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, 2004

                          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, 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 (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 14, 2005
                 -------                --------------------------------
    Common stock, $.33-1/3 par value             1,011,404 shares

<PAGE>

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

<TABLE>
<CAPTION>
PART I   FINANCIAL INFORMATION                                                   PAGE
<S>                                                                              <C>
            Item 1  Financial Statements:

                    Balance Sheets (Unaudited) -
                    December 31, 2004 and June 30, 2004                            1

                    Statements of Income (Unaudited) -
                    Three and Six Months Ended December 31, 2004 and 2003          3

                    Statements of Cash Flows (Unaudited)-
                    Six Months Ended December 31, 2004 and 2003                    4

                    Notes to Financial Statements (Unaudited)                      5

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

            Item 3  Quantitative and Qualitative Disclosures About Market Risk     10

            Item 4  Controls and Procedures                                        10

PART II     OTHER INFORMATION AND SIGNATURES                                       11

            Item 1  Legal Proceedings                                              11

            Item 2  Unregistered Sales of Equity Securities                        11

            Item 4  Submission of Matters to a Vote of Security Holders            11

            Item 5  Other Information                                              11

            Item 6  Exhibits                                                       12

            SIGNATURES                                                             12
</TABLE>

<PAGE>

                          PART I: FINANCIAL INFORMATION

                         ESPEY MFG. & ELECTRONICS CORP.

                           Balance Sheets (Unaudited)

                       December 31, 2004 and June 30, 2004
               --------------------------------------------------
                                   A S S E T S

<TABLE>
<CAPTION>
                                                                                     2004            2004
                                                                                 December 31,      June 30,
                                                                                 ------------     -----------
<S>                                                                              <C>              <C>
ASSETS:

            Cash and cash equivalents                                            $12,217,928      $12,310,972
            Short term investments                                                 1,824,000        1,056,000
            Trade accounts receivable, net                                         2,309,842        2,140,397
            Other receivables                                                          8,541            1,809

            Inventories:

                     Raw materials and supplies                                    1,689,332        1,543,930
                     Work-in-process                                               3,637,742        3,390,133
                     Costs relating to contracts in process, net of advance
                        payments of $88,830 at December 31, 2004 and
                        $905,646 at June 30, 2004                                  4,681,032        5,151,234
                                                                                 -----------      -----------
                                          Total inventories                       10,008,106       10,085,297
                                                                                 -----------      -----------

            Deferred income taxes                                                     76,876           76,876
            Prepaid expenses and other current assets                                236,951          359,393
                                                                                 -----------      -----------

                                          Total current assets                    26,682,244       26,030,744
                                                                                 -----------      -----------

            Property, plant and equipment, net                                     3,049,062        3,100,516
                                                                                 -----------      -----------

                                          Total assets                           $29,731,306      $29,131,260
                                                                                 ===========      ===========
</TABLE>


See accompanying notes to the financial statements.

                                                                     (Continued)

<PAGE>

                         ESPEY MFG. & ELECTRONICS CORP.

                      Balance Sheets (Unaudited), Continued

                       December 31, 2004 and June 30, 2004
          -------------------------------------------------------------
                      LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                                       2004              2004
                                                                                   December 31,         June 30,
                                                                                   ------------       ------------
<S>                                                                                <C>                <C>
LIABILITIES AND STOCKHOLDERS' EQUITY:

            Accounts payable                                                       $  1,015,005       $    250,675
            Accrued expenses:
                     Salaries, wages and commissions                                     83,534             44,519
                     Employee insurance costs                                             8,510              7,487
                     Vacation                                                           401,563            451,516
                     Other                                                               55,370             50,370
            Payroll and other taxes withheld and accrued                                 45,514             26,000
            Income taxes payable                                                         84,656            134,471
                                                                                   ------------       ------------
                                    Total current liabilities                         1,694,152            965,038
                                                                                   ------------       ------------
            Deferred income taxes                                                       345,778            324,316
                                                                                   ------------       ------------
                                    Total liabilities                                 2,039,930          1,289,354
                                                                                   ------------       ------------

            Common stock, par value $.33-1/3 per share. Authorized 10,000,000
                shares; issued 1,514,937 shares on December 31, 2004 and June
                30, 2004 Outstanding 1,011,404 and 1,014,618 on December
                31, 2004 and June 30, 2004, respectively                                504,979            504,979

            Capital in excess of par value                                           10,408,095         10,411,915

