UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   FORM 10-KSB

[X]      Annual  Report  Pursuant  to  Section  13 or 15 (d)  of the  Securities
         Exchange Act of 1934 for the fiscal year ended June 30, 2007

[_]      Transition  Report  Pursuant to Section 13 or 15 (d) of the  Securities
         Exchange Act of 1934. For the transition period from         to

                           Commission File No. 1-4383

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

           NEW YORK                                              14-1387171
           --------                                              ----------
(State or other jurisdiction of                                 (IRS Employer
 incorporation or organization)                              Identification No.)

                233 Ballston Avenue, Saratoga Springs, NY 12866
                -----------------------------------------------
          (Address of principal executive offices including Zip Code)

        (Registrant's telephone number including area code) (518)245-4400
                                                             ------------

                                                         Name of Each Exchange
     Title of Each class                                 on Which Registered
     -------------------                                 -------------------
Common Stock $.33-1/3 par value                          American Stock Exchange
Common Stock Purchase Rights                             American Stock Exchange

Securities registered pursuant to Section 12 (g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required
to the filed by  Section  13 or 15 (d) of the  Securities  Exchange  Act of 1934
during  the  preceding  12  months,  and (2) has  been  subject  to such  filing
requirements for the past 90 days.
         [X] Yes [ ] No

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-B is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB.
         [X] Yes [ ] No

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Act).
         [ ] Yes [X] No

Revenues for fiscal year ended June 30, 2007 were $27,656,359.

The  aggregate  market value of the voting stock held by  non-affiliates  of the
registrant  was  $34,425,742  based upon the closing sale price of $24.09 on the
American Stock Exchange on June 30, 2007.

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

              Class                           Outstanding at September 5, 2007
             -------                          --------------------------------
Common stock, $.33-1/3 par value                        2,307,150 shares

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                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the  registrants'  definitive  proxy statement  relating to the 2007
Annual  Meeting of  Shareholders,  to be filed with the  Securities and Exchange
Commission,  are  incorporated  by reference in Part III, Items 10 through 14 on
Form 10-KSB as indicated herein.

Forward-Looking Statements

This Annual Report on Form 10-KSB contains  forward-looking  statements that are
based on management's  expectations,  estimates,  projections  and  assumptions.
Words  such  as  "expects,"  "anticipates,"  "plans,"  "believes,"  "scheduled,"
"estimates"  and variations of these words and similar  expressions are intended
to identify  forward-looking  statements.  Forward-looking  statements  are made
pursuant to the safe harbor  provisions  of the  Private  Securities  Litigation
Reform Act of 1995, as amended.  These  statements  are not guarantees of future
performance  and involve certain risks and  uncertainties  that are difficult to
predict.  Therefore, actual future results and trends may differ materially from
what is  forecast  in  forward-looking  statements  due to a variety of factors,
including, without limitation:

   o  Changing  priorities in the U.S.  government's  defense budget  (including
      changes in  priorities  in  response  to  terrorist  threats or to improve
      homeland security);
   o  Termination of government contracts due to unilateral government action;
   o  Differences in anticipated and actual program  performance,  including the
      ability to perform under long-term  fixed-price contracts within estimated
      costs, and performance issues with key suppliers and subcontractors;
   o  Potential for changing prices for energy and raw materials.

All  forward-looking  statements speak only as of the date of this report or, in
the case of any document  incorporated by reference,  the date of that document.
All subsequent written and oral forward-looking  statements  attributable to the
Company or any  person  acting on the  Company's  behalf  are  qualified  by the
cautionary  statements  in this  section.  The Company  does not  undertake  any
obligation  to update or  publicly  release  any  revisions  to  forward-looking
statements to reflect events, circumstances or changes in expectations after the
date of this report.

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                                     PART I

Item 1.  Description of Business

General

Espey Mfg. & Electronics Corp. (the "Company") located in Saratoga Springs,  New
York, is engaged principally in the development,  design, production and sale of
specialized  electronic power supplies, a wide variety of transformers and other
types of iron-core components,  and electronic system components. In some cases,
the  Company   manufactures  such  products  in  accordance  with  pre-developed
mechanical and electrical  requirements  ("build to print"). In other cases, the
Company  is  responsible  for both the  overall  design and  manufacture  of the
product. The Company does not generally manufacture standardized components. The
Company operates a one-segment business and was incorporated in 1928.

The electronic  power supplies and components  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.

The Company's iron-core  components include (i) transformers of the audio, power
and  pulse  types,  (ii)  magnetic  amplifiers  and  (iii)  audio  filters.  The
electronic system components manufactured by the Company include antenna systems
and high power radar transmitters. These system components utilize the Company's
own electronic power supplies,  transformers and other iron-core  components and
mechanical assemblies.

In the fiscal years ended June 30, 2007 and 2006, the Company's total sales were
$27,656,359 and $20,851,570,  respectively. Sales to two customers accounted for
30% and 29% of total sales in 2007. Sales to three customers  accounted for 35%,
17% and 13% of total sales in 2006.

Export  sales in 2007 and 2006 were  approximately  $3,747,000  and  $3,392,000,
respectively.

Sources of Raw Materials

The Company has never experienced any significant delay or shortage with respect
to the purchase of raw materials and components  used in the  manufacture of its
products, and has at least two potential sources of supply for a majority of its
raw materials.  However,  certain  components used in our products are available
from only a limited number of sources,  and other  components are only available
from a single source.  Despite the risk associated with limited or single source
suppliers, the benefits of higher quality goods and timely delivery minimize and
often limit any  potential  risk and can  eliminate  problems with part failures
during production.

Sales Backlog

At September 5, 2007, the Company's backlog was approximately $35.7 million. The
total  backlog at June 30, 2007 was  approximately  $36.3 million as compared to
approximately  $37.7  million at June 30,  2006.  The  Company's  total  backlog
represents  the estimated  remaining  sales value of work to be performed  under
firm  contracts.  The Company's  backlog and risks  associated  with  government
contracts is discussed in greater detail in Management's Discussion and Analysis
of Financial Condition and Results of Operations, contained in Item 7 below.

It is presently anticipated that a minimum of $25.7 million of orders comprising
the June 30, 2007 backlog will be filled  during the fiscal year ending June 30,
2008. The minimum of $25.7 million does not include any shipments,  which may be
made against orders subsequently received during the fiscal year ending June 30,
2008.  The estimate of the June 30, 2007 backlog to be shipped in fiscal 2008 is
subject to future  events,  which may cause the amount of the  backlog  actually
shipped to differ from such estimate.

Marketing and Competition

The  Company  markets  its  products  primarily  through  its own  direct  sales
organization.  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
many  agencies  of the United  States  Department  of Defense and  generally  is
automatically  solicited by such agencies for  procurement  needs falling within
the major classes of products produced by the Company.

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<page>

There is  competition  in all classes of products  manufactured  by the Company,
including 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 U.S. and
foreign government  appropriations and program allocations,  the competition for
available   military  business,   and  government   termination  of  orders  for
convenience.

The Company's business is not considered to be seasonal in nature.

Research and Development

The  Company's  expenditures  for research and  development  were  approximately
$79,836  and  $121,000  in 2007 and 2006,  respectively.  Some of the  Company's
engineers and technicians spend varying degrees of time on either development of
new products or improvement of existing products.

Employees

The Company had 180 employees as of September 5, 2007.  Some of these  employees
are  represented by the  International  Brotherhood of Electrical  Workers Local
#1799. The current  collective  bargaining  agreement  expires on June 30, 2008.
Relations with the Union are considered  good.  Union membership at September 5,
2007 was 76 people.

Government Regulations

Compliance  with federal,  state and local  provisions that have been enacted or
adopted  to  regulate  the  discharge  of  materials  into the  environment,  or
otherwise relating to the protection of the environment,  did not in fiscal year
2007,  and the Company  believes  will not in fiscal year 2008,  have a material
effect upon the capital expenditures, net income, or competitive position of the
Company.

