UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549


                                   FORM 10 - K


[X] Annual Report Pursuant to Section 13 or 15 (d) of the Securities
    Exchange Act of 1934

                    For the fiscal year ended June 30, 2002

[ ] 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-K 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-K or any amendment to this
Form 10-K. [X]

The  aggregate  market value of the voting stock held by  non-affiliates  of the
registrant was  $19,118,687 as of September 11, 2002 based upon the closing sale
price of $18.48 on the American Stock Exchange on September 11, 2002.

The number of shares of common stock  outstanding  as of September  11, 2002 was
1,034,561.


                                       1
<PAGE>


                                     PART I
Item 1.           Business.

General

Espey Mfg. & Electronics  Corp.  (the  "Company") 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. 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, medium range and global communication  systems, (v)
navigation systems for aircraft, (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  year ended June 30,  2002  (referred  to herein as  "2002"),  the
Company's total sales were $18,405,213.  Sales to two domestic customers and one
foreign customer  accounted for 26%, 21% and 14% and 40%, 20%, and 12%, of total
sales in 2002 and 2001, respectively.  Sales to two domestic customers accounted
for 30% and 26% respectively, of total sales in 2000.

Export sales in 2002, 2001 and 2000 were approximately  $6,600,000,  $8,700,000,
and $4,200,000, respectively. The Company has a foreign sales corporation.

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 11, 2002, the Company's  backlog was  approximately  $28.5 million.
The total backlog at June 30, 2002 was  approximately  $24.6 million as compared
to  approximately  $27.5  million at June 30,  2001.  The  Company's  backlog 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 $19 million of orders  comprising
the June 30, 2002 backlog will be filled  during the fiscal year ending June 30,
2003.  The minimum of $19 million does not include any  shipments,  which may be
made against orders subsequently received during the fiscal year ending June 30,
2003.  The estimate of the June 30, 2002 backlog to be shipped in fiscal 2003 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,  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


                                       2
<PAGE>


many  agencies of the  Department  of Defense  and  generally  is  automatically
solicited  by such  agencies  for  procurement  needs  falling  within the major
classes of products produced by the Company.  In addition,  the Company directly
solicits  bids from both the  Department  of  Defense  and other  United  States
Government agencies for prime contracts.

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

Research and Development

The  Company's  expenditures  for research and  development  were  approximately
$335,000,  $249,000, and $255,000 in 2002, 2001 and 2000, 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 number of persons  employed by the Company as of September 11, 2002 was 188.
Some of these  employees are  represented  by the  International  Brotherhood of
Electrical  Workers Local #1799.  The current  collective  bargaining  agreement
expires on June 30,  2003.  The  contract  includes a 3% pay  increase in fiscal
2003.  Relations  with the  Union  are  considered  good.  Union  membership  at
September 11, 2002 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 2002, and
the Company  believes  will not in fiscal year 2003 have a material  effect upon
the capital expenditures, earnings, or competitive position of the Company.

Item 2.           Properties

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

The  Saratoga  Springs  plant,  which the  Company  owns,  consists  of  various
adjoining one-story  buildings.  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


                                       3
<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,  the principal  market for trading in the
common stock, for each quarterly period for the last two fiscal years ended June
30:

         2002                             High                        Low
         First Quarter                    18.98                      17.40
         Second Quarter                   20.99                      18.45
         Third Quarter                    20.49                      19.50
         Fourth Quarter                   20.14                      19.90

         2001                             High                        Low
         First Quarter                    17.50                      14.00
         Second Quarter                   17.938                     15.875
         Third Quarter                    19.50                      16.625
         Fourth Quarter                   18.16                      17.60

Holders

The  approximate  number of  holders  of record of the  common  stock was 150 on
September  11,  2002  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 a cash dividend on the common stock of $.30,  $.20 and $.20 per
share for the fiscal years ended June 30, 2002, 2001 and 2000, respectively. The
Board of Directors  has  authorized  the payment of a fiscal 2003 first  quarter
dividend of $.075 payable September 30, 2002.


                                       4
<PAGE>


Item 6. Selected Financial Data.

<TABLE>
<CAPTION>


                                                             ESPEY MFG. & ELECTRONICS CORP.
                                                             Five Years Ended June 30, 2002
                                      -----------------------------------------------------------------------------
Selected Income Statement Data            2002             2001            2000             1999           1998
                                      ------------     ------------    ------------     ------------    -----------

<S>                                    <C>              <C>             <C>             <C>             <C>
Net Sales........................      $ 18,405,213     $ 17,251,640    $ 14,719,818    $ 13,629,692    $ 10,793,572
Operating Income (loss)..........           549,139        1,169,271         733,617         690,839      (1,750,663)
Other income, net................           179,615          305,833         459,326         441,762         595,691
Net income (loss)................           545,754        1,033,069         782,943         730,601        (739,602)
Income (loss) per common share:..      $        .53     $       1.00    $        .75    $        .66    $       (.67)
                                       ============     ============    ============    ============    ============

Selected Balance Sheet Data

Current Assets...................        25,035,574       23,736,991      22,540,316      22,091,114      21,309,658
Current Liabilities..............         1,305,384        1,063,497       1,329,171       1,274,126         883,980
Working Capital..................        23,730,190       22,673,494      21,211,145      20,816,988      20,425,678
Total Assets.....................        28,359,826       27,228,881      26,118,037      25,394,712      24,574,108

Stockholders' equity.............        27,054,442       26,165,384      24,788,866      24,120,586      23,690,128
Cash dividends declared and
paid per common share............      $        .30     $        .20    $        .20    $        .20    $        .70
                                       ============     ============    ============    ============    ============

</TABLE>

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

Results of Operations

Net  Sales  for  fiscal  years  ended  June  30,  2002,  2001,  and  2000,  were
$18,405,213,  $17,251,640, and $14,719,818,  respectively.  The 6.7% increase in
sales in 2002 as  compared  to 2001,  is the  result  of a  strong  sales  order
backlog.  The Company  continues to realize the  benefits of increased  business
with  existing  customers as well as  establishing  new customer  relationships.
These  relationships  have provided for the continued increase in sales that has
occurred  over the last five  years.  The  sales  backlog  at June 30,  2002 was
approximately  $24.6 million.  The backlog includes  significant orders for land
and shipboard  high voltage radar power  supply/transmitters,  industrial  power
supplies,  and significant contracts to manufacture certain customer products in
accordance with pre-engineered  requirements.  The increase in net sales in 2001
as compared to 2000 was also a result of an increased  sales order backlog which
allowed the Company to ship significantly more in 2001. Significant shipments in
2001 and 2000  included  high  voltage  radar power  supply/transmitters,  radar
repair depot, and industrial power supplies.

Net  income  for  fiscal  2002,  was  $545,754  or $.53 per  share  compared  to
$1,033,069 or $1.00 per share for fiscal 2001.  The decrease in income per share
was due to increased  expenditures  made on engineering  development  contracts.
These  contracts  are  for  the  development  of  new  technologies   which,  if
successful,  should  significantly  enhance the Company's  power supply  product
offerings  and  operating  income in the future.  The  decrease in earnings  was
partially  offset by enhanced  internal cost  controls,  which resulted in lower
selling,  general and administrative  expenses.  Net income for fiscal 2001, was
$1,033,069  or $1.00 per share  compared to a net income of $782,943 or $.75 per
share for fiscal 2000. The net income  increase in 2001 was due to increased net
sales and a favorable product mix.

For  fiscal  years  ended  June  30,  2002,  2001 and 2000  gross  profits  were
$2,300,994  $3,061,730,  and  $2,735,934,  respectively.  The  decrease in gross
profit  between  2002  and  2001  was  due to  increased  expenditures  made  on
engineering  development  contracts  as discussed  above.  The increase in gross
profit between 2001 and 2000, was predominately  due to increased  efficiency in
the manufacturing and engineering workforces and an increase in net sales.


                                       5
<PAGE>


Selling, general and administrative expenses were $1,751,855 for the fiscal year
ended June 30, 2002,  a decrease of  $140,604,  or 7.4% as compared to the prior
year.  This decrease is mainly  attributable  to an overall  decrease in travel,
freight and labor costs  caused by a decrease of  approximately  five  full-time
equivalent  employees.   Selling,   general  and  administrative  expenses  were
$1,892,459 for the year ended June 30, 2001, a decrease of $109,858,  or 5.5% as
compared to the prior year.  The decrease is primarily  related to a decrease in
professional fees, officers salaries and employment-related expenses.

Total other income in fiscal 2002,  as compared to 2001  declined as expected as
interest  rates  continued to offer lower  returns in fiscal  2002.  Total other
income in fiscal  2001,  as  compared  to 2000  declined as expected as interest
rates declined continuously in fiscal 2001.

Business Outlook

The Company  continues  to increase net sales while also  maintaining  a sizable
sales backlog. The sales backlog of $28.5 million as of September 11, 2002 gives
the Company a solid base to grow from.  In addition to the backlog,  the Company
currently  has  outstanding  quotations in excess of $16 million for both repeat
and new programs.  The Company has received major  contracts for  pre-engineered
hardware. The Company also expects to receive substantial orders for spare parts
on the various types of transmitters which are already in the field, a number of
contracts for further  development  and  manufacture of numerous power supplies,
transformers and additional contracts for pre-engineered hardware.

The outstanding  quotations  encompass  various new and previously  manufactured
power supplies, transformers, and subassemblies.  There can be no assurance that
the Company will acquire any or all of the proposed orders described above since
such a forward-looking statement is subject to future events, market conditions,
political stability of foreign governments, and allocations of the United States
defense budget.

