AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 23, 1997

REGISTRATION NO. 333-35489
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------

AMENDMENT NO. 3
TO
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 JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
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)

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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. /x/ 33-92424

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
(Cover continued on following page)
----------------------

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.
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(Cover continued from previous page)

CALCULATION OF REGISTRATION FEE

PROPOSED PROPOSED
TITLE OF EACH CLASS OF AMOUNT TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PRICE PER SECURITY(1) OFFERING PRICE REGISTRATION FEE

Units, each consisting of one (1) Share of
Common Stock, $1.00 par value per Share and
four (4) Class A Warrants(2).................. 805,000 $5.00 $ 4,025,000 $ 1,219.58
Common Stock, $1.00 par value................... 805,000 -- -- --
Class A Warrants................................ 3,220,000 -- -- --

Common Stock, $1.00 par value underlying Class A
Warrants...................................... 3,220,000 $6.00 $19,320,000 $ 5,853.96
Representative's Unit Purchase Option........... 70,000 $8.00 $ 560,000 $ 169.68
Common Stock, $1.00 par value in
Representative's Unit Purchase Option......... 70,000 -- -- --
Class A Warrants in Representative's Unit
Purchase Option............................... 280,000 -- -- --
Common Stock, $1.00 par value underlying Class A
Warrants in Representative's Unit Purchase
Option........................................ 280,000 $9.60 $ 2,688,000 $ 814.46
Class A Warrants of Selling Securityholders..... 1,200,000 $ .10 $ 120,000 $ 41.38
Common Stock, $1.00 par value underlying Class A
Warrants of Selling Securityholders........... 1,200,000 $6.00 $ 7,200,000 $ 2,181.60
Total Registration and Fee...................... $32,905,000 $10,280.66(3)

(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.

(3) $305.42 paid herewith. $9,975.24 previously paid.

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

PURSUANT TO RULE 429 OF THE ACT, THIS FORM INCORPORATES BY REFERENCE AND
UPDATES ALL OF THE INFORMATION CONTAINED IN THE REGISTRATION STATEMENT ON FORM
S-1; FILE NO. 33-92424. THE SECURITIES BEING CARRIED FORWARD FROM SUCH
REGISTRATION STATEMENT ARE: 235,750 SHARES OF COMMON STOCK UNDERLYING CLASS A
WARRANTS OFFERED TO THE PUBLIC ($487.72 FILING FEE PREVIOUSLY PAID); 20,500
UNDERWRITER'S OPTIONS TO PURCHASE 41,000 SHARES OF COMMON STOCK AND 20,500 CLASS
A WARRANTS ($84.82 FILING FEE PREVIOUSLY PAID); 20,500 SHARES OF COMMON STOCK
UNDERLYING CLASS A WARRANTS IN SUCH UNDERWRITER'S OPTIONS ($42.41 FILING FEE
PREVIOUSLY PAID); AND 900,000 SHARES OF COMMON STOCK UNDERLYING CLASS A WARRANTS
PREVIOUSLY OFFERED BY CERTAIN SHAREHOLDERS ($1,861.92 FILING FEE PREVIOUSLY
PAID).

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.

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

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

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

4. Use of Proceeds....................................... Use of Proceeds

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

6. Dilution.............................................. Risk Factors

7. Selling Securityholders............................... Selling Securityholders

8. Plan of Distribution.................................. Underwriting

9. Description of Securities to be registered............ Description of Securities

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

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

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

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 offer, solicitation or sale would be unlawful prior to registration
or qualification under the securities laws of such State.

SUBJECT TO COMPLETION, DATED DECEMBER 23, 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 $ 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. The Units will
not trade after 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 30, 2002. The Class A Warrants are
subject to redemption by the Company commencing the earlier of (i) 24 months
from the date of this Prospectus or (ii) 12 months from the date of this
Prospectus, with the consent of IAR Securities Corp. (the 'Representative'), 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.' It is currently estimated that the offering
price will be between $4.75 and $5.00 per Unit.

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.'
(Continued on page 3)

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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 9 AND 'DILUTION.'
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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.

[CAPTION]

PRICE TO DISCOUNT AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)

Per Unit.................................. $ $ $
Total(3).................................. $ $ $

(1) Does not include additional underwriting compensation to be paid by the
Company to 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 $8.00 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.'

(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. VTR CAPITAL, INC.
THE DATE OF THIS PROSPECTUS IS , 1998.

(Continued from cover page)

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.

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 ,
1998.

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 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.

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 unit purchase option issued in
connection with the August 1995 Offering. See 'Description of Securities,'
'Bridge Financing,' and 'Underwriting.' The Prospectus assumes an offering price
of $5.00 per Unit.

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

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.

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 in fiscal 1997 were $1,123,390 a 42%
decrease from fiscal 1996. Revenues from the Company's military product sales
represented approximately 60%, 30%, 23% and 10% of sales of the Company in
fiscal 1994, 1995, 1996 and 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.

PRESENT CAPITALIZATION

Common Stock.............................. 2,816,126(1)

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

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

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

Shareholders of Record.................... 819(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. The Common Stock and
Class A Warrants are detachable and may trade separately immediately
upon issuance. The Units will not trade after issuance. See
'Descriptions of Securities.'

Common Stock to be Outstanding After
Completion of the Offering.............. 3,516,126

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 30, 2002. The Class A Warrants are subject to
redemption by the Company commencing the earlier of (i) 24 months
from the date of this Prospectus or (ii) 12 months from the date of
this Prospectus, with the consent of the Representative, on not less
than 30 days' notice at $.05 per Warrant, provided the average
closing price of the Common Stock exceeds $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.'

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(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 November 26, 1997.

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.

UNAUDITED
THREE MONTHS ENDED
OCTOBER 31, YEAR ENDED JULY 31,
---------------------- --------------------------------------------------------------
1997 1996 1997 1996 1995 1994 1993
--------- ---------- ---------- ---------- ---------- ---------- ----------

Net sales and other income........ $ 113,327 $ 418,734 $1,123,390 $1,924,466 $2,090,933 $2,044,860 $1,486,298
Net loss before extraordinary
items........................... (173,198) (43,247) (1,969,736) (448,422) (537,290) (1,182,988) (322,005)
Extraordinary item(1)(2).......... -- --(2) (1,841,000)(1) 740,376 -- -- --
Net income (loss)................. (173,198) (43,247) (3,810,736) 291,754 (537,290) (1,182,988) (322,005)
Income (loss) from operations per
share........................... (.06) (.04) (1.24) (.43) (12.36) (27.22) (7.41)
Income (loss) after extraordinary
item--per share................. -- -- (2.41) .28 -- -- --
Net income (loss) per share--
primary......................... (.06) (.04) (2.41) .28 (12.36) (27.22) (7.41)
Net income (loss) per share--
fully diluted................... (.06) (.04) (2.41) .25 (12.36) (27.22) (7.41)
Total assets...................... 4,070,973 4,339,752 4,339,752 3,927,834 3,882,235 3,739,294 4,601,015
Long-term debt and capitalized
lease obligations............... -- -- -- 4,973 34,103 3,829,625 3,732,961

off its deferred tax asset against the forgiveness of debt, resulting in
extraordinary income of $740,376.

(2) During April 1997 debt retirement cost in the amount of $1,841,000 resulted
when the Company's bank debt was converted into 1,400,000 shares of Common
Stock.

AT OCTOBER 31, 1997
----------------------------------------
ACTUAL ADJUSTMENT AS ADJUSTED
---------- ---------- -----------

Working Capital............................................. $2,297,213 $2,750,000(1) $ 5,047,213
Total Assets................................................ 4,070,973 2,750,000(1) 6,820,973
Long-Term Liabilities....................................... 0 0 0
Stockholders' Equity........................................ 2,678,198 2,750,000(1) 5,428,198

- ------------------
(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 as
follows:

Gross proceeds from offering.......................................... $3,500,000
Discounts, commissions................................................ 350,000
Estimated offering expenses........................................... 225,000
Consulting agreement.................................................. 70,000
Non-accountable expenses (Underwriter)................................ 105,000
----------
Net additions to cash................................................. $2,750,000
----------
----------

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 October 31 1997, the Company had working capital of $2,297,213 and
stockholders' equity of $2,678,198. The Company's continued existence is
dependent upon it successfully expanding its business and attaining profitable
operations. The Company reported losses of $173,198, $3,810,736, income of
$291,754 and losses of $537,290 for the quarter ended October 31, 1997 and the
years ended July 31, 1997, 1996 and 1995, respectively. The profit in 1996 was
only due to the debt extinguishment of $1,232,728, which after the deferred tax
asset of $492,352 resulted in extraordinary income of $740,376. The profits
(losses) reported included inventory write-offs of $28,101, $50,281 and $656,248
for the years 1997, 1996 and 1995, respectively. In addition, reported interest
expense for October 31, 1997 was $13,350, and $81,025, $131,854 and $253,686 for
the years 1997, 1996 and 1995, respectively. See 'Management's Discussion and
Analysis of Financial Condition and Results of Operations.'

