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, 2008

                          Commission File Number I-4383


                         ESPEY MFG. & ELECTRONICS CORP.
             (Exact name of registrant as specified in its charter)

         NEW YORK                                   14-1387171
         --------                                   ----------
 (State of incorporation)             (I.R.S. Employer's Identification No.)

              233 Ballston Avenue, Saratoga Springs, New York 12866
                    (Address of principal executive offices)

         Registrant's telephone number, including area code 518-584-4100
                                                            ------------

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

         Yes  |X|          No  [ ]

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer,  a
non-accelerated  filer, or a smaller reporting  company.  See the definitions of
"large accelerated  filer,"  "accelerated filer" and "smaller reporting company"
in Rule 12b-2 of the Exchange Act.

         Large accelerated filer [ ]          Accelerated filer [ ]

         Non-accelerated filer [ ]            Smaller reporting company |X|

Indicated by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).

         Yes  [ ]          No  |X|


Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

              Class                             Outstanding at February 11, 2009
              -----                             --------------------------------
Common stock, $.33-1/3 par value                        2,329,153 shares


<PAGE>

                         ESPEY MFG. & ELECTRONICS CORP.
                          Quarterly Report on Form 10-Q
                                    I N D E X

PART I    FINANCIAL INFORMATION                                             PAGE

          Item 1   Financial Statements:

                         Balance Sheets -
                         December 31, 2008 (Unaudited) and June 30, 2008      1

                         Statements of Income (Unaudited) -
                         Three Months Ended December 31, 2008 and 2007        3

                         Statements of Cash Flows (Unaudited)-
                         Three Months Ended December 31, 2008 and 2007        4

                         Notes to Financial Statements (Unaudited)            5

          Item 2   Management's Discussion and Analysis of                    9
                   Financial Condition and Results of Operations

          Item 3   Quantitative and Qualitative Disclosures About Market
                   Risk                                                      12

          Item 4   Controls and Procedures                                   12


PART II   OTHER INFORMATION AND SIGNATURES                                   13

          Item 1   Legal Proceedings                                         13

          Item 2   Unregistered Sales of Equity Securities                   13

          Item 4   Submission of Matters to a Vote of Security Holders       13

          Item 5   Other Information                                         14

          Item 6   Exhibits                                                  14

          SIGNATURES                                                         14

<PAGE>
<TABLE>
<CAPTION>

                          PART I: FINANCIAL INFORMATION

                         ESPEY MFG. & ELECTRONICS CORP.
                                 Balance Sheets
                 December 31, 2008 (Unaudited) and June 30, 2008


                                                                              2008          2008
                                                                           December 31,    June 30,
                                                                           -----------   -----------
<S>                                                                          <C>           <C>
ASSETS:

          Cash and cash equivalents                                        $ 1,299,601   $ 6,851,753
          Short term investments                                             9,566,000     7,336,000
          Trade accounts receivable, net                                     3,039,829     3,646,127
          Income tax receivable                                                516,310       276,087
          Other receivables                                                      6,363         4,348
          ESOP receivable due to dividends on unallocated shares               246,656        36,809

          Inventories:
                  Raw materials                                              1,516,264     1,575,116
                  Work-in-process                                            1,025,538     1,151,332
                  Costs relating to contracts in process, net of advance
                    payments of $830,215 at December 31, 2008 and
                    $959,175 at June 30, 2008                                8,803,035     7,461,786
                                                                           -----------   -----------
                                    Total inventories                       11,344,837    10,188,234

          Deferred income taxes                                                167,422       169,853
          Prepaid expenses and other current assets                            215,519       355,688
                                                                           -----------   -----------
                                    Total current assets                    26,402,537    28,864,899
                                                                           -----------   -----------

          Property, plant and equipment, net                                 2,891,876     2,956,590
          Loan receivable                                                       51,937        65,003
                                                                           -----------   -----------

                                    Total assets                           $29,346,350   $31,886,492
                                                                           ===========   ===========


See accompanying notes to the financial statements.                                      (Continued)

</TABLE>

                                       1
<PAGE>
<TABLE>
<CAPTION>

                         ESPEY MFG. & ELECTRONICS CORP.
                                 Balance Sheets
                 December 31, 2008 (Unaudited) and June 30, 2008


                                                                                      2008            2008
                                                                                  December 31,      June 30,
                                                                                  ------------    ------------
<S>                                                                                    <C>             <C>
LIABILITIES AND STOCKHOLDERS' EQUITY:

          Accounts payable                                                        $  1,894,957    $    600,931
          Accrued expenses:
                  Salaries, wages and commissions                                       99,314         184,377
                  Vacation                                                             450,940         542,441
                  ESOP payable                                                              --              --
                  Other                                                                 66,747          46,253
          Payroll and other taxes withheld and accrued                                  47,041          42,175
                                                                                  ------------    ------------
                               Total current liabilities                             2,558,999       1,416,177
                                                                                  ------------    ------------

          Deferred income taxes                                                        114,557         132,578
                                                                                  ------------    ------------
                               Total liabilities                                     2,673,556       1,548,755
                                                                                  ------------    ------------

          Common stock, par value $.33-1/3 per share. Authorized 10,000,000
              shares; issued 3,029,874 shares on December 31, 2008 and June 30,
              2008. Outstanding 2,326,953 and 2,325,902 (includes 213,333 and
              225,000 Unearned ESOP Shares on December 31, 2008
              and June 30, 2008, respectively)                                       1,009,958       1,009,958

          Capital in excess of par value                                            13,604,470      13,476,609

          Retained earnings                                                         22,051,959      25,796,703
                                                                                  ------------    ------------
                                                                                    36,666,387      40,283,270

          Less: Unearned ESOP shares                                                (3,251,248)     (3,251,248)

                  Treasury shares, cost of 702,921 shares on December
                  31, 2008 and 703,972 shares on June 30, 2008                      (6,742,345)     (6,694,285)
                                                                                  ------------    ------------
                               Total stockholders' equity                           26,672,794      30,337,737
                                                                                  ------------    ------------

                               Total liabilities and stockholders' equity         $ 29,346,350    $ 31,886,492
                                                                                  ============    ============

</TABLE>

See accompanying notes to the financial statements.

