UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                    ________________________________________

                                    FORM 10-Q

     [X]  QUARTERLY  REPORT  PURSUANT  TO SECTION 13 OR 15(d) OF THE  SECURITIES
          EXCHANGE ACT OF 1934

                For the quarterly period ended September 30, 2008

     [ ]  TRANSITION  REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES
          EXCHANGE ACT OF 1934

                          Commission File No. 33-18978

                        TEL-INSTRUMENT ELECTRONICS CORP.
              ----------------------------------------------------
             (Exact name of the Registrant as specified in Charter)

       New Jersey                                              22-1441806
 ----------------------                               -------------------------
(State of Incorporation)                             (I.R.S. Employer ID Number)

                    728 Garden Street, Carlstadt, New Jersey      07072
                     --------------------------------------      --------
                    (Address of Principal Executive Offices)    (Zip Code)

          Registrant's Telephone No. including Area Code: 201-933-1600

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed  by  Section  13 or 15 (d) of the  Securities  Exchange  Act of 1934
during the preceding 12 months (or for such shorter  period that the  registrant
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days. Yes  X   No
                                      -----   -----

Indicate by check mark whether the registrant is a large  accelerated  filer, an
accelerated filer,  non-accelerated  filer, or a smaller reporting company.  See
definition of "accelerated  filer and large accelerated  filer" in Rule 12b-2 of
the Exchange Act.


Large accelerated filer [ ]                Accelerated filer [ ]
Non-accelerated filer   [ ]                Smaller reporting company [X]
(Do not check if a smaller reporting company)


Indicate by checkmark  whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Securities Act). Yes      No  X
                                      -----   -----

Indicate the number of shares  outstanding of the issuer's  common stock,  as of
the latest practical date:

    2,448,261 shares of Common stock, $.10 par value as of November 7, 2008.

<PAGE>


                     TEL-INSTRUMENT ELECTRONICS CORPORATION
                     --------------------------------------

                                TABLE OF CONTENTS
                                -----------------



                                                                            PAGE

               Part I - Financial Information

Item 1.        Condensed Consolidated Financial Statements (Unaudited):

               Condensed Consolidated Balance Sheets
               September 30, 2008 and March 31, 2008 (Audited)                 1

               Condensed Consolidated Statements of Operations -
               Three and Six Months Ended September 30, 2008 and 2007          2

               Condensed Consolidated Statements of Cash Flows -
               Six Months Ended September 30, 2008 and 2007                    3

               Notes to Condensed Consolidated Financial Statements         4-11

Item 2.        Management's Discussion and Analysis of the Results of
                  Operations and Financial Condition                       12-18

Item 4 (T).    Controls and Procedures                                        19

               Part II - Other Information

Item 1.        Legal Proceedings                                              19

Item 2.        Unregistered sales of Equity Securities and Use of Proceeds    19

Item 6.        Exhibits                                                       19



               Signatures                                                     19

               Certifications

                                       i

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Item 1 - Financial Statements


                            TEL-INSTRUMENT ELECTRONICS CORPORATION
                            --------------------------------------
                             CONDENSED CONSOLIDATED BALANCE SHEETS
                             -------------------------------------




ASSETS                                                            September 30,    March 31,
                                                                       2008          2008
                                                                   (Unaudited)
<S>                                                               <C>            <C>
Current assets:
   Cash and cash equivalents                                      $   478,673    $   469,906
  Accounts receivable, net                                          2,375,052      1,223,753
  Unbilled government receivables                                   1,277,073      1,100,323
  Inventories, net                                                  2,232,113      2,075,542
  Prepaid expenses and other current assets                            57,003        141,446
  Deferred income taxes                                               229,079        531,975
                                                                  -----------    -----------
Total current assets                                                6,648,993      5,542,945

Property, plant and equipment, net                                    473,286        532,240
Deferred income taxes - non-current                                   900,221        900,221
Other assets                                                           75,325        142,069

Total assets                                                      $ 8,097,825    $ 7,117,475
                                                                  -----------    -----------

LIABILITIES & STOCKHOLDERS EQUITY

Current liabilities:
  Convertible note payable - related party                        $    50,000    $    50,000
  Line of credit                                                      450,000        350,000
  Accounts payable                                                    870,602        928,367
  Deferred revenues                                                    59,931         55,014
  Accrued payroll, vacation pay, and payroll taxes                    322,225        348,683
  Accrued expenses                                                  1,579,406      1,129,370
                                                                  -----------    -----------
Total current liabilities                                           3,332,164      2,861,434

Deferred revenues                                                      49,230         43,818
                                                                  -----------    -----------

Total liabilities                                                   3,381,394      2,905,252
                                                                  -----------    -----------

Commitments

Stockholders' equity:
   Common stock, par value $.10 per share, 2,448,261 and
       2,428,261 issued and outstanding as of September 30,
       2008, and March 31, 2008, respectively                         244,826        242,826
   Additional paid-in capital                                       4,679,808      4,611,262
   Accumulated deficit                                               (208,203)      (641,865)
                                                                  -----------    -----------

Total stockholders' equity                                          4,716,431      4,212,223
                                                                  -----------    -----------

                     Total liabilities and stockholders' equity   $ 8,097,825    $ 7,117,475
                                                                  ===========    ===========


See accompany notes to condensed consolidated financial statements

                                     - 1 -
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<CAPTION>


                                 TEL-INSTRUMENT ELECTRONICS CORPORATION
                                 --------------------------------------
                             CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                             -----------------------------------------------
                                                    (Unaudited)


                                                   Three Months Ended            Six Months Ended
                                                   ------------------            ----------------
                                              September 30,  September 30,  September 30,  September 30,
                                              -------------  -------------  -------------  -------------
                                                  2008           2007           2008           2007
                                                  ----           ----           ----           ----
<S>                                           <C>            <C>            <C>            <C>
Net sales                                     $ 3,855,121    $ 2,844,692    $ 7,407,096    $ 5,800,431
Cost of sales                                   1,715,634      1,611,483      3,778,680      3,353,920
                                              -----------    -----------    -----------    -----------

Gross margin                                    2,139,487      1,233,209      3,628,416      2,446,511

Operating expenses:
  Selling, general and administrative             763,784        613,488      1,472,142      1,169,475
  Engineering, research and development           713,853        617,537      1,449,004      1,390,284
                                              -----------    -----------    -----------    -----------
Total operating expenses                        1,477,637      1,231,025      2,921,146      2,559,759
                                              -----------    -----------    -----------    -----------

Income (loss) from continuing operations          661,850          2,184        707,270       (113,248)

Interest income (expense):
  Interest income                                   1,683          6,525          2,073          9,686
  Interest expense                                (13,336)       (10,799)       (24,855)       (19,745)
                                              -----------    -----------    -----------    -----------

Income (loss) from continuing operations
       before income taxes                        650,197         (2,090)       684,488       (123,307)

Income tax provision (benefit)                    304,365           (835)       318,065        (50,310)
                                              -----------    -----------    -----------    -----------

Net income (loss) from continuing
       operations, net of income taxes            345,832         (1,255)       366,423        (72,997)

Income (loss) from discontinued operations,
        net of income taxes                        44,819        (21,862)        67,239        (33,494)
                                              -----------    -----------    -----------    -----------

Net income (loss)                             $   390,651    $   (23,117)   $   433,662    $  (106,491)
                                              ===========    ===========    ===========    ===========

