Conolog Reports Results for Fiscal Year Ended July 31, 2010

SOMERVILLE, N.J.--([ BUSINESS WIRE ])--Conolog Corporation (NASDAQ: CNLG) a provider of digital signal processing and digital security solutions to electric utilities worldwide, reported today its financial results for the fiscal year ended July 31, 2010 and restated financial results for the fiscal year ended July 31, 2009.

Operating Revenues: For the last two years the majority of the Companya�s sales revenue has been generated from sales of the PDR-2000 and PTR-1500 Teleprotection products. For the fiscal year ended July 31, 2010 we had total product revenue sales of $1,178,673 compared to revenues of $1,485,298 for the fiscal year ended July 31, 2009, a decrease of $306,625 or 20%. The decline in sales revenues can be attributed to (a) a decrease of approximately $273,000 or 83% decline in the PTR-1500 products as customers are switching from old analog technical to digital technology, (b) A 7% decline in the PDR-2000 sales due to a delay in current projects by public utilities companies, (c) Telemetry sales decline of approximately $103,000 or 36% due natural rhythm of our markets, we expect this category to further decline in the coming years, (d) Military sales increased approximately $128,000 due to an unexpected military supply contract for current and next fiscal year.


Sales changes by product line for the fiscal years ended July 31, 2010 and 2009.

Products sold	2010		% to total		2009		% to total		$ change			% chg

PDR-2000 digital teleprotection	749,500		64	%	807,600		54	%		(58,100	)	-7.2	%
PTR-1500 analog teleprotection	54,700		5	%	328,100		22	%		(273,400	)	-83.3	%
Telemetry equipment	181,350		15	%	284,100		19	%		(102,750	)	-36.2	%
Military Sales	170,500		14	%	42,000		3	%		128,500		306.0	%
Spare parts	24,000		2	%	25,000		2	%		(1,000	)	-4.0	%
Freights	3,923			%	5,800			%		(1,877	)	-32.4	%
Discounts	(5,300	)		%	(7,302	)		%		2,002		-27.4	%
Net Sales Revenues	1,178,673		100	%	1,485,298		100	%		(306,625	)	-20.6	%

Net Loss: The Company recorded a net loss of $24,910,756 for the fiscal year ended July 31, 2010, as compared to a net loss of $2,289,415 for fiscal year ended July 31, 2009. The increase in net loss of $22,621,341 can mainly be attributed to noncash transactions related to the subscription agreement entered into in 2009. A decline in sales of approximately $307,000, along with a decline in gross profit margin of approximately $213,000 also contributed to the increase in net loss. The Company reported a net loss applicable to common shares of ($5.36) per share for fiscal 2010, compared to a net loss applicable to common shares of ($2.36) per share, as restated for fiscal 2009.

LIQUIDITY AND CAPITAL RESOURCES

At July 31, 2010, the Company had total current assets of $1,859,984 and total current liabilities of $351,880, resulting in working capital of $1,508,104 compared to working capital of $598,825 at year ended July 31, 2009, as restated. The Companya�s current assets consists of $713,005 in cash and cash equivalents, $826,079 in inventory, $248,297 in prepaid expenses and $67,603 in accounts receivable. Accounts receivable decreased from $245,980 at July 31, 2009 to $67,603 at July 31, 2010. This decline in our accounts receivable is the of result of lower sales in the last three months of our fiscal year due to a few customers delaying their sales orders until fiscal year 2011.

Cash expenditures have exceeded revenues for the prior year and Management expects this consumption of cash to continue into next year. Our operations have been and will continue to be funded from existing cash balances and private placements of equity. We are dependent on improved operating results and raising additional funds over the next twelve month period. There are no assurances that we will be able to raise additional funding. In the event that we are unable to generate sufficient cash flow or receive proceeds from offerings of debt or equity securities, the Company may be forced to curtail or cease it activities and/or operations.

OPERATING ACTIVITIES

Net cash used in operating activities was $1,636,745 for fiscal year ended July 31, 2010, as compared to net cash used in operating activities in the amount of $1,264,121 for fiscal year 2009, an increase of $372,624, this increase can be attributed to increase in cash use in paying down our accounts payable liabilities for approximately ($66,600), increased spending for inventory for approximately ($313,900) and an increased spending on cash prepaid expenses for approximately ($121,300) for an aggregate of approximately $365,400. Additionally, accounts receivable collections increased by approximately $178,000.

INVESTING ACTIVITIES

Net cash used in investing activities for the fiscal year ended July 31, 2010 was $22,781 for the purchase of manufacturing equipment. For fiscal year ended July 31, 2009 investing activities funded $600,182 from the redemption of a certificate of deposit.

FINANCING ACTIVITIES

Net cash provided by financing activities was $2,345,173 for the fiscal year ended July 31, 2010, as compared to $10,650 provided in fiscal year 2009. In fiscal year 2010 the Company received proceeds of $2,000,000 related to issuance of convertible debentures and $635,070 related to the exercise of warrants. The Company paid deferred loan costs of $291,507.

