Offering) for a period of one year from
the date of this Prospectus. The Representative's Unit Purchase Option also
provides that on two occasions, upon the request of the Representative or
holders of a majority interest in the Representative's Unit Purchase Option or
the underlying securities, at any time during the four-year period commencing
one year after the Effective Date, the Company will prepare and file a
post-effective amendment or new registration statement permitting the sale of
the

                                       65
Representative's Unit Purchase Option and/or the underlying securities and use
its best efforts to keep the registration statement effective for a nine-month
period following the effective date of such post-effective amendment or new
registration statement. The Company will bear the cost of the first such
registration statement, but the holders will bear all costs incident to the
second such registration statement. If the Company files a registration
statement relating to an equity offering under the provisions of the Securities
Act at any time during the five-year period commencing on the date of this
Prospectus, the holders of the Representative's Unit Purchase Option or
underlying securities will have the right, subject to certain conditions, to
include in such registration statement, at the Company's expense, all or part of
the underlying securities at the request of the holders. The number of Units
covered by the Representative's Unit Purchase Option and the exercise price are
subject to adjustment upon certain events to prevent dilution.

     For the life of the Representative's Unit Purchase Option, the holders
thereof will have the opportunity to profit from a rise in the market price of
the Securities with a resulting dilution in the interests of other stockholders.
The Representative's registration rights may result in substantial expense to
the Company at a time when it may not be able to afford such expense and may
impede future financing. The Company may find that the terms on which it could
obtain additional capital may be adversely affected while the Representative's
Unit Purchase Option is outstanding.

     The Company has also agreed to pay the Representative a warrant
solicitation fee equal to 4% of the Class A Warrant exercise price for any of
the publicly held Class A Warrants, when exercised, at any time commencing one
year after the date of this Prospectus, provided that the Representative or any
NASD member firm has solicited such exercise, as evidenced in writing signed by
the warrant holder, and that (a) the market price of the Common Stock on the
date that any such Class A Warrant is exercised is greater than the exercise

price of the Class A Warrant; (b) prior specific written approval for exercise
is received from the customer if the Class A Warrant is held in a discretionary
account; (c) disclosure of this compensation arrangement is made prior to or
upon the exercise of such Class A Warrant; (d) solicitation of the exercise is
not in violation of Regulation M of the Exchange Act; and (e) solicitation of
the exercise is in compliance with NASD Notice to Members 81-38. In addition,
unless granted an exemption by the Commission from Regulation M under the
Exchange Act, the Representative will be prohibited from engaging in any market
making activities or solicited brokerage activities with respect to the
Company's Securities for the period up to five business days prior to any
solicitation of the exercise of any Class A Warrant until the later of the
termination of such solicitation activity or the termination (by waiver or
otherwise) of any right the Representative may have to receive a fee for the
exercise of the Class A Warrants following such solicitation. As a result, the
Representative may be unable to continue to provide a market for the Company's
Securities during certain periods while the Warrants are exercisable.

                                       66
SELLING SECURITYHOLDERS

     The Registration Statement of which this Prospectus is a part also relates
to the offer and sale of 1,200,000 Class A Warrants issuable upon exercise of
the Convertible Bridge Notes and the shares of Common Stock underlying such
Class A Warrants (the "Selling Securityholder's Securities") by the Selling
Securityholders or their transferees. See "Bridge Financing." All of such Class
A Warrants are expected to become tradeable on or about the date of this
Prospectus. Sales of the Class A Warrants being offered by Selling
Securityholders or the Common Stock underlying the Class A Warrants, or even the
potential of such sales, would likely have an adverse effect on the market
prices of the Securities being offered for sale by the Company.

     The following table sets forth the beneficial ownership of the securities
of the Company held by each person who is a Selling Securityholder and by all
Selling Securityholders as a group prior to this Offering and after this
Offering, assuming all of the Class A Warrants owned by the Selling
Securityholders are sold.

                                           Class A        Percent of Class A
                                        Warrants Owned      Warrants Owned
                                     Prior to     After   Prior to     After
Name of Beneficial Owner             Offering   Offering  Offering   Offering
------------------------             --------   --------  --------   --------
Ekistics, Inc. ....................   300,000       0       12.84%       0%
Blue Star Group Investment, Ltd. ..   696,000       0       29.80%       0%
James Solakian ....................   120,000       0        5.14%       0%
Bruce Ungerleider .................    30,000       0        1.28%       0%
Harold Yordy ......................    27,000       0        1.16%       0%
Michael Yordy .....................    27,000       0        1.16%       0%

      Total ....................... 1,200,000       0       51.37%       0%

     None of the Selling Securityholders are affiliated with the Company in any
capacity, has had any business relationship with the Company at any time nor
owned any of the Company's Common Stock beneficially or of record prior to this
Offering.

     The securities offered thereby may be sold from time to time directly by
the Selling Securityholders. Alternatively, the Selling Securityholders may from
time to time offer such securities through underwriters, dealers or agents. The
distribution of securities by the Selling Securityholders may be effected in one
or more transactions that may take place on the over-the-counter market,
including ordinary broker's transactions, privately-negotiated transactions or
through sales to one or more broker-dealers for resale of such securities as
principals, at market prices prevailing at the time of sale, at prices related
to such prevailing market prices or at negotiated prices. Usual and customary or
specifically negotiated brokerage fees or commissions may be paid by the Selling
Securityholders in connection with

                                       67
such sales of securities. The Selling Securityholders and intermediaries through
whom such securities are sold may be deemed "underwriters" within the meaning of
the Act with respect to the securities offered, and any profits realized or
commissions received may be deemed underwriting compensation.

     At the time a particular offer of securities is made by or on behalf of a
Selling Securityholder, to the extent required, a prospectus will be distributed
which will set forth the number of securities being offered and the terms of the
offering, including the name or names of any underwriters, dealers or agents, if
any, the purchase price paid by any underwriter for securities purchased from
the Selling Securityholder and any discounts, commissions or concessions allowed
or reallowed or paid to dealers, and the proposed selling price to the public.

     Under the Exchange Act, and the regulations thereto, any person engaged in
a distribution of the securities of the Company offered by the Selling
Securityholders may not simultaneously engage in market-making activities with
respect to such securities of the Company during the applicable "cooling off"
period (up to 5 days) prior to the commencement of such distribution. In
addition, and without limiting the foregoing, the Selling Securityholders will
be subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including without limitation, Regulation M, in
connection with transactions in such securities, which provisions may limit the
timing of purchase and sales of such securities by the Selling Securityholders.