Liquidity and Capital Resources

The Company's  working  capital is an appropriate  indicator of the liquidity of
its  business,  and  during the past  three  fiscal  years,  the  Company,  when
possible,  has  funded all of its  operations  with cash  flows  resulting  from
operating  activities and when necessary from its existing cash and investments.
The  Company  did not borrow  any funds  during  the last  three  fiscal  years.
Management  has available a $3,000,000  uncommitted  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,  2002,  2001,  and  2000  was
$23,730,190,  $22,673,494, and $21,211,145,  respectively. During 2002, 2001 and
2000 the Company repurchased 0, 4,170, and 30,027 shares,  respectively,  of its
common  stock  from  the  Company's   ESOP  and  in  other  private  and  public
transactions,   for  a  total  purchase  price  of  $0,  $70,891,  and  $403,472
respectively.   Under  existing  authorizations  from  the  Company's  Board  of
Directors,  as of September  11, 2002,  management  is authorized to purchase an
additional $854,860 of Company stock.

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

                                                       2002           2001
                                                    -----------    -----------

Net cash provided by operating activities...........$ 3,656,911    $ 3,073,481
Net cash provided by investing activities...........    576,916         37,263
Net cash used in financing activities ..............    241,601        277,200

Net cash provided by operating  activities  fluctuates between periods primarily
as a result of  differences  in net  income,  the  timing of the  collection  of
accounts  receivable,  purchases  of  inventory,  level of sales and payments of
accounts payable.  Net cash provided by investing activities increased in fiscal
2002 due to the sale of an investment security with no offsetting purchase.  The
decrease  in cash used in  financing  activities  is due to the  decrease in the
amount of treasury stock  purchased  during 2002 as compared to 2001,


                                       6
<PAGE>


which was  partially  offset by the  increased  payment  of  dividends  and cash
received from the exercise of stock options.

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.  The amount of
bad debts over the years has been minimal.

During fiscal year 2002, and 2001, the Company expended  approximately  $394,000
and  $537,000,  respectively,  for plant  improvements  and new  equipment.  The
Company  has  budgeted  approximately  $350,000  for  new  equipment  and  plant
improvements in fiscal 2003.  Management  presently  anticipates  that the funds
required will be available from current operations.

Critical Accounting Policies and Estimates

Our significant  accounting policies are described in Note 2 to the consolidated
financial  statements.  We believe our most critical accounting policies include
revenue recognition and cost estimation on our contracts.

A significant portion of our business is comprised of development and production
contracts which are accounted for under the provisions of the American Institute
of  Certified  Public  Accountants  (AICPA)  Statement  of  Position  No.  81-1,
"Accounting for  Performance of  Construction-Type  and Certain  Production-Type
Contracts." Generally revenue 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.

Contract  accounting  requires  judgment relative to estimating costs and making
assumptions  related to technical issues and delivery  schedule.  Contract costs
include material,  subcontract costs, labor and an allocation of indirect 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 in the
estimation of cost at  completion.  When a change in contract value or estimated
cost is determined, changes are reflected in current period earnings.

Other Matters

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

Each year the Company makes  contributions  to the ESOP,  which are used to make
loan interest and principal  payments.  With each loan and interest  payment,  a
portion of the common stock is allocated to participating  employees. As of June
30,  2002,  there were  220,888  shares  allocated  to  participants.  Dividends
attributable to allocated  shares were likewise  allocated to the  participants'
accounts,  whereas the dividends on unallocated  shares were used in part of the
loan repayment, thus reducing the Company's required contribution.

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


                                       7
<PAGE>


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

It  should  be  noted  that in this  Management's  Discussion  and  Analysis  of
Financial Condition and Results of Operations are  "forward-looking  statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the  Securities  Exchange Act of 1934,  as amended,  and are made
pursuant to the safe harbor  provisions  of the  Private  Securities  Litigation
Reform  Act of  1995.  The  terms  "believe,"  "anticipate,"  "intend,"  "goal,"
"expect," and similar expressions may identify forward-looking statements. These
forward-looking  statements  represent the  Company's  current  expectations  or
beliefs  concerning  future events.  The matters covered by these statements are
subject to certain risks and  uncertainties  that could cause actual  results to
differ  materially  form  those  set  forth in the  forward-looking  statements,
including  the  Company's  dependence on timely  development,  introduction  and
customer  acceptance  of new  products,  the  impact  of  competition  and price
erosion,  as well as supply and  manufacturing  constraints  and other risks and
uncertainties. The foregoing list should not be construed as exhaustive, and the
Company  disclaims any  obligation  subsequently  to revise any  forward-looking
statements to reflect events or circumstances  after the date of such statements
or to reflect the occurrence of anticipated or unanticipated events. The Company
wishes  to  caution   readers   not  to  place   undue   reliance  on  any  such
forward-looking statements, which speak only as of the date made.

Item 8.           Financial Statements

Report of Independent Accountants

To the Board of Directors and Stockholders of
Espey Mfg. & Electronics Corp. and Subsidiary:

In our  opinion,  the  consolidated  financial  statements  listed  in the index
appearing under Item 14 (a) (1) present fairly,  in all material  respects,  the
financial  position of Espey Mfg. & Electronics Corp. and Subsidiary at June 30,
2002 and 2001, and the results of their operations and their cash flows for each
of the  three  years in the  period  ended  June  30,  2002 in  conformity  with
accounting principles generally accepted in the United States of America.  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 of these  statements  in  accordance  with
auditing  standards  generally  accepted in the United States of America,  which
require that we plan and perform the audit 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 financial  statements,  assessing the  accounting  principles
used and  significant  estimates made by management,  and evaluating the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

/s/PricewaterhouseCoopers LLP
-----------------------------
PricewaterhouseCoopers LLP
Albany, New York
August 5, 2002


                                       8
<PAGE>


<TABLE>
<CAPTION>

Espey Mfg. & Electronics Corp. and Subsidiary
Consolidated Balance Sheets
June 30, 2002 and 2001
--------------------------------------------------------------------------------
                                                                                    2002                 2001
                                                                                ------------         ------------
ASSETS
Current assets:
        <S>                                                                    <C>                 <C>
         Cash and cash equivalents ......................................       $  9,192,962        $  5,200,736
         Investment securities ..........................................            368,000             737,600
                                                                                 ------------        ------------
                           Cash and cash equivalents
                           and investment securities ....................          9,560,962           5,938,336
                                                                                 ------------        ------------
         Trade accounts receivable, net .................................          2,409,706           2,537,310
         Other receivables ..............................................             13,413              31,179
                                                                                 ------------        ------------
                           Total receivables ............................          2,423,119           2,568,489
                                                                                 ------------        ------------

         Inventories:
                  Raw materials and supplies ............................          1,424,278           1,036,726
                  Work in Process .......................................          4,298,988           2,658,436
                  Costs related to contracts in process,
                  net of progress payments of $2,194,269
                  in 2002 and $289,000 in 2001 ..........................          7,017,529          11,237,515
                                                                                 ------------        ------------
                           Total inventories ............................         12,740,795          14,932,677
                                                                                 ------------        ------------
         Deferred income taxes ..........................................             85,773             145,609
         Prepaid expenses and other current assets ......................            198,061             151,880
                                                                                 ------------        ------------
                  Total current assets ..................................         25,008,710          23,736,991
                                                                                 ------------        ------------
Property plant and equipment, at cost ...................................         11,175,248          11,334,007
Less accumulated depreciation ...........................................         (7,850,996)         (7,842,117)
                                                                                 ------------        ------------
         Net property, plant and equipment ..............................          3,324,252           3,491,890
                                                                                 ------------        ------------
                  Total Assets ..........................................       $ 28,332,962        $ 27,228,881
                                                                                 ============        ============
</TABLE>


                                       9
<PAGE>


<TABLE>
<CAPTION>

LIABILITIES AND STOCKHOLDERS'EQUITY

<S>                                                                  <C>              <C>
Current Liabilities:
         Accounts payable ........................................    $    497,454     $    334,772
         Accrued expenses:
                  Salaries, wages and commissions ................          86,881          124,081
                  Vacation .......................................         398,898          345,546
                  Employee insurance costs .......................           6,887           61,798
                  Other ..........................................          41,410          37,711
         Payroll and other taxes withheld and accrued ............          37,943           39,397
         Income taxes payable ....................................          88,966           61,440
         Deferred income taxes ...................................         120,081           58,752
                                                                       ------------    ------------
                           Total current liabilities .............       1,278,520        1,063,497
                                                                       ------------    ------------
Stockholders' equity
         Common stock, par value $.33-1/3 per share
              Authorized 10,000,000 shares; Issued 1,514,937
              shares in 2002 and 2001, outstanding 1,034,561
              and 1,029,461 shares in 2002 and 2001 ..............         504,979          504,979
         Capital in excess of par value ..........................      10,465,878       10,496,287
         Accumulated other comprehensive loss ....................         (29,079)         (50,281)
         Retained Earnings .......................................      24,848,858       24,607,239
                                                                       ------------    ------------
                                                                        35,790,636      35,558,224
         Less common stock subscribed ............................      (1,117,325)      (1,675,987)
         Cost of 480,376 and 485,476 shares of
              common stock in treasury in 2002
              and 2001, respectively .............................      (7,618,869)      (7,716,853)
                                                                       ------------    ------------
                           Total stockholders' equity ............      27,054,442       26,165,384
                                                                       ------------    ------------
                           Total liabilities and
                           stockholders' equity ..................    $ 28,332,962     $ 27,228,881
                                                                      ============    ============
</TABLE>

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


                                       10
<PAGE>


<TABLE>
<CAPTION>

Espey Mfg. & Electronics Corp. and Subsidiary
Consolidated Statements of Income
Years Ended June 30, 2002, 2001 and 2000
--------------------------------------------------------------------------------
                                                                   2002                 2001               2000
                                                               -----------          -----------        -----------

<S>                                                           <C>                 <C>                <C>
Net sales .............................................       $ 18,405,213        $ 17,251,640       $ 14,719,818
Cost of sales .........................................         16,104,219          14,189,910         11,983,884
                                                                ------------       ------------       ------------
                  Gross profit ........................          2,300,994           3,061,730          2,735,934

Selling, general and
     administrative expenses ..........................          1,751,855           1,892,459          2,002,317
                                                                ------------       ------------       ------------
                  Operating income ....................            549,139           1,169,271            733,617

Other income
                  Interest and dividend income ........            199,050             271,935            363,599
                  Other ...............................            (19,435)             33,898             95,727
                                                                ------------       ------------       ------------