                                       2
<PAGE>


                         ESPEY MFG. & ELECTRONICS CORP.
                        Statements of Income (Unaudited)
              Three and Six Months Ended December 31, 2008 and 2007

<TABLE>
<CAPTION>
                                                            Three Months                          Six Months
                                                      2008                2007             2008               2007
                                                 ----------------------------------   ---------------------------------
<S>                                                    <C>                <C>              <C>               <C>
Net sales                                        $     6,194,177    $     6,732,144   $    12,247,696   $    13,033,930
Cost of sales                                          5,568,247          5,049,559        10,470,491        10,002,235
                                                 ---------------    ---------------   ---------------   ---------------
       Gross profit                                      625,930          1,682,585         1,777,205         3,031,695

Selling, general and
   administrative expenses                               789,585            701,819         1,467,812         1,369,372
                                                 ---------------    ---------------   ---------------   ---------------

       Operating (loss) income                          (163,655)           980,766           309,393         1,662,323
                                                 ---------------    ---------------   ---------------   ---------------

Other income

       Interest and dividend income                       92,969            203,324           195,884           399,445
       Other                                               4,672             29,077            15,913            48,562
                                                 ---------------    ---------------   ---------------   ---------------
                                                          97,641            232,401           211,797           448,007
                                                 ---------------    ---------------   ---------------   ---------------

(Loss) income before income taxes                        (66,014)         1,213,167           521,190         2,110,330

(Benefit) provision for income taxes                     (23,602)           416,081           165,306           721,661
                                                 ---------------    ---------------   ---------------   ---------------

                  Net (loss) income              $       (42,412)   $       797,086   $       355,884   $     1,388,669
                                                 ===============    ===============   ===============   ===============

Net (loss) income per share:

       Basic                                     $          (.02)   $           .38   $           .17   $           .67
       Diluted                                   $          (.02)   $           .37   $           .17   $           .65
                                                 ---------------    ---------------   ---------------   ---------------

Weighted average number of shares outstanding:

       Basic                                           2,107,257          2,074,789         2,104,782         2,070,334
       Diluted                                         2,114,363          2,109,650         2,115,201         2,125,632
                                                 ---------------    ---------------   ---------------   ---------------

Dividends per share:                             $        1.7250    $         .1750   $        1.9500   $         .3500
                                                 ===============    ===============   ===============   ===============
</TABLE>


See accompanying notes to the financial statements.

                                       3
<PAGE>

                         ESPEY MFG. & ELECTRONICS CORP.
                      Statements of Cash Flows (Unaudited)
                   Six Months Ended December 31, 2008 and 2007
<TABLE>
<CAPTION>

                                                                                        December 31,
                                                                                    2008            2007
                                                                                ------------    ------------
<S>                                                                             <C>             <C>
Cash Flows From Operating Activities:
       Net income                                                               $    355,884    $  1,388,669

       Adjustments  to  reconcile  net income to net
         cash  provided by operating activities:
       Excess tax benefits from share-based compensation                              30,245          83,471
       Stock-based compensation                                                       58,166          83,331
       Depreciation                                                                  247,973         246,473
       ESOP compensation expense                                                     228,903         263,174
       Loss on disposal of assets                                                      2,542           5,681
       Deferred income tax                                                           (15,590)        (26,979)
       Changes in assets and liabilities:
           Decrease (increase) in trade receivables, net                             606,298      (1,337,174)
           Increase in income taxes receivable                                      (240,223)         (5,273)
           Increase in other receivables                                              (2,015)           (717)
           Increase in ESOP receivable due to dividends on unallocated shares       (209,847)             --
           (Increase) decrease in inventories                                     (1,156,603)      1,022,965
           Decrease in prepaid expenses and other current assets                     140,169         247,405
           Increase (decrease) in accounts payable                                 1,294,026        (130,775)
           Decrease in accrued salaries, wages and commissions                       (85,063)        (31,470)
           Decrease in vacation accrual                                              (91,501)       (105,627)
           Decrease in ESOP payable                                                 (228,903)        (87,208)
           Increase in other accrued expenses                                         20,494           3,512
           Increase (decrease) in payroll & other taxes withheld and accrued           4,866          (4,417)
           Decrease in income taxes payable                                          (30,245)       (283,414)
                                                                                ------------    ------------
                      Net cash provided by operating activities                      929,576       1,331,627
                                                                                ------------    ------------

Cash Flows From Investing Activities:
       Additions to property, plant & equipment                                     (185,801)       (292,436)
       Payment for issuance of loan receivable                                            --         (80,000)
       Proceeds from loan receivable                                                  13,066              --
       Purchase of short term investments                                         (6,550,000)     (4,543,000)
       Maturity of short term investments                                          4,320,000       2,016,000
                                                                                ------------    ------------
                      Net cash used in investing activities                       (2,402,735)     (2,899,436)
                                                                                ------------    ------------

Cash Flows From Financing Activities:
       Dividends on common stock                                                  (4,100,628)       (722,569)
       Purchase of treasury stock                                                   (102,510)       (571,763)
       Proceeds from exercise of stock options                                        93,900         246,040
       Excess tax benefits from share-based compensation                              30,245          83,471
                                                                                ------------    ------------
                      Net cash used in financing activities                       (4,078,993)       (964,821)
                                                                                ------------    ------------

(Decrease) increase in cash and cash equivalents                                  (5,552,152)     (2,532,630)
Cash and cash equivalents, beginning of period                                     6,851,753      11,096,111
                                                                                ------------    ------------
Cash and cash equivalents, end of period                                           1,299,601       8,563,481
                                                                                ============    ============

Supplemental disclosures of cash flow information:
       Income Taxes Paid                                                        $    400,000    $    880,000
                                                                                ============    ============
</TABLE>

See accompanying notes to the financial statements.

