<DOCUMENT>
<TYPE>10KSB
<SEQUENCE>1
<FILENAME>fm10ksb23.txt
<DESCRIPTION>FORM 10-KSB, FEBRUARY 28, 2003
<TEXT>
                                                     1

                       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, 2003

                        Commission File Number: 0-16035

                              SONO-TEK CORPORATION
                 (Name of Small Business Issuer 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)

         Check whether the Issuer (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. [X]

The Issuer had revenues of $3,157,756 for Fiscal Year ended February 28, 2003.

As of May 20, 2003 the aggregate market value of the  Registrant's  Common Stock
held by non-affiliates of the Registrant was approximately  $1,452,437  computed
by  reference  to the average of the bid and asked prices of the Common Stock on
said date, which average was $0.18.

The  Registrant had 9,200,161  shares of Common Stock  outstanding as of May 20,
2003.

<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.  Ultrasonic  nozzle  systems
atomize low to medium  viscosity  liquids by converting  electrical  energy into
mechanical motion in the form of high frequency ultrasonic vibrations that break
liquids into minute drops that can be applied to surfaces at low velocity.

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 has had sales  declines  when the  electronics  industry has had
downturns.  The Company has diversified its product offerings to provide coating
systems to medical  device  manufacturers,  to provide  components  for  coating
systems for surface  acoustic wave wafers used in sensors,  which are being used
in homeland  defense  systems and to provide  components used in systems for the
manufacture of solder paste.

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  products that
have expanded its market opportunities:

1.                    SonoFlux  2000F - new spray fluxer  product - designed for
                      high volume operations with standard width lines requiring
                      low   maintenance   using  a  variety  of  solder  fluxes,
                      including  rosin  flux.  It  is  designed  to be  used  by
                      electronic  circuit  board  manufacturers  to apply solder
                      flux to fixed width circuit  boards.  The major  customers
                      for the SonoFlux 2000Fare original equipment manufacturers
                      (OEMs) who produce their own electronic circuit boards.

2.                    Molten Mist - ultrasonic  nozzle for atomizing  metals and
                      other melts.  Used in the  manufacture of solder paste and
                      features dual air/liquid  cooling and a simple replaceable
                      tip. It is designed to be used by high volume producers of
                      solder paste.

3.                    SonoFlux XL - new spray  fluxer  product - applies  solder
                      flux to electronic  printed  circuit boards that vary from
                      two inches to up to 24 inches in width in a cost-effective
                      and  uniform  manner.  It is designed to be used by either
                      OEMs  or  contract  manufacturers  of  electronic  circuit
                      assemblies.

4.                    Widetrack - Wide area coating  system - uses one nozzle to
                      cover up to 24  inches  wide  target  areas  and  multiple
                      nozzles to cover any width  material.  Uses a non-clogging
                      ultrasonic  atomizing  nozzle to  produce a low  velocity,
                      highly  controllable  spray.  It is designed to be used by
                      glass  manufacturers  or  by  any  company  that  requires
                      efficient web-coating or wide area spraying capability.

5.                    Medisonic - ultra-thin  computer-controlled coating system
                      utilizing  licensed and patented  technology.  This system
                      uses a process  of  liquid  delivery  through  a  Sono-Tek
                      ultrasonic nozzle dispensed into a vacuum environment.  It
                      is designed  to apply  successive  coats of  polymer-based
                      chemicals to be used by medical  device  manufacturers  to
                      coat stents and other implantable devices.

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. The Company
expended approximately 11.4% and 9.3% of its Fiscal Years 2003 and 2002
total revenues, respectively, on new engineering and 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 has been recertified annually since then.

Patents

The  Company's  business  is based in part on the  technology  covered by United
States  patents held by 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.

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. The Company has executed  non-disclosure,  non-compete  agreements with
all of its  employees  to  safeguard  its  intellectual  property.  The  Company
executes  reciprocal   non-disclosure  agreements  with  its  key  customers  to
safeguard any jointly developed know-how.


Marketing and Distribution

The Company  markets and  distributes  its products  through  independent  sales
representatives or sales representative  companies, OEMs 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.

Competition

The Company  operates in a highly  competitive  environment  for its electronics
manufacturing  equipment.  The Company  maintains  its  competitive  position by
providing highly effective solutions that meet its customers' requirements.

Foreign and Export Sales

During  Fiscal Years 2003 and 2002,  sales to foreign  customers  accounted  for
approximately  $656,000 and  $800,000,  or 21% and 23%,  respectively,  of total
revenues.

Employees

As of May 20, 2003,  the Company had 24 full-time  employees  and two  part-time
employees.  The Company  believes  that its  relationship  with its employees is
good.


ITEM 2            PROPERTIES

The  Company's  offices,   product   development,   manufacturing  and  assembly
facilities are located in a building in Milton,  New York,  consisting of 13,000
square feet pursuant to a lease that expires on November 30, 2003. 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.




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.

FISCAL YEAR ENDED FEBRUARY 28, FEBRUARY 28,
                                       2003                     2002
HIGH LOW HIGH LOW

First Quarter                       $0.50    $0.32           $0.56     $0.20
Second Quarter                       0.40     0.20            0.28      0.09
Third Quarter                        0.25     0.10            0.32      0.08
Fourth Quarter                       0.20     0.12            0.54      0.16

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 19, 2003, there were 309 holders of record 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 is subject to certain agreements that
restrict the payment of cash dividends.

(d) Securities  Authorized for Issuance Under Equity Compensation Plans:

                          Number of           Weighted-          Number of
                      securities to be    average exercise  securities remaining
                         issued upon          price of      available for future
                        exercise of   outstanding options, issuance under equity
                    outstanding options, warrants and rights  compensation plans
                     warrants and rights                  (excluding securities
                                                        reflected in column (a))
                            (a)                 (b)                (c)
Equity compensation plans approved by security holders:
1993 Stock
   Incentive Plan       1,122,562              $.33               377,471

Equity compensation plans not approved by security holders:
  Warrants issued to individuals for
  Monies loaned or services rendered
                        905,000                $.36                  -
Warrants issued in conjunction with
   Subordinated Mezzanine Debt
                      2,077,777                $.13                  -
                     ----------        ------------             -----------

           Total      4,105,339                $.24                377,471
                      =========                ====                =======

Description of Equity Compensation Plans:

1993 Stock Incentive Plan
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 2012.

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.

Warrants Issued to Individuals for Monies Loaned or Services Rendered:

Warrants  were issued in Fiscal  Year  February  28,  2000 to five  individuals,
including  officers  and  directors,  who loaned  monies to the  Company and one
individual who assisted in raising funds for the Company. These warrants are for
terms of five years with  exercise  prices  ranging from $.30 per share to $1.00
per share. These warrants expire as follows; 5,000 in March 2004; 600,000 in May
2004; 225,000 in August 2004; 25,000 in January 2005; and 50,000 in May 2005.

