<DOCUMENT>
<TYPE>10KSB
<SEQUENCE>1
<FILENAME>edg10ksb.txt
<DESCRIPTION>FORM 10KSB YEAR ENDED FEBRUARY 28, 2002
<TEXT>
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year ended: February 28, 2002

Commission File Number: 0-16035

                              SONO-TEK CORPORATION
             (Exact name of Registrant as Specified in its Charter)

         NEW YORK                                       14-1568099
(State or other Jurisdiction of             (IRS Employer Identification Number)
Incorporation or Organization)

                  2012 Route 9W, Milton, New York                 12547
                  (Address of Principal Executive Offices)     (Zip Code)

Registrant's Telephone Number, Including Area Code:  (845) 795-2020

Securities Registered Pursuant to Section 12(b) of the Act:  None

Securities Registered Pursuant to Section 12(g) of the Act:
                          Common Stock, $.01 par value
                                (Title of Class)

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

         Indicate by check mark if disclosure of delinquent  filers  pursuant to
Item 405 of Regulation S-B is not contained  herein,  and will not be contained,
to the best of  Registrant's  knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB. [ ]

         As of May 20,  2002 the  aggregate  market  value  of the  Registrant's
Common  Stock  held  by  non-affiliates  of  the  Registrant  was  approximately
$3,213,704  computed by  reference to the average of the bid and asked prices of
the Common Stock on said date, which average was $0.43.

         The Registrant had 9,105,422  shares of Common Stock  outstanding as of
May 20, 2002.

<PAGE>
                                     PART I
ITEM 1  BUSINESS

Organization and Business.

Sono-Tek  Corporation (the "Company" or "Sono-Tek") was incorporated in New York
on March 21, 1975 for the purpose of  engaging in the  development,  manufacture
and sale of ultrasonic liquid atomizing nozzles.

The Company operates in one business segment, spraying systems. Since inception,
the spraying  systems  business  has had periods of sales  growth and  financial
stability,  but suffered sales declines and losses when the electronics industry
had a downturn.  During the past year, the Company has  diversified  its product
offerings to provide  coating  systems to medical  device  manufacturers  and to
provide  components for coating systems for surface acoustic wave wafers used in
sensors, which are being used in homeland defense systems.

The Company  acquired two cleaning and drying systems  businesses in Fiscal Year
2000 and incurred losses in both Fiscal Year 2000 and 2001 in these  businesses.
During the first  quarter of Fiscal Year 2002,  the Company  discontinued  these
businesses.

Product Development

The Company has core  technology  and has  developed  the following new products
that could expand its market opportunities:

1.   Thinsonic-   ultra-thin,   computer-controlled   precision  coating  system
     utilizing licensed and patented technology.  Uses a unique system of pulsed
     liquid  delivery  through a Sono-Tek  ultrasonic  nozzle  dispensed  into a
     vacuum environment.
2.   Medisonic  - similar to the  Thinsonic  except  that it is designed to coat
     with  polymer-based  chemicals and is specially  designed to be used by the
     medical device manufacturers to coat stents and other implant devices.
3.   MicroFlux  XL - computer  controlled,  three  dimensional  precision  spray
     system with applications in both electronics  component  assembly and other
     applications   requiring  precision  spray  of  costly  or  environmentally
     controlled liquids.
4.   SonoFlux  XL - new spray  fluxer  product - applies  solder flux to circuit
     boards up to 24 inches wide in a very cost-effective and uniform manner.

Management  believes that the Company's long-term growth and stability is linked
to the  development  and release of products  that  provide  total  solutions to
customer needs across a wide spectrum of industries, while advancing the utility
of the Company's core technology.  To this end, the Company's  resources will be
focused on a strategy of growth from within the core ultrasonic spray technology
to new segments and customer needs. The Company expended  approximately  9.3% of
its Fiscal Year 2002 total revenues on new product development.

Manufacturing

The Company  purchases  circuit board assemblies and sheet metal components from
outside suppliers.  These materials are available from a wide range of suppliers
throughout  the world.  All raw  materials  used in the  Company's  products are
readily available from many different domestic suppliers. The Company provides a
limited warranty on all of its products covering parts and labor for a period of
one year from the date of sale.  The Company has a business and quality  control
system  that meets the  qualifications  of ISO 9001.  The  Company  was ISO 9001
registered in September  1998 and was  recertified in September 2000 and January
2002.  In  addition  to the high  degree of  quality  implied  by being ISO 9001
registered,  the Company  expects that such  registration  will  discipline  the
Company in running its business and will stimulate continuous improvement.

Patents

The  Company's  business  is based in part on the  technology  covered  by eight
United States  patents held by the Company,  three of which have expired with no
material effect on the Company. Patent applications,  based on the United States
applications,   covering  fundamental  aspects  of  the  ultrasonic   technology
developed by the Company, have been issued in several foreign jurisdictions. The
Company's  effective  patents will expire in December 2007. The Company's patent
on its central bolt design,  used in current product offerings,  expires in July
2004.  There can be no assurance  that the Company's  existing  patents will, if
challenged, be upheld, or that any such patents will afford the necessary degree
of patent protection with respect to the nozzle systems. Furthermore, due to the
high cost of maintaining patents in several foreign  jurisdictions,  the Company
decided not to maintain its patent  protection in certain countries in which the
Company believes the protection is no longer required. There can be no assurance
that  events  will not occur  which,  as a result of the  Company's  failure  to
maintain  its patent  protection,  would have a material  adverse  effect on the
Company's sales in such foreign  jurisdictions.  In addition, the Company may be
unable, for financial or other reasons, to enforce its rights under its patents.

The  Company has a patent  pending on a process  for  coating  three-dimensional
substrates with thin organic films and products, which is the technology used in
its Thinsonic and Medisonic CVD products.

The Company also relies on unpatented  know-how in the  production of its nozzle
systems.

Marketing and Distribution

The Company  markets and  distributes  its products  through  independent  sales
representatives  or sales  representative  companies,  OEMs (original  equipment
manufacturers) and through an in-house direct sales force. Many of the Company's
sales  leads  are  generated  from  the  Company's  internet  web  site and from
attendance at major industry trade shows.

Foreign and Export Sales

During  Fiscal Years 2002 and 2001,  sales to foreign  customers  accounted  for
approximately $800,010 and $1,059,000,  or 23% and 24%,  respectively,  of total
revenues.

Employees

As of May 20,  2002,  the Company  had 26  full-time  employees  and 2 part-time
employees.  The Company  believes  that its  relationship  with its employees is
good.

ITEM 2  PROPERTIES

The Company's manufacturing  operations are located in a facility in the town of
Milton,  New York. The Company's  current  manufacturing  areas consist of (i) a
machine shop, (ii) a nozzle  assembly/test  area, (iii) an electronics  assembly
area,  and (iv) a receiving and shipping area.  The Company's  offices,  product
development,  manufacturing  and assembly  facilities  are located in a building
consisting  of 13,000  square feet  pursuant to a lease that expires on November
30, 2002. The Company plans to renew its current lease.

ITEM 3  LEGAL PROCEEDINGS

None.

ITEM 4  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.


                                     PART II

ITEM 5  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS


(a) The Company's Common Stock trades in the over-the-counter  market on the OTC
Bulletin Board. The following table sets forth the range of high and low closing
bid  quotations  for the  Company's  Common  Stock for the periods  indicated as
furnished by the NASDAQ OTC System.


FISCAL YEAR ENDED              FEBRUARY 28,                  FEBRUARY 28,
                                  2002                          2001
                           HIGH          LOW             HIGH          LOW
                           ----          ---             ----          ---
First Quarter             $0.56        $0.20          $2.4375       $1.375
Second Quarter             0.28         0.09           1.75          0.9062
Third Quarter              0.32         0.08           1.3125        0.5625
Fourth Quarter             0.54         0.16           1.125         0.3281

The above quotations are believed to represent  inter-dealer  quotations without
retail  markups,   markdowns  or  commissions  and  may  not  represent   actual
transactions. The Company believes that, although limited or sporadic quotations
exist,  there is no established  public trading market for the Company's  Common
Stock.

(b) As of May 20, 2002,  there were 316 record  holders of the Company's  Common
Stock.

(c) The Company has not paid any cash  dividends  on its Common  Stock since its
inception,  and intends to retain earnings,  if any, for use in its business and
for other  corporate  purposes.  The Company  has  entered  into debt and equity
agreements that restrict the payment of cash dividends.


ITEM  6  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

Overview

The Company  experienced a turn-around  during the year ended February 28, 2002.
During the first  quarter,  the Company  operated  at a loss.  At the end of the
first  quarter,  the  Company  discontinued  its  cleaning  and  drying  systems
businesses and took measures to reduce costs in its spraying  systems  business.
Coincident with these actions, the Company made top management changes. Sales of
the Company's  original products,  ultrasonic nozzles and systems,  and products
for the coating of medical  devices and for use in homeland  defense systems led
the return to  profitability.  Orders for the Company's  mainstay,  the SonoFlux
9500,  which is used for  coating  printed  circuit  boards for the  electronics
industry,  were  affected  by the  slowdown  of orders  for  consumer  products.
Nevertheless, the diversification of products has allowed the Company to weather
the downturn in the consumer electronics markets.

For the first time in several  years,  Sono-Tek  has brought new products to the
marketplace;  the MicroFlux XL selective  fluxing system, a computer  controlled
fluxing machine for  "flip-chip"  applications,  was completed  during the third
quarter  and  has  been  "Beta-site"  tested  at one of the  Company's  customer
locations.  Also  introduced  were the  "Thinsonic"  chemical  vapor  deposition
machine for the plating of very thin  coatings on  substrates,  the  "Medisonic"
vapor  deposition  system  for the  plating of thin  coatings  of  polymers  and
medications on stents and other medical devices, and the SonoFlux XL an improved
18- to 24-inch  wide spray  fluxing  machine for the  spraying of solder flux on
printed circuit boards.

Forward-Looking Statements

Certain   statements  made  in  this  report  may  constitute   "forward-looking
statements"   within  the  meaning  of  the  Federal   Securities   Laws.   Such
forward-looking  statements include statements  regarding the intent,  belief or
current  expectations of the Company and its  management,  and involve known and
unknown  risks,  uncertainties  and other  factors  which  may cause the  actual
results,  performance or achievements of the Company to be materially  different
from any future  results,  performance or  achievements  expressed or implied by
such forward-looking  statements.  Such factors include, among other things, the
following:

-     The Company's ability to respond to competition in its markets;

-     General economic conditions in the Company's markets;

The Company  undertakes  no obligation  to update  publicly any  forward-looking
statement.

