UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D. C. 20549

                                   FORM 10-QSB

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

                For the Quarterly Period Ended December 31, 2007

      [ ] TRANSISTION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

             For the transition period from __________ to __________

                          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)

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

Check  whether  the issuer  (1) has filed all  reports  required  to be filed by
Section 13 or 15 (d) of the  Securities  Exchange  Act during the past 12 months
(or for such  shorter  period  that the  registrant  was  required  to file such
reports),  and (2) has been subject to such filing  requirements for the past 90
days. YES [X] NO [ ]

Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). YES [ ] NO [X]


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

              Class                            Outstanding at February 14, 2008
              -----                            --------------------------------
Common stock, $.33-1/3 par value                       2,316,773 shares


Transitional Small Business Disclosure Format YES [ ] NO [X]

<PAGE>
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                                 ESPEY MFG. & ELECTRONICS CORP.
                                Quarterly Report on Form 10-QSB
                                           I N D E X


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

                           Balance Sheet (Unaudited) - December 31, 2007                      1

                           Statements of Income (Unaudited) -
                           Three and Six Months Ended December 31, 2007 and 2006              2

                           Statements of Cash Flows (Unaudited) -
                           Six Months Ended December 31, 2007 and 2006                        3

                           Notes to Financial Statements (Unaudited)                          4

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

            Item 3    Controls and Procedures                                                10


PART II     OTHER INFORMATION                                                                11

            Item 1    Legal Proceedings                                                      11

            Item 2    Unregistered Sales of Equity Securities and Use of Proceeds            11

            Item 3    Defaults on Senior Securities                                          11

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

            Item 5    Other Information                                                      12

            Item 6    Exhibits                                                               12

                      SIGNATURES                                                             13

</TABLE>
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<TABLE>
<CAPTION>

                              PART I: FINANCIAL INFORMATION

                             ESPEY MFG. & ELECTRONICS CORP.
                                Balance Sheet (Unaudited)
                                    December 31, 2007

<S>                                                                            <C>
ASSETS:

          Cash and cash equivalents                                         $  8,563,481
          Short term investments                                               6,847,000
          Trade accounts receivable, net                                       4,357,655
          Other receivables                                                        4,165
          Income taxes receivable                                                  5,273

          Inventories:
                  Raw materials                                                1,665,173
                  Work-in-process                                              2,238,297
                  Costs relating to contracts in process, net of advance
                    payments of $50,000 at December 31, 2007                   6,222,892
                                                                            ------------
                               Total inventories                              10,126,362

          Deferred income taxes                                                  184,068
          Prepaid expenses and other current assets                              300,807
                                                                            ------------
                               Total current assets                           30,388,811
                                                                            ------------

          Property, plant and equipment, net                                   2,974,792
          Loan receivable                                                         80,000
                                                                            ------------

                               Total assets                                 $ 33,443,603
                                                                            ============

LIABILITIES AND STOCKHOLDERS' EQUITY:

          Accounts payable                                                  $    850,176
          Accrued expenses:
                  Salaries, wages and commissions                                130,732
                  Vacation                                                       476,854
                  ESOP payable                                                   175,966
                  Other                                                           49,560
          Payroll and other taxes withheld and accrued                            37,636
          Income taxes payable                                                        --
                                                                            ------------
                               Total current liabilities                       1,720,924
                                                                            ------------
          Deferred income taxes                                                  158,324
                                                                            ------------
                               Total liabilities                               1,879,248
                                                                            ------------

          Common stock, par value $.33-1/3 per share.
              Authorized 10,000,000 shares; issued 3,029,874  shares
              on December 31, 2007. Outstanding 2,312,773 (includes
              237,084 Unearned ESOP Shares) on December 31, 2007               1,009,958
          Capital in excess of par value                                      13,124,911
          Retained earnings                                                   27,720,425

          Less:   Unearned ESOP Shares                                        (3,600,459)
                  Cost of 717,101 Treasury shares on December 31, 2007        (6,690,480)
                                                                            ------------
                               Total stockholders' equity                     31,564,355
                                                                            ------------

                               Total liabilities and stockholders' equity   $ 33,443,603
                                                                            ============


See accompanying notes to the financial statements.