Warrants Issued in Conjunction with Subordinated Mezzanine Debt:

Warrants were issued to Norwood Venture Corporation in conjunction with $850,000
in funding supplied to the Company. Stock purchase warrants (the "Put Warrants")
to purchase  1,100,000 shares of the Company's common stock at an exercise price
of $.30,  the fair market value of the  Company's  common stock on September 30,
1999. 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 exercise
prices  of  $0.30  and $.10  per  share,  respectively.  In  connection  with an
amendment to the Norwood  Agreement,  in October  2001,  the  exercise  price of
certain  of the  warrants  was  reduced  from  $.30 to $.15 per  share.  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.  ITEM 6  MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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;

-     Ability to continue to obtain deferral of principal payments from
      its note holders;

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

Overview

The Company  experienced  sluggish  sales in the year ended  February  28, 2003.
These reduced sales are attributable to the economic  slowdown that is affecting
the capital goods segment of the economy,  and more specifically the electronics
industry,  which has been our main business.  As a result, we have used $187,557
of our cash  reserves over the last year. A total of $248,588 of payments due in
the period from August 31, 2003 to February 28, 2003 were  deferred.  These were
comprised of loan principal and interest of $219,680 and incentive  compensation
payments to officers and key management  employees of $28,907.  Monthly payments
of approximately  $37,000 continue to be deferred after February 28, 2003. There
can be no assurances that creditors will allow continued deferrals.

The Company  continues to see  developing  opportunities  for its  technology in
newer markets such as biomedical and defense and in the eventual recovery of the
economy and the electronics industry.

Liquidity and Capital Resources

The Company's  working capital  increased  $27,137 from $499,948 at February 28,
2002 to $527,085 at  February  28,  2003.  The  increase in working  capital was
principally the result of decreases in cash of $188,000, accounts receivables of
$5,000,  prepaid expenses of $12,000,  a decrease in the current portion of debt
of $29,000, reductions in accounts payable and accrued expenses of $144,000, and
an increase in  inventory of $26,000.  The  stockholders'  deficiency  decreased
$143,101  from  $782,554 at February  28, 2002 to $639,453 at February 28, 2003.
The  decrease in  stockholders'  deficiency  was the result of the net profit of
$120,956,  investment of $18,000 and $4,145 of imputed  interest on amounts owed
to one of the Company's  directors.  The Company has operated profitably for the
last seven fiscal quarters.

Accounts  receivable at February 28, 2003 decreased $5,052, or 1%, from February
28, 2002 due to better  collection  efforts in the twelve months ended  February
28, 2003.

Inventory  increased  $25,955,  or 3%,  as the  result of  additional  labor and
overhead capitalized at February 28, 2003 due to current labor rates.

Accounts  payable  decreased  $131,000 as  compared to February  28, 2002 due to
reduced purchasing  activity and payments made to vendors on current and overdue
amounts during the year ended February 28, 2003.

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, 2003,  the  outstanding  balance was
$312,000.

During the first  quarter of Fiscal  Year 2002,  the  Company  discontinued  the
production  of capital  equipment  in the cleaning  and drying  systems  segment
focused on 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 Operations

The operations of the Company reflect improved  operating  margins since payroll
and  operating  expenses  were reduced  during the quarter ended May 31, 2001 in
order to provide  positive cash flow.  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, 2003, the Company's sales decreased  $311,653 to
$3,157,756,  as compared to $3,469,409 for the year ended February 28, 2002. The
decrease was a result of a decrease in MCS nozzle-spraying  system and specialty
coating system sales of $546,000  partially  offset by increases in fluxer sales
of $192,000,  nozzle  sales of $5,000 and, an increase in cleaning  system spare
parts and service of $38,000.  The sales  decrease in specialty  coating  system
sales was  caused by fewer  orders  placed  for  systems  for  national  defense
contracts.  The increase in fluxer sales was due to the successful  introduction
of new products, the SonoFlux XL and the SonoFlux 2000F.

The Company's gross profit decreased $399,440,  to $1,775,080 for the year ended
February 28, 2003 from  $2,174,520  for the year ended  February  28, 2002.  The
decrease was  primarily a result of lower 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  affected the gross margin  percentage,  which was
reduced from 63% for the year ended February 28, 2002, to 56% for the year ended
February 28, 2003.

Research and product  development costs increased  $40,723,  to $361,783 for the
year ended  February 28,  2003,  from  $321,060 for the year ended  February 28,
2002.  The  increase  was a result of  product  development  costs on new fluxer
systems and continued work on the CVD (chemical vapor deposition) product line.

Marketing  and selling  costs  decreased  $47,091 to $615,736 for the year ended
February 28, 2003 from  $662,827,  for the year ended  February  28,  2002.  The
decrease  was a result of  decreases in  marketing  and  consultant  expenses of
$39,000,  sales commissions of $23,000,  trade show costs of $26,000, and travel
expenses of $3,000,  facilities and other costs of $16,000, which were offset by
increased personnel costs of $60,000.

General and administrative costs decreased $21,211, from $577,471,  for the year
ended  February 28, 2002, to $556,260 for the year ended  February 28, 2003. The
decrease was  attributable to reduced  consulting  expenses of $13,000,  royalty
expenses of $17,000,  travel expenses of $8,000,  bank fees of $11,000,  reduced
facility  and  utility  costs of $7,000  and other  cost  reductions  of 11,000,
partially offset by increased  personnel costs of $4,000,  increased  accounting
and legal fees of $6,000, increased bad debt provision of $22,000, and increased
directors and officers insurance of $14,000.

Interest and other income increased $50,332 for the year ended February 28, 2003
as compared to February 28, 2002 primarily as the result of profits  realized on
settlements with vendors.

Interest  expense was reduced  $15,000 for the year ended  February  28, 2003 as
compared to the year ended  February 28, 2002 as the result of  repayments  made
and a drop in prevailing interest rates.

The  Company's  income  from  continuing  operations  decreased  $309,556,  from
$430,522 or $0.05 per share,  for the year ended February 28, 2002, to $120,956,
or $.01 per share, for the year ended February 28, 2003.

Results of Discontinued Operations

The Company did not experience any loss from discontinued  operations during the
year ended February 28, 2003.

Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations
are based upon our consolidated  financial statements,  which have been prepared
in accordance with accounting principles generally accepted in the United States
of America.  The preparation of these financial  statements  requires us to make
estimates  and  judgements  that  affect  the  reported  amount  of  assets  and
liabilities,  revenues and expenses, and related disclosure on contingent assets
and  liabilities  at the date of our financial  statements.  Actual  results may
differ from these estimates under different assumptions and conditions.

Critical  accounting  policies  are  defined  as those  that are  reflective  of
significant  judgements  and  uncertainties,   and  potentially  may  result  in
materially  different  results under different  assumptions  and conditions.  We
believe that our  critical  accounting  policies are limited to those  described
below.  For a  detailed  discussion  on  the  application  of  these  and  other
accounting policies see our note 3 to our consolidated financial statements.
Long-Lived Assets (including Tangible and Intangible Assets)

We acquired two businesses in recent years,  which resulted in intangible assets
being  recorded.  The  determination  of the  value  of such  intangible  assets
requires   management  to  make  estimates  and  assumptions   that  affect  our
consolidated  financial  statements.  We  assess  potential  impairment  to  the
intangible and tangible assets on a quarterly basis or when evidence that events
or changes in  circumstances  indicate that the carrying  amount of an asset may
not  be  recovered.   Our  judgements  regarding  the  existence  of  impairment
indicators  and  future  cash  flows  related  to  these  assets  are  based  on
operational  performance of our business,  market  conditions and other factors.
Future events could cause us to conclude that  impairment  indicators  exist and
that other  tangible or  intangible  assets is  impaired.  In fiscal  2002,  the
Company  recorded  a  $477,377  write down of  goodwill  due to such  impairment
evaluation.

