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 March 31, 2008

      [ ] 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 May 14, 2008
                    -----                       ---------------------------
      Common stock, $.33-1/3 par value               2,324,773 shares


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

<PAGE>

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

PART I   FINANCIAL INFORMATION                                              PAGE

         Item 1    Financial Statements:

                       Balance Sheet (Unaudited)  - March 31, 2008           1

                       Statements of Income (Unaudited) -
                       Three and Nine Months Ended March 31, 2008 and 2007   2

                       Statements of Cash Flows (Unaudited)-
                       Nine Months Ended March 31, 2008 and 2007             3

                       Notes to Financial Statements (Unaudited)             4

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

         Item 3    Controls and Procedures                                  11

PART II  OTHER INFORMATION                                                  12

         Item 1    Legal Proceedings                                        12

         Item 2    Unregistered Sales of Equity Securities and Use of
                   Proceeds                                                 12

         Item 3    Defaults on Senior Securities                            12

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

         Item 5    Other Information                                        12

         Item 6    Exhibits                                                 13

         SIGNATURES                                                         13

<PAGE>
<TABLE>
<CAPTION>
                                PART I: FINANCIAL INFORMATION

                                ESPEY MFG. & ELECTRONICS CORP.
                                  Balance Sheet (Unaudited)
                                        March 31, 2008
<S>                                                                                 <C>
ASSETS:

          Cash and cash equivalents                                              $  6,588,780
          Short term investments                                                    6,847,000
          Trade accounts receivable, net                                            3,795,069
          Other receivables                                                             4,873
          ESOP receivable due to dividends on unallocated shares                      129,681

          Inventories:
                  Raw materials                                                     1,622,904
                  Work-in-process                                                   2,852,379
                  Costs relating to contracts in process, net of advance
                    payments of  $230,700 at March 31, 2008                         6,086,123
                                                                                 ------------
                                    Total inventories                              10,561,406

          Deferred income taxes                                                       180,769
          Prepaid expenses and other current assets                                   340,970
                                                                                 ------------
                                    Total current assets                           28,448,548
                                                                                 ------------

          Property, plant and equipment, net                                        2,989,879
          Loan receivable                                                              73,605
                                                                                 ------------

                                    Total assets                                 $ 31,512,032
                                                                                 ============

LIABILITIES AND STOCKHOLDERS' EQUITY:

          Accounts payable                                                       $  1,127,907
          Accrued expenses:
                  Salaries, wages and commissions                                     182,515
                  Vacation                                                            527,616
                  Other                                                                41,974
          Payroll and other taxes withheld and accrued                                 41,983
          Income taxes payable                                                        175,723
                                                                                 ------------
                                    Total current liabilities                       2,097,718
                                                                                 ------------
          Deferred income taxes                                                       148,036
                                                                                 ------------
                                    Total liabilities                               2,245,754
                                                                                 ------------

          Common stock, par value $.33-1/3 per share.
              Authorized 10,000,000 shares; issued 3,029,874 shares
              on March 31, 2008. Outstanding 2,324,773 (includes
               231,042 Unearned ESOP Shares) on March 31, 2008                      1,009,958
          Capital in excess of par value                                           13,252,634
          Retained earnings                                                        25,278,350

          Less: Unearned ESOP Shares                                               (3,600,459)
                  Treasury shares, cost of 705,101 shares on March 31, 2008        (6,674,205)
                                                                                 ------------
                                    Total stockholders' equity                     29,266,278
                                                                                 ------------

                                    Total liabilities and stockholders' equity   $ 31,512,032
                                                                                 ============
</TABLE>

See accompanying notes to the financial statements.

