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, 2004

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

      Commission File No. 33-18978

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

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

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

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

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

                               Yes |X|     No |_|

Indicate  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:

2,144,151 shares of Common stock, $.10 par value as of August 9, 2004.

<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, 2004 and March 31, 2004                                     1

        Condensed Consolidated Comparative Statements of Operations -
        Three Months Ended June 30, 2004 and 2003                            2

        Condensed Consolidated Comparative Statements of Cash Flows -
        Three Months Ended June 30, 2004 and 2003                            3

        Notes to Condensed Consolidated Financial Statements                4-7

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

Item 3. Quantitative and Qualitative Disclosures about Market Risk           12

Item 4. Controls and Procedures                                              12

        Part II - Other Information

Item 6. Exhibits and Reports on Form 8-K                                     12

        Signatures                                                           13

        Certifications                                                     14-17

<PAGE>

Item 1 - Financial Statements

                     TEL-INSTRUMENT ELECTRONICS CORPORATION
                CONDENSED CONSOLIDATED COMPARATIVE BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                            June 30, 2004            March 31, 2004
                                                                                            -------------            --------------
                                                                                             (unaudited)
<S>                                                                                           <C>                      <C>
ASSETS

Current assets:
   Cash and cash equivalents                                                                  $  868,062               $1,509,828
   Accounts receivable, net                                                                    2,374,033                1,266,905
   Inventories, net                                                                            2,173,318                2,202,143
   Prepaid expenses and other current assets                                                     265,716                  263,734
   Deferred income tax benefit                                                                   546,384                  581,348
                                                                                              ----------               ----------
Total current assets                                                                           6,227,513                5,823,958

Property, plant and equipment, net                                                               920,694                  867,886
Intangible assets, net                                                                           391,498                  413,047
Other assets                                                                                     287,610                  287,610
                                                                                              ----------               ----------
Total assets                                                                                  $7,827,315               $7,392,501
                                                                                              ==========               ==========
LIABILITIES & STOCKHOLDERS EQUITY

Current liabilities:
   Note payable - related party - current portion                                             $   50,000               $  250,000
   Convertible subordinated notes - related party                                                  7,500                    7,500
   Notes payable - other                                                                          87,000                   87,000
   Capitalized lease obligations - current portion                                                17,104                   24,768
   Accounts payable                                                                              597,348                  346,169
   Deferred revenues                                                                              70,538                   44,663
   Accrued payroll, vacation pay payroll taxes                                                   386,113                  333,180
   Accrued expenses                                                                            1,023,465                  963,528
                                                                                              ----------               ----------
Total current liabilities                                                                      2,239,068                2,056,808

Notes payable - related party - non-current portion                                              200,000                       --
Deferred taxes - long term                                                                        48,000                   48,000
                                                                                              ----------               ----------
Total liabilities                                                                              2,487,068                2,104,808

Stockholders' equity:
   Common stock                                                                                  214,418                  214,418
   Additional paid-in capital                                                                  3,960,886                3,960,886
   Retained earnings                                                                           1,164,943                1,112,389
                                                                                              ----------               ----------

Total stockholders' equity                                                                     5,340,247                5,287,693
                                                                                              ----------               ----------

Total liabilities and stockholders' equity                                                    $7,827,315               $7,392,501
                                                                                              ==========               ==========
</TABLE>

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, 2004    June 30, 2003
                                                  -------------    -------------
Net sales                                          $ 2,812,800      $ 3,057,906

Cost of sales                                        1,335,240        1,286,522
                                                   -----------      -----------

Gross margin                                         1,477,560        1,771,384

Operating expenses:
  Selling, general and administrative                  833,211          734,999
  Amortization of acquired intangibles                  21,549               --
  Engineering, research and development                532,450          567,910
                                                   -----------      -----------
Total operating expenses                             1,387,210        1,302,909
                                                   -----------      -----------

Income from operations                                  90,350          468,475

Other income (expense):
  Interest income                                        3,504           10,722
  Interest expense                                      (6,337)          (8,985)
                                                   -----------      -----------