Accounting for Income Taxes

As part of the process of preparing our consolidated financial statements we are
required  to  estimate  our income  taxes.  Management  judgment  is required in
determining our provision of our deferred tax asset. We recorded a valuation for
the full deferred tax asset from our net operating losses carried forward due to
the Company not demonstrating any consistent profitable operations. In the event
that the actual results differ from these estimates or we adjust these estimates
in future periods we may need to adjust such valuation recorded.


Impact of New Accounting Pronouncements

In June 2002,  the FASB issued SFAS No. 146,  "Accounting  for Costs  Associated
with Exit or Disposal Activities". This SFAS applies to costs associated with an
"exit  activity"  that does not involve an entity  newly  acquired in a business
combination  or with a disposal  activity  covered by SFAS No. 144.  These costs
include,  but are not limited to the following:  termination benefits associated
with involuntary terminations, terminating contracts that are not capital leases
and costs to consolidate facilities or relocate employees.  SFAS No. 146 will be
effective for exit or disposal activities initiated after December 31, 2002 with
early application encouraged.

During  2002,  the FASB  issued  SFAS No.  145,  147 and 148,  which were merely
amendments to existing SFAS or other accounting pronouncements.

In January 2003, the Financial  Accounting  Standards Board ("FASB") issued FASB
Interpretation  No. 46,  "Consolidation of Variable  Entities",  (FIN No. 46) an
interpretation of Accounting  Research Bulletin No. 51. FIN No. 46 requires that
variable  interest  entities  be  consolidated  by a company if that  company is
subject to a majority of the risk and loss from the variable  interest  entity's
activities or is entitled to receive a majority of the entity's residual returns
or both. FIN No. 46 requires  disclosures  about variable interest entities that
companies  are  not  required  to  consolidate  but  which  the  company  has  a
significant  variable  interest.  The  consolidation   requirements  will  apply
immediately for newly formed variable  interest  entities  created after January
31, 2003 and entities established prior to January 31, 2003, in the first fiscal
year or interim period beginning after June 30, 2003. The adoption of FIN No. 46
is not  expected  to have a  material  impact  on our  consolidated  results  of
operations and financial position.

In April 2003, the FASB issued Statements of Financial  Accounting Standards No.
149 ("SFAS No. 149"), an amendment to SFAS No. 133. SFAS No. 149 clarifies under
what circumstances a contract with initial investments meets the characteristics
of a derivative and when a derivative contains a financing component.  This SFAS
is effective for contracts entered into or modified after June 30, 2003.

In May 2003, the FASB issued  Statements of Financial  Accounting  Standards No.
150  ("SFAS No.  150"),  SFAS No. 150  established  standards  for how an issuer
classifies and measures in its statement of financial position certain financial
instruments with  characteristics  of both  liabilities and equity.  It requires
that an issuer  classify a  financial  instrument  that is within its scope as a
liability (or an asset in some circumstances)  because that financial instrument
embodies an  obligation  of the issuer.  This SFAS is  effective  for  financial
instruments  entered  into or  modified  after  May 31,  2003 and  otherwise  is
effective at the beginning of the first interim period  beginning after June 15,
2003. It is to be implemented by reporting the cumulative  effect of a change in
accounting principle for financial  instruments created before the issuance date
of SFAS No. 150 and still  existing at the  beginning  of the interim  period of
adoption.  Restatement is not permitted.  The adoption of SFAS No. 150 will only
require the Company to have  additional  disclosures  regarding the Put Warrants
and will not have a material effect on the financial  statements.  We will adopt
SFAS No. 150 in the first quarter of fiscal 2004.

ITEM 7   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See pages 20 to 40.

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                 64      Director and Chief Technologist
Christopher L. Coccio            62      Chief Executive Officer, President
                                            and a Director
Samuel Schwartz                  83      Chairman and Director*
Jeffrey O. Spiegel               44      Director*
J. Duncan Urquhart               49      Treasurer and Director*

*  Member of the Audit Committee and Compensation Committee.

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 2004, 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     62     Chief Executive Officer, President and Director
Vincent F. DeMaio         65     Vice President
R. Stephen Harshbarger    35     Vice President
Duncan Urquhart           49     Treasurer

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.  From  1998 to 2001,  he  worked  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.

VINCENT F. DEMAIO has been Vice President of  Manufacturing of the Company since
March 2003. He joined the Company in August 1991 as  Production  Manager and has
served as Field Service Manager and Director of Operations. Prior to joining the
Company Mr. DeMaio was an independent  real estate  developer from 1987 to 1991.
From 1956 to 1987,  Mr.  DeMaio  was  employed  by IBM  Corporation  in  various
manufacturing  positions  the  last  being  Manufacturing  Supervisor  over  600
employees.

R. STEPHEN  HARSHBARGER  has been Vice President of the Company since June 2000.
He joined the Company in October 1993 as a Sales  Engineer and served in various
sales management capacities from 1997 to 2000. Prior to joining the Company, Mr.
Harshbarger  was the  Sales and  Marketing  Coordinator  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. He became 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 a 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

The Company is not aware of any reports  required by section 16(a) that were not
filed on a timely basis.


ITEM 10  EXECUTIVE COMPENSATION

The following table sets forth the aggregate remuneration paid or accrued by the
Company for Fiscal Years ended February 28, 2003,  2002 and 2001, for each named
officer  of  the  Company.   No  other  executive  officer  received   aggregate
remuneration  that  equaled  or  exceeded  $100,000  for the  Fiscal  Year ended
February 28, 2003.





                           SUMMARY COMPENSATION TABLE

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

Christopher L. Coccio  2003 $124,462  $7,500         0              $1,260
CEO, President and     2002  $92,354 $40,000         0                $178
    Director

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.

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


                   Option/SAR Grants in Last Fiscal Year

                        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

Christopher L. Coccio    275,000          62%          $.20           11/14/2012


The following table sets forth information regarding option exercises during the
Fiscal  Years  ended  February  28,  2003 and 2002,  as well as any  unexercised
options  held as of  February  28,  2003 and 2002 by each  named  executive  who
received in excess of $100,000 in salary and bonus.

             Aggregate Option/SAR Exercises in Last Fiscal Year and
                       Fiscal Year End Option/ SAR Values

                                      Number of Securities       Value of
                                         Underlying             Unexercised
                                      Unexercised Options   In-the Money Options
                  Shares               Fiscal Year End(#) At Fiscal Year End($)
               Acquired on   Value    Exercisable           Exercisable
Name            Exercise  Realized            Unexercisable        Unexercisable
                    (#)       ($)
--------------------------------------------------------------------------------
Christopher Coccio   0         0       420,000     75,000      $1,000     $0


Audit Committee

The  Company's  Board of  Directors  has an Audit  Committee  composed of Samuel
Schwartz,  Jeffrey  Spiegel  and J.  Duncan  Urquhart.  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.  However,  the  Compensation
Committee serves an advisory function only. All decisions regarding compensation
are made by the full Board of Directors.









