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

                                   ----------

                                    FORM 10-Q

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

                  For the quarterly period ended December 31, 2003

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

                  Commission File No. 33-18978

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

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

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

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

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

                      Yes |X|                       No |_|

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

2,144,151 shares of Common stock, $.10 par value as of February 9, 2004.


<PAGE>

                     TEL-INSTRUMENT ELECTRONICS CORPORATION

                                TABLE OF CONTENTS

                                                                          PAGE
                                                                          ----

Item 1.     Financial Statements (Unaudited):

            Condensed Comparative Balance Sheets
               December 31, 2003 and March 31, 2003                        1

            Condensed Comparative Statements of Operations -
               Three and Nine Months Ended December 31, 2003 and 2002      2

            Condensed Comparative Statements of Cash Flows -
               Nine Months Ended December 31, 2003 and 2002                3

            Notes to Condensed Financial Statements                        4-6

Item 2.     Management's Discussion and Analysis of Financial
                Condition and Results of Operations                        7-11

Item 4.     Controls and Procedures                                        11

                  Part II           Other Information

Item 4.     Submission of matters to a Vote of Security Holders            12

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

            Signatures                                                     13

            Certifications                                                 14-17


<PAGE>

Item 1 - Financial Statements

                     TEL-INSTRUMENT ELECTRONICS CORPORATION
                      CONDENSED COMPARATIVE BALANCE SHEETS
                      December 31, 2003 and March 31, 2003

<TABLE>
<CAPTION>
       ASSETS                                                     (Unaudited)
                                                            December 31, 2003      March 31, 2003
                                                            -----------------      --------------
<S>                                                                <C>                 <C>
Current assets:
  Cash                                                             $1,976,723          $1,680,124
  Accounts receivable, net of allowance for doubtful
    accounts of $36,598 at December 31, 2003 and
    March 31, 2003                                                  2,002,004           1,966,815
  Inventories                                                       1,880,015           2,262,147
  Prepaid expenses and other current assets                            85,773              42,587
  Deferred income tax benefit - current                               622,348             535,448
                                                                   ----------          ----------

Total current assets                                                6,566,863           6,487,121

Property, plant, and equipment, net                                   700,253             726,594
Other assets                                                          297,293              97,462
                                                                   ----------          ----------

Total assets                                                       $7,564,409          $7,311,177
                                                                   ==========          ==========

LIABILITIES & STOCKHOLDERS EQUITY

Current liabilities:
  Note payable - related party - current portion                   $  200,000          $  200,000
  Convertible subordinated notes - related party                        7,500               7,500
  Capitalized lease obligations - current portion                      28,231              28,637
  Accounts payable                                                    371,337             503,216
  Accrued payroll, vacation pay, deferred wages,
     and payroll taxes                                                383,191             436,630
  Income taxes payable                                                     --             103,924
  Accrued expenses                                                  1,056,017           1,052,327
                                                                   ----------          ----------

Total current liabilities                                           2,046,276           2,332,234

Notes payable - related party - non-current portion                    50,000              50,000
Capitalized lease obligations - excluding current portion                 453              21,069
                                                                   ----------          ----------

Total liabilities                                                   2,096,729           2,403,303

Stockholders' equity:
  Common stock                                                        214,418             213,583
  Additional paid-in capital                                        3,960,886           3,944,812
  Retained earnings                                                 1,292,376             749,479
                                                                   ----------          ----------

Total stockholders' equity                                          5,467,680           4,907,874
                                                                   ----------          ----------

Total liabilities and stockholders' equity                         $7,564,409          $7,311,177
                                                                   ==========          ==========

See accompanying notes to condensed financial statement
</TABLE>


                                       1
<PAGE>

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

<TABLE>
<CAPTION>
                                                                     Three Months Ended                   Nine Months Ended
                                                             Dec. 31, 2003      Dec. 31, 2002      Dec. 31, 2003      Dec. 31, 2002
                                                             -------------      -------------      -------------      -------------
<S>                                                            <C>                <C>                <C>                <C>
Sales

