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<SEC-DOCUMENT>0001171520-04-000346.txt : 20041012
<SEC-HEADER>0001171520-04-000346.hdr.sgml : 20041011
<ACCEPTANCE-DATETIME>20041012151923
ACCESSION NUMBER:		0001171520-04-000346
CONFORMED SUBMISSION TYPE:	10QSB
PUBLIC DOCUMENT COUNT:		3
CONFORMED PERIOD OF REPORT:	20040831
FILED AS OF DATE:		20041012
DATE AS OF CHANGE:		20041012

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			SONO TEK CORP
		CENTRAL INDEX KEY:			0000806172
		STANDARD INDUSTRIAL CLASSIFICATION:	MISCELLANEOUS ELECTRICAL MACHINERY, EQUIPMENT & SUPPLIES [3690]
		IRS NUMBER:				141568099
		STATE OF INCORPORATION:			NY
		FISCAL YEAR END:			0228

	FILING VALUES:
		FORM TYPE:		10QSB
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-16035
		FILM NUMBER:		041074735

	BUSINESS ADDRESS:	
		STREET 1:		2012 RT 9W BLDG 3
		CITY:			MILTON
		STATE:			NY
		ZIP:			12547
		BUSINESS PHONE:		8457952020

	MAIL ADDRESS:	
		STREET 1:		2012 RT. 9W, BLDG. 3,
		CITY:			MILTON
		STATE:			NY
		ZIP:			12547
</SEC-HEADER>
<DOCUMENT>
<TYPE>10QSB
<SEQUENCE>1
<FILENAME>eps1557.txt
<DESCRIPTION>SONO-TEK CORPORATION
<TEXT>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

|X|   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
      EXCHANGE ACT OF 1934

                 For the quarterly period ended: August 31, 2004

                                       OR

|_|   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
      EXCHANGE ACT OF 1934

                          Commission File No.: 0-16035

                              SONO-TEK CORPORATION
        (Exact name of small business issuer as specified in its charter)

              New York                                      14-1568099
    -------------------------------                       -------------
    (State or other jurisdiction of                       (IRS Employer
     incorporation or organization)                     Identification No.)

                          2012 Rt. 9W, Milton, NY 12547
               (Address of Principal Executive Offices) (Zip Code)

           Issuer's telephone no., including area code: (845) 795-2020

Indicate by check mark whether the small business 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
small business issuer was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.

                                YES |X|  NO |_|

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

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

                                                         Outstanding as of
            Class                                        October 11, 2004
            -----                                        ----------------

Common Stock, par value $.01 per share                       11,297,394
<PAGE>

                              SONO-TEK CORPORATION


                                      INDEX

Part I - Financial Information                                             Page

Item 1 - Consolidated Financial Statements:                                1 - 3

Consolidated Balance Sheets - August 31, 2004 (Unaudited) and
      February 29, 2004                                                        1

Consolidated Statements of Operations - Six Months and Three Months
      Ended August 31, 2004 and 2003 (Unaudited)                               2

Consolidated Statements of Cash Flows - Six Months Ended
      August 31, 2004 and 2003 (Unaudited)                                     3

Notes to Consolidated Financial Statements                                 4 - 7

Item 2 - Management's Discussion and Analysis or Plan of Operations       8 - 11

Item 3 - Controls and Procedures                                              12

Part II - Other Information                                              13 - 14

Signatures and Certifications                                             15 -18
<PAGE>

                              SONO-TEK CORPORATION
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                     ASSETS

                                                                    August 31,    February 29,
                                                                      2004            2004
Current Assets                                                      Unaudited       Audited
                                                                   -----------    -----------
<S>                                                                <C>            <C>
     Cash and cash equivalents                                     $   276,060    $   189,987
     Accounts receivable (less allowance of $21,046 and $13,675
       At August 31 and February 29, respectively)                     824,949        813,835
     Inventories                                                     1,295,676        905,469
     Prepaid expenses and other current assets                          33,318         83,599
     Deferred tax asset                                                117,000        117,000
                                                                   -----------    -----------
                  Total current assets                               2,547,003      2,109,890
                                                                   -----------    -----------
Equipment, furnishings and leasehold improvements
  (less accumulated depreciation of $692,079 and
  $675,795 at August 31 and February 29, respectively)                  56,797         57,835
Intangible assets, net                                                  27,442         31,050
Other assets                                                             7,171          6,542
Deferred tax asset                                                     468,000        468,000
                                                                   -----------    -----------

