SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

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

                For the quarterly period ended: November 30, 2000

                                       OR

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

                          Commission File No.: 0-16035

                              SONO-TEK CORPORATION
             (Exact name of registrant as specified in its charter)

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

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

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

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  Registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                                 YES X NO _____

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

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

                                                          Outstanding as of
         Class                                             January 16, 2001

Common Stock, par value $.01 per share                         9,092,355

                              SONO-TEK CORPORATION


                                      INDEX



Part I - Financial Information                                        Page


Item 1 - Financial Statements:                                        1 - 3


Consolidated Balance Sheets -
         November 30, 2000 (Unaudited) and February 29, 2000            1


Consolidated Statements of Operations - Nine Months and Three Months
         Ended November 30, 2000 and 1999 (Unaudited)                   2


Consolidated Statements of Cash Flows - Nine Months Ended
         November 30, 2000 and 1999 (Unaudited)                         3


Notes to Consolidated Financial Statements                            4 - 9


Item 2 - Management's Discussion and Analysis of Financial
         Condition and Results of Operations                         10 - 12


Item 3 - Quantitative and Qualitative Disclosure About Market Risk      12


Part II - Other Information                                             13


Signatures                                                              14

                              SONO-TEK CORPORATION
                           CONSOLIDATED BALANCE SHEETS


                                     ASSETS

                                                                                      November 30,       February 29,
                                                                                          2000                 2000
Current Assets                                                                          Unaudited
                                                                                        ------------------------------
                                                                                                   
     Cash and cash equivalents                                                        $    43,720        $      8,176
     Accounts receivable (less allowance of $36,997 and $39,997
         at November 30 and February 29, respectively)                                  1,155,788           1,619,639
     Inventories (Note 5)                                                               1,240,232           1,224,380
     Prepaid expenses and other current assets                                            131,300              74,308
                                                                                     ------------        ------------
                  Total current assets                                                  2,571,040           2,926,503
Equipment, furnishings and leasehold improvements (less accumulated
     depreciation of $532,913 and $469,011 at November 30 and
     February 29, respectively)                                                           320,095             256,994
Intangible assets, net:
     Goodwill                                                                           1,275,084           1,232,571
     Patents, patents pending and copyrights (Note 1)                                      27,142              31,642
     Deferred financing fees                                                               27,235              32,563
                                                                                    -------------         -----------
                  Total intangible assets, net                                          1,329,461           1,296,776
Long-term equity investments (Note 6)                                                      16,686              19,310
Other assets                                                                               11,342              14,542
                                                                                    -------------       -------------
TOTAL ASSETS                                                                           $4,248,624          $4,514,125
                                                                                       ==========          ==========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
     Accounts payable                                                                   $ 975,647           $ 847,135
     Deferred revenue                                                                           0             725,491
     Accrued expenses                                                                     736,738             437,342
     Revolving line of credit                                                             350,000             334,307
     Short term loans-related parties (Note 7)                                            302,084             239,084
     Current maturities of long term debt                                                 253,611             220,532
     Short term convertible loan                                                                0             100,000
                                                                                 ----------------          ----------
                  Total current liabilities                                             2,618,080           2,903,891
                                                                                       ----------           ---------
Subordinated mezzanine debt                                                               398,368             382,060
Long term debt, less current maturities                                                   121,737             273,544
Subordinated convertible loans-related parties                                            150,000             150,000
                                                                                       ----------             -------
                  Total liabilities                                                     3,288,185           3,709,495
Commitments and Contingencies
Put Warrants                                                                               77,000              77,000

Stockholders' Equity
     Common stock, $.01 par value;  25,000,000 shares authorized,  9,092,355 and
       8,866,612 outstanding at November 30 and February 29, respectively                  90,924              88,666
     Additional paid-in capital                                                         5,980,167           5,711,800
     Accumulated deficit                                                               (5,187,652)         (5,072,836)
                                                                                       -----------         ----------
                  Total stockholders' equity                                              883,439             727,630
                                                                                      -----------        ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                             $4,248,624          $4,514,125
                                                                                       ==========          ==========


                 See notes to consolidated financial statements.

                              SONO-TEK CORPORATION

                      CONSOLIDATED STATEMENTS OF OPERATIONS



                                                   Nine Months Ended November 30,        Three Months Ended November 30,
                                                              Unaudited                              Unaudited
                                                        2000             1999                  2000              1999
                                                    ----------------------------           ----------------------------

                                                                                                 
Net Sales                                           $6,274,904        $3,660,200           $1,980,921        $1,551,772
Cost of Goods Sold                                   3,608,736         1,726,067            1,024,411           739,523
                                                    ----------         ---------            ---------         ---------
                  Gross Profit                       2,666,168         1,934,133              956,510           812,249
                                                    ----------         ---------            ---------         ---------

Operating Expenses
Research and product development costs                 687,693           430,068              218,058           170,712
Marketing and selling expenses                       1,108,465           787,757              363,191           303,061
General and administrative costs                       691,249           591,840              243,105           300,986
                                                     ---------        ----------            ---------         ---------

                  Total Operating Expenses           2,487,407         1,809,665              824,354           774,759
                                                     ---------         ---------            ---------         ---------

Operating Income                                       178,761           124,468              132,156            37,490

Other (Loss) Income:
Interest expense                                      (230,765)         (167,587)             (53,402)          (38,550)
Equity loss in PNR (Note 6)                            (70,585)                0              (18,558)                0
Interest income and other (loss) income                  7,773            11,980                3,826              (588)
                                                    ----------         ---------             --------         ----------
                  Total Other (Loss) Income           (293,577)         (155,607)             (68,134)          (39,138)

(Loss) Income Before Income Taxes                     (114,816)          (31,139)              64,022            (1,648)

Income Tax Expense                                           0                 0                    0                 0
                                                    ----------         ---------             --------         ---------

Net (Loss) Income                                   $(114,816)          $(31,139)             $64,022           $(1,648)
                                                    =========          =========             ========           =======


Basic (Loss) Earnings Per Share                         $(0.01)          $(0.00)               $ 0.01            $(0.00)
                                                        =======          =======               ======            =======

Diluted  (Loss) Earnings Per Share                      $(0.01)          $(0.00)               $ 0.01            $(0.00)
                                                        =======          =======               ======            =======


Weighted Average Shares - Basic                      8,984,787         7,155,467            9,047,025         8,289,566
                                                     =========         =========            =========         =========

Weighted Average Shares - Diluted                    8,984,787         7,155,467           10,987,648         8,289,566
                                                     =========         =========           ==========         =========


                 See notes to consolidated financial statements.

                              SONO-TEK CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                                                      Nine Months Ended November 30,
                                                                                                   Unaudited
CASH FLOWS FROM OPERATING ACTIVITIES:                                                      2000                1999
                                                                                       ------------------------------
                                                                                                       
    Net Loss                                                                            $(114,816)           $(31,139)
    Adjustments  to  reconcile  net  loss to net  cash  provided  by  (used  in)
       operating activities:
          Non-cash charge for issuance of warrants                                         75,831             102,626
          Accrued interest-short term loans-related parties                                27,337              13,293
          Imputed interest expense on subordinated mezzanine debt                          16,308               3,624
          Loss on equity investment                                                         2,624                   0
          Depreciation and amortization                                                   141,529              75,937
          (Benefit) provision for doubtful accounts                                        (3,000)              3,915
          (Increase) decrease in:
              Accounts receivable                                                         466,851            (421,013)
              Inventories                                                                 (15,852)            (36,919)
              Prepaid expenses and other current assets                                   (53,792)            (10,423)
          Increase (decrease) in:
              Accounts payable and accrued expenses                                       219,176             (16,640)
              Customer deposits181,396                                                    (16,000)
              Deferred revenue                                                           (725,491)                  0
              Non-current rent payable                                                          0                 749
                                                                                         --------           ----------
                 Net Cash Provided by (Used in) Operating Activities                      218,101            (331,990)
                                                                                         --------           ----------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Acquisition costs net of cash received                                                (102,813)           (315,518)
   Purchase of equipment and furnishings                                                 (127,003)            (46,424)
                                                                                         ---------           ---------
                 Net Cash Used in Investing Activities                                   (229,816)           (361,942)
                                                                                         ---------           ---------

CASH FLOW FROM FINANCING ACTIVITIES:
   Proceeds from revolving line of credit                                                  15,693             100,000
   Proceeds from bank loan for production equipment                                        78,859                   0
   Proceeds from short term loans-related parties                                         204,000             127,000
   Proceeds from subordinated mezzanine debt                                                    0             450,000
   Proceeds from issuance of stock                                                        130,000             287,000
   Proceeds from exercise of warrants                                                      55,692                   0
   Proceeds from exercise of stock options                                                  1,602                   0
   Deferred financing fees                                                                      0             (35,523)
   Repayments of short term loans-related party                                          (141,000)           (100,000)
   Repayments of short term borrowings                                                   (100,000)                  0
   Repayments of note payable and equipment loans                                        (197,587)            (64,181)
                                                                                         --------            --------
                 Net Cash Provided by Financing Activities                                 47,259             764,296
                                                                                        ---------            --------

NET INCREASE IN CASH AND CASH EQUIVALENTS                                                  35,544              70,364
CASH AND CASH EQUIVALENTS
   Beginning of period                                                                      8,176              70,051
                                                                                          -------            --------
   End of period                                                                          $43,720            $140,415
                                                                                          =======            ========


SUPPLEMENTAL DISCLOSURE:
   Interest paid                                                                          $34,859            $ 39,179
                                                                                          =======            ========
   Common stock issued in connection with purchase of SEREC assets                         $7,500                  $0
                                                                                           ======                  ==
   Non-cash equity contribution in PNR                                                     $9,800                  $0
                                                                                           ======                  ==
   Non-cash exchange of accrued bonuses for common stock                                       $0             $17,188
                                                                                               ==             =======

                 See notes to consolidated financial statements.

