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 September 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:

2,601,261 shares of Common stock, $.10 par value as of November 10, 2009.

<PAGE>


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



                                                                            PAGE
                                                                            ----

              Part I - Financial Information

Item 1.       Condensed Consolidated Financial Statements (Unaudited):

              Condensed Consolidated Balance Sheets
              September 30, 2009 and March 31, 2009                          3

              Condensed Consolidated Statements of Operations -
              Three and Six Months Ended September 30, 2009 and 2008         4

              Condensed Consolidated Statements of Cash Flows -
              Six Months Ended September 30, 2009 and 2008                   5

              Notes to Condensed Consolidated Financial Statements          6-15

Item 2.       Management's Discussion and Analysis of the Results of
              Operations and Financial Condition                           16-23

Item 4.       Controls and Procedures                                        23

              Part II - Other Information

Item 1.       Legal Proceedings                                              24

Item 2.       Unregistered sales of Equity Securities and Use of Proceeds    24

Item 6.       Exhibits                                                       24



              Signatures                                                     25

              Certifications

                                       2

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Item 1 - Financial Statements


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



                                                           September 30,    March 31,
                                                           -------------    ---------
                                                                2009           2009
                                                                ----           ----
                                                            (unaudited)
ASSETS
<S>                                                         <C>            <C>
Current assets:
   Cash and cash equivalents                                $   457,663    $   601,887
  Accounts receivable, net                                    1,514,024      1,516,698
  Unbilled government receivables                             1,441,200      1,265,470
  Inventories, net                                            1,662,692      2,206,546
  Prepaid expenses and other                                     71,639         90,509
  Deferred income tax asset                                     461,627        461,631
                                                            -----------    -----------
Total current assets                                          5,608,845      6,142,741

Equipment and leasehold improvements, net                       363,502        437,974
Deferred income tax asset - non-current                       1,248,800        852,413
Other assets                                                     70,764         72,261
                                                            -----------    -----------

Total assets                                                $ 7,291,911    $ 7,505,389
                                                            ===========    ===========

LIABILITIES & STOCKHOLDERS' EQUITY

Current liabilities:
  Line of credit                                                600,000        450,000
  Accounts payable                                              448,009        456,343
  Deferred revenues                                              21,222         21,891
  Accrued payroll, vacation pay and payroll taxes               317,507        326,202
  Accrued expenses                                            1,286,692      1,604,190
                                                            -----------    -----------
Total current liabilities                                     2,673,430      2,858,626

Deferred revenues                                                39,076         43,243
                                                            -----------    -----------

Total liabilities                                             2,712,506      2,901,869
                                                            -----------    -----------

Commitments

Stockholders' equity:
   Common stock, par value $.10 per share, 2,601,261
      and 2, 478,761 issued and outstanding as of
      September 30, 2009 and March 31, 2009, respectively       260,126        247,876
   Additional paid-in capital                                 5,355,056      4,801,272
   Accumulated deficit                                       (1,035,777)      (445,628)
                                                            -----------    -----------
Total stockholders' equity                                    4,579,405      4,603,520
                                                            -----------    -----------

Total liabilities and stockholders' equity                  $ 7,291,911    $ 7,505,389
                                                            ===========    ===========


          See accompanying notes to condensed consolidated financial statements

                                            3
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<CAPTION>


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



                                                    Three Months Ended                  Six Months Ended
                                                    ------------------                  ----------------
                                              September 30,     September 30,     September 30,     September 30,
                                              -------------     -------------     -------------     -------------
                                                  2009              2008              2009              2008
                                                  ----              ----              ----              ----

<S>                                           <C>               <C>               <C>                <C>
Net sales                                     $ 2,384,354       $ 3,855,121       $ 4,710,109        $ 7,407,096
Cost of sales                                   1,160,105         1,715,634         2,417,771          3,778,680
                                              -----------       -----------       -----------        -----------

Gross margin                                    1,224,249         2,139,487         2,292,338          3,628,416

Operating expenses:
  Selling, general and administrative             710,718           763,784         1,517,966          1,472,142
  Engineering, research and development           815,203           713,853         1,748,075          1,449,004
                                              -----------       -----------       -----------        -----------
Total operating expenses                        1,525,921         1,477,637         3,266,041          2,921,146
                                              -----------       -----------       -----------        -----------

Operation income (loss) from continuing
  operations                                     (301,672)          661,850          (973,703)           707,270

Interest income (expense):
  Interest income                                     123             1,683               493              2,073
  Interest expense                                (11,526)          (13,336)          (18,999)           (24,855)
                                              -----------       -----------       -----------        -----------

Income (loss) from continuing operations
       Before income taxes                       (313,075)          650,197          (992,209)           684,488

Income tax provision (benefit)                   (125,074)          304,365          (396,387)           318,065
                                              -----------       -----------       -----------        -----------

Net income (loss) from continuing
       operations                                (188,001)          345,832          (595,822)           366,423