TOTAL ASSETS                                                       $ 3,106,413    $ 2,673,317
                                                                   ===========    ===========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
     Accounts payable                                              $   347,567    $   245,981
     Accrued expenses                                                  538,917        441,117
     Line of Credit                                                    312,000        312,000
     Subordinated mezzanine debt                                            --        282,144
 Current maturities of long term debt                                   42,353         42,189
                                                                   -----------    -----------
                  Total current liabilities                          1,240,837      1,323,431

Subordinated mezzanine debt                                            600,000        557,856
Long term debt, less current maturities                                  2,846         16,960
                                                                   -----------    -----------
                  Total liabilities                                  1,843,683      1,898,247
                                                                   -----------    -----------

Commitments and Contingencies                                               --             --
Put Warrants                                                           188,223        188,223

Stockholders' Equity
     Common stock, $.01 par value; 25,000,000 shares authorized,
       11,297,394 and 10,494,156 shares issued and outstanding
       at August 31 and February 29, respectively                      112,975        104,942
     Additional paid-in capital                                      6,603,339      6,465,436
     Accumulated deficit                                            (5,641,807)    (5,983,531)
                                                                   -----------    -----------
                  Total stockholders' equity                         1,074,507        586,847
                                                                   -----------    -----------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                         $ 3,106,413    $ 2,673,317
                                                                   ===========    ===========
</TABLE>

                     See notes to consolidated financial statements.


                                       1
<PAGE>

                              SONO-TEK CORPORATION

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                             Six Months Ended August 31,    Three Months Ended August 31,
                                             ---------------------------    -----------------------------
                                                      Unaudited                       Unaudited
                                                 2004           2003             2004           2003
                                             --------------------------      --------------------------

<S>                                          <C>            <C>              <C>            <C>
Net Sales                                    $ 2,721,369    $ 1,449,257      $ 1,514,937    $   690,735
Cost of Goods Sold                             1,222,247        601,074          684,156        281,556
                                             -----------    -----------      -----------    -----------
                  Gross Profit                 1,499,122        848,183          830,781        409,178
                                             -----------    -----------      -----------    -----------

Operating Expenses
Research and product development costs           227,848        182,829          131,712         89,572
Marketing and selling expenses                   505,808        287,970          271,455        138,712
General and administrative costs                 369,215        275,129          193,934        139,422
                                             -----------    -----------      -----------    -----------

                  Total Operating Expenses     1,102,871        745,928          597,101        367,706
                                             -----------    -----------      -----------    -----------

Operating Income                                 396,251        102,255          233,680         41,472

Interest Expense                                 (58,332)       (92,205)         (26,971)       (41,495)
Interest and Other Income                          3,805          7,855              405          6,882
                                             -----------    -----------      -----------    -----------

Income from Operations Before Income Taxes       341,724         17,905          207,114          6,859

Income Tax Expense                                     0          1,110                0          1,110
                                             -----------    -----------      -----------    -----------

Net Income                                   $   341,724    $    16,795      $   207,114    $     5,749
                                             ===========    ===========      ===========    ===========


Basic Earnings Per Share                     $      0.03    $      0.00      $      0.02    $      0.00
                                             ===========    ===========      ===========    ===========

Diluted Earnings Per Share                   $      0.03    $      0.00      $      0.02    $      0.00
                                             ===========    ===========      ===========    ===========

Weighted Average Shares - Basic               11,014,757      9,200,161       11,176,044      9,200,161
                                             ===========    ===========      ===========    ===========

Weighted Average Shares - Diluted             13,064,644     10,242,454       13,151,455     10,302,258
                                             ===========    ===========      ===========    ===========
</TABLE>

                 See notes to consolidated financial statements.