2. WORKING CAPITAL; CASH FLOW; BACKLOG. At October 31, 1997, the Company
had working capital of $2,297,213. At July 31, 1997, the Company had working
capital of $2,456,122. For the periods ended October 31, 1997 and July 31, 1997
cash flow used in operations amounted to $298,345 and $654,214, respectively.
The Company has no material cash commitments for the current period other than
consistent with supporting existing orders, new orders and contracts. Funds to
support said commitments will be provided for from cash on hand, new receivables
and, if necessary, borrowings. As of July 31, 1997 the Company had a backlog of
$2,900,000. Of such backlog, $2,800,000 relate to the Company's PTR-1000 series
of products which are subject to the terms of the blanket-contracts with certain
of its largest customers. See 'Risk Factors--Dependence on Large Customers' and
'Business--Largest Customers.' The terms of such contracts are not binding and
only represent potential purchases, whereby the Company sets certain prices for
its products for the duration of the contract.

3. 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. The Company anticipates
using approximately $600,000 to complete this task and have marketable products
by March 1998. 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.'

4. 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.'

5. 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.'

6. MANAGEMENT'S 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.'

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

8. 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.'

9. 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.'

10. LACK OF COMPENSATION AND AUDIT COMMITTEES. Currently, the Board of
Directors consists of four members, only one of which (Mr. Massad) is a
non-employee director. Accordingly, the employee-directors are in a position to
control the actions and decisions of the Board of Directors. See 'Management.'
Currently there are no compensation or audit committees. In order to comply with
the new Nasdaq continued listing requirements (which will take effect on
February 23, 1998), the Company intends to elect an additional non-employee
director (so that it has a minimum of two independent directors) and to form
compensation and audit committees, a majority of whom are required to be
independent directors. No assurances can be given that the Company will be
successful in identifying additional non-employee directors. Failure to comply
with such Nasdaq requirements could lead to delisting, which would have an
adverse effect on the market value and liquidity of the Company's securities.

11. 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.'

12. DEPENDENCE ON LARGE CUSTOMERS. Sales to the Company's two major
customers during fiscal 1997 (General Electric and Bonneville Power
Administration) totaled $255,500 and $200,000, respectively (22% and 18%,
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). The Company has three (3) ongoing contracts, in addition to existing
open orders. These may continue to produce revenue past the date of this
prospectus, namely from the General Electric Company and Bonneville Power
Administration. However, these contracts are blanket contracts, are not binding
and only represent potential purchases, whereby the Company sets certain prices
for its products for the duration of the contract. Thus, investors in this
offering are advised that there are no guaranteed future purchases under such
contracts. The loss of General Electric and Bonneville Power Administration
would have a material adverse effect upon the Company. 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.

13. 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 $150,000 in fiscal 1997 or 13% of the Company's total
revenue of $1,123,390, 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.

14. 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.

15. 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
$1.11, representing a dilution of $3.89 per share (77.8%) from the $5.00
offering price of the Units (attributing no value to the Warrants contained
therein). See 'Dilution.'

16. 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 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.'

17. REDEMPTION OF REDEEMABLE WARRANTS. The Class A Warrants are subject
to redemption by the Company commencing the earlier of (i) 24 months from the
date of this Prospectus or (ii) 12 months from the date of this Prospectus, with
the consent of the Representative, 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.'

18. 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.'

19. 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.'

20. NASDAQ LISTING AND CONTINUED LISTING REQUIREMENTS. The Company's
Common Stock and Class A Warrants are currently listed on the Nasdaq SmallCap
Market, Inc. ('Nasdaq'). For continued listing on Nasdaq, a company, among other
things, must have $2,000,000 in net tangible assets, 500,000 shares in the
public float, $1,000,000 in market value of public float and a minimum bid price
of $1.00 per share. If the Company is unable to satisfy the requirements for
continued quotation on Nasdaq, trading, if any, in the Common Stock and Warrants
offered hereby would be conducted in the over-the-counter market in what are
commonly referred to as the 'pink sheets' or on the NASD OTC Electronic Bulletin
Board. As a result, an investor may find it more difficult to dispose of, or to
obtain accurate quotations as to the price of, the securities offered hereby.
The above-described rules may materially adversely affect the liquidity of the
market for the Company's securities.

21. '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.

22. RESTRICTED SHARES OF COMMON STOCK ELIGIBLE FOR FUTURE SALE.
Immediately prior to the sale of the Shares hereunder, the Company had an
aggregate 2,816,126 shares of its Common Stock issued and outstanding, 315,356
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 , 1999 (eighteen (18) months from

the date of this Prospectus), without the prior written consent of the
Representative. See 'Underwriting.'

23. 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 date, at a price of $8.00 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.'

24. 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.'

25. 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 3,516,126 shares of Common Stock 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 10,427,626 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 eighteen (18) 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 twenty-four (24) months following the date of this Prospectus without the
prior written consent of the Representative other than in certain circumstances
(see 'Underwriting'). 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. See 'Underwriting.'

26. 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.'

27. LACK OF PATENT PROTECTION OR PROPRIETARY RIGHTS. Other than as set
forth below, the Company currently does not have any patent or trademark
applications pending. However, the Company may file patent or trademark
applications relating to certain of the Company's products. If patents or
trademarks were to issue, there can be no assurance as to the extent of the
protection that will be granted to the Company as a result of having such
patents or trademarks or that the Company will be able to afford the expenses of
any complex litigation which may be necessary to enforce their proprietary
rights. Except as may be required by the filing of patent or trademark
applications, the Company will attempt to keep all other proprietary information
secret and to take such actions as may be necessary to insure the results of its
development activities are not disclosed and are protected under the common law
concerning trade secrets. Such steps will include the execution of nondisclosure
agreements by key Company personnel and may also include the imposition of
restrictive agreements on purchasers of the Company's products and services.
There is no assurance that the execution of such agreements will be effective to
protect the Company, that the Company will be able to enforce the provisions of
such nondisclosure agreements or that technology and other information acquired

by the Company pursuant to its development activities will be deemed to
constitute trade secrets by any court of competent jurisdiction.

The Company uses the trademark INIVEN for its commercial products. 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. See 'Business--Patents and Trademarks.'

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, which are repayable upon the earlier of (i) the
closing of this offering or (ii) one year from the date of each of such
loans. 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.'

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.

CAPITALIZATION

The following table sets forth the capitalization of the Company as of
October 31, 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 OCTOBER 31, 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; 1,197 shares issued and outstanding.............. 597 -- 597
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
2,816,126 shares including 8,776 shares held in Treasury before
offering; after offering 3,516,126(1)............................... 2,816,126 700,000(1) 3,516,126
Contributed Capital................................................... 7,022,400 2,050,000(1) 9,072,400
Retained earnings (deficit)........................................... (7,106,691) -- (7,106,691)

Treasury stock........................................................ (131,734) -- (131,734)
---------- ----------- -----------
TOTAL STOCKHOLDERS' EQUITY............................................ 2,678,198 -- 5,428,198
---------- -----------
TOTAL CAPITALIZATION.................................................. $2,678,198 -- $ 5,428,198
---------- -----------
---------- -----------

- ------------------
(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.

BRIDGE FINANCING

In December 1996 and January 1997, the Company obtained bridge financing in
the aggregate amount of $200,000. The holders of the Bridge Notes are the
individuals identified in this Prospectus as 'Selling Securityholders.' In
exchange for making the loans to the Company, the lenders 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)
January 31, 1999 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 resale 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.'

DILUTION

Prior to this offering, there were 2,816,126 shares of the Company's Common
Stock outstanding. As of October 31, 1997, the net tangible book value of the
Company was $2,508,110. The net tangible book value per share of the Company,
immediately prior to this offering is, therefore, $.89. 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 (attributing no value to the
Warrants contained therein) 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 $50,000
in Convertible Bridge Notes (See 'Bridge Financing'), the pro forma net tangible
book value of the Company would be $1.11 per share. Investors in this Offering,
therefore, will sustain an immediate dilution to the extent of $3.89 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...................................... $ .89
Increase per share attributable to the Offering........................................ $ .22
Net tangible book value per share after Offering....................................... $1.11
Dilution per share to new investors.................................................... $3.89

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 $50,000 in Convertible Bridge Notes. This does not take into effect the
exercise of Class A Warrants or the Representative's over-allotment option.

