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

                                   ----------

                                    FORM 10-Q

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

                  For the quarterly period ended September 30, 2004

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

                  Commission File No. 33-18978

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

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

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

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

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed  by  Section  13 or 15 (d) of the  Securities  Exchange  Act of 1934
during the preceding 12 months (or for such shorter  period that the  registrant
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days.

                             Yes |X|     No |_|

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

2,144,751 shares of Common stock, $.10 par value as of November 7, 2004.
<PAGE>

                     TEL-INSTRUMENT ELECTRONICS CORPORATION

                                TABLE OF CONTENTS

                                                                            PAGE
                                                                            ----
        Part I - Financial Information

Item 1. Condensed Consolidated Financial Statements (Unaudited):

        Condensed Consolidated Comparative Balance Sheets
        September 30, 2004 and March 31, 2004                                  1

        Condensed Consolidated Comparative Statements of Operations -
        Three and Six Months Ended September 30, 2004 and 2003                 2

        Condensed Consolidated Comparative Statements of Cash Flows -
        Six Months Ended September 30, 2004 and 2003                           3

        Notes to Condensed Consolidated Financial Statements                 4-7

Item 2. Management's Discussion and Analysis of the Results of
        Operations and Financial Conditions                                 8-11

Item 3. Quantitative and Qualitative Disclosures about Market Risk            12

Item 4. Controls and Procedures                                               12

        Part II - Other Information

Item 6. Exhibits and Reports on Form 8-K                                      12

        Signatures                                                            13

        Certifications                                                     14-17
<PAGE>

Item 1 - Financial Statements
                     TEL-INSTRUMENT ELECTRONICS CORPORATION
                CONDENSED CONSOLIDATED COMPARATIVE BALANCE SHEETS

                                                    (Unaudited)
                                                    September 30,    March 31,
ASSETS                                                  2004           2004
                                                    -------------   ----------
Current assets:
   Cash and cash equivalents                           $1,027,670   $1,509,828
  Accounts receivable, net                              1,788,354    1,266,905
  Inventories, net                                      2,533,957    2,202,143
  Taxes receivable                                        161,695      161,695
  Prepaid expenses and other current assets                69,747      102,039
  Deferred income taxes                                   599,029      581,348
                                                       ----------   ----------
Total current assets                                    6,180,452    5,823,958

Property, plant and equipment, net                        906,008      867,886
Intangible assets                                         369,949      413,047
Other assets                                              285,775      287,610
                                                       ----------   ----------

Total assets                                           $7,742,184   $7,392,501
                                                       ==========   ==========

LIABILITIES & STOCKHOLDERS EQUITY

Current liabilities:
  Note payable - related party - current portion       $   50,000   $  250,000
  Convertible subordinated notes - related party            7,500        7,500
  Notes payable - other                                    87,000       87,000
  Capitalized lease obligations - current portion          13,837       24,768
  Accounts payable                                        599,213      346,169
  Deferred revenues                                        77,817       44,663
  Accrued payroll, vacation pay, profit sharing
   and payroll taxes                                      388,846      333,180
  Accrued expenses                                      1,007,777      963,528
                                                       ----------   ----------
Total current liabilities                               2,231,990    2,056,808

Notes payable - related party - long-term                 200,000           --
Deferred taxes - long-term                                 48,000       48,000
                                                       ----------   ----------
Total liabilities                                       2,479,990    2,104,808

Stockholders' equity:
   Common stock                                           214,478      214,418
   Additional paid-in capital                           3,961,906    3,960,886
   Retained earnings                                    1,085,810    1,112,389
                                                       ----------   ----------
Total stockholders' equity                              5,262,194    5,287,693
                                                       ----------   ----------

Total liabilities and stockholders' equity             $7,742,184   $7,392,501
                                                       ==========   ==========

See accompanying notes to condensed financial statements


                                      -1-
<PAGE>

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

<TABLE>
<CAPTION>
                                                                      Three Months Ended                  Six Months Ended
                                                             Sept. 30, 2004     Sept. 30, 2003     Sept. 30, 2004     Sept. 30, 2003
                                                             --------------     --------------     --------------     --------------
<S>                                                            <C>                <C>                <C>                <C>
Net sales                                                      $ 2,238,950        $ 2,616,716        $ 5,051,750        $ 5,674,622