The Company's  U.S.  government  contract and  subcontract  orders are funded by
government  budgets,  which operate on an  October-to-September  fiscal year. In
February of each year, the President of the United States presents to Congress a
proposed budget for the upcoming  fiscal year. This budget includes  recommended
appropriations  for every  federal  agency and is the result of months of policy
and program  reviews  throughout  the executive  branch.  From February  through
September of each year,  the  appropriations  and  authorization  committees  of
Congress  review the  President's  budget  proposals  and  establish the funding
levels  for  the  upcoming  fiscal  year  in  appropriations  and  authorization
legislation. Once these levels are enacted into law, the Executive Office of the
President administers the funds to the agencies.

There are two primary risks associated with this process. First, the process may
be delayed or disrupted  because of congressional  schedules,  negotiations over
funding levels for programs or unforeseen  world events,  which could,  in turn,
alter the  funding for a program or  contract.  Second,  funding for  multi-year
contracts can be changed by future appropriations, which could affect the timing
of funds, schedules and program content.

Also,  our  international  sales  are  denominated  in United  States  currency.
Consequently, changes in exchange rates that strengthen the United States dollar
could increase the price in local  currencies of our products in foreign markets
and make our products relatively more expensive than competitors' products.

U.S. Government Defense Contracts and Subcontracts

Generally,  U.S.  government  contracts  are  subject  to  procurement  laws and
regulations.  Some  of the  Company's  contracts  are  governed  by the  Federal
Acquisition Regulation (FAR), which lays out uniform policies and procedures for
acquiring  goods  and  services  by the  U.S.  government,  and  agency-specific
acquisition  regulations that implement or supplement the FAR. For example,  the
Department of Defense implements the FAR through the Defense Federal Acquisition
Regulation (DFAR).

The FAR also contains  guidelines and  regulations for managing a contract after
award, including conditions under which contracts may be terminated, in whole or
in part,  at the  government's  convenience  or for  default.  If a contract  is
terminated for the  convenience of the  government,  a contractor is entitled to
receive  payments for its  allowable

4
<page>

costs and, in general,  the proportionate share of fees or earnings for the work
done. If a contract is terminated for default, the government generally pays for
only the work it has  accepted.  These  regulations  also subject the company to
financial audits and other reviews by the government of its costs,  performance,
accounting and general business practices  relating to its contracts,  which may
result in adjustment of the company's contract-related costs and fees.

Item 2.  Description of Property

The Company's  manufacturing and engineering  facilities are located in Saratoga
Springs, New York.

The  Saratoga  Springs  plant,  which the  Company  owns,  consists  of  various
adjoining one-story buildings on a 22 acre site.  (Approximately 8 acres of this
site is unimproved) The property is not subject to mortgage  indebtedness or any
other  material  encumbrance.  The plant has a sprinkler  system  throughout and
contains  approximately  151,000 square feet of floor space,  of which 90,000 is
used  for  manufacturing,  24,000  for  engineering,  33,000  for  shipping  and
climatically secured storage,  and 4,000 for offices.  The offices,  engineering
and some manufacturing  areas are  air-conditioned.  In addition to assembly and
wiring  operations,  the plant  includes  facilities  for  varnishing,  potting,
plating, impregnation and spray-painting operations. The manufacturing operation
also includes a complete machine shop, with welding and sheet metal  fabrication
facilities  adequate for substantially all of the Company's current  operations.
Besides normal test equipment,  the Company  maintains a  sophisticated  on-site
environmental  test  facility.  In  addition  to  meeting  all of the  Company's
in-house  needs,  the plating,  machine shop and  environmental  facilities  are
available to other companies on a contract basis.

Item 3.  Legal Proceedings

         None

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

         None



5
<page>

                                     PART II

Item 5.  Market  for the  Registrant's  Common  Equity and  Related  Stockholder
         Matters

Price Range of Common Stock

The table below shows the range of high and low prices for the Company's  common
stock on the American Stock Exchange (ticker symbol "ESP"), the principal market
for  trading in the common  stock,  for each  quarterly  period for the last two
fiscal years ended June 30:

         2007                               High                   Low
         First Quarter                      18.30                 16.10
         Second Quarter                     19.05                 16.65
         Third Quarter                      19.91                 16.85
         Fourth Quarter                     24.30                 19.61

         2006                               High                   Low
         First Quarter                      17.88                 15.05
         Second Quarter                     20.45                 17.31
         Third Quarter                      18.95                 15.00
         Fourth Quarter                     19.45                 15.90

Holders

The  approximate  number of  holders  of record of the  common  stock was 117 on
September 5, 2007 according to records of the Company's transfer agent. Included
in this number are shares held in "nominee" or "street" name and, therefore, the
number of beneficial  owners of the common stock is believed to be substantially
in excess of the foregoing number.

Dividends

The Company  paid cash  dividends on common stock of $.56 and $.34 per share for
the  fiscal  years  ended  June 30,  2007 and 2006,  respectively.  The Board of
Directors has authorized the payment of a fiscal 2008 first quarter  dividend of
$.175 payable September 21, 2007 to shareholders of record on September 4, 2007.

During  fiscal  2007, the  Company  sold common  stock to certain  employees and
directors as they exercised  existing stock options  granted under a shareholder
approved  plan.  During the year,  28,600 shares were sold at prices that ranged
from  $8.98 a share to  $11.25 a  share.  The  securities  were  sold for  cash.
Proceeds are used for general working capital purposes.

There were no purchases of equity securities in the fiscal 2007 fourth quarter.

<table>
<caption>

                        Securities Authorized For Issuance Under Equity Compensation Plans


                           Number of securities to      Weighted-average             Number of Securities remaining
                           be issued upon exercise      exercise price of         available for future issuance under
                           of outstanding options,    outstanding options,        equity compensation plan (excluding
Plan Category                warrants and rights       warrants and rights         securities reflected in column (a))
----------------------------------------------------------------------------------------------------------------------
                                     (a)                       (b)                               (c)
----------------------------------------------------------------------------------------------------------------------

                                <c>                       <c>                                <c>
Equity compensation
   plans approved by
   security holders                138,800                   $15.77                             75,400
Equity compensation
   plans not approved
   by security holders
                                   -------                                                      ------
           Total                   138,800                                                      75,400
----------------------------------------------------------------------------------------------------------------------
</table>

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<page>

Item 6. Management's  Discussion and Analysis of Financial Condition and Results
of Operations

Business Outlook

The business outlook for the Company is excellent.  The order backlog,  together
with potential new orders realized from  outstanding  quotations by the Company,
remain at a level that  should  permit the  Company to sustain  the level of its
fiscal year 2007 revenues in fiscal year 2008.  Expectations are for product mix
and margins to remain  favorable for fiscal 2008.  During fiscal 2007 new orders
received by the Company were approximately  $26.3 million.  The order backlog of
approximately  $36.3  million at June 30, 2007 gives the Company a solid base of
future  sales.  It is presently  anticipated  that a minimum of $25.7 million of
orders  comprising  the June 30, 2007 backlog  will be filled  during the fiscal
year ending June 30,  2008.  The minimum of $25.7  million  does not include any
shipments,  which may be made against orders  subsequently  received  during the
fiscal year ending June 30, 2008. The backlog represents the estimated remaining
sales value of work to be performed under firm contracts.  The funded portion of
this backlog at June 30, 2007 is  approximately  $31.6  million.  This  includes
items that have been  authorized and  appropriated  by Congress and/or funded by
the customer.  The unfunded backlog is approximately $4.7 million and represents
firm  multi-year  orders  for which  funding  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 June 30, 2006 was approximately $8.5 million.

In addition to the backlog,  the Company  currently has  outstanding  quotations
representing  in excess of $42 million in the  aggregate for both repeat and new
programs.  Many potential  orders are currently  being  discussed and negotiated
with existing and potential  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.

Sales  to two  significant  customers  in  fiscal  2007  represented  59% of the
Company's  total  sales.  While the  Company  has always  had a small  number of
customers that make up its total sales in any given year, management is pursuing
business  opportunities  involving  significant  product  programs  with new and
current  customers  with an objective of lowering the overall  concentration  of
sales, and minimizing the impact of loss of a significant  customer or excessive
reliance upon a single major product program of a particular customer.

