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

                                   ----------

                                    FORM 10-Q

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

            For the quarterly period ended June 30, 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  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act). Yes |_|   No |X|

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

2,187,831 shares of Common stock, $.10 par value as of August 9, 2005.
<PAGE>

                     TEL-INSTRUMENT ELECTRONICS CORPORATION
                                TABLE OF CONTENTS

                                                                            PAGE
                                                                            ----
        Part I - Financial Information

Item 1. Condensed Consolidated Financial Statements (Unaudited):

        Condensed Consolidated Comparative Balance Sheets
        June 30, 2005 and March 31, 2005                                       1

        Condensed Consolidated Comparative Statements of Operations -
        Three Months Ended June 30, 2005 and 2004                              2

        Condensed Consolidated Comparative Statements of Cash Flows -
        Three Months Ended June 30, 2005 and 2004                              3

        Notes to Condensed Consolidated Financial Statements                 4-6

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

Item 3. Quantitative and Qualitative Disclosures about Market Risk            12

Item 4. Controls and Procedures                                               12

        Part II - Other Information

Item 6. Exhibits                                                              12

        Signatures                                                            12

        Certifications
<PAGE>

Item 1 - Financial Statements

                     TEL-INSTRUMENT ELECTRONICS CORPORATION
                CONDENSED CONSOLIDATED COMPARATIVE BALANCE SHEETS

                                                   June 30, 2005  March 31, 2005
                                                   -------------  --------------
                                                    (unaudited)
ASSETS

Current assets:
  Cash and cash equivalents                          $  562,044     $  826,959
  Accounts receivable, net                            1,848,724      1,610,519
  Inventories, net                                    2,848,007      2,926,011
  Taxes receivable                                      125,674        125,674
  Prepaid expenses and other current assets             111,943        124,946
  Deferred income tax benefit                           553,801        583,560
                                                     ----------     ----------
Total current assets                                  6,050,193      6,197,669

Equipment and leasehold improvements, net               811,625        844,075
Intangible assets, net                                  305,302        326,851
Other assets                                            306,822        302,135
                                                     ----------     ----------
Total assets                                         $7,473,942     $7,670,730
                                                     ==========     ==========

LIABILITIES & STOCKHOLDERS' EQUITY

Current liabilities:
  Convertible note payable - related
    party - current portion                          $   50,000     $   50,000
  Convertible subordinated note
    payable - related party                               7,500          7,500
  Notes payable - other                                  58,000         58,000
  Capitalized lease obligations                              --          2,323
  Accounts payable                                      349,055        481,146
  Deferred revenues                                     158,836        169,866
  Accrued payroll, vacation pay
    payroll taxes                                       340,227        353,704
  Accrued expenses                                      935,061      1,028,014
                                                     ----------     ----------
Total current liabilities                             1,898,679      2,150,553

Convertible notes payable - related
  party-non-current portion                             150,000        150,000
Deferred taxes                                           43,000         43,000
                                                     ----------     ----------
Total liabilities                                     2,091,679      2,343,553

Stockholders' equity:
   Common stock, par value $.10 per
     share, 2,187,831 issued and
     outstanding as of June 30, 2005
     and March 31, 2005, respectively                   218,786        218,786
   Additional paid-in capital                         4,050,848      4,024,910
   Retained earnings                                  1,112,629      1,083,481
                                                     ----------     ----------

Total stockholders' equity                            5,382,263      5,327,177
                                                     ----------     ----------
Total liabilities and
  stockholders' equity                               $7,473,942     $7,670,730
                                                     ==========     ==========

See accompanying notes to condensed financial statements


                                     - 1 -
<PAGE>

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

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

Net sales                                             $3,150,978     $2,812,800

Cost of sales                                          1,544,295      1,335,240
                                                      ----------     ----------

Gross margin                                           1,606,683      1,477,560

Operating expenses:
  Selling, general and administrative                    897,995        833,211
  Amortization of intangibles                             21,549         21,549
  Engineering, research and development                  628,522        532,450
                                                      ----------     ----------
Total operating expenses                               1,548,066      1,387,210
                                                      ----------     ----------

Income from operations                                    58,617         90,350

Other income (expense):
  Interest income                                          3,090          3,504
  Interest expense                                        (3,716)        (6,337)
                                                      ----------     ----------

Income before income taxes                                57,991         87,517

Provision for income taxes                                28,843         34,963
                                                      ----------     ----------

