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, 2004

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

                      Commission File No. 33-18978

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

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

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

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

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

                                    Yes X      No ___

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

2,192,831 shares of Common stock, $.10 par value as of February 7, 2005.


<PAGE>

                     TEL-INSTRUMENT ELECTRONICS CORPORATION

                                TABLE OF CONTENTS

                                                                           PAGE
                                                                           ----

         Part I - Financial Information

Item 1.  Condensed Consolidated Financial Statements (Unaudited):

         Condensed Consolidated Comparative Balance Sheets
           December 31, 2004 and March 31, 2004                            1

         Condensed Consolidated Comparative Statements of Operations -
           Three and Nine Months Ended December 31, 2004 and 2003          2

         Condensed Consolidated Comparative Statements of Cash Flows -
           Nine Months Ended December 31, 2004 and 2003                    3

         Notes to Condensed Consolidated Financial Statements              4-7

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

Item 3.  Quantitative and Qualitative Disclosures about Market Risk        12

Item 4.  Controls and Procedures                                           12


         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                                  13

         Signatures                                                        13

         Certifications                                                    14-17


<PAGE>

Item 1 - Financial Statements

                     TEL-INSTRUMENT ELECTRONICS CORPORATION
                CONDENSED CONSOLIDATED COMPARATIVE BALANCE SHEETS

<TABLE>
<CAPTION>
ASSETS                                                   (Unaudited)
                                                   December 31, 2004      March 31, 2004
                                                   -----------------      --------------
<S>                                                   <C>                   <C>
Current assets:
  Cash                                                $  464,409            $1,509,828
  Accounts receivable, net                             2,096,691             1,266,905
  Inventories                                          2,772,980             2,202,143
  Taxes receivable                                       161,695               161,695
  Prepaid expenses and other current assets              123,175               102,039
  Deferred income tax benefit - current                  571,301               581,348
                                                      ----------            ----------

Total current assets                                   6,190,251             5,823,958

Property, plant, and equipment, net                      883,490               867,886
Intangible assets, net                                   348,400               413,047
Other assets                                             296,682               287,610
                                                      ----------            ----------

Total assets                                          $7,718,823            $7,392,501
                                                      ==========            ==========

LIABILITIES & STOCKHOLDERS EQUITY

Current liabilities:
  Note payable - related party - current portion      $   50,000            $  250,000
  Convertible subordinated notes - related party           7,500                 7,500
  Notes payable - other                                   87,000                87,000
  Capitalized lease obligations - current portion          7,853                24,768
  Accounts payable                                       485,220               346,169
  Deferred revenues                                       80,507                44,663
  Accrued payroll, vacation pay, profit sharing
     and payroll taxes                                   388,094               333,180
  Accrued expenses                                       991,709               963,528
                                                      ----------            ----------

Total current liabilities                              2,097,883             2,056,808

Notes payable - related party - non-current portion      200,000                    --
Deferred taxes - long-term                                48,000                48,000
                                                      ----------            ----------

Total liabilities                                      2,345,883             2,104,808

Stockholders' equity:

  Common stock                                           218,786               214,418
  Additional paid-in capital                           4,026,298             3,960,886
  Retained earnings                                    1,127,856             1,112,389
                                                      ----------            ----------

Total stockholders' equity                             5,372,940             5,287,693
                                                      ----------            ----------

Total liabilities and stockholders' equity            $7,718,823            $7,392,501
                                                      ==========            ==========
</TABLE>

     See accompanying notes to condensed consolidated financial statements.


