----

|   |                                                                          QUARTERLY REPORT PURSUANT TO SECTION 13 OR |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |                                                                             15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | PAGE |
|--------|------|

----

| TEL-INSTRUMENT ELECTRONICS CORPORATION                                                                                                                                                                                                                                                  |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| CONDENSED CONSOLIDATED BALANCE SHEETS                                                                                                                                                                                                                                                   |   |
|                                                                                                                                                                                                                                                                                    |   |
|                                                                                                                                                                                                                                                                                    |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                    |   | December 31,2010 |   |   | March 31,2010 |   |
|                                                                                                                                                                                                                                                                                    |   | (unaudited) |   |   |   |   |
| ASSETS                                                                                                                                                                                                                                                                                  |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                    |   |   |   |   |   |   |
| Current assets:                                                                                                                                                                                                                                                                         |   |   |   |   |   |   |
|    Cash and cash equivalents                                                                                                                                                                                                                                             |   | $ | 440,086 |   |   | $ | 173,048 |   |
| Accounts receivable, net                                                                                                                                                                                                                                                                |   |   | 1,614,232 |   |   |   | 939,143 |   |
| Unbilled government receivables                                                                                                                                                                                                                                                         |   |   | 1,490,290 |   |   |   | 1,491,111 |   |
| Inventories, net                                                                                                                                                                                                                                                                        |   |   | 3,328,969 |   |   |   | 2,242,227 |   |
| Prepaid expenses and other                                                                                                                                                                                                                                                              |   |   | 72,816 |   |   |   | 87,535 |   |
| Deferred debt expense                                                                                                                                                                                                                                                                   |   |   | 108,320 |   |   |   | - |   |
| Deferred income tax asset                                                                                                                                                                                                                                                               |   |   | 1,373,691 |   |   |   | 1,234,788 |   |
| Total current assets                                                                                                                                                                                                                                                                    |   |   | 8,428,404 |   |   |   | 6,167,852 |   |
|                                                                                                                                                                                                                                                                                    |   |   |   |   |   |   |   |   |
| Equipment and leasehold improvements, net                                                                                                                                                                                                                                               |   |   | 333,294 |   |   |   | 336,131 |   |
| Deferred income tax asset – non-current                                                                                                                                                                                                                                           |   |   | 1,176,223 |   |   |   | 1,176,223 |   |
| Deferred debt expense – long-term                                                                                                                                                                                                                                                 |   |   | 400,185 |   |   |   | - |   |
| Other assets                                                                                                                                                                                                                                                                            |   |   | 43,075 |   |   |   | 54,131 |   |
| Total assets                                                                                                                                                                                                                                                                            |   | $ | 10,381,181 |   |   | $ | 7,734,337 |   |
|                                                                                                                                                                                                                                                                                    |   |   |   |   |   |   |   |   |
| LIABILITIES & STOCKHOLDERS’ EQUITY                                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                    |   |   |   |   |   |   |   |   |
