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

                                    FORM 10-Q

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

                  For the quarterly period ended June 30, 2009

                          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:

2,478,761 shares of Common stock, $.10 par value as of August 6, 2009.

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                     TEL-INSTRUMENT ELECTRONICS CORPORATION
                     --------------------------------------
                                TABLE OF CONTENTS
                                -----------------



                                                                           PAGE
                                                                           ----

           Part I - Financial Information

Item 1.    Condensed Consolidated Financial Statements (Unaudited):

           Condensed Consolidated Balance Sheets
           June 30, 2009 and March 31, 2009                                  1

           Condensed Consolidated Statements of Operations -
           Three Months Ended June 30, 2009 and 2008                         2

           Condensed Consolidated Statements of Cash Flows -
           Three Months Ended June 30, 2009 and 2008                         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.    Controls and Procedures                                           18

           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                                                        20

           Certifications

                                       i

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Item 1 - Financial Statements


                       TEL-INSTRUMENT ELECTRONICS CORPORATION
                       CONDENSED CONSOLIDATED BALANCE SHEETS



                                                      June 30, 2009     March 31, 2009
                                                      -------------     --------------
                                                       (unaudited)
ASSETS

<S>                                                   <C>                <C>
Current assets:
   Cash and cash equivalents                           $   466,346       $   601,887
  Accounts receivable, net                               1,326,966         1,516,698
  Unbilled government receivables                        1,415,203         1,265,470
  Inventories, net                                       2,009,150         2,206,546
  Prepaid expenses and other                                98,489            90,509
  Deferred income tax asset                                733,851           461,631
                                                       -----------       -----------
Total current assets                                     6,050,005         6,142,741

Equipment and leasehold improvements, net                  403,143           437,974
Deferred income tax asset - non-current                    852,413           852,413
Other assets                                                73,306            72,261

Total assets                                           $ 7,378,867       $ 7,505,389
                                                       ===========       ===========

LIABILITIES & STOCKHOLDERS' EQUITY

Current liabilities:
  Line of credit                                           600,000           450,000
  Accounts payable                                         870,179           456,343
  Deferred revenues                                         19,417            21,891
  Accrued payroll, vacation pay and payroll taxes          295,874           326,202
  Accrued expenses                                       1,338,937         1,604,190
                                                       -----------       -----------
Total current liabilities                                3,124,407         2,858,626

Deferred revenues                                           41,966            43,243
                                                       -----------       -----------

Total liabilities                                        3,166,373         2,901,869
                                                       -----------       -----------

Commitments

Stockholders' equity:
   Common stock, par value $.10 per share, 2,478,761
          issued and outstanding as of June 30,
          2008 and March 31, 2008, respectively            247,876           247,876
   Additional paid-in capital                            4,818,977         4,801,272
   Accumulated deficit                                    (854,359)         (445,628)
                                                       -----------       -----------
Total stockholders' equity                               4,212,494         4,603,520
                                                       -----------       -----------

Total liabilities and stockholders' equity             $ 7,378,867       $ 7,505,389
                                                       ===========       ===========


See accompanying notes to condensed consolidated financial Statements

                                         1

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

                                                        Three Months Ended
                                                        ------------------
                                                  June 30, 2009     June 30, 2008
                                                  -------------     -------------

<S>                                                 <C>               <C>
Net sales                                           $ 2,325,755       $ 3,551,975
Cost of sales                                         1,257,666         2,063,046
                                                    -----------       -----------

Gross margin                                          1,068,089         1,488,929

Operating expenses:
  Selling, general and administrative                   807,248          708,358
  Engineering, research and development                 932,872           735,151
                                                    -----------       -----------
Total operating expenses                              1,740,120         1,443,509
                                                    -----------       -----------

Income (loss) from continuing operations               (672,031)           45,420

Interest income (expense):
  Interest income                                           370               390
  Interest expense                                       (7,473)          (11,519)
                                                    -----------       -----------

Income (loss) from continuing operations
       before income taxes                             (679,134)           34,291

Income tax provision (benefit)                         (271,313)           13,700

Net income (loss) from continuing
       operations, net of income taxes                 (407,821)           20,591

Income (loss) from discontinued operations,
        net of income taxes                                (910)           22,420
                                                    -----------       -----------

Net income (loss)                                   $  (408,731)      $    43,011
                                                    ===========       ===========
Income (loss) from continuing operations,
        net of income taxes:
   Basic income (loss) per common share             $     (0.16)      $      0.01
                                                    ===========       ===========
   Diluted income (loss) per common share           $     (0.16)      $      0.01
                                                    ===========       ===========

Income (loss) from discontinued operations,
       net of income taxes:
   Basic income (loss) per common share             $      0.00       $      0.01
                                                    ===========       ===========
   Diluted income (loss) per common share           $      0.00       $      0.01
                                                    ===========       ===========

Net Income (loss):
   Basic income (loss) per common share             $     (0.16)      $      0.02
                                                    ===========       ===========
   Diluted income (loss) per common share           $     (0.16)      $      0.02
                                                    ===========       ===========