Liquidity and Capital Resources

The Company's  working  capital  deficiency  improved  $1,127,747 from a working
capital  deficiency  of  $627,799 at  February  28,  2001 to working  capital of
$499,948 at February 28, 2002. The increase in working  capital was  principally
the result of an increase in cash of $450,000,  reductions  in accounts  payable
and accrued  expenses  of  $672,000,  and a decrease  in the current  portion of
related-party  loans and bank  loans of  $373,000,  offset by  decreases  in net
accounts receivable of $214,000,  decrease in inventory of $28,000,  decrease in
prepaid  expenses of $28,000,  and an  increase  in the  current  maturities  of
convertible loans and subordinated mezzanine debt of $102,000. The stockholders'
deficiency  increased $177,190 from $605,364 at February 28, 2001 to $782,554 at
February 28, 2002.  The decrease in  stockholders'  equity was the result of the
loss of $186,391 for the year ended  February 28, 2002.  The loss was due to the
write-off of the remaining  goodwill of the discontinued  operation in the first
quarter.  The Company was  profitable  in the  remaining  three  quarters of the
fiscal year.

Accounts  receivable  at February  28, 2002  decreased  $213,513,  or 36%,  from
February  28, 2001 due to better  collection  efforts in the nine  months  ended
February 28, 2002. The allowance for doubtful  accounts was reduced $91,581 from
February 28, 2001, due to collection from one foreign customer whose payment was
remitted during the second quarter of this fiscal year.

Inventory  decreased $27,985,  or 4%, as the result of reduced purchasing in the
year ended February 28, 2002.  This reduction was based upon the order level for
the Company's principal product,  solder flux application products  ("fluxers"),
during the year ended  February  28,  2002,  partially  offset by finished  good
inventory of new Thinsonic and Medisonic  machines on hand at February 28, 2002.
This reduction in the sale of fluxers was due to the slowdown in the manufacture
of printed circuit boards.

Accounts payable decreased  $561,000 as compared to February 28, 2001 due to the
reduced purchasing  activity noted above and payments made to vendors on current
and overdue amounts during the year ended February 28, 2002.

On April 30,  2001,  the Company  amended its  agreement  with  Norwood  Venture
Corporation  ("Norwood"),  pursuant to which the Company increased its five-year
loan in the  principal  amount of  $300,000,  of which  $216,750  was  loaned by
certain of the Company's directors,  an officer and an affiliate of the Company.
The terms of the loan require  payments of interest only through  September 2001
followed by monthly  payments of $23,612 plus  interest  through  September  30,
2004.  The  Company was also  required  to grant a warrant to  purchase  733,333
shares of the  Company's  common stock at an exercise  price of $0.10 per share,
which can be put to the Company. Such warrants were valued at $80,667,  which is
accounted for as a discount and will be imputed as additional  interest  expense
over the term of the loan. On October 24, 2001, the Company and Norwood  amended
their agreement by changing the repayment  commencement date to October 31, 2002
with final payment on September 30, 2005.  Additionally,  the exercise  price of
certain of the warrants was reduced from $.30 to $.15 per share.  This  resulted
in an increase in the value of the warrants of $13,445,  which is accounted as a
discount and is being  imputed as additional  interest  expense over the term of
the loan.

The Company  currently  has a $350,000  line of credit with a bank.  The loan is
collateralized by accounts receivable, inventory and all other personal property
of the Company,  and is  personally  guaranteed  by the former  Chief  Executive
Officer of the Company.  As of February 28, 2002,  the  outstanding  balance was
$344,000.

Due to the  consolidated  Company losses incurred during Fiscal Years 2001, 2000
and 1999, the Company borrowed on a short-term basis from officers and directors
of the Company.  At Fiscal Year End 2002, loans from directors,  former officers
and related parties in the amount of $286,084, plus accrued interest of $62,728,
were  formalized  into  four-year  notes  bearing  interest  at 5% on the unpaid
balance.  Repayments of these notes commenced March 31, 2002 on a monthly basis.
Earlier  during the year,  related  party loans in the amount of  $146,000  were
repaid with interest.

During the first  quarter of Fiscal  Year 2002,  the  Company  discontinued  the
production of capital  equipment in the cleaning and drying systems  segment and
began  to  focus  on its  original  product  lines,  specifically  the  sales of
ultrasonic nozzles. As the result of taking these steps, the Company was able to
remain profitable for the remainder of Fiscal Year 2002.

Results of Continuing Operations

The continuing operations of Sono-Tek reflect improved operating margins and the
Company reduced its payroll and operating  expenses during the quarter ended May
31, 2001 in order to provide positive cash flow from continuing operations. This
was  accomplished by downsizing the spraying  systems  business through layoffs,
salary reductions,  and cutbacks in employee benefits.  The Company also reduced
costs by changing outside professionals and other service providers.

For the year ended February 28, 2002, the Company's sales decreased  $837,486 to
$3,469,409,  as compared to $4,306,895 for the year ended February 28, 2001. The
decrease was a result of a decrease in fluxer sales of  $1,218,000  offset by an
increase  in nozzle  sales of $297,000  and an  increase in MCS  nozzle-spraying
system and plating system sales of $83,000. The sales decrease was caused by the
slowdown in the  consumer  electronics  markets  that use the  company's  solder
flux-spraying  systems.  The increase in nozzle and other sales was attributable
to orders  placed by  customers  in the medical  device  field and for  national
defense contracts.

The Company's gross profit decreased $310,366,  to $2,174,520 for the year ended
February 28, 2002 from  $2,484,886  for the year ended  February  28, 2001.  The
decrease was  primarily a result of decreased  sales of the  Company's  products
that were offset by the related  material costs and labor. The change in the mix
of the  Company's  products sold and cost  reductions  improved the gross margin
percentage  from 58% for the year ended  February 28, 2001,  to 63% for the year
ended February 28, 2002.

Research and product  development costs increased  $22,593,  to $321,060 for the
year ended  February 28,  2002,  from  $298,467 for the year ended  February 28,
2001. The increase was a result of product  development costs on the Microfluxer
(which  is a new  product)  and  continued  work  on  the  CVD  (chemical  vapor
deposition) product line.

Marketing and selling costs decreased  $195,496,  to $662,827 for the year ended
February 28, 2002 from  $858,323,  for the year ended  February  28,  2001.  The
decrease  was a result of decreases in  marketing  and  advertising  expenses of
$127,000,  sales  commissions  of $110,000,  professional  fees of $11,000,  and
travel  expenses of $39,000,  which were offset by increased  personnel costs of
$81,000, and facilities and other costs of $11,000.

General and administrative costs decreased $85,528, from $662,999,  for the year
ended  February 28, 2001, to $577,471 for the year ended  February 28, 2002. The
decrease was  attributable to reduced  consulting  expenses of $50,000,  reduced
professional  fees of  $62,000,  reduced bad debt  expenses of $84,000,  reduced
merger and  acquisition  costs of $32,000  and  reduced  corporate  expenses  of
$25,000,  partially offset by increased  personnel and travel costs of $127,000,
increased  banks  fees of  $11,000,  increased  facility  and  utility  costs of
$15,000, and increased royalty expenses of $15,000.

Interest and other  income  increased  $107,347 for the year ended  February 28,
2002 as compared to February  28,  2001,  primarily  as the result of $38,500 of
profits  realized on settlements  with vendors,  $26,000 of gains on disposal of
fixed assets,  and $13,000 of interest income offset by $10,000 spent to acquire
the cleaning  systems  spares  business this year, as compared to a $60,000 loss
from affiliate which was offset by $14,000 of interest income last fiscal year.

Interest  expense was unchanged for the year ended February 28, 2002 as compared
to the year ended February 28, 2001.

During Fiscal Year 2002, the Company  negotiated vendor settlements with several
of its vendors, which resulted in $38,000 of other income.

The Company's income from continuing operations increased $55,212, from $375,310
or $0.04 per share,  for the year ended February 28, 2001, to $430,522,  or $.05
per share, for the for the year ended February 28, 2002.

Results of Discontinued Operations

The Company's loss from discontinued  operations  decreased  $1,388,886,  from a
loss of $2,005,799  for the year ended  February 28, 2001, to a loss of $616,913
for the year ended  February 28, 2002.  At February 28, 2001,  the  discontinued
operation  had  residual  goodwill of $477,377.  This  goodwill was based on the
residual  profits of open  contracts at February 28, 2001,  the assumed value of
the residual spares  business,  and the value that was assumed could be realized
from the sale of the business.  During the quarter ended May 31, 2001, one major
customer  canceled the balance of its order. It was determined that the business
could  not be sold  and the  value  of the  spares  business  was  deemed  to be
overstated.  Accordingly,  the goodwill was considered  impaired and was written
off.  The  Fiscal  Year  2002  loss was due to the  impairment  of  goodwill  of
$477,377,  an increase in the raw material  inventory reserve $39,246, a reserve
of $89,812 for work in process inventory, an increase in allowance for bad debts
of $30,000, impairment of fixed assets of $70,511, and provision of reserves for
future rent and utility costs of $27,430,  plus the lack of sales to support the
necessary amount of overhead.

The  Company's  wholly owned  subsidiary  negotiated  with its vendors and other
creditors to repay its past-due obligations.  During the year ended February 28,
2002,  settlement  agreements were reached with 28 creditors of the discontinued
operation,  which  reduced a gross  amount of  $371,397  of  obligations  due to
$110,493. Such amounts were paid and the obligations were satisfied.

ITEM 7  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See pages 18 to 39.

ITEM 8  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

Not applicable
                                    PART III

ITEM 9  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

(a)  Identification of Directors

Name                            Age       Position with the Company
----                            ---       -------------------------
Harvey L. Berger                 63       Director and Chief Technologist
Christopher L. Coccio            61       Chief Executive Officer, President and
                                             a Director
Samuel Schwartz                  82       Chairman and Director*
Jeffrey O. Spiegel               43       Director*
J. Duncan Urquhart               48       Treasurer and Director*

*  Member of the Audit Committee and Compensation Committee.

Dr. Berger has been a Director of the Company since June 1975. In April 2001, he
resigned his position as President and was  appointed  Chief  Technologist.  Dr.
Coccio has been a Director of the  Company  since June 1998.  In April 2001,  he
accepted the positions of President and Chief  Executive  Officer.  Mr. Schwartz
has been a Director  since August 1987.  Mr.  Spiegel has been a Director  since
November 2000. Mr. Urquhart has been a Director since September 1988.

The Board of Directors is divided into two classes,  which were  established  by
the Company's shareholders at their annual meeting held on October 19, 1989. The
directors in each class serve for a term of two years.  The terms of the classes
are  staggered  so that only one class of  directors  is elected at each  annual
meeting of the Company. The terms of Messrs. Schwartz and Urquhart run until the
annual meeting to be held in 2002, and the term of Drs.  Berger and Coccio,  and
Mr.  Spiegel run until the annual  meeting to be held in 2003,  and in each case
until their respective successors are duly elected and qualified.

(b)  Identification of Executive Officers

Name                            Age       Position with the Company
----                            ---       -------------------------
Christopher L. Coccio            61       Chief Executive Officer, President and
                                             a Director
R. Stephen Harshbarger           34       Vice President
J. Duncan Urquhart               48       Treasurer

Dr.  Coccio was  appointed  Acting Chief  Executive  Officer in March 2001,  and
accepted the positions of Chief  Executive  Officer and President in April 2001.
Mr.  Harshbarger  has served as Vice President since June 2000. Mr. Urquhart has
served as Treasurer since August 2002.