                                       4
<PAGE>


                         ESPEY MFG. & ELECTRONICS CORP.
                    Notes to Financial Statements (Unaudited)
                    -----------------------------------------

Note 1. Basis of Presentation

In the opinion of management the  accompanying  unaudited  financial  statements
contain  all  adjustments  (consisting  of only  normal  recurring  adjustments)
necessary for a fair  presentation of the results for such periods.  The results
for any  interim  period are not  necessarily  indicative  of the  results to be
expected for the full fiscal year. Certain information and footnote  disclosures
normally  included in financial  statements  prepared in accordance  with United
States generally accepted accounting  principles have been condensed or omitted.
The preparation of these financial  statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities,  revenues and
expenses, and related disclosure of assets and liabilities. On an ongoing basis,
we evaluate our  estimates  and  judgments,  including  those related to revenue
recognition, inventories, income taxes, and stock-based compensation. Management
bases its estimates on historical  experience  and on various other factors that
are believed to be reasonable under the circumstances, the results of which form
the  basis  for  making  judgments  about the  carrying  values  of  assets  and
liabilities that are not readily apparent from other sources. Actual results may
differ from these  estimates under  different  assumptions or conditions.  These
financial  statements  should be read in  conjunction  with the  Company's  most
recent audited  financial  statements  included in its report on Form 10-KSB for
the year ended June 30, 2008.

Note 2. Net Income per Share

Basic net income per share  excludes  dilution  and is computed by dividing  net
income available to common stockholders by the weighted average number of common
shares  outstanding  for the period.  Diluted net income per share  reflects the
potential  dilution that could occur if  securities or other  contracts to issue
common stock were  exercised  or converted  into common stock or resulted in the
issuance  of common  stock  that then  shared in the income of the  Company.  As
Unearned ESOP shares are released or committed-to-be-released  the shares become
outstanding for earnings-per-share computations.

Note 3. Stock Based Compensation

Effective July 1, 2006, the Company  adopted  Statement of Financial  Accounting
Standards  No. 123 (Revised  2004),"Share-Based  Payment"  ("SFAS No. 123 (R)"),
which amends SFAS No. 123 and  supersedes  Accounting  Principles  Board Opinion
("APB") No. 25 in establishing  standards for the accounting for transactions in
which an entity exchanges its equity instruments for goods or services,  as well
as transactions  in which an entity incurs  liabilities in exchange for goods or
services that are based on the fair value of the entity's equity  instruments or
that may be settled by the issuance of those equity instruments. SFAS No. 123(R)
requires that the cost resulting from all  share-based  payment  transactions be
recognized  in  the  financial  statements  based  on  the  fair  value  of  the
share-based  payment.  SFAS No.123(R)  establishes fair value as the measurement
objective in accounting for  share-based  payment  transactions  with employees,
except for equity instruments held by employee share ownership plans. As allowed
under SFAS No. 123(R),  the Company elected the modified  prospective  method of
adoption,   under  which  compensation  cost  is  recognized  in  the  financial
statements  beginning  with  the  effective  date of  SFAS  No.  123(R)  for all
share-based  payments  granted  after that  date,  and for all  unvested  awards
granted  prior to the  effective  date of SFAS No.  123(R).  Accordingly,  prior
period amounts have not been restated.

Total stock-based compensation expense recognized in the Statement of Income for
the three  months  ended  December  31, 2008 and 2007,  was $29,083 and $32,491,
respectively,  before income taxes.  The related total  deferred tax benefit was
approximately  $2,477 and $2,487,  for the three months ended  December 31, 2008
and 2007, respectively. Total stock-based compensation expense recognized in the
Statement  of Income for the six months ended  December  31, 2008 and 2007,  was
$58,166 and  $83,331,  respectively,  before  income  taxes.  The related  total
deferred  tax benefit was  approximately  $4,954 and $6,504,  for the six months
ended  December 31, 2008 and 2007,  respectively.  Prior to the adoption of SFAS
No. 123(R), the Company presented all tax benefits for deductions resulting from
the exercise of stock options as operating  cash flows in the Statements of Cash
Flows.  SFAS No. 123(R) requires the tax benefits  resulting from tax deductions
in excess of the compensation cost recognized for those options to be classified
and reported as both an operating  cash outflow and a financing cash inflow on a
prospective basis upon adoption.

                                       5
<PAGE>

As of  December  31,  2008,  there was  approximately  $89,900  of  unrecognized
compensation  cost  related  to  stock  option  awards  that is  expected  to be
recognized as expense over a period of 1.5 years.

The  Company has one  employee  stock  option  plan under  which  options may be
granted,  the 2007 Stock Option and Restricted Stock Plan (the "2007 Plan"). The
Board of  Directors  may grant  options  to  acquire  shares of common  stock to
employees  of the  Company at the fair market  value of the common  stock on the
date of grant.  Generally,  options granted have a two-year vesting period based
on two years of continuous service and have a ten-year  contractual life. Option
grants provide for accelerated  vesting if there is a change in control.  Shares
issued upon the  exercise of options are from those held in  Treasury.  The 2007
Plan was approved by the Company's  shareholders at the Company's Annual Meeting
on November 30, 2007 and  supercedes  the Company's  2000 Stock Option Plan (the
"2000 Plan").  Options covering 400,000 shares are authorized for issuance under
the 2007 Plan, of which 34,400 have been granted as of December 31, 2008.  While
no further grants of options may be made under the 2000 Plan, as of December 31,
2008,   83,100  options  were   outstanding  of  which  49,900  are  vested  and
exercisable.

