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Item 9A. Controls and Procedures

2022-05-24 compared with 2021-05-28 · 699 added, 783 removed, 510 unchanged (74% of the section changed)

1 unchanged sentence

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial

Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e)

under the Securities Exchange Act of 1934, as amended (the “Act”)) as of the end of the period covered by this annual report

on Form 10-K.

Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that these disclosure

controls and procedures were effective as of such date, at a reasonable level of assurance, in ensuring that the information required

to be disclosed by us in the reports we file or submit under the Act is (i) accumulated and communicated to our management (including

the Chief Executive Officer and Chief Financial Officer) in a timely manner, and (ii) recorded, processed, summarized and reported within

the time periods specified in the SEC’s rules and forms.

Our management, with the participation of our Chief Executive Officer

and Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as

defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Act”)) as of the end of the period covered

by this annual report on Form 10-K.

Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded

that these disclosure controls and procedures were effective as of such date, at a reasonable level of assurance, in ensuring that the

information required to be disclosed by us in the reports we file or submit under the Act is (i) accumulated and communicated to our management

(including the Chief Executive Officer and Chief Financial Officer) in a timely manner, and (ii) recorded, processed, summarized and reported

within the time periods specified in the SEC’s 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 28, 2021.

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.

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 and for the year ended February 28, 2022.

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.

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.

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.

OTHER INFORMATION - None.

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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

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.

Haskell and Ms.

O’Donnell run until the annual meeting to be held

The terms of Drs.

Coccio and Riemer and Messrs.

Strasburg and Harshbarger run until the annual meeting to be held in 2021.

Haskell and Ms.

O’Donnell run until the annual meeting to be held in 2022, and in each case until their

respective successors are duly elected and qualified.

Strasburg and Harshbarger run until the annual meeting to be held in 2023, and

in each case until their respective successors are duly elected and qualified.

Audit Committee

The Company has a separate designated standing Audit Committee established and administered

in accordance with SEC rules.

The Company has a separate designated standing Audit Committee established

and administered in accordance with SEC rules.

The three members of the Audit Committee are Philip A.

Strasburg, CPA (who serves as Chairman of the Audit

Committee), Carol O’Donnell and Eric Haskell, CPA.

The Board of Directors has determined that each member if the Audit Committee

meets the independence criteria prescribed by NASDAQ governing the qualifications for audit committee members and each Audit Committee

member meets NASDAQ’s financial knowledge requirements.

Strasburg, CPA (who serves as Chairman

of the Audit Committee), Carol O’Donnell and Eric Haskell, CPA.

The Board of Directors has determined that each member if the Audit

Committee meets the independence criteria prescribed by NASDAQ governing the qualifications for audit committee members and each Audit

Committee member meets NASDAQ’s financial knowledge requirements.

The Board of Directors has determined that Mr.

Strasburg qualifies as an

“audit committee financial expert,” as defined in the rules and regulations of the SEC.

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.

Strasburg qualifies

as an “audit committee financial expert,” as defined in the rules and regulations of the SEC.

The Audit Committee is responsible for (i) selecting an independent

public accountant for ratification by the stockholders, (ii) reviewing material accounting items affecting the consolidated financial

statements of the Company, and (iii) reporting its findings to the Board of Directors.

Compensation Committee

The Company’s executive compensation is administered by the Compensation Committee

of the Board of Directors, which was established in 2020.

The members of the Compensation Committee are Dr.

O’Donnell

Strasburg, all of whom have been determined by the Board to be independent in accordance with NASDAQ’s requirement for independent

director oversight of executive officer compensation.

The Company’s executive compensation is administered by the

Compensation Committee of the Board of Directors, which was established in 2020.

The members of the Compensation Committee are Drs.

and Riemer and Mr.

Strasburg, all of whom have been determined by the Board to be independent in accordance with NASDAQ’s requirement

for independent director oversight of executive officer compensation.

Nominating Committee

There have been no changes to the procedures by which shareholders may recommend nominees

to the Board of Directors.

There have been no changes to the procedures by which shareholders

may recommend nominees to the Board of Directors.

Identification of Executive Officers

with the Company

Position with the Company

Chief Financial Officer

8 unchanged sentences

President and Director

The foregoing officers are appointed 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.

The foregoing officers are appointed 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

BAGLEY, CPA was appointed Chief Financial Officer in June

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.

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.

Bagley has been a member of the OTCQX Issuer Advisory Council since 2019.

Bagley is a past President of the Board of Education for

the New Paltz Central School District and a past Chairman of the Audit and Finance Committee for the District.

BRUNTIL was appointed Vice President – Sales & Marketing in March

Bruntil joined Sono-Tek in 2007 as a Regional Sales Manager and has served as Marketing Brand Manager and Director of the Electronics

and Advanced Energy Division.

Bruntil has experience in branding and product development and has successfully implemented sales strategies,

launched new products and management of a diverse product line.

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.

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.

Bagley served on the OTCQX US Advisory Council from 2019 to 2020.

Bagley is a past President of the Board of

Education for the New Paltz Central School District and a past Chairman of the Audit and Finance Committee for the District.

BRUNTIL was appointed Vice President – Sales &

Marketing in March 2018.

Bruntil joined Sono-Tek in 2007 as a Regional Sales Manager and has served as Marketing Brand Manager and

Director of the Electronics and Advanced Energy Division.

Bruntil has experience in branding and product development and has successfully

implemented sales strategies, launched new products and management of a diverse product line.

Prior to joining Sono-Tek, Mr.

Bruntil was a branch manager in the retail

banking industry.

He is a graduate of Central Connecticut State University with a major in psychology and a concentration in sociology.

a branch manager in the retail banking industry.

He is a graduate of Central Connecticut State University with a major in psychology and

a concentration in sociology.

CHRISTOPHER C.

CICHETTI was appointed Vice President – Application Engineering in

Cichetti joined Sono-Tek in 2005 as an Electrical Engineer and has served as Application Engineer, Senior Application Engineer,

and Manager of the Application Engineering Department.

Cichetti has experience in lab testing, process development, project management,

and has successfully implemented several successful OEM relationships with outside vendors.

He is a graduate of Worcester Polytechnic

Institute with a major in Computer and Electrical Engineering and a minor in International Studies.

CICHETTI was appointed Vice President – Application

Engineering in June 2019.

Cichetti joined Sono-Tek in 2005 as an Electrical Engineer and has served as Application Engineer, Senior

Application Engineer, and Manager of the Application Engineering Department.

Cichetti has experience in lab testing, process development,

project management, and has successfully implemented several successful OEM relationships with outside vendors.

He is a graduate of Worcester

Polytechnic Institute with a major in Computer and Electrical Engineering and a minor in International Studies.

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.

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.

He also won an ASME Congressional Fellowship and served with

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Coccio received a B.S.M.E.

from Stevens Institute of Technology, an M.S.M.E.

from Stevens Institute of Technology, an

from the University of Colorado, and a Ph.D.

from Rensselaer Polytechnic Institute

in Chemical Engineering.

from Rensselaer Polytechnic Institute in Chemical Engineering.

Key attributes, Experience and Skills:

Coccio brings

his strategic vision for our Company to the Board together with his leadership, business experience and investor relations skills.

Coccio brings his strategic vision for our Company to the Board together with his leadership, business experience and investor relations

Coccio has an immense knowledge of our Company and its related applications which is beneficial to the Board.

Coccio’s service

as Chairman and CEO bridges a critical gap between the Company’s management and the Board, enabling the Board to benefit from management’s

perspective on the Company’s business while the Board performs its oversight function.

ENGLE joined Sono-Tek in 2000 as a Field

Service Technician, became Vice President of Engineering in January 2013 and was appointed Executive Vice President in September 2019.

Engle created the Sono-Tek Service Department and led the development of key products in his leadership role of our engineering resources.

As Vice President of Engineering, he directs the engineering department, service department, IT and Sono-Tek laboratory services.

service as Chairman and CEO bridges a critical gap between the Company’s management and the Board, enabling the Board to benefit

from management’s perspective on the Company’s business while the Board performs its oversight function.

ENGLE joined Sono-Tek

in 2000 as a Field Service Technician, became Vice President of Engineering in January 2013 and was appointed Executive Vice President

in September 2019.

Engle created the Sono-Tek Service Department and led the development of key products in his leadership role of

our engineering resources.

As Vice President of Engineering, he directs the engineering department, service department, IT and Sono-Tek

laboratory services.

Engle was formally trained and certified by the U.S.

Navy as a Nuclear Operator where he was recognized with an induction into the Navy

League Memorial for meritorious service and the advancement of training techniques.

He also served with honors on board a submarine and

earned the prestigious Sub-Surface Warfare (E) Insignia.

STEPHEN HARSHBARGER joined Sono-Tek in 1993.

was appointed President of the Company in 2012 and became a Director in August 2013.

As President, he directs the Company’s Sales,

Marketing, Engineering, Service, and Manufacturing Operations.

Navy as a Nuclear Operator where he was recognized with

an induction into the Navy League Memorial for meritorious service and the advancement of training techniques.

He also served with honors

on board a submarine and earned the prestigious Sub-Surface Warfare (E) Insignia.

STEPHEN HARSHBARGER joined

Sono-Tek in 1993.

He was appointed President of the Company in 2012 and became a Director in August 2013.

As President, he directs the

Company’s Sales, Marketing, Engineering, Service, and Manufacturing Operations.

Prior to assuming his present position, Mr.

Harshbarger served as Sales

Engineer, World-Wide Sales and Marketing Manager, Vice President & Director of Electronics and Advanced Energy (E&AE) and Executive

Vice President.