                                       1
<PAGE>
<TABLE>
<CAPTION>
                                ESPEY MFG. & ELECTRONICS CORP.
                               Statements of Income (Unaudited)
                      Three and Nine Months Ended March 31, 2008 and 2007

                                                       Three Months                 Nine Months
                                                     2008          2007          2008          2007
                                                 -------------------------   -------------------------
<S>                                                <C>           <C>          <C>           <C>
Net sales                                        $ 6,479,020   $ 8,059,695   $19,512,950   $20,250,921
Cost of sales                                      4,301,589     6,443,561    14,303,824    15,979,258
                                                 -----------   -----------   -----------   -----------
       Gross profit                                2,177,431     1,616,134     5,209,126     4,271,663

Selling, general and
   administrative expenses                           647,998       697,740     2,017,370     2,137,463
                                                 -----------   -----------   -----------   -----------

       Operating income                            1,529,433       918,394     3,191,756     2,134,200
                                                 -----------   -----------   -----------   -----------

Other income (expense)

       Interest and dividend income                  137,594       151,896       537,039       447,285
       Other                                          16,186         9,589        64,748        43,939
                                                 -----------   -----------   -----------   -----------
                                                     153,780       161,485       601,787       491,224
                                                 -----------   -----------   -----------   -----------

Income before income taxes                         1,683,213     1,079,879     3,793,543     2,625,424

Provision for income taxes                           584,008       365,849     1,305,669       888,433
                                                 -----------   -----------   -----------   -----------

                  Net income                     $ 1,099,205   $   714,030   $ 2,487,874   $ 1,736,991
                                                 ===========   ===========   ===========   ===========

Net income per share:

       Basic                                     $      0.53   $      0.35   $      1.20   $      0.85
       Diluted                                   $      0.53   $      0.34   $      1.18   $      0.84
                                                 -----------   -----------   -----------   -----------

Weighted average number of shares outstanding:

       Basic                                       2,083,659     2,053,545     2,074,743     2,044,839
       Diluted                                     2,098,596     2,077,994     2,101,177     2,069,730
                                                 -----------   -----------   -----------   -----------

Dividends per share:                             $      1.70   $      0.15   $      2.05   $      0.41
                                                 ===========   ===========   ===========   ===========
</TABLE>

See accompanying notes to the financial statements.

                                       2
<PAGE>
<TABLE>
<CAPTION>

                                      ESPEY MFG. & ELECTRONICS CORP.
                                   Statements of Cash Flows (Unaudited)
                                Nine Months Ended March 31, 2008 and 2007
                                                                                             March 31,
                                                                                       2008            2007
                                                                                   ------------    ------------
<S>                                                                                     <C>             <C>
Cash Flows From Operating Activities:
       Net income                                                                  $  2,487,874    $  1,736,991

       Adjustments to  reconcile  net income to net cash  provided by  operating
          activities:
       Excess tax benefits from share-based compensation                                 83,471          64,636
       Stock option compensation                                                        115,822         119,856
       Depreciation                                                                     368,147         363,833
       ESOP compensation expense                                                        381,111         333,250
       Loss on disposal of assets                                                          (385)          5,404
       Deferred income tax                                                              (33,968)        (54,867)
       Changes in assets and liabilities:
          Increase in trade receivable, net                                            (774,588)       (363,816)
          (Increase) decrease in other receivables                                       (1,425)          3,528
          Increase in ESOP receivable due to dividends on unallocated shares           (129,681)             --
          Decrease in inventories                                                       587,921         720,318
          Decrease (increase) in prepaid expenses and other current assets              207,242         (91,540)
          Increase in accounts payable                                                  146,956         383,277
          Increase in accrued salaries, wages and commissions                            20,313          26,623
          Decrease in other accrued expenses                                             (4,061)         (4,265)
          (Decrease) increase in vacation accrual                                       (54,865)            726
          (Decrease) increase in payroll and other taxes withheld and accrued               (83)         13,611
          Decrease in income taxes payable                                             (107,691)       (602,718)
          Decrease in ESOP payable                                                     (381,111)       (112,408)
                                                                                   ------------    ------------
                      Net cash provided by operating activities                       2,910,999       2,542,439
                                                                                   ------------    ------------