                              SONO-TEK CORPORATION
                   Notes to Consolidated Financial Statements
                           November 30, 2000 and 1999

NOTE 1:  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation - The accompanying  consolidated  financial statements of Sono-Tek
Corporation, a New York Corporation (the "Company"), include the accounts of the
Company  and its  wholly  owned  subsidiary,  Sono-Tek  Cleaning  Systems,  Inc.
("SCS"), a New Jersey Corporation formerly known as S&K Products  International,
Inc., ("S&K"), which the Company acquired on August 3, 1999 (the "Acquisition").
All  significant  intercompany  accounts  and  transactions  are  eliminated  in
consolidation. The inclusion of SCS's results since August 3, 1999 has an effect
on the comparison of the Company's Fiscal Year 2001 results to prior periods.

Interim Reporting - The attached summary consolidated financial information does
not  include  all  disclosures  required  to be  included  in a complete  set of
financial statements prepared in conformity with accounting principles generally
accepted in the United States of America.  Such  disclosures  were included with
the financial  statements  of the Company at February 29, 2000,  and included in
its report on Form 10-K. Such statements  should be read in conjunction with the
data herein.

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

Patent and Patent Pending Costs - Costs of patent  applications are deferred and
charged to operations over seventeen years for domestic patents and twelve years
for  foreign  patents.  However,  if it appears  that such costs are  related to
products  which are not  expected to be  developed  for  commercial  application
within the reasonably  foreseeable future, or are applicable to geographic areas
where the Company no longer requires patent protection,  they are written-off to
operations.  The accumulated  amortization is $84,554 and $80,053 at November 30
and February 29, 2000, respectively.

Reclassifications - Certain February 29, 2000 balances have been reclassified to
conform with the current period presentations.

Adoption  of  Financial  Accounting  Standards  - In June  1998,  the  Financial
Accounting  Standards  Board ("FASB") issued  Statement of Financial  Accounting
Standards  No.  133,   "Accounting   for  Derivative   Instruments  and  Hedging
Activities"  ("SFAS  133").  This  statement   establishes   standards  for  the
accounting and reporting for derivative  instruments and for hedging  activities
and  requires  the  recognition  of all  derivatives  as assets  or  liabilities
measured at their fair value. Gains or losses resulting from changes in the fair
value of  derivatives  would be  recognized  in earnings in the period of change
unless certain hedging criteria are met. The Company does not expect SFAS 133 to
have a material impact on the consolidated financial statements. The FASB issued
SFAS Nos. 137 and 138, which deferred the effective  date of  implementation  of
SFAS 133 to all fiscal  quarters of all fiscal  years  beginning  after June 15,
2000 and amended SFAS 133, respectively.

Revenue  Recognition in Financial  Statements - In December 1999, the Securities
and Exchange  Commission ("SEC") issued Staff Accounting  Bulletin No. 101 ("SAB
101"), "Revenue Recognition in Financial Statements." SAB 101 summarizes certain
of the SEC's views in applying accounting  principles  generally accepted in the
United States of America to revenue recognition in financial statements. On June
26, 2000, the SEC issued SAB 101B to defer the effective date of  implementation
of SAB 101 until no later than the  fourth  quarter  of fiscal  years  beginning
after  December 31,  1999.  The Company is required to adopt SAB 101 by February
28, 2001. The Company does not expect the adoption of SAB 101 to have a material
impact on the consolidated financial statements.

NOTE 2:  SEGMENT INFORMATION

The Company has two  reportable  segments:  spraying  products  and cleaning and
drying  systems.  The  spraying  products  segment is  primarily  engaged in the
business  of  developing,   manufacturing,  selling,  installing  and  servicing
ultrasonic spray  equipment.  The cleaning and drying systems segment is engaged
in the business of developing,  manufacturing, selling, installing and servicing
cleaning  and drying  systems for the  semiconductor,  disk drive and  precision
cleaning industries.

Summary financial  information  concerning the Company's  reportable segments is
shown in the following table:


                                                                Nine Months Ended November 30, 2000
                                                                Spraying              Cleaning
                                                                Products              Systems             Total
                                                                                                
         Net Sales                                                $3,361,438           $2,913,466        $6,274,904
         Net Income (Loss)                                           370,566             (485,382)         (114,816)
         Capital Expenditures                                        121,561                5,442           127,003
         Depreciation and Amortization Expense                        57,225               84,305           141,530




                                                                 Three Months Ended November 30, 2000
                                                                Spraying              Cleaning
                                                                Products              Systems             Total
                                                                                                
         Net Sales                                                $1,190,617             $790,303        $1,980,921
         Net Income (Loss)                                           233,426             (169,404)           64,022
         Capital Expenditures                                         23,253                    0            23,253
         Depreciation and Amortization Expense                        23,329               30,871            54,201


The Company operated in a single reportable segment for the period from March 1,
1999 through August 3, 1999.



NOTE 3:  ACQUISITION OF SCS

On August 3, 1999 the  Company  purchased  all the  outstanding  stock of S&K, a
supplier of cleaning and drying systems for the  semiconductor,  disk drive, and
precision cleaning  industries.  In June 2000, the Company changed S&K's name to
SCS.

The  following  unaudited  proforma   information  presents  a  summary  of  the
consolidated  results of operations of the Company and SCS as if the acquisition
had occurred on March 1, 1999.



                                                       Proforma Consolidated Statement of Operations
                                                            Nine months ended November 30, 1999

                                                                   
                           Net Sales                                  $4,219,427
                           Cost of Goods Sold                          1,962,130
                                                                       ---------
                           Gross Profit                                2,257,297
                           Operating Expenses                          2,329,840
                                                                       ---------
                           Operating Loss                                (72,543)
                           Interest Expense                             (198,672)
                           Interest  & Misc. Income                       28,382
                                                                       ---------
                           Net Loss                                    $(242,833)
                                                                       =========


These  unaudited pro forma results have been prepared for  comparative  purposes
only and include certain adjustments, such as additional amortization expense as
a result of goodwill and the elimination of extraordinary  items associated with
the  acquisition.  They  do not  purport  to be  indicative  of the  results  of
operations  that actually  would have resulted had the  combination  occurred on
March 1, 1999, or of future results of operations of the consolidated entities.

NOTE 4:  ACQUISITION OF SEREC ASSETS

On September 21, 2000, the Company  acquired certain  intellectual  property and
intangible  assets  of  Serec  Corporation,  a Rhode  Island  corporation  which
manufactured and sold solvent based cleaning  systems.  In exchange for $100,000
cash,  the  Company  received  the  rights  to  seven  patents,  one  registered
trademark,  unfulfilled  purchase orders,  engineering designs and certain other
intangible  assets.  Professional  fees and other  costs of  $10,313,  $7,500 of
which,  was  attributed to the issuance of common  stock,  were  capitalized  as
additional  purchase price. The aggregate purchase price of $110,313 is recorded
as goodwill due to the inability to specifically  identify the values associated
with the various  intangible assets acquired.  The goodwill will be amortized on
the straight-line  basis over 5 years.  Accumulated  amortization of goodwill at
November 30, 2000 was $3,678.

NOTE 5:  INVENTORY

Inventories at November 30, 2000 are comprised of:

                   Finished goods                                      $440,492
                   Work in process                                      135,188
                   Raw materials and subassemblies                      860,152
                                                                     ----------
                       Total                                          1,435,832
                   Less:  Allowance                                    (195,600)
                                                                     ----------
                   Net total inventories                             $1,240,232

NOTE 6:  LONG-TERM EQUITY INVESTMENT - NET

In January  2000,  in  connection  with the  formation  of PNR  America,  LLC, a
Delaware limited liability company ("PNR America"), the Company invested $19,600
in PNR America for a 49%  ownership  interest.  Flowtech  Srl  ("Flowtech"),  an
Italian  pressure nozzle  manufacturer,  owns the remaining 51%. In August 2000,
the Company and Flowtech pledged an additional investment of $9,800 and $10,200,
respectively,  in PNR America, thereby maintaining each's proportional share. On
November 30, 2000 the Company made its $9,800  contribution  by  decreasing  the
amount owed to the Company by PNR America.

PNR America was formed to market and sell nozzles  imported from Flowtech in the
U.S. The PNR America product line compliments the Company's existing business as
there are certain  basic  nozzle  properties  common to both  product  lines and
capitalizes on the Company's existing relationships with its customers. Prior to
the  formation  of PNR  America,  the  Company  had been a U.S.  distributor  of
Flowtech products.

Certain of the Company's  officers and directors are also officers and directors
of PNR America,  however,  PNR  America's  board of directors is  controlled  by
Flowtech.  The Company  does not control  PNR  America and it is  therefore  not
consolidated for reporting purposes.

The Company shares its  facilities  and personnel with PNR America.  The Company
allocated  costs of $21,438  and  $78,668 to PNR  America for the three and nine
month periods ended November 30, 2000, respectively,  and $13,967 for the period
of inception through February 29, 2000. Balances due from PNR America of $58,161
and $13,967 at November  30,  2000 and  February  29,  2000,  respectively,  are
expected  to be repaid out of PNR  America's  fiscal  year 2001  operating  cash
flows.