     ITEM 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
-------

The  following  information  is  furnished  as of  May  20,  2003,  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                                  386,700(1)          4.2%
     *Christopher L. Coccio                             461,000(2)          4.8%
     *Samuel Schwartz                                   997,083(3)         10.6%
     *Jeffrey O. Spiegel                                 98,217(4)          1.4%
     *J. Duncan Urquhart                                 40,000(5)           **
                                                     ----------         --------
All Executive Officers and Directors as a Group (7)   2,143,568(6)         21.0%

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

     Norwood Venture Corporation                     2,077,777(7)          18.4%
     65 Norwood Avenue
     Montclair, NJ 07043

*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 65,000  options
  deemed exercisable issued under the 1993 Plan.
2 Includes 420,000 options deemedexercisable issued under the 1993 Plan. Does
  not include 75,000 options that arenot yet vested.
3 Includes 300,000  warrants deemed  exercisable  awarded by theBoard of
  Directors in May 1999 and 20,000  options  deemed  exercisable  issued under
  the 1993 Plan. Does not include 20,000 options that are not yet vested.
4 Includes 20,000 options deemed exercisable issued under the 1993Plan.
5 Includes  40,000 options deemed  exercisable  issued under the 1993 Plan. Does
  not include 20,000 options that are not yet vested.
6 Includes  712,500 options deemed exercisable  issued  under  the  1993  Plan,
  300,000  warrants  deemed exercisable  awarded by the Board of  Directors  in
  May 1999.  Does not  include  122,5000 options that are not yet vested.
7 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 $103,416.64  was paid to
Norwood and $26,371 was forwarded to these individuals during Fiscal Year 2003.

Short-term  loans - 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.  Interest  expense of $16,468 was either paid or accrued to these  parties
during this fiscal year.

Consulting agreement -
At February  28, 2003 and 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 in each of the two years then ended.


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)9    Restated Certificate of Incorporation
4(a)4    Form of Warrant.
4(b)4    Master Security Agreement.
4(c)     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(d)5    Letter  agreement  between the Company and The Bank of New York.
4(e)6    Former CEO's Personal Guarantee for the Bank of New York.
4(f)3    Note and Warrant Purchase Agreement  dated  September  29, 1999 by and
         between the Company and Norwood Venture Corp.
4(g)3    Note issued by the Company,  dated  September  29, 1999, in the
         principal sum of $450,000.
4(h)3    Common Stock Purchase  Warrant,  dated  September 29, 1999,  issued by
         the Company to Norwood Venture  Corp.
4(i)3    General  Security  Agreement, dated September 29, 1999, issued by the
         Company in favor of Norwood Venture Corp.
4(j)10   Amended, Note and Warrant Purchase  Agreements dated December 22, 2000
         and April 30, 2001 by and between the Company and Norwood Venture Corp.
4(k)11   Amended  Note and Warrant Purchase  Agreement  dated  October 24, 2001
         between the Company and Norwood Venture Corp.
10(a)8   Lease forthe Company's facilities in Milton, NY dated December 1, 1999.
*10(e) 7 1993 Stock Incentive Plan as amended.
10(f) 6  Bank of New York Line of Credit.
21       Subsidiaries of Small Business Issuer.
23(a)    Independent Auditors' Consent.
99-1     CEO Certification.
99-2     Treasurer Certification.

* 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-Q quarterly  report
for the quarter ended May 31, 1996.
6 Incorporated herein by reference to the Company's Form 10-K for the year ended
February 28, 1999.
7 Incorporated  herein by reference to the Company's Form 10-Q quarterly  report
for the quarter ended August 31, 1998.
8  Incorporated  herein by  reference  to the  Company's  Form 10-K for the year
ended February 29, 2000.
9 Incorporated  herein by reference to the Company's Form 10-Q quarterly  report
for the quarter ended November 30, 2000.
10 Incorporated herein by reference to the Company's Form 10-K for the year
ended February 28, 2001.
11  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.






ITEM 14       CONTROLS AND PROCEDURES

The Company has established and maintains  "disclosure  controls and procedures"
(as those  terms  are  defined  in Rules 13a  -14(c)  and 15d-  14(c)  under the
Securities and Exchange Act of 1934 (the "Exchange Act'). Christopher L. Coccio,
President and Chief Operating  Officer of the Company,  and J. Duncan  Urquhart,
Treasurer of the Company have  evaluated the Company's  disclosure  controls and
procedures  within  90  days  of  filing  this  Form  10-KSB.   Based  on  their
evaluations,  Messrs.  Coccio and Urquhart  have  concluded  that the  Company's
disclosure  controls and procedures are effective to ensure that the information
required  to be  disclosed  by the  Company in reports  that it files or submits
under the Exchange Act is recorded,  processed,  summarized and reported  within
the time periods specified by SEC rules and Forms.

There were no significant changes in the Company's internal controls or in other
factors that could  significantly  affect these controls after the date of their
evaluations.  There were no significant deficiencies or material weaknesses, and
therefore there were no corrective actions taken.



ITEM 15       DISCLOSURE OF FEES PAID TO PRINCIPAL ACCOUNTANTS

For the Fiscal  Years  ended  February  28,  2003 and 2002 the  Company  paid or
accrued fees of approximately $29,000 and $44,000 for services rendered by Radin
Glass & Co., LLP, its independent  auditors.  These fees included audit services
and tax return  preparation.  For Fiscal Year ended  February 28, 2002, the fees
include $15,000 for the re-audit and certification of Fiscal Year ended February
28, 2001.

<PAGE>



                              SONO-TEK CORPORATION

                                   FORM 10-KSB

                                     ITEM 7

            INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES

                      FOR THE YEAR ENDED FEBRUARY 28, 2003


INDEPENDENT AUDITORS' REPORT

CONSOLIDATED FINANCIAL STATEMENTS:

Consolidated Balance Sheet at February 28, 2003

Consolidated Statements of Operations
   For the Years Ended February 28, 2003 and February 28, 2002

Consolidated Statements of Stockholders' Equity (Deficiency)
   For the Years Ended February 28, 2003 and February 28, 2002

Consolidated Statements of Cash Flows
   For the Years Ended February 28, 2003 and February 28, 2002

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, 2003, 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, 2003 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
May 2, 2003






<PAGE>

                              SONO-TEK CORPORATION
                           CONSOLIDATED BALANCE SHEETS

                                     ASSETS
                                                                    February 28,
                                                                       2003
Current Assets
Cash and cash equivalents                                             $265,658
Accounts receivable (less allowance of $13,675)                        375,040
Inventories (Note 7)                                                   794,666
Prepaid expenses and other current assets                               56,023
                                                                   -----------
Total current assets                                                 1,491,387

Equipment, furnishings and leasehold
  improvements(less accumulated depreciation of $638,341)(Note 8)       84,878
Intangible assets, net:
Patents and patents pending (Note 3)                                    29,520
Deferred financing fees (Note 14)                                       11,251
                                                                    ----------
Total intangible assets                                                 40,771
Other assets                                                             6,541
                                                                    ----------
TOTAL ASSETS                                                        $1,623,577
                                                                    ==========

                    LIABILITIES AND STOCKHOLDERS' DEFICIENCY

Current Liabilities:
Accounts payable                                                      $149,920
Accrued expenses (Note 10)                                             244,286
Revolving Line of Credit (Note 11)                                     312,000
Current maturities of long term loans-related
    parties (Notes 13 & 19)                                             63,924
Current maturities of long term debt (Notes 13)                          9,072
Current maturities of subordinated mezzanine debt (Note 14)            141,672
Current maturities of subordinated loans (Note 12)                      43,428
                                                                      --------
Total current liabilities                                              964,302
Subordinated  mezzanine debt (Note 14)                                 690,722
Long term debt,  less current  maturities  (Notes 13 & 19)             250,033
Subordinated loans (Notes  12)                                         100,674
Other  long-term   liabilities   (Note  19)                             69,076
                                                                     ---------
Total liabilities                                                    2,074,807

Commitments and Contingencies (Note 15)                                   -

Put Warrants (Note 14)                                                 188,223

Stockholders' Deficiency
Common stock, $.01 par value; 25,000,000 shares authorized,
9,200,161 issued and outstanding                                        92,002
Additional paid-in capital                                           6,037,305
Accumulated deficit                                                 (6,768,760)
                                                                     ---------
Total stockholders'deficiency                                         (639,453)
                                                                     ---------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY                      $1,623,577
                                                                    ==========
                 See notes to consolidated financial statements.


