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 September 30, 2005

[_]   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:

2,210,731 shares of Common stock, $.10 par value as of November 7, 2005.

<PAGE>

                     TEL-INSTRUMENT ELECTRONICS CORPORATION

                                TABLE OF CONTENTS

                                                                            PAGE
                                                                            ----

            Part I - Financial Information

Item 1.     Condensed Consolidated Financial Statements (Unaudited):

            Condensed Consolidated Balance Sheets
            September 30, 2005 and March 31, 2005                              1

            Condensed Consolidated Statements of Operations -
            Three and Six Months Ended September 30, 2005 and 2004             2

            Condensed Consolidated Statements of Cash Flows -
            Six Months Ended September 30, 2005 and 2004                       3

            Notes to Condensed Consolidated Financial Statements             4-8

Item 2.     Management's Discussion and Analysis of the Results of
            Operations and Financial Condition                              9-13

Item 3.     Quantitative and Qualitative Disclosures about Market Risk        14

Item 4.     Controls and Procedures                                           14

            Part II - Other Information

Item 6.     Exhibits                                                          14

            Signatures                                                        14

            Certifications                                                 15-17

<PAGE>

Item 1 - Financial Statements

                     TEL-INSTRUMENT ELECTRONICS CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
ASSETS                                                     September 30, 2005  March 31, 2005
                                                           ------------------  --------------
                                                               (Unaudited)
<S>                                                            <C>              <C>
Current assets:
  Cash and cash equivalents                                    $1,588,841       $  826,959
  Accounts receivable, net                                      1,378,095        1,610,519
  Inventories, net                                              2,411,204        2,926,011
  Taxes receivable                                                125,674          125,674
  Prepaid expenses and other current assets                       153,754          124,946
  Deferred income taxes                                           526,203          583,560
                                                               ----------       ----------
Total current assets                                            6,183,771        6,197,669

Property, plant and equipment, net                                819,931          844,075
Intangible assets, net                                            326,851          283,754
Other assets                                                      308,132          302,135
                                                               ----------       ----------
Total assets                                                   $7,595,588       $7,670,730
                                                               ==========       ==========

LIABILITIES & STOCKHOLDERS EQUITY

Current liabilities:
  Convertible note payable - related party - current portion   $   50,000       $   50,000
  Convertible subordinated notes - related party                    7,500            7,500
  Notes payable - other                                            58,000           58,000
  Capitalized lease obligations - current portion                    --              2,323
  Accounts payable                                                282,783          481,146
  Deferred revenues                                               149,991          169,866
  Accrued payroll, vacation pay, profit sharing
    and payroll taxes                                             328,815          353,704
  Accrued expenses                                              1,075,608        1,028,014
                                                               ----------       ----------
Total current liabilities                                       1,952,697        2,150,553

Convertible notes payable - related party - long-term             150,000          150,000
Deferred taxes - long-term                                         43,000           43,000
                                                               ----------       ----------
Total liabilities                                               2,145,697        2,343,553

Stockholders' equity:
   Common stock, par value $.10 per share, 2,195,731 and
       2,187,831 issued and  outstanding as of September 30,
       2005, and March 31, 2005, respectively                     219,576          218,786
   Additional paid-in capital                                   4,081,570        4,024,910
   Retained earnings                                            1,148,745        1,083,481
                                                               ----------       ----------
Total stockholders' equity                                      5,449,891        5,327,177
                                                               ----------       ----------
Total liabilities and stockholders' equity                     $7,595,588       $7,670,730
                                                               ==========       ==========
</TABLE>

See accompanying notes to condensed financial statements


                                      -1-
<PAGE>

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

<TABLE>
<CAPTION>
                                               Three Months Ended             Six Months Ended
                                        Sept. 30, 2005  Sept. 30, 2004  Sept. 30, 2005  Sept. 30, 2004
                                        --------------  --------------  --------------  --------------