                                       1
<PAGE>

                     TEL-INSTRUMENT ELECTRONICS CORPORATION
           CONDENSED CONSOLIDATED COMPARATIVE STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                              (Unaudited)                         (Unaudited)
                                                          Three Months Ended                   Nine Months Ended
                                                 Dec. 31, 2004       Dec. 31, 2003      Dec. 31, 2004     Dec. 31, 2003
                                                 -------------       -------------      -------------     -------------
<S>                                               <C>                <C>                <C>                <C>
Net sales                                           2,782,090          2,914,271          7,833,840          8,588,893

Cost of sales                                       1,232,404          1,417,825          3,594,055          3,897,156
                                                  -----------        -----------        -----------        -----------

Gross margin                                        1,549,686          1,496,446          4,239,785          4,691,737

Operating expenses:
  Selling, general & administrative                   844,758            715,465          2,486,711          2,165,055
  Amortization of intangibles                          21,549                 --             64,647                 --
  Engineering, research, & development                610,781            551,869          1,653,277          1,619,917
                                                  -----------        -----------        -----------        -----------

Total operating expenses                            1,477,088          1,267,334          4,204,635          3,784,972

     Income from operations                            72,598            229,112             35,150            906,765

Other income (expense):
  Interest income                                       2,387              3,928              9,137             19,838
  Interest expense                                     (5,214)            (4,587)           (18,776)           (22,529)
                                                  -----------        -----------        -----------        -----------

Income before taxes                                    69,771            228,453             25,511            904,074

Provision for income taxes                             27,725             91,266             10,044            361,177
                                                  -----------        -----------        -----------        -----------

Net income                                        $    42,046        $   137,187        $    15,467        $   542,897
                                                  ===========        ===========        ===========        ===========

    Basic income per common share                 $      0.02        $      0.06        $      0.01        $      0.25
    Diluted income per common share               $      0.02        $      0.06        $      0.01        $      0.24

Dividends per share                                      None               None               None               None

Weighted average shares outstanding
     Basic                                          2,156,771          2,144,151          2,149,199          2,141,896
     Diluted                                        2,272,473          2,232,820          2,264,901          2,230,565
</TABLE>

     See accompanying notes to condensed consolidated financial statements.


                                       2
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                  Nine Months Ended      Nine Months Ended
                                                                                  December 31, 2004       December 31,2003
                                                                                  -----------------      -----------------
<S>                                                                               <C>                      <C>
Cash flows from operating activities
Net income                                                                        $    15,467              $   542,897
Adjustments to reconcile net income to cash used
    In operating activities:
     Deferred income taxes                                                             10,047                  (86,900)
     Depreciation                                                                     217,462                  196,487
     Amortization of intangibles                                                       64,647                       --
     Reserve for obsolescence of inventories                                           45,000                   40,000
Changes in assets and liabilities:
   Increase in accounts receivable                                                   (829,786)                 (35,189)
   (Increase) decrease in inventories                                                (615,837)                 342,132
   Increase in prepaid expenses and other current assets                              (21,136)                 (43,186)
   Increase in other assets                                                            (9,072)                (199,831)
   Increase (decrease) in accounts payable                                            139,051                 (131,879)
   Increase in deferred revenues                                                       88,549                    6,792
   Increase (decrease) in accrued payroll, vacation pay,
     and payroll taxes                                                                 54,914                  (53,439)
   Decrease in income taxes payable                                                        --                 (103,924)
   Decrease in accrued expenses                                                       (24,524)                  (3,102)
                                                                                  -----------              -----------
Net cash (used in) provided by operations                                            (865,218)                 470,858
                                                                                  -----------              -----------

Cash flows from investing activities:
  Purchases of property, plant and equipment                                         (233,066)                (170,146)
                                                                                  -----------              -----------
Net cash used in investing activities                                                (233,066)                (170,146)
                                                                                  -----------              -----------

Cash flows from financing activities:
Proceeds from exercise of stock options                                                69,780                   16,909
Repayment of capitalized lease obligations                                            (16,915)                 (21,022)
                                                                                  -----------              -----------
Net cash provided by (used in) financing activities                                    52,865                   (4,113)
                                                                                  -----------              -----------

Net (decrease) increase in cash and cash equivalents                               (1,045,419)                 296,599
Cash and cash equivalents at beginning of period                                    1,509,828                1,680,124
                                                                                  -----------              -----------
Cash and cash equivalents at end of period                                        $   464,409              $ 1,976,723
                                                                                  ===========              ===========

Supplemental Cash Flow Information:

Interest paid                                                                     $    84,847              $    26,105
                                                                                  ===========              ===========
Taxes paid                                                                        $        --              $   462,029
                                                                                  ===========              ===========
</TABLE>

      See accompanying notes to condensed consolidated financial statements


                                       3
<PAGE>

                         TEL-INSTRUMENT ELECTRONICS CORP
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 Basis of Presentation

In the opinion of management,  the accompanying unaudited condensed consolidated
financial  statements  contain all adjustments  (consisting  primarily of normal
recurring  accruals)  necessary  to present  fairly the  financial  position  of
Tel-Instrument  Electronics  Corp  as of  December  31,  2004,  the  results  of
operations  for the three and nine months  ended  December 31, 2004 and December
31, 2003,  and  statements of cash flows for the nine months ended  December 31,
2004 and December 31, 2003. These results are not necessarily  indicative of the
results to be expected for the full year.

The financial  statements have been prepared in accordance with the requirements
of Form 10-Q and  consequently  do not include  disclosures  normally made in an
Annual Report on Form 10-K. The March 31, 2004 results included herein have been
derived from the audited financial  statements  included in the Company's annual
report on Form 10-K.  Accordingly,  the  financial  statements  included  herein
should be  reviewed  in  conjunction  with the  financial  statements  and notes
thereto included in the Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 2004.

Note 2 Accounts Receivable

The following table sets forth the components of accounts receivable:

                                          December 31, 2004       March 31, 2004
                                          -----------------       --------------

      Commercial                            $ 1,019,986           $   862,259
      Government                              1,120,803               446,244
      Allowance for Bad Debts                   (44,098)              (41,598)
                                            -----------           -----------

      Total                                 $ 2,096,691           $ 1,266,905
                                            ===========           ===========

Note 3 Inventories

Inventories consist of:

                                          December 31, 2004       March 31, 2004
                                          -----------------       --------------

      Purchased Parts                       $ 1,247,543           $   846,782
      Work-in-Process                         1,642,236             1,401,722
      Finished Goods                             69,099                94,537
      Less: Reserve for Obsolescence           (185,898)             (140,898)
                                            -----------           -----------

      Total                                 $ 2,772,980           $ 2,202,143
                                            ===========           ===========


                                       4
<PAGE>

                         TEL-INSTRUMENT ELECTRONICS CORP
              NOTES TO CONDENSED CONSOLIDATED 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 353,650 outstanding stock options under SFAS No. 123, the pro forma
amounts are indicated below:

<TABLE>
<CAPTION>
                                                               Nine Months Ended               Nine Months Ended
                                                               December 31, 2004               December 31, 2003
                                                               -----------------               -----------------
<S>                                                                <C>                            <C>
      Net income  - as reported                                    $ 15,467                       $ 542,987
      Less fair value of stock options                              (44,986)                        (60,750)
                                                                    --------                        --------
      Net income (loss) - pro forma                                 (29,519)                        482,237
                                                                    ========                        =======

      Basic earnings per share - as reported                           0.01                            0.25
      Basic earnings (loss) per share - pro forma                     (0.01)                           0.23

      Diluted earnings per share - as reported                         0.01                            0.24
      Diluted earnings  (loss) per share - pro forma                  (0.01)                           0.22

<CAPTION>
                                                              Three Months Ended              Three Months Ended
                                                               December 31, 2004               December 31, 2003
                                                              ------------------              ------------------
<S>                                                                <C>                            <C>
      Net income  - as reported                                    $ 42,046                       $ 137,187
      Less fair value of stock options                              (14,996)                        (12,043)
                                                                    --------                        --------
      Net income - pro forma                                         27,050                         125,144
                                                                     ======                         =======

      Basic earnings per share - as reported                           0.02                            0.06
      Basic earnings per share - pro forma                             0.01                            0.06

      Diluted earnings per share - as reported                         0.02                            0.06
      Diluted earnings per share - pro forma                           0.01                            0.06
</TABLE>

During the nine months ended  December 31, 2004,  the Company sold 26,720 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 Segment Information

