Edgar Filing: SONO TEK CORP

UNITED STATES
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 29, 2008

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. |_|

Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). YES |_| NO |X|

The Issuer had revenues of $5,698,602 for the Fiscal Year ended February
29, 2008.

As of May 19, 2008, the aggregate market value of the Registrant's Common
Stock held by non-affiliates of the Registrant was approximately $13,361,709
computed by reference to the average of the bid and asked prices of the Common
Stock on said date, which average was $1.10.

The Registrant had 14,361,091 shares of Common Stock outstanding as of May
19, 2008.

PART I

ITEM 1 DESCRIPTION OF BUSINESS

Organization and Business

Sono-Tek Corporation (the "Company", "Sono-Tek", "We" or "Our") 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 key advantage of these nozzle systems is that they use much less liquid to
attain the required coatings on glass, textiles, food and food packaging,
circuit boards, medical devices and many other coating applications. This
advantage translates into lower costs for materials, less water consumption,
less energy required for subsequent drying operations and less release into the
environment of spray that would normally bounce back with competitive nozzle
systems. These factors are increasingly important at a time of rising commodity
and energy costs and supply limitations.

We operate in one business segment, spraying and coating systems. The spraying
systems business has had periods of sales growth and financial stability, but
has had sales declines when the electronics industry, a principal market for our
products, has had downturns due to lower levels of printed circuit boards being
made. To offset this, we have diversified our product offerings to provide
coating systems to medical device manufacturers, to provide spray drying systems
for nanotechnology applications, and to provide wide area industrial precision
coating equipment, including the manufacture of float glass, textiles and food
products and packaging.

Product Development

We have core technology and have developed and market the following products:

1. SonoFlux 2000F - 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 2000F are original equipment manufacturers (OEMs) that
produce their own electronic circuit boards.

2. SonoFlux 2000FP, SonoFlux XL and SonoFlux EZ- 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. They are designed to be used by either OEMs or
contract manufacturers of electronic circuit assemblies. All
SonoFlux products provide substantial benefits in terms of reduced
use of fluxing agents, reduced need for maintenance and reduced cost
of operations versus foam fluxers and competitive pressure nozzle
fluxing products.

3. MediCoat and Medicoat II for stent coating - table-top,
fully-contained systems designed to apply thin layers of polymer and
drug coatings to arterial stents with high precision. The system
incorporates motion control of the stent during the coating process
and produces coatings having excellent uniformity. The MediCoat
systems use either the Accumist or MicroMist nozzle systems, which
are precision nozzle configurations used in applications where
precise patterns of lines and dots are required. These products
provide customers the ability to achieve a minimal amount waste of
expensive drug polymer coatings and high uniformity of drug addition
from stent to stent.

4. WideTrack - Wide area modular coating system - One module can cover
substrates from 6 inches to 24 inches wide, depending on the
application. Much greater widths can be achieved by linking modules
together, and these systems have been applied in glass lines of up
to four meters wide. A number of systems have been sold over the
past four years, and this application holds promise for the future
due to cost and environmental savings demonstrated at customer
sites. It uses non-clogging ultrasonic atomizing nozzles to produce
a low velocity, highly controllable spray. It is designed to be used
in applications that require efficient web-coating or wide area
spraying capability. The WideTrack System offers significant
advantages over conventional pressure-spray methods in a broad range
of applications such as non-woven fabrics, float glass, or
odd-shaped industrial or consumer products. Since the ultrasonic
spray can be easily controlled, it is possible to use less
chemicals, water and energy in applying coatings to glass, textiles,
food products and packaging materials than with traditional nozzles.
This also results in reduced environmental impact due to less
overspray. We recently sold our first WideTrack coater for
application in a major textile finishing plant. The sale was based
on the projected savings of chemicals, water and energy, which could
provide a payback in less than a year for the capital equipment.

5. Advanced Energy Applications - We now offer a line of equipment for
applications involving coatings for fuel cell membranes and solar
energy panels. This equipment is offered in bench-top configurations
as our Exactacoat product and standalone as our Flexicoat product.
Both have seen increasing sales in these growing industries,
especially when combined with a novel ultrasonic syringe pump to
agitate and suspend the carbon based suspensions needed in fuel cell
applications (patent pending).

Other Product Offerings

We have an exclusive distribution relationship with EVS International.
Ltd. ("EVS"), a U.K. Company, to distribute EVS's line of solder recovery
systems and spares parts. The territory for this distribution relationship
is the United States and Canada. EVS manufactures the EVS6000, EVS3000
and the EVS1000 solder recovery systems which are used to reclaim solder
from the dross which accumulates in the wave-solder equipment of circuit
board manufacturers. The customer base for distribution of these systems
is synergistic with Sono-Tek's existing customer base for spray fluxer
sales. Sales of EVS products were approximately 7% of our total revenues
for the current fiscal year ended February 29, 2008. We plan to continue
the distribution of EVS's products.

We have recently released a new line of Laboratory Ultrasonic Spray Drying
Systems - The SonoDry Ultrasonic Spray Dryer. This new spray dryer is
available in three sizes, providing the ability to choose the proper size
machine for differing requirements. All SonoDry Spray Dryers are supplied
with Sono-Tek's unique non-clogging ultrasonic atomizing nozzle
incorporated into them. SonoDry systems also have the ability to use a
traditional twin fluid air atomizing nozzle system as well. Nozzle
requirements can be specified by the customer depending on application
needs. The machines can handle both aqueous and solvent based liquids. All
systems include software that allows for recipe storage and complete data
logging of all system functions. The SonoDry series of spray dryers is of
particular importance to product and process developers in the following
industries: pharmaceuticals (e.g. for drug actives and intermediates,
enzymes and low molecular weight proteins), foods (e.g. for
nutriceuticals, herbal extracts and flavors) and specialty chemicals (e.g.
for fragrances, cosmetics ingredients and nano-scale particles).

Manufacturing

We purchase 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 our products are readily
available from many different domestic suppliers. We provide a limited warranty
on all of our products covering parts and labor for a period of one year from
the date of sale. We have a business and quality control system that meets the
qualifications of ISO 9001/2000. We were ISO 9001 registered in September 1998
and we have been recertified annually since then.

Research and Development

We believe that our long-term growth and stability is linked to the development
and release of products that provide solutions to customer needs across a wide
spectrum of industries, while advancing the utility of our core technology. We
expended approximately $796,000 and $858,000 for Fiscal Years 2008 and 2007,
respectively, on new engineering and product development. We recently were
awarded a cost sharing contract from New York State Energy Research and
Development Authority to develop ultrasonic spray coating systems for
biodegradable films used in the food industry. The intention is to develop
equipment that can apply nanotechnology based coatings to limit the permeation
of oxygen and moisture, but which will decompose quickly in a landfill.

Patents and Licenses

Our business is based in part on the technology covered by our United States
patents. We also rely on unpatented know-how in the design and production of our
nozzle systems. We have executed non-disclosure and non-compete agreements with
all of our employees to safeguard our intellectual property. We execute
reciprocal non-disclosure agreements with our key customers to safeguard any
jointly developed intellectual property. We also have an exclusive license from
Cornell University for a patented vacuum deposition system using our ultrasonic
nozzles.

During the fiscal year ended February 29, 2008, we have made significant
progress on building our intellectual property portfolio. We have a patent
pending covering a new design for our entire line of nozzle systems. We have
also applied for patents on the following projects:

- New air shaping technology (Chinese patent).