Management  continues to invest in capital  equipment to upgrade its  technology
and stay  current with the  industry.  Capital  expenditures  are expected to be
$400,000 for fiscal 2008.  Also,  management  along with the Company's  Board of
Directors, continues to look for potential opportunities to expand the Company's
business through acquisitions.

Results of Operations

Net Sales for fiscal years ended June 30, 2007 and 2006,  were  $27,656,359  and
$20,851,570,  respectively,  a 32.6% increase.  Generally,  this increase can be
attributed to the contract  specific  nature of the  Company's  business and the
long-term nature of these contracts. The Company continues to deliver product on
its single  largest order for power  supplies.  The increase in sales is largely
attributable  to an increase in  shipments  to two  customers  for  military and
industrial  power  supplies.  The sales  backlog at June 30, 2007,  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.

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 fiscal years ended June 30, 2007 and 2006 gross profits were  $6,059,967 and
$4,542,089,  respectively.  Gross profit as a percentage  of sales was 21.9% and
21.8%, for fiscal 2007 and 2006, respectively. A favorable product mix in fiscal
2007,  offset by higher ESOP and stock-based  compensation  expense,  caused the
gross profit  percentage in fiscal 2007 to be consistent  with fiscal 2006. ESOP
compensation  expense included in cost of sales was $377,701 for the fiscal year
ended June 30,  2007,  and  $356,990  for the fiscal  year ended June 30,  2006.
Stock-based  compensation  expense included in cost of sales was $56,318 for the
fiscal year ended June 30, 2007 and zero for the fiscal year ended June 30, 2006
(see  notes 11 and 12 to the  financial  statements).  Management  continues  to

7
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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 June 30, 2007 was 179  people, compared to 169 people
employed at June 30, 2006.

Selling, general and administrative expenses were $2,831,365 for the fiscal year
ended June 30, 2007,  an increase of $194,907,  or 7.4% as compared to the prior
year. This increase is primarily due to employee  training and recruitment fees,
stock-based compensation and in increase in selling expenses.

Other  income for the fiscal years ended June 30, 2007 and 2006 was $677,888 and
$460,923,  respectively,  a 47.1%  increase.  This  increase is due to increased
interest  income  on the  Company's  cash and cash  equivalents  and  short-term
investments  due to higher  interest rates as well as an increase in scrap metal
income.  The Company does not believe that there is significant  risk associated
with its investment  policy,  since at June 30, 2007 all of the investments were
primarily represented by short-term liquid investments including certificates of
deposit and money market accounts.

The effective income tax rate was 34.9% in fiscal 2007 and 34.2% in fiscal 2006.
The  effective  tax rate was impacted in fiscal 2007 mainly due to the qualified
production activities benefit,  ESOP dividend payment deduction,  offset by ESOP
differences  between book expense and tax expense for currently allocated shares
and state taxes.

Net income for fiscal 2007, was  $2,544,720 or $1.24 and $1.23 per share,  basic
and diluted, respectively, compared to net income of $1,558,016 or $.77 and $.76
per share, basic and diluted, respectively, for fiscal 2006. The increase in net
income per share was due to increased sales offset  partially by the 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 two 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 two 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 June 30, 2007 and 2006 was $28,301,566 and
$26,316,971,  respectively.  During 2007 and 2006 the Company repurchased 16,269
and 38,746 shares, respectively, of its common stock from the Company's Employee
Retirement Plan and Trust ("ESOP") and in other open market transactions,  for a
total  purchase  price of $298,064 and $679,809,  respectively.  Under  existing
authorizations  from the  Company's  Board of  Directors,  as of June 30,  2007,
management is authorized to purchase an additional $2 million of Company stock.

The table below  presents  the summary of cash flow  information  for the fiscal
year indicated:

                                                           2007         2006
                                                           ----         ----
Net cash provided by (used in) operating activities... $ 6,075,626  $  (309,778)
Net cash used in investing activities.................    (948,993)  (5,667,338)
Net cash (used in) provided by financing activities ..  (1,103,137)   3,246,224

Net cash provided by (used in) 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,  receipt of progress  payments,
level of sales and  payments of  accounts  payable.  Net cash used in  investing
activities  decreased  in fiscal  2007 as expected  due to the ESOP  transaction
executed in fiscal 2006 and  described in note 11. The decrease in cash provided
by (used in) financing  activities is also due primarily to the sale of treasury
shares to the ESOP in the first half of fiscal 2006 as  described in note 11 and
an increase in dividends paid on common stock.

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.

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  fiscal year 2007 and fiscal  2008,  the Company  expended  $565,003  and
$468,868,  respectively,  for plant improvements and new equipment.  The Company
has budgeted  approximately $400,000 for new equipment and plant improvements in
fiscal 2008.  Management  anticipates  that the funds required will be available
from current operations.

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<page>

Critical Accounting Policies and Estimates

Our  significant  accounting  policies are  described in note 2 to the financial
statements.  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  schedules.  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.


Item 7.  Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders
Espey Mfg. & Electronics Corp.
Saratoga Springs, New York:


We have audited the accompanying balance sheet of Espey Mfg. & Electronics Corp.
as of  June  30,  2007,  and  the  related  statements  of  income,  changes  in
stockholders'  equity,  and cash  flows for each of the two years in the  period
ended June 30, 2007. These financial  statements are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audits.

We conducted our audits in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and  perform  the  audits to  obtain  reasonable  assurance  about  whether  the
financial  statements  are free of  material  misstatement.  An  audit  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the statements.  An audit also includes assessing the accounting principles used
and significant estimates made by management,  as well as evaluating the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the financial position of the Company as of June 30, 2007
and the results of its  operations  and its cash flows for each of the two years
in the period ended June 30, 2007,  in  conformity  with  accounting  principles
generally accepted in the United States of America.

/s/Rotenberg & Co., LLP
-----------------------
Rochester, New York
September 5, 2007

9
<page>
<table>
<caption>

Espey Mfg. & Electronics Corp.
Balance Sheet
June 30, 2007
-------------------------------------------------------------------------------------
                                                                              2007
                                                                              ----

                                                                         <c>
ASSETS
     Cash and cash equivalents .......................................   $ 11,096,111
     Short term investments ..........................................      4,320,000
     Trade accounts receivable, net ..................................      3,020,481
     Other receivables ...............................................          3,448

     Inventories:
              Raw materials and supplies .............................      1,755,944
              Work in Process ........................................      2,137,961
              Costs related to contracts in process, net of progress
                payments of $206,238 .................................      7,255,422
                                                                         ------------
                           Total inventories .........................     11,149,327

     Deferred income taxes ...........................................        177,665
     Prepaid expenses and other current assets .......................        548,212
                                                                         ------------
                           Total current assets ......................     30,315,244
                                                                         ------------
     Property, plant and equipment, net ..............................      2,934,510
                                                                         ------------

                           Total Assets ..............................   $ 33,249,754
                                                                         ============

LIABILITIES AND STOCKHOLDERS' EQUITY

     Accounts payable ................................................   $    980,951
     Accrued expenses:
              Salaries, wages and commissions ........................        162,202
              Vacation ...............................................        582,481
              Other ..................................................         46,053
     Payroll and other taxes withheld and accrued ....................         42,048
     Income taxes payable ............................................        199,943
                                                                         ------------
                           Total current liabilities .................      2,013,678
                                                                         ------------
     Deferred income taxes ...........................................        178,900
                                                                         ------------
                           Total Liabilities .........................      2,192,578
                                                                         ------------

     Common stock, par value $.33-1/3 per share
              Authorized 10,000,000 shares; Issued 3,029,874 shares in
                   2007. Outstanding 2,316,893 (includes 249,167
                   Unearned ESOP Shares) .............................      1,009,958
     Capital in excess of par value ..................................     12,890,269
     Retained earnings ...............................................     27,054,325
                                                                         ------------
                                                                           40,954,552

     Less: Unearned ESOP Shares ......................................     (3,600,459)
           Cost of 712,981 shares of common stock in treasury ........     (6,296,917)
                                                                         ------------
                           Total Stockholders' Equity ................     31,057,176
                                                                         ------------

                           Total Liabilities and Stockholders' Equity    $ 33,249,754
                                                                         ============
</table>

The accompanying notes are an integral part of the financial statements.