Income (loss) from continuing operations,
        net of income taxes:
   Basic income (loss) per common share       $      0.14    $      0.00    $      0.15    $     (0.03)
                                              ===========    ===========    ===========    ===========
   Diluted income (loss) per common share     $      0.14    $      0.00    $      0.15    $     (0.03)
                                              ===========    ===========    ===========    ===========
Income (loss) from discontinued operations,
       net of income taxes:
   Basic income (loss) per common share       $      0.02    $     (0.01)   $      0.03    $     (0.02)
                                              ===========    ===========    ===========    ===========
   Diluted income (loss) per common share     $      0.02    $     (0.01)   $      0.03    $     (0.02)
                                              ===========    ===========    ===========    ===========
Net Income (loss):
   Basic income (loss) per common share       $      0.16    $     (0.01)   $      0.18    $     (0.05)
                                              ===========    ===========    ===========    ===========
   Diluted income (loss) per common share     $      0.16    $     (0.01)   $      0.17    $     (0.05)
                                              ===========    ===========    ===========    ===========
Weighted average shares outstanding:
   Basic                                        2,445,511      2,362,331      2,439,547      2,353,545
   Diluted                                      2,512,068      2,362,331      2,506,104      2,353,545


See accompanying notes to condensed consolidated financial statements

                                                 - 2 -
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<CAPTION>



                          TEL-INSTTRUMENT ELECTRONICS CORP
                   CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                     (Unaudited)


                                                              Six Months Ended
                                                           Sept. 30,      Sept. 30,
                                                             2008           2007
                                                             ----           ----
<S>                                                      <C>            <C>
Cash flows from operating activities:
Net income (loss)                                        $   433,662    $  (106,491)
Adjustments to reconcile net income (loss) to net cash
        used in operating activities:

    Deferred income taxes                                    302,896        (73,614)
    Non-cash stock-based compensation                         24,766         16,492
    Depreciation                                              93,912        119,616
Changes in operating assets or liabilities:
     Increase in accounts receivable                      (1,151,299)      (871,396)
     Increase in unbilled government receivables            (176,750)      (766,965)

    (Increase) decrease in inventories, net                 (133,799)       272,056
     Decrease (increase) in prepaid expenses and

       other current assets                                   84,443        (14,490)

    Increase in other assets                                    (834)        (3,314)
   (Decrease) increase in accounts payable                   (57,765)       436,474
    Increase (decrease) in deferred revenues                  10,329         (2,890)
    Decrease in accrued payroll, vacation pay,

     and payroll taxes                                       (26,458)       (21,652)
    Increase in accrued
expenses                                                     450,036        206,059
                                                         -----------    -----------

Net cash used in operating activities                       (146,861)      (810,115)

Cash flows from investing activities:

  Purchases of property, plant and equipment                 (57,730)       (39,586)
                                                         -----------    -----------
Net cash used in investing activities                        (57,730)       (39,586)
                                                         -----------    -----------

Cash flows from financing activities:
  Proceeds from exercise of stock options                     45,780         87,600
  Proceeds from loan on life insurance policy                 67,578           --
  Proceeds from borrowings from line of credit, net          100,000        350,000
                                                         -----------    -----------
  Net cash provided by financing activities                  213,358        437,600
                                                         -----------    -----------


Net increase (decrease) in cash and cash equivalents           8,767       (412,101)

Cash and cash equivalents at beginning of period             469,906        655,836
                                                         -----------    -----------
Cash and cash equivalents at end of period               $   478,673    $   243,735
                                                         ===========    ===========

Supplemental information
     Interest paid                                       $    14,418    $    15,542
                                                         ===========    ===========
     Taxes paid                                               15,290    $      --
                                                         ===========    ===========


See accompanying notes to condensed consolidated financial statements

                                       - 3 -
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<CAPTION>


                        TEL-INSTRUMENT ELECTRONICS CORP.
                        --------------------------------
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
              ----------------------------------------------------


Note 1            Basis of Presentation
------            ---------------------

In the opinion of management,  the accompanying unaudited condensed consolidated
financial  statements  contain all adjustments  (consisting  primarily of normal
recurring  accruals)  necessary  to present  fairly the  financial  position  of
Tel-Instrument  Electronics  Corp,  and  its  marine  systems  subsidiary  whose
operations  were  discontinued  at March 31, 2008, as of September 30, 2008, the
results of operations for the three and six months ended  September 30, 2008 and
September  30,  2007,  and  statements  of cash flows for the six  months  ended
September  30, 2008 and September  30, 2007.  These results are not  necessarily
indicative of the results to be expected for the full year.

The financial  statements have been prepared in accordance with the requirements
of Form 10-Q and  consequently  do not include  disclosures  normally made in an
Annual Report on Form 10-K. The March 31, 2008 results included herein have been
derived from the audited financial  statements  included in the Company's annual
report on Form  10-K as of that  date.  Accordingly,  the  financial  statements
included  herein  should  be  reviewed  in  conjunction  with  the  consolidated
financial  statements and notes thereto  included in the Company's Annual Report
on Form 10-K for the fiscal year ended March 31, 2008.

Note 2            Revenue Recognition - Percentage-of-Completion - ITATS
------            ------------------------------------------------------

Due to the unique nature of the ITATS program  wherein a significant  portion of
this  contract  will not be  delivered  for  over a year,  revenues  under  this
contract are recognized on a  percentage-of-completion  basis,  which recognizes
sales  and  profit  as they are  earned,  rather  than at the time of  shipment.
Revenues and profits are estimated using the  cost-to-cost  method of accounting
where revenues are recognized and profits recorded based upon the ratio of costs
incurred to estimate of total costs at  completion.  The ratio of costs incurred
to date to the estimate of total costs at  completion is applied to the contract
value to  determine  the revenues and  profits.  When  adjustments  in estimated
contract  revenues or estimated  costs at completion  are required,  any changes
from prior  estimates  are  recognized by recording  adjustments  in the current
period for the  inception-to-date  effect of the  changes  on current  and prior
periods. The Company also receives progress billings on this program, which is a
funding mechanism by the government to assist contractors on long-term contracts
prior to  delivery.  (See  Note 4 and  Critical  Accounting  Policies  - Revenue
Recognition)

Note 3            Accounts Receivable, net
------            ------------------------

Accounts receivable, net, consist of:
                                                      September 30, 2008      March 31, 2008
                                                      ------------------      --------------
                  <S>                                   <C>                    <C>
                  Commercial                            $     479,153          $    647,063
                  Government                                1,927,105               607,896
                  Allowance for doubtful accounts             (31,206)              (31,206)
                                                        -------------          ------------
                  Total                                 $   2,375,052          $  1,223,753
                                                        =============          ============

Note 4            Unbilled Government Receivables
------            -------------------------------

Unbilled  government  receivables  represent  unbilled costs and accrued profits
primarily  related to revenues on long-term  contracts that have been recognized
on a percentage-of-completion  basis for accounting purposes, but not yet billed
to  customers.  As  revenues  are  recognized,  performance-based  payments  and
progress payments are charged as an offset to the related receivables balance.

                                     - 4 -
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<CAPTION>


                        TEL-INSTRUMENT ELECTRONICS CORP.
                        --------------------------------
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
        ----------------------------------------------------------------


Note 5            Inventories, net
------            ----------------

Inventories, net, consist of:
                                                      September 30, 2008          March 31, 2008
                                                      ------------------          --------------

                   <S>                                    <C>                       <C>
                  Purchased parts                         $ 1,296,697               $ 1,246,733
                  Work-in-process                           1,216,952                   881,472
                  Finished goods                               44,863                   224,284
                  Less:  Reserve for obsolescence            (326,399)                 (276,947)
                                                          -----------               -----------
                  Total                                   $ 2,232,113               $ 2,075,542
                                                          ===========               ===========

Note:  Inventories over one year immaterial.