- New ultrasonic food processing design and process.

- New type of ultrasonic syringe pump for fuel cell liquids and other
nano particle suspensions.

In addition, the United States Patent and Trademark Office recently assigned us
a patent for a process for coating three dimensional substrates with thin
organic films and products. This process uses our ultrasonic nozzles to produce
micro-droplets in a vacuum chamber, which then produce a smooth, continuous,
uniform conformal coating on various surfaces such as cardiovascular stents,
diabetes monitors and other implantable medical devices.

Marketing and Distribution

Our products are marketed and distributed through independent sales
representatives or sales representative companies, OEMs and through an in-house
direct sales force. Many of our sales leads are generated from our Internet web
site and from attendance at major industry trade shows.

In addition to the above, we have engaged an external marketing firm to expand
awareness of our products in our targeted industries.

Competition

We operate in competitive markets in the electronics industry. We compete
against global and regional electronics manufacturers based on price, quality,
product features and follow up service. We maintain our competitive position by
providing highly effective solutions that meet our customers' requirements and
needs. In other markets, there is limited competition based on the uniqueness of
the ultrasonic technology in these applications.

Significant Customers

Two customers accounted for 3.3% and 3.2%, of our sales for Fiscal Year ended
February 29, 2008.

Foreign and Export Sales

During Fiscal Years 2008 and 2007, sales to foreign customers accounted for
approximately $2,783,000 and $3,509,000, or 49% and 51% respectively, of total
revenues.

Employees

As of February 29, 2008, we employed forty-seven full-time employees and five
part-time employees. We believe that relations with our employees are generally
good.

Available Information

Our Annual Reports on Form 10-KSB, Quarterly Reports on Form 10-QSB, Current
Reports on Form 8-K, proxy statements and amendments to those reports, are also
available free of charge on our internet website at http://www.sono-tek.com as
soon as reasonably practicable after such reports are electronically filed with
or furnished to the Securities and Exchange Commission.

ITEM 2 DESCRIPTION OF PROPERTIES

Our offices, product development, manufacturing and assembly facilities are
located in an industrial park in Milton, New York. We presently lease a 13,000
square foot building and a 2,400 square foot storage building on a month to
month basis. In addition, we have recently added 2,000 square feet of additional
office space in an adjacent building. Our 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.

We presently maintain a sales and service office in Hong Kong and an equipment
demonstration room in Shenzhen, China. The office and demonstration room are
located on the premises of one of our product distributors.

ITEM 3 LEGAL PROCEEDINGS - None.

ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

PART II

ITEM 5 MARKET FOR COMMON EQUITY, RELATED STOCKHOLDERS MATTERS AND SMALL
BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES

(a) Our 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 our Common Stock for the periods indicated.

YEAR ENDED YEAR ENDED
FEBRUARY 29, FEBRUARY 28,
2008 2007
HIGH LOW HIGH LOW
------------------ ----------------------
First Quarter $1.30 $1.08 $1.85 $1.40
Second Quarter 1.15 0.90 1.68 1.35
Third Quarter 1.09 0.79 1.60 1.25
Fourth Quarter 0.97 0.66 1.30 0.96

The above quotations are believed to represent inter-dealer quotations without
retail markups, markdowns or commissions and may not represent actual
transactions.

(b) As of May 19, 2008, there were 273 shareholders of record of our Common
Stock, according to our stock transfer agent. We estimate that we have
between 1,000 and 1,400 beneficial shareholders of our common stock. The
difference between the shareholders of record and the total shareholders
is due to stock being held in street names at our transfer agent.

(c) We have not paid any cash dividends on our Common Stock since inception.
We intend to retain earnings, if any, for use in our business and for
other corporate purposes.

(d) Recent Sales of Unregistered Securities - None

ITEM 6 MANAGEMENT'S DISCUSSION AND ANALYSIS

Forward-Looking Statements

We discuss expectations regarding our future performance, such as our business
outlook, in our annual and quarterly reports, press releases, and other written
and oral statements. These "forward-looking statements" are based on currently
available competitive, financial and economic data and our operating plans. They
are inherently uncertain, and investors must recognize that events could turn
out to be significantly different from our expectations. These factors include,
among other considerations, general economic and business conditions; political,
regulatory, competitive and technological developments affecting the Company's
operations or the demand for its products; timely development and market
acceptance of new products; adequacy of financing; capacity additions, the
ability to enforce patents and the successful implementation of the business
development program.

We undertake no obligation to update any forward-looking statement.

Overview
--------

Sono-Tek has developed a unique and proprietary series of ultrasonic atomizing
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 and lower energy use.

We have a well established position in the electronics industry with our
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 less material cost, fewer
chemicals in the workplace, and less clean-up. Also, the SonoFlux equipment
reduces the number of soldering defects, which reduces the amount of rework.

One change that has proven successful is our diversification into the medical
device market. In the past several years, we have focused engineering resources
on the medical device market, with emphasis on providing coating solutions for
the new generation of drug coated stents. We have sold a significant number of
specialized ultrasonic nozzles and MediCoat stent coating systems to large
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. We 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. We have also introduced and sold several multiple stent coaters known as
Medicoat II.

Another change that has stimulated an increase in business has been the
development of the WideTrack coating system, a broad based platform for applying
a variety of coatings to moving webs of glass, textiles, plastic, metal, food
products and packaging materials. The WideTrack is a long-term product and
market development effort. Thus far, we have made successful inroads with
WideTrack systems into the glass, medical textile (bandages), textiles and solar
and fuel cell industries. We plan to increase our marketing efforts into the
broader textile and food industry markets. This will require a continuation of
market and technology development in these areas in the years ahead. Some of
these WideTrack applications involve nano-technology based liquids. We believe
there is an excellent fit between the thin, precise films required in
nano-technology coating applications and our ultrasonic nozzle systems.

In the electronics, medical device and WideTrack coating markets, it has been
incumbent upon us to focus our attention and resources on the development of a
much greater international presence. We believe we have accomplished this and
plan to continue our marketing efforts. Our international sales have risen from
approximately 20% of total revenues in Fiscal Year 2003 to approximately 50%
today, and we expect to increase that percentage in the years ahead.

Past history shows the cyclical nature of the electronics business. This cycle,
coupled with the increasing trend toward moving electronics production offshore,
created a need to diversify. As expected, our US based electronics business has
declined this year and is approximately 33% below previous levels, as a result
of the trend toward production moving offshore, coupled with a slower economy
and the reduced competitiveness of our US based automotive customers. We have
been able to offset this reduction in US electronics sales with an increase in
our international electronics and medical device sales.

The creation of technological innovations and the expansion into new
geographical markets requires the investment of both time and capital. Although
there is no guarantee of success, we expect that over time, these newer markets
will be the basis for Sono-Tek's continued growth and will contribute to future
profitability. It is management's opinion that this strategy will be a better
one than being bound to a shrinking domestic market.

Liquidity and Capital Resources

Working Capital - Our working capital decreased $442,000 from a working capital
of $4,232,000 at February 28, 2007 to $3,790,000 at February 29, 2008. The
decrease in working capital is primarily due to the purchase of equipment and
leasehold improvements and the reclassification of $200,000 of our current
deferred tax asset to long term. Our current ratio is 4.2 to 1 at February 29,
2008, as compared to 6.8 to 1 at February 28, 2007.