10
<page>

Espey Mfg. & Electronics Corp.
Statements of Income
Years Ended June 30, 2007 and 2006
--------------------------------------------------------------------------------

                                                      2007           2006
                                                      ----           ----
Net sales ....................................   $ 27,656,359   $ 20,851,570
Cost of sales ................................     21,596,392     16,309,481
                                                 ------------   ------------
         Gross Profit ........................      6,059,967      4,542,089

Selling, general and administrative expenses .      2,831,365      2,636,458
                                                 ------------   ------------
         Operating income ....................      3,228,602      1,905,631

Other income (expense)
         Interest and dividend income ........        614,229        464,143
         Other ...............................         63,659         (3,220)
                                                 ------------   ------------
                Total other income, net ......        677,888        460,923
                                                 ------------   ------------

Income before income taxes ...................      3,906,490      2,366,554

Provision for income taxes ...................      1,361,770        808,538
                                                 ------------   ------------

                           Net income ........   $  2,544,720   $  1,558,016
                                                 ============   ============

Net income per share:
         Basic ...............................   $       1.24   $        .77
         Diluted .............................   $       1.23   $        .76
                                                 ------------   ------------

Weighted average number of shares outstanding:
         Basic ...............................      2,048,626      2,012,761
         Diluted .............................      2,077,664      2,049,455
                                                 ============   ============


The accompanying notes are an integral part of the financial statements.

11
<page>
<table>
<caption>

Espey Mfg. & Electronics Corp.
Statements of Changes in Stockholders' Equity
Years Ended June 30, 2007 and 2006
-----------------------------------------------------------------------------------------------------------------

                                         Outstanding                   Capital in      Unearned
                                           Common                      Excess of         ESOP          Retained
                                           Shares        $ Amount      Par Value        Shares         Earnings
                                        ------------   ------------   ------------   ------------    ------------

                                       <c>         <c>            <c>            <c>             <c>
Balance as of June 30, 2005                2,016,588   $    504,979   $ 10,412,073   $         --    $ 25,284,554
                                        ------------   ------------   ------------   ------------    ------------

Net income, 2006                                                                                        1,558,016

Stock options exercised                       23,200                        48,578

Dividends paid on common stock
   $.3425 per share                                                                                      (685,646)

Stock dividend paid on common stock                         504,979                                      (504,979)

Sale of treasury stock to ESOP               303,520                     1,973,781     (4,335,000)

Purchase of treasury stock                   (38,746)

Reduction of unearned ESOP shares                                           72,317        373,921
                                        ------------   ------------   ------------   ------------    ------------

Balance as of June 30, 2006                2,304,562      1,009,958     12,506,749     (3,961,079)     25,651,945
                                        ------------   ------------   ------------   ------------    ------------

Net income, 2007                                                                                        2,544,720

Stock options exercised                       28,600                        51,620

Stock option expense                                                       170,698

Dividends paid on common stock
   $.56 per share                                                                                      (1,142,340)

Tax effect of stock options exercised                                       49,697

Purchase of treasury stock                   (16,269)

Reduction of unearned ESOP shares                                          111,505        360,620
                                        ------------   ------------   ------------   ------------    ------------

Balance as of June 30, 2007                2,316,893   $  1,009,958   $ 12,890,269   $ (3,600,459)   $ 27,054,325
                                        ============   ============   ============   ============    ============


The accompanying notes are an integral part of the financial statements.

                                                                                                      (Continued)
</table>

12
<page>
<table>
<caption>


                                               Treasury Stock              Total
                                        ---------------------------    Stockholders'
                                           Shares        $ Amount         Equity
                                        ------------   ------------    ------------

                                          <c>            <c>             <c>
Balance as of June 30, 2005                1,013,286   $ (8,144,314)   $ 28,057,292
                                        ------------   ------------    ------------

Net income, 2006                                                          1,558,016

Stock options exercised                      (23,200)       166,677         215,255

Dividends paid on common stock                                             (685,646)
   $.3425 per share

Stock dividend paid on common stock                                              --

Sale of treasury stock to ESOP              (303,520)     2,422,642          61,423

Purchase of treasury stock                    38,746       (679,808)       (679,808)

Reduction of unearned ESOP shares                                           446,238
                                        ------------   ------------    ------------

Balance as of June 30, 2006                  725,312     (6,234,803)     28,972,770
                                        ============   ============    ============

Net income, 2007                                                          2,544,720

Stock options exercised                      (28,600)       235,950         287,570

Stock option expense                                                        170,698

Dividends paid on common stock                                           (1,142,340)
   $.56 per share

Tax effect of stock options exercised                                        49,697

Purchase of treasury stock                    16,269       (298,064)       (298,064)

Reduction of unearned ESOP shares                                           472,125
                                        ------------   ------------    ------------

Balance as of June 30, 2007                  712,981   $ (6,296,917)   $ 31,057,176
                                        ============   ============    ============
</table>

The accompanying notes are an integral part of the financial statements.

13
<page>
<table>
<caption>

Espey Mfg. & Electronics Corp.
Statements of Cash Flows
Years Ended June 30, 2007 and 2006
------------------------------------------------------------------------------------

                                                              2007           2006
                                                              ----           ----

                                                           <c>            <c>
Cash Flows From Operating Activities:
     Net income .......................................   $ 2,544,720    $ 1,558,016

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

     Excess tax benefits from share-based compensation         49,697             --

     Stock-based compensation .........................       170,698             --

     Depreciation .....................................       504,243        532,735

     ESOP Compensation Expense ........................       472,125        446,238

     Loss on disposal of assets .......................         8,692         37,988

     Deferred income tax benefit ......................       (60,449)      (100,376)

     Changes in assets and liabilities:

          Decrease (increase) in trade receivables, net     1,192,747     (1,219,988)

          Decrease (increase) in other receivables ....         3,436         (3,711)

          Decrease (increase) in inventories, net .....     1,255,052     (2,036,827)

          Decrease (increase) in prepaid
             expenses and other current assets ........         5,915       (218,132)

          Increase in accounts payable ................       365,365        236,815

          Increase in accrued salaries,
             wages and commissions ....................        34,195         65,729

          Decrease in other accrued expenses ..........        (5,365)        (2,383)

          Increase in vacation accrual ................        37,058         47,408

          Increase in payroll and
             other taxes withheld and accrued .........         1,469          4,620

          (Decrease) increase in income taxes payable .      (503,972)       342,090
                                                          -----------    -----------

                      Net cash provided by (used in)
                         operating activities .........   $ 6,075,626    $  (309,778)
                                                          -----------    -----------


The accompanying notes are an integral part of the financial statements.

                                                                          (Continued)
</table>

14
<page>
<table>
<caption>

                                                         <c>             <c>
Cash Flows From Investing Activities:

     Unearned ESOP Shares ............................             --      (4,335,000)

     Additions to property, plant and equipment ......       (565,003)       (468,868)

     Purchase of short term investments ..............     (4,896,000)     (5,952,000)

     Proceeds from maturity of short term investments       4,512,000       5,088,000

     Proceeds on sale of assets, net .................             10             530
                                                         ------------    ------------

                      Net cash used in
                         investing activities ........       (948,993)     (5,667,338)
                                                         ------------    ------------

Cash Flows From Financing Activities:

     Sale of Treasury Stock ..........................             --       4,396,423

     Dividends on common stock .......................     (1,142,340)       (685,646)

     Purchase of treasury stock ......................       (298,064)       (679,808)

     Proceeds from exercise of stock options .........        287,570         215,255

     Excess tax benefits from share-based compensation         49,697              --
                                                         ------------    ------------

                      Net cash (used in) provided by
                         financing activities ........     (1,103,137)      3,246,224
                                                         ------------    ------------

Increase (decrease) in cash and cash equivalents .....      4,023,496      (2,730,892)

Cash and cash equivalents, beginning of the year .....      7,072,615       9,803,507
                                                         ------------    ------------

Cash and cash equivalents, end of the year ...........   $ 11,096,111    $  7,072,615
                                                         ============    ============

     Income Taxes Paid ...............................   $  1,826,746    $    591,345
                                                         ============    ============
</table>

The accompanying notes are an integral part of the financial statements.

