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 September 30, 2008

                          Commission File Number I-4383


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

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

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

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


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

         Yes  |X|          No  [ ]

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

         Large accelerated filer |_|             Accelerated filer |_|

         Non-accelerated filer |_|               Smaller reporting company |X|

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

         Yes  |_|          No  |X|


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

                 Class                          Outstanding at November 13, 2008
                 -----                          --------------------------------
      Common stock, $.33-1/3 par value                   2,325,353 shares

<PAGE>

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

PART I  FINANCIAL INFORMATION                                               PAGE

        Item 1   Financial Statements:

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

                       Statements of Income (Unaudited) -
                       Three Months Ended September 30, 2008 and 2007          3

                       Statements of Cash Flows (Unaudited)-
                       Three Months Ended September 30, 2008 and 2007          4

                       Notes to Financial Statements (Unaudited)               5

        Item 2   Management's Discussion and Analysis of                       8
                 Financial Condition and Results of Operations

        Item 3   Quantitative and Qualitative Disclosures About Market Risk   11

        Item 4   Controls and Procedures                                      11


PART II OTHER INFORMATION AND SIGNATURES                                      12

        Item 1   Legal Proceedings                                            12

        Item 2   Unregistered Sales of Equity Securities                      12

        Item 4   Submission of Matters to a Vote of Security Holders          12

        Item 5   Other Information                                            12

        Item 6   Exhibits                                                     12

        SIGNATURES                                                            13

<PAGE>


                          PART I: FINANCIAL INFORMATION
                          -----------------------------

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

<TABLE>
<CAPTION>

                                                                             2008            2008
                                                                         September 30,      June 30,
                                                                         -------------      --------

<S>                                                                        <C>           <C>
ASSETS:

          Cash and cash equivalents                                        $ 4,240,259   $ 6,851,753
          Short term investments                                             9,466,000     7,336,000
          Trade accounts receivable, net                                     4,284,555     3,646,127
          Income tax receivable                                                502,244       276,087
          Other receivables                                                      2,874         4,348
          ESOP receivable due to dividends on unallocated shares                    --        36,809

          Inventories:
                  Raw materials                                              1,556,332     1,575,116
                  Work-in-process                                              976,038     1,151,332
                  Costs relating to contracts in process, net of advance
                    payments of $968,648 at September 30, 2008 and
                    $959,175 at June 30, 2008                                8,343,542     7,461,786
                                                                           -----------   -----------
                                    Total inventories                       10,875,912    10,188,234

          Deferred income taxes                                                166,898       169,853
          Prepaid expenses and other current assets                            291,197       355,688
                                                                           -----------   -----------
                                    Total current assets                    29,829,939    28,864,899
                                                                           -----------   -----------

          Property, plant and equipment, net                                 2,955,478     2,956,590
          Loan receivable                                                       58,494        65,003
                                                                           -----------   -----------

                                    Total assets                           $32,843,911   $31,886,492
                                                                           ===========   ===========


See accompanying notes to the financial statements.                                       (Continued)
</TABLE>



                                       1
<PAGE>


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

<TABLE>
<CAPTION>

                                                                                  2008              2008
                                                                              September 30,        June 30,
                                                                              -------------        --------

<S>                                                                            <C>             <C>
LIABILITIES AND STOCKHOLDERS' EQUITY:

          Accounts payable                                                     $  1,531,034    $    600,931
          Accrued expenses:
                  Salaries, wages and commissions                                   254,654         184,377
                  Vacation                                                          481,018         542,441
                  ESOP payable                                                       30,984              --
                  Other                                                              36,793          46,253
          Payroll and other taxes withheld and accrued                               49,015          42,175
                                                                               ------------    ------------
                               Total current liabilities                          2,383,498       1,416,177
                                                                               ------------    ------------

          Deferred income taxes                                                     123,568         132,578
                                                                               ------------    ------------
                               Total liabilities                                  2,507,066       1,548,755
                                                                               ------------    ------------


          Common stock, par value $.33-1/3 per share.
              Authorized 10,000,000 shares; issued 3,029,874 shares
              on September 30, 2008 and June 30, 2008.  Outstanding
              2,327,358 and 2,325,902 (includes 219,167 and
              225,000 Unearned ESOP Shares on September 30, 2008
              and June 30, 2008, respectively)                                    1,009,958       1,009,958