PNR America's year end is December 31, however, for financial reporting purposes
the Company will reflect its proportionate share of the operating results of PNR
America on a monthly  basis,  as the records are  compiled by the  Company.  The
Company's  cumulative  recorded  equity loss in PNR America at November 30, 2000
was  $55,442.  The Company  recognized,  during the nine and three month  period
ended  November  30, 2000 and the period from  inception  to February  29, 2000,
$70,585, $18,558 and $14,257, respectively, as its estimate of the proportionate
share of the net loss of PNR  America.  The  Company,  for  financial  reporting
purposes,  has  netted  the  cumulative  equity  loss in PNR  America  with  the
intercompany balances due from PNR America.

The condensed  financial  information of PNR America as of November 30, 2000 and
for the three month period ended November 30, 2000 is as follows:

Net loss-three months ended November 30, 2000              $(35,654)
                                                          =========
Net loss-nine months ended November 30, 2000              $(144,048)
                                                          =========
         Total assets - current                             $91,622
                                                            =======

         Due to Sono-Tek                                    $72,128
         Due to Flowtech                                    137,087
         Accrued Expenses                                     5,756
                                                           --------
         Liabilities                                        214,971
         Stockholders' deficiency                           (123,49)
                                                           --------
         Total liabilities and stockholders' deficiency     $91,622
                                                            =======

Note 7:  SHORT TERM LOANS RELATED PARTIES

From time to time the Company has required  short-term loans to meet its payment
obligations. All of these loans, which are payable on demand, have been provided
by certain  officers and  directors of the Company at an interest  rate of prime
plus 2% computed at the time of the loan (9.75% to 11.5% at November 30,  2000).
As of  November  30, 2000 the amount of these loans  outstanding  was  $302,084.
Interest expense for the nine month period and three month period ended November
30, 2000 was $16,657 and $7,381, respectively.  Accrued interest was $27,337 and
$13,165 at November 30, 2000 and February 29, 2000, respectively.

NOTE 8:   COMMITMENTS AND CONTINGENCIES

On October 1, 2000,  the Company  entered into a lease  agreement for additional
production space in Milton, NY. The lease,  which terminates  November 30, 2002,
has an annual rent of $18,000. The Company has the option to renew the lease for
a period of three years after expiration.

NOTE 9.  EARNINGS (LOSS) PER SHARE

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



The  computation  of basic  and  diluted  (loss)  per share are set forth on the
following table:



                                                           Nine Months Ended              Three Months Ended
                                                              November 30,                     November 30,
                                                           2000           1999              2000           1999
                                                           ----           ----              ----           ----
                                                                                           
    Numerator-
       Numerator for basic and diluted
          earnings (loss) per share                    $(114,816)       $(31,139)         $64,022       $(1,648)
                                                       ==========       =========         =======       ========

    Denominator:
       Denominator for basic earnings (loss)
          per share - weighted average shares          8,984,787       7,155,467        9,047,025      8,289,467
       Effects of dilutive securities:
          Stock warrants                                       0*              0*       1,526,483              0*
          Stock options for employees, directors
              and outside consultants                          0*              0*         414,140              0*
                                                  -------------- ---------------     ------------ --------------
       Denominator for diluted earnings
          (loss) per share                             8,984,787*      7,155,467*      10,987,648*     8,289,566
                                                       =========       =========       ==========      =========


    *Stock options and warrants for employees, directors and outside consultants
    are  antidilutive  as a  result  of the  net  loss  and  therefore  are  not
    considered in the Diluted LPS calculation.

Under the assumption  that stock  options,  warrants and  convertible  long term
loans were not  antidilutive as described above, the denominator for Diluted LPS
would be 11,234,771  and 9,408,667  weighted  average  shares for the nine month
period at  November  30, 2000 and 1999,  respectively  and  11,340,411  weighted
average shares for the three month period at November 30, 1999.

On October 9, 2000,  the Board of  Directors of the Company  granted  options to
acquire  72,500  shares of common  stock to  qualified  employees of the Company
which are  exercisable at the fair market value on the date of grant,  under the
Company's 1993 Stock Incentive Plan, as amended.

NOTE 10:  SUBSEQUENT EVENTS

Letter of intent - On May 16,  2000,  the  Company  signed a letter of intent to
purchase  all the  outstanding  stock of a  corporation  to  further  expand the
Company's  product base.  This letter of intent has expired by its terms and the
Company is no longer pursing the purchase.

Short term loans - related  parties - During  December  2000,  a director of the
Company loaned the Company $20,000 at the fixed rate of 9%, convertible at $1.00
per share into the Company's common stock.

Subordinated  mezzanine  debt - During  December 2000, the note was increased by
$100,000.  If the $100,000  plus  interest is not repaid by March 22, 2001,  the
scheduled   principal  payments  will  increase  to  $15,278  per  month  and  a
replacement  Warrant will be issued for 1,344,444 shares of the Company's common
stock.

                              SONO-TEK CORPORATION

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

Forward-Looking Statements

Certain   statements  made  in  this  report  may  constitute   "forward-looking
statements"   within  the  meaning  of  the  Federal   Securities   Laws.   Such
forward-looking  statements include statements  regarding the intent,  belief or
current  expectations  of the Company and its  management  and involve known and
unknown  risks,  uncertainties  and other  factors  which  may cause the  actual
results,  performance or achievements of the Company to be materially  different
from any future  results,  performance or  achievements  expressed or implied by
such forward-looking  statements.  Such factors include, among other things, the
following:  general  economic and business  conditions;  political,  regulatory,
competitive and technological developments affecting the Company's operations or
the demand for its products;  timely  development  and market  acceptance of new
products;  adequacy of  financing;  capacity  additions;  and ability to enforce
patents.
The Company  undertakes  no obligation  to update  publicly any  forward-looking
statements.

Liquidity and Capital Resources

The Company's  working  capital  decreased  $69,652 from $22,612 at February 29,
2000 to a working  capital  deficiency  of $(47,040)  at November 30, 2000.  The
decrease  in working  capital  was  primarily a result of a decrease in accounts
receivable  of $466,851  that was offset by a decrease  in  deferred  revenue of
$725,491 and increases in accrued expenses of $219,176 and customer  deposits of
$181,396.

The Company's  stockholders' equity increased $155,809 from $727,630 on February
29, 2000 to $883,439 on November 30, 1999. Of this increase, $137,500 was due to
the sale of 137,500 shares of common stock through a Private Placement, $132,242
was due to the exercise of warrants and options that were offset by the $114,816
loss for the nine months ended November 30, 2000.

During  Fiscal Year 2000,  the Company  entered into an  agreement  with a Small
Business  Investment  Corporation,   Norwood  Venture  Corporation  ("Norwood"),
pursuant to which the Company  obtained a five-year loan in the principal amount
of $450,000.  The terms of the loan require interest payments only for the first
two years  followed  by  monthly  payments  of  $12,500  plus  interest  through
September  30,  2004.  The Company  also  granted  Norwood a warrant to purchase
1,100,000  shares of the Company's common stock which can be put to the Company.
Such  warrants  were valued at $77,000  which is accounted for as a discount and
will be imputed as additional interest expense over the term of the loan.

The Company  currently  has a $350,000  line of credit with a bank.  The loan is
collateralized by accounts receivable, inventory and all other personal property
of the Company and is guaranteed  by the Chairman and CEO of the Company.  As of
November 30, 2000 the outstanding balance was $350,000.

Due to losses  incurred  during  Fiscal  Years 2000 and 1999,  the  Company  has
borrowed on a short-term  basis from officers and directors.  As of November 30,
2000 the balance owed these officers and directors was $302,084.

Although  there  can be no  assurances,  management  believes  that its  current
backlog of orders and  continued  sales and  expanding  markets for its products
will lead to increases in profits. These factors, and the anticipated success of
PNR America,  should allow the Company to meet its current  obligations  as they
become due.

Results of Operations

The Company's  sales  increased  $2,614,704  from $3,660,200 for the nine months
ended  November 30, 1999 to  $6,274,904  for the nine months ended  November 30,
2000. The increase was due to an increase in SCS sales of $2,310,100,  increased
sales of the  SonoFlux  System of  $609,948,  that were  offset by a decrease in
nozzle and liquid delivery sales of $107,657.

The Company's  sales  increased  $429,149 from  $1,551,772  for the three months
ended  November 30, 1999 to $1,980,921  for the three months ended  November 30,
2000. The increase was due to $274,710 in sales  attributable to SCS,  increased
sales of the SonoFlux System of $109,084,  MCSoInfinity and  AccuMistoSystems of
$163,673,  that were offset by a decrease in nozzle and liquid delivery sales of
$68,918.

Gross profit increased  $732,035 from $1,934,133 for the nine-month period ended
November 30, 1999 to $2,666,168  for the  nine-month  period ended  November 30,
2000.  The  increase  in gross  profit is due to the  increase in sales that was
offset by increases in personnel  costs of $607,175,  service travel of $135,651
and warranty expense of $75,314.

The Company's gross profit increased $144,261 from $812,249 for the three months
ended  November 30, 1999 to $956,510  for the three  months  ended  November 30,
2000.  The  increase  in gross  profit is due to the  increase in sales that was
offset by increases in personnel costs of $89,627, service travel of $45,899 and
warranty expense of $19,922.