                  Total other income ..................            179,615             305,833            459,326
                                                                ------------       ------------       ------------
                  Income before income taxes ..........            728,754           1,475,104          1,192,943

Provision for income taxes ............................            183,000             442,035            410,000
                                                                ------------       ------------       ------------
                  Net income ..........................       $    545,754       $  1,033,069       $    782,943
                                                                ============       ============       ============
Income per common share;
         Net income per common share -
                  basic and diluted ...................       $        .53       $       1.00       $        .75
                                                                ============       ============       ============
         Weighted average outstanding shares:
                  Basic ...............................          1,030,556           1,031,403          1,045,520
                                                                ============       ============       ============
                  Diluted .............................          1,034,904           1,033,989          1,045,520
                                                                ============       ============       ============
</TABLE>

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


                                       11
<PAGE>


<TABLE>
<CAPTION>

Espey Mfg. & Electronics Corp. and Subsidiary
Consolidated Statements of Changes in Stockholders' Equity
Years Ended June 30, 2002, 2001 and 2000
--------------------------------------------------------------------------------
                                                                                         Accumulated
                                                                                            Other
                                                                         Capital in      Comprehen-
                                                                         Excess of      sive income     Retained
                                                          Common          par Value        (Loss)        Earnings
                                                       -----------       -----------    -----------     -----------
<S>                                                   <C>                <C>           <C>             <C>
Balance at June 30, 1999                               $   504,979       $10,496,287    $   (38,175)    $23,193,297
                                                       -----------       -----------    -----------     -----------
Comprehensive income (loss):
                  Net income, 2000                                                                          782,943
                  Other comprehensive loss,
                    net of tax benefit of $39,962                                          (69,046)

Comprehensive income

Dividends paid on common stock
   $.20 per share                                                                          (208,729)

Tax effect of dividends on
   unallocated ESOP shares                                                                                    7,922

Purchase of treasury stock

Reduction of common stock subscribed
                                                       -----------       -----------    -----------     -----------
Balance as of June 30, 2000                                504,979        10,496,287       (107,221)     23,775,433
                                                       -----------       -----------    -----------     -----------
Comprehensive income (loss):
                  Net income, 2001                                                                        1,033,069
                  Other comprehensive income,
                    net of tax benefit of $30,660                                            56,941

Comprehensive income

Dividends paid on common stock
   $.20 per share                                                                                          (206,309)

Tax effect of dividends on
   unallocated ESOP shares                                                                                    5,043

Purchase of treasury stock

Reduction of common stock subscribed
                                                       -----------       -----------    -----------     -----------
Balance as of June 30, 2001                                504,979        10,496,287        (50,281)     24,607,239
                                                       -----------       -----------    -----------     -----------
Comprehensive income (loss):
                  Net income, 2002                                                                          545,754
                  Other comprehensive income,
                    net of tax benefit of $9,940                                             21,202

Comprehensive income

Stock option exercises                                                       (30,409)

Dividends paid on common stock
   $.30 per share                                                                                          (309,176)

Tax effect of dividends on
   unallocated ESOP shares                                                                                    5,041

Reduction of common stock subscribed
                                                       -----------       -----------    -----------     -----------
Balance as of June 30, 2002                            $   504,979       $10,465,878    $   (29,079)    $24,848,858
                                                       ===========       ===========     ===========     ===========
</TABLE>


                                       12
<PAGE>


<TABLE>
<CAPTION>

                                                        Common               Treasury Stock                Total
                                                        Stock          ---------------------------     Stockholders'
                                                      Subscribed         Shares           Amount          Equity
                                                     -----------       -----------     -----------      -----------

<S>                                                 <C>                   <C>         <C>              <C>
Balance at June 30, 1999                             $(2,793,312)          451,279     $(7,242,490)     $24,120,586
                                                     -----------       -----------     -----------      -----------
Comprehensive income (loss):
                  Net income, 2000                                                                          782,943
                  Other comprehensive loss,
                    net of tax benefit of $39,962                                                           (69,046)
                                                                                                        -----------
Comprehensive income                                                                                        713,897

Dividends paid on common stock
   $.20 per share                                                                                          (208,729)

Tax effect of dividends on
   unallocated ESOP shares                                                                                    7,922

Purchase of treasury stock                                                  30,027        (403,472)        (403,472)

Reduction of common stock subscribed                     558,662                                            558,662
                                                     -----------       -----------     -----------      -----------
Balance as of June 30, 2000                           (2,234,650)          481,306      (7,645,962)      24,788,866
                                                     -----------       -----------     -----------      -----------

Comprehensive income (loss):
                  Net income, 2001                                                                        1,033,069
                  Other comprehensive loss,
                    net of tax benefit of $30,660                                                            56,941
                                                                                                        -----------
Comprehensive income                                                                                      1,090,009

Dividends paid on common stock
   $.20 per share                                                                                          (206,309)

Tax effect of dividends on
   unallocated ESOP shares                                                                                    5,043

Purchase of treasury stock                                                   4,170         (70,890)         (70,890)

Reduction of common stock subscribed                     558,663                                            558,663
                                                     -----------       -----------     -----------      -----------
Balance as of June 30, 2001                           (1,675,987)          485,476      (7,716,853)      26,165,384
                                                     -----------       -----------     -----------      -----------
Comprehensive income (loss):
                  Net income, 2002                                                                          545,754
                  Other comprehensive income,
                  net of tax benefit of $9,940                                                               21,202
                                                                                                        -----------
Comprehensive income                                                                                        566,956

Stock option exercises                                                      (5,100)         97,984           67,575

Dividends paid on common stock
   $.30 per share                                                                                          (309,176)

Tax effect of dividends on
   unallocated ESOP shares                                                                                    5,041

Reduction of common stock subscribed                     558,662                                            558,662

                                                     -----------       -----------     -----------      -----------
Balance as of June 30, 2002                          $(1,117,325)          480,376     $(7,618,869)     $27,054,442
                                                     ===========       ===========     ===========      ===========

</TABLE>

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


                                       13
<PAGE>


<TABLE>

Espey Mfg. & Electronics Corp. and Subsidiary
Consolidated Statements of Cash Flows
Years Ended June 30, 2002, 2001 and 2000
--------------------------------------------------------------------------------
                                                                        2002               2001            2000
                                                                    ------------      ------------     ------------
Cash flows from operating activities:
<S>                                                                   <C>            <C>               <C>
     Net sales    ........................................            $545,754       $  1,033,069      $    782,943

     Adjustments to reconcile net income to net cash
       provided by (used in) operating activities:

           Tax effect of dividends on
              unallocated ESOP shares ....................               5,043              5,043             7,922

           Depreciation  .................................             513,470            604,988           472,149

           Gain on disposal of assets ....................              35,782             (4,272)               --

           Deferred income tax ...........................             112,097            188,709           103,600

           Change in assets and liabilities

                Decrease (increase) in trade
                  account receivables, and
                  other receivables, net .................             145,370          1,582,974           299,655

                Decrease (increase)in inventories, net....           2,191,882           (106,225)       (3,784,508)

                Decrease (increase) in prepaid
                  expenses and other current assets......              (46,181)            93,621           (13,450)

                Increase (decrease) in
                  accounts payable .......................             162,682           (206,864)          256,355

                Decrease in accrued
                  salaries, wages and commissions ........             (37,200)          (120,784)         (253,830)

                Increase (decrease) in accrued
                  employee insurance costs ...............             (54,911)            (3,396)            6,655

                Increase (decrease) in other
                  accrued expenses .......................               3,699             16,602           (37,879)

                Increase in vacation accrual .............              53,352             65,053            69,331

                Decrease in payroll and
                  other taxes withheld and accrued........              (1,454)           (12,402)          (46,675)

                Increase (decrease) in income
                  taxes payable ..........................              27,526            (62,635)           61,088
                                                                  ------------       ------------       -----------
                      Net cash provided by (used
                         in) operating activities........            3,656,911          3,073,481        (2,076,644)
                                                                  ------------       ------------       -----------
</TABLE>


                                       14
<PAGE>


<TABLE>
<CAPTION>

Cash flows from investing activities

     <S>                                                             <C>                    <C>          <C>
     Proceeds from maturity of investment
       securities........................................              399,869                 --         2,915,161

     Additions to property, plant and
       equipment .........................................            (393,865)          (536,748)         (782,122)

     Proceeds on sale of assets ..........................              12,250             15,350                --

     Reduction of common stock subscribed ................             558,662            558,662           558,662
                                                                  ------------       ------------      ------------
                      Net cash provided by
                         investing activities ............             576,916             37,264         2,691,701
                                                                  ------------       ------------      ------------
Cash flows from financing activities

     Dividends on common stock ...........................            (309,176)          (206,309)         (208,729)

     Purchase of treasury stock .........................                   --            (70,891)         (403,472)

     Proceeds from exercise of stock options..............              67,575                 --                --
                                                                  ------------       ------------      ------------
                      Net cash used in
                         financing activities ............            (241,601)          (277,200)         (612,201)
                                                                  ------------       ------------      ------------
Increase (decrease) in cash
   and cash equivalents ..................................           3,992,226          2,833,545             2,856

Cash and cash equivalents, beginning
   of the year ...........................................           5,200,736          2,367,191         2,364,335
                                                                  ------------       ------------      ------------
Cash and cash equivalents, end
   of the year ...........................................        $  9,192,962       $  5,200,736      $  2,367,191
                                                                  ============       ============      ============
Supplemental disclosures of cash flow information:
     Income taxes paid....................................        $     62,238        $    295,000     $    237,500
                                                                  ============       ============      ============

</TABLE>

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


                                       15
<PAGE>


Espey Mfg. & Electronics Corp. and Subsidiary
Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

1.   Nature of operations

     Espey Mfg.  &  Electronics   Corp.  and  Subsidiary   (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.  During 1999,  the Company  established a foreign
     sales corporation (Subsidiary).