Cash Flows From Investing Activities:
       Additions to property, plant and equipment                                      (423,131)       (371,701)
       Proceeds on sale of assets, net                                                       --              10
       Payment for loan receivable                                                      (80,000)             --
       Proceeds from return of loan receivable                                            6,395              --
       Purchase of short term investments                                            (5,887,000)     (3,648,000)
       Maturity of short term investments                                             3,360,000       3,360,000
                                                                                   ------------    ------------
                      Net cash used in investing activities                          (3,023,736)       (659,691)
                                                                                   ------------    ------------

Cash Flows From Financing Activities:
       Sale of treasury stock                                                                --              --
       Dividends on common stock                                                     (4,263,849)       (836,111)
       Purchase of treasury stock                                                      (716,363)       (298,064)
       Proceeds from exercise of stock options                                          502,147         252,260
       Excess tax benefits from share-based compensation                                 83,471          64,636
                                                                                   ------------    ------------
                      Net cash (used in) provided by financing activities            (4,394,594)       (817,279)
                                                                                   ------------    ------------

(Decrease) increase in cash and cash equivalents                                     (4,507,331)      1,065,469
Cash and cash equivalents, beginning of period                                       11,096,111       7,072,615
                                                                                   ------------    ------------
Cash and cash equivalents, end of period                                              6,588,780       8,138,084
                                                                                   ============    ============

Supplemental disclosures of cash flow information:
       Income Taxes Paid                                                           $  1,290,000    $  1,417,038
                                                                                   ============    ============

Non-cash investing and financing activities:
</TABLE>

See accompanying notes to the financial statements.

                                       3
<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  March 31,  2008 and 2007,  was  $32,491  and  $43,836,
respectively,  before income taxes.  The related total  deferred tax benefit was
approximately  $2,487 and $3,470,  for the three months ended March 31, 2008 and
2007,  respectively.  Total stock-based  compensation  expense recognized in the
Statement  of Income for the nine  months  ended  March 31,  2008 and 2007,  was
$115,822 and $119,856,  respectively,  before  income  taxes.  The related total
deferred tax benefit was  approximately  $8,991 and $9,462,  for the nine months
ended March 31, 2008 and 2007,  respectively.  Prior to the adoption of SFAS No.
123(R), the Company presented all tax benefits for deductions resulting from the
exercise of stock  options as  operating  cash flows in the  Statements  of Cash
Flows.  SFAS No. 123(R) requires the tax benefits  resulting from tax deductions
in excess of the compensation cost recognized for those options to be classified
and reported as both an operating  cash outflow and a financing cash inflow on a
prospective basis upon adoption.

As  of  March  31,  2008,  there  was  approximately   $55,201  of  unrecognized
compensation  cost  related  to  stock  option  awards  that is  expected  to be
recognized as expense over a period of 1 year.

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 March 31, 2008. While no further grants of options may be made under the 2000
Plan, as of March 31, 2008,  96,100 options were outstanding of which 28,700 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 nine months
ended March 31, 2008:

                                           Three Months Ended  Nine Months Ended
                                             March 31, 2008     March 31, 2008
                                           ------------------  -----------------
 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 nine months
ended March 31, 2008:

                                               Employee Stock Options Plan
                                        -------------------------------------
                                                                   Weighted
                                          Number of   Weighted      Average
                                           Shares      Average     Remaining
                                           Subject    Exercise    Contractual
                                          To Option     Price        Term
                                        -------------------------------------
     Balance at July 1, 2007               138,800      $15.77       7.38
     Granted                                    --          --         --
     Exercised                             (41,100)     $12.22         --
     Forfeited or expired                   (1,600)     $18.05         --
                                        -------------------------------------
     Balance at March 31, 2008              96,100      $17.25       8.03
                                        =====================================
     Exercisable at March 31, 2008          28,700      $15.37       6.88
                                        =====================================