SFAS No.  123(R)  requires the use of a valuation  model to  calculate  the fair
value of stock-based  awards.  The Company has elected to use the  Black-Scholes
option valuation model, which incorporates  various assumptions  including those
for volatility, expected life and interest rates.

The table below outlines the weighted average  assumptions that the Company used
to  calculate  stock-based  employee  compensation  for the three and six months
ended December 31, 2008 and 2007:

<TABLE>
<CAPTION>
                                             Three Months Ended        Six Months Ended
                                                December 31,             December 31,
                                             2008          2007        2008          2007
                                            --------------------     ----------------------
<S>                                           <C>          <C>         <C>           <C>
Dividend yield                                3.34%        2.59%       3.34%         2.40%
Expected stock price volatility              24.41%       20.50%      24.41%        22.29%
Risk-free interest rate                       3.91%        4.80%       3.91%         4.54%
Expected option life (in years)               4.0 yrs      5 yrs       4.0 yrs       5 yrs
Weighted average fair value per share of
   options granted during the period         $3.59        $3.66       $3.59         $3.84
</TABLE>

The Company  pays  dividends  quarterly  and does plan to pay  dividends  in the
foreseeable  future.  Expected stock price volatility is based on the historical
volatility of the Company's stock.  The risk-free  interest rate is based on the
implied  yield  available  on  U.S.  Treasury  issues  with an  equivalent  term
approximating  the expected  life of the options.  The expected  option life (in
years)  represents  the estimated  period of time until exercise and is based on
the safe harbor calculation under SFAS No. 123.

The following  table  summarizes  stock option  activity during the three months
ended December 31, 2008:

                                           Employee Stock Options Plan
                                       -------------------------------------
                                                                  Weighted
                                       Number of     Weighted      Average
                                         Shares       Average     Remaining
                                        Subject      Exercise    Contractual
                                       To Option       Price         Term
                                       -------------------------------------
    Balance at July 1, 2008              126,500      $18.40        7.85
    Granted                                   --          --
    Exercised                             (6,600)     $14.23
    Forfeited or expired                  (2,400)     $17.82
                                       -------------------------------------
    Balance December 31, 2008            117,500      $18.65        7.94
                                       =====================================
    Exercisable at December 31, 2008      49,900      $16.89        6.81
                                       =====================================

The intrinsic value of stock options exercised was $18,495 and $179,365,  during
the six months  ended  December 31 2008 and 2007,  respectively.  The  intrinsic
value of stock options  outstanding  and exercisable as of December 31, 2008 and
2007 was $90,637 and $207,917, respectively.

                                       6
<PAGE>

Note 4.  Commitments and Contingencies

The Company at certain  times enters into standby  letters of credit  agreements
with  financial  institutions  primarily  relating  to the  guarantee  of future
performance on certain contracts.  Contingent liabilities on outstanding standby
letters of credit  agreements  aggregated  to zero at December  31,  2008.  As a
government  contractor,  the Company is continually  subject to audit by various
agencies of the U.S. Government to determine compliance with various procurement
laws and regulations.  As a result of such audits and as part of normal business
operations of the Company,  various  claims and charges can be asserted  against
the  Company.  It is not  possible  to  predict  the  outcome  of such  actions.
Currently the Company has no claims or assertions  pending or threatened against
it.

Note 5.  Recently Issued Accounting Standards

In May 2008, the Financial  Accounting Standards Board ("FASB") issued Statement
of  Financial  Accounting  Standard  No.  162 ("SFAS  162"),  The  Hierarchy  of
Generally  Accepted  Accounting  Principals.  SFAS 162 identifies the sources of
accounting principles and the framework for selecting the principles used in the
preparation  of  financial  statements  of  nongovernmental  entities  that  are
presented in conformity with generally accepted accounting  principles (GAAP) in
the United States. SFAS 162 is effective 60 days following the SEC's approval of
the Public Company Accounting  Oversight Board amendments to AU Section 411, The
Meaning of Present  Fairly in  Conformity  With  Generally  Accepted  Accounting
Principles.  SFAS 162 does not have a material effect on the company's financial
statements.

In March 2008, the FASB issued  Statement of Financial  Accounting  Standard No.
161  ("SFAS  161"),   Disclosures  about  Derivative   Instruments  and  Hedging
Activities,  an amendment of FASB Statement No. 133. SFAS 161 requires  enhanced
disclosures  about an entity's  derivative and hedging  activities.  SFAS 161 is
effective for financial  statements  issued for fiscal years and interim periods
beginning after November 15, 2008 with early  application  encouraged.  As such,
the Company  was  required to adopt these  provisions  at the  beginning  of the
fiscal year ended June 30, 2009. The adoption of the provisions of SFAS 161 will
not have a material effect on the Company's financial statements.

In December 2007, the FASB issued Statement of Financial Accounting Standard No.
160 ("SFAS 160"), Noncontrolling Interests in Consolidated Financial Statements,
an  amendment  of ARB No. 51.  SFAS 160  establishes  accounting  and  reporting
standards  for  the  noncontrolling   interest  in  a  subsidiary  and  for  the
deconsolidation  of a subsidiary.  SFAS 160 is effective  for fiscal years,  and
interim  periods  within those fiscal years,  beginning on or after December 15,
2008. As such, the Company was required to adopt these  provisions on January 1,
2009. The adoption of the provisions of SFAS 160 will not have a material effect
on the Company's financial statements.