2.   Summary of Significant Accounting Policies

     Inventory Valuation,  Cost Estimation and Revenue Recognition
     Raw  materials  are stated at the lower of cost or market and 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  relative to those  contracts  where such costs are
     reimbursable  under the terms of the  contracts.  Provision  for  losses on
     contracts is made when the existence of such losses  becomes  evident.  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 (unit-of-delivery method).

     A  significant  portion of our  business is comprised  of  development  and
     production  contracts  which are accounted for under the  provisions of the
     American  Institute of Certified Public  Accountants  (AICPA)  Statement of
     Position No. 81-1,  "Accounting  for Performance of  Construction-Type  and
     Certain   Production-Type   Contracts."   Generally  revenue  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.

     Contract  accounting  requires  judgment  relative to estimating  costs and
     making  assumptions  related to  technical  issues and  delivery  schedule.
     Contract costs include material, subcontract costs, labor and an allocation
     of indirect  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 in the  estimation of cost at completion.
     When a change in contract 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.

     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.  In  addition,  SFAS No. 109 requires
     that the tax benefit of tax-deductible dividends


                                       16
<PAGE>


Espey Mfg. & Electronics Corp. and Subsidiary
Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

2.   Summary of Significant Accounting Policies, Continued

     on  unallocated  ESOP shares be  recorded as a direct  addition to retained
     earnings rather than as a reduction of income tax expense.

     Cash and Cash Equivalents
     Cash  and  cash  equivalents  consist  of cash in  banks,  certificates  of
     deposit,  money market  accounts,  and U.S.  Treasury  bills with  original
     maturities of three months or less.

     Investment Securities
     The Company  accounts for its  investments in accordance with SFAS No. 115,
     "Accounting for Certain Investments in Debt and Equity Securities."

     Investment securities at June 30, 2002 and 2001 consist of corporate equity
     securities.   The  Company   classifies   corporate  equity  securities  as
     available-for-sale.

     Unrealized  holding  gains and losses,  net of the  related tax effect,  on
     available-for-sale  securities  are excluded from earnings and are reported
     as a separate  component of stockholders'  equity until realized.  Realized
     gains and  losses  for  securities  classified  as  available-for-sale  are
     included in income and are  determined  using the  specific  identification
     method. Interest income is recognized when earned.

     Stock-Based Compensation
     The  intrinsic   value  method  of  accounting  is  used  for   stock-based
     compensation plans. Under the intrinsic value method,  compensation cost is
     measured as the excess,  if any, of the quoted market price of the stock at
     the grant date over the amount an employee must pay to acquire the stock.

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

     Comprehensive Income
     Comprehensive  income consists of net income and unrealized  gains (losses)
     on  securities  available-for-sale  and is  presented  in the  Statement of
     Changes in Stockholders'  Equity.  There were no significant realized gains
     (losses) included in net income requiring  reclassification  adjustments to
     other comprehensive income in all years presented.

     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.


                                       17
<PAGE>


Espey Mfg. & Electronics Corp. and Subsidiary
Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

2.   Summary of Significant Accounting Policies, Continued

     Accounting Pronouncements
     During  the  period  of June  2001 to June  2002 the  Financial  Accounting
     Standards Board issued SFAS No. 141, "Business Combinations", SFAS No. 142,
     "Goodwill and Other Intangible Assets", SFAS No. 143, "Accounting for Asset
     Retirement  Obligations",  SFAS No,  144,  "Accounting  for  Impairment  or
     Disposal of Long-Live Assets", SFAS No. 145, "Rescission of FASB Statements
     No.  4,  44,  64,  Amendment  of  FASB  Statement  No.  13,  and  Technical
     Corrections  as of April  2002",  and SFAS No. 146,  "Accounting  for Costs
     Associated  with Exit or Disposal  Activities".  Management  of the Company
     does not expect that the adoption of these  statements  will have an impact
     on the consolidated financial statements.


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

     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
     competitor's products.

3.   Investment Securities

     Investment  securities  at June 30,  2002,  and 2001  consist of  corporate
     equity securities,  which are classified as available-for-sale  securities,
     and recorded at market value. The cost, gross unrealized holding losses and
     fair value of  available-for-sale  securities at June 30, 2002 and 2001 are
     as follows:
                                                                         Gross
                                                                      Unrealized
   Year             Type                Cost        Holding Loss      Fair Value
   -----            -----              -----      ---------------     ----------

   2002      Corporate Equities      $ 419,005        $  51,005       $ 368,000

   2001      Corporate Equities      $ 819,005        $  81,405       $ 737,600

     The change in  unrealized  holding  loss on available  for sale  investment
     securities   net  of  tax  was  $20,460  and  $56,940  in  2002  and  2001,
     respectively.  During 2002, the Company sold an equity security with a cost
     basis of $400,000 for $399,128 in net proceeds.

4.   Contracts in Process

     Contracts in process at June 30, 2002 and 2001 are as follows:

                                                   2002                 2001
                                               -------------        ------------

        Gross contract value                    $ 24,644,653        $ 27,446,185

        Costs related to contracts in process,
        net of progress payments of $ 2,194,269
        in 2002 and $289,000 in 2001            $  7,017,529        $ 11,237,515

     Included  in costs  relating to  contracts  in process at June 30, 2002 and
     2001 are costs of  $1,999,616  and  $1,693,364,  respectively,  relative to
     contracts  that may not be  completed  within the ensuing  year.  Under the
     unit-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.


                                       18
<PAGE>


Espey Mfg. & Electronics Corp. and Subsidiary
Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

5.   Property, Plant and Equipment

     A summary of the original cost of property, plant and equipment at June 30,
     2002 and 2001 is as follows:

                                                    2002                2001
                                                ------------        ------------

        Land                                    $     45,000        $     50,000
        Building and improvements                  3,813,343           3,895,524
        Machinery and equipment                    7,011,192           7,031,298
        Furniture, fixtures and office equipment     305,713             357,185
                                                ------------        ------------
                                                $ 11,175,248        $ 11,334,007
                                                ============        ============

     Estimated useful lives of depreciable assets are as follows:

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

6.   Line of credit

     At June 30, 2002, the Company has an available  uncommitted  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.  As of June 30, 2002 there were no
     borrowings outstanding under this agreement.

7.   Research and Development Costs

     Research and  development  costs  charged to cost of sales during the years
     ended June 30, 2002, 2001 and 2000 were approximately  $335,000,  $249,000,
     and $255,000, respectively.

8.   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 are based upon hours worked
     at a specified  rate and amounted to $83,778 in 2002,  $92,662 in 2001, and
     $88,660 in 2000.

9.   Provision (Benefit) for Income Taxes

     A summary of the components of the provision (benefit) for income taxes for
     the years ended June 30, 2002, 2001 and 2000 is as follows:
<TABLE>
<CAPTION>

                                                     2002          2001          2000
                                                  ---------     ---------     ---------
       <S>                                     <C>            <C>           <C>
        Current tax expense (benefit)-federal    $  49,653     $ 257,400     $ 295,400
        Current tax expense - state                  1,383        17,000        11,000
        Deferred tax expense (benefit)             131,964       167,635       103,600
                                                  ---------     ---------     ---------
                                                 $ 183,000     $ 442,035     $ 410,000
                                                  =========     =========     =========

</TABLE>

     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.


                                       19
<PAGE>


Espey Mfg. & Electronics Corp. and Subsidiary
Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

9.   Provision (Benefit) for Income Taxes, Continued

     The  combined  U.S.  federal and state  effective  income tax rates of 25%,
     30.0%,  and 34.4% for 2002, 2001 and 2000  respectively,  differed from the
     statutory U.S. federal income tax rate for the following reasons:

<TABLE>
<CAPTION>

                                                             2002         2001          2000
                                                            ------       ------        ------
        <S>                                                  <C>          <C>          <C>
        U.S. federal statutory income tax rate                34.0%        34.0%        34.0%
        Increase (reduction) in rate
             resulting from:
                 Dividends received deduction                 (1.0)        (0.8)        (1.2)
                 State franchise tax, net of federal
                      income tax benefit                       1.1          1.4          1.7
                 Foreign sales corporation benefit            (7.3)        (4.7)        (1.0)
                 Other                                        (1.7)          .1           .9
                                                            ------       ------         ------
        Effective tax rate                                    25.1%        30.0%        34.4%
                                                             ======       ======        ======

</TABLE>

     For the years ended June 30, 2002 and 2001  deferred  income tax expense of
     $131,964 and $167,635,  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, 2002 and 2001 are presented as follows:

<TABLE>
<CAPTION>

                                                                                    2002            2001
                                                                                  --------        --------
        Deferred tax assets:
            <S>                                                                 <C>             <C>
            Inventory - differences in valuation methods ..................      $    --         $ 30,120
            Unrealized loss on available-for-sale
                 investment securities ....................................        20,102           9,302
            Common stock subscribed - due to difference
                 in interest recognition ..................................       255,983         343,811
            Non-deductible accruals .......................................        92,354         125,699
            Other .........................................................        18,353          19,821
                                                                                 --------        --------
                          Total deferred tax assets .......................       386,792         528,753
                                                                                 --------        --------
        Deferred tax liabilities:
            Property, plant and equipment - principally due
                 to differences in depreciation methods ...................       376,064         402,563
            Inventory - effect on uniform capitalization ..................        45,036          39,333
                                                                                 --------        --------
                          Total deferred tax liabilities ..................       421,100         441,896
                                                                                 --------        --------
        Net deferred tax (liability) asset ................................      $(34,308)       $ 86,857
                                                                                 ========        ========
</TABLE>

     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  schedule  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.


                                       20
<PAGE>


Espey Mfg. & Electronics Corp. and Subsidiary
Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

10.  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  and one  foreign  customer  accounted  for  26%,  21%,  and 14%,
     respectively,  of total sales in 2002. Sales to two domestic  customers and
     one foreign  customer  accounted  for 40%, 20%, and 12%,  respectively,  of
     total sales in 2001. Sales to two domestic customers  accounted for 30% and
     26% respectively, of total sales in 2000.

     Export  sales  aggregated  approximately  $  6,600,000,   $8,700,000,   and
     $4,200,000, for the years ended June 30, 2002, 2001 and 2000, respectively.