Stockholders' Equity - Stockholders' equity increased $47,000 from $4,851,000 at
February 28, 2007 to $4,898,000 at February 29, 2008. The increase in
stockholders' equity is the result of net income of $11,000, and stock based
compensation of $36,000.

Operating Activities - In 2008, our operations provided $491,000 of cash
compared to $731,000 in the prior year, a decrease of $240,000 or 33%. The
current year's decrease in cash provided from operations is due to a decrease in
net income, a decrease in accounts receivable and an increase in inventories and
accounts payable and accrued expenses and the purchase of equipment and
leasehold improvements.

Investing Activities - In 2008, we used $385,000 for the purchase of capital
equipment and $8,000 for patent application costs.

Financing Activities - In 2008, our net cash used in financing activities was
$27,000, resulting from the repayments of notes payable.

We currently have a revolving credit line of $500,000 and a $150,000 equipment
purchase facility, both of these are with a bank. At February 29, 2008, there
were no outstanding borrowings under the line of credit. The revolving credit
line is collateralized by all of the assets of the Company and requires a 30 day
annual payoff, which took place between April 12, 2005 and May 12, 2005. There
have been no borrowing's under the revolving credit line after it was paid off
in May 2005.

We had outstanding borrowings of $52,000 under the equipment facility at
February 29, 2008. The borrowings have repayment terms which vary from 36 - 60
months and bear interest at rates from 6.2% to 6.6%.

Results of Operations

For the year ended February 29, 2008, our sales decreased by $1,187,000 to
$5,699,000 as compared to $6,886,000 for the year ended February 28, 2007. For
the year ended February 29, 2008, we experienced a decrease in sales of both
fluxer units and nozzles when compared to the prior year. The decrease in sales
of these units was partially offset by sales of our Spray Dryer units, EVS
Systems used for solder recovery and our programmable XYZ precision coating
units. Sales of our medical device products were flat year over year. Our sales
to customers located in Asian countries decreased by $534,000 or 32% for the
year ended February 29, 2008. Our sales to US based customers decreased by
$686,000 or 17% for the year ended February 29, 2008.

Our gross profit decreased $798,000, to $2,664,000 for the year ended February
29, 2008 from $3,462,000 for the year ended February 28, 2007. Our gross margin
percentage was 47% for the year ended February 29, 2008 compared to 50% for the
year ended February 28, 2007.

Marketing and selling costs decreased $185,000 to $1,096,000 for the year ended
February 29, 2008 from $1,281,000, for the year ended February 28, 2007. The
decrease is due to decreased sales commissions and travel expenses.

General and Administrative expense increased $25,000 to $875,000 for the year
ended February 29, 2008 from $850,000, for the year ended February 28, 2007. The
increase is primarily due to an increase in salaries resulting from an increase
in personnel.

Research and product development costs decreased $62,000 to $796,000 for the
year ended February 29, 2008 as compared to $858,000 for the year ended February
28, 2007. The decrease is due to decreased engineering materials, depreciation
expense and salaries.

Interest income increased $8,000 to $80,000 for the year ended February 29, 2008
as compared to $72,000 for the year ended February 28, 2007. Our present
investment policy is to invest excess cash in short term commercial paper with
an S & P rating of at least A1+.

For the year ended February 29, 2008, we reported an operating loss of
($102,000) compared to operating income of $474,000 for the year ended February
28, 2007, a decrease of $576,000. Net income decreased $533,000 to $11,000 or
$.00 per share on a diluted basis for the year ended February 29, 2008 from
$544,000 or $0.04 per share for the year ended February 28, 2007. The decrease
in operating income is a result of the current year's decrease in sales and the
effects of our business development plan. Our business development plan was
introduced in the third quarter and its focus is on areas where we have
demonstrated new capabilities and on areas where there appears to be more
opportunity that we could serve with additional technical and sales personnel.
The programs goal is to grow both sales and net income.

Other Income

As previously reported on Form 8-K, filed on July 5, 2005, the Company
determined that a former employee had misappropriated approximately $250,000 of
the Company's monies, primarily through unauthorized check writing from the
Company's accounts over a period of three calendar years. The Company had
previously expensed substantially all of the misappropriated funds over the
years.

The Company has recovered approximately 72% of these funds to date. The Company
has a promissory note that is being repaid by the former employee. The note has
been fully reserved for as the collectibility is questionable. As previously
discussed, the Company can offer no assurances that it will be successful in its
attempt to collect the balance of the remaining restitution.

Critical Accounting Policies

The discussion and analysis of the Company's financial condition and results of
operations are based upon the Company's 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 its critical accounting policies are limited to those
described below. For a detailed discussion on the application of these and other
accounting policies, please see the notes to the Company's consolidated
financial statements.

Accounting for Income Taxes

As part of the process of preparing the consolidated financial statements, the
Company is required to estimate income taxes. Management judgment is required in
determining the provision for the 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.

Stock-Based Compensation

The computation of the expense associated with stock-based compensation requires
the use of a valuation model. SFAS 123(R) is a new and very complex accounting
standard, the application of which requires significant judgment and the use of
estimates, particularly surrounding Black-Scholes assumptions such as stock
price volatility, expected option lives, and expected option forfeiture rates,
to value equity-based compensation. We currently use a Black-Scholes option
pricing model to calculate the fair value of stock options. We primarily use
historical data to determine the assumptions to be used in the Black-Scholes
model and have no reason to believe that future data is likely to differ
materially from historical data. However, changes in the assumptions to reflect
future stock price volatility and future stock award exercise experience could
result in a change in the assumptions used to value awards in the future and may
result in a material change to the fair value calculation of stock-based awards.
SFAS 123(R) requires the recognition of the fair value of stock compensation in
net income. Although every effort is made to ensure the accuracy of our
estimates and assumptions, significant unanticipated changes in those estimates,
interpretations and assumptions may result in recording stock option expense
that may materially impact our financial statements for each respective
reporting period.

Impact of New Accounting Pronouncements

FASB 161 - Disclosures about Derivative Instruments and Hedging Activities

In March 2008, the FASB issued FASB Statement No. 161, which amends and expands
the disclosure requirements of FASB Statement No. 133 with the intent to provide
users of financial statements with an enhanced understanding of how and why an
entity uses derivative instruments, how the derivative instruments and the
related hedged items are accounted for and how the related hedged items affect
an entity's financial position, performance and cash flows. This Statement is
effective for financial statements for fiscal years and interim periods
beginning after November 15, 2008. Management believes this Statement will have
no impact on the financial statements of the Company once adopted.

ITEM 7 FINANCIAL STATEMENTS

Our financial statements are presented on pages 24 to 40 of this Report.

ITEM 8 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE - None.

ITEM 8A CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We carried out an evaluation, under the supervision and with the participation
of the Company's management, including our Chairman & CEO (principal executive
officer) and Chief Financial Officer (principal accounting officer), of the
effectiveness of the design and operation of our disclosure controls and
procedures. Based upon that evaluation, the Company's Chief Executive Officer
and Chief Financial Officer, concluded that the Company's disclosure controls
and procedures are effective as of the period covered by this report. Disclosure
controls and procedures are controls and procedures that are designed to ensure
that information required to be disclosed in Company reports filed or submitted
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified by SEC rules and forms.

Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Exchange Act Rules
13a-15(f). Under the supervision and with the participation of our management,
including our Chairman & CEO (principal executive officer) and Chief Financial
Officer (principal accounting officer), we conducted an evaluation of the
effectiveness of our internal control over financial reporting based on the
criteria in Internal Control - Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Based on our evaluation,
management has concluded that our internal control over financial reporting was
effective as of February 29, 2008. Because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to
the risks that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may
deteriorate. This annual report does not include an attestation report of our
registered public accounting firm regarding internal control over financial
reporting pursuant to temporary rules of the Securities and Exchange Commission.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting (as defined
in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended) that
has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.

ITEM 8B OTHER INFORMATION - None.

PART III

ITEM 9 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE
GOVERNANCE; COMPIANCE WITH 16(a) OF THE EXCHANGE ACT

(a) Identification of Directors

Name Age Position with the Company
---- --- -------------------------

Christopher L. Coccio 67 Chief Executive Officer, Chairman and a
Director
Edward J. Handler, Esq. 71 Director*
Donald F. Mowbray 70 Director*
Joseph Riemer 59 President and Director
Samuel Schwartz 88 Chairman Emeritus and Director
Philip A. Strasburg, CPA 69 Director*

* Member of the Audit Committee and Compensation Committee.

The Board of Directors is divided into two classes. 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 Dr.'s Mowbray and Riemer and Messrs. Handler and Schwartz run until
the annual meeting to be held in 2008. The terms of Dr. Coccio and Mr. Strasburg
run until the annual meeting to be held in 2009, and in each case until their
respective successors are duly elected and qualified.

Audit Committee

The Company's Board of Directors has an Audit Committee composed of Edward J.
Handler, Donald F. Mowbray and Philip A. Strasburg, CPA, as Chairman of the
Audit Committee. The "audit committee financial expert" designated by the Board
is Philip A. Strasburg. Mr. Strasburg is not presently considered an independent
Director under the NASDAQ rules because he is a former employee. However, as of
July 1, 2008, Mr. Strasburg will be deemed independent for this purpose. Mr.
Strasburg was a part-time employee from February 23, 2005 to July 1, 2005,
working a total of five days.

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.

Nominating Committee

There have been no changes to the procedures by which shareholders may recommend
nominees to the Board of Directors.

Identification of Executive Officers

Name Age Position with the Company
---- --- -------------------------

Stephen J. Bagley, CPA 45 Chief Financial Officer
Christopher L. Coccio 67 Chief Executive Officer, Chairman and a
Director
Vincent F. DeMaio 70 Vice President
R. Stephen Harshbarger 40 Vice President
Joseph Riemer 59 President and Director

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.

Business Experience

STEPHEN J. BAGLEY, CPA was appointed Chief Financial Officer in June 2005. From
1987 to 1991 he worked in public accounting in various capacities. From 1992 to
2005, he held various leadership positions as Controller, Chief Financial
Officer and Vice President of Finance for companies with up to $45,000,000 in
revenues. Mr. Bagley earned a Bachelor of Science degree from The State
University of NY - College at Oneonta and an MBA from Marist College. He was
licensed as a CPA in 1990.

DR. CHRISTOPHER L. COCCIO was appointed President and Chief Executive Officer of
Sono-Tek on April 30, 2001, has been a Director of the Company since June 1998,
and was appointed Chairman in August 2007. 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. Dr. Coccio received a B.S.M.E. from Stevens Institute
of Technology, an M.S.M.E. from the University of Colorado, and a Ph.D. from
Rensselaer Polytechnic Institute in Chemical Engineering.

VINCENT F. DEMAIO has been a Vice President 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.

EDWARD J. HANDLER, III, Esq., is a retired partner from Kenyon & Kenyon, a law
firm that provided intellectual property advice to the Company. Mr. Handler
became a Director of the Company on October 1, 2004, coincident with his
retirement from his law firm. Mr. Handler has 40 years experience in all aspects
of intellectual property, including patents, trade secrets, trademarks and
copyrights, including litigation and other adversarial proceedings. Mr. Handler
is President and COO of Storm Bio, Inc., a private Delaware corporation active
in the area of therapeutics for acute inflammatory conditions. Mr. Handler is
past President of the West Point Society of New York and a past Trustee of the
Association of Graduates, U.S. Military Academy. He holds a J.D. degree from the
University of Virginia Law School and a B.S. in Engineering Science from the
United States Military Academy.

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.

DR. DONALD F. MOWBRAY has been a Director since August 2003. He has been an
independent consultant since August 1997. From September 1992 to August 1997 he
was the Manager of the General Electric Company's Corporate Research and
Development Mechanical Engineering Laboratory. From 1962 to 1992 he worked for
the General Electric Company in a variety of engineering and managerial
positions. Dr. Mowbray received a B.S. in Aeronautical Engineering from the
University of Minnesota in 1960, a Master of Science in Engineering Mechanics
from the University of Minnesota in 1962 and a Ph.D. from Rensselaer Polytechnic
Institute in Engineering Mechanics in 1968.

DR. JOSEPH RIEMER joined the Company in January 2007 as Vice President of
Engineering, became a Director in August 2007 and was appointed President in
September 2007. Dr. Riemer holds a Ph.D. in Food Science and Technology from the
Massachusetts Institute of Technology (MIT), focusing on food technology, food
chemistry, biochemical analysis, and food microbiology. His experience includes
seven years with Pfizer in its Adams Confectionary Division, where he was
Director, Global Operations Development. Dr. Riemer has also held leading
positions with several food, food ingredients, and personal care products
companies. He has served in the capacities of research and development,
operations, and general management. Prior to joining the Company, he was a
management consultant serving clients in the food, biotech and pharmaceutical
industries

SAMUEL SCHWARTZ has been a Director of the Company since August 1987, and was
Chairman of the Board from February 1993 to May 1999 and August 2001 to August
2007. 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 an M.Ch.E. from New York University in 1948.

PHILIP STRASBURG, CPA, has been a Director since August 2004. He is a retired
partner from the firm of Anchin Block and Anchin, LLP and has 40 years of
experience in auditing. He served as Audit Committee Chairman from August 2004
until February 2005, when he was elected Treasurer. Mr. Strasburg was
reappointed Audit Committee chairman in May 2005 concurrent with his resignation
as Treasurer. He was the lead partner on the Sono-Tek account from Fiscal 1994
to Fiscal 1996. Mr. Strasburg is a certified public accountant in New York
State. He has a Master of Science in economics from The London School of
Economics and Political Science and a Bachelors of Science degree from Lehigh
University, where he majored in business administration. He is a member of the
Board of Directors of the Westchester Public/Private Partnership for Aging
Services.

(b) Identification of Certain Significant Employees

Not applicable.

None.

(d) Involvement in certain legal proceedings

None.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Directors, executive officers and persons who own more than ten percent of the
Company's common stock to file with the Securities and Exchange Commission
initial reports of beneficial ownership and reports of changes of beneficial
ownership of common stock. Such persons are also required by Securities and
Exchange Commission regulations to furnish the Company with copies of all such
reports. Based solely on a review of such filings, during the year ended
February 29, 2008, all of the Company's Directors and executive officers and
holders of more than ten percent of the Company's stock have made timely filings
of such reports except as follows: two reports by Stephen Bagley relating to two
transactions and two reports by Joseph Riemer relating to two transactions.

Code of Ethics

The Company has adopted a Code of Ethics for senior executives and financial
officers. The Board intends that this Code satisfy the requirements of the
Securities and Exchange Commission rules for a Code of Ethics that applies to
senior management. A copy of the Company's Code of Ethics is posted on the
"information for investors" web page located at
http://www.sono-tek.com/corporate/page/91/88 and is available in print to any
shareholder who requests a copy.

