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 September 30, 2005

      [ ] 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 November 10, 2005
              -------                           --------------------------------
 Common stock, $.33-1/3 par value                        1,151,212 shares


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


<PAGE>
<TABLE>
<CAPTION>

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

PART I    FINANCIAL INFORMATION                                                        PAGE
<S>                                                                                 <C>

          Item 1      Financial Statements:

                          Balance Sheet (Unaudited)  - September 30, 2005               1

                          Statements of Income (Unaudited) -
                          Three Months Ended September 30, 2005 and 2004                3

                          Statements of Cash Flows (Unaudited)-
                          Three Months Ended September 30, 2005 and 2004                4

                          Notes to Financial Statements (Unaudited)                     5

          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 AND SIGNATURES

          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 and Reports on Form 8-K                                 13

          SIGNATURES                                                                   14

</TABLE>
<PAGE>

                          PART I: Financial Information

                         ESPEY MFG. & ELECTRONICS CORP.

                            Balance Sheet (Unaudited)

                               September 30, 2005
                            -------------------------
                                   A S S E T S


                                                                       2005
                                                                   September 30,
                                                                   -------------
ASSETS:

          Cash and cash equivalents                                $   9,014,126
          Short term investments                                       3,360,000
          Trade accounts receivable, net                               2,919,461
          Other receivables                                                9,455


          Inventories:
                  Raw materials and supplies                           1,754,412
                  Work-in-process                                      2,723,012
                  Costs relating to contracts in
                        process, net of advance payments of
                        $97,758 at September 30, 2005                  6,389,404
                                                                   -------------

                                    Total inventories                 10,866,828
                                                                   -------------

          Deferred income taxes                                          135,997
          Prepaid expenses and other current assets                      636,946
                                                                   -------------

                                    Total current assets              26,942,813
                                                                   -------------

          Property, plant and equipment, net                           2,898,312
                                                                   -------------

                                    Total assets                   $  29,841,125
                                                                   =============


See accompanying notes to the financial statements.                (Continued)

                                       1
<PAGE>

                         ESPEY MFG. & ELECTRONICS CORP.

                      Balance Sheet (Unaudited), Continued

                               September 30, 2005

                      ------------------------------------
                      LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                             2005
                                                                         September 30,
                                                                         -------------
<S>                                                                      <C>

LIABILITIES AND STOCKHOLDERS' EQUITY:

      Accounts payable                                                   $     841,463
      Accrued expenses:
          Salaries, wages and commissions                                       92,083
          Employees' insurance costs                                                --
          Vacation                                                             442,488
          ESOP payable                                                          83,901
          Other                                                                 48,103
      Payroll and other taxes withheld and accrued                              44,266
      Income taxes payable                                                     178,221
                                                                         -------------
                           Total current liabilities                         1,730,525
                                                                         -------------
      Deferred income taxes                                                    280,557
                                                                         -------------
                           Total liabilities                                 2,011,082
                                                                         -------------

      Common stock, par value .33-1/3 per share. Authorized 10,000,000
          shares; issued 1,514,937 shares on September 30, 2005
          Outstanding  1,001,212 on September 30, 2005                         504,979

      Capital in excess of par value                                        12,405,915

      Retained earnings                                                     25,352,395
                                                                         -------------


      Less:   Cost of 150,000 Unearned ESOP Shares
              on September 30, 2005                                         (4,335,000)
              Cost of 363,725 Treasury shares on September 30, 2005         (6,098,246)
                                                                         -------------
                           Total stockholders' equity                       27,830,043
                                                                         -------------
                                    Total liabilities and
                                    stockholders' equity                 $  29,841,125
                                                                         =============
</TABLE>

See accompanying notes to the financial statements.

                                       2
<PAGE>

                         ESPEY MFG. & ELECTRONICS CORP.