<S>                                       <C>            <C>             <C>              <C>
Net sales                                 $ 3,094,442    $ 2,238,950     $ 6,245,420      $ 5,051,750

Cost of sales                               1,589,623      1,026,411       3,133,918        2,361,651
                                          -----------    -----------     -----------      -----------
Gross margin                                1,504,819      1,212,539       3,111,502        2,690,099

Operating expenses
  Selling, general and administrative         774,853        808,742       1,672,848        1,641,953
  Amortization of intangibles                  21,549         21,549          43,098           43,098
  Engineering, research and development       643,578        510,046       1,272,100        1,042,496
                                          -----------    -----------     -----------      -----------
Total operating expenses                    1,439,980      1,340,337       2,988,046        2,727,547
                                          -----------    -----------     -----------      -----------
     Income (loss) from operations             64,839       (127,798)        123,456          (37,448)

Other income (expense):
  Interest income                               3,300          3,246           6,390            6,750
  Interest expense                             (3,255)        (7,225)         (6,971)         (13,562)
                                          -----------    -----------     -----------      -----------
Income (loss) before taxes                     64,884       (131,777)        122,875          (44,260)

Provision (benefit) for income taxes-          28,768        (52,644)         57,611          (17,681)
                                          -----------    -----------     -----------      -----------
Net income (loss)                         $    36,116    $   (79,133)    $    65,264      $   (26,579)
                                          ===========    ===========     ===========      ===========

Basic income (loss) per common share            $0.02         $(0.04)          $0.03           $(0.01)
                                                =====         ======           =====           ======
Diluted income (loss) per common share          $0.02         $(0.04)          $0.03           $(0.01)
                                                =====         ======           =====           ======
Dividends per share                              None           None            None             None
Weighted average shares outstanding
     Basic                                  2,190,006      2,144,301       2,189,074        2,144,237
     Diluted                                2,302,015      2,144,301       2,301,083        2,144,237
</TABLE>

See accompanying notes to condensed financial statements


                                      -2-
<PAGE>

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

<TABLE>
<CAPTION>
                                                                   Six Months Ended
                                                           Sept. 30, 2005  Sept. 30, 2004
                                                           --------------  --------------
<S>                                                         <C>            <C>
Cash flows from operating activities:
Net income (loss)                                           $    65,264    $   (26,579)
Adjustments to reconcile net income (loss) to net cash
    provided by (used in) operating activities:
    Deferred income taxes                                        57,356        (17,681)
    Depreciation                                                136,829        130,414
    Amortization of intangibles                                  43,098         43,098
    Non-cash stock-based compensation                            43,230           --
Changes in operating assets or liabilities:
   Decrease (increase) in accounts receivable, net              232,424       (521,449)
   Decrease (increase) in inventories, net                      514,807       (331,814)
   (Increase) decrease in prepaid expenses and
       other current assets                                     (28,808)        32,292
   (Increase) decrease in other assets                           (5,997)         1,835
   (Decrease) increase in accounts payable                     (198,363)       253,044
   (Decrease) increase in deferred revenues                     (19,875)        33,154
   (Decrease) increase  in accrued payroll, vacation pay,
     and payroll taxes                                          (24,889)        55,666
  Increase in accrued expenses                                   47,594         44,249
                                                            -----------    -----------
Net cash provided by (used in) operating activities             862,670       (303,771)
                                                            -----------    -----------
Cash flows from investing activities:
  Purchases of property, plant and equipment                   (112,685)      (168,536)
                                                            -----------    -----------
Net cash used in investing activities                          (112,685)      (168,536)
                                                            -----------    -----------
Cash flows from financing activities:
  Proceeds from exercise of stock options                        14,220          1,080
  Payment of capitalized lease obligations                       (2,323)       (10,931)
                                                            -----------    -----------
  Net cash provided by (used in) financing activities            11,897         (9,851)
                                                            -----------    -----------
Net increase (decrease) in cash and cash equivalents            761,882       (482,158)
Cash and cash equivalents at beginning of period                826,959      1,509,828
                                                            -----------    -----------
Cash and cash equivalents at end of period                  $ 1,588,841    $ 1,027,670
                                                            ===========    ===========
Supplemental information
     Interest paid                                          $     4,500    $     2,383
                                                            ===========    ===========
</TABLE>

See accompanying notes to condensed 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  September  30,  2005,  the  results  of
operations  for the three and six months ended  September 30, 2005 and September
30, 2004,  and  statements of cash flows for the six months ended  September 30,
2005 and September 30, 2004. 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, 2005 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, 2005.