Income (loss) from discontinued operations,
        net of income taxes                         6,583            44,819             5,673             67,239
                                              -----------       -----------       -----------        -----------

Net income (loss)                             $  (181,418)      $   390,651       $  (590,149)       $   433,662
                                              -----------       -----------       -----------        -----------

Income (loss) from continuing operations

   Basic income (loss) per common share       $     (0.07)      $      0.14       $     (0.24)       $      0.15
                                              ===========       ===========       ===========        ===========
   Diluted income (loss) per common share     $     (0.07)      $      0.14       $     (0.24)       $      0.15
                                              ===========       ===========       ===========        ===========

Income (loss) from discontinued operations,
       net of income taxes:
   Basic income (loss) per common share       $      0.00       $      0.02       $      0.00        $      0.03
                                              ===========       ===========       ===========        ===========
   Diluted income (loss) per common share     $      0.00       $      0.02       $      0.00        $      0.03
                                              ===========       ===========       ===========        ===========

Net Income (loss):
   Basic income (loss) per common share       $     (0.07)      $      0.16       $     (0.24)       $      0.18
   Diluted income (loss) per common share     $     (0.07)      $      0.16       $     (0.24)       $      0.17

Weighted average shares outstanding:
   Basic                                        2,504,794         2,445,511         2,491,848          2,439,547
   Diluted                                      2,504,794         2,512,068         2,491,848          2,506,104


                       See accompanying notes to condensed consolidated financial statements

                                                         4
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<CAPTION>


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



                                                              Six Months Ended
                                                              ----------------
                                                       September 30,     September 30,
                                                       -------------     -------------
                                                           2009              2008
                                                           ----              ----

<S>                                                    <C>               <C>
Cash flows from operating activities:
Net  income (loss)                                     $  (590,149)      $   433,662
Adjustments to reconcile net loss to net
    cash used in operating activities:
       Deferred income taxes                              (396,383)          302,896
       Depreciation                                         90,580            93,912
       Non-cash stock-based compensation                    36,149            24,766

Changes in assets and liabilities:
    Decrease (increase) in accounts receivable               2,674        (1,151,299)
    Increase in unbilled government receivables           (175,730)         (176,750)
    Decrease (increase) in inventories                     543,854          (133,799)
    Decrease in prepaid expenses & other                    18,870            84,443
    Decrease (increase) in other assets                      1,497              (834)
    Decrease in accounts payable                            (8,334)          (57,765)
    Decrease in accrued payroll, vacation pay
      and payroll taxes                                     (8,695)          (26,458)
    (Decrease) increase  in deferred revenues               (4,836)           10,329
    (Decrease) increase in accrued expenses               (317,498)          450,036
                                                       -----------       -----------
Net cash used in operating activities                     (808,001)         (146,861)
                                                       -----------       -----------

Cash flows from investing activities:
    Purchases of equipment                                 (16,108)          (57,730)
                                                       -----------       -----------
Net cash used in investing activities                      (16,108)          (57,730)
                                                       -----------       -----------

Cash flows from financing activities:
    Proceeds from the issuance of common stock             359,470              --
    Proceeds from the exercise of stock options            170,415            45,780
    Proceeds from loan on life insurance policy               --              67,578
    Proceeds from borrowings from line of credit
                                                           150,000           100,000
                                                       -----------       -----------
Net cash provided by financing activities                  679,885           213,358
                                                       -----------       -----------

Net (decrease) increase in cash and cash equivalents      (144,224)            8,767
Cash and cash equivalents at beginning of period           601,887           469,906
                                                       -----------       -----------
Cash and cash equivalents at end of period             $   457,663       $   478,673
                                                       ===========       ===========

Taxes paid                                             $     3,470       $    15,290
                                                       ===========       ===========
Interest paid                                          $     9,656       $    14,418
                                                       ===========       ===========



        See accompanying notes to condensed consolidated financial statements

                                          5
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<PAGE>

                        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 September 30, 2009,
the results of operations for the three and six months ended  September 30, 2009
and  September 30, 2008,  and  statements of cash flows for the six months ended
September  30, 2009 and September  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).
These  progress  payments  are  applied to Accrued  Receivables  resulting  from
revenues recognized under percentage-of-completion accounting.

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

          The following table sets forth the components of accounts receivable:

                                                 September 30,        March 31,
                                                 -------------        ---------
                                                          2009             2009
                                                          ----             ----

              Government                          $  1,205,412     $  1,199,989
              Commercial                               348,916          357,013
              Allowance for doubtful accounts          (40,304)         (40,304)
                                                  ------------     ------------

                                                  $  1,514,024     $  1,516,698
                                                  ============     ============

                                       6

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


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

              Inventories consist of:

                                                                              September 30,              March 31,
                                                                              -------------              ---------
                                                                                      2009                    2009
                                                                                      ----                    ----

                <S>                                                      <C>                     <C>
                Purchased parts                                          $       1,155,136       $       1,534,184


                Work-in-process                                                    777,061                 918,038
                Finished  goods                                                    110,414                 104,243
                Less: Inventory reserve                                           (379,919)               (349,919)

                                                                         $       1,662,692        $      2,206,546

Note 5        Earnings Per Share

Financial  Accounting  Standards Board ("FASB") ASC 260-10 (Prior  authoritative
Financial  Accounting SFAS No. 128, "Earnings Per Share") requires  presentation
of basic  earnings  per share  ("basic  EPS")  and  diluted  earnings  per share
("diluted EPS").