            Retained earnings                                                        24,836,205         24,911,920
                                                                                   ------------       ------------
                                                                                     35,749,279         35,828,814

            Less:    Cost of 503,533 shares on December
                     31, 2004 and 500,319 on June 30, 2004
                     of common stock in treasury                                     (8,057,903)        (7,986,908)
                                                                                   ------------       ------------
                                    Total stockholders' equity                       27,691,376         27,841,906
                                                                                   ------------       ------------
                                               Total liabilities and
                                               stockholders' equity                $ 29,731,306       $ 29,131,260
                                                                                   ============       ============
</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, 2004 and 2003
           ----------------------------------------------------------

<TABLE>
<CAPTION>
                                                             Three Months                      Six Months
                                                          2004            2003            2004             2003
                                                    --------------------------      ---------------------------
<S>                                                 <C>             <C>             <C>             <C>
Net sales                                           $4,896,741      $5,871,675      $9,627,068      $10,966,992
Cost of sales                                        4,124,354       5,143,799       8,205,539        9,338,943
                                                    ----------      ----------      ----------      -----------
        Gross profit                                   772,387         727,876       1,421,529        1,628,049

Selling, general and
   administrative expenses                             580,538         684,594       1,181,217        1,234,397
                                                    ----------      ----------      ----------      -----------
        Operating income                               191,849          43,282         240,312          393,652
                                                    ----------      ----------      ----------      -----------

Other income (expense)

        Interest and dividend income                    43,618          21,865          78,488           45,229
        Other                                            3,150          21,574           6,366           22,814
                                                    ----------      ----------      ----------      -----------
                                                        46,768          43,439          84,854           68,043
                                                    ----------      ----------      ----------      -----------

Income before income taxes                             238,617          86,721         325,166          461,695

Provision for income taxes                              71,585          25,291          97,550          119,300
                                                    ----------      ----------      ----------      -----------

                     Net income                     $  167,032      $   61,430      $  227,616      $   342,395
                                                    ==========      ==========      ==========      ===========

Net income per share:

        Basic                                       $      .17      $      .06      $      .22      $       .34
        Diluted                                     $      .16      $      .06      $      .22      $       .34
                                                    ----------      ----------      ----------      -----------

Weighted average number of shares outstanding:

             Basic                                   1,011,378       1,013,077       1,012,269        1,014,591
             Diluted                                 1,024,535       1,023,660       1,022,926        1,021,821
                                                    ==========      ==========      ==========      ===========
</TABLE>

See accompanying notes to the financial statements.


                                       3
<PAGE>

                         ESPEY MFG. & ELECTRONICS CORP.
                      Statements of Cash Flows (Unaudited)
                   Six Months Ended December 31, 2004 and 2003

<TABLE>
<CAPTION>
                                                                                              December 31,
                                                                                           2004               2003
                                                                                   ------------       ------------
<S>                                                                                <C>                <C>
Cash Flows From Operating Activities:

        Net income                                                                 $    227,616       $    342,395

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

        Depreciation                                                                    282,170            247,339
        Deferred income tax                                                              21,462             67,526
        Changes in assets and liabilities:
                Increase in receivables                                                (176,177)        (1,164,057)
                Decrease in inventories                                                  77,191            859,918
                Decrease in prepaid expenses and other current assets                   122,442            110,826
                Increase (Decrease) in accounts payable                                 764,330           (185,049)
                Increase in accrued salaries, wages and commissions                      39,015             17,017
                Increase in accrued employee insurance costs                              1,023                734
                Decrease in vacation accrual                                            (49,953)           (50,225)
                Increase in other accrued expenses                                        5,000              1,902
                Increase in payroll & other taxes withheld and accrued                   19,514             25,129
                Decrease in income taxes payable                                        (49,815)          (347,943)
                Increase in ESOP payable                                                     --            268,825
                                                                                   ------------       ------------
                          Net cash provided by operating activities                   1,283,818            194,337
                                                                                   ------------       ------------
Cash Flows From Investing Activities:

        Additions to property, plant & equipment                                       (230,716)          (174,924)
        Purchase of short term investments                                           (1,440,000)                --
        Maturity of short term investments                                              672,000
                                                                                   ------------       ------------
                          Net cash used in investing activities                        (998,716)          (174,924)
                                                                                   ------------       ------------
Cash Flows From Financing Activities:

        Dividends on common stock                                                      (303,331)          (759,686)
        Purchase of treasury stock                                                      (90,315)          (272,328)
        Proceeds from exercise of stock options                                          15,500             58,105
                                                                                   ------------       ------------
                          Net cash used in financing activities                        (378,146)          (973,909)
                                                                                   ------------       ------------
Decrease in cash and cash equivalents                                                   (93,044)          (954,496)
Cash and cash equivalents, beginning of period                                       12,310,972         10,996,483
                                                                                   ------------       ------------
Cash and cash equivalents, end of period                                             12,217,928         10,041,987
                                                                                   ------------       ------------
Income Taxes Paid                                                                  $    125,902       $    413,501
                                                                                   ============       ============
</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.
These financial statements should be read in conjunction with the Company's most
recent audited financial statements included in its 2004 Form 10-K.

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.

Note 3. Employee Stock Ownership Plan

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.  Effective June 30, 2004, the ESOP loan was paid in
full and all  shares  in the  ESOP  are  allocated  to  participant's  accounts.
Therefore,  in fiscal 2005 no  contributions  to the ESOP have been made.  As of
December 31, 2004, there were 235,245 shares allocated to participants.

Note 4. Stock Based Compensation

The Company has elected to account for its stock-based  compensation plans under
the intrinsic  value-based method of accounting as permitted by SFAS No. 123 and
as prescribed by Accounting Principles Board ("APB") Opinion No. 25, "Accounting
for Stock  Issued to  Employees,"  and related  interpretations  including  FASB
Interpretation  No. 44,  "Accounting  for Certain  Transactions  Involving Stock
Compensation  - An  Interpretation  of APB No. 25," in accounting  for its fixed
stock option plans. Under this method, compensation expense would be recorded on
the date of grant  only if the  current  market  price of the  underlying  stock
exceeded the exercise price.

The  following  table  illustrates  the  effect on net income and net income per
share if the Company had applied the fair value  recognition  provisions of SFAS
No. 123, to stock-based employee compensation.


                                       5
<PAGE>

<TABLE>
<CAPTION>
                                            3 Months Ended                  6 Months Ended
                                              December 31,                    December 31,
                                           2004            2003            2004            2003
                                     ----------      ----------      ----------      ----------
<S>                                  <C>             <C>             <C>             <C>
      Net income as reported         $  167,032      $   61,430      $  227,616      $  342,395

      Deduct: Total stock-based
      employee compensation
      expense determined under
      fair value based method
      for all awards, net of
      related  tax effects               (9,997)         (9,227)        (18,374)        (18,454)
                                     ----------      ----------      ----------      ----------

      Pro forma net income           $  157,035      $   52,203      $  209,242      $  323,941
                                     ==========      ==========      ==========      ==========

      Net Income per share:

          Basic-as reported          $      .17      $      .06      $      .22      $      .34
                                     ==========      ==========      ==========      ==========
          Basic-pro forma            $      .16      $      .05      $      .21      $      .32
                                     ==========      ==========      ==========      ==========

          Diluted-as reported        $      .16      $      .06      $      .22      $      .34
                                     ==========      ==========      ==========      ==========
          Diluted-pro forma          $      .15      $      .05      $      .20      $      .32
                                     ==========      ==========      ==========      ==========
</TABLE>

Note 5. Commitments and Contingencies

The Company has entered 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 $39,300 at December 31, 2004. The Company does not
expect to fund any of the amounts under the standby letters of credit.

Note 6. Recently Issued Accounting Standards

In November  2004,  the FASB issued SFAS No.  151,  "Accounting  for  Unexpected
Production  Defects and Waste." SFAS No. 151 requires  that  "abnormal  freight,
handling costs, and amounts of wasted materials (spoilage)" should be treated as
current-period  costs.  Under this  concept,  if the costs  associated  with the
actual  level of spoilage  or  production  defects  are  greater  than the costs
associated with the range of normal spoilage or defects,  the difference  should
be charged to  current-period  expense.  SFAS No.  151 is  effective  for annual
periods  beginning  after June 15, 2005. In December  2004, the FASB issued SFAS
No. 123R,  "Share Based Payment." SFAS No. 123R requires  companies to recognize
in the income  statement  the  grant-date  fair value of stock options and other
equity-based  compensation  issued to employees.  SFAS No. 123R is effective for
annual periods  beginning  after June 15, 2005. The adoption of SFAS No. 151 and
SFAS No.  123R are not  expected  to have a  material  impact  on the  Company's
results of operations and financial condition.

In December 2004, the FASB issued Staff Position FAS 109-1 regarding Income from
Domestic Production Activities which was effective  immediately.  Staff Position
FAS 109-1  clarifies  SFAS No. 109's  guidance that applies to the new deduction
for qualified domestic production activities.  The staff position clarifies that
the deduction should be accounted for as a special deduction under SFAS No. 109.
The adoption of Staff  Position FAS 109-1 did not have a material  impact on the
Company's results of operations or financial condition.


                                       6
<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. 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 and 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 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.

Business Outlook

Management is optimistic  about the future of the Company.  In the first half of
fiscal  2005,  the Company  received  approximately  $8.3 million in new orders.
These orders include both follow-on  production  quantities for mature products,
and engineering  development orders which will enable the Company to utilize its
engineering  expertise in developing  new customer  specific  products.  Some of
these products, once developed,  will be produced in the Company's manufacturing
facility and are expected to provide  large  production  order  quantities  over
several years.  These orders are in line with the Company's  strategy of getting
involved in long-term high quantity military and industrial products.

Management  expects to receive several more orders in fiscal 2005.  These orders
will increase the  Company's  backlog  which is  approximately  $14.7 million at
February 14, 2005.  Many  potential  orders are  currently  being  discussed and
negotiated  with  our  customers.  Some of  these  potential  orders  management
expected to receive in the first half of fiscal 2005. The delay in placing these
orders may be due to several  factors  including the war in Iraq. In addition to
the backlog,  the Company currently has outstanding  quotations  representing in
excess of $47 million in the aggregate  for both repeat and new programs.  Based
on management's  communications  with customers,  the Company expects to receive
substantial orders for spare parts on the various types of transmitters  already
in service,  contracts  for the further  development  and  manufacture  of power
supplies and transformers,  as well as additional  contracts for  pre-engineered
hardware.  We expect these  contracts to increase sales  substantially  in years
after fiscal year 2005. 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 the  expected  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 continues to evaluate
potential strategic alternatives on a periodic basis.

As stated in the  Company's  10-K filed for the year ended  June 30,  2004,  the
Company  anticipates  a decrease in sales for fiscal 2005.  During  fiscal 2004,
while net sales increased,  new orders received by the Company did not keep pace
with backlog  relieved.  Thus,  while the sales backlog of  approximately  $15.4
million  at June 30,  2004 gave the  Company a solid base of future  sales,  the
Company continues to anticipate a reduction of sales during fiscal 2005.

Critical Accounting Policies and Estimates

We believe our most critical accounting policies include revenue recognition and
estimates to completion.


                                       7
<PAGE>

Revenue recognition and estimation

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

The  Company's  operating  cycle is  long-term  and  includes  various  types of
products and varying delivery  schedules.  Accordingly,  results of a particular
period or period-to-period comparison of recorded revenues and income may not be
indicative  of future  operating  results.  The following  comparative  analysis
should be viewed in this context.

Net sales for the three  months  ended  December  31,  2004 were  $4,896,741  as
compared  to  $5,871,675  for the  same  period  in 2003,  representing  a 16.6%
decrease.  Net sales for the six months ended December 31, 2004 were  $9,627,068
as compared to  $10,966,992  for the same period in 2003,  representing  a 12.2%
decrease.  The  Company's  decrease  in sales for the three  month and six month
period  ended  December  31,  2004  is due  primarily  to a  decrease  in  radar
transmitter  component shipments offset partially by an increase in power supply
shipments.  Generally,  the  decrease  also  can be  attributed  to the  overall
decrease in the Company's backlog.

The backlog at December 31, 2004 was  approximately  $14.1  million  compared to
approximately  $17.3  million at  December  31,  2003.  New orders for the three
months ended December 31, 2004 were approximately  $3.5 million.  New orders for
the six-month  period ended December 31, 2004 were  approximately  $8.3 million.
Management continues to market the engineering  capabilities and products of the
Company.  Currently,  approximately $47 million in quotations are outstanding to
various customers of the Company.

The primary factor in determining gross profit and net income is product mix. In
any given accounting  period, the mix of product shipments between higher margin
mature programs and less mature  programs and loss contracts,  has a significant
impact on gross profit and net income. The table below presents the statement of
income line items as a percentage of net sales for  period-to-period  comparison
purposes.

<TABLE>
<CAPTION>
                                                        3 Months Ended December 31,      6 Months Ended December 31,
                                                         2004                2003         2004                 2003
                                                        ------              ------       ------               ------
<S>                                                      <C>                 <C>          <C>                  <C>
      Net sales                                          100.0%              100.0%       100.0%               100.0%
      Cost of sales                                       84.2%               87.6%        85.2%                85.2%
                                                        ------              ------       ------               ------
             Gross profit                                 15.8%               12.4%        14.8%                14.8%

      Selling, general and administrative expenses        11.9%               11.7%        12.3%                11.3%
                                                        ------              ------       ------               ------
             Operating income                              3.9%                0.7%         2.5%                 3.6%

      Other income (expense)

             Interest and dividend income                  0.9%                0.3%         0.8%                 0.4%
             Other                                         0.1%                0.5%         0.1%                 0.3%
                                                        ------              ------       ------               ------
                                                           1.0%                0.7%         0.9%                 0.6%

      Income before income taxes                           4.9%                1.5%         3.4%                 4.2%

      Provision for income taxes                           1.5%                0.4%         1.0%                 1.1%
                                                        ------              ------       ------               ------
                   Net income                              3.4%                1.0%         2.4%                 3.1%
                                                        ======              ======       ======               ======
</TABLE>


For the three months ended  December 31, 2004,  gross profit as a percentage  of
net sales was higher as compared to the three  months  ended  December 31, 2003.
The improved gross profit percentage relates to the continued  investment by the
Company in  engineering  contracts  that  result in charges to cost of sales for
loss contracts,  and lower ESOP contribution  expense.  The engineering contract
charges were less for the three-month period ended December 31, 2004 as compared
to the same period  ended  December 31, 2003.  These  contracts  are expected to
improve the operating results of the Company when the engineering phase of these
contracts  are completed and  follow-on  production  orders are received.  Gross
profit for the three and six month


                                       8
<PAGE>

periods ended was also  positively  impacted by a decrease in ESOP  contribution
expense,  which was zero for the three month period ended December 31, 2004, and
$107,530 for the three month period ended  December 31, 2003. Net income for the
same period  improved due to the  increase in gross profit and reduced  selling,
general and administrative  expenses. For the six months ended December 31, 2004
gross profit as a percentage of net sales remained the same at 14.8% as compared
to the six months ended  December 31, 2003.  The ESOP  contribution  expense was
zero for the six month period  ended  December 31, 2004 and $215,060 for the six
month period ended  December 31, 2003.  This  decrease had a positive  impact on
gross  profit which was offset by lower sales and  unfavorable  product mix. Net
income  decreased  for the same period due to lower sales,  partially  offset by
lower selling, general and administrative expenses.

The  Company has  encountered  performance  problems  with one  customer  due to
technical problems associated with a product. Several shipments of hardware have
been made to this customer. The customer and the Company are working together to
resolve the  technical  problems  and to date the  customer has not asserted any
liability claims against the Company.  Shipments made on this customer  specific
product were $1,273,824 through December 31, 2004. Shipments to be made for this
customer on orders currently  included in the Company's  backlog at December 31,
2004 are $ 885,926. Management believes the technical issues can be resolved and
has added to contract cost estimates to cover the anticipated  work necessary to
resolve the technical issues.

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  performed.  Employment at December 31, 2004
was 171 people compared to 190 people at December 31, 2003.

Selling,  general and administrative expenses were $580,538 for the three months
ended  December 31,  2004,  a decrease of $104,056  compared to the three months
ended  December 31, 2003.  Selling,  general and  administrative  expenses  were
$1,181,217  for the six months  ended  December  31, 2004, a decrease of $53,180
compared to the six months ended  December  31, 2003.  The decrease is primarily
due to a decrease in administrative salaries and ESOP contribution expense.

Other  income  for the three  months  ended  December  31,  2004 was  $46,768 as
compared to $43,439 for the three months ended  December 31, 2003.  Other income
for the six months ended  December 31, 2004  increased to $84,854 as compared to
$68,043 for the six months  ended  December  31,  2003.  The  increase  for both
periods is due to higher returns on short-term investments and cash equivelents.
The Company  does not believe  there is  significant  risk  associated  with its
investment  policy,  since  at  December  31,  2004 all of the  investments  are
primarily represented by short-term liquid investments including certificates of
deposit and money market funds.

The Company estimates its income taxes using an estimated effective tax rate for
the annual period.  The effective  income tax rate at December 31, 2004 and 2003
was 30.0% and 25.8%,  respectively.  The effective tax rate  fluctuates  between
periods  and is less  than the  statutory  tax rate  mainly  due to the  foreign
exportation benefit the Company receives on its foreign sales.

Liquidity and Capital Resources

As of December  31,  2004,  the Company  had  working  capital of $25.0  million
compared to $24.4 million at December 31, 2003. The Company meets its short-term
financing needs through cash flow from  operations and when necessary,  from its
existing cash and cash equivalents.

The table below presents the summary of cash flow for the periods indicated:

                                                  Six Months Ended December 31,
                                                      2004             2003
                                                  -----------       ---------
Net cash provided by operating activities         $ 1,283,818       $ 194,337
Net cash used by investing activities                (998,716)       (174,924)
Net cash used in financing activities                (378,146)       (973,909)

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.  The change in net cash used by investing activities is due to
the purchase of  short-term  certificates  of deposit.  The decrease in net cash
used in financing  activities  is due mainly to decreased  dividends.  The first
quarter of fiscal  year ended June 30,  2004  included  the payment of a special
dividend in the amount of $506,357 or $.50 per share.

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.  Management, if necessary, has at its disposal a
$3,000,000  line of credit to help fund  further  growth.  For the first half of
fiscal 2005 capital expenditures were $230,716.

During the  three-month  period ended  December  31,  2004,  600, and during the
six-month period ended December 31, 2004, 800 stock options were exercised under
the Company's  existing stock option plan. No shares were repurchased during the
three-month period ended December 31, 2004. During the six months ended December
31, 2004, the Company  repurchased  4,014 shares of its common stock for a total
of $90,315.  As of December  31,  2004,  under  existing  Board  authorizations,
approximately  $452,251  could be utilized to repurchase  the  Company's  common
stock.


                                       9
<PAGE>

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  small  business  as  defined  under  Security  and  Exchange
Commission  rule 12b-2 and  therefore  files Form 10-Q  utilizing  the exemption
available to small business issuers for Item 305 of Regulation S-K, quantitative
and  qualitative  disclosures  about market risk, and therefore does not provide
the information for this item.

Item 4. 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.


                                       10
<PAGE>

                    PART II: Other Information and Signatures

Item 1.     Legal Proceedings

            None

Item 2.     Unregistered Sales of Equity Securities and Securities Repurchased

            (a)   Securities Sold -  For the six-month period ended December 31,
                                     2004,  800  stock  options  were  exercised
                                     under the Company's  existing  stock option
                                     plan. The securities were sold for cash and
                                     were made  without  registration  under the
                                     Securities   Act  in   reliance   upon  the
                                     exemption from registration  afforded under
                                     Section 4(2) of the Securities Act of 1933.
                                     Proceeds  were  used  for  general  working
                                     capital purposes.

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 12, 2004.

            (b)   Seymour  Saslow was  re-elected as a Class B director to serve
                  for a  three-year  term.  Subsequent  to  the  mailing  of the
                  Company's proxy  statement for the Annual Meeting,  William P.
                  Greene, the other Class B director, passed away. Continuing as
                  directors after the Annual Meeting were:

                          Class A (term expiring 2006):     Howard Pinsley
                                                            Alvin O. Sabo
                                                            Carl Helmetag

                          Class C (term expiring 2005):     Paul J. Corr
                                                            Barry Pinsley
                                                            Michael W. Wool

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

                  The  election of one Class B director.  The votes were cast as
                  follows:

<TABLE>
<CAPTION>
                              Nominee:       Voted For:    Voted Against or Withheld:     Broker Non-Votes:
                              -------        ---------     -------------------------      ----------------
<S>                                           <C>                    <C>                        <C>
                          Seymour Saslow      965,050                19,165                     9,542
</TABLE>

                  Approval  of an  Amendment  to the  Company's  Certificate  of
                  Incorporation, to change the number of members of the Board of
                  Directors from nine to a number not less than three,  nor more
                  than nine. The votes were cast as follows:

                          Shares IN FAVOR                       975,014
                          Shares AGAINST                          8,300
                          ABSTENTIONS                               901
                          Broker NON-VOTES                        9,542

                  Ratification  of KPMG LLP,  as  independent  auditors  for the
                  Corporation  for the fiscal  year ending  June 30,  2005.  The
                  votes were cast as follows:

                          Shares IN FAVOR                       982,419
                          Shares AGAINST                          1,066
                          ABSTENTIONS                               730
                          Broker NON-VOTES                        9,542

Item 5.     Other Information

            None


                                       11
<PAGE>

Item 6.           Exhibits

                  3.1   Certificate   of   Amendment  of  the   Certificate   of
                        Incorporation (14th Amendment)

                  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 14, 2005
-----------------
      Date

                                       12