Income before taxes                                     87,517          470,212

Provision for income taxes                              34,963          188,269
                                                   -----------      -----------

Net income                                              52,554          281,943
                                                   ===========      ===========

Basic income per common share                      $      0.02      $      0.13
                                                   ===========      ===========
Diluted income per common share                    $      0.02      $      0.13
                                                   ===========      ===========

Dividends per share                                       None             None

Weighted average shares outstanding
   Basic                                             2,144,151        2,138,551
   Diluted                                           2,270,496        2,169,585

See accompanying notes to condensed financial statements


                                      -2-
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                                        Three Months ended
                                                                                                        ------------------
                                                                                              June 30, 2004            June 30, 2003
                                                                                              -------------            -------------
<S>                                                                                            <C>                      <C>
Cash flows from operating activities:
Net income                                                                                     $    52,554              $   281,943
Adjustments to reconcile net income to net
    Cash provided by operating activities:
       Deferred income taxes                                                                        34,964                  (62,293)
       Depreciation                                                                                 74,907                   60,313
       Amortization of acquired intangibles                                                         21,549                       --

Changes in assets and liabilities:
    Increase in accounts receivable                                                             (1,107,128)                 (47,064)
    Decrease (increase) in inventories                                                              28,825                 (110,092)
    Increase in prepaid expenses & other current assets                                             (1,982)                 (37,506)
    Increase in other assets                                                                            --                   (7,501)
    Increase in accounts payable                                                                   251,179                   86,133
    Increase in income taxes payable                                                                    --                  165,561
    Increase in accrued payroll, vacation pay
      and payroll taxes                                                                             52,933                   58,078
    Increase (decrease) in deferred
      revenues and accrued expenses                                                                 85,812                  (11,310)
                                                                                               -----------              -----------
Net cash (used in) provided by operating activities                                               (506,387)                 376,262
                                                                                               -----------              -----------

Cash flows from investing activities:
    Purchases of property, plant and equipment                                                    (127,715)                 (49,720)
                                                                                               -----------              -----------
Net cash used in investing activities                                                             (127,715)                 (49,720)
                                                                                               -----------              -----------

Cash flows from financing activities:
    Proceeds from the exercise of stock options                                                         --                   14,625
    Repayment of loan on life insurance policy                                                          --                 (172,426)
    Payment of capitalized lease obligations                                                        (7,664)                  (5,957)
                                                                                               -----------              -----------
Net cash used in financing activities                                                               (7,664)                (163,758)
                                                                                               -----------              -----------

Net (decrease) increase in cash and cash equivalents                                              (641,766)                 162,784
Cash and cash equivalents at beginning of period                                                 1,509,828                1,680,124
                                                                                               -----------              -----------
Cash and cash equivalents at end of period                                                     $   868,062              $ 1,842,908
                                                                                               ===========              ===========

Taxes paid                                                                                              --              $    85,000
Interest paid                                                                                  $     2,591              $    23,362
</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  necessary to present fairly the
financial position of Tel-Instrument  Electronics Corp. as of June 30, 2004, the
results of  operations  for the three  months  ended June 30,  2004 and June 30,
2003, and statements  of cash flows for the three months ended June 30, 2004 and
June 30, 2003. These results are not necessarily indicative of the results to be
expected for the full year.

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

Note 2 Accounts Receivable, net

Accounts receivable, net consist of:

                                                  June 30, 2004   March 31, 2004
                                                  -------------   --------------
      Commercial                                    $  694,706      $  862,259
      Government                                     1,720,925         446,244
      Less: Allowance for doubtful debts               (41,598)        (41,598)
                                                    ----------      ----------

                                                    $2,374,033      $1,266,905
                                                    ==========      ==========

Note 3 Inventories, net

Inventories, net consist of:

                                                  June 30, 2004   March 31, 2004
                                                  -------------   --------------
      Purchased parts                               $  931,983      $  846,782
      Work-in-process                                1,362,230       1,401,722
      Finished Goods                                    35,003          94,537
      Less: Reserve for obsolescence                  (155,898)       (140,898)
                                                    ----------      ----------

                                                    $2,173,318      $2,202,143
                                                    ==========      ==========


                                      -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.

