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

                                    FORM 10-Q

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

                For the quarterly period ended December 31, 2009

                          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 a large  accelerated  filer, an
accelerated filer,  non-accelerated  filer, or a smaller reporting company.  See
definition of "accelerated  filer and large accelerated  filer" in Rule 12b-2 of
the Exchange Act.


Large accelerated filer [ ]                     Accelerated filer         [ ]

Non-accelerated filer   [ ]                     Smaller reporting company [X]
(Do not check if a smaller reporting company)

Indicate by checkmark  whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Securities Act). Yes      No  X
                                      -----   -----

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

2,613,861 shares of Common stock, $.10 par value as of February 12, 2010.

<PAGE>


                     TEL-INSTRUMENT ELECTRONICS CORPORATION
                     --------------------------------------
                                TABLE OF CONTENTS
                                -----------------



                                                                            PAGE
                                                                            ----

              Part I - Financial Information

Item 1.       Condensed Consolidated Financial Statements (Unaudited):

              Condensed Consolidated Balance Sheets
              December 31, 2009 and March 31, 2009                           1

              Condensed Consolidated Statements of Operations -
              Three and Nine Months Ended December 31, 2009 and 2008         2

              Condensed Consolidated Statements of Cash Flows -
              Nine Months Ended December 31, 2009 and 2008                   3

              Notes to Condensed Consolidated Financial Statements          4-13

Item 2.       Management's Discussion and Analysis of the Results of
                   Operations and Financial Condition                      14-22

Item 4.       Controls and Procedures                                        22

              Part II - Other Information

Item 1.       Legal Proceedings                                              22

Item 2.       Unregistered sales of Equity Securities and Use of Proceeds    22

Item 4.       Submission of Matters to a Vote of Security Holders            23

Item 6.       Exhibits                                                       23



              Signatures                                                     23

              Certifications

                                       i

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<CAPTION>


Item 1 - Financial Statements


                         TEL-INSTRUMENT ELECTRONICS CORPORATION
                         -------------------------------------
                         CONDENSED CONSOLIDATED BALANCE SHEETS
                         -------------------------------------


                                                          December 31,      March 31,
                                                          ------------      ---------
                                                                  2009           2009
                                                                  ----           ----
                                                           (unaudited)
ASSETS
<S>                                                        <C>            <C>
Current assets:
  Cash and cash equivalents                                $   138,640    $   601,887
  Accounts receivable, net                                   1,165,751      1,516,698
  Unbilled government receivables                            1,423,859      1,265,470
  Inventories, net                                           1,899,814      2,206,546
  Prepaid expenses and other                                    74,881         90,509
  Deferred income tax asset                                    842,907        461,631
                                                           -----------    -----------
Total current assets                                         5,545,852      6,142,741

Equipment and leasehold improvements, net                      341,364        437,974
Deferred income tax asset - non-current                      1,248,800        852,413
Other assets                                                    71,214         72,261
                                                           -----------    -----------

Total assets                                               $ 7,207,230    $ 7,505,389
                                                           ===========    ===========

LIABILITIES & STOCKHOLDERS' EQUITY

Current liabilities:
  Line of credit                                               600,000        450,000
  Accounts payable                                             909,801        456,343
  Deferred revenues                                             33,454         21,891
  Accrued payroll, vacation pay and payroll taxes              343,064        326,202
  Accrued expenses                                           1,219,022      1,604,190
                                                           -----------    -----------
Total current liabilities                                    3,105,341      2,858,626

Deferred revenues                                               32,888         43,243
                                                           -----------    -----------

Total liabilities                                            3,138,229      2,901,869
                                                           -----------    -----------

Commitments

Stockholders' equity:
   Common stock, par value $.10 per share, 2,612,861
      and 2,478,761 issued and outstanding as of
      December 31, 2009 and March 31, 2009, respectively       261,286        247,876
   Additional paid-in capital                                5,415,822      4,801,272
   Accumulated deficit                                      (1,608,107)      (445,628)
                                                           -----------    -----------
Total stockholders' equity                                   4,069,001      4,603,520
                                                           -----------    -----------

Total liabilities and stockholders' equity                 $ 7,207,230    $ 7,505,389
                                                           ===========    ===========


See accompanying notes to condensed consolidated financial
     statements

                                           1
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<CAPTION>


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



                                                 Three Months Ended              Nine Months Ended
                                                 ------------------              -----------------
                                            December 31,    December 31,    December 31,    December 31,
                                            ------------    ------------    ------------    ------------
                                                    2009            2008            2009            2008
                                                    ----            ----            ----            ----
<S>                                         <C>             <C>             <C>             <C>
Net sales                                   $  1,633,971    $  2,915,428    $  6,344,080    $ 10,322,524
Cost of sales                                    949,442       1,490,161       3,367,213       5,268,841
                                            ------------    ------------    ------------    ------------

Gross margin                                     684,529       1,425,267       2,976,867       5,053,683

Operating expenses:
  Selling, general and administrative            740,250         709,534       2,258,216       2,181,676
  Engineering, research and development          924,044         684,017       2,672,119       2,133,021
                                            ------------    ------------    ------------    ------------
Total operating expenses                       1,664,294       1,393,551       4,930,335       4,314,697
                                            ------------    ------------    ------------    ------------

Operation income (loss) from continuing
  Operations                                    (979,765)         31,716      (1,953,468)        738,986

Interest income (expense):
  Interest income                                    209           1,710             702           3,783
  Interest expense                               (15,419)        (11,248)        (34,418)        (36,103)
                                            ------------    ------------    ------------    ------------

Income (loss) from continuing operations
       Before income taxes                      (994,975)         22,178      (1,987,184)        706,666

Income tax provision (benefit)                  (397,493)          8,861        (793,880)        326,926
                                            ------------    ------------    ------------    ------------

Net income (loss) from continuing
       operations                               (597,482)         13,317      (1,193,304)        379,740

Income from discontinued operations,
        net of income taxes                       25,152           3,317          30,825          70,556
                                            ------------    ------------    ------------    ------------

Net income (loss)                           $   (572,330)   $     16,634    $ (1,162,479)   $    450,296
                                            ============    ============    ============    ============

Income (loss) from continuing operations

   Basic income (loss) per common share     $      (0.23)   $       0.01    $      (0.47)   $       0.16
                                            ============    ============    ============    ============
   Diluted income (loss) per common share   $      (0.23)   $       0.01    $      (0.47)   $       0.15
                                            ============    ============    ============    ============

Income from discontinued operations,
       Net of income taxes:
   Basic income per common share            $       0.01    $       0.00    $       0.01    $       0.03
                                            ============    ============    ============    ============
   Diluted income per common share          $       0.01    $       0.00    $       0.01    $       0.03
                                            ============    ============    ============    ============

Net Income (loss):
   Basic income (loss) per common share     $      (0.22)   $       0.01    $      (0.46)   $       0.18
                                            ============    ============    ============    ============
   Diluted income (loss) per common share   $      (0.22)   $       0.01    $      (0.46)   $       0.18
                                            ============    ============    ============    ============
Weighted average shares outstanding:
   Basic                                       2,605,148       2,452,718       2,529,752       2,443,854
   Diluted                                     2,605,148       2,481,218       2,529,752       2,472,354


See accompanying notes to condensed consolidated financial
     statements

                                                     2
</TABLE>

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<CAPTION>


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



                                                                Nine Months Ended
                                                                -----------------
                                                           December 31,   December 31,
                                                           ------------   ------------
                                                                   2009           2008
                                                                   ----           ----
Cash flows from operating activities:
<S>                                                        <C>            <C>
Net  income (loss)                                         $(1,162,479)   $   450,296
Adjustments to reconcile net loss to net
    cash used in operating activities:
       Deferred income taxes                                  (777,663)       308,463
       Depreciation                                            133,263        140,474
       Non-cash stock-based compensation                        55,135         38,971