| Current liabilities:                                                                                                                                                                                                                                                                    |   |   |   |   |   |   |   |   |
| Line of credit                                                                                                                                                                                                                                                                          |   |   | - |   |   |   | 600,000 |   |
| Current portion of long-term debt                                                                                                                                                                                                                                                       |   |   | 158,493 |   |   |   | - |   |
| Capital lease obligations                                                                                                                                                                                                                                                               |   |   | 24,279 |   |   |   | - |   |
| Subordinated notes payable-related parties, net of debt discount                                                                                                                                                                                                                        |   |   | 244,231 |   |   |   | 226,923 |   |
| Accounts payable                                                                                                                                                                                                                                                                        |   |   | 1,885,957 |   |   |   | 1,145,572 |   |
| Progress Billings                                                                                                                                                                                                                                                                       |   |   | - |   |   |   | 69,412 |   |
| Deferred revenues                                                                                                                                                                                                                                                                       |   |   | 28,843 |   |   |   | 50,279 |   |
| Accrued payroll, vacation pay and payroll taxes                                                                                                                                                                                                                                         |   |   | 466,030 |   |   |   | 420,572 |   |
| Accrued expenses                                                                                                                                                                                                                                                                        |   |   | 1,388,448 |   |   |   | 1,335,506 |   |
| Total current liabilities                                                                                                                                                                                                                                                               |   |   | 4,196,281 |   |   |   | 3,848,264 |   |
|                                                                                                                                                                                                                                                                                    |   |   |   |   |   |   |   |   |
| Long-term debt, net of debt discount                                                                                                                                                                                                                                                    |   |   | 2,090,027 |   |   |   | - |   |
| Warranty liability                                                                                                                                                                                                                                                                      |   |   | 411,340 |   |   |   | - |   |
| Deferred revenues                                                                                                                                                                                                                                                                       |   |   | 18,725 |   |   |   | 27,957 |   |
| Total liabilities                                                                                                                                                                                                                                                                       |   |   | 6,716,373 |   |   |   | 3,876,221 |   |
|                                                                                                                                                                                                                                                                                    |   |   |   |   |   |   |   |   |
| Commitments                                                                                                                                                                                                                                                                             |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                    |   |   |   |   |   |   |   |   |
| Stockholders' equity:                                                                                                                                                                                                                                                                   |   |   |   |   |   |   |   |   |
|    Common stock, par value $.10 per share, 2,626,823 and          2,615,361 issued and outstanding as of December 31,          2010 and March 31, 2010, respectively |   |   |   262,682 |   |   |   |   261,536 |   |
|    Additional paid-in capital                                                                                                                                                                                                                                            |   |   | 5,621,031 |   |   |   | 5,481,091 |   |
|    Accumulated deficit                                                                                                                                                                                                                                                   |   |   | (2,218,905 | ) |   |   | (1,884,511 | ) |
| Total stockholders' equity                                                                                                                                                                                                                                                              |   |   | 3,664,808 |   |   |   | 3,858,116 |   |
| Total liabilities and stockholders' equity                                                                                                                                                                                                                                              |   | $ | 10,381,181 |   |   | $ | 7,734,337 |   |
|  See accompanying notes to condensed consolidated financial     Statements                                                                                                                                                                           |   |   |   |   |   |   |   |   |