The  foregoing  officers  are  elected  for  terms of one  year or  until  their
successors  are duly elected and qualified or until  terminated by the action of
the Board of Directors.  There are no arrangements or understandings between any
executive officer and any other persons(s)  pursuant to which he was or is to be
selected as an officer.

(c)  Identification of Certain Significant Employees

Not applicable.

(d)  Family Relationships

None.

(e)  Business Experience

DR.  HARVEY L. BERGER has been a Director of the Company since June 1975. He was
appointed Chief Technologist in April 2001. He was President of the Company from
November 1981 to September 1984 and from  September 1985 until April 2001.  From
September  1986 to  September  1988,  he also served as  Treasurer.  He was Vice
Chairman of the Company from March 1981 to September  1985.  Dr.  Berger holds a
Ph.D. in physics from  Rensselaer  Polytechnic  Institute and is a member of the
Marist College Advisory Board.

DR.  CHRISTOPHER  L. COCCIO has been a Director of the Company  since June 1998.
From 1964 to 1996, he held various engineering,  sales, marketing and management
positions at General Electric Company,  with P&L responsibilities for up to $100
million  in sales and 500 people  throughout  the United  States.  His  business
experience  includes both domestic and international  markets and customers.  He
founded a management  consulting  business in 1996, and worked with the New York
State Assembly's  Legislative  Commission on Science and Technology from 1996 to
1998.  In  1998,  he  began  to  work  with  Accumetrics  Associates,   Inc.,  a
manufacturer  of  digital  wireless  telemetry  systems,  as Vice  President  of
Business Development and member of the Board of Advisors.  Mr. Coccio received a
B.S.M.E. from Stevens Institute of Technology, a M.S.M.E. from the University of
Colorado,  and  a  Ph.D.  from  Rensselaer  Polytechnic  Institute  in  Chemical
Engineering.  He was appointed President and Chief Executive Officer of Sono-Tek
on April 30, 2001.

R. STEPHEN  HARSHBARGER  has been Vice President of the Company since June 2000.
He joined Sono-Tek in October 1993 as a Sales Engineer. In 1997, he was promoted
to Regional Sales  Manager,  and in 1999, he advanced to National Sales Manager.
Prior  to  joining  Sono-Tek,  Mr.  Harshbarger  was  the  Sales  and  Marketing
Coordinator for three years at Plasmaco,  Inc., a developer and  manufacturer of
state-of-the-art  flat panel displays. He is a graduate of Bentley College, with
a major in Finance and a minor in Marketing.

SAMUEL  SCHWARTZ has been a Director of the Company  since August 1987,  and was
Chairman of the Board from February 1993 to May 1999. In April 2001, he accepted
the position as Acting  Chairman of the Board and Chairman in August 2001.  From
1959 to 1992,  he was the  Chairman  and Chief  Executive  Officer of  Krystinel
Corporation,  a manufacturer of ceramic  magnetic  components used in electronic
circuitry.  He received a B.CH.E. from Rensselaer  Polytechnic Institute in 1941
and a M.CH.E. from New York University in 1948.

JEFFREY  SPIEGEL has been a Director of the Company since  November  2000. He is
the President and Chief Executive Officer of Randa Corp., a position he has held
since 1986. Randa Corp. is an international men's accessory company. Mr. Spiegel
received an B.A. from Brandeis University in 1979.

J. DUNCAN  URQUHART has been the Treasurer of the Company since August 2001, and
has been a Director of the Company since September 1988.  Since January 1999, he
has been a  Consultant  Associate  with  Resources  Connection,  which  provides
contract accounting  services.  From October 1997 to December 1998, Mr. Urquhart
was  Director  of  Business   Operations  at  The  Gun  Parts  Corporation,   an
international  supplier of gun parts.  Prior to his resignation from Sono-Tek in
October 1997, he was  Controller of the Company from January 1988, and Treasurer
of the Company from September 1988.

Section 16(a) Beneficial Ownership Reporting Compliance

Not applicable.

ITEM 10  EXECUTIVE COMPENSATION

The following table sets forth the aggregate remuneration paid or accrued by the
Company for Fiscal Years ended February 28, 2002,  2001 and 2000, for each named
officer  of  the  Company.   No  other  executive  officer  received   aggregate
remuneration  that  equaled or  exceeded  $100,000  for the Fiscal  Years  ended
February 28, 2002, 2001 and 2000.
<TABLE>

                           SUMMARY COMPENSATION TABLE
<CAPTION>

                                                                         Long Term
                                      Annual Compensation              Compensation
Name and                                                             Awards, Securities          All Other
Principal Position         Year       Salary ($)   Bonus ($)      Underlying Options (#)     Compensation ($)(1)
------------------         ----       ----------   ---------      ----------------------     -------------------
<S>                        <C>         <C>          <C>                     <C>                    <C>
Christopher L. Coccio      2002(2)      $92,354     $40,000                  0                       $178
CEO, President and
    Director

R. Stephen Harshbarger     2002         $90,519      $5,000                  0                       $207
Vice President             2001        $102,487           0                  0                     $2,695
                           2000         $91,357           0                  0                     $1,533

(1) Dollar amounts are Company contributions under the Company's retirement plan.
(2) Dr. Coccio became an employee of the Company as of May 7, 2001.
</TABLE>

The following table sets forth  information  regarding option grants made during
the last completed fiscal year for each named officer of the Company.
<TABLE>

                      Option/SAR Grants in Last Fiscal Year
<CAPTION>

                           Number of         Percent of total
                           Securities          options/SARs
                           Underlying           granted to
                           Options/SARs        employees in         Exercise or base
Name                       granted (#)          fiscal year           price ($/Sh)     Expiration date
----                       -----------          -----------           ------------     ---------------
<S>                        <C>                    <C>                   <C>                 <C>
Christopher L. Coccio      100,000                27%                   $.29                05/07/11
                           100,000                27%                   $.19                12/20/11

R. Stephen Harshbarger      15,000                 4%                   $.19                12/20/01
</TABLE>

The following table sets forth information regarding option exercises during the
Fiscal  Years  ended  February  28,  2002 and 2001,  as well as any  unexercised
options  held as of  February  28,  2002 and 2001 by each  named  executive  who
received in excess of $100,000 in salary and bonus.
<TABLE>
<CAPTION>

                                                       Number of Securities Underlying    Value of Unexercised
                                                             Unexercised Options          In-the Money Options
                          Shares                            at Fiscal Year End (#)        At Fiscal Year End ($)
                        Acquired on     Value
Name                    Exercise (#)  Realized ($)     Exercisable   Unexercisable     Exercisable  Unexercisable
----                    ------------  ------------     -----------   -------------     -----------  -------------
<S>                          <C>         <C>             <C>            <C>               <C>          <C>
Christopher Coccio           0           0               95,001         124,999           $9,750       $26,250

R. Stephen Harshbarger       0           0               43,000          22,000           $2,260        $5,620
</TABLE>

Audit Committee

The  Company's  Board of  Directors  has an Audit  Committee  composed of Samuel
Schwartz,  Jeffrey Spiegel and J. Duncan Urquhart, all Directors of the Company.
The Audit  Committee is  responsible  for (i)  selecting an  independent  public
accountant  for  ratification  by  the  stockholders,  (ii)  reviewing  material
accounting items affecting the consolidated financial statements of the Company,
and (iii) reporting its findings to the Board of Directors.

Compensation Committee Interlocks and Insider Participation

The Company's Board of Directors has a Compensation Committee composed of Samuel
Schwartz,  Jeffrey Spiegel and J. Duncan Urquhart, all Directors of the Company.
However,  the  Compensation  Committee  serves an advisory  function  only.  All
decisions  regarding  compensation  are  made by the full  Board  of  Directors,
including Drs. Berger and Coccio,  who could participate in decisions  regarding
the compensation of the Company's executive officers, including their own.

ITEM 11  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The  following  information  is  furnished  as of  May  20,  2002,  to  indicate
beneficial  ownership of the Company's  Common Stock by each  Director,  by each
named executive officer who has a salary and bonus in excess of $100,000, by all
Directors  and  executive  officers as a group,  and by each person known to the
Company to be the beneficial owner of more than 5% of the Company's  outstanding
Common  Stock.  Such  information  has  been  furnished  to the  Company  by the
indicated owners.  Unless otherwise indicated,  the named person has sole voting
and investment power.

 Name (and address if                                 Amount
   more than 5%) of                                Beneficially
   Beneficial owner                                   Owned              Percent
   ----------------                                   -----              -------
Directors and Officers
     *Harvey L. Berger                              366,700(1)              4.0%
     *Christopher L. Coccio                         261,000(2)              2.8%
     *R. Stephen Harshbarger                         65,000(3)               **
     *Samuel Schwartz                               997,083(4)             10.6%
     *Jeffrey O. Spiegel                            126,777(5)              1.4%
     *J. Duncan Urquhart                             40,000(6)               **
                                                  ---------               ------
All Executive Officers and Directors as a Group   1,856,560(7)             18.9%

Additional 5% owners
     Herbert Spiegel                                513,692                 5.6%
     425 East 58th Street
     New York, NY  10022

     Norwood Venture Corporation                  2,077,777(8)             18.6%
     C/o Danziger & Co.
     1430 Broadway, Suite 1107
     New York, NY  10018

*c/o Sono-Tek Corporation, 2012 Route 9W, Milton, NY  12547.
** Less than 1%

(1)  Includes  4,000 shares in the name of Dr.  Berger's wife and 45,000 options
     deemed exercisable issued under the 1993 Plan..

(2)  Includes 220,000 options deemed exercisable issued under the 1993 Plan.

(3)  Includes 65,000 options deemed exercisable issued under the 1993 Plan.

(4)  Includes  300,000  warrants  deemed  exercisable  awarded  by the  Board of
     Directors in May 1999 and 20,000  options deemed  exercisable  issued under
     the 1993 Plan.

(5)  Assumes the exercise of a warrant Mr. Spiegel received upon conversion of a
     secured subordinated  promissory note, which warrant is exercisable at $.65
     per share for an  additional  28,560  shares  of  Common  Stock and  20,000
     options deemed exercisable issued under the 1993 Plan.

(6)  Includes 40,000 options deemed exercisable issued under the 1993 Plan.

(7)  Includes  410,000  options deemed  exercisable  issued under the 1993 Plan,
     300,000  warrants deemed  exercisable  awarded by the Board of Directors in
     May 1999, and 28,560 warrants deemed  exercisable  received upon conversion
     of secured subordinated promissory note.

(8)  Includes  1,100,000  warrants  deemed  exercisable  issued on September 30,
     1999,  244,444 warrants deemed exercisable issued on December 20, 2000, and
     733,333  warrants  deemed  exercisable  issued  on April 30,  2001,  all in
     conjunction with a loan, as amended, made to the Company.