Net income                                                29,148         52,554
                                                      ==========     ==========

Basic income per common share                         $     0.01     $     0.02
                                                      ==========     ==========
Diluted income per common share                       $     0.01     $     0.02
                                                      ==========     ==========

Dividends per share                                         None           None

Weighted average shares outstanding
   Basic                                               2,187,831      2,144,151
   Diluted                                             2,337,848      2,270,496

See accompanying notes to condensed financial statements


                                     - 2 -
<PAGE>

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

                                                         Three Months ended
                                                    ----------------------------
                                                    June 30, 2005  June 30, 2004
                                                    -------------  -------------

Cash flows from operating activities:
Net income                                           $   29,148     $   52,554
Adjustments to reconcile net income to net
  cash provided by operating activities:
   Deferred income taxes                                 29,759         34,964
   Depreciation                                          68,499         74,907
   Amortization of acquired intangibles                  21,549         21,549
   Non-cash stock-based compensation                     25,938             --

Changes in assets and liabilities:
  Increase in accounts receivable                      (238,205)    (1,107,128)
  Decrease in inventories                                78,004         28,825
  Decrease (increase) in prepaid expenses
    & other current assets                               13,003         (1,982)
  Increase in other assets                               (4,687)            --
  (Decrease) increase in accounts payable              (132,091)       251,179
  (Decrease) increase in accrued payroll,
    vacation pay and payroll taxes                      (13,477)        52,933
  (Decrease) increase in deferred revenues              (11,030)        25,875
  (Decrease) increase in accrued expenses               (92,953)        59,937
                                                     ----------     ----------
Net cash used in operating activities                  (226,543)      (506,387)
                                                     ----------     ----------

Cash flows from investing activities:
  Purchases of property, plant and equipment            (36,049)      (127,715)
                                                     ----------     ----------
Net cash used in investing activities                   (36,049)      (127,715)
                                                     ----------     ----------

Cash flows from financing activities:
  Payment of capitalized lease obligations               (2,323)        (7,664)
                                                     ----------     ----------
Net cash used in financing activities                    (2,323)        (7,664)
                                                     ----------     ----------

Net decrease in cash and cash equivalents              (264,915)      (641,766)
Cash and cash equivalents at beginning of period        826,959      1,509,828
                                                     ----------     ----------
Cash and cash equivalents at end of period           $  562,044     $  868,062
                                                     ==========     ==========

Taxes paid                                                   --             --
Interest paid                                        $       --     $    2,591

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  necessary to present fairly the
financial position of Tel-Instrument  Electronics Corp. as of June 30, 2005, the
results of  operations  for the three  months  ended June 30,  2005 and June 30,
2004,  and statements of cash flows for the three months ended June 30, 2005 and
June 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 balance sheet included herein was
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:

                                                 June 30, 2005    March 31, 2005
                                                 -------------    --------------

     Commercial                                   $   511,893       $   642,954
     Government                                     1,383,037         1,013,771
     Less: Allowance for doubtful debts               (46,206)          (46,206)
                                                  -----------       -----------

                                                  $ 1,848,724       $ 1,610,519
                                                  ===========       ===========

Note 3  Inventories, net

Inventories, net consist of:                     June 30, 2005    March 31, 2005
                                                 -------------    --------------

     Purchased parts                              $ 1,587,411       $ 1,452,080
     Work-in-process                                1,337,650         1,532,535
     Finished Goods                                   108,586           112,036
     Less:  Reserve for obsolescence                 (185,640)         (170,640)
                                                  -----------       -----------

                                                  $ 2,848,007       $ 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  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,  divided by the weighted  average  number of common  shares  outstanding
during the period, including common share equivalents, such as outstanding stock
options.

<TABLE>
<CAPTION>
                                                                                      Three Months Ended  Three Months Ended
                                                                                         June 30, 2005       June 30, 2004
                                                                                      ------------------  ------------------
<S>                                                                                        <C>                <C>
Basic net income per share computation:
  Net income attributable to common stockholders                                           $   29,148         $   52,554
  Weighted-average common shares outstanding                                                2,187,831          2,144,151
  Basic net income per share attributable to common stockholders                           $     0.01         $     0.02
Diluted net income per share computation
  Net income attributable to common stockholders                                           $   29,148         $   52,554
  Weighted-average common shares outstanding                                                2,187,831          2,144,151
  Incremental shares attributable to the assumed exercise of
   outstanding stock options                                                                  150,017            126,345
  Total adjusted weighted-average shares                                                    2,337,848          2,270,496
  Diluted net income per share attributable to common stockholders                         $     0.01         $     0.02
</TABLE>

