UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                                WASHINGTON, D. C.

                                    FORM 10-Q

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


                For the Quarterly Period Ended December 31, 1998
                                               -----------------

                          Commission File Number I-4383
                                                 ------

                           ESPEY MFG. & ELECTRONICS CORP.
--------------------------------------------------------------------------------
               (Exact name of registrant as specified in 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)               (Zip Code)



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


         Number of shares outstanding of issuer's class of common stock $.33-1/3
         par value as of February 2, 1999: 1,102,458.

         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  [   ]

<PAGE>

                                      ESPEY MFG. & ELECTRONICS CORP.

                                                I N D E X



PART I   FINANCIAL INFORMATION                                             PAGE


                  Item 1   Financial Statements:


                                Balance Sheets - December 31, 1998           1
                                and June 30, 1998


                                Statements of Income - Three and             3
                                Six Months ended December 31, 1998
                                and 1997


                                Statements of Cash Flows - Six Months        4
                                Ended December 31, 1998 and 1997


                                Notes to Financial Statements                5


                  Item 2   Management's Discussion and Analysis of           7
                           Financial Condition and Results of
                           Operations 


PART II  OTHER INFORMATION                                                  12

                  Item 4   Submission of Matters to a Vote
                           of Security Holders 

                  Item 5   Other Information


                  Item 6   Exhibits and Reports on Form 8-K

                  SIGNATURES                                                13

<PAGE>
<TABLE>
<CAPTION>
                             ESPEY MFG. & ELECTRONICS CORP.

                                     Balance Sheets

                           December 31, 1998 and June 30, 1998

                                       A S S E T S
                                                           Unaudited
                                                             1998               1998
                                                          December 31         June 30
                                                         ------------------------------
<S>                                                      <C>               <C>         
CURRENT ASSETS:

         Cash and cash equivalents .................     $     92,783      $    191,739
         Short-term investments ....................        1,900,000         2,400,000
                                                         ------------      ------------
                           Total Cash and Short-term
                                    Investments ....        1,992,783         2,591,739
                                                         ------------      ------------

         Investments securities ....................        7,246,781         7,235,749

         Trade accounts receivable net of
            $3,000 allowance at December 31, 1998
            and June 30, 1998 ......................        2,333,791         1,866,336
         Other receivables .........................           57,808           289,050
                                                         ------------      ------------

                           Net Receivables .........        2,391,599         2,155,386
                                                        ------------      ------------
         Inventories:

            Raw materials and supplies .............          400,227           558,951
            Work-in-process ........................        2,091,255         2,905,269
            Costs relating to contracts in
            process ................................        7,536,589         5,324,491

                           Total Inventories .......       10,028,071         8,788,711
                                                         ------------      ------------

         Deferred income taxes .....................          337,714           348,514
         Prepaid expenses and other current assets .          350,161           189,559
                                                         ------------      ------------

                           Total Current Assets ....       22,347,109        21,309,658
                                                         ------------      ------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                             ESPEY MFG. & ELECTRONICS CORP.

                                     Balance Sheets

                           December 31, 1998 and June 30, 1998

                                       A S S E T S
                                       (continued)
                                                           Unaudited
                                                             1998               1998
                                                          December 31         June 30
                                                         ------------------------------
<S>                                                      <C>               <C>         
Deferred Income Taxes ..............................           80,793            80,793

Property, Plant and Equipment at cost...............       12,536,655        12,344,139

         Less: Accumulated depreciation and
               amortization ........................       (9,377,293)       (9,160,482)
                                                         ------------      ------------

                  Net Property, Plant and Equipment         3,159,362         3,183,657
                                                         ------------      ------------

                           Total Assets ...........      $ 25,587,264      $ 24,574,108
                                                         ============      ============
</TABLE>

                                      - 1 -                          (Continued)

<PAGE>
<TABLE>
<CAPTION>
                             ESPEY MFG. & ELECTRONICS CORP.