In his years managing the sales organization, he established a worldwide distribution and representative network in more

than 40 countries consisting of more than 300 persons, with revenue growth of greater than 300%.

He has over 25 years of experience in

ultrasonic coating equipment for the electronics, medical device and advanced energy industries.

Prior to joining Sono-Tek, Mr.

was the Sales and Marketing Manager for Plasmaco Inc., a world leader in the development of flat panel displays.

In that position, he

established their distribution network, participated in venture capital funding, and introduced the first flat panel technology to Wall

Street trading floors.

served as Sales Engineer, World-Wide Sales and Marketing Manager, Vice President & Director of Electronics and Advanced Energy (E&AE)

and Executive Vice President.

In his years managing the sales organization, he established a worldwide distribution and representative

network in more than 40 countries consisting of more than 300 persons, with revenue growth of greater than 300%.

He has over 25 years

of experience in ultrasonic coating equipment for the electronics, medical device and advanced energy industries.

Prior to joining

Sono-Tek, Mr.

Harshbarger was the Sales and Marketing Manager for Plasmaco Inc., a world leader in the development of flat panel displays.

In that position, he established their distribution network, participated in venture capital funding, and introduced the first flat panel

technology to Wall Street trading floors.

He is a graduate of Bentley University, with a major in Finance and a minor in Marketing.

Key attributes, Experience and Skills:

is among a small handful of ultrasonic coating experts in the world.

He has a proven track record of identifying, developing and implementing

the technology for new markets and applications.

His expertise in establishing strong distribution networks and knowledge of ultrasonic

coating for new product developments, targeted at specific advanced technology applications, bring insights to the Board.

also brings leadership and oversight experience to the Board.

Harshbarger is among a small handful of ultrasonic coating experts in the world.

He has a proven track record of identifying, developing

and implementing the technology for new markets and applications.

His expertise in establishing strong distribution networks and knowledge

of ultrasonic coating for new product developments, targeted at specific advanced technology applications, bring insights to the Board.

Harshbarger also brings leadership and oversight experience to the Board.

ERIC HASKELL, CPA has been a Director since August 2009.

He has over 40 years of experience

in senior financial positions at several public and private companies.

He has significant expertise in the areas of acquisitions

and divestitures, strategic planning and investor relations.

From December 2005 through March 2008, Mr.

Haskell served as the

Executive Vice President and Chief Financial Officer of SunCom Wireless Holdings, Inc., a company providing digital wireless communications

services which was publicly traded until its merger with a wholly-owned subsidiary of T-Mobile USA, Inc.

40 years of experience in senior financial positions at several public and private companies.

He has significant expertise

in the areas of acquisitions and divestitures, strategic planning and investor relations.

From December 2005 through March

Haskell served as the Executive Vice President and Chief Financial Officer of SunCom Wireless Holdings, Inc., a company providing

digital wireless communications services which was publicly traded until its merger with a wholly-owned subsidiary of T-Mobile USA, Inc.

in February 2008.

also served as a member of SunCom’s Board of Directors from November 2003 through May 2007.

From 1989 until April 2004,

Haskell served as the Chief Financial Officer of Systems & Computer Technology Corp., a NASDAQ listed software and services corporation.

He also served as a member of SunCom’s Board of Directors from November 2003 through May 2007.

1989 until April 2004, Mr.

Haskell served as the Chief Financial Officer of Systems & Computer Technology Corp., a NASDAQ listed software

and services corporation.

Haskell received a Bachelors Degree in Business Administration from Adelphi University in 1969.

Key attributes, Experience and Skills:

training and extensive experience in financial management at both public and private companies provide the Board with valuable insights.

Haskell’s significant experience in acquisitions and divestitures and investor relations bring strategic judgment and experience

to the Board.

Haskell’s strong operational and business background complement his accounting and finance experience and are

valuable resources to the Board as it exercises its oversight duties and support of the Company’s growth strategies.

Haskell’s training and extensive experience in financial management at both public and private companies provide the Board with

valuable insights.

Haskell’s significant experience in acquisitions and divestitures and investor relations bring strategic

judgment and experience to the Board.

Haskell’s strong operational and business background complement his accounting and finance

experience and are valuable resources to the Board as it exercises its oversight duties and support of the Company’s growth strategies.

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.

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.

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.

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.

Key attributes, Experience and Skills:

extensive research and managerial experience enables him to bring valuable insights to the Board.

His knowledge of the Company’s

products and the materials sciences technology underlying them has enabled him to contribute to the Company’s advanced products

development and designs.

Mowbray also brings leadership and oversight experience to the Board from his General Electric management

CAROL O’DONNELL has been a Director since November 2018.

O’Donnell joined Protégé

Partners, an industry leading firm investing in and seeding smaller and emerging hedge fund managers in 2016 and has served as Chief Executive

Officer since 2018.

She was a key member of the Protégé

executive team that launched an affiliate business, MOV37, for which

she also serves as Chief Executive Officer.

Prior to joining Protégé

Mowbray’s extensive research and managerial experience enables him to bring valuable insights to the Board.

His knowledge of

the Company’s products and the materials sciences technology underlying them has enabled him to contribute to the Company’s

advanced products development and designs.

Mowbray also brings leadership and oversight experience to the Board from his General Electric

management background.

CAROL O’DONNELL has been a Director since November 2018.

O’Donnell joined Protégé Partners, an industry leading firm investing in and seeding smaller and

emerging hedge fund managers in 2016 and has served as Chief Executive Officer since 2018.

Prior to joining Protégé

Partners, Ms.

O’Donnell was the Director of Legal

and Compliance with DARA Capital US, Inc., a Swiss-owned boutique registered investment advisory and wealth management firm from 2013

She has also served as General Counsel to Boothbay Fund Management LLC, a registered investment adviser, since December 2019.

She also worked at Permal Group as General Counsel and Chief Compliance Officer and was COO and General Counsel of Framework Investment

O’Donnell is admitted to practice law in the States of New York and Connecticut.

O’Donnell was the Director of Legal and Compliance with DARA Capital US, Inc., a Swiss-owned boutique registered

investment advisory and wealth management firm from 2013 to 2016.

She also served as General Counsel to Boothbay Fund Management

LLC, a registered investment adviser, from December 2019 through May 2021, and was General Counsel and Chief Compliance Officer of

each of the Permal Group and Framework Investment Group from 2004 through 2011 and from 2002 to 2004, respectively.

admitted to practice law in the States of New York and Connecticut.

Key attributes, Experience and Skills:

extensive experience as an attorney enables her to bring valuable strategic insights to the Board in the areas of corporate governance,

finance and securities law.

O’Donnell’s extensive experience as an attorney enables her to bring valuable strategic insights to the Board in the areas

of corporate governance, finance and securities law.

O’Donnell also brings leadership and oversight experience to the Board.

JOSEPH RIEMER joined the Company in January 2007 as Vice President of Engineering and

has been a Director since August 2007.

Riemer served as President from September 2007 until August 2012 when he became Vice President

of Food Business Development, which position he held until June 2016.

JOSEPH RIEMER joined the Company in January 2007 as Vice President

of Engineering and has been a Director since August 2007.

Riemer served as President from September 2007 until August 2012 when he

became Vice President of Food Business Development, which position he held until June 2016.

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.

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.

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.

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.

Key attributes, Experience and Skills:

extensive research and management experience enables him to bring valuable insights to the Board.

His considerable experience in the biotech,

food and pharmaceutical industries bring specific product application insights to the Board.

Riemer’s previous service as Vice

President of Food Business Development helps to provide focus to the Board on this important marketing area.

Riemer also brings leadership

and oversight experience to the Board.

Riemer’s extensive research and management experience enables him to bring valuable insights to the Board.

His considerable

experience in the biotech, food and pharmaceutical industries bring specific product application insights to the Board.

previous service as Vice President of Food Business Development helps to provide focus to the Board on this important marketing area.

Riemer also brings leadership and oversight experience to the Board.

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 has served as Audit Committee Chairman since 2005.

a retired partner from the firm of Anchin Block and Anchin, LLP and has 40 years of experience in auditing.

He has served as Audit Committee

Chairman since 2005.

He was the lead partner on the Sono-Tek account from fiscal 1994 to fiscal 1996.

Strasburg is a certified public accountant in New

He has a Master of Science in economics from The London School of Economics and Political Science and a Bachelor of Science

degree from Lehigh University, where he majored in business administration.

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

Bachelor of Science degree from Lehigh University, where he majored in business administration.

Key attributes, Experience and Skills:

training and extensive experience in auditing provide the Board with valuable insights and skills necessary to lead the Audit Committee.

Strasburg’s strong operational and business background complement his accounting and finance experience, and are valuable resources

to the Board as it exercises its oversight duties and support of the Company’s growth strategies.

Strasburg’s training and extensive experience in auditing provide the Board with valuable insights and skills necessary to lead

the Audit Committee.

Strasburg’s strong operational and business background complement his accounting and finance experience,

and are valuable resources to the Board as it exercises its oversight duties and support of the Company’s growth strategies.

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 28, 2021, 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, with the exception of one late filing by each of Eric

Haskell and Donald Mowbray.

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 28, 2022, 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,

Code of Ethics

The Company has adopted a Code of Business Conduct and Ethics that applies to all directors,

officers, and employees.

This code of ethics is designed to comply with the NASDAQ marketplace rules related to codes of conduct.

of the Company's Code of Ethics is posted on the "information for investors"

web page located at http://www.sono-tek.com/code-of-ethics/

and is available in print to any shareholder who requests a copy.

