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 June 30, 1998

      ___   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:

2,094,735 shares of Common stock, $.10 par value as of  July 22, 1998.

<PAGE>

                     TEL-INSTRUMENT ELECTRONICS CORPORATION

                                TABLE OF CONTENTS

                                                                            PAGE
                                                                            ----
Item 1.     Financial Statements (Unaudited):

            Condensed Comparative Balance Sheets
               June 30, 1998 and March 31, 1998                              1
                                                                       
            Condensed Comparative Statements of Operations -           
               Three Months Ended June 30, 1998 and 1997                     2
                                                                       
            Condensed Comparative Statements of Cash Flows -           
               Three Months Ended June 30, 1998 and 1997                     3
                                                                       
            Notes to Condensed Financial Statements                          4-5
                                                                       
Item 2.       Management's Discussion and Analysis of Financial        
                 Condition and Results of Operations                         6-8
                                                                       
            SIGNATURES                                                       9
                                                                       
                                                                       
<PAGE>                                                                 

Item 1 - Financial Statements

                     TEL-INSTRUMENT ELECTRONICS CORPORATION
                      CONDENSED COMPARATIVE BALANCE SHEETS

                        June 30, 1998 and March 31, 1998

                                                     (Unaudited)      (Audited)
                              ASSETS                   June 30,        March 31,
                                                         1998           1998
                                                      ----------       ---------
Current assets:
  Cash                                               $   242,048    $   585,281
  Accounts receivable, net of allowance for doubtful     473,169        374,506
      accounts of $16,064 at June 30, 1998 and
      March 31, 1998
  Inventories                                            478,852        383,030
  Prepaid expenses and other current assets               35,344         24,017
  Deferred income tax benefit - current                   78,300         78,300
                                                     -----------    -----------
Total current assets                                   1,307,713      1,445,134
Property, plant and equipment, net                        81,688         79,321
Other assets                                             115,735         96,067
Deferred income tax benefit                              375,135        320,619
                                                     -----------    -----------
Total assets                                           1,880,271      1,941,141
                                                     -----------    -----------

             LIABILITES & STOCKHOLDERS EQUITY

Current liabilities:
  Note payable - related party - current portion          50,000         50,000
  Convertible subordinated notes - related party          15,000         15,000
  Accrued payroll, vacation pay, deferred wages
      payroll taxes and interest on deferred wages       195,211        211,400
  Accounts payable and accrued expenses                  341,938        304,673
                                                     -----------    -----------
Total current liabilities                                602,149        581,073

Notes payable - related party - non-current portion      300,000        300,000
                                                     -----------    -----------
Total liabilities                                        902,149        881,073

Stockholders' equity:
   Common stock                                          209,476        209,476
   Additional paid-in capital                          3,921,670      3,921,670
   Accumulated deficit                                (3,153,024)    (3,071,078)
                                                     -----------    -----------

   Total stockholders' equity                            978,122      1,060,068
   Total liabilities and stockholders' equity        $ 1,880,271    $ 1,941,141
                                                     ===========    ===========

See accompanying notes to condensed financial statements

 
                                      1
<PAGE>

                     TEL-INSTRUMENT ELECTRONICS CORPORATION
                 CONDENSED COMPARATIVE STATEMENTS OF OPERATIONS

                                   (Unaudited)

                                                         Three Months Ended
                                                               June 30,
                                                         1998           1997
                                                     -----------    -----------

Sales - government, net                              $   382,740    $   557,514
Sales - commercial, net                                  282,453        313,309
                                                     -----------    -----------
   Total sales                                           665,193        870,823

Cost of sales                                            339,306        336,220
                                                     -----------    -----------
       Gross margin                                      325,887        534,603

Operating expenses:
   Selling, general and administrative                   214,524        218,930
   Engineering, research and development                 242,012        157,945
                                                     -----------    -----------
Total operating expenses                                 456,536        376,875
                                                     -----------    -----------
       (Loss)/Income from operations                    (130,649)       157,728