<PAGE>


                              SONO-TEK CORPORATION

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                                              Years Ended
                                                       February 28, February 28,
                                                          2003          2002
                                                          ----          ----

Net Sales (Note 20)                                   $3,157,756    $3,469,409
Cost of Goods Sold                                     1,382,676     1,294,889
                                                       ---------     ---------
     Gross Profit                                      1,775,080     2,174,520
                                                       ---------     ---------

Operating Expenses
Research and product development                         361,783       321,060
Marketing and selling                                    615,736       662,827
General and administrative                               556,260       577,471
                                                         -------       -------
     Total Operating Expenses                          1,533,779     1,561,358
                                                       ---------     ---------

Operating Income                                         241,301       613,162

Interest Expense                                        (228,488)     (243,536)
Interest and Other Income (Loss)                         111,228        60,896
                                                       ---------    ----------
Income from Continuing Operations
  Before Income Tax Expense                              123,430       430,522
Income Tax Expense (Note 16)                               3,085          -
                                                       ---------    ----------
Income from continuing operations                        120,956       430,522

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

Net Income (Loss)                                       $120,956     $(186,391)
                                                        ========     ==========

Basic and Diluted Earnings (Loss) Per Share (Note 18)
     Continuing Operations                                 $0.01         $0.05
     Discontinued Operations                                 -           (0.07)
                                                           -----         -----
Net Loss                                                   $0.01        ($0.02)
                                                           =====        ======

Weighted Average Shares - Basic                        9,152,401     9,096,436
                                                       =========     =========

Weighted Average Shares - Diluted                     10,265,644     9,096,436
                                                      ==========     =========



                 See notes to consolidated financial statements.


<PAGE>


                              SONO-TEK CORPORATION
          CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIENCY) EQUITY
               YEARS ENDED FEBRUARY 28, 2003 AND FEBRUARY 28, 2002

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

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
Imputed interest
  - affiliate loan             -       -         4,145        -          4,145
Net Loss                       -       -          -       (186,391)   (186,391)
                         ---------- ------- ----------- -----------   ---------
Balance -
  February 28, 2002       9,105,422  91,055  6,016,107  (6,889,716)   (782,554)

Issuance of common stock     94,739     947     17,053        -         18,000
Imputed interest
  - affiliate loan             -       -         4,145        -          4,145
Net Income                     -       -          -        120,956     120,956
                         ----------  ------- ---------  ----------    ---------
Balance -
  February 28, 2003       9,200,161 $92,002 $6,037,305 $(6,768,760)  $(639,453)
                          ========= ======= ========== ============  ==========



                 See notes to consolidated financial statements.

<PAGE>


                              SONO-TEK CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                               Years Ended
                                                      February 28,  February 28,
                                                         2003          2002
                                                         ----          ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss)                                     $120,956       $(186,391)
Adjustments to reconcile net income (loss) to net
  cash provided by (used in) operating activities:
  Loss from discontinued operations                       -            616,913
  Depreciation and amortization                         76,532          77,176
  Imputed interest expense                              74,666          72,193
  Provision for doubtful accounts                      (11,325)        (91,581)
  (Increase) decrease in:
     Accounts receivable                                16,377         305,094
     Inventories                                       (25,955)         27,985
     Prepaid expenses and other current assets          12,371          26,698
     Other assets                                         -                501
  Increase (decrease) in:
     Accounts payable and accrued expenses            (144,309)       (672,136)
                                                     ---------       ---------
Net Cash Provided By Continuing Operations             119,313         176,452
Net Cash (Used In) Provided By
    Discontinued Operations                           (167,403)        284,480
                                                      ---------       --------
Net Cash (Used In)Provided By Operating Activities     (48,090)        462,932
                                                      --------         -------

CASH FLOWS FROM INVESTING ACTIVITIES:
Sale (purchase) of equipment, furnishings
 and leasehold improvements                             (8,165)          3,547
Patent filing costs                                    (13,965)           -
Other assets                                             1,126            -
                                                         -----           -----
Net Cash (Used In)Provided By Continuing Operations    (21,004)          3,547
                                                       -------           -----
Net Cash (Used In) Provided By Investing Activities    (21,004)          3,547
                                                        ------           -----

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of stock                         18,000           2,875
Proceeds from exercise of warrants and options            -              2,181
Proceeds from subordinated mezzanine debt                 -            300,000
Renegotiation of short-term and other liabilities         -            161,487
Repayment under revolving credit line                  (32,000)           -
Repayments of note payable and equipment loans         (22,686)        (27,990)
Repayment of notes to related parties                  (46,196)       (173,521)
Repayment of subordinated debt                          (5,898)           -
Payment of long-term liabilities                       (29,683)           -
                                                        ------        --------
Net Cash (Used in) Provided by Continuing Operations  (118,463)        265,032
Net Cash (Used in) Discontinued Operations                -           (281,528)
                                                       -------         -------
Net Cash Used in Financing Activities                 (118,463)        (16,496)
                                                       -------          ------

NET (DECREASE)   INCREASE IN CASH AND
        CASH EQUIVALENTS                              (187,557)        449,983
CASH AND CASH EQUIVALENTS
   Beginning of year                                   453,215           3,232
                                                       -------         -------
   End of year                                        $265,658        $453,215
                                                      ========        ========

                       See notes to consolidated financial statements.


<PAGE>


                              SONO-TEK CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               YEARS ENDED FEBRUARY 28, 2003 AND FEBRUARY 28, 2002

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 that break liquids into minute drops that
can be applied to surfaces at low velocity.

NOTE 2:  FINANCIAL CONSIDERATIONS AND MANAGEMENT'S PLANS

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.  During the first
quarter of Fiscal Year 2002, the Company also received additional financing from
Norwood and directors of the Company.


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. The Company  occasionally  has cash or cash equivalents on hand
in excess of the  $100,000  insurable  limits at a given bank.  At February  28,
2003, the Company had $122,307 over the insurable limit.





Supplemental Cash Flow Disclosure -
                                                           Years Ended
                                                   February 28,     February 28,
                                                      2003             2002
Interest paid
Continuing Operations                               $168,644         $191,485
                                                    ========         ========
Discontinued Operations                                 -             $16,482
                                                                      =======
Income taxes paid                                       -                -
Non-cash items:
     Interest expense for issuance of warrants       $70,521          $68,048
                                                     =======           =======
      Interest expense imputed on affiliate loan      $4,145            $4,145
                                                      ======            ======
     Conversion of accrued bonus to equity              -               $2,875
                                                                        ======
     Stock issued and warrants and options
         granted for services                        $18,000            $2,181
                                                     =======            ======

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 $65,770 at February 28, 2003.

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,
2003  are  being  amortized  over  the  term of the  related  debt.  Accumulated
amortization was $24,272 at February 28, 2003.

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 would 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.

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.