Note 6            Earnings Per Share
------            ------------------

SFAS No. 128,  "Earnings Per Share" requires  presentation of basic earnings per
share ("basic EPS") and diluted earnings per share ("diluted EPS").

The Company's basic income (loss) per common share is based on net income (loss)
for the relevant period, divided by the weighted average number of common shares
outstanding  during the period.  Diluted income (loss) per common share is based
on net income  (loss),  divided by the weighted  average number of common shares
outstanding  during the period,  including  common  share  equivalents,  such as
outstanding  stock  options.  Diluted  loss  per  share  for the  periods  ended
September 30, 2007 do not include common stock equivalents, as these equivalents
would be anti-dilutive.


                                                                                Three Months Ended   Three Months Ended
                                                                                ------------------   ------------------
                                                                                September 30, 2008   September 30, 2007
                                                                                ------------------   ------------------
Basic net income (loss) per share computation:
  Net income (loss) attributable to common stockholders                       $            390,651  $           (23,117)
  Weighted-average common shares outstanding                                             2,445,511            2,362,331
  Basic net income(loss) per share attributable to common stockholders        $               0.16  $             (0.01)
Diluted net income (loss) per share computation
  Net income(loss) attributable to common stockholders                        $            390,651  $          (23,117)
  Weighted-average common shares outstanding                                             2,445,511            2,362,331
  Incremental shares attributable to the assumed exercise of
       Outstanding stock options                                                            66,557                 --
  Total adjusted weighted-average shares                                                 2,512,068            2,362,331
  Diluted net income(loss) per share attributable to common stockholders      $               0.16  $             (0.01)


                                                                                  Six Months Ended      Six Months Ended
                                                                                  ----------------      ----------------
                                                                                September 30, 2008    September 30, 2007
                                                                                ------------------    ------------------
Basic net income (loss) per share computation:
  Net income (loss) attributable to common stockholders                       $            433,662   $         (106,491)
  Weighted-average common shares outstanding                                             2,439,547            2,353,545
  Basic net income(loss) per share attributable to common stockholders        $               0.18   $            (0.05)
Diluted net income (loss) per share computation
  Net income(loss) attributable to common stockholders                        $            433,662   $         (106,491)
  Weighted-average common shares outstanding                                             2,439,547            2,353,545
  Incremental shares attributable to the assumed exercise of
       outstanding stock options                                                            66,557                 --
  Total adjusted weighted-average shares                                                 2,506,104            2,353,545
  Diluted net income(loss) per share attributable to common stockholders      $               0.17   $            (0.05)

                                                          - 5 -
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                        TEL-INSTRUMENT ELECTRONICS CORP.
                        --------------------------------
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
        ----------------------------------------------------------------


Note 7            Stock Options
------            -------------

Effective April 1, 2006, the Company adopted  Statement of Financial  Accounting
Standards No. 123R, "Share-Based Payment" ("SFAS 123R"),  utilizing the modified
prospective   method.   SFAS  123R  requires  the   measurement  of  stock-based
compensation  based on the fair  value of the award on the date of grant.  Under
the modified prospective method, the provisions of SFAS 123R apply to all awards
granted after the date of adoption. The Company recognizes  compensation cost on
awards on a straight-line  basis over the vesting period,  typically four years.
As a result of adopting SFAS 123(R),  operations was charged  $12,546 and $8,991
for three months ended  September 30, 2008 and 2007,  respectively,  and $24,766
and $16,492 for the six months ended September 30, 2008 and 2007,  respectively.
The  Company  estimates  the fair value of each option  using the Black  Scholes
option-pricing model with the following weighted-average  assumptions:  expected
dividend yield of 0.0%, risk-free interest rate of 2.26% to 3.16%, volatility at
37.96% to  39.14%,  and an  expected  life of 5 years for the six  months  ended
September 30, 2008; expected dividend yield of 0.0%,  risk-free interest rate of
3.99% to 5%, volatility at 45.53% to 56.94%, and an expected life of 5 years for
the six months ended September 30, 2007. The Company  estimates  forfeiture rate
based on historical  data. Based on an analysis of historical  information,  the
Company has applied a forfeiture rate of 15% for both periods.

Note 8            Segment Information
------            -------------------

As a result of the classification of its marine systems division as discontinued
operations in accordance  with FAS No. 131,  "Disclosures  about  Segments of an
Enterprise  and  related  information",   the  Company  determined  it  has  two
reportable segments for continuing operations - avionics government and avionics
commercial. There are no inter-segment revenues.

The Company is organized  primarily on the basis of its avionics  products.  The
avionics government segment consists primarily of the design,  manufacture,  and
sale of test equipment to the U.S. and foreign governments and militaries either
directly or through  distributors.  The avionics  commercial segment consists of
design,  manufacture,  and  sale of  test  equipment  to  domestic  and  foreign
airlines,  directly or through commercial distributors,  and to general aviation
repair and maintenance  shops.  The Company  develops and designs test equipment
for the avionics industry and as such, the Company's  products and designs cross
segments.

Management  evaluates the performance of its segments and allocates resources to
them based on gross margin. The Company's general and  administrative  costs and
sales  and  marketing  expenses  are not  segment  specific.  As a  result,  all
operating  expenses are not managed on a segment  basis.  Net interest  includes
expenses on debt and income  earned on cash  balances.  Segment  assets  include
accounts  receivable,  unbilled  government  receivables and inventories.  Asset
information, other than accounts receivable, unbilled government receivables and
inventories,   is  not  reported,  since  the  Company  does  not  produce  such
information internally. All long-lived assets are located in the U.S.

                                     - 6 -

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                          TEL-INSTRUMENT ELECTRONICS CORP.
                          --------------------------------
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
        ----------------------------------------------------------------


Note 8            Segment Information (continued)
------            -------------------------------

The table  below  presents  information  about  reportable  segments  within the
avionics business for the periods ending September 30, 2008 and 2007:

  Three Months Ended                       Avionics       Avionics        Avionics       Corporate
  ------------------                       --------       --------        --------       ---------
  September 30, 2008                          Gov't        Comm'l.           Total           Items           Total
  ------------------                          -----        -------           -----           -----           -----
<S>                                     <C>            <C>             <C>             <C>             <C>
  Net sales                             $ 3,356,533    $   498,588     $ 3,855,121                     $ 3,855,121
  Cost of sales                           1,424,221        291,413       1,715,634                       1,715,634
                                        -----------    -----------     -----------                     -----------
  Gross margin                            1,932,312        207,175       2,139,487                       2,139,487
                                        -----------    -----------     -----------                     -----------
  Engineering, research, & dev.                                            713,853                         713,853
  Selling, general, and admin.                                             370,461     $   393,323         763,784
  Interest expense, net                                                     11,653            --            11,653
                                                                       -----------     -----------     -----------
  Total expenses                                                         1,095,967         393,323       1,489,290
                                                                       -----------     -----------     -----------
  Income  (loss) from  continuing
  operations before taxes                                              $ 1,043,520     $  (393,323)    $   650,197
                                                                       ===========     ===========     ===========