                        Statements of Income (Unaudited)

                 Three Months Ended September 30, 2005 and 2004
                    ----------------------------------------


                                                             Three Months
                                                          2005           2004
                                                      --------------------------

Net sales                                             $ 4,560,574    $ 4,730,327
Cost of sales                                           3,680,284      4,081,185
                                                      -----------    -----------
         Gross profit                                     880,290        649,142

Selling, general and
   administrative expenses                                669,719        600,679
                                                      -----------    -----------
         Operating income                                 210,571         48,463
                                                      -----------    -----------

Other income (expense)

         Interest and
           dividend income                                 98,934         34,870
         Other                                             (2,823)         3,217
                                                      -----------    -----------
                                                           96,111         38,087
                                                      -----------    -----------

Income before income taxes                                306,682         86,550

Provision for income taxes                                 88,938         25,965
                                                      -----------    -----------


                  Net income                          $   217,744    $    60,585
                                                      ===========    ===========

Net income per share:

         Basic                                        $       .22    $       .06
         Diluted                                      $       .21    $       .06
                                                      -----------    -----------

Weighted average number of shares outstanding:
         Basic                                          1,008,582      1,013,160
         Diluted                                        1,027,471      1,020,880
                                                      ===========    ===========

See accompanying notes to the financial statements.

                                       3
<PAGE>
<TABLE>
<CAPTION>

                                    ESPEY MFG. & ELECTRONICS CORP.
                                 Statements of Cash Flows (Unaudited)
                            Three Months Ended September 30, 2005 and 2004

                                                                                   September 30,
                                                                                2005            2004
                                                                            ------------    ------------
<S>                                                                         <C>             <C>
Cash Flows From Operating Activities:

       Net income                                                           $    217,744    $     60,585

       Adjustments to reconcile net income to net cash
       provided by operating activities:
       Depreciation                                                              128,874         127,722
       ESOP compensation expense                                                 106,401              --
       Loss on disposal of assets                                                  8,077
       Deferred income tax                                                       (17,500)         10,731
       Changes in assets and liabilities:
              Decrease (increase) in trade receivables, net                       73,779        (729,310)
              Increase in other receivables                                       (6,282)         (5,390)
              (Increase) decrease in inventories                                (499,276)        333,673
              (Increase) decrease in prepaid expenses and
                other current assets                                            (300,951)         87,581
              Increase in accounts payable                                       462,692         496,057
              Increase in accrued salaries, wages and commissions                 29,805          17,133
              Increase in accrued employees' insurance costs                          --           1,304
              (Decrease) increase in other accrued expenses                       (5,680)          3,941
              Decrease in vacation accrual                                       (55,527)        (64,519)
              Increase in payroll and other taxes withheld and accrued             8,289           8,529
              Decrease in income taxes payable                                  (133,907)        (49,669)
              Decrease in ESOP payable                                           (22,500)             --
                                                                            ------------    ------------
                      Net cash (used in) provided by operating activities         (5,962)        298,368
                                                                            ------------    ------------
Cash Flows From Investing Activities:

       Unearned ESOP Shares                                                   (4,335,000)             --
       Additions to property, plant & equipment                                  (50,426)       (113,761)
       Purchase of short-term investments                                     (1,920,000)       (384,000)
       Maturity of short-term investments                                      1,632,000              --
                                                                            ------------    ------------
                      Net cash used in investing activities                   (4,673,426)       (497,761)
                                                                            ------------    ------------
Cash Flows From Financing Activities:

       Sale of treasury stock                                                  4,396,424              --
       Dividends on common stock                                                (149,903)       (151,621)
       Purchase of treasury stock                                               (417,684)        (90,315)
       Proceeds from exercise of stock options                                    61,170           3,590
                                                                            ------------    ------------
                      Net cash provided by (used in) financing activities      3,890,007        (238,346)
                                                                            ------------    ------------
Decrease in cash and cash equivalents                                           (789,381)       (437,739)
Cash and cash equivalents, beginning of period                                 9,803,507      12,310,972
                                                                            ------------    ------------
Cash and cash equivalents, end of period                                       9,014,126      11,873,233
                                                                            ============    ============
Income Taxes Paid                                                           $    240,345    $     64,903
                                                                            ============    ============
</TABLE>

See accompanying notes to the financial statements.

                                       4
<PAGE>

                         ESPEY MFG. & ELECTRONICS CORP.

                    Notes to Financial Statements (Unaudited)

                               -------------------

Note 1. Basis of Presentation

In the opinion of management the  accompanying  unaudited  financial  statements
contain  all  adjustments  (consisting  of only  normal  recurring  adjustments)
necessary for a fair  presentation of the results for such periods.  The results
for any  interim  period are not  necessarily  indicative  of the  results to be
expected for the full fiscal year. Certain information and footnote  disclosures
normally  included in financial  statements  prepared in accordance  with United
States generally accepted accounting  principles have been condensed or omitted.
These financial statements should be read in conjunction with the Company's most
recent audited financial statements included in its 2005 Form 10-K.