The Company's basic income (loss) per common share is based on net income (loss)
for the relevant period, divided by the weighted average number of common shares
outstanding  during the period.  Diluted income (loss) per common share is based
on net income  (loss),  divided by the weighted  average number of common shares
outstanding  during the period,  including  common  share  equivalents,  such as
outstanding  stock  options.  Diluted  loss  per  share  for the  periods  ended
September  30, 2009 do not include  common  stock  equivalents,  as these shares
would be anti-dilutive.

                                                                            Three Months Ended           Three Months Ended
                                                                            ------------------           ------------------
                                                                            September 30, 2009           September 30, 2008
                                                                            ------------------           ------------------
Basic net income (loss) per share computation:
  Net income (loss) attributable to common stockholders                  $            (181,418)       $             390,651
  Weighted-average common shares outstanding                                         2,504,794                    2,445,511
  Basic net income(loss) per share attributable to common
       Stockholders                                                      $               (0.07)       $                0.16
Diluted net income (loss) per share computation
  Net income(loss) attributable to common stockholders                   $            (181,418)       $             390,651
  Weighted-average common shares outstanding                                         2,504,794                    2,445,511
  Incremental shares attributable to the assumed exercise of
       outstanding stock options                                                          --                         66,557
  Total adjusted weighted-average shares                                             2,504,794                    2,512,068
  Diluted net income(loss) per share attributable to common
      stockholders                                                       $               (0.07)       $                0.16

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


Note 5        Earnings Per Share (continued)
------        ------------------------------

                                                                                Six Months Ended                Six Months Ended
                                                                                ----------------                ----------------
                                                                              September 30, 2009              September 30, 2008
                                                                              ------------------              ------------------
<S>                                                                       <C>                            <C>
Basic net income (loss) per share computation:
  Net income (loss) attributable to common stockholders                   $             (590,149)        $               433,662
  Weighted-average common shares outstanding                                           2,491,848                       2,439,547
  Basic net income(loss) per share attributable to common
        Stockholders                                                      $                (0.24)        $                  0.18
Diluted net income (loss) per share computation
  Net income(loss) attributable to common stockholders                    $             (590,149)        $               433,662
  Weighted-average common shares outstanding                                           2,491,848                       2,439,547
  Incremental shares attributable to the assumed exercise of
       outstanding stock options                                                            --                            66,557
  Total adjusted weighted-average shares                                               2,491,848                       2,506,104
  Diluted net income(loss) per share attributable to common
       stockholders                                                       $                (0.24)        $                  0.17


Note 6        Stock Options
------        -------------

Effective April 1, 2006, the Company adopted the Financial  Accounting Standards
Board ("FASB") ASC 718-10 (Prior  authoritative  Financial  Accounting Standards
No.  123R,   "Share-Based  Payment"  ("SFAS  123R")),   utilizing  the  modified
prospective  method.  FASB ASC 718-10  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 FASB ASC 718-10 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 FASB ASC 718-10,  operations were charged $18,444
and $36,149 and $12,546 and $24,766 for three and six months ended September 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 38.71% to 43.06%,  and an expected life of 5 years for
the six months  ended  September  30,  2009;  expected  dividend  yield of 0.0%,
risk-free  interest rate of 2.26% to 3.16%,  volatility at 37.96% to 39.14%, and
an expected  life of 5 years for the six months ended  September  30, 2008.  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%.

                                       8
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                        TEL-INSTRUMENT ELECTRONICS CORP.
                        --------------------------------
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
        ----------------------------------------------------------------
                                   (Unaudited)


Note 7        Segment Information
------        -------------------

As a result of the classification of its marine systems division as discontinued
operations, in accordance with Financial Accounting Standards Board ("FASB") ASC
280-10 (Prior authoritative  Financial 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.