                                LEGAL PROCEEDINGS

     The Company is not a party to any legal proceedings.

                                  LEGAL MATTERS

     The validity of the securities offered hereby has been passed upon for the
Company by Bernstein & Wasserman, LLP, 950 Third Avenue, New York, New York
10022. Bernstein & Wasserman, LLP has served, and continues to serve, as counsel
to the Representative on matters unrelated to this Offering. Certain legal
matters in connection with this offering will be passed upon for the
Representative by Lester Morse, P.C., 111 Great Neck Road, Great Neck, NY 11021.

                                     EXPERTS

     The financial statements of Conolog Corporation have been included herein
and in the Registration Statement in reliance upon the report of Rosenberg Rich
Baker Berman & Company, independent certified public accounts, appearing
elsewhere herein and upon the authority of said firm as experts in accounting
and auditing.

                                       68
Index to the Financial Statements

Independent Auditors' Report .....................................    F-2

Balance Sheets - April 30, 1997 (Unaudited) and
   July 31, 1996 and 1995 ........................................    F-3a, F-3b

Statements of Income - Nine Months Ended April 30,
   1997 and 1996 (Unaudited) and Years Ended July 31, 1996,
   1995 and 1994 .................................................    F-4

Statements of Stockholders' Equity (Deficiency) - Nine Months
   Ended April 30, 1997 (Unaudited) and Years Ended July 31,
   1996, 1995 and 1994 ...........................................    F-5

Statements of Cash Flows - Nine Months Ended April 30, 1997
   and 1996 (Unaudited) and Years Ended July 31, 1996, 1995
   and 1994 ......................................................    F-6

Notes to Financial Statements - April 30, 1997 (Unaudited) and
   July 31, 1996, 1995 and 1994 ..................................    F-7-14

                                                                             F-1
Rosenberg Rich Baker Berman & Company

                                  [LETTERHEAD]
            

                          Independent Auditors' Report

Board of Directors
Conolog Corporation

We have audited the accompanying balance sheets of Conolog Corporation at July
31, 1996 and 1995, and the related statements of income, stockholders' equity
(deficiency) and cash flows for each of the three years in the period ended July

31, 1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Conolog Corporation at July 31,
1996 and 1995, and the results of its operations and its cash flows for each of
the three years in the period ended July 31, 1996 in conformity with generally
accepted accounting principles. Furthermore, it is our opinion that the
schedules referred to above present fairly the information set forth therein in
compliance with the applicable accounting regulation of the Securities and
Exchange Commission.

                                    /s/ Rosenberg  Rich  Baker  Berman & Company
                                    --------------------------------------------

Maplewood, New Jersey
October 8, 1996, except as to Note 5, which date is September 5, 1997

                                                                             F-2
Conolog Corporation
                                 Balance Sheets
April 30,            July 31,
                                                                                  --------------   ------------------------
                                                                                      1997            1996         1995
                                                                                  --------------   ---------     ----------
                                                                                   (Unaudited)
Assets
Current Assets
     Cash                                                                         $   93,660       $  178,213    $   27,577
     Accounts receivable - less allowances of $14,000
       in 1997 and 1996 and $10,000 in 1995                                          166,827          304,020       171,541

     Inventories                                                                   3,232,580        2,937,780     2,598,127

     Other current assets                                                             56,923           43,517        25,683
     Deferred tax asset                                                                 --               --         492,352
     Deferred offering costs                                                            --               --          86,154
                                                                                  ----------       ----------    ----------

                                                                                   3,549,990        3,463,530     3,401,434
                                                                                  ----------       ----------    ----------

Property, Plant and Equipment
     Land and improvements                                                            34,524           34,524        34,524
     Building and improvements                                                       665,327          659,477       651,977
     Machinery and equipment                                                       1,289,578        1,289,578     1,298,844
     Furniture and fixtures                                                          336,266          330,735       304,472
     Auto                                                                              3,340             --            --
                                                                                  ----------       ----------    ----------
                                                                                   2,329,035        2,314,314     2,289,817
     Less allowance for depreciation and amortization                              1,923,272        1,880,408     1,820,922
                                                                                  ----------       ----------    ----------

                                                                                     405,763          433,906       468,895
                                                                                  ----------       ----------    ----------

Other assets                                                                          23,383           30,398        11,906
                                                                                  ----------       ----------    ----------

             Total Assets                                                         $3,979,136       $3,927,834    $3,882,235
                                                                                  ==========       ==========    ==========
F-3a

See notes to the financial statements.
April 30,            July 31,
                                                                                  --------------   ------------------------
                                                                                      1997            1996         1995
                                                                                  --------------   ---------     ----------
                                                                                   (Unaudited)
Liabilities
Current Liabilities
   Notes payable                                                                  $    74,735    $ 1,012,500    $ 3,798,000
   Accounts payable                                                                    95,400        280,629        287,630
   Accrued payroll                                                                    115,778         41,716        499,761
   Accrued interest                                                                     6,133         64,699        654,618
   Bridge loans                                                                       200,000           --          200,000
   Other accrued expenses                                                             120,977        115,723        135,936
   Current maturities of capitalized lease obligations                                  8,184         33,282         54,660
                                                                                  -----------    -----------    -----------

           Total Current Liabilities                                                  621,207      1,548,549      5,630,605
                                                                                  -----------    -----------    -----------

Other Liabilities
   Capitalized lease obligations, less current maturities                                --            4,973         34,103
   Due to officers                                                                       --             --          161,705
                                                                                  -----------    -----------    -----------
                                                                                         --            4,973        195,808
                                                                                  -----------    -----------    -----------

Stockholders' Equity (Deficiency)
   Preferred Stock, par value $.50; Series A; 4% cumulative; 
     162,000 shares authorized; 155,000 shares issued and
     outstanding                                                                       77,500         77,500         77,500
   Preferred Stock, par value $.50; Series B; $.90 cumulative;
     50,000 shares authorized; issued and outstanding 1,197 
     shares at April 30, 1997, 1,197 shares in 1996 and 21,321 in
     1995                                                                                 597            597         10,661
   Preferred stock par value $5.00, 2,000,000 shares authorized,
   0 shares outstanding                                                                   --             --            --
   Common Stock, par value $1.00; 20,000,000 shares 
     authorized; issued 2,443,973 at April 30, 1997, issued 
     1,035,186 shares in 1996 and 52,239 in 1995, including
     8,776 shares held in Treasury                                                  2,443,973      1,035,186         52,239
   Additional Paid-In Capital                                                       4,124,013      4,401,636        952,994
   Retained Earnings (Deficit)                                                     (3,156,420)    (3,008,873)    (2,905,838)
   Treasury Shares at Cost                                                           (131,734)      (131,734)      (131,734)
                                                                                  -----------    -----------    -----------