  Government, net                                              $ 2,002,133        $ 2,435,114        $ 5,634,389        $ 7,448,690
  Commercial, net                                                  912,138            631,689          2,954,504          1,450,748
                                                               -----------        -----------        -----------        -----------

Total Sales                                                      2,914,271          3,066,803          8,588,893          8,899,438

Cost of sales                                                    1,417,825          1,437,563          3,897,156          4,209,428
                                                               -----------        -----------        -----------        -----------

Gross margin                                                     1,496,446          1,629,240          4,691,737          4,690,010

Operating expenses:

  Selling, general & administrative                                715,465            803,872          2,165,055          2,167,533
  Engineering, research, & development                             551,869            391,690          1,619,917          1,260,736
                                                               -----------        -----------        -----------        -----------

Total operating expenses                                         1,267,334          1,195,562          3,784,972          3,428,269

     Income from operations                                        229,112            433,678            906,765          1,261,741

Other income (expense):

  Interest income                                                    3,928             17,954             19,838             33,743
  Interest expense                                                  (4,587)           (15,653)           (22,529)           (48,941)
                                                               -----------        -----------        -----------        -----------

Income before taxes                                                228,453            435,979            904,074          1,246,543

Provision for income taxes, net                                     91,266            174,173            361,177            497,993
                                                               -----------        -----------        -----------        -----------

Net income                                                     $   137,187        $   261,806        $   542,897        $   748,550
                                                               ===========        ===========        ===========        ===========

    Basic income per common share                              $      0.06        $      0.12        $      0.25        $      0.35
    Diluted income per common share                            $      0.06        $      0.12        $      0.24        $      0.35

Dividends per share                                                   None               None               None               None

Weighted average shares outstanding
     Basic                                                       2,144,151          2,135,801          2,141,896          2,135,536
     Diluted                                                     2,232,820          2,159,985          2,230,565          2,158,985

See accompanying notes to condensed financial statements.
</TABLE>


                                       2
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                Nine Months Ended      Nine Months Ended
                                                                                December 31, 2003       December 31,2002
                                                                                -----------------       ----------------
<S>                                                                                   <C>                    <C>
Cash flows from operating activities
Net income                                                                            $   542,897            $   748,550
Adjustments to reconcile net income to cash used
    In operating activities:
     Deferred income taxes                                                                (86,900)               107,371
     Depreciation                                                                         196,487                188,135
     Reserve for obsolescence                                                              40,000                 45,000

Changes in assets or liabilities:
   Increase in accounts receivable, net                                                   (35,189)              (941,560)
   Decrease in inventories, net                                                           342,132                626,796
   Increase in prepaid expenses and other current assets                                  (43,186)                (8,244)
   Increase in other assets                                                              (199,831)                (5,575)
   (Decrease) increase in accounts payable                                               (131,879)               335,382
   Increase in accrued payroll, vacation pay, deferred wages,
     and payroll taxes                                                                    (53,439)                64,302
   Decrease in income taxes payable                                                      (103,924)                    --
   Increase in accrued expenses                                                             3,690                374,521
                                                                                      -----------            -----------
Net cash provided by operations                                                           470,858              1,534,678
                                                                                      -----------            -----------

Cash flows from investing activities:
  Cash purchases of property, plant and equipment                                        (170,146)               (90,537)
                                                                                      -----------            -----------
Net cash used in investing activities                                                    (170,146)               (90,537)
                                                                                      -----------            -----------

Cash flows from financing activities:
Proceeds from exercise of stock options                                                    16,909                  3,090
Repayment of note payable - related party                                                      --               (100,000)
Repayment of capitalized lease obligations                                                (21,022)               (97,336)
                                                                                      -----------            -----------
Net cash used in financing activities                                                      (4,113)              (194,246)
                                                                                      -----------            -----------