                                       2
<PAGE>

                              SONO-TEK CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                         Six Months Ended August 31,
                                                                         ---------------------------
                                                                                   Unaudited
                                                                               2004        2003
                                                                           -----------------------

<S>                                                                         <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net Income                                                               $ 341,724    $  16,795

   Adjustments to reconcile net income to net cash provided by (used in)
      operating activities:
         Depreciation and amortization                                         20,239       25,638
         Imputed interest expense                                                   0       17,608
         Provision for doubtful accounts                                        6,000       (4,629)
         Decrease (Increase) in:
             Accounts receivable                                              (17,114)     (54,013)
             Inventories                                                     (390,207)     (66,746)
             Prepaid expenses and other current assets                         50,282       34,846
         Decrease in:
             Accounts payable and accrued expenses                            199,385      (26,397)
                                                                            ---------    ---------
       Net Cash Provided By (Used In) Operating Activities                    210,309      (56,898)
                                                                            ---------    ---------

CASH FLOW FROM INVESTING ACTIVITIES:
   Patent Application Costs                                                      (346)           0
   Purchase of equipment and furnishings                                      (15,246)      (4,274)
   Other                                                                         (630)           0
                                                                            ---------    ---------
       Net Cash Used In Investing Activities                                  (16,222)      (4,274)
                                                                            ---------    ---------

CASH FLOW FROM FINANCING ACTIVITIES:
   Proceeds from exercise of stock options and warrants                        99,236            0
   Proceeds from issuance of stock                                             26,064            0
   Conversion of debt to equity                                                20,636            0
   Loan payments/exchanges                                                    (20,636)           0
   Repayments of notes payable and loans                                     (233,314)     (28,677)
                                                                            ---------    ---------
          Net Cash Used In Financing Activities                              (108,014)     (28,677)
                                                                            ---------    ---------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                           86,073      (89,849)

CASH AND CASH EQUIVALENTS
   Beginning of period                                                        189,987      265,658
                                                                            ---------    ---------
   End of period                                                            $ 276,060    $ 175,809
                                                                            =========    =========

SUPPLEMENTAL DISCLOSURE:
   Interest paid                                                            $  59,910    $  68,675
                                                                            =========    =========
</TABLE>

                     See notes to consolidated financial statements.


                                       3
<PAGE>

                              SONO-TEK CORPORATION
                   Notes to Consolidated Financial Statements
                    Six Months Ended August 31, 2004 and 2003


NOTE 1: 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"), that the Company acquired on August 3, 1999. SCS is
a non-operating entity. All significant intercompany accounts and transactions
are eliminated in consolidation.

Interim Reporting - The attached summary consolidated financial information does
not include all disclosures required to be included in a complete set of
financial statements prepared in conformity with accounting principles generally
accepted in the United States of America. Such disclosures were included with
the financial statements of the Company at February 29, 2004, and included in
its report on Form 10-KSB. Such statements should be read in conjunction with
the data herein.

The financial information reflects all adjustments, which, in the opinion of
management, are necessary for a fair presentation of the results for the interim
periods presented. The results for such interim periods are not necessarily
indicative of the results to be expected for the year.

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 and No.
148 (SFAS 123 and SFAS 148), "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 pro-forma disclosures. The
Company has elected to provide the related pro-forma disclosures utilizing an
intrinsic value method of accounting for such stock based compensation.

The estimated fair value of options granted during Fiscal Year 2004 was $.22 per
share and the estimated fair value of options granted during the six months
ended August 31, 2004 was $.98 per share. The Company applies Accounting
Principles Board Opinion No. 25 and related interpretations in accounting for
the 2003 and 1993 Plans. Had compensation cost for the Company's stock option
plan been determined based on the intrinsic value at the option grant dates for
awards in accordance with the accounting provisions of SFAS 123, the Company's
net income and basic and diluted earnings per share for the three and six month
periods ended August 31, 2004 and 2003 would have been changed to the pro forma
amounts indicated below:


                                       4
<PAGE>

                                         Six Months Ended    Three Months Ended
                                             August 31,          August 31,
                                          2004       2003      2004      2003
                                          ----       ----      ----      ----
Net Profit:
     As reported                        $341,724   $16,795   $207,114   $5,749
     Deduct: Total stock based
     employee compensation
     under intrinsic value based
     method for all awards,
     net of tax effects                   18,720     3,955      9,360    1,998
                                        --------   -------   --------   ------
Pro forma                               $323,004   $12,840   $197,754   $3,412
                                        ========   =======   ========   ======
Basic and diluted earnings per share:
     As reported                        $   0.03   $  0.00   $   0.02   $ 0.00
     Pro forma                          $   0.02   $  0.00   $   0.02   $ 0.00

Intangible Assets - Include cost of patent applications that are deferred and
charged to operations over seventeen years for domestic patents and twelve years
for foreign patents. The accumulated amortization is $43,310 and $41,132 at
August 31, 2004 and February 29, 2004, respectively.

Deferred financing fees of $35,523 at August 31, 2004 are being amortized over
the term of the related debt. Accumulated amortization was $33,152 at August 31,
2004.

NOTE 2: INVENTORIES

Inventories at August 31, 2004 are comprised of:

         Finished goods                      $  393,889
         Work in process                        629,842
         Consignment                              5,379
         Raw materials and subassemblies        501,315
                                             ----------
                 Total                        1,530,425
         Less: Allowance                       (234,749)
                                             ----------
         Net inventories                     $1,295,676
                                             ==========

NOTE 3: RELATED PARTY TRANSACTIONS

Subordinated Mezzanine Debt

One of the Company's directors and a significant shareholder and another
significant shareholder are participants with Norwood Venture Corporation in its
subordinated mezzanine financing.


                                       5
<PAGE>

NOTE 4: SUBORDINATED MEZZANINE DEBT

Norwood Ventures Corporation, a mezzanine lender to the Company, loaned $850,000
to the Company at various times from September 30, 1999 to April 30, 2001.
Coincident with these loans were the issuance of 2,077,777 detachable stock
purchase warrants (the "Put Warrants") to purchase the Company's common stock at
values from $.10 to $.15 per share. During the fiscal year ended February 29,
2004, 24,444 warrants were exercised and $10,000 of the principal of this loan
was repaid. During the six months ended August 31, 2004, the Company exchanged
49,133 shares of common stock valued at $.42 per share for a reduction of
$20,636 of this debt. Additionally, $219,364 of principal was repaid during the
six month period ended August 31, 2004. The outstanding balance of the loan was
$600,000 at August 31, 2004 and 2,053,333 warrants with an aggregate exercise
price of $272,556 remain outstanding. Monthly principal repayments of $42,000
per month are required commencing November 30, 2005 until the unpaid balance of
the loan is repaid. The Company, at its option can make prepayments at anytime.

The Put Warrant holders may, commencing after the delivery of the February 29,
2008 audited financial statements and terminating one year thereafter, require
the Company to purchase such warrants at a price equal to the result calculated
by subtracting the aggregate exercise of the warrants to the extent remaining
from the product of the greatest of:

      a)    the fair market value of the Company as determined by an independent
            appraiser as at the end of the Company's fiscal year end February
            29, 2008 (the "Company's 2008 Fiscal Year"),

      b)    five times EBITDA for the Company's 2008 Fiscal Year or, if higher,
            average EBITDA for such year and the fiscal year of the Company
            immediately prior to such year, or

      c)    the book value of the Company as at the end of the Company's 2008
            Fiscal Year,

multiplied by the fraction of (the "Put Fraction") the numerator of which is the
total number of shares of common stock the Put Warrant holders would own upon
such exercise of the warrants and the denominator of which would be the total
number of common shares outstanding upon the exercise of all equity rights to
acquire common stock.

Depending on the fair value of the Company based on the above computations from
the Company's 2008 Fiscal Year results will determine if the Company will be
required, assuming such Put Warrant holders exercise their put warrants, to pay
up to $272,556 for the warrants. These warrants are exercisable for the purchase
of up to 2,053,333 shares of common stock.

The put provision above may be terminated if the Company's stock trades at an
average daily volume of 50,000 shares and at an average price above $1.50 per
share for a period of 180 consecutive days.