The Company intends to satisfy any disclosure requirement under Item

5.05 of Form 8-K regarding an amendment to, or waiver from, a provision of our code of ethics by posting such information on the Company’s

The Company has adopted a Code of Business Conduct and Ethics that

applies to all directors, officers, and employees.

This code of ethics is designed to comply with the NASDAQ marketplace rules related

to codes of conduct.

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/code-of-ethics/ and is available in print to any shareholder who requests a copy.

The Company intends to satisfy

any disclosure requirement under Item 5.05 of Form 8-K regarding an amendment to, or waiver from, a provision of our code of ethics by

posting such information on the Company’s website.

EXECUTIVE COMPENSATION

The following table sets forth the aggregate remuneration paid or accrued by the Company

for fiscal 2021 and fiscal 2020 for each named officer of the Company.

The following table sets forth the aggregate remuneration paid or

accrued by the Company for fiscal 2022 and fiscal 2021 for each named officer of the Company.

Summary Compensation Table

5 unchanged sentences

Chief Financial Officer

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

Option awards in the above table are calculated using the Black-Scholes options pricing

model which is further discussed in Note 4 – Stock Based Compensation, in the Company’s financial statements.

All Other Compensation represents Company contributions to the Company’s

Option awards in the above table are calculated using the Black-Scholes

options pricing model which is further discussed in Note 4 – Stock Based Compensation, in the Company’s financial statements.

Officer Compensation Arrangements

During fiscal 2022, Dr.

Coccio was compensated at the rate of $150,000 per annum.

Coccio was compensated at the rate of $150,000

During fiscal 2022, Mr.

Harshbarger was compensated at the rate of $220,000 per annum.

Harshbarger was compensated at the rate of

$220,000 per annum, until August 2021, at which time his annual compensation increased to $235,000.

During fiscal 2022, Mr.

Bagley was compensated at the rate of $155,000 per annum, until

November 2020, at which time his annual compensation increased to $165,000.

In addition, each named officer earned bonus compensation based on the achievement of certain

operating objectives.

Bagley was compensated at the rate of $165,000

In addition, each named officer earned bonus compensation based on

the achievement of certain operating objectives.

Outstanding Equity Awards at Fiscal Year End

11 unchanged sentences

Chief Financial Officer

1 These options vested on March 15, 2021 and have been exercised.

Estimated Payments and Benefits Upon Termination or Change in Control

On September 1, 2007, the Company entered into identical Executive Agreements with Stephen

On September 1, 2007, the Company entered into identical Executive

Agreements with Stephen J.

Bagley, Chief Financial Officer and Christopher L.

Coccio, Chief Executive Officer.

The Company also entered into an Executive

Agreement with R.

The Company also entered

into an Executive Agreement with R.

Stephen Harshbarger, President, on March 5, 2008.

The agreements, as subsequently amended, provide that in the event

of a change of control of the Company followed by a termination of the executives’ employment under certain circumstances, the officers

shall receive severance payments equal to two years of the executive’s annual base, commissions and bonus compensation paid by the

Company for the previous calendar year.

Based on last year’s salary arrangements, if the rights of the foregoing officers

were to be triggered following a change of control, they would be entitled to the following payments from the Company:

$391,000, Christopher L.

The agreements, as subsequently amended, provide

that in the event of a change of control of the Company followed by a termination of the executives’ employment under certain circumstances,

the officers shall receive severance payments equal to two years of the executive’s annual base, commissions and bonus compensation

paid by the Company for the previous calendar year.

Based on last year’s salary arrangements, if the rights of the

foregoing officers were to be triggered following a change of control, they would be entitled to the following payments from the Company:

Bagley $389,000, Christopher L.

Coccio $412,000 and R.

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Severance Agreements

On October 20, 2017, the Company entered into identical Executive Agreements with Stephen

On October 20, 2017, the Company entered into identical Executive

Agreements with Stephen J.

Bagley, Chief Financial Officer, Christopher L.

Coccio, Chief Executive Officer and R.

Stephen Harshbarger, President.

The agreements

provide that in the event of termination of the executive’s employment, other than for the cause, the officers shall receive severance

payments equal to two weeks of compensation for each full year employed by the Company.

Stephen Harshbarger,

The agreements provide that in the event of termination of the executive’s employment, other than for the cause, the

officers shall receive severance payments equal to two weeks of compensation for each full year employed by the Company.

Compensation of Directors

Each non-employee director receives $2,000 for each meeting attended.

Directors who

are employees of the Company receive no additional compensation for serving as directors.

For the year ended February 28, 2021, director

compensation was as follows:

Each non-employee director receives $2,500 for each meeting

Directors who are employees of the Company receive no additional compensation for serving as directors.

For the year ended February

28, 2022, director compensation was as follows:

2022 Director Compensation

Incentive Plan

Carol O’Donnell

Philip Strasburg

Joseph Riemer

Samuel Schwartz 6

During fiscal 2022, Mr.

Haskell received a grant of 6,050 options exercisable at $3.19 per share.

At the end of fiscal 2021,

At the end of fiscal 2022, Mr.

Haskell held an aggregate of 26,050 stock options.

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Mowbray received a grant of 6,050 options exercisable at $3.19 per share.

At the end of fiscal 2021,

At the end of fiscal 2022, Dr.

Mowbray held an aggregate of 16,050 stock options.

During fiscal 2022, Ms.

O’Donnell received a grant of 6,050 options exercisable at $3.19 per share.

At the end of fiscal 2022, Ms.

O’Donnell held an aggregate of 20,000 stock options.

O’Donnell held an aggregate of 6,050 stock options.

During fiscal 2022, Mr.

Strasburg received a grant of 6,050 options exercisable at $3.19 per share.

At the end of fiscal 2022, Mr.

Strasburg held an aggregate of 8,050 stock options.

During fiscal 2022, Dr.

Riemer received a grant of 6,050 options exercisable at $3.19 per share.

At the end of fiscal 2022, Dr.

Riemer held an aggregate of 8,050 stock options.

Schwartz died in July 2020.

Option awards in the above table are calculated using the Black-Scholes options pricing

model which is further discussed in Note 4 – Stock Based Compensation, in the Company’s financial statements.

Option awards in the above table are calculated using the Black-Scholes

options pricing model which is further discussed in Note 4 – Stock Based Compensation, in the Company’s financial statements.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following information is furnished as of May 13, 2021 to indicate beneficial

ownership of the Company's Common Stock by each Director, by each named executive officer, 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.

The following information is furnished as of May 23, 2022 to indicate

beneficial ownership of the Company's Common Stock by each Director, by each named executive officer, 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.

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*Eric Haskell

*Carol O’Donnell

*Joseph Riemer

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Circle N Advisors, LLC 9

Adah Nicklin 10

Judith Schwartz 12

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** Less than 1%

1 Includes 2,250 options currently exercisable issued under the Company’s

Stock Incentive Plans.

2 Includes 2,000 shares held in the name of Dr.

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Stock Incentive Plans.

3 Represents 16,000 options currently exercisable issued under the Company’s

Stock Incentive Plans.

4 Includes 4,500 options currently exercisable issued under the Company’s

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5 Includes 10,000 shares in the name of Mr.

Strasburg’s wife and 4,500

options currently exercisable issued under the Company’s Stock Incentive Plans.

Strasburg’s wife.

6 The group total includes 37,590 options currently exercisable issued under

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The group total does not include 139,776 options that are currently unexercisable.

total includes 85,529 shares held by Robb Engle, Executive Vice President and 7,493 shares held by Bennett Bruntil, a Vice President.

total includes 81,167 shares held by Robb Engle, Executive Vice President, 8,631 shares held by Bennett Bruntil, a Vice President and

1,138 shares held by Christopher Cichetti, a Vice President.

7 Emancipation Management LLC, Charles Frumberg and Circle N Advisors share

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9 The address of this person is 1065 Main Street, Suite F, PO Box 336, Fishkill,

10 The address of this person is 3 Rivers Edge, Newburgh, NY 12550.

11 The address of this person is 3697 Se Doubleton Drive, Stuart, FL 34997.

12 The address of this person is 877 Route 9W, Upper Grandview, NY 10960.

Includes 20,000 options currently exercisable issued under the Company’s stock incentive

Securities Authorized for Issuance Under Equity Compensation Plans:

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2013 Stock Incentive Plan

Under the 2013 Stock Incentive Plan, as amended (the "2013 Plan"),

options can be granted to officers, directors, consultants and employees of the Company and its subsidiaries to purchase up to 2,500,000

shares of the Company's common stock.

Under the 2013 Stock Incentive Plan, as amended (the "2013

Plan"), options can be granted to officers, directors, consultants and employees of the Company and its subsidiaries to purchase

up to 2,500,000 shares of the Company's common stock.

Under the 2013 Plan options expire ten years after the date of grant.

As of February 28, 2021, there

were 460,959 options outstanding under the 2013 plan.

Under the 2013 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 plan

or unless otherwise specified at the discretion of the Board of Directors, no option may be exercised prior to one year after date of

grant, with the balance becoming exercisable in cumulative installments over a three year period during the term of the option, and terminating

at a stipulated period of time after an employee's termination of employment.

As of February

28, 2022, there were 243,710 options outstanding under the 2013 plan.

Under the 2013 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 plan or unless otherwise specified at the discretion of the Board of Directors, no option may be exercised prior to one

year after date of grant, with the balance becoming exercisable in cumulative installments over a three-year period during the term of

the option and terminating at a stipulated period of time after an employee's termination of employment.

2003 Stock Incentive Plan

Under the 2003 Stock Incentive Plan, as amended (the "2003 Plan"),

until May 2013, options were available to 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.

As of February 28, 2021, there were 47,500 options outstanding under the 2003

Plan, under which no additional options may be granted.