Note 5  Stock Options

The Company accounts for its stock option plan in accordance with the provisions
of Accounting  Principles  Board ("APB")  Opinion No. 25,  "Accounting for Stock
Issued to Employees," and related  interpretations.  The Company has adopted the
disclosure  only provisions of Statement of Financial  Accounting  Standards No.
123 and 148,  "Accounting  for Stock-Based  Compensation"  ("SFAS 123 and 148").
Under SFAS 123 and 148 the Company  provides  pro forma net income and pro forma
earnings  per share  disclosures  for employee  stock  option  grants made since
fiscal  1996 as if the  fair-value-based  method as  defined in SFAS No. 123 had
been applied.  The Company plans to adopt the fair value based method prescribed
by SFAS No. 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 394,900 outstanding stock options under SFAS No.
123, the pro forma amounts are indicated below:

<TABLE>
<CAPTION>
                                                                               Three Months Ended    Three Months Ended
                                                                                 June 30, 2005         June 30, 2004
                                                                               ------------------    ------------------
<S>                                                                                <C>                    <C>
Net income  - as reported                                                          $   29,148             $   52,554
Add: Stock-based employee compensation expense included
  In reported net income, net of taxes                                                 10,375                     --
Less: Total stock based employee compensation, net of taxes                           (27,137)               (11,318)
                                                                                   ----------             ----------
  Net income - pro forma                                                               12,386                 41,236
                                                                                   ==========             ==========
  Basic earnings per share - as reported                                                 0.01                   0.02
  Basic earnings per share - pro forma                                                   0.01                   0.02
  Diluted earnings per share - as reported                                               0.01                   0.02
  Diluted earnings  per share - pro forma                                                0.01                   0.02
</TABLE>

Note 6  Reclassifcation

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


                                     - 5 -
<PAGE>

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

Note 7  Segment Information

Information is presented for the Company's three reportable  segments,  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 lower gross
margins.  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 to
hydrographic,   oceanographic,   researchers,   engineers,   geophysicists,  and
surveyors.

The table below presents information about sales and gross margin. Cost of sales
includes certain  allocation factors for indirect costs.  Engineering,  research
and development  expenses and marketing and selling  expenses  represent  direct
expenses for the avionics and marine segments.

<TABLE>
<CAPTION>
Three Months Ended                              Avionics       Avionics     Avionics       Marine         Corporate
June 30, 2005                                     Gov't         Comm'l.       Total        Systems           Items          Total
------------------                             ----------     ----------   ----------     ----------      ----------      ----------
<S>                                            <C>            <C>          <C>            <C>             <C>             <C>
Revenues                                       $2,373,035     $  562,072   $2,935,107     $  215,871                      $3,150,978
Cost of Sales                                     978,394        418,775    1,397,169        147,126                       1,544,295
                                               ----------     ----------   ----------     ----------                      ----------

Gross Margin                                    1,394,641        143,297    1,537,938         68,745                       1,606,683
                                               ----------     ----------   ----------     ----------                      ----------

Engineering, research, and
 development                                                                  586,698         41,824                         628,522
Selling, general, and admin.                                                  418,198         85,713         394,084         897,995
Amortization of intangibles                                                                                   21,549          21,549
Interest expense, net                                                             429            197              --             626
                                                                           ----------     ----------      ----------      ----------
Total expenses                                                              1,005,325        127,734         415,633       1,548,692
                                                                           ----------     ----------      ----------      ----------

Income before income taxes                                                 $  532,613     $  (58,989)     $ (415,633)     $   57,991
                                                                           ==========     ==========      ==========      ==========
<CAPTION>
Three Months Ended                              Avionics       Avionics     Avionics       Marine         Corporate
June 30, 2004                                     Gov't         Comm'l.       Total        Systems           Items          Total
------------------                             ----------     ----------   ----------     ----------      ----------      ----------
<S>                                            <C>            <C>          <C>            <C>             <C>             <C>
Revenues                                       $1,901,858     $  681,213   $2,583,071     $  229,729                      $2,812,800
Cost of Sales                                     787,576        406,178    1,193,754        141,486                       1,335,240
                                               ----------     ----------   ----------     ----------                      ----------