ITEM 12  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Norwood  loans - On April  30,  2001,  in  order to  induce  the  advance  of an
additional $300,000 by Norwood,  certain of the Company's directors,  an officer
and an  affiliate of the Company  participated  in the amount of $216,750 in the
additional mezzanine financing.  Interest expense of $24,500 was paid to Norwood
and forwarded to these individuals during Fiscal Year 2002.

Short term loans - From time to time the Company has  required  short term loans
to meet its cash  requirements.  Employees  have made advances to the Company in
order to purchase raw materials and pay operating expenses.

At Fiscal  Year End 2002,  loans from  directors,  former  officers  and related
parties  in the  amount of  $286,084  plus  accrued  interest  of  $62,728  were
formalized  into four-year  notes bearing  interest at 5% on the unpaid balance.
Repayments of these notes on a monthly basis commenced  March 31, 2002.  Earlier
during the year,  related party loans in the amount of $146,000 were repaid with
interest.  The total interest charge for related party notes was $25,653 for the
fiscal year ended February 28, 2002.

Consulting agreement -
At February 28, 2002, prior years' consulting fees of $69,076 recorded from 1993
to 1996 to the  Company's  Chairman  of the  Board  have  been  reclassified  as
long-term.  Accordingly, $4,145 in interest expense has been imputed and charged
to paid-in capital. At February 28, 2001, this liability was included in accrued
expenses.

ITEM 13  EXHIBITS, CONSOLIDATED FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
         FORM 8-K

(a)(1)  The  consolidated  financial  statements  and  schedules  listed  in the
accompanying "Index to Consolidated Financial Statements" are filed as a part of
this annual report.

(2)  See (a)(1) above.

(3)  Exhibits

Ex. No.     Description
3(a)(1)     Certificate of Incorporation of the Company and all amendments
            thereto.
3(b)(2)     By-laws of the Company as amended.
3(c)(3)     Certificate of Amendment of the Certificate of Incorporation, dated
            September 30, 1999.
3(d)(12)    Restated Certificate of Incorporation.
4(a)(1)     Form of Convertible Note.
4(b)(4)     Form of Warrant.
4(c)(4)     Master Security Agreement.
4(d)        The Company agrees to furnish a copy of the equipment loan referred
            to in the Company's financial statements to the Commission upon
            request.
4(e)(5)     Form of 1995 Amendment to Convertible Note.
4(f)(6)     Form of 1996 Amendment to Convertible Note.
4(g)(7)     Form of 1997 Amendment to Convertible Note.
4(h)(8)     Letter agreement between the Company and The Bank of New York.
4(i)(9)     Form of 1999 Amendment to Convertible  Note.
4(j)(9)     Former CEO's Personal  Guarantee for the Bank of New York.
4(k)(3)     Note and  Warrant  Purchase  Agreement  dated  September  29, 1999
            by and between the Company and Norwood Venture Corp.
4(l)(3)     Note issued by the Company, dated  September  29, 1999, in the
            principal sum of $450,000
4(m)(3)     Common Stock Purchase Warrant, dated September 29, 1999, issued by
            the Company to Norwood Venture Corp.
4(n)(3)     General Security Agreement, dated September 29, 1999, issued by the
            Company in favor of Norwood Venture Corp.
4(o)(13)    Amended, Note and Warrant Purchase Agreements dated December 22,
            2000 and April 30, 2001 by and between the Company and Norwood
            Venture Corp.
4(p)(14)    Amended Note and Warrant Purchase Agreement dated October 24, 2001
            between the Company and Norwood  Venture Corp.
10(a)(11)   Lease for the Company's facilities in Milton, NY dated December 1,
            1999.
*10(e)(10)  1993 Stock Incentive Plan as amended.
10(f)(9)    Bank of New York Line of Credit.
23(a)       Independent Auditors' Consent.

* Management Contract or Compensatory Plan.

(1)  Incorporated  herein by reference to the  Company's  Form 10-K for the year
     ended February 28, 1994.
(2)  Incorporated  herein by reference  to exhibit 2 to Amendment  No. 1 to Form
     8-A, SEC file #0-16035.
(3)  Incorporated  herein by  reference  to the  Company's  Form 10-Q  Quarterly
     Report for the quarter ended November 30, 1999.
(4)  Incorporated  herein by  reference  to the  Company's  Form 10-Q  Quarterly
     Report for the quarter ended November 30, 1993.
(5)  Incorporated  herein by reference to the  Company's  Form 10-K for the year
     ended  February  28,  1995.
(6)  Incorporated  herein by reference to the  Company's  Form 10-K for the year
     ended February 29, 1996.
(7)  Incorporated  herein by reference to the  Company's  Form 10-K for the year
     ended February 28, 1997.
(8)  Incorporated  herein by  reference  to the  Company's  Form 10-Q  quarterly
     report for the quarter ended May 31, 1996.
(9)  Incorporated  herein by reference to the  Company's  Form 10-K for the year
     ended February 28, 1999.
(10) Incorporated  herein by  reference  to the  Company's  Form 10-Q  quarterly
     report for the quarter ended August 31, 1998.
(11) Incorporated  herein by reference to the  Company's  Form 10-K for the year
     ended February 29, 2000.
(12) Incorporated  herein by  reference  to the  Company's  Form 10-Q  quarterly
     report for the quarter ended November 30, 2000.
(13) Incorporated  herein by reference to the  Company's  Form 10-K for the year
     ended February 28, 2001.
(14) Incorporated  herein by reference to the  Company's  Form 10-QSB  quarterly
     report for the quarter ended November 30, 2001.

(b)  Reports on Form 8-K.
     No reports on Form 8-K were filed during the last quarter of the period
covered by this report.
<PAGE>
                              SONO-TEK CORPORATION

                                   FORM 10-KSB

                                     ITEM 7

            INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES

                      FOR THE YEAR ENDED FEBRUARY 28, 2002



INDEPENDENT AUDITORS' REPORT

CONSOLIDATED FINANCIAL STATEMENTS:

              Consolidated Balance Sheet at February 28, 2002

              Consolidated Statements of Operations
                 For the Years Ended February 28, 2002 and February 28, 2001

              Consolidated Statements of Stockholders' Equity (Deficiency)
                 For the Years Ended February 28, 2002 and February 28, 2001

              Consolidated Statements of Cash Flows
                 For the Years Ended February 28, 2002 and February 28, 2001

              Notes to the Consolidated Financial Statements
<PAGE>
                          INDEPENDENT AUDITORS' REPORT



To the Stockholders and Board of Directors
Sono-tek Corporation
Milton, New York

We have  audited  the  accompanying  consolidated  balance  sheets  of  Sono-tek
Corporation as of February 28, 2002, and the related consolidated  statements of
operations,  stockholders'  deficiency  and cash  flow for each of the two years
then ended.  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 audit in accordance with auditing standards  generally accepted
in the United  States.  Those  standards  require  that we plan and  perform the
audits to obtain reasonable assurance about whether the financial statements are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence supporting the amounts and disclosures in the financial statements.  An
audit also includes  assessing the accounting  principles  used and  significant
estimates  made by  management,  as well as  evaluating  the  overall  financial
statement  presentation.  We believe that our audits provide a reasonable  basis
for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the financial position of Sono-tek  Corporation,  as of
February  28, 2002 and the results of their  operation  and their cash flows for
each of the two  years  then  ended in  conformity  with  accounting  principles
generally accepted in the United States.


/S/Radin, Glass & Co., LLP
Certified Public Accountants

New York, New York
April 23, 2002
<PAGE>
<TABLE>
                              SONO-TEK CORPORATION
                           CONSOLIDATED BALANCE SHEETS
<CAPTION>

                                     ASSETS
                                                                           February 28,
                                                                               2002
                                                                               ----
<S>                                                                         <C>
Current Assets
     Cash and cash equivalents                                                $453,215
     Accounts receivable (less allowance of $25,000)                           380,092
     Inventories (Note 7)                                                      768,711
     Prepaid expenses and other current assets                                  68,395
                                                                             ---------
          Total current assets                                               1,670,413

Equipment, furnishings and leasehold improvements (less accumulated
     depreciation of $573,547)(Note 8)                                         141,509
Intangible assets, net:
     Patents and patents pending (Note 3)                                       20,187
     Deferred financing fees (Note 14)                                          18,355
                                                                            ----------
          Total intangible assets                                               38,542
Other assets                                                                     7,667
                                                                            ----------
TOTAL ASSETS                                                                $1,858,130
                                                                            ==========

                    LIABILITIES AND STOCKHOLDERS' DEFICIENCY

Current Liabilities:
     Accounts payable                                                         $280,548
     Accrued expenses (Note 10)                                                257,968
     Revolving Line of Credit  (Note 11)                                       344,000
     Current maturities of long term loans-related parties (Notes 13 & 20)      87,203
     Current maturities of long term debt (Notes 13)                            22,686
     Current maturities of subordinated mezzanine debt (Note 14)               118,060
     Current maturities of subordinated convertible loans (Note 12)             60,000
                                                                            ----------
          Total current liabilities                                          1,170,465
Subordinated mezzanine debt (Note 14)                                          643,813
Long term debt - related parties, less current maturities (Notes 13 & 20)      282,020
Subordinated convertible loans (Notes 12)                                       90,000
Other long-term liabilities  (Note 20)                                          98,759
Estimated future costs of discontinued operations (Note 6)                     167,404
                                                                            ----------
          Total liabilities                                                  2,452,461
                                                                            ----------

Commitments and Contingencies (Note 15)                                              -
Put Warrants (Note 14)                                                         188,223

Stockholders' Deficiency
     Common stock, $.01 par value; 25,000,000 shares authorized,
          9,105,422 issued and outstanding                                      91,055
     Additional paid-in capital                                              6,016,107
     Accumulated deficit                                                    (6,889,716)
                                                                            ----------
          Total stockholders' deficiency                                      (782,554)
                                                                            ----------

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY                              $1,858,130
                                                                            ==========
</TABLE>
                 See notes to consolidated financial statements.
<PAGE>
<TABLE>
                              SONO-TEK CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>

                                                                     Years Ended
                                                          February 28,        February 28,
                                                             2002                2001
                                                             ----                ----

<S>                                                       <C>                <C>
Net Sales (Note 21)                                       $3,469,409          $4,306,895
Cost of Goods Sold                                         1,294,889           1,822,009
                                                           ---------           ---------
          Gross Profit                                     2,174,520           2,484,886
                                                           ---------           ---------

Operating Expenses
     Research and product development                        321,060             298,467
     Marketing and selling                                   662,827             858,323
     General and administrative                              577,471             662,999
                                                             -------             -------
          Total Operating Expenses                         1,561,358           1,819,789
                                                           ---------           ---------

Operating Income                                             613,162             665,097

Interest Expense                                            (243,536)           (243,336)
Interest and Other Income (Loss)                              60,896             (46,451)
                                                            --------            --------
Income from Continuing Operations
     Before Income Tax Expense                               430,522             375,310
Income Tax Expense (Note 16)                                       -                   -
                                                            --------            --------
Income from continuing operations                            430,522             375,310

Loss from discontinued operations (Note 6)                  (616,913)         (2,005,799)
                                                            --------          ----------