Impact of New Accounting Pronouncements -

In June 2002,  the FASB issued SFAS No. 146,  "Accounting  for Costs  Associated
with Exit or Disposal Activities". This SFAS applies to costs associated with an
"exit  activity"  that does not involve an entity  newly  acquired in a business
combination  or with a disposal  activity  covered by SFAS No. 144.  These costs
include,  but are not limited to the following:  termination benefits associated
with involuntary terminations, terminating contracts that are not capital leases
and costs to consolidate facilities or relocate employees.  SFAS No. 146 will be
effective for exit or disposal activities initiated after December 31, 2002 with
early application encouraged.

During  2002,  the FASB  issued  SFAS No.  145,  147 and 148,  which were merely
amendments to existing SFAS or other accounting pronouncements.

In January 2003, the Financial  Accounting  Standards Board ("FASB") issued FASB
Interpretation  No. 46,  "Consolidation of Variable  Entities",  (FIN No. 46) an
interpretation of Accounting  Research Bulletin No. 51. FIN No. 46 requires that
variable  interest  entities  be  consolidated  by a company if that  company is
subject to a majority of the risk and loss from the variable  interest  entity's
activities or is entitled to receive a majority of the entity's residual returns
or both. FIN No. 46 requires  disclosures  about variable interest entities that
companies  are  not  required  to  consolidate  but  which  the  company  has  a
significant  variable  interest.  The  consolidation   requirements  will  apply
immediately for newly formed variable  interest  entities  created after January
31, 2003 and entities established prior to January 31, 2003, in the first fiscal
year or interim period beginning after June 30, 2003. The adoption of FIN No. 46
is not  expected  to have a  material  impact  on our  consolidated  results  of
operations and financial position.

In April 2003, the FASB issued Statements of Financial  Accounting Standards No.
149 ("SFAS No. 149"), an amendment to SFAS No. 133. SFAS No. 149 clarifies under
what circumstances a contract with initial investments meets the characteristics
of a derivative and when a derivative contains a financing component.  This SFAS
is effective for contracts entered into or modified after June 30, 2003.

In May 2003, the FASB issued  Statements of Financial  Accounting  Standards No.
150  ("SFAS No.  150"),  SFAS No. 150  established  standards  for how an issuer
classifies and measures in its statement of financial position certain financial
instruments with  characteristics  of both  liabilities and equity.  It requires
that an issuer  classify a  financial  instrument  that is within its scope as a
liability (or an asset in some circumstances)  because that financial instrument
embodies an  obligation  of the issuer.  This SFAS is  effective  for  financial
instruments  entered  into or  modified  after  May 31,  2003 and  otherwise  is
effective at the beginning of the first interim period  beginning after June 15,
2003. It is to be implemented by reporting the cumulative  effect of a change in
accounting principle for financial  instruments created before the issuance date
of SFAS No. 150 and still  existing at the  beginning  of the interim  period of
adoption.  Restatement is not permitted.  The adoption of SFAS No. 150 will only
require the Company to have  additional  disclosures  regarding the Put Warrants
and will not have a material effect on the financial  statements.  We will adopt
SFAS No. 150 in the first quarter of fiscal 2004.


NOTE 4:  SEGMENT INFORMATION

The Company currently operates in one business segment,  spraying systems and is
primarily  engaged  in  the  business  of  developing,  manufacturing,  selling,
installing and servicing ultrasonic spray equipment.


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 the  Fiscal  Year ended  February  28,  2002.  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 are as follows:

                                                             February 28,
                                                                 2002
Revenues                                                       $1,229,665
Expenses                                                        1,846,578
                                                                ---------
Loss from discontinued operations                              $ (616,913)
                                                               ===========

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.  There were no additional costs
of  discontinuance  for the  orderly  liquidation  of the  disposed  assets  and
liabilities.


NOTE 7:  INVENTORIES

Inventories consist of the following:

                                                                February 28,
                                                                    2003
                                                                    ----
Raw Materials                                                    $314,941
Work-in-process                                                   316,869
Consignment                                                         3,342
Finished Goods                                                    379,308
                                                                ---------
Totals                                                          1,014,460
Less:  Allowance                                                 (219,794)
                                                                ---------
                                                                $ 794,666
                                                                =========

NOTE 8:  EQUIPMENT, FURNISHINGS AND LEASEHOLD IMPROVEMENTS


Equipment, furnishings and leasehold improvements consist of the following:

                                                                February 28,
                                                                    2003
                                                                    ----
Laboratory equipment                                              $82,395
Machinery and equipment                                           394,412
Leasehold improvements                                             43,865
Furniture and fixtures                                            202,547
                                                                 --------
Totals                                                            723,219
Less:  accumulated depreciation                                  (638,341)
                                                                 --------
                                                                  $84,878
                                                                  =======
NOTE 10:  ACCRUED EXPENSES


Accrued expenses consist of the following:

                                                                February 28,
                                                                    2003
                                                                    ----
Accrued compensation                                              $92,483
Sales tax liability                                                37,271
Accrued interest                                                   16,361
Accrued marketing expense                                          22,695
Estimated warranty costs                                            9,900
Accrued commissions                                                 8,845
Professional fees                                                  18,731
Other accrued expenses                                             38,000
                                                                 --------
                                                                 $244,286
                                                                 ========
NOTE 11:  REVOLVING LINE OF CREDIT
The Company  has a $350,000  revolving  line of credit that  carries an interest
rate of prime plus 2% (6.25% at February 28, 2003).  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, 2003, the balance was $312,000.


NOTE 12:  SUBORDINATED LOANS

Two  subordinated  loans for a total of $144,102 were converted from S&K debt to
Company  debt on August 3, 1999.  These notes were  rewritten in August 2002 and
are payable over four years with equal principal  payments plus accrued interest
at 6% on the unpaid  balance.  In April 2003,  the Company and the note  holders
reached an agreement to limit  repayments  for six months to principal of $1,500
per month plus  interest  with the  balance of payments  to be  renegotiated  in
August 2003, based on the Company's ability to increase repayments.

NOTE 13:  LONG-TERM DEBT

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

                                                                 February 28,
                                                                    2003
                                                                    ----
Notes payable to related parties, payable monthly In
installments of $7,267 plus monthly interest of 5%
over 48 months through March 31, 2006.                            $302,617

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 (6.25% at
February 28, 2003) through May 2005.                                20,412
                                                                    ------

Total long term debt                                               323,029
Due within one year                                                (72,996)
                                                                  --------
Due after one year                                                $250,033
                                                                  ========

Long-term debt is payable as follows (as of February 28, 2003):
Fiscal Year ending February,
                        2004                                      $ 72,996
                        2005                                        96,275
                        2006                                        89,471
                        2007                                        64,287
                                                                  --------
                                                                  $323,029
                                                                  ========

The Company  reached  agreements  with its note holders to defer  principal  and
interest payments on their notes.

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") less a
proportionate  equity share of the greatest of three different valuations of the
Company upon exercise of the Put Warrants. 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  was 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 an 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, 2003 is $17,606.  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 $24,272 at February 28, 2003.

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  $78,447 and $78,060,  for the two
years ended February 28, 2003 and February 28, 2002, respectively.

The Company has $58,835 in future  minimum  obligations  under its lease,  which
expires in Fiscal Year 2004.