  Segment assets                       $ 5,185,267,    $   698,971     $ 5,884,238     $ 2,213,587     $ 8,097,825
                                       ===========     ===========     ===========     ===========     ===========

  Three Months Ended                       Avionics       Avionics        Avionics       Corporate
  ------------------                       --------       --------        --------       ---------
  September 30, 2007                          Gov't        Comm'l.           Total           Items           Total
  ------------------                          -----        -------           -----           -----           -----
  Net sales                             $ 1,984,511    $   860,161     $ 2,844,692                     $ 2,844,692
  Cost of sales                           1,110,871        500,612       1,611,483                       1,611,483
                                        -----------    -----------     -----------                     -----------
  Gross margin                              873,640        359,569       1,233,209                       1,233,209
                                        -----------    -----------     -----------                     -----------
  Engineering, research, & dev.                                            617,537                         617,537
  Selling, general, and admin.                                             327,715     $   285,773         613,488
  Interest expense, net                                                      4,274            --             4,274
                                                                       -----------     -----------     -----------
  Total expenses                                                           949,526         285,773       1,235,299
                                                                       -----------     -----------     -----------
  Income (loss) from continuing
  operations before taxes                                              $   283,683     $   (285,773)   $    (2,090)
                                                                       ===========     ============    ===========

  Six Months Ended                         Avionics       Avionics        Avionics       Corporate
  ----------------                         --------       --------        --------       ---------
  September 30, 2008                          Gov't        Comm'l.           Total           Items           Total
  ------------------                          -----        -------           -----           -----           -----
  Net sales                             $ 6,317,129    $ 1,089,967     $ 7,407,096                     $ 7,407,096
  Cost of sales                           3,165,417        613,262       3,778,680                       3,778,680
                                        -----------    -----------     -----------                     -----------
  Gross margin                            3,151,712        476,705       3,628,416                       3,628,416
                                        -----------    -----------     -----------                     -----------
  Engineering, research, & dev.                                          1,449,004                       1,449,004
  Selling, general, and admin.                                             756,025     $   716,117       1,472,142
  Interest expense, net                                                     22,782            --            22,782
                                                                       -----------     -----------     -----------
  Total expenses                                                         2,227,811         716,117       2,943,928
                                                                       -----------     -----------     -----------
  Income (loss) from continuing
  operations before taxes                                              $ 1,400,605     $  (716,117)    $   684,488
                                                                       ===========     ===========     ===========

  Six Months Ended                         Avionics       Avionics        Avionics      Corporate
  ----------------                         --------       --------        --------      ---------
  September 30, 2007                          Gov't        Comm'l.           Total          Items            Total
  ------------------                          -----        -------           -----          -----            -----
  Net sales                             $ 4,044,818     $1,755,613     $ 5,800,431                     $ 5,800,431
  Cost of sales                           2,366,194        987,726       3,353,920                       3,353,920
                                        -----------    -----------     -----------                     -----------
  Gross margin                            1,678,624        767,887       2,446,511                       2,446,511
                                        -----------    -----------     -----------                     -----------
  Engineering, research, & dev.                                          1,390,284                       1,390,284
  Selling, general, and admin.                                             624,710      $ 544,765        1,169,475
  Interest income, net                                                      10,059           --             10,059
                                                                       -----------    -----------      -----------
  Total expenses                                                         2,025,053        544,765        2,569,818
                                                                       -----------    -----------      -----------
  Income  (loss)  from   continuing
  operations before taxes                                              $   421,458    $  (544,765)     $  (123,307)
                                                                       ===========    ===========      ===========

                                                        - 7 -
</TABLE>

<PAGE>


                        TEL-INSTRUMENT ELECTRONICS CORP.
                        --------------------------------
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
        ----------------------------------------------------------------


Note 9            Income Taxes
------            ------------

The Company  adopted the  provisions  of Financial  Accounting  Standards  Board
("FASB")  Interpretation No. 48 ("FIN 48"), Accounting for Uncertainty in Income
Taxes- an  Interpretation  of FASB  Statement  No.  109,  on April 1, 2007.  The
Company  has  analyzed  filing  positions  in  all  of  the  federal  and  state
jurisdictions  where it is required to file income tax  returns,  as well as all
open tax years in these jurisdictions. The Company did not have any unrecognized
tax  benefits and there was no effect on its  financial  condition or results of
operations as a result of implementing FIN 48.

The  tax  effect  of  temporary   differences,   primarily  net  operating  loss
carryforwards,  asset  reserves  and  accrued  liabilities,  gave  rise  to  the
Company's  deferred tax asset in the  accompanying  September 30, 2008 and March
31, 2008 consolidated  balance sheets.  Deferred income taxes are recognized for
the tax  consequence  of such  temporary  differences  at the  enacted  tax rate
expected to be in effect when the differences reverse.

Note 10           Stock Options
-------           -------------

During the quarter ended  September 30, 2008 stock options for 9,000 shares were
exercised for total proceeds of $20,450.  For the six months ended September 30,
2008 stock  options  for 20,000  shares  were  exercised  for total  proceeds of
$45,780.


Note 11           Fair Value Measurements
-------           -----------------------

On April 1, 2008,  the Company  adopted  SFAS No. 157 "Fair Value  Measurements"
("SFAS 157"). SFAS 157 defines fair value,  provides a consistent  framework for
measuring fair value under Generally Accepted Accounting  Principles and expands
fair value financial  statement  disclosure  requirements.  SFAS 157's valuation
techniques are based on observable and unobservable  inputs.  Observable  inputs
reflect readily  obtainable data from independent  sources,  while  unobservable
inputs reflect our market assumptions. SFAS 157 classifies these inputs into the
following hierarchy:

     Level 1 Inputs- Quoted prices for identical instruments in active markets.

     Level 2 Inputs- Quoted prices for similar instruments in active markets;
         quoted prices for identical or similar instruments in markets that are
         not active; and model-derived valuations whose inputs are observable or
         whose significant value drivers are observable.
     Level 3 Inputs- Instruments with primarily unobservable value drivers.

At  September  30,  2008,  the Company had no  financial  assets or  liabilities
reported at fair value.

                                     - 8 -

<PAGE>


                        TEL-INSTRUMENT ELECTRONICS CORP.
                        --------------------------------
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
        ----------------------------------------------------------------
                                   (Unaudited)
                                   -----------

Note 12           New Accounting Pronouncements
-------           -----------------------------

In February  2007,  the FASB issued  SFAS No.  159,  "The Fair Value  Option for
Financial Assets and  Liabilities,  including an amendment of FASB Statement No.
115" ("SFAS No.  159").  SFAS No. 159 permits  entities to choose,  at specified
election dates, to measure many financial instruments and certain other items at
fair  value  that are not  currently  required  to be  measured  at fair  value.
Unrealized  gains and losses shall be reported on items for which the fair value
option has been elected in earnings at each subsequent  reporting date. SFAS No.
159 is  effective  for fiscal years  beginning  after  November 15, 2007.  Early
adoption is  permitted  as of the  beginning  of a fiscal year that begins on or
before  November  15,  2007,  provided  the  entity  also  elects  to apply  the
provisions  of SFAS No. 157.  The  adoption of SFAS No. 159 had no impact on the
Company's financial position or results of operations.

In December 2007, the FASB issued SFAC No 141(R),  "Business Combinations." This
statement  provides new  accounting  guidance and  disclosure  requirements  for
business  combinations.  SFAS No 141(R) is effective  for business  combinations
which occur in the first fiscal year  beginning  on or after  December 15, 2008.
The adoption of SFAS No 141 (R) will not have a material impact on the Company's
financial statements..