Note 5 Stock Options

The Company accounts for its stock option plan in accordance with the provisions
of Accounting  Principles  Board ("APB")  Opinion No. 25,  "Accounting for Stock
Issued to Employees," and related  interpretations.  The Company has adopted the
disclosure  only provisions of Statement of Financial  Accounting  Standards No.
123 and 148,  "Accounting  for Stock-Based  Compensation"  ("SFAS 123 and 148").
Under SFAS 123 and 148 the Company  provides  pro forma net income and pro forma
earnings  per share  disclosures  for employee  stock  option  grants made since
fiscal  1996 as if the  fair-value-based  method as  defined in SFAS No. 123 had
been applied.  The Company currently does not plan to adopt the fair value based
method prescribed by SFAS 123.

The  Company  estimates  the fair value of each option  using the Black  Scholes
option-pricing model with the following weighted-average  assumptions:  expected
dividend  yield of 0.0%,  risk-free  interest rate of 3.5% and 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  306,300  outstanding
stock options under SFAS No. 123, the pro forma amounts are indicated below:

                                         Three Months Ended   Three Months Ended
                                         ------------------   ------------------
                                            June 30, 2004        June 30, 2003
                                            -------------        -------------

Net income  - as reported                     $ 52,554              $281,943
Less fair value of stock options               (11,318)             (17,333)
                                              --------              --------
Net income - pro forma                          41,236              264,610
                                              ========              ========

Basic earnings per share - as reported            0.02                 0.13
Basic earnings per share - pro forma              0.02                 0.12

Diluted earnings per share - as reported          0.02                 0.13
Diluted earnings  per share - pro forma           0.02                 0.12


                                      -5-
<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  segments,  avionics
government,  avionics commercial and marine systems. The marine systems division
was  acquired on January 16,  2004,  and, as such,  no amounts are shown for the
quarter ended June 30, 2003. 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.   Additionally,
administrative  expenses have been allocated between avionics and marine systems
based upon a percentage of total sales.

<TABLE>
<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                                                     490,865        41,585                    532,450
 Development
Selling, general, and admin.                                                   685,357       147,854                    833,211
Amortization of intangibles                                                                                21,549        21,549
Interest expense, net                                                            2,576           257           --         2,833
                                                                            ----------     ---------     --------    ----------
Total expenses                                                               1,178,798       189,696       21,549     1,390,043
                                                                            ----------     ---------     --------    ----------

Income before income taxes                                                  $  210,519     $(101,453)    $(21,549)   $   87,517
                                                                            ==========     =========     ========    ==========
</TABLE>

<TABLE>
<CAPTION>
Three Months Ended                               Avionics      Avionics      Avionics        Marine      Corporate
June 30, 2003                                      Gov't        Comm'l.        Total        Systems        Items        Total
-------------                                   ----------    ----------    ----------     ---------     ---------   ----------
<S>                                             <C>           <C>           <C>            <C>           <C>         <C>
Revenues                                        $1,869,489    $1,188,417    $3,057,906            --                 $3,057,906

Cost of Sales                                      726,926       559,596     1,286,522            --                  1,286,522
                                                ----------    ----------    ----------         -----                 ----------

Gross Margin                                     1,142,563       628,821     1,771,384            --                  1,771,384
                                                ----------    ----------    ----------         -----                 ----------

Engineering, research,& dev.                                                   567,910                                  567,910
Selling, general, and admin.                                                   734,999                                  734,999
Interest expense, net                                                           (1,737)                                  (1,737)
                                                                            ----------                               ----------
Total expenses                                                               1,301,172                                1,301,172

Income before income taxes                                                  $  470,212            --                 $  470,212
                                                                            ==========         =====                 ==========
</TABLE>


                                      -6-
<PAGE>

                        TEL-INSTRUMENT ELECTRONICS CORP.