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

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

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

<TABLE>
<CAPTION>
  Three Months Ended                     Avionics         Avionics     Avionics        Marine       Corporate
  December 31, 2004                       Gov't           Comm'l.        Total         Systems        Items             Total
  -----------------                      ----------       --------     -----------    ----------    ---------        -----------
<S>                                      <C>              <C>          <C>            <C>           <C>              <C>
  Sales                                  $1,667,293       $844,487     $ 2,511,780    $  270,310                     $ 2,782,090
  Cost of sales                             600,020        467,092       1,067,112       165,292                       1,232,404
                                           --------       --------       ---------    ----------                       ---------

  Gross margin                            1,067,273        377,395       1,444,668       105,018                       1,549,686
                                          ---------        -------       ---------    ----------                       ---------

  Engineering, research, and                                               522,044        88,737                         610,781
   Development
  Selling, general, and admin.                                             697,753       147,005                         844,758
  Amort. of intangibles - marine                                                                       21,549             21,549
  Interest expense, net                                                      3,006          (179)          --              2,827
                                                                             -----    ----------    ---------        -----------
  Total expenses                                                         1,222,803       235,563       21,549          1,479,915
                                                                         ---------    ----------    ---------        -----------

  Income (loss) before income taxes                                    $   221,865    $ (130,545)   $ (21,549)       $    69,771
                                                                       ===========    ==========    =========        ===========

<CAPTION>
  Three Months Ended                     Avionics         Avionics     Avionics        Marine       Corporate
  December 31, 2003                       Gov't           Comm'l.        Total         Systems        Items             Total
  -----------------                      ----------       --------     -----------    ----------    ---------        -----------
<S>                                      <C>              <C>          <C>            <C>           <C>              <C>
  Sales                                  $2,002,133       $912,138     $ 2,914,271            --                     $ 2,914,271
  Cost of sales                             906,451        511,374       1,417,825            --                       1,417,825
                                           --------       --------     -----------    ----------                     -----------

  Gross margin                            1,095,682        400,764       1,496,446            --                       1,496,446
                                          ---------        -------     -----------    ----------                     -----------

  Engineering, research,& dev.                                             551,869                                       551,869
  Selling, general, and admin.                                             715,465                                       715,465
  Interest expense, net                                                        659                                           659
                                                                       -----------                                   -----------
  Total expenses                                                         1,267,993                                     1,267,993
                                                                       -----------                                   -----------

  Income before income taxes                                             $ 228,453            --                     $   228,453
                                                                       ===========    ==========                     ===========
</TABLE>


                                       6
<PAGE>

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

Note 6 Segment Information (continued)

<TABLE>
<CAPTION>
  Nine Months Ended                      Avionics       Avionics       Avionics         Marine      Corporate
  December 31, 2004                       Gov't         Comm'l.          Total          Systems       Items             Total
  -----------------                      ----------     ----------     -----------   -----------    ---------        -----------
<S>                                      <C>            <C>            <C>           <C>                             <C>
  Sales                                  $4,952,143     $2,228,038     $ 7,180,181   $   653,659                     $ 7,833,840
  Cost of sales                           1,893,457      1,298,480       3,191,937       402,118                       3,594,055
                                         ----------     ----------       ---------   -----------                     -----------

  Gross margin                            3,058,686        929,558       3,988,244       251,541                       4,239,785
                                         ----------       -------       ---------    -----------                     -----------

  Engineering, research, and                                             1,427,597       225,680                       1,653,277
   development
  Selling, general, and admin.                                           2,050,244       436,467                       2,486,711
  Amort. of intangibles - marine                                                                       64,647             64,647
  Interest expense, net                                                      9,382           257           --              9,639
                                                                         ---------   -----------    ---------        -----------
  Total expenses                                                         3,487,223       662,404       64,647          4,214,274
                                                                         ---------   -----------    ---------        -----------

  Income   (loss)  before  income                                        $ 501,021   $ (410,863)    $  64,647        $    25,511
                                                                           =======   ===========    =========        ==========
  taxes