                                       6
<PAGE>

NOTE 6: STOCK OPTIONS AND WARRANTS

Stock Options - Under the 2003 Stock Incentive Plan, as amended ("2003 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. The 2003 Plan supplemented and replaced the 1993 Stock Incentive Plan
(the "1993 Plan"), under which no further options may be granted. Options
granted under the 1993 Plan expire on various dates through 2013. As of August
31, 2004, there were 278,612 options outstanding under the 1993 Plan.

During Fiscal Year 2004, the Company granted options for 20,000 shares
exercisable at $.19 per share to a director of the Company and options for
10,000 shares at $.25 to a consultant to the Company. There were no options
granted to employees of the Company. During Fiscal Year 2004, compensation
expense of $1,564 was recognized based on the fair value of the options granted
to a consultant. During the six month period ended August 31, 2004, 55,000 stock
options exercisable at $.95 per share were granted to officers of the Company
and 41,500 options exercisable at prices from $.95 to $1.21 per share were
granted to qualified employees of the Company.

Under both the 1993 and 2003 Stock Incentive Plans, 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 plans
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.

Warrants - There were no warrants issued during Fiscal 2004 and 2005.

NOTE 7: EARNINGS PER SHARE

The denominator for the calculation of diluted earnings per share at August 31,
2004 and 2003 are calculated as follows:

                                              August 31, 2004    August 31, 2003
                                              ---------------    ---------------

Denominator for basic earnings per share         11,014,757        9,200,161

    Dilutive effect of warrants                   1,847,222          931,944
    Dilutive effect of stock options                202,665          110,349
                                                 ----------       ----------

Denominator for dilutive earnings per share      13,064,644       10,242,454
                                                 ==========       ==========


                                       7
<PAGE>

                              SONO-TEK CORPORATION

MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN 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.

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

Overview

Sono-Tek has developed a unique and proprietary series of ultrasonic atomization
nozzles, which are being used in an increasing variety of electronic, medical,
industrial, and nanotechnology applications. These nozzles are electrically
driven and create a fine, uniform, low velocity spray of atomized liquid
particles, in contrast to common pressure nozzles. These characteristics create
a series of commercial applications that benefit from the precise, uniform, thin
coatings that can be achieved. When combined with significant reductions in
liquid waste and less overspray than can be achieved with ordinary pressure
nozzle systems, there is lower environmental impact.

The Company has a well established position in the electronics industry with its
SonoFlux spray fluxing equipment. It saves customers from 40% to 80% of the
liquid flux required to solder printed circuit boards over more labor intensive
methods, such as foam fluxing. Less flux equates to lower material cost, fewer
chemicals in the workplace, and less clean-up. Also, the SonoFlux equipment
reduces the number of soldering defects, which reduces the level of rework. The
Company experienced a significant recovery of this market towards the latter
part of Fiscal Year 2004 and to date into Fiscal Year 2005, resulting in
increased orders for the Company's equipment.

In the past two years, the Company has focused engineering resources on the
medical device market, with emphasis on providing coating solutions for the new
generation of drug coated stents. The Company has sold many specialized
ultrasonic nozzles and AccuMist(TM) and Micromist stent coating systems to large
pharmaceutical and medical device customers. Sono-Tek's stent coating systems
are superior compared to pressure nozzles in their ability to uniformly coat the
very small arterial stents without creating webs or gaps in the coatings. The


                                       8
<PAGE>

Company has begun to sell a bench-top, fully outfitted stent coating system to a
wide range of customers that are manufacturing stents and/or applying coatings
to be used in developmental trials. The Company has developed a unique patented
vacuum-based ultrasonic system capable of uniformly coating batches of stents
with anti-restenosis coatings, and is now offering this technology to selected
manufacturers for licensing.

The Company also committed engineering resources to develop a general industrial
coating product, the WideTrack coating system, which is finding increasing
applications in the glass, food and textile manufacturing industries. The
WideTrack is saving customers money by reducing the use of materials and
lessening the environmental impact by significantly reducing overspray, which is
common with other types of coating systems.

In conclusion, the Company's sales levels have increased as the result of an
improved economy, product development efforts, and related marketing thrusts
which have had the effects of improving net income, reducing debt, and bringing
shareholders' equity from a deficit position to a positive position.