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Note 7 Acquisition

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

                                                  Quarter Ended  Quarter  Ended
                                                  June 30, 2004   June 30, 2003
                                                  (as reported)    (pro forma)

      Net sales                                    $2,812,800       $3,267,906
      Income before taxes                              87,517          431,776
      Net income                                       52,554          259,281
      Basic income per common share                      0.02             0.12
      Diluted income per common share                    0.02             0.12


                                      -7-
<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.

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.


                                      -8-
<PAGE>

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

Results of Operations (continued)

Critical Accounting Policies (continued)

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

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

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,  2004,  total  sales  decreased  8% to
$2,812,800  and net income  decreased  to  $52,554  in the first  quarter of the
current  fiscal year as compared to $281,943  for the same period last year.  In
January 2004, the Company  completed its  acquisition of Innerspace  Technology,
Inc.  ("ITI"),  a company selling its products to the marine industry.  ITI is a
wholly-owned  subsidiary of the Company,  and ITI's balance sheet and results of
operations  are  consolidated  in the  Company's  financial  statements  for the
quarter  ended  June  30,  2004  (see  Note 6 to  the  Notes  to  the  Financial
Statements).

For the quarter ended June 30, 2004, sales of avionics  products were $2,583,071
(92% of total sales),  as compared to sales of $3,057,906  (100% of total sales)
for the  quarter  ended  June 30,  2003.  The  decline  in  sales  is  primarily
associated with the decrease in avionics  commercial sales.  Income before taxes
for the avionics  segment was  $210,549  for the quarter  ended June 30, 2004 as
compared to $470,212 for the quarter ended June 30, 2003.

The marine systems segment generated sales of $229,729 (8% of total sales),  and
incurred a loss before taxes of $101,453 for the quarter ended June 30, 2004.


                                      -9-
<PAGE>

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

Results of Operations (continued)

Overview (continued)

Deliveries of the AN/APM-480 IFF (Identification, Friend or Foe) Transponder Set
Test Set (TSTS) to the U.S.  Navy  continued in the first quarter of fiscal year
2005.  As of June 30,  2004,  the Company  has shipped  1,203 of the 1,300 units
under  contract,  and expects to ship the remaining  units in the current fiscal
year.  This  program  firmly  established  the  Company  as one  of the  leading
suppliers  in the  avionics  test  equipment  industry,  and improved its market
position.

Investment  in new product  development  continues in order to meet the expected
needs of its  customers  and remain as one of the leaders in the  industry.  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.
The Company  anticipates  that most of the  AN/APM-480's  will be  returned  and
modified, in the future, to accommodate more sophisticated IFF testing. Although
there is no  assurance  that the  Company  will  receive  any such  modification
contracts,  the  Company  believes  that it is well  positioned  to obtain  such
contracts.

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

Sales

For the three  months  ended  June 30,  2004,  total  avionics  sales  decreased
$474,835  (15.5%) to  $2,583,071  as compared to the three months ended June 30,
2003.  Avionics  commercial sales decreased $507,204 (42.7%) to $681,213 for the
quarter ended June 30, 2004 as compared to $1,188,417 for the same period in the
prior fiscal year.  Commercial  sales for the first  quarter ended June 30, 2003
were higher as a result of a sales promotion of the T-49C  Transponder/TCAS test
set, resulting in higher commercial sales last year.  Avionics  government sales
increased  $32,369  (1.7%) to $1,901,858 as compared to $1,869,489 for the first
three months of the prior  fiscal year.  Shipment of the T-30CM under a contract
with the U.S. Navy and sales of the AN/APM-480 to customers  other than the U.S.
Navy were mostly offset by a decline in sales of other government products,  and
lower  sales of the  AN/APM-480  to the U.S.  Navy.  Marine  systems  sales were
$229,729 for the quarter ended June 30, 2004.

Gross Margin

Gross margin decreased $293,824 (16.6%) for the three months ended June 30, 2004
as compared to the same three months in the prior  fiscal year.  The decrease in
gross margin is primarily attributed to the lower sales volume, lower absorption
of overhead  expenses,  and a change in product mix. The gross margin percentage
for the three  months ended June 30, 2004 was 52.5% as compared to 57.9% for the
three  months  ended  June 30,  2003,  as a result  of the lower  sales  volume,
including the associated lower absorption rate of overhead  expenses,  change in
product mix and ITI's lower gross margin.