The gross  profit  was 42% and 53% of sales  for the nine  month  period  ending
November  30, 2000 and 1999,  respectively.  The gross profit was 48% and 52% of
sales  for  the  three  month  period   ending   November  30,  2000  and  1999,
respectively.  For both the three and nine month  periods  the  decrease  in the
Company's  gross  profit  was  primarily  a  result  of  increased  sales of the
Company's products with lower profit margins.

Research and product  development costs increased $257,625 from $430,068 for the
nine  months  ended  November  30, 1999 to  $687,693  for the nine months  ended
November 30, 2000. Research and product development costs increased $47,346 from
$170,712 for the three months ended  November 30, 1999 to $218,058 for the three
months ended November 30, 2000.  For both the three and nine month periods,  the
increase in the Company's research and product development costs was a result of
increased  compensation  and rent expense  resulting  from a larger  engineering
staff and travel costs associated with new products for SCS.

Marketing and selling costs increased $320,708 from $787,757 for the nine months
ended  November 30, 1999 to  $1,108,465  for the nine months ended  November 30,
2000. The increase was a result of increased  sales  commissions  and additional
sales  personnel  that totaled  $236,312  and  increased  marketing  expenses of
$25,030.

Marketing and selling costs increased $60,130 from $303,061 for the three months
ended  November 30, 1999 to $363,191  for the three  months  ended  November 30,
2000. The increase was a result of additional  commissions of $118,707 that were
offset by decreases in personnel  costs of $15,623,  travel costs of $11,471 and
marketing costs of $23,899.

General and  administrative  costs increased  $99,409 from $591,840 for the nine
month period ended November 30, 1999 to $691,249 for the nine month period ended
November 30,  2000.  The  increase  was due to  increases  in  professional  and
consulting fees of $128,817 plus goodwill and deferred financing amortization of
$44,232 that were offset by a decrease in personnel costs of $58,929.

General and  administrative  costs decreased $57,881 from $300,986 for the three
month  period  ended  November  30, 1999 to $243,105  for the three month period
ended November 30, 2000. The decrease was due to increases in  professional  and
consulting  fees of $45,758  that were offset by  decreased  personnel  costs of
$81,313.

Interest expense increased $63,178 from $167,587 for the nine month period ended
November  30, 1999 to $230,765  for the nine months  ended  November  30,  2000.
Interest expense increased $14,852 from $38,550 for the three month period ended
November 30, 1999 to $53,402 for the three months ended  November 30, 2000.  The
increase is primarily due to an increase in interest costs  associated  with the
addition of SCS and Norwood loan interest and new equipment loans from the bank.

For the nine  months  ended  November  30,  2000 the  Company  had a net loss of
$114,816  or $(0.01)  per share as  compared to a net loss of $31,139 or $(0.00)
per share for the nine months ended November 30, 1999.

For the three  months  ended  November  30, 2000 the Company had a net income of
$64,022 or $0.01 per share as  compared  to a net loss of $1,648 or $(0.00)  per
share for the three months ended November 30, 1999.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to market risk related to changes in interest rates.  The
interest rate on the Company's debt is based on fluctuations in the prime rates.
If the prime rate  increased by 1  percentage  point from the levels at February
29, 2000,  the negative  effect on the  Company's  results of  operations  would
approximate  $1,300 for the quarter  ended  November 30, 2000 and $3,500 for the
nine months ended November 30, 2000.


                           PART II - OTHER INFORMATION


Item 1.    Legal Proceedings
                  None

Item 2.  Changes in Securities and Use of Proceeds
                  None

Item 3.  Defaults on Senior Securities
                  None

Item 4.  Submission of Matters to a Vote of Security Holders
                  None

Item 5.  Other Information
                  None

Item 6.  Exhibits and Reports on Form 8-K

         (a)      Exhibits

                  Exhibit No.      Description
                  3(d)             Restated Certificate of Incorporation

                  10(g)            Lease for the Company's facilities in Milton,
                                   NY dated September 29, 2000


(b)      Reports on Form 8-K
                  None

                                   SIGNATURES




Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

Dated: January 16, 2001




                                                     SONO-TEK CORPORATION
                                                           (Registrant)




                                                     By: /s/ James L. Kehoe
                                                         James L. Kehoe
                                                         Chief Executive Officer





                                                     By: /s/ Kathleen N. Martin
                                                         Kathleen N. Martin
                                                         Chief Financial Officer

Exhibit 3(d)

                         CERTIFICATE OF INCORPORATION OF
                              SONO-TEK CORPORATION


         Under Section 402 of the business Corporation Law

IT IS HEREBY CERTIFIED THAT:

(1)      The name of the proposed corporation is:

                           SONO-TEK CORPORATION

(2) The  purpose or  purposes  for which  this  corporation  is  formed,  are as
follows, to wit:

                To engage in the business of manufacturing, designing, creating,
compounding,  developing,  formulating, investing, patenting, owning, acquiring,
producing,  processing,  constructing,  storing, applying, assembling, adapting,
conducting,  operating,  using, preparing for market, exhibiting,  distributing,
installing,   buying,  selling,   disposing,   leasing,   renting,   mortgaging,
exploiting,   licensing,  exchanging,   reconstructing,   repairing,  importing,
exporting  and  generally  dealing in and with  household  and  industrial  fuel
combustion systems including but not limited to all kinds of burners,  furnaces,
fuel  atomizers,  stoves,  boilers,  engines,  fuel  delivery  systems,  heating
devices,  lighting  devices,  refrigerating  devices,  devices for producing and
furnishing gases, heat, light, cold, power, or electricity,  and all other kinds
of mechanical and electrical machines, devices, and appliances, and all kinds of
materials,  supplies,  accessories,  equipment, devices or other things used for
any of the  foregoing,  or in any other way  thereto  relating,  and any and all
other kinds of machinery, appliances, device, supplies and articles.

                  To  acquire  such  property,  real  and  personal,  as  may be
necessary to the conduct of such business.

                  The powers, rights and privileges provided in this Certificate
of Incorporation are not to be deemed to be in limitation of similar,  other, or
additional  powers,  rights and privileges granted or permitted to a corporation
by the Business  Corporation Law, it being intended that this Corporation  shall
have the right to engage in such similar  activities  as like  corporations  may
lawfully engage in under the Business  Corporation Law of the State of New York,
as now in effect, or as hereafter promulgated.

                  To  do  everything  necessary,  suitable  or  proper  for  the
accomplishment,  attainment  or  furtherance  of, to do every other act or thing
incidental to,  appurtenant  to, growing out of or connected with, the purposes,
objects or powers set forth in this Certificate of Incorporation,  whether alone
or in association with others, to possess all the rights,  powers and privileges
now or  hereafter  conferred  by  the  laws  of the  State  of New  York  upon a
corporation  organized  under the laws of the State of New York and, in general,
to carry on any of the  activities  and to do any of the things herein set forth
to the same  extent  and as fully as a natural  person or  partnership  might or
could do;  provided,  that  nothing  herein  set  forth  shall be  construed  as
authorizing  the  Corporation to possess any purpose,  object or power, or to do
any act or thing  forbidden by law to a Corporation  organized under the laws of
the State of New York.
(3)  The  office of the  Corporation  is to be  located  in the Town of  Milton,
     County of Ulster, State of New York.

(4)  The aggregate  number of shares of all classes which the Corporation  shall
     have authority to issue is twenty-five million  (25,000,000) common shares,
     par value $0.01 per share. No holder of any share of the Corporation shall,
     because of his ownership of shares,  have a  pre-emptive  or other right to
     purchase,  subscribe for, or take any part of any shares or any part of any
     notes, debentures,  bonds, or other securities convertible into or carrying
     options or warrants to purchase shares of the Corporation issued,  optioned
     or sold by the Corporation.

(5)  The Secretary of State is designated as agent of the corporation  upon whom
     process  against it may be  served.  The post  office  address to which the
     Secretary of State shall mail a copy of any process against the Corporation
     served  upon him is c/o  Sono-Tek  Corporation  2012  Route 9W,  Building 3
     Milton, New York 12547

(6)  The  Corporation  may,  to the fullest  extent  permitted  by Sections  721
     through 726 of the Business  Corporation Law of New York, indemnify any and
     all directors and officers whom it shall have power to indemnify  under the
     said Sections from and against any and all of the expenses,  liabilities or
     other  matters  referred  to  in or  covered  by  such  sections,  and  the
     indemnification  provided for herein  shall not be deemed  exclusive of any
     other rights to which the persons so indemnified  may be entitled under any
     By-law,  agreement,  vote of  shareholders  or  disinterested  directors or
     otherwise,  both as to action in his official  capacity and as to action in
     another capacity by holding such office, and shall continue as a person who
     has ceased to be a director  or officer  and shall  inure to the benefit of
     the heirs,  executors and  administrators of such a person.

(7) No director
     of the  Corporation  shall  be  personally  liable  to the  Corporation  or
     shareholders  for damages  for any breach of duty as a  director;  provided
     that this Article (7) shall neither eliminate nor limit liability: (a) if a
     judgment or other final adjudication  adverse to such director  establishes
     that his or her acts or omissions were in bad faith or involved intentional
     misconduct  or a  knowing  violation  of law or that  he or she  personally
     gained in fact a financial profit or other advantage to which he or she was
     not legally  entitled or that his or her acts  violated  Section 719 of the
     Business  Corporation  law;  or (b) for any act or  omission  prior  to the
     effectiveness  of this Article (7). Any repeal or any  modification  to the
     provisions  of this  Article  (7) shall not  adversely  affect any right or
     protection  of a director  of the  Corporation  existing  pursuant  to this
     Article (7) immediately prior to such repeal or modification.