Cost of sales                                                    1,026,411          1,192,809          2,361,651          2,479,331
                                                               -----------        -----------        -----------        -----------

Gross margin                                                     1,212,539          1,423,907          2,690,099          3,195,291

Operating expenses
  Selling, general and administrative                              808,742            714,591          1,641,953          1,449,590
  Amortization of intangibles                                       21,549                 --             43,098                 --
  Engineering, research and development                            510,046            500,138          1,042,496          1,068,048
                                                               -----------        -----------        -----------        -----------
Total operating expenses                                         1,340,337          1,214,729          2,727,547          2,517,638
                                                               -----------        -----------        -----------        -----------

  Income (loss) from operations                                   (127,798)           209,178            (37,448)           677,653

Other income (expense):
  Interest income                                                    3,246              5,188              6,750             15,910
  Interest expense                                                  (7,225)            (8,957)           (13,562)           (17,942)
                                                               -----------        -----------        -----------        -----------

Income (loss) before taxes                                        (131,777)           205,409            (44,260)           675,621

Provision (benefit) for income taxes                               (52,644)            81,642            (17,681)           269,911
                                                               -----------        -----------        -----------        -----------

Net (loss) income                                              $   (79,133)       $   123,767        $   (26,579)       $   405,710
                                                               ===========        ===========        ===========        ===========

Basic income (loss) per common share                           $     (0.04)       $      0.06        $     (0.01)       $      0.19
                                                               ===========        ===========        ===========        ===========
Diluted income (loss) per common share                         $     (0.04)       $      0.06        $     (0.01)       $      0.18
                                                               ===========        ===========        ===========        ===========

Dividends per share                                                   None               None               None               None
Weighted average shares outstanding
  Basic                                                          2,144,301          2,143,776          2,144,237          2,140,930
  Diluted                                                        2,144,301          2,202,281          2,144,237          2,199,435
</TABLE>

See accompanying notes to condensed financial statements


                                      -2-
<PAGE>

                     TEL-INSTRUMENT ELECTRONICS CORPORATION
           CONDENSED CONSOLIDATED COMPARATIVE STATEMENTS OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                                      Six Months Ended
                                                                                            Sept. 30, 2004         Sept. 30, 2003
                                                                                            --------------         --------------
<S>                                                                                          <C>                    <C>
Cash flows from operating activities:
Net income (loss)                                                                            $   (26,579)           $   405,710
Adjustments to reconcile net income to net cash provided
 by operating activities:
 Deferred income taxes                                                                           (17,681)              (144,166)
 Depreciation                                                                                    130,414                129,270
 Amortization of intangibles                                                                      43,098                     --
Changes in operating assets or liabilities:
  (Increase) decrease in accounts receivable, net                                               (521,449)                84,819
   Increase in inventories, net                                                                 (331,814)               (90,054)
   Decrease (increase) in prepaid expenses and other current assets                               32,292                (34,474)
   Decrease (increase) in other assets                                                             1,835               (192,456)
   Increase in accounts payable                                                                  253,044                 18,392
   Increase (decrease) in deferred revenues                                                       33,154                 (2,440)
  Increase  in accrued payroll, vacation pay,
  and payroll taxes                                                                               55,666                 49,331
  Decrease in income taxes payable                                                                    --               (103,924)
  Increase (decrease) in accrued expenses                                                         44,249                (46,686)
                                                                                             -----------            -----------

Net cash provided by (used in) operating activities                                             (303,771)                73,322
                                                                                             -----------            -----------

Cash flows from investing activities:
  Cash purchases of property, plant and equipment                                               (168,536)              (111,395)
                                                                                             -----------            -----------
Net cash used in investing activities                                                           (168,536)              (111,395)
                                                                                             -----------            -----------

Cash flows from financing activities:
  Proceeds from exercise of stock options                                                          1,080                 16,913
  Payment of capitalized lease obligations                                                       (10,931)               (14,486)
                                                                                             -----------            -----------
  Net cash provided by (used in) financing activities                                             (9,851)                 2,427
                                                                                             -----------            -----------