                                      -10-
<PAGE>

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

Results of Operations (continued)

Operating Expenses

Selling,  general and administrative  expenses increased $98,212 (13.4%) for the
three months ended June 30, 2004, as compared to the three months ended June 30,
2003.  This  increase is primarily  attributed  to the selling  expenses for the
marine systems  division,  which were not included in the quarter ended June 30,
2003.

Engineering,  research and development  expenses decreased $35,460 (6.2%). Lower
outside contract  expenditures was partially offset by engineering  expenditures
associated with the marine systems division and with higher recruitment fees.

Income Taxes

A provision for income taxes was recorded in the amount of $34,963 for the three
months  ended June 30, 2004 as compared to a tax  provision  of $188,269 for the
three months ended June 30, 2003. These amounts  represent the effective federal
and state tax rate of  approximately  40% on the  Company's  net  income  before
taxes.

Liquidity and Capital Resources

At June 30, 2004 the Company had working  capital of  $3,988,445  as compared to
$3,767,150   at  March  31,   2004.   In  May   2004,   the   Company   and  its
Chairman/President renegotiated the terms of the notes payable-related party. As
such,  $200,000 of these notes was  re-classified  as  long-term.  The Notes now
become due in consecutive  years  beginning March 31, 2005. For the three months
ended June 30, 2004,  the Company used $506,387 in operations as compared to the
cash  provided by  operations  of $376,262  for the three  months ended June 30,
2003.  This  decline  in cash from  operations  is  primarily  attributed  to an
increase in accounts  receivable,  which almost doubled from March 31, 2004 as a
result  of  significant  amount  of the sales  being  shipped  at the end of the
quarter, and the decrease in net income.

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,  2004 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  2004. The credit facility
requires the Company to maintain  certain  financial  covenants.  As of June 30,
2004, 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.  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 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, 2004.  These  financial  statements  should be read in conjunction  with the
Company's  Annual Report on Form 10-K to the Securities and Exchange  Commission
for the fiscal year ended March 31, 2004.


                                      -11-
<PAGE>

Item 3. Quantitative and Qualitative Disclosures about Market Risk

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

Item 4. Controls and Procedures

The Company adopted  disclosure  controls and  procedures,  as called for by the
recently   adopted   legislation  and  rules  of  the  Securities  and  Exchange
Commission.  Under  Rules  promulgated  by  the  SEC,  disclosure  controls  and
procedures are defined as "those controls or other procedures of the issuer that
are designed to ensure that  information  required to be disclosed by the issuer
in the reports  filed or  submitted  by it under the  Exchange  Act is recorded,
processed,  summarized,  and reported,  within the time periods specified in the
commission's  rules  and  forms."  The Chief  Executive  Officer  and  Principal
Accounting Officer evaluated the Company's Disclosure Controls and Procedures at
June 30,  2004 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,  2004 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 and Reports on Form 8-K

      a.    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.

      b.    Reports on Form 8-K.

            Report on Form 8-K regarding  press release  announcing  results for
            the year ended March 31, 2004 was submitted on June 22,2004.

            Report  on  Form  8-K  regarding   press  release   announcing   the
            certification  of its  T-47G  Flight  Line Test Set for use with DoD
            Mark  XII  "Identification,   Friend  or  Foe  (IFF)  platforms  was
            submitted on July 1, 2004.


                                      -12-
<PAGE>

SIGNATURES

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

                                                TEL-INSTRUMENT ELECTRONICS CORP.

Date: August 13, 2004                           By: /s/ Harold K. Fletcher
                                                    ----------------------------
                                                    /s/ Harold K. Fletcher
                                                    Chairman and President

Date: August 13, 2004                           By: /s/ Joseph P. Macaluso
                                                    ----------------------------
                                                    /s/ Joseph P. Macaluso
                                                    Principal Accounting Officer


                                      -13-