          Capital in excess of par value                                         13,568,187      13,476,609

          Retained earnings                                                      25,721,621      25,796,703
                                                                               ------------    ------------
                                                                                 40,299,766      40,283,270

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

                  Treasury shares, cost of 702,516 shares on September
                  30, 2008 and 703,972 shares on June 30, 2008                   (6,711,673)     (6,694,285)
                                                                               ------------    ------------
                               Total stockholders' equity                        30,336,845      30,337,737
                                                                               ------------    ------------

                               Total liabilities and stockholders' equity      $ 32,843,911    $ 31,886,492
                                                                               ============    ============


See accompanying notes to the financial statements.
</TABLE>


                                       2
<PAGE>

                         ESPEY MFG. & ELECTRONICS CORP.
                        Statements of Income (Unaudited)
                 Three Months Ended September 30, 2008 and 2007


<TABLE>
<CAPTION>
                                                              Three Months
                                                     September 30,    September 30,
                                                         2008             2007
                                                     ------------------------------
<S>                                                  <C>              <C>
Net sales                                            $  6,053,519     $  6,301,786
Cost of sales                                           4,902,244        4,952,676
                                                     ------------     ------------
       Gross profit                                     1,151,275        1,349,110

Selling, general and administrative expenses              678,227          667,553
                                                     ------------     ------------

       Operating income (expense)                         473,048          681,557
                                                     ------------     ------------

Other income (expense)

       Interest and dividend income                       102,915          196,121
       Other                                               11,241           19,485
                                                     ------------     ------------
                                                          114,156          215,606
                                                     ------------     ------------

Income before income taxes                                587,204          897,163

Provision for income taxes                                188,908          305,580
                                                     ------------     ------------

                  Net income                         $    398,296     $    591,583
                                                     ============     ============

Net income per share:

       Basic                                         $       0.19     $      0.29
       Diluted                                       $       0.19     $      0.28
                                                     ------------     ------------

Weighted average number of shares outstanding:

           Basic                                        2,102,306        2,065,879
           Diluted                                      2,116,039        2,103,746
                                                     ------------     ------------

Dividends per share:                                 $    0.2250      $     0.1750
                                                     ============     ============

See accompanying notes to the financial statements.
</TABLE>

                                       3
<PAGE>


                         ESPEY MFG. & ELECTRONICS CORP.
                      Statements of Cash Flows (Unaudited)
                 Three Months Ended September 30, 2008 and 2007
<TABLE>
<CAPTION>

                                                                                          September 30,
                                                                                      2008             2007
                                                                                ------------   -------------
<S>                                                                             <C>             <C>
Cash Flows From Operating Activities:
       Net income                                                               $    398,296    $    591,583

       Adjustments to reconcile net income to net
         cash provided by operating activities:
       Excess tax benefits from share-based compensation                              30,245          53,725
       Stock-based compensation                                                       29,083          50,840
       Depreciation                                                                  124,325         123,657
       ESOP compensation expense                                                     118,418         134,247
       Loss on disposal of assets                                                      2,542           1,526
       Deferred income tax                                                            (6,055)        (14,229)
       Changes in assets and liabilities:
           Increase in trade receivable, net                                        (638,428)       (335,763)
           Increase in income taxes receivables                                     (226,157)        (64,358)
           Decrease (increase) in other receivables                                    1,474          (2,486)
           Decrease in ESOP receivable due to dividends on unallocated shares         36,809              --
           (Increase) decrease in inventories                                       (687,678)        624,150
           Decrease in prepaid expenses and other current assets                      64,491         143,504
           Increase (decrease) in accounts payable                                   930,103        (432,144)
           Increase in accrued salaries, wages and commissions                        70,277          25,191
           Decrease in vacation accrual                                              (61,423)        (91,239)
           Decrease in ESOP payable                                                  (87,434)        (43,604)
           Decrease in other accrued expenses                                         (9,460)           (114)
           Increase in payroll and other taxes withheld and accrued                    6,840          22,688
           Decrease in income taxes payable                                          (30,245)       (253,668)
                                                                                ------------   -------------
                  Net cash provided by operating activities                           66,023         533,506
                                                                                ------------   -------------