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


  Three Months Ended                       Avionics       Avionics        Avionics       Corporate
  ------------------                       --------       --------        --------       ---------
  September 30, 2009                          Gov't        Comm'l.           Total           Items            Total
  ------------------                          -----        -------           -----           -----            -----
<S>                                     <C>            <C>             <C>             <C>              <C>
  Net sales                             $ 1,798,305    $   586,049     $ 2,384,354                      $ 2,384,354
  Cost of sales                             788,216        371,889       1,160,105                        1,160,105
                                        -----------    -----------     -----------                      -----------
  Gross margin                            1,010,089        214,160       1,224,249                        1,224,249
                                        -----------    -----------     -----------                      -----------
  Engineering, research, & dev.                                            815,203                          815,203
  Selling, general, and admin.                                             362,500     $   348,218          710,718
  Interest expense, net                                                     11,403               -           11,403
                                                                       -----------     -----------      -----------
  Total expenses                                                         1,189,106         348,218        1,537,324
                                                                       -----------     -----------      -----------
  Income  (loss) from  continuing
  operations before taxes                                              $    35,143     $  (348,218)     $  (313,075)
                                                                       ===========     ===========      ===========

  Segment assets                        $ 4,231,418    $   386,498     $ 4,617,916     $ 1,387,316      $ 6,005,232
                                        ===========    ===========     ===========     ===========      ===========


  Three Months Ended                       Avionics       Avionics        Avionics       Corporate
  ------------------                       --------       --------        --------       ---------
  September 30, 2008                          Gov't        Comm'l.           Total           Items            Total
  ------------------                          -----        -------           -----           -----            -----
  Net sales                             $ 3,356,533       $498,588     $ 3,855,121                      $ 3,855,121
  Cost of sales                           1,424,221       _291,413       1,715,634                        1,715,634
                                        -----------    -----------     -----------                     -----------
  Gross margin                            1,932,312        207,175       2,139,487                        2,139,487
                                        -----------    -----------     -----------                     -----------

  Engineering, research, & dev.                                            713,853                          713,853
  Selling, general, and admin.                                             370,461     $   393,323          763,784
  Interest expense, net                                                     11,653            --             11,653
                                                                       -----------     -----------      -----------
  Total expenses                                                         1,095,967         393,323        1,489,290
                                                                       -----------     -----------      -----------
  Income (loss) from continuing
  operations before taxes                                                1,043,520     $  (393,323)     $   650,197
                                                                       ===========     ===========      ===========

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

                                                          9
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<CAPTION>


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


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

  Six Months Ended                         Avionics       Avionics        Avionics       Corporate
  ----------------                         --------       --------        --------       ---------
  September 30, 2009                          Gov't        Comm'l.           Total           Items           Total
  ------------------                          -----        -------           -----           -----           -----
  <S>                                   <C>            <C>             <C>              <C>            <C>
  Net sales                             $ 3,689,545    $ 1,020,564     $ 4,710,109                     $ 4,710,109
  Cost of sales                           1,762,441        655,330       2,417,771                       2,417,771
                                        -----------    -----------     -----------                     -----------
  Gross margin                            1,927,104        365,234       2,292,338                       2,292,338
                                        -----------    -----------     -----------                     -----------

  Engineering, research, & dev.                                          1,748,075                       1,748,075
  Selling, general, and admin.                                             860,893      $   657,073      1,517,966
  Interest expense, net                                                     18,506             --           18,506
                                                                       -----------      -----------    -----------
  Total expenses                                                         2,627,474          657,073      3,284,547
                                                                       -----------      -----------    -----------
  Income (loss) from continuing
  operations before taxes                                              $  (335,136)     $  (657,073)   $  (992,209)
                                                                       ===========      ===========    ===========


  Six Months Ended                         Avionics       Avionics        Avionics      Corporate
  ----------------                         --------       --------        --------      ---------
  September 30, 2008                          Gov't        Comm'l.           Total          Items            Total
  ------------------                          -----        -------           -----          -----            -----
  Net sales                             $ 6,317,129    $ 1,089,967     $ 7,407,096                     $ 7,407,096
  Cost of sales                           3,165,417        613,262       3,778,680                       3,778,680
                                        -----------    -----------     -----------                     -----------
  Gross margin                            3,151,712        476,705       3,628,416                       3,628,416
                                        -----------    -----------     -----------                     -----------

  Engineering, research, & dev.                                          1,449,004                       1,449,004
  Selling, general, and admin.                                             756,025      $   716,117      1,472,142
  Interest income, net                                                      22,782             --           22,782
                                                                       -----------      -----------    -----------
  Total expenses                                                         2,227,811          716,117      2,943,928
                                                                       -----------      -----------    -----------
  Income  (loss)  from   continuing
  operations before taxes                                              $ 1,400,605      $  (716,117)   $   684,488
                                                                       ===========      ===========    ===========


Note 8        Income Taxes
------        ------------

The Company adopted the provisions of FASB ASC 718-10  (formerly  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  September 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.

                                       10
</TABLE>

<PAGE>


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


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

On September  2006,  the FASB issued FASB ASC 820-10,  which defines fair value,
establishes a framework for measuring fair value, and expands  disclosures about
fair value measurements.  The provisions of FASB ASC 820-10 were effective April
1, 2008.

As defined in FASB ASC 820-10, 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.  FASB ASC 820-10
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 FASB ASC 820-10 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  short-term  nature of these  instruments.  The carrying value of the
Company's short-term  borrowings is a Reasonable estimate of their 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 September 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 FASB ASC 820-10.