----

| TEL-INSTRUMENT ELECTRONICS CORPORATION                                                            |   |
|---------------------------------------------------------------------------------------------------|--------|
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS                                                   |   |
| (Unaudited)                                                                                       |   |
|                                                                                              |   |
|                                                                                              |   | Three Months Ended |   |   | Nine Months Ended |   |
|                                                                                              |   | December 31, 2010 |   |   | December 31, 2009 |   |   | December 31, 2010 |   |   | December 31, 2009 |   |
|                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |
| Net sales                                                                                         |   | $ | 4,261,222 |   |   | $ | 1,690,460 |   |   | $ | 9,772,435 |   |   | $ | 6,443,770 |   |
| Cost of sales                                                                                     |   |   | 2,395,206 |   |   |   | 949,644 |   |   |   | 5,354,804 |   |   |   | 3,376,840 |   |
|                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Gross margin                                                                                      |   |   | 1,866,016 |   |   |   | 740,816 |   |   |   | 4,417,631 |   |   |   | 3,066,930 |   |
|                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating expenses:                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Selling, general and administrative                                                   |   |   | 686,380 |   |   |   | 741,397 |   |   |   | 2,137,055 |   |   |   | 2,259,603 |   |
|   Engineering, research and development                                                 |   |   | 767,366 |   |   |   | 937,299 |   |   |   | 2,385,802 |   |   |   | 2,709,463 |   |
| Total operating expenses                                                                          |   |   | 1,453,746 |   |   |   | 1,678,696 |   |   |   | 4,522,857 |   |   |   | 4,969,066 |   |
|                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income (loss) from operations                                                                     |   |   | 412,270 |   |   |   | (937,880 | ) |   |   | (105,226 | ) |   |   | (1,902,136 | ) |
|                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other income (expense):                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Amortization of debt discount                                                         |   |   | (19,164 | ) |   |   | - |   |   |   | (33,678 | ) |   |   | - |   |
|   Amortization of debt expense                                                          |   |   | (27,080 | ) |   |   | - |   |   |   | (33,098 | ) |   |   | - |   |
|   Change in fair value of common       stock warrant |   |   | (129,684 | ) |   |   | - |   |   |   | (129,684 | ) |   |   | - |   |
|   Gain on sale of capital asset                                                         |   |   | - |   |   |   | - |   |   |   | 3,600 |   |   |   | - |   |
|   Interest income                                                                       |   |   | 71 |   |   |   | 209 |   |   |   | 219 |   |   |   | 702 |   |
|   Interest expense                                                                      |   |   |  (102,016 | ) |   |   |  (15,422 | ) |   |   |  (172,715 | ) |   |   |  (34,418 | ) |
|                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income (loss) before income taxes                                                                 |   |   | 134,397 |   |   |   | (953,093 | ) |   |   | (470,582 | ) |   |   | (1,935,852 | ) |
|                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income tax provision (benefit)                                                                    |   |   | 105,385 |   |   |   | (380,763 | ) |   |   | (136,188 | ) |   |   | (773,373 | ) |
|                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss)                                                                                 |   |   | 29,012 |   |   |   | (572,330 | ) |   |   | (334,394 | ) |   |   | (1,162,479 | ) |
|                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income (loss) per common share                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Basic                                                                           |   | $ | 0.01 |   |   | $ | (0.22 | ) |   | $ | (0.13 | ) |   | $ | (0.46 | ) |
|    Diluted                                                                         |   | $ | 0.01 |   |   | $ | (0.22 | ) |   | $ | (0.13 | ) |   | $ | (0.46 | ) |
|                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average shares outstanding:                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Basic                                                                           |   |   | 2,626,149 |   |   |   | 2,605,148 |   |   |   | 2,621,417 |   |   |   | 2,529,752 |   |
|    Diluted                                                                         |   |   | 2,642,747 |   |   |   | 2,605,148 |   |   |   | 2,621,417 |   |   |   | 2,529,752 |   |
|                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| See accompanying notes to condensed consolidated financial statements                             |   |   |   |   |   |   |   |   |   |

----

| TEL-INSTRUMENT ELECTRONICS CORPORATION          |
|-------------------------------------------------|
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
| (Unaudited)                                     |