Liquidity and Capital Resources

The Company's working capital increased $520,000 from a working capital of
$786,000 at February 29, 2004 to $1,306,000 at August 31, 2004. The Company's
current ratio is 2.05 to 1 at May 31, 2004, as compared to 1.59 to 1 at February
29, 2004. The Company's debt to equity ratio has improved from 3.23 to 1 at
February 29, 2004 to 1.72 to 1 at August 31, 2004. The increase in working
capital and improvement in the financial ratios was a result of a reduction in
the current maturity of subordinated mezzanine debt of $282,000, an increase in
inventories of $390,000, an increase in accounts payable and accrued expenses of
$199,000 and an increase in cash of $87,000 partially offset by a decrease in
prepaid assets of $50,000. Stockholders' equity increased $488,000 from $587,000
at February 29, 2004 to $1,075,000 at August 31, 2004. The increase in
stockholders' equity was the result of the net profit of $342,000 for the six
months ended August 31, 2004, stock option exercises of $99,000, stock issuance
of $26,000 and conversion of debt to equity of $21,000.

Inventory increased $390,000 or 43% from $ 905,000 to $1,296,000 as the result
of the large influx of orders received during the six months ended August 31,
2004.

The Company currently has a $350,000 line of credit with a bank, in the form of
a demand note. The loan is collateralized by accounts receivable, inventory and
all other personal property of the Company and is guaranteed by the former Chief
Executive Officer of the Company. As of August 31, 2004 and February 29, 2004,
the outstanding balance was $312,000. New borrowings are presently precluded
under this note.

The Company and its mezzanine lender, Norwood Venture Corporation ("Norwood"),
reached an agreement during May 2004 whereby principal payments under the
$840,000 loan would be deferred until November 2005. At that time, Norwood would
be repaid over 20 months at $42,000 per month. As a result of this agreement,
$282,000 of current debt was reclassified as long-term. During the six months


                                       9
<PAGE>

ended August 31, 2004, the Company prepaid $220,000 of this loan. Additionally,
$20,000 of this loan was converted to 49,000 shares of the Company's common
stock by Norwood on May 28, 2004.

Results of Operations

For the six months ended August 31, 2004, the Company's sales increased
$1,272,000 to $2,721,000 as compared to $1,449,000 for the six months ended
August 31, 2003. For the three months ended August 31, 2004, the Company's sales
increased $824,000 to $1,515,000 as compared to $691,000 for the three months
ended August 31, 2003. The increases were principally the result of increased
fluxer sales, the sale of a large cleaning system, and sales of new products,
such as Accumist stent coaters, spray dryers using SonoDry nozzles and WideTrack
systems.

The Company's gross profits increased $651,000 to $1,499,000 for the six months
ended August 31, 2004 from $848,000 for the six months ended August 31, 2003.
The gross profit margin was 55.1% of sales for the six months ended August 31,
2004 as compared to 58.5% of sales for the six months ended August 31, 2003. The
Company's gross profit increased $422,000 to $831,000 for the three months ended
August 31, 2004 from $409,000 for the three months ended August 31, 2003. The
gross profit margin was 54.8% of sales for the three months ended August 31,
2004 as compared to 59.2% of sales for the three months ended August 31, 2003.
The changes in gross margin occurred as the result of the changing mix of
products in each period.

Research and product development costs increased $45,000 to $228,000 for the six
months ended August 31, 2004 from $183,000 for the six months ended August 31,
2003 and $42,000 to $132,000 for the three months ended August 31, 2004 from
$90,000 for the three months ended August 31, 2003. The increases were
principally due to an increase in engineering personnel and increased purchases
of research and development materials in the current periods.

Marketing and selling costs increased $218,000 and $133,000 for the respective
six and three month periods ended August 31, 2004 as compared to the same
periods ended August 31, 2003. The increases were due principally to increased
commissions, trade show costs and increased labor and fringe benefit costs.