15
<page>

Espey Mfg. & Electronics Corp.
Notes to Financial Statements
--------------------------------------------------------------------------------

Note 1. Nature of operations

Espey Mfg. & Electronics  Corp.  (the Company) is a  manufacturer  of electronic
equipment used primarily in military and industrial applications.  The principal
markets for the Company's products are companies that provide electronic support
to both military and industrial applications.

Note 2. Summary of Significant Accounting Policies

Inventory  Valuation,  Cost Estimation and Revenue Recognition Raw materials are
valued at weighted average cost.

Inventoried  work relating to contracts in process and work in process is valued
at actual production cost,  including factory overhead incurred to date. Work in
process  represents  spare units;  parts and other  inventory  items acquired or
produced to service units previously sold or to meet anticipated  future orders.
The cost  elements  of  contracts  in  process  and work in  process  consist of
production  costs of goods and  services  currently  in  process  and  overhead.
Provision  for losses on  contracts  is made when the  existence  of such losses
becomes  probable and estimable.  The costs  attributed to units delivered under
contracts  are based on the estimated  average cost of all units  expected to be
produced. Certain contracts are expected to extend beyond twelve months.

Revenue  is  recognized  on  contracts  in the  period  in which  the  units are
delivered and billed  (units-of-delivery  method). 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  schedules.  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.


Depreciation
Depreciation  of plant and equipment is computed on a  straight-line  basis over
the estimated useful lives of the assets.

Estimated useful lives of depreciable assets are as follows:

      Buildings and improvements                                   10 - 35 years
      Machinery and equipment                                       3 - 25 years
      Furniture, fixtures and office equipment                      5 - 10 years

Income Taxes
The  Company  follows  the  provisions  of  Statement  of  Financial  Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes."

Under the provisions of SFAS No. 109,  deferred tax assets and  liabilities  are
recognized for the future tax consequences  attributable to differences  between
the financial  statement carrying amounts of existing assets and liabilities and
their  respective tax bases.  Deferred tax assets and  liabilities  are measured
using  enacted  tax rates  expected  to apply to taxable  income in the years in
which those temporary  differences are expected to be recovered or settled.  The
effect on deferred taxes and  liabilities of a change in tax rates is recognized
in earnings in the period that  includes the enactment  date. In addition,  SFAS
No. 109 requires that the tax benefit of tax-deductible dividends on unallocated
ESOP shares be recorded as a direct addition to retained earnings rather than as
a reduction of income tax expense.

16
<page>

Espey Mfg. & Electronics Corp.
Notes to Financial Statements
--------------------------------------------------------------------------------

Note 2.  Summary of Significant Accounting Policies, Continued

Cash and Cash Equivalents
Cash and cash equivalents consist of cash in banks, certificates of deposit, and
money market accounts.  The Company considers all highly liquid investments with
original maturities of three months or less to be cash equivalents.

Short-term  investments include  certificates of deposit with maturities greater
than three months to a year.

Accounts receivable and allowance for doubtful accounts
The Company extends credit to its customers in the normal course of business and
collateral is generally not required for trade  receivables.  Exposure to credit
risk is  controlled  through  the use of credit  approvals,  credit  limits  and
monitoring procedures.  Accounts receivable are reported net of an allowance for
doubtful accounts.  The Company estimates the allowance based on its analysis of
specific balances, taking into consideration the age of the past due account and
anticipated  collections  resulting  from legal issues.  An account is generally
considered past due after thirty (30) days from the invoice date. Based on these
factors,  there was an  allowance  for  doubtful  accounts of $3,000 at June 30,
2007.  Changes to the allowance for doubtful accounts are charged to expense and
reduced by charge-offs, net of recoveries.

Stock-Based Compensation
Prior to July 1, 2006, the Company  accounted for its  stock-based  compensation
plan under the recognition and measurement  provisions of Accounting  Principles
Board Opinion No. 25,  "Accounting for Stock Issued to Employees"  ("APB Opinion
No. 25") and related  interpretations,  as permitted by the Financial Accounting
Standards Board's ("FASB") Statement of Financial  Accounting Standards ("SFAS")
No. 123,  Accounting for Stock-Based  Compensation,  as amended by SFAS No. 148,
Accounting  for   Stock-Based   Compensation   -  Transition   and   Disclosure.
Accordingly, no stock-based compensation expense was recognized in the Statement
of Income for the fiscal year ended June 30, 2006, as all options  granted under
the Company's stock-based employee compensation plan had an exercise price equal
to the market  value of the  underlying  common  stock on the date of grant.  As
permitted by SFAS No. 123,  stock-based  compensation  expense was included as a
pro forma disclosure in the notes to the Company's financial  statements for the
fiscal year ended June 30, 2006.

Effective  July  1,  2006,  the  Company  adopted  the  fair  value  recognition
provisions  of  SFAS  No.  123(R),   Share-Based  Payment,  using  the  modified
prospective  transition method. Under that transition method,  compensation cost
recognized  during the fiscal  year ended June 30,  2007  includes  compensation
expense for all  stock-based  compensation  awards granted prior to, but not yet
vested as of July 1,  2006,  based on the  grant-date  fair value  estimated  in
accordance  with the provisions of SFAS No. 123.  Results for prior periods have
not been  restated,  as allowed for under the  modified  prospective  transition
method.

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.

                                                      Year Ended June 30,
                                                             2006
                                                             ----
                Net income as reported                  $   1,558,016

                Deduct: Total stock-based employee
                compensation expense determined
                under fair value based method for all
                awards, net of related tax effects            (88,411)
                                                        -------------

                Pro forma net income                    $   1,469,605
                                                        =============

                Net income per share:
                   Basic-as reported                    $        0.77
                                                        =============
                   Basic-pro forma                      $        0.73
                                                        =============

                   Diluted-as reported                  $        0.76
                                                        =============
                   Diluted-pro forma                    $        0.72
                                                        =============

17
<page>

Espey Mfg. & Electronics Corp.
Notes to Financial Statements
--------------------------------------------------------------------------------

Note 2.  Summary of Significant Accounting Policies, Continued

Per Share  Amounts  SFAS 128  "Earnings  Per  Share"  requires  the  Company  to
calculate  net income  (loss) per share  based on basic and  diluted  net income
(loss) per share,  as defined.  Basic EPS  excludes  dilution and is computed by
dividing net income (loss) by the weighted average number of shares  outstanding
for the period.  Diluted EPS reflects the potential dilution that could occur if
securities or other  contracts to issue common stock were exercised or converted
into common stock.  The dilutive  effect of  outstanding  options  issued by the
Company are reflected in diluted EPS using the treasury stock method.  Under the
treasury stock method, options will only have a dilutive effect when the average
market price of common stock during the period exceeds the exercise price of the
options.

Comprehensive Income
Comprehensive  Income for the years ended June 30, 2007 and 2006 is equal to net
income.

Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States of America requires  management to make
estimates  and  assumptions  that  affect  the  reported  amount of  assets  and
liabilities  and disclosure of contingent  assets and liabilities at the date of
the  financial  statements  and the  reported  amounts of revenues  and expenses
during the reporting period. Actual results could differ from those estimates.

Investment Tax Credits
Investment tax credits are accounted for as a reduction of income tax expense in
the year taxes payable are reduced.

Reclassifications
Certain  reclassifications  may  have  been  made to the  prior  year  financial
statements to conform to the current year presentation.

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 and an
adjustment  to tax  liabilities  in the  period  of  adoption.  FIN 48  will  be
effective  beginning  July 1,  2007.  The  adoption  of FIN 48 will  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.