The intrinsic value of stock options  exercised was $240,245 and $106,108 during
the nine months ended March 31, 2008 and 2007, respectively. The intrinsic value
of stock options  outstanding  and exercisable as of March 31, 2008 and 2007 was
$132,828 and $389,485, 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  March  31,  2008.  As a
government  contractor,  the Company is continually  subject to audit by various
agencies of the U.S. Government to determine compliance with various procurement
laws and regulations.  As a result of such audits and as part of normal business
operations of the Company,  various  claims and charges can be asserted  against
the  Company.  It is not  possible  to  predict  the  outcome  of such  actions.
Currently the Company has no claims or assertions 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
$117,937 for the quarter  ended March 31, 2008 and  $381,111 for the  nine-month
period  ending  March 31,  2008.  The ESOP  shares as of March 31,  2008 were as
follows:

        Allocated Shares                                           418,076
        Committed-to-be-released shares                             18,125
        Unreleased shares                                          231,042
                                                               -----------

        Total shares held by the ESOP                              667,243
                                                               ===========

        Fair value of unreleased shares at March 31, 2008      $ 4,620,840
                                                               ===========

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

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

In the first nine  months of fiscal  2008,  the Company  received  approximately
$16.3  million in new orders.  These orders  include both  follow-on  production
quantities for mature  products and  engineering  development  orders which will
enable the  Company to utilize  its  engineering  expertise  in  developing  new
customer  specific  products.  Some of these products,  once developed,  will be
produced in the  Company's  manufacturing  facility  and are expected to provide
large production  order quantities over several years.  These orders are in line
with the  Company's  strategy of getting  involved in  long-term  high  quantity
military and industrial products.  The Company's backlog is $41.8 million at May
12, 2008, which includes $27.5 million from the two most  significant  customers
in the first nine months of fiscal 2008.

The sales  backlog of  approximately  $33.0  million at March 31, 2008 gives the
Company a solid base of future sales.  Management  expects sales for fiscal 2008
to be slightly  less than fiscal 2007  sales.  In addition to the  backlog,  the
Company currently has outstanding  quotations and expected business representing
approximately $34.7 million in the aggregate for both repeat and new programs.

Sales to two  significant  customers in the first nine months of fiscal 2008 and
2007 represented  58.0% and 58.9%,  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 backlog at
March  31,  2008 of  $33.0  million  includes  $23.0  million  from the two most
significant customers in the first nine months 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 $33.0  million at March 31, 2008,  up $0.9
million  from March 31,  2007,  and up $1.6  million  from  December  31,  2007,
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 March 31, 2008 were  $6,479,020 as compared
to $8,059,695 for the same period in 2007,  representing a 19.6%  decrease.  Net
sales for the nine months ended March 31, 2008 were  $19,512,950  as compared to
$20,250,921  for  the  same  period  in  2007,  representing  a  3.6%  decrease.
Generally,  these decreases can be attributed to the contract specific nature of
the  Company's  business.  Also,  one  large  program  currently  in  production
experienced vendor delays with material needed to produce power supplies,  which
caused  decreased  sales for the quarter.  New orders received in the first nine
months of fiscal 2008 were  approximately  $16.3  million,  representing a 10.9%
increase  over the amount of new  orders  received  in the first nine  months of
fiscal  2007.  The sales  order  backlog  has been over $30  million  for twelve
consecutive fiscal quarters and expectations are this trend will continue.

For the three months ended March 31, 2008 and 2007 gross profits were $2,177,431
and  $1,616,134,  respectively.  Gross profit as a percentage of sales was 33.6%
and 20.1%, for the three months ended March 31, 2008 and 2007, respectively. For
the nine months ended March 31, 2008 and 2007 gross profits were  $5,209,126 and
$4,271,663,  respectively.  Gross profit as a percentage  of sales was 26.7% and
21.1%,  for the nine months  ended March 31,  2008 and 2007,  respectively.  The
primary  factor in  determining  gross profit and net income is product mix. The
gross  profits on mature  products  and build to print  contracts  are higher as
compared to products which are still in the engineering  development stage or in
the  early  stages of  production.  In any given  accounting  period  the mix of
product shipments between higher margin mature programs and less mature programs
including  loss  contracts,  has a  significant  impact on gross  profit and net
income.  The improved gross profit and gross profit  percentage in the three and
nine months ended March 31,  2008,  was the result of shipping  mature  products
with favorable margins. 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 March 31,  2008 was 173  compared to 182 people at
March 31, 2007.