Net Loss                                                   $(186,391)        $(1,630,489)
                                                           ==========        ============

Basic and Diluted Earnings (Loss) Per Share (Note 19)
     Continuing Operations                                    $0.05               $0.04
     Discontinued Operations                                  (0.07)              (0.22)
                                                              -----               -----
Net Loss                                                     $(0.02)             $(0.18)
                                                              ======             ======

Weighted Average Shares - Basic and Diluted                9,096,436           9,011,310
                                                           =========           =========
</TABLE>


                 See notes to consolidated financial statements.
<PAGE>
<TABLE>
                              SONO-TEK CORPORATION
          CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIENCY) EQUITY
               YEARS ENDED FEBRUARY 28, 2002 AND FEBRUARY 28, 2001
<CAPTION>


                                       Common Stock                                                 Total
                                      Par Value $.01          Additional                         Stockholders'
                                  ---------------------         Paid-In        Accumulated       (Deficiency)
                                    Shares       Amount         Capital          Deficit            Equity
                                    ------       ------         -------          -------            ------

<S>                               <C>           <C>           <C>              <C>               <C>
Balance - February 29, 2000       8,866,612     $88,666       $5,711,800       $(5,072,836)        $727,630

Warrants exercised                   85,680         857           54,835                 -           55,692
Options exercised                     2,562          26            1,575                 -            1,601
Issuance of warrants                      -           -           75,832                 -           75,832
Issuance of common stock            137,500       1,375          136,125                 -          137,500
Non-employee stock option                 -           -           26,870                 -           26,870
Net Loss                                  -           -                -        (1,630,489)      (1,630,489)
                                  ---------      ------        ---------       ------------      -----------
Balance - February 28, 2001       9,092,354      90,924        6,007,037        (6,703,325)        (605,364)

Conversion of bonus                  13,068         131            2,744                 -            2,875
Non-employee stock options                -           -            2,181                 -            2,181
Net Loss                                  -           -                -          (186,391)        (186,391)
                                  ---------     -------       ----------       ------------       ----------
Balance - February 28, 2002       9,105,422     $91,055       $6,011,962       $(6,889,716)       $(786,699)
                                  =========     =======       ==========       ============       ==========
</TABLE>

                 See notes to consolidated financial statements.
<PAGE>
<TABLE>
                              SONO-TEK CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
                                                                           Years Ended
                                                                February 28,          February 29,
                                                                    2002                  2001
                                                                    ----                  ----
<S>                                                              <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net Loss                                                     $(186,391)          $(1,630,489)
    Adjustments to reconcile net loss to net
       cash provided by (used in) operating activities:
          Loss from discontinued operations                        616,913             2,005,799
          Loss (Gain) on equity investment                               -                19,310
          Depreciation and amortization                             77,176                71,691
          Imputed interest expense                                  72,193                22,988
          Provision for doubtful accounts                          (91,581)               83,584
          Non-cash charge for stock options & warrants                   -               102,701
          Non-cash charge for conversion of debt                         -                 7,500
          (Increase) decrease in:
              Accounts receivable                                  305,094                42,820
              Inventories                                           27,985              (160,957)
              Prepaid expenses and other current assets             26,698               (46,691)
              Other assets                                             501                     -
          Increase (decrease) in:
              Accounts payable and accrued expenses               (672,136)              460,134
                                                                  --------               -------
    Net Cash Provided By Continuing Operations                     176,452               978,390
    Net Cash Provided By (Used In) Discontinued Operations         284,480            (1,132,476)
                                                                   -------            ----------
    Net Cash Provided By (Used In) Operating Activities            462,932              (154,086)
                                                                   -------              --------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Sale (purchase) of equipment, furnishings and
        leasehold improvements                                       3,547              (124,433)
                                                                    ------              --------
    Net Cash Provided By (Used In) Continuing Operations             3,547              (124,433)
    Net Cash Provided By (Used In) Discontinued Operations               0                  (428)
                                                                    ------              --------
    Net Cash Provided By (Used In) Investing Activities              3,547              (124,861)
                                                                    ------              --------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from revolving line of credit                               -                15,639
    Proceeds from short term loans-related parties                       -               361,521
    Proceeds from equipment loans                                        -                45,359
    Proceeds from issuance of stock                                  2,875               130,000
    Proceeds from exercise of warrants and options                   2,181                57,293
    Proceeds from subordinated mezzanine debt                      300,000               100,000
    Loan assumed at acquisition of SCS                             150,000               150,000
    Renegotiation of short-term and other liabilities              161,487                     -
    Repayments of note payable and equipment loans                 (27,990)              (17,780)
    Repayments of short term convertible loan                            -              (100,000)
    Repayment of short term debt-related party                    (173,521)             (141,000)
                                                                  --------              --------
    Net Cash Provided by Continuing Operations                     265,032               451,087
    Net Cash Used in Discontinued Operations                      (281,528)             (175,039)
                                                                  --------              --------
    Net Cash Provided by Financing Activities                      (16,496)              276,048
                                                                  --------              --------

NET DECREASE IN CASH AND
        CASH EQUIVALENTS                                           449,983                (2,899)
CASH AND CASH EQUIVALENTS
    Beginning of year                                                3,232                 6,131
                                                                  --------                ------
    End of year                                                   $453,215                $3,232
                                                                  ========                ======

</TABLE>

                 See notes to consolidated financial statements.
<PAGE>
                              SONO-TEK CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               YEARS ENDED FEBRUARY 28, 2002 AND FEBRUARY 28, 2001

NOTE 1:  BUSINESS DESCRIPTION

The  Company was  incorporated  in New York on March 21, 1975 for the purpose of
engaging  in  the  development,  manufacture,  and  sale  of  ultrasonic  liquid
atomizing  nozzles.  Ultrasonic  nozzle systems atomize low to medium  viscosity
liquids by converting  electrical  energy into mechanical  motion in the form of
high  frequency  (ultrasonic)  vibrations  which break liquids into minute drops
that can be applied to surfaces  at low  velocity.  During  Fiscal Year 2001 and
2000, the Company also developed, manufactured,  installed and serviced cleaning
systems for the  semiconductor,  disk drive and  precision  cleaning  industries
through its wholly owned subsidiary Sono-Tek Cleaning Systems, Inc. ("SCS").

NOTE 2:  FINANCIAL CONSIDERATIONS AND MANAGEMENT'S PLANS

Both the Company and its wholly owned subsidiary, SCS, incurred losses in Fiscal
Year 2000 and 2001.  These losses led to an increase in the  Company's  debt and
negative cash flow. During Fiscal Year 2001, the Company increased its borrowing
from a bank, an investment banker, and officers and directors of the Company.

During the Fiscal Year Ended 2002,  the Company took actions to limit its losses
and reduce  negative cash flow.  The spraying  systems  segment was downsized to
reflect  the decline in market  demand,  and the sales  force was  refocused  to
increase nozzle sales instead of fluxer sales.  The cleaning and drying segment,
represented by SCS, terminated production of capital equipment, but continues to
service  equipment  and sell  spare  parts on a  limited  basis.  By  decreasing
operating  costs and terminating  thirty-two  employees,  the Company  generated
income  beginning  in the second  quarter of Fiscal  Year 2002.  This income was
sufficient to cover current  operating costs, and permitted  partial payments to
vendors  and the  required  payments  on all debt.  During the first  quarter of
Fiscal Year 2002,  the Company also received  additional  financing from Norwood
and directors of the Company.

In order to decrease its losses, the Company moved to discontinue  operations of
the cleaning and drying systems  segment during the first quarter of Fiscal 2002
(see Note 6). The Company has refocused on the sales of  ultrasonic  nozzles and
is attempting  to increase  sales  through  diversifying  the product line while
decreasing the reliance on the electronics industry.

The Company  believes  that these steps are  appropriate  and helped the Company
return to profitability during the last three quarters of Fiscal Year 2002.

NOTE 3:  SIGNIFICANT ACCOUNTING POLICIES

Consolidation - The accompanying  consolidated  financial statements of Sono-Tek
Corporation, a New York corporation (the "Company"), include the accounts of the
Company and its wholly owned subsidiary,  Sono-Tek Cleaning Systems, Inc., a New
Jersey  Corporation  ("SCS"),  which the Company acquired on August 3, 1999 (the
"Acquisition")  which  has  been  treated  as a  "discontinued  operation."  All
significant   intercompany   accounts  and   transactions   are   eliminated  in
consolidation.

Cash and Cash  Equivalents - Cash and cash  equivalents  consist of money market
mutual funds and short-term  certificates of deposit with original maturities of
90 days or less.

Supplemental Cash Flow Disclosure -
                                                          Years Ended
                                               February 28,         February 28,
                                                   2002                 2001
                                                   ----                 ----
Interest paid
  Continuing Operations                         $191,485              $99,186
                                                ========              =======
  Discontinued Operations                        $16,482              $35,966
                                                ========             ========
Income taxes paid                                      -                    -
Non-cash items:
  Interest expense for issuance of warrants      $68,048             $127,453
                                                 =======             ========
  Conversion of accrued bonus to equity           $2,875              $17,188
                                                  ======              =======
  Stock issued and warrants and options
    granted for services                          $2,181               $7,500
                                                  ======               ======

Inventories  -  Inventories  are stated at the lower of cost or market.  Cost is
determined  using the  first-in,  first-out  (FIFO)  method  for raw  materials,
subassemblies and  work-in-progress and the specific  identification  method for
finished  goods.  Consignment  goods  are  spare  parts  used by  outside  sales
representatives for emergency repairs performed on customer's equipment.

Equipment,  Furnishings and Leasehold Improvements - Equipment,  furnishings and
leasehold  improvements  are  stated  at cost.  Depreciation  of  equipment  and
furnishings  is  computed  by use  of  the  straight-line  method  based  on the
estimated useful lives of the assets which range from three to five years.

Product Warranty - Expected future product warranty expense is recorded when the
product is sold.

Patent and Patent Pending Costs - Costs of patent  applications are deferred and
charged to operations over seventeen years for domestic patents and twelve years
for  foreign  patents.  However,  if it appears  that such costs are  related to
products  which are not  expected to be  developed  for  commercial  application
within the reasonably  foreseeable future, or are applicable to geographic areas
where the Company no longer requires patent protection,  they are written off to
operations. The accumulated amortization is $61,138 at February 28, 2002.

Amortization  of Discounts on Borrowings - A discount  between the face value of
borrowings  and the fair value of the proceeds  received are amortized  over the
term of the  borrowing  using  the  effective-interest  method.  Borrowings  are
reported net of the related unamortized discount.

Deferred  Financing  Fees - Deferred  financing  fees of $35,523 at February 28,
2002  are  being  amortized  over  the  term of the  related  debt.  Accumulated
amortization was $17,168 at February 28, 2002.

Research and Product  Development  Expenses - Research  and product  development
expenses represent  engineering and other  expenditures  incurred for developing
new products,  for refining the Company's  existing  products and for developing
systems to meet unique customer  specifications  for potential orders or for new
industry  applications and are expensed as incurred.  Engineering costs directly
applicable to the manufacture of existing products are included in cost of goods
sold.