Impairment of Long-Lived Assets
Long-lived assets,  including property,  plant, and equipment,  are reviewed for
impairment  whenever  events  or  changes  in  circumstances  indicate  that the
carrying amount of an asset may not be recoverable.  Recoverability of assets to
be held and used is measured by a comparison of the carrying  amount of an asset
to  estimated  undiscounted  future cash flows  expected to be  generated by the
asset.  If the carrying  amount of an asset  exceeds its  estimated  future cash
flows,  an  impairment  charge is recognized by the amount by which the carrying
amount of the asset  exceeds the fair value of the asset.  Assets to be disposed
of are  separately  presented in the balance  sheet and reported at the lower of
the carrying amount or fair value less costs to sell, and no longer depreciated.
The assets and  liabilities of a disposed group  classified as held for sale are
presented  separately in the  appropriate  asset and  liability  sections of the
balance sheet

18
<page>

Espey Mfg. & Electronics Corp.
Notes to Financial Statements
--------------------------------------------------------------------------------

Note 2.  Summary of Significant Accounting Policies, Continued

Concentrations of Risk
The market for our  defense  electronics  products is largely  dependent  on the
availability of new contracts from the United States and foreign  governments to
prime contractors to which we provide components. Any decline in expenditures by
the United  States or  foreign  governments  may have an  adverse  effect on our
financial performance.

Generally,  U.S.  government  contracts  are  subject  to  procurement  laws and
regulations.  Some  of the  Company's  contracts  are  governed  by the  Federal
Acquisition Regulation (FAR), which lays out uniform policies and procedures for
acquiring  goods  and  services  by the  U.S.  government,  and  agency-specific
acquisition  regulations that implement or supplement the FAR. For example,  the
Department of Defense implements the FAR through the Defense Federal Acquisition
Regulation (DFAR).

The FAR also contains  guidelines and  regulations for managing a contract after
award, including conditions under which contracts may be terminated, in whole or
in part,  at the  government's  convenience  or for  default.  If a contract  is
terminated for the  convenience of the  government,  a contractor is entitled to
receive  payments for its  allowable  costs and, in general,  the  proportionate
share of fees or earnings  for the work done.  If a contract is  terminated  for
default, the government generally pays for only the work it has accepted.  These
regulations  also subject the Company to financial  audits and other  reviews by
the  government  of its costs,  performance,  accounting  and  general  business
practices  relating  to its  contracts,  which may result in  adjustment  of the
Company's contract-related costs and fees.

Note 3. Contracts in Process

Contracts in process at June 30, 2007 and 2006 are as follows:
<table>
<caption>
                                                                                  2007           2006
                                                                                  ----           ----

                                                                            <c>            <c>
         Gross contract value                                                  $36,265,636    $37,722,746

         Costs related to contracts in process, net of progress payments
         of $206,238 in fiscal 2007 and $234,154 in fiscal 2006                $ 7,255,422    $ 8,301,077
</table>

Included in costs relating to contracts in process at June 30, 2007 and 2006 are
costs of $865,097 and $1,895,688,  respectively,  relative to contracts that may
not be completed  within the ensuing year. Under the  units-of-delivery  method,
the related  sale and cost of sales will not be  reflected  in the  statement of
income until the units under contract are shipped.

Note 4. Property, Plant and Equipment

A summary of the original cost of property, plant and equipment at June 30, 2007
and 2006 is as follows:

                                                        2007           2006
                                                        ----           ----
         Land                                       $     45,000   $     45,000
         Building and improvements                     4,478,437      4,354,242

         Machinery and equipment                       6,528,069      6,595,080

         Furniture, fixtures and office equipment        143,221        141,650
                                                    ------------   ------------

                                                      11,194,727     11,135,972
         Accumulated depreciation                     (8,260,217)    (8,253,520)
                                                    ------------   ------------
                                                    $  2,934,510   $  2,882,452
                                                    ============   ============

Depreciation expense was $504,243 and $532,735,  during the years ended June 30,
2007 and 2006, respectively.

19
<page>

Espey Mfg. & Electronics Corp.
Notes to Financial Statements
--------------------------------------------------------------------------------

Note 5. Line of credit

At June 30, 2007, the Company has an uncommitted  and unused Line of Credit with
a financial  institution.  The agreement provides that the Company may borrow up
to $3,000,000.  The line provides for interest at the  borrower's  choice of (I)
prime minus .75% or (II) LIBOR plus 1.80% for periods of 1, 2, or 3 months.  Any
borrowing  under  the  line  of  credit  will  be   collateralized  by  accounts
receivable.

Note 6. Research and Development Costs

Research and  development  costs charged to cost of sales during the years ended
June 30, 2007 and 2006 were approximately $79,836 and $121,000, respectively.

Note 7. Pension Expense

Under terms of a  negotiated  union  contract,  the Company is obligated to make
contributions  to  a  union-sponsored  defined  benefit  pension  plan  covering
eligible employees.  Such contributions and expenses are based upon hours worked
at a specified rate and amounted to $94,890 in fiscal 2007 and $88,138 in fiscal
2006.

The  Company  sponsors  a  401(k)  plan  with  employee  and  employer  matching
contributions.  The employer match is 10% of the employee  contribution  and was
$32,262 and $32,590, for fiscal years 2007 and 2006, respectively.


Note 8. Provision for Income Taxes

A summary of the  components  of the  provision  for income  taxes for the years
ended June 30, 2007 and 2006 is as follows:

                                               2007           2006
                                               ----           ----
          Current tax expense - federal    $ 1,282,953    $   823,563
          Current tax expense - state          139,265         85,351
          Deferred tax (benefit) expense       (60,448)      (100,376)
                                           -----------    -----------
                                           $ 1,361,770    $   808,538
                                           ===========    ===========

Deferred income taxes reflect the impact of "temporary  differences" between the
amount of assets and  liabilities  for  financial  reporting  purposes  and such
amounts measured by tax laws and regulations.  These "temporary differences" are
determined in accordance with SFAS No. 109.

The  combined  U.S.  federal and state  effective  income tax rates of 34.9% and
34.2%, for 2007 and 2006 respectively,  differed from the statutory U.S. federal
income tax rate for the following reasons:

                                                              2007       2006
                                                              ----       ----
U.S. federal statutory income tax rate                         34.0%      34.0%
Increase (reduction) in rate resulting from:
    State franchise tax, net of federal income tax benefit      2.4        2.4
    Foreign exportation benefit                                (0.2)      (0.8)
    ESOP cost versus Fair Market Value                          1.0        1.0
    Dividend on allocated ESOP shares                          (1.2)      (1.8)
    Qualified Production Activities                            (1.0)      (1.0)
    Stock-based compensation                                    0.4         --
    Other                                                      (0.5)       0.4
                                                             ------     ------
Effective tax rate                                             34.9%      34.2%
                                                             ======     ======

For the years  ended  June 30,  2007 and 2006  deferred  income  tax  benefit of
$(60,448)  and  $(100,376),  respectively,  result from the changes in temporary
differences  for each year. The tax effects of temporary  differences  that give
rise to deferred tax assets and deferred tax liabilities as of June 30, 2007 and
2006 are presented as follows:

20
<page>

Espey Mfg. & Electronics Corp.
Notes to Financial Statements
--------------------------------------------------------------------------------

Note 8. Provision for Income Taxes, Continued

                                                           2007        2006
                                                           ----        ----
  Deferred tax assets:
      Accrued expenses ..............................   $ 159,204   $ 142,269
      ESOP ..........................................      56,323      30,328
      Stock-based compensation ......................       4,850          --
      Other .........................................      13,612      12,500
                                                        ---------   ---------
                    Total deferred tax assets .......     233,989     185,097
                                                        ---------   ---------

  Deferred tax liabilities:
      Property, plant and equipment - principally due
           to differences in depreciation methods ...     235,224     256,980

      Inventory - effect on uniform capitalization ..          --     (10,201)
                                                        ---------   ---------

                    Total deferred tax liabilities ..     235,223     246,779
                                                        ---------   ---------
  Net deferred tax liability ........................   $   1,235   $  61,682
                                                        =========   =========

In assessing  the  realizability  of deferred tax assets,  management  considers
whether it is more likely than not that some  portion or all of the deferred tax
assets will be  realized.  The  ultimate  realization  of deferred tax assets is
dependent  upon the  generation of future  taxable  income during the periods in
which those temporary  differences become deductible.  Management  considers the
scheduled reversal of deferred tax liabilities, projected future taxable income,
and tax planning  strategies in making this assessment.  Based upon the level of
historical  taxable  income and  projection  for future  taxable income over the
period in which the deferred tax assets are deductible,  management  believes it
is more  likely  than not that the Company  will  realize the  benefits of these
temporary differences without consideration of a valuation allowance.