Weighted average shares outstanding:
   Basic                                              2,478,761         2,433,381
   Diluted                                            2,478,761         2,512,692


         See accompanying notes to condensed consolidated financial statements

                                        2

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



                                                              Three Months ended
                                                              ------------------
                                                       June 30, 2009     June 30, 2008
                                                       -------------     -------------

<S>                                                      <C>               <C>
Cash flows from operating activities:
Net  income (loss)                                       $(408,731)        $  43,011
Adjustments to reconcile net loss to net
    cash used in operating activities:
       Deferred income taxes                              (272,220)           28,615
       Depreciation                                         46,144            44,480
       Non-cash stock-based compensation                    17,705            12,220

Changes in assets and liabilities:
    Increase in accounts receivable                        189,732           (99,995)
    Increase in unbilled government receivables           (149,733)         (250,857)
    Decrease in inventories                                197,396           155,377
    Decrease (increase) in prepaid expenses & other         (7,980)           21,352
    Increase in other assets                                (1,045)             (559)
   (Decrease) increase in accounts payable                 413,836          (134,447)
    Decrease in accrued payroll, vacation pay
      and payroll taxes                                    (30,328)          (18,124)
    Increase (decrease) in deferred revenues                (3,751)           28,166
    (Decrease) increase in accrued expenses               (265,253)          389,218
                                                         ---------         ---------
Net cash provided by (used in) operating activities       (274,228)          218,457
                                                         ---------         ---------

Cash flows from investing activities:
    Purchases of equipment                                 (11,313)          (39,276)
                                                         ---------         ---------
Net cash used in investing activities                      (11,313)          (39,276)
                                                         ---------         ---------

Cash flows from financing activities:
    Proceeds from the exercise of stock options               --              25,330
    Proceeds from borrowings from line of credit           150,000           200,000
                                                         ---------         ---------

Net cash provided by financing activities                  150,000           225,330

Net increase (decrease) in cash and cash equivalents      (135,541)          404,511
Cash and cash equivalents at beginning of period           601,887           469,906
                                                         ---------         ---------
Cash and cash equivalents at end of period               $ 466,346         $ 874,417
                                                         =========         =========

Taxes paid                                               $    --           $    --
                                                         =========         =========
Interest paid                                                4,391             4,357
                                                         =========         =========


See accompanying notes to condensed consolidated financial statements

                                       3

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--

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


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

In the opinion of management,  the accompanying unaudited condensed consolidated
financial  statements  contain all  adjustments  necessary to present fairly the
financial position of Tel-Instrument  Electronics Corp. as of June 30, 2009, the
results of  operations  for the three  months  ended June 30,  2009 and June 30,
2008,  and statements of cash flows for the three months ended June 30, 2009 and
June 30, 2008. 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, 2009 balance sheet included herein was
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 financial  statements
and notes thereto  included in the Company's  Annual Report on Form 10-K for the
fiscal year ended March 31, 2009.


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

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 Critical Accounting Policies - Revenue Recognition)


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

          The following table sets forth the components of accounts receivable:

                                                           June 30,     March 31,
                                                           --------     ---------
                                                               2009          2009

             <S>                                       <C>           <C>
             Government                                 $ 1,189,526   $ 1,199,989
             Commercial                                     177,744       357,013
             Less: Allowance for doubtful accounts          (40,304)      (40,304)
                                                        -----------   -----------

                                                        $ 1,326,966   $ 1,516,698
                                                        ===========   ===========

                                       4
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                        TEL-INSTRUMENT ELECTRONICS CORP.
                        --------------------------------
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
        ----------------------------------------------------------------
                                   (Unaudited)



Note 4        Inventories, net
------        ----------------

          Inventories consist of:

                                                June 30,       March 31,
                                                   2009             2009

             Purchased parts                 $ 1,324,352     $ 1,534,184


             Work-in-process                     970,436         918,038
             Finished  goods                      79,281         104,243
             Less: Inventory reserve            (364,919)       (349,919)
                                             -----------     -----------

                                             $ 2,009,150     $ 2,206,546
                                             ===========     ===========


Note 5        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 period ended June 30,
2009  does not  include  common  stock  equivalents,  as these  shares  would be
anti-dilutive.


                                                                                   Three Months      Three Months
                                                                                   ------------      ------------
                                                                                          Ended             Ended
                                                                                          -----             -----
                                                                                  June 30, 2009     June 30, 2008
                                                                                  -------------     -------------
<S>                                                                              <C>                <C>
Basic net income (loss) per share computation:
  Net income (loss) attributable to common stockholders                          $    (408,731)     $      43,011
  Weighted-average common shares outstanding                                         2,478,761          2,433,381
  Basic net income (loss) per share attributable to common stockholders          $       (0.16)     $        0.02
Diluted net income (loss) per share computation
  Net income (loss) attributable to common stockholders                          $    (408,731)     $      43,011
  Weighted-average common shares outstanding                                         2,478,761          2,433,381
  Incremental shares attributable to the assumed exercise of
       outstanding stock options                                                          --               79,311
  Total adjusted weighted-average shares                                             2,478,761          2,512,692
  Diluted net income (loss) per share attributable to common stockholders        $      (0.16)      $        0.02

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


Note 6        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 $17,705 and $12,220
for three  months  ended  June 30,  2009 and  2008,  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 2.09% to 2.74%,  volatility  at 42.09% to
43.06%,  and an  expected  life of 5 years for the three  months  ended June 30,
2009;  expected  dividend  yield of 0.0%,  risk-free  interest  rate of 2.56% to
3.16%,  volatility at 38.63% to 39.14%,  and an expected life of 5 years for the
three months ended June 30, 2008. 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%.