PERCENTAGE OF
SHARES PERCENTAGE OF TOTAL TOTAL
PURCHASED TOTAL SHARES CONSIDERATION CONSIDERATION
--------- ------------- ------------- -------------

New Investors................................. 700,000 20% $ 3,500,000 34.7%
Present Stockholders.......................... 2,816,126 80% 6,585,986 65.3%
--------- ------ ------------- -------------
Total.................................... 3,516,126 100% $ 10,085,986 100%

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.

UNAUDITED
THREE MONTHS ENDED
OCTOBER 31, YEAR ENDED JULY 31
---------------------- --------------------------------------------------------------
1997 1996 1997 1996 1995 1994 1993
--------- ---------- ---------- ---------- ---------- ---------- ----------

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

(2) During April 1997 debt retirement cost in the amount of $1,841,000 resulted
when the Company's bank debt was converted into 1,400,000 shares of Common
Stock.

AT OCTOBER 31, 1997
----------------------------------------
ACTUAL ADJUSTMENT AS ADJUSTED
---------- ---------- -----------

- ------------------
(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 as
follows:

Gross proceeds from offering.......................................................... $3,500,000
Discounts, commissions................................................................ 350,000
Estimated offering expenses........................................................... 225,000
Consulting agreement.................................................................. 70,000
Non-accountable expenses (Underwriter)................................................ 105,000
----------
Net additions to cash............................................................. $2,750,000
----------
----------

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.

PERCENTAGE INCREASE/DECREASE
INCOME & EXPENSE ITEMS AS A -----------------------------------------------
THREE PERCENTAGE OF REVENUE FROM 3 MONTHS
MONTHS OPERATIONS FOR THE INCOME & EXPENSE OCTOBER 1996
ENDED YEARS ENDED JULY 31, ITEMS TO 3 MONTHS
OCTOBER 31, ---------------------------- ------------------------------------ OCOTBER 31, 1996 TO 1995 TO 1994 TO
1997 1997 1996 1995 1997 1997 1996 1995
- ----------- ------- ------ ------- ---------------- ------- ------- -------
(UNAUDITED)

100.00% 100.00% 100.00% 100.00% Sales & other income (72.94)% (41.63)% (8.00)% 2.2%
100.00 84.16* 67.15* 92.16* Cost of products sold (56.39) (27.92) (32.90) (4.20)
139.87 182.90 49.71 43.81 Selling, general & administrative (10.47) (116.97) 3.38 7.39
11.78 7.38 6.94 13.27 Interest (48.01) (37.95) (51.83) (23.43)
- ----------- ------- ------ ------- ------- ------- ------- -------
291.65 274.44 123.30 (149.24) Total costs & expenses (38.32) (29.93) (23.00) (3.33)
- ----------- ------- ------ ------- ------- ------- ------- -------
(151.82) (174.44) 123.30 (49.24) Income (loss) before taxes (297.43) (338.52) (56.45) (12.97)
1.01 .90 -- (23.54) Income taxes (credits) 3.06 494.20 (100.00) --
- ----------- ------- ------ ------- ------- ------- ------- -------
(152.83)% (175.34)% (23.30)% (25.70)% Income (loss) before extraordinary (300.49) (339.06)% (16.50)% (12.97)%
item

- ------------------
* Includes write-offs for obsolete or excess inventories which were $28,101,
$50,281 and $656,248 for 1997, 1996 and 1995, respectively. The inventory
write-offs were military related and in management's opinion these items will
not be reordered in the foreseeable future. The Company believes that material
adjustments will not recur in future periods.

Year ended July 31, 1997 Compared to 1996

A summary of income, costs and expenses for the year ended July 31, 1997
and corresponding period of the previous year follows:

FOR THE YEAR ENDED JULY 31,
---------------------------
1997 1996
------------- ------------

Revenue................................................................... 1,123,390 1,924,466
Costs and expenses........................................................ 3,083,042 2,372,888

Net-Income (Loss) before taxes and extraordinary item..................... (1,959,652) (448,422)

Total revenue decreased $801,076 or 42% from $1,924,466 to $1,123,391 in
1997. This decrease was attributable to delays in the release of tone protection
orders from the Bonneville Power Administration and other customers. The Company
attributes these delays to the budget constraints for various utilities and to
the pending release of the new advanced tone protection device, the PTR-1500.
The Company essentially completed the prototypes during the first fiscal quarter
of 1998 and plans to ship prototypes to GE during November 1997 and sales to
occur in the second quarter of fiscal 1998.

Gross Margins for the year totaled $177,910 and $632,185 respectively,
representing 15.8% and 32.9% of revenues. Gross margins for 1997 were lower than
1996 due to the low utilization of the factory in fiscal 1997 over 1996.

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.

The backlog of orders for the Company's PTR-1000 series of products
consists of multi-year blanket - contracts at fixed prices for the duration of
the contracts. There is no obligation or penalty if the contracts expire prior
to additional orders being placed for the total value of the contracts. The
contracts do not provide for any guaranteed purchases, however, the Company has
received order releases in the amount of approximately $200,000 against the
blanket-order for the PTR-1000 from Bonneville Power Authority and BC Hydro and
anticipates additional releases from existing customers for ongoing projects.
The Company does not expect other factors to contribute to a reduction in
revenues in fiscal 1998. See 'Risk Factors Dependence on Large Customers' and
'Business--Largest Customers.'

As of July 31, 1997, the Company's backlog of orders was approximately
$2,900,000 compared to $3,400,000 as of July 31, 1996.

Selling, General and Administrative expenses increased from $946,954 in
1996 to $2,054,630 in 1997 representing an increase of 117.% This increase is
the result of 359,500 shares of Common Stock issued to eight employees. This
increased salaries in the amount of 1,313,750.

Cost of sales decreased from $1,242,001 in 1996 to $917,379 in 1997,

representing a 26% decrease reflecting the reduction in material costs.

Interest expense totaled $82,932 for the year ended July 31, 1997 compared
to $133,652 for the year ended July 31, 1996. This decrease was a result of
lower amounts of borrowings due to the paydown of the credit facility during the
year.

As a result of the foregoing, the Company reported a net loss before
extraordinary item of $1,969,736 or $1.24 per share. This compares to a net loss
before extraordinary item of $448,622 or $.43 per share for the same period last
year.

1996 Compared to 1995

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

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

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

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

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

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

On August 16, 1995, in connection with the August 1995 Offering, the Bank
exchanged their existing loan agreement (which as of such date had outstanding
debt of $4,382,728 which included accrued interest of $584,728) for the
following:

(a) $250,000 cash

(b) $1,025,000 five-year term loan

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.

Selling, general and administrative expenses increased from $916,016 in
1995 to $946,954 in 1996, representing an increase of 3.4%. These expenses
increased as a result of an expansion of the employment base and an increase in
advertising and promotion costs.

Interest expense totaled $133,652 for the year ended July 31, 1996 as
compared to $277,440 in interest expense for the year ended July 31, 1995. The
Company reached a debt restructuring agreement with the Bank during 1995 that
resulted in having no interest expense for the quarter ended April 30, 1995.

As a result of the foregoing, the Company reported a net profit of $291,754
or $.28 per share. The 1996 net profit was inclusive of a debt compromise of
$740,376 net of a tax benefit of $492,352. This compares to a net loss of
$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 $448,622 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 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 $916,000 or 43.8% 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 $737,000 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 $277,000 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 $537,000
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.

Quarter Ended October 31, 1997

A summary of income, costs and expenses for the current quarter and
corresponding quarter of the previous year follows:

FOR THE QUARTER
ENDED OCTOBER 31,
---------------------
1997 1996
--------- --------

Revenues................................................................................. $ 113,327 $418,734
Costs and Expenses....................................................................... 286,525 461,981
--------- --------
Net Income/(Loss) after Taxes, before extraordinary item................................. $(173,198) $(43,247)
--------- --------

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

Revenues for the quarter ended October 31, 1997 totalled $113,327,
representing a decrease of 72.9% or $305,407 from $418,734 reported for the same
quarter a year ago. Revenues decreased largely due to a sharp decrease of
expected 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 $(200) representing 0% of revenues as
compared to $159,463 or 38% of revenues for the quarter ended October 31, 1996.
The decrease in gross margin 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 April 1997, the Company

engaged outside contractors almost exclusively to complete its product
development. During the 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 $177,034 to
$158,507 for the quarter, representing a decrease of $18,527 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 $25,676 to $13,350 or $12,326 for the
quarter ended October 31, 1997 over the same period of 1996.