Note 2. Net income per Share

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

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

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

                                       5
<PAGE>

                                               Three Months
                                            Ended September 30,
                                             2005         2004
                                          -----------------------
              Net income as reported      $  217,744   $   60,585

              Deduct: Total stock-based
              employee compensation
              expense determined under
              fair value based method
              for all awards, net of
              related  tax effects            (4,858)      (8,377)
                                          ----------   ----------
              Pro forma net income        $  212,886   $   52,208
                                          ==========   ==========
              Net income per share:

                 Basic-as reported        $      .22   $      .06
                                          ==========   ==========
                 Basic-pro forma          $      .21   $      .05
                                          ==========   ==========


                 Diluted-as reported      $      .21   $      .06
                                          ==========   ==========
                 Diluted-pro forma        $      .21   $      .05
                                          ==========   ==========

Note 4. Commitments and Contingencies

The Company has entered into standby letters of credit agreements with financial
institutions  primarily  relating  to the  guarantee  of future  performance  on
certain  contracts.  Contingent  liabilities on outstanding  standby  letters of
credit agreements aggregated $39,300 at September 30, 2005. The Company does not
expect to fund any of the  amounts  under the  standby  letters of credit.  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 are asserted  against the
Company.  It is not  possible  at this time to predict  the  outcome of all such
actions. However, management is of the opinion that it has good defenses against
such actions and believes that none of these matters will have a material effect
on the consolidated  financial position,  results of operations or cash flows of
the Company.

Note 5. Recently Issued Accounting Standards

In December 2004, the FASB issued SFAS No. 123R, "Share Based Payment." SFAS No.
123R requires companies to recognize in the income statement the grant-date fair
value of stock options and other equity-based  compensation issued to employees.
SFAS No. 123R was originally  effective for interim and annual periods beginning
after  December 15, 2005.  The effective  date has been delayed by the SEC until
annual  periods  beginning  after  December 15,  2005.  The SFAS No. 123R is not
expected to have a material  impact on the Company's  results of operations  and
financial condition.

In December 2004, the FASB issued SFAS No. 153,  Exchanges of Nonmonetary Assets
-  Accounting  Principles  Board  Opinion  No. 29,  Accounting  for  Nonmonetary
Transactions.  SFAS No. 153  requires  that  exchanges  should be  recorded  and
measured at the fair value of the assets  exchanged,  with  certain  exceptions.
SFAS No. 153 is effective for nonmonetary  exchanges occurring in fiscal periods
beginning  after June 15, 2005.  The adoption of SFAS No. 153 is not expected to
have a significant  impact on the  Company's  results of operations or financial
position.

                                       6
<PAGE>

In June 2005,  the FASB  issued  SFAS No.  154,  "Accounting  Changes  and Error
Corrections",  a replacement of APB Opinion No. 20,  "Accounting  Changes",  and
SFAS No. 3, "Reporting Accounting Changes in Interim Financial Statements". SFAS
No. 154 changes the requirements of the accounting for and reporting of a change
in  accounting  principle.  Previously,  most  voluntary  changes in  accounting
principles  required  recognition via a cumulative  effect adjustment within net
income  of the  period  of the  change.  SFAS  No.  154  requires  retrospective
application to prior periods' financial statements,  unless it is impractical to
determine  either the  period-specific  effects or the cumulative  effect of the
change.  SFAS No. 154 is effective for  accounting  changes made in fiscal years
beginning  after December 15, 2005;  however,  the Statement does not change the
transition  provisions of any of the existing accounting  pronouncements.  We do
not  believe  adoption  of SFAS  No.  154 will  have a  material  effect  on our
consolidated financial position, results of operations or cash flows.

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. Prior to July 15, 2005, the ESOP owned 230,120 shares,  all
of which were  allocated to  employees.  On July 15,  2005,  pursuant to a Stock
Purchase Agreement dated as of such date, the Company, by selling 150,000 shares
of its  common  stock,  par value  $0.33 1/3 per  share,  to the  Espey  Mfg.  &
Electronics  Corp. Employee Stock Ownership Plan Trust,  provided more shares to
be allocated to employees for services rendered over the next 15 years. The ESOP
paid  $28.90 per share,  for an  aggregate  purchase  price of  $4,335,000.  The
determination  of the purchase price was based on a fairness opinion obtained by
an independent  valuation firm. The ESOP borrowed from the Corporation an amount
equal to the  purchase  price.  The loan will be repaid in  fifteen  (15)  equal
annual  installments of principal and the unpaid balance will bear interest at a
fixed rate of 6.25% per annum,  the  "prime  rate" as quoted in The Wall  Street
Journal on the date of closing.