Note 7        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 and work-in-process inventory. Asset information, other than
accounts receivable and work-in-process  inventory,  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)
                                  ----------------------------------------------------------------
                                                             (Unaudited)


Note 7        Segment Information (continued)
------        -------------------------------

The table below presents  information  about reportable  segments within the avionics business for the periods
ending June 30, 2009 and 2008:

  Three Months Ended                                 Avionics        Avionics        Avionics       Corporate
  ------------------                                 --------        --------        --------       ---------
  June 30, 2009                                         Gov't         Comm'l.           Total           Items                Total
  -------------                                         -----         -------           -----           -----                -----
  <S>                                             <C>             <C>             <C>              <C>                 <C>
  Net sales                                       $ 1,891,240     $   434,515     $ 2,325,755                          $ 2,325,755
  Cost of Sales                                       974,225         283,441       1,257,666                            1,257,666
                                                  -----------     -----------     -----------                          -----------
  Gross Margin                                        917,015         151,074       1,068,089                            1,068,089
                                                  -----------     -----------     -----------                          -----------

  Engineering, research, and development                                              932,872                              932,872
  Selling, general, and admin.                                                        308,854         498,394              807,248
  Interest (income) expense,net                                                         7,103               -                7,103
                                                                                  -----------     -----------          -----------
  Total expenses                                                                    1,248,829         498,394            1,747,223
                                                                                  -----------     -----------          -----------
  Loss from continuing operations
         before income taxes                                                      $  (180,740)    $  (498,394)         $  (679,134)
                                                                                  ===========     ===========          ===========

  Segment assets                                  $ 4,317,644     $   433,675     $ 4,751,319     $ 2,627,548          $ 7,378,867
                                                  ===========     ===========     ===========     ===========          ===========


  Three Months Ended                                 Avionics        Avionics        Avionics       Corporate
  ------------------                                 --------        --------        --------       ---------
  June 30, 2008                                         Gov't         Comm'l.           Total           Items               Total
  -------------                                         -----         -------           -----           -----               -----
  Net sales                                       $ 2,960,596     $   591,379     $ 3,551,975                          $ 3,551,975
  Cost of Sales                                     1,741,197         321,849       2,063,046                            2,063,046
                                                  -----------     -----------     -----------                          -----------
  Gross Margin                                      1,219,399         269,530       1,488,929                            1,488,929
                                                  -----------     -----------     -----------                          -----------

  Engineering, research, and development                                              735,151                              735,151
  Selling, general, and admin.                                                        385,565         322,793              708,358
  Interest (income) expense ,net                                                       11,129               -               11,129
                                                                                  -----------     -----------          -----------
  Total expenses                                                                    1,131,845         322,793            1,454,638
                                                                                  -----------     -----------          -----------
  Income (loss) from continuing operations
      before income taxes                                                         $   357,084     $  (322,793)         $    34,291
                                                                                  ===========     ===========          ===========


Note 8        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  does  not  have  any
unrecognized tax benefits.

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  June 30, 2009 and March 31,
2009 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.

                                       7
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                        TEL-INSTRUMENT ELECTRONICS CORP.
                        --------------------------------
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
        ----------------------------------------------------------------
                                   (Unaudited)


Note 9        Fair Value Measurements
------        -----------------------

On  September  2006,  the FASB  issued  SFAS  157,  which  defines  fair  value,
establishes a framework for measuring fair value, and expands  disclosures about
fair value  measurements.  The  provisions of SFAS 157 were  effective  April 1,
2008.  The FASB has also issued Staff Position (FSP) SFAS 157-2 (FSP No. 157-2),
which  delayed  the  effective  date of SFAS  157 for  nonfinancial  assets  and
liabilities,  except for items that are recognized or disclosed at fair value in
the financial statements on a recurring basis (at least annually),  until fiscal
years beginning after November 15, 2008.

As defined in SFAS 157,  fair value is the price that would be  received to sell
an asset or paid to  transfer  a  liability  in an orderly  transaction  between
market  participants at the measurement date (exit price).  The Company utilizes
market data or  assumptions  that market  participants  would use in pricing the
asset or liability,  including  assumptions about risk and the risks inherent in
the inputs to the valuation  technique.  These inputs can be readily observable,
market  corroborated,  or generally  unobservable.  The Company  classifies fair
value balances based on the observability of those inputs.  SFAS 157 establishes
a fair value  hierarchy that  prioritizes the inputs used to measure fair value.
The hierarchy gives the highest  priority to unadjusted  quoted prices in active
markets for identical assets or liabilities (level 1 measurement) and the lowest
priority to unobservable inputs (level 3 measurement).