     Total Stockholders' Equity (Deficiency)                                        3,357,929      2,374,312     (1,944,178)
                                                                                  -----------    -----------    -----------

           Total Liabilities and Stockholders' Equity                             $ 3,979,136    $ 3,927,834    $ 3,882,235
                                                                                  ===========    ===========    ===========
F-3b

See notes to the financial statements.
Conolog Corporation
                              Statements of Income
Nine Months Ended April 30,                  Year Ended July 31,
                                                        ---------------------------     -------------------------------------------
                                                           1997            1996            1996            1995            1994
                                                        -----------     -----------     -----------     -----------     -----------
                                                               (Unaudited)
Sales and other income                                  $   978,979     $ 1,519,975     $ 1,924,466     $ 2,090,933     $ 2,044,860
                                                        -----------     -----------     -----------     -----------     -----------

Costs and Expenses:
     Cost of products sold                                  528,498         957,435       1,242,001       1,270,771       1,067,560
     Selling, general and administrative                    518,944         653,571         946,954         924,524         852,951
     Interest                                                69,199         118,371         131,854         253,686         362,317
     Write-off of obsolete or excess
       inventories                                             --              --            50,281         656,248         944,970
                                                        -----------     -----------     -----------     -----------     -----------

                                                          1,116,641       1,729,377       2,371,090       3,105,229       3,227,798
                                                        -----------     -----------     -----------     -----------     -----------

Loss Before Income Taxes and
  Extraordinary Items                                      (137,662)       (209,402)       (446,624)     (1,014,296)     (1,182,938)

Income taxes (benefit)                                        9,884             100             200        (492,252)             50
                                                        -----------     -----------     -----------     -----------     -----------

Net Loss Before Extraordinary Items                        (147,546)       (209,502)       (446,824)       (522,044)     (1,182,988)

Extraordinary Item (Net of Tax Benefit of $492,392)             --          740,376         740,376            --              --
                                                        -----------     -----------     -----------     -----------     -----------

Net Income (Loss)                                       $  (147,546)    $   530,874     $   293,552     $  (522,044)    $(1,182,988)
                                                        ===========     ===========     ===========     ===========     ===========

Earnings (Loss) Per Share Before Extra-
  ordinary Item                                                (.12)           (.20)           (.43)           (.12)           (.27)

Extraordinary Item                                             --               .71             .71            --              --

Earnings (Loss) Per Share                                      (.12)            .51             .28            (.12)           (.27)
See notes to the financial statements.
                                                                             F-4
Conolog Corporation
                 Statement of Stockholders' Equity (Deficiency)
                Nine Months Ended April 30, 1997 (Unaudited) and
                    Years Ended July 31, 1996, 1995 and 1994
Total
                                  Series A      Series B                   Additional       Retained                   Stockholders'
                                 Preferred     Preferred       Common       Paid-in         Earnings      Treasury        Equity
                                   Stock         Stock          Stock       Capital         (Deficit)      Stock       (Deficiency)
                                -----------   -----------    -----------   -----------    -----------    -----------   -----------
Balance at July 31, 1993        $    77,500   $    10,661    $    52,239   $   952,994    $(1,200,806)   $  (131,734)  $  (239,146)

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

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

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

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

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

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

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

Additional stock issued                --            --        1,408,787      (277,623)          --             --       1,131,164

Net loss for the period                --            --             --            --         (147,546)          --        (147,546)
                                -----------   -----------    -----------   -----------    -----------    -----------   -----------

Balance at April 30, 1997       $    77,500   $       597    $ 2,443,973   $ 4,124,013    $(3,156,419)   $  (131,734)  $ 3,357,930
  (Unaudited)                   ===========   ===========    ===========   ===========    ===========    ===========   ===========
See notes to the financial statements.

                                                                             F-5
Conolog Corporation
                            Statements of Cash Flows
Nine Months Ended April 30,             Year Ended July 31,
                                                             --------------------------    -----------------------------------------
                                                                1997           1996            1996          1995           1994
                                                             -----------    -----------    -----------    -----------    -----------
                                                                    (Unaudited)
Cash Flows From Operating Activities
  Net Income (Loss)                                         $  (147,546)   $   530,874    $   293,552    $  (522,044)   $(1,182,988)
     Adjustments to Reconcile Net Income to
       Net Cash Provided (Used) by  Operating
       Activities
     Deferred income taxes                                         --             --          492,352       (492,352)          --
     Depreciation and amortization                               42,864         46,347         64,994         60,396         57,529
     Gain on disposition of equipment                              --             --           (3,420)          --             --
     Provision for losses on accounts
       receivables                                                 --             --            9,000           --          (28,561)
  (Increase) Decrease in Operating Assets
     Accounts receivable                                        137,193       (208,304)      (141,479)        74,529        (58,051)
     Inventories                                               (294,800)      (257,374)      (339,653)       392,058        874,989
     Other current assets                                        (6,387)        (5,941)       (17,834)        (3,394)        22,555
  Increase (Decrease) in Operating Liabilities
     Accounts payable                                          (185,229)       (81,359)        (7,001)        12,330         38,459
     Accrued expenses and other liabilities                      20,744       (618,819)    (1,068,177)       417,484        398,239
                                                            -----------    -----------    -----------    -----------    -----------
       Net Cash Provided (Used) by
         Operating Activities                                  (433,161)      (594,576)      (717,666)       (60,993)       122,171
                                                            -----------    -----------    -----------    -----------    -----------
Cash Flows From Investing Activities
  Purchase of property, plant and equipment                     (14,721)       (23,284)       (43,163)       (19,625)       (44,675)
  Proceeds from sale of equipment                                  --             --           18,666           --             --
                                                            -----------    -----------    -----------    -----------    -----------
       Net Cash Used in Investing Activities                    (14,721)       (23,284)       (24,497)       (19,625)       (44,675)
                                                            -----------    -----------    -----------    -----------    -----------
Cash Flows From Financing Activities
  Deferred offering costs                                          --             --           86,154        (86,154)          --
  Increase from public stock offering                              --        4,409,839      4,421,525           --             --
  Proceeds from long-term borrowings                               --             --             --             --           75,000
  Increase (Decrease) in bridge loan                            200,000       (200,000)      (200,000)       200,000           --
  Repayments of long-term borrowings                         (1,042,571)    (2,773,147)    (2,836,008)       (38,681)       (53,098)
  (Increase) reductions in other assets                            --             --          (20,580)           325         20,672
  Dividends paid                                                   --         (384,903)      (396,587)          --             --
  Increase (decrease) in due to officers                           --         (161,705)      (161,705)        17,302       (137,333)
  Issuance of common stock                                    1,408,787           --
  Additional paid-in capital                                   (277,622)          --