(8)  The business of the  Corporation  shall be managed under the direction of a
     Board of Directors in accordance with the following:

          (a)  The  Board  shall  consist  of six  directors,  unless  and until
               otherwise determined by vote of a majority of the entire board of
               directors (whether or not there exist any vacancies in previously
               authorized directorships at the time such resolution is presented
               to the Board for adoption).

          (b)  The directors shall be divided into two classes, designated Class
               I and Class II. All classes shall be as nearly equal in number as
               possible,  and no class shall include less than three  directors.
               The terms of office of the directors  initially  classified shall
               be as follows: at the 1989 annual meeting of shareholders,  Class
               I directors  shall be elected for a one year term expiring at the
               next annual meeting of shareholders  and Class II directors for a
               two year term expiring at the second succeeding annual meeting of
               shareholders.  At each annual meeting of shareholders  after such
               initial  classification,  directors to replace  those whose terms
               expire at such  annual  meeting  shall be elected to hold  office
               until the second succeeding  annual meeting.  Each director shall
               hold  office  until  the  expiration  of his term and  until  his
               successor is elected and  qualified  or until his earlier  death,
               resignation or removal.

          (c)  A  director  elected  to fill a vacancy  shall be elected to hold
               office for a term expiring at the next meeting of shareholders at
               which  the  election  of  directors  is in the  regular  order of
               business and until his successor has been elected and qualified.

          (d)  If the number of  directors  is  changed,  (1) any newly  created
               directorships  or  any  decrease  in  directorships  shall  be so
               apportioned  among the  classes as to make all  classes as nearly
               equal in number as possible; and (2) when the number of directors
               is increased by the Board and any newly created directorships are
               filled by the  Board,  there  shall be no  classification  of the
               additional   directors   until  the  next   annual   meeting   of
               shareholders.

          (e)  Newly  created  directorships  resulting  from an increase in the
               number of directors and vacancies  occurring in the Board for any
               reason may be filled only by vote of the Board.  If the number of
               directors  then in  office  is less  than a  quorum,  such  newly
               created  directorships  and vacancies may be filled by a majority
               of the directors then in office.

          (f)  Any director may be removed for cause by action of the Board. Any
               director may also be removed for cause (but not without cause) by
               the affirmative vote of the holders of at least two-thirds of the
               outstanding shares entitled to vote thereon.

          (g)  The  provisions  of this  Article (8) may be altered,  amended or
               repealed, and any provision inconsistent herewith may be adopted,
               only  by  the  affirmative  vote  of  the  holders  of  at  least
               two-thirds of the outstanding shares entitled to vote thereon.

The undersigned incorporator is of the age of eighteen years or over.

                  IN WITNESS WHEREOF,  this certificate has been subscribed this
21st day of March,  1975 by the undersigned who affirms that the statements made
herein are true under penalties of perjury.

Exhibit 10(a)

                                      LEASE


LEASE MADE THIS 29th     DAY OF   September,   2000

BETWEEN Jean K.  Woodward,  owner,  as may be  represented  by William  Woodward
(William Woodward  Enterprises)  residing at 50 Riverview Drive,  Marlboro,  New
York 12542-5310 herein referred to as Lessor,

AND  Sono-Tek Corporation, having it's principal place of business at
2012 Route 9-W, Milton Industrial Park, Milton, New York 12547,  herein referred
to as Lessee.

                                                      RECITALS:

1:                Lessor is the sole owner of the premises  described  below and
                  desires  to  lease  the  premises  to a  suitable  Lessee  for
                  business purposes.
2:                           Lessee  desires  to  lease  the  premises  for  the
                             purpose  of   conducting   a   business   of  light
                             manufacturing,  electronics  and related  machinery
                             and equipment.
3: The parties desire to enter a lease agreement  defining their rights,  duties
and liabilities relating to the premises.

In consideration of the mutual covenants  contained herein, the parties agree as
follows:

I.  SUBJECT AND PURPOSES:
         Lessor  leases a portion of the building  known as Phase I, Building 1,
in the Milton  Industrial  Park, in the County of Ulster,  State of New York and
more particularly described as follows:

Approximately  4,200  square  feet of  space  located  adjacent  to the  SonoTek
existing facilities  containing a separate electric meter, gas meter, bathroom ,
small office and one drive-in overhead door.

II.   TERM AND RENT:
         Lessor  demises the above  premises for a term of two (2) Years and two
(2) months,  commencing  October 1, 2000 and terminating on November 30, 2002 at
five  o'clock  P.M.,  or sooner as  provided  herein,  at the  annual  rental of
Eighteen Thousand Dollars ($18,000.00) or proportioned thereof..
         Such sums are  payable in  advance on October  first for the first year
and on the anniversary date for each succeeding  year.  However and provided the
lessee is not  otherwise  in default,  the lessee for  convenience  and with the
consent of the lessor may pay such annual rent in equal monthly  installments of
OneThousand Five Hundred Dollars ($1,500.00) in advance on the first day of each
month  for that  month's  rental,  during  the term of this  lease.  All  rental
payments shall be made to Lessor at the address  specified  above.  Lessee shall
pay the rent as specified herein and in Section Three hereof.

III.   ADDITIONAL RENT:
         All taxes,  charges,  costs, and expenses that Lessee assumes or agrees
to pay  hereunder,  together  with all  interest and  penalties  that may accrue
thereon in the event of the failure of Lessee to pay those items,  and all other
damages,  costs, expenses, and sums that Lessor may suffer or incur, or that may
become  due by reason of any  default  of Lessee or  failure by Lessee to comply
with the terms and  conditions  of this lease  shall be deemed to be  additional
rent,  and,  in the event of  nonpayment,  lessor  shall have all the rights and
remedies as herein provided for failure to pay rent.

IV. UTILITIES NOT FURNISHED BY LESSOR - ENTIRE RESPONSIBILITY OF LESSEE:
         Lessee shall initiate, contract for, and obtain, in its name, electric,
natural gas, and telephone utility services as required on the demised premises.
         Lessee  shall  indemnify  and hold  harmless  lessor  from  any  claims
whatsoever  arising out of lessee's  failure to pay for utility  services and/or
the charges therefor.  Lessee shall pay Lessor's  attorney's fees arising out of
any claims against Lessor arising out of charges for Lessee's utility services.
         Except in the case of acts of  negligence  committed by Lessor,  Lessor
shall not be liable for any personal  injury or property  damage  resulting form
the negligent  operation or faulty installation of utility services provided for
use on the demised premises, nor shall Lessor be liable for any injury or damage
suffered by lessee as a result of the failure to make  necessary  repairs to the
utility facilities.
         Lessee  shall be liable for any injury or damages to the  equipment  of
service lines of the utility suppliers that are located on the demised premises,
resulting  from the  negligent or  deliberate  acts of lessee,  or the agents or
employees of lessee.

V.    BROKERS COMMISSION:
         There is no Broaker's  Commission payable or due from either the Lessor
or the Lessee.

VI.    IMPROVEMENTS TO BE MADE TO PREMISES:
         Lessee shall make the following  improvements to the premises:  Install
access from the existing rental space into the new rental  spacethrough a common
wall area as located and type of materials approved by the lessor.
          The  above   improvements  shall  be  at  the  direction  of  Sono-Tek
Corporation and completed no later than January 1, 2001. The above  improvements
shall be subject to the provisions of paragraph VII.

VII:     ALTERATIONS, ADDITIONS AND IMPROVEMENTS:
1.                Subject to the  limitation  that no portion of the building on
                  the demised  premises shall be demolished or removed by Lessee
                  without  the  prior  written  consent  of  Lessor,  and  ,  if
                  necessary, of any mortgagee. Lessee may at any time during the
                  lease term  subject to the  conditions  set forth below and at
                  his own expense, make alterations,  additions, or improvements
                  in and to the demised premisses and the building.  Alterations
                  shall be  performed  in a  workmanlike  manner  and  shall not
                  weaken or impair the structural strength, or lessen the value,
                  of the  building on the  premises,  or change the purposes for
                  which the building, or any pert thereof, may be used.
2.  Conditions with respect to  alterations,  additions or  improvements  are as
follows:

          1.   Before  commencement  of any work all  plans  and  specifications
               shall be filed with and approved by all governmental  departments
               or authorities having jurisdiction and any public utility company
               having  an  interest  therein,  and  all  work  shall  be done in
               accordance with requirements of local regulations.  The plans and
               specifications  of any  alterations  shall  be  submitted  to the
               Lessor  for  written  approval  prior to  commencing  work.  Said
               approval not to be unreasonably withheld. . The lessee shall have
               the right to install one identification sign at the main entrance
               to the  demised  premises.  Such  sign  shall not  violate  local
               building  codes.  At the end of the term of this lease the lessee
               shall at the  option of lessor  remove  such  alterations  as are
               designated by lessor.

          2.   Prior to  commencement of any work Lessee shall pay the amount of
               any  increase in  premiums on  insurance  policies  provided  for
               herein  because  of  endorsements  to be made  covering  the risk
               during the course of work. 1.

          3.   Alterations,  additions  and  improvements  on or in the  demised
               premises may  commence  upon the signing of this  agreement.  All
               additions and improvements that may be erected or installed prior
               to or during the term,  shall become part of the demised premises
               and the sole  property of Lessor,  except that all movable  trade
               fixtures,  and a modular  Class 100 clean  room if  installed  by
               lessee shall be and remain the property of Lessee.