ITEM 10 EXECUTIVE COMPENSATION

The following table sets forth the aggregate remuneration paid or accrued by the
Company for the Fiscal Years ended February 29, 2008 and February 28, 2007 for
each named officer of the Company.

Summary Compensation Table
--------------------------

All Other
Stock Option Compensation
Name and Principal Position Year Salary ($) Bonus ($) Awards Awards ($) Total ($)

Christopher L. Coccio 2008 168,845 0 0 0 4,362 173,207
CEO, Chairman and Director 2007 159,766 47,000 0 0 3,909 210,675

Joseph Riemer, President 2008 133,862 0 0 36,500 1,820 172,182

R. Stephen Harshbarger 2008 140,469 0 0 0 2,917 143,386
Vice-President 2007 135,357 9,500 0 0 2,861 147,718

All Other Compensation represents Company contributions to the Company's 401K
plan.

Outstanding Equity Awards At Fiscal Year End
--------------------------------------------

Number of Number of
Securities Securities
Underlying Underlying
Unexercised Unexercised Option
Options Options Exercise Option
Name (#) Exercisable (#) Unexercisable Price ($) Expiration Date

Christopher L. Coccio 20,000 0.95 5/19/2014
475,000(1) 1.75(1) 11/12/2014

Joseph Riemer - 25,000 (2) 1.18 04/13/2017
- 50,000 (2) .95 09/04/2017

R. Stephen Harshbarger 7,500 0.60 6/26/2008
10,000 0.95 5/19/2014

(1) 150,000 of these options were repriced at $.74 in March 2008.
(2) Dr. Riemer's unvested options become exercisable at various dates
beginning April 13, 2008.

Compensation of Directors

Each non-employee director receives $500 for each meeting attended. Committee
Chairmen and committee members receive $100 for each committee meeting attended.
Directors who are employees of the Company receive no additional compensation
for serving as directors. For the year ended February 29, 2008, director
compensation is as follows:

2008 Director Compensation
--------------------------

Non-Equity Nonqualified
Fees Incentive Deferred
Earned or Stock Option Plan Compensation All Other
Paid in Awards Awards Compensation Earnings Compensation
Cash ($) ($) ($) ($) ($) ($) Total ($)
Name

Edward J. Handler 3,000 - - - - - 3,000

Donald F. Mowbray 3,000 - - - - - 3,000

Samuel Schwartz 2,500 - - - - - 2,500

Philip Strasburg 3,000 - - - - - 3,000

The number of vested and unvested stock options held by non-employee directors
as of February 29, 2008 is as follows:

Number of Number of
Vested Options Unvested Options
-------------------------------------------------------------------------

Edward J. Handler 20,000 -
Donald F. Mowbray 30,000 -
Samuel Schwartz 60,000 -
Philip Strasburg 30,000 -

ITEM 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following information is furnished as of May 19, 2008 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
*Christopher L. Coccio 971,125(1) 6.54%
*Edward J. Handler 117,508(2) **
*R. Stephen Harshbarger 17,500(3) **
*Donald F. Mowbray 55,000(4) **
*Joseph Riemer 11,250(5) **
*Samuel Schwartz 1,575,147(6) 10.92%
*Philip A. Strasburg 55,000(7) **

All Executive Officers and Directors as a Group 2,915,333(8) 19.36%

Additional 5% owners
Herbert Spiegel 756,931 5.27%
425 East 58th Street
New York, NY 10022

Norwood Venture Corporation 1,084,672 7.55%
65 Norwood Avenue
Montclair, NJ 07043

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

(1) Includes 3,000 shares owned jointly with Dr. Coccio's father, 2,000 shares
in the name of Dr. Coccio's wife and 495,000 options currently exercisable
issued under the Company's Stock Incentive Plans.
(2) Includes 61,579 shares owned jointly with Mr. Handler's wife, 35,929
shares in the name of Mr. Handler's wife and 20,000 options currently
exercisable issued under the Company's Stock Incentive Plans.
(3) Represents 17,500 options currently exercisable under the Company's Stock
Incentive Plans.
(4) Includes 30,000 options currently exercisable issued under the Company's
Stock Incentive Plans.
(5) Represents 11,250 options currently exercisable issued under the Company's
Stock Incentive Plans.
(6) Includes 60,000 options currently exercisable issued under the Company's
Stock Incentive Plans.
(7) Includes 30,000 options currently exercisable issued under the Company's
Stock Incentive Plans.
(8) The group total includes 701,250 options currently exercisable issued
under the Company's Stock Incentive Plans. The group total includes 75,303
shares and 12,500 exercisable options held by Mr. DeMaio and 25,000
exercisable options held by Mr. Bagley.

Securities Authorized for Issuance Under Equity Compensation Plans:

EQUITY COMPENSATION PLAN INFORMATION

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 80,000 $.69 --
2003 Stock Incentive Plan 892,375 $1.6 589,000
------- -------
Total 972,375 589,000
======= =======

Description of Equity Compensation Plans:

1993 Stock Incentive Plan

Under the 1993 Stock Incentive Plan, as amended ("1993 Plan"), options have been
granted to officers, directors, consultants and employees of the Company and its
subsidiaries to purchase the Company's common shares. Options granted under the
1993 Plan expire on various dates through 2013. There can be no further grants
under the 1993 Plan.

Under the 1993 Stock Incentive Plan, option prices were 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.

2003 Stock Incentive Plan

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 Plan. Under the 2003 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 2003 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.

ITEM 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE

Certain Relationships and Related Transactions

On September 1, 2007, the Company entered into identical Executive Agreements
with Stephen J. Bagley, Chief Financial Officer, Christopher L. Coccio, Chief
Executive Officer and Joseph Riemer, President. In the event of a change of
control of the Company followed by a termination of the executives' employment
under certain circumstances, the Executive Agreements provide for severance
payments to each officer equal to one year of the executive's annual base and
bonus compensation paid by the Company for the previous calendar year.

Independence of Directors
The Company's Board of Directors is comprised of three "independent directors",
as that term is defined under Nasdaq rules, and three directors who are not
"independent directors". The Company's "independent directors" are Samuel
Schwartz, Donald Mowbray and Edward Handler. Christopher Coccio and Joseph
Riemer are employees of the Company and are therefore not independent. Philip
Strasburg is not considered an independent director under the Nasdaq rules
because he is a former employee. However, as of July 1, 2008, Mr. Strasburg will
be deemed independent for this purpose. Mr. Strasburg was a part-time employee
from February 23, 2005 to July 1, 2005, working a total of five days.

ITEM 13 EXHIBITS

Ex. No. Description
------ -----------

3(a)(1) Certificate of Incorporation of the Company and all amendments
thereto.
3(b)(1) By-laws of the Company as amended.
10(a)(2) Lease for the Company's facilities in Milton, NY dated December
1, 1999.
10(b)(1) Sono-Tek Corporation 1993 Stock Incentive Plan as amended.
10(c)(1) Sono-Tek Corporation 2003 Stock Incentive Plan.
10(d)(5) Equipment Line Credit Agreement between Sono-Tek Corporation and
M&T Bank, dated March 24, 2005.
10(e)(5) General Security Agreement between Sono-Tek Corporation and M&T
Bank, dated December 21, 2004.