Gross Margin                                    1,114,282        275,035    1,389,317         88,243                       1,477,560
                                               ----------     ----------   ----------     ----------                      ----------

Engineering, research, and
 Development                                                                  496,008         36,442                         532,450
Selling, general, and admin.                                                  345,758         96,128         391,325         833,211
Amortization of intangibles                                                                                   21,549          21,549
Interest expense, net                                                           2,576            257              --           2,833
                                                                           ----------     ----------      ----------      ----------
Total expenses                                                                844,342        132,827         412,874       1,390,043
                                                                           ----------     ----------      ----------      ----------
Income before income taxes                                                 $  544,975     $  (44,584)     $ (412,874)     $   87,517
                                                                           ==========     ==========      ==========      ==========
</TABLE>


                                     - 6 -
<PAGE>

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

Results of Operations

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

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

All  predictions  as to future  results  contain a measure  of  uncertainty  and
accordingly,  actual  results  could differ  materially.  Among the factors that
could cause a difference are: changes in the general economy;  changes in demand
for the Company's products or in the cost and availability 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 filings
with the Securities and Exchange Commission.

Critical Accounting Policies

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

Revenue  recognition  - revenues are  recognized  at the time of shipment to, or
acceptance by customer  provided  title and risk of loss is  transferred  to the
customer.  Provisions,  when  appropriate,  are made  where  the right to return
exists.  Revenues under service  contracts are recognized  when the services are
performed. Shipping and handling costs charged to customers are not material.

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.


                                     - 7 -
<PAGE>

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

Results of Operations

Critical Accounting Policies (continued)

The Company,  beginning  in fiscal year 2002,  began to accrue the cost of these
enhancements  as the units were shipped in order to properly  match the revenues
with the  expenses.  The Company  considers  this accrual  similar to a warranty
expense.  The Company  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
1,100 units  (approximately  $17,000,000  in revenues)  through the period ended
June  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 we 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  $450 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.

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.


                                     - 8 -
<PAGE>

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

Results of Operations

Critical Accounting Policies (continued)

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.

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.

Overview

For the  first  quarter  ended  June 30,  2005,  total  sales  increased  12% to
$3,150,978  as  compared to the same  quarter in the prior year,  and net income
decreased from $52,554 to $29,148 for the same period.  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 in the first  quarter of the current  fiscal year as
compared  to the same  period  last year,  and the loss for the  marine  systems
division,  resulting  in a decrease in net income.  Gross  profit  declined as a
percentage  from the same  period  in the last  fiscal  year due to lower  gross
profit on sales related to repairs and calibration. Operating expenses increased
primarily  due to  increased  SG&A and  engineering,  research  and  development
expenses,  resulting  primarily  from higher  commission  expenses and increased
engineering  efforts  associated with new contracts and technology  improvements
discussed  below.  The  Company is  reviewing  its gross  profit  and  operating
expenses in an effort to reduce cost.

Marine  systems  sales and gross  profit  decreased  as a result of new  product
delays.  Marine systems backlog has increased to approximately  $117,000 at June
30, 2005 as  compared to  approximately  $44,000 at June 30,  2004.  The Company
continues to closely monitor its operations.

Although  cash  declined in the June 30,  2005  quarter,  the  Company  does not
believe that cash and working capital will decline materially during the balance
of fiscal year 2006.

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. 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


                                     - 9 -
<PAGE>

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

Results of Operations (continued)

Overview (continued)

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
with shipments to begin in 2-3 years.

Investment  in new product  development  continues  for both avionics and marine
systems in anticipation  of expected  customer needs and to remain as leaders in
the respective industries.  For the avionics division, the Company continues its
work on the next  generation of IFF test sets in  anticipation  of U.S. and NATO
requirements  for more  sophisticated  IFF  testing.  In  addition,  the Company
continues the development of a foundation  technology for future  products,  and
the incorporation of other product enhancements in existing designs. The Company
continues development of CRAFT (see above).