<CAPTION>
  Nine Months Ended                      Avionics       Avionics       Avionics         Marine      Corporate
  December 31, 2003                       Gov't         Comm'l.          Total          Systems       Items             Total
  -----------------                      ----------     ----------     -----------     ---------    ---------        -----------
<S>                                      <C>            <C>            <C>                                           <C>
  Sales                                  $5,634,389     $2,954,504     $ 8,588,893            --                     $ 8,588,898
  Cost of sales                           2,382,096      1,515,060       3,897,156            --                       3,897,156
                                         ----------     ----------     -----------     ---------                     -----------

  Gross margin                            3,252,293      1,439,444       4,691,737            --                       4,691,737
                                         ----------     ----------     -----------     ---------                     -----------

  Engineering, research,& dev.                                           1,619,917                                     1,619,917
  Selling, general, and admin.                                           2,165,055                                     2,165,055
  Interest expense, net                                                      2,691                                         2,691
                                                                       -----------                                   -----------
  Total expenses                                                         3,787,663                                     3,787,663
                                                                       -----------                                   -----------

  Income before income taxes                                             $ 904,074            --                     $   904,074
                                                                       ===========     =========                     ===========
</TABLE>

Note 7 Acquisition

      On January 16, 2004,  the Company  acquired  Innerspace  Technology,  Inc.
      ("ITI") for $547,000,  including a note,  and employment  agreements  with
      principals.  The following  table  represents  the unaudited  consolidated
      results of operations as though the  acquisition  of ITI occurred on April
      1, 2003,  utilizing ITI's unaudited financial  statements for the December
      31, 2003 period.

                                       Three Months Ended     Nine Months  Ended
                                        December 31, 2003      December 31, 2003
                                       ------------------     ------------------
                                            (pro forma)            (pro forma)

      Net sales                              $3,126,234            $9,241,490
      Income before taxes                       151,867               752,223
      Net income                                 91,196               451,710
      Basic income per common share                0.04                  0.21
      Diluted income per common share              0.04                  0.20


                                       7
<PAGE>

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

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

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

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

Critical Accounting Policies

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

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

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

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


                                       8
<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 and income  decreased  for the three and nine months  ended  December  31,
2004. As previously  reported,  sales and operating  income declined  because of
delays  in  deliveries  under  existing  contracts  and in the  awarding  of new
contracts,  and as a result  of the  losses  attributed  to the  marine  systems
division,  as a result of the planned additional marketing and development costs
for ITI.  In  addition,  the  Company,  in  agreement  with the U.S.  Navy,  has
temporarily  stopped  shipment of the AN/APM-480 in  anticipation of these units
being  returned for up-grades  and  enhancements.  However,  the total number of
units under  contract  has not changed and  approximately  90 units remain to be
shipped under this contract.

Commercial  sales also  declined  during this period  primarily as a result of a
successful  sales  promotion  in the prior year which was not  continued  in the
current  year,  and  the  generally  weak  financial  condition  of the  airline
industry.  Fortunately,  these declines were partially offset by the shipment of
the T-36M pursuant to a $1,600,000 contract (previously announced) from the Army
National Guard. The Company expects to complete delivery of all units under this
contract during the current fiscal year. Sales also increased T-47G,  T-30CM and
the  TR-220/210  family of  products  for the first nine  months of the  current
fiscal year.

The Company has been  encouraged by the award of two new contracts,  in addition
to the one received in September from the Army National Guard. In December 2004,
the Company received an order,  through its  distributor,  to supply T-47NH's to
the Royal Australian Air Force in the amount of $694,350.  In February 2005, the
Company  received a contract in the amount of $1,815,000 to supply the T-36M and
the T-47NH to the U.S. Army.

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


                                       9
<PAGE>

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

Overview (continued)

For marine systems,  the Company has made improvements to its tide gauge, and is
upgrading its sounders with a new Windows  operating system which will allow for
improvements to the hardware.