                                Balance Sheets, Continued

                           December 31, 1998 and June 30, 1998

                          LIABILITIES AND STOCKHOLDERS' EQUITY

                                                          Unaudited
                                                            1998                1998
                                                         December 31          June 30
                                                         ------------------------------ 
<S>                                                      <C>               <C>         
CURRENT LIABILITIES:

         Accounts Payable ..........................     $    717,807      $    207,886
         Accrued expenses:
            Salaries, wages and commissions ........          610,156           583,058
            Employees' insurance costs .............           44,388            37,472
            ESOP payable ...........................          279,331              --
            Other ..................................           13,905            12,204
            Payroll and other taxes withheld
                  and accrued ......................          101,861            43,360
                                                         ------------      ------------

                           Total Current Liabilities        1,767,448           883,980

STOCKHOLDERS' EQUITY:

         Common stock, par value .33-1/3 per
         share.  Authorized 2,250,000 shares;
         issued 1,514,937 shares at December
         31, 1998 and June 30, 1998  ...............          504,979           504,979

         Unrealized gain on available-for-sale
         securities, net $3,740 of income tax ......            7,260             7,260

         Capital in excess of par value ............       10,496,287        10,496,287

         Retained earnings .........................       22,921,992        22,671,840
                                                         ------------      ------------
                                                           33,930,518        33,680,366

         Less:  Common stock subscribed ............       (3,351,974)       (3,351,974)
                Cost of 412,479 shares on
                    December 31, 1998 and 403,717
                    on June 30, 1998 of common
                    stock in treasury ..............       (6,758,728)       (6,638,264)
                                                         ------------      ------------

                  Total Stockholders' Equity........       23,819,816        23,690,128
                                                         ------------      ------------
                       Total Liabilities and 
                       Stockholders' Equity ........     $ 25,587,264      $ 24,574,108 
                                                         ============      ============ 
</TABLE>
See accompanying notes to financial statements

                                      - 2 -
<PAGE>
<TABLE>
<CAPTION>
                                     ESPEY MFG. & ELECTRONICS CORP.

                                          STATEMENTS OF INCOME

                         Three and Six Months Ended December 31, 1998 and 1997


                                                   Unaudited                         Unaudited
                                                  Three Months                      Six Months
                                              1998            1997             1998            1997
                                          ------------------------------------------------------------ 
<S>                                       <C>             <C>              <C>             <C>        
Net Sales ...........................     $ 3,134,377     $ 3,549,697      $ 5,658,362     $ 6,053,281

Cost of sales .......................       2,508,924       3,148,397        4,634,203       5,223,379
                                          -----------     -----------      -----------     -----------

                  Gross profit ......         625,453         401,300        1,024,159         829,902

Selling, general and administrative
 Expenses ...........................         532,737         500,660          938,518       1,007,825
                                          -----------     -----------      -----------     -----------
         Operating income (loss) ....          92,716         (99,360)          85,641        (177,923)
                                          -----------     -----------      -----------     -----------

Other income
         Interest and dividend income         143,138         140,933          292,241         290,298
         Sundry income ..............             255             382              270           1,589
                                          -----------     -----------      -----------     -----------
                                              143,393         141,315          292,511         291,887
                                          -----------     -----------      -----------     -----------

Income before income taxes ..........         236,109          41,955          378,152         113,964

Provision for income taxes ..........          70,000          17,000          128,000          44,000
                                          -----------     -----------      -----------     -----------


                  Net Income ........     $   166,109     $    24,955      $   250,152     $    69,964
                                          ===========     ===========      ===========     ===========
 
Income per share:


Basic and dilutive income per share .     $       .15     $       .02      $       .23     $       .06
                                          -----------     -----------      -----------     -----------


Weighted average number of shares
         outstanding ................       1,104,675       1,111,220        1,106,557       1,111,220
                                          ===========     ===========      ===========     ===========
</TABLE>
See accompanying notes to Financial Statements

                                      - 3 -
<PAGE>
<TABLE>
<CAPTION>
                                          ESPEY MFG. & ELECTRONICS CORP.
                                             Statements of Cash Flows
                                   Six Months Ended December 31, 1998 and 1997


                                                                                             Unaudited
                                                                                            December 31
                                                                                       1998             1997
                                                                                  ------------------------------
<S>                                                                               <C>               <C>         
Cash Flows From Operating Activities:

         Net income .........................................................     $    250,152      $     69,964

Adjustments to reconcile net income to net cash used by operating activities:

         Tax effect of dividends on unallocated ESOP shares .................             --              39,084
         Depreciation .......................................................          216,811           210,040
         Changes in assets and liabilities:
                  Increase in receivables, net ..............................         (236,213)       (1,419,002)
                  Increase in inventories, net ..............................       (1,239,360)          (38,241)
                  Increase in other current assets ..........................         (160,602)         (238,073)
                  Increase in accounts payable ..............................          509,921           219,859
                  Increase in accrued salaries, wages and commissions .......           27,098           107,984
                  Increase (decrease) in accrued employee insurance costs ...            6,916            (2,756)
                  Increase in other accrued expenses ........................            1,701             4,530
                  Increase in payroll & other
                           taxes withheld and accrued .......................           58,501            26,049
                  Increase (decrease) in income tax payable .................             --            (148,606)
                  Decrease (increase) in deferred income taxes ..............           10,800            (6,611)
                  Increase in accrued ESOP contributions ....................          279,331           227,852
                                                                                  ------------      ------------

                                            Net cash used in
                                            operating activities ............         (274,944)         (947,927)
                                                                                  ------------      ------------

Cash Flows From Investing Activities:
         Proceeds from maturity of investment
            securities ......................................................        6,000,000              --
         Purchases of investment securities .................................       (6,011,032)             --
         Additions to property, plant & equipment ...........................         (192,516)          (98,856)
                                                                                  ------------      ------------

                                            Net cash used in
                                            investing activities ............         (203,548)          (98,856)
                                                                                  ------------      ------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                          ESPEY MFG. & ELECTRONICS CORP.
                                             Statements of Cash Flows
                                   Six Months Ended December 31, 1998 and 1997
                                                   (continued)


                                                                                             Unaudited
                                                                                            December 31
                                                                                       1998             1997
                                                                                  ------------------------------
<S>                                                                               <C>               <C>         
Cash Flows From Financing Activities:

         Dividends on common stock ..........................................             --            (777,854)
         Purchase of treasury stock .........................................         (120,464)             --
                                                                                  ------------      ------------

                                            Net cash used in
                                            financing activities ............         (120,464)         (777,854)
                                                                                  ------------      ------------

Decrease in cash and short-term investments .................................         (598,956)       (1,824,637)


Cash and short-term investments, beginning of period ........................        2,591,739        12,123,583
                                                                                  ------------      ------------

Cash and short-term investments, end of period ..............................     $  1,992,783      $ 10,298,946
                                                                                  ============      ============



Income Taxes Paid ...........................................................     $       --        $    195,000
                                                                                  ============      ============
</TABLE>

See accompanying notes to financial statements



                                      - 4 -
<PAGE>
                           ESPEY MFG. & ELECTRONICS CORP.

                          Notes to Financial Statements
                               -------------------

     1. In the  opinion  of  management  the  accompanying  unaudited  financial
     statements  contain all  adjustments  (consisting of only normal  recurring
     adjustments)  necessary  for a  fair  presentation  for  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  generally  accepted  accounting  principles  have been
     condensed  or  omitted.  These  financial  statements  should  be  read  in
     conjunction  with the Company's  most recent audited  financial  statements
     included in its 1998 Annual Report to Stockholders and its 1998 Form 10-K.

     2. The income per share  computations  for  December 31, 1998 were based on
     1,106,557  shares and on 1,111,220  shares for  December  31,  1997.  These
     represent  the average  number of shares  outstanding  for each  respective
     period.

     3. Other  income  consists  principally  of  interest  on  Certificates  of
     Deposit,  Treasury  Bills,  money market  accounts and  dividends on equity
     securities.

     4. For purposes of the statements of cash flows, the Company  considers all
     liquid debt instruments with original maturities of three months or less to
     be cash equivalents.

     5. In fiscal 1989 the Company  established an Employee Stock Ownership Plan
     (ESOP) for eligible  non-union  employees.  The ESOP used the proceeds of a
     loan from the Company to purchase  316,224  shares of the Company's  common
     stock  for   approximately   $8.4  million  and  the  Company   contributed
     approximately  $400,000  to the ESOP which was used by the ESOP to purchase
     an additional 15,000 shares of the Company's common stock.

     The loan from the Company to the ESOP is repayable in annual

                                      - 5 -
<PAGE>

     installments  of  $1,039,605,  including  interest,  through June 30, 2004.
     Interest  is payable at a rate of 9% per annum.  The  Company's  receivable
     from the ESOP is recorded as common stock  subscribed  in the  accompanying
     balance sheets.