Changes in assets and liabilities:
    Decrease (increase) in accounts receivable                 350,947     (1,080,980)
    Increase in unbilled government receivables               (158,389)      (210,916)
    Decrease (increase) in inventories                         306,732       (435,013)
    Decrease in prepaid expenses & other current assets         15,628         82,858
    Decrease in other assets                                     1,047          1,080
    Increase (decrease) in accounts payable                    453,458         (8,482)
    Increase (decrease) in accrued payroll, vacation pay
      and payroll taxes                                         16,862        (39,488)
    Increase (decrease) in deferred revenues                     1,208         (5,655)
    (Decrease) increase in accrued expenses                   (385,168)       357,516
                                                           -----------    -----------
Net cash used in operating activities                       (1,149,419)      (400,876)
                                                           -----------    -----------

Cash flows from investing activities:
    Purchases of equipment                                     (36,653)       (81,301)
                                                           -----------    -----------
Net cash used in investing activities                          (36,653)       (81,301)
                                                           -----------    -----------

Cash flows from financing activities:
    Proceeds from the issuance of common stock                 359,470           --
    Proceeds from the exercise of stock options                213,355         64,730
    Proceeds from loan on life insurance policy                   --           67,578
    Proceeds from borrowings from line of credit
                                                               150,000        100,000
                                                           -----------    -----------
Net cash provided by financing activities                      722,825        232,308
                                                           -----------    -----------

Net decrease in cash and cash equivalents                     (463,247)      (249,869)
Cash and cash equivalents at beginning of period               601,887        469,906
                                                           -----------    -----------
Cash and cash equivalents at end of period                 $   138,640    $   220,037
                                                           ===========    ===========

Taxes paid                                                 $     3,990    $    20,790
                                                           ===========    ===========
Interest paid                                              $    15,406    $    23,178
                                                           ===========    ===========


See accompanying notes to condensed consolidated financial statements

                                           3
</TABLE>

<PAGE>


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


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 December 31, 2009,
the results of operations  for the three and nine months ended December 31, 2009
and December 31, 2008,  and  statements  of cash flows for the nine months ended
December  31, 2009 and  December 31,  2008.  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, 2009 balance sheet included herein was
derived from the audited financial  statements  included in the Company's annual
report on Form  10-K as of that  date.  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, 2009.

Note 2        Revenue Recognition - Percentage-of-Completion - ITATS
------        ------------------------------------------------------
              ("Intermediate Level TACAN Test Set") (AN/ARM-206)
              --------------------------------------------------

Due to the unique nature of the ITATS program,  wherein a significant portion of
this  contract  will not be  delivered  for  over a year,  revenues  under  this
contract are recognized on a  percentage-of-completion  basis,  which recognizes
sales and profit as they are earned,  rather than at the time of shipment.  This
contract is nearing  completion  and a major portion of the revenues  associated
with this program have been recognized. Revenues and profits are estimated using
the cost-to-cost  method of accounting where revenues are recognized and profits
recorded  based upon the ratio of costs  incurred  to estimate of total costs at
completion.  The ratio of costs  incurred to date to the estimate of total costs
at  completion  is applied to the contract  value to determine  the revenues and
profits.  When adjustments in estimated  contract revenues or estimated costs at
completion  are required,  any changes from prior  estimates  are  recognized by
recording adjustments in the current period for the inception-to-date  effect of
the changes on current and prior  periods.  The Company also  receives  progress
billings on this  program,  which is a funding  mechanism by the  government  to
assist  contractors  on long-term  contracts  prior to delivery.  (See  Critical
Accounting Policies - Revenue Recognition).  These progress payments are applied
to Unbilled  Government  Receivables  resulting from revenues  recognized  under
percentage-of-completion accounting.

Note 3        Accounts Receivable, net
------        ------------------------

         The following table sets forth the components of accounts receivable:

                                                   December 31,       March 31,
                                                   ------------       ---------
                                                           2009            2009
                                                           ----            ----

         Government                                $    955,807    $  1,199,989
         Commercial                                     249,862         357,013
         Less: Allowance for doubtful accounts          (39,918)        (40,304)
                                                   ------------    ------------

                                                   $  1,165,751    $  1,516,698
                                                   ============    ============

                                         4

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<CAPTION>


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

Note 4        Inventories, net

         Inventories consist of:

                                                   December 31,       March 31,
                                                   ------------       ---------
                                                           2009            2009
                                                           ----            ----

         Purchased parts                           $  1,175,103    $  1,534,184


         Work-in-process                                946,174         918,038
         Finished  goods                                178,537         104,243
         Less: Inventory reserve                       (400,000)       (349,919)
                                                   ------------    ------------

                                                   $  1,899,814    $  2,206,546
                                                   ============    ============

Note 5        Earnings Per Share
------        ------------------

Financial  Accounting  Standards  Board  ("FASB")  ASC 260 (Prior  authoritative
Financial  Accounting SFAS No. 128, "Earnings Per Share") requires  presentation
of basic  earnings  per share  ("basic  EPS")  and  diluted  earnings  per share
("diluted EPS").

The Company's basic income (loss) per common share is based on net income (loss)
for the relevant period, divided by the weighted average number of common shares
outstanding  during the period.  Diluted income (loss) per common share is based
on net income  (loss),  divided by the weighted  average number of common shares
outstanding  during the period,  including  common  share  equivalents,  such as
outstanding stock options. Diluted loss per share for the periods ended December
31, 2009 do not include  common stock  equivalents,  as these stock  equivalents
would be anti-dilutive.

                                                                    Three Months Ended         Three Months Ended
                                                                    ------------------         ------------------
                                                                     December 31, 2009          December 31, 2008
                                                                     -----------------          -----------------
<S>                                                              <C>                        <C>
Basic net income (loss) per share computation:
  Net income (loss) attributable to common stockholders          $            (572,330)     $              16,634
  Weighted-average common shares outstanding                                 2,605,148                  2,452,718
  Basic net income(loss) per share attributable to common
       Stockholders                                              $               (0.22)     $                0.01
Diluted net income (loss) per share computation
  Net income(loss) attributable to common stockholders           $            (572,330)     $              16,634
  Weighted-average common shares outstanding                                 2,605,148                  2,452,718
  Incremental shares attributable to the assumed exercise of
       outstanding stock options                                                  --                       28,500
  Total adjusted weighted-average shares                                     2,605,148                  2,481,218
  Diluted net income(loss) per share attributable to common
      stockholders                                               $               (0.22)     $                0.01

                                                         5

</TABLE>

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<CAPTION>


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


Note 5        Earnings Per Share (continued)
------        ------------------------------

                                                                    Nine Months Ended          Nine Months Ended
                                                                    -----------------          -----------------
                                                                    December 31, 2009          December 31, 2008
                                                                    -----------------          -----------------
<S>                                                              <C>                        <C>
Basic net income (loss) per share computation:
  Net income (loss) attributable to common stockholders          $         (1,162,479)      $            450,296
  Weighted-average common shares outstanding                                2,529,752                  2,443,854
  Basic net income(loss) per share attributable to common
        Stockholders                                             $              (0.46)      $               0.18
Diluted net income (loss) per share computation
  Net income(loss) attributable to common stockholders           $         (1,162,479)      $            450,296
  Weighted-average common shares outstanding                                2,529,752                  2,443,854
  Incremental shares attributable to the assumed exercise of
       outstanding stock options                                                 --                       28,500
  Total adjusted weighted-average shares                                    2,529,752                  2,472,354
  Diluted net income(loss) per share attributable to common
       stockholders                                              $              (0.46)      $               0.18


Note 6        Stock Options
------        -------------

Effective April 1, 2006, the Company adopted the Financial  Accounting Standards
Board ("FASB") ASC 718 (Prior  authoritative  Financial Accounting Standards No.
123R,  "Share-Based Payment" ("SFAS 123R")),  utilizing the modified prospective
method. FASB ASC 718 requires the measurement of stock-based  compensation based
on the  fair  value  of the  award  on the date of  grant.  Under  the  modified
prospective  method,  the provisions of FASB ASC 718 apply to all awards granted
after the date of adoption.  The Company recognizes  compensation cost on awards
on a  straight-line  basis over the vesting  period,  typically four years. As a
result of adopting FASB ASC 718,  operations were charged $18,986 and $14205 for
the three months ended December 31, 2009 and 2008, respectively, and $55,085 and
$38,971 for the nine months ended December 31, 2009 and 2008, respectively.  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 2.09% to 2.74%, volatility at
37.28% to 43.06%,  and an  expected  life of 5 years for the nine  months  ended
December 31, 2009;  expected dividend yield of 0.0%,  risk-free interest rate of
1.07% to 3.16%,  volatility at 37.67% to 40.35%, and an expected life of 5 years
for the nine months ended  December 31, 2008. The Company  estimates  forfeiture
rate based on historical data.  Based on an analysis of historical  information,
the Company has applied a forfeiture rate of 15%.

                                       6
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                        TEL-INSTRUMENT ELECTRONICS CORP.
                        --------------------------------
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
        ----------------------------------------------------------------
                                   (Unaudited)


Note 7        Segment Information
------        -------------------

As a result of the classification of its marine systems division as discontinued
operations,  in accordance with FASB ASC 280 (Prior authoritative  Financial FAS
No. 131, "Disclosures about Segments of an Enterprise and related information"),
the Company determined it has two reportable segments for continuing  operations
-  avionics  government  and  avionics  commercial.  There are no  inter-segment
revenues.

The Company is organized  primarily on the basis of its avionics  products.  The
avionics government segment consists primarily of the design,  manufacture,  and
sale of test equipment to the U.S. and foreign governments and militaries either
directly or through  distributors.  The avionics  commercial segment consists of
design,  manufacture,  and  sale of  test  equipment  to  domestic  and  foreign
airlines,  directly or through commercial distributors,  and to general aviation
repair and  maintenance  shops,  directly or through  distributors.  The Company
develops and designs test  equipment for the avionics  industry and as such, the
Company's products and designs cross segments.

Management  evaluates the performance of its segments and allocates resources to
them based on gross margin. The Company's general and  administrative  costs and
sales  and  marketing  expenses  are not  segment  specific.  As a  result,  all
operating  expenses are not managed on a segment  basis.  Net interest  includes
expenses on debt and income  earned on cash  balances.  Segment  assets  include
accounts receivable and work-in-process inventory. Asset information, other than
accounts receivable and work-in-process  inventory,  is not reported,  since the
Company does not produce such information internally.  All long-lived assets are
located  in the U.S.  The table  below  presents  information  about  reportable
segments  within the avionics  business for the periods ending December 31, 2009
and 2008:

  Three Months Ended                       Avionics       Avionics        Avionics      Corporate
  ------------------                       --------       --------        --------      ---------
  December 31, 2009                           Gov't        Comm'l.           Total          Items           Total
  -----------------                           -----        -------           -----          -----           -----
  <S>                                  <C>            <C>             <C>            <C>              <C>
  Net sales                            $  1,161,985   $    471,986    $  1,633,971                    $  1,633,971
  Cost of sales                             599,848        349,594         949,442                         949,442
                                       ------------   ------------    ------------                    ------------
  Gross margin                              562,137        122,392         684,529                         684,529
                                       ------------   ------------    ------------                    ------------
  Engineering, research, & dev.                                            924,044                         924,044
  Selling, general, and admin.                                             341,152   $    399,098          740,250
  Interest expense, net                                                     15,210           --             15,210
                                                                      ------------   ------------     ------------
  Total expenses                                                         1,280,406        399,098        1,679.504
                                                                      ------------   ------------     ------------

  Income  (loss) from  continuing
  operations before taxes                                             $   (595,877)  $   (399,098)    $   (994,975)
                                                                      ============   ============     ============
  Segment assets                       $  3,969,882   $    519,542    $  4,489,424   $  2,717,806     $  7,207,230
                                       ============   ============    ============   ============     ============


  Three Months Ended                       Avionics       Avionics        Avionics       Corporate
  ------------------                       --------       --------        --------       ---------
  December 31, 2008                           Gov't        Comm'l.           Total           Items           Total
  -----------------                           -----        -------           -----           -----           -----
  Net sales                            $  2,526,036   $    389,392    $  2,915,428                    $  2,915,428
  Cost of sales                           1,230,636        259,525       1,490,161                       1,490,161
                                       ------------   ------------    ------------                    ------------
  Gross margin                            1,295,400        129,867       1,425,267                       1,425,267
                                       ------------   ------------    ------------                    ------------
  Engineering, research, & dev.                                            684,017                         684,017
  Selling, general, and admin.                                             374,185   $     335,349         709,534
  Interest expense, net                                                      9,538            --             9,538
                                                                      ------------   -------------    ------------
  Total expenses                                                         1,067,740         335,349       1,403,089
                                                                      ------------   -------------    ------------
  Income (loss) from continuing
  operations before taxes                                             $    357,527   $    (335,349)   $     22,178
                                                                      ============   =============    ============
  Segment assets                       $  5,809,904   $    339,395    $  6,149,299   $   1,926,064    $  8,075,363
                                       ============   ============    ============   =============    ============

                                                          7
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<TABLE>
<CAPTION>


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


Note 7        Segment Information (continued)
------        -------------------------------

  Nine Months Ended                        Avionics       Avionics        Avionics       Corporate
  -----------------                        --------       --------        --------       ---------
  December 31, 2009                           Gov't        Comm'l.           Total           Items           Total
  -----------------                           -----        -------           -----           -----           -----
  <S>                                  <C>            <C>             <C>                             <C>
  Net sales                            $  4,851,530   $  1,492,550    $  6,344,080                    $  6,344,080
  Cost of sales                           2,362,290      1,004,923       3,367,213                       3,367,213
                                       ------------   ------------    ------------                    ------------
  Gross margin                            2,489,240        487,627       2,976,867                       2,976,867
                                       ------------   ------------    ------------                    ------------

  Engineering, research, & dev.                                          2,672,119                       2.672,119
  Selling, general, and admin.                                             998,225   $   1,259,991       2,258,216
  Interest expense, net                                                     33,716            --            33,716
                                                                      ------------   -------------    ------------
  Total expenses                                                         3,704,060       1,259,991       4,964,051
                                                                      ------------   -------------    ------------
  Income (loss) from continuing
  operations before taxes                                             $   (727,193)  $  (1,259,991)   $ (1,987,184)
                                                                      ============   =============    ============


  Nine Months Ended                        Avionics       Avionics        Avionics      Corporate
  -----------------                        --------       --------        --------      ---------
  December 31, 2008                           Gov't        Comm'l.           Total          Items            Total
  -----------------                           -----        -------           -----          -----            -----
  Net sales                            $  8,843,166   $  1,479,358    $ 10,322,524                    $ 10,322,524
  Cost of sales                           4,396,054        872,787       5,268,841                       5,268,841
                                       ------------   ------------    ------------                    ------------
  Gross margin                            4,447,112        606,571       5,053,683                       5,053,683
                                       ------------   ------------    ------------                    ------------

  Engineering, research, & dev.                                          2,133,021                       2,133,021
  Selling, general, and admin.                                           1,049,281   $  1,132,395        2,181,676
  Interest income, net                                                      32,320           --             32,320
                                                                      ------------   ------------     ------------
  Total expenses                                                         3,214,622      1,132,395        4,347,017
                                                                      ------------   ------------     ------------

  Income  (loss)  from   continuing
  operations before taxes                                             $  1,839,061   $ (1,132,395)    $    706,666
                                                                      ============   ============     ============


Note 8        Income Taxes
------        ------------

The Company adopted the provisions of FASB ASC 718 (formerly  Interpretation No.
48 ("FIN 48"),  Accounting for Uncertainty in Income Taxes- an Interpretation of
FASB  Statement  No. 109),  on April 1, 2007.  The Company has  analyzed  filing
positions in all of the federal and state  jurisdictions where it is required to
file income tax returns,  as well as all open tax years in these  jurisdictions.
The Company does not have any unrecognized tax benefits.

The  tax  effect  of  temporary   differences,   primarily  net  operating  loss
carryforwards,  asset  reserves  and  accrued  liabilities,  gave  rise  to  the
Company's deferred tax asset in the accompanying December 31, 2009 and March 31,
2009 consolidated  balance sheets.  Deferred income taxes are recognized for the
tax  consequence of such temporary  differences at the enacted tax rate expected
to be in effect when the differences reverse.

                                       8
</TABLE>

<PAGE>


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


Note 9        Fair Value Measurements
------        -----------------------

On  September  2006,  the FASB issued FASB ASC 820,  which  defines  fair value,
establishes a framework for measuring fair value, and expands  disclosures about
fair value measurements.  The provisions of FASB ASC 820 were effective April 1,
2008.

As defined in FASB ASC 820,  fair value is the price that would be  received  to
sell an asset or paid to transfer a liability in an orderly  transaction between
market  participants at the measurement date (exit price).  The Company utilizes
market data or  assumptions  that market  participants  would use in pricing the
asset or liability,  including  assumptions about risk and the risks inherent in
the inputs to the valuation  technique.  These inputs can be readily observable,
market corroborated,  or generally  unobservable,  when applicable.  The Company
classifies fair value balances based on the observability of those inputs.  FASB
ASC 820 establishes a fair value  hierarchy that  prioritizes the inputs used to
measure  fair value.  The  hierarchy  gives the highest  priority to  unadjusted
quoted prices in active  markets for identical  assets or  liabilities  (level 1
measurement)   and  the  lowest  priority  to   unobservable   inputs  (level  3
measurement).

The three levels of the fair value  hierarchy  defined by FASB ASC 820-10 are as
follows:

Level 1 - Quoted prices are available in active markets for identical  assets or
liabilities  as of the  reporting  date.  Active  markets  are  those  in  which
transactions for the asset or liability occur in sufficient frequency and volume
to provide pricing  information on an ongoing basis.  Level 1 primarily consists
of  financial  instruments  such  as  exchange-traded  derivatives,   marketable
securities and listed equities.

Level 2 - Pricing inputs are other than quoted prices in active markets included
in level 1,  which  are  either  directly  or  indirectly  observable  as of the
reported date.  Level 2 includes  those  financial  instruments  that are valued
using  models or other  valuation  methodologies.  These  models  are  primarily
industry-standard  models that consider  various  assumptions,  including quoted
forward prices for  commodities,  time value,  volatility  factors,  and current
market and contractual prices for the underlying  instruments,  as well as other
relevant  economic   measures.   Substantially  all  of  these  assumptions  are
observable in the marketplace throughout the full term of the instrument, can be
derived from  observable  data or are  supported by  observable  levels at which
transactions  are  executed in the  marketplace.  Instruments  in this  category
generally  include  non-exchange-traded  derivatives  such as  commodity  swaps,
interest rate swaps, options and collars.

Level 3 - Pricing  inputs  include  significant  inputs that are generally  less
observable  from  objective  sources.  These inputs may be used with  internally
developed methodologies that result in management's best estimate of fair value.

Cash, accounts  receivable,  accounts payable, and accrued expenses reflected in
the  consolidated  balance sheets are a reasonable  estimate of their fair value
due to the  short-term  nature of these  instruments.  The carrying value of the
Company's short-term  borrowings is a reasonable estimate of their fair value as
borrowings  under the Company's credit facility have variable rates that reflect
currently  available  terms and  conditions for similar debt. As of December 31,
2009 and March 31,  2009,  the  Company  did not have any  financial  assets and
liabilities measured at fair value on a recurring basis that would be subject to
the disclosure provisions of FASB ASC 820.

                                       9

<PAGE>
<TABLE>
<CAPTION>


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


Note 10       Discontinued Operations
-------       -----------------------

In fiscal year 2008, the Board of Directors approved discontinuing the Company's
marine systems  division.  As a result,  the consolidated  financial  statements
present the marine systems division as a discontinued operation.

The Company  wrote-off fixed assets of approximately  $77,000 and inventories of
approximately $151,000 in 2008.

The Company's  decision to discontinue its marine operations was based primarily
on the  historical  losses  sustained  and  management's  intent to focus on its
avionics business

The  following  tables  reflect  sales,  costs  and  expenses,   and  loss  from
discontinued  operations,  net of taxes  for the  three  and nine  months  ended
December 31, 2009 and 2008, respectively.

     ------------------------------------------------------ ----------------------- ------------------------
                                                                      Three Months             Three Months
                                                                      ------------             ------------
                                                                             Ended                    Ended
                                                                             -----                    -----
                                                                 December 31, 2009        December 31, 2008
                                                                 -----------------        -----------------
     ------------------------------------------------------ ----------------------- ------------------------
     Discontinued Operations:
     ------------------------------------------------------ ----------------------- ------------------------
     <S>                                                                 <C>                      <C>
     Sales                                                               $  56,489                $  46,848
     ------------------------------------------------------ ----------------------- ------------------------
     Costs and expenses                                                     14,604                   41,325
                                                                         ---------                ---------
     ------------------------------------------------------ ----------------------- ------------------------
     Income from operations of discontinued operations                      41,885                    5,523
     ------------------------------------------------------ ----------------------- ------------------------
     Income tax provision                                                   16,733                    2,206
                                                                         ---------                ---------
     ------------------------------------------------------ ----------------------- ------------------------
     Income from discontinued operations                                 $  25,152                $   3,317
                                                                         =========                =========
     ------------------------------------------------------ ----------------------- ------------------------


     ------------------------------------------------------ ----------------------- ------------------------
                                                                       Nine Months              Nine Months
                                                                       -----------              -----------
                                                                             Ended                    Ended
                                                                             -----                    -----
                                                                 December 31, 2009        December 31, 2008
                                                                 -----------------        -----------------
     ------------------------------------------------------ ----------------------- ------------------------
     Discontinued Operations:
     ------------------------------------------------------ ----------------------- ------------------------
     Sales                                                               $  99,690                $ 233,449
     ------------------------------------------------------ ----------------------- ------------------------
     Costs and expenses                                                     48,358                  115,954
                                                                         ---------                ---------
     ------------------------------------------------------ ----------------------- ------------------------
     Income from operations of discontinued operations                      51,332                  117,495
     ------------------------------------------------------ ----------------------- ------------------------
     Income tax provision                                                   20,507                   46,939
                                                                         ---------                ---------
     ------------------------------------------------------ ----------------------- ------------------------
     Income from discontinued operations                                 $  30,825                $  70,556
                                                                         =========                =========
     ------------------------------------------------------ ----------------------- ------------------------


Note 11       Reclassifications
-------       -----------------

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

                                       10
</TABLE>

<PAGE>


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


Note 12       Litigation
-------       ----------

On March 24, 2009, Aeroflex Wichita,  Inc. ("Aeroflex") filed a petition against
the Company and two of its  employees in the District  Court,  Sedgwick  County,
Kansas, Case No. 09 CV 1141 (the "Aeroflex  Action"),  alleging that the Company
and two of its employees  misappropriated  Aeroflex's  proprietary technology in
connection  with the Company  winning a substantial  contract from the U.S. Army
(the  "Award"),  to develop  new Mode-5  radar test sets and kits to upgrade the
existing TS-4530 radar test sets to Mode 5. Aeroflex's  petition alleges that in
connection with the award,  the Company and its named employees  misappropriated
Aeroflex's trade secrets;  tortiously interfered with its business relationship;
conspired to harm Aeroflex and tortiously interfered with its contract and seeks
injunctive  relief and  damages.  The gravamen of all the claims in the Aeroflex
Action  is that  the  Company  misappropriated  and  used  Aeroflex  proprietary
technology in winning the Award.

In February  2009,  subsequent  to the Award to the  Company,  Aeroflex  filed a
protest of the Award  with the  Government  Accounting  Office  ("GAO").  In its
protest,  Aeroflex  alleged,  inter  alia,  that  the  Company  used  Aeroflex's
proprietary  technology in order to win the Award, the same material allegations
as were later alleged in the Aeroflex  Action.  On or about March 17, 2009,  the
Army Contracts Attorney and the Army Contracting  Officer each filed a statement
with the GAO, expressly rejecting  Aeroflex's  allegations that the Company used
or  infringed  Aeroflex  proprietary   technology  in  winning  the  Award,  and
concluding  that the Company had used only its own  proprietary  technology.  On
April 6, 2009, Aeroflex withdrew its protest.

In December 2009, the Kansas court dismissed the Aeroflex civil suit against the
Company.  While this decision was based primarily on jurisdictional  issues, the
ruling did note that Aeroflex, after discovery proceedings,  did not provide any
evidence that Tel or its employees  misappropriated  Aeroflex trade secrets. The
Kansas  ruling  also  referenced  the Army's  findings,  in its  response to the
General  Accountability  Office ("GAO"),  which rejected  Aeroflex's  claims and
determined  that  Tel  used  its own  proprietary  technology  on this  program.
Aeroflex  has elected to appeal this Kansas  decision and has agreed to stay any
action against the two former employees until a decision is reached. Tel remains
confident  as to  the  outcome  of  this  appeal  and  any  potential  follow-on
litigation.

However,  Tel has  incurred  substantial  legal  fees  in  connection  with  the
litigation,  and these  costs  will have an  adverse  effect on its  results  of
operations for the fiscal year ending March 31, 2010.

Note 13       New Accounting Pronouncements
-------       -----------------------------

In June 2009, the FASB issued FASB ASC 105 (Prior authoritative literature: SFAS
No. 168, The FASB Accounting  Standards  Codification and Hierarchy of Generally
Accepted Accounting Principles (GAAP), a replacement of FASB Statement No. 162).
FASB  ASC  105   establishes   the  FASB   Standards   Accounting   Codification
("Codification")  as the source of authoritative  GAAP recognized by the FASB to
be applied to nongovernmental  entities.  The only other source of authoritative
GAAP is the rules and  interpretive  releases of the SEC which only apply to SEC
registrants. The Codification supersedes all the existing non-SEC accounting and
reporting  standards  upon  its  effective  date.  Since  the  issuance  of  the
Codification  did not change or alter existing GAAP,  adoption of this statement
did not have an  impact  on the  Company's  financial  position  or  results  of
operations, but will change the way in which GAAP is referenced in the Company's
financial statements. FASB ASC 105 is effective for interim and annual reporting
periods ending after  September 15, 2009, and the Company has complied with this
pronouncement.

                                       11

<PAGE>


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


Note 13       New Accounting Pronouncements
-------       -----------------------------

In March 2008,  the FASB issued  FASB ASC 808 (Prior  authoritative  literature:
SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities -
an  amendment  of FASB  Statement  No. 133" ("SFAS  161")),  which  modifies and
expands the  disclosure  requirements  for  derivative  instruments  and hedging
activities.   FASB  ASC  808  requires  that  objectives  for  using  derivative
instruments be disclosed in terms of underlying risk and accounting  designation
and requires  quantitative  disclosures  about fair value  amounts and gains and
losses  on  derivative   instruments.   It  also  requires   disclosures   about
credit-related  contingent  features in derivative  agreements.  FASB ASC 808 is
effective for financial  statements  issued for fiscal years and interim periods
beginning  after  November  15,  2008.  FASB  ASC 808  encourages,  but does not
require,  comparative  disclosures for earlier periods at initial adoption.  The
Company adopted this standard  effective January 1, 2009. The  implementation of
this  standard  did  not  impact  the  disclosures   related  to  the  Company's
consolidated financial statements.

In April 2009, the FASB issued FASB ASC 825 (Prior authoritative literature: FSP
FAS  107-1 and APB 28-1,  Interim  Disclosures  about  Fair  Value of  Financial
Instruments.  FASB ASC 825  requires  disclosures  about fair value of financial
instruments for interim  reporting  periods of publicly traded companies as well
as in annual  financial  statements.  FASB ASC 825 was effective for interim and
annual  reporting  periods ending after June 15, 2009. The Company is making the
disclosures required by this statement.  In April 2009, the FASB issued FASB ASC
825 (Prior authoritative literature:  FSP FAS 157-4, Determining Fair Value When
the Volume and Level of Activity for the Asset or Liability  Have  Significantly
Decreased  and  Identifying  Transactions  That Are Not  Orderly).  FASB ASC 825
provides additional guidance for estimating fair value when the volume and level
of activity for an asset or liability have significantly decreased. FASB ASC 825
also includes guidance on identifying  circumstances that indicate a transaction
is not  orderly.  FASB  ASC  825  emphasizes  that  even  if  there  has  been a
significant  decrease  in the  volume  and  level of  activity  for the asset or
liability and regardless of the valuation  technique(s) used, the objective of a
fair value  measurement  remains the same. Fair value is the price that would be
received  to sell  an  asset  or paid to  transfer  a  liability  in an  orderly
transaction  (that is, not a forced  liquidation  or  distressed  sale)  between
market  participants  at the measurement  date under current market  conditions.
FASB ASC 825 was effective for interim and annual reporting periods ending after
June 15, 2009, and is applied prospectively.  The Company's adoption of FASB ASC
825 did not have an impact on the  Company's  condensed  consolidated  financial
statements.

                                       12

<PAGE>


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


Note 13       New Accounting Pronouncements (continued)
-------       -----------------------------------------

In May 2009, the FASB issued FASB ASC 855, Subsequent Events,  which establishes
general  standards of accounting  for and  disclosure of events that occur after
the balance  sheet date but before the  financial  statements  are issued or are
available to be issued. The Company adopted FASB ASC 855 effective April 1, 2009
and has evaluated subsequent events after the balance sheet date of December 31,
2009 through the date the financial statements were issued, February 16, 2010.

In October 2009, the FASB issued Accounting  Standards Update 2009-13,  "Revenue
Recognition  (Topic 605)".  This Update  provides  amendments to the criteria in
Subtopic  605  for  separating  consideration  in  multiple-deliverable  revenue
arrangements.  It  establishes  a hierarchy of selling  prices to determine  the
selling  price  of each  specific  deliverable  which  includes  vendor-specific
objective  evidence (if  available),  third-party  evidence (if  vendor-specific
evidence is not available),  or estimated  selling price if neither of the first
two  are  available.  This  Update  also  eliminates  the  residual  method  for
allocating  revenue  between the elements of an  arrangement  and requires  that
arrangement  consideration  be  allocated at the  inception of the  arrangement.
Finally,  this Update expands the disclosure  requirements  regarding a vendor's
multiple-deliverable  revenue arrangements.  This Update is effective for fiscal
years  beginning on or after June 15, 2010. We do not anticipate any impact from
this Update.

                                       13

<PAGE>


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


Forward Looking Statements
--------------------------

A number of the statements made by the Company in this report may be regarded as
"forward-looking  statements" within the meaning of the Securities  Exchange Act
of 1934 and the rules and regulations thereunder.

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, including statements regarding litigation,  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;  changes in  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,  the  Company  applies its  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 on repairs and  calibrations are recognized at the time the repaired or
calibrated unit is shipped, as it is at the time that the work is completed.

Due to the unique nature of the ITATS program  wherein a significant  portion of
this  contract  will not be  delivered  for  over a year,  revenues  under  this
contract are recognized on a  percentage-of-completion  basis,  which recognizes
sales  and  profit  as they are  earned,  rather  than at the time of  shipment.
Revenues and profits are estimated using the  cost-to-cost  method of accounting
where revenues are recognized and profits recorded based upon the ratio of costs
incurred  to date to our  estimate of total  costs at  completion.  The ratio of
costs  incurred to our estimate of total costs at  completion  is applied to the
contract  value to  determine  the revenues and  profits.  When  adjustments  in
estimated  contract revenues or estimated costs at completion are required,  any
changes from prior  estimates  are  recognized by recording  adjustments  in the
current  period for the  inception-to-date  effect of the changes on current and
prior  periods.  The Company also  receives  progress  billings on this program,
which  is a  funding  mechanism  by the  government  to  assist  contractors  on
long-term  contracts prior to delivery.  These progress  payments are applied to
Unbilled  Government   Receivables  resulting  from  revenues  recognized  under
percentage-of-completion accounting.

Shipping and handling costs charged to customers are classified as revenue,  and
the shipping and handling costs incurred are included in cost of goods sold.

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

                                       14

<PAGE>


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


Critical Accounting Policies (continued)
----------------------------------------

Inventory reserves - inventory reserves or write-downs are estimated for excess,
slow-moving and obsolete  inventory as well as inventory whose carrying value is
in  excess  of net  realizable  value.  These  estimates  are  based on  current
assessments  about future  demands,  market  conditions  and related  management
initiatives.  If market  conditions  and actual  demands are less favorable than
those projected by management, additional inventory write-downs may be required.
While such  estimates  have  historically  been within our  expectation  and the
provision  established,  the Company  cannot  guarantee  that its estimates will
continue to be within the provision established.

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 its estimates will
continue to be within the provision established.

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  expectations  and the provisions
established,  future warranty costs could be in excess of the Company's warranty
reserves.  A  significant  increase in these costs  could  adversely  affect the
Company's  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  arise from a variety of sources,  the most
significant  being:  a) tax losses  that can be carried  forward to be  utilized
against  profits  in  future  years;  b)  expenses  recognized  in the books but
disallowed  in the tax return  until the  associated  cash flow  occurs;  and c)
valuation  changes of assets which need to be tax effected for book purposes but
are taxable only when the valuation change is realized.  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 are  expected to 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. In assessing the need for a valuation allowance, future taxable income
is estimated,  considering the realization of tax loss carryforwards.  Valuation
allowances related to deferred tax assets can also be affected by changes to tax
laws, changes to statutory tax rates and future taxable income levels.

In the event it is determined  that the Company would not be able to realize all
or a portion of our  deferred  tax assets in the  future,  we would  reduce such
recorded  amounts  through  a charge  to  income  in the  period  in which  that
determination is made. Conversely, if we were to determine that we would be able
to realize our  deferred  tax assets in the future in excess of the net carrying
amounts,  we would decrease the recorded valuation allowance through an increase
to income in the period in which that  determination  is made. In its evaluation
of a valuation  allowance the Company takes into account existing  contracts and
backlog,  and the  probability  that options under these contract awards will be
exercised as well as sales of existing  products.  The Company  prepares  profit
projections  based on the revenue and expenses  forecast to determine  that such
revenues  will  produce  sufficient  taxable  income to realize the deferred tax
assets

                                       15

<PAGE>


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

General
-------

Management's  discussion  and analysis of results of  operations  and  financial
condition is intended to assist the reader in the  understanding  and assessment
of  significant  changes  and trends  related to the results of  operations  and
financial position of the Company together with its subsidiary.  This discussion
and  analysis  should be read in  conjunction  with the  consolidated  financial
statements and  accompanying  financial  notes and  Management's  Discussion and
Analysis in the  Company's  Annual  Report on Form 10-K for the year ended March
31, 2009.

The Company's  avionics business is conducted in the Government,  Commercial and
General  aviation  markets  (see  Note 7 of Notes to  Financial  Statements  for
segment  financial  information).  In January  2004,  the Company  completed its
acquisition of ITI, a company selling products to the marine industry, and ITI's
financial  statements were consolidated with the Company's financial  statements
until the Company  considered it a  discontinued  operation as of March 31, 2008
(see Note 10 to Financial Statements).

Overview
--------

In the third  quarter of the current  fiscal  year,  revenues  declined  and the
Company  incurred a net loss,  principally as a result of a delay in the receipt
of a large Navy CRAFT production order as well as manufacturing  issues at a key
sub-contractor  that  limited  the number of CRAFT  units that could be shipped.
Revenues  for the nine months ended  December 31, 2009  declined by 38% from the
same  period  in 2008  and the  Company  recorded  a net  loss  from  continuing
operations,  net of taxes, for the period of $1,193,304.  Profits for the period
declined due to the reduction in revenues and due to increased engineering costs
for the new projects and legal costs  incurred in  connection  with the Aeroflex
litigation  discussed below.  For the quarter ended December 31, 2009,  revenues
declined  by 44% from last  year's  comparable  quarter to $1.6  million and the
Company recorded a net loss from continuing  operations of $597,482 for the same
reasons discussed above.

The delayed  revenues  have not been lost,  but are expected to be recognized in
the next two fiscal  quarters.  The  Company  believes  that  based on  expected
production  orders on existing  contracts and its current backlog,  revenues and
profits will  substantially  improve  beginning  in the next fiscal  year,  with
increased sales of the CRAFT AN/USM 719 and AN/USM-708,  as well as sales of the
AN/ARM-206  and T-4530A.  Engineering  costs are also expected to decline due to
the completion of the  engineering  for AN/USM-708  and  AN/ARM-206  units.  The
Company anticipates that due to increased revenues and a decrease in engineering
and legal costs, the Company will be profitable in the next fiscal year.

On February 8, 2010 the Company won a five year indefinite  delivery  indefinite
quantity  contract  with the U.S. Air Force with a maximum value of $2.7 million
for yet another product,  the T-100 TACAN test set. The Company continues to bid
on Military  solicitations where the Company believes it has a technical or cost
advantage.

                                       16

<PAGE>


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


Overview (continued)
--------------------

At December 31, 2009 the Company's backlog stood at approximately  $20.6 million
as compared to  approximately  $10 million at December 31, 2008.  The backlog at
December  31, 2009  includes  only the amount of  currently  exercised  delivery
orders on open IDIQ (indefinite  delivery/indefinite quantity) contracts, and is
expected to materially  increase when the volume  production orders for the Navy
CRAFT AN/USM-708 and the ITATS AN/ARM-206  products are received.  Historically,
the Company  obtains a  substantial  volume of orders  which are  required to be
filled in less than twelve months, and, therefore,  these anticipated orders are
not  reflected in the  backlog.  The Company has  received  approximately  $14.9
million in orders related to the TS-4530A  program,  and this amount is included
in the backlog at December 31, 2009.

As a result of the decline in  revenues  and losses  incurred  due to the delays
discussed above, and the increased engineering costs incurred in the development
of the AN/USM-708, AN/ARM-206 and the TS4530A, the Company's working capital and
cash flow  declined.  In September  2009,  as previously  reported,  the Company
raised approximately $520,000 through the sales of common shares to Directors of
the  Company.  The  Company is  currently  in  discussions  to raise  additional
capital, and is confident that it will be able to improve its cash flow.

The Company has renewed its annual bank  agreement on September 30th for several
years,  and is currently in discussion  for a renewal until  September 30, 2010.
Based on those  discussions,  the  Company  believes  the bank  will  renew  the
agreement,  but with a lower borrowing limit. The Company currently has borrowed
$600,000  against this line, and does not believe that the lower limit discussed
with the bank will be materially adverse.

The  Company's  win of the critical  TS-4530A  Mode 5 Army program  represents a
major event for our future.  This award, in conjunction with our Navy CRAFT Mode
5  program,  provides  TIC  with  undisputed  market  leadership  in the  Mode 5
Identification Friend & Foe ("IFF") business and should provide a robust revenue
stream for some years to come. The Company has already received $14.9 million in
delivery  orders on the  TS-4530A  program  out of a maximum  contract  value of
approximately $44 million. In contrast to the multi-year CRAFT program,  this is
an accelerated  development program that takes full advantage of the significant
investment that the Company has made in its proprietary  Mode 5 technology.  TIC
has also  completed  our CRAFT  AN/USM-719  test set and this is the only Mode 5
flight-line test set fully certified by the AIMS Program Office. This represents
the culmination of a multi-year, multi-million investment by the Company in Mode
5 technology and will provide a significant  competitive  advantage in the years
to come as the  U.S.  and our  NATO  allies  migrate  to this  leading  edge IFF
technology.  Moreover,  these  programs will provide a technical base from which
additional advanced products can be developed.

Tel has built a solid  infrastructure  to support a rapidly growing business and
the outlook for the Company is very positive with  potential  backlog on our new
products  totaling around $80 million.  Our continuing  challenge is to finalize
the AN/USM-708 and TS-4530A programs on schedule in a cost-effective fashion. We
also  continue to  evaluate  other  attractive  potential  market  opportunities
although  our current  capital  structure  and  engineering  backlog  limits our
flexibility  at  this  time.  We  will  continue  to  prudently   explore  these
opportunities  as well as  additional  financing  options  to  allow us to fully
capitalize on these market  opportunities  and support the expected  doubling in
the size of our business in the next fiscal year.

                                       17

<PAGE>


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


Overview (continued)
--------------------


On March 24,  2009,  Aeroflex  Wichita,  Inc.  ("Aeroflex")  filed a civil claim
against the Company and two of its  employees  in the District  Court,  Sedgwick
County,  Kansas, Case No. 09 CV 1141 (the "Aeroflex Action"),  alleging that the
Company  and  two  of  its  employees  misappropriated   Aeroflex's  proprietary
technology in connection  with TEL winning the Army TS-4530A  contract.  Many of
these same claims had been included in Aeroflex's  previous,  formal  Protest of
the Contract  award which it filed with the U.S.  Government  Accounting  Office
("GAO"),  and which the Company  denied.  On or about March 17,  2009,  the Army
Contracts Attorney and the Army Contracting  Officer each filed a statement with
the GAO,  expressly  rejecting  Aeroflex's  allegations that the Company used or
infringed Aeroflex  proprietary  technology in winning the Award, and concluding
that the Company had used only its own proprietary technology. On April 6, 2009,
Aeroflex withdrew its GAO Protest, but continued the civil litigation.

In December 2009, the Kansas court dismissed the Aeroflex civil suit against the
Company.  While this decision was based primarily on jurisdictional  issues, the
ruling did note that Aeroflex, after discovery proceedings,  did not provide any
evidence that Tel or its employees  misappropriated  Aeroflex trade secrets. The
Kansas  ruling  also  referenced  the Army's  findings,  in its  response to the
General  Accountability  Office ("GAO"),  which rejected  Aeroflex's  claims and
determined  that  Tel  used  its own  proprietary  technology  on this  program.
Aeroflex  has elected to appeal this Kansas  decision and has agreed to stay any
action against the two former employees until a decision is reached. Tel remains
confident  as to the  outcome  of this  appeal.  (See  Note 12 to the  Financial
Statements).

Sales
-----

For the quarter ended December 31, 2009, total sales decreased  $1,281,457 (44%)
to $1,633,971 as compared to $2,915,428  for the same quarter in the prior year.
Avionics  Government  sales  decreased  $1,364,051  (54%) to $1,161,985  for the
period as compared to $2,526,036  for the same period last year. The decrease in
Avionics Government sales is primarily  attributed to a decrease in shipments of
the T-47N for which the Company had a large  contract  from the U.S. Army in the
prior  year.  Government  sales have been  impacted  by delays in the receipt of
several  expected  large orders as well as in the completion of two of its major
programs.  Commercial sales increased  $82,594 (21.2%) to $471.986 for the three
months ended December 30, 2009 as compared to $389,392 in the same period in the
prior  year.  The  increase  in sales is the result of an  increase  in revenues
associated with repairs and is not a trend that the Company expects to continue.

For the nine months ended December 31, 2009,  total sales  decreased  $3,978,444
(38.5%) to  $6,344,080  as  compared to  $10,322,524  for the same period in the
prior year. Avionics Government sales decreased $3,991,636 (45.1%) to $4,851,530
for the period as compared  to  $8,843,166  for the same  period last year.  The
decrease in Avionics Government sales is primarily  attributed to: a decrease in
shipments of the T-47N, T-30D,  TR-401,  T-76, T-47G as well as sales associated
with the ITATS,  which are  recognized  on a  percentage  of  completion  as the
initial phase of the programs nears completion. Additionally, the first nine

                                       18

<PAGE>



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


Results of Operations (continued)
---------------------------------

Sales
-----


months of the prior fiscal year included a negotiated  billing to the government
in the amount of $406,000 for additional work previously  performed and expensed
on the CRAFT program as well as increased billings for revenues  associated with
the test and  documentation  phase of the CRAFT program.  Government  sales have
been impacted by delays in the receipt of several  expected large orders as well
as delays in the completion of two of its major  programs.  These decreases were
partially  offset by higher  sales of the  TR-420.  Commercial  sales  increased
$13,192  (0.9%) to  $1,492,550  for the nine months  ended  December 31, 2009 as
compared to  $1,479,358  in the same period in the prior year.  The  increase in
sales is the result of an increase in revenues  associated  with  repairs and is
not a trend that the Company expects to continue.


Gross Margin
------------

Gross margin decreased $748,738 (52%) to $684,529 for the quarter ended December
31, 2009 as  compared to  $1,425,267  for the same  quarter in the prior  fiscal
year.  The decrease in gross margin is primarily  attributed  to the decrease in
volume.  The gross margin percentage for the quarter ended December 31, 2009 was
41.9% as compared to 48.9% for the quarter ended December 31, 2008. The decrease
in gross  margin  dollars and  percentage  is also  attributed  to a  negotiated
billing in the second  quarter of the prior year to the government in the amount
of $406,000 for additional work  previously  performed and expensed on the CRAFT
program.

Gross margin  decreased  $2,076,816  (41.1%) to  $2,976,867  for the nine months
ended  December  31, 2009 as compared to  $5,053,683  for the same period in the
prior fiscal year.  The decrease in gross margin is primarily  attributed to the
decrease  in volume.  The gross  margin  percentage  for the nine  months  ended
December  31,  2009 was  46.9% as  compared  to 49% for the  nine  months  ended
December 31, 2008.  The decrease in gross margin  dollars and percentage is also
attributed  to a negotiated  billing in the second  quarter of the prior year to
the  government  in the  amount  of  $406,000  for  additional  work  previously
performed and expensed on the CRAFT program.

Operating Expenses
------------------

Selling,  general  and  administrative  expenses  increased  $30,716  (4.3%)  to
$740,250 for the quarter  ended  December 31, 2009,  as compared to $709,534 for
the quarter  ended  December 31, 2008.  This  increase is  attributed  mainly an
increase in legal fees associated  with the Aeroflex  litigation (see Note 12 to
the Financial Statements) and the addition of a program manager for the TS-4530A
program offset partially by lower outside selling commissions.

Selling,  general  and  administrative  expenses  increased  $76,540  (3.5%)  to
$2,258,216  for the  nine  months  ended  December  31,  2009,  as  compared  to
$2,181,676  for the nine  months  ended  December  31,  2008.  This  increase is
attributed  mainly to an increase in legal fees  associated  with the litigation
(see  Note  12 to  the  Financial  Statements),  and  professional  fees  offset
partially by lower outside commissions and lower bonus accrual expense.

                                       19

<PAGE>


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


Results of Operations (continued)
---------------------------------

Operating Expenses (continued)
------------------------------

Engineering,  research and development  expenses  increased  $240,027 (35.1%) to
$924,044 and $539,098 (25.3%) to $2,672,119 for the three months and nine months
ended December 31, 2009 as compared to $684,017 and $2,133,021 for the three and
nine months  ended  December  31, 2008.  Engineering,  research and  development
expenses are mostly  attributed  to  engineering  costs related to the CRAFT and
TS-4530A programs.

Interest, net
-------------

Interest income decreased primarily as a result of lower cash balances.

Interest  expense  increased by $4,171 for the three  months ended  December 31,
2009 to $15,419 as compared to $11,248 in the prior year  primarily  as a result
of interest on the loan on the life insurance policy.

Interest expense decreased $1,685 for the nine months ended December 31, 2009 to
$34,418 as  compared to $36,103 in the prior year  primarily  as a result of the
payment in full of the convertible note payable.


Income (Loss) from Continuing Operations before Income Taxes
------------------------------------------------------------

As a result of the above, the Company recorded losses from continuing operations
before  income  taxes of $994,975 and  $1,987,184  for the three and nine months
ended December 31, 2009 as compared to income from continuing  operations before
income  taxes of  $22,178  and  $706,666  for the  three and nine  months  ended
December 31, 2008.

Income Taxes
------------

Income tax benefits in the amounts  $397,493 and $793,880  were recorded for the
three and nine  months  ended  December  31,  2009 as  compared  to  income  tax
provisions  in the amounts of $8,861 and  $326,926 for the three and nine months
ended  December 31, 2008.  The change is due to the losses  before taxes for the
three and nine months ended December 31, 2009 as compared to income before taxes
for the three and niine months ended December 31, 2008. These amounts  represent
the effective  federal and state tax rate of approximately  40% on the Company's
net income or loss before taxes.


Net Income (Loss) from Continuing Operations, Net of Taxes
----------------------------------------------------------

As a result of the  above,  the  Company  recorded  net losses  from  continuing
operations,  net of taxes of  $597,482  and  $1,193,304  for the  three and nine
months  ended  December  31,  2009 as  compared  to net income  from  continuing
operations,  net of taxes of $13,317 and  $379,740 for the three and nine months
ended December 31, 2008.

                                       20

<PAGE>


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


Results of Operations (continued)
---------------------------------

Income from Discontinued Operations, Net of taxes
-------------------------------------------------

For the three months ended December 31, 2009, the Company  recorded  income from
discontinued  operations,  net of taxes,  of $25,152 as  compared to income from
discontinued operations, net of taxes of $3,317. This increase was the result of
higher sales.  For the nine months ended December 31, 2009, the Company recorded
income from  discontinued  operations,  net of taxes,  of $30,825 as compared to
income from discontinued operations,  net of taxes of $70,556 as a result of the
lower sales volume See Note 10 to the Financial Statements.

Net Income (Loss)
-----------------

As a result of the  above,  the  Company  recorded  net losses of  $572,330  and
$1,162,479  for the three and nine months ended December 31, 2009 as compared to
recording net income of $16,634 and $450,296 for the three and nine months ended
December 31, 2008.

Liquidity and Capital Resources
-------------------------------

At December 31, 2009, the Company had working  capital of $2,440,511 as compared
to  $3,284,115 at March 31, 2009.  For the nine months ended  December 31, 2009,
the Company used  $1,149,419 in cash for  operations as compared to $400,876 for
the  nine  months  ended  December  31,  2008.  This  increase  in cash  used in
operations is primarily attributed to the increase in the operating loss for the
period as compared to the  previous  year offset  partially  by the  decrease in
accounts  receivable as compared to an increase in accounts  receivable  for the
nine months ended December 31, 2008.

Net cash used in  investing  activities  was $36,653  for the nine months  ended
December 31, 2009 as compared to $81,301 for the nine months ended  December 31,
2008 due to the decrease in purchases of equipment.

Net cash  provided by  financing  activities  increased to $722,825 for the nine
months ended  December 31, 2009 from $232,308 for the nine months ended December
31, 2008  primarily  due to proceeds  from the sale of new common  stock and the
proceeds from the exercise of stock options, discussed below.

At December 31, 2009 the Company's backlog stood at approximately  $20.6 million
as compared to  approximately  $10.0 million at December 31 2008. The backlog at
December  31, 2009  includes  only the amount of  currently  exercised  delivery
orders on open IDIQ (indefinite  delivery/indefinite quantity) contracts, and is
expected to materially  increase when the volume  production orders for the Navy
CRAFT AN/USM-708 and the ITATS AN/ARM-206  products are received.  Historically,
the Company  obtains a  substantial  volume of orders  which are  required to be
filled in less than twelve months, and, therefore,  these anticipated orders are
not reflected in the backlog.  Approximately  $14.3 million in orders is related
to the TS-4530A program,  and this amount is included in the backlog at December
31, 2009.

The Company raised $520,000 of capital from Directors,  through a combination of
sales of new shares (at "market")  and the exercise of previously  granted stock
options in September  2009. In addition,  the Company is in discussions to raise
additional  capital and it is confident that it will be able to improve its cash
position. (See Overview).

                                       21

<PAGE>


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


Liquidity and Capital Resources (continued)
-------------------------------------------

As  discussed,  the Company is currently  discussing  an extension of its credit
line.

There was no  significant  impact  on the  Company's  operations  as a result of
inflation  for  the  nine  months  ended  December  31,  2009.  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, 2009.

Item 4 (T).   Controls and Procedures
-----------   -----------------------

As of the end of the period  covered by this  report,  the Company  conducted an
evaluation,  under the supervision and with the  participation  of the principal
executive officer and principal financial officer,  of the Company's  disclosure
controls and procedures (as defined in Rules  13a-15(e) and 15d-15(e)  under the
Securities Exchange Act of 1934 (the "Exchange Act")). Based on this evaluation,
the principal  executive officer and principal  financial officer concluded that
the Company's  disclosure  controls and  procedures are effective to ensure that
information  required to be disclosed by the Company in reports that it files or
submits under the Exchange Act is recorded,  processed,  summarized and reported
within the time periods  specified in Securities and Exchange  Commission  rules
and forms.

There was no change in the Company's  internal control over financial  reporting
during the Company's most recently  completed fiscal quarter that has materially
affected,  or is reasonably likely to materially  affect, the Company's internal
control over financial reporting.

Part II.      Other Information
--------      -----------------


Item 1.       Legal Proceedings
-------       -----------------

               See discussion in Note 12 to the Financial  Statements,  and MD&A
               overview.

Item 2.       Unregistered Sales of Equity Securities and Use of Proceeds
-------       -----------------------------------------------------------

               In September  2009,  the Company sold 76,000 shares of its Common
               Stock at $4.73 per share to certain Directors and Officers of the
               Company.  All other  shareholders  were given the  opportunity to
               participate on the same price,  terms and conditions subject to a
               minimum share purchase.  A mailing was sent to all  shareholders,
               but no existing  shareholders chose to participate.  Theses funds
               were used for working capital needs.

               The shares were sold to the  Directors  pursuant to the exemption
               provided  by  Section  4  of  the  Securities  Act  of  1933  and
               Regulation D thereunder.  The Directors were accredited investors
               under Rule 501(a)(4) under the Securities Act of 1933.

                                       22

<PAGE>


Item 4.       Submission of Matters to a Vote of Security Holders
-------       ---------------------------------------------------

(a)  The Annual  Meeting of  Shareholders  was held on  December  16,  2009 (the
     "Annual Meeting").
(b)  Not applicable
(c)  At the  Annual  Meeting,  the  Company's  shareholders  voted  in  favor of
     re-electing  management's nominees for election as directors of the Company
     as follows:

                                          For                          Against
                                          ---                          -------
     Harold K. Fletcher                2,305,514                       104,442
     George J. Leon                    2,322,701                        87,255
     Robert J. Melnick                 2,307,661                       102,295
     Jeff C. O'Hara                    2,307,661                       102,295
     Robert A. Rice                    2,322,701                        87,255
     Robert H. Walker                  2,322,701                        87,255

(d)  Not applicable

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 and 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:    February 16, 2010               By:  /s/  Harold K. Fletcher
                                            --------------------------------
                                                   Harold K. Fletcher
                                                   CEO

Date:   February 16, 2010                By:  /s/  Joseph P. Macaluso
                                            --------------------------------
                                                   Joseph P. Macaluso
                                                   Principal Accounting Officer