Selling,  general and administrative expenses were $647,998 for the three months
ended March 31, 2008;  a decrease of $49,742  compared to the three months ended
March 31, 2007. Selling, general and administrative expenses were $2,017,370 for
the nine months  ended March 31,  2008;  a decrease of $120,093  compared to the
nine months  ended March 31,  2007.  The  decrease is due  primarily  to reduced
headcount.

                                       8
<PAGE>

Other income for three months ended March 31, 2008  decreased as compared to the
three  months  ended  March 31,  2007 due to  decreased  interest  income on the
Company's cash and cash equivalents and short-term  investments.  Lower interest
rates and lower cash and cash  equivalents due to the special  dividend of $1.50
per share paid to  shareholders on March 20, 2008,  caused this decrease.  Other
income for the nine months  ended March 31,  2008  increased  as compared to the
nine  months  ended  March  31,  2007 due to  higher  balances  of cash and cash
equivalents  for a majority of the nine month period  ended March 31, 2008.  The
Company does not believe that there is a significant  risk  associated  with its
investment policy,  since at March 31, 2008 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 March 31,  2008 and 2007 was 34.4% and 33.8%,
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 March 31, 2008, was $1,099,205 or $.53 per
share, both basic and diluted,  compared to $714,030 or $.35 and $.34 per share,
basic and diluted,  respectively, for the three months ended March 31, 2007. Net
income for the nine months ended March 31,  2008,  was  $2,487,874  or $1.20 and
$1.18 per share, basic and diluted, respectively, compared to $1,736,991 or $.85
and $.84 per share, basic and diluted,  respectively,  for the nine months ended
March 31,  2007.  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 March 31,  2008 was  approximately  $26.4
million.  During the three  months  ended  March 31,  2008 and 2007 the  Company
repurchased 7,500 and 10,196 shares, respectively,  of its common stock from the
Company's  Employee  Retirement  Plan and Trust  ("ESOP"),  for a total purchase
price of $144,600 and $187,861, respectively. During the nine months ended March
31,  2008  and  2007  the  Company   repurchased   33,220  and  16,269   shares,
respectively,  of its common  stock for a total  purchase  price of $716,363 and
$298,064,  respectively.  Under existing authorizations from the Company's Board
of  Directors,  as of March 31, 2008,  management  is  authorized to purchase an
additional $1,283,637 million of Company stock.

                                                   Nine Months Ended March 31,
                                                     2008              2007
                                                  -----------       ----------
Net cash provided by operating activities         $2,910,999        $2,542,439
Net cash used in investing activities             (3,023,736)         (659,691)
Net cash used in financing activities             (4,394,594)         (817,279)

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
nine  months 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 nine  months  ended March 31,  2008 and 2007,  the  Company  expended
$423,131 and $371,701,  respectively,  for plant improvements and new equipment.
The Company has  budgeted  approximately  $400,000 for new  equipment  and plant
improvements in fiscal 2008 (and does not anticipate additional  expenditures of
this nature during the fourth quarter).

                                       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 March 31, 2008.



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>
              March 1 to
              March 31, 2008             7,500          $19.28           7,500             $1,283,637
</TABLE>

              (1)  Pursuant to a prior Board of Directors  authorization,  as of
              March 31, 2008 the Company can  repurchase up to $1,283,637 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

              None

Item 5.       Other Information

              None


                                       11
<PAGE>


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






                               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

May 14, 2008
------------
   Date

                                       12