Net increase in cash                                                                      296,599              1,249,895
Cash at beginning of period                                                             1,680,124              1,198,191
                                                                                      -----------            -----------
Cash at end of period                                                                 $ 1,976,723            $ 2,448,086
                                                                                      ===========            ===========

Supplemental Cash Flow Information:
Interest paid                                                                         $    26,105            $    77,243
                                                                                      ===========            ===========
Taxes paid                                                                            $   462,029            $   428,029
                                                                                      ===========            ===========
</TABLE>

See accompanying notes to condensed financial statements


                                       3
<PAGE>

                         TEL-INSTRUMENT ELECTRONICS CORP
                     NOTES TO CONDENSED FINANCIAL STATEMENTS

Note 1      Basis of Presentation

In the opinion of management,  the accompanying  unaudited  condensed  financial
statements  contain  all  adjustments   (consisting  only  of  normal  recurring
accruals)  necessary to present fairly the financial  position of Tel-Instrument
Electronics  Corp as of December 31,  2003,  the results of  operations  for the
three and nine  months  ended  December  31, 2003 and  December  31,  2002,  and
statements  of cash  flows  for the nine  months  ended  December  31,  2003 and
December 31, 2002.  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, 2003 results included herein have been
derived from the audited financial  statements  included in the Company's annual
report on Form 10-K.  Accordingly,  the  financial  statements  included  herein
should be  reviewed  in  conjunction  with the  financial  statements  and notes
thereto included in the Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 2003.

Note 2      Accounts Receivable

The following table sets forth the components of accounts receivable:

                                    December 31, 2003       March 31, 2003
                                    -----------------       --------------

            Commercial                    $   919,998          $   555,076
            Government                      1,118,604            1,448,337
            Allowance for Bad Debts           (36,598)             (36,598)
                                          -----------          -----------

            Total                         $ 2,002,004          $ 1,966,815
                                          ===========          ===========

Note 3      Inventories

Inventories consist of:

                                            December 31, 2003    March 31, 2003
                                            ----------------     --------------

            Purchased Parts                       $   645,632       $ 1,074,442
            Work-in-Process                         1,290,763         1,289,578
            Finished Goods                             96,433            10,940
            Less:  Reserve for Obsolescence          (152,813)         (112,813)
                                                  -----------       -----------

            Total                                 $ 1,880,015       $ 2,262,147
                                                  ===========       ===========


                                       4
<PAGE>

                         TEL-INSTRUMENT ELECTRONICS CORP
                     NOTES TO CONDENSED FINANCIAL STATEMENTS

Note 4      Earnings Per Share

The  Company's  basic  income per share is based on net income for the  relevant
period,  divided by the weighted  average  number of common  shares  outstanding
during the period.  Diluted income per share is based on net income,  divided by
the weighted  average  number of common  shares  outstanding  during the period,
including common share equivalents, such as outstanding stock options.

Note 5      Stock Options

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

The  Company  estimates  the fair value of each option  using the Black  Scholes
option-pricing model with the following weighted-average  assumptions:  expected
dividend yield of 0.0%, risk-free interest rate of 3.5, volatility at 50% and an
expected life of 5 years. Had the Company determined  compensation cost based on
the fair  market  value at the grant date for its stock  options  under SFAS No.
123, the pro forma amounts are indicated below:

<TABLE>
<CAPTION>
                                                                     Nine Months Ended       Nine Months Ended
                                                                     December 31, 2003       December 31, 2002
                                                                     -----------------       -----------------
<S>                                                                     <C>                     <C>
            Net income  - as reported                                   $ 542,897               $ 748,550
            Less fair value of stock options                              (60,750)                (58,082)
                                                                        ---------               ---------
            Net income - pro forma                                        482,147                 690,468
                                                                        =========               =========

            Basic earnings per share - as reported                          0.25                    0.35
            Basic earnings per share - pro forma                            0.23                    0.32

            Diluted earnings per share - as reported                        0.24                    0.35
            Diluted earnings  per share - pro forma                         0.22                    0.32
</TABLE>

During the nine months ended December 31, 2003, the Company sold 8,350 shares of
common stock upon exercise of previously  granted employee options,  pursuant to
the exemption from  registration  provided by Sec. 4(2) of the Securities Act of
1933.