Sales

For the three  months  ended  June 30,  2005,  total  avionics  sales  increased
$352,036  (13.6%) to  $2,935,107  as compared to the three months ended June 30,
2004.  Avionics  commercial sales decreased $119,141 (17.5%) to $562,072 for the
quarter  ended June 30, 2005 as compared to $681,213  for the same period in the
prior fiscal year,  primarily as a result of lower sales of the TR-220,  and the
weak financial  condition of the airline  industry.  Avionics  government  sales
increased $471,177 (24.8%) to $2,373,035 as compared to $1,901,858 for the first
three  months of the prior  fiscal  year.  Shipments  of the T-36M and the T-47N
under a contract with the U.S.  Army and sales of the T-47N to Royal  Australian
Air Force,  through our distributor,  was partially offset by lower sales of the
AN/APM-480. Marine systems sales declined slightly from $229,729 for the quarter
ended June 30, 2004 to $215,871 in the current  quarter.  Marine  systems  sales
decreased  as a  result  of new  product  delays.  Marine  systems  backlog  has
increased   to   approximately   $117,000  at  June  30,  2005  as  compared  to
approximately $44,000 at June 30, 2004.

Gross Margin

Gross margin increased  $129,123 (8.7%) for the three months ended June 30, 2005
as compared to the same three months 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 June 30, 2005 was 51.0% as compared
to 52.5% for the three months ended June 30, 2004.  The decrease in gross profit
percentage  is primarily  attributed  to lower gross profit on sales  related to
repairs and calibrations.

Operating Expenses

Selling,  general and  administrative  expenses increased $64,784 (7.8%) for the
three months ended June 30, 2005, as compared to the three months ended June 30,
2004. This increase is primarily attributed to higher commission expenses in the
avionics division.

Engineering,  research and  development  expenses  increased  $96,072 (18%) as a
result of the increased  research and  development  efforts,  including the next
generation of IFF test sets, CRAFT, enhancements to the TB-2100, and the TR-401.


                                     - 10 -
<PAGE>

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

Results of Operations (continued)

Income Taxes

A provision for income taxes was recorded in the amount of $28,843 for the three
months  ended June 30, 2005 as compared  to a tax  provision  of $34,963 for the
three months ended June 30, 2004. 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 June 30, 2005 the Company had working  capital of  $4,168,806  as compared to
$4,047,116  at March 31, 2005,  but cash  decreased.  For the three months ended
June 30, 2005,  the Company used  $226,543 in operations as compared to $506,387
for the three  months  ended June 30,  2004.  This  improvement  in cash used in
operations is primarily attributed to the change in accounts receivable,  offset
partially by a reduction in accounts payable.

The Company  has a line of credit of  $1,750,000  from Fleet  Bank.  The line of
credit bears an interest rate of 0.5% above the lender's  prevailing  base rate,
which is payable monthly,  based upon the outstanding  balance. The Company does
not pay to  maintain  this  open  line.  At June  30,  2005 the  Company  had no
outstanding  balance.  The line of credit is collateralized by substantially all
of the assets of the Company and expires in September  2005. The credit facility
requires the Company to maintain  certain  financial  covenants.  As of June 30,
2005, the Company was in compliance with all financial covenants.

Based upon the current backlog,  its existing credit line, and cash balance, the
Company  believes that it has sufficient  working  capital to fund its operating
plans  for at least  the next  twelve  months.  Currently,  the  Company  has no
material  capital  expenditure  requirements.  However,  as the Company  pursues
additional opportunities, the need for additional capital may arise. The Company
will evaluate its  alternatives  when they 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 in the event the cash is needed
for acquisition.

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


                                     - 11 -
<PAGE>

Item 3. Quantitative and Qualitative Disclosures about Market Risk

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

Item 4. Controls and Procedures

The Company adopted  disclosure  controls and  procedures,  as called for by the
recently   adopted   legislation  and  rules  of  the  Securities  and  Exchange
Commission.  Under  Rules  promulgated  by  the  SEC,  disclosure  controls  and
procedures are defined as "those controls or other procedures of the issuer that
are designed to ensure that  information  required to be disclosed by the issuer
in the reports  filed or  submitted  by it under the  Exchange  Act is recorded,
processed,  summarized,  and reported,  within the time periods specified in the
commission's  rules  and  forms."  The Chief  Executive  Officer  and  Principal
Accounting Officer evaluated the Company's Disclosure Controls and Procedures at
June 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 June  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 our 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  15d-14  under  the
                  Securities Exchange Act.

            31.2  Certification  by  CFO  pursuant  to  Rule  15d-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: August 18, 2005                     By: /s/ Harold K. Fletcher
                                              ----------------------------------
                                              Harold K. Fletcher
                                              Chairman and President

Date: August 18, 2005                     By: /s/ Joseph P. Macaluso
                                              ----------------------------------
                                              Joseph P. Macaluso
                                              Principal Accounting Officer


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