                                           1
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<CAPTION>

                                    ESPEY MFG. & ELECTRONICS CORP.
                                   Statements of Income (Unaudited)
                         Three and Six Months Ended December 31, 2007 and 2006


                                                        Three Months                 Six Months
                                                     2007          2006          2007          2006
                                                 -------------------------   -------------------------
<S>                                              <C>           <C>           <C>           <C>
Net sales                                        $ 6,732,144   $ 6,119,320   $13,033,930   $12,191,226
Cost of sales                                      5,049,559     4,861,099    10,002,235     9,535,697
                                                 -----------   -----------   -----------   -----------
       Gross profit                                1,682,585     1,258,221     3,031,695     2,655,529

Selling, general and
   administrative expenses                           701,819       712,743     1,369,372     1,439,723
                                                 -----------   -----------   -----------   -----------

       Operating income                              980,766       545,478     1,662,323     1,215,806
                                                 -----------   -----------   -----------   -----------

Other income (expense)

       Interest and dividend income                  203,324       149,878       399,445       295,389
       Other                                          29,077        30,725        48,562        34,350
                                                 -----------   -----------   -----------   -----------
                                                     232,401       180,603       448,007       329,739
                                                 -----------   -----------   -----------   -----------

Income before income taxes                         1,213,167       726,081     2,110,330     1,545,545

Provision for income taxes                           416,081       246,170       721,661       522,584
                                                 -----------   -----------   -----------   -----------

                  Net income                     $   797,086   $   479,911   $ 1,388,669   $ 1,022,961
                                                 ===========   ===========   ===========   ===========

Net income per share:

       Basic                                     $       .38   $       .23   $       .67   $       .50
       Diluted                                   $       .37   $       .23   $       .65   $       .49
                                                 -----------   -----------   -----------   -----------

Weighted average number of shares outstanding:

       Basic                                       2,074,789     2,047,803     2,070,334     2,040,909
       Diluted                                     2,109,650     2,071,693     2,125,632     2,066,015
                                                 -----------   -----------   -----------   -----------

Dividends per share:                             $     .1750   $     .1300   $     .3500   $     .2600
                                                 ===========   ===========   ===========   ===========


See accompanying notes to the financial statements.

                                                  2
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<TABLE>
<CAPTION>

                                      ESPEY MFG. & ELECTRONICS CORP.
                                   Statements of Cash Flows (Unaudited)
                                Six Months Ended December 31, 2007 and 2006
                                                                                      December 31,
                                                                                  2007            2006
                                                                              ------------    ------------
<S>                                                                                <C>             <C>
Cash Flows From Operating Activities:
       Net income                                                             $  1,388,669    $  1,022,961

       Adjustments to reconcile net income to net
         cash provided by operating activities:
       Excess tax benefits from share-based compensation                            83,471          49,697
       Stock-based compensation                                                     83,331          76,020
       Depreciation                                                                246,473         243,022
       ESOP compensation expense                                                   263,174         218,625
       Loss on disposal of assets                                                    5,681           4,376
       Deferred income tax                                                         (26,979)        (36,262)
       Changes in assets and liabilities:
           (Increase) decrease in trade receivables, net                        (1,337,174)      1,200,435
           (Increase) decrease in other receivables                                   (717)          3,411
           Increase in income taxes receivable                                      (5,273)             --
           Decrease (increase) in inventories                                    1,022,965        (170,125)
           Decrease (increase) in prepaid expenses and other current assets        247,405         (34,770)
           (Decrease) increase in accounts payable                                (130,775)        173,805
           (Decrease) increase in accrued salaries, wages and commissions          (31,470)         12,990
           Decrease in vacation accrual                                           (105,627)        (47,973)
           Increase in other accrued expenses                                        3,512           3,705
           Decrease in payroll & other taxes withheld and accrued                   (4,417)        (13,530)
           Decrease in income taxes payable                                       (283,414)       (661,414)
           Decrease in ESOP payable                                                (87,208)        (71,284)
                                                                              ------------    ------------
                      Net cash provided by operating activities                  1,331,627       1,973,689
                                                                              ------------    ------------