11.  Stock Rights Plan

     The Company has a  Shareholder  Rights Plan which  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 $50 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 offer
     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.

     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.

12.  Employee Stock Ownership Plan

     In 1989, the Company  established  an Employee Stock  Ownership Plan (ESOP)
     for eligible non-union employees. The ESOP used the proceeds of a loan from
     the Company to purchase  316,224  shares of the Company's  common stock for
     approximately  $8.4  million  and  the  Company  contributed  approximately
     $400,000  in 1989 to the ESOP  which  was used by the ESOP to  purchase  an
     additional 15,000 shares of the Company's common stock.  Since inception of
     the Plan, the ESOP has sold or  distributed  83,653 shares of the Company's
     common  stock to pay benefits to  participants.  At June 30, 2002 and 2001,
     the ESOP held a total of 262,912 and 271,932 shares,  respectively,  of the
     Company's common stock, of which 220,888 and 208,896 shares,  respectively,
     were allocated to participants in the Plan.


                                       21
<PAGE>


Espey Mfg. & Electronics Corp. and Subsidiary
Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

12.  Employee Stock Ownership Plan, Continued

     The loan from the Company to the ESOP is repayable  in annual  installments
     of  $1,039,605  including  interest,  through  June 30,  2004.  Interest is
     payable at a rate of 9% per annum.  The Company's  receivable from the ESOP
     is recorded as common stock subscribed in the accompanying  balance sheets.
     The  Company  recognizes  the  principal  payments  of the ESOP debt,  on a
     straight-line basis over the term of the note, as compensation expense.

     Each year,  the Company makes  contributions  to the ESOP which are used to
     make loan payments.  With each loan payment,  a portion of the common stock
     is allocated to  participating  employees.  For the periods  ended June 30,
     2002 and 2001,  21,012 shares were allocated to participants.  In 2002, the
     Company's required contribution of $1,039,605 was reduced by $18,911, which
     represents  the dividends paid on  unallocated  ESOP shares.  The resulting
     payment of $1,020,694 includes $539,752 classified as compensation expense.
     In 2001, the Company's  required  contribution of $1,039,605 was reduced by
     $16,809,  which  represents  the  dividends  paid on the  unallocated  ESOP
     shares. The resulting payment of $1,022,796 includes $541,853 classified as
     compensation  expense.  In 2000,  the Company's  required  contribution  of
     $1,039,605 was reduced by $21,012,  which  represents the dividends paid on
     unallocated  ESOP shares.  The  resulting  payment of  $1,018,593  includes
     $537,650  classified as compensation  expense.  All shares purchased by the
     ESOP  are   considered  to  be   outstanding   for  the  income  per  share
     computations.

13.  Stock Options

     During fiscal 2000,  the Board of Directors and  shareholders  approved the
     2000  Stock  Option  Plan  (the  Plan).  Under  the  Plan,   incentive  and
     non-qualified  stock  options will be granted to purchase  shares of common
     stock of the Company. As of June 30, 2002, the Plan was authorized to issue
     options to purchase  113,500  shares of the  Company's  common stock with a
     maximum of 15,000 shares in any one year.

     Options  granted under the Plan have been granted at not less than the fair
     market value at the grant date and vest over a period of two years.

     Information  concerning the plans incentive and non-qualified stock options
     is as follows:

<TABLE>
<CAPTION>

                                                  Option                       Option Price
                                                  Shares                         Per Share
     --------------------------------------------------------------------------------------
     <S>                                        <C>                         <C>
     June 30, 1999                                    0                           $0.00
     --------------------------------------------------------------------------------------
     Options granted                             11,500                           13.25
     Options canceled                              (800)                          13.25
     Options exercised                           (5,100)                          13.25
     --------------------------------------------------------------------------------------
     June 30, 2000                                5,600                          $13.25
     --------------------------------------------------------------------------------------
     Options granted                             13,100                           17.95
     Options canceled                              (300)                          17.95
     Options exercised                               --                              --
     --------------------------------------------------------------------------------------
     June 30, 2001                               18,400                      $13.25 - 17.95
     --------------------------------------------------------------------------------------
     Options granted                             13,000                           19.85
     Options canceled                                --                              --
     Options exercised                               --                              --
     --------------------------------------------------------------------------------------
     June 30, 2002                               31,400                      $13.25 - 19.85
     ======================================================================================
</TABLE>


                                       22
<PAGE>


Espey Mfg. & Electronics Corp. and Subsidiary
Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

13.  Stock Options, Continued

     A total of 5,600 options were  exercisable  at June 30, 2002 at an exercise
     price of $13.25.  None of the options granted were  exercisable at June 30,
     2001 and June 30, 2000.

     The table  below  summarizes  information  with  respect  to stock  options
     outstanding as of June 30, 2002:

<TABLE>
<CAPTION>

                                                   Remaining                           Exercise Price of
         Exercise               Options           Contractual          Options            Exercisable
          Prices              Outstanding            Life            Exercisable            Options
     -------------------------------------------------------------------------------------------------
    <S>  <C>                     <C>                 <C>               <C>                 <C>
         $ 13.25                  5,600               7                 5,600               $ 13.25
         $ 17.95                 12,800               8                     0                    --
         $ 19.85                 13,000               9                     0                    --
     -------------------------------------------------------------------------------------------------
     Total                       31,400                                 5,600                $13.25
     =================================================================================================
</TABLE>

     The Company has elected to apply  Accounting  Principles  Board Opinion No.
     25, "Accounting for Stock Issued to Employees," in accounting for the Plan.
     Under APB 25, no compensation expense has been recognized. Had compensation
     cost and fair value been  determined  pursuant to  Statement  of  Financial
     Accounting   Standards  No.  123  (FAS  123)  "Accounting  for  Stock-Based
     Compensation,"  net income would have  decreased from $545,754 to $509,674,
     $1,033,069 to $1,018,526  and $782,943 to $778,296 for the years ended June
     30, 2002, 2001 and 2000, respectively.  Proforma basic and diluted earnings
     per share  would have been $.49,  $.99 and $.74  respectively.  The initial
     impact of FAS 123 on pro forma earnings per share may not be representative
     of the effect on income in future years  because  options vest over several
     years and additional option grants may be made each year.

     The weighted  average fair value of options  granted under the plans during
     fiscal years 2002, 2001 and 2002 was $3.93, $4.67 and $3.71,  respectively.
     The assumptions used for the Black-Scholes model are as follows:

<TABLE>
<CAPTION>

                                                                 2002      2001      2000
                                                                ------    ------     ------
     <S>                                                       <C>       <C>        <C>
     Risk-free interest rate.................................      4.5%      5.0%       6.0%
     Expected term...........................................   5 years   5 years    5 years
     Company's expected volatility...........................     20.0%     25.0%      16.4%
     Dividend yield..........................................      2.5%      2.5%       2.5%

</TABLE>

14.  Financial Instruments/Concentration of Credit Risk

     The carrying  amounts of  financial  instruments,  including  cash and cash
     equivalents,  investment securities,  accounts receivable, accounts payable
     and accrued expenses,  approximated fair value as of June 30, 2002 and 2001
     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,  investment  securities 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 10, 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  Government  and certain  industrial  customers.  The
     related accounts  receivable balance represented by three customers was 39%
     and 75% of the Company's  total trade accounts  receivable  balance at June
     30, 2002 and 2001, respectively.


                                       23
<PAGE>


Espey Mfg. & Electronics Corp. and Subsidiary
Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

14.  Financial Instruments/Concentration of Credit Risk, Continued

     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.  Government,  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.

15.  Related Parties

     The  Company  paid a law  firm in  which a  director  of the  Company  is a
     partner, a total of $24,000,  $27,000 and $42,000 for legal services during
     fiscal years ended June 30, 2002, 2001, and 2000, respectively. The Company
     paid a  director  of the  Company,  a total  of  approximately  $5,600  for
     consulting services during the fiscal years ended June 30, 2002 and 2001.

16.  Quarterly Financial Information (Unaudited)

<TABLE>
<CAPTION>

                                                 First           Second           Third           Fourth
                                                Quarter          Quarter          Quarter         Quarter
     2002                                       -------          -------          -------         -------
            <S>                              <C>              <C>             <C>              <C>
             Net Sales.............           $4,585,515       $5,199,517      $4,616,587       $4,003,594
             Gross profit .........              607,585          593,569         700,016          399,824
             Net income (loss).....              203,691           81,999         212,644           47,420

     Net income (per share -
             basic and diluted)....                  .20              .08             .20             0.05

     2001
             Net Sales.............           $4,167,234       $4,184,994      $4,615,137       $4,284,274
             Gross profit .........              688,261          889,008         694,761          789,699
             Net income (loss).....              203,420          269,269         205,554          354,826

     Net income (per share -
             basic and diluted)                     0.20             0.26            0.20             0.34

     2000
             Net Sales ............           $3,298,980       $3,412,424      $3,289,816       $4,718,598
             Gross profit .........              414,586          493,051         771,435        1,056,862
             Net income (loss).....               39,593           47,092         263,548          432,710

     Net income (per share -
             basic and diluted)                     0.04             0.04            0.25             0.42

</TABLE>


                                       24
<PAGE>


                                                               PART III

Item 9.  Changes  in  and  disagreements  with  accountants  on  accounting  and
     financial disclosure

None

Item 10. Directors and Executive Officers of the Registrant

Identification of Directors

<TABLE>
<CAPTION>

                                          Date Present Term                  Other Positions
                                          Expires and Period                 and Offices Held
         Name                             Served as Director                 With Registrant               Age
         -----                            ------------------                 ----------------              ---

        <S>                              <C>                                <C>                           <C>
         Paul J. Corr                     Annual Meeting in                  None                          58
                                          December 2002
                                          Director since 1992

         William P. Greene                Annual Meeting in                  None                          72
                                          December 2004
                                          Director since 1992

         Carl Helmetag                    Annual Meeting in                  None                          54
                                          December 2003
                                          Director since 1999

         Barry Pinsley                    Annual Meeting in                  None                          60
                                          December 2002
                                          Director since 1994