|                                                                                                                              |   | Nine Months ended |         |
|-----------------------------------------------------------------------------------------------------------------------------------|--------|-------------------|--------------|
|                                                                                                                              |   | December 31,2010  |         |   | December 31,2009 |   |
| Cash flows from operating activities:                                                                                             |   |              |         |   |   |   |
| Net loss                                                                                                                          |   | $                 | (334,394     | ) |   | $ | (1,162,479 | ) |
| Adjustments to reconcile net loss to net    cash used in operating activities:                                |   |              |         |   |   |   |   |   |
|        Deferred income taxes                                                                   |   |              | (138,903     | ) |   |   | (777,663 | ) |
|        Depreciation and amortization                                                           |   |              | 202,069      |   |   |   | 133,263 |   |
|        Change in fair value of common stock warrant                                            |   |              | 129,684      |   |   |   | - |   |
|        Gain on sale of asset                                                                   |   |              | (3,600       | ) |   |   | - |   |
|        Non-cash stock-based compensation                                                       |   |              | 75,771       |   |   |   | 55,135 |   |
|                                                                                                                              |   |              |         |   |   |   |   |   |
| Changes in assets and liabilities:                                                                                                |   |              |         |   |   |   |   |   |
|     (Increase) decrease in accounts receivable, net                                                           |   |              | (675,089     | ) |   |   | 350,947 |   |
|     Decrease (increase) in unbilled government receivables                                                    |   |              | 821          |   |   |   | (158,389 | ) |
|     (Increase) decrease in inventories                                                                        |   |              | (1,086,742   | ) |   |   | 306,732 |   |
|     Decrease in prepaid expenses & other                                                                  |   |              | 14,719       |   |   |   | 15,628 |   |
|     Decrease in other assets                                                                                  |   |              | 11,056       |   |   |   | 1,047 |   |
|     Increase (decrease) increase in accounts payable                                                          |   |              | 740,385      |   |   |   | 453,458 |   |
|     Increase (decrease) in accrued payroll, vacation pay      and payroll taxes |   |              |  45,458 |   |   |   |  16,862 |   |
|     Decrease in deferred revenues                                                                             |   |              | (30,668      | ) |   |   | 1,208 |   |
|     Decrease in progress billings                                                                             |   |              | (69,412      | ) |   |   | - |   |
|     Increase (decrease) in accrued expenses                                                                   |   |              | 52,942       |   |   |   | (385,168 | ) |
| Net cash used in operating activities                                                                                             |   |              | (1,065,903   | ) |   |   | (1,149,419 | ) |
|                                                                                                                              |   |              |         |   |   |   |   |   |
| Cash flows from investing activities:                                                                                             |   |              |         |   |   |   |   |   |
|     Proceeds from the sale of capital asset                                                                   |   |              | 3,600        |   |   |   | - |   |
|     Purchases of equipment                                                                                    |   |              | (106,070     | ) |   |   | (36,653 | ) |
| Net cash used in investing activities                                                                                             |   |              | (102,470     | ) |   |   | (36,653 | ) |
|                                                                                                                              |   |              |         |   |   |   |   |   |
| Cash flows from financing activities:                                                                                             |   |              |         |   |   |   |   |   |
|     Proceeds from the issuance of common stock                                                                |   |              | 50,000       |   |   |   | 359,470 |   |
|     Proceeds from the exercise of stock options                                                               |   |              | 15,315       |   |   |   | 213,355 |   |
|     Proceeds from long-term debt                                                                              |   |              | 2,500,000    |   |   |   | - |   |
|     Expenses associated with long-term debt                                                                   |   |              | (527,796     | ) |   |   | - |   |
|     Proceeds from borrowings from line of credit                                                              |   |              | 400,000      |   |   |   | - |   |
|     Repayment of capitalized lease obligations                                                                |   |              | (2,108       | ) |   |   | - |   |
|     Repayment of line of credit                                                                               |   |              | (1,000,000   | ) |   |   | 150,000 |   |
| Net cash provided by financing activities                                                                                         |   |              | 1,435,411    |   |   |   | 722,825 |   |
|                                                                                                                              |   |              |         |   |   |   |   |   |
| Net increase (decrease) in cash and cash equivalents                                                                              |   |              | 267,038      |   |   |   | (463,247 | ) |
| Cash and cash equivalents at beginning of period                                                                                  |   |              | 173,048      |   |   |   | 601,887 |   |
| Cash and cash equivalents at end of period                                                                                        |   | $                 | 440,086      |   |   | $ | 138,640 |   |
|                                                                                                                              |   |              |         |   |   |   |   |   |
| Taxes paid                                                                                                                        |   | $                 |  -      |   |   | $ |  3,990 |   |
| Interest paid                                                                                                                     |   | $                 | 136,408      |   |   | $ | 15,406 |   |
|                                                                                                                              |   |              |         |   |   |   |   |   |
| Supplemental Schedule of Non-Cash Financing Activities:                                                                           |   |              |         |   |   |   |   |   |
|    Capital expenditures funded by capital lease borrowings                                                         |   | $                 | 26,387       |   |   | $ |  - |   |
|                                                                                                                              |   |              |         |   |   |   |   |   |