Net decrease in cash and cash equivalents                                                       (482,158)               (35,646)
Cash and cash equivalents at beginning of period                                               1,509,828              1,680,124
                                                                                             -----------            -----------
Cash and cash equivalents at end of period                                                   $ 1,027,670            $ 1,644,478
                                                                                             ===========            ===========

Supplemental information
  Interest paid                                                                              $     2,383            $    23,269
                                                                                             ===========            ===========
  Income taxes paid                                                                          $        --            $   518,000
                                                                                             ===========            ===========
</TABLE>

See accompanying notes to condensed financial statements


                                      -3-
<PAGE>

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

Note 1 Basis of Presentation

In the opinion of management,  the accompanying unaudited condensed consolidated
financial  statements  contain all adjustments  (consisting  primarily of normal
recurring  accruals)  necessary  to present  fairly the  financial  position  of
Tel-Instrument  Electronics  Corp as of  September  30,  2004,  the  results  of
operations  for the three and six months ended  September 30, 2004 and September
30, 2003,  and  statements of cash flows for the six months ended  September 30,
2004 and September 30, 2003. 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, 2004 results included herein have been
derived from the audited financial  statements  included in the Company's annual
report on Form 10-K.  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, 2004.

Note 2 Accounts Receivable, net

Accounts receivable, net, consist of:

                                        September 30, 2004   March 31, 2004
                                        ------------------   --------------
      Commercial                            $   623,294       $   862,259
      Government                              1,206,658           446,244
      Allowance for doubtful accounts           (41,598)          (41,598)
                                            -----------       -----------
      Total                                 $ 1,788,354       $ 1,266,905
                                            ===========       ===========

Note 3 Inventories, net

Inventories, net, consist of:
                                        September 30, 2004   March 31, 2004
                                        ------------------   --------------
      Purchased parts                       $ 1,079,547       $   846,782
      Work-in-process                         1,557,567         1,401,722
      Finished goods                             67,741            94,537
      Less:  Reserve for obsolescence          (170,898)         (140,898)
                                            -----------       -----------
      Total                                 $ 2,533,957       $ 2,202,143
                                            ===========       ===========


                                      -4-
<PAGE>

                        TEL-INSTRUMENT ELECTRONICS CORP.

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Note 4 Earnings Per Share

The  Company's  basic income  (loss) per 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 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.  Common share  equivalents  are not included in the
calculation  for the three and six months  ended  September  30,  2004 since the
effect would be antidilutive, but are included for the fiscal year 2004 periods.

Note 5 Stock Options

The Company accounts for its stock option plan in accordance with the provisions
of Accounting  Principles  Board ("APB")  Opinion No. 25,  "Accounting for Stock
Issued to Employees," and related  interpretations.  The Company has adopted the
disclosure  only provisions of Statement of Financial  Accounting  Standards No.
123 and 148,  "Accounting  for Stock-Based  Compensation"  ("SFAS 123 and 148").
Under SFAS 123 and 148 the Company  provides  pro forma net income and pro forma
earnings  per share  disclosures  for employee  stock  option  grants made since
fiscal  1996 as if the  fair-value-based  method as  defined in SFAS No. 123 has
been applied.  The Company currently does not plan to adopt the fair value based
method prescribed by SFAS 123.

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 3.5%,  volatility at 50% and
an expected life of 5 years. Had the Company determined  compensation cost based
on the fair  market  value at the grant date for its 347,200  outstanding  stock
options under SFAS No. 123, the pro forma amounts are indicated below:

                                              Six Months Ended  Six Months Ended
                                                September 30,     September 30,
                                                    2004               2003
                                              ----------------  ----------------
Net income (loss)  - as reported                 $ (26,579)         $405,710
Less fair value of stock options                   (13,156)          (38,507)
                                                 ---------          --------
Net income  (loss)- pro forma                      (39,735)          367,203
                                                 =========          ========
Basic earnings (loss) per share - as reported        (0.01)             0.19
Basic earnings (loss) per share - pro forma          (0.02)             0.17