10(f)(6) Executive Agreement between Sono-Tek Corporation and Stephen J.
Bagley dated September 1, 2007.
10(g)(6) Executive Agreement between Sono-Tek Corporation and Christopher
L. Coccio dated September 1, 2007.
10(h)(6) Executive Agreement between Sono-Tek Corporation and Joseph
Riemer dated September 1, 2007.
14(4) Code of Ethics.
21(3) Subsidiaries of Small Business Issuer.
23.1 Consent of Independent Registered Public Accounting Firm.
31.1 Rule 13a-14/15d - 14(a) Certification.
31.2 Rule 13a-14/15d - 14(a) Certification.
32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(1) Incorporated herein by reference to the Company's Registration Statement
No. 333-11913 on Form S-8 filed on February 18, 2004.

(2) Incorporated herein by reference to the Company's Form 10-K for the year
ended February 29,2000.

(3) Incorporated herein by reference to the Company's Form 10-KSB for the year
ended February 28, 2003.

(4) Incorporated herein by reference to the Company's Form 10-KSB for the year
ended February 29, 2004.

(5) Incorporated herein by reference to the Company's Form 10-KSB for the year
ended February 28, 2005.

(6) Incorporated herein by reference to the Company's Form 10-QSB for the
quarter ended August 31, 2007.

ITEM 14 PRINCIPAL ACCOUNTANT FEES AND SERVICES

For the Fiscal Years ended February 29, 2008 and February 28, 2007, the Company
paid or accrued fees of approximately $40,500 and $41,000 for services rendered
by Sherb & Co., LLP , its independent auditors. These fees included audit and
review services.

For the Fiscal Years ended February 29, 2008 and February 28, 2007, the Company
paid or accrued tax preparation fees of approximately $5,500 and $4,000 for
services rendered by Sherb & Co., LLP, its independent auditors.

There were no other fees for services rendered by Sherb & Co., LLP other than
for services described above.

SONO-TEK CORPORATION

FORM 10-KSB

ITEM 7

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES

FOR THE YEARS ENDED FEBRUARY 29, 2008 and FEBRUARY 28, 2007

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

CONSOLIDATED FINANCIAL STATEMENTS:

Consolidated Balance Sheet at February 29, 2008

Consolidated Statements of Operations
For the Years Ended February 29, 2008 and February 28, 2007

Consolidated Statements of Stockholders' Equity
For the Years Ended February 29, 2008 and February 28, 2007

Consolidated Statements of Cash Flows
For the Years Ended February 29, 2008 and February 28, 2007

Notes to the Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

We have audited the accompanying consolidated balance sheet of Sono-Tek
Corporation as of February 29, 2008, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the years ended
February 29, 2008 and February 28, 2007. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the 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 29, 2008 and the results of their operation and their cash flows for
each of the years then ended February 29, 2008 and February 28, 2007 in
conformity with accounting principles generally accepted in the United States.

/S/SHERB & CO., LLP

Certified Public Accountants
New York, New York
May 16, 2008

SONO-TEK CORPORATION
CONSOLIDATED BALANCE SHEET

ASSETS
February 29,
2008
-----------
Current Assets:
Cash and cash equivalents $ 2,339,550
Accounts receivable (less allowance of $18,500) 614,378
Inventories, net 1,602,511
Prepaid expenses and other current assets 69,032
Deferred tax asset 70,000
-----------
Total current assets 4,695,471
-----------

Equipment, furnishings and leasehold improvements
(less accumulated depreciation of $1,046,195) 536,892
Intangible assets, net 34,011
Other assets 7,171
Deferred tax asset 615,803
-----------

TOTAL ASSETS $ 5,889,348
===========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
Accounts payable $ 412,692
Accrued expenses 452,911
Current maturities of long term debt 23,909
Deferred tax liability 16,239
-----------
Total current liabilities 905,751
-----------

Long term debt, less current maturities 27,628
Deferred tax liability 57,978
-----------

Total Liabilities 991,357
-----------

Commitments and Contingencies

Stockholders' Equity
Common stock, $.01 par value; 25,000,000 shares
authorized, 14,361,091 issued and
outstanding 143,612
Additional paid-in capital 8,343,880
Accumulated deficit (3,589,501)
-----------
Total stockholders' equity 4,897,991
-----------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,889,348
===========

See notes to consolidated financial statements.

SONO-TEK CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

Years Ended
------------------------------
February 29, February 28,
2008 2007
---- ----

Net Sales $ 5,698,602 $ 6,886,453
Cost of Goods Sold 3,034,693 3,424,183
------------ ------------
Gross Profit 2,663,909 3,462,270
------------ ------------

Operating Expenses
Research and product development 795,551 857,718
Marketing and selling 1,095,544 1,280,553
General and administrative 875,210 850,238
------------ ------------
Total Operating Expenses 2,766,305 2,988,509
------------ ------------

Operating (Loss) Income (102,396) 473,761

Other Income (Expense):
Interest Expense (4,292) (6,133)
Interest Income 80,336 72,313
Other Income 12,158 11,523
------------ ------------
Income before Income Taxes (14,194) 551,464
Income Tax Benefit (Expense) 25,399 (7,261)
------------ ------------

Net Income $ 11,205 $ 544,203
============ ============

Basic Earnings Per Share $ .00 $ .04
============ ============

Diluted Earnings Per Share $ .00 $ .04
============ ============

Weighted Average Shares - Basic 14,360,618 14,359,936
============ ============

Weighted Average Shares - Diluted 14,394,010 14,439,808
============ ============

See notes to consolidated financial statements.

SONO-TEK CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED FEBRUARY 29, 2008 AND FEBRUARY 28, 2007

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

Balance - February 29, 2006 14,354,416 $143,545 $ 8,247,091 $(15,750) $(4,144,909) $4,229,977

Exercise of non-employee
stock options 5,000 50 900 -- -- 950

Stock Sold/Issued -- -- -- 15,750 -- 15,750

Exercise of stock options 1,125 11 1,587 -- -- 1,598

Stock Based Compensation
Expense -- -- 58,723 -- -- 58,723

Net Income -- -- -- -- 544,203 544,203
---------- -------- ----------- -------- ----------- ----------
Balance - February 28, 2007 14,360,541 143,606 8,308,301 -- (3,600,706) 4,851,201

Exercise of stock options 550 6 (6) -- -- --

Stock Based Compensation
Expense -- -- 35,585 -- -- 35,585

Net Income -- -- -- -- 11,205 11,205
---------- -------- ----------- -------- ----------- ----------
Balance - February 29, 2008 14,361,091 $143,612 $ 8,343,880 -- $(3,589,501) $4,897,991
========== ======== =========== ======== =========== ==========

See notes to consolidated financial statements.

SONO-TEK CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended
---------------------------
February 29, February 28,
2008 2007
---- ----

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 11,205 $ 544,203
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 154,020 132,401
Stock based compensation expense 35,585 58,723
Gain on sale of equipment -- 17,723
(Increase) Decrease in:
Accounts receivable 332,455 8,261
Inventories (196,280) 114,166
Prepaid expenses and other current assets 75 (1,083)
Deferred tax asset (4,564)
(Decrease) Increase in:
Accounts payable and accrued expenses 180,261 (143,863)
Deferred tax liability (22,022) --
----------- -----------
Net Cash Provided by Operating Activities 490,735 730,531
----------- -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment, furnishings and leasehold improvements (384,952) (189,615)
Patent filing costs (7,867) (5,392)
----------- -----------
Net Cash Used In Investing Activities (392,819) (195,007)
----------- -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of stock -- 15,750
Proceeds from exercise of warrants and options -- 2,548
Repayment of long term debt (27,342) (25,650)
----------- -----------
Net Cash Used in Financing Activities (27,342) (7,352)
----------- -----------

NET INCREASE IN CASH AND CASH EQUIVALENTS 70,574 528,172

CASH AND CASH EQUIVALENTS:
Beginning of year 2,268,976 1,740,804
----------- -----------
End of year $ 2,339,550 $ 2,268,976
=========== ===========

See notes to consolidated financial statements.