Cash Flows From Investing Activities:
       Additions to property, plant & equipment                                   (292,436)       (200,871)
       Payment for issuance of loan receivable                                     (80,000)             --
       Purchase of short term investments                                       (4,543,000)     (2,400,000)
       Maturity of short term investments                                        2,016,000       2,112,000
                                                                              ------------    ------------
                      Net cash used in investing activities                     (2,899,436)       (488,871)
                                                                              ------------    ------------

Cash Flows From Financing Activities:
       Dividends on common stock                                                  (722,569)       (529,914)
       Purchase of treasury stock                                                 (571,763)       (110,203)
       Proceeds from exercise of stock options                                     246,040         150,680
       Excess tax benefits from share-based compensation                            83,471          49,697
                                                                              ------------    ------------
                      Net cash used in financing activities                       (964,821)       (439,740)
                                                                              ------------    ------------

(Decrease) increase in cash and cash equivalents                                (2,532,630)      1,045,078
Cash and cash equivalents, beginning of period                                  11,096,111       7,072,615
                                                                              ------------    ------------
Cash and cash equivalents, end of period                                         8,563,481       8,117,693
                                                                              ============    ============

Supplemental disclosures of cash flow information:
       Income Taxes Paid                                                      $    880,000    $  1,121,159
                                                                              ============    ============

See accompanying notes to the financial statements.


                                                    3
</TABLE>
<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 report on Form 10-KSB for
the year ended June 30, 2007.

Note 2. Net Income per Share

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

Note 3. Stock Based Compensation

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

Total stock-based compensation expense recognized in the Statement of Income for
the three  months  ended  December  31, 2007 and 2006,  was $32,491 and $36,831,
respectively,  before income taxes.  The related total  deferred tax benefit was
approximately  $2,487 and $2,923,  for the three months ended  December 31, 2007
and 2006, respectively. Total stock-based compensation expense recognized in the
Statement  of Income for the six months ended  December  31, 2007 and 2006,  was
$83,331 and  $76,020,  respectively,  before  income  taxes.  The related  total
deferred  tax benefit was  approximately  $6,504 and $5,992,  for the six months
ended  December 31, 2007 and 2006,  respectively.  Prior to the adoption of SFAS
No. 123(R), the Company presented all tax benefits for deductions resulting from
the exercise of stock options as operating  cash flows in the Statements of Cash
Flows.  SFAS No. 123(R) requires the tax benefits  resulting from tax deductions
in excess of the compensation cost recognized for those options to be classified
and reported as both an operating  cash outflow and a financing cash inflow on a
prospective basis upon adoption.

As of  December  31,  2007,  there was  approximately  $87,692  of  unrecognized
compensation  cost  related  to  stock  option  awards  that is  expected  to be
recognized as expense over a period of 1.25 years.

The  Company has one  employee  stock  option  plan under  which  options may be
granted,  the 2007 Stock Option and Restricted Stock Plan (the "2007 Plan"). The
Board of  Directors  may grant  options  to  acquire  shares of common  stock to
employees  of the  Company at the fair market  value of the common  stock on the
date of grant.  Generally,  options granted have a two-year vesting period based
on two years of continuous service and have a ten-year

                                        4
<PAGE>

contractual  life.  Option grants provide for accelerated  vesting if there is a
change in control.  Shares  issued  upon the  exercise of options are from those
held in Treasury.  The 2007 Plan was approved by the Company's  shareholders  at
the Company's  Annual  Meeting on November 30, 2007 and supercedes the Company's
2000 Stock Option Plan (the "2000 Plan").  Options  covering  400,000 shares are
authorized  for issuance under the 2007 Plan, of which zero have been granted as
of December 31, 2007.  While no further  grants of options may be made under the
2000 Plan, as of December 31, 2007,  115,600  options were  outstanding of which
48,200 are vested and exercisable.