The three levels of the fair value hierarchy defined by SFAS 157 are as follows:

Level 1 - Quoted prices are available in active markets for identical  assets or
liabilities  as of the  reporting  date.  Active  markets  are  those  in  which
transactions for the asset or liability occur in sufficient frequency and volume
to provide pricing  information on an ongoing basis.  Level 1 primarily consists
of  financial  instruments  such  as  exchange-traded  derivatives,   marketable
securities and listed equities.

Level 2 - Pricing inputs are other than quoted prices in active markets included
in level 1,  which  are  either  directly  or  indirectly  observable  as of the
reported date.  Level 2 includes  those  financial  instruments  that are valued
using  models or other  valuation  methodologies.  These  models  are  primarily
industry-standard  models that consider  various  assumptions,  including quoted
forward prices for  commodities,  time value,  volatility  factors,  and current
market and contractual prices for the underlying  instruments,  as well as other
relevant  economic   measures.   Substantially  all  of  these  assumptions  are
observable in the marketplace throughout the full term of the instrument, can be
derived from  observable  data or are  supported by  observable  levels at which
transactions  are  executed in the  marketplace.  Instruments  in this  category
generally  include  non-exchange-traded  derivatives  such as  commodity  swaps,
interest rate swaps, options and collars.

Level 3 - Pricing  inputs  include  significant  inputs that are generally  less
observable  from  objective  sources.  These inputs may be used with  internally
developed methodologies that result in management's best estimate of fair value.

Cash, accounts  receivable,  accounts payable, and accrued expenses reflected in
the  consolidated  balance sheets are a reasonable  estimate of their fair value
due to the  shot-term  nature of these  instruments.  The carrying  value of the
Company's  short-term  borrowings is a reasonable  estimate of its fair value as
borrowings  under the Company's credit facility have variable rates that reflect
currently  available  terms and conditions for similar debt. As of June 30, 2009
and  March  31,  2009,  the  Company  did not  have  any  financial  assets  and
liabilities measured at fair value on a recurring basis that would be subject to
the disclosure provisions of SFAS 157.

                                       8

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


Note 10       Discontinued Operations
-------       -----------------------

In fiscal year 2008, the Board of Directors approved discontinuing the Company's
marine systems  division.  As a result,  the consolidated  financial  statements
present the marine systems division as a discontinued operation.

The Company  wrote-off fixed assets of approximately  $77,000 and inventories of
approximately $151,000 in 2008.

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  following  tables  reflects  sales,  costs  and  expenses,  and  loss  from
discontinued  operations,  net of taxes for the three months ended June 30, 2009
and 2008, respectively.

     --------------------------------------------------------------- ---------------------- -----------------
                                                                              Three Months      Three Months
                                                                              ------------      ------------
                                                                                     Ended             Ended
                                                                                     -----             -----
                                                                             June 30, 2009     June 30, 2008
                                                                             -------------     -------------

     --------------------------------------------------------------- ---------------------- -----------------
     Discontinued Operations:
     ------------------------
     --------------------------------------------------------------- ---------------------- -----------------
     <S>                                                                         <C>               <C>
     Sales                                                                        $ 16,444          $ 81,506
     --------------------------------------------------------------- ---------------------- -----------------
     Costs and expenses                                                             17,960            44,170
                                                                                  --------          --------
     --------------------------------------------------------------- ---------------------- -----------------
     Income (loss) from operations of discontinued operations                       (1,516)           37,336
     --------------------------------------------------------------- ---------------------- -----------------
     Income tax provision (benefit)                                                   (606)           14,916
                                                                                  --------          --------
     --------------------------------------------------------------- ---------------------- -----------------
     Net income (loss)  from discontinued operations                              $   (910)         $ 22,420
                                                                                  ========          ========
     --------------------------------------------------------------- ---------------------- -----------------


Note 11       Reclassifications
-------       -----------------

Certain prior year and period amounts have been  reclassified  to conform to the
current period presentation.


Note 12       Litigation
-------       ----------

On March 24, 2009, Aeroflex Wichita,  Inc. ("Aeroflex") filed a petition against
the Company and two of its  employees in the District  Court,  Sedgwick  County,
Kansas, Case No. 09 CV 1141 (the "Aeroflex  Action"),  alleging that the Company
and its two  employees  misappropriated  Aeroflex's  proprietary  technology  in
connection  with the Company  winning a substantial  contract from the U.S. Army
(the  "Award"),  to develop  new Mode-5  radar test sets and kits to upgrade the
existing TS-4530 radar test sets to Mode 5. Aeroflex's  petition alleges that in
connection with the award,  the Company and its named employees  misappropriated
Aeroflex's trade secrets;  tortiously interfered with its business relationship;
conspired to harm Aeroflex and tortiously interfered with its contract and seeks
injunctive  relief and  damages.  The gravamen of all the claims in the Aeroflex
Action  is that  the  Company  misappropriated  and  used  Aeroflex  proprietary
technology in winning the Award.