SONO-TEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED FEBRUARY 29, 2008 AND FEBRUARY 28, 2007

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, which are sold world-wide. 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: 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, and
whose operations have been discontinued. There have been no operations of this
subsidiary since Fiscal Year Ended February 28, 2002. All significant
intercompany accounts and transactions are eliminated in consolidation.

Cash and Cash Equivalents - Cash and cash equivalents consist of money market
mutual funds, short term commercial paper 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 29, 2008, the Company had $2,239,550 over the insurable
limit.

Supplemental Cash Flow Disclosure -
Years Ended
-------------------------------
February 29, February 28,
2008 2007
---- ----
Interest paid $4,140 $5,923
====== ======
Income taxes paid $1,827 $7,261
====== ======

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.

Allowance for doubtful accounts - The Company records a bad debt
expense/allowance based on managements estimate of uncollectible accounts. All
outstanding accounts receivable accounts are reviewed for collectibility on an
individual basis. The bad debt expense recorded for the years ended February 29,
2008 and February 28, 2007 was $0 and $3,750, respectively.

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.

Intangible Assets -Include costs of patent applications which are deferred and
charged to operations over seventeen years for domestic patents and twelve years
for foreign patents and the unamortized portion of deferred financing costs. The
accumulated amortization of patents is $58,949 at February 29, 2008. Annual
amortization expense of such intangible assets is expected to be $4,600 per year
for the next five years.

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 Per Share - Basic earnings per share ("EPS") is computed by dividing
net income 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 exercisable under the
Company's stock option plans are not included for Diluted EPS calculations under
the treasury stock method.

Shipping and Handling Costs - Shipping and handling costs are included in cost
of sales in the accompanying consolidated statements of operations.

Advertising Expenses - The Company expenses the cost of advertising in the
period in which the advertising takes place. Advertising expense for the years
ended February 29, 2008 and February 28, 2007 was $130,024 and $116,274,
respectively.

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.

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. Sales are presented net of
discounts and allowances. Discounts and allowances are determined when a sale is
negotiated. The Company does not grant its customers or independent
representatives the ability to return equipment after a sale is complete.

Concentration of Credit Risk - The Company does not believe that it is subject
to any unusual or significant risks, in the normal course of business. The
Company does have cash in excess of the federal insurable limits as noted above.
The Company also has two customers, which accounted for 3.3% and 3.2% of sales,
respectively, during the year ended February 29, 2008. One customer accounted
for 9.1% of the outstanding accounts receivables at February 29, 2008.

Fair Value of Financial Instruments - The carrying amounts reported in the
balance sheet for cash, receivables, accounts payable and accrued expenses
approximate fair value based on the short-term maturity of these instruments.

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.

New Accounting Pronouncements-
FASB 161 - Disclosures about Derivative Instruments and Hedging Activities

NOTE 3: 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 4: STOCK-BASED COMPENSATION

On March 1, 2006, the Company adopted SFAS No. 123R, "Share Based Payments."
SFAS No. 123R requires companies to expense the value of employee stock options
and similar awards for periods beginning after December 15, 2005, and applies to
all outstanding and vested stock-based awards at a company's adoption date.

The weighted-average fair value of options has been estimated on the date of
grant using the Black-Scholes options-pricing model. The weighted-average
Black-Scholes assumptions are as follows:

2008 2007
--------------------------------
Expected life 4 years 4 years
Risk free interest rate 4.01% - 4.97% 4.35% - 5.07%
Expected volatility 47% - 57% 39% - 78%
Expected dividend yield 0% 0%

In computing the impact, the fair value of each option is estimated on the date
of grant based on the Black-Scholes options-pricing model utilizing certain
assumptions for a risk free interest rate; volatility; and expected remaining
lives of the awards. The assumptions used in calculating the fair value of
share-based payment awards represent management's best estimates, but these
estimates involve inherent uncertainties and the application of management
judgment. As a result, if factors change and the Company uses different
assumptions, the Company's stock-based compensation expense could be materially
different in the future. In addition, the Company is required to estimate the
expected forfeiture rate and only recognize expense for those shares expected to
vest. In estimating the Company's forfeiture rate, the Company analyzed its
historical forfeiture rate, the remaining lives of unvested options, and the
amount of vested options as a percentage of total options outstanding. If the
Company's actual forfeiture rate is materially different from its estimate, or
if the Company reevaluates the forfeiture rate in the future, the stock-based
compensation expense could be significantly different from what the Company has
recorded in the current period.

For the years ended February 29, 2008 and February 28, 2007, net income and
earnings per share reflect the actual deduction for stock-based compensation
expense. The impact of applying SFAS 123R approximated $35,585 and $58,723 in
additional compensation expense for the years then ended, respectively. Such
amount is included in general and administrative expenses on the statement of
operations. The expense for stock-based compensation is a non-cash expense item.

NOTE 5: INVENTORIES

Inventories consist of the following:

February 29,
-----------
2008
----
Raw Materials $ 550,624
Work-in-process 457,832
Consignment 9,770
Finished Goods 788,482
-----------
Totals 1,806,708
Less: Allowance (204,197)
-----------
$ 1,602,511
===========

NOTE 6: EQUIPMENT, FURNISHINGS AND LEASEHOLD IMPROVEMENTS

Equipment, furnishings and leasehold improvements consist of the following:

February 29,
-----------
2008
----
Laboratory equipment $ 415,507
Machinery and equipment 357,702
Leasehold improvements 86,333
Furniture and fixtures 723,545
-----------
Totals 1,583,087
Less: accumulated depreciation (1,046,195)
-----------
$ 536,892
===========

Depreciation expense for the years ended February 29, 2008 and February 28, 2007
was $149,421 and $127,831, respectively.

NOTE 7: ACCRUED EXPENSES

Accrued expenses consist of the following:

February 29,
------------
2008
----
Accrued compensation $169,310
Estimated warranty costs 14,700
Accrued commissions 47,364
Professional fees 26,102
Customer deposits 180,409
Other accrued expenses 15,026
--------
$452,911
========

NOTE 8: REVOLVING LINE OF CREDIT
The Company has a $500,000 revolving line of credit at prime which was 6.00% at
February 29, 2008. The loan is collateralized by all of the assets of the
Company. The line of credit is payable on demand and must be retired for a 30
day period once annually. As of February 29, 2008, the Company had no
outstanding borrowings under the revolving line of credit.