VIII.    TAXES AND OTHER CHARGES:
         Lessor shall pay and discharge when due all state,  municipal and local
real estate taxes, inheritance,  succession and , assessments,  levies and other
charges,  general and special,  ordinary and  extraordinary,  of whatever  name,
nature  and kind  that are or may be  during  the term  hereof  or any  renewal,
beginning with the fiscal year 2000, levied, assessed, imposed or charged on the
land or the  premises  hereby  demised or on the  (building  or  buildings)  and
improvements  now thereon or hereafter to be built or made  thereon,  and all of
which may be levied,  assessed,  imposed or charged on or against the  leasehold
estate hereby  created and on the  reversionary  estate in the demised  premises
during the term hereof or any renewal.

         If at any time  during the term of this lease,  the  present  method of
taxation  or  assessment  should be changed so that the whole or any part of the
taxes,  assessments,  levies or charges now  levied,  assessed or imposed on the
real estate hereby demised and improvements thereon, shall be transferred to the
rentals  received  from such real estate,  lessee  shall pay such  proportionate
share of taxes and  assessments  levied and  assessed  on such  rentals as shall
proportionately  relieve the taxes and assessments on such real estate, it being
the intent of the parties  hereto that lessor shall  receive the rents  reserved
herein with deduction of taxes (except gift, estate, inheritance, succession and
income  taxes on the  interest  of  lessor),  assessments  levies or  charges in
respect to the real estate and improvements  thereon,  but that lessee shall not
be  obligated  to pay  full  taxes  and  assessments  on such  real  estate  and
improvements and also on such rentals.

IX.     REPAIRS:
         Lessee  shall,  at all times  during  the lease and at his own cost and
expense,  repair,  replace and maintain in good, safe and substantial condition,
all buildings and any  improvements,  additions,  and alterations on the demised
premises,  and shall use all reasonable  precaution to prevent waste,  damage or
injury to the  demised  premises.  It is  intended  that this  clause  refers to
non-structural  repairs,  unless  structural  repairs  are  necessitated  by the
conduct  of  lessee,  its  agents or  assigns.  In such  case,  lessee  shall be
responsible for structural repairs.

         Lessor  shall  maintain the building  exterior,  lawn and  landscaping.
Lessor shall be responsible for snow removal, and grounds cleaning. Lessor shall
replace all shrubs to the property which have died.

          Lessee  shall  remove  snow and debris from  walkways  and in front of
doors.. Lessee shall be responsible for office cleaning, window cleaning, refuse
removal,  maintenance of light  fixtures,  bi-annual  service of heating and air
condition  equipment,  and to maintain all plumbing  fixtures  against leaks and
water wasting.

X.     SECURITY DEPOSIT:
         Lessee shall  deposit No Money with lessor upon the signing here of for
the purposes of a security deposit.

XI.     INSURANCE:
          1.   In the term of the lease  and for any  further  time that  Lessee
               shall hold the demised premises, Lessee shall obtain and maintain
               at his  expense  the  following  types and  mounts of  insurance:
               Personal Injury and Property Damage Insurance.  Insurance against
               liability for bodily injury and property damage in the sum of Two
               Million  Dollars  ($2,000,000.00)  per claimant and in the sum of
               Five Million Dollars ($5,000,000.00) per occurrence.

          2.   All  insurance  provided by Lessee as  required  by this  section
               shall  be  carried  in  favor  of  Lessor  and  Lessee  as  their
               respective  interests  may appear,  and in the case of  insurance
               against  damage  to  the  demised  premises  by  fire  and  other
               casualty, shall provide that loss, if any, shall be adjusted with
               and be payable to Lessor.  If required by Lessor,  any  insurance
               against fire or other  casualty  shall provide that loss shall be
               payable to the  holder  under a standard  mortgage  clause.  Rent
               insurance  and the proceeds  are hereby  assigned to lessor to be
               held by Lessor as  security  for the  payment of the rent and any
               additional rent hereunder until restoration of the premises.  All
               insurance shall be written with responsible companies that Lessor
               shall approve,  and the policies shall be held by lessor, or when
               appropriate,  by the holder of any  mortgage in which case copies
               of the policies or  certificates  of insurance shall be delivered
               by Lessee to Lessor. All policies shall require 30 days notice by
               registered mail to Lessor of any cancellation or change affecting
               any interest of Lessor.

XII.     UNLAWFUL OR DANGEROUS ACTIVITY:
         Lessee  shall  neither use nor occupy the demised  premises or any part
thereof for any unlawful,  disreputable or ultra hazardous  business purpose nor
operate or conduct his business in a manner constituting a nuisance of any kind.
Lessee shall  immediately,  on discovery of any unlawful,  disreputable or ultra
hazardous  use,  take  action  to halt  such  activity  and keep  such  premises
environmentally clean and safe.


XIII.     DEFAULT OR BREACH:
         Each of the  following  events shall  constitute a default or breach of
this lease by Lessee:

1.                If Lessee,  or any  successor  or assignee of Lessee  while in
                  possession,  shall file a petition in bankruptcy or insolvency
                  or for  reorganization  under  any  bankruptcy  act,  or shall
                  voluntarily  take  advantage  of any  such  act by  answer  or
                  otherwise,  or shall  make an  assignment  fo the  benefit  of
                  creditors.
2.                If  involuntary   proceedings  under  any  bankruptcy  law  or
                  insolvency  act shall be  institute  against  Lessee,  or if a
                  receiver or trustee shall be appointed of all or substantially
                  all of the property of Lessee,  and such proceedings shall not
                  be dismissed or the receivership or trusteeship vacated within
                  20 days after the institution or appointment.
3.                If Lessee shall fail to pay Lessor any rent owed or additional
                  rent when the rent shall  become  due  within  five days after
                  written  notice of such failure to lessee at the address above
                  given. Lessee shall pay as additional rent the sum of $300.00.
                  If such rent is not  received  on or before the 1st day of the
                  month and lessor sends such written notice of default.  Lessor
                  shall extend to lessee,  a five (5) day grace period  relative
                  to such rent payment.
4.                If lessee  shall  fail to  perform  or comply  with any of the
                  conditions  of  this  lease  and if the  nonperformance  shall
                  continue  for a period  of 10 days  after  notice  thereof  by
                  Lessor to Lessee or, if the  performance  cannot be reasonably
                  had within the 10 day period,  Lessee  shall not in good faith
                  have commenced  performance within the 10 day period and shall
                  not diligently proceed to completion of performance.
5.                If this  lease or the  estate  of  Lessee  hereunder  shall be
                  transferred to or shall pass to or devolve on any other person
                  or party, except in the manner herein permitted.

6.                If Lessee fails to take possession of the demised  premises on
                  the term  commencement  date,  or within 10 days after  notice
                  that the demised premises are available for occupancy,  if the
                  term  commencement  date  is not  fixed  herein  or  shall  be
                  deferred as herein provided.

XIV.     EFFECT OF DEFAULT:
         In the event of any default  hereunder,  as set forth in Section I, the
rights of Lessor shall be as follows:

1.                Lessor  shall  have the right to  cancel  and  terminate  this
                  lease,  as well as all of the  right,  title and  interest  of
                  lessee  hereunder,  by giving to lessee  not less than 10 days
                  notice of the cancellation  and termination.  On expiration of
                  the time fixed in the notice;  this lease and the right, title
                  and interest of lessee hereunder,  shall terminate in the same
                  manner  and with the  same  force  and  effect,  except  as to
                  lessee's  liability,  as if the date  fixed in the  notice  of
                  cancellation   and  termination  were  the  end  of  the  term
                  cancellation  and termination  were the end of the term herein
                  originally determined.
2.                Lessor  may  elect,  but  shall not be  obligated  to make any
                  payment   required  by  lessee   herein  or  comply  with  any
                  agreement,  term or condition  required hereby to be performed
                  by Lessee,  and the  lessor  shall have the right to enter the
                  demised  premises for the purpose of  correcting  or remedying
                  any such  default  and to remain  until the  default  has been
                  corrected or remedied,  but any expenditure for the correction
                  by lessor  shall not be deemed to waive or release the default
                  of lessee or the right of lessor to take any  action as may be
                  other wise permissible hereunder in the case of any default.
3.                Lessor may re-enter the  premises  immediately  and remove the
                  property and personnel of lessee,  and store the property in a
                  public  warehouse  or at a place  selected  by lessor,  at the
                  expense of lessee.  After  re-entry  lessor may  terminate the
                  lease on  giving 10 days  written  notice  of  termination  to
                  lessee.  Without the notice,  re-entry  will not terminate the
                  lease. On termination,  the lessor may recover from lessee all
                  damages proximately  resulting from the breach,  including the
                  costs  recovering  the premises,  and the present worth of the
                  balance of this lease over the present worth of the reasonable
                  rental value of the  premises  for the  remainder of the lease
                  term, which sum shall be immediately due lessor from lessee.
4.                After  re-entry,  lessor  may relet the  premises  or any part
                  thereof for any term  without  terminating  the lease,  at the
                  rent and on the terms as lessor  may  choose.  Lessor may make
                  alterations  and  repairs  to the  premises.  The  duties  and
                  liabilities  of the  parties  if the  premises  are  relet  as
                  provided herein shall be as follows:
                           a. In addition to  lessee's  liability  to lessor for
                  breach of the lease,  lessee  shall be liable for all expenses
                  of the reletting,  for the  alterations  and repairs made, and
                  for the  difference  between the rent received by lessor under
                  the new lease agreement and the rent installments that are due
                  for the same period under this lease.
                           b.  Lessor  shall  have the  right,  but shall not be
                  required,  to apply the rent  received  from the reletting for
                  the  premises  (1) to  reduce  the  indebtedness  of lessee to
                  lessor under the lease,  not including  indebtedness for rent,
                  (2) to expenses of the reletting and  alterations  and repairs
                  made,  (3) to rent due under this lease,  or (4) to payment of
                  future rent under this lease as it becomes due.
                            If the new  lessee  does not pay a rent  installment
                  promptly to lessor, and the rent installment has been credited
                  in advance of payment to the indebtedness of lessee other than
                  rent,  or if rentals  from the new lessee have been  otherwise
                  applied by Lessor as  provided  for herein and during any rent
                  installment  period  are less  than the rent  payable  for the
                  corresponding  installment  period  under this  lease,  lessee
                  shall pay  lessor  the  deficiency,  separately  for each rent
                  installment  deficiency  period,  and  before  the end of that
                  period. Lessor may at any time after a reletting terminate the
                  lease for the breach on which  lessor  had based the  re-entry
                  and subsequently relet the premises.
5.                After  re-entry,  lessor  may  procure  the  appointment  of a
                  receiver to take  possession  and collect rents and profits of
                  the business of lessee, and, if necessary to collect the rents
                  and profits.  The receiver may take possession of the personal
                  property used in the business of lessee,  including inventory,
                  trade fixtures, and furnishings,  and use them in the business
                  without compensating lessee.  Proceedings for appointment of a
                  receiver by lessor,  or the  appointment of a receiver,  shall
                  not  terminate  and forfeit this lease unless lessor has given
                  written notice of termination to lessee as provided herein.