----

| Note 2 | Revenue Recognition – Percentage-of-Completion – ITATS (“Intermediate Level TACAN Test Set”) (AN/ARM-206) |
|--------|-----------------------------------------------------------------------------------------------------------------------------------|

|                                                                                                                                                                             |   | December 31, 2010 |      |   | March 31,  2010  |   |    |    |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------|-----------|--------|----------------------------|--------|---------|---------|
|                                                                                                                                                                             |   |              |      |   |                       |   |    |    |
|                         Government                       |   | $                 | 1,451,826 |   |                       | $      | 735,184 |    |   |   |
|                         Commercial                       |   |              | 199,076   |   |                       |   | 243,878 |    |   |   |
|                         Less: Allowance for doubtful accounts |   |              | (36,670   | )      |                       |   | (39,919 |  ) |   |   |
|                                                                                                                                                                             |   |              |      |   |                       |   |    |    |   |   |
|                                                                                                                                                                             |   | $                 | 1,614,232 |   |                       | $      | 939,143 |    |   |   |

----

|                                                                                                                                                                                                         |   | December 31, 2010 |      |   | March 31, 2010 |   |      |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------|-----------|--------|----------------|--------|-----------|--------|
|                                                                                                                                                                                                         |   |              |      |   |           |   |      |   |
|                                Purchased parts    |   | $                 | 2,226,298 |   |           | $      | 1,432,782 |   |   |   |
|                               Work-in-process               |   |              | 1,489,668 |   |           |   | 1,142,851 |   |   |   |
|                                Finished goods          |   |              | 53,003    |   |           |   | 76,594    |   |   |   |
|                                Less: Inventory reserve |   |              | (440,000  | )      |           |   | (410,000  | )      |   |   |
|                                                                                                                                                                                                         |   |              |      |   |           |   |      |   |   |   |
|                                                                                                                                                                                                         |   | $                 | 3,328,969 |   |           | $      | 2,242,227 |   |   |   |

|                                                                                                                                      |   | Three Months Ended          |      |                  | Three Months Ended |   |
|-------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|-----------|-----------------------|--------------------|--------|
|                                                                                                                                      |   | December  31,2010 |      | December 31,2009 |               |
| Basic net income (loss) per share computation:                                                                                            |   |                        |      |                  |               |   |
|   Net income (loss) attributable to common stockholders                                                                         |   | $                           | 29,012    |                  |               | $      | (572,330 | ) |
|   Weighted-average common shares outstanding                                                                                    |   |                        | 2,626,149 |                  |               |   | 2,605,148 |   |
|   Basic net income(loss) per share attributable to common      Stockholders                       |   | $                           | 0.01      |                  |               | $      | (0.22 | ) |
| Diluted net income (loss) per share computation                                                                                           |   |                        |      |                  |               |   |   |   |
|   Net income(loss) attributable to common stockholders                                                                          |   | $                           | 29,012    |                  |               | $      | (572,330 | ) |
|   Weighted-average common shares outstanding                                                                                    |   |                        | 2,626,149 |                  |               |   | 2,605,148 |   |
|   Incremental shares attributable to the assumed exercise of       Outstanding stock options |   |                        | 16,598    |                  |               |   | - |   |
|   Total adjusted weighted-average shares                                                                                        |   |                        | 2,642,747 |                  |               |   | 2,605,148 |   |
|   Diluted net income(loss) per share attributable to common       stockholders               |   | $                           | 0.01      |                  |               | $      | (0.22 | ) |

|                                                                                                                                                 |   | Nine Months Ended     |      |   | Nine Months Ended     |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------|-----------|--------|-----------------------|--------|
|                                                                                                                                                 |   | December 31,2010 |      |   | December 31,2009 |   |
| Basic and diluted net loss per share computation:                                                                                                    |   |                  |      |   |                  |   |
|   Net loss attributable to common stockholders                                                                                             |   | $                     | (334,394  | )      |                  | $      | (1,162,479 | ) |
|   Weighted-average common shares outstanding                                                                                               |   |                  | 2,621,417 |   |                  |   | 2,529,752 |   |
|   Basic and diluted net  loss per share attributable to common         stockholders |   | $                     | (0.13     | )      |                  | $      | (0.46 | ) |