Income  Taxes - The  Company  accounts  for  income  taxes  under  the asset and
liability  method.  Under this method,  deferred income taxes are recognized for
the tax consequences of "temporary  differences" by applying  enacted  statutory
tax rates  applicable  to future  years to  differences  between  the  financial
statement carrying amounts and the tax basis of existing assets and liabilities.
If it is more likely than not that some  portion or all of a deferred  tax asset
will not be realized, a valuation allowance is recognized.

Earnings  (Loss) Per Share - Basic earnings (loss) per share ("EPS") is computed
by dividing net income  (loss) by the  weighted-average  number of common shares
outstanding  for the period.  Diluted EPS reflects the  potential  dilution that
could  occur  if  securities  or other  contracts  to issue  common  stock  were
exercised or converted  into common  stock.  Stock  options  granted but not yet
exercised  under the  Company's  stock option plans are included for Diluted EPS
calculations under the treasury stock method.

Advertising  Expenses - The  Company  expenses  the cost of  advertising  in the
period in which the advertising takes place.

Long-Lived  Assets - The Company  periodically  evaluates the carrying  value of
long-lived assets,  including  intangible assets,  when events and circumstances
warrant such a review.  The carrying  value of a long-lived  asset is considered
impaired  when  the  anticipated  undiscounted  cash  flow  from  such  asset is
separately  identifiable  and is less than its carrying  value. In that event, a
loss is recognized  based on the amount by which the carrying  value exceeds the
fair market  value of the  long-lived  asset.  Fair market  value is  determined
primarily using the  anticipated  cash flows  discounted at a rate  commensurate
with the risk involved.

In the fourth  quarter of Fiscal Year 2001,  the Company  identified  indicators
that  goodwill  related to two  acquisitions,  one made in Fiscal  Year 2000 the
other in Fiscal Year 2001,  was impaired.  The  indicators  consisted of lack of
future  orders,  low profit on equipment  sales and the  termination  of the two
principals  of the  previous  S&K company that were  responsible  for  equipment
sales.  The Company  estimated it will not likely realize  positive  future cash
flows from these acquired businesses and, therefore, recorded a write-off of the
goodwill related to such  acquisitions.  During the first quarter of Fiscal Year
2002, the Company wrote off the residual goodwill of $477,377 (See Note 6).

Stock-Based  Employee  Compensation  -  The  Company  accounts  for  stock-based
compensation  plans  utilizing the  provisions of  Accounting  Principles  Board
Opinion No. 25 (APB 25),  "Accounting  for Stock  Issued to  Employees"  and the
Financial  Accounting  Statement of Financial Accounting Standards No. 123 (SFAS
123),  "Accounting  for Stock-Based  Compensation".  Under SFAS 123, the Company
will  continue to apply the  provisions  of APB 25 to its  stock-based  employee
compensation  arrangements,  and is only  required to  supplement  its financial
statements with additional proforma disclosures.

Recognition  of Revenue - Sales are  recorded  at the time  title  passes to the
customer,  which, based on shipping terms,  generally occurs when the product is
shipped to the  customer.  Based on prior  experience,  the  Company  reasonably
estimates  its sales  returns and  warranty  reserves.  In  connection  with the
acquisition  of SCS, the  introduction  of new product  lines,  and the terms of
certain   equipment  sales   contracts  with  specific   acceptance  and  return
provisions,  the Company has no reasonable basis for recognizing revenue related
to certain deliveries that fall into this category. Accordingly, the Company has
billed its  customers  upon  shipment of the  equipment and deferred the revenue
recognition until such point in time that the earnings process is complete.

In connection with the sale of capital equipment and services,  the Company also
sells extended  service  contracts.  The related revenue is deferred at the date
the contract is sold and recognized ratably over the life of the contract.

Management  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
amounts  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.

Reclassifications - Certain amounts in the prior year financial  statements have
been reclassified to conform to the current year presentation.

Impact of New Accounting Pronouncements - In June 2001, the FASB issued SFAS No.
141,  "Business  Combination",  SFAS No.  142,  "Goodwill  and Other  Intangible
Assets" and SFAS No. 143,  "Accounting for Asset Retirement  Obligations".  SFAS
No. 141 requires the use of the purchase  method of accounting and prohibits the
use of the  pooling-of-interest  method of accounting for business  combinations
initiated  after June 30,  2001.  It also  requires  that the Company  recognize
acquired  intangible  assets apart from goodwill.  SFAS No. 142 requires,  among
other  things,  that  companies no longer  amortize  goodwill,  but instead test
goodwill for impairment at least  annually.  In addition,  SFAS No. 142 requires
that  the  Company  identify  reporting  units  for the  purposes  of  assessing
potential  future  impairments  of goodwill,  reassess the useful lives of other
existing  recognized  intangible  assets,  and cease  amortization of intangible
assets with an  indefinite  useful  life.  SFAS No. 143  establishes  accounting
standards for recognition and measurement of a liability for an asset retirement
obligation and the associated asset retirement cost, which will be effective for
financial statements issued for fiscal years beginning after June 15, 2002.

In August 2001, the FASB issued SFAS No. 144,  "Accounting for the Impairment of
Disposal of Long-Lived  Assets" which further clarifies SFAS No. 121 and methods
of  quantifying  potential  impairments  or disposal  of assets,  as well as the
related reporting of such impairments or disposals.

The adoption of SFAS No. 141, SFAS No. 142, SFAS No. 143 and SFAS No. 144 is not
expected to have a material effect on the Company's financial position,  results
of operations and cash flows.

NOTE 4:  SEGMENT INFORMATION

The Company has adopted the  Statement of Financial  Accounting  Standard No 131
("SFAS  131")   "Disclosures   About  Segments  of  an  Enterprise  and  Related
Information".  Previously,  the Company had two  reportable  segments:  spraying
systems and  cleaning and drying  systems.  During  Fiscal Year ended 2002,  the
Company moved to discontinue the cleaning and drying system segment. As a result
of  these  actions,  the  cleaning  and  drying  system  segment  is  no  longer
applicable.

The spraying systems segment is primarily engaged in the business of developing,
manufacturing, selling, installing and servicing ultrasonic spray equipment. The
cleaning and drying  systems  segment was engaged in the business of developing,
manufacturing,  selling,  installing  and  servicing  cleaning  systems  for the
semiconductor, disk drive and precision cleaning industries.

NOTE 5:  ACQUISITIONS

SCS - On August 3, 1999 the Company  purchased all the outstanding stock of SCS,
a supplier of cleaning and drying systems for the semiconductor, disk drive, and
precision cleaning industries. SCS is a wholly owned subsidiary of the Company.

The  aggregate  purchase  price  exceeded the fair value of net assets  acquired
resulting in goodwill that was to be amortized on the  straight-line  basis over
15  years.  Subsequent  to  the  year  ended  February  28,  2001,  the  Company
discontinued the cleaning and drying systems segment.  At February 28, 2001, the
Company  wrote off  $669,697  remaining  goodwill  for this  segment  due to the
impairment.  The Company wrote off the balance of $477,377 of the goodwill as of
May 31,  2001 due to  impairment,  as the Company  determined  that it would not
realize  future  positive  cash flows from the residual  assets and  uncompleted
orders of this business.

Serec - On September 21, 2000, the Company  acquired for $100,000,  plus closing
costs, certain intellectual property and intangible assets of Serec Corporation,
a Rhode Island  corporation  which  manufactured and sold solvent based cleaning
systems.  Professional  fees and  other  costs of  $10,313,  $7,500 of which was
attributed  to the issuance of common  stock,  were  capitalized  as  additional
purchase  price.  The  aggregate  purchase  price of  $110,313  was  recorded as
goodwill due to the  inability to  specifically  identify the values  associated
with the various intangible assets acquired. The goodwill was to be amortized on
the straight-line  basis over five years.  Subsequent to the year ended February
28, 2001, the Company  discontinued the cleaning and drying systems segment.  At
February  28,  2001,  the Company  wrote off  $100,313  in  goodwill  due to the
impairment. During September 2001, the assets of Serec were sold for $35,000.

NOTE 6:  DISCONTINUED OPERATIONS

In order to decrease its losses, the Company moved to discontinue the operations
of the cleaning and drying  systems  segment  during the first quarter of Fiscal
2002.

The  accompanying  statements of operations  have been  reclassified so that the
results  for  the  cleaning  and  drying  systems   segment  are  classified  as
discontinued operations for all periods presented. The assets and liabilities of
the  discontinued  operations  have been  reclassified  in the February 28, 2002
balance  sheet as  "estimated  future  costs of  discontinued  operations".  The
statements  of cash  flows  and  related  notes  to the  consolidated  financial
statements have also been reclassified to conform to the discontinued operations
presentation.

Summary  operating  results of the discontinued  operations for each fiscal year
are as follows:

                                           February 28,             February 28,
                                              2002                     2001
                                              ----                     ----
     Revenues                              $1,229,665               $3,726,562
     Expenses                               1,846,578                5,732,361
                                            ---------                ---------
     Loss from discontinued operations      $(616,913)             $(2,005,799)
                                            ==========             ============

A summary of the estimated  future costs of the  discontinued  operations are as
follows:

                                                           February 28,
                                                               2002
                                                               ----
Assets
     Cash                                                      $429
     Accounts Receivable, net                                 4,325
                                                             ------
          Total assets                                       $4,754
                                                             ------
Liabilities
     Current Liabilities
     Accounts payable                                       $34,356
     Accrued expenses                                       122,982
     Customer deposits                                       14,820
                                                            -------
          Total liabilities                                 172,158

Estimated future costs of discontinued operations          $167,404
                                                           ========

At February 28, 2001, the Company wrote off $669,697 remaining goodwill for this
segment due to the impairment.  The Company wrote off the balance of $477,377 of
the goodwill as of May 31, 2001 due to impairment as the Company determined that
it would not realize  future  positive  cash flows from the residual  assets and
uncompleted  orders  of this  business.  Additionally,  the  Company  wrote  off
impaired accounts receivable of $30,000, impaired inventory of $81,057, impaired
fixed assets of $70,511, and provided reserves for future rent and utility costs
of $27,430.  The  Company  reached  settlements  with  substantially  all of the
vendors  and  creditors  of  the  discontinued  operations,  which  resulted  in
forgiveness  of  liabilities  and debt of $337,587.  The Company does not expect
that there will be any additional  estimated future costs of discontinuance  for
the orderly liquidation of the disposed assets and liabilities.