As a result of the foregoing, the Company reported a net loss of
$(173,198), or $(.06) per share for the quarter compared to a net loss of
$(43,247) or $(.04) per share.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

Financial Condition, Liquidity and Capital Resources at July 31, 1997

Working capital at July 31, 1997 was $2,456,121 compared to $1,806,318 at
year ended July 31, 1996. The improvement in the working capital is the result
of a planned inventory increase of $236,012. This is primarily attributed to the
building of the PTR-1500 tone protection device. The Company will be delivering
to the General Electric Company prototype units during November 1997. Production
units are expected to be delivered during the second fiscal quarter of fiscal
1998.

Accounts receivable have decreased from $304,020 at year-end July 31, 1996
to $109,571 at July 31, 1997. This decrease of $194,449 is the result of lower
average sales for fiscal 1997 versus 1996.

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 to the 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 year ended July 31, 1997 the Company received $916,235 in loans
from CNL Holdings, Inc.

The Company is using significant amounts of cash in operations and plans to
meet its operating cash requirement for the next twelve (12) months, in addition
to existing cash balances and cash generated from operations, with loans from
officers, banks and loans secured in private transactions.

1996 Compared to 1995

Working capital at July 31, 1996 was $1,806,318 compared to a deficit of
$2,726,247 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 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 $2,726,247
and a shareholder deficit of $2,426,000. 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 $2,426,000 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 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.

Quarter ended October 31, 1997

Inventories increased $126,253 from July 31, 1997 attributable to the
PTR-1500 Series product.

Accounts Receivable decreased $60,642 to $48,929 reflecting lower sales
during the current quarter.

Working Capital at October 31, 1997 was $2,297,213 compared to $2,456,121
at July 31, 1997. This is primarily attributed to the building of the PTR-1500
tone protection device. The Company will be delivering to the General Electric
Company under contract prototype units during December 1997. Production units
are expected to be delivered during the second quarter of fiscal 1998.

During 1997, the Company recieved a $200,000 bridge loan from several
investors. The money was received following the execution of two promissory
notes for each investor that aggregated $150,000 (Note 1) and $50,000 (Note 2),
respectively. Note 1 is payable on the earlier of January 31, 1999 or upon
closing of the next public offering. Note 2 contains the same terms as with
respect to Note 1, or at the investors option is convertible into shares of
Common Stock Purchase Warrants (see Notes to the Financial Statements for a

description on the full terms of the conversion option). The funds received from
the bridge loan were applied to improve working capital and to reduce accounts
payable.

The Company has received $916,235 from CNL from the sale of stock it
received from the bank. The monies will be repaid plus accrued interest twelve
months from the date received or converted to Series C Preferred Stock (see
notes to financial statements).

The Company plans to use these additional funds to complete the development
of the PTR-1500 and deliver the first prototypes to the General Electric Co. for
testing and approvals and to improve its financial condition and prepare for an
anticipated increase in business in the latter part of 1997. The Company
anticipates additional backlog releases from the Bonneville Power Administration
and the US Government as well as other key customers. This should generate
additional sales and resulting cash flow to support an expanded operating level
in fiscal 1998 versus fiscal 1997. In the event that additional financing and
backlog releases are not forthcoming, fiscal 1998 sales would be adversely
impacted.

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

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.

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.

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 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.'

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
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 three quarters of 1997. Such quotations represent
inter-dealer prices, without retail markups, markdowns or commissions and may
not necessarily represent actual transactions. As of November 26, 1997, the
Company's Common Stock was held by approximately 819 shareholders of record.

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
Third Quarter.............................................. -- -- 5.625 2.25 .875 .25
Fourth Quarter............................................. [ ]

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.

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 85% of sales
in 1997 ($900,000). 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. The 12
year warranty has been part of the Company's marketing of its products since
1988. The Company does not believe this is customary in the industry. The terms
of the warranty covers parts, labor and operation of units. All the Company's
products are functionally tested before shipment. Experience has demonstrated
the reliability of the designs. All returns were for non warranty causes and for
the most part, were chargeable to the customer. The Company does not provide the
right of merchandise return.

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 in fiscal 1997 were $1,123,390
a 42% decrease from fiscal 1996. Revenues from the Company's military product
sales represented approximately 60%, 30%, 23% and 10% of sales of the Company in
fiscal 1994, 1995, 1996 and 1997, respectively, reflecting the Company's
emphasis on commercial sales and markets.

GENERAL DESCRIPTION; PRODUCTS

The Company is engaged in the design and manufacture of (i) transducers,
which are 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
--Sales to system assemblers
--Sales to contractors/installers

(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.

(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.

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
enhancements. 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.

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.

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.

(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.

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. The Company has at least 20
competitors world wide and believes it has no significant market share. 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. The Company
employs only 2 marketing executives.

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 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 fiscal 1997 (General
Electric and Bonneville Power Administration) totaled $255,500 and $200,000,
respectively (22% and 18%, 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). The Company has three (3) ongoing
contracts, in addition to existing open orders. This may continue to produce
revenue past the date of this prospectus, namely from the General Electric
Company and Bonneville Power Administration. The loss of General Electric and
Bonneville Power Administration would have a material adverse effect upon the
Company. None of such customers has or had any material relationship other than
business with the Company. See 'Risk Factors--Dependence on Large Customers.'
The terms of the blanket-contracts the Company has with General Electric,
Bonneville Power Administration and its Canadian distributors are not binding
and only represent potential purchases, whereby the Company set certain prices
for its products for the duration of the contract. The contracts are subject to
cancellation under the terms of such contracts. See 'Risk Factors--Dependence on
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 (i.e., resistors, capacitors and
inductors), diodes and assorted hardware such as printed circuit boards,
connectors and faceplates. The Company is not dependent upon any single
supplier. The Company also purchases a number of other electronic components and
sub-assemblies from various suppliers. There has been no material increase in
the cost of most raw materials and the Company has no reason to anticipate any
significant shortage of raw materials in the future. The Company generally is
required to maintain adequate amounts of raw material and parts inventories to
meet delivery requirements of customers and to assure itself of a continuous
availability of these items. 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.

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, 1997 and 1996, the Company had a backlog of approximately
$2,900,000 and $3,400,000, respectively. Approximately $2,800,000 of the
Company's 1997 backlog is for the Company's PTR-1000 series of products and
consists of multi-year blanket contracts at fixed prices for the duration of the
contracts. However, these contracts are blanket contracts, are not binding and
only represent potential purchases, whereby the Company sets certain prices for
its products for the duration of the contract. The Company has received order
releases in the amount of approximately $200,000 against existing blanket orders
for the PTR-1000 from Bonneville Power Authority and BC Hydro in November 1997.
The Company anticipates additional releases against its blanket orders and to
ship the $2,900,000 of backlog by the fiscal year ending July 31, 1998. However,
purchase orders are subject to changes and/or cancellation due to technological
changes, product development, and changes in customer specifications or
requirements.

FOREIGN OPERATIONS

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
year ended July 31, 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 October 31, 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. The Company's employees are not
represented by any union.

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 was Vice President, Chief Financial Officer and Director of Computer
Power Inc. from 1986 to 1996. Mr. Massad is presently a registered
representative of C.J.M. Planning Corp., a member of the NASD. Mr. Massad holds
a BS and MS degree from Cairo University (Egypt) and an MBA from Long Island
University, New York.

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

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

Currently there are no compensation or audit committees. In order to comply
with the new Nasdaq continued listing requirements (which will take effect on
February 23, 1998), the Company intends to elect an additional non-employee
director (so that it has a minimum of two independent directors) and to form
compensation and audit committees, a majority of whom are required to be
independent directors. No assurances can be given that the Company will be
successful in identifying additional non-employee directors. See 'Risk
Factors--Lack of Compensation and Audit Committees.'

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, 1997, 1996 and, 1995:

SUMMARY COMPENSATION TABLE

ANNUAL COMPENSATION
----------------------------------
FISCAL OTHER LONG TERM COMPENSATION
YEAR- ANNUAL --------------------------------
NAME AND PRINCIPAL POSITION END SALARY BONUS COMPENSATION AWARDS PAYOUTS
- ------------------------------ ------ -------- -------- ------------ --------------------- --------

RESTRICTED ALL
STOCK OPTIONS/ LTIP OTHER
AWARDS SARS PAYOUTS COMPENSATION
---------- -------- -------- ------------
Robert Benou, President(1).... 1997 $150,000 -- -- -- --
1996 $150,000 -- -- -- --
1995 $150,000 -- -- -- --

- ------------------
(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 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 in November 1997 and $20,000 per annum
each year thereafter, if the Company is profitable (defined as 'income before
income tax provision.') In addition, Mr. Benou is entitled to an annual bonus
equal to 6% of the Company's annual 'income before income tax provision.' 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.

