FORM 10-QSB

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

(Mark One)
[ X ]     QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES
          EXCHANGE ACT OF 1934

                      For the quarter ended March 31, 2006

                                       OR

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

             For the transition period from __________ to __________


                 Commission File Number                  1-12727
                                                      ----------


                            SENTRY TECHNOLOGY CORPORATION
                            -----------------------------
        (Exact name of small business issuer as specified in its charter)


       Delaware                                        96-11-3231714
     ----------                                        -------------
(State  or  other  jurisdiction  of                  (I.R.S. Employer
incorporation  or organization)                       Identification No.)


        1881  Lakeland  Avenue,  Ronkonkoma,  NY                    11779
      -----------------------------------------------------------------------
       (Address of principal executive offices)                   (Zip Code)

                                    631-739-2000
                                    ------------
              (Registrant's telephone number, including area code)


    (Former name, former address and former fiscal year, if changed since last
                                     report)


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
        -


As  of  May 12, 2006, there were 120,728,804 shares of Common Stock outstanding.


<PAGE>



                          SENTRY TECHNOLOGY CORPORATION
                          -----------------------------
                                      INDEX
                                      -----




                                                        Page No.
                                                        --------

PART I.   FINANCIAL INFORMATION
-------------------------------

Item 1.     Financial Statements (Unaudited)

     Consolidated Balance Sheets --
     March 31, 2006 and December 31, 2005                   3

     Consolidated Statements of Operations --
     Three Months Ended March 31, 2006 and 2005             4

     Consolidated Statements of Cash Flows --
     Three Months Ended March 31, 2006 and 2005             5

     Notes to Consolidated Financial
     Statements - March 31, 2006                          6 - 11


Item 2.     Management's Discussion and Analysis of
     Financial Condition and Results of Operations       11 - 13


Item 3.     Controls and Procedures                         14



PART II.   OTHER INFORMATION
----------------------------

Item 6.     Exhibits                                     14 - 15


Signatures                                                  15










<PAGE>
------
PART I.   FINANCIAL INFORMATION
-------------------------------

Item 1.     Financial Statements (Unaudited)


<TABLE>
<CAPTION>

<S>                                                                              <C>                <C>
SENTRY TECHNOLOGY CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
                                                                                  March 31,          December 31,
                                                                                    2006                 2005
                                                                                 ----------         -------------
                                                                                 (Unaudited)          (Audited)
ASSETS
--------------
CURRENT ASSETS
   Cash and cash equivalents                                                     $     638           $    842
   Accounts receivable, less allowance for doubtful
     accounts of $84 and $141, respectively                                          2,152              2,762
   Inventories                                                                       2,909              2,709
   Prepaid expenses and other assets                                                   452                318
                                                                                 ----------          ---------
            Total current assets                                                     6,151              6,631


PROPERTY, PLANT AND EQUIPMENT, net                                                     610                637
GOODWILL                                                                             1,564              1,564
OTHER ASSETS                                                                           529                563
                                                                                 ----------          ---------
                                                                                    $8,854             $9,395
                                                                                 ==========          =========


LIABILITIES AND SHAREHOLDERS' EQUITY
----------------------------------------------------
CURRENT LIABILITIES
   Revolving line of credit and term loan                                        $   1,507           $  2,039
   Accounts payable                                                                    537                489
   Accrued liabilities                                                               1,577                925
   Obligations under capital leases - current portion                                    6                  6
   Deferred income                                                                     129                135
                                                                                 ----------          ---------
            Total current liabilities                                                3,756              3,594


OBLIGATIONS UNDER CAPITAL LEASES -
   non-current portion                                                                 ---                  1
DEFFERED TAX LIABILITY                                                                  58                 58
CONVERTIBLE DEBENTURES                                                               1,914              1,904
MINORITY INTEREST                                                                    1,148              1,140
                                                                                 ----------          ---------
            Total liabilities                                                        6,876              6,697


SHAREHOLDERS' EQUITY
   Common stock, $0.001 par value; authorized 160,000 shares
     issued and outstanding 120,729 and 120,629 shares                                 121                121
   Additional paid-in capital                                                       48,795             48,783
   Accumulated deficit                                                             (47,138)           (46,408)
   Other accumulated comprehensive income                                              200                202
                                                                                 ----------          ---------
            Total shareholders' equity                                               1,978              2,698
                                                                                 ----------          ---------
                                                                                    $8,854             $9,395
                                                                                 ==========          =========


See notes to the consolidated financial statements.