NOTE 7:  INVENTORIES

Inventories for continuing operations consist of the following:

                                         February 28,
                                             2002
                                             ----
         Raw Materials                     $321,950
         Work-in-process                    226,885
         Consignment                          5,437
         Finished Goods                     422,235
                                            -------
              Totals                        976,505
         Less:  Allowance                  (207,794)
                                           --------
                                           $768,711
                                           ========

NOTE 8:  EQUIPMENT, FURNISHINGS AND LEASEHOLD IMPROVEMENTS

Equipment,  furnishings  and leasehold  improvements  for continuing  operations
consist of the following:

                                         February 28,
                                             2002
                                             ----
         Laboratory equipment               $79,441
         Machinery and equipment            392,412
         Leasehold improvements              43,865
         Furniture and fixtures             199,340
                                           --------
              Totals                        715,028
         Less: accumulated depreciation    (573,547)
                                            --------
                                           $141,509
                                           ========

NOTE 9:  LONG-TERM EQUITY INVESTMENT

In January  2000,  in  connection  with the  formation  of PNR  America,  LLC, a
Delaware limited liability company ("PNR America"), the Company invested $19,600
in PNR America for a 49% ownership  interest.  Flowtech Srl, an Italian  company
("Flowtech"),  a pressure nozzle manufacturer,  owns the remaining 51%. Prior to
the  formation  of PNR  America,  the  Company  had been a U.S.  distributor  of
Flowtech products.

The Company shared its  facilities  and personnel with PNR America.  The Company
allocated costs of $104,199 to PNR America during Fiscal Year 2001.

PNR America's year end is December 31, however, for financial reporting purposes
the Company  reflects its  proportionate  share of the operating  results of PNR
America on a monthly  basis,  as the records are  compiled by the  Company.  The
Company's  cumulative  recorded  equity loss in PNR America at February 28, 2001
was $45,250.  The Company recognized its proportionate  share in the net loss of
PNR America  during the twelve month period ended  February 28, 2001,  which was
$60,393.

During  the  year  ended  February  28,  2001,  the  Company   discontinued  its
relationship with PNR America.

NOTE 10:  ACCRUED EXPENSES

Accrued expenses from continuing operations consist of the following:

                                         February 28,
                                             2002
                                             ----
         Accrued compensation              $136,355
         Sales tax liability                 44,997
         Accrued interest                    31,183
         Estimated warranty costs            14,700
         Accrued commissions                  6,548
         Professional fees                    3,231
         Other accrued expenses              20,954
                                           --------
                                           $257,968
                                           ========

NOTE 11:  REVOLVING LINE OF CREDIT
The Company has a $350,000  revolving  line of credit which  carries an interest
rate of prime plus 2% (6.75% at February 28, 2002).  The loan is  collateralized
by accounts receivable, inventory and all other personal property of the Company
and is  guaranteed  by the  former  CEO of the  Company.  The line of  credit is
payable on demand. As of February 28, 2002, the balance was $344,000.

NOTE 12:  SUBORDINATED CONVERTIBLE LOAN

Two subordinated  convertible  loans for a total of $150,000 were converted from
S&K debt to Company debt on August 3, 1999.  These notes are payable as follows;
$60,000  plus  accrued  interest at 6% on August 3, 2002,  and the balance in 30
equal monthly installments with interest of 6%.

NOTE 13:  LONG-TERM DEBT

Long-term debt of continuing operations consists of the following:

                                                                    February 28,
                                                                        2002
                                                                        ----
Notes payable to related parties, payable monthly in
     installments of $7,267 plus monthly interest of
     5% over 48 months through March 31, 2006.                        $348,812

Equipment loan, bank, collateralized by related production
     equipment, payable in monthly installments of $1,225,
     including interest at 2% over the bank's prime rate
     (6.75% at February 28, 2002) through February 2003.                13,614

Equipment loan, bank, collateralized by related production
     equipment, payable in monthly  installments of principal
     of $756 plus interest at 2% over the bank's prime rate
     (6.75% at February 28, 2002) through May 2005.                     29,483
                                                                        ------
     Total long term debt                                              391,909
     Due within one year                                              (109,889)
                                                                      ---------
     Due after one year                                               $282,020
                                                                      ========

     Long-term debt is payable as follows (as of February 28, 2002):

               Fiscal Year ending February,
                                     2003                             $109,889
                                     2004                               96,275
                                     2005                               96,275
                                     2006                               89,471
                                                                       -------
                                                                      $391,909
                                                                      ========

NOTE 14:  SUBORDINATED MEZZANINE DEBT

On September 30, 1999, the Company entered into a 12%, $450,000 Note and Warrant
Purchase  Agreement  with  Norwood  Venture  Corporation  ("Norwood  Note").  On
December  22,  2000,  Norwood  amended the Note and Warrant  Purchase  Agreement
("Agreement")  to increase  the note to  $550,000.  On April 30,  2001,  Norwood
amended  the  Agreement  to increase  the note by  $300,000 to $850,000  and the
warrant shares to 2,077,777. In connection with this additional loan, $50,000 of
advances from certain  shareholders and directors were repaid (See note 20). The
Norwood Note, as amended,  requires  interest  payments through  September 2002,
followed by monthly principal payments of $23,612 and interest through September
2005. The Norwood Note is collateralized  by certain assets of the Company.  The
Norwood Note, among other things, restricts the payment of dividends.

In  addition,  the  original  Norwood  Note was issued with a  detachable  stock
purchase  warrant  (the "Put  Warrants")  to  purchase  1,100,000  shares of the
Company's common stock at a exercise price of $.30, the fair market value of the
Company's  common  stock on  September  30,  1999.  The fair  market  value,  as
determined by an independent appraisal, of the Put Warrants was determined to be
$0.07 per share, and is accounted for as a discount to the Norwood Note and will
be amortized over the life of the principal repayment term of the Agreement.  In
connection  with the  amendments,  dated December 22, 2000 and April 30, 2001,an
additional  244,444 and 733,333 warrant shares were granted at an exercise price
of $0.30 and $.10 per share,  respectively.  In connection  with an amendment to
the Agreement in October 2001, the exercise price of certain of the warrants was
reduced from $.30 to $.15 per share.  This  resulted in an increase in the value
of the warrants of $13,445,  which is accounted as a discount to the loan and is
being imputed as additional  interest over the term of the loan. The unamortized
discount at February  28, 2002 is $88,127.  The Put  Warrants  can be put to the
Company from May 29, 2006 to May 29, 2007 as defined by the Agreement,  and they
expire on September 30, 2010.

The deferred  financing fees of $35,523 incurred to acquire the Norwood Note are
being  amortized  over the life of the  loan.  Accumulated  amortization  of the
deferred financing fees was $17,168 at February 28, 2002.

NOTE 15:  COMMITMENTS AND CONTINGENCIES

Litigation - During the normal  course of  business,  the Company is involved in
various routine legal matters. The Company believes the outcome of these matters
will not have a material adverse effect on the Company's financial statements.

Leases - Total rent expense was approximately $ 78,060 and $124,500, for the two
years ended February 28, 2002 and February 28, 2001,  respectively.  At February
28, 2002, $18,327of the Company's future lease obligations are reserved for, due
to the fact that a portion of the Company's  facility is vacant as the result of
the discontinuance of the Cleaning Systems business.

The  Company  has $92,250 in future  minimum  obligations  under its lease which
expires in Fiscal Year 2003.

NOTE 16:  INCOME TAXES

The annual provision (benefit) for income taxes differs from amounts computed by
applying the maximum U.S.  Federal  income tax rate to pre-tax  income (loss) as
follows:
                                         February 28,            February 28,
                                        2002        %           2001        %
                                        ----        -           ----        -
     Computed tax (benefit)
          at maximum rate            $(63,373)   (34.0)     $(554,366)   (34.0)
     Non-deductible goodwill          162,308     87.0        256,766     15.7
     Other permanent differences        3,304      1.8          6,457       .4
     Change in valuation
          allowance for tax
          effect of operating
          loss carryforwards          102,239    (54.8)      (291,143)    17.9
                                      -------    ------      ---------    ----
     Provision for
          income taxes               $      -        -       $      -       -
                                     ========     =====      ========     ====

The net deferred tax asset is comprised of the following:

                                                     February 28,
                                                         2002
                                                         ----
     Allowance for doubtful accounts                    $15,000
     Accumulated depreciation                            22,000
     Accumulated amortization                             7,000
     Inventory                                          143,000
     Accrued vacation                                    14,000
     Accrued expenses                                    86,000
     Net operating losses and other
          carryforwards                               1,298,000
                                                      ---------
     Net deferred tax assets before
          valuation allowance                         1,585,000
     Deferred tax asset valuation allowance          (1,585,000)
                                                      ---------
          Net deferred tax asset                     $        -
                                                     ==========

The change in the valuation  allowance was $102,000 for the year ended  February
28, 2002.

At February 28, 2002, the Company has available net operating loss carryforwards
of approximately  $3,816,384 for income tax purposes which expire between fiscal
2002 and fiscal 2022. The Company also has research and  development  credits of
approximately  $136,000,  which expire  between fiscal 2010 and fiscal 2021. The
net  operating  loss and  credit  carryforwards  generated  by S&K  prior to the
acquisition are subject to limitations under Section 382 of the Internal Revenue
Code.

NOTE 17:  CAPITAL STOCK

On May 5, 1999, the Company  commenced a private  placement  through the Private
Placement  Memorandum to raise $500,000 by offering  1,666,667  shares of common
stock at $0.30 per share (the "Private Placement"). During Fiscal Year 2001, the
Company  completed  the sale of 130,000  shares of common stock  pursuant to the
Private Placement.

During Fiscal Year 1999, in connection  with the  conversion of the  Convertible
Secured Subordinated Promissory Notes, on February 26, 1999 the Company modified
the terms of the original  detachable stock warrants reducing the exercise price
from $1.50 per share to $0.65 per share on the 756,840 warrants outstanding (See
Note 18). During Fiscal Year 2001,  85,680 of the above mentioned  warrants were
exercised to purchase the Company's  common  stock,  resulting in $55,692 of new
capital.

NOTE 18:  STOCK OPTIONS AND WARRANTS

Stock Options - Under the 1993 Stock  Incentive  Plan, as amended ("1993 Plan"),
options can be granted to officers, directors,  consultants and employees of the
Company and its subsidiaries to purchase up to 1,500,000 of the Company's common
shares.  Options  granted  under the 1993 Plan expire on various  dates  through
2011.

Under the 1993 Stock Incentive Plan,  option prices must be at least 100% of the
fair market value of the common stock at time of grant. For qualified employees,
except  under  certain  circumstances  specified  in the  1993  plan  or  unless
otherwise  specified at the discretion of the Board of Directors,  no option may
be exercised  prior to one year after date of grant,  with the balance  becoming
exercisable in cumulative  installments over a three year period during the term
of the option,  and terminate at a stipulated period of time after an employee's
termination of employment.

During  Fiscal  Year 2002,  the  Company  granted  options  for  335,000  shares
exercisable  at  between  $0.09  per  share  and  $.88 per  share  to  qualified
employees,  12,500  shares  exercisable  at  between  $.20 and $.24 per share to
consultants of the Company, and 20,000 shares exercisable at $.11 per share to a
director of the Company. During Fiscal Year 2002, compensation expense of $2,181
was  recognized  based  on the fair  value  of the  vested  options  granted  to
consultants.