  From investors                                                 74,735           --
                                                            -----------    -----------    -----------    -----------    -----------
       Net Cash Provided (Used) by
         Financing Activities                                   363,329        890,084        892,799         92,792        (94,759)
                                                            -----------    -----------    -----------    -----------    -----------
Net Increase (Decrease) in Cash                                 (84,553)       272,224        150,636         12,174        (17,263)
Cash at Beginning of Period                                     178,213         27,577         27,577         15,403         32,666
                                                            -----------    -----------    -----------    -----------    -----------
Cash at End of Period                                       $    93,660    $   299,801    $   178,213    $    27,577    $    15,403
                                                            ===========    ===========    ===========    ===========    ===========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
  Cash paid during the year for:
     Interest paid                                          $    12,365    $     9,564    $   772,773    $   102,816    $    90,917
     Taxes paid                                             $    17,324    $       --     $       125    $        50    $        50
SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES     
  Capitalized lease obligations incurred for                $       --     $       --     $       --     $    56,550    $       -- 
  use of equipment
See notes to the financial statements.
                                                                             F-6
Conolog Corporation
                        Notes to the Financial Statements
           April 30, 1997 (Unaudited) and July 31, 1996, 1995 and 1994

(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

     Basis of Presentation
         In the opinion of management, the preceding unaudited financial
         statements contain all adjustments (consisting of normal recurring
         accruals) necessary for a fair presentation of the financial condition
         of the Company as of April 30, 1997 and the results of its operations
         for the nine months ended April 30, 1997 and 1996.

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

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

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

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

     Income Taxes
         Deferred income taxes have been provided for in accordance with
         Statement No. 109 of the Financial Accounting Standards Board. Deferred

         income taxes arise from timing differences resulting from income and
         expense items reported for financial accounting and tax purposes in
         different periods. Deferred taxes are classified as current or
         noncurrent, depending on the classification of the assets and
         liabilities to which they relate. Deferred taxes arising from timing
         differences that are not related to an asset or liability are
         classified as current or noncurrent depending on the periods in which
         the timing differences are expected to reverse.

                                                                             F-7
Conolog Corporation
                        Notes to the Financial Statements
           April 30, 1997 (Unaudited) and July 31, 1996, 1995 and 1994

(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     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.

(2)  INVENTORIES AT APRIL 30, 1997 (UNAUDITED), JULY 31, 1996 AND JULY 31, 1995
     CONSIST OF THE FOLLOWING:

                                       April 30,               July 31,
                                      ----------     ---------------------------
                                         1997            1996            1995
                                      ----------      ----------      ----------
                                     (Unaudited)

Materials and supplies                $               $1,313,816      $1,236,905
Work in process                                          129,675         831,410
Finished goods                                         1,494,289         529,812
                                      ----------      ----------      ----------

                                      $3,232,580      $2,937,780      $2,598,127
                                      ==========      ==========      ==========

(3)  NOTES PAYABLE (UNAUDITED)

     Bank
         The principal amount owing to the Bank under the Company's Credit
         Facility at July 31, 1996 was $1,012,500 and the unpaid accrued
         interest was $57,196. The Bank and the Company entered into the Conolog
         Corporation Allonge, dated as of September 11, 1996, pursuant to which
         the Amended and Restated Term Note dated as of August 2, 1995 between
         the Company and the Bank (the "Note") was amended to permit the
         conversion by the Bank of the unpaid principal and interest due under
         the Note into 1,400,000 shares of the Company's Common Stock on or
         before April 16, 1997. The conversion right was exercisable by the Bank
         or its assignee. The Bank had deferred all payments of principal and
         interest under the Note until April 16, 1997.

         The Bank and CNL Holdings, Inc. ("CNL") entered into an Option and

         Purchase, Sale and Assignment Agreement (which was amended as described
         below) dated as of September 12, 1996 (the "Option Agreement"). Under
         the original Option Agreement the Bank granted an option to CNL to
         purchase all of the Bank's interest in (i) the Amended and Restated
         Term Loan Agreement dated as of August 2, 1995 between the Company and
         the Bank, (ii) the Note and (iii) the 375,000 shares of the Company's
         Common Stock owned by the Bank. CNL paid $150,000 to the Bank for the
         option, which had an exercise price of $1,500,000 and an expiration
         date of April 15, 1997.

                                                                             F-8
Conolog Corporation
                        Notes to the Financial Statements
           April 30, 1997 (Unaudited) and July 31, 1996, 1995 and 1994

(3)  NOTES PAYABLE (Continued)

     Bank
         The Company and CNL entered into an agreement (which was amended as
         described below) dated as of September 12, 1996 (the "CNL Agreement"),
         whereby CNL agreed to loan up to $2,500,000 to the Company under
         certain circumstances (as described below).

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

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

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

         On January 31, 1997, the Bank and the Company entered into Amendment
         No. 1 to the Conolog Corporation Allonge dated September 11, 1996 (the
         "Allonge") (which previously amended the Amended and Restated Term Note

         dated as of August 2,1995 between the Company and the Bank (previously
         defined as the "Note")). The original Allonge provided that the Bank
         may convert the entire unpaid principal and interest due under the Note
         ("Debt Claim") into 1,400,000 shares of Common Stock of the Company at
         any time on or before April 15, 1997. The amended Allonge provided the
         Bank the right to convert all or, if it so desires, only a portion of
         the Debt Claim. The number of shares issuable upon conversion of a
         portion of the Debt Claim was to be calculated on the basis of 1 share
         for each $3.00 of the Debt Claim being converted with the balance of
         the 1,400,000 shares to be issued when all of the Debt Claim has been
         converted.