Diluted earnings (loss) per share - as reported      (0.01)             0.18
Diluted earnings (loss) per share - pro forma        (0.02)             0.17

                                      Three Months Ended      Three Months Ended
                                         September 30,           September 30,
                                             2004                    2003
                                      ------------------      ------------------
Net income (loss)  - as reported          $  (79,133)              $123,767
Less fair value of stock options              (1,838)               (21,174)
                                          ----------               --------
Net income  (loss)- pro forma                (80,971)               102,593
                                          ==========               ========
Basic earnings (loss) per share
  - as reported                                (0.04)                  0.06
Basic earnings (loss) per share
  - pro forma                                  (0.04)                  0.05

Diluted earnings (loss) per share
  - as reported                                (0.04)                  0.06
Diluted earnings (loss) per share
  - pro forma                                  (0.04)                  0.05


                                      -5-
<PAGE>

                        TEL-INSTRUMENT ELECTRONICS CORP.

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Note 6 Segment Information

Information is presented for the Company's three reportable activities, avionics
government,  avionics commercial and marine systems. The marine systems division
was acquired on January 16, 2004,  and, as such, no amounts are shown for fiscal
year 2004 in the data below. There are no inter-segment revenues.

The  Company is  organized  primarily  on the basis of its  avionics  and marine
instrument  products.  The avionics  government market consists primarily of the
design, manufacture,  and sale of test equipment to U.S. and foreign governments
and militaries,  either direct or through distributors.  The avionics commercial
market  consists  primarily  of the  design,  manufacture,  and  sales  of  test
equipment to domestic and foreign airlines, to commercial  distributors,  and to
general aviation repair and maintenance  shops. The avionics  commercial  market
also includes sales related to repairs and calibration  which have a lower gross
margin.  The Company  primarily  develops  and designs  test  equipment  for the
avionics  industry  and, as such,  the  Company's  products  and  designs  cross
segments.  The  marine  instrumentation  systems  segment  consists  of sales of
different  products  to  hydrographic,  oceanographic,  researchers,  engineers,
geophysicists, and surveyors.

The table below  presents  information  about sales and gross  margin.  Costs of
sales  include  certain  allocation  factors for indirect  costs.  Additionally,
administrative expenses have been allocated between avionics and marine systems.

<TABLE>
<CAPTION>
Three Months Ended                   Avionics        Avionics          Avionics             Marine       Corporate
September 30, 2004                    Gov't           Comm'l.            Total             Systems         Items           Total
------------------                   --------        --------          --------             ------       ---------         -----
<S>                                <C>             <C>                <C>                <C>              <C>          <C>
Sales                              $ 1,382,992     $   702,338        $ 2,085,330        $   153,620                   $ 2,238,950
Cost of sales                          505,861         425,210            931,071             95,340                     1,026,411
                                   -----------     -----------        -----------        -----------                   -----------

Gross margin                           877,131         277,128          1,154,259             58,280                     1,212,539
                                   -----------     -----------        -----------        -----------                   -----------

Engineering, research, and                                                414,688             95,358                       510,046
 development
Selling, general, and admin                                               667,134            141,608                       808,742
Amortization of intangibles                                                                                 21,549          21,549
Interest expense, net                                                       3,800                179            --           3,979
                                                                      -----------        -----------      --------     -----------
Total expenses                                                          1,085,622            237,145        21,549       1,344,317
                                                                      -----------        -----------      --------     -----------

Income before income taxes                                            $    68,637        $  (178,865)     $(21,549)    $  (131,777)
                                                                      ===========        ===========      ========     ===========
<CAPTION>
Three Months Ended                   Avionics        Avionics          Avionics             Marine       Corporate
September 30, 2003                    Gov't           Comm'l.            Total             Systems         Items           Total
                                     --------        --------          --------             ------       ---------         -----
<S>                                <C>             <C>                <C>                <C>              <C>          <C>
Sales                              $ 1,762,767     $   853,949        $ 2,616,716                 --                   $ 2,616,716
Cost of sales                         _748,719        _444,090          1,192,809                 --                     1,192,809
                                   -----------     -----------        -----------        -----------                   -----------