Note 9. Significant Customers

A significant  portion of the Company's  business is the  production of military
and industrial  electronic equipment for use by the U.S. and foreign governments
and certain industrial customers.  Sales to two domestic customers accounted for
30% and 29% of total sales in fiscal  2007.  Sales to three  domestic  customers
accounted for 35%, 17%, and 13% of total sales in fiscal 2006.

Export sales in fiscal 2007 and fiscal 2006 were  approximately  $3,747,000  and
$3,392,000, respectively.

Note 10. Stock Rights Plan

The Company has a  Shareholder  Rights Plan that  expires on December  31, 2009.
Under this plan,  common stock purchase rights were distributed as a dividend at
the rate of one right for each share of common stock outstanding as of or issued
subsequent  to April 14, 1989.  Each right  entitles  the holder  thereof to buy
one-half  share of common  stock of the Company at an exercise  price of $25 per
share  subject to  adjustment.  The rights are  exercisable  only if a person or
group acquires beneficial ownership of 15% or more of the Company's common stock
or commences a tender or exchange offer which, if  consummated,  would result in
the  offeror  individually  or,  together  with all  affiliates  and  associates
thereof,  being  the  beneficial  owner of 15% or more of the  Company's  common
stock.

If  a  15%  or  larger  shareholder   should  engage  in  certain   self-dealing
transactions  or a merger with the Company in which the Company is the surviving
corporation  and its shares of common  stock are not changed or  converted  into
equity  securities  of any other  person,  or if any  person  were to become the
beneficial owner of 15% or more of the Company's  common stock,  then each right
not owned by such  shareholder or related  parties of such  shareholder  (all of
which will be void) will  entitle its holder to  purchase,  at the right's  then
current  exercise price,  shares of the Company's common stock having a value of
twice the right's exercise price. In addition, if the Company is involved in any
other  merger  or  consolidation  with,  or sells  50% or more of its  assets or
earning power to another person, each right will entitle its holder to purchase,
at the right's then current exercise price, shares of common stock of such other
person having a value of twice the right's exercise price.

21
<page>

Espey Mfg. & Electronics Corp.
Notes to Financial Statements
--------------------------------------------------------------------------------

Note 10. Stock Rights Plan, Continued

The Company  generally is entitled to redeem the rights at one cent per right at
any time until the 15th day (or 25th day if extended by the  Company's  Board of
Directors)  following public  announcement that a 15% position has been acquired
or the  commencement of a tender or exchange offer which, if consummated,  would
result in the offer or,  together with all affiliates  and  associates  thereof,
being the beneficial owner of 15% or more of the Company's common stock.

Note 11. 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 above ESOP information has not been adjusted
for the stock split completed December 30, 2005.

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 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
$472,125 for the year ended June 30,  2007.  The ESOP shares as of June 30, 2007
were as follows:

         Allocated Shares                                      451,296
         Committed-to-be-released shares                            --
         Unreleased shares                                     249,167
                                                            ----------

         Total shares held by the ESOP                         700,463
                                                            ==========

         Fair value of unreleased shares at June 30, 2007   $6,002,433
                                                            ==========

22
<page>

Espey Mfg. & Electronics Corp.
Notes to Financial Statements
--------------------------------------------------------------------------------

Note 12. Stock-based Compensation

Prior to July 1, 2006, the Company  accounted for its  stock-based  compensation
plan under the recognition and measurement  provisions of Accounting  Principles
Board Opinion No. 25,  "Accounting for Stock Issued to Employees"  ("APB Opinion
No. 25") and related  interpretations,  as permitted by the Financial Accounting
Standards Board's ("FASB") Statement of Financial  Accounting Standards ("SFAS")
No. 123,  Accounting for Stock-Based  Compensation,  as amended by SFAS No. 148,
Accounting  for   Stock-Based   Compensation   -  Transition   and   Disclosure.
Accordingly, no stock-based compensation expense was recognized in the Statement
of Income for the fiscal year ended June 30, 2006, as all options  granted under
the Company's stock-based employee compensation plan had an exercise price equal
to the market  value of the  underlying  common  stock on the date of grant.  As
permitted by SFAS No. 123,  stock-based  compensation  expense was included as a
pro forma disclosure in the notes to the Company's financial  statements for the
fiscal year ended June 30, 2006.

Effective  July  1,  2006,  the  Company  adopted  the  fair  value  recognition
provisions  of  SFAS  No.  123(R),   Share-Based  Payment,  using  the  modified
prospective  transition method. Under that transition method,  compensation cost
recognized  during the fiscal  year ended June 30,  2007  includes  compensation
expense for all  stock-based  compensation  awards granted prior to, but not yet
vested as of July 1,  2006,  based on the  grant-date  fair value  estimated  in
accordance  with the provisions of SFAS No. 123.  Results for prior periods have
not been  restated,  as allowed for under the  modified  prospective  transition
method.

Total stock-based compensation expense recognized in the Statement of Income for
the fiscal years ended 2007 and 2006, was $170,698 and $0, respectively,  before
income taxes. The related total deferred tax benefit was  approximately  $13,480
and $0,  respectively  for the same  periods.  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  June  30,  2007  there  was   approximately   $171,024  of  unrecognized
compensation  cost,  before income tax,  related to stock option awards that are
expected to be recognized as expense over the next 2 years.  The total  deferred
tax benefit related to these awards is approximately $13,282.

The 2000 Stock Option Plan is the Company's only stock option 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 contractual  life. Option grants provide
for  accelerated  vesting  if there is a change  in  control.  Shares  issued to
satisfy  option grants are issued from Treasury  stock.  Options  authorized for
issuance under the 2000 Stock Option Plan totaled 275,300.  As of June 30, 2007,
of  the  options   authorized  for  issuance,   138,800  were  granted  and  are
outstanding,  37,400 of which are vested and exercisable.  Options available for
future grants at June 30, 2007 total 75,400.

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 year ended June 30, 2007:

                                                            Year Ended
                                                          June 30, 2007
                                                         ---------------
            Dividend yield                                     2.53%
            Expected stock price volatility                   21.80%
            Risk-free interest rate                            4.42%
            Expected option life (in years)                     5.0
            Weighted average fair value per share
               of options granted during the period         $ 4.007

23
<page>

Espey Mfg. & Electronics Corp.
Notes to Financial Statements
--------------------------------------------------------------------------------

Note 12. Stock-based Compensation, Continued

The Company pays  dividends  quarterly and  anticipates  that it will be able to
continue  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  illustrates the effect on net income per share for the year
ended June 30, 2006 as if the  Company  had  applied the fair value  recognition
provisions of SFAS No. 123 to stock-based employee compensation:

                                                           Year Ended
                                                         June 30, 2006
                                                         -------------
         Net income, as reported                         $   1,558,016
         Deduct: Total stock-based employee
                 compensation expense determined
                 under fair value based method for all
                 awards, net of related income taxes           (88,411)
                                                         -------------
         Pro forma net income                            $   1,469,605
                                                         =============

         Income per share:
         Basic - as reported                             $         .77
         Basic - pro forma                               $         .73
         Diluted - as reported                           $         .76
         Diluted - pro forma                             $         .72

The table below outlines the weighted average  assumptions as if the Company had
applied the fair value  recognition  provisions  of SFAS No. 123 to  stock-based
employee compensation for the year ended June 30, 2006:

                                                           Year Ended
                                                         June 30, 2006
                                                         -------------
         Dividend yield                                       2.36%
         Expected stock price volatility                     21.72%
         Risk-free interest rate                              4.35%
         Expected option life (in years)                      5.4
         Weighted average fair value per share
            of options granted during the period             $4.049

The following table  summarizes stock option activity during the year ended June
30, 2007:

                                             Employee Stock Options Plan
                                       ---------------------------------------
                                                                    Weighted
                                          Number of    Weighted      Average
                                           Shares       Average     Remaining
                                           Subject     Exercise    Contractual
                                         To Options      Price        Term
                                       ---------------------------------------
       Balance at July 1, 2006            146,200       $14.02          8
       Granted                             37,800        18.29         10
       Exercised                          (28,600)       10.05         --
       Forfeited or expired               (16,600)       15.92         --
                                       ---------------------------------------
       Balance at June 30, 2007           138,800        15.77          8
                                       =======================================
       Exercisable at June 30, 2007        37,400        10.18          6
                                       =======================================

The intrinsic value of stock options  exercised was $121,825,  during the twelve
months ended June 30, 2007. The intrinsic value of stock options outstanding and
exercisable as of June 30, 2007 was $520,111.