Other income (expenses):
   Interest income                                         6,070          6,082
   Interest expenses                                     (11,883)       (17,743)
                                                     -----------    -----------
(Loss)/Income before taxes                              (136,462)       146,067
(Benefit)/Provision for income taxes                     (54,516)        58,339
                                                     -----------    -----------
Net (loss)/income                                        (81,946)        87,728
                                                     ===========    ===========
Basic and diluted income (loss) per common share     $     (0.04)   $      0.04
                                                     -----------    -----------

Dividends per share                                         None           None
Weighted average shares outstanding
          Basic                                        2,094,735      2,030,948
          Diluted                                      2,094,735      2,091,071

See accompanying notes to condensed financial statements


                                       2
<PAGE>

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

                                                          Three Months Ended
                                                                June 30,
                                                            1998         1997
                                                         ---------      --------
(Decrease) increase in cash:
Cash flows from operating activities
Net (loss) income                                        $ (81,946)      87,728
Adjustments to reconcile net (loss) income to cash
  used in operating activities:
        Deferred income taxes                              (54,516)      58,339
        Depreciation                                        10,909        6,614

Changes in assets and liabilities:
   (Increase) decrease in accounts receivable              (98,663)    (203,569)
   (Increase) decrease in inventories                      (95,822)    (101,031)
   (Increase) decrease in prepaid expenses and other
      current assets                                       (11,327)         423
   (Increase) decrease in other assets                     (19,668)        --
   (Decrease) increase in accrued payroll, deferred
       wages and vacation pay                              (16,189)       5,314
   (Decrease) increase in accounts payable and accrued
       expenses                                             37,265      (50,331)
                                                         ---------    ---------

Net cash used in operations                               (329,957)    (196,513)
                                                         ---------    ---------
Cash flows from investing activities:
   Cash purchases of property, plant and equipment         (13,276)      (3,643)
                                                         ---------    ---------
Net cash used in investing activities                      (13,276)      (3,643)
                                                         ---------    ---------
Net decrease in cash                                      (343,233)    (200,156)
Cash at beginning of period                                585,281      528,636
                                                         ---------    ---------
Cash at end of period                                    $ 242,048    $ 328,480
                                                         =========    =========
Interest Paid                                            $   2,609    $   7,536
                                                         =========    =========

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 June 30, 1998,  the results of operations for the three
months ended June 30, 1998 and June 30, 1997,  and  statements of cash flows for
the three months ended June 30, 1998 and June 30,  1997.  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, 1998 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, 1998.

Note 2 Inventories

Inventories consist of:

                                                      June 30,        March 31.
                                                        1998            1998
                                                      --------        ---------
                    Purchased parts                   $265,382        $253,616
                    Work-in-process                    249,090         165,034
                    Less: Reserve for obsolescense     (35,620)        (35,620)
                                                      --------        --------
                                                      $478,852        $383,030
                                                      ========        ========

Note 3 Income Taxes

The Company,  in accordance  with FASB 109, has recognized a deferred income tax
benefit based upon the expected  utilization of net operating loss carryforwards
as the Company  believes  that it is more likely than not that it will realize a
portion of its operating  losses before they expire.  For the three months ended
June 30,  1998,  the  Company  recorded  an  additional  deferred  income tax of
$54,516,  which  represents  the  effective  federal  and  state tax rate on the
Company's  net loss before taxes of $136,462.  The Company has no tax  liability
nor will it  receive  a refund  for  this  amount.  The  $54,516  increased  the
Company's  deferred  income tax benefit by the same  amount in the  accompanying
balance sheet.  The Company  expects to utilize this deferred income tax benefit
in the future for tax reporting purposes.

Note 4 Reclassifications

Certain  reclassifications  have been  made to the  fiscal  year 1998  financial
statements to be consistent with the fiscal year 1999 presentation.