                                       5
<PAGE>

                         TEL-INSTRUMENT ELECTRONICS CORP
                     NOTES TO CONDENSED FINANCIAL STATEMENTS

Note 6      Government and Commercial Sales

The Company is organized on the basis of its avionics  products.  The government
market  consists  primarily  of the sale of test  equipment  to U.S. and foreign
governments  and  militaries,   either  direct  or  through  distributors.   The
commercial  market  consists of sales of test  equipment to domestic and foreign
airlines and to commercial  distributors.  The  commercial  market also includes
sales related to repairs and  calibration  which have a lower gross margin.  The
Company primarily  develops and designs test equipment for the avionics industry
and, as such,  the Company's  products and designs may be sold in the government
and commercial markets.

The table below presents information about sales and gross margin. Cost of sales
includes certain allocation factors for indirect costs.

<TABLE>
<CAPTION>
                                      Three Months Ended               Three Months Ended
                                       December 31, 2003                December 31, 2002
                                 Government       Commercial       Government       Commercial
                                 ----------       ----------       ----------       ----------
<S>                              <C>               <C>             <C>               <C>
            Sales                $2,002,133        $912,138        $2,435,114        $631,689
            Cost of Sales           906,451         511,374         1,126,062         311,501
                                 ----------        --------        ----------        --------
            Gross Margin         $1,095,682        $400,764        $1,309,052        $320,188
                                 ==========        ========        ==========        ========

<CAPTION>
                                      Three Months Ended               Three Months Ended
                                       December 31, 2003                December 31, 2002
                                 Government       Commercial       Government       Commercial
                                 ----------       ----------       ----------       ----------
<S>                              <C>             <C>               <C>             <C>
            Sales                $5,634,389      $2,954,504        $7,448,690      $1,450,748
            Cost of Sales         2,382,096       1,515,060         3,436,478         772,950
                                 ----------      ----------        ----------      ----------
            Gross Margin         $3,252,293      $1,439,444        $4,012,212      $  677,798
                                 ==========      ==========        ==========      ==========
</TABLE>

Note 7      Subsequent Events

In January 2004, the Company acquired privately held Innerspace Technology, Inc.
(ITI) of  Waldwick,  NJ. ITI has been in business  for over 30 years  designing,
manufacturing and distributing a variety of shipboard and underwater instruments
to support hydrographers, oceanographers, researchers, engineers, geophysicists,
and surveyors worldwide.  ITI has total annual sales of approximately $1 million
dollars,  and the  purchase  price was $547,000 and  employment  contracts  were
signed with the  principals.  This  acquisition  was  financed  internally  from
available funds, and, as such, the Company's cash balance was reduced in January
2004. The Company hopes to significantly increase the sales of ITI's products by
expanding distribution and enhancing marketing and product development; however,
there can be no assurance.

The Company has been  approved  for listing of its common  stock on the American
Stock  Exchange  (Amex).  The Company  began trading on the Amex on February 10,
2004 with the stock symbol TIK.


                                       6
<PAGE>

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

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

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

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

Critical Accounting Policies

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

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

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

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

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


                                       7
<PAGE>

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

Critical Accounting Policies (continued)

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

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

Overview

Sales for the three and nine months  ended  December  31, 2003  decreased 5% and
3.5%, respectively. The decrease in sales is primarily attributed to the reduced
shipments of the AN/APM-480 to the U.S. Navy. The Company, in agreement with the
U.S.  Navy,  has  temporarily  decreased  the  number  of units it is  currently
shipping in  anticipation  of these  units  being  returned  for  up-grades  and
enhancements. The total number of units under contract has not changed. However,
this decline was partially  offset by an increase in  commercial  sales for both
periods,  primarily as a result of the introduction of the TR-220/210  family of
products,  and the T-47G and the T-30D.  The decline in sales of the  AN/APM-480
for the nine months  ended  December 31, 2003 was also  partially  offset by the
increase in the shipment of DME test sets.