24
<page>

Espey Mfg. & Electronics Corp.
Notes to Financial Statements
--------------------------------------------------------------------------------

Note 13. Financial Instruments/Concentration of Credit Risk

The  carrying  amounts  of  financial  instruments,   including  cash  and  cash
equivalents, short term investments,  accounts receivable,  accounts payable and
accrued  expenses,  approximated fair value as of June 30, 2007 and 2006 because
of the relatively short maturities of these instruments.

Financial  instruments that potentially subject the Company to concentrations of
credit  risk  consist  principally  of cash  and  cash  equivalents,  short-term
investments  and  accounts  receivable.  The  Company  maintains  cash  and cash
equivalents with various financial  institutions.  At times such investments may
be in excess of FDIC  insurance  limits.  As disclosed in note 9, a  significant
portion of the Company's  business is the  production of military and industrial
electronic  equipment  for use by the U.S. and foreign  governments  and certain
industrial  customers.  The related accounts receivable balance of the Company's
total trade accounts receivable  balance,  represented at June 30, 2007 by three
customers was 51%, and 63% by three customers at June 30, 2006.

Although the Company's  exposure to credit risk  associated  with  nonpayment of
these balances is affected by the conditions or occurrences  within the U.S. and
foreign  governments,  the Company  believes that its trade accounts  receivable
credit risk exposure is limited. The Company performs ongoing credit evaluations
of its customer's financial conditions and requires collateral, such as progress
payments,  in certain  circumstances.  The Company  establishes an allowance for
doubtful  accounts  based upon factors  surrounding  the credit risk of specific
customers, historical trends and other information.

Note 14. Related Parties

The Company  paid a law firm in which a director of the Company is a partner,  a
total of $0 and $19,658,  for legal services  during fiscal years ended June 30,
2007 and 2006, respectively.  Included in the payment of $19,658 for fiscal year
ended  June  30,  2006,  was  $9,085  held in trust  and  paid to other  service
providers.

The shares of common  stock owned by the ESOP Trust are voted by the Trustees in
the manner  directed by the ESOP  Committee.  The Trustees,  Howard  Pinsley and
Peggy A. Murphy,  are the  Chairman of the Board,  Chief  Executive  Officer and
President of the Company and Secretary of the Company, respectfully. See note 11
for additional information regarding the ESOP.

Note 15. 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 June 30, 2007.

Note 16. Quarterly Financial Information (Unaudited)
                                  First       Second        Third       Fourth
2007                            Quarter      Quarter      Quarter      Quarter
                             ----------   ----------   ----------   ----------
  Net Sales ..............   $6,071,906   $6,119,320   $8,059,695   $7,405,438
     Gross profit ........    1,397,308    1,258,221    1,616,134    1,788,304
     Net income ..........      543,050      479,911      714,030      807,729

 Net income per share -
  Basic ..................          .27          .23          .35          .39
  Diluted ................          .26          .23          .34          .39

2006
  Net Sales ..............   $4,560,574   $5,056,083   $4,677,808   $6,557,105
     Gross profit ........      880,290      947,360    1,042,265    1,672,174
     Net income ..........      217,744      274,260      365,057      700,955

 Net income per share -
  Basic ..................         0.11         0.14         0.18         0.34
  Diluted ................         0.11         0.13         0.18         0.34

25
<page>

Item 8.  Changes  in  and  disagreements  with  accountants  on  accounting  and
         financial disclosure

         None

Item 8A. 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  Annual  Report on Form  10-KSB.  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.

Item 8B. Other information

         None.


26
<page>

                                    PART III

The information called for by "Item 9. Directors,  Executive Officers, Promoters
and Control Persons; Compliance with Section 16(a) of the Registrant", "Item 10.
Executive  Compensation",  "Item 11.  Security  Ownership of Certain  Beneficial
Owners and  Management  and  Related  Stockholder  Matters",  "Item 12.  Certain
Relationships and Related  Transactions" and "Item 14. Principal Accountant Fees
and  Services",  is hereby  incorporated  by  reference to the  Company's  Proxy
Statement  for its Annual  Meeting  of  Shareholders,  (scheduled  to be held on
November 30, 2007) to be filed with the SEC pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended.

Item 13. Exhibits

         3.1      Certificate  of  incorporation  and  all  amendments   thereto
                  (incorporated by reference to Exhibit 3.1 to Espey's Report on
                  Form 10-K for the year ended June 30,  2004 and Report on Form
                  10-Q for the quarter ended December 31, 2004)

         3.2      By-laws  (incorporated  by reference to Exhibit 3.2 to Espey's
                  Report on Form 10-Q for the quarter ended March 31, 2004)

         4.1      Amended and Restated Rights  Agreement,  dated March 31, 1989,
                  as amended  February 12, 1999 and  December 31, 1999,  between
                  Espey Mfg. &  Electronics  Corp.  and  Registrar  and Transfer
                  Company  (incorporated  by reference to Espey's Form 8-K dated
                  December 20, 1999)

         4.2      Description  of Capital  Stock  (Incorporated  by reference to
                  Espey's Report on Form 8-K dated October 7, 2005)

         10.1     2000 Stock Option Plan  (incorporated  by reference to Espey's
                  Definitive  Proxy  Statement  dated  December  6, 1999 for the
                  January 4, 2000 annual meeting)

         10.2     Executive Officer contract (filed herewith)

         11.1     Statement  re:  Computation  of Per  Share Net  income  (filed
                  herewith)

         14.1     Code of ethics  (incorporated  by reference to Espey's website
                  www.espey.com)
                  -------------

         23.1     Consent of Rotenberg & Co., LLP (filed herewith)

         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 (filed herewith)

         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 (filed herewith)

         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 (filed herewith)

         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 (filed herewith)

27
<page>

                               S I G N A T U R E S


Pursuant to the requirements of Section 13 and 15 (d) 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/Howard Pinsley                                 President
---------------------------                       (Chief Executive Officer)
Howard Pinsley                                    September 5, 2007

/s/David O'Neil                                   Treasurer
---------------------------                       (Principal Financial Officer)
David O'Neil                                      September 5, 2007


/s/Katrina Sparano                                Assistant Treasurer
---------------------------                       (Principal Accounting Officer)
Katrina Sparano                                   September 5, 2007)


/s/Barry Pinsley                                  Director
---------------------------                       September 5, 2007
Barry Pinsley

/s/Seymour Saslow                                 Director
---------------------------                       September 5, 2007
Seymour Saslow

/s/Michael W. Wool                                Director
---------------------------                       September 5, 2007
Michael W. Wool

/s/Paul J. Corr                                   Director
---------------------------                       September 5, 2007
Paul J. Corr

/s/Alvin O. Sabo                                  Director
---------------------------                       September 5, 2007
Alvin O. Sabo

/s/Carl Helmetag                                  Director
---------------------------                       September 5, 2007
Carl Helmetag


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