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,
                                         2003      %           2002        %
                                         ----      -           ----        -
   Computed tax (benefit)
          at maximum rate              41,125     34.0       $(63,373)   (34.0)
   Non-deductible goodwill                  0      0          162,308     87.0
   Other permanent differences          2,440      2.0          3,304      1.8
   Change in valuation
      allowance for tax
      effect of operating
       loss carryforwards             (43,565)   (36.0)      (102,239)   (54.8)
                                    ---------   ------       --------   ------
    Provision for
       income taxes                  $   -          -        $   -        -
                                    =========   ======       ========   ======

The net deferred tax asset is comprised of the following:

                                                              February 28,
                                                                 2003
    Allowance for doubtful accounts                             $5,000
    Accumulated depreciation                                    20,000
    Accumulated amortization                                     5,000
    Inventory                                                  166,000
    Accrued vacation                                             6,000
    Accrued expenses                                            52,000
    Net operating losses and other
                 carryforwards                               1,475,000
    Net deferred tax assets before                           ---------
                 valuation allowance                         1,729,000
    Deferred tax asset valuation allowance                  (1,729,000)
                                                             ---------
    Net deferred tax asset                                  $     -
                                                            ==========

The change in the valuation  allowance was $144,000 for the year ended  February
28, 2003.

At February 28, 2003, the Company has available net operating loss carryforwards
of approximately $4,337,190 for income tax purposes, which expire between fiscal
2004 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:  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
2012.

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 2003,  the  Company  granted  options  for  415,000  shares
exercisable  at  between  $0.15 per  share  and  $0.30  per  share to  qualified
employees and 40,000 shares exercisable at $0.37 to directors of the Company.

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.

A summary of the 1993 Plan activity for the two years ended February 28, 2003 is
as follows:
                                                        Weighted Average
                               Stock Options              Exercise Price
                            Outstanding Exercisable  Outstanding    Exercisable

Balance-February 28, 2001    1,125,062    598,699      $.69           $.52
Granted Fiscal Year 2002       367,500                  .23
Canceled Fiscal Year 2002     (652,500)                (.53)
                             ---------                 ----
Balance - February 28, 2002    840,062    752,187       .50           $.59
Granted Fiscal Year 2003       445,000                  .22
Canceled Fiscal Year 2003     (162,500)                (.49)
                             ---------                 -----
Balance - February 28, 2003  1,122,562    903,062      $.33          $.35
                             =========                 =====         ====

Information,  at date of issuance,  regarding  stock option grants for the years
ended February 28, 2003 and 2002:

                                                   Weighted         Weighted
                                                    Average         Average
                                                   Exercise           Fair
                                         Shares      Price            Value
                                         ------    --------        --------
Year ended February 28, 2002:
Exercise price exceeds market price        -       $   -            $   -
Exercise price equals market price       367,500      .23             .16
Exercise price is less that market price    -          -                -

Year ended February 28, 2003:
Exercise price exceeds market price      275,000   $  .20          $  .15
Exercise price equals market price       170,000      .16             .16
Exercise price is less that market price    -          -                -




The following table summarizes  information about stock options  outstanding and
exercisable at February 28, 2003:




                          Outstanding and Exerciseable
                                     Weighted      Weighted
                           Shares    Average       Average       Number
                                     Remaining     Exercise    Exercisable
                                    Life In Years    Price
Range of exercise prices:
$.09 to $.20               587,500     9.2           $.18         446,000

$.21 to $.50               377,500     6.0           $.33         302,500

$.51 to $.90               102,562     5.9           $.60         102,562

$1.00 to $1.53              55,000     7.5          $1.43          52,000


The fair value of options  granted under the Company's  fixed stock option plans
during Fiscal Years 2003 and 2002were  estimated on the dates of grant using the
minimum  value  options-pricing  models  with  the  following   weighted-average
assumptions used:  expected  volatility of approximately 107% and 105% in Fiscal
Years 2003 and 2002,  respectively,  risk-free  interest  rate of  approximately
3.25% and 5.00% in Fiscal  Years  2003 and 2002,  and  expected  lives of option
grants of approximately five years.

The estimated  fair value of options  granted  during Fiscal Years 2003 and 2002
were $.22 and $.28 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, 2003 and February 28, 2002 would have been changed to the pro forma
amounts indicated below:

                                               2003                       2002
                                               ----                       ----
Net Profit (Loss):
      As reported                           $120,956                  $(186,391)
      Pro forma                            $  19,184                  $(290,690)

Basic and diluted earnings (loss) per share (see Note 18):
      As reported                            $.01                       $(.02)
      Pro forma                              $.00                       $(.03)

Warrants - There were no warrants issued during Fiscal 2003 and 2002.  370,175
warrants issued in 1999 in conjunction with the retirement of subordinated debt
expired in Fiscal 2003.

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.

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.


NOTE 18:  EARNINGS (LOSS) PER SHARE

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

                                              February 28,         February 28,
                                                  2003                  2002
Numerator for basic and diluted
      Earnings (loss) per share:
 Continuing operations                          $120,956           $375,310
 Discontinued operations                         -               (2,005,799)
                                                --------          ----------
  Net earnings (loss)                            $120,956        $(1,630,489)
                                                 ========        ============
Denominator:
Denominator for basic earnings (loss)
  weighted average shares                       9,152,401          9,096,436
Effects of dilutive securities:
  Warrants                                      1,020,085              0*
 Stock options for employees,
    directors and outside consultants              93,158              0*
                                               ----------       -------------
Denominator for diluted earnings
  (loss) per share                             10,265,644          9,096,436*
                                               ==========          =========

Basic Earnings (Loss) Per Share-
 Continuing Operations                            $.01                $.05
 Discontinued Operations                           .00                (.07)
                                                 -----                -----
Net earnings (loss)                               $.01               $(.02)
                                                  ====               ======
Diluted Earnings (Loss) Per Share-
  Continuing Operations                           $.01                $.05
  Discontinued Operations                          .00                (.07)
                                                   ---                -----
Net earnings (loss)                               $.01               $(.02)*
                                                  ====               ======

* The warrants and stock options are  antidilutive  during Fiscal Year 2002 as a
result of the net losses and,  therefore,  are not considered in the Diluted EPS
calculation.

NOTE 19:  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 $26,371 and $24,500 was paid to Norwood and  forwarded  to these  individuals
during Fiscal Years 2003 and 2002, respectively.

Short-term loans - related parties -

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  $16,468
and$25,653 for the fiscal year ended February 28, 2003 and 2002, respectively.

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 in each of the two years ended February 28, 2003 and 2002.


NOTE 20:  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.

Export sales to customers  located outside the United States were  approximately
as follows:

                                   February 28,                 February 28,
                                      2003                          2002
                                      ----                          ----
Western Europe                      $356,000                      $533,000
Far East                             170,000                        80,000
Other                                130,000                       187,000
                                     -------                       -------
                                    $656,000                      $810,000
                                    ========                      ========



<PAGE>


SIGNATURES

In accordance  with Section 13 or 15(d) of the Exchange Act, the  Registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

Dated: May 27, 2003
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.