Note 2 Accounts Receivable, net

Accounts receivable, net, consist of:

                                            September 30, 2005    March 31, 2005

       Commercial                               $   718,119        $   642,954
       Government                                   703,004          1,013,771
       Allowance for doubtful accounts              (43,028)           (46,206)
                                                -----------        -----------
       Total                                    $ 1,378,095        $ 1,610,519
                                                ===========        ===========

Note 3 Inventories, net

Inventories, net, consist of:

                                            September 30, 2005    March 31, 2005

       Purchased parts                          $ 1,457,761        $ 1,452,080
       Work-in-process                            1,052,761          1,532,535
       Finished goods                                92,901            112,036
       Less:  Reserve for obsolescence             (192,219)          (170,640)
                                                -----------        -----------
       Total                                    $ 2,411,204        $ 2,926,011
                                                ===========        ===========


                                      -4-
<PAGE>

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

Note 4 Earnings Per Share

The  Company's  basic income  (loss) per common 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 common share is based on net
income  (loss),  divided  by  the  weighted  average  number  of  common  shares
outstanding  during the period,  including  common  share  equivalents,  such as
outstanding  stock  options.  Common share  equivalents  are not included in the
calculation  for the three and six months  ended  September  30,  2004 since the
effect would be antidilutive.

<TABLE>
<CAPTION>
                                                              Three Months Ended   Three Months Ended
                                                              September 30, 2005   September 30, 2004
                                                              ------------------   ------------------
<S>                                                              <C>                  <C>
Basic net income (loss) per share computation:
  Net income (loss) for common stockholders                      $    36,116          $   (79,133)
  Weighted-average common shares outstanding                       2,190,006            2,144,301
  Basic net income (loss) per share for common stockholders      $      0.02          $     (0.04)
Diluted net income (loss) per share computation
  Net income (loss) for common stockholders                      $    36,116          $   (79,133)
  Weighted-average common shares outstanding                       2,190,006            2,144,301
  Incremental shares attributable to the assumed exercise of
       outstanding stock options                                     112,009                 --
  Total adjusted weighted-average shares                           2,302,015            2,144,301
  Diluted net income (loss) per share for common stockholders    $      0.02          $     (0.04)

                                                                Six Months Ended      Six Months Ended
                                                              September 30, 2005    September 30, 2004
                                                              ------------------    ------------------
Basic net income (loss) per share computation:
  Net income (loss) for common stockholders                      $    65,264          $   (26,579)
  Weighted-average common shares outstanding                       2,189,074            2,144,237
  Basic net income (loss) per share for common stockholders      $      0.03          $     (0.01)
Diluted net income (loss) per share computation
  Net income (loss) for common stockholders                      $    65,264          $   (26,579)
  Weighted-average common shares outstanding                       2,189,074            2,144,237
  Incremental shares attributable to the assumed exercise of
       outstanding stock options                                     112,009                 --
  Total adjusted weighted-average shares                           2,301,083            2,144,237
  Diluted net income (loss) per share for common stockholders    $      0.03          $     (0.01)
</TABLE>


                                      -5-
<PAGE>

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


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 has
been applied.  The Company  currently plans to adopt the fair value based method
prescribed by SFAS 123R for the fiscal year ended March 31, 2007.

