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, 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:

2,107,057 shares of Common stock, $.10 par value as of February 1, 1999.

<PAGE>

                     TEL-INSTRUMENT ELECTRONICS CORPORATION

                                TABLE OF CONTENTS

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

            Condensed Comparative Balance Sheets
              December 31, 1998 and March 31, 1998                             1

            Condensed Comparative Statements of Operations -
              Three and Nine Months Ended December 31, 1998 and 1997           2

            Condensed Comparative Statements of Cash Flows -
              Nine Months Ended December 31, 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                           6-10

Part II     Other Information                                                 11

                    SIGNATURES                                                11


<PAGE>

Item 1 - Financial Statements

                     TEL-INSTRUMENT ELECTRONICS CORPORATION
                      CONDENSED COMPARATIVE BALANCE SHEETS
                                   (Unaudited)

                                     ASSETS          December 31,     March 31,
                                                        1998            1998
                                                     -----------     ----------
Current assets:
  Cash                                               $    55,506     $  585,281
  Accounts receivable, net of allowance for doubtful     447,495        374,506
    Accounts of $15,923 at December 31, 1998 and
    $16,164 at March 31, 1998
  Unbilled revenues (see note 2)                         154,011           --
  Inventories                                            592,720        383,030
  Prepaid expenses and other current assets               33,060         24,017
  Deferred income tax benefit - current                   78,300         78,300
                                                     -----------    -----------
Total current assets                                   1,361,092      1,445,134
Property, plant, and equipment, net                      108,477         79,321
Other assets                                             127,063         96,067
Deferred income tax benefit                              328,571        320,619
                                                     -----------    -----------
Total assets                                           1,925,203      1,941,141
                                                     ===========    ===========
LIABILITIES & 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        210,624        211,400
  Accounts payable and accrued expenses                  296,846        304,673
                                                     -----------    -----------
Total current liabilities                                572,470        581,073
Notes payable - related party -
   non-current portion                                   300,000        300,000
                                                     -----------    -----------
Total liabilities                                        872,470        881,073
                                                     -----------    -----------
Stockholders' equity:
  Common stock                                           210,708        209,476
  Additional paid-in capital                           3,925,057      3,921,670
  Accumulated deficit                                 (3,083,032)    (3,071,078)
                                                     -----------    -----------
Total stockholders' equity                             1,052,733      1,060,068
                                                     -----------    -----------
Total liabilities and stockholders' equity           $ 1,925,203    $ 1,941,141
                                                     ===========    ===========

See accompanying notes to condensed financial statements


<PAGE>

                     TEL-INSTRUMENT ELECTRONICS CORPORATION
                 CONDENSED COMPARATIVE STATEMENTS OF OPERATIONS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                             Three Months Ended           Nine Months Ended
                                         December 31,   December 31,   December 31,   December 31,
Sales                                       1998            1997          1998           1997
                                         -----------    -----------    -----------    -----------
<S>                                      <C>            <C>            <C>            <C>        
  Government, net                        $   584,490    $ 1,133,538    $ 1,385,702    $ 2,258,243
  Commercial, net                            388,446        348,495      1,278,103        938,654
                                         -----------    -----------    -----------    -----------
Total Sales                                  972,936      1,482,033      2,663,805      3,196,897

Cost of sales                                346,610        505,202      1,111,420      1,193,096
                                         -----------    -----------    -----------    -----------
Gross Margin                                 626,326        976,831      1,552,385      2,003,801

Operating expenses:
  Selling, general & administrative          233,366        334,208        706,593        737,383
  Engineering, research, & development       273,057        284,309        842,602        648,235
                                         -----------    -----------    -----------    -----------
Total operating expenses                     506,423        618,517      1,549,195      1,385,618

     Income from operations                  119,903        358,314          3,190        618,183