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

Results of Operations

Sales

Sales of avionics products declined for the three and nine months ended December
31, 2004, as compared to the same periods in the prior year $402,491 (13.8%) and
$1,408,712 (16.4%),  respectively,  mainly for the reasons discussed above under
Overview.  Government sales declined  $682,246 (12.1%) for the nine months ended
December 31, 2004 as compared to the same period in the prior fiscal year. Lower
sales of the  AN/APM-480 to the U.S.  Navy was partially  offset by increases in
sales of the T-36M, T-47G, and AN/APM-480 to customers other than the U.S. Navy,
and of the T-30CM.  For the three  months  ended  December  31,  2004,  avionics
government sales decreased  $334,840  (16.7%),  Lower sales of the AN/APM-480 to
the U.S. Navy were partially offset by increases in sales of the T-36M, T-47NH ,
and the T-76.  Commercial  sales decreased  $726,466 (24.6%) and $67,651 (7.4%),
respectively,  for the nine and three months ended December 31, 2004 as compared
to the same periods last year, primarily as a result of a sales promotion in the
prior year that was not continued in the current year.

Gross Margin

Gross margin  decreased  $451,952  (9.6%) for the nine months ended December 31,
2004,  as compared to the same  period last year,  primarily  as a result of the
lower sales volume.  Gross margin increased  $53,240 (3.6%) for the three months
because  of a change  in sales  mix,  but which  was  offset by the lower  sales
volume.  The gross margin percentage for the nine months ended December 31, 2004
was 54.1%  compared to 54.6% for the nine months ended  December  31, 2003.  The
gross margin  percentage  for the three months ended December 31, 2004 was 55.7%
as compared to 51.3% for the three months ended December 31, 2003.

Operating Expenses

Selling,  general and  administrative  expenses  increased  $129,293 (18.1%) and
$321,656  (14.9%)  for the  three  and nine  months  ended  December  31,  2004,
respectively,  as compared to the three and nine months ended December 31, 2003.
This increase is primarily  attributed to added selling  expenses for the marine
systems  division,  which  expenses  were not  included in the nine months ended
December 31, 2003, and to higher avionics  commission  expenses offset partially
by lower  recruitment  and  relocation  expenses and  decreased  consulting  and
professional fees.


                                       10
<PAGE>

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

Results of Operations (continued)

Operating Expenses (continued

Engineering,  research and development  expenses  increased  $58,912 (10.7%) and
$33,360  (2.1%)  for the three and nine  months  ended  December  31,  2004,  as
compared to the same periods in the prior fiscal year. Engineering  expenditures
associated  with the marine systems  division,  higher  recruitment  fees and an
increases in salaries and materials were mostly offset by lower outside contract
labor expenditures.

Income Taxes

Income taxes  decreased  $63,541 and $351,133,  respectively,  for the three and
nine months ended December 31, 2004 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.

Liquidity and Capital Resources

At December 31, 2004, the Company had working  capital of $4,092,368 as compared
to $3,767,150 at March 31, 2004 and cash  declined  $1,045,419  during this same
period due to matters  discussed  in the  Overview.  For the nine  months  ended
December 31, 2004, the Company used $865,218 of cash for operating activities as
compared to the cash  provided  by  operations  of $470,858  for the nine months
ended  December 31,  2003.  This  decline in cash from  operations  is primarily
attributed to a substantial  increase in accounts receivable and in inventories,
as well as the decrease in net income caused by the previously noted delays.

In May 2004, the Company and its  Chairman/President  renegotiated  the terms of
the notes  payable-related  party,  resulting  in  $200,000 of these notes being
re-classified as long-term and improving the working capital by this amount. The
Notes now become due in consecutive years beginning March 31, 2005.

The Company has a line of credit of $1,750,000 from Bank of America  (previously
Fleet  Bank).  The line of  credit  bears an  interest  rate of 0.5%  above  the
lender's prevailing base rate, based upon the outstanding  balance.  The Company
does not pay to maintain this open line.  At December 31, 2004,  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, 2004, the Company was
in  compliance  with all  financial  covenants.  The line of credit  expires  at
September 30, 2005.