----

----

| Three Months EndedDecember 31, 2010                                             | AvionicsGov’t    | AvionicsComm’l. | AvionicsTotal                          | MarineSystems | CorporateItems                         |  Total                           |
|---------------------------------------------------------------------------------|------------------------|-----------------------|----------------------------------------|---------------|----------------------------------------|---------------------------------------|
| Net sales                                                                       | $  3,696,348 | $  564,874  | $ 4,261,222                            | -             | -                                      |   $ 4,261,222               |
| Cost of Sales                                                                   | 2,087,951              | 307,255               | 2,395,206                              | -             | -                                      | 2,395,206                             |
|                                                                            |                   |                  |                                   |          |                                   |                                  |
| Gross Margin                                                                    |  1,608,397        |  257,619         | 1,866,016                              | -             | -                                      |  1,866,016                       |
|                                                                            |                   |                  |                                   |          |                                   |                                  |
| Engineering, research, and Development                                     |                   |                  |  767,366                          |  -       |  -                                |  767,366                         |
| Selling, general, and admin.                                                    |                   |                  | 364,957                                | -             |  $    321,423 | 686,380                               |
| Change in fair value of common      Stock warrant |                   |                  |  -                                |  -       |  129,684                          |  129,684                         |
| Amortization                                                                    |                   |                  |                                   |          | 46,244                                 | 46,244                                |
| Interest (income) expense,net                                                   |                   |                  | -                                      |          | 101,945                                |      101,945 |
| Total expenses                                                                  |                   |                  | 1,132,323                              | -             | 599,296                                | 1,731,619                             |
|                                                                            |                   |                  |                                   |          |                                   |                                  |
| Income (loss) before income taxes                                               |                   |                  | $     733,693 | -             |   $  (599,296)     | $   134,397                 |

| Three Months EndedDecember 31, 2009          | AvionicsGov’t    | AvionicsComm’l. | AvionicsTotal                | MarineSystems | CorporateItems                         |  Total                          |
|----------------------------------------------|------------------------|-----------------------|------------------------------|---------------|----------------------------------------|--------------------------------------|
| Net sales                                    | $  1,161,985 | $  471,986  | $ 1,633,971                  | $ 56,489      | -                                      |   $ 1,690,460              |
| Cost of Sales                                | 599,849                | 349,593               | 949,442                      | 202           | -                                      | 949,644                              |
|                                         |                   |                  |                         |          |                                   |                                 |
| Gross Margin                                 |  562,136          |  122,393         | 684,529                      |  56,287  | -                                      | 740,816                              |
|                                         |                   |                  |                         |          |                                   |                                 |
| Engineering, research, and development  |                   |                  |  924,044                |  13,255  |  -                                |  937,299                        |
| Selling, general, and admin.                 |                   |                  | 341,152                      | 1,147         |  $    399,098 | 741,397                              |
| Interest (income) expense,net                |                   |                  | -                            | -             | 15,213                                 |      15,213 |
| Total expenses                               |                   |                  | 1,265,196                    | 14,102        | 414,311                                | 1,693,909                            |
| 7                                            |                   |                  |                         |          |                                   |                                 |
| Income (loss) before income  taxes |                   |                  | $   (580,667) | $ 41,885      | (414,311)                              | $   (953,093)              |