         Howard Pinsley                   Annual Meeting in                  President and Chief           62
                                          December 2003                      Executive Officer
                                          Director since 1992

         Alvin O. Sabo                    Annual Meeting in                  None                          59
                                          December 2003
                                          Director since 1999

         Seymour Saslow                   Annual Meeting in                  None                          81
                                          December 2004
                                          Director since 1992

         Michael W. Wool                  Annual Meeting in                  None                          56
                                          December 2002
                                          Director since 1990

</TABLE>


                                       25
<PAGE>


Identification of Executive Officers

<TABLE>
<CAPTION>

                                        Positions and
                                        Offices Held                     Period Served As
       Name                             With Company                     Executive Officer                    Age
       ----                             -----------------                -----------------                    ---

       <S>                             <C>                               <C>                                 <C>
       Howard Pinsley                   President and                    Served as Vice President-            62
                                        Chief Executive                  Special Power Supplies
                                        Officer                          from April 3, 1992 until
                                                                         being elected as Executive
                                                                         Vice President on December
                                                                         6, 1997. Elected to present
                                                                         office on June 9, 1998

       John J. Pompay, Jr.              Vice President-                  Since December 6, 1996               67
                                        Marketing and Sales

       David A. O'Neil                  Treasurer & Principal            Since January 4, 2000                37
                                        Financial Officer                Controller and Assistant
                                                                         Treasurer from December 11,
                                                                         1998 to January 3, 2000

       Peggy A. Murphy                  Secretary                        Since December 11, 1998              44

       Garry M. Jones                   Assistant Treasurer              Since August 4, 1988                 62
                                        & Principal Accounting           Principal Financial
                                        Officer                          Officer from August 4, 1988
                                                                         to September 10, 1993

       Tim A. Polidore                  Assistant Treasurer              Since December 8, 2000               42

</TABLE>

     The terms of office of Mr. Howard Pinsley,  Mrs. Peggy A. Murphy, Mr. David
     A. O'Neil,  Mr. Tim A. Polidore,  and Mr. Garry M. Jones are until the next
     annual  meeting  of the Board of  Directors  unless  successors  are sooner
     appointed by the Board of  Directors.  The term of office of Mr.  Pompay is
     subject to the provisions of an agreement between him and the Company.  See
     "Employment Contracts and Termination of Employment."

     Family Relationships

     Barry Pinsley and Howard Pinsley are cousins.

     Business Experience of Directors and Officers

     Paul J. Corr is a Certified  Public  Accountant and has been a Professor of
     Business at Skidmore College in Saratoga Springs,  New York since 1981. Mr.
     Corr currently holds the position of Associate Professor.  Mr. Corr is also
     a shareholder in the Latham,  New York  accounting  firm of Rutnik,  Matt &
     Corr, P.C.

     William P. Greene,  D.B.A. was vice president of operations for the Company
     until  December  31, 2000 when he retired.  Prior to joining the  Company's
     management  team he was Vice President of Finance for  ComCierge,  LLC, San
     Diego,  CA since August 1997.  Prior to that position,  Dr. Greene held the
     position of Vice President  Operations  for Bulk  Materials  International,
     Newtown,  CT from 1993 to July  1997.  From 1991 to 1993,  Dr.  Greene  was
     Associate  Professor of Finance and International  Business at Pennsylvania
     State University Kutztown,  PA. From 1985 to 1990, he was Associate Dean of
     the School of Business, United States International University,  San Diego,
     CA. From 1992 to 1995,  he was  Chairman  of the  Department  of  Business,
     Skidmore  College,  Saratoga  Springs,  NY. Prior to that time, he had been
     employed as an officer with several financial institutions.

     Barry Pinsley is a Certified Public  Accountant who for five years acted as
     a consultant to the Company prior to his election as Vice President-Special
     Projects on March 25, 1994. On December 6, 1997, Mr. Pinsley was elected to
     the position of Vice President-Investor Relations and Human Resources, from
     which he  resigned  on June 9,  1998.  Mr.  Pinsley  has been a  practicing
     Certified Public Accountant in Saratoga Springs, New York since 1975.


                                       26
<PAGE>


     Howard  Pinsley for more than the past five years has been  employed by the
     Company on a full-time  basis as a Program  Director prior to being elected
     Vice  President-Special  Power  Supplies  on April 3, 1992.  On December 6,
     1996, Mr. Pinsley was elected to the position of Executive Vice  President.
     On June 9, 1998 he was  elected to the  positions  of  President  and Chief
     Operating Officer. Subsequently he became the President and Chief Executive
     Officer.

     Seymour Saslow had been Senior Vice President since December 6, 1996. Prior
     to being  elected  to Senior  Vice  President,  Mr.  Saslow  served as Vice
     President-Engineering  since  April 3,  1992.  Mr.  Saslow  resigned  as an
     executive officer effective December 31, 1999.

     Michael W. Wool is an attorney  engaged in the private  practice of law and
     as a senior  partner since 1982 in the law firm of Langrock,  Sperry & Wool
     with offices in Burlington and Middlebury, Vermont.

     Alvin O. Sabo is an attorney  engaged in private practice of law and Senior
     Partner of the law firm of  Donohue,  Sabo,  Varley &  Armstrong,  P.C.  in
     Albany,  NY since 1980. Prior to that position,  he was Assistant  Attorney
     General, State of New York, Department of Law for eleven years.

     Carl Helmetag is currently  President  and CEO of UVEX Inc. in  Providence,
     RI. From 1996 to 1999, he was  President and CEO of Head USA Inc.  Prior to
     that  position,  Mr.  Helmetag  was  Executive  Vice  President,  and  then
     President at Dynastar  Inc.  from 1978 to 1996.  He is an MBA graduate from
     the Wharton School of Business, University of Pennsylvania.

     Peggy Murphy is Secretary of the Company since  December 11, 1998.  She has
     been employed by the Company as Director of Human  Resources  since October
     1998.

     David A. O'Neil is currently the Treasurer and Principal  Financial Officer
     of the Company.  Mr. O'Neil is a Certified Public Accountant who joined the
     Company as Controller and Assistant Treasurer on November 6, 1998. Prior to
     joining the Company, Mr. O'Neil was a Senior Manager at the accounting firm
     of KPMG LLP.

     John J. Pompay,  Jr. for more than the past five years has been employed by
     the Company on a full-time  basis as Director of Marketing  and Sales prior
     to being elected Vice President-Marketing and Sales on December 6, 1996.

     Tim A. Polidore is currently the  Assistant  Treasurer of the Company.  Mr.
     Polidore  joined the Company on May 17, 1999.  Prior to joining the Company
     he was Accounting Manager for Brinks, Inc.

     Garry M. Jones for more than the past five years has been  employed  by the
     Company on a full-time  basis as Senior  Accountant  prior to being elected
     Assistant Treasurer and Principal Accounting Officer on August 4, 1988.

     Directorships

     Howard Pinsley serves as a director of All American Semiconductor Corp.

     None of the other  directors holds a directorship in any other company with
     a class of securities registered pursuant to Section 12 of the Exchange Act
     or subject to the requirements of Section 15 (d) of that Act or any company
     registered as an Investment  company  under the  Investment  Company Act of
     1940.

     Legal Proceedings

     None  of the  directorships  or  executive  officers  of the  Company  were
     involved  during  the past five  years in any legal  proceedings  specified
     under Item 401(f) of Regulation S-K.


                                       27
<PAGE>


Item 11. Executive Compensation

The following table  summarizes the annual  compensation  for each of the fiscal
years  ended June 30,  2002,  2001,  and 2000  received by the  Company's  Chief
Executive  Officer and the other highest paid executive  officers of the Company
that received over $100,000 in total compensation as of June 30, 2002.

<TABLE>
<CAPTION>
                                                      SUMMARY COMPENSATION TABLE

                                                                                   Long Term
                                                                                 Compensation
                                                                                 ------------
                                                                                  Securities
Name and                              Fiscal        Annual                        Underlying          All Other
Principal Position                     Year         Salary         Bonus          Options(#)        Compensation(1)
------------------                    ------        ------         ------        ------------         ---------

<S>                                     <C>          <C>           <C>                 <C>            <C>
Howard Pinsley                          2002         $173,120      $25,000             2,000           $ 11,841
President and                           2001         $172,600      $25,000             2,000           $  9,590
Chief Executive Officer                 2000         $160,520      $25,000             1,500           $  8,623

John J. Pompay, Jr.                     2002         $154,340      $25,000               800           $ 12,134
Vice President-Sales                    2001         $152,938      $25,000               800           $  9,737
                                        2000         $237,816      $20,000               600           $  8,822

David A. O'Neil                         2002         $ 99,950      $12,500               800           $  9,899
Treasurer and Principal                 2001         $ 91,200      $12,500               800           $  7,703
Financial Officer                       2000         $ 84,930      $10,000               600           $  6,162

</TABLE>

(1)  Represents  (a) the cash and market value of the shares  allocated  for the
     respective  fiscal  years under the  Company's  ESOP to the extent to which
     each  named  executive  officer  is  vested,  and  the  Company's  matching
     contribution under the 401K plan.

                        OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth information concerning the grant of stock options
to the named executive officers during the year ended on June 30, 2002.

<TABLE>
<CAPTION>
                                                                                                Potential
                                                                                            Realizable Value
                                                                                                at Assumed
                            Number of        % of Total                                       Rates of Stock
                           Securities          Options                                      Price Appreciation
                           Underlying        Granted to      Exercise                       for Option Term (1)
                            Options         Employees in       Price        Expiration     ---------------------
Name                        Granted          Fiscal Year      ($/SH)           Date        5%($)           10%($)
----------------            --------         ----------       ------          -------      ------          ------

<S>                           <C>               <C>             <C>            <C>         <C>             <C>
Howard Pinsley                 2,000             15%            19.85          2012        64,667          102,972

John J. Pompay Jr.               800              6%            19.85          2012        25,866           41,189

David A. O'Neil                  800              6%            19.85          2012        25,866           41,189

</TABLE>

(1)  Amounts  reflect  certain  assumed rates of  appreciation  set forth in the
     Commission's executive compensation disclosure rules. Actual gains, if any,
     on stock option  exercises will depend on future  performance of the Common
     Stock. No assurance can be made that the amounts reflected in these columns
     will be achieved.  The values in these columns  assume that the fair market
     value on the date of grant of each option was equal to the  exercise  price
     thereof.