NOTE 9: LONG-TERM DEBT

Long-term debt consists of the following:
February 29, 2008
-----------------

Equipment loan, bank, collateralized by related production
equipment, payable in monthly installments of principal and
interest of $832. Interest rate 6.51%. 60 month term. $19,385

Equipment loan, bank, collateralized by related office
equipment, payable in monthly installments of principal and
interest of $1,039. Interest rate 6.21%. 36 month term. 7,103

Equipment loan, bank, collateralized by related engineering
equipment, payable in monthly installments of principal and
interest of $770. Interest rate 6.54%. 60 month term. 25,049
-------
Total long term debt 51,537
Due within one year 23,909
-------
Due after one year $27,628
=======

Long-term debt is payable as follows:

Fiscal Year ending February 28,
-------------------------------
2010 17,853
2011 9,775

NOTE 10: COMMITMENTS AND CONTINGENCIES

Leases - Total rent expense was approximately $104,331 and $100,769, for the
years ended February 29, 2008 and February 28, 2007, respectively.

The Company presently leases its office and production facilities on a
month-to-month basis.

NOTE 11: 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 29, February 28,
------------ ------------
2008 % 2007 %
-------- ------- --------- ------

Computed tax at maximum rate $ (4,968) 35.00 $ 193,012 (35.00)
Franchise taxes due, net of federal benefit (596) 4.2 23,161 (4.20)
Permanent Difference- FASB 123R 14,234 (100.28) 23,489 (4.26)
Utilization or change in valuation
allowance for tax effect of operating loss
carryforwards -- -- (246,923) 44.78
Recognition of remaining deferred tax net
operating loss carryforwards 16,729 (117.23) -- --
-------- ------- --------- ------
Income Tax (Benefit) $ 25,399 (178.31) $ (7,261) 1.32

The net deferred tax asset is comprised of the following:
February 29,
2008
----

Inventory $122,000
Accrued expenses 21,000
Net operating losses and other
carryforwards 542,803
--------
Net deferred tax asset $685,803
========

Deferred tax liability - Depreciation $ 74,217
========

The change in the valuation allowance was $80,000 for the year ended February
29, 2008. This represents an $80,000 decrease in the net operating loss
valuation allowance offset by a $64,000 change in other timing differences and a
$16,000 increase in the net deferred tax asset recorded. A $685,803 tax benefit
has been reflected as a tax asset in the financial statements, of which $270,000
is a current asset.

At February 29, 2008, the Company has available net operating loss carryforwards
of approximately $1,543,000 for income tax purposes, which expire between fiscal
2019 and fiscal 2028. 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 a subsidiary are
subject to limitations under Section 382 and Section 383 of the Internal Revenue
Code.

NOTE 12: STOCKHOLDERS' EQUITY

Stock Options - The Company has two stock option plans, the 1993 Stock Incentive
Plan, as Amended ("1993 Plan") and the 2003 Stock Incentive Plan ("2003 Plan").
Under each 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 2013. The 1993 Plan expired in October 2003 and no further options
can be granted under the 1993 Plan. A total of 80,000 options remain outstanding
under the 1993 Plan. Under the 2003 Plan options expire at various dates through
2015. A total of 892,375 options are outstanding under the 2003 Plan.

During Fiscal Year 2008, the Company granted options for 90,000 shares
exercisable at prices from $.95 to $1.18 to officers of the Company and options
for 20,000 shares exercisable at prices from $.95 to $1.30 to employees of the
Company.

During Fiscal Year 2007, the Company granted options for 45,000 shares
exercisable at prices from $1.00 to $1.99 to employees of the Company.

Under both the 1993 Plan and the 2003 Plan, options are granted at prices that
are 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 both
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.

A summary of the activity of both plans for the years ended February 29, 2008
and February 28, 2007 is as follows:

Weighted Average
Stock Options Exercise Price
Outstanding Exercisable Outstanding Exercisable
----------- ----------- ----------- -----------

Balance - February 28, 2006 935,500 762,425 1.61 1.83
Granted Fiscal Year 2007 45,000 1.41
Exercised Fiscal Year 2007 (6,125) (.42)
Canceled Fiscal Year 2007 (25,000) (1.82)
-------- -------
Balance - February 28, 2007 949,375 871,500 1.58 1.63
Granted Fiscal Year 2008 110,000 1.03
Exercised Fiscal Year 2008 (1,500) (.50)
Canceled Fiscal Year 2008 (85,500) (1.36)
-------- -------
Balance - February 29, 2008 972,375 840,950 1.54 1.60
======== ========= ======= ======

Information, at date of issuance, regarding stock option grants for the years
ended February 29, 2008:

Weighted Weighted
Average Average
Exercise Fair
Shares Price Value
-------- --------- --------
Year ended February 29, 2008:
Exercise price exceeds market price -- -- --
Exercise price equals market price 110,000 $1.03 $ .49
Exercise price is less than market price -- -- --

The following table summarizes information about stock options outstanding and
exercisable at February 29, 2008:

Weighted-
Average Weighted
Remaining Average
Number Life in Exercise Number
Outstanding Years Price Exercisable
----------- ----- ----- -----------
Range of exercise prices:
$.25 to $.50 40,000 4.9 $ .31 40,000
$.51 to $1.00 147,500 7.3 $ .91 70,000
$1.01 to $1.75 654,875 6.8 $ 1.60 603,950
$1.76 to $2.30 90,000 7.1 $ 2.18 88,500
$2.31 to $3.00 40,000 7.4 $ 2.48 38,500

NOTE 13: EARNINGS PER SHARE

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

February 29, February 28,
2008 2007
---- ----
Numerator for basic and diluted
Earnings per share $ 11,205 $ 544,203
============= ===========

Denominator:
Denominator for basic earnings per
share-weighted average shares 14,360,618 14,359,936
Effects of dilutive securities:
Stock options for employees,
directors and outside consultants 33,392 79,872
------------- -----------
Denominator for diluted earnings
per share 14,394,010 14,439,808
============= ===========

Basic Earnings Per Share $ .00 $ .04
============= ===========

Diluted Earnings Per Share $ .00 $ .04
============= ===========

NOTE 14: SIGNIFICANT CUSTOMERS AND FOREIGN SALES

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

February 29, February 28,
2008 2007
---- ----
Western Europe $ 918,000 $ 886,000
Far East 1,090,000 1,567,000
Other 775,000 1,056,000
---------- ----------
$2,783,000 $3,509,000
========== ==========

During Fiscal Years 2008 and 2007, sales to foreign customers accounted for
approximately $2,783,000 and $3,509,000, or 49% and 51% respectively, of total
revenues.

NOTE 15: OTHER INCOME

As previously reported on Form 8-K, filed on July 5, 2005, the Company
determined that a former employee had misappropriated approximately $250,000 of
the Company's monies, primarily through unauthorized check writing from the
Company's accounts over a period of three calendar years. The Company has
previously expensed substantially all of the misappropriated funds over the
years.

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 29, 2008
Sono-Tek Corporation
(Registrant)

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

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 29, 2008 /s/ Samuel Schwartz May 29, 2008
---------------------------- -------------------
Christopher L. Coccio Samuel Schwartz
Chief Executive Officer, Director
Chairman and Director

/s/ Stephen J. Bagley May 29, 2008 /s/ Dr. Joseph Riemer May 29, 2008
--------------------- --------------------
Stephen J. Bagley Dr. Joseph Riemer
Chief Financial Officer President and Director

/s/ Edward J. Handler, III May 29, 2008 /s/ Philip A. Strasburg May 29, 2008
-------------------------- -----------------------
Edward J. Handler, III Philip A. Strasburg
Director Director

/s/ Dr. Donald F. Mowbray May 29, 2008
-------------------------
Donald F. Mowbray
Director