Gross margin                         1,014,048         409,859          1,423,907                 --                     1,423,907
                                   -----------     -----------        -----------        -----------                   -----------

Engineering, research,& dev                                               714,591                                          714,591
Selling, general, and admin                                               500,138                                          500,138
Interest expense, net                                                       3,769                                            3,769
                                                                      -----------                                      -----------
Total expenses                                                          1,218,498                                        1,218,498
                                                                      -----------                                      -----------

Income before income taxes                                            $   205,409                 --                   $   205,409
                                                                      ===========        ===========                   ===========
</TABLE>


                                      -6-
<PAGE>

                        TEL-INSTRUMENT ELECTRONICS CORP.

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Note 6 Segment Information (continued)

<TABLE>
<CAPTION>
Six Months Ended                     Avionics        Avionics          Avionics             Marine       Corporate
September 30, 2004                    Gov't           Comm'l.            Total             Systems         Items           Total
------------------                   --------        --------          --------             ------       ---------         -----
<S>                                <C>             <C>                <C>                <C>              <C>          <C>
Sales                              $ 3,284,850     $ 1,383,551        $ 4,668,401        $   383,349                   $ 5,051,750
Cost of sales                        1,293,437         831,388          2,124,825            236,826                     2,361,651
                                   -----------     -----------        -----------        -----------                   -----------

Gross margin                         1,991,413         552,163          2,543,576            146,523                     2,690,099
                                   -----------     -----------        -----------        -----------                   -----------

Engineering, research, and                                                905,553            136,943                     1,042,496
 Development
Selling, general, and admin                                             1,352,491            289,462                     1,641,953
Amortization of intangibles                                                                                 43,098          43,098
Interest expense, net                                                       6,376                436            --           6,812
                                                                      -----------        -----------      --------     -----------
Total expenses                                                          2,264,420            426,841        43,098       2,734,359
                                                                      -----------        -----------      --------     -----------

Income before income taxes                                            $   279,156        $  (280,318)     $(43,098)    $   (44,260)
                                                                      ===========        ===========      ========     ===========
<CAPTION>

Six Months Ended                     Avionics        Avionics          Avionics             Marine       Corporate
September 30, 2003                    Gov't           Comm'l.            Total             Systems         Items           Total
------------------                   --------        --------          --------             ------       ---------         -----
<S>                                <C>             <C>                <C>                <C>              <C>          <C>
Sales                              $ 3,632,256     $ 2,042,366        $ 5,674,622                 --                   $ 5,674,622
Cost of sales                        1,475,645       1,003,686          2,479,331                 --                     2,479,331
                                   -----------     -----------        -----------        -----------                   -----------

Gross margin                         2,156,611       1,038,680          3,195,291                 --                     3,195,291
                                   -----------     -----------        -----------        -----------                   -----------

Engineering, research,& dev                                             1,068,048                                        1,068,048
Selling, general, and admin                                             1,449,590                                        1,449,590
Interest expense, net                                                       2,032                                            2,032
                                                                      -----------                                      -----------
Total expenses                                                          2,519,670                                        2,519,670
                                                                      -----------                                      -----------

Income before income taxes                                            $   675,621                 --                   $   675,621
                                                                      ===========        ===========                   ===========
</TABLE>

Note 7 Acquisition

      On January 16, 2004,  the Company  acquired  Innerspace  Technology,  Inc.
      ("ITI") for  $547,000,  including a note and  employment  agreements  with
      principals.  The following  table  represents  the unaudited  consolidated
      results of operations as though the  acquisition  of ITI occurred on April
      1, 2003,  utilizing ITI's unaudited financial statements for the September
      2003 period.

                                        Three Months Ended     Six Months Ended
                                           September 30,         September 30,
                                               2003                  2003
                                        ------------------     ----------------
                                           (pro forma)           (pro forma)

Net sales                                 $ 2,847,350           $ 6,115,256
Income (loss) before taxes                    168,580              600,356
Net income (loss)                             101,233              360,514
Basic income (loss) per common share             0.05                 0.17
Diluted income (loss) per common share           0.05                 0.16


                                      -7-
<PAGE>

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

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

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

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

Critical Accounting Policies

In  preparing  our  financial  statements  and  accounting  for  the  underlying
transactions and balances, we apply our accounting policies as disclosed in Note
2 of our Notes to Financial  Statements included in our Form 10-K. 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 the customer provided title and risk of loss is transferred to the
customer.  Provisions,  when  appropriate,  are made  where  the right to return
exists.  Revenues under service  contracts are recognized  when the services are
performed.