                                       9
</TABLE>

<PAGE>


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


Note 12       Litigation (continued)
-------       ----------------------

In February  2009,  subsequent  to the Award to the  Company,  Aeroflex  filed a
protest of the Award  with the  Government  Accounting  Office  ("GAO").  In its
protest,  Aeroflex  alleged,  inter  alia,  that  the  Company  used  Aeroflex's
proprietary  technology in order to win the Award, the same material allegations
as were later alleged in the Aeroflex  Action.  On or about March 17, 2009,  the
Army Contracts Attorney and the Army Contracting  Officer each filed a statement
with the GAO, expressly rejecting  Aeroflex's  allegations that the Company used
or  infringed  Aeroflex  proprietary   technology  in  winning  the  Award,  and
concluding  that the Company had used only its own  proprietary  technology.  On
April 6, 2009, Aeroflex withdrew its protest.

The Aeroflex civil claim is currently in the jurisdiction  phase.  Based,  among
other  things,  on Tel's  knowledge  of the  technology  involved and the Army's
detailed and emphatic  refutation of Aeroflex's  allegations,  Tel believes that
Aeroflex's claims are without merit.  However,  Tel has incurred and anticipates
that it will incur substantial legal fees in connection with the litigation, and
these  costs will have an adverse  effect on its results of  operations  for the
fiscal year ending March 31, 2010.  During the quarter ended June 30, 2009,  the
Company  incurred  approximately  $111,000 of legal fees associated with the GAO
protest and the civil litigation.


Note 13       New Accounting Pronouncements
-------       -----------------------------


In December  2007, the Financial  Accounting  Standards  Board  ("FASB")  issued
Statement  of  Financial  Accounting  Standards  ("SFAS")  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 141(R) will not have a significant  impact on the
Company's  consolidated  financial  statements  or financial  position,  but the
nature and magnitude of the specific effects will depend upon the nature,  terms
and size of any acquisitions the Company consummates after the effective date.

In March  2008,  the FASB issued 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. SFAS 161 encourages, but does
not require,  comparative  disclosures for earlier periods at initial  adoption.
The Company adopted this standard  effective January 1, 2009. The implementation
of this standard did not have a material  impact on the  disclosures  related to
the Company's consolidated financial statements.

In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1,  Interim  Disclosures
about Fair Value of Financial  Instruments.  This FSP amends FASB  Statement No.
107,  Disclosures  about  Fair  Value  of  Financial  Instruments,   to  require
disclosures  about fair value of  financial  instruments  for interim  reporting
periods of publicly traded companies as well as in annual financial  statements.
This FSP also amends APB Opinion

                                       10

<PAGE>


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


Note 13       New Accounting Pronouncements (continued)
-------       -----------------------------------------

No. 28, Interim Financial Reporting,  to require those disclosures in summarized
financial  information at interim reporting periods.  FSP FAS 107-1 and APB 28-1
were  effective for interim and annual  reporting  periods ending after June 15,
2009. The Company made the disclosures required by this statement.

In April 2009,  the FASB issued FSP FAS 157-4,  Determining  Fair Value When the
Volume  and Level of  Activity  for the Asset or  Liability  Have  Significantly
Decreased and Identifying  Transactions That Are Not Orderly.  This FSP provides
additional  guidance for estimating fair value in accordance with FASB Statement
No. 157, Fair Value Measurements,  when the volume and level of activity for the
asset or liability have significantly decreased. This FSP also includes guidance
on identifying  circumstances  that indicate a transaction is not orderly.  This
FSP emphasizes that even if there has been a significant  decrease in the volume
and level of activity for the asset or liability and regardless of the valuation
technique(s)  used, the objective of a fair value measurement  remains the same.
Fair  value is the  price  that  would be  received  to sell an asset or paid to
transfer  a  liability  in  an  orderly  transaction  (that  is,  not  a  forced
liquidation or distressed  sale) between market  participants at the measurement
date under current  market  conditions.  FSP FAS 157-4 was effective for interim
and  annual  reporting  periods  ending  after  June 15,  2009,  and is  applied
prospectively.  The Company's  adoption of FSP FAS 157-4 did not have a material
impact on the Company's condensed consolidated financial statements.

In June 2009,  the FASB  issued  SFAS No.  168,  The FASB  Accounting  Standards
Codification  and  Hierarchy  of Generally  Accepted  Accounting  Principles,  a
replacement of FASB  Statement No. 162 ("SFAS 168").  SFAS 168  establishes  the
FASB  Standards  Accounting  Codification  ("Codification")  as  the  source  of
authoritative  GAAP  recognized  by the FASB to be  applied  to  nongovernmental
entities.  The  only  other  source  of  authoritative  GAAP  is the  rules  and
interpretive  releases  of the SEC  which  only  apply to SEC  registrants.  The
Codification  will supersede all the existing  non-SEC  accounting and reporting
standards upon its effective date. Since the issuance of the Codification is not
intended to change or alter existing  GAAP,  adoption of this statement will not
have an impact on the Company's financial position or results of operations, but
will  change  the way in which GAAP is  referenced  in the  Company's  financial
statements.  SFAS 168 is  effective  for  interim and annual  reporting  periods
ending after September 15, 2009.