The Board of Directors  of the Company had  approved a purchase  price per share
equal to a 5% discount  on the average  trading  price of the  Company's  common
stock on the American Stock Exchange on the date before closing, but in no event
greater than the fair market value as  determined  by an  independent  valuation
firm retained by the ESOP.  The average  trading  price of the Company's  common
stock on the American Stock Exchange on July 14, 2005 was $30.72.

In making the sale, the Company relied on the exemption from registration  under
Section 4(2) of the Securities Act of 1933, as amended,  because the shares sold
were offered only to the ESOP.

After giving  effect to the  transaction  the ESOP owned  380,120  shares of the
Company's 1,158,294 outstanding shares of common stock as of July 15, 2005.

The  Company  makes  annual  contributions  to the ESOP equal to the ESOP's debt
service less dividends 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  $106,401  for the quarter  ended
September 30, 2005. The ESOP shares as of September 30 were as follows:

          Allocated Shares                                     219,738
          Committed-to-be-released shares                        3,229
          Unreleased shares                                    146,771
                                                            ----------
          Total shares held by the ESOP                        369,738
                                                            ==========
          Fair value of unreleased shares at September 30   $5,144,324
                                                            ==========

                                       7
<PAGE>

Item 2. Management's Discussion and Analysis

Overview

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

Business is solicited from large industrial manufacturers and defense companies,
the  government of the United States and foreign  governments  and major foreign
electronic  equipment  companies.  In certain countries the Company has external
sales  representatives  to help solicit and coordinate  foreign  contracts.  The
Company  is also  on the  eligible  list of  contractors  of the  United  States
Department of Defense and generally is automatically  solicited by such 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 from  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.

Management  is  optimistic  about the future of the Company.  In the first three
months of fiscal 2006, the Company received  approximately  $18.1 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 sales backlog of approximately $45.3 million at September 30, 2005 gives the
Company a solid  base of  future  sales  and,  therefore,  management  expects a
significant  increase in sales during fiscal 2006 as compared to fiscal 2005. In
addition  to the  backlog,  the Company  currently  has  outstanding  quotations
representing  in excess of $27 million in the  aggregate for both repeat and new
programs.  Many potential  orders are currently  being  discussed and negotiated
with our customers.

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.

The total  backlog for the Company of $45.3  million at September  30, 2005,  up
$29.7 million over September 30, 2004,  represents the estimated remaining sales
value of work to be performed under firm  contracts.  The funded portion of this
backlog at September  30, 2005 is  approximately  $36.6  million.  This includes
items that have been  authorized and  appropriated  by Congress and/or funded by
the customer.  The unfunded backlog is approximately $8.7 million and represents
firm  multi-year  orders  for which  funding

                                       8
<PAGE>

has not yet been  appropriated  by Congress.  While there is no  guarantee  that
future  budgets and  appropriations  will provide  funding for a given  program,
management has included in unfunded backlog only those programs that it believes
are likely to receive  funding.  The unfunded  backlog at September 30, 2004 was
zero.  The  backlog  at  September  30,  2005,  as  discussed  above,   includes
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 the  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 alternatives on a periodic basis.

Critical Accounting Policies and Estimates

We believe our most critical accounting policies include revenue recognition and
cost estimation on our contracts.

Revenue Recognition and Estimates

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 contract  costs could be recorded if different
assumptions were used, based on changes in  circumstances,  in the estimation of
cost at  completion.  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,  2005 and  2004,  were
$4,560,574 and $4,730,327,  respectively. The 3.6% decrease in net sales for the
three  months  ended  September  30, 2005 as  compared to 2004,  was a result of
shipments  being  delayed  due to  customer  sourcing  requirements  and quality
control inspections that could not be performed by the Company's customers until
after the quarter  ended.  New orders  received in first  quarter of fiscal 2006
were  approximately  $18.1 million compared to  approximately  $4.8 in the first
quarter of fiscal 2005.