Based upon the current  backlog,  which had  increased to $4,800,000 at December
31, 2004, its existing credit line, and cash balance,  the Company believes that
it has sufficient  working  capital to fund its operating plans for at least the
next twelve months.  However,  as the Company pursues additional  opportunities,
the need for  additional  capital  may arise.  The  Company  will  evaluate  its
alternatives  when these  opportunities  arise.  The Company  has also  retained
Semaphore   Capital  Advisors  as  its  investment   bankers,   to  help  pursue
acquisitions  and alliances and, if needed,  to help raise capital.  The Company
maintains  its cash balance  primarily in a money market  account  until needed.
There was no  significant  impact  on the  Company's  operations  as a result of
inflation  for  the  nine  months  ended  December  31,  2004.  These  financial
statements  should be read in  conjunction  with the Company's  Annual Report on
Form 10-K to the  Securities  and Exchange  Commission for the fiscal year ended
March 31, 2004.


                                       11
<PAGE>

Item 3. Quantitative and Qualitative Disclosures about Market Risk

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

Item 4. Controls and Procedures

The Company adopted  disclosure  controls and  procedures,  as called for by the
recently   adopted   legislation  and  rules  of  the  Securities  and  Exchange
Commission.  Under  Rules  promulgated  by  the  SEC,  disclosure  controls  and
procedures are defined as "those controls or other procedures of the issuer that
are designed to ensure that  information  required to be disclosed by the issuer
in the reports  filed or  submitted  by it under the  Exchange  Act is recorded,
processed,  summarized,  and reported,  within the time periods specified in the
commission's  rules  and  forms."  Our Chief  Executive  Officer  and  Principal
Accounting Officer evaluated the Company's Disclosure Controls and Procedures at
January  31,  2005 and have  concluded  that they are  effective  based on their
evaluation  of these  controls  and  procedures  required  by  paragraph  (b) of
Exchange Act Rules 13a-15 or 15d-15.

There  were  no  changes  in  our  internal  control  over  financial  reporting
identified in connection  with the  evaluation as of March 31, 2004 by the Chief
Executive Officer and Principal Accounting Officer, required by paragraph (d) of
Exchange Act Rules 13a-15 or 15d-15 that occurred during our last fiscal quarter
that have materially affected, or are reasonably likely to materially affect our
internal controls over financial reporting.

Part II Other Information

Item 4 Submission of Matters to a Vote of Security Holders

(a)   The  Annual  Meeting of  Shareholders  was held on  December  8, 2004 (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 pursuant
      to  Regulation  14;  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                    1,604,622                19,106
      George J. Leon                        1,622,837                 891
      Robert J. Melnick                     1,604,622                19,106
      Jeff C. O'Hara                        1,604,622                19,106
      Robert A. Rice                        1,622,837                 891
      Robert H. Walker                      1,622,837                 891

The  shareholders  also voted  1,622,338  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,  2005.  Shareholders  voted 1,000
shares against this proposal and shareholders totaling 390 shares withheld their
vote.

(d)   Not applicable


                                       12
<PAGE>

Item 6. Exhibits and Reports on Form 8-K

      a.    Exhibits

      31.1  Certification  by CEO pursuant to Rule 13a-14  under the  Securities
            Exchange Act.
      31.2  Certification  by CFO pursuant to Rule 13a-14  under the  Securities
            Exchange Act.
            32.1  Certification  by CEO pursuant to 18 U.S.C.  Section  1350, as
                  adopted  pursuant to Section 906 of the Sarbanes-Oxley  Act of
                  2002.
            32.2  Certification  by CFO pursuant to 18 U.S.C.  Section  1350, as
                  adopted  pursuant to Section 906 of the Sarbanes-Oxley  Act of
                  2002.

      b.    Reports on Form 8-K.

      Report on Form 8-K  regarding  press  release  announcing  results for the
      quarter ended September 30, 2004 was submitted November 18, 2004

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 14, 2005                        By: /s/ Harold K. Fletcher
                                                   -----------------------------
                                                   Harold K. Fletcher
                                                   Chairman and President

Date: February 14, 2005                        By: /s/ Joseph P. Macaluso
                                                   -----------------------
                                                   Joseph P. Macaluso
                                                   Principal Accounting Officer


                                       13