         On January 31, 1997, the Bank and CNL entered into Amendment No. 1 to
         the Option Agreement. The amended Option Agreement required CNL, on or
         before February 5, 1997, to purchase from the Bank for an aggregate
         purchase price of $600,000, no less than (i) 133,333 shares of Common
         Stock for $399,999 and (ii) $200,001 of the Debt Claim represented by
         the Note. CNL purchased such Common Stock and portion of the Debt Claim
         on February 5, 1997. CNL had the right to exercise the remainder of the
         option on or before April 15, 1997. CNL had the right to purchase from
         the Bank additional shares of Common Stock owned by the Bank at the
         price of $3.00 per share and portions of the Debt Claim from time to
         time. CNL purchased such Common Stock and portion of the Debt Claim on
         February 5, 1997.

                                                                             F-9
Conolog Corporation
                        Notes to the Financial Statements
           April 30, 1997 (Unaudited) and July 31, 1996, 1995 and 1994

(3)  NOTES PAYABLE

     Bank
         On January 31, 1997, the Company and CNL entered into an Amendment to
         the CNL Agreement. The amended CNL Agreement provided that in the event
         not all of the Debt Claim was converted into shares of Common Stock by
         the Bank prior to CNL's acquisition of the Note, CNL would promptly
         convert the remaining portion of the Debt Claim into shares of Common
         stock in accordance with the Note. In addition, the proceeds of the
         sale of the Acquired Shares were to be applied as follows: First to
         reimburse CNL for payments made to the Bank pursuant to Option
         Agreement; 50% of the balance, up to $2,500,000, to be loaned to the
         Company within five days of CNL's receipt of the proceeds.

         The balance under the option (as of Mach 15, 1997) was $750,000
         (evidencing an option to purchase 241,667 shares of Common Stock and

         the Note, convertible into 1,333,333 shares of Common Stock). On March
         26, 1997, CNL exercised a portion of its option to purchase shares of
         Common Stock, by purchasing a portion of the principal amount of the
         Note ($720,000) and converted such portion of the Note into 240,000
         shares of Common Stock at $3.00 per share, leaving a balance due under
         the option at $30,000. On March 27, 1997, CNL exercised the remaining
         portion of the option in consideration of $30,000. On such date, the
         remaining portion of the Note was converted into 1,093,333 shares of
         Common Stock, the Bank transferred 241,667 shares of Common Stock to
         CNL and the Debt Claim was extinguished.

         As of April 30, 1997, $74,735 had been loaned to the Company by CNL.
         Subsequent to April 30, 1997 an additional $841,500 had been loaned to
         the Company by CNL.

     Bridge Loans
         In December 1996 and January 1997, the Company obtained bridge
         financing from seven (7) lenders in the amount of $200,000. In exchange
         for making the loans to the Company, each lender received two (2)
         promissory notes. Certain Notes are in the aggregate principal amount
         of $150,000 and the other Notes are in the aggregate principal amount
         of $50,000. Each of the Notes bears interest at the rate of eight
         percent (8%) per annum. The Notes are due and payable upon the earlier
         of (i) December 31, 1997 or (ii) the date on which the proposed stock
         offering closes. The Company intends to use a portion of the net
         proceeds of the proposed offering to repay the Notes.

(4)  DUE TO OFFICERS

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

(5)  CAPITAL STOCK

     The Series A Preferred Stock provides 4% ($.02 per share) cumulative
     dividends, which were $87,600 in arrears at April 30, 1997. In addition,
     each share of Series A Preferred Stock may be exchanged for one share of
     Common Stock upon surrender of the Preferred Stock and payment of $1,200
     per share. The Company may redeem the Series A Preferred Stock at $.50 per
     share plus accrued and unpaid dividends.

                                                                            F-10
Conolog Corporation
                        Notes to the Financial Statements
           April 30, 1997 (Unaudited) and July 31, 1996, 1995 and 1994

(5)  CAPITAL STOCK (Continued)

     The Series B Preferred Stock provides cumulative dividends of $.90 per
     share which were $25,743 in arrears at April 30, 1997. In addition, each
     five shares of Series B Preferred Stock is convertible into .20 shares of
     Common Stock. The Company may redeem the Series B Preferred Stock at $15 
     per share plus accrued and unpaid dividends.

(6)  WRITE-OFF OF OBSOLETE OR EXCESS INVENTORIES

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

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

(7)  INCOME TAXES

     Income taxes are comprised of the following:
April 30,                                   July 31,
                                               --------------        ---------------------------------------------------------
                                                   1997                  1996                  1995                 1994
                                               --------------        --------------       ---------------       --------------
                                                (Unaudited)
Deferred Income Taxes (Benefit)               $             -      $              -      $      (492,352)      $             -
Current Income Taxes
     Federal                                            9,684                     -                     -                    -
     State                                                200                   200                   100                   50
                                               --------------        --------------       ---------------       --------------
                                              $         9,884      $            200      $      (492,252)      $            50
                                               ==============        ==============       ===============       ==============
Taxable income differs from financial statement income due to the effect of
     non-deductible permanent tax differences. These permanent tax differences
     include officer's life insurance premiums and non-deductible entertainment
     expenses.

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

     2000, $26,300 in 2001 and $64,900 in 2002.

     The above net operating loss created a deferred tax asset that has been
     fully reserved. The amount is $1,185,209. The Federal income taxes accrued
     at April 30, 1997 is the result of the corporation being subject to the
     alternative minimum tax rules.

                                                                            F-11
Conolog Corporation
                        Notes to the Financial Statements
           April 30, 1997 (Unaudited) and July 31, 1996, 1995 and 1994

(8)  EXTRAORDINARY ITEM

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

(9)  LEASES

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

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

                                                       July 31,
                                          -----------------------------------
                                               1996                1995
                                          ---------------     ---------------

     Machinery and equipment              $       303,574     $       322,239
     Less allowance for amortization              263,832             248,013
                                          ---------------     ---------------

                                          $        39,742     $        74,226
                                          ===============     ===============

     Lease amortization is included in depreciation expense.

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

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

                                                                            F-12
Conolog Corporation
                        Notes to the Financial Statements
           April 30, 1997 (Unaudited) and July 31, 1996, 1995 and 1994

(9)  LEASES (Continued)

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

     Year Ended July 31,
     -------------------
             1997                                             $        7,659
             1998                                                      4,808
             1999                                                      4,808
                                                              --------------
                                                              $       17,275
                                                              ==============

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

(10) MAJOR CUSTOMERS AND EXPORT SALES

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

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

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

(11) SUBSEQUENT EVENTS (UNAUDITED)

     On or about September 11, 1997, the Company filed with the SEC a
     Registration Statement to sell and issue 700,000 units consisting of one
     share of Common Stock and four redeemable Class A Common Stock Purchase
     Warrants.