                                       11

<PAGE>
<TABLE>
<CAPTION>


                        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  reflect  sales,  costs  and  expenses,   and  loss  from
discontinued  operations,  net of  taxes  for the  three  and six  months  ended
September 30, 2009 and 2008, respectively.

     ----------------------------------------------------------------------------------------------------------
                                                                         Three Months             Three Months
                                                                         ------------             ------------
                                                                                Ended                    Ended
                                                                                -----                    -----
                                                                   September 30, 2009       September 30, 2008
                                                                   ------------------       ------------------
     --------------------------------------------------------- ----------------------- ------------------------
     Discontinued Operations:
     --------------------------------------------------------- ----------------------- ------------------------
     <S>                                                                     <C>                      <C>
     Sales                                                                   $ 26,757                 $105,095
     --------------------------------------------------------- ----------------------- ------------------------
     Costs and expenses                                                        15,794                   30,459
     --------------------------------------------------------- ----------------------- ------------------------
     Income from operations of discontinued operations                         10,963                   74,636
     --------------------------------------------------------- ----------------------- ------------------------
     Income tax provision                                                       4,380                   29,817
     --------------------------------------------------------- ----------------------- ------------------------
     Income from discontinued operations                                      $ 6,583                 $ 44,819
     --------------------------------------------------------- ----------------------- ------------------------


     --------------------------------------------------------- ----------------------- ------------------------
                                                                           Six Months               Six Months
                                                                           ----------               ----------
                                                                               Ended                    Ended
                                                                               -----                    -----
                                                                   September 30, 2009       September 30, 2008
                                                                   ------------------       ------------------
     --------------------------------------------------------- ----------------------- ------------------------
     Discontinued Operations:
     --------------------------------------------------------- ----------------------- ------------------------
     Sales                                                                   $ 43,201                $ 186,601
     --------------------------------------------------------- ----------------------- ------------------------
     Costs and expenses                                                        33,754                   74,629
     --------------------------------------------------------- ----------------------- ------------------------
     Income from operations of discontinued operations                          9,447                  111,972
     --------------------------------------------------------- ----------------------- ------------------------
     Income tax provision                                                       3,774                   44,733
     --------------------------------------------------------- ----------------------- ------------------------
     Income from discontinued operations                                      $ 5,673                 $ 67,239
     --------------------------------------------------------- ----------------------- ------------------------


Note 11       Reclassifications

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

                                       12
</TABLE>

<PAGE>


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


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 two of its 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.

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.


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

In  December  2007,  the  FASB  issued  FASB  ASC  805-10  Prior   authoritative
literature:  SFAS No 141(R),  "Business  Combinations.)" This statement provides
new accounting guidance and disclosure  requirements for business  combinations.
FASB ASC 805-10 is effective for business  combinations which occur in the first
fiscal year  beginning on or after  December 15, 2008.  The adoption of FASB ASC
805-10 did not have an impact on the Company's consolidated financial statements
or financial  position,  but the nature and magnitude of any specific effects in
the future will depend upon the nature,  terms and size of any  acquisitions the
Company consummates after the effective date.

                                       13

<PAGE>


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


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

In March 2008, the FASB issued FASB ASC 808-10 (Prior authoritative  literature:
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.  FASB ASC  808-10  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.  FASB ASC 808-10 is
effective for financial  statements  issued for fiscal years and interim periods
beginning  after November 15, 2008.  FASB ASC 808-101  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  impact  the  disclosures   related  to  the  Company's
consolidated financial statements.

In April 2009, the FASB issued FASB ASC 825-10 (Prior authoritative  literature:
FSP FAS 107-1 and APB 28-1,  Interim  Disclosures  about Fair Value of Financial
Instruments.  FASB ASC 825-10 requires disclosures about fair value of financial
instruments for interim  reporting  periods of publicly traded companies as well
as in annual financial statements. FASB ASC 825-10 requires those disclosures in
summarized financial  information at interim reporting periods.  FASB ASC 825-10
was 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 FASB ASC 825-10 (Prior authoritative  literature:
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).  FASB  ASC  825-10  provides  additional  guidance  for
estimating  fair value when the  volume and level of  activity  for the asset or
liability have significantly  decreased.  FASB ASC 825-10 also includes guidance
on identifying  circumstances  that indicate a transaction is not orderly.  FASB
ASC 825-10 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.  FASB ASC 825-10 was effective for interim
and  annual  reporting  periods  ending  after  June 15,  2009,  and is  applied
prospectively.  The Company's adoption of FASB ASC 825-10 did not have an impact
on the Company's condensed consolidated financial statements.