In December  2007,  the FASB issued SFAS No. 160,  Noncontrolling  Interests  in
Consolidated  Financial  Statements ("SFAS 160"). SFAS 160 requires all entities
to report  noncontrolling  interests  as equity  in the  consolidated  financial
statements.  SFAS 160 is effective for fiscal years,  and interim periods within
those fiscal years,  beginning on or after  December 15, 2008.  The Company does
not expect the adoption of this statement will have a significant  impact on its
financial position or results of operations.

In December 2007, the FASB finalized the provisions of the Emerging  Issues Task
Force (EITF) Issue No. 07-1,  "Accounting for Collaborative  Arrangements." This
EITF Issue provides guidance and requires  financial  statement  disclosures for
collaborative  arrangements.  EITF  Issue No.  07-1 is in effect  for  financial
statements  issued  for fiscal  years  beginning  after  December15,  2008.  The
adoption of EITF Issue No. 07-1 will not have a material impact on the Company's
financial statements..

In  March  2008,  the  Financial  Accounting  Standards  Board  ("FASB")  issued
Statement of Financial Accounting Standards ("SFAS") No. 161, "Disclosures about
Derivative  Instruments and Hedging  Activities - an amendment of FASB Statement
No. 133" ("SFAS 161"),  which modifies and expands the  disclosure  requirements
for  derivative  instruments  and hedging  activities.  SFAS 161  requires  that
objectives for using derivative  instruments be disclosed in terms of underlying
risk and accounting designation and requires quantitative disclosures about fair
value amounts and gains and losses on derivative  instruments.  It also requires
disclosures about credit-related  contingent features in derivative  agreements.
SFAS 161 is  effective  for  financial  statements  issued for fiscal  years and
interim  periods  beginning  after  November  15, 2008,  with early  application
encouraged.  SFAS 161 encourages, but does not require,  comparative disclosures
for  earlier  periods  at  initial  adoption.  The  adoption  of SFAS 161 is not
expected to have a material impact on the Company's financial statements.

                                     - 9 -

<PAGE>
<TABLE>
<CAPTION>


                        TEL-INSTRUMENT ELECTRONICS CORP.
                        --------------------------------
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
        ----------------------------------------------------------------
                                   (Unaudited)
                                   -----------


Note 12           New Accounting Pronouncements (continued)
-------           -----------------------------------------

In April 2008, the FASB issued FASB Staff Position ("FSP") Financial  Accounting
Standard 142-3,  Determination of the Useful Life of Intangible Assets ("FSP FAS
142-3").  FSP FAS  142-3  amends  the  factors  that  should  be  considered  in
developing renewal or extension assumptions used to determine the useful life of
a  recognized  intangible  asset under SFAS No. 142. In  developing  assumptions
about renewal or extension, FSP FAS 142-3 requires an entity to consider its own
historical  experience (or, if no experience,  market  participant  assumptions)
adjusted for relevant  entity-specific  factors in paragraph 11 of SFAS No. 142.
FSP FAS  142-3  expands  the  disclosure  requirements  of SFAS  No.  142 and is
effective for the Company  beginning April 1, 2009. The guidance for determining
the useful life of a recognized  intangible asset shall be applied prospectively
to  intangible   assets  acquired  after  the  effective  date.  The  disclosure
requirements shall be applied  prospectively to all intangible assets recognized
as of, and  subsequent  to, the effective  date. The Company does not expect the
adoption  of FSP FAS  142-3 on April 1,  2009 to have a  material  impact on its
consolidated financial position or results of operations.

Note 13           Discontinued Operations
-------           -----------------------

As of March 2008,  the Board of Directors  approved  categorizing  the Company's
marine systems division as a discontinued  operation.  The Company's decision to
discontinue its marine  operations was based primarily on the historical  losses
sustained and management's intent to focus on its avionics business

The Company  wrote-off fixed assets of approximately  $77,000 and inventories of
approximately  $151,000 in 2008. The Company continues to sell and service these
products  while sales  options for the division are explored.  As a result,  all
results for this operation are recorded  separately as results from discontinued
operations.

The following tables reflect sales,  costs and expenses,  and income (loss) from
discontinued  operations,  net of  taxes  for the  three  and six  months  ended
September 30, 2008 and 2007, respectively.

     ----------------------------------------------------------- ---------------------- ----------------------
                                                                          Three Months           Three Months
                                                                          ------------           ------------
                                                                                Ended                  Ended
                                                                                -----                  -----
                                                                    September 30, 2008     September 30, 2007
                                                                    ------------------     ------------------
     ----------------------------------------------------------- ---------------------- ----------------------
     <S>                                                                     <C>                    <C>
     Discontinued Operations:
     ----------------------------------------------------------- ---------------------- ----------------------
     Sales                                                                    $105,095              $ 123,555
     ----------------------------------------------------------- ---------------------- ----------------------
     Costs and expenses                                                         30,459                159,956
     ----------------------------------------------------------- ---------------------- ----------------------
     Income (loss) from operations of discontinued operations                   74,636                (36,401)
     ----------------------------------------------------------- ---------------------- ----------------------
     Income tax provision (benefit)                                             29,817                (14,539)
     ----------------------------------------------------------- ---------------------- ----------------------
     Net income (loss)  from discontinued operations                          $ 44,819              $ (21,862)
     ----------------------------------------------------------- ---------------------- ----------------------

                                                    - 10 -
</TABLE>

<PAGE>
<TABLE>
<CAPTION>



                                       TEL-INSTRUMENT ELECTRONICS CORP.
                                       --------------------------------
                       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
                       ----------------------------------------------------------------
                                                  (Unaudited)
                                                  -----------


Note 13           Discontinued Operations (continued)
-------           -----------------------------------

     ----------------------------------------------------------- ---------------------- ----------------------
                                                                            Six Months             Six Months
                                                                                Ended                  Ended
                                                                    September 30, 2008     September 30, 2007
     ----------------------------------------------------------- ---------------------- ----------------------
     ----------------------------------------------------------- ---------------------- ----------------------
     <S>                                                                     <C>                   <C>
     Discontinued Operations:
     ----------------------------------------------------------- ---------------------- ----------------------
     Sales                                                                   $ 186,601              $ 248,868
     ----------------------------------------------------------- ---------------------- ----------------------
     Costs and expenses                                                         74,629                302,892
     ----------------------------------------------------------- ---------------------- ----------------------
     Income (loss) from operations of discontinued operations                  111,972                (54,024)
     ----------------------------------------------------------- ---------------------- ----------------------
     Income tax provision (benefit)                                             44,733                (20,530)
     ----------------------------------------------------------- ---------------------- ----------------------
     Net income (loss)  from discontinued operations                          $ 67,239              $ (33,494)
     ----------------------------------------------------------- ---------------------- ----------------------


Note 14           Reclassifications
-------           -----------------

Certain prior year amounts have been reclassified to conform to the current year
presentation, relating primarily to discontinued operations.

                                     - 11 -
</TABLE>

<PAGE>




Item 2.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
-------           -------------------------------------------
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION
                  ---------------------------------------------


A number of the statements made by the Company in this report may be regarded as
"forward-looking  statements"  within  the  meaning  of the  Private  Securities
Litigation Reform Act of 1995.