     All costs associated with this offering will be deferred and deducted from
     the proceeds from the sale of stock. If the Company does not complete this
     offering, such costs will be charged to expense.

     The Registration Statement also covers the offering of 1,200,000 Class A
     Warrants owned by certain selling security holders, the resale of the
     Common Stock underlying the Class A Warrants and the exercise of the Class
     A Warrants by the transferees of the selling security holders. The Company
     will not receive any of the proceeds from the sale of the securities of the
     selling security holders.

                                                                            F-13
Conolog Corporation
                        Notes to the Financial Statements
           April 30, 1997 (Unaudited) and July 31, 1996, 1995 and 1994

(11) SUBSEQUENT EVENTS (UNAUDITED) (Continued)

     The expenses of the offering are estimated to be $400,000, with the
     proceeds of approximately $2,750,000 going to the Company.

     During the quarter ended April 30, 1997, the Company obtained bridge
     financing in the amount of $200,000. In exchange for making the loans to
     the Company, the Company executed in favor of the lenders two promissory
     notes. Certain bridge notes are in the aggregate principal amount of
     $150,000, and the other bridge notes are in the aggregate principal amount
     of $50,000. Each of the bridge notes bears interest at the rate of 8% per

     annum. The bridge notes are due and payable upon the earlier of (i)
     December 31, 1997 or (ii) the date of which the offering closes.

                                                                            F-14
No dealer, salesman or other person has been authorized to give any
information or to make any representations not contained in this Prospectus and
if given or made, such information or representations must not be relied upon as
having been authorized by the Company or any Underwriter. Neither the delivery
of this Prospectus nor any sale made hereunder shall under any circumstances
create any implication that there has been no change in the affairs of the
Company since the date hereof. This Prospectus does not constitute an offer to
sell or a solicitation of an offer to buy any of the securities offered hereby
in any jurisdiction to any person to make such offer or solicitation in such
jurisdiction.

                                 ---------------

                                TABLE OF CONTENTS

                                                                          Page
                                                                          ----
Prospectus Summary.....................................................
The Offering...........................................................
Summary Financial
  Information..........................................................
Risk Factors...........................................................
Use Of Proceeds........................................................
Capitalization.........................................................
Bridge Financing.......................................................
Dividends..............................................................
Selected Financial Information.........................................
Management's Discussion and
 Analysis of Financial
 Condition and Results of
 Operations............................................................
Market Price for Securities ...........................................
Business...............................................................
Management.............................................................
Certain Relationships
 and Related Transactions..............................................
Principal Shareholders.................................................
Description of
 Securities............................................................
Shares Available for
 Future Sales..........................................................
Underwriting...........................................................

Selling Securityholders................................................
Legal Proceedings......................................................
Legal Matters..........................................................
Experts................................................................
Financial Statements...................................................

                                 ---------------

Until ________________,1997 (25 days after the date of this Prospectus), all
dealers effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.

                                  700,000 UNITS

                               CONOLOG CORPORATION

                                 ---------------

                                   PROSPECTUS

                                 ---------------

                              IAR Securities Corp.

                                 ______ __, 1997

                                 ---------------
Subject to Completion, dated _____ __, 1997

Alternate Prospectus

                               CONOLOG CORPORATION

                1,200,000 Class A Common Stock Purchase Warrants

     The securities offered hereby consist of 1,200,000 Class A Common Stock
Purchase Warrants ("Class A Warrants"), of Conolog Corporation, a Delaware
corporation ("Conolog" or the "Company") which have been issued to certain
non-affiliated persons (the "Selling Securityholders"). Each Class A Warrant
entitles the holder to purchase one share of the Company's Common Stock, at an
exercise price of $6.00, subject to adjustment, at any time through August 16,
1998. The Class A Warrants are subject to redemption by the Company at any time
on not less than 30 days' notice at $.05 per Warrant, provided the average
closing price of the Common Stock for 20 consecutive trading days ending within
15 days prior to the notice exceeds $7.20 per share. See "Description of
Securities".

     The Class A Warrants offered by this Prospectus may be sold from time to
time by the Selling Securityholders or their transferees. No underwriting
arrangements have been entered into by the Selling Securityholders. The
distribution of the securities by the Selling Securityholders may be effected in
one or more transactions that may take place on the over-the-counter market
including ordinary broker's transactions, privately negotiated transactions or
through sales to one or more dealers for resale of such securities as principals
at market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. Usual and customary or
specially negotiated brokerage fees may be paid by the Selling Securityholders
in connection with sales of such securities.

     On the date hereof the Company commenced a public offering of 700,000
Units, each Unit consisting of one (1) share of Common Stock and four (4) Class
A Warrants. See "Concurrent Sales."

     The Company will not receive any of the proceeds for the sale of securities
by the Selling Securityholders. All costs incurred in the registration of the
securities of the Selling Securityholders are being borne by the Company. See
"Selling Securityholders."

     The Company's Common Stock and Class A Warrants are currently trading on
the Nasdaq SmallCap Market ("Nasdaq"). On _________, 1997, the closing price for
the Common Stock and Class A Warrants were $_______ and $______, respectively.

     AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES A HIGH DEGREE OF
RISK. AN INVESTMENT IN THESE SECURITIES SHOULD BE CONSIDERED ONLY BY THOSE
PERSONS CAPABLE OF SUSTAINING THE LOSS OF THEIR ENTIRE INVESTMENT. SEE "RISK
FACTORS" WHICH BEGIN ON PAGE _____ AND "DILUTION."

                                       A-1
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

           The date of this Prospectus is _____________________, 1997

                                       A-2
CONCURRENT SALES

     On the date of this Prospectus, a registration statement under the
Securities Act with respect to an underwritten public offering (the "Offering")
of securities by the Company was declared effective by the Securities and
Exchange Commission ("SEC"), and the Company commenced the sale of the
securities offered thereby. The securities consist of 700,000 Units, each unit
consisting of one (1) share of Common Stock and (4) Class A Warrants (without
giving effect to the Over-Allotment Option granted to the Representative of the
Offering). Sales of securities under this Prospectus by the Selling
Securityholders or even the potential of such sales may have an adverse effect
on the market price of the Company's securities.

                             SELLING SECURITYHOLDERS

     This registration statement, of which this Prospectus forms a part, also
covers the registration of 1,200,000 Class A Warrants. All of such securities
are expected to become tradeable on or about the date of this Prospectus. Sales
of the Class A Warrants being offered by the Selling Securityholders hereby or
the Common Stock underlying the Class A Warrants or even the potential of such
sales, would likely have an adverse effect on the market prices of the
securities being offered for sale by the Company.