In May 2009, the FASB issued SFAS No. 165, Subsequent Events ("SFAS 165"), which
establishes  general  standards of accounting  for and disclosure of events that
occur  after the  balance  sheet date but before the  financial  statements  are
issued or are  available to be issued.  The Company  adopted SFAS 165  effective
April 1, 2009 and has evaluated  subsequent  events after the balance sheet date
of June 30, 2009 through the date the financial  statements were issued,  August
14, 2009.

                                       11

<PAGE>


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

Forward Looking Statements
--------------------------

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, including statements regarding litigation,  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  the  financial  statements  and  accounting  for  the  underlying
transactions  and  balances,  the  Company  applies its  accounting  policies as
disclosed  in Note 2 of our Notes to Financial  Statements  included in our Form
10-K. 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 is  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 the 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 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.  If market  conditions  and actual  demands are less favorable than
those projected by management, additional 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  credits and  payments  from its  customers  and
maintains  provision  for  estimated  credit  losses  based  on  its  historical
experience and any specific  customer issues that have been identified.  For the
year ended March 31, 2009  approximately  67% of the Company's sales were to the
U.S.  Government.  While such credit  losses have  historically  been within our
expectation and the provision established,  the Company cannot guarantee that it
will continue to receive positive results.

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 are  expected to 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 is  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, 2009.

The Company's  avionics business is conducted in the Government,  Commercial and
General  aviation  markets  (see  Note 7 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, 2009
see Note 10 to Financial Statements).

Overview
--------

As discussed in our Form 10-K for the year ended March 31, 2009,  because of the
continuing  decline in commercial  sales,  the difficult  economic  environment,
delays in several major anticipated government orders, the increased new product
engineering  costs, and the increased legal and  professional  fees, the Company
expected  that sales and  profits in the first half of the  current  fiscal year
would decline materially,  until substantial  production and delivery of the new
products commence.  However,  the Company believes that the financial  situation
for the Company will  improve in the second half of the current  fiscal year and
the Company expects to be profitable in the next fiscal year.

In the first  quarter  of fiscal  year  2010,  the  Company's  sales fell 35% as
compared to the same period last year, and the Company  recorded a net loss from
continuing  operations  before  taxes of  $679,000 as compared to $34,291 in net
income from continuing operations before taxes in the prior year.

As  discussed  in our Form 10-K for the year ended March 31,  2009,  the current
fiscal year will be a challenge as the commercial avionics market shows no signs
of improvement and military sales have been impacted by delays in the receipt of
several  expected  large  orders,  as well as some  delay in  completion  of our
existing  programs.   Moreover,   the  Company  continues  to  make  substantial
engineering  investments  in the AN/USM-708  and the recently  awarded  TS-4530A
programs.  TEL  has  also  experienced  delays  on  two of  its  major  programs
(AN/USM-708/ and AN/ARM-206) that have collectively  increased  development cost
and time and delayed production  shipments.  At this time, it appears that sales
will  remain at  depressed  levels for the first half of this fiscal year with a
substantial  operating loss.  Starting in the third quarter of this fiscal year,
revenues and profitability are expected to increase due to anticipated shipments
of the AN/APM-719 as well as the receipt of anticipated  government orders which
have been delayed.

TEL currently has three major government  contracts totaling over $80 million of
potential orders, which it won competitively. Upon completion of our engineering
development  on these  major  programs,  TEL has the  ability  to  substantially
increase the size and  profitability  of our business  starting next fiscal year
(which  begins  April  2010) as  production  deliveries  of the  AN/USM-708  and
AN/APM-206 are expected to commence in volume. Production deliveries of TS-4530A
are also  expected  to  commence in volume  later in  calendar  year 2010.  This
program has a maximum contract value of $44 million with $15 million of delivery
orders already received.

                                       14

<PAGE>


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


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

On July  28,  2009,  Tel was  notified  by the  AIMS  Program  Office  that  its
AN/USM-719  Mode 5 test  set has  been  officially  certified  for Mode 5 system
integration  purposes.  This is a major  accomplishment  as this  represents the
first Mode 5 flight-line test set certified by AIMS (the DoD Agency in charge of
IFF system  certification).  This  represents the culmination of a multi-million
investment  by the company in Mode 5 technology  and will provide a  significant
competitive  advantage  in the  years  to come as the U.S.  and our NATO  allies
migrate to this leading edge IFF technology.  To our knowledge,  Tel is the only
company with AIMS certified Mode 5 flight-line test sets.

At June 30, 2009 the Company's backlog stood at approximately  $14.7 million, as
compared to  approximately  $11.4 million at June 30, 2008.  The backlog at June
30, 2009 includes only the amount of currently exercised delivery orders on open
IDIQ (indefinite  delivery/indefinite  quantity)  contracts,  and is expected to
materially  increase  when the volume  production  orders for the two large Navy
contracts are received.  Historically,  the Company obtains a substantial volume
of orders  which are  required  to be filled in less than  twelve  months,  and,
therefore,  these  anticipated  orders are not  reflected  in the  backlog.  The
Company  has  received  approximately  $8.83  million  in orders  related to the
TS-4530A  program,  and this amount is included in the backlog at June 30, 2009.
In July 2009, the Company received an additional delivery order of approximately
$6 million related to the TS-4530 program.