     Each year,  the Company will make  contributions  to the ESOP which will be
     used to make  loan  interest  and  principal  payments.  With each loan and
     interest  payment,  a portion of the  common  stock  will be  allocated  to
     participating  employees. As of December 31, 1998 there were 165,139 shares
     allocated to participants.

     6.  The  Company  adopted  the  provisions  of  SFAS  No.  130,  "Reporting
     Comprehensive  Income", and SFAS No. 131, "Disclosures about Segments of an
     Enterprise and Related  Information",  as of July 1, 1998. The adoptions of
     these accounting standards had no material effect on the financial position
     or results of operations of the Company.







                                      - 6 -

<PAGE>
Item 2.  Management's Discussion and Analysis of Financial Condition and Results
of Operations
--------------------------------------------------------------------------------
Results of Operations
---------------------

Net sales for the six months ended December 31, 1998 were $5,658,362 as compared
to $6,053,281  for the same period in 1997. Net sales for the three months ended
December 31, 1998 were  $3,134,377 as compared to $3,549,697 for the same period
in 1997.  The  Company's  decline  in sales for the three and six month  periods
ended  December  31,  1998 as  compared  to  December  31,1997 is largely due to
customer  determined  delivery  schedules  and the  time  required  for  product
development.

Net income for the six months  ended  December 31, 1998 was $250,152 or $.23 per
share compared to $69,964 or $.06 per share for the  corresponding  period ended
December 31, 1997.  The net earnings  increase was due to favorable  product mix
and an overall decrease in selling, general and administrative expenses.

The Company  continues to  diversify  its customer  base and product  line.  The
backlog at December 31, 1998 was approximately  $17,700,000,  an increase of 50%
over the prior year. (See Business Outlook section for further discussion).

During the first half and second quarter of fiscal 1999,  gross profits were 23%
and 56%  higher,  respectively,  than in the same  periods of fiscal  1998.  The
increase in gross  profit was  predominately  due to  favorable  product mix and
increased efficiency in manufacturing and engineering.

Selling,  general and  administrative  expenses were $938,518 for the six months
ended December 31, 1998, a decrease of $69,307,  or 6.9%, as compared to the six
months ended  December 31, 1997. The reduction is primarily due to a decrease in
professional fees and employment related expenses.

Other  income for the three and six months  ended  December  31,  1998  remained
relatively  the same as compared to the three and six months ended  December 31,
1997.  The  Company  does not feel that  there is any risk  associated  with its
investment policy, since a majority of the investments are represented by United
States Government Treasury Securities,  preferred equity securities, and a money
market account.


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

As of December  31,  1998,  the Company  had  working  capital of $20.6  million
compared to $20.4 million at December 31, 1997. The Company meets its short-term
financing  needs  through  cash from  operations  and when  necessary,  from its
existing cash and short term investments.

                                      - 7 -
<PAGE>
The table below presents the summary of cash flow for the periods indicated:
<TABLE>
<CAPTION>
                                                      Six Months Ended December 31,
                                                      -----------------------------
                                                          1998            1997
                                                        --------        --------
<S>                                                     <C>             <C>     
Net cash used in operating activities ..........        $274,944        $947,927
Net cash used in investing activities ..........         203,548          98,856
Net cash used in financing activities ..........         120,464         777,854
</TABLE>

Net cash used in 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. The increase in net cash used in investing activities relates mainly to
increased  plant  and  equipment  expenditures.  The  decrease  in cash  used in
financing  activities  is due to the  suspension  of the 1998  dividends  by the
Company's Board of Directors.  The Board is hopeful of reinstituting the payment
of dividends when the Company returns to profitability on a consistent basis.

The Company believes that the cash generated from operations and when necessary,
from cash and short-term  investments,  will be sufficient to meet its long-term
funding  requirements.  For the first half of fiscal 1999  capital  expenditures
were approximately $193,000.

Since the debt of the Company's  ESOP is not to an outside party the Company has
eliminated from the Statements of Income the offsetting items of interest income
and  interest  expense  relating to the ESOP.  The Company  has  eliminated  the
offsetting accruals from the Balance Sheets.

During the six months  ended  December  31, 1998 the Company  repurchased  8,762
shares  of  its  common  stock  from  the   Company's   ESOP.   Under   existing
authorizations,  as of December 31, 1998, funds in the amount of $1,763,527 were
available for the continuing repurchase of the Company's shares.