Cash Flows From Investing Activities:
       Additions to property, plant and equipment                                   (125,755)        (72,359)
       Proceeds from loan receivable                                                   6,509              --
       Purchase of short term investments                                         (4,242,000)       (864,000)
       Maturity of short term investments                                          2,112,000         864,000
                                                                                ------------   -------------
                  Net cash used in investing activities                           (2,249,246)        (72,359)
                                                                                ------------   -------------

Cash Flows From Financing Activities:
       Dividends on common stock                                                    (473,378)       (360,147)
       Purchase of treasury stock                                                    (52,038)       (370,857)
       Proceeds from exercise of stock options                                        66,900         156,100
       Excess tax benefits from share-based compensation                              30,245          53,725
                                                                                ------------   -------------
                  Net cash used in financing activities                             (428,271)       (521,179)
                                                                                ------------   -------------

Decrease in cash and cash equivalents                                             (2,611,494)        (60,032)
Cash and cash equivalents, beginning of period                                     6,851,753      11,096,111
                                                                                ------------   -------------
Cash and cash equivalents, end of period                                        $  4,240,259   $  11,036,079
                                                                                ============   =============

Supplemental disclosures of cash flow information:
       Income Taxes Paid                                                        $    400,000   $     540,000
                                                                                ============   =============

See accompanying notes to the  financial statements.
</TABLE>


                                       4
<PAGE>

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

Note 1. Basis of Presentation

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

Note 2. Net Income per Share

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

Note 3. Stock Based Compensation

Effective July 1, 2006, the Company  adopted  Statement of Financial  Accounting
Standards  No. 123 (Revised  2004),"Share-Based  Payment"  ("SFAS No. 123 (R)"),
which amends SFAS No. 123 and  supersedes  Accounting  Principles  Board Opinion
("APB") No. 25 in establishing  standards for the accounting for transactions in
which an entity exchanges its equity instruments for goods or services,  as well
as transactions  in which an entity incurs  liabilities in exchange for goods or
services that are based on the fair value of the entity's equity  instruments or
that 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  September  30, 2008 and 2007,  was $29,083 and $50,840,
respectively,  before income taxes.  The related total  deferred tax benefit was
approximately  $2,477 and $4,017,  for the three months ended September 30, 2008
and 2007,  respectively.  Prior to the adoption of SFAS No. 123(R),  the Company
presented all tax benefits for  deductions  resulting from the exercise of stock
options as operating cash flows in the Statements of Cash Flows. SFAS No. 123(R)
requires  the tax  benefits  resulting  from tax  deductions  in  excess  of the
compensation  cost recognized for those options to be classified and reported as
both an  operating  cash  outflow and a financing  cash inflow on a  prospective
basis upon adoption.

As of  September  30, 2008,  there was  approximately  $118,984 of  unrecognized
compensation  cost  related  to  stock  option  awards  that is  expected  to be
recognized as expense over a period of 1.75 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

                                       5
<PAGE>

stock to  employees  of the Company at the fair market value of the common stock
on the date of grant. Generally,  options granted have a two-year vesting period
based on two years of continuous  service and have a ten-year  contractual life.
Option grants provide for  accelerated  vesting if there is a change in control.
Shares issued upon the exercise of options are from those held in Treasury.  The
2007 Plan was approved by the Company's  shareholders  at the  Company's  Annual
Meeting on November 30, 2007 and supercedes the Company's 2000 Stock Option Plan
(the "2000 Plan").  Options  covering 400,000 shares are authorized for issuance
under the 2007 Plan, of which 34,400 have been granted as of September 30, 2008.
While no  further  grants of  options  may be made  under the 2000  Plan,  as of
September 30, 2008,  87,900 options were  outstanding of which 53,900 are vested
and exercisable.