| Nine Months EndedDecember 31, 2010                                              | AvionicsGov’t    | AvionicsComm’l.  | AvionicsTotal                          | MarineSystems | CorporateItems                     |  Total                          |
|---------------------------------------------------------------------------------|------------------------|------------------------|----------------------------------------|---------------|------------------------------------|--------------------------------------|
| Net sales                                                                       | $  7,942,668 | $  1,829,767 | $ 9,772,435                            | -             | -                                  |   $ 9,772,435              |
| Cost of Sales                                                                   | _4,208,229             | 1,146,575              | 5,354,804                              | -             | -                                  | 5,354,804                            |
|                                                                            |                   |                   |                                   |          |                               |                                 |
| Gross Margin                                                                    |  3,734,439        |  683,192          | 4,417,631                              | -             | -                                  |  4,417,631                      |
|                                                                            |                   |                   |                                   |          |                               |                                 |
| Engineering, research, and Development                                     |                   |                   |  2,385,802                        |  -       |  -                            |  2,385,802                      |
| Selling, general, and admin.                                                    |                   |                   | 1,060,756                              | -             | $    1,076,299 | 2,137,055                            |
|  Gain on sale of asset                                                     |                   |                   | -                                      | -             | (3,600)                            | (3,600)                              |
| Amortization                                                                    |                   |                   |                                   |          | 66,776                             |      66,776 |
| Change in fair value of common      Stock warrant |                   |                   |                                   |          |  129,684                      |  129,684                        |
| Interest expense,net                                                            |                   |                   | -                                      | -             | 172,496                            | 172,496                              |
| Total expenses                                                                  |                   |                   | 3,446,558                              | -             | 1,441,655                          | 4,888,213                            |
|                                                                            |                   |                   |                                   |          |                               |                                 |
| Income (loss) before income taxes                                               |                   |                   | $     971,073 | -             | $  (1,441,655)           | $   (470,582)              |

| Nine Months EndedDecember 31, 2009          | AvionicsGov’t    | AvionicsComm’l.  | AvionicsTotal                | MarineSystems | CorporateItems                     |  Total                                                                                                                      |
|---------------------------------------------|------------------------|------------------------|------------------------------|---------------|------------------------------------|----------------------------------------------------------------------------------------------------------------------------------|
| Net sales                                   | $  4,851,530 | $  1,492,550 | $ 6,344,080                  | $ 99,690      | -                                  |   $ 6,443,770                                                                                                          |
| Cost of Sales                               | 2,362,290              | 1,004,923              | 3,367,213                    | 9,627         | -                                  | 3,376,840                                                                                                                        |
|                                        |                   |                   |                         |          |                               |                                                                                                                             |
| Gross Margin                                |  2,489,240        |  487,627          | 2,976,867                    |  90,063  | -                                  | 3,066,930                                                                                                                        |
|                                        |                   |                   |                         |          |                               |                                                                                                                             |
| Engineering, research, and Development |                   |                   |  2,672,119              |  37,344  |  -                            |  2,709,463                                                                                                                  |
| Selling, general, and admin.                |                   |                   | 998,225                      | 1,387         | $    1,259,991 | 2,259,603                                                                                                                        |
| Interest (income) expense,net               |                   |                   | -                            | -             | 33,716                             |      33,716                                                                                             |
| Total expenses                              |                   |                   | 3,670,344                    | 38,731        | 1,293,707                          | 5,002,782                                                                                                                        |
|                                        |                   |                   |                         |          |                               |                                                                                                                             |
| Income (loss) before income taxes           |                   |                   | $   (693,477) | $ 51,332      | $  (1,293,707)           |                     $ (1,935,852) |