                                       4
<PAGE>

                        TEL-INSTRUMENT ELECTRONICS CORP.

               NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued)

Note 5 Earnings Per Share

In February 1997, the Financial  Accounting  Standards Board issued Statement of
Financial  Accounting Standard No. 128 "Earnings Per Share" (SFAS 128). SFAS 128
supersedes  Accounting  Principles  Board Opinion No. 15, Earnings Per Share and
specifies the computation, presentation and disclosure requirements for earnings
per share for entities with  publicly  held common stock.  SFAS 128 is effective
for  financial  statements  relating to both interim and annual  periods  ending
after December 15, 1997.

Basic  income  (loss) per share is based on net income  (loss) for the  relevant
period,  divided by the weighted  average  number of common  shares  outstanding
during  the  period.  Diluted  loss per share for June 30,  1998 is based on net
loss, divided by the weighted average number of common shares outstanding during
the period. Common share equivalents, such as outstanding stock options, are not
included in the  calculation  for the three months ended June 30, 1998 since the
effect would be antidilutive.


                                       5

<PAGE>

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

Results of Operations

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 if its raw materials;
the  actions of its  competitors;  the success of our  customers;  technological
change;  changes in  employee  relations;  government  regulations;  litigation,
including  its  inherent  uncertainty;  difficulties  in  plant  operations  and
materials;   transportation,   environmental   matters;   and  other  unforeseen
circumstances.  A number of these factors are discussed in the Company's filings
with the Securities and Exchange Commission.

Overview

The  Company  continues  to  invest  heavily  in  engineering,   research,   and
development as  expenditures  increased by 53% for the first three months of the
current  fiscal year as compared to the first three  months in the prior  fiscal
year.  Engineering,  research,  and  development  expenditures  continue  to  be
primarily  devoted to the  finalization  of the design of the T-47M IFF test set
for the U.S. Navy. In April 1998, the Company completed its second design review
with the U.S. Navy without any major technical issues requiring  resolution.  If
field evaluations are successful and the Navy exercises  production  options, it
is anticipated  that shipments  could begin early in the next fiscal year.  This
contract could be a source of significant  revenues which could include  options
for up to 1300 units,  which the U.S.  Navy can exercise  through  calendar year
2001.  However,  there  can be no  assurance  that the Navy  will  exercise  its
purchase  options under this  contact.  In addition,  the Company  continues the
development of the T-36M, under a U.S. Army contract, and the development of new
products for other markets.

Currently,  the off shore  commercial  market is larger than the domestic market
because many foreign airlines are upgrading to meet U.S.  requirements.  Part of
the Company's strategy is to attempt to further penetrate the foreign market. As
part of this strategy,  in June 1998, the Company signed an exclusive  agreement
with Muirhead Avionics, based in the United Kingdom, to represent the Company in
parts of Europe.  The Company has recently  received  from  Muirhead  Avionics a
$382,900 contract for its T-48I IFF test set.

As reported in the Form 10-K,  during fiscal year 1998 the Company fulfilled its
obligation  and delivered the final units of the T-30CM ILS test set to the U.S.
Air  Force.  As a  result  of  completing  this  substantial  contract,  it  was
anticipated  that the Company  would have lower  sales  during the first half of
fiscal  year  1999.  The  Company  continues  to  believe  that this  decline is
temporary and new contracts can be obtained to increase sales.  For example,  in
June and July 1998, the Company received a $382,900 order from


                                       6
<PAGE>

Item 2.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE

                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION

Overview (Continued)

Muirhead  Avionics  (see  above) and an order in the amount of  $192,300  from a
major air freight carrier.  Both of these contracts are expected to be completed
in the current fiscal year.

The Company's  backlog in mid-July is approximately  $2,160,000,  an increase of
approximately 25% from March 31, 1998. It is expected that  substantially all of
this back log will be shipped in the current fiscal year.