                                       14

<PAGE>


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


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

In June 2009, the FASB issued FASB ASC 105 -10 (Prior authoritative  literature:
SFAS No. 168,  The FASB  Accounting  Standards  Codification  and  Hierarchy  of
Generally Accepted Accounting Principles (GAAP), a replacement of FASB Statement
No.  162).  FASB  ASC  105  -10   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  did 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.  FASB ASC 105 -10 is effective
for interim and annual  reporting  periods ending after  September 15, 2009, and
the Company has complied with this pronouncement.

In May  2009,  the  FASB  issued  FASB  ASC 855 -10,  Subsequent  Events,  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  FASB ASC 855 -10
effective  April 1, 2009 and has evaluated  subsequent  events after the balance
sheet date of September 30, 2009 through the date the financial  statements were
issued, November 16, 2009.

In October 2009, the FASB issued Accounting  Standards Update 2009-13,  "Revenue
Recognition  (Topic 605)".  This Update  provides  amendments to the criteria in
Subtopic 605-24 for separating  consideration  in  multiple-deliverable  revenue
arrangements.  It  establishes  a hierarchy of selling  prices to determine  the
selling  price  of each  specific  deliverable  which  includes  vendor-specific
objective  evidence (if  available),  third-party  evidence (if  vendor-specific
evidence is not available),  or estimated  selling price if neither of the first
two  are  available.  This  Update  also  eliminates  the  residual  method  for
allocating  revenue  between the elements of an  arrangement  and requires  that
arrangement  consideration  be  allocated at the  inception of the  arrangement.
Finally,  this Update expands the disclosure  requirements  regarding a vendor's
multiple-deliverable  revenue arrangements.  This Update is effective for fiscal
years  beginning on or after June 15, 2010.  We do not  anticipate  any material
impact from this Update.

                                       15

<PAGE>


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

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;  changes in  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.  These progress  payments are applied to
Accrued     Receivables     resulting    from    revenues    recognized    under
percentage-of-completion accounting.

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.

                                       16

<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.
While such  estimates  have  historically  been within our  expectation  and the
provision  established,  the Company  cannot  guarantee that it will continue to
receive positive results.

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.

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.

                                       17

<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 and in Management's  Discussion and
Analysis 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, 2008
(see Note 10 to Financial Statements).

Overview
--------

As  projected  in our Form 10-K for the year  ended  March 31,  2009,  sales and
profits in the first half of the current fiscal year declined materially because
of 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  believes that  substantial
production  and  delivery of products  will  commence in the second half of this
fiscal year,  and the  financial  situation  for the Company will  improve.  The
Company  expects to be profitable in the fourth  quarter of this fiscal year and
in the next fiscal year.

During the first six months of the current fiscal year, the Company's sales fell
36% as compared to the same  period  last year,  and the Company  recorded a net
loss from continuing operations before taxes of $992,000 as compared to $684,488
in net income from continuing operations before taxes in the prior year.

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.  The Company continues to make substantial
engineering  investments  in the AN/USM-708  and the recently  awarded  TS-4530A
programs.  TEL has 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 and revenues. During the second half of this fiscal
year,  revenues  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,  and the Company should be profitable in the fourth quarter of the
current  fiscal  year.  In  November  2009,  the  Company  received an order for
approximately  $2.4 million for its AN/ASM-719 and AN/USM-708.  Shipments of the
AN/APM-719 will commence in the 3rd quarter of the current fiscal year.

Over the  last few  years  TEL was  awarded  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
over the next 18 months as production  deliveries of the AN/USM-708,  AN/APM-206
and TS-4530A are expected to commence in volume,  and  engineering  costs should
also decline.

                                       18

<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),  and the culmination of a multi-year,  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 September 30, 2009 the Company's backlog stood at approximately $18.3 million
as compared to  approximately  $10 million at September 30, 2008. The backlog at
September  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 $14.9 million in orders related
to the TS-4530A program, and this amount is included in the backlog at September
30, 2009.

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  two  of  its  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"),  and which the Company  denied.  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. (See Note 12 to the
Financial Statements)

While TEL is contesting  Aeroflex's  claims, and is confident about the ultimate
successful outcome of the litigation, the Company anticipates that it will incur
legal fees in connection  with the  litigation,  which have had and will have an
adverse effect on its results of operations for the fiscal year ending March 31,
2010.

The Company has  increased  its capital and  liquidity in the last six months in
order to fund the  operating  losses in the first two  quarters  of this  fiscal
year,  and the  anticipated  increase  in  production  and sales in the last two
quarters. See Liquidity and Capital Resources below.