XV.      CONDEMNATION:
         Rights and duties in the event of condemnation are as follows:

         1.       If the  whole  of the  demised  premises  shall  be  taken  or
                  condemned by any public, or quasi-public use or purpose,  this
                  lease shall cease and  terminate as of the date on which title
                  shall vest thereby in that  authority,  and the rent  reserved
                  hereunder shall be apportioned and paid up to that date.
         2        .If only a portion of the demised  premises  shall be taken or
                  condemned,  this lease and the terms hereof shall not cease of
                  terminate, but the rent payable after the date on which lessee
                  shall be  required to  surrender  possession  of such  portion
                  shall be reduced in  proportion  to the decreased use suffered
                  by lessee as the parties  may agree or as shall be  determined
                  by arbitration.
         3.       In the  event of any  taking  or  condemnation  in whole or in
                  part,  the entire  resulting  award of  consequential  damages
                  shall belong to lessor without any deduction therefrom for the
                  value of the  unexpired  term of this  lease or for any  other
                  estate or interest in the demised premises now or later vested
                  in lessee.  Lessee assigns to lessor all his right,  title and
                  interest in any and all such  awards.  If a separate  award is
                  made for moving expenses,  business  interruption and fixtures
                  then such award of moving expenses,  business interruption and
                  fixtures shall belong to the lessee.
         4.       In the  event  of a  partial  taking,  lessor  shall  promptly
                  proceed  to  restore  the  remainder  of the  building  on the
                  demised premises to a self-contained architectural unit.
         5.       In case of any governmental action not resulting in the taking
                  or  condemnation  of any portion of the demised  premises  but
                  creating a right to compensation  therefor,  or if less than a
                  fee title to all or any portion of the demised  premises shall
                  be  taken  or  condemned  by any  governmental  authority  for
                  temporary use of occupancy,  this lease shall continue in full
                  force and effect  without  reduction or abatement of rent, and
                  the rights of the  parties  shall be  unaffected  by the other
                  provisions  of  this   section,   but  shall  be  governed  by
                  applicable law.

XVI.    DESTRUCTION OF PREMISES:
                  In the event of a partial  destruction  of the  premises  (not
                  caused  by  lessee  and/or  its'  agents  and/or   independent
                  contractors)  by fire or other  cause  for  which  lessee  has
                  provided  insurance  payable to lessor under paragraph XIII or
                  condemnation  during the term,  lessor shall forth with repair
                  the same,  provided  the repairs can be made within 30 days of
                  receipt of such  insurance or  governmental  authorities.  Any
                  partial  destruction  shall neither annul nor void this lease.
                  If the repairs  cannot be made in the specified  time,  lessor
                  may, at lessor's  option,  make  repairs  within a  reasonable
                  time,  this lease  continuing in full force and effect and the
                  rent to be proportionately  rebated.  In the event that lessor
                  does not  elect to make  repairs  that  cannot  be made in the
                  specified time, or those repairs cannot be made under the laws
                  and  regulations of the applicable  governmental  authorities,
                  this lease may be  terminated  at the option of either  party.
                  Should the building in which the demised premises are situated
                  be destroyed as set forth herein or condemned to the extent of
                  not  less  than  75  percent  (75%)  of the  replacement  cost
                  thereof, this lease shall be terminated.

XVII.     SUBORDINATION:

                  This lease and all rights of lessee hereunder shall be subject
         and  subordinate  to the lien of any and all mortgages  that may now or
         hereafter affect the demised premises,  or any part thereof, and to any
         and all renewals,  modifications  or extensions of any such  mortgages.
         Lessee  shall on demand  execute,  acknowledge  and  deliver to lessor,
         without  expense  to  lessor,  any  and  all  instruments  that  may be
         necessary or proper to subordinate this lease and all rights therein to
         the  lien  of  any  such   mortgage  or  mortgages  and  each  renewal,
         modification  or  extension,  and if lessee  shall  fail at any time to
         execute,  acknowledge  and deliver any such  subordination  instrument,
         lessor in  addition  to any other  remedies  available  in  consequence
         thereof,  may  execute,  acknowledge  and  deliver the same as lessee's
         attorney in fact and in lessee's name. Lessee hereby irrevocably makes,
         constitutes  and appoints  lessor,  its  successors  and  assigns,  his
         attorney in fact for that purpose.

                  Lessor hereby covenants and warrants that,  subject to Section
         XVIII, he is owner of the demised premises and that lessee,  on payment
         of the rents herein  provided for and the performance of the provisions
         hereof on its part to be performed,  shall and may  peacefully  possess
         and enjoy the  demised  premises  during the term  hereof  without  any
         interruption or disturbance.

XVIII.    ACCESS TO PREMISES; SIGNS POSTED BY LESSOR:
                  Lessee shall permit  lessor or its agents to enter the demised
         premises  at all  reasonable  hours to  inspect  the  premises  or make
         repairs  that lessee may neglect or refuse to make in  accordance  with
         the  provisions  of  this  lease,  and  also to show  the  premises  to
         prospective  buyers. At any time within one year prior to expiration of
         the term,  lessor may show the premises to persons  prior to expiration
         of the term,  permit the usual  notices of "For Rent" and "For Sale" to
         be  place  on the  demised  premises  and  to  remain  thereon  without
         hindrance and molestation.

XIX.     EASEMENTS, AGREEMENTS OR ENCUMBRANCES:
                  The  parties  shall  be  bound  by  all  existing   easements,
         agreements and encumbrances of record relating to the demised premises,
         and lessor shall not be liable to lessee for any damages resulting from
         any action  taken by a holder of an interest  pursuant to the rights of
         that holder thereunder.

XX.    LIABILITY OF LESSOR:
                  Lessee shall be in  exclusive  control and  possession  of the
         demised premises,  and lessor (except for acts of negligence of lessor)
         shall not be liable for any injury or damages to any property or to any
         person  on or about  the  demised  premises  nor for any  injury to any
         property of lessee.  The provisions  herein  permitting lessor to enter
         and inspect the demised  premises  are made to insure that lessee is in
         compliance with the terms and conditions  hereof and makes repairs that
         lessee has failed to make. Lessor shall not be liable to lessee for any
         entry on the  premises  for  inspection  purposes  (except  for acts of
         negligence of Lessor).

XXI.     RENT  ABATEMENT:
                  No abatement, diminution or reduction of rent shall be claimed
         or  allowed  to  lessee  or any  person  claiming  under  him under any
         circumstances,  whether for inconvenience,  discomfort, interruption of
         business or otherwise,  arising from and during the  restoration of the
         demised  premises  after the  destruction  or damage thereof by fire or
         other  cause or the  taking or  condemnation  of a portion  only of the
         demised premises.

XXII.     STORAGE OF TOXIC MATERIALS, EXPLOSIVES AND FLAMMABLES PROHIBITED:
                  Lessee shall not, at anytime  whatsoever,  keep for use on the
         demised  premises  any  toxic  materials,   explosives  or  inflammable
         substances.

XXIII.     REPRESENTATIONS BY LESSOR:
                  At the  commencement  of the  term  lessee  shall  accept  the
         buildings  and   improvements  and  any  equipment  in  their  existing
         condition   and   state  of   repair   and   lessee   agrees   that  no
         representations,  statements or  warranties,  express or implied,  have
         been  made by or on  behalf of  lessor  in  respect  thereto  except as
         contained in the provisions of this lease.

XXIV.    WAIVERS:
                  The failure of lessor to insist on a strict performance of any
         of the  terms  and  conditions  hereof  shall be deemed a waiver of the
         rights  or  remedies  that  lessor  may have  regarding  that  specific
         instance  only,  and shall  not be  deemed a waiver  of any  subsequent
         breach or default in any terms and conditions.