On March 24,  2009,  Aeroflex  Wichita,  Inc.  ("Aeroflex")  filed a civil claim
against the Company and two of its  employees  in the District  Court,  Sedgwick
County,  Kansas, Case No. 09 CV 1141 (the "Aeroflex Action"),  alleging that the
Company and its two employees misappropriated  Aeroflex's proprietary technology
in connection  with TEL winning the Army TS-4530A  contract.  Many of these same
claims were  included in  Aeroflex's  previous,  formal  Protest of the Contract
award which it filed with the U.S.  Government  Accounting Office ("GAO"). On or
about March 17,  2009,  the Army  Contracts  Attorney  and the Army  Contracting
Officer  each filed a statement  with the GAO,  expressly  rejecting  Aeroflex's
allegations that the Company used or infringed Aeroflex  proprietary  technology
in winning  the Award,  and  concluding  that the  Company had used only its own
proprietary technology. On April 6, 2009, Aeroflex withdrew its GAO Protest, but
continued  the civil  litigation.  The Aeroflex  civil claim is currently in the
jurisdiction phase.

While TEL is confident about the ultimate  successful outcome of the litigation,
the Company  anticipates  that it will incur legal fees in  connection  with the
litigation,  and these  costs  will have an  adverse  effect on its  results  of
operations  for the fiscal year ending March 31, 2010.  During the quarter ended
June 30, 2009,  the Company  incurred  legal fees of  approximately  $110,000 in
connection with the GAO protest and this litigation.

Given the weak first quarter  results,  Tel increased it borrowing on its credit
facility by $150,000 in the quarter to $600,000 and had  approximately  $485,000
of available  borrowing  capacity as of June 30, 2009.  This credit line is on a
year-to-year  basis with a September 30, 2009 renewal date.  Given first quarter
loss and the expected loss in the second quarter as well as the sharp  expansion
in projected  business  starting  this fall,  the Company is planning to raise a
minimum  of  $500,000  of  equity  funding  in the next  few  months  through  a
combination of Director stock option exercises and new share purchases.  At this
time, the Company has received  informal  commitments from several  Directors to
purchase  between  90,000 and 100,000  shares of newly issued company stock at a
price to be  determined  by a  Special  Committee  of  Directors  who  would not
purchase  shares.  Other  shareholders  will  be  provided  the  opportunity  to
participate  on the  same  terms  and  conditions  subject  to a  minimum  share
purchase.  Further information about the financing program will be provided when
the details are finalized.

                                       15

<PAGE>


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


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

Sales
-----

For the first  quarter  ended June 30, 2009,  total sales  decreased  $1,226,220
(34.5%) to  $2,325,755  as compared to  $3,551,975  for the same  quarter in the
prior year. Avionics Government sales decreased $1,069,356 (36.1%) to $1,891,240
for the period as compared  to  $2,960,596  for the same  period last year.  The
decrease in Avionics Government sales is primarily  attributed to: a decrease in
sales  associated  with the  ITATS,  which are  recognized  on a  percentage  of
completion  as the initial  phase of the  programs  nears  completion  as well a
decrease in shipments of the T-30D,  T-47N, and the T-47G,  which were primarily
associated with orders that were awarded in the previous year.  Government sales
have been  impacted by delays in the receipt of several  expected  large orders.
These  decreases  were  partially  offset  by  higher  sales of the  AN/APM-719.
Commercial  sales  decreased  $156,864  (26.5%) to $434,515 for the three months
ended June 30, 2009 as compared to $591,379 in the same period in the prior year
As a result of the continued weakness in the commercial market.


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

Gross margin decreased $420,840 (28.3%) to $1,068,089 for the three months ended
June 30, 2009 as compared to  $1,488,929  for the same three months in the prior
fiscal  year.  The  decrease in gross  margin is  attributed  to the decrease in
volume. The gross margin percentage for the three months ended June 30, 2009 was
45.9% as compared to 41.9% for the three months ended June 30, 2008.

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

Selling, general and administrative expenses increased $98,890 (14%) to $807,248
for the three months ended June 30, 2009,  as compared to $708,358 for the three
months ended June 30, 2008. This increase is attributed mainly to an increase in
legal  fees  associated  with  the  litigation  (see  Note  12 to the  Financial
Statements),   and   professional   fees  offset   partially  by  lower  outside
commissions.

Engineering,  research and development  expenses  increased  $197,721 (26.9%) to
$932,872  for three  months  ended June 30, 2009 as compared to $735,151 for the
three months ended June 30, 2008. Engineering, research and development expenses
are mostly attributed to efforts related to the CRAFT and TS-4530 programs.

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

Interest expense decreased as a result of lower interest rates.