Property  and  equipment  - property  and  equipment  are  stated at cost,  less
accumulated  depreciation.  Depreciation  is  provided  using the  straight-line
method over the  estimated  useful lives of the  respective  assets over periods
ranging  from three to eight years.  Useful lives are  estimated at the time the
asset is acquired and are based upon  historical  experience with similar assets
as well as taking  into  account  anticipated  technological  or other  changes.
Leasehold  improvements  are amortized  over the term of the lease or the useful
life of the asset, whichever is shorter.

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 reserves or inventory write-downs may
be required.

Warranty  reserves - warranty reserves are estimated 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 our  expectations  and the
provisions established, future warranty costs could be in excess of our warranty
reserves.  A  significant  increase in these costs  could  adversely  affect our
operating  results  for  the  period  and the  periods  these  additional  costs
materialize.  Warranty  cost accruals are adjusted from time to time when actual
warranty claim experience differs from estimates.


                                      -8-
<PAGE>

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

Critical Accounting Policies (continued)

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.  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.

Income  taxes - deferred  tax assets and  liabilities  are  determined  based on
differences  between financial reporting and tax bases of assets and liabilities
and are  measured  using  enacted tax rates and laws that will be in effect when
such differences are expected to reverse. The measurement of deferred tax assets
is reduced, if necessary,  by a valuation allowance for any tax benefit which is
not more likely than not to be  realized.  The effect on deferred tax assets and
liabilities  of a change in tax rate is  recognized  in the period that such tax
rate changes are enacted.

Results of Operations

Overview

As previously  reported,  sales and operating  income  declined in the first six
months of fiscal  year 2005,  because  of delays in  deliveries  under  existing
contracts  and in the  awarding  of new  contracts,  and as a result of  planned
additional  marketing and development  costs for ITI. In September,  the Company
received  a  $1,600,000  contract  to  supply  T-36M  ramp test sets to the Army
National Guard. The Company expects to complete delivery of all units under this
contract during the current fiscal year.

Investment  in new product  development  continues  for both avionics and marine
systems in order to meet the expected customer needs and to remain as leaders in
the respective industries.  For the avionics division, the Company continues its
work on the next generation of IFF (Identification,  Friend or Foe) test sets in
anticipation of U.S. and NATO  requirements for more  sophisticated IFF testing.
The Company  anticipates  that most of the  AN/APM-480's  previously sold by the
Company,  will be returned and  modified,  in the future,  to  accommodate  more
sophisticated IFF testing.  Although there is no assurance that the Company will
receive any such  modification  contracts,  the Company believes that it is well
positioned to obtain such contracts.  For marine systems,  the Company is making
improvements  to its tide gauge,  and  upgrading its sounders with a new Windows
operating system which will allow for improvements to the hardware.

The Company has been active in  responding  to requests  for  quotation  for new
government  programs,  which will  award new test  equipment  contracts,  and is
currently in the process of submitting  proposals for large government programs.
The Company  continues  actively to pursue  opportunities in both the commercial
and  government  avionics and marine  systems  markets,  both  domestically  and
internationally.  The Company  continues  its  efforts  with  Semaphore  Capital
Advisors LLC to pursue growth through  acquisitions  and alliances of compatible
businesses or technologies.