Forward-looking  statements  include,  among others,  statements  concerning the
Company's outlook, pricing trends and forces within the industry, the completion
dates of capital projects,  expected sales growth, cost reduction strategies and
their  results,   long-term  goals  of  the  Company  and  other  statements  of
expectations, beliefs, future plans and strategies, anticipated events or trends
and similar expressions concerning matters that are not historical facts.

All  predictions  as to future  results  contain a measure  of  uncertainty  and
accordingly,  actual  results  could differ  materially.  Among the factors that
could cause a difference are: changes in the general economy;  changes in demand
for the Company's products or in the cost and availability of its raw materials;
the  actions of its  competitors;  the success of our  customers;  technological
change;  changes in  employee  relations;  government  regulations;  litigation,
including  its  inherent  uncertainty;  difficulties  in  plant  operations  and
materials;   transportation,   environmental   matters;   and  other  unforeseen
circumstances.  A number of these factors are discussed in the Company's filings
with the Securities and Exchange Commission.

Critical Accounting Policies
----------------------------

In  preparing  our  financial  statements  and  accounting  for  the  underlying
transactions and balances, we apply our accounting policies as disclosed in Note
2 of our Notes to Financial  Statements included in our Form 10-K for the fiscal
year ended March 31, 2008.  The  Company's  accounting  policies  that require a
higher degree of judgment and  complexity  used in the  preparation of financial
statements include:

Revenue  recognition  - revenues are  recognized  at the time of shipment to, or
acceptance by customer,  provided title and risk of loss are  transferred to the
customer.  Provisions,  when  appropriate,  are made  where  the right to return
exists.

Revenues on repairs and  calibrations are recognized at the time the repaired or
calibrated unit is shipped, as it is at this time that the work is completed.

Due to the unique nature of the ITATS program  wherein a significant  portion of
this  contract  will not be  delivered  for  over a year,  revenues  under  this
contract are recognized on a  percentage-of-completion  basis,  which recognizes
sales  and  profit  as they are  earned,  rather  than at the time of  shipment.
Revenues and profits are estimated using the  cost-to-cost  method of accounting
where revenues are recognized and profits recorded based upon the ratio of costs
incurred  to date to our  estimate of total  costs at  completion.  The ratio of
costs  incurred to our estimate of total costs at  completion  is applied to the
contract  value to  determine  the revenues and  profits.  When  adjustments  in
estimated  contract revenues or estimated costs at completion are required,  any
changes from prior  estimates  are  recognized by recording  adjustments  in the
current  period for the  inception-to-date  effect of the changes on current and
prior  periods.  The Company also  receives  progress  billings on this program,
which  is a  funding  mechanism  by the  government  to  assist  contractors  on
long-term contracts prior to delivery.

Shipping and handling costs charged to customers are classified as revenue,  and
the shipping and handling costs incurred are included in cost of goods sold.

Payments  received  prior to the  delivery  of units or services  performed  are
recorded as deferred revenues.

                                     - 12 -

<PAGE>


Item 2.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
-------           -------------------------------------------
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Continued)
                  ---------------------------------------------------------


Critical Accounting Policies (continued)
----------------------------------------

Inventory reserves - inventory reserves or write-downs  (primarily for purchased
parts) are estimated for excess,  slow-moving and obsolete  inventory as well as
inventory  whose  carrying  value is in excess of net  realizable  value.  These
estimates  are  based  on  current  assessments  about  future  demands,  market
conditions and related management initiatives.  While reserves have historically
been  within  expectation,  if market  conditions  and actual  demands  are less
favorable than those projected by management,  additional  reserves or inventory
write-downs may be required.

Accounts  receivable - the Company  performs  ongoing credit  evaluations of its
customers and adjusts credit limits based on customer payment and current credit
worthiness,  as determined by review of their current  credit  information.  The
Company  continuously  monitors  credit of and payments  from its  customers and
maintains  a provision  for  estimated  credit  losses  based on its  historical
experience and any specific  customer  issues that have been  identified.  While
such credit losses have historically  been within  expectation and the provision
established, the Company cannot guarantee that this will continue.

Warranty  reserves  - warranty  reserves  are based  upon  historical  rates and
specific items that are identifiable and can be estimated at time of sale. While
warranty costs have  historically  been within  expectations  and the provisions
established,  future warranty costs could be in excess of the Company's warranty
reserves.  A  significant  increase in these costs  could  adversely  affect the
Company's  operating  results  for the period and the periods  these  additional
costs materialize.  Warranty reserves are adjusted from time to time when actual
warranty claim experience differs from estimates.

Income  taxes - deferred  tax assets  arise from a variety of sources,  the most
significant  being:  a) tax losses  that can be carried  forward to be  utilized
against  profits  in  future  years;  b)  expenses  recognized  in the books but
disallowed  in the tax return  until the  associated  cash flow  occurs;  and c)
valuation  changes of assets which need to be tax effected for book purposes but
are taxable only when the valuation change is realized.  Deferred tax assets and
liabilities are determined based on differences  between financial reporting and
tax bases of assets and liabilities and are measured using enacted tax rates and
laws that will be in effect when such  differences are expected to reverse.  The
measurement  of deferred  tax assets is reduced,  if  necessary,  by a valuation
allowance  for any tax benefit which is not more likely than not to be realized.
In  assessing  the need for a  valuation  allowance,  future  taxable  income is
estimated,  considering  the  realization of tax loss  carryforwards.  Valuation
allowances related to deferred tax assets can also be affected by changes to tax
laws,  changes to statutory tax rates and future taxable  income levels.  In the
event it was  determined  that the Company would not be able to realize all or a
portion of our deferred  tax assets in the future,  we would reduce such amounts
through a charge to income in the  period in which that  determination  is made.
Conversely,  if we were  to  determine  that we  would  be able to  realize  our
deferred  tax assets in the  future in excess of the net  carrying  amounts,  we
would decrease the recorded valuation allowance through an increase to income in
the period in which that determination is made. In its evaluation of a valuation
allowance the Company takes into account existing contracts and backlog, and the
probability  that options under these contract  awards will be exercised as well
as sales of existing products.  The Company prepares profit projections based on
the revenue and expenses  forecast to determine  that such revenues will produce
sufficient taxable income to realize the deferred tax assets.

                                     - 13 -

<PAGE>




Item 2.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
-------           -------------------------------------------
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Continued)
                  ---------------------------------------------------------


General
-------

Management's  discussion  and analysis of results of  operations  and  financial
condition is intended to assist the reader in the  understanding  and assessment
of  significant  changes  and trends  related to the results of  operations  and
financial position of the Company together with its subsidiary.  This discussion
and  analysis  should be read in  conjunction  with the  consolidated  financial
statements and  accompanying  financial notes in the Company's  Annual Report on
Form 10-K for the year ended March 31, 2008.

The Company's  avionics business is conducted in the Government,  Commercial and
General  aviation  markets  (see  Note 8 of Notes to  Financial  Statements  for
segment  financial  information).  In January  2004,  the Company  completed its
acquisition of ITI, a company selling products to the marine industry, and ITI's
financial  statements were consolidated with the Company's financial  statements
until the Company  considered it a  discontinued  operation as of March 31, 2008
(see Note 13 to Financial Statements).

Results of Operations
---------------------

Overview
--------

Tel's improving financial results and condition accelerated in the September 30,
2008 quarter,  with quarterly  revenues,  profits and working capital  improving
over last year's comparable  quarter as well as improving over the first quarter
of the current fiscal year.