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| December  31, 2010 |   | Level I                                                                                                                                                                                                                     |   |   | Level II                                                                                                                                                                                                               |   |   | Level III                                                                                                                                                                                                        |   |   | Total                                                                                                                                                                                                                 |   |
|------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| Total Assets                 |   |  $                                    - |   |   |  $                                    - |   |   |  $                                   - |   |   |  $                                   - |   |
|                         |   |                                                                                                                                                                                                                        |   |   |                                                                                                                                                                                                                        |   |   |                                                                                                                                                                                                                  |   |   |                                                                                                                                                                                                                  |   |
| Warrant liability            |   |                                                                                                                                                                                                                        | -      |   |                                                                                                                                                                                                                        |   | -      |                                                                                                                                                                                                                  |   |   | 411,340                                                                                                                                                                                                               |   |   |   | 411,340 |   |
| Total Liabilities            |   | $                                                                                                                                                                                                                           | -      |   |                                                                                                                                                                                                                        | $      | -      |                                                                                                                                                                                                                  |   | $      | 411,340                                                                                                                                                                                                               |   |   | $ | 411,340 |   |
|                         |   |                                                                                                                                                                                                                        |   |   |                                                                                                                                                                                                                        |   |   |                                                                                                                                                                                                                  |   |   |                                                                                                                                                                                                                  |   |   |   |   |   |

| March 31, 2010    |   | Level I                                                                                                                                                                                                                     |   |   | Level II                                                                                                                                                                                                               |   |   | Level III                                                                                                                                                                                                              |   |   | Total                                                                                                                                                                                                                                              |   |
|-------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| Total Assets      |   |  $                                    - |   |   |  $                                    - |   |   |  $                                    - |   |   |  $                                       - |   |
|              |   |                                                                                                                                                                                                                        |   |   |                                                                                                                                                                                                                        |   |   |                                                                                                                                                                                                                        |   |   |                                                                                                                                                                                                                                               |   |
| Total Liabilities |   | $                                                                                                                                                                                                                           | -      |   |                                                                                                                                                                                                                        | $      | -      |                                                                                                                                                                                                                        |   | $      | -                                                                                                                                                                                                                                                  |   |   | $ | - |   |

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| 1.   | The Note has a term of five (5) years with an interest rate of 14% on the outstanding principal amount. Payments for the first year are interest only, and after the first year the Company will make monthly payments of approximately $69,000 for the remaining term of the loan. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2.   |  The Company issued BCA  a nine-year warrant for 136,090 shares, based upon 4.5% of the fully –diluted outstanding shares of the Company’s common stock at $6.70 per share, the average closing price over the three days preceding the closing on the NYSE-Amex Exchange. In the event of specific major corporate events or the maturity of the five-year loan, BCA can require the Company to purchase the warrant and warrant shares at the higher of the then Exchange market price or five times operating income per share. In connection with the warrant issued in conjunction with this debt, the Company recorded a debt discount and warrant liability of $267,848, which will be marked to fair value at the end of each period (see Note 9). The debt discount is to be amortized over the life of the loan. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.   | Loan provisions also contain customary representations and warranties. |
|----------------|------------------------------------------------------------------------|

| 4.   | BCA has a lien on all of the Company’s assets. In February 2011, BCA agreed to release part of its lien on Company assets to the U.S. Government to allow for progress billings up to $1,000,000. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 5.   | Provisions of the loan also include certain financial covenants that the Company must comply with, beginning December 31, 2010. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------|

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| (a)   | The Annual Meeting of Shareholders was held on December 15, 2010 (the “Annual Meeting”). |
|-----------------|------------------------------------------------------------------------------------------------------|

| (b)   | Not applicable |
|-----------------|----------------|

| (c)   | At the Annual Meeting, the Company’s shareholders voted in favor of  re-electing management’s nominees for election as directors of the Company as follows: |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                                                  | For       | Against                                                                                                                                                                                                                                                                                                                            |
|-----------------------------------------------------------------------------------------------------------------------|-----------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                  Harold K. Fletcher   | 1,636,996 | 35,240                                                                                                                                                                                                                                                                                                                             |
|                  George J. Leon       | 1,672,036 |     200                                                                                                                                                                                                                                                                                                        |
|                  Jeff C. O’Hara | 1,618,996 | 53,240                                                                                                                                                                                                                                                                                                                             |
|                  Robert A. Rice       | 1,672,036 |                                                       200 |
|                  Robert H. Walker     | 1,672,036 |      200                                                                                                                                                                                                                                                                                                  |

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| (d)   | Not applicable |
|-----------------|----------------|

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