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

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

                                           Three Months Ended   Six Months Ended
                                            December 31, 2007  December 31, 2007
                                            -----------------  -----------------
Dividend yield                                     2.59%              2.40%
Expected stock price volatility                   20.50%             22.29%
Risk-free interest rate                            4.80%              4.54%
Expected option life (in years)                       5                  5
Weighted average fair value per share
   of options granted during the period           $3.95              $4.04

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

The following table summarizes stock option activity during the six months ended
December 31, 2007:

                                                Employee Stock Options Plan
                                        ----------------------------------------
                                                                      Weighted
                                         Number of     Weighted        Average
                                          Shares        Average       Remaining
                                          Subject      Exercise     Contractual
                                         To Option       Price           Term
                                        ----------------------------------------
Balance at July 1, 2007                  138,800         $15.77           7.63
Granted                                       --             --             --
Exercised                                (21,600)        $11.39             --
Forfeited or expired                      (1,600)        $18.05             --
                                        ----------------------------------------
Balance at December 31, 2007             115,600         $16.55           7.97
                                        ========================================
Exercisable at December 31, 2007          48,200         $14.47           6.86
                                        ========================================

The  intrinsic  value of stock  options  exercised  was $35,521,  during the six
months ended December 31, 2007. The intrinsic value of stock options outstanding
and  exercisable  as of December 31, 2007 and 2006 was  $207,917  and  $436,975,
respectively.

Note 4. Commitments and Contingencies

The Company at certain  times enters into standby  letters of credit  agreements
with  financial  institutions  primarily  relating  to the  guarantee  of future
performance on certain contracts.  Contingent liabilities on outstanding standby
letters of credit  agreements  aggregated  to zero at December  31,  2007.  As a
government  contractor,  the Company is continually  subject to audit by various
agencies of the U.S. Government to determine compliance with various procurement
laws and regulations.  As a result of such audits and as part of normal business
operations of the Company,  various  claims and charges can be asserted  against
the  Company.  It is not  possible  to  predict  the  outcome  of such  actions.
Currently the Company has no claims or assertions against it.

                                       5
<PAGE>

Note 5. Recently Issued Accounting Standards

In July 2006,  the FASB issued  Interpretation  No.  ("FIN") 48,  Accounting for
Uncertainty in Income Taxes-An  Interpretation  of FASB Statement No. 109, which
prescribes a recognition  threshold and measurement  attribute for the financial
statement  recognition and measurement of a tax position taken or expected to be
taken in a tax return. In particular, this interpretation requires uncertain tax
positions to be recognized only if they are  "more-likely-than-not" to be upheld
based  on their  technical  merits.  Additionally,  the  measurement  of the tax
position will be based on the largest  amount that is determined to have greater
than a 50% likelihood of  realization  upon ultimate  settlement.  Any resulting
cumulative  effect of applying the  provisions of FIN 48 upon adoption  would be
reported as an adjustment to the beginning  balance of retained  earnings in the
period of adoption. FIN 48 was effective beginning July 1, 2007. The adoption of
FIN 48 did not have a material effect on the Company's financial statements.

In September 2006, the FASB issued  Statement of Financial  Accounting  Standard
("SFAS")  No.  157,  Fair  Value  Measurements.  SFAS 157  defines  fair  value,
establishes a framework for measuring fair value, and expands  disclosures about
fair value  measurements.  SFAS 157 applies to other  accounting  pronouncements
that  require or permit  fair value  measurements,  but does not require any new
fair value measurements.  SFAS 157 is effective for financial  statements issued
for fiscal years  beginning  after November 15, 2007, and interim periods within
those  years.  The Company is  currently  evaluating  the effect of the guidance
contained in SFAS 157 and does not expect the  implementation to have a material
effect on the Company's financial statements.