During  Fiscal  Year 2001,  the  Company  granted  options  for  135,000  shares
exercisable  at  between  $0.92 per  share  and  $1.97  per  share to  qualified
employees,  100,000 shares exercisable at $1.625 per share to consultants of the
Company, and 60,000 shares exercisable at between $0.625 per share and $1.48 per
share to directors of the Company. During Fiscal Year 2001, compensation expense
of $26,870 was recognized  based on the fair value of the vested options granted
to  consultants.  During  Fiscal  Year 2001,  an option for 2,562  shares of the
Company's stock, at $.625 per share, was exercised.

A summary of the 1993 Plan  activity for the two year period ended  February 28,
2002 is as follows:
<TABLE>
<CAPTION>
                                                                                 Weighted Average
                                            Stock Options                         Exercise Price
                                   Outstanding        Exercisable         Outstanding       Exercisable
                                   -----------        -----------         -----------       -----------
<S>                                 <C>                 <C>                   <C>               <C>
Balance-February 29, 2000             970,124           598,699               $.48              $.41
Granted Fiscal Year 2001              295,000                                 1.20
Canceled Fiscal Year 2001            (142,500)                                (.08)
Exercised Fiscal Year 2001             (2,562)                                (.63)
                                    ---------                                 ----
Balance - February 28, 2001         1,120,062           752,187                .69              $.52
Granted Fiscal Year 2002              367,500                                  .23
Canceled Fiscal Year 2002            (652,500)                                (.53)
                                     ---------                                -----
Balance - February 28, 2002           835,062           497,563               $.50              $.59
                                      =======                                 ====              ====
</TABLE>

The fair value of options  granted under the Company's  fixed stock option plans
during Fiscal Years 2002 and 2001were  estimated on the dates of grant using the
minimum  value  options-pricing  models  with  the  following   weighted-average
assumptions used:  expected  volatility of approximately 105% and 103% in Fiscal
Years 2002 and 2001,  respectively,  risk-free  interest  rate of  approximately
5.00% and 5.75% in Fiscal  Years  2002 and 2001,  and  expected  lives of option
grants of approximately five years.

The estimated  fair value of options  granted  during Fiscal Years 2002 and 2001
were $.28 and $.67 per  share,  respectively.  The  Company  applies  Accounting
Principles  Board Opinion No. 25 and related  interpretations  in accounting for
the 1993 Plan. Had  compensation  cost for the Company's  stock option plan been
determined  based on the fair  value at the  option  grant  dates for  awards in
accordance with the accounting  provisions of SFAS 123, the Company's net income
(loss)  and basic and  diluted  earnings  (loss)  per share for the years  ended
February 28, 2002 and February 28, 2001 would have been changed to the pro forma
amounts indicated below:
                                            2002                     2001
                                            ----                     ----
     Net Loss:
         As reported                    $(186,391)            $(1,630,489)
         Pro forma                      $(290,690)            $(1,758,456)
     Basic and diluted loss per share (see Note 19):
         As reported                       $(.02)                  $(.18)
         Pro forma                         $(.03)                  $(.20)

Warrants - During Fiscal 2002 and 2001, the following warrants were issued.

During  Fiscal Year 2001,  warrants to purchase  50,000  shares of the Company's
common stock were issued to a former officer of the Company in acknowledgment of
short term loans  granted to the Company in Fiscal Year 2000.  One warrant is to
purchase  25,000  shares of the Company's  common stock at $0.50 per share,  the
other  warrant is to purchase  25,000  shares of the  Company's  common stock at
$1.00 per share.  Both warrants  expire March 3, 2005. The Company  recognized a
non-cash  interest  charge  of  $11,799  based on the fair  market  value of the
warrants granted.

On February 15, 2000,  the Company  entered into a 90 day $100,000  subordinated
convertible loan with a non-affiliated  individual convertible into common stock
at $1.00  per  share.  The loan and  related  interest  of 8 % was  repaid  upon
maturity,  May 15, 2000. As part of the loan agreement,  the lender was eligible
to receive a warrant to purchase 50,000 shares of the Company's common stock, if
the  loan was not  converted  to  equity  or was not  repaid.  When the loan was
repaid, the lender received a five-year warrant to purchase 50,000 shares of the
Company's  common stock at $1.00 per share in accordance  with the provisions of
the agreement. The warrant expires on May 15, 2005. During Fiscal Year 2001, the
Company  recognized  a non-cash  interest  charge of  $64,033  based on the fair
market value of the warrants granted.

NOTE 19:  LOSS PER SHARE

The following  table sets forth the  computation  of basic and diluted  earnings
(loss) per share:

                                              February 28,       February 28,
                                                    2002               2001
                                                    ----               ----
 Numerator for basic and diluted
   earnings (loss) per share:
          Continuing operations                   $375,310          $375,310
          Discontinued operations               (2,005,799)       (2,005,799)
                                                -----------      ------------
          Net loss                             $(1,630,489)      $(1,630,489)
                                                ===========      ============
 Denominator:
         Denominator for basic earnings (loss)
           per share-weighted average shares     9,096,436         9,011,310
Effects of dilutive securities:
         Warrants                                        0*                0*
         Stock options for employees
           and outside consultants                       0*                0*
                                                 ---------         ---------
         Denominator for diluted earnings
                (loss) per share                 9,096,436***      9,011,310**
                                                 =========         =========

Basic Earnings (Loss) Per Share-
         Continuing Operations                       $.05              $.04
         Discontinued Operations                     (.07)             (.22)
                                                     ----              ----
                  Net Loss                          $(.02)            $(.18)
                                                    ======            ======
Dilute Earnings (Loss) Per Share-
         Continuing Operations                       $.05              $.04
         Discontinued Operations                     (.07)             (.22)
                                                     ----              ----
                  Net Loss                          $(.02)****        $(.18)****
                                                    ======            ======

* The warrants  and stock  options for  employees  and outside  consultants  are
antidilutive during Fiscal Years 2002 and 2001as a result of the net losses and,
therefore, are not considered in the Diluted EPS calculation.

** The effect of considering  the warrants  issued in  connection  with the debt
conversion  during  Fiscal  Year  1999,  the  convertible  secured  subordinated
promissory  notes and related  warrants,  the warrants issued at the time of the
acquisition  of SCS, the warrants  issued in  acknowledgement  of the short term
loans,  the warrants  issued in  connection  with the Private  Placement and the
Norwood  warrants  (see Note 18) at February 28, 2002 and  February 28,  2001are
antidilutive and, therefore,  not considered for the diluted (loss) earnings per
share calculations.

*** At February 28, 2002 and February 28, 2001, the Diluted EPS calculation  for
discontinued  operations  and net loss will not consider  the stock  options and
warrants as a result of the loss from discontinued operations and net loss.

**** Under the assumption  that stock options and warrants were not antidilutive
as  described in * and **, the  denominator  for diluted loss per share would be
9,794,434,  and  11,006,435,  at  February  28,  2002  and  February  28,  2001,
respectively.

NOTE 20:  RELATED PARTY TRANSACTIONS

Norwood  loans - On April  30,  2001,  in  order to  induce  the  advance  of an
additional  $300,000  by  Norwood  Venture  Corp.  ("Norwood"),  certain  of the
Company's directors,  an officer and an affiliate of the Company participated in
the amount of $216,750 in the additional mezzanine  financing.  Interest expense
of $24,500 was paid to Norwood and forwarded to these individuals  during Fiscal
Year 2002.

Short term loans - related parties -

From time to time the  Company  has  required  short term loans to meet its cash
requirements.  Employees  have made advances to the Company in order to purchase
raw materials and pay operating expenses.

At Fiscal  Year End 2002,  loans from  directors,  former  officers  and related
parties  in the  amount of  $286,084  plus  accrued  interest  of  $62,728  were
formalized  into four-year  notes bearing  interest at 5% on the unpaid balance.
Repayments of these notes on a monthly basis commenced  March 31, 2002.  Earlier
during the year,  related party loans in the amount of $146,000 were repaid with
interest.  The total interest charge for related party notes was $25,653 for the
fiscal year ended February 28, 2002.

Consulting agreement -
At February 28, 2002, prior years' consulting fees of $69,076 recorded from 1993
to 1996 to the  Company's  Chairman  of the  Board  have  been  reclassified  as
long-term.  Accordingly, $4,145 in interest expense has been imputed and charged
to paid-in capital. At February 28, 2001, this liability was included in accrued
expenses.

NOTE 21:  SIGNIFICANT CUSTOMERS AND FOREIGN SALES

From continuing  operations - For the year ended February 28, 2002, one customer
accounted for 12% of the Company's  sales,  and for the year ended  February 28,
2001,  one  customer  accounted  for 17% of the  Company's  sales and 17% of the
Company's trade receivables.

Export sales to customers located outside the United States were approximately
as follows:
                          February 28,             February 28,
                              2002                     2001
                              ----                     ----
     Western Europe         $533,000                 $434,000
     Far East                 80,000                   60,000
     Other                   187,000                  565,000
                             -------                  -------
                            $810,000               $1,059,000
                            ========               ==========
<PAGE>
SIGNATURES

Pursuant to the  requirements of Section 13 or 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, thereto duly authorized.

Dated: May 28, 2002
Sono-Tek Corporation
(Registrant)

By: /s/  Dr. Christopher L. Coccio
         Dr. Christopher L. Coccio,  Chief Executive Officer and President

KNOW ALL MEN BY THESE PRESENTS,  that the undersigned  directors and officers of
Sono-Tek Corporation, a New York corporation,  which is filing its Annual Report
on Form 10-KSB with the Securities and Exchange  Commission under the provisions
of the  Securities  Exchange  Act of 1934,  as amended,  hereby  constitute  and
appoint  Christopher  L. Coccio and Duncan  Urquhart and each of them their true
and lawful  attorney-in-fact  and agent,  with full power and  substitution  and
re-substitution, for him and her and in his or her name, place and stead, in any
and all  capacities,  to sign such Form 10-KSB and any or all  amendments to the
Form 10-KSB,  and all other  documents in connection  therewith to be filed with
the Securities and Exchange Commission,  granting unto said attorney-in-fact and
agent full power and  authority  to do and perform  each and every act and thing
requisite and  necessary to be done in and about the  premises,  as fully to all
interests  and  purposes  as each of them  might or could do in  person,  hereby
ratifying  and  confirming  all  that  said  attorney-in-fact  and  agent or his
substitutes, may lawfully do or cause to be done by virtue hereof.

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

/s/ Dr. Christopher L Coccio        May 28, 2002
----------------------------
Christopher L. Coccio
Chief Executive Officer, President and Director

/s/ J. Duncan Urquhart              May 28, 2002
----------------------
J. Duncan Urquhart
Treasurer and Director

/s/ Jeffrey O. Speigel              May 28, 2002
----------------------
Jeffrey O. Speigel
Director

/s/ Samuel Schwartz                 May 28, 2002
-------------------
Samuel Schwartz
Chairman and Director

/s/ Dr. Harvey L Berger             May 28, 2002
----------------------
Dr. Harvey L. Berger
Director

/s/ R. Stephen Harshbarger          May 28, 2002
--------------------------
R. Stephen Harshbarger
Vice President

</TEXT>
</DOCUMENT>