Revenues from continuing operations increased 36% to $3.9 million in the current
fiscal  quarter  ended  September  30, 2008 and pretax  profits  also  increased
$650,000 as  compared  to a small loss for the same  period in the prior  fiscal
year.  Revenues  and pretax  profits  for the  current  quarter  also  increased
significantly over the first quarter of the current fiscal year.

Net income for the period  increased  as a result of: (1) an increase in product
shipments;  (2) a negotiated billing to the government in the amount of $406,000
for additional work previously  performed and expensed on the Craft program; (3)
increased billings for revenues associated with the test and documentation phase
of the Craft program; and (4) higher net income from its marine systems division
whose   operations,   including  costs  for  marketing  and  engineering,   were
discontinued  as of March 31, 2008. For the six months ended September 30, 2008,
net  sales  from  continuing  operations  increased  approximately  28% to  $7.4
million, and the Company reported a net income of $433,662, as compared to a net
loss of $106,491 for the six months ended September 30, 2007.

Working capital,  cash and shareholder  equity have also improved in the current
fiscal quarter ended September 30, 2008, over the comparable quarter last year.

Despite an  uncertain  economic  situation,  which is  adversely  affecting  the
Company's  commercial  sales,  the Company  anticipates a profitable  result for
fiscal year 2009 primarily due to a strong  increase and projected  increases in
military sales of its legacy products, and the recent commencement of deliveries
of the AN/USM-719 test set.

                                     - 14 -

<PAGE>


Item 2.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
-------           -------------------------------------------
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Continued)
                  ---------------------------------------------------------


Results of Operations (continued)
---------------------------------

Overview (continued)
--------------------

TIC  was  previously  awarded  the US Navy  AN/USM-708  (CRAFT)  contract  for a
multi-functional  flight-line  test set. This unit combines the function of five
different  test  sets  into  one and is the  only  Mode 5 IFF  ("Identification,
Friend, or Foe") flight-line test unit now under government  contract.  The Navy
subsequently  amended the contract to provide for an IFF only variant called the
AN/USM-719  and  increased  the total IDIQ  (Indefinite  Quantity  -  Indefinite
Delivery)  order  quantity  from 750 to 1,200 units.  These IDIQ options for the
AN/USM-708  and 719  units,  if  exercised,  would add about $23  million to the
Company's  backlog and projected  revenues.  To date, the Company has received a
delivery order for 83 AN/USM-719  units and has shipped 23 units. The AN/USM-708
engineering hardware design has been largely completed and the fabrication of 15
pilot  production  units is expected to take place in early  calendar year 2009.
These units are currently  scheduled to undergo  design  validation  testing and
Navy TECHEVAL next summer with production  currently  scheduled to begin late in
the 2009 calendar year.  Given the unique nature of the design,  this unit could
also generate  significant sales to other military customers,  both domestically
and overseas.

In July 2006 the Company was awarded a second  major U.S.  Navy  contract for an
Intermediate Level TACAN Test Set AN/APM-206 (ITATS).  This contract has options
for up to 180 units with a total value of over $12  million;  the  initial  work
authorization was $4.4 million. The Company has been working with an engineering
sub-contractor on this project and this program will entail  substantially  less
of the Company's  engineering  effort than the  AN/USM-708.  These units are now
beginning  environmental testing with Navy TECHEVAL expected to begin later this
fiscal  year.  Given the  unique  nature of the  design,  this unit  could  also
generate  significant sales to other military  customers,  both domestically and
overseas.

As revenues have  increased  this year,  cash and working  capital have improved
from March 31, 2008. The Company's  bank loan has been extended until  September
2009,  and the  Company  believes  that  it has  adequate  liquidity,  borrowing
resources and backlog to fund operating plans for the next 12 months,  and until
substantial deliveries of its new units commence.

Net Sales
---------

Total net sales  increased  $1,010,429  (35.5%)  to  $3,855,121  and  $1,606,665
(27.7%)  to  $7,407,096,  respectively,  for  the  three  and six  months  ended
September 30, 2008 as compared to the same periods in the prior fiscal year.

Avionics  government  sales  increased  $1,372,022  (69.1%)  to  $3,356,533  and
$2,272,311  (56.2%) to  $6,317,129,  respectively,  for the three and six months
ended  September  30, 2008 as compared to the same  periods in the prior  fiscal
year. The increase in avionics  government sales for the quarter ended September
30, 2008 is primarily  attributed to: increased shipments of the T-47N and T-30D
as a result of two large  contracts from the U.S. Army, a negotiated  billing to
the  government  in the  amount  of  $406,000  for  additional  work  previously
performed and expensed on the CRAFT  program:,  increased  billings for revenues
associated  with the test and  documentation  phase of the  CRAFT  program,  and
shipments of the AN/APM-719 (Craft variant) as well as increases in other legacy
products. These  increases  were  partially  offset by lower  shipments of the
T-30CM  andAN/APM-480 and lower revenues associated with the ITATS program.  For
the six months ended  September 30, 2008  Avionics  government  sales  increased
primarily to:  increased  shipments of the T-30D as a result of a large contract
from the U.S.  Army, a  negotiated  billing to the  government  in the amount of
$406,000 for  additional  work  previously  performed  and expensed on the CRAFT
program:, increased billings for revenues associated with the test and

                                     - 15 -

<PAGE>


Item 2.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
-------           -------------------------------------------
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Continued)
                  ---------------------------------------------------------


Results of Operations (continued)
---------------------------------

Net Sales (continued)
---------------------

documentation phase of the CRAFT program, the shipment of T-47G test sets to the
Canadian Air Force  (through  our  distributor  in Canada) and  shipments of the
AN/APM-719  (Craft variant) and the Company's new TR-420 as well as increases in
other legacy products.  These increases were partially offset by lower shipments
of the  T-30CM  andAN/APM-480  and  lower  revenues  associated  with the  ITATS
program.

Avionics  commercial  sales  decreased  $361,573  (42%) to $498,588 and $665,646
(37.9%) to  $1,089,967,  respectively,  for the same  periods.  This decrease is
mostly  attributed to decreases in sales of the TR-220  Multi-Function  Test set
and the T-36C,  as a result of the  continued  weak  financial  condition of the
commercial airline industry.

Gross Margin
------------

Gross margin  dollars  increased  $906,277  (73.4%) to $2,139,487 and $1,181,905
(48.3%) to  $3,628,416  for the three and six months ended  September  30, 2008,
respectively,  as  compared  to the same period in the prior  fiscal  year.  The
increase  in gross  margin is  attributed  to the  increase in volume and higher
gross profit percentage.  The increase in gross profit dollars and percentage is
also  attributed  to a  negotiated  billing to the  government  in the amount of
$406,000 for  additional  work  previously  performed  and expensed on the CRAFT
program and higher  profitability  on the revenues  associated with the test and
documentation  phase of the CRAFT program.  The gross margin  percentage for the
three  months  ended  September  30, 2008 was 55.5% as compared to 43.4% for the
three months ended  September 30, 2007. The gross margin  percentage for the six
months  ended  September  30,  2008 was 49.0% as  compared  to 42.2% for the six
months ended September 30, 2007.

Operating Expenses
------------------

Selling,  general and  administrative  expenses  increased  $150,296  (24.5%) to
$763,784 and $302,667  (25.9%) to $1,472,142 for the three months and six months
ended September 30, 2008, respectively,  as compared to the three and six months
ended September 30, 2007.  This increase is attributed  mainly to an increase in
outside  commissions,  higher compensation and bonus accrual expense, and higher
marketing and sales  expenses  associated  with an increase in customer  support
services

Engineering,  research and  development  expenses  increased  $96,316 (15.6%) to
$713,853  and $58,270  (4.2%) to  $1,449,004  for the three and six months ended
September 30, 2008,  respectively,  as compared to the same periods in the prior
fiscal  year.   Engineering,   research  and  development  expenses  are  mostly
attributed to efforts related to the CRAFT program.