Other income (expense):
  Interest income                                 82          6,145          8,635         17,878
  Interest expense                           (10,238)       (17,578)       (31,731)       (55,170)
                                         -----------    -----------    -----------    -----------
Income/(loss) before taxes                   109,747        346,881        (19,906)       580,891
Provision/(Benefit) for income taxes          43,844        138,834         (7,952)       232,298
                                         -----------    -----------    -----------    -----------
Net income/(loss)                        $    65,903    $   208,047    $   (11,954)   $   348,593
                                         ===========    ===========    ===========    ===========
Basic and diluted income (loss)
     per common share                    $      0.03    $      0.10    $     (0.01)   $      0.17
Dividends per share                             None           None           None           None
Weighted average shares outstanding
     Basic                                 2,104,539      2,039,581      2,098,657      2,035,248
     Diluted                               2,116,101      2,093,989      2,098,657      2,089,656
</TABLE>

See accompanying notes to condensed financial statements


                                       2
<PAGE>

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

                                                          Nine Months Ended
                                                             December 31,
                                                          1998          1997
                                                       ------------  ----------
(Decrease) increase in cash:
Cash flows from operating activities
Net (loss) income                                       $ (11,954)   $ 348,593
Adjustments to reconcile net (loss) income
    to cash used in operating activities:
     Deferred income taxes                                 (7,952)     232,298
     Depreciation                                          30,558       24,483
Changes in assets or liabilities:
  (Increase) decrease in accounts receivable
       and unbilled revenue                              (227,000)    (482,853)
  (Increase) decrease in inventories                     (209,690)     (45,318)
  (Increase) decrease in prepaid expenses and
       other current assets                                (9,043)     (18,594)
  (Increase) decrease in other assets                     (30,996)     (15,000)
  Increase in advanced billings                              --         57,061
  (Decrease) increase in accrued payroll,
       deferred wages and
       And vacation pay                                      (776)      (5,747)
  (Decrease) increase in accounts payable
     and accrued expenses                                  (7,827)    (106,206)
                                                        ---------    ---------
Net cash used in operations                              (474,680)     (11,283)
                                                        ---------    ---------
Cash flows from investing activities:
  Cash purchases of property, plant and equipment         (59,714)     (62,483)
                                                        ---------    ---------
Net cash used in investing activities                     (59,714)     (62,483)
                                                        ---------    ---------
Cash flows from financing activities:
Proceeds from exercise of stock options                     4,619        8,188
Proceeds from issuance of common stock                       --           --
                                                        ---------    ---------
Net cash provided by financing activities                   4,619        8,188
                                                        ---------    ---------
Net decrease in cash                                     (529,775)     (65,578)
Cash at beginning of period                               585,281      528,636
                                                        ---------    ---------
Cash at end of period                                   $  55,506    $ 463,058
                                                        =========    =========
Interest paid                                           $  20,538    $  45,041
                                                        =========    =========

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, 1998,  the results of  operations  for the
three and nine  months  ended  December  31, 1998 and  December  31,  1997,  and
statements  of cash  flows  for the nine  months  ended  December  31,  1998 and
December 31, 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   Unbilled Revenue

Sales are recognized primarily upon shipment of products,  except in the case of
long-term contracts wherein sales are recognized on the percentage-of-completion
method.

Sales   under   the   U.S.   Navy   contract   have   been   recorded   on   the
percentage-of-completion method. Under this approach, sales and gross margin are
recognized  based  on the  ratio of costs  incurred  to date to total  estimated
contract costs.  Unbilled revenues of $154,011  represent  recoverable costs and
accrued    profit   not   billed    resulting    from   the    application    of
percentage-of-completion  accounting.  Actual  billing of these  amounts will be
based upon contractual billing terms.

Note 3   Inventories

Inventories consist of:

                                                  December 31,     March 31, 
                                                     1998            1998
                                                  ---------       ---------
Purchased parts                                   $355,843        $ 253,616
Work-in-process                                    272,497          165,034
Less: Reserve for obsolescence                     (35,620)         (35,620)
                                                  --------        ---------
                                                  $592,720        $ 383,030
                                                  ========        =========

Note 4   Income Taxes

The Company,  in accordance  with SFAS 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 nine months ended
December 31, 1998, the Company recorded a deferred income tax benefit of $7,952,
which  represents the effective  federal and state tax rate on the Company's net
loss before taxes of $19,906.  This tax benefit reduced the loss for the period.
The $7,952 increased the Company's  deferred income tax asset 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.