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

As a result of the above, the Company recorded a loss from continuing operations
before  income taxes of $679,134 for the quarter ended June 30, 2009 as compared
to income from  continuing  operations  before  income  taxes of $34,291 for the
quarter ended June 30, 2008.

                                       16

<PAGE>



                   MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
                   -------------------------------------------

            RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Continued)
            ---------------------------------------------------------


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

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

An income tax benefit of $271,313  was  recorded for the three months ended June
30, 2009 as compared to an income tax provision in the amount of $13,700 for the
quarter ended June 30, 2008.  The change is due to the loss before taxes for the
quarter  ended June 30, 2009 as compared to income  before taxes for the quarter
ended June 30, 2008. These amounts represent the effective federal and state tax
rate of approximately 40% on the Company's net income or loss before taxes.


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

As a  result  of  the  above,  the  Company  recorded  a  loss  from  continuing
operations,  net of taxes of  $407,821  for the  quarter  ended June 30, 2009 as
compared to net income from continuing  operations,  net of taxes of $20,591 for
the quarter ended June 30, 2008.

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

For the three  months  ended June 30,  2009,  the  Company  recorded a loss from
discontinued  operations,  net of taxes,  of $910 as  compared  to  income  from
discontinued  operations,  net of taxes,  of $22,420 for the three  months ended
June 30, 2008, primarily as a result of the lower sales volume.

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

As a result of the above,  the Company  recorded a net loss of $408,731  for the
quarter ended June 30, 2009 as compared to net income of $43,011 for the quarter
ended June 30, 2008.

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

At June 30, 2009,  the Company had working  capital of $2,925,598 as compared to
$3,284,115  at March 31, 2009.  For the three  months  ended June 30, 2009,  the
Company used $274,228 in cash for operations as compared to generating  $218,457
in cash from  operations the three months ended June 30, 2008.  This decrease in
cash from operations is primarily  attributed to the loss for the period and the
decrease  in  accrued  expenses  partially  offset by an  increase  in  accounts
payable.

Net cash used in  investing  activities  was $11,313 for the three  months ended
June 30, 2009 from  $39,276 for the three  months ended June 30, 2008 due to the
decrease in purchases of equipment.

Net cash  provided by financing  activities  decreased to $150,000 for the three
months  ended June 30, 2009 from  $225,330  for the three  months ended June 30,
2008 due to the lower  borrowings  from the line of  credit  and a  decrease  in
proceeds from the exercise of stock options.

                                       17

<PAGE>


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


Liquidity and Capital Resources (continued)
-------------------------------------------

At June 30, 2009 the Company's backlog stood at approximately  $14.7 million, as
compared to  approximately  $11.4 million at June 30, 2008.  The backlog at June
30, 2009 includes only the amount of currently exercised delivery orders on open
IDIQ (indefinite  delivery/indefinite  quantity)  contracts,  and is expected to
materially  increase  when the volume  production  orders for the two large Navy
contracts are received.  Historically,  the Company obtains a substantial volume
of orders  which are  required  to be filled in less than  twelve  months,  and,
therefore,  these  anticipated  orders are not  reflected  in the  backlog.  The
Company  has  received  approximately  $8.83  million  in orders  related to the
TS-4530A  program,  and this amount is included in the backlog at June 30, 2009.
In addition, in July 2009 the Company received an additional $6 million delivery
order  from  the  Army,   bringing  the  total  amount  of  orders  received  to
approximately $15 million.

Given the weak first quarter  results,  Tel increased it borrowing on its credit
facility by $150,000 in the quarter to $600,000 and had  approximately  $485,000
of available  borrowing  capacity as of June 30, 2009.  This credit line is on a
year-to-year  basis with a September 30, 2009 renewal date.  Given first quarter
loss and the expected loss in the second quarter as well as the sharp  expansion
in projected  business  starting  this fall,  the Company is planning to raise a
minimum  of  $500,000  of  equity  funding  in the next  few  months  through  a
combination of Director stock option exercises and new share purchases.  At this
time, the Company has received  informal  commitments from several  Directors to
purchase  between  90,000 and 100,000  shares of newly issued company stock at a
price to be  determined  by a  Special  Committee  of  Directors  who  would not
purchase  shares.  Other  shareholders  will  be  provided  the  opportunity  to
participate  on the  same  terms  and  conditions  subject  to a  minimum  share
purchase.  Further information about the financing program will be provided when
the details are finalized.

There was no  significant  impact  on the  Company's  operations  as a result of
inflation for the three months ended June 30, 2009.  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, 2009.


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.

                                       18

<PAGE>


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


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

              See discussion in Item 3 of the Company's Report on Form 10-K for
              the fiscal year ended March 31,  2009,  and the above under M,D&A
              overview.

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
              first quarter ended June 30, 2009.

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.

                                       19

<PAGE>


                                   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:    August 14, 2009                 By:  /s/  Harold K. Fletcher
                                            -----------------------------------
                                                   Harold K. Fletcher
                                                   CEO


Date:   August 14, 2009                  By:  /s/  Joseph P. Macaluso
                                            -----------------------------------
                                                   Joseph P. Macaluso
                                                   Principal Accounting Officer

                                       20