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 had advanced $139,196 to the
Company for working capital purposes. Such advances were repaid, with interest,
in September 1995.

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.

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.

PERCENTAGE OF
AMOUNT AND OUTSTANDING SHARES(1)

NATURE OF ---------------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP BEFORE OFFERING AFTER OFFERING
- ------------------------------------------------------------- -------------------- --------------- --------------

Robert S. Benou(2)........................................... 200,039 7.1% 5.69%
Arpad J. Havasy(2)........................................... 50,117 1.78% 1.43%
Marc R. Benou(2)............................................. 40,000 1.42% 1.14%
Louis S. Massad(2)........................................... 5,000 .18% .142%
Thomas Fogg(2)............................................... 20,200 .72% .57%
All Directors and Officers as A Group (5 persons)............ 315,356 11.20% 8.97%

- ------------------
(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.

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 2,816,126 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 2,816,126 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 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 July 31, 1997, there was $86,800 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 July 31, 1997, there was $27,937 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 30, 2002,
subject to certain adjustments. The original expiration date was August 16,
1998. On November 21, 1997, the Company announced the extension of such
expiration date to August 30, 2002. 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 and restated 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
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.

Commencing the earlier of (i) 24 months from the date of this Prospectus or
(ii) 12 months from the date of this Prospectus, with the consent of the
Representative, 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:

(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 2,816,126 shares of its Common Stock issued and outstanding,
315,356 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.

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..............................
VTR Capital, Inc.................................
---------------
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.

The Company and its officer or directors 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
eighteen (18) months (twenty-four (24) months in case of the Company) from the
date of this Prospectus, without the prior written consent of the Representative
(other than (with respect to issuances by the Company) in certain circumstances
such as issuance of Common Stock by the Company in connection with the exercise
of outstanding warrants and up to 50,000 restricted shares to employees and in
connection with mergers and acquisitions, so long as such newly issued shares
(other than in connection with the exercise of outstanding warrants) can not be
resold prior to the date which is twenty-four months from the date of this
Prospectus).

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 $8.00 per Unit, 160%
of the public offering price of the Units. The Class A Warrants contained in the
Representative's Unit Purchase Option have an exercise price of $9.60, 160% of
the exercise price of the Class A Warrants included in the Units offered hereby.
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 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.

An investment in the securities offered hereby involves a high degree of
risk and substantial dilution. See 'Risk Factors' which begin on page 9 and

'Dilution' on page 17.

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.(1)..................................................... 300,000 0 12.84% 0%
Blue Star Group Investment, Ltd(2).................................... 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%
--------- --------- --------- ---
--------- --------- --------- ---

- ------------------
(1) The beneficial owners of such entity are Gregory Roberts and Noel Roberts.

(2) Blue Star Group Investments, Ltd. is a corporation organized under the laws
of the British Virgin Islands. George Zahalan is the sole officer and
director of Blue Star Group Investments, Ltd. The sole shareholder of Blue
Star Group Investments, Ltd. is Med Trust Company Limited as trustee of a

trust, the grantor of which is David Meridor and whose beneficiaries are
members of the Meridor family.

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 (other than Mr. Solakian who is the owner of 107,250 shares of Common
Stock).

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.

LEGAL PROCEEDINGS

The Company is not a party to any material 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 accountants, appearing
elsewhere herein and upon the authority of said firm as experts in accounting
and auditing.

INDEX TO THE FINANCIAL STATEMENTS

CONOLOG CORPORATION

JULY 31, 1997

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

Balance Sheets--October 31, 1997 (Unaudited) and July 31, 1997 and 1996............................... F-3

Statements of Operations--Three Months Ended October 31, 1997 and 1996 (Unaudited) and Years Ended
July 31, 1997, 1996 and 1995........................................................................ F-4

Statements of Stockholders' Equity (Deficiency)--Three Months Ended October 31, 1997 (Unaudited) and
Years Ended July 31, 1997, 1996 and 1995............................................................ F-5

Statements of Cash Flows--Three Months Ended October 31, 1997 and 1996 (Unaudited) and Years Ended
July 31, 1997, 1996 and 1995........................................................................ F-6

Notes to Financial Statements October 31, 1997 (Unaudited) and July 31, 1997, 1996 and 1995........... F-7-F-12

F-1

INDEPENDENT AUDITORS' REPORT

Board of Directors

Conolog Corporation

We have audited the accompanying balance sheets of Conolog Corporation at
July 31, 1997 and 1996 and the related statements of operations, stockholders'
equity (deficiency) and cash flows for each of the three years in the period
ended July 31, 1997. 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, 1997 and 1996, and the results of its operations and its cash flows for each
of the three years in the period ended July 31, 1997 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.

ROSENBERG RICH BAKER BERMAN & COMPANY

Maplewood, New Jersey

October 13, 1997,
except as to Notes 11, 12 & 13
which are dated December 11, 1997

F-2

CONOLOG CORPORATION
BALANCE SHEETS

JULY 31,
OCTOBER 31, ------------------------
1997 1997 1996
----------- ---------- ----------
(UNAUDITED)

ASSETS
Current assets:
Cash................................................................. $ 178,395 $ 503,217 $ 178,213
----------- ---------- ----------
Accounts receivable--less allowances of $6,000 and $14,000 in 1997
and 1996, respectively............................................ 48,929 109,571 304,020
----------- ---------- ----------
Inventories:
Finished goods.................................................. 1,839,429 1,705,782 1,494,289
Work-in-process................................................. 496,070 498,070 129,675
Materials and supplies.......................................... 964,546 969,940 1,313,816
----------- ---------- ----------
3,300,045 3,173,792 2,937,780
Other current assets................................................. 23,127 44,085 43,517
Deferred offering costs.............................................. 139,492 113,813 --
----------- ---------- ----------
3,689,988 3,944,478 3,463,530
----------- ---------- ----------
Property, plant and equipment:
Land and improvements................................................ 34,523 34,524 34,524
Building and improvements............................................ 663,630 663,630 659,477
Machinery and equipment.............................................. 1,291,838 1,291,838 1,289,578
Furniture and fixtures............................................... 336,001 336,001 330,735
----------- ---------- ----------
2,325,992 2,325,993 2,314,314
Less allowance for depreciation and amortization..................... 1,952,476 1,938,188 1,880,408
----------- ---------- ----------
373,516 387,805 433,906
----------- ---------- ----------
Other assets............................................................. 7,469 7,469 30,398
----------- ---------- ----------
Total assets.................................................... 4,070,973 $4,339,752 $3,927,834
----------- ---------- ----------
----------- ---------- ----------

LIABILITIES
Current liabilities:
Note payable--bank................................................... -- $ -- $1,012,500
Notes payable--other................................................. 916,235 916,235 --

Accounts payable..................................................... 113,037 188,510 280,629
Accrued payroll...................................................... 19,467 15,645 39,811
Accrued interest..................................................... 30,682 17,374 64,699
Bridge loan.......................................................... 200,000 200,000 --
Other accrued expenses............................................... 110,351 146,791 115,723
Current maturities of capitalized lease obligations.................. 3,003 3,802 33,282
----------- ---------- ----------
----------- ---------- ----------
Total current liabilities....................................... 1,392,775 1,488,357 1,546,644
----------- ---------- ----------
Other liabilities:
Capitalized lease obligations, less current maturities............... -- -- 4,973
----------- ---------- ----------
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 77,500
Preferred Stock, par value $.50; Series B; $.90 cumulative; 50,000
shares authorized; issued and outstanding 1,197 shares in 1997 and
1,197 in 1996..................................................... 597 597 597
Common Stock, par value $1.00; 20,000,000 shares authorized; issued
2,816,126 shares at October 31, 1997, 2,803,473 shares in 1997 and
1,035,186 in 1996, including 8,776 shares held in Treasury........ 2,816,126 2,803,473 1,035,186
Contributed Capital...................................................... 7,022,400 7,034,008 4,512,204
Retained Earnings (Deficit).............................................. (7,106,691) (6,932,449) (3,117,536)
Treasury Shares at Cost.................................................. (131,734) (131,734) (131,734)
----------- ---------- ----------
Total Stockholders' Equity...................................... 2,678,198 2,851,395 2,376,217
----------- ---------- ----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY........................ $ 4,070,973 $4,339,752 $3,927,834
----------- ---------- ----------
----------- ---------- ----------

See notes to the financial statements.