                                      -9-
<PAGE>

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

Results of Operations (continued)

Sales

Sales of avionics  products declined in the three and six months ended September
30, 2004,  as compared to the same periods in the prior year,  $531,386  (20.3%)
and $1,006,221  (17.7%),  respectively,  for the reasons  discussed  above under
Overview.  Government  sales of avionics  products  declined  for the six months
ended  September  30,  2004  as  compared  to  the  same  period  last  year  by
approximately  $380,000, most of which decline occurred in the second quarter of
the current fiscal year. Commercial sales of avionics products declined $151,611
and  $658,815,  respectively,  for the three and six months ended  September 30,
2004 as compared to the same  periods  last year,  primarily  as a result of the
sales promotion in the prior fiscal year, which was not continued in the current
fiscal year, and the generally weak financial condition of the airline industry.
See Footnote 6 to the Financial Statements,  Segment Information.  Marine system
sales were  $153,620 and  $383,349 for the three and six months ended  September
30, 2004, respectively.

Gross Margin

Gross margin  decreased  $505,192 (15.8%) for the six months ended September 30,
2004,  as compared to the same period in the prior fiscal year.  The decrease in
gross margin,  for the most part,  is attributed to the lower sales volume.  The
gross margin percentage for the six months ended September 30, 2004 was 53.3% as
compared to 56.3% for the six months ended  September  30, 2003,  primarily as a
result of a change in product mix and ITI's lower gross margin.

Gross margin decreased $211,368 (14.8%) for the three months ended September 30,
2004, as compared to the same period in the prior fiscal year.  This decrease in
gross margin,  for the most part,  is attributed to the lower sales volume.  The
gross margin  percentage for the three months ended September 30, 2004 was 54.2%
as compared to 54.4% for the three months ended September 30, 2003, primarily as
a result a change in  product  mix and  ITI's  lower  gross  margin  which  were
partially offset by lower manufacturing overhead variances.

Operating Expenses

Selling,  general and  administrative  expenses  increased  $94,151  (13.2%) and
$192,363  (13.3%)  for the  three  and six  months  ended  September  30,  2004,
respectively,  as compared to the three and six months ended September 30, 2003.
This  increase is primarily  attributed  to the selling  expenses for the marine
systems  division,  which  expenses  were not  included in the six months  ended
September  30, 2003 and higher  commission  expenses  offset  partially by lower
recruitment and relocation  expenses and decreased  consulting and  professional
fees.

Engineering,  research and development  expenses increased $9,908 (2.0%) for the
three months ended  September 30, 2004 and decreased  $25,552 (2.4%) for the six
months  ended  September  30, 2004 as compared to the same  periods in the prior
fiscal year. Lower outside contract labor  expenditures were partially offset by
engineering  expenditures  associated  with the marine  systems  division and by
higher recruitment fees


                                      -10-
<PAGE>

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

Operating Expenses (continued)

Income Taxes

A tax benefit of $17,681 was  recorded for the six months  ended  September  30,
2004, as compared to a provision for income taxes of $269,911 for the six months
ended  September  30,  2003. A tax benefit of $52,644 was recorded for the three
months ended  September 30, 2004, as compared to a provision for income taxes of
$81,642 for the three months ended September 30, 2003.  These amounts  represent
the effective  federal and state tax rate of approximately  40% on the Company's
net income (loss) before taxes.

Liquidity and Capital Resources

At September 30, 2004, the Company had positive working capital of $3,948,462 as
compared  to  $3,767,150  at March 31,  2004.  In May 2004,  the Company and its
Chairman/President  renegotiated the terms of the notes  payable-related  party,
resulting  in  $200,000  of these notes being  re-classified  as  long-term  and
improving  the  working  capital  by this  amount.  The Notes now  become due in
consecutive  years  beginning March 31, 2005. For the six months ended September
30, 2004, the Company used $303,771 of cash for operating activities as compared
to the cash provided by operations of $73,322 for the six months ended September
30, 2003.  This decline in cash from  operations  is primarily  attributed  to a
substantial increase in accounts receivable, as a result of a significant amount
of sales  being  shipped  at the end  of the  quarter, and  inventories  and the
decrease in net income partially offset by an increase in accounts payable and a
decrease in other assets from the prior year.

The  Company  has a line of credit of  $1,750,000  from  Fleet  Bank,  currently
expiring on November 30, 2004. The line of credit bears an interest rate of 0.5%
above the lender's prevailing base rate, based upon the outstanding balance. The
Company  does not pay to maintain  this open line.  At September  30, 2004,  the
Company had no  outstanding  balance.  The line of credit is  collateralized  by
substantially  all of the assets of the  Company,  and  requires  the Company to
maintain certain financial covenants.  As of September 30, 2004, the Company was
in  compliance  with  all  financial  covenants.  The  Company  has  received  a
commitment from the bank to renew this line for another year beyond November 30,
2004.