Note 6. Employee Stock Ownership Plan

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

The  Company  makes  annual  contributions  to the ESOP equal to the ESOP's debt
service less dividends on unallocated shares received by the ESOP. All dividends
on  unallocated  shares  received  by the ESOP  are  used to pay  debt  service.
Dividends  on  allocated  ESOP shares are  recorded  as a reduction  of retained
earnings.  As the debt is repaid,  shares are released  and  allocated to active
employees, based on the proportion of debt service paid in the year. The Company
accounts  for  its  ESOP  in  accordance   with   Statement  of  Position  93-6.
Accordingly,  the shares  purchased  by the ESOP are  reported as Unearned  ESOP
Shares in the  statement  of  financial  position.  As shares  are  released  or
committed-to-be-released,  the Company reports compensation expense equal to the
current  average market price of the shares,  and the shares become  outstanding
for  earnings-per-share  (EPS)  computations.   ESOP  compensation  expense  was
$128,927 for the quarter ended  December 31, 2007 and $263,174 for the six-month
period ending December 31, 2007. The ESOP shares as of December 31, 2007 were as
follows:

          Allocated Shares                                          425,576
          Committed-to-be-released shares                            12,083
          Unreleased shares                                         237,084
                                                                 ----------

          Total shares held by the ESOP                             674,743
                                                                 ==========

          Fair value of unreleased shares at December 31, 2007   $4,452,438
                                                                 ==========

                                       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 and
does not have a product  line.  The  products  manufactured  by the Company find
application principally in (i) shipboard and land based radar, (ii) locomotives,
(iii)  aircraft,   (iv)  short  and  medium  range  communication  systems,  (v)
navigation systems, and (vi) land-based military vehicles.

Business is solicited from large industrial manufacturers and defense companies,
the  government of the United States 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 agency
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.

In the first  half of fiscal  2008,  the  Company  received  approximately  $8.2
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.   The  Company  has  received  a  preliminary  agreement  to  commence
performance  on a contract for  military  power  supplies  expected to be in the
approximate  amount of $6 million.  A definitive  agreement is expected by April
30, 2008.  Excluding the above  preliminary  contract,  the Company's backlog is
$34.5 million at February 12, 2008.

The sales backlog of approximately  $31.4 million at December 31, 2007 gives the
Company a solid base of future sales and,  therefore,  management  expects sales
for fiscal  2008 to equal or exceed  sales for fiscal  2007.  In addition to the
backlog, the Company currently has outstanding  quotations and expected business
representing  approximately  $38.0  million in the aggregate for both repeat and
new programs.

Sales to two significant  customers in the first half of fiscal 2008 represented
57.7%,  while sales to three  significant  customers in the first half of fiscal
2007 represented  69.0%,  respectively,  of the Company's total sales. While the
Company  has always had a small  number of  customers  that  account for a large
percentage of its total sales in any given year, management is pursuing business
opportunities  involving  significant  product  programs  with  new and  current
customers with an overall  objective of lowering the  concentration of sales and
minimizing  the impact of a  significant  customer or excessive  reliance upon a
single major product  program of a particular  customer.  The current backlog at
December  31, 2007 of $31.4  million  includes  $21.9  million from the two most
significant customers in the first half of fiscal 2008.

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.

                                       7
<PAGE>

The total  backlog for the Company of $31.4  million at December 31, 2007,  down
$2.3 million from December 31, 2006,  represents the estimated  remaining  sales
value of work to be performed  under firm  contracts.  These  contracts  include
significant orders for military and industrial power supplies,  and contracts to
manufacture   certain  customer  products  in  accordance  with   pre-engineered
requirements.

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

Critical Accounting Policies and Estimates

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

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

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

Results of Operations

Net sales for the three  months  ended  December  31,  2007 were  $6,732,144  as
compared  to  $6,119,320  for the  same  period  in 2006,  representing  a 10.0%
increase.  Net sales for the six months ended December 31, 2007 were $13,033,930
as compared to  $12,191,226  for the same  period in 2006,  representing  a 6.9%
increase.  Generally, these increases can be attributed to the contract specific
nature of the Company's  business.  The Company  continues to deliver product on
its single  largest  order for power  supplies and the increase in sales for the
six months is largely  attributable  to an increase in  shipments on this order.
New orders  received in the first six months of fiscal  2008 were  approximately
$8.2  million,  the same as the amount of new orders  received  in the first six
months of fiscal  2007.  The sales  order  backlog has been over $30 million for
eleven  consecutive  fiscal  quarters  and  expectations  are  this  trend  will
continue.