Business Outlook
----------------

The backlog as of December 31, 1998 was approximately  $17,700,000,  as compared
to approximately  $11,500,000 as of December 31, 1997. The Company  continues to
grow the backlog while maintaining  current sales levels.  This was particularly
evident in the six months  ended  December  31,  1998,  during which the Company
received in excess of $11 million in new orders.  Management  expects this trend
to continue and is currently anticipating several new contracts.

Management  continues  to  anticipate  that the course of action the  Company is
taking will enhance revenue and  profitability  in future periods.  Both Item 7,
"Management's

                                      - 8 -
<PAGE>
Discussion  and  Analysis of  Financial  Condition  and Results of  Operations -
Business   Outlook"  of  our  1998  Form  10-K,  and  the  President's   message
accompanying  our 1998  Annual  Report to  Shareholders,  describe in detail the
products the Company is  concentrating  on and the type of contracts the Company
expects to receive.

Accounting Pronouncements
-------------------------

In June 1997, Statement of Financial Accounting Standards No.130, "Comprehensive
Income" was issued.  Statement No. 130  establishes  standards for reporting and
display  of  comprehensive  income and its  components  in a full set of general
purpose financial statements. Statement No. 130 requires that all items that are
required  to  be  recognized  under   accounting   standards  as  components  of
comprehensive  income  are to be  reported  in a  financial  statement  that  is
displayed  in equal  prominence  with other  financial  statements.  The Company
adopted  Statement No. 130 as of July 1, 1998, and the adoption had no impact on
the Company's financial  statements since there are no significant items between
the Company's statement of income and the information that would be presented in
a statement of comprehensive income.

In June 1997, Statement of Financial Accounting Standards No. 131,  "Disclosures
about Segments of an Enterprise and Related Information " was issued.  Statement
No.  131  establishes  standards  for the way that a public  enterprise  reports
information about operating segments in annual financial statements and requires
that those enterprises  report selected  information about operating segments in
interim  financial reports issued to stockholders but not for interim periods in
the initial year of adoption.  Statement  No. 131 is effective  for fiscal years
beginning after December 15, 1997. The Company  believes that it operates as one
segment,   which  includes  three  product  lines  (Electronic  Power  Supplies,
Transformers and Magnetic  Components,  and Electronics  Systems and Assemblies)
and Statement No. 131 did not have an impact on its financial statements.

Year 2000 Issues
----------------

The Year 2000 issue is the result of computer programs having been written using
two  digits,  rather  than  four,  to define  the  applicable  year.  Any of the
Company's  computers,   computer  programs,   manufacturing  and  administration
equipment or products  that have  date-sensitive  software may  recognize a date
using "00" as the year 1900 rather than the Year 2000.  If any of the  Company's
systems or  equipment  that have  date-sensitive  software  use only two digits,
system failures or miscalculations may result causing disruptions of operations,
including,  among other things, a temporary inability to process transactions or
send and receive  electronic data with third parties or engage in similar normal
business activities.

The  Company  formed a team to  address  the Year 2000  issue  that  encompasses
operating  and   administrative   areas  of  the  Company.   The  team  has  the
responsibility  of identifying and resolving  significant  Year 2000 issues in a
timely manner. In addition, executive

                                      - 9 -
<PAGE>
management   continues  to  monitor  the  status  of  the  Company's  Year  2000
remediation.  The process  includes an assessment of issues and  development  of
remediation plans, where necessary,  as they relate to internally used software,
computer   hardware  and  use  of  computer   applications   in  the   Company's
manufacturing  processes  and products.  In addition,  the Company is engaged in
assessing the Year 2000 issue with significant suppliers.  The Company continues
to communicate  with its significant  suppliers and large customers to determine
the extent to which the Company is vulnerable to those third parties' failure to
remediate  their own Year 2000 issues.  To date no significant  issues have been
identified as to internally used software, computer hardware and use of computer
applications in the Company's manufacturing processes and products. In addition,
no  issues  have  been  identified  regarding  significant  suppliers  and large
customers.

Finally, with regard to products sold by the Company,  Management has determined
that  contingencies  related  to the Year  2000  Issue  are  unlikely  to have a
material  adverse  effect.  Accordingly,  the  Company  has  not  established  a
contingency plan and does not anticipate creating such a plan.

The Company is utilizing both internal and external  resources to reprogram,  or
replace and test,  the software it currently  uses for Year 2000  modifications.
The Company had expected its Year 2000 assessment and remediation  program to be
substantially   completed  by  January  31,  1999.  The  Company  now  plans  to
substantially  complete its Year 2000  assessment  and  remediation  by June 30,
1999.  The  delay is not a result  of the  Company  encountering  any Year  2000
difficulties.   Management  was  simply   optimistic  in  its  earlier  targeted
completion  date. The total project cost has not yet been  determined.  To date,
the  Company  has not  incurred  any  material  costs  and does  not  anticipate
incurring any material  costs,  related to the assessment and remediation of its
Year 2000 issues.

The costs of the project and the date on which the Company plans to complete its
Year 2000 assessment and remediation are based on management's estimates,  which
were derived  utilizing  numerous  assumptions  of future  events  including the
continued availability of certain resources,  third party modification plans and
other factors.  However,  there can be no guarantee that these estimates will be
achieved  and actual  results  could  differ  significantly  from  those  plans.
Specific  factors  that might  cause  differences  from  management's  estimates
include,  but are not limited to, the availability and cost of personnel trained
in this area, the ability to locate and correct  relevant  computer  codes,  and
similar  uncertainties.  Management  believes  that the Company is devoting  the
necessary  resources to identify and resolve  significant  Year 2000 issues in a
timely manner.

With  regard to its  internal  Year 2000  compliance  program,  the  Company has
completed  approximately  80%  of  its  review  and,  when  necessary,  100%  of
remediation.  With regard to its Year 2000  compliance  program  addressing  the
status of the  Company's  suppliers  and  customers,  the Company has  completed
approximately 50% of its review.

                                     - 10 -
<PAGE>
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private
--------------------------------------------------------------------------------
Securities Litigation Reform Act of 1995.
-----------------------------------------

It should be noted that certain  statements in this Management's  Discussion and
Analysis of Financial  Condition and Results of Operations are  "forward-looking
statements"  within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and
are made  pursuant  to the safe  harbor  provisions  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.  Any or all of the Company's
forward  looking  statements  may turn out to be wrong.  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,  as well as supply and  manufacturing  constraints  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.




                                     - 11 -
<PAGE>
                         ESPEY MFG. & ELECTRONICS CORP.


PART II:  Other Information

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 December 11, 1998.

         b)   Proxies  for  the  Annual  Meeting  were  solicited   pursuant  to
              Regulation  14A  under the  Securities  Exchange  Act of 1934,  as
              amended. There were no solicitations in opposition to management's
              nominees  listed  in the  proxy  statement.  Both of the  nominees
              listed in the proxy statement were elected.

         c)   The following matters were voted upon at the Annual Meeting:

              1. The election of two Class B  directors.  The votes were cast as
                 follows:

                                                For                Withheld
                                                ---                --------

          William P. Greene                   923,611               26,644
          Seymour Saslow                      921,601               28,654

               2.  Ratification   of   PricewaterhouseCoopers   L.L.P.   as  the
                   Company's  independent  public  auditors  for the fiscal year
                   ending June 30, 1999. The votes were cast as follows:


                             For              Against           Abstain
                           -------            -------           -------
                           928,755             3,200             18,200

               3.  A  shareholder  proposal   recommending  that  the  Board  of
                   Directors  consider  the  initiation  and  consummation  of a
                   merger,  sale or other extraordinary  transaction.  The votes
                   were cast as follows:

                             For              Against           Abstain
                           -------            -------           -------
                           61,399             728,627            13,878

Item 5.  Other Information
         -----------------

         Effective December 11, 1998, Mr. Howard Pinsley was elected to serve as
         President and Chief  Executive  Officer.  Mr.  Pinsley had been interim
         President and Chief Operating Officer since June 9, 1998.




                                     - 12 -

<PAGE>
Item 6.  Exhibits and Reports on Form 8-K
         --------------------------------

         (a) Exhibits

              EX-27 - Financial Data Schedule (for electronic filing only)

         (b) Reports on Form 8-K

              Form 8-K, filed October 30, 1998,  reporting  under Items 4 and 7,
              announcing a change in audit firms.



                               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.




      February 5, 1999                          /s/Howard Pinsley
                                                -----------------
                                                Howard Pinsley, President and
                                                Chief Executive Officer


      February 5, 1999                          /s/David O'Neil
                                                ---------------
                                                David O'Neil, Controller
                                                And Assistant Treasurer













                                     - 13 -