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

The table below outlines the weighted average  assumptions that the Company used
to calculate stock-based employee compensation for the three months ended:


<TABLE>
<CAPTION>

                                                  September 30, 2008    September 30,2007
                                                  -------------------   -----------------
<S>                                                         <C>            <C>
       Dividend yield                                          3.34 %                2.4%
       Expected stock price volatility                        24.41 %              22.29%
       Risk-free interest rate                                 3.91 %               4.54%
       Expected option life (in years)                          4 yrs               5 yrs
       Weighted average fair value per share of options
         granted during the period                             $3.594               $4.04
</TABLE>

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

The following  table  summarizes  stock option  activity during the three months
ended September 30, 2008:

<TABLE>
<CAPTION>
                                                            Employee Stock Options Plan
                                                  ----------------------------------------------
                                                                                      Weighted
                                                  Number of         Weighted           Average
                                                   Shares            Average          Remaining
                                                   Subject          Exercise         Contractual
                                                  To Option           Price             Term
                                                  ----------------------------------------------
<S>                                               <C>                 <C>                  <C>
       Balance at July 1, 2008                    126,500             $18.40               8.10
       Granted                                         --
       Exercised                                   (4,200)            $15.93
       Forfeited or expired                            --
                                                  ----------------------------------------------
       Balance September 30, 2008                 122,300             $18.49               8.14
                                                  ==============================================
       Exercisable at September 30, 2008           53,900             $16.66               7.02
                                                  ==============================================
</TABLE>

The intrinsic value of stock options exercised was $18,495 and $144,447,  during
the three months ended September 30, 2008 and 2007, respectively.  The intrinsic
value of stock options  outstanding and exercisable as of September 30, 2008 and
2007 was $90,945 and $239,585, 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 September  30, 2008.  As a
government  contractor,  the Company is continually  subject to audit by various
agencies of the U.S. Government to determine compliance with various procurement
laws and regulations.  As a result of such audits and as part of normal business
operations of the Company,  various  claims and charges can be asserted  against
the  Company.  It is not  possible  to  predict  the  outcome  of such  actions.
Currently the Company has no claims or assertions  pending or threatened against
it.

                                       6
<PAGE>

Note 5.  Recently Issued Accounting Standards

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

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

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

In July 2006, the FASB issued  Interpretation No. 48 ("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.

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 $118,418
for the quarter ended  September  30, 2008.  The ESOP shares as of September 30,
2008 were as follows:

      Allocated Shares                                                 442,886
      Committed-to-be-released shares                                    5,833
      Unreleased shares                                                219,167
                                                                   -----------

      Total shares held by the ESOP                                    667,886
                                                                   ===========

      Fair value of unreleased shares at September 30, 2008        $ 4,021,714
                                                                   ===========

                                       7
<PAGE>

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

Overview

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

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

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

In the first three months of fiscal  2009,  the Company  received  approximately
$5.5 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's  backlog was $44.2 million at
September  30, 2008 and is $42.7  million at November 10, 2008,  which  includes
$26.8 million from two significant customers.

The sales backlog gives the Company a solid base of future sales. Based upon the
backlog and the anticipated  schedule for the fulfillment of orders,  management
expects  sales for fiscal 2009 to be higher than fiscal 2008 sales.  In addition
to the backlog,  the Company currently has outstanding  quotations and potential
business  representing  approximately  $48.2  million in the  aggregate for both
repeat and new programs.

Sales to two significant  customers in the first three months of fiscal 2009 and
2008 represented  71.8% and 56.9%,  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 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.

                                       8
<PAGE>

The total  backlog for the Company of $44.2  million at September  30, 2008,  up
$10.1 million from September 30, 2007, and down $0.6 million from June 30, 2008,
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  September  30, 2008 were  $6,053,519  as
compared  to  $6,301,786  for the  same  period  in  2007,  representing  a 3.9%
decrease.  Generally, these decreases can be attributed to the contract specific
nature of the Company's business.  Net sales to two customers represented 72% of
total sales for the  quarter.  New orders  received in the first three months of
fiscal 2009 were approximately $5.5 million,  representing a 31.8% increase over
the amount of new orders received in the first three months of fiscal 2008.

For the three  months  ended  September  30,  2008 and 2007 gross  profits  were
$1,151,275 and $1,349,110,  respectively.  Gross profit as a percentage of sales
was 19.0% and 21.4%,  for the three  months ended  September  30, 2008 and 2007,
respectively.  The primary factor in determining  gross profit and net income is
product mix. The gross profits on mature  products and build to print  contracts
are  higher  as  compared  to  products  which  are  still  in  the  engineering
development stage or in the early stages of production.  In any given accounting
period the mix of product  shipments  between higher margin mature  programs and
less mature  programs,  including loss  contracts,  has a significant  impact on
gross  profit and net  income.  The  decreased  gross  profit  and gross  profit
percentage  in the three months  ended  September  30,  2008,  was the result of
shipping  mature products with favorable  margins,  offset by losses incurred on
contracts  with  significant  engineering  time  required  for  design  efforts.
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  September  30,  2008 was 169  compared  to 182  people at
September 30, 2007.