                                       28
<PAGE>


The following table sets forth information  concerning  unexercised options held
on June 30, 2002 by the named executive officers:

     AGGREGATED OPTIONS AT FISCAL YEAR-END AND FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>

                                            Number of Securities                      Value of Unexercised
                                           Underlying Unexercised                         In-the-Money
                                                 Options at                                Options at
                                             Fiscal Year-End (#)                       Fiscal Year-End ($)
Name                                      Exercisable/Unexercisable                 Exercisable/Unexercisable
-------------                             -------------------------                --------------------------
<S>                                                <C>                                   <C>
Howard Pinsley                                     0/4,000                                 $0/$80,400

John J. Pompay Jr.                                600/1,600                              $12,060/$32,160

David A. O'Neil                                    0/1,600                                 $0/$32,160

</TABLE>

In  accordance  with the 2000 Stock Option Plan the above  options have exercise
dates that range from March 1, 2002 through and expiring on March 1, 2012.

Insurance

The  executive  officers  and  directors  of the Company can elect to be covered
under the Company  sponsored  health plans which do not discriminate in favor of
the officers or directors  of the Company and which are  available  generally to
all  employees.  In addition,  the executive  officers are covered under a group
life plan, which does not discriminate, and is available to all employees.

The Company maintains  insurance  coverage,  as authorized by Section 727 of the
New York  Business  Corporation  Law,  providing  for (a)  reimbursement  of the
Company  for  payments  it makes to  indemnify  officers  and  directors  of the
Company,  and (b) payment on behalf of officers and directors of the Company for
losses, costs and expenses incurred by them in any actions.

Employee Retirement Plan and Trust

Under the  Company's  ESOP,  approved by the Board of Directors on June 2, 1989,
effective  July 1, 1988, all non-union  employees of the Company,  including the
Company's executive and non-executive officers are eligible to participate.  The
ESOP is a non-contributory  plan which is designed to invest primarily in shares
of common stock of the Company.  Reference is made to, and there is incorporated
by reference,  the  description  of the ESOP, its  implementation  and pertinent
documents  attached as exhibits in the  Company's  Form 8-K dated June 16, 1989,
filed with the Commission on June 20, 1989, and to the amendments  thereto filed
as an Exhibit  to the 10-K  Report  for the  fiscal  year  ended June 30,  1991.
Certain technical  amendments not considered  material were adopted effective as
of June 30, 1994.

Of the 220,888 shares of common stock of the Company  allocated to  participants
of the ESOP as of June 30, 2002,  8,981 shares were  allocated to John J. Pompay
Jr., 8,481 shares were allocated to Howard Pinsley,  6,810 shares were allocated
to Seymour  Saslow,  1,287  shares were  allocated  to David A. O'Neil and 3,017
shares were allocated to Barry Pinsley.


                                       29
<PAGE>


Compensation of Directors

The Company's standard  arrangement  compensates each director of the Company an
annual  fee in the  amount  of  $10,000  for  being a  member  of the  Board  of
Directors.  Each Director that also serves as a member of the Audit Committee is
compensated an additional  annual fee of $5,000.  Each director that serves as a
member of the Succession  Committee or the Mergers and Acquisition  Committee is
compensated an additional $2,500 for each committee. These fees are paid monthly
to the Directors.  Barry Pinsley was paid $5,600 for additional services for the
fiscal  year  ended June 30,  2001.  Executive  officers  that also serve on the
Company's Board of Directors do not receive director's fees.

Directors are also eligible to receive stock options under the 2000 Stock Option
Plan at the discretion of the stock option committee. The stock option committee
consists of three appointed board members.  For the year ended June 30, 2002 the
following  options remain  granted and  unexercised by the Board of Directors in
accordance with this Plan.

Name                         Number of Options              Exercise Price Range
----                         -----------------              --------------------
Seymour Saslow                      1,000                      $17.95 - 19.85

Barry Pinsley                       1,700                       13.25 - 19.85

Michael W. Wool                     1,000                       17.95 - 19.85

William P. Greene                     600                       17.95 - 19.85

Paul J. Corr                        1,300                       13.25 - 19.85

Alvin O. Sabo                       1,100                       13.25 - 19.85

Carl Helmetag                         900                       13.25 - 19.85

Howard Pinsley                      4,000                       17.95 - 19.85

The above options have exercise dates ranging from March 1, 2002 and expiring on
March 1, 2012.

Employment Contracts and Termination of Employment

The Company has an  employment  contract  with John J. Pompay Jr. in  connection
with  his  duties  as Vice  President-Marketing  and  Sales.  The  contract  was
effective  as of January 1, 2002,  and expires on  December  31, 2002 unless the
parties  mutually  agree to extend the  agreement.  The contract  provides for a
minimum base annual salary of $150,800 plus commissions at the rate of 3% on all
payments  received by the Company  against Mr. Pompay's open orders booked up to
and including  December 31, 1996, and 1% on all payments received against orders
booked by the  Company  between  January  1, 1997 and  December  31,  1998.  The
contract further  provides that if Mr. Pompay's  employment is terminated by the
Company prior to the expiration  date, other than for cause, he will continue to
receive  his full  salary for 27 months and  commissions  due on his orders when
payment is received.  The contract also  provides for a restrictive  covenant of
non-competition  by Mr.  Pompay for a period of two years upon  termination  for
cause or termination  of the contract by Mr. Pompay.  At the end of the contract
term  Mr.  Pompay  has  the  option  to  accept  at the  time  of his  voluntary
resignation as an executive officer,  an employment  contract as a non-executive
officer in which he would  receive full  compensation  for 13 weeks and then for
the next 143 weeks receive $1,000 per week for services rendered.

The Company  entered into an agreement  with Howard  Pinsley,  President and CEO
effective July 1, 2002. The contract  allows Mr. Pinsley upon his resignation or
termination  to become a  non-executive  officer of the  Company for a period of
thirty-six  months.  In consideration for services to be provided by Mr. Pinsley
for the equivalent of two days a month after his resignation or termination, and
to perform duties as reasonably  requested by the Company,  he will receive full
benefits  plus,  $15,000  per month for the first three  months,  and $4,333 per
month for the next thirty-three  consecutive  months.  This agreement expires on
December 31, 2005.


                                       30
<PAGE>


Item 12. Security  Ownership of Certain Beneficial Owners and Management


Security Ownership of Certain Beneficial Owners

The  following  information  is  furnished  as of  September  11,  2002  (unless
otherwise  indicated) with respect to any person  (including any "group" as that
term is used in Section  13(d)(3)  of the Act) who is known to the Company to be
the  beneficial  owner of more than five  percent of any class of the  Company's
voting securities:

<TABLE>
<CAPTION>
                                                                   Amount and
                                                                   Nature of
Title                    Name and Address                          Beneficial                       Percent of
Class                    of Beneficial Owner                       Ownership                           Class
-----                    -------------------                       ---------                           -----

<S>                     <C>                                    <C>             <C>                     <C>
Common Stock             Dimensional Fund                       72,600 - Direct (1)                     7.05%
                         Advisors Inc.
                         1299 Ocean Avenue
                         11th Floor
                         Santa Monica,
                         CA 90401

"                        Franklin Advisory                      80,000 - Direct (2)                     7.70%
                         Services, LLC
                         777 Mariners Island Blvd
                         P.O. Box 7777
                         San Mateo,
                         CA 94403-7777

"                        The Adirondack Trust                  258,600 - Direct (3)                    25.00%
                         Company, as Trustee of
                         the Company's Employee
                         Retirement Plan and Trust
                         473 Broadway
                         Saratoga Springs,
                         NY 12866

"                        Howard Pinsley                         43,634 - Direct                         5.04%
                         233 Ballston Avenue                     8,481 - Indirect (4)
                         Saratoga Springs,
                         NY 12866

</TABLE>

(1)  The  information  as to the number of shares of common stock of the Company
     that may be deemed  beneficially  owned by advisory  clients of Dimensional
     Fund Advisors Inc.  ("Dimensional") is from the Schedule 13G dated February
     12, 2002 filed with the  Securities  and Exchange  Commission  (the "SEC").
     Dimensional,  a registered investment advisor, is deemed to have beneficial
     ownership of 72,600  shares of Espey Mfg. & Electronics  Corp.  stock as of
     December 31, 2001, all of which shares are held in  Dimensional  investment
     companies,  trusts and  accounts.  Dimensional,  in its role as  investment
     advisor and/or manager,  disclaims beneficial ownership of all such shares.
     Dimensional,  it its role as investment  advisor and/or  manager,  reported
     sole voting power with respect to 72,600 shares.

(2)  The information as the number of shares of common stock of the Company that
     may be  deemed  beneficially  owned  by  Franklin  Advisory  Services,  LLC
     ("Franklin")  is from the Schedule  13G,  dated January 31, 2001 filed with
     the SEC.  The  Franklin  statement  indicated  that  Franklin's  investment
     "advisory  subsidiaries,"  have sole  voting  and  dispositive  power  with
     respect to all of the shares of common  stock  shown in the table above for
     Franklin.  The Franklin statement indicates that the common stock set forth
     in the  table  is  beneficially  owned  by one or more  open or  closed-end
     investment  companies or other managed accounts which are advised by direct
     and indirect Franklin investment advisory subsidiaries.  The statement also
     indicated that it filed the Schedule 13G on behalf of itself and Franklin's
     principal shareholders,  Charles B. Johnson and Rupert H. Johnson, Jr. (the
     "Principal Shareholders"), all of which are deemed beneficial owners of the
     shares of common stock shown in the above table for Franklin.  Franklin and
     the  Principal


                                       31
<PAGE>


     Shareholders  disclaim any economic interest or beneficial ownership in any
     of the common stock shown in the table for Franklin.