F-3

CONOLOG CORPORATION

STATEMENTS OF OPERATIONS

THREE MONTHS ENDED
OCTOBER 31, YEAR ENDED JULY 31,
-------------------- -------------------------------------
1997 1996 1997 1996 1995
--------- -------- ----------- ---------- ----------
(UNAUDITED)

Sales and other income............................ $ 113,327 418,734 1,123,390 $1,924,466 $2,090,933
--------- -------- ----------- ---------- ----------

Costs and expenses:

Cost of products sold........................ 113,527 259,271 917,379 1,242,001 1,270,771

Selling, general and administrative.......... 158,507 177,034 2,054,630 946,954 916,016

Interest..................................... 13,350 25,676 82,932 133,652 277,440

Write-off of obsolete or excess inventories.. -- -- 28,101 50,281 656,248
--------- -------- ----------- ---------- ----------

285,384 461,981 3,083,042 2,372,888 3,120,475
--------- -------- ----------- ---------- ----------

Loss before income taxes and extraordinary
items........................................... (172,057) (43,247) (1,959,652) (448,422) (1,029,542)

Income taxes (benefit)............................ 1,141 0 10,084 200 (492,252)
--------- -------- ----------- ---------- ----------

Net loss before extraordinary items............... (173,198) (43,247) (1,969,736) (448,622) (537,290)

Extraordinary item................................ -- -- (1,841,000) 740,376 --
--------- -------- ----------- ---------- ----------

Net income (loss)................................. $(173,198) $(43,247) $(3,810,736) $ 291,754 $ (537,290)
--------- -------- ----------- ---------- ----------
--------- -------- ----------- ---------- ----------

(Loss) from continuing operations per share....... $ (.06) $ (.04) $ (1.24) $ (.43) $ (12.36)
--------- -------- ----------- ---------- ----------
--------- -------- ----------- ---------- ----------

Net income (loss) after extraordinary items per

share........................................... -- -- $ (2.41) $ .28 $ (12.36)
--------- -------- ----------- ---------- ----------
--------- -------- ----------- ---------- ----------

Net income (loss) per share--primary.............. $ (.06) $ (.04) $ (2.41) $ .28 $ (12.36)
--------- -------- ----------- ---------- ----------
--------- -------- ----------- ---------- ----------

--Fully diluted....... $ (.06) $ (.04) $ (2.41) $ .25 $ (12.36)
--------- -------- ----------- ---------- ----------
--------- -------- ----------- ---------- ----------

See notes to the financial statements.

F-4

CONOLOG CORPORATION

STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY)

SERIES A SERIES B
PREFERRED PREFERRED COMMON CONTRIBUTED
STOCK STOCK STOCK CAPITAL
--------- --------- ---------- -----------

Balance at July 31, 1994...................................... $77,500 $ 10,661 $ 52,239 $ 952,994
Prior period adjustment....................................... -- -- -- --
Net loss for the year.................................... -- -- -- --
Dividends..................................................... -- -- -- 500,779
--------- --------- ---------- -----------
Balance at July 31, 1995...................................... 77,500 10,661 52,239 1,453,773
Public stock offering......................................... -- (10,064) 982,947 3,448,642
Net income for the year.................................. -- -- -- --
Dividends..................................................... -- -- -- (390,211)
--------- --------- ---------- -----------
Balance at July 31, 1996...................................... 77,500 597 1,035,186 4,512,204
Debt to equity conversion..................................... -- -- 1,408,787 1,563,377
Additional shares issued to employees......................... -- -- 359,500 954,250
Net loss for the year.................................... -- -- -- --
Dividends..................................................... -- -- -- 4,177
--------- --------- ---------- -----------
Balance at July 31, 1997...................................... 77,500 597 2,803,473 7,034,008
Transfer agent adjustment..................................... -- -- 12,653 (12,653)
Net loss for three months................................ -- -- -- --
Dividends..................................................... -- -- -- 1,045
--------- --------- ---------- -----------
Balance at Oct. 31, 1997...................................... $77,500 $ 597 $2,816,126 $ 7,022,400
--------- --------- ---------- -----------
--------- --------- ---------- -----------

TOTAL
RETAINED STOCKHOLDERS'
EARNINGS TREASURY EQUITY
(DEFICIT) STOCK (DEFICIENCY)
----------- --------- ------------

Balance at July 31, 1994............................................... $(2,383,794) $(131,734) $ (1,422,134)
Prior period adjustment................................................ 18,949 -- 18,949
Net loss for the year............................................. (537,290) -- (537,290)
Dividends.............................................................. (500,779) -- --

----------- --------- ------------
Balance at July 31, 1995............................................... (3,402,914) (131,734) (1,940,475)
Public stock offering.................................................. -- -- 4,421,525
Net income for the year........................................... 291,754 -- 291,754
Dividends.............................................................. (6,376) -- (396,587)
----------- --------- ------------
Balance at July 31, 1996............................................... (3,117,536) (131,734) 2,376,217
Debt to equity conversion.............................................. -- -- 2,972,164
Additional shares issued to employees.................................. -- -- 1,313,750
Net loss for the year............................................. (3,810,736) -- (3,810,736)
Dividends.............................................................. (4,177) -- --
----------- --------- ------------
Balance at July 31, 1997............................................... $(6,932,449) $(131,734) $ 2,851,395
Net loss for three months......................................... (173,198) --
Dividends.............................................................. (1,044) (173,198)
----------- --------- ------------
Balance at October 31, 1997............................................ (7,106,691) (131,734) 2,678,197
----------- --------- ------------
----------- --------- ------------

See notes to the financial statements.

F-5

CONOLOG CORPORATION

STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED
OCTOBER 31, YEAR ENDED JULY 31,
--------------------- -------------------------------------
1997 1996 1997 1996 1995
--------- --------- ----------- ----------- ---------
(UNAUDITED)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)................................. (173,198) (43,247) $(3,810,736) $ 291,754 $(537,290)
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Debt retirement cost......................... 1,841,000 -- --
Prior period adjustment...................... -- -- 18,949
Common stock base compensation............... 1,313,750 -- --
Deferred income taxes........................ -- 492,352 (492,352)
Depreciation and amortization................ 14,289 14,287 57,781 64,994 60,396
Gain on disposition of equipment............. -- (3,420) --
Provision for losses on accounts
receivables................................ (8,000) 9,000 --
(Increase) Decrease in Operating Assets:

Accounts receivable...................... 60,642 120,338 202,449 (141,479) 74,529
Inventories.............................. (126,253) (29,512) (236,012) (339,653) 392,058
Other current assets..................... 20,958 23,127 (568) (17,834) (3,394)
Increase (Decrease) in Operating Liabilities
Accounts payable......................... (75,473) (135,581) (92,119) (7,001) 12,330
Accrued expenses and other liabilities... (19,310) 42,729 78,241 (1,066,379) 413,781
--------- --------- ----------- ----------- ---------
NET CASH (USED) BY OPERATING ACTIVITIES............... (298,345) (7,859) (654,214) (717,666) (60,993)
--------- --------- ----------- ----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment......... (9,684) (11,680) (43,163) (19,625)
Proceeds from sale of equipment................... -- 18,666 --
--------- ----------- ----------- ---------
NET CASH USED IN INVESTING ACTIVITIES................. -- (9,684) (11,680) (24,497) (19,625)
--------- --------- ----------- ----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Deferred offering costs........................... (25,678) (113,813) 86,154 (86,154)
Increase from public stock offering............... -- 4,421,525 --
Proceeds from borrowings.......................... 916,235 -- --
Increase (Decrease) in bridge loan................ 200,000 (200,000) 200,000
Repayments of long-term borrowings................ (799) (25,150) (34,453) (2,836,008) (38,681)
(Increase) reductions in other assets............. 22,929 (20,580) 325
Dividends paid.................................... -- (396,587) --
Increase (decrease) in due to officers............ -- (161,705) 17,302
--------- --------- ----------- ----------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES............. (26,477) (25,150) 990,898 892,799 92,792
--------- --------- ----------- ----------- ---------
NET INCREASE (DECREASE) IN CASH....................... (324,822) (42,693) 325,004 150,636 12,174
CASH AT BEGINNING OF PERIOD........................... 503,217 178,213 178,213 27,577 15,403
--------- --------- ----------- ----------- ---------
CASH AT END OF PERIOD................................. 178,395 135,520 $ 503,217 $ 178,213 $ 27,577
--------- --------- ----------- ----------- ---------
--------- --------- ----------- ----------- ---------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
CASH PAID DURING THE YEAR FOR:
Interest paid..................................... $ 0 $ 1,246 $ 77,349 $ 772,773 $ 102,816
Taxes paid........................................ $ 1,141 $ 0 $ 10,084 $ 125 $ 50
SCHEDULE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:
Capitalized lease obligations incurred for use of
equipment....................................... $ -- $ -- $ 56,550
Additional common stock was issued upon conversion
of $1,131,164 of long-term debt, accrued
interest payable.