                                       19

<PAGE>


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

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

Sales
-----

For the quarter  ended  September  30, 2009,  total sales  decreased  $1,470,767
(38.2%) to  $2,384,354  as compared to  $3,855,121  for the same  quarter in the
prior year. Avionics Government sales decreased $1,558,228 (46.4%) to $1,798,305
for the period as compared  to  $3,356,533  for the same  period last year.  The
decrease in Avionics Government sales is primarily  attributed to: a decrease in
shipments of the T-47N, AN/APM-719, TR-401, and T-76 as well as sales associated
with the ITATS,  which are  recognized  on a  percentage  of  completion  as the
initial phase of the programs nears completion. Additionally, the second quarter
of the prior fiscal year included a negotiated  billing to the government in the
amount of $406,000 for additional work previously  performed and expensed on the
CRAFT  program as well as increased  billings for revenues  associated  with the
test and  documentation  phase of the CRAFT program.  Government sales have been
impacted by delays in the receipt of several expected large orders as well as in
the  completion of two of its major  programs.  These  decreases  were partially
offset by higher sales of the TR-420 and the T-47G.  Commercial  sales increased
$87,461  (17.5%) to $586,049 for the three months  ended  September  30, 2009 as
compared to $498,588 in the same period in the prior year. The increase in sales
is only the result of the  timing of orders and is not a trend that the  Company
expects to continue.

For the six months ended September 30, 2009,  total sales  decreased  $2,696,987
(36.4%) to $4,710,109 as compared to $7,407,096 for the same period in the prior
year. Avionics  Government sales decreased  $2,627,584 (41.6%) to $3,689,545 for
the period as compared to $6,317,129 for the same period last year. The decrease
in Avionics Government sales is primarily attributed to: a decrease in shipments
of the T-47N,  T-30D,  TR-401,  T-76, T-47G as well as sales associated with the
ITATS,  which are  recognized on a percentage of completion as the initial phase
of the  programs  nears  completion.  Additionally,  the first six months of the
prior fiscal year included a negotiated  billing to the government in the amount
of $406,000 for additional work  previously  performed and expensed on the CRAFT
program as well as increased billings for revenues  associated with the test and
documentation phase of the CRAFT program. Government sales have been impacted by
delays  in the  receipt  of  several  expected  large  orders  as well as in the
completion of two of its major programs.  These decreases were partially  offset
by higher  sales of the TR-420,  T-30CM,  AN/APM-719  and the T-760.  Commercial
sales decreased  $69,403 (6.4%) to $1,020,564 for the six months ended September
30, 2009 as compared to  $1,089,967  in the same period in the prior year.  This
decrease in sales is a result of the continued  weak condition of the commercial
airline industry.


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

Gross margin  decreased  $915,238  (42.8%) to  $1,224,249  for the quarter ended
September 30, 2009 as compared to  $2,139,487  for the same quarter in the prior
fiscal  year.  The  decrease  in gross  margin is  primarily  attributed  to the
decrease in volume.  The gross margin percentage for the quarter ended September
30,  2009 was 51.3% as compared to 55.5% for the  quarter  ended  September  30,
2008. The decrease in gross margin dollars and percentage is also  attributed to
a negotiated  billing in the second  quarter of the prior year to the government
in the amount of $406,000 for additional work previously  performed and expensed
on the CRAFT program.

                                       20

<PAGE>


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


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

Gross Margin (continued)
------------------------

Gross margin decreased $1,336,078 (36.8%) to $2,292,338 for the six months ended
September  30, 2009 as compared to  $3,628,416  for the same period in the prior
fiscal  year.  The  decrease  in gross  margin is  primarily  attributed  to the
decrease  in  volume.  The gross  margin  percentage  for the six  months  ended
September  30,  2009  was  48.7% as  compared  to 49% for the six  months  ended
September 30, 2008.  The decrease in gross margin dollars and percentage is also
attributed  to a negotiated  billing in the second  quarter of the prior year to
the  government  in the  amount  of  $406,000  for  additional  work  previously
performed and expensed on the CRAFT program.

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

Selling,  general  and  administrative  expenses  decreased  $53,066  (6.9%)  to
$710,718 for the quarter  ended  September 30, 2009, as compared to $763,784 for
the quarter  ended  September 30, 2008.  This  decrease is attributed  mainly to
lower bonus accrual and travel expenses offset partially by an increase in legal
fees associated with the litigation (see Note 12 to the Financial Statements).

Selling,  general  and  administrative  expenses  increased  $45,824  (3.1%)  to
$1,517,966  for  the six  months  ended  September  30,  2009,  as  compared  to
$1,472,142  for the six months  ended  September  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 and lower bonus accrual expense.

Engineering,  research and development  expenses  increased  $101,350 (14.2%) to
$815,203 and $299,071  (20.6%) to $1,748,075 for the three months and six months
ended  September 30, 2009 as compared to $713,853 and  $1,449,004  for the three
and six months ended September 30, 2008.  Engineering,  research and development
expenses are mostly  attributed  to  engineering  costs related to the CRAFT and
TS-4530 programs.

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

Interest expense decreased for the three and six months ended September 30, 2009
primarily as a result of lower interest rates.

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

As a result of the above, the Company recorded losses from continuing operations
before  income taxes of $313,075 and $992,209 for the three and six months ended
September  30,  2009 as compared to income  from  continuing  operations  before
income  taxes of  $650,197  and  $684,488  for the  three and six  months  ended
September 30, 2008.