     The following table sets forth the beneficial ownership of the securities
of the Company held by each person who is a Selling Securityholder and by all
Selling Securityholders as a group prior to this Offering and after this
Offering, assuming all of the Class A Warrants owned by the Selling
Securityholders are sold.
Class A          Percent of Class A
                                                             Warrants Owned         Warrants Owned
                                                             --------------         --------------
                                                         Prior to         After   Prior to      After
                                                         Offering       Offering  Offering    Offering
                                                         --------       --------  --------    --------
Name of Beneficial Owner
------------------------
Ekistics, Inc. ......................................     300,000           0      12.84%        0%
Blue Star Group Investment, Ltd. ....................     696,000           0      29.80%        0%
James Solakian ......................................     120,000           0       5.14%        0%
Bruce Ungerleider ...................................      30,000           0       1.28%        0%
Harold Yordy ........................................      27,000           0       1.16%        0%
Michael Yordy .......................................      27,000           0       1.16%        0%

       Total ........................................   1,200,000           0      51.37%        0%
None of the Selling Securityholders are affiliated with the Company in any
capacity, has had any business relationship with the Company at any time nor
owned any of the Company's Common Stock beneficially or of record prior to this
Offering.

                                       A-3
The securities offered thereby may be sold from time to time directly by
the Selling Securityholders. Alternatively, the Selling Securityholders may from
time to time offer such securities through underwriters, dealers or agents. The
distribution of securities by the Selling Securityholders may be effected in one
or more transactions that may take place on the over-the-counter market,
including ordinary broker's transactions, privately-negotiated transactions or
through sales to one or more broker-dealers for resale of such securities as
principals, at market prices prevailing at the time of sale, at prices related
to such prevailing market prices or at negotiated prices. Usual and customary or
specifically negotiated brokerage fees or commissions may be paid by the Selling
Securityholders in connection with such sales of securities. The Selling
Securityholders and intermediaries through whom such securities are sold may be
deemed "underwriters" within the meaning of the Act with respect to the
securities offered, and any profits realized or commissions received may be
deemed underwriting compensation.

     At the time a particular offer of securities is made by or on behalf of a
Selling Securityholder, to the extent required, a prospectus will be distributed
which will set forth the number of securities being offered and the terms of the
offering, including the name or names of any underwriters, dealers or agents, if
any, the purchase price paid by any underwriter for securities purchased from
the Selling Securityholder and any discounts, commissions or concessions allowed
or reallowed or paid to dealers, and the proposed selling price to the public.

     Under the Exchange Act, and the regulations thereto, any person engaged in
a distribution of the securities of the Company offered by the Selling
Securityholders may not simultaneously engage in market-making activities with
respect to such securities of the Company during the applicable "cooling off"
period (up to 5 days) prior to the commencement of such distribution. In
addition, and without limiting the foregoing, the Selling Securityholders will
be subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including without limitation, Regulation M, in
connection with transactions in such securities, which provisions may limit the
timing of purchase and sales of such securities by the Selling Securityholders.

                              PLAN OF DISTRIBUTION

     The securities offered hereby may be sold from time to time directly by the
Selling Securityholders. Alternatively, the Selling Securityholders may from
time to time offer such securities through underwriters, dealers or agents. The
distribution of securities by the Selling Securityholders may be effected in one

or more transactions, privately-negotiated transactions or through sales to one
or more broker-dealers for resale of such shares as principals, including the
Representative, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices. Usual and
customary or specifically negotiated brokerage fees or commissions may be paid
by the Selling Securityholders in connection with such sales of securities. The
Selling Securityholders and intermediaries through whom such securities are sold
may be deemed "underwriters" within the meaning of the Securities Act with
respect to the securities offered, and any profits realized or commissions
received may be deemed underwriting compensation.

                                       A-4
At the time of particular offer of securities is made by or on behalf of a
Selling Securityholder, to the extent required, a Prospectus will be distributed
which will set forth the number of shares being offered and the terms of the
offering, including the name or names of any underwriters, dealers or agents, if
any, the purchase price paid by any underwriter for shares purchased from the
Selling Securityholder and the discounts, commissions or concessions allowed or
reallowed or paid to dealers, and the proposed selling price to the public.

                                       A-5
No dealer, salesman or other person has been authorized to give any
information or to make any representations not contained in this Prospectus and
if given or made, such information or representations must not be relied upon as
having been authorized by the Company or any Underwriter. Neither the delivery
of this Prospectus nor any sale made hereunder shall under any circumstances
create any implication that there has been no change in the affairs of the
Company since the date hereof. This Prospectus does not constitute an offer to
sell or a solicitation of an offer to buy any of the securities offered hereby
in any jurisdiction to any person to make such offer or solicitation in such
jurisdiction.

                                 ---------------

                                TABLE OF CONTENTS

                                                                         Page
                                                                         ----

Prospectus Summary.....................................................
The Offering...........................................................
Summary Financial
  Information..........................................................
Risk Factors...........................................................
Use of Proceeds of Company Offering....................................
Capitalization.........................................................
Bridge Financing.......................................................
Dividends..............................................................
Selected Financial Information.........................................
Management's Discussion and
Analysis of Financial
 Condition and Results of
 Operations............................................................
Market Price for Securities............................................
Business...............................................................
Management.............................................................
Certain Relationships
 and Related Transactions..............................................
Principal Shareholders.................................................
Description of
 Securities............................................................
Shares Available for
 Future Sales..........................................................
Concurrent Sales.......................................................
Selling Securityholders................................................
Plan of Distribution...................................................
Legal Proceedings......................................................
Legal Matters..........................................................
Experts................................................................

Financial Statements...................................................

                                 ---------------

Until        , 1997 (25 days after the date of this Prospectus), all dealers 
effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.

                           1,200,000 CLASS A WARRANTS

                               CONOLOG CORPORATION

                                 ---------------

                                   PROSPECTUS

                                 ---------------

                                _______ __, 1997

                                 ---------------
PART II
                     INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13.   Other Expenses of Issuance and Distribution.

           The estimated expenses in connection with this offering are as
           follows:

           SEC filing fee .....................................  $     9,932.82
           Nasdaq filing fee ..................................  $     7,500.00
           NASD filing fee ....................................  $     3,776.50
           Printing and engraving* ............................  $    40,000.00
           Transfer Agent Fees*  ..............................  $     2,500.00
           Legal fees and expenses* ...........................  $    90,000.00
           Accounting fees and expenses* ......................  $    25,000.00
           Blue Sky fees and expenses*  .......................  $    30,000.00
           Miscellaneous expenses* ............................  $    16,290.68
                                                                 --------------

                     Total ....................................  $   225,000.00

-----------
*    Indicates expenses that have been estimated for the purpose of filing.