General and administrative costs increased $94,000 and $55,000 for the
respective six and three month periods ended August 31, 2004 as compared to the
same periods ended August 31, 2003. The increase was due principally to
increased payroll costs, increased legal, consulting and accounting costs

Interest expense decreased $34,000 to $58,000 for the six months ended August
31, 2004 from $92,000 for the six months ended August 31, 2003. Interest expense
decreased $15,000 to $27,000 for the three months ended August 31, 2004 from
$42,000 for the three months ended August 31, 2003. The decrease is primarily
due to reduced interest and amortization on the Norwood loans and reduced
interest on related party and bank loans.


                                       10
<PAGE>

The Company's net income was $342,000 and $207,000 for the six and three month
periods ended August 31, 2004 as compared to $17,000 and $6,000 for the six and
three month periods ended August 31, 2003.

The Company's backlog of firm orders increased from $375,000 at February 29,
2004 to $1,007,000 at August 31, 2004. All of these orders are deliverable
before the end of the Company's current fiscal year which is February 28, 2005.

Critical Accounting Policies

The discussion and analysis of the Company's financial condition and results of
operations are based upon the 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
the Company to make estimates and judgments that affect the reported amount of
assets and liabilities, revenues and expenses, and related disclosure on
contingent assets and liabilities at the date of the 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 judgments and uncertainties, and may potentially result in
materially different results under different assumptions and conditions. The
Company believes that critical accounting policies are limited to the one
described below. For a detailed discussion on the application of this and other
accounting policies see note 2 to the Company's consolidated financial
statements included in Form 10-KSB for the year ended February 29, 2004.

Accounting for Income Taxes

As part of the process of preparing the Company's consolidated financial
statements, the Company is required to estimate its income taxes. Management
judgment is required in determining the provision on its deferred tax asset.
During the fourth quarter of the year ended February 29, 2004, the Company
reduced the valuation reserve for the deferred tax asset resulting from the net
operating losses carried forward due to the Company having demonstrated
consistent profitable operations. In the event that actual results differ from
these estimates, the Company may need to again adjust such valuation reserve.

Impact of New Accounting Pronouncements

There were no new issuances which affected the Company during this quarter.


                                       11
<PAGE>

                              SONO-TEK CORPORATION
                             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,
Chief Executive Officer and President (principal executive and accounting
officer) of the Company, has evaluated the Company's disclosure controls and
procedures as of August 31, 2004. Based on his evaluation, Dr. Coccio has
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 August 31, 2004.
There were no significant deficiencies or material weaknesses, and therefore
there were no corrective actions taken.


                                       12
<PAGE>

                           PART II - OTHER INFORMATION

      Item 1. Legal Proceedings

              None

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

              During the three months ended August 31, 2004 the Company sold
              25,000 shares of its common stock to a consultant at $.93 per
              share for $23,250. Additionally, the Company issued 7,035 shares
              of common stock to another consultant for services rendered. These
              issuances were deemed exempt form registration under Securities
              Act of 1933 in reliance upon Section 4(2) of the Securities Act.

      Item 3. Defaults Upon Senior Securities

              None

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

              The following matters were voted upon at the Company's annual
              meeting of shareholders held on August 19, 2004.

                  1.    The election of two (2) directors of the Company to
                        serve until the Company's 2005 annual meeting of
                        shareholders.

                                                   For              Against
                                                   ---              -------
                  Edward J. Handler III         9,531,325           15,800
                  Philip Strasburg              9,531,325           15,800

                              There were no broker non-votes.

                  2.    The election of two (2) directors of the Company to
                        serve until the Company's 2006 annual meeting of
                        shareholders.

                                                   For              Against
                                                   ---              -------
                  Donald F. Mowbray             9,531,325           15,800
                  Samuel Schwartz               9,530,325           16,800

                              There were no broker non-votes.

                  3.    The ratification of the appointment of Radin Glass & Co.
                        as the Company's independent auditors for the fiscal
                        year ending February 28, 2005.

                              For 9,411,624; Against 119,701; Abstained 15,800
                              There were no broker non-votes.


                                       13
<PAGE>

      Item 5. Other Information

              None

      Item 6. Exhibits and Reports on Form 8-K

              (a)   Exhibits

                  31  - Rule 13a - 14(a)/15d - 14(a) Certification

                  32  - Certification Pursuant to 18 U.S.C. Section 1350, as
                        adopted pursuant to section 906 of the Sarbanes-Oxley
                        Act of 2002.