Based upon the current  backlog,  which has increased to $4,400,000 at September
30, 2004, its existing credit line, and cash balance,  the Company believes that
it has sufficient  working  capital to fund its operating plans for at least the
next twelve months.  However,  as the Company pursues additional  opportunities,
the need for  additional  capital  may arise.  The  Company  will  evaluate  its
alternatives  when these  opportunities  arise.  The Company  has also  retained
Semaphore   Capital  Advisors  as  its  investment   bankers,   to  help  pursue
acquisitions  and alliances and, if needed,  to help raise capital.  The Company
maintains  its cash balance  primarily in a money market  account  until needed.
There was no  significant  impact  on the  Company's  operations  as a result of
inflation  for  the  six  months  ended  September  30,  2004.  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, 2004.


                                      -11-
<PAGE>

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Company,  at this time, is generally not exposed to financial  market risks,
including  changes in interest  rates,  foreign  currency  exchange  rates,  and
marketable equity security prices.

Item 4. Controls and Procedures

The Company adopted  disclosure  controls and  procedures,  as called for by the
recently   adopted   legislation  and  rules  of  the  Securities  and  Exchange
Commission.  Under  Rules  promulgated  by  the  SEC,  disclosure  controls  and
procedures are defined as "those controls or other procedures of the issuer that
are designed to ensure that  information  required to be disclosed by the issuer
in the reports  filed or  submitted  by it under the  Exchange  Act is recorded,
processed,  summarized,  and reported,  within the time periods specified in the
commission's  rules  and  forms."  The Chief  Executive  Officer  and  Principal
Accounting Officer evaluated the Company's Disclosure Controls and Procedures at
September 30, 2004 and have concluded  that they are  effective,  based on their
evaluation  of these  controls  and  procedures  required  by  paragraph  (b) of
Exchange Act Rules 13a-15 or 15d-15.

There were no changes in internal control over financial reporting identified in
connection  with the evaluation as of September 30, 2004 by the Chief  Executive
Officer and Principal Accounting Officer,  required by paragraph (d) of Exchange
Act Rules 13a-15 or 15d-15,  which  occurred  during our last fiscal quarter and
which have materially  affected,  or are reasonably likely to materially affect,
internal controls over financial reporting.

Part II. Other Information

Item 6. Exhibits and Reports on Form 8-K

      a.    Exhibits

            31.1  Certification  by  CEO  pursuant  to  Rule  13a-14  under  the
                  Securities Exchange Act.

            31.2  Certification  by  CFO  pursuant  to  Rule  13a-14  under  the
                  Securities Exchange Act.

            32.1  Certification  by CEO pursuant to 18 U.S.C.  Section  1350, as
                  adopted pursuant to Section 906 of the  Sarbanes-Oxley  Act of
                  2002.

            32.2  Certification  by CFO pursuant to 18 U.S.C.  Section  1350, as
                  adopted pursuant to Section 906 of the  Sarbanes-Oxley  Act of
                  2002.

      b.    Reports on Form 8-K.

            Report on Form 8-K regarding  press release  announcing  results for
            the quarter ended June 30, 2004 was submitted on August 16,2004.

            Report on Form 8-K regarding press release announcing the award of a
            $1,600,000  contract  to  supply  T-36M  ramp  test sets to the Army
            National Guard was submitted on September 3, 2004.

            Report on Form 8-K regarding press release relating to its September
            30, 2004 quarter was submitted on October 1, 2004.


                                      -12-
<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: November 12, 2004                     By: /s/ Harold K. Fletcher
                                                --------------------------------
                                                /s/ Harold K. Fletcher
                                                Chairman and President

Date: November 12, 2004                     By: /s/ Joseph P. Macaluso
                                                --------------------------------
                                                /s/ Joseph P. Macaluso
                                                Principal Accounting Officer


                                      -13-