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 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  408,500  outstanding  stock
options under SFAS No. 123R, the pro forma amounts are indicated below:

<TABLE>
<CAPTION>
                                                     Six Months Ended     Six Months Ended
                                                    September 30, 2005   September 30, 2004
                                                    ------------------   ------------------

<S>                                                    <C>                <C>
Net income (loss)  - as reported                       $   65,264         $  (26,579)
Add: Stock-based compensation expense included
          in reported net income, net of taxes             25,960               --
Less fair value of stock options, net of taxes            (35,009)           (13,156)
                                                           ------            -------
Net income  (loss)- pro forma                              56,215            (39,735)
                                                           ======            =======
Basic earnings (loss) per share - as reported                0.03              (0.01)
Basic earnings (loss) per share - pro forma                  0.03              (0.02)

Diluted earnings (loss) per share - as reported              0.03              (0.01)
Diluted earnings (loss) per share - pro forma                0.02              (0.02)

                                                    Three Months Ended   Three Months Ended
                                                    September 30, 2005   September 30, 2004
                                                    ------------------   ------------------

Net income (loss)  - as reported                       $   36,116         $  (79,133)
Add: Stock-based compensation expense included
          in reported net income, net of taxes             10,321               --
Less fair value of stock options, net of taxes            (17,505)            (1,838)
                                                           ------            -------
Net income  (loss)- pro forma                              28,932            (80,971)
                                                           ======            =======
Basic earnings (loss) per share - as reported                0.02              (0.04)
Basic earnings (loss) per share - pro forma                  0.01              (0.04)

Diluted earnings (loss) per share - as reported              0.02              (0.04)
Diluted earnings (loss) per share - pro forma                0.01              (0.04)
</TABLE>


                                      -6-
<PAGE>

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

Note 6 Segment Information

Information is presented for the Company's three reportable activities, avionics
government,  avionics commercial, and marine systems. 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  consists  of sales of
different  products  to  hydrographic,  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
September 30, 2005                       Gov't         Comm'l.         Total          Systems         Items           Total
------------------                       -----         -------         -----          -------         -----           -----

<S>                                  <C>             <C>            <C>             <C>                            <C>
Sales                                $ 1,832,373     $   917,352    $ 2,749,725     $   344,717                    $ 3,094,442
Cost of sales                            833,272         543,166      1,376,438         213,185                      1,589,623
                                     -----------     -----------    -----------     -----------                    -----------
Gross margin                             999,101         374,186      1,373,287         131,532                      1,504,819
                                     -----------     -----------    -----------     -----------                    -----------
Engineering, research, & dev.                                           592,793          50,785                        643,578
Selling, general, and admin.                                            330,078          91,652    $   353,123         774,853
Amortization of intangibles                                                                             21,549          21,549
Interest,, net                                                              (45)           --             --               (45)
                                                                    -----------     -----------    -----------     -----------
Total expenses                                                          922,826         142,437        374,672       1,439,935
                                                                    -----------     -----------    -----------     -----------
Income (loss) before income taxes                                   $    450,461    $   (10,905)   $  (374,672)     $   64,884
                                                                    ============    ===========    ===========      ==========

Three Months Ended                     Avionics        Avionics       Avionics        Marine        Corporate
September 30, 2004                       Gov't          Comm'l.         Total         Systems         Items           Total
------------------                       -----          -------         -----         -------         -----           -----

Sales                                $ 1,382,992     $   702,338    $ 2,085,330     $   153,620                    $ 2,238,950
Cost of sales                            505,861         425,210        931,071          95,340                      1,026,411
                                     -----------     -----------    -----------     -----------                    -----------
Gross margin                             877,131         277,128      1,154,259          58,280                      1,212,539
                                     -----------     -----------    -----------     -----------                    -----------
Engineering, research, & dev.                                           414,688          95,358                        510,046
Selling, general, and admin.                                            326,268         100,927    $   381,547         808,742
Amortization of intangibles                                                                             21,549          21,549
Interest expense, net                                                     3,800             179           --             3,979
                                                                    -----------     -----------    -----------     -----------
Total expenses                                                          744,756         196,464        403,096       1,344,316
                                                                    -----------     -----------    -----------     -----------
Income (loss) before income taxes                                   $   409,503     $  (138,184)   $  (403,096)    $  (131,777)
                                                                    ===========     ===========    ===========     ===========
</TABLE>