Interest, net
-------------

Interest income  decreased as a result of lower average cash balances.  Interest
expense  increased as a result of the increased  borrowings  associated with the
line of credit and the loan against the cash surrender  value of the keyman life
insurance policy.

                                     - 16 -

<PAGE>


Item 2.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
-------           -------------------------------------------
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Continued)
                  ---------------------------------------------------------


Results of Operations (continued)
---------------------------------

Income (Loss) from Continuing Operations before Income Taxes
------------------------------------------------------------

As a result of the above, the Company recorded income from continuing operations
before  income taxes of $650,197 and $684,488 for the three and six months ended
September  30,  2008,  respectively,  as  compared  to  losses  from  continuing
operations  before  income  taxes of $2,090 and  $123,307  for the three and six
months ended September 30, 2007, respectively.

Income Taxes
------------

An income tax  provision  in the amount of $304,365  was  recorded for the three
months ended September 30, 2008 as compared to an income tax benefit of $835 for
the three months ended September 30, 2007. An income tax provision in the amount
of $318,065 was recorded for the six months ended September 30, 2008 as compared
to an income tax benefit of $50,310 for the six months ended September 30, 2007.
The change is due to the income  before taxes for the three and six months ended
September  30, 2008 as  compared  to a loss  before  taxes for the three and six
months ended September 30, 2007. These amounts  represent the effective  federal
and state tax rate of approximately 40% on the Company's net loss before taxes.

Net Income (Loss) from Continuing Operations, Net of Taxes
----------------------------------------------------------

As a result of the  above,  the  Company  recorded  net income  from  continuing
operations,  net of taxes of $345,832  and $366,423 for the three and six months
ended  September  30,  2008,  respectively,  as  compared  to  net  losses  from
continuing operations,  net of taxes of $1,255 and $72,997 for the three and six
months ended September 30, 2007, respectively.

Income (Loss) from  Discontinued Operations, Net of taxes
------------------  -------------------------------------

For the three and six months  ended  September  30, 2008,  the Company  recorded
income from  discontinued  operations,  net of taxes,  of $44,819  and  $67,239,
respectively,  as compared to losses from discontinued operations, net of taxes,
of $21,862 and $33,494 for the three and six months  ended  September  30, 2007,
primarily as a result of the  reclassification  of certain allocated fixed costs
to continuing  operations  and sales of products that were  written-off in 2008,
and the termination of marketing and engineering expenses

Net Income (Loss)
-----------------

As a result of the  above,  the  Company  recorded  net income of  $390,651  and
$433,662 for the three and six months ended September 30, 2008, respectively, as
compared  to net losses of  $23,117  and  $106,491  for the three and six months
ended September 30, 2007.

                                     - 17 -

<PAGE>


Item 2.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
-------           -------------------------------------------
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Continued)
                  ---------------------------------------------------------


Liquidity and Capital Resources
-------------------------------

At September 30, 2008, the Company had working capital of $3,316,829 as compared
to  $2,681,511 at March 31, 2008.  For the six months ended  September 30, 2008,
the Company used $146,861 in cash from  operations as compared to using $810,115
of cash in operations the six months ended September 30, 2007. This  improvement
in cash from  operations  is primarily  attributed to the increase in income for
the period as well as the change in unbilled government receivables.

Net cash used in  investing  activities  increased to $57,730 for the six months
ended  September  30, 2008 from $39,586 for the six months ended  September  30,
2007 due to the increase in purchases of equipment.

Net cash  provided by  financing  activities  decreased  to $213,358 for the six
months ended September 30, 2008 from $437,600 for the six months ended September
30, 2007 due to the lower borrowings from the line of credit offset partially by
an decrease in proceeds  from the  exercise of stock  options and a loan against
the cash value of a life insurance policy

At September 30, 2008 the Company had an outstanding loan balance of $450,000 on
which it currently pays 5.5% interest.  The line of credit is  collateralized by
substantially  all of the assets of the Company.  The credit  agreement  expired
September 30, 2008, and the agreement includes a borrowing base calculation tied
to working capital. The Company has received an extension to September 30, 2009.
As of September 30, 2008,  remaining  availability  under this modified line was
approximately  $229,000 based upon defined eligible  receivables and inventories
at September 30, 2008.  The Company's cash balance was $478,673 at September 30,
2008 as compared to $469,906 at March 31, 2008.

As a  consequence  of the increase in sales and  profitability,  the Company has
improved  its  financial  position.  The Company  believes  that it has adequate
liquidity,  borrowing resources and backlog to fund operating plans for the next
12 months, and until deliveries of its new units commence.

There was no  significant  impact  on the  Company's  operations  as a result of
inflation  for  the  six  months  ended  September  30,  2008.  These  financial
statements  should be read in  conjunction  with the Company's  Annual Report on
Form 10-K to the  Securities  and Exchange  Commission for the fiscal year ended
March 31, 2008.

                                     - 18 -

<PAGE>


Item 4 (T).       Controls and Procedures
-----------       -----------------------

As of the end of the period  covered by this  report,  the Company  conducted an
evaluation,  under the supervision and with the  participation  of the principal
executive officer and principal financial officer,  of the Company's  disclosure
controls and procedures (as defined in Rules  13a-15(e) and 15d-15(e)  under the
Securities Exchange Act of 1934 (the "Exchange Act")). Based on this evaluation,
the principal  executive officer and principal  financial officer concluded that
the Company's  disclosure  controls and  procedures are effective to ensure that
information  required to be disclosed by the Company in reports that it files or
submits under the Exchange Act is recorded,  processed,  summarized and reported
within the time periods  specified in Securities and Exchange  Commission  rules
and forms.

There was no change in the Company's  internal control over financial  reporting
during the Company's most recently  completed fiscal quarter that has materially
affected,  or is reasonably likely to materially  affect, the Company's internal
control over financial reporting.

Part II.         Other Information
--------         -----------------


Item 1.         Legal Proceedings
-------         -----------------

                None.

Item 2.         Unregistered Sales of Equity Securities and Use of Proceeds
-------         -----------------------------------------------------------

There  were no  unregistered  sales  of  equity  securities  and  there  were no
repurchases  of equity  securities  during the  Company's  for six months  ended
September 30, 2008.

Item 6.         Exhibits
-------         --------

                Exhibits

                  31.1  Certification by CEO pursuant to Rule 15d-14 under the
                        Securities Exchange Act.
                  31.2  Certification by CFO pursuant to Rule 15d-14 under the
                        Securities Exchange Act.
                  32.1  Certification by CEO and CFO pursuant to 18 U.S.C.
                        Section 1350, as adopted pursuant to Section 906 of the
                        Sarbanes-Oxley Act of 2002.

SIGNATURES
----------

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                                         TEL-INSTRUMENT ELECTRONICS CORP.

Date:    November 13, 2008               By:  /s/  Harold K. Fletcher
                                            --------------------------------
                                                   Harold K. Fletcher
                                                   CEO

Date:   November 13, 2008                By:  /s/  Joseph P. Macaluso
                                                   Joseph P. Macaluso
                                                   Principal Accounting Officer

                                     - 19 -