                                       4
<PAGE>

                        TEL-INSTRUMENT ELECTRONICS CORP.

               NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued)

Note 5   Reclassifications

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

Note 6   Earnings Per Share

Basic  income  (loss) per share is based on net income  (loss) for the  relevant
period,  divided by the weighted  average  number of common  shares  outstanding
during the period.  Diluted  income  (loss) per share for  December  31, 1998 is
based on net income  (loss),  divided by the weighted  average  number of common
shares outstanding, including common share equivalents such as outstanding stock
options  and  warrants  during the period.  Common  share  equivalents,  such as
outstanding  stock  options,  are not included in the  calculation  for the nine
months ended December 31, 1998 since the effect would be antidilutive.

Note 7   Credit Facility

On July 22, 1998, the Company  entered into a credit  agreement with Summit Bank
for  $350,000,  which  extends for one year and is  thereafter  renewable  on an
annual  basis at the bank's  option.  The Company  does not  currently  have any
outstanding balance against this credit line. The Company pays no commitment fee
and the rate of interest on borrowings is the Lender's Prevailing Base Rate plus
1%.


                                       5
<PAGE>

Item 2   MANAGEMENT'S DISCUSSION OF RESULTS OF OPERATIONS
         AND ANALYSIS OF FINANCIAL POSITION

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 the
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  unforseen
circumstances.  A number of these factors are discussed in the Company's filings
with the Securities and Exchange Commission.

Overview

While the  Company's  long-term  outlook  continues to be positive,  the Company
experienced two problems which resulted in a decline in sales and income for the
first nine  months of the  current  fiscal  year as  compared  to the first nine
months of the prior fiscal year. As previously  reported,  the Company completed
deliveries  under its  substantial  U.S. Air Force  T-30CM  contract in the last
quarter of fiscal year 1998. The company also experienced  manpower problems and
technical  issues in  engineering,  associated  with the  Company's  substantial
growth  in  sales  in the last two  years,  due to  development  of new and more
sophisticated  products.  This resulted in delays in completion  and shipment of
orders,  and consequent  reduction in sales for the current year. These problems
have been  identified  and are in the  process  of being  corrected.  Management
believes  that most of the delayed  shipments  will be made in the first half of
the next fiscal year.

Operating  income levels have declined from the prior fiscal year primarily as a
result of lower  sales,  while  operating  expense  levels have been as planned.
Management  continues to believe  that this  decline is  temporary  and that new
contracts can and will be obtained and the current  backlog  shipped to increase
sales.  In this  regard,  management  is  encouraged  by the dollar value of its
backlog,  which  was over  $2,250,000  at  December  31,  1998,  the  large  and
unexpected  increase in commercial sales, which increased 36% for the first nine
months of the current  fiscal year as compared to last year, the progress on the
U.S. Navy contract,  and the efforts of its  international  distributors.  Total
bookings  increased  $581,982 (22%) for the nine months ended December 31, 1998,
as compared to the same period last year.

The  Company's  profit  before  taxes was  $109,747  for the three  months ended
December 31, 1998, which reduced the loss before taxes for the nine months ended
December 31, 1998 to $19,906. The net profit for the three months ended December
31, 1998 was earned  despite the Company  having  lower sales as compared to the
three months ended September 30, 1998. The higher  profitability  in the current
quarter  is the  result of a higher  gross  profit on sales and  slightly  lower
engineering, research and development expenses.

The  Company  continues  to invest  heavily  in product  development,  and these
expenditures  represented  28% of sales for the three months ended  December 31,
1998. The principal  effort resulted from the U.S. Navy exercising  their option
to incorporate a collision  avoidance (TCAS) test capability into the T-47M test


                                       6
<PAGE>

Item 2   MANAGEMENT'S DISCUSSION OF RESULTS OF OPERATIONS
         AND ANALYSIS OF FINANCIAL POSITION (Continued)

Overview (Continued)

design.  Eight T-47M  prototypes have been fabricated and these units have begun
several months of environmental and functional testing.  Several tests have been
successfully  completed,  including the  reliability  test,  which  exceeded the
Navy's  requirements.  Field evaluation by the U.S. Navy is anticipated to begin
early in the next fiscal year. The U.S. Navy continually  monitors the Company's
progress on this  contract and  management  believes  that the Navy is satisfied
with  the  Company's  product  and  progress.  Assuming  field  evaluations  are
satisfactory and the U.S. Navy exercises production options in the first quarter
of the next fiscal year,  deliveries  would begin in the second  quarter of that
year.  This contract can be a source of significant  revenues that could include
options for up to 1,300 units, which the U.S. Navy can exercise through calendar
year 2001.  However,  there can be no assurance that field  evaluations  will be
favorable and that the U.S. Navy will exercise its options under this  contract.
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.

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 had received from Muirhead  Avionics a $323,000  contract for its T-48I,
which  deliveries  have  been  mostly  completed.  The  Company  also  signed an
exclusive agreement with Milspec Services Pty. Ltd. ("Milspec") to represent the
Company in Australia and New Zealand.  The Company received a $447,000  contract
to supply T-47CC ramp test sets to the Australian military,  as direct result of
Milspec's efforts,  for completion in the first quarter of the next fiscal year.
The  Company  believes  that the  foreign  commercial  market is larger than the
domestic  market  because  many  foreign  airlines  are  upgrading  to meet U.S.
requirements.

Sales

For the three months ended December 31, 1998 sales decreased  $509,097 (34%), as
compared to the three months ended December 31, 1997. Commercial sales increased
$39,951 (12%) while  government  sales  decreased  $549,048  (48%) for the three
months  ended  December  31,  1998 as  compared  to the same period in the prior
fiscal  year.  Government  sales for the three  months  ended  December 31, 1997
included sales to a Defense  Department prime contractor for the Company's T-47C
in the amount of $564,445 and the final  shipments of the T-30CM to the U.S. Air
Force in the amount of $198,159,  thereby  accounting  for the decline in fiscal
year 1999. These decreases were partially  offset by sales to Muirhead  Avionics
for the T-48I.

For the nine months ended December 31, 1998 sales declined  $533,092  (17%),  as
compared to the nine months ended December 31, 1997.  Government sales decreased
$872,541 (39%), as compared to the same period last year.  Government  sales for
the nine months ended December 31, 1997 included  sales to a Defense  Department
prime contractor for the Company's T-47C in the amount of $743,660 and the final
shipments of the T-30CM to the U.S.  Air Force in the amount of  $836,014.  This
decline  was  partially  offset  by sales to  Muirhead  for the T-48I and by the
increase in commercial  sales of $339,449 (36%).  The Company is encouraged with
the growth in the  commercial  market for which sales  increased 36% in the nine
months ended  December 31, 1998,  as compared to the same period last year.  The
backlog for commercial  sales  increased  $418,326 (39%) as compared to December
31, 1997. However, there is no assurance that this market will continue to grow.


                                       7
<PAGE>

Item 2   MANAGEMENT'S DISCUSSION OF RESULTS OF OPERATIONS
         AND ANALYSIS OF FINANCIAL POSITION (Continued)

Gross Margin

For the three  months and nine  months  ended  December  31,  1998 gross  margin
decreased  $350,505 (36%) and $451,416 (23%),  respectively,  as compared to the
three and nine months  ended  December  31,  1997.  This  decrease is  primarily
attributed  to lower sales.  The gross margin  percentage  was 64% for the three
months  ended  December  31, 1998 as compared to 66% for the three  months ended
December 31, 1997.  For the nine months ended December 31, 1998 the gross margin
percentage  was 58% as compared to 63% for the nine months  ended  December  31,
1997. This decrease is primarily attributed to the lower gross margin associated
with the documentation and test portion of the U.S. Navy T-47M contract.

Operating Expenses

Selling,  general and  administrative  expenses decreased $100,842 (30%) for the
three months  ended  December 31, 1998 as compared to the same period last year.
This  decrease is primarily  associated  with lower accrued  employee  incentive
compensation expense and a reduction in the level of expenditures related to the
Company's efforts to explore additional markets for its technology.

Selling, general and administrative expenses decreased $30,790 (4%) for the nine
months ended  December  31, 1998 as compared to the same period last year.  This
decrease  is  primarily   associated  with  lower  accrued  employee   incentive
compensation expense and a reduction in the level of expenditures related to the
Company's efforts to explore  additional  markets for its technology,  partially
offset by an increase in selling expenses and higher administrative salaries. In
fiscal year 1998 the  Company's  President  devoted a percentage  of his time to
research and development activities to ensure that such activities were properly
supervised.  In fiscal year 1999,  the Company hired a Director of  Engineering,
thus minimizing the President's  time in overseeing the research and development
function and allowing him to concentrate on Company growth.

Engineering,  research  and  development  decreased  $11,252  (4%) for the three
months ended  December  31, 1998 as compared to the three months ended  December
31, 1997.  Lower  accrued  employee  incentive  compensation  expense was mostly
offset by higher  consulting  fees for work on the  development of the T-47M for
the U.S. Navy.

Engineering,  research and  development  increased  $194,367  (30%) for the nine
months ended December 31, 1998 as compared to the nine months ended December 31,
1997. This increase reflects the Company's ongoing  commitment to developing new
products  and  finalization  of the  design of the T-47M  test sets for the U.S,
Navy. Outlays for new product development continue to be high.

Income Taxes

In accordance  with SFAS 109, a provision for income taxes was recognized in the
amount of $232,298  for the nine months ended  December  31, 1997.  For the nine
months  ended  December  31,  1998 the  Company  recorded a deferred  income tax
benefit of $7,952,  which represents the effective federal and state tax rate on
the Company's net loss before taxes of $19,906 (See Note 4 to Notes to Condensed
Financial Statements).


                                       8
<PAGE>

Item 2   MANAGEMENT'S DISCUSSION OF RESULTS OF OPERATIONS
         AND ANALYSIS OF FINANCIAL POSITION (Continued)

Liquidity and Capital Resources

At December  31, 1998 the Company had  positive  working  capital of $788,622 as
compared to $864,061 at March 31, 1998.  For the nine months ended  December 31,
1998,  cash used in operations  was $474,680 as compared to $11,283 for the nine
months ended  December 31, 1997.  This  reduction in available cash is primarily
associated  with  increases  in  accounts  receivable,  unbilled  revenues,  and
inventories.

The Company continues to invest heavily in research and development. The Company
expects  these  investments  will finalize the design for the T-47M for the U.S.
Navy and complete the  development  of  projects,  such as the T-47N,  T-36M and
T-47CC.  The  company  will then begin to ship these  units now in the  backlog,
which  should  increase  sales,  cash  flow and  profits.  However,  there is no
assurance that sales and profits will increase.

The  Company  has  received a  commitment  from Summit Bank for a credit line of
$350,000.  As of December  31,  1998,  the Company  has no  outstanding  balance
against this line.

Based upon the current backlog,  available  working  capital,  and the available
credit line, the Company believes that it has sufficient working capital to fund
its plans for the next twelve months. At present, the Company does not expect to
incur  significant  long-term needs for capital outside of its normal  operating
activities,  although  it may use some of its credit  line with Summit Bank on a
short term basis.

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

Year 2000 Issue

Many  existing  computer  programs  use a  two-digit  suffix  to  identify  year
references  with an  assumed  prefix  of "19".  This  limits  those  systems  to
recognizing  dates between 1900 and 1999.  As a result,  in a little less than a
year,  computer systems and/or software used by many companies in a wide variety
of applications may experience  operating  difficulties unless they are modified
or upgraded to adequately process information involving, related to or dependent
upon the century change.  If not corrected,  systems and/or  applications  could
fail or create  erroneous  results at or in connection with  applications  after
December 31,  1999.  Significant  uncertainty  exists  concerning  the scope and
magnitude of problems associated with the century change.