                                      -7-
<PAGE>

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

<TABLE>
<CAPTION>
Note 6 Segment Information (continued)

Six Months Ended                       Avionics       Avionics       Avionics         Marine        Corporate
September 30, 2005                       Gov't         Comm'l.         Total          Systems         Items           Total
------------------                       -----         -------         -----          -------         -----           -----
<S>                                  <C>             <C>            <C>             <C>                            <C>
Sales                                $ 4,205,408     $ 1,479,424    $ 5,684,832     $   560,588                    $ 6,245,420
Cost of sales                          1,811,666         961,941      2,773,607         360,311                      3,133,918
                                     -----------     -----------    -----------     -----------                    -----------
Gross margin                           2,393,742         517,483      2,911,225         200,277                      3,111,502
                                     -----------     -----------    -----------     -----------                    -----------
Engineering, research, & dev.                                         1,179,491          92,609                      1,272,100
Selling, general, and admin.                                            748,276         177,365    $   747,207       1,672,848
Amortization of intangibles                                                                             43,098          43,098
Interest expense, net                                                       581            --             --               581
                                                                    -----------     -----------    -----------     -----------
Total expenses                                                        1,928,348         269,974        790,305       2,988,627
                                                                    -----------     -----------    -----------     -----------
Income (loss) before income taxes                                   $   982,897     $   (69,697)   $  (790,305)    $   122,875
                                                                    ===========     ===========    ===========     ===========

Six Months Ended                       Avionics       Avionics       Avionics         Marine        Corporate
September 30, 2004                       Gov't         Comm'l.         Total          Systems         Items           Total
------------------                       -----         -------         -----          -------         -----           -----
Sales                                $ 3,284,850     $ 1,383,551    $ 4,668,401     $   383,349                    $ 5,051,750
Cost of sales                          1,293,437         831,388      2,124,825         236,826                      2,361,651
                                     -----------     -----------    -----------     -----------                    -----------
Gross margin                           1,991,413         552,163      2,543,576         146,523                      2,690,099
                                     -----------     -----------    -----------     -----------                    -----------
Engineering, research, & dev.                                           905,553         136,943                      1,042,496
Selling, general, and admin.                                            672,026         197,056    $   772,871       1,641,953
Amortization of intangibles                                                                             43,098          43,098
Interest expense, net                                                     6,376             436           --             6,812
                                                                    -----------     -----------    -----------     -----------
Total expenses                                                        1,583,955         334,435        815,969       2,734,359
                                                                    -----------     -----------    -----------     -----------
Income (loss) before income taxes                                   $   959,621     $  (187,912)   $  (815,969)    $   (44,260)
                                                                    ===========     ===========    ===========     ===========
</TABLE>

Note 7 Reclassifcation

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


                                      -8-
<PAGE>

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

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

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

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

Critical Accounting Policies

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

Revenue  recognition  - revenues are  recognized  at the time of shipment to, or
acceptance by 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.

Payments  received  prior to the  delivery  of units or services  performed  are
recorded as deferred revenues on the accompanying balance sheets.

The Company has an existing contract with the U.S. Navy for the delivery of test
equipment  (AN/APM-480).  The AN/APM-480 is a catalog product, which the Company
also sells to civilian and other government  customers.  While the Company sells
this product to the U.S.  Navy,  the  proprietary  rights to the  technology are
retained by the Company. Since the AN/APM-480 was a significant product, and the
Company's  premier IFF test set, the Company continued to improve the product to
meet the needs of its other customers,  to increase product performance,  and to
improve the manufacturing process. Further, although the AN/APM-480 was accepted
and  used  by the  Navy,  since  it  was  in  substantial  compliance  with  the
specification,  there were limited areas where the AN/APM-480 did not operate at
maximum  performance  according  to the  specification.  Since  U.S.  Navy was a
significant  customer  and  because of these  minor  specification  issues,  the
Company agreed in fiscal year 2002 to provide enhancements at no additional cost
to the customer.