Under the 2003 Stock Incentive Plan, as amended (the "2003

Plan"), until May 2013, options were available to 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.

As of February 28, 2022, there were 10,000 options outstanding

and vested under the 2003 Plan, under which no additional options may be granted.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

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Independence of Directors

The Company’s Board of Directors is comprised of five “independent directors”,

as that term is defined under NASDAQ rules, and two directors who are not “independent directors”.

The Company’s “independent

directors” are Donald Mowbray, Eric Haskell, Carol O’Donnell, Philip Strasburg and Joseph Riemer.

Christopher L.

The Company’s Board of Directors is comprised of five “independent

directors”, as that term is defined under NASDAQ rules, and two directors who are not “independent directors”.

The Company’s

“independent directors” are Donald Mowbray, Eric Haskell, Carol O’Donnell, Philip Strasburg and Joseph Riemer.

Coccio and R.

Stephen Harshbarger are current employees of the Company and therefore are not considered independent.

PRINCIPAL ACCOUNTING FEES AND SERVICES

For fiscal 2021, the Company paid or accrued fees of approximately $81,000 for services

rendered by Friedman LLP, its independent auditors.

These fees included audit and review services.

For fiscal 2020, the Company paid or accrued fees of approximately $46,500 for services

rendered by Liggett & Webb, P.A., its former independent auditors.

These fees included audit and review services.

For fiscal 2022 and 2021, the Company paid or accrued fees of approximately

$129,000 and $81,000, respectively, for services rendered by Friedman LLP, its independent auditors.

These fees included audit and review

Audit Related Fees - None

For fiscal 2021, the Company paid or accrued tax preparation fees of approximately $7,500

for services rendered by RBSM, LLP.

For fiscal 2020, the Company paid or accrued tax preparation fees of approximately $5,500

for services rendered by Liggett & Webb, P.A..

For fiscal 2022 and 2021, the Company paid or accrued tax preparation

fees of approximately $14,000 and $7,500, respectively, for services rendered by RBSM, LLP.

All Other Fees – None

Pre-Approval Policies and Procedures

The Audit Committee’s current policy is to pre-approve all audit and non-audit services

that are to be performed and fees to be charged by the Company’s independent auditor to assure that the provision of these services

does not impair the independence of the auditor.

The Audit Committee pre-approved all audit and non-audit services rendered by the Company’s

principal accountants in fiscal 2021 and fiscal 2020.

FINANCIAL STATEMENT SCHEDULES

The Audit Committee’s current policy is to pre-approve all audit

and non-audit services that are to be performed and fees to be charged by the Company’s independent auditor to assure that the provision

of these services does not impair the independence of the auditor.

The Audit Committee pre-approved all audit and non-audit services rendered

by the Company’s principal accountants in fiscal 2022 and fiscal 2021.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

Certificate of Incorporation of the Company and all amendments thereto.

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Consent of Friedman LLP

Rule 13a-14/15d –

14(a) Certification.

Rule 13a-14/15d –

14(a) Certification.

Rule 13a-14/15d – 14(a) Certification.

Certification pursuant to 18 U.S.C.

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Incorporated herein by reference to the Company’s Current Report on Form 8-K dated April 17, 2020 and filed with the Securities and Exchange Commission on April 21, 2020.

Incorporated herein by

reference to the Company’s Current Report on Form 8-K dated September 24, 2020 and filed with the Securities and Exchange

Commision on September 17, 2020..

Incorporated herein by reference to the Company’s Current Report on Form 8-K dated September 24, 2020 and filed with the Securities and Exchange Commission on September 17, 2020.

Filed herewith.

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES

FOR THE YEARS ENDED FEBRUARY 28, 2021 and FEBRUARY 29, 2020

REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS

FOR THE YEARS ENDED FEBRUARY 28, 2022 and 2021

REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS (PCAOB

CONSOLIDATED FINANCIAL STATEMENTS:

Consolidated Balance Sheets at February 28, 2021 and February 29,

Consolidated Balance Sheets at February 28, 2022 and 2021

Consolidated Statements of Income

For the Years Ended February 28, 2021 and February 29, 2020

For the Years Ended February 28, 2022 and 2021

Consolidated Statements of Stockholders' Equity

For the Years Ended February 28, 2021 and February 29, 2020

For the Years Ended February 28, 2022 and 2021

Consolidated Statements of Cash Flows

For the Years Ended February 28, 2021 and February 29, 2020

For the Years Ended February 28, 2022 and 2021

Notes to the Consolidated Financial Statements

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Sono-Tek Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Sono-Tek

Corporation (the “Company”) as of February 28, 2021, and the related consolidated statements of income, stockholders’

equity, and cash flows for the year then ended, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of February

28, 2021, and the results of its operations and its cash flows for the year ended February 28, 2021, in conformity with accounting principles

generally accepted in the United States of America.

Opinion on the Financial Statements update

We have audited the accompanying consolidated balance

sheets of Sono-Tek Corporation (the “Company”) as of February 28, 2022 and 2021, and the related consolidated statements

of income, stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as

the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the

financial position of the Company as of February 28, 2022 and 2021, and the results of its operations and its cash flows for each of

the years in the two-year period then ended, in conformity with accounting principles generally accepted in the United States of

Basis for Opinion

These financial statements are the responsibility of the Company’s

Our responsibility is to express an opinion on the Company’s financial statements based on our audit.

These financial statements are the responsibility of the Company’s

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public

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and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of

We conducted our audits in accordance with the standards of

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements

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As part of our audit, we are required to obtain an understanding of internal

control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal

control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks

Our audits included performing procedures to assess the risks

of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

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presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

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As discussed in Notes 2 and 3 to the financial statements, the Company recognizes revenue when the customer obtains control of promised goods or services in an amount that reflects the consideration they expect to receive in exchange for those goods or services.

The Company’s product and service offerings are customized to meet specific customer needs.

There is significant judgment exercised by the Company in determining revenue recognition which includes (i) determination of whether products and services are considered distinct performance obligations that should be accounted for separately versus together (ii) the pattern of delivery (i.e.

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To test the accounting we evaluated management's significant accounting policies related to these customer agreements for reasonableness included in Note 3.

We selected a sample of customer agreements and performed the following procedures (i) Obtained and read source documents for each selection (ii) tested management's identification and treatment of agreed upon terms (iii) assessed the terms in the customer agreement and evaluated the appropriateness of management's application of their accounting policies, along with their use of estimates, in the determination of revenue recognition conclusions (iv) we evaluated the reasonableness of management’s determination of the performance obligation (v) we tested the mathematical accuracy of management's calculations of revenue and the associated timing of revenue recognized in the financial statements.

/s/ Friedman LLP

We have served as the Company’s auditor since 2020.

East Hanover, New Jersey

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

SONO-TEK CORPORATION

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of

Sono-Tek Corporation (the "Company") as of February 29, 2020, the related consolidated statements of operations and comprehensive

income, stockholders’

equity, and cash flows for the year then ended, and the related notes (collectively referred to as the "financial

statements").

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position

of the Company as of February 29, 2020, and the results of its operations and its cash flows for the year then ended, in conformity with

accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company's

Our responsibility is to express an opinion on the Company's financial statements based on our audits.

We are a public accounting

firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent

with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities

and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements

are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform,

an audit of its internal control over financial reporting in accordance with the standards of the PCAOB.

As part of our audits we are

required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the

effectiveness of the Company's internal control over financial reporting.

Accordingly, we express no such opinion in accordance with the

standards of the PCAOB.

Our audit included performing procedures to assess the risks of

material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall

presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

/s/ Liggett & Webb, P.A.

We have served as the Company’s auditor since 2012.

SONO-TEK CORPORATION

CONSOLIDATED BALANCE SHEETS

February 28, 2021

February 29, 2020

Current Assets:

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Marketable securities

Accounts receivable (less allowance of $56,123 and $71,000, respectively)

Accounts receivable (less allowance of $ 56,123 )

Inventories, net

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Deferred tax asset

LIABILITIES AND STOCKHOLDERS’

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities:

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Customer deposits

Current maturities of long term debt

Income taxes payable

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Commitments and Contingencies (Note 13)

Stockholders’

Stockholders’ Equity

Common stock, $ .01 par value;

25,000,000 shares authorized, 15,452,656 and 15,348,180 issued and outstanding, respectively

25,000,000 shares authorized, 15,729,175 and 15,452,656 issued and outstanding as February 28, 2022, and 2021, respectively

Additional paid-in capital

Accumulated earnings

Total stockholders’

TOTAL LIABILITIES AND STOCKHOLDERS’

Total stockholders’ equity

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

See accompanying notes to consolidated financial statements.

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Fiscal Year Ended

February 28, 2021

February 29, 2020

Cost of Goods Sold

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Interest and Dividend Income

Paycheck Protection Program Loan Forgiveness

Income before Income Taxes

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Diluted Earnings Per Share

Weighted Average Shares –

Weighted Average Shares – Basic

Weighted Average Shares – Diluted

See accompanying notes to consolidated financial statements.

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

YEARS ENDED FEBRUARY 28, 2021 AND FEBRUARY 29, 2020

YEARS ENDED FEBRUARY 28, 2022 AND 2021

Par Value $.01

(Deficit) Earnings

Stockholders’

Balance –

February 28, 2019

Total Stockholders’

Balance - February 29, 2020

Stock based compensation expense

Exercise of stock options

Balance –

February 29, 2020

Cashless exercise of stock options

Balance - February 28, 2021

Stock based compensation expense

Exercise of stock options

Balance –

February 28, 2021

Cashless exercise of stock options

Proceeds from exercise of stock options

Balance - February 28, 2022

See accompanying notes to consolidated financial statements.