The primary  factor in  determining  gross profit and net income is product mix.
The gross profits on mature  products and build to print contracts are higher as
compared to products which are still in the engineering  development stage or in
the  early  stages of  production.  In any given  accounting  period  the mix of
product shipments between higher margin mature programs and less mature programs
including  loss  contracts,  has a  significant  impact on gross  profit and net
income.

For the three  months  ended  December  31,  2007 and 2006  gross  profits  were
$1,682,585 and $1,258,221,  respectively.  Gross profit as a percentage of sales
was 25.0% and 20.6%,  for the three  months  ended  December  31, 2007 and 2006,
respectively.  For the six months ended December 31, 2007 and 2006 gross profits
were  $3,031,695 and $2,655,529,  respectively.  Gross profit as a percentage of
sales was 23.3% and 21.8%,  for the six months ended December 31, 2007 and 2006,
respectively. The improved gross profit and gross profit percentage in the three
and six months ended  December 31, 2007,  was the result of increased  net sales
and a favorable mature product mix on those shipments.  Management  continues to
evaluate the Company's workforce to ensure that production and overall execution
of the  backlog  orders  and  additional  anticipated  orders  are  successfully
obtained and executed.  Employment of full time equivalents at December 31, 2007
was 175 compared to 174 people at December 31, 2006.

Selling,  general and administrative expenses were $701,819 for the three months
ended  December  31,  2007,  a decrease of $10,924  compared to the three months
ended  December 31, 2006.  Selling,  general and  administrative

                                       8
<PAGE>

expenses were  $1,369,372 for the six months ended December 31, 2007, a decrease
of $70,351  compared to the six months ended  December 31, 2006. The decrease is
primarily due to lower selling costs due to reduced headcount.

Other  income for three and six months  ended  December  31, 2007  increased  as
compared to the three months ended  December 31, 2006 due to increased  interest
income on the Company's cash and cash equivalents and short-term investments due
to higher balances in each category.  The Company does not believe that there is
a significant risk associated with its investment policy,  since at December 31,
2007 all of the  investments  are primarily  represented  by  short-term  liquid
investments including certificates of deposit and money market funds.

The effective income tax rate at December 31, 2007 and 2006 was 34.3% and 33.9%,
respectively.  The effective tax rate is less than the statutory tax rate mainly
due to the foreign exportation benefit the Company receives on its international
sales, the Qualified Production Activities benefit, and the benefit derived from
the ESOP dividends paid on allocated shares.

Net income for the three  months ended  December 31, 2007,  was $797,086 or $.38
and $.37 per share,  basic and diluted,  compared to $479,911 or $.23 per share,
both basic and diluted, for the three months ended December 31, 2006. Net income
for the six months ended  December 31, 2007, was $1,388,669 or $.67 and $.65 per
share,  basic and diluted,  compared to  $1,022,961  or $.50 and $.49 per share,
basic and diluted,  for the six months ended  December 31, 2006. The increase in
net income per share was due to higher gross profit as a percentage of sales,  a
decrease in selling, general and administrative expenses, and increased interest
income.

Liquidity and Capital Resources

The Company's  working  capital is an appropriate  indicator of the liquidity of
its  business,  and  during the past  three  fiscal  years,  the  Company,  when
possible,  has  funded all of its  operations  with cash  flows  resulting  from
operating  activities and when necessary from its existing cash and investments.
The  Company  did not borrow  any funds  during  the last  three  fiscal  years.
Management had available a $3,000,000 line of credit to help fund further growth
or working capital needs, but did not anticipate the need for any borrowed funds
in the  foreseeable  future and therefore did not renew the line of credit which
expired November 30, 2007.

The Company's  working capital as of December 31, 2007 was  approximately  $28.7
million.  During the three months  ended  December 31, 2007 and 2006 the Company
repurchased 8,977 and 4,307 shares,  respectively,  of its common stock from the
Company's  Employee  Retirement  Plan and Trust  ("ESOP"),  for a total purchase
price of  $200,905  and  $79,077,  respectively.  During  the six  months  ended
December  31, 2007 and 2006 the  Company  repurchased  25,720 and 6,073  shares,
respectively,  of its common  stock for a total  purchase  price of $571,763 and
$110,202,  respectively.  Under existing authorizations from the Company's Board
of Directors,  as of December 31, 2007,  management is authorized to purchase an
additional $1,428,237 million of Company stock.

                                                 Six Months Ended December 31,
                                                    2007               2006
                                                 -----------      ------------
Net cash provided by operating activities        $ 1,331,627      $  1,973,689
Net cash used in investing activities             (2,899,436)         (488,871)
Net cash used in financing activities               (964,821)         (439,740)

Net cash provided by operating  activities  fluctuates between periods primarily
as a result of  differences  in net  income,  the  timing of the  collection  of
accounts  receivable,  purchase  of  inventory,  level of sales and  payment  of
accounts payable.  Net cash used in investing  activities increased in the first
half of fiscal 2008 due to the increase in purchases of short-term  investments.
The  increase  in cash used in  financing  activities  is due  primarily  to the
increase in purchases of treasury stock and the increase in dividends paid.

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

During the six months  ended  December 31, 2007 and 2006,  the Company  expended
$292,436 and $200,871,  respectively,  for plant improvements and new equipment.
The Company has  budgeted  approximately  $400,000 for new  equipment  and plant
improvements  in fiscal 2008,  and expects to spend the remaining  amount in the
second  half of the  year.  Management  presently  anticipates  that  the  funds
required will be available from current operations.

                                       9
<PAGE>

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


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

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


Item 3. 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-QSB.  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 Use of Proceeds

              (a) None

              (c) Securities Repurchased

<TABLE>
<CAPTION>
                                   Purchases of Equity Securities

                                                            Total Number    Maximum Number
                                                              of Shares     (or Approximate
                                                              Purchased     Dollar Value)
                                                             as Part of       of Shares
                                     Total        Average     Publicly       that May Yet
                                    Number         Price      Announced      Be Purchased
                                   of Shares       Paid        Plan or      Under the Plan
              Period               Purchased     per Share     Program      or Program (1)
              -----------------------------------------------------------------------------
<S>                                <C>          <C>           <C>           <C>
              December 1 to
              December 31, 2007      8,977        $22.38        8,977         $1,428,237
</TABLE>

              (1)  Pursuant to a prior Board of Directors  authorization,  as of
              December 31, 2007 the Company can  repurchase  up to $1,428,237 of
              its common stock pursuant to an ongoing plan.

Item 3        Defaults on Senior Securities

              None

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

              (a) The  Company's  Annual  Meeting of  Shareholders  (the "Annual
                  Meeting") was held on November 30, 2007.

              (b) Barry  Pinsley and Seymour  Saslow were  re-elected as Class B
                  directors each to serve for a three-year  term.  Continuing as
                  directors after the Annual Meeting were:

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

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

                      Class C (term expiring 2008):    Paul J. Corr
                                                       Michael W. Wool

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

                  The election of two Class B directors. The votes were cast as
                  follows:
<TABLE>
<CAPTION>
                  Nominee:            Voted For:   Voted Against or Withheld:   Broker Non-Votes:
                  -------             ---------    -------------------------    ----------------
<S>                                   <C>                    <C>                       <C>
                  Barry Pinsley       2,050,942              14,221                    0
                  Seymour Saslow      1,782,564             282,599                    0
</TABLE>

                                       11
<PAGE>

                  Ratification  of  Rotenberg  &  Company  LLP,  as  independent
                  auditors for the  Corporation  for the fiscal year ending June
                  30, 2008. The votes were cast as follows:

                      Shares in favor               2,036,566
                      Shares against                    8,033
                      Abstentions                      20,565
                      Broker non-votes                      0

                  Approval of the adoption of the Espey Mfg. & Electronics Corp.
                  2007 Stock  Option  and  Restricted Stock Plan. The votes were
                  cast as follows:

                      Shares in favor               1,135,721
                      Shares against                  550,665
                      Abstentions                      14,212
                      Broker non-votes                      0

Item 5.       Other Information

              None


Item 6.       Exhibits

              (a)     Exhibits

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

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

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

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

                                       12
<PAGE>


                               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, 2008
-----------------
      Date


                                       13