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
than  with  respect  to  the  products,  which  are  still  in  the  engineering
development stage or in the early stages of production.  In any given accounting
period the mix of product  shipments  between higher margin mature  programs and
less mature programs including loss contracts, has a significant impact on gross
profit and net income.

For the three  months  ended  September  30,  2005 and 2004 gross  profits  were
$880,290, and $649,142,  respectively. Gross profit as a percentage of sales was
19.3% and  13.7%,  for the  three  months  ended  September  30,  2005 and 2004,
respectively.  The improved  gross profit  percentage  in the three months ended
September  30, 2005,  relates to  favorable  product  mix,  offset  partially by
decreased sales and higher ESOP contribution  expense. ESOP contribution expense
included in cost of sales was $85,120 for the three months ended  September  30,
2005, and zero for the three months ended September 30, 2004, (see note 6 to the
financial statements).  Management continues to evaluate the Company's workforce
to ensure that  production  and  overall  execution  of the  backlog  orders and
additional  anticipated  orders  are  successfully   performed.   Employment  at
September 30, 2005 was 173 people  compared to 178 people at September 30, 2004.

                                       9
<PAGE>

Selling, general and administrative expenses were $669,719, for the three months
ended  September 30, 2005,  an increase of $69,040,  or 11.5% as compared to the
same  period in the prior year.  This  increase is  primarily  due to  increased
selling salaries and ESOP contribution  expense,  offset partially by a decrease
in professional fees.

Other income for three months ended  September 30, 2005 increased as compared to
the three months ended  September 30, 2004 due to increased  interest  income on
the Company's cash equivalents and short-term investments due to higher interest
rates.  The Company does not believe that there is significant  risk  associated
with its investment  policy,  since at September 30, 2005 all of the investments
are  primarily   represented   by  short-term   liquid   investments   including
certificates of deposit and money market accounts.

The  effective  income  tax rate at  September  30,  2005 and 2004 was 29.0% and
30.0%, 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 September 30, 2005, was $217,744 or $.22
and $.21 per share, basic and diluted, respectively, compared to $60,585 or $.06
per share, both basic and diluted, for the three months ended September 30,
2004. The increase in net income per share was due to improved gross profit as a
percentage of sales, offset partially by the decrease in sales and increase in
selling, general and administrative expenses.

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 has available a $3,000,000 line of credit to help fund further growth
or working capital needs, if necessary, but does not anticipate the need for any
borrowed funds in the foreseeable future.

The Company's working capital as of September 30, 2005 was $25.2 million. During
the three  months  ended  September  30, 2005 and 2004 the  Company  repurchased
12,142, and 4,014 shares,  respectively,  of its common stock from the Company's
Employee  Retirement  Plan and Trust  ("ESOP"),  for a total  purchase  price of
$417,685 and  $90,315,  respectively.  Under  existing  authorizations  from the
Company's Board of Directors, as of September 30, 2005, management is authorized
to purchase an additional $582,315 million of Company stock.

<TABLE>
<CAPTION>
                                                    Three Months Ended September 30,
                                                    --------------------------------
                                                           2005            2004
                                                      --------------  --------------

<S>                                                   <C>             <C>
Net cash (used in) provided by operating activities   $       (5,962) $      298,368
Net cash used in investing activities                      4,673,426         497,761
Net cash provided by (used in) financing activities        3,890,007        (238,346)

</TABLE>

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, purchases of inventory, receipt of progress payments, level
of sales and payments of accounts payable. Net cash used in investing activities
increased in the first  quarter of fiscal 2006 due to the purchase of short-term
investments and the ESOP  transaction  described in note 6. The increase in cash
provided by financing activities is due primarily to the sale of treasury shares
to the ESOP in the first quarter of fiscal 2006.

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

                                       10
<PAGE>

Management  believes  that the  Company's  reserve  for bad  debts of  $3,000 is
adequate given the customers with whom the Company does business.  Historically,
bad debt expense has been minimal.

During the three months ended September 30, 2005 and 2004, the Company  expended
$50,426 and $113,761,  respectively,  for plant  improvements and new equipment.
The Company has  budgeted  approximately  $500,000 for new  equipment  and plant
improvements in fiscal 2006.  Management  presently  anticipates  that the funds
required will be available from current operations.