In December 2007, the FASB issued Statement of Financial Accounting Standard No.
141(R)  ("SFAS  141(R)"),   Business   Combinations.   SFAS  141(R)  establishes
principles and requirements for how the acquirer  recognizes and measures in its
financial statements the identifiable assets acquired,  the liabilities assumed,
an any  noncontrolling  interest in the  acquiree,  recognizes  and measures the
goodwill acquired in the business combination or a gain from a bargain purchase,
and  determines  what  information  to disclose to enable users of the financial
statements  to  evaluate  the  nature  and  financial  effects  of the  business
combination.  SFAS 141(R) is effective  for fiscal  years,  and interim  periods
within those fiscal years, beginning on or after December 15, 2008. As such, the
Company was required to adopt these provisions  January 1, 2009. The adoption of
the  provisions  of SFAS 160 will not have a  material  effect on the  Company's
financial statements.

In February 2007, the FASB issued Statement of Financial Accounting Standard No.
159 ("SFAS  159"),  The Fair Value  Option for  Financial  Assets and  Financial
Liabilities.  SFAS 159  provides  companies  with an option  to report  selected
financial assets and financial  liabilities at fair value.  Unrealized gains and
losses on items for which the fair value option has been elected are reported in
earnings at each subsequent reporting date. SFAS 159 is effective beginning July
1, 2008.  The  adoption  of the  provisions  of SFAS 159 did not have a material
effect on the Company's financial statements.

In September 2006, the FASB issued  Statement of Financial  Accounting  Standard
No. 157 ("SFAS  157"),  Fair Value  Measurements.  SFAS 157 defines  fair value,
establishes a framework for measuring fair value, and expands  disclosures about
fair value  measurements.  SFAS 157 applies to other  accounting  pronouncements


                                       7
<PAGE>

that  require or permit  fair value  measurements,  but does not require any new
fair value measurements.  SFAS 157 is effective for financial  statements issued
for fiscal years  beginning  after November 15, 2007, and interim periods within
those years. SFAS 157 did not have a material effect on the Company's  financial
statements.

Note 6. Employee Stock Ownership Plan

The Company sponsors a leveraged employee stock ownership plan (the "ESOP") that
covers  all  nonunion  employees  who work  1,000 or more hours per year and are
employed on June 30.

The  Company  makes  annual  contributions  to the ESOP equal to the ESOP's debt
service less dividends on unallocated shares received by the ESOP. All dividends
on  unallocated  shares  received  by the ESOP  are  used to pay  debt  service.
Dividends  on  allocated  ESOP shares are  recorded  as a reduction  of retained
earnings.  As the debt is repaid,  shares are released  and  allocated to active
employees, based on the proportion of debt service paid in the year. The Company
accounts  for  its  ESOP  in  accordance   with   Statement  of  Position  93-6.
Accordingly,  the shares  purchased  by the ESOP are  reported as Unearned  ESOP
Shares in the  statement  of  financial  position.  As shares  are  released  or
committed-to-be-released,  the Company reports compensation expense equal to the
current  average market price of the shares,  and the shares become  outstanding
for  earnings-per-share  (EPS)  computations.   ESOP  compensation  expense  was
$110,485 for the quarter ended  December 31, 2008 and $228,903 for the six-month
period ending December 31, 2008. The ESOP shares as of December 31, 2008 were as
follows:

       Allocated Shares                                           437,593
       Committed-to-be-released shares                             11,667
       Unreleased shares                                          213,333
                                                               ----------

       Total shares held by the ESOP                              662,593
                                                               ==========

       Fair value of unreleased shares at December 31, 2008    $3,991,460
                                                               ==========

                                       8
<PAGE>

Item 2.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations

Overview

Espey Mfg. & Electronics Corp. (the "Company") located in Saratoga Springs,  New
York, is engaged principally in the development,  design, production and sale of
specialized  electronic power supplies, a wide variety of transformers and other
types of iron-core components,  and electronic system components. In some cases,
the  Company   manufactures  such  products  in  accordance  with  pre-developed
mechanical and electrical  requirements  ("build to print"). In other cases, the
Company  is  responsible  for both the  overall  design and  manufacture  of the
product. The Company does not generally manufacture  standardized components and
does not have a product  line.  The  products  manufactured  by the Company find
application principally in (i) shipboard and land based radar, (ii) locomotives,
(iii)  aircraft,   (iv)  short  and  medium  range  communication  systems,  (v)
navigation systems, and (vi) land-based military vehicles.

Business is solicited from large industrial manufacturers and defense companies,
the  government  of the United  States,  foreign  governments  and major foreign
electronic  equipment  companies.  In certain countries the Company has external
sales  representatives  to help solicit and coordinate  foreign  contracts.  The
Company is also on the eligible  list of  contractors  of agencies of the United
States  Department of Defense and generally is  automatically  solicited by such
agencies for  procurement  needs  falling  within the major  classes of products
produced by the Company.  In addition,  the Company directly  solicits bids from
the United States Department of Defense for prime contracts.

There is competition in all classes of products manufactured by the Company from
divisions of the largest electronic companies,  as well as many small companies.
The  Company's  sales do not  represent a  significant  share of the  industry's
market for any class of its products.  The principal  methods of competition for
electronic  products of both a military and  industrial  nature  include,  among
other  factors,  price,  product  performance,  the experience of the particular
company and history of its dealings in such  products.  The Company,  as well as
other companies  engaged in supplying  equipment for military use, is subject to
various risks,  including,  without limitation,  dependence on United States and
foreign government  appropriations and program allocations,  the competition for
available   military  business,   and  government   termination  of  orders  for
convenience.