Item 14. Indemnification of Directors and Officers.

     Indemnification is provided for in Article Eighth of the Company's
Certificate of Incorporation and such provisions are incorporated herein by
reference.

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

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

     Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such

                                      II-1
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. If a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person in connection with the
securities being registered) the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

Item 15. Recent Sales of Unregistered Securities.

     There were no underwriting discounts and commissions paid in connection
with the issuance of any shares of Common Stock within the last three (3) years
prior to the date of this Registration Statement other than those paid to I.A.
Rabinowitz & Co., the underwriter of the August 1995 Offering.

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

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

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

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

     On August 16, 1995, Chase Manhattan Bank converted approximately $3,000,000
of debt into 375,000 shares of Common Stock.

     Between February and March, 1997, all of the principal amount of The Chase
Manhattan Note was converted into 1,400,000 shares of Common Stock and issued to
CNL Holdings, Inc., the holder of the option to purchase such Note. See
"Management's Discussion and Analysis of Financial Condition and Results of

Operations-Credit Facility."

     In June 1997, the Company issued 360,000 shares of Common Stock to eight
individuals, all of whom are employees of the Company, as follows: Robert Benou
(200,000), Arpad Havasy (50,000), Marc Benou (50,000) Thomas Fogg (25,000), Dina
Stellwagen (20,000), Louis Massad (10,000), Mary Ann Edwards (2,500) and Albert
S. Lenhardt (2,000).

                                      II-2
Item 16. Exhibits.

Exhibit No.               Description of Exhibit
-----------               ----------------------

      1(aa)*              Form of Underwriting Agreement

      1(b)(b)*            Form of Selected Dealer Agreement.

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

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

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

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

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

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

       (g)                Certificate of Ownership and Merger respecting merger
                          of Conolog Corporation into the Registrant and the
                          changing of the Registrant's name from "DSI Systems,

                          Inc." to "Conolog Corporation" - incorporated by
                          reference to Exhibit 3 to the Registrant's Current
                          Report on Form 8-K for June 1975.

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

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

       (b)**              Specimen Certificate for Class A Warrant

                                      II-3
(c)**              Warrant Agreement between Conolog Corporation and 
                          Continental Stock Transfer & Transfer Co.

      (cc)****            Amendment No. 1 to Warrant Agreement

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

      (ee)*               Form of Financial Consulting Agreement

    5.1****               Opinion of Bernstein & Wasserman on legality of 
                          securities being registered.

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

   10.2**                 Conolog Corporation 1995/1996 Stock Option Plan.

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

   10.3(A)*****           Amendment No. 1 dated January 3, 1997 to Option and 
                          Purchase, Sale and Assignment Agreement (dated as of 
                          September 12, 1996), by and between The Chase 
                          Manhattan Bank and CNL Holdings, Inc.

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

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

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

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

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

   23.1 ****              Consent of Bernstein & Wasserman (included in Exhibit 
                          No. 5)

   23.2*                  Consent of Rosenberg Rich Baker Berman & Company,  
                          Independent Certified Public Accountants.

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

                                      II-4
***    Incorporated by reference to the Registrant's Registration Statement on
       Form S-1 (333-14247).
****   To be filed by amendment.
*****  Incorporated by reference to Registrant's Form 8-K filed 
       February 4, 1997.

                                      II-5
Item 17. Undertakings.

     (a) The undersigned registrant hereby undertakes to provide to the
Representative at the closing specified in the Underwriting Agreement,
certificates in such denominations and registered in such names as required by
the Representative to permit prompt delivery to each purchaser.

     (b) Rule 415 Offering

     The undersigned registrant will:

     1. File, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to:

          (i) Include any prospectus required by Section 10(a)(3) of the
     Securities Act;

          (ii) Reflect in the prospectus any facts or events arising after the
     effective date of this registration statement (or the most recent
     post-effective amendment thereto), which, individually or in the aggregate,
     represent a fundamental change in the information set forth in the
     registration statement;

          (iii) Include any material information with respect to the plan of
     distribution not previously disclosed in this registration statement or any
     material change to such information in this registration statement.

     2. For determining liability under the Securities Act, treat each such
post-effective amendment as a new registration statement relating to the
securities offered, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering.

     3. File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.

     (c) Filings Incorporating Subsequent Exchange Act Documents by Reference.

     The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing with a employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
herein and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

     (d) Indemnification

     Insofar as indemnification for liabilities arising under the Securities Act

may be permitted to directors, officers or controlling persons of the Registrant
pursuant to the provisions referred to in Item 24 of this Registration Statement
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the

                                      II-6
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.

     (e) Rule 430A

     The undersigned Registrant hereby undertakes that:

     (1) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in the form of a
prospectus filed by the registrant under Rule 424(b)(1) or (4) or 497(h) under
the Securities Act as part of this Registration Statement as of the time the
Commission declared it effective.

     (2) For purposes of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new Registration Statement for the securities offered in the
Registration Statement, and that the offering of the securities at that time as
the initial bona fide offering of those securities.

     (f) Request of Acceleration of Effective Date

     The Registrant may elect to request acceleration of the Registration
Statement under Rule 461 of the 1933 Act.

                                      II-7
SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-1 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of New
York, State of New York, on the 11th day of September, 1997.

                                         CONOLOG CORPORATION

                                        /s/ Robert S. Benou
                                        -----------------------------
                                        By: Robert S. Benou
                                            President, Director, Chief
                                            Executive Officer, Chief
                                            Financial Officer and Comptroller

     Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

       Signature                 Title                              Date
       ---------                 -----                              ----

/s/Robert S. Benou      President, Director, Chief            September 11, 1997
---------------------   Executive Officer, Chief           
Robert S. Benou         Financial Officer and Comptroller  

/s/Arpad J. Havasy      Executive Vice President,             September 11, 1997
---------------------   Secretary, Treasurer and 
Arpad J. Havasy         Director                 

/s/ Marc R. Benou       Vice President,                       September 11, 1997
---------------------   Assistant Secretary and 
Marc R. Benou           Director                

/s/ Louis S. Massad     Director                              September 11, 1997
---------------------
Louis S. Massad

                                      II-8