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Stock based compensation expense

Bad debt expense

Inventory reserve

Paycheck Protection Program Loan Forgiveness

( 1,005,372 )

Deferred tax expense

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Capital expenditure grant proceeds

Sale (purchase) of marketable securities, net

Net Cash (Used In) Investing Activities

Purchase of marketable securities, net

( 1,304,520 )

Net Cash Used In Investing

( 1,631,462 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from exercise of stock options

Proceeds from note payable - bank

Repayment of long-term debt

Net Cash Provided By (Used In) Financing Activities

Net Cash Provided By Financing Activities

NET INCREASE IN CASH AND CASH EQUIVALENTS

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BUSINESS DESCRIPTION

Sono-Tek Corporation (the “Company”, “Sono-Tek”, “We”

or “Our”) was incorporated in New York on March 21, 1975.

We are the world leader in the design and manufacture of ultrasonic

coating systems for applying precise, thin film coatings to protect, strengthen or smooth surfaces on parts and components for the microelectronics/electronics,

alternative energy, medical, industrial and emerging research & development/other markets.

We design and manufacture custom-engineered

ultrasonic coating systems and also provide patented nozzles and generators for manufacturers’ equipment.

Sono-Tek Corporation (the “Company”, “Sono-Tek”,

“We” or “Our”) was incorporated in New York on March 21, 1975.

We are the world leader in the design and manufacture

of ultrasonic coating systems for applying precise, thin film coatings to add functional properties, protect or strengthen surfaces on

parts and components for the microelectronics/electronics, alternative energy, medical, industrial and emerging research & development/other

We design and manufacture custom-engineered ultrasonic coating systems incorporating our patented technology, in combination

with strong applications engineering knowledge, to assist our customers in achieving their desired coating solutions.

SIGNIFICANT ACCOUNTING POLICIES

Advertising Expenses - The Company expenses the cost of advertising

in the period in which the advertising takes place.

Advertising expense for fiscal 2021 and fiscal 2020 was $78,206 and $297,297, respectively.

Accounts Receivable, net- In the normal course of business, the Company extends

credit to customers.

Accounts receivable, less the allowance for doubtful accounts, reflect the net realizable value of receivables and

approximate fair value.

The Company records a bad debt expense/allowance based on management’s estimate of uncollectible accounts.

Advertising Expenses - The Company expenses the

cost of advertising in the period in which the advertising takes place.

Advertising expense for fiscal 2022 and fiscal 2021 was $ 178,500

and $ 78,200 , respectively.

Accounts Receivable, net - In the normal course of business,

the Company extends credit to customers.

Accounts receivable, less the allowance for doubtful accounts, reflect the net realizable value

of receivables and approximate fair value.

The Company records a bad debt expense/allowance based on management’s estimate of uncollectible

All outstanding accounts receivable accounts are reviewed for collectability on an individual basis.

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.

Consolidation - The accompanying consolidated financial statements of the

Company include the accounts of the Company and its wholly owned subsidiary, Sono-Tek Industrial Park, LLC (“SIP”) in conformity

with generally accepted accounting principles in the United States (“GAAP”).

SIP operates as a real estate holding company

for the Company’s real estate operations.

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.

Consolidation - The accompanying consolidated financial

statements of the Company include the accounts of the Company and its wholly owned subsidiary, Sono-Tek Industrial Park, LLC (“SIP”)

in conformity with generally accepted accounting principles in the United States (“GAAP”).

SIP operates as a real estate holding

company for the Company’s real estate operations.

All intercompany accounts and transactions have been eliminated in consolidation.

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

under the treasury stock method.

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.

Fair Value of Financial Instruments - The Company applies Accounting Standards

Codification (“ASC”) 820, Fair Value Measurement (“ASC 820”), which establishes a framework for

measuring fair value and clarifies the definition of fair value within that framework.

ASC 820 defines fair value as an exit price, which

is the price that would be received for an asset or paid to transfer a liability in the Company’s principal or most advantageous

market in an orderly transaction between market participants on the measurement date.

The fair value hierarchy established in ASC 820

generally requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair

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.

EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted

into common stock under the treasury stock method.

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.

Fair Value of Financial Instruments - The Company applies

Accounting Standards Codification (“ASC”) 820, Fair Value Measurement (“ASC 820”), which establishes

a framework for measuring fair value and clarifies the definition of fair value within that framework.

ASC 820 defines fair value as an

exit price, which is the price that would be received for an asset or paid to transfer a liability in the Company’s principal or

most advantageous market in an orderly transaction between market participants on the measurement date.

The fair value hierarchy established

in ASC 820 generally requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring

Observable inputs reflect the assumptions that market participants would use in pricing the asset or liability and are developed

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liability and are to be developed based on the best information available in the circumstances.

The carrying amounts of financial instruments reported in the accompanying consolidated

financial statements for current assets and current liabilities approximate the fair value because of the immediate or short-term maturities

of the financial instruments.

The carrying amounts of financial instruments reported in the accompanying

consolidated financial statements for current assets and current liabilities approximate the fair value because of the immediate or short-term

maturities of the financial instruments.

The valuation hierarchy is composed of three levels.

The classification within the valuation

hierarchy is based on the lowest level of input that is significant to the fair value measurement.

The levels within the valuation hierarchy

are described below:

Level 1 — Assets and liabilities with unadjusted, quoted prices listed on active

market exchanges.

Inputs to the fair value measurement are observable inputs, such as quoted prices in active markets for identical assets

or liabilities.

Level 2 — Inputs to the fair value measurement are determined using prices for recently

traded assets and liabilities with similar underlying terms, as well as direct or indirect observable inputs, such as interest rates and

yield curves that are observable at commonly quoted intervals.

Level 3 — Inputs to the fair value measurement are unobservable inputs, such as estimates,

assumptions, and valuation techniques when little or no market data exists for the assets or liabilities.

The classification

within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement.

The levels within

the valuation hierarchy are described below:

Level 1 — Assets and liabilities with unadjusted, quoted prices

listed on active market exchanges.

Inputs to the fair value measurement are observable inputs, such as quoted prices in active markets

for identical assets or liabilities.

Level 2 — Inputs to the fair value measurement are determined

using prices for recently traded assets and liabilities with similar underlying terms, as well as direct or indirect observable inputs,

such as interest rates and yield curves that are observable at commonly quoted intervals.

Level 3 — Inputs to the fair value measurement are unobservable

inputs, such as estimates, assumptions, and valuation techniques when little or no market data exists for the assets or liabilities.

The fair values of financial assets of the

Company were determined using the following categories at February 28, 2022 and February 28, 2021, respectively:

Marketable Securities –

February 28, 2021

Marketable Securities –

February 29, 2020

Marketable Securities include certificates of deposit and US Treasury

securities, totaling $4,563,470 and $4,219,240 that are considered to be highly liquid and easily tradeable as of February 28, 2021 and

Significant Accounting Policies - Fair values of financial assets of the Company

Marketable Securities – February 28, 2022

Marketable Securities – February 28, 2021

Marketable Securities include certificates

of deposit and US Treasury securities, totaling $ 5,867,990 and $ 4,563,470 that are considered to be highly liquid and easily tradeable

as of February 28, 2022 and February 28, 2021, respectively.

US Treasury securities are valued using inputs observable in active markets

for identical securities and are therefore classified as Level 1 and certificates of deposit are classified as Level 2 within the

Company’s fair value hierarchy.

The Company’s marketable securities are considered to be trading securities as defined under

ASC 320 “Investments – Debt and Equity Securities.”

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.

The Company uses a recognition threshold and a measurement attribute

for financial statement recognition and measurement of tax positions taken or expected to be taken in a return.

For those benefits to

be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities.

As of February 28,

2022 and February 28, 2021, there were no uncertain tax positions.

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, which is considered the useful life.

The accumulated amortization of patents is $ 192,490 and $ 181,922 at February 28, 2022 and

February 28, 2021, respectively.

US Treasury securities are valued using inputs observable in active markets for identical securities

and are therefore classified as Level 1 and certificates of deposit are classified as Level 2 within the Company’s fair value

The Company’s marketable securities are considered to be trading securities as defined under ASC 320 “Investments

– Debt and Equity Securities.”

Grant Proceeds – The Company was awarded a

$100,000 Wired Innovations Center grant in June 2019 from the utility that provides its electricity service.

Proceeds of the grant were

conditioned upon the Company’s successful completion of certain energy efficiency related improvements.

In addition, the grant was

subject to certain other requirements and was provided on a reimbursement basis only.

The Company expended approximately $580,000 related

to these improvements during the fiscal year ended February 29, 2020.

During the second quarter of fiscal 2021, the Company received the

$100,000 grant in its entirety.

The Company has concluded that this grant is not within the scope of ASC 606, as it does

not meet the definition of a contract with a “customer”.

The Company has further concluded that Subtopic 958-605, Not-for-Profit-Entities-Revenue

Recognition also does not apply, as the Company is a business entity and the grant is from a public utility.

Grants and related receivables

are recognized when there is reasonable assurance that the grant will be received, and all attaching conditions will be complied with.

The Company has applied the grant proceeds against the cost of the capitalized improvements applicable to the grant, reducing the carrying

value and the related depreciation expense going forward.

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.

The Company uses a recognition threshold and a measurement attribute for financial

statement recognition and measurement of tax positions taken or expected to be taken in a return.

For those benefits to be recognized,

a tax position must be more likely than not to be sustained upon examination by taxing authorities.

As of February 28, 2021 and February

29, 2020, there were no accruals for uncertain tax positions.