New orders  received in the first six months of fiscal  2009 were  approximately
$11.5  million,  representing  a 40.4%  increase  over the  amount of new orders
received in the first six months of fiscal 2008. These orders are  predominately
follow-on  production  quantities for mature products.  These orders are in line
with the  Company's  strategy of getting  involved in  long-term  high  quantity
military and  industrial  products.  The Company's  backlog was $44.0 million at
December  31, 2008 and is $43.6  million at February 10,  2009,  which  includes
$23.8  million  from two  significant  customers.  The  backlog  for the Company
represents  the estimated  remaining  sales value of work to be performed  under
firm contracts.  These  contracts  include  significant  orders for military and
industrial  power  supplies,  and  contracts  to  manufacture  certain  customer
products in accordance with pre-engineered requirements.

The sales backlog gives the Company a solid base of future sales. Based upon the
backlog and the anticipated  schedule for the fulfillment of orders,  management
expects  sales for fiscal 2009 to be higher than fiscal 2008 sales.  In addition
to the backlog,  the Company currently has outstanding  quotations and potential
business  representing  approximately  $49.0  million in the  aggregate for both
repeat and new programs.

Net  sales to two  significant  customers  represented  67.1%  and  58.5% of the
Company's  total sales for the  three-month  period ended  December 31, 2008 and
2007, respectively.  Sales to these two customers for the six-month period ended
December  31,  2008 and  2007  represented  69.4%  and  57.7%  of  total  sales,
respectively.  While the Company has always had a small number of customers that
account for a large percentage of its total sales in any given year,  management
is pursuing business  opportunities  involving significant product programs with
new  and  current   customers   with  an  overall   objective  of  lowering  the
concentration  of sales and minimizing  the impact of a significant  customer or
excessive reliance upon a single major product program of a particular customer.

                                       9
<PAGE>

The outstanding  quotations  encompass  various new and previously  manufactured
power  supplies,  transformers,  and  subassemblies.  However,  there  can be no
assurance  that the Company  will acquire any or all of the  anticipated  orders
described  above,  many of which are subject to allocations of the United States
defense  spending  and factors  affecting  the  defense  industry  and  military
procurement generally.

Management,  along with the Board of  Directors,  continues to evaluate the need
and use of the  Company's  working  capital.  Expectations  are that the working
capital  will be required to fund any  increase in orders over the next  several
quarters,  dividend payments, and general operations of the business.  Also, the
Mergers  and  Acquisitions  Committee  of the Board of  Directors  continues  to
evaluate potential strategic options on a periodic basis.

Critical Accounting Policies and Estimates

Management  believes  our most  critical  accounting  policies  include  revenue
recognition and estimates to completion.

A significant portion of our business is comprised of development and production
contracts.  Generally,  revenues on long-term fixed-price contracts are recorded
on a percentage of completion  basis using units of delivery as the  measurement
basis for progress toward completion.

Percentage  of  completion  accounting  requires  judgment  relative to expected
sales,  estimating costs and making assumptions  related to technical issues and
delivery schedule. Contract costs include material, subcontract costs, labor and
an  allocation  of overhead  costs.  The  estimation  of cost at completion of a
contract is subject to numerous variables involving contract costs and estimates
as to the length of time to complete the contract. Given the significance of the
estimation  processes  and  judgments  described  above,  it  is  possible  that
materially  different  amounts of  expected  sales and  contract  costs could be
recorded if different  assumptions were used, based on changes in circumstances,
in the  estimation  process.  When a change in expected sales value or estimated
cost is determined, changes are reflected in current period earnings.

Results of Operations

Net sales for the three  months  ended  December  31,  2008 were  $6,194,177  as
compared to $6,732,144 for the same period in 2007, representing an 8% decrease.
Net sales for the six  months  ended  December  31,  2008  were  $12,247,696  as
compared to $13,033,930 for the same period in 2007, representing a 6% decrease.
Generally,  these decreases can be attributed to the contract specific nature of
the Company's business. Management expected sales to be higher for the three and
six months ended December 31, 2008, however,  anticipated  shipments of products
under two engineering  development  contracts were delayed for reasons described
below.

For the three  months  ended  December  31,  2008 and 2007  gross  profits  were
$625,930 and $1,682,585, respectively. Gross profit as a percentage of sales was
10.1%  and  25.0%,  for the  three  months  ended  December  31,  2008 and 2007,
respectively.  For the six months ended December 31, 2008 and 2007 gross profits
were  $1,777,205 and $3,031,695,  respectively.  Gross profit as a percentage of
sales was 14.5% and 23.3%,  for the six months ended December 31, 2008 and 2007,
respectively.  The primary factor in determining  gross profit and net income is
product mix. The gross profits on mature  products and build to print  contracts
are  higher  as  compared  to  products  which  are  still  in  the  engineering
development stage or in the early stages of production.  In any given accounting
period the mix of product  shipments  between higher margin mature  programs and
less mature  programs,  including loss  contracts,  has a significant  impact on
gross  profit and net  income.  The  decreased  gross  profit  and gross  profit
percentage  in the three and six months ended  December 31, 2008,  was primarily
the result of  unexpected  losses  incurred  on two  programs  with  significant
engineering and production time required for design efforts.  These two programs
experienced  significant  cost  overruns in the current  quarter due to extended
product   qualification  testing  and  difficulties  moving  the  products  from
engineering  design into full production.  Currently,  one program has completed
qualification  testing and has moved into full production.  The other program is
still  in  qualification  testing  and has  made  significant  progress  towards
completion.  Management  is not  anticipating  any  more  losses  on  these  two
contracts.  Management  continues to evaluate the Company's  workforce to ensure
that  production  and overall  execution  of the backlog  orders and  additional
anticipated  orders are successfully  obtained and executed.  Employment of full
time equivalents at December 31, 2008 was 171 compared to 175 people at December
31, 2007.

Selling,  general and administrative expenses were $789,585 for the three months
ended  December 31, 2008;  an increase of $87,766,  compared to the three months
ended  December 31, 2007.  Selling,  general and  administrative  expenses  were


                                       10
<PAGE>

$1,467,812  for six months  ended  December  31,  2008,  an  increase of $98,440
compared to the six months ended  December 31, 2007.  The increase for the three
and six months  ended  December 31,  2008,  relates  primarily to an increase in
salaries and an increase in legal and accounting fees.

Other income for the three and six months ended  December 31, 2008  decreased as
compared to the three and six months  ended  December  31, 2007 due to decreased
interest  income  on the  Company's  cash and cash  equivalents  and  short-term
investments.  The Company  does not  believe  that there is a  significant  risk
associated  with its  investment  policy,  since at December 31, 2008 all of the
investments  were  primarily   represented  by  short-term  liquid   investments
including certificates of deposit and money market funds.

The effective income tax rate at December 31, 2008 and 2007 was 31.7% and 34.3%,
respectively.  The effective tax rate is less than the statutory tax rate mainly
due to the benefit the Company receives on its Qualified  Production  Activities
and the benefit derived from the ESOP dividends paid on allocated shares.

Net (loss) income for the three months ended December 31, 2008, was $(42,412) or
$(.02) per share, both basic and diluted,  compared to $797,086 or $.38 and $.37
per share, basic and diluted,  respectively, for the three months ended December
31, 2007. Net income for the six months ended December 31, 2008, was $355,884 or
$.17 per share, both basic and diluted,  compared to $1,388,669 or $.67 and $.65
per share,  basic and diluted,  for the six months ended  December 31, 2007. The
decrease  in net  income  per  share  was  primarily  due to the  loss  programs
explained above and decreased interest income.

Liquidity and Capital Resources

The Company's  working  capital is an appropriate  indicator of the liquidity of
its  business,  and  during the past  three  fiscal  years,  the  Company,  when
possible,  has  funded all of its  operations  with cash  flows  resulting  from
operating  activities and when necessary from its existing cash and investments.
The Company did not borrow any funds during the last three fiscal years.

The Company's working capital as of December 31, 2008 and 2007 was approximately
$23.8  million and $28.7  million,  respectively.  During the three months ended
December  31,  2008 and 2007 the  Company  repurchased  2,805 and 8,977  shares,
respectively,  of its common  stock for a total  purchase  price of $50,471  and
$200,905,  respectively.  Of the total  purchases,  800 shares and 8,977 shares,
respectively,  were purchased from the Company's  Employee  Retirement  Plan and
Trust ("ESOP") for a purchase price of $14,400 and $200,905,  respectively.  All
remaining shares were purchased on the open market.  During the six months ended
December  31, 2008 and 2007 the  Company  repurchased  5,549 and 25,720  shares,
respectively,  of its common  stock for a total  purchase  price of $102,510 and
$571,763,  respectively.  Of the total purchases,  800 shares and 25,720 shares,
respectively,  were purchased from the Company's  Employee  Retirement  Plan and
Trust ("ESOP") for a purchase price of $14,400 and $571,763,  respectively.  All
remaining   shares  were   purchased   on  the  open  market.   Under   existing
authorizations  from the Company's Board of Directors,  as of December 31, 2008,
management is authorized to purchase an additional $1,897,489 million of Company
stock.
                                                   Six Months Ended December 31,
                                                      2008              2007
                                                   ----------       -----------
Net cash provided by operating activities          $  929,576       $ 1,331,627
Net cash used in investing activities              (2,402,735)       (2,899,436)
Net cash used in financing activities              (4,078,993)         (964,821)

Net cash provided by operating  activities  fluctuates between periods primarily
as a result of  differences  in net  income,  the  timing of the  collection  of
accounts  receivable,  purchase  of  inventory,  level of sales and  payment  of
accounts payable.  Net cash used in investing  activities decreased in the first
half of fiscal  2009 due to more  short-term  investments  maturing  during  the
period.  The increase in cash used in financing  activities and the reduction in
the Company's working capital is due primarily to dividends paid on common stock
which included a special dividend of $1.50 per share paid in December.

The Company currently  believes that the cash flow generated from operations and
when necessary,  from cash and cash equivalents,  will be sufficient to meet its
long-term funding requirements for the foreseeable future.

                                       11
<PAGE>

During the six months  ended  December 31, 2008 and 2007,  the Company  expended
$185,801 and $292,436,  respectively,  for plant improvements and new equipment.
The Company has  budgeted  approximately  $350,000 for new  equipment  and plant
improvements in fiscal 2009. Management anticipates that the funds required will
be available from current operations.

The Company at certain  times enters into standby  letters of credit  agreements
with  financial  institutions  primarily  relating  to the  guarantee  of future
performance on certain contracts.  Contingent liabilities on outstanding standby
letters  of  credit  agreements  aggregated  to zero at  December  31,  2008 and
December 31, 2007.




    CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
                PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

This  report  contains  "forward-looking  statements"  within the meaning of the
Private  Securities   Litigation  Reform  Act  of  1995.  The  terms  "believe,"
"anticipate,"  "intend," "goal," "expect," and similar  expressions may identify
forward-looking  statements.  These  forward-looking  statements  represent  the
Company's current  expectations or beliefs concerning future events. The matters
covered by these statements are subject to certain risks and uncertainties  that
could  cause  actual  results to differ  materially  from those set forth in the
forward-looking  statements,   including  the  Company's  dependence  on  timely
development, introduction and customer acceptance of new products, the impact of
competition and price erosion, supply and manufacturing  constraints,  potential
new orders from customers and other risks and uncertainties.  The foregoing list
should not be construed as exhaustive,  and the Company disclaims any obligation
subsequently  to revise any  forward-looking  statements  to  reflect  events or
circumstances  after the date of such statements or to reflect the occurrence of
anticipated or unanticipated  events.  The Company wishes to caution readers not
to place undue reliance on any such forward-looking statements, which speak only
as of the date made.


Item 3. Quantitative and Qualitative Disclosures About Market Risk

The  Company is a smaller  reporting  company as defined  under  Securities  and
Exchange  Commission Rule 12b-2.  Pursuant to the exemption available to smaller
reporting  company  issuers under Item 305 of Regulation S-K,  quantitative  and
qualitative  disclosures  about  market  risk,  the  Company is not  required to
provide the information for this item.

Item 4T. Controls and Procedures

(a) The Company's  management,  with the  participation  of the Company's  chief
executive officer and chief financial officer,  carried out an evaluation of the
effectiveness  of our  disclosure  controls and  procedures  (as defined in Rule
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end
of the period  covered  by this  Quarterly  Report on Form  10-Q.  Based on such
evaluation,  our chief  executive  officer  and  chief  financial  officer  have
concluded that our disclosure  controls and procedures  were effective as of the
end of the period covered by this report.

(b) There have been no changes in our internal controls over financial reporting
during the period covered by this report that have materially  affected,  or are
reasonably  likely to materially  affect,  our internal  controls over financial
reporting.

                                       12
<PAGE>

                    PART II: Other Information and Signatures

Item 1.       Legal Proceedings

              None

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

              (a) None

              (c) Securities Repurchased
<TABLE>
<CAPTION>
                                             Purchases of Equity Securities

                                                                     Total Number        Maximum Number
                                                                       of Shares         (or Approximate
                                                                       Purchased         Dollar Value)
                                                                      as Part of           of Shares
                                         Total          Average        Publicly           that May Yet
                                        Number           Price         Announced          Be Purchased
                                       of Shares         Paid           Plan or          Under the Plan
              Period                   Purchased       per Share        Program          or Program (1)
              ------------------------------------------------------------------------------------------
<S>                                      <C>          <C>                <C>              <C>
              October 1 to
              October 31, 2008            562          $18.6155           562              $1,937,499

              November 1 to
              November 30, 2008          1,443         $17.7197          1,443             $1,911,929

              December 1 to
              December 31, 2008           800          $18.0500           800              $1,897,489
</TABLE>

              (1)  Pursuant to a prior Board of Directors  authorization,  as of
              December 31, 2008 the Company can  repurchase  up to $1,897,489 of
              its common stock pursuant to an ongoing plan.

Item 3        Defaults Upon Senior Securities

              None

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

              (a) The  Company's  Annual  Meeting of  Shareholders  (the "Annual
                  Meeting") was held on November 21, 2008.

              (b) Paul  Corr  and  Michael  Wool  were  re-elected  as  Class  C
                  directors each to serve for a three-year  term.  Continuing as
                  directors after the Annual Meeting were:

                  Class A (term expiring 2009):    Howard Pinsley
                                                   Alvin Sabo
                                                   Carl Helmetag

                  Class B (term expiring 2010):    Barry Pinsley
                                                   Seymour Saslow

                  Class C (term expiring 2011):    Paul J. Corr
                                                   Michael W. Wool

                                       13
<PAGE>


              (c) The following matters were voted upon at the annual meeting:

                  The election of two Class C directors.  The votes were cast as
                  follows:
<TABLE>
<CAPTION>
                    Nominee:         Voted For:   Voted Against or Withheld:  Broker Non-Votes:
                    -------          ---------    -------------------------   ----------------
<S>                                  <C>                    <C>                      <C>
                    Paul Corr        2,268,817              21,367                   0
                    Michael Wool     1,773,524             516,660                   0
</TABLE>

                  Ratification  of  Rotenberg  &  Company  LLP,  as  independent
                  auditors for the  Corporation  for the fiscal year ending June
                  30, 2009. The votes were cast as follows:

                      Shares in favor               2,258,201
                      Shares against                   31,056
                      Abstentions                         926
                      Broker non-votes                      0

Item 5.       Other Information

              None

Item 6.       Exhibits

              31.1         Certification of the Chief Executive Officer pursuant
                           to Rules 13a-14(a) and 15d-14(a) under the Securities
                           Exchange Act of 1934, as adopted  pursuant to Section
                           302 of the Sarbanes-Oxley Act of 2002

              31.2         Certification  of  the  Principal  Financial  Officer
                           pursuant to Rules  13a-14(a) and 15d-14(a)  under the
                           Securities  Exchange Act of 1934, as adopted pursuant
                           to Section 302 of the Sarbanes-Oxley Act of 2002

              32.1         Certification of the Chief Executive Officer pursuant
                           to 18 U.S.C.  Section  1350,  as adopted  pursuant to
                           Section 906 of the Sarbanes-Oxley Act of 2002

              32.2         Certification  of  the  Principal  Financial  Officer
                           pursuant  to  18  U.S.C.  Section  1350,  as  adopted
                           pursuant to Section 906 of the  Sarbanes-Oxley Act of
                           2002

                               S I G N A T U R E S

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.

                                              ESPEY MFG. & ELECTRONICS CORP.


                                              /s/ Howard Pinsley
                                              -----------------------------
                                              Howard Pinsley, President and
                                              Chief Executive Officer

                                              /s/ David O'Neil
                                              -----------------------------
                                              David O'Neil, Treasurer and
                                              Principal Financial Officer

February 12, 2009
-----------------
      Date


                                       14