                                       21

<PAGE>


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


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

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

Income tax benefits in the amounts  $125,074 and $396,387  were recorded for the
three and six  months  ended  September  30,  2009 as  compared  to  income  tax
provisions  in the amounts of $304,365 and $318,065 for the three and six months
ended  September 30, 2008.  The change is due to the losses before taxes for the
three and six months ended September 30, 2009 as compared to income before taxes
for the three and six months ended September 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  net losses  from  continuing
operations,  net of taxes of $188,001  and $595,822 for the three and six months
ended September 30, 2009 as compared to net income from  continuing  operations,
net of taxes of  $345,832  and  $366,423  for the  three  and six  months  ended
September 30, 2008.

Income from  Discontinued Operations, Net of taxes
--------------------------------------------------

For the three and six months  ended  September  30, 2009,  the Company  recorded
income  from  discontinued  operations,  net of  taxes,  of $6,583  and  $5,673,
respectively,  as compared to income from discontinued operations, net of taxes,
of  $44,819  and  $67,239,  respectively,  for the  three and six  months  ended
September 30, 2008, primarily as a result of the lower sales volume. See Note 10
to the Financial Statements.

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

As a result of the  above,  the  Company  recorded  net losses of  $181,418  and
$590,149  for the three and six months ended  September  30, 2009 as compared to
recording net income of $390,651 and $443,662 for the three and six months ended
September 30, 2008.

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

At September 30, 2009, the Company had working capital of $2,935,415 as compared
to  $3,284,115 at March 31, 2009.  For the six months ended  September 30, 2009,
the Company used $808,001 in cash for operations as compared to $146,861 for the
six months ended September 30, 2008. This increase in cash used in operations is
primarily  attributed to the  operating  loss for the period and the decrease in
accrued expenses partially offset by the decrease in inventories.

Net cash used in  investing  activities  was  $16,108  for the six months  ended
September 30, 2009 as compared to $57,730 for the six months ended September 30,
2008 due to the decrease in purchases of equipment.

Net cash  provided by  financing  activities  increased  to $679,885 for the six
months ended September 30, 2009 from $213,358 for the six months ended September
30, 2008  primarily  due to proceeds  from the sale of new common  stock and the
proceeds from the exercise of stock options, discussed below.

                                       22

<PAGE>



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


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

At September 30, 2009 the Company's backlog stood at approximately $18.3 million
as compared to approximately  $10.0 million at September 30 2008. The backlog at
September  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.  Approximately  $14.3  million  in orders is  related  to the  TS-4530A
program, and this amount is included in the backlog at September 30, 2009.

In order to ensure  adequate  funding,  in light of the  losses in the first two
quarters, and of the anticipated increasing production and sales in the last two
quarters, the Company increased its borrowing under its bank credit agreement by
$150,000  to  $600,000  and  raised  an  additional  $520,000  of  capital  from
Directors,  through a  combination  of sales of new shares and the  exercise  of
previously  granted  stock  options.  All  other  shareholders  were  given  the
opportunity to purchase additional shares of stock at the same price paid by the
directors, but none chose to participate. See Part II, Item 2, below.

The Company has an additional $248,000 available to borrow under its bank credit
agreement  at  September  30,  2009 and is  currently  discussing  with the bank
another annual  extension of that agreement  until  September 30, 2010. The bank
has agreed to annual  extensions for several years, and the Company is confident
that the agreement will be extended to September 30, 2010.

Based  on its  substantial  backlog,  the  additional  capital  raised  from the
directors,  and the  available  amount  under its bank  agreement,  the  Company
believes that it has adequate liquidity for at least the next twelve months.

There was no  significant  impact  on the  Company's  operations  as a result of
inflation  for  the  six  months  ended  September  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.

                                       23

<PAGE>


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


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

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

              See discussion in Note 12 to the Financial Statements, and under
              M,D&A overview.

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

              In September  2009,  the Company sold 76,000  shares of its Common
              Stock at $4.73 per share to certain  Directors and Officers of the
              Company.  All other  shareholders  were given the  opportunity  to
              participate on the same price,  terms and conditions  subject to a
              minimum share  purchase.  A mailing was sent to all  shareholders,
              but no existing  shareholders  chose to participate.  Theses funds
              were used for working capital needs.

              The shares were sold to the  Directors  pursuant to the  exemption
              provided by Section 4 of the Securities Act of 1933 and Regulation
              D thereunder.  The Directors were accredited  investors under Rule
              501(a)(4) under the Securities Act of 1933.

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.

                                       24

<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 16, 2009                 By:  /s/  Harold K. Fletcher
                                             --------------------------------
                                                    Harold K. Fletcher
                                                    CEO


Date:   November 16, 2009                 By:  /s/  Joseph P. Macaluso
                                             --------------------------------
                                                    Joseph P. Macaluso
                                                    Principal Accounting Officer

                                       25