              (b)   Reports on Form 8-K

                  The Company filed a report on Form 8-K on July 9, 2004
                  relating to a press release on the results of operations for
                  the quarter ended May 31, 2004.

                  The Company filed a report on Form 8-K on July 22, 2004
                  relating to a press release on the installation and sale of
                  its WideTrack coating system for the production of float
                  glass.

                  The Company filed a report on Form 8-K on August 19, 2004 to
                  report on the results of its Annual Meeting of Shareholders
                  and remarks made by Christopher L. Coccio, President and CEO.

                  The Company filed a report on Form 8-K on September 27, 2004
                  relating to a press release announcing the Company being
                  appointed exclusive distributor for EVS International products
                  in the United States and Canada.


                                       14
<PAGE>

                                   SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

Dated: October 12, 2004


                                          SONO-TEK CORPORATION
                                               (Registrant)



                                    By: /s/ Christopher L. Coccio
                                        -----------------------------------
                                        Christopher L. Coccio
                                    Chief Executive Officer and President
                                    (principal executive and accounting officer)


                                       15


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31
<SEQUENCE>2
<FILENAME>ex-31.txt
<TEXT>

                                                                      Exhibit 31


                      RULE 13a-14/15d - 14(a) CERTIFICATION

I, Christopher L. Coccio, Chief Executive Officer and President (principal
executive and accounting officer), certify that:

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

2.    Based on my knowledge, this quarterly 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 quarterly report;

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

4.    I am responsible for establishing and maintaining disclosure controls and
      procedures (as defined in Exchange Act Rules 13a-15(e) and 15d - 15(e) and
      internal control over financial reporting (as defined in Exchange Act
      Rules 13a-15(f) and 15d-15(f) for the small business issuer and I have:

      a)    Designed such disclosure controls and procedures, or caused such
            disclosure controls and procedures to be designed under my
            supervision, to ensure that material information relating to the
            small business issuer, including its consolidated subsidiaries, is
            made known to me by others within those entities, particularly
            during the period in which this report is being prepared;

      b)    Designed such internal control over financial reporting, or caused
            such internal control over financial reporting to be designed under
            my supervision, to provide reasonable assurance regarding the
            reliability of financial reporting and the preparation of financial
            statements for external purposes in accordance with generally
            accepted accounting principles;

      c)    Evaluated the effectiveness of the small business issuer's
            disclosure controls and procedures and presented in this report my
            conclusions about the effectiveness of disclosure controls and
            procedures, as of the end of the period covered by this report based
            on such evaluation; and

      d)    Disclosed in this report any change in the small business issuer's
            internal control over financial reporting that occurred during the
            small business issuer's most recent fiscal quarter that has
            materially affected, or is reasonably likely to materially affect,
            the small business issuer's internal control over financial
            reporting; and


                                       16
<PAGE>

5.    I have disclosed, based on my most recent evaluation of internal control
      over financial reporting, to the small business issuer's auditors and the
      audit committee of the small business issuer's board of directors:

      a)    All significant deficiencies and material weaknesses in the design
            or operation of internal control over financial reporting which are
            reasonably likely to adversely affect the small business issuer's
            ability to record, process, summarize and report financial
            information; and

      b)    Any fraud, whether or not material, that involves management or
            other employees who have a significant role in the small business
            issuer's internal controls over financial reporting.

Date: October 12, 2004

/s/ Christopher L. Coccio
Christopher L. Coccio
Chief Executive Officer and President
(principal executive and accounting officer)


                                       17

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32
<SEQUENCE>3
<FILENAME>ex-32.txt
<TEXT>

                                                                      Exhibit 32


                            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 Quarterly Report of Sono-Tek Corporation on Form 10QSB
for the period ended August 31, 2004 as filed with the Securities and Exchange
Commission on the date hereof (the "Report"). I, Christopher L. Coccio, Chief
Executive Officer and President (principal executive and accounting officer) of
the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to
section 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.

Date: October 12, 2004

/s/ Christopher L. Coccio
Christopher L. Coccio
Chief Executive Officer and President
(principal executive and accounting officer)


                                       18

</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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