See notes to the financial statements.

F-6

CONOLOG CORPORATION

NOTES TO THE FINANCIAL STATEMENTS

(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.

Revenue Recognition

Sales are recognized when the products are shipped. Sales under certain
fixed-price-type contracts, where progress payments are received, are recognized
when work is performed, under the percentage-of-completion method, in accordance
with Statement of Position 81-1, Accounting for Performance of Construction Type
and Certain Production-Type contracts.

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 and 1995 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.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

F-7

CONOLOG CORPORATION

NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)

(2) WRITE-OFF OF OBSOLETE OR EXCESS INVENTORIES:

During 1997, the Company recorded a write-off of obsolete or excess
inventories of $28,101. During 1996 and 1995, the Company recorded a write-off
of obsolete or excess inventories of $50,281 and $656,248, respectively.

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

(3) NOTES PAYABLE--BANK:

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

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

On September 12, 1996 CNL entered into an agreement with the Company
whereby the Company would use its best efforts to file a Registration Statement
with the Securities and Exchange Commission covering the 375,000 Bank Shares and
the 1,400,000 Note Shares (collectively the 'Acquired Shares'). Such
Registration Statement shall be declared effective as soon as possible after the
filing thereof, and kept current and effective for a period of two years or
until such time as all shares registered pursuant therewith have been sold or
otherwise transferred. The proceeds of the sale of the Acquired Shares shall be

applied as follows: The first $1,500,000 shall be paid to reimburse CNL for
payments made to the bank pursuant to the Option Agreement. Fifty percent of the
balance of the proceeds, not to exceed $2,500,000, shall be loaned to the
Company by CNL. The balance of the proceeds belong to CNL. The amounts loaned by
CNL to the Company shall be evidenced by notes which shall be due twelve months
after making such loan and shall bear interest at the rate of 4% per annum. At
maturity of the loans, the Company will have the option to repay the loan
balance and accrued interest by issuing a new Series C Preferred Stock (the
'Preferred Stock') valued at $5.00 per share. The Preferred Stock will be
non-voting and will carry a cumulative dividend of 8% per annum, which may be
payable by the issuance of shares of common stock valued at $5.00 per share up
to a maximum of 40,000 shares per annum.

On January 31, 1997, the Bank and Conolog entered into Amendment No. 1 to
the Option and Purchase, Sale and Assignment Agreement dated September 12, 1996.
The amended Option Agreement now provides that on or before February 5, 1997,
CNL will 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, subject to the
approval of IAR Securities Corp. and (ii) $200,001 of the Debt Claim represented
by the note. CNL thereafter may exercise the remainder of the option on or
before April 15, 1997. In addition, CNL may 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. On February 3, 1997, CNL paid the
Bank $600,000 consummating the purchase of the above 200,000 shares. On January
31, 1997, $200,001 of the Debt to the Bank was adjusted resulting in all accrued
interest in the amount of $106,298 being reduced and the remaining being applied
to principal.

On March 26, 1997, CNL completed the exercise of the 'Option Agreement'
with the Bank effectively eliminating all debts and liens with the Bank.

F-8

CONOLOG CORPORATION

NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)

(4) NOTES PAYABLE--OTHER:

CNL Holdings, Inc. loaned the Company $916,235. The notes will be due
during the fiscal year July 31, 1998 and shall bear interest at the rate of 4%
per annum. The loans are payable in cash or Series C Preferred Stock, at the
Company's option at $5.00 per share. Interest is payable in Common Stock up to a
maximum of 40,000 shares per annum.

There is no relationship between CNL Holdings and the Company except as
specifically detailed above.

(5) BRIDGE LOAN:

The Company received $200,000 in net proceeds from several investors in a
private placement. Each investor received two (2) Promissory Notes. Promissory

Notes (the 'Final Note') totaling $150,000 are due and payable on the earlier of
January 31, 1999 or the closing of the Company's next public offering. The
Second Convertible Note (the 'Second Note'), totaling $50,000 plus accrued
interest is payable on the earlier of January 31, 1999 or the closing of the
Company's next public offering, or convertible at the time the next Registration
Statement is declared effective by the Securities and Exchange Commission and at
the option of the selling security holders into a total of 1.2 million Class A
Warrants. Each Class A Warrant contained in the Second Note is identical to the
Company's currently outstanding Class A Warrants.

The Company has granted the lenders a security interest in its property
located at 5 Columbia Road, Somerville, NJ (collateral).

(6) 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,
--------------------
1997 1996
-------- --------

Machinery and equipment......................................................... $303,574 $303,574
Less allowance for amortization................................................. 273,538 263,832
-------- --------
$ 30,036 $ 39,742
-------- --------
-------- --------

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, 1997:

1998
------

Total minimum lease payments......................................................... $4,208
Less amounts representing interest................................................... 406
------
Present value of net minimum lease payments.......................................... 3,802

Less, current maturities of capitalized lease obligations............................ 3,802
------
Long-term capitalized lease obligations.............................................. $ 0
------
------

F-9

CONOLOG CORPORATION

NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)

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

Year ended July 31,
1998........................................................... $ 4,808
1999........................................................... 4,808
2000........................................................... 4,808
-------
$14,424
-------
-------

Total rental expense for all operating leases of the Company amounted to
approximately $7,659, $10,353 and $11,447 during the years ended July 31, 1997,
1996 and 1995, respectively.

(7) CAPITAL STOCK:

The Series A Preferred Stock provides 4% ($.02 per share) cumulative
dividends, which were $86,800 in arrears at July 31, 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.

The Series B Preferred Stock provides cumulative dividends of $.90 per
share which were $27,945 in arrears at July 31, 1997. In addition, each five
shares of Series B Preferred Stock is convertible into 1 share of Common Stock.
The Company may redeem the Series B Preferred Stock at $15 per share plus
accrued and unpaid dividends.

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

(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.

The cost of debt retirement (see note 13) of $1,841,000, which occured in
1997, is considered an extraordinary item with no tax effect due to the
non-deductibility of this expense.

(9) INCOME TAXES:

Income taxes are comprised of the following:

OCT 31, JULY 31,
--------------- ----------------------------
1997 1996 1997 1996 1995
------- ---- ------- ---- ---------
UNAUDITED

Deferred income taxes (benefit)...................... -- -- $ -- $ -- $(492,352)
Current income taxes:
Federal......................................... 941 -- 9,884 -- --
State........................................... 200 -- 200 200 100
------- ---- ------- ---- ---------
1,141 -- $10,084 $200 $(492,252)
------- ---- ------- ---- ---------
------- ---- ------- ---- ---------

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.

F-10

CONOLOG CORPORATION

NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)

At July 31, 1997 the Company has a net operating loss carryforward of

approximately $3,966,750 for financial reporting purposes and approximately
$2,443,000 for tax purposes which is available to offset future Federal taxable
income. For Federal purposes, $253,000 of the carryforward expires in 2008,
$1,232,000 expires in 2009 and $957,000 expires in 2010. For state purposes the
carryforward is approximately $1,604,000; $706,000 expires in in 2001 and
$898,000 expires in 2002. Also, at July 31, 1997 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 $1,329,286.

(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 NUMBER OF PERCENTAGE
Year ended: MAJOR CUSTOMERS CUSTOMERS OF TOTAL
--------------- --------- ----------

1997......................................................... $ 625,134 3 57
1996......................................................... 401,840 1 21
1995......................................................... 424,849 1 20

During 1997 the Company had no export sales. During 1996 the Company had
export sales of $401,840 and none in 1995.