The Company has entered into standby letters of credit agreements with financial
institutions  primarily  relating  to the  guarantee  of future  performance  on
certain  contracts.  Contingent  liabilities on outstanding  standby  letters of
credit agreements aggregated $39,300 at September 30, 2005. The Company does not
expect to fund any of the amounts under the standby letters of credit.

Other Matters

An Employee  Retirement Plan and Trust ("ESOP") was established for the eligible
non-union employees of the Company,  effective as of July 1, 1988. The ESOP used
the proceeds of a loan from the Company made on June 5, 1989 to purchase 316,224
shares of the  Company's  common  stock  for  approximately  $8,400,000  and the
Company contributed  approximately  $400,000 in 1989 to the ESOP, which was used
by the ESOP to purchase an  additional  15,000  shares of the  Company's  common
stock.

Each year the Company made  contributions  to the ESOP,  which were used to make
loan interest and principal  payments.  With each loan and interest  payment,  a
portion of the common  stock is  allocated  to  participating  employees.  As of
September  30,  2005,  there were  219,738  shares  allocated  to  participants.
Dividends  attributable  to  allocated  shares were  likewise  allocated  to the
participants'  accounts,  whereas the dividends on unallocated  shares were used
toward the loan repayment, thus reducing the Company's required contribution.

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

Effective  June 30,  2004 the loan from the Company to the ESOP was paid in full
and all shares have been allocated to participant's accounts.

On July 15, 2005,  pursuant to a Stock Purchase Agreement dated as of such date,
the Company sold  150,000  shares of its common  stock,  par value $0.33 1/3 per
share, to the Espey Mfg. & Electronics Corp. Employee Stock Ownership Plan Trust
(the "ESOP"). The ESOP paid $28.90 per share, for an aggregate purchase price of
$4,335,000.  The  determination  of the  purchase  price was based on a fairness
opinion  obtained by an independent  valuation  firm. The ESOP borrowed from the
Corporation  an amount equal to the purchase  price.  The loan will be repaid in
fifteen (15) equal annual  installments of principal and the unpaid balance will
bear interest at a fixed rate of 6.25% per annum,  the "prime rate" as quoted in
The Wall Street Journal on the date of closing.

The Board of Directors of the Company  approved a purchase price per share equal
to a 5% discount on the average  trading price of the Company's  common stock on
the American Stock Exchange on the date before closing,  but in no event greater
than the fair  market  value as  determined  by an  independent  valuation  firm
retained by the ESOP. The average trading price of the Company's common stock on
the American Stock Exchange on July 14, 2005 was $30.72.

In making the sale, the Company relied on the exemption from registration  under
Section 4(2) of the Securities Act of 1933, as amended,  because the shares sold
were offered only to the ESOP.

After giving  effect to the  transaction  the ESOP owned  380,120  shares of the
Company's 1,158,294 outstanding shares of common stock as of July 15, 2005.

                                       11
<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. 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.


                                       12
<PAGE>

                    PART II: Other Information and Signatures

Item 1.       Legal Proceedings

              None

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

             (a) Securities Sold -  For the  three-month  period ended September
                                    30, 2005, 3,300 stock options were exercised
                                    under the  Company's  existing  stock option
                                    plan.   In  addition  to  the  stock  option
                                    shares, the Company sold 1,760 shares to the
                                    ESOP. The securities  were sold for cash and
                                    the  sales  were made  without  registration
                                    under the  Securities  Act in reliance  upon
                                    the  exemption  from  registration  afforded
                                    under Section 4(2) of the  Securities Act of
                                    1933. Proceeds were used for general working
                                    capital purposes.

              (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>
              August 1 to
              August 31, 2005           12,142          $34.40          12,142              $582,315
              -----------------------------------------------------------------------------------------
              Total                     12,142                          12,142
              =========================================================================================
</TABLE>

              (1)  Pursuant to a prior Board of Directors  authorization,  as of
              September  30, 2005 the Company can  repurchase  up to $582,315 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


                                       13
<PAGE>

Item 6.       Exhibits and Reports on Form 8-K

              (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

(b) Reports on Form 8-K

                  Form 8-K filed July 15, 2005 announcing the unregistered sales
                  of equity securities to the Company's ESOP.

                  Form 8-K filed  August 18, 2005  announcing  the issuance of a
                  press release  detailing the financial  results for the fiscal
                  year ended June 30, 2005.


                                       14
<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 10, 2005
-------------------------
       Date


                                       15