</TABLE>


<PAGE>


SENTRY TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

<TABLE>
<CAPTION>
                                                                                              Three Months Ended
                                                                                                   March 31,
                                                                                              --------------------
                                                                                       2006                        2005
                                                                                       --------------------------------
                                                                                                   (Unaudited)
<S>                                                                                 <C>                         <C>

REVENUES
   Sales                                                                            $  2,285                    $1,913
   Service, installation and other                                                       423                       580
                                                                                    --------                    -------
                                                                                       2,708                     2,493
COSTS AND EXPENSES:
   Cost of sales                                                                       1,256                       980
   Customer service expenses                                                             523                       749
   Selling, general and administrative expenses                                        1,353                     1,221
   Research and development                                                              200                       233
                                                                                    --------                    -------
                                                                                       3,332                     3,183
                                                                                    --------                    -------
OPERATING LOSS                                                                          (624)                     (690)
INTEREST AND FINANCING EXPENSES                                                           82                        91
                                                                                    --------                    -------
LOSS BEFORE INCOME TAXES AND MINORITY INTEREST                                          (706)                     (781)
INCOME TAX (BENEFIT)                                                                      10                       (17)
                                                                                    --------                    -------
LOSS BEFORE INCOME TAXES                                                                (716)                     (764)
MINORITY INTEREST                                                                         14                        (4)
                                                                                    --------                    -------
NET LOSS                                                                            $   (730)                   $ (760)
                                                                                    ========                    =======

NET LOSS PER SHARE
          Basic and diluted                                                         $  (0.01)                   $(0.01)
                                                                                    ========                    =======

WEIGHTED AVERAGE SHARES
          Basic and diluted                                                          120,648                   120,551
                                                                                    ========                   ========


See notes to the consolidated financial statements.

</TABLE>


<PAGE>



SENTRY TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

<TABLE>
<CAPTION>

<S>                                                                               <C>                        <C>
                                                                                           Three Months Ended
                                                                                                March 31,
                                                                              -------------------------------------------
                                                                                     2006                     2005
                                                                                     ----                     ----

CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                                                       $ (730)                    $(760)
   Adjustment to reconcile net loss
     to net cash provided by (used in) operating activities:
   Depreciation and amortization                                                      69                        80
   Provision for bad debts                                                             3                         3
   Deferred income taxes                                                              --                       (67)
   Non cash consideration                                                             19                        16
   Minority interest in net loss of consolidated subsidiary                            8                       (14)
 Changes in operating assets and liabilities:
   Accounts receivable                                                               607                     1,479
   Inventories                                                                      (200)                     (422)
   Prepaid expenses and other assets                                                (134)                       35
   Accounts payable and accrued liabilities                                          700                       (78)
   Deferred income                                                                    (6)                      (84)
                                                                                  -------                   -------


        Net cash provided by operating activities                                    336                       188
                                                                                  -------                   -------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of property and equipment                                                (11)                       (9)
   Intangibles                                                                        --                        (1)
                                                                                  -------                   -------

         Net cash used in investing activities                                       (11)                      (10)
                                                                                  -------                   -------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Net payments under the revolving line of credit                                  (532)                     (688)
   Repayment of term loan                                                            ---                       (77)
   Repayment of notes payable                                                        ---                      (153)
   Repayment of obligations under capital leases                                      (1)                       (1)
   Proceeds from exercise of stock options                                             6                         1
                                                                                  -------                   -------

         Net cash used in financing activities                                      (527)                     (918)
                                                                                  -------                   -------

EFFECTS OF EXCHANGE RATES ON CASH                                                     (2)                      (14)