(11) ACCRUED PAYROLL:

At July 31, 1995 the Company had accrued payroll to an officer in the
amount of $492,775. During the year ended July 31, 1996 this amount was paid
down by a cash payment of $150,000 and $309,109 which was converted into Common
Stock. The Company made an adjustment in the amount of $55,691 for discounted
payroll/imputed interest. This amount was adjusted as follows:

Prior Period................................................... $47,183
7/31/95........................................................ 8,508
-------
$55,691
-------

-------

On the above accrued payroll the Company made an adjustment for imputed
interest. The adjustment was as follows:

Prior Period................................................... $28,234
7/31/95........................................................ 23,754
7/31/96........................................................ 1,797
7/31/97........................................................ 1,906
-------
$55,691
-------
-------

(12) COMMON STOCK ISSUED TO EMPLOYEES

At July 31, 1997 the Company issued 359,500 shares of Common Stock to eight
employees. Two employees sold 4,500 shares of Common Stock and $18,000 was
charged to salary expense. An adjustment was made to record compensation as
employees did not pay for the stock. The fair value of the stock used at the
time was $1,295,750 ($3.65 per share). The effect on income was an increase in
the loss by $1,295,750 or .80 per share and a corresponding increase in net
operating loss carry-forward for financial reporting purposes.

F-11

CONOLOG CORPORATION

NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)

(13) CONTRIBUTED CAPITAL

During the years additional capital was contributed through the accrual of
unpaid dividends on Preferred Stock, and dividends which were not paid were
considered as contributed capital and amounted to $114,745 through July 31,
1997.

In addition to the above, during the year January 31, 1997, the Bank
converted 1,400,000 shares of Common Stock it was holding using a value
negotiated between Conolog and the Bank. The difference between the fair value
and the negotiated value was $1.315 and was considered to be contributed capital
and an extraordinary expense called Debt Retirement Cost (see footnote,
Extraordinary Item). The total value placed upon this transaction was $1,841,000
(1,400,000 x $1.315). The effect on primary loss per share was an increase of
$1.16.

(14) SUBSEQUENT EVENTS:

On September 12, 1997 the Company filed a Registration Statement (S-1) with
the Securities and Exchange Commission. This Statement covers the primary
offering of securities by the Company and the offering of other securities by
certain selling security holders. The Company is registering, under the primary
prospectus 805,000 Units, each unit consisting of one (1) share of Common Stock
and four (4) Class A Warrants. The selling security holders are registering
under an alternate prospectus 1,200,000 Class A Warrants.

At October 31, 1997 all costs associated with this offering were deferred.
These costs will be deducted from the proceeds from the sale of stock.

F-12

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

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............................. 4
The Offering................................... 6
Summary Financial Information.................. 8
Risk Factors................................... 9
Use Of Proceeds................................ 15
Capitalization................................. 16
Bridge Financing............................... 16
Dividends...................................... 17
Dilution....................................... 17
Selected Financial Information................. 18
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 19
Market Price for Securities.................... 27
Business....................................... 28
Management..................................... 37
Certain Relationships and Related
Transactions................................. 40
Principal Shareholders......................... 41
Description of Securities...................... 41
Shares Available for Future Sales.............. 44
Underwriting................................... 44
Selling Securityholders........................ 46
Legal Proceedings.............................. 48
Legal Matters.................................. 48
Experts........................................ 48
Financial Statements........................... F-1

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

UNTIL , 1998 (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.
VTR CAPITAL, INC.

, 1998

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

ALTERNATE

SUBJECT TO COMPLETION, DATED , 1998
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 30,
2002. The Class A Warrants are subject to redemption by the Company commencing

the earlier of (i) 24 months from the date of this Prospectus or (ii) 12 months
from the date of this Prospectus, with the consent of IAR Securities Corp., 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 9 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.

THE DATE OF THIS PROSPECTUS IS , 1998

ALT-1

ALTERNATE

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.

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.

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.(1)..................................................... 300,000 0 12.84% 0%
Blue Star Group Investment, Ltd(2).................................... 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%

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

(1) The beneficial owners of such entity are Gregory Roberts and Noel Roberts.

ALT-46

ALTERNATE

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.

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.

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.

LEGAL PROCEEDINGS

The Company is not a party to any material legal proceedings.

LEGAL MATTERS

Representative by Lester Morse, P.C., 111 Great Neck Road, Great Neck, NY 11021.

EXPERTS

ALT-47

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

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

TABLE OF CONTENTS

PAGE
----

Certain Relationships and Related
Transactions................................. 40
Principal Shareholders......................... 41
Description of Securities...................... 41
Shares Available for Future Sales.............. 44
Concurrent Sales............................... 46
Selling Securityholders........................ 46
Plan of Distribution........................... 47
Legal Proceedings.............................. 47
Legal Matters.................................. 47
Experts........................................ 47
Financial Statements........................... F-1

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ALTERNATE

1,200,000

CLASS A WARRANTS

CONOLOG CORPORATION

------------------------
PROSPECTUS
------------------------

, 1998

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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............................................. $ 10,280.66
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*.................................... 15,942.84
-----------
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 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 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.

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On August 16, 1995, accrued salaries of $309,109 owed by the Company to Mr.
Benou (President and Director) 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.

Each of the foregoing transactions was exempt from registration under
Section 4(2) of the Act as transactions by an issuer not involving a public
offering (as such sales were made to officers, directors or lenders of the
Company). In each case the offering was only made to a limited number of
offerees, all of whom had a long standing close relationship to the issuer, and
was effected by direct negotiation with the issuer.

In December 1996 and January 1997, the Company obtained bridge financing in
the aggregate amount of $200,000. In exchange for making the loans to the
Company, each lender received two (2) promissory notes (the 'Bridge Notes'). The
holders of the Bridge Notes are the individuals identified in this Prospectus as
'Selling Securityholders', to wit, Ekistics, Inc.--$50,000; James
Solakian--$20,000; Bruce Ungerleider--$5,000; Harold Yordy--$4,500; Michael
Yordy--$4,500; and Blue Star Group Investment, Ltd. $116,000. 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) January 31, 1999 or (ii) the date on which
this offering closes. The Convertible Bridge Notes are convertible into a total

of 1,200,000 Class A Warrants. Each Class A Warrant contained in the Convertible
Bridge Notes is identical to the Class A Warrants offered hereby. See 'Bridge
Financing.' The foregoing transaction was exempt from registration under Section
4(2) of the Act as a transaction by an issuer not involving a public offering.
The offering was only made to a limited number of offerees, the offering was
relatively small and was effected by direct negotiation with the issuer.

In September 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). The foregoing transaction was exempt
from registration under Section 4(2) of the Act as a transaction by an issuer
not involving a public offering. The offering was only made to a limited number
of offerees, all of whom had an employer-employee relationship with the issuer,
and involved no investment decision on behalf of such employees.

ITEM 16. EXHIBITS.

EXHIBIT
NUMBER 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).

II-2

EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ -----------------------------------------------------------------------------------------------------

(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.
(i)++ -- Certificate of Amendment of Certificate of Incorporation filed August 17, 1995.
(j)++ -- Certificate of Amendment of Certificate of Incorporation filed November 19, 1997.
4 (a)** -- Specimen Certificate for shares of Common Stock.
(b)** -- Specimen Certificate for Class A Warrant.
(c)** -- Warrant Agreement between Conolog Corporation and Continental Stock Transfer & Transfer Co.
(cc)+++ -- Form of Amended and Restated Warrant Agreement between Conolog Corporation and Continental
Stock Transfer & Trust Co.
(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.
10.8++ -- Form of December 1996/January 1997 Bridge Loan Agreement.
10.9++ -- Form of Amendment to December 1996/January 1997 Bridge Loan Agreement.
11 * -- Statement Re: Computation of Per Share Earnings.
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).

*** Incorporated by reference to the Registrant's Registration Statement on
Form S-1 (333-14247).

(Footnotes continued on next page)

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(Footnotes continued from previous page)

***** Incorporated by reference to Registrant's Form 8-K filed February 4, 1997.

+ Incorporated by reference to Registrant's Registration Statement on Form
S-1 (333-35489) filed on September 12, 1997.

++ Incorporated by reference to Amendment No. 1 to Registrant's Registration
Statement on Form S-1 (333-35489) filed on November 6, 1997.

+++ Incorporated by reference to Amendment No. 2 to Registrant's Registration
Statement on Form S-1 (333-35489) filed on November 24, 1997.

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.

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
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.

(d) 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.

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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 23RD DAY OF DECEMBER, 1997.

CONOLOG CORPORATION

By: /s/ ROBERT S. BENOU
-----------------------------------
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 Executive December 23, 1997
- ------------------------------------------ Officer, Chief Financial Officer and
Robert S. Benou Comptroller

/s/ ARPAD J. HAVASY Executive Vice President, Secretary, December 23, 1997
- ------------------------------------------ Treasurer and Director
Arpad J. Havasy

/s/ MARC R. BENOU Vice President, Assistant Secretary and December 23, 1997
- ------------------------------------------ Director
Marc R. Benou

/s/ LOUIS S. MASSAD Director December 23, 1997
- ------------------------------------------
Louis S. Massad

II-5