The  Company  continues  to  invest  in new  product  development.  Engineering,
research,  and development  expenditures increased 28% for the nine months ended
December 31, 2003, as compared to the same period in the prior fiscal year,  and
represented  19% of total sales for the nine months  ended  December 31, 2003 as
compared  to 14%  for  the  same  period  last  year.  The  introduction  of the
TR-220/TR-210  Multi-Function  test  sets was  very  successful. These  products
accounted for 16% and 12% of total sales,  respectively,  for the three and nine
months ended  December 31, 2003.  The Company  continues to evaluate and develop
new products. Research and development activities include the design of the next
generation of IFF test sets,  development of a foundation  technology for future
products,  and  incorporation  other product  enhancements.  The Company is also
developing a  multi-function  bench test set,  which will add a new market and a
diversification opportunity for the future.

In January 2004, the Company acquired privately held Innerspace Technology, Inc.
(ITI) of  Waldwick,  NJ. ITI has been in business  for over 30 years  designing,
manufacturing and distributing a variety of shipboard and underwater instruments
to support hydrographers, oceanographers, researchers, engineers, geophysicists,
and surveyors worldwide.  ITI has total annual sales of approximately $1 million
dollars,  and the purchase price was $547,000 and the Company signed  employment
contracts with the principals.  The Company hopes to significantly  increase the
sales of ITI's products by expanding  distribution  and enhancing  marketing and
product development; however, there can be no assurance (see Note 7 to Financial
Statements).


                                       8
<PAGE>

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

Overview (continued)

The Company has been active in  responding to customer  requests for  quotation,
and continues to pursue  opportunities  in both the  commercial  and  government
markets, both domestically and internationally.  Exploration of opportunities in
non-avionic  government and  commercial  markets also continues in an attempt to
broaden the  Company's  product  line.  The Company  continues  its efforts with
Semaphore  Capital  Advisors  LLC to  pursue  growth  through  acquisitions  and
alliances of compatible businesses or technologies.  In addition, the Company is
working with Investment  Partners  Group,  exploring the licensing of compatible
technologies.

Results of Operations

Sales

For the nine months ended December 31, 2003, net sales decreased $310,545 (3.5%)
as  compared  to the nine months  ended  December  31,  2002.  Government  sales
decreased  $1,814,301  (24.4%) for the nine months  ended  December  31, 2003 as
compared to the nine months ended  December  31, 2002.  The decrease in sales is
primarily  attributed  to the reduced  shipments of the  AN/APM-480  to the U.S.
Navy. The Company,  in agreement with the U.S. Navy, has  temporarily  decreased
the number of units it is  currently  shipping  in  anticipation  of these units
being returned for up-grades and  enhancements.  The total number of units under
contract  has not changed.  This  decrease in sales was  partially  offset by an
increase in the shipment of Precision DME test sets.  Commercial sales increased
$1,503,756  (103.7%) for the nine months ended  December 31, 2003 as compared to
the same period last year. The  introduction of the TR-220  Multi-Function  test
set and a sales promotion of the T-49C  Transponder/TCAS  test set accounted for
this increase.  The Company's repairs and calibration business also increased in
this period.  However,  the commercial market remains uncertain,  primarily as a
result of the weak financial position of most commercial airlines.

For the three months  ended  December 31,  2003,  net sales  decreased  $152,532
(5.0%) as compared to the three months ended December 31, 2002. Government sales
decreased  $432,981  (17.8%) for the three  months  ended  December  31, 2003 as
compared to the three months ended  December 31, 2002.  The decrease in sales is
primarily attributed to the reduced shipments of the AN/APM-480 to the U.S. Navy
as discussed  above.  This  decrease was  partially  offset by a net increase in
other government  products.  Commercial sales increased $280,449 (44.4%) for the
three months  ended  December 31, 2003 as compared to the same period last year.
The  introduction of the  TR-220/TR-210  Multi-Function  test sets accounted for
most of this  increase.  The  Company's  repairs and  calibration  business also
increased in this  period.  This  increase in  commercial  sales were  partially
offset by a decrease in the sale of the Company's  T-49C  Transponder/TCAS  ramp
test set as a result of ending a sales promotion.


                                       9
<PAGE>

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

Results of Operations (continued)

Gross Margin

Gross margin  dollars  decreased  $1,727 for the nine months ended  December 31,
2003 as compared to the same period last year. This decrease, for the most part,
is attributed to the lower  overall sales volume,  and the higher  percentage of
sales to distributors, who are sold to at a discount, partially offset by higher
gross  profit on certain  products.  The gross  margin  percentage  for the nine
months ended  December 31, 2003 was 54.6%  compared to 52.7% for the nine months
ended December 31, 2002.

Gross  margin  dollars  decreased  $132,794  (8.2%) for the three  months  ended
December  31, 2003 as compared  to the same period last year.  This  decrease in
gross margin,  for the most part,  is attributed to the lower sales volume.  The
gross margin  percentage  for the three months ended December 31, 2003 was 51.3%
as compared to 53.1% for the three months ended December 31, 2002.

Operating Expenses

Selling,  general and  administrative  expenses  decreased $2,478 (0.1%) for the
nine months  ended  December  31,  2003 as  compared  to the nine  months  ended
December 31, 2002.  Lower  relocation,  recruitment,  selling  commissions,  and
professional  fees were mostly  offset by an increase in  personnel  and related
salaries, benefits and travel expenses.

Selling,  general and administrative  expenses decreased $88,407 (11.0%) for the
three  months  ended  December  31, 2003 as compared to the three  months  ended
December 31, 2002.  This  decrease is mainly  attributed  to lower  professional
fees, and relocation expenses.

Engineering,  research and development  expenses  increased $160,179 (40.9%) and
$359,181 (28.5%), respectively, for the three and nine months ended December 31,
2003, as compared to same periods in the prior fiscal year.  The higher level of
expenditures  is  associated  with  an  increase  in  research  and  development
activities,  including  the next  generation  of IFF  test  sets,  developing  a
foundation  technology  for future  products,  and  incorporating  other product
enhancements.  The Company is also developing a bench test set, which will add a
new market and diversification opportunity for the future.

Income Taxes

Income taxes  decreased  $82,907 and $136,816,  respectively,  for the three and
nine months ended December 31, 2003 as compared to the same periods last year as
a result of the lower  profit.  The provision  for income taxes  represents  the
effective  federal and state tax rate on the Company's  income before taxes. The
Company has utilized all its net operating  loss  carryforwards  and the Company
will pay federal taxes this fiscal year.


                                       10
<PAGE>

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

Liquidity and Capital Resources

At December 31, 2003 the Company had positive  working  capital of $4,520,587 as
compared to $4,154,887 at March 31, 2003. For the nine months ended December 31,
2003, cash provided by operations was $470,858 as compared to $1,534,678 for the
nine months ended  December 31, 2002.  This decrease in cash from  operations is
primarily  attributable  to an  increase  in  inventories,  an increase in other
assets, a decrease in accrued expenses, and payment of income taxes.

The Company  has a line of credit of  $1,750,000  from Fleet  Bank.  The line of
credit bears an interest rate of 0.5% above the lender's  prevailing  base rate,
which is payable monthly,  based upon the outstanding  balance.  At December 31,
2003,  the  Company  had  no  outstanding   balance.   The  line  of  credit  is
collateralized  by  substantially  all of the assets of the company.  The credit
facility  requires the Company to maintain certain  financial  covenants.  As of
December 31, 2003, the Company was in compliance  with all financial  covenants.
The line of credit expires at September 30, 2004.

Based upon the current backlog,  its existing credit line, and cash balance, the
Company  believes that it has sufficient  working  capital to fund its operating
plans for at least the next  twelve  months.  However,  as the  Company  pursues
additional opportunities, the need for additional capital may arise. The Company
will  evaluate  its  alternatives  at that time.  The Company has also  retained
Semaphore Capital Advisors as its investment bankers to help pursue acquisitions
and alliances and, if needed,  to help raise capital.  The Company maintains its
cash balance primarily in a money market account in the event the cash is needed
for  an  acquisition.  Some  of  this  cash  was  used  to  purchase  Innerspace
Technology, Inc. (see above).

There was no  significant  impact  on the  Company's  operations  as a result of
inflation for the nine months ended December 31, 2003.

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, 2003.

Item 4.     Controls and Procedures

The Company adopted  disclosure  controls and  procedures,  as called for by the
recently   adopted   legislation  and  rules  of  the  Securities  and  Exchange
Commission.  Under rules  promulgated  by the S.E.C.,  disclosure  controls  and
procedures are defined as "those controls or other procedures of the issuer that
are designed to ensure that  information  required to be disclosed by the issuer
in the reports  filed or  submitted  by it under the  Exchange  Act is recorded,
processed,  summarized  and reported,  within the time periods  specified in the
Commission's  rules and forms." The Chief  Executive  Officer and the  Principal
Accounting  Officer of the Company evaluated the Company's  disclosure  controls
and procedures at January 30, 2004, and concluded that they are effective.

Furthermore,  there  were  no  significant  changes  in the  Company's  internal
controls,  or in other factors that could  significantly  affect these controls,
after  January  30,  2004,  the date of the  evaluation  by the Chief  Executive
Officer and the Principal Accounting Officer.


                                       11
<PAGE>

Part II Other Information

Item 4.     Submission of Matters to a Vote of Security Holders

(a)   The Annual  Meeting of  Shareholders  was held on  November  12, 2003 (the
      "Annual Meeting").

(b)   Not  applicable  because (i) there was no  solicitation  in  opposition to
      management's nominees as listed in the Company's proxy statement; and (ii)
      all of such  nominees  who  were  directors,  previously  reported  to the
      Commission, were re-elected.

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

                                          For               Against
                                          ---               -------

      Harold K. Fletcher               1,616,834               0
      George J. Leon                   1,616,834               0
      Robert J. Melnick                1,616,834               0
      Jeff C. O'Hara                   1,616,834               0
      Robert H. Walker                 1,616,834               0


The shareholders also voted all 1,616,834 shares in favor of ratifying the audit
committee's  appointment  of  BDO  Seidman  LLP,  as the  Company's  independent
auditors for the fiscal year ending March 31, 2004.

(d)   Not applicable

Item 6.     Exhibits and Reports on Form 8-K

            a.    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  Cerification by CEO pursuant to 18 U.S.C.  Section 1350,
                        as adopted pursuant to Section 906 of the  Sabanes-Oxley
                        Act of 2002.
                  32.2  Cerification by CFO pursuant to 18 U.S.C.  Section 1350,
                        as adopted pursuant to Section 906 of the  Sabanes-Oxley
                        Act of 2002.

            b.    Reports on Form 8-K.

                  Report on Form 8-K  regarding  the  acquisition  of Innerspace
                  Technology was submitted January 26, 2004 under Item 9.


                                       12
<PAGE>

SIGNATURES

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

                                               TEL-INSTRUMENT ELECTRONICS CORP.

Date:    February 13, 2004                     By: /s/ Harold K. Fletcher
                                                   ----------------------
                                                   Harold K. Fletcher
                                                   Chairman and President

Date:   February 13, 2004                      By: /s/ Joseph P. Macaluso
                                                   ----------------------
                                                   Joseph P. Macaluso
                                                   Principal Accounting Officer


                                       13