The Company,  beginning  in fiscal year 2002,  began to accrue the cost of these
enhancements  as the original  units were shipped in order to properly match the
revenues  with the expenses.  The Company  considers  this accrual  similar to a
warranty  expense,  and recorded the liability and the expense to cost of sales.
The enhancements made, and to be made to the product, the Company believes,  are
relatively  insignificant.  The  Company  has shipped and has been paid for over
1,200 units (approximately $17,000,000 in revenues)


                                      -9-
<PAGE>

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

Critical Accounting Policies (continued)

through the period ended September 30, 2005, and the cost of these  enhancements
is less than 3% of the  revenues.  The  customer  continues  to use the original
product in the field,  because the enhancements are not essential to the unit to
perform the major functions of the delivered  products.  We continue to ship the
units in accordance with the original contract, and are being paid in accordance
with the terms of the  original  contract.  Revenue was  recognized  because Tel
substantially  completed  and  fulfilled  the terms  specified  in the  original
contract,  the Navy took  delivery and the Armed Forces are using the product in
the field.  There was no obligation to perform any  enhancements at the time the
original  contract was signed in 2000, and when the first shipments were made in
our fiscal year ended March 31, 2001.

The  costs,  estimated  to be  approximately  $480 per unit  are for  labor  and
material,  based upon our experience manufacturing the product, and our standard
costing information. The Company is charging costs of performing the enhancement
to the accrued liability as the units are shipped. This accrual is being reduced
as the units are enhanced and returned to the military.

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

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 reserves or inventory write-downs may
be required.

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


                                      -10-
<PAGE>

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

Critical Accounting Policies (continued)

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. The measurement of deferred tax assets
is reduced, if necessary,  by a valuation allowance for any tax benefit which is
not more likely than not to be  realized.  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.

Results of Operations

Overview

In March  2005,  the  Company won a  competitive  procurement  and was awarded a
$17,344,853                    multi-year,                     firm-fixed-price,
indefinite-delivery/indefinite-quantity  contract  for the systems  engineering,
design   and   integration,   fabrication,   testing,   and   production   of  a
Communications/Navigation  (COMM/NAV)  Radio Frequency (RF) Avionics  Flightline
Tester  (CRAFT) with  sonobuoy  simulator  capabilities.  In August  2005,  this
contract was modified to include  testing of the next  generation of IFF in this
state-of-the-art  multi-function  test set.  This  contract  is  expected  to be
completed in March 2010. The CRAFT combines advanced navigation,  communication,
IFF, and sonobuoy test capabilities in a portable test set, which will utilize a
flexible and expandable digital-signal-processing-based  architecture. The CRAFT
is another  significant  milestone for the Company,  because the  development of
this  technology  will help  solidify  the  Company as one of the leaders in the
industry, and will meet the U.S. Navy's test requirements for years to come. The
Company will continue  funding the  development  of this product.  This contract
currently has production options totaling 750 units,  which if exercised,  would
result in deliveries  beginning in early fiscal year 2008. The Company  believes
the CRAFT  technology  is a  significant  advance  on  current  products  in the
marketplace and will form the basis for a new family of test  instruments  which
will  diversify  and  modernize  our product  line and could lead to  additional
sales.  Tel  is  actively  pursuing  other  major  government  contracts  and is
continuing its efforts to broaden its markets and products.

Sales and  operating  results  for the first six months of the 2006  fiscal year
have  improved as compared to the same six months in fiscal year 2005,  although
near-to-mid-term  commercial  and  military  orders have  continued  to be below
expectations.