Sales

For the three months ended June 30, 1998, net sales decreased  $205,630  (23.6%)
as compared to the three  months  ended June 30, 1997.  While  commercial  sales
declined by $30,856 (9.8%),  government sales decreased  $174,774  (31.3%).  The
decrease in  government  sales is primarily  due to the fact that the T-30CM ILS
contract with the U.S. Air Force was completed and shipments  have not yet begun
on the  contract  with the U.S.  Navy.  Sales for the first three  months of the
prior fiscal year attributed to the contract with the U.S. Air Force amounted to
$220,794 or 25.4% of total sales. This decrease was partially offset by revenues
from the U.S.  Navy  associated  with  documentation  and testing to be provided
under the U.S.  Navy T-47M IFF test sets  contract.  In  addition,  the  Company
identified  and  corrected a technical  issue with one of its products and, as a
result, certain shipments have been delayed.

Gross Margin

Gross Margin decreased $208,716 (39.0%) for the three months ended June 30, 1998
as compared to the same three months in the prior  fiscal year.  The decrease in
gross margin is  attributed  to lower  volume and lower gross margin  associated
with the documentation and testing portion of the U.S. Navy T-47M contract.

Operating Expenses

Selling,  general and  administrative  expenses  decreased $4,406 (2.0%) for the
three  months ended June 30, 1998 as compared to the three months ended June 30,
1997.  This  decrease  is,  for the  most  part,  attributed  to  lower  selling
commissions.

Engineering,   research  and  development  expenses  increased  $84,067  (53.2%)
primarily  associated with the  finalization of the design of the T-47M IFF test
sets for the U.S. Navy.

Income Taxes

In accordance  with SFAS 109, a provision for income taxes was recognized in the
amount of $58,339 for the months ended June 30, 1997. For the three months ended
June 30, 1998,  the Company  recorded a deferred  income tax benefit of $54,516,
which  represents the effective  federal and state tax rate on the Company's net
loss  before  taxes of  $136,642.  (See Note 3 to Notes to  Condensed  Financial
Statements).


                                       7
<PAGE>

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

Liquidity and Capital Resources

At June 30,  1998 the  Company  had  positive  working  capital of  $705,564  as
compared to  $864,061 at March 31,  1998.  For the three  months  ended June 30,
1998, cash used in operations was $329,957 as compared to $196,513 for the three
months  ended June 30,  1997.  This  reduction  in  available  cash is primarily
associated  with the  Company's  loss from  operations,  increases  in  accounts
receivable and  inventories,  and payment of deferred wages.  These amounts were
partially offset by an increase in accounts payable and accrued expenses.

The Company continues to spend heavily in research and development.  The Company
expects  these  investments  will finalize the design for the U.S. Navy contract
and also introduce other new products which will increase sales,  cash flow, and
profits. However, there is no assurance that sales and profits will increase.

Based upon the  current  backlog  and  available  working  capital,  the Company
believes that it has sufficient  working  capital to fund its plans for the next
year.  At present,  the Company does not expect to incur  significant  long-term
needs for capital outside of its normal operating activities.

The Company has received a letter of interest for a credit line of $350,000 from
a major bank.  This  arrangement has been approved by the Board of Directors and
is expected to be finalized by August 1998.

There was no  significant  impact  on the  Company's  operations  as a result of
inflation for the three months ended June 30, 1998.

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, 1998.

New Accounting Pronouncements

Statement of Financial  Accounting  Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities, was issued in June 1998 and is effective for
all  fiscal  quarters  of fiscal  years  beginning  after  June 15,  1999.  This
statement   establishes   accounting  and  reporting  standards  for  derivative
instruments   and  hedging   activities.   The  Company   does  not  expect  its
implementation will have a material effect on the Company's financial statements
as currently presented.


                                       8
<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:                                     By: /s/ Harold K. Fletcher
                                              -----------------------------
                                              /s/ Harold K. Fletcher
                                              Chairman and President