Selling, general and administrative expenses were consistent with the comparable
period one year earlier, $678,227 for the three months ended September 30, 2008;
an increase of $10,674, compared to the three months ended September 30, 2007.

Other income for three months ended  September 30, 2008 decreased as compared to
the three months ended  September 30, 2007 due to decreased  interest  income on
the Company's cash and cash equivalents and short-term investments.  The Company
does not believe that there is a significant risk associated with its investment
policy,  since at  September  30,  2008 all of the  investments  were  primarily
represented by short-term liquid investments  including  certificates of deposit
and money market funds.

                                       9
<PAGE>

The  effective  income  tax rate at  September  30,  2008 and 2007 was 32.2% and
34.1%, respectively.  The effective tax rate is less than the statutory tax rate
mainly due to the  benefit  the Company  receives  on its  Qualified  Production
Activities  and the benefit  derived from the ESOP  dividends  paid on allocated
shares.

Net income for the three months ended  September 30, 2008,  was $398,296 or $.19
per share,  both basic and  diluted,  compared  to $591,583 or $.29 and $.28 per
share, basic and diluted, respectively, for the three months ended September 30,
2007.  The decrease in net income per share was mainly due to lower gross profit
as a percentage of sales and decreased interest income.

Liquidity and Capital Resources

The Company's  working  capital is an appropriate  indicator of the liquidity of
its  business,  and  during the past  three  fiscal  years,  the  Company,  when
possible,  has  funded all of its  operations  with cash  flows  resulting  from
operating  activities and when necessary from its existing cash and investments.
The  Company  did not borrow  any funds  during  the last  three  fiscal  years.
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 September 30, 2008 was  approximately  $27.4
million.  During the three months ended  September 30, 2008 and 2007 the Company
repurchased 2,744 and 16,743 shares, respectively,  of its common stock from the
Company's  Employee  Retirement  Plan and Trust  ("ESOP"),  for a total purchase
price of $52,038 and $370,857,  respectively. Under existing authorizations from
the  Company's  Board of  Directors,  as of September  30, 2008,  management  is
authorized to purchase an additional $1,947,961 million of Company stock.

                                                Three Months Ended September 30,
                                                      2008             2007
                                                ------------      -----------
Net cash provided by operating activities       $    66,023       $  533,506
Net cash used in investing activities            (2,249,246)         (72,359)
Net cash used in financing activities              (428,271)        (521,179)

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
three  months of fiscal 2009 due to the  increase  in  purchases  of  short-term
investments.  The decrease in cash used in financing activities is due primarily
to the decrease in purchases of treasury stock.

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 three months ended September 30, 2008 and 2007, the Company  expended
$125,755 and $72,359,  respectively,  for plant  improvements and new equipment.
The Company has  budgeted  approximately  $350,000 for new  equipment  and plant
improvements in fiscal 2009. Management anticipates that the funds required will
be available from current operations.

The Company at certain  times enters into standby  letters of credit  agreements
with  financial  institutions  primarily  relating  to the  guarantee  of future
performance on certain contracts.  Contingent liabilities on outstanding standby
letters of credit agreements aggregated to zero at September 30, 2008.


                                       10
<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 smaller  reporting  company as defined  under  Securities  and
Exchange  Commission Rule 12b-2.  Pursuant to the exemption available to smaller
reporting  company  issuers under Item 305 of Regulation S-K,  quantitative  and
qualitative  disclosures  about  market  risk,  the  Company is not  required to
provide the information for this item.

Item 4T. Controls and Procedures

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

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

                                       11
<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>
            September 1 to
            September 30, 2008         2,744          $18.96           2,744          $1,947,961
</TABLE>

            (1)  Pursuant to a prior  Board of  Directors  authorization,  as of
            September  30, 2008 the Company can  repurchase  up to $1,947,961 of
            its common stock pursuant to an ongoing plan.

Item 3      Defaults Upon Senior Securities

            None

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

            None

Item 5.     Other Information

            None

Item 6.     Exhibits

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

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

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

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

                                       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

November 13, 2008
-----------------
      Date


                                       13