For the six months  ended  September  30,  2005,  total sales  increased  24% to
$6,245,420 as compared to the same period in the prior year,  and net income for
the six months  ended  September  30,  2005 was $65,264 as compared to a loss of
$26,579 for the first six months of the prior fiscal year. The increase in sales
is  primarily  attributed  to the  increase in avionics  government  sales.  The
increase  in sales was  offset  by an  increase  in  engineering,  research  and
development  expenditures  for avionics.  Gross profit  declined as a percentage
from the same period in the last fiscal year  primarily  as a result of a change
in product mix,  lower pricing on commercial  products and lower gross margin on
billings related to the  documentation  and test activities for CRAFT and on the
initial  shipments of the TR-401. In the second quarter of fiscal year 2006, the
marine systems showed improvement. The introduction, production, and shipment of
new products significantly increased sales, but decreased the product backlog as
new orders have been below expectations.

As of September 30, 2005,  cash  increased to $1,588,841  from $826,959 at March
31, 2005 as a result of reductions in inventories and accounts receivable.


                                      -11-
<PAGE>

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

Results of Operations (continued)

Sales

Sales of avionics products increased $664,395 (31.9%) and $1,016,431 (21.8%) for
the three and six months ended September 30, 2005, respectively,  as compared to
the same periods in the prior year. Avionics commercial sales increased $215,014
(30.6%) for the three months ended  September  30, 2005,  which is attributed to
sales of the new  TB-2100  Bench Test set,  an  increase in sales for the TR-220
line of Multi-Function Test sets and the T-30D,  partially offset by lower sales
for repairs and  calibrations.  For the six months  ended  September  30,  2005,
avionics  commercial sales increased $95,873 (6.9%) as a result of sales for the
new TB-2100 Bench Test set and increased sales of the T-30D, partially offset by
lower sales of the TR-220 line of  Multi-Function  Test sets. The weak financial
condition of the commercial  airline industry  continues to curtail  significant
growth in this segment. Avionics government sales increased $449,381 (32.5%) for
the second  quarter of fiscal year 2006 as compared to the second  quarter  last
year.  Shipments of the AN/APM-480 to the U.S. Navy, an increase in sales of the
T-47N  associated with a contract with the U.S.  Military,  sales of the TR-401,
and billings  related to the test and  documentation  phase of the CRAFT program
were offset by lower sales of the T-760 and sales of the AN/APM-480 to customers
other than the U.S. Navy. Avionics government sales increased $920,558 (28%) for
the six months ended  September  30, 2005. An increase in sales of the T-47N and
the T-36M associated with a contract with the U.S, Military was partially offset
by lower sales of the  AN/APM-480  to customers  other than the U.S.  Navy,  the
T-760 and the T-30CM.  Marine Systems sales increased  $191,097 and $177,239 for
the three and six months ended September 30, 2005, respectively,  as compared to
the three and six months ended September 30, 2004. The introduction, production,
and shipment of new products  significantly  increased  sales, but decreased the
product backlog as new orders have been below expectations.

Gross Margin

Gross margin  increased  $292,280 (24.1%) and $421,403 (15.7%) for the three and
six months  ended  September  30,  2005,  respectively,  as compared to the same
period in the prior  fiscal  year.  The  increase in gross  margin is  primarily
attributed to the higher sales volume. The gross margin percentage for the three
months  ended  September  30,  2005 was 48.6% as compared to 54.2% for the three
months ended September 30, 2004. The gross margin  percentage for the six months
ended September 30, 2005 was 49.8% as compared to 53.3% for the six months ended
September  30, 2004.  The decrease in gross margin  percentage is primarily as a
result of a change in product  mix,  lower  pricing on  commercial  products and
lower gross margin on billings related to the  documentation and test activities
for CRAFT, and the initial shipments of the TR-401.