XXV.     NOTICE:
                  All notices to be given with respect to this lease shall be in
         writing.  Each notice shall be sent by  registered  or certified  mail,
         postage  prepaid  and  return  receipt  requested,  to the  party to be
         notified at the address  set forth  herein or at such other  address as
         either party may from time to time designate in writing.

                  Every notice shall be deemed to have been given at the time it
         shall be deposited in the United States mails in the manner  prescribed
         herein.  Nothing  contained  herein  shall  be  construed  to  preclude
         personal service of a summons or other legal process.

XXVI.     ASSIGNMENT, MORTGAGE OR SUBLEASE:
                  Neither  lessee nor his  successors  or assigns  shall assign,
         mortgage,  pledge or encumber this lease or sublet the demised premises
         in whole or in part,  or permit the  premises to be used or occupied by
         others, nor shall this lease be assigned or transferred by operation of
         law,  without the prior consent in writing of lessor in each  instance.
         Exception  to this would be legal  subsidiaries  of  lessee.  After two
         years such consent is not to be unreasonably withheld. If this lease is
         assigned or transferred,  or if all or any part of the demised premises
         is sublet or occupied by anybody other than lessee,  lessor may,  after
         default  by  lessee,  collect  rent  from  the  assignee,   transferee,
         subtenant,  or occupant, and apply the net amount collected to the rent
         reserved  herein,  but no such  assignment,  subletting,  occupancy  or
         collection  shall be  deemed a waiver  of any  agreement  or  condition
         hereof , or the  acceptance of the assignee,  transferee,  subtenant or
         occupant as lessee.  Lessee  shall  continue to be liable  hereunder in
         accordance with the terms and conditions of this lease and shall not be
         released from the performance of the terms and conditions  hereof.  The
         consent by lessor to an assignment,  mortgage, pledge or transfer shall
         not be construed to relieve lessee from  obtaining the express  written
         consent of lessor to any future transfer of interest.

XXVII.     OPTION TO RENEW:
         Lessor  grants to lessee an option to renew  this lease for a period of
Three (3) years  after  expiration  of the term of this  lease.  The rental rate
shall be increased  an amount  equal to the Consumer  Price Index (CPI) as noted
for New York and area,  each year of the renewal.  All other terms and condition
of this renewal lease to be the same as those  herein.  To exercise this option,
lessee must give lessor  written  notice of the  intention to do so at least six
(6) months before this lease expires.

XXVIII.     SURRENDER OF POSSESSION:
                  Lessee  shall,  on the last  day of the  term,  or on  earlier
         termination  and  forfeiture  of  the  lease,   peaceably  and  quietly
         surrender   and  deliver  the  demised   premises  to  lessor  free  of
         subtenancies,  including  all  buildings,  additions  and  improvements
         constructed  or  placed  thereon  by  lessee,   except  moveable  trade
         fixtures,  all in good condition and repair subject to reasonable  wear
         and tear (except to the extent provided for under paragraph XI, and XVI
         herein.  Any trade fixtures or personal property not used in connection
         with the operation of the demised premises and belonging to Lessee,  if
         not  removed at the  termination  of  default,  and if lessor  shall so
         elect,  shall be deemed  abandoned  and become the  property  of lessor
         without any payment or offset therefor. Lessor may remove such fixtures
         or property  from the demised  premises  and store them at the risk and
         expense of lessee if lessor shall not so elect. Lessee shall repair and
         restore  all damage to the  demised  premises  caused by the removal of
         equipment, trade fixtures and personal property.

XXIX.     REMEDIES OF LESSOR:
A.   In the  event of a breach  or a  threatened  breach by lessee of any of the
     terms or  conditions  hereof,  lessor shall have the right of injunction to
     restrain  lessee and the right to invoke  any  remedy  allowed by law or in
     equity, as if the specific remedies of indemnity or reimbursements were not
     provided herein.
B.   The  rights  and  remedies  given to  lessor in this  lease  are  distinct,
     separate and  cumulative  and no one of them,  whether or not  exercised by
     lessor,  shall be deemed to be in exclusion of any of the others herein, by
     law, or by equity provided.
C.   In all cases hereunder,  and in any suit,  action or proceeding of any kind
     between the parties,  it shall be  presumptive  evidence of the fact of the
     existence of a charge being due if lessor shall  produce a bill,  notice or
     certificate  of any public  official  entitled  to give that  notice to the
     effect  that such  charge  appears of record on the books in his office and
     has not been paid.

D.   No receipt of money by lessor from lessee after default or  cancellation of
     this lease in any lawful manner shall (1) reinstate, continue or extend the
     term or affect any notice given to lessee,  (2) operated as a waiver of the
     right of lessor to enforce the payment of rent and additional rent then due
     or  falling  due,  or (3)  operated  as a waiver  of the right of lessor to
     recover  possession  of  the  demised  premises  by  proper  suit,  action,
     proceeding or other remedy.  After (1) service of notice of termination and
     forfeiture  as herein  provided and the  expiration  of the time  specified
     therein  (2) the  commencement  of any suit,  action,  proceeding  or other
     remedy,  or (3) final order or judgement for  possession of the monies due,
     without in any manner  affecting such notice,  order or judgement.  Any and
     all such  monies so  collected  shall be deemed to be payment on account of
     the use and  occupation  of the  demised  premises  or at the  election  of
     lessor, on account of the liability of lessee hereunder.

XXX.     TOTAL AGREEMENT; APPLICABLE TO SUCCESSORS:
                  This lease contains the entire  agreement  between the parties
         and  cannot be  changed to  terminated  except by a written  instrument
         subsequently  executed by the parties hereto.  This lease and the terms
         and  conditions  hereof  apply to and are  binding on the heirs,  legal
         representatives, successors and assigns of both parties.

XXXI.     INDEMNIFICATION - LIABILITIES AND LOSSES:
                  Lessee shall,  at all times prior to the  termination  of this
         lease  and  to the  delivery  to a  lessor  possession  of the  demised
         premises and all  improvements  thereon,  indemnify  lessor against all
         liability, loss, cost, damage or expense sustained by lessor, including
         attorney's  fees and other  expenses  of  litigation  arising  prior to
         termination  of the lease term and delivery to lessor of  possession of
         the premises:
1.   On account of or through the use of the demised premises or improvements or
     any part thereof or by any other reason for any purpose  inconsistent  with
     the provisions of this lease.
2.   Arising out of, or directly or indirectly  due to, any failure of lessee in
     any respect  promptly and faithfully to satisfy his obligations  under this
     lease.
3.   Arising  out of, or directly or  indirectly  due to, any  accident or other
     occurrence  causing  injury to any person or persons or property  resulting
     from the use of the demised premises and improvements or any part thereof.
4.   For which the demised  premises and improvements or any part thereof or the
     lessor as owner thereof or interested  therein may hereafter  without fault
     by lessor become liable,  and  especially,  but not  exclusively,  any such
     liability,  loss, cost, damage or expense that may arise under any statute,
     ordinance or regulation  except such requirements as to which compliance is
     related  to  the   improvements   on  the  demised   premises  (other  than
     improvements  made by Lessee)  and are not caused by use and  occupancy  of
     lessee.  It is not intended by this clause that Lessee shall be responsible
     for liabilities  imposed by the acts of others  committed prior to the date
     of this lease.
                  Lessee also shall,  at all times prior to  termination  of the
         lease  term and  delivery  to lessor  of  possession  of the  premises,
         indemnify  lessor against all liens and charges of any and every nature
         that  may at any  time  be  established  against  the  premises  or any
         improvements  thereon or any part thereof as a  consequence,  direct or
         indirect, of any act or omission of lessee or as a consequence,  direct
         or indirect, of the existence of lessee's interest under this lease.

XXXII.    NOTICE BY LESSEE OF LITIGATION - PAYMENT OF ATTORNEY'S FEES AND COSTS:
                  Within five days after  lessee has  knowledge  of any material
         litigation or other proceeding that shall be instituted against lessee,
         against the demised premises to secure or recover  possession  thereof,
         or that may  affect  the  title to or the  interest  of  lessor  in the
         demised premises, lessee shall give written notice thereof to lessor.
                  Lessee shall pay all reasonable  attorney's  fees and costs on
         behalf of lessor if (a) lessor institutes litigation against lessee for
         a  breach  of the  terms  and  conditions  of this  lease,  (b)  lessor
         institutes  litigation  against lessee for an unlawful  detainer of the
         demised  premises,  or (c) lessor is made a part to litigation  against
         lessee  instituted by a third party,  relating to the demised premises,
         wherein  lessor is not at fault.  The  reasonable  attorney's  fees and
         costs  incurred  by  lessor  herein  shall  be paid by  lessee  whether
         litigation is prosecuted to judgement or not.
                  The payment of all  attorney's  fees and court costs  required
         hereby shall be made to lessor as additional rental and shall be due in
         full on the next regular  date for a rental  payment.  This  additional
         rental  shall be subject to an interest  charge of  eighteen  (18%) per
         cent per annum,  and lessor may enforce the payment by using any remedy
         available  at law or under  this  lease of the  collection  of past due
         rent.

XXXIII.    APPLICABLE LAW:
                  This   agreement   shall  be  governed  by  and  construed  in
accordance with the laws of the State of New York.

                  IN WITNESS  WHEREOF,  the parties have  executed this lease in
         the State of New York the day and year first above written.

                                               /s/ Jean K. Woodward
                                                   Jean K. Woodward, Lessor

                                             By:  /s/  James L. Kehoe
                                                  Sono-Tek Corp, Lessee
/s/ Kathleen N. Martin, Witness