About Conolog Corporation

Conolog Corporation is a provider of digital signal processing and digital security solutions to electric utilities worldwide. The Company designs and manufactures electromagnetic products to the military and provides engineering and design services to a variety of industries, government organizations and public utilities nationwide. The Companya�s INIVEN division manufactures a line of digital signal processing systems, including transmitters, receivers and multiplexers.

Forward-looking statements in this release are made pursuant to the asafe harbora provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward looking statements involve risks and uncertainties, including, without limitation, continued acceptance of the Companya�s products, increased levels of competition, new products introduced by competitors, and other risks detailed from time to time in the Companya�s periodic reports filed with the Securities and Exchange Commission. There can be no assurance that the Companya�s revenue for the year ending July 31, 2011 will be more than its revenue for the year ended July 31, 2010.There can also be no assurance that the Company will find suitable growth opportunities.


CONOLOG CORPORATION AND SUBSIDIARIES Consolidated Balance Sheet For the Years Ended July 31, 2010 and 2009

ASSETS				As Restated
	2010			2009
Current Assets:
Cash and cash equivalents	$	713,005		$	27,358
Accounts receivable, net of allowance		67,603			245,980
Inventory , net of reserve for obsolescence		826,079			587,782
Prepaid expenses		248,297			47,000
Current portion of note receivable		-			1,610
Other current assets		5,000			5,000
Total Current Assets		1,859,984			914,730
Property and equipment:
Machinery and equipment		1,357,053			1,357,053
Furniture and fixtures		430,924			429,765
Automobiles		34,097			34,097
Computer software		231,002			209,380
Leasehold improvements		30,265			30,265
Total property and equipment		2,083,341			2,060,560
Less: accumulated depreciation		(1,987,284	)		(1,960,054	)
Net Property and Equipment		96,057			100,506
Other Assets:
Deferred financing fees, net of amortization		382,132			-
Total Other Assets		382,132			-

TOTAL ASSETS	$	2,338,173		$	1,015,236

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	150,880		$	217,455
Accrued expenses		201,000			64,132
Convertible debenture, net of discount, of $0 and $3,631 at July 2010 and 2009, respectively		-			34,318
Total Current Liabilities		351,880			315,905
Non-Current Liabilities:
Convertible debenture, net of discount of $720,687 and $0 at July 31, 2010 and 2009, respectively		279,313			-
Total Liabilities		631,193			315,905
Stockholders' Equity:
Preferred stock, par value $.50; Series A; 4% cumulative; 500,000 shares authorized; 155,000 shares issued and outstanding at July 31, 2010 and 2009, respectively.		77,500			77,500
Preferred stock, par value $.50; Series B; $.90 cumulative; 500,000 shares authorized; 1,197 shares issued and outstanding at July 31, 2010 and 2009 , respectively.		597			597
Common stock, par value $0.01; 30,000,000 shares authorized; 6,967,881 and 1,842,485 shares issued and outstanding at July 31, 2010 and 2009 respectively including 2 shares held in treasury.		69,679			18,425
Contributed capital		78,088,878			52,221,727
Accumulated deficit		(76,397,940	)		(51,487,184	)
Treasury shares at cost		(131,734	)		(131,734	)
Total Stockholdersa� Equity		1,706,980			699,331
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	2,338,173		$	1,015,236


CONOLOG CORPORATION AND SUBSIDIARIES Consolidated Statement of Operations For the Years Ended July 31, 2010 and 2009

				As Restated
	2010			2009
OPERATING REVENUES
Product revenue	$	1,178,673		$	1,485,298
Cost of product revenue
Materials and labor used in production		618,990			618,325
Obsolete inventory parts		75,564			169,712
Total Cost of product revenue		694,554			788,037
Gross Profit from Operations		484,119			697,261
Selling, general and administrative expenses
General and administrative		3,759,490			1,779,243
Research and development		139,951			368,331
Selling expenses		117,323			170,564
Total selling, general and administrative expenses		4,016,764			2,318,138
Loss Before Other Income (Expenses)		(3,532,645	)		(1,620,877	)
OTHER INCOME (EXPENSES)
Loss on derivative financial instruments		(18,958,801	)		-
Beneficial conversion feature		(457,692	)		-
Incremental consideration for modification of debt warrants		(107,863	)		-
Interest expense		(44,546	)		(102,379	)
Interest income		3,630			16,265
Induced conversion cost		(150,201	)		(621,880	)
Bad debt for note receivable		-			(83,101	)
Amortization of debt discount		(1,279,313	)		(123,274	)
Amortization of deferred financing fees		(520,656	)		(128,108	)
Total Other Income (Expense)		(21,515,442	)		(1,042,477	)
Net Loss before income tax benefit		(25,048,087	)		(2,663,354	)
Income tax benefit		137,331			373,939
NET LOSS APPLICABLE TO COMMON SHARES		(24,910,756	)		(2,289,415	)
NET LOSS PER BASIC AND DILUTED COMMON SHARE	$	(5.36	)	$	(2.36	)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING		4,650,113			968,723		*

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

Contributing Sources

Market Wire

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Conolog Reports Results for Fiscal Year Ended July 31, 2010