Operating Expenses

Selling,  general and  administrative  expenses decreased $33,889 (4.2%) for the
three  months  ended  September  30, 2005 as compared to the three  months ended
September 30, 2004, primarily as a result of lower administrative  salaries, and
a decrease in  advertising  expenses for the marine systems  division.  Selling,
general and administrative  expenses increased $30,895 (1.9%) for the six months
ended September 30, 2005 as compared to the same period last year, as the result
of higher  commission  expenses  for the avionics  division and higher  salaries
which were partially  offset by lower travel expenses for the avionics  division
and lower advertising expenses for the marine systems division.


                                      -12-
<PAGE>

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

Operating Expenses (continued)

Engineering,  research and development  expenses  increased $133,532 (26.2%) and
$229,604  (22%)  for  the  three  and  six  months  ended  September  30,  2005,
respectively,  as  compared  to the same  periods in the prior  fiscal year as a
result  of  increased  research  and  development   efforts,   including  CRAFT,
enhancements to the TB-2100, and the TR-401.

Income Taxes

A provision  for income  taxes was recorded in the amount of $57,611 for the six
months ended  September 30, 2005 as compared to a tax benefit of $17,681 for the
six months  ended  September  30, 2004 as a result of the loss for that  period.
These  amounts   represent   the  effective   federal  and  state  tax  rate  of
approximately  40% on the Company's net income before taxes, plus additional New
Jersey state taxes for the avionics  business.  Under New Jersey law,  losses in
the marine systems  subsidiary cannot be applied to reduce taxes on the avionics
business

Liquidity and Capital Resources

At September 30, 2005, the Company had positive working capital of $4,231,074 as
compared to $4,047,116 at March 31, 2005, and cash increased to $1,588,841  from
$826,959 at March 31, 2005.  For the six months ended  September  30, 2005,  the
Company  generated  $862,670 in cash from  operating  activities  as compared to
using  $303,771  for the same period last year.  This  improvement  in cash from
operating  activities is primarily  attributed to a reduction in inventories and
accounts  receivable,  partially  offset by a  reduction  in  accounts  payable.
Stockholders'  equity  increased  to  $5,449,891  at  September  30,  2005  from
$5,327,177 at March 31, 2005.

The Company has a line of credit of $1,750,000 from Bank of America. The line of
credit bears an interest rate of 0.5% above the lender's  prevailing  base rate,
which is payable monthly,  based upon the outstanding  balance. The Company does
not pay any fees to maintain this open line. At September 30, 2005,  the Company
had  no  outstanding   balance.   The  line  of  credit  is   collateralized  by
substantially  all of the assets of the  Company,  and  requires  the Company to
maintain certain financial covenants.  As of September 30, 2005, the Company was
in  compliance  with  all  financial  covenants.  The  Company  has  received  a
commitment  from the bank to renew this line for another year, and, as such, the
line of credit will expire on November 30, 2006.

Based upon the current  backlog,  which has increased to $6,400,000 at September
30, 2005 from  $6,200,000 at March 31, 2005, 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  six  months  ended  September  30,  2005.  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, 2005.


                                      -13-
<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."  The Chief  Executive  Officer  and  Principal
Accounting Officer evaluated the Company's Disclosure Controls and Procedures at
September 30, 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 internal control over financial reporting identified in
connection  with the evaluation as of September 30, 2005 by the Chief  Executive
Officer and Principal Accounting Officer,  required by paragraph (d) of Exchange
Act Rules 13a-15 or 15d-15,  which occurred during Tel's last fiscal quarter and
which have materially  affected,  or are reasonably likely to materially affect,
internal controls over financial reporting.

Part II. Other Information

Item 6.     Exhibits

            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.

SIGNATURES

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

                                                TEL-INSTRUMENT ELECTRONICS CORP.

Date: November 11, 2005                         By: /s/ Harold K. Fletcher
                                                    ----------------------------
                                                    /s/ Harold K. Fletcher
                                                    Chairman and President

Date: November 11, 2005                         By: /s/ Joseph P. Macaluso
                                                    ----------------------------
                                                    /s/ Joseph P. Macaluso
                                                    Principal Accounting Officer


                                      -14-