In  accordance  with the Exchange  Act, 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 27, 2003    /s/ Samuel Schwartz   May 27, 2003
----------------------------                  -------------------
Christopher L. Coccio                        Samuel Schwartz
Chief Executive Officer,                     Chairman and Director
President and Director

/s/ J. Duncan Urquhart     May 27, 2003  /s/ Dr. Harvey L Berger    May 27, 2003
----------------------                   ----------------------
J. Duncan Urquhart                           Dr. Harvey L. Berger
Treasurer and Director                       Director

/s/ Jeffrey O. Spiegel     May 27, 2003 /s/ R. Stephen Harshbarger  May 27, 2003
----------------------                      --------------------------
Jeffrey O. Spiegel                          R. Stephen Harshbarger
Director                                    Vice President

/s/ Vincent F. DeMaio      May 27, 2003
---------------------
Vincent F. DeMaio
Vice President





                                                             CERTIFICATION

I, Christopher L. Coccio, certify that:

1.    I have reviewed this annual report on Form 10-KSB of Sono-Tek Corporation;

2.    Based on my  knowledge,  this annual report does not contain any untrue
      statement of a material fact or omit to state a material fact necessary
      to make the statements made, in light of the  circumstance  under which
      such  statements  were made, not misleading  with respect to the period
      covered by this annual report;

3.    Based on my knowledge,  the financial  statements,  and other financial
      information  included  in this  annual  report,  fairly  present in all
      material  respects the financial  condition,  results of operations and
      cash flows of the  registrant  as of, and for the periods  presented in
      this annual report;

4.    The  registrant's  other  certifying  officer and I are responsible for
      establishing  and  maintaining  disclosure  controls and procedures (as
      defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
      we have:
               a) Designed such disclosure  controls and procedures to ensure
               that  material   information   relating  to  the   registrant,
               including its consolidated  subsidiaries,  is made known to us
               by others  within  those  entities,  particularly  during  the
               period this annual report is being prepared;

               b) Evaluated the effectiveness of the registrant's  disclosure
               controls and  procedures  as of a date within 90 days prior to
               the filing date of this annual report (the "Evaluation Date");
               and

               c)Presented in this annual report our conclusions  about the
               effectiveness  of the  disclosure  controls and procedures
               based on our evaluation as of the Evaluation Date:

5.    The registrant's other certifying  officer and I have disclosed,  based
      on our most recent  evaluation,  to the  registrant's  auditors and the
      audit  committee of the  registrant's  board of  directors  (or persons
      performing the equivalent functions):

              a) All significant deficiencies in the design or operation of
                 internal   controls  which  could  adversely   affect  the
                 registrant's  ability to record,  process,  summarize  and
                 report   financial  data  and  have   identified  for  the
                 registrant's  auditors any material weaknesses in internal
                 controls; and

              b) Any fraud, whether or not material; that involves management
                 or other employees who have a significant role in the
                 registrant's internal controls; and

6.  The registrant's other certifying officers and I have indicated in this
    annual report whether or not there were significant changes in internal
    controls or in other factors that could  significantly  affect internal
    controls  subsequent  to  the  date  of  our  most  recent  evaluation,
    including   any   corrective   actions   with  regard  to   significant
    deficiencies and material weaknesses.

     Date:  May 27, 2003

                                    /s/ Christopher L. Coccio
                                    Christopher L. Coccio
                                    Chief Executive Officer and President



<PAGE>



                                                             CERTIFICATION

I, J. Duncan Urquhart, certify that:

1.  I have reviewed this annual report on Form 10-KSB of Sono-Tek Corporation;

2.  Based on my  knowledge,  this annual report does not contain any untrue
    statement of a material fact or omit to state a material fact necessary
    to make the statements made, in light of the  circumstance  under which
    such  statements  were made, not misleading  with respect to the period
    covered by this annual report;

3.  Based on my knowledge,  the financial  statements,  and other financial
    information  included  in this  annual  report,  fairly  present in all
    material  respects the financial  condition,  results of operations and
    cash flows of the  registrant  as of, and for the periods  presented in
    this annual report;

4.  The  registrant's  other  certifying  officer and I are responsible for
    establishing  and  maintaining  disclosure  controls and procedures (as
    defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
    we have:

             a) Designed such disclosure  controls and procedures to ensure
             that  material   information   relating  to  the   registrant,
             including its consolidated  subsidiaries,  is made known to us
             by others  within  those  entities,  particularly  during  the
             period this annual report is being prepared;

             b) Evaluated the effectiveness of the registrant's  disclosure
             controls and  procedures  as of a date within 90 days prior to
             the filing date of this annual report (the "Evaluation Date");
             and

             c) Presented  in this  annual  report our  conclusions  about the
             effectiveness of the disclosure  controls and procedures based
             on our evaluation as of the Evaluation Date:

5.   The registrant's other certifying  officer and I have disclosed,  based
     on our most recent  evaluation,  to the  registrant's  auditors and the
     audit  committee of the  registrant's  board of  directors  (or persons
     performing the equivalent functions):

             a) All  significant  deficiencies  in the design or  operation of
             internal   controls   which   could   adversely   effect   the
             registrant's ability to record, process,  summarize and report
             financial  data  and  have  identified  for  the  registrant's
             auditors any material weaknesses in internal controls; and

             b) Any fraud, whether or not material; that involves management or
             other employees who have a significant role in the
             registrant's internal controls; and

6.  The registrant's other certifying officers and I have indicated in this
         annual report whether or not there were significant changes in internal
         controls or in other factors that could  significantly  affect internal
         controls  subsequent  to  the  date  of  our  most  recent  evaluation,
         including   any   corrective   actions   with  regard  to   significant
         deficiencies and material weaknesses.

     Date:  May 27, 2003

                                    /s/ J. Duncan Urquhart
                                    J. Duncan Urquhart
                                    Treasurer


<PAGE>

                                                                      Exhibit 21


         Sono-Tek Corporation
         Fiscal Year Ended February 28, 2003


         Subsidiaries of Small Business Issuer


         Name                                          State of Incorporation

         Sono-Tek Cleaning Systems, Inc.               New Jersey












<PAGE>


                                                                   Exhibit 23(a)


Consent of Independent Auditors


We consent to the use in connection with the Annual report on Form 10-KSB of
SONO-TEK CORPORATION, of our report dated May 2, 2003 relating to the financial
statements of SONO-TEK CORPORATION and Subsidiary as of February 28, 2003 and
for each of the two years ended February 28, 2003.

/s/ Radin Glass & co., LLP
Certified Public Accountants

New York, New York
May 27, 2003


<PAGE>

                                                                    Exhibit 99.1

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Sono-Tek  Corporation on Form 10-KSB for
the period  ended  February 28, 2003 as filed with the  Securities  and Exchange
Commission on the date hereof (the "Report").  I,  Christopher L. Coccio,  Chief
Executive  Officer of the Company,  certify,  pursuant to 18 U.S.C. ss. 1350, as
adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the  requirements  of section 13(a) and 15(d)
of the Securities Exchange Act of 1934; and (2) The information contained in the
Report fairly presents,  in all material respects,  the financial  condition and
result of operations of the Company.


/s/ Christopher L. Coccio


Christopher L. Coccio
Chief Executive Officer and President


<PAGE>


                                                                    Exhibit 99.2

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Sono-Tek  Corporation on Form 10-KSB for
the period  ended  February 28, 2003 as filed with the  Securities  and Exchange
Commission on the date hereof (the "Report"),  I, J. Duncan Urquhart,  Treasurer
of the Company,  certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to
ss. 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the  requirements  of section 13(a) and 15(d)
of the Securities Exchange Act of 1934; and (2) The information contained in the
Report fairly presents,  in all material respects,  the financial  condition and
result of operations of the Company.


/s/ J. Duncan Urquhart


J. Duncan Urquhart
Treasurer



















<PAGE>



</TEXT>
</DOCUMENT>