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.

The accumulated amortization

of patents is $181,922 and $171,210 at February 28, 2021 and February 29, 2020, respectively.

Annual amortization expense of such intangible

assets is expected to be approximately $11,000 per year for the next five years.

Inventories - Inventories are stated at the lower of cost or net realizable

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.

Management compares the cost of inventory with the net realizable value and, if applicable,

an allowance is made for writing down the inventory to its net realizable value, if lower than cost.

On an ongoing basis, inventory is

reviewed for potential write-down for estimated obsolescence or unmarketable inventory based upon forecasts for future demand and market

Land and Buildings – Land and buildings are stated at cost.

are being depreciated by use of the straight-line method based on an estimated useful life of forty years.

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.

No impairment losses were identified or recorded in the twelve months ended February 28, 2021 and February 29,

2020 on the Company’s long-lived assets.

Management Estimates - The preparation of the consolidated financial

statements in conformity with GAAP 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 consolidated financial statements and the reported

amounts of revenues and expenses during the reporting period.

Annual amortization expense of such intangible assets is expected to be approximately $ 11,000 per

year for the next five years.

Inventories - Inventories are stated at the lower

of cost or net realizable value.

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.

Management compares the cost of inventory with the net realizable value and,

if applicable, an allowance is made for writing down the inventory to its net realizable value, if lower than cost.

On an ongoing basis,

inventory is reviewed for potential write-down for estimated obsolescence or unmarketable inventory based upon forecasts for future demand

and market conditions.

Land and Buildings - Land and buildings are stated at

Buildings are being depreciated by use of the straight-line method based on an estimated useful life of forty years.

Land and Buildings

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.

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.

No impairment losses were identified or recorded for the years ended February 28,

2022 and February 28, 2021 on the Company’s long-lived assets.

Management Estimates - The preparation of the

consolidated financial statements in conformity with GAAP 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 consolidated financial statements

and the reported amounts of revenues and expenses during the reporting period.

Actual results could differ from those estimates.

New Accounting Pronouncements - In December 2019, the FASB issued ASU 2019-12,

“ Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes .” The guidance issued in this update simplifies

the accounting for income taxes by eliminating certain exceptions to the guidance in ASC 740 related to the approach for intra-period

tax allocation, the methodology for calculating income taxes in an interim period and the recognition for deferred tax liabilities for

outside basis differences.

ASU 2019-12 also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or

rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill.

The ASU became effective for

the Company on March 1, 2021, with early adoption permitted, and is not expected to have a significant impact on the Company’s consolidated

financial statements.

In June 2016, the FASB issued ASU 2016-13 - Financial Instruments-Credit Losses-Measurement

of Credit Losses on Financial Instruments.

Codification Improvements to Topic 326, Financial Instruments –

Credit Losses, have been

released in November 2018 (2018-19), November 2019 (2019-10 and 2019-11) and a January 2020 Update (2020-02) that provided additional

guidance on this Topic.

This guidance replaces the current incurred loss impairment methodology with a methodology that reflects expected

credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

New Accounting Pronouncements - In December 2019, the

FASB issued ASU 2019-12, “ Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes .” The guidance issued

in this update simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in ASC 740 related to the

approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition for deferred

tax liabilities for outside basis differences.

ASU 2019-12 also simplifies aspects of the accounting for franchise taxes and enacted changes

in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill.

The ASU became

effective for the Company on March 1, 2021 and did not have a significant impact on the Company’s consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13 - Financial Instruments-Credit

Losses-Measurement of Credit Losses on Financial Instruments.

Codification Improvements to Topic 326, Financial Instruments – Credit

Losses, have been released in November 2018 (2018-19), November 2019 (2019-10 and 2019-11) and a January 2020 Update (2020-02) that provided

additional guidance on this Topic.

This guidance replaces the current incurred loss impairment methodology with a methodology that reflects

expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

For SEC filers meeting certain criteria, the amendments in this ASU are effective for fiscal years, and interim periods within those fiscal

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analysis of the impact of this guidance on its consolidated financial statements and does not expect the adoption of this guidance to

have a material impact on the Company’s consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (ASC 820):

Framework-Changes to the Disclosure Requirements for Fair Value Measurement.

ASU 2018-13 removes certain disclosures, modifies certain

disclosures and adds additional disclosures.

The ASU is effective for annual periods, including interim periods within those annual periods,

beginning after December 15, 2019.

Early adoption is permitted.

The Company adopted the new standard on March 1, 2020, and the adoption

did not have a material impact on its consolidated financial statements.

Other than Accounting Standards Update (“ASU”) 2019-12, ASU 2016-13 and ASU

2018-13 discussed above, all new accounting pronouncements issued but not yet effective have been deemed to be not applicable to the

have a material impact on the Company’s consolidated financial statements.

Other than Accounting Standards Update (“ASU”) 2019-12

and ASU 2016-13 discussed above, all new accounting pronouncements issued but not yet effective have been deemed to be not applicable

to the Company.

Hence, the adoption of these new accounting pronouncements, once effective, is not expected to have an impact on the Company.

Product Warranty - Expected future product warranty expense is recorded when

the product is sold.

Reclassifications – Where appropriate, prior year’s financial

statements reflect reclassifications to conform to the current year’s presentation.

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

Revenue Recognition

- The Company recognizes

revenue in accordance with ASC 606, Revenue from Contracts with Customers, the core principle of which is that an entity should recognize

revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity

expects to be entitled to receive in exchange for those goods or services.

Shipping and Handling Costs – Shipping and handling costs are included

in cost of sales in the accompanying consolidated statements of operations.

Stock-Based Compensation - The Company currently uses a Black-Scholes

option pricing model to calculate the fair value of its stock options.

The Company primarily uses historical data to determine the

assumptions to be used in the Black-Scholes model and has 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.

ASC 718 requires the recognition of the fair value of stock compensation expense on a

straight line basis over the requite service period, based on the terms of the award in net income.

The Company accounts for

forfeitures as they occur.

Although every effort is made to ensure the accuracy of the Company’s estimates and assumptions,

significant unanticipated changes in those estimates, interpretations and assumptions may result in recording stock option expense

that may materially impact the Company’s financial statements for each respective reporting period.

Uncertainties - Since early 2020, when the World Health Organization established

the transmissible and pathogenic coronavirus a global pandemic, there have been business slowdowns.

The outbreak of such a communicable

disease has resulted in a widespread health crisis which has adversely affected general commercial activity and the economies and financial

markets of many countries, including the United States.

As the outbreak of the disease has continued through fiscal 2021 and into fiscal

2022, the measures taken by the governments of countries affected has adversely affected the Company’s business, financial condition,

and results of operations.

The pandemic had a slight adverse impact on sales and the demand for products in fiscal 2021, resulting in

sales that were less than expected at the beginning of fiscal 2021.

The Company expects the pandemic to continue to have an adverse impact

during fiscal 2022.

Product Warranty - Expected future product warranty

expense is recorded when the product is sold.

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.

Revenue Recognition - The Company recognizes revenue

in accordance with ASC 606, Revenue from Contracts with Customers, the core principle of which is that an entity should recognize revenue

to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects

to be entitled to receive in exchange for those goods or services.

To determine revenue recognition for

arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps:

· Identification

of the contract, or contracts, with a customer

· Identification

of the performance obligations in the contract

· Determination

of the transaction price

of the transaction price to the performance obligations in the contract

· Recognition

of revenue when, or as, performance obligations are satisfied

Shipping and Handling Costs - Shipping and handling

costs are included in cost of sales in the accompanying consolidated statements of operations.

Stock-Based Compensation - The Company currently uses

a Black-Scholes option pricing model to calculate the fair value of its stock options.

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;

and expected lives of the awards.

The Company primarily uses historical data to determine the assumptions to be used in the Black-Scholes

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.

ASC 718 requires the recognition of

the fair value of stock compensation expense to be recognized over the vesting term of such award.

The Company accounts for forfeitures

as they occur.

Uncertainties

- Since early 2020, when the World Health Organization established the transmissible and pathogenic coronavirus a global

pandemic, there have been business slowdowns.

The outbreak of such a communicable disease has resulted in a widespread health crisis

which has adversely affected general commercial activity and the economies and financial markets of many countries, including the

United States.

As the outbreak of the disease has continued through fiscal 2022, the measures taken by the governments of impacted

countries have slightly impacted the Company’s business, financial condition, and results of operations.

The pandemic had a

slightly adverse impact on sales and the demand for products in fiscal 2021.

REVENUE RECOGNITION

A majority of the Company’s sales revenue is derived primarily from short term contracts

with customers, which, on average, are in effect for less than twelve months.

Sales revenue from manufactured equipment transferred at

a single point in time accounts for a majority of the Company’s revenue.

Sales revenue is recognized when control of the Company’s manufactured equipment

is transferred to its customers in an amount that reflects the consideration the Company expects to receive based upon the agreed transaction

The Company’s performance obligations are satisfied when its customers take control of the purchased equipment, which is

based on the contract terms.

A majority of the Company’s sales revenue is derived primarily

from short term contracts with customers, which, on average, are in effect for less than twelve months.

Sales revenue from manufactured

equipment transferred at a single point in time accounts for a majority of the Company’s revenue.

Sales revenue is recognized when control of the Company’s manufactured

equipment is transferred to its customers in an amount that reflects the consideration the Company expects to receive based upon the agreed

transaction price.

The Company’s performance obligations are satisfied when its customers take control of the purchased equipment,

which is based on the contract terms.

Based on prior experience, the Company reasonably estimates its sales returns and warranty reserves.

are presented net of discounts and allowances.