The  Company  has  reviewed  its  information   and   operational   systems  and
manufacturing processes in order to identify those products, services or systems
that are not Year 2000  compliant.  As a result of its initial  assessment,  the
Company does not believe,  based upon available  information,  that any material
exposure to significant  business  interruption  exists as a result of Year 2000
compliance  issues.  Accordingly,   the  Company  has  not  adopted  any  formal
contingency  plan.  However,  there can be no  assurance  that the  Company  can
identify and remediate all significant Year 2000 problems, that remedial efforts
will not involve  significant  time and expense,  or that such problems will not
have a material adverse effect on the Company's business,  results of operations
or financial position.


                                       9
<PAGE>

Item 2   MANAGEMENT'S DISCUSSION OF RESULTS OF OPERATIONS
         AND ANALYSIS OF FINANCIAL POSITION (Continued)

Year 2000 Issue (continued)

The Company also faces risk to the extent that  suppliers of products,  services
and systems purchased by it and others whom the Company transacts  business on a
worldwide  basis do not comply with Year 2000  requirements.  The  Company  will
initiate  written  communications  with  significant  suppliers and customers to
determine the extent to which it is vulnerable to these third  parties'  failure
to  remediate  their own Year 2000 issues.  In the event any such third  parties
cannot provide the Company with products, services or systems that meet the Year
2000  requirements  on a timely basis,  or in the event Year 2000 issues prevent
such third parties from timely delivery of products or services  required by the
Company,  its results of operations could be materially  adversely affected.  To
the extent Year 2000 issues cause  significant  delays in, or  cancellation  of,
decisions to purchase the Company's products or services, its business,  results
of operations and financial position could be materially adversely affected. Due
to the  uncertainty,  both internally and externally,  inherent in the Year 2000
problem  resulting,  in part, from the uncertainty of its Year 2000 readiness of
third  parties,  suppliers  and  customers,  the Company is unable to accurately
predict at this time whether the  consequences of Year 2000 failures will have a
material impact on the Company's  results of operations,  liquidity or financial
condition.

The discussion of the Company's efforts, and management's expectations, relating
to Year 2000 compliance are forward-looking statements. The Company's ability to
achieve  Year 2000  compliance  and the level of  incremental  costs  associated
therewith,  could be adversely impacted by, among other things, the availability
and cost of  programming  and  testing  resources,  vendors'  ability  to modify
proprietary  software,  and  unanticipated  problems  identified  in the ongoing
compliance review.


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<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  December  1, 1998 (the
      "Annual Meeting").

(b)   Not  applicable  because  (i)  proxies  for the  Annual  Meeting  were not
      solicited pursuant to Regulation 14A under the Securities  Exchange Act of
      1934;  (ii)  there  was no  solicitation  in  opposition  to  management's
      nominees as listed in the Company's proxy statement; and (iii) all of such
      nominees were elected.

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

                                          For                    Against
                                          ---                    -------
     Harold K. Fletcher                 1,376,464                   0
     George F. Leon                     1,376,464                   0
     Robert J. Melnick                  1,376,464                   0
     Jeff C. O'Hara                     1,376,464                   0
     Robert J. Walker                   1.376,464                   0


The    shareholders    also   voted   all   1,376,464   shares   in   favor   of
PricewaterhouseCoopers  L.L.P. as the Company's certified public accountants for
the fiscal year ending March 31, 1999.

The  shareholders  also  voted all  1,376,464  shares  for  ratification  of the
Company's 1998 Stock Option Plan.

(d) Not applicable

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: 02/12/99                        By: /s/ Harold K. Fletcher
                                         ------------------------------
                                              Harold K. Fletcher
                                              Chairman and President


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