(3)  This  information  is from the Form 4 dated  August 30, 2002 filed with the
     SEC by the Trustee on behalf of the  Company's  ESOP.  The ESOP Trustee has
     sole voting power with respect to  unallocated  common  shares owned by the
     Trust,  as directed by the Plan  Administrator  appointed by the  Company's
     Board of  Directors.  As to the common  shares  allocated to  participants,
     216,577  shares as of September 11, 2002, the ESOP Trustee has the power to
     vote such shares as directed by such Plan  Administrator  to the extent the
     participants do not direct the manner in which such shares are to be voted.

(4)  This  information  is from Form 5 dated  August 5,  2002.  Indirect  shares
     represent stock being held in the Company ESOP.

Security Ownership

The  following  information  is  furnished  as of  September  11,  2002  (unless
otherwise  indicated),  as to each  class of equity  securities  of the  Company
beneficially  owned by all Directors and Executive Officers and by Directors and
Executive Officers of the Company as a Group:

<TABLE>
<CAPTION>
                                                            Amount and
                                                             Nature of
Title                      Name of                          Beneficial               Percent of
Class                  Beneficial Owner                     Ownership                   Class
-----                 -------------------                    ----------               ----------
<S>                 <C>                                 <C>                           <C>
Common Stock

$.33-1/3 p.v.         Paul J. Corr                      3,000 - Direct                  *

        "             William P. Greene                   100 - Direct                  *

        "             Carl Helmetag                     2,500 - Direct                  *
                                                          500 - Indirect (3)

        "             Gary M. Jones                     4,225 - Indirect (2)            *

        "             Peggy Murphy                      2,851 - Indirect (2)            *

        "             David A. O'Neil                   1,600 - Direct                  *
                                                        1,287 - Indirect (2)

        "             Barry Pinsley                    40,130 - Direct                  4.17%
                                                        3,017 - Indirect (1,2)

        "             Howard Pinsley                   43,634 - Direct                  5.04%
                                                        8,481 - Indirect (2)

        "             Timothy A. Polidore                 609 - Indirect (2)            *

        "             John J. Pompay, Jr.               8,980 - Indirect (2)            *

        "             Alvin O. Sabo                         0                           *

        "             Seymour Saslow                    1,051 - Direct                  *
                                                        6,810 - Indirect (2)

        "             Michael W. Wool                     400 - Direct                  *

        "             Officers and Directors           92,415 - Direct                 12.48%
                      as a Group (13 persons)          36,760 - Indirect

</TABLE>

* Less than one percent


                                       32
<PAGE>


(1)  Excludes  2,000  shares  owned by the spouse of Barry  Pinsley.  Beneficial
     ownership of the shares is disclaimed by Mr. Pinsley

(2)  Includes shares allocated to named director or executive officer as of June
     30, 2002 as a participant in the Company's  ESOP.  Each such person has the
     right to direct the manner in which such shares allocated to him or her are
     to be voted by the ESOP Trustee.

(3)  Includes 500 shares owned by the trust of Molly K. Helmetag.  As trustee of
     the trust,  Mr.  Helmetag is deemed  beneficial  owner,  as defined in rule
     13d-3,  of the shares held by the trust.  Excludes  800 shares owned by the
     spouse of Mr. Helmetag. Beneficial ownership is disclaimed by Mr. Helmetag.

There are no arrangements known to the Company,  the execution of which may at a
subsequent date, result in change of control of the Company.

Item 13 Certain Relationships and Related Transactions

As previously  reported,  the Company  established and sold to the ESOP Trust on
June 5,  1989,  331,224  shares of the  Company's  treasury  stock at a price of
$26.50 per share,  which  purchase price was funded by the Company making a cash
contribution  and loan. Each year, the Company makes  contributions to the ESOP,
which are used to make loan interest and principal payments to the Company. With
each such  payment,  a portion of the common stock held by the ESOP is allocated
to  participating  employees.  As of June 30, 2002,  there were  220,888  shares
allocated to participants. The loan from the Company to the ESOP is repayable in
annual installments of $1,039,605,  including  interest,  through June 30, 2004.
Officers of the Company,  including (Howard Pinsley) who is also a director,  is
eligible to participate in the ESOP and to have shares and cash allocated to his
account and distributed to him in accordance with the terms of the ESOP.

The Company paid the law firm of Langrock,  Sperry & Wool,  of which  Michael W.
Wool,  a director  of the  Company,  is a partner,  a total of $24,000 for legal
services during the fiscal year ended June 30, 2002.


                                       33
<PAGE>


                                     PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

          (a)  1. Financial Statements

                    Included in Part II, Item 8, of this report:
                    Reports of Independent Accountants

                    Balance Sheets at June 30, 2002 and 2001

                    Statements of Income for the years ended
                    June 30, 2002, 2001 and 2000

                    Statements of Changes in Stockholders' Equity
                    for  the years ended June 30, 2002, 2001 and 2000

                    Statements of Cash Flows for the years ended
                    June 30, 2002, 2001 and 2000

                    Notes to Financial Statements

          2.   Financial Statement Schedules

                    Schedules  are omitted  because of the absence of conditions
                    under  which  they are  required  or  because  the  required
                    information  is given in the  financial  statements or notes
                    thereto.

          3.   Exhibits

     11.2 Statement re: Computation of Per Share Earnings

     (b)  Reports on Form 8-K
          Form 8-K filed November 9, 2001, announcing the death of a Director.


                                       34
<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

                    Certification of Chief Executive Officer
            Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Howard Pinsley, certify that:

     1.   I have  reviewed  this  annual  report  on Form 10-K of Espey  Mfg.  &
          Electronics Corp.
     2.   Based on my knowledge,  this annual report does not contain any untrue
          statement  of a  material  fact  or  omit to  state  a  material  fact
          necessary to make the statements  made, in light of the  circumstances
          under which such  statements were made, not misleading with respect to
          the period covered by this annual report; and
     3.   Based on my knowledge,  the financial statements,  and other financial
          information  included in this  annual  report,  fairly  present in all
          material respects the financial  condition,  results of operations and
          cash flows of the registrant as of, and for, the periods  presented in
          this annual report.

     Date: September 13, 2002

                                                  /s/ Howard Pinsley
                                                  ------------------------------
                                                  Howard Pinsley,
                                                  President and
                                                  Chief Executive Officer

                    Certification of Chief Financial Officer
            Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, David A. O'Neil, certify that:

     1.   I have  reviewed  this  annual  report  on Form 10-K of Espey  Mfg.  &
          Electronics Corp.
     2.   Based on my knowledge,  this annual report does not contain any untrue
          statement  of a  material  fact  or  omit to  state  a  material  fact
          necessary to make the statements  made, in light of the  circumstances
          under which such  statements were made, not misleading with respect to
          the period covered by this annual report; and
     3.   Based on my knowledge,  the financial statements,  and other financial
          information  included in this  annual  report,  fairly  present in all
          material respects the financial  condition,  results of operations and
          cash flows of the registrant as of, and for, the periods  presented in
          this annual report.

         Date: September 13, 2002

                                                  /s/ David A. O'Neil
                                                  ------------------------------
                                                  David A. O'Neil
                                                  Treasurer and Principal
                                                  Financial Officer


                                       35
<PAGE>


     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report is signed below by the following  persons on behalf of the Registrant and
in the capacities and on the dates indicated.


/s/ Howard Pinsley                              President
--------------------------------------          (Principal Executive Officer)
Howard Pinsley                                  September 13, 2002


/s/ David A. O' Neil                            Treasurer
--------------------------------------          (Principal Financial Officer)
David A. O'Neil                                 September 13, 2002


/s/ Garry M. Jones                              Assistant Treasurer
--------------------------------------          (Principal Accounting Officer)
Garry M. Jones                                  September 13, 2002


/s/ Timothy A. Polidore                         Assistant Treasurer
--------------------------------------          (Principal Accounting Officer)
Timothy A. Polidore                             September 13, 2002


/s/ Barry Pinsley                                Director
--------------------------------------          September 13, 2002
Barry Pinsley


/s/ Seymour Saslow                              Director
--------------------------------------          September 13, 2002
Seymour Saslow


/s/ William P. Greene                           Director
--------------------------------------          September 13, 2002
William P. Greene


/s/ Michael W. Wool                             Director
--------------------------------------          September 13, 2002
Michael W. Wool


/s/ Paul J. Corr                                Director
--------------------------------------          September 13, 2002
Paul J. Corr


/s/ Alvin O. Sabo                               Director
--------------------------------------          September 13, 2002
Alvin O. Sabo


/s/ Carl Helmetag                               Director
--------------------------------------          September 13, 2002
Carl Helmetag


                                       36
<PAGE>


                    Certification of Chief Executive Officer
            Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In  connection  with this annual report on Form 10-K of Espey Mfg. & Electronics
Corp. (the "Company"), I, Howard Pinsely,  President and Chief Executive Officer
of the Company,  certify , pursuant to Section 906 of the  Sarbanes-Oxley Act of
2002, that:

     1.   The report fully  complies with the  requirements  of Section 13(a) or
          15(d) of the Securities Exchange Act of 1934; and

     2.   The  information  contained  in this report  fairly  presents,  in all
          material respects,  the financial  condition and results of operations
          of the Company

Date: September 13, 2002


                                                  /s/ Howard Pinsley
                                                  ------------------------------
                                                  Howard Pinsley,
                                                  President and
                                                  Chief Executive Officer


                    Certification of Chief Financial Officer
            Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In  connection  with this annual report on form 10-K of Espey Mfg. & Electronics
Corp. (the  "Company"),  I, David A. O'Neil,  Treasurer and Principal  Financial
Officer of the Company,  certify,  pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that:

     1.   The report fully  complies with the  requirements  of Section 13(a) or
          15(d) of the Securities Exchange Act of 1934; and

     2.   The  information  contained  in this report  fairly  presents,  in all
          material respects,  the financial  condition and results of operations
          of the Company.

Date: September 13, 2002


                                                  /s/ David A. O'Neil
                                                  ------------------------------
                                                  David A. O'Neil
                                                  Treasurer and Principal
                                                  Financial Officer


                                       37