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 nor does it grant price adjustments after a sale is

The Company does not capitalize any sales commission costs related to the acquisition of

All commissions related to a performance obligation that are satisfied at a point in time are expensed when the customer takes

control of the purchased equipment.

The Company applies the practical expedient in paragraph ASC 606-10-50-14 and does not disclose information about

remaining performance obligations that have original expected durations of one-year or less.

They apply the transition practical expedient

in paragraph ASC 606-10-65-1(f)(3) and does not disclose the amount of the transaction price allocated to the remaining performance obligations

and an explanation of when we expect to recognize that amount as revenue.

At February 28, 2021, the Company had received $1,167,000 in cash deposits, and had issued

Letters of Credit in the amount of $849,000 to secure these cash deposits.

At February 28, 2021, the Company was utilizing $849,000

of its available credit line to collateralize these letters of credit.

At February 29, 2020, the Company had received $1,649,000 in cash deposits for customer

During the year ended February 28, 2021 the Company recognized $1,567,000 of these deposits as revenue.

At February 28, 2019, the Company had received $1,150,000 in cash deposits for customer

During the year ended February 29, 2020 the Company recognized $1,108,000 of these deposits as revenue.

The Company does

not grant its customers or independent representatives the ability to return equipment nor does it grant price adjustments after a sale

The Company does not capitalize any sales commission costs related

to the acquisition of a contract.

All commissions related to a performance obligation that are satisfied at a point in time are expensed

when the customer takes control of the purchased equipment.

The Company applies the practical expedient in paragraph ASC 606-10-50-14

and does not disclose information about remaining performance obligations that have original expected durations of one-year or less.

At February 28, 2022, the Company had received $ 1,168,000 in cash

deposits, and had issued a Letter of Credit in the amount of $ 5,000 to secure these cash deposits.

At February 28, 2022, the Company was

utilizing $5,000 of its available credit line to collateralize these letters of credit .

At February 28, 2021, the Company had received $ 1,167,000 in cash

deposits, and had issued Letters of Credit in the amount of $ 849,000 to secure these cash deposits.

At February 28, 2021, the Company

was utilizing $849,000 of its available credit line to collateralize these letters of credit .

The Company’s sales revenue, by product line is as follows:

Revenue Recognition - Sales Revenue by Product Line

Twelve Months Ended

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STOCK-BASED COMPENSATION

Stock Options –

Under the 2013 Stock Incentive Plan, as amended

(the "2013 Plan"), options can be granted to officers, directors, consultants and employees of the Company and its subsidiaries

to purchase up to 2,500,000 shares of the Company's common stock.

Under the 2013 Plan options expire ten years after the date of grant.

Stock Options – Under the 2013 Stock

Incentive Plan, as amended (the "2013 Plan"), options can be granted to officers, directors, consultants and employees of the

Company and its subsidiaries to purchase up to 2,500,000 shares of the Company's common stock.

Under the 2013 Plan options expire ten

years after the date of grant.

As of February 28, 2022, there were 243,710 options outstanding under the 2013 plan.

Under the 2003 Stock Incentive Plan, as amended (the "2003 Plan"),

until May 2013, options were available to 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.

As of February 28, 2021, there were 47,500 options outstanding under the 2003

Plan, under which no additional options may be granted.

Under the 2013 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 plan or unless otherwise specified at the discretion of the Board of Directors, no option may be exercised prior to one year after

date of grant, with the balance becoming exercisable in cumulative installments over a three-year period during the term of the option,

and terminating at a stipulated period of time after an employee's termination of employment.

During fiscal 2021, the Company granted options to acquire 60,500 shares to employees

exercisable at prices ranging from $3.70 to $4.45 and options to acquire 20,000 shares to the non-employee members of the board of directors

with an exercise price of $3.70.

The options granted to employees and directors vest over three years and expire in ten years.

granted by the Company during fiscal 2021 had a combined weighted average grant date fair value of $2.20 per share.

During fiscal 2020, the Company granted options to acquire 17,500 shares to employees

exercisable at prices ranging from $2.10 to $2.65, options to acquire 20,000 shares to the non-employee members of the board of directors

with an exercise price of $2.65 and options for 200,000 shares to an officer and director exercisable at prices of ranging from $2.45

The options granted to employees and directors vest over three years and expire in ten years.

The options granted to the officer

vested upon grant and expire in ten years.

The options granted by the Company during fiscal 2020 had a combined weighted average grant

date fair value of $0.34 per share.

A summary of the activity of both plans for fiscal 2021 and fiscal 2020 is as follows:

Under the 2003 Stock Incentive Plan, as amended (the "2003

Plan"), until May 2013, options were available to 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.

As of February 28, 2022, there were 10,000 options outstanding

under the 2003 Plan, under which no additional options may be granted.

Under the 2013 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 plan or unless otherwise specified at the discretion of the Board of Directors, no option may be exercised prior to one

year after date of grant, with the balance becoming exercisable in cumulative installments over a three-year period during the term of

the option, and terminating at a stipulated period of time after an employee's termination of employment.

During fiscal 2022, the Company granted options to acquire

138,085 shares to employees exercisable at prices ranging from $ 3.19 to $ 6.26 and options to acquire 30,250 shares to the non-employee

members of the board of directors with an exercise price of $ 3.19 .

The options granted to employees and directors vest over three years

and expire in ten years.

The options granted by the Company during fiscal 2022 had a combined weighted average grant date fair value of

$ 2.76 per share.

During fiscal 2021, the Company granted options to acquire

60,500 shares to employees exercisable at prices ranging from $ 3.70 to $ 4.45 and options to acquire 20,000 shares to the non-employee

members of the board of directors with an exercise price of $ 3.70 .

The options granted to employees and directors vest over three years

and expire in ten years.

The options granted by the Company during fiscal 2021 had a combined weighted average grant date fair value of

$ 2.20 per share.

A summary of the activity of both plans for fiscal 2022 and fiscal

2021 is as follows:

Stock-Based Compensation - Summary of Stock Options

Weighted Average

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Balance - February 28, 2022

aggregate intrinsic value of the Company’s vested and exercisable options at February 28, 2021 was $692,490 .

For the years ended February

28, 2021 and February 29, 2020, the Company recognized $47,633 and $90,305 in stock based compensation expense for the years then ended,

respectively.

Such amounts are included in general and administrative expenses on the statement of operations.

Total compensation expense

related to non-vested options not yet recognized as of February 28, 2021 was $185,000 and

will be recognized on a straight-line basis through January 2024.

The amount of future stock option compensation expense could be affected

by any future option grants or by any forfeitures.

During the year ended February 28, 2021, the Company had net settlement exercises of

stock options, whereby, the optionee did not pay cash for the options but instead received the number of shares equal to the difference

between the exercise price and the market price on the date of exercise.

Net settlement exercises during the year ended February 28, 2021

resulted in 104,476 shares issued and 56,732 options cancelled in the settlement of shares issued.

Determining the appropriate fair value of the stock-based awards requires the input of

subjective assumptions, including the fair value of the Company’s common stock, and for stock options, the expected life of the

option, and the expected stock price volatility.

The Company uses the Black-Scholes option pricing model to value its stock option awards.

The assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent

uncertainties and the application of management’s judgment.

As a result, if factors change and management uses different assumptions,

stock-based compensation expense could be materially different for future awards.

The expected term of the options is estimated based on the Company’s historical exercise

The aggregate intrinsic value of the Company’s vested and exercisable

options at February 28, 2022 was $ 115,780 .

For the years ended February 28, 2022 and 2021, the Company

recognized $ 179,283 and $ 47,633 in stock based compensation expense, respectively.

Such amounts are included in general and

administrative expenses on the consolidated statements of income.

Total compensation expense related to non-vested options not yet

recognized as of February 28, 2022 was $ 456,000 and will be recognized over the next three years based on vesting date.

of future stock option compensation expense could be affected by any future option grants or by any forfeitures.

During the year

ended February 28, 2022, the Company had net settlement exercises of stock options, whereby, the optionee did not pay cash for the

options but instead received the number of shares equal to the difference between the exercise price and the market price on the

date of exercise.

Net settlement exercises during the year ended February 28, 2022 resulted in 249,019 shares of common stock issued.

Determining the appropriate fair value of the stock-based awards requires

the input of subjective assumptions, including the fair value of the Company’s common stock, and for stock options, the expected

life of the option, and the expected stock price volatility.

The Company uses the Black-Scholes option pricing model to value its stock

option awards.

The assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and

involve inherent uncertainties and the application of management’s judgment.

The expected term of the options is estimated based on the Company’s

historical exercise rate.

The expected life of awards that vest immediately use the contractual maturity since they are vested when issued.

For stock price

volatility, the Company uses its expected volatility of the price of the Company’s common stock based on historical activity.

risk-free interest rate is based on U.S.

Treasury notes with a term approximating the expected life of the option at the grant-date.

The weighted-average fair value of options has been estimated on the date of

grant using the Black-Scholes options-pricing model.

For stock price volatility, the Company uses its expected volatility of the price of the Company’s common stock based on historical

The risk-free interest rate is based on U.S.

Treasury notes with a term approximating the expected life of the option at the

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:

Stock-Based Compensation

- Weighted-average Black-Scholes assumptions

Fiscal Year Ended

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Expected dividend yield

For the years ended February 28, 2021 and February 29, 2020, net income and earnings per

share reflect the actual deduction for stock-based compensation expense.

The impact of applying ASC 718 was $47,633 and $90,305 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.

Inventories consist of the following:

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Equipment, furnishings and leasehold improvements consist of the following:

Building, Equipment, Furnishings and Leasehold Improvements

Laboratory equipment

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Accumulated depreciation

Depreciation expense for the years ended February 28, 2021 and February 29, 2020 was $427,650

and $390,082, respectively.

( 5,900,511 )

( 5,484,428 )

Depreciation expense for the years ended February 28, 2022 and February

28, 2021 was $ 416,083 and $ 427,650 , respectively.

ACCRUED EXPENSES

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Other accrued expenses

Total accrued expenses

REVOLVING LINE OF CREDIT

The Company has a $1,500,000 revolving line of credit which accrues interest at the prime

rate which was 3.25% at February 28, 2021 and 4.75% at February 29, 2020.

The revolving credit line is collateralized by the Company’s

accounts receivable and inventory.

The Company has a $ 1,500,000 revolving line of credit at prime which

was 3.25 % at February 28, 2022 and February 28, 2021.

The revolving credit line is collateralized by the Company’s accounts receivable

and inventory.

The revolving credit line is payable on demand and must be retired for a 30-day period, once annually.

If the Company fails to perform the 30-day annual pay down or if the bank elects to terminate the credit line, the bank may, at its option,

convert the outstanding balance to a 36-month term note with payments including interest in 36 equal installments.

As of February 28, 2021, $849,000 of the Company’s credit line was being utilized

to collateralize letters of credit issued to customers that have remitted cash deposits to the Company on existing orders.

of credit expire at various times in the fiscal year ending February 28, 2022.

As of February 28, 2021, there were no outstanding borrowings

under the line of credit and the unused portion of the credit line was $651,000 as of February 28, 2021.

If the Company fails

to perform the 30-day annual pay down or if the bank elects to terminate the credit line, the bank may, at its option, convert the outstanding

balance to a 36-month term note with payments including interest in 36 equal installments.

As of February 28, 2022, $ 5,000 of the Company’s credit line was being utilized to

collateralize a Letter of Credit issued to a customer that has remitted cash deposits to the Company on existing orders.

The Letter of

Credit expires in 2023.

As of February 28, 2022, there were no outstanding borrowings under the line of credit and the unused portion

of the credit line was $ 1,495,000 .

As of February 28, 2021, $ 849,000 of the Company’s credit line

was being utilized to collateralize letters of credit issued to customers that have remitted cash deposits to the Company on existing

The letters of credit expire at various times in the fiscal year ending February 28, 2022.

As of February 28, 2021, there were

no outstanding borrowings under the line of credit and the unused portion of the credit line was $ 651,000 as of February 28, 2021.

LONG-TERM DEBT

Long-term debt consists of the following:

Note payable, bank, collateralized by land and buildings, payable in monthly installments of principal and interest of $16,358 through January 2024 with an interest rate of 4.15% and a 10-year term.

Payable, bank, unsecured, Paycheck Protection Program funding, initially scheduled to be payable in monthly installments of

principal and interest of $56,370 through April 2022.

Interest rate 1%.

Under the terms of the

CARE Act, forgiveness for all or a portion of the loan may be granted based upon use of the loan proceeds for eligible payroll and

related payroll costs and other qualified expenses.

The Company has applied for forgiveness of this

Under the Paycheck Protection Program Flexibility Act, payments of principal and interest shall be deferred

until the date that the Small Business Administration remits the forgiveness amount to the Company’s lender or determines that

some or all of the PPP loan is not eligible for forgiveness.

If all or a portion of the loan is not forgiven, the unforgiven

balance and accrued interest shall be payable during the remainder of the term of the loan.

This loan was forgiven in its entirety by the SBA in April 2021.

Total long-term debt

Due within one year

Due after one year

COMMITMENTS AND CONTINGENCIES

Other than the letters of credit discussed in Notes 3 and 8, the Company did not have

any material commitments or contingencies as of February 28, 2021.

The annual provision (benefit) for income taxes differs from amounts computed by applying

the maximum U.S.

In fiscal year 2021, the Company

obtained a loan under the Paycheck Protection Program (“PPP”) for $ 1,001,640 .

In April 2022, the Company received notice

from the SBA that the loan was forgiven in full and recorded a gain on forgiveness of $ 1,005,372 , which is recorded on the consolidated

statements of income.

Unsecured Debt

Subsequent Event

The annual provision (benefit) for income taxes differs from amounts

computed by applying the maximum U.S.

Federal income tax rate of 21% to pre-tax income as follows:

Income Taxes - Income tax reconciliation

Expected federal income tax

3 unchanged sentences

Income tax expense

In assessing the realizability of deferred tax assets, management considers whether it

is more likely than not that some portion or all of the deferred tax assets will not be realized.

The ultimate realization of deferred

tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.

Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and projections for future

taxable income over periods in which the deferred tax assets are deductible.

Management believes it is more likely than not that the

Company will realize the benefits of these deductible differences.

Management does not believe that there are significant uncertain tax positions in 2021.

In assessing the realizability of deferred tax assets, management

considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.

The ultimate realization

of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences

become deductible.

Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and projections

for future taxable income over periods in which the deferred tax assets are deductible.

Management believes it is more likely than not

that the Company will realize the benefits of these deductible differences.

Management does not believe that there are significant uncertain

tax positions in 2022.

There are no interest and penalties related to uncertain tax positions in 2022.

As of February 28, 2022, open

years related to the federal and state jurisdictions are 2020, 2019 and 2018.

The deferred tax asset and liability are comprised of the following:

Income Taxes - Deferred tax asset and liability

Deferred tax asset

Allowance for inventory

Allowance for accounts receivable

Accrued expenses and other

Research tax credits

Deferred tax asset –

Deferred tax asset – Long Term

Deferred tax liability

Building and leasehold depreciation

Deferred tax liability –

Deferred tax liability – Long Term

$ ( 169,000 )

$ ( 206,000 )

EARNINGS PER SHARE

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

The following table sets forth the computation of basic and diluted

earnings per share:

Earnings Per Share - The computation of basic and diluted

earnings per share

Numerator for basic and diluted earnings per share

3 unchanged sentences

Denominator for diluted earnings per share

Basic Earnings Per Share –

Weighted Average

Diluted Earnings Per Share –

Weighted Average

Basic Earnings Per Share – Weighted Average

Diluted Earnings Per Share – Weighted Average

CUSTOMER CONCENTRATIONS AND FOREIGN SALES

Export sales to customers located outside the United States and Canada were approximately

Asia Pacific (APAC)

Europe, Middle East, Asia (EMEA)

Latin America

During fiscal 2021 and fiscal 2020, sales to foreign customers accounted for approximately

$9,678,000 and $10,849,000, or 65% and 71% respectively, of total revenues.

The Company had three customers which accounted for 28% of sales during fiscal 2021.

Two customers accounted

for 64% of the outstanding accounts receivables at February 28, 2021.

The Company had three customers which accounted for 30% of sales during fiscal 2020.

customers accounted for 67% of the outstanding accounts receivables at February 29, 2020.

SUBSEQUENT EVENTS

Paycheck Protection Program Loan

During fiscal 2021, the Company entered into a loan transaction pursuant to which the Company

received proceeds of $1,001,640 (the “PPP Loan”) under the Paycheck Protection Program (“PPP”).

established as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), provides for loans to

qualifying companies and is administered by the U.S.

Small Business Administration (the “SBA”).

The PPP Loan was evidenced by a promissory note (the “Note”), between the

Company and M&T Bank (the “Bank”).

The Note had a two-year term, accrued interest at the rate of 1.0% per annum, and was prepayable at

any time without payment of any premium.

No payments of principal or interest were due during the six-month period beginning on the

date of the Note (the “Deferral Period”).

Beginning on the seventh month following the date of the Note, the Company was

required to make 18 monthly payments of principal and interest in the amount of $56,370.

Under the terms of the CARES Act, PPP loan recipients can apply for and be granted forgiveness

for all or a portion of loan granted under the PPP, with such forgiveness to be determined, subject to limitations, based on the use of

the loan proceeds for payment of payroll costs and any payments of mortgage interest, rent, and utilities.

However, at least 75 percent

of the PPP Loan proceeds must be used for eligible payroll costs.

The terms of any forgiveness may also be subject to further requirements

in any regulations and guidelines the SBA may adopt.

The Company applied for forgiveness of the PPP Loan in December 2020.

On April 1, 2021,

the Company received notice from the Bank that the Bank had received confirmation from the SBA that

the application for forgiveness of the PPP Loan had been approved.

The loan forgiveness request in the amount of $1,001,640 was applied

to the Company’s entire outstanding PPP Loan balance with the Bank.

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.

Export sales to customers located outside the United States and Canada

were approximately as follows:

Customer Concentrations and Foreign Sales - Schedule of Customer Concentrations and Foreign Sales

Asia Pacific (APAC) Asia Pacific (APAC)

Europe, Middle East, Asia (EMEA) Europe, Middle East, Asia (EMEA)

Latin America Latin America

During fiscal 2022 and fiscal 2021, sales to foreign customers accounted

for approximately $ 11,653,000 and $ 9,678,000 , or 68 % and 65 % respectively, of total revenues.

Accounts Receivable

Sales Revenue

The Company had two customers which accounted for 24 % of sales during

Three customers accounted for 41 % of the outstanding accounts receivables at February 28, 2022.

The Company had three customers which accounted for 28 % of sales during

Two customers accounted for 64 % of the outstanding accounts receivables at February 28, 2021.

COMMITMENTS AND CONTINGENCIES

Other than the letter of credit discussed in Notes 3 and 8, the Company did not have any

material commitments or contingencies as of February 28, 2022.

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.

Sono-Tek Corporation

2 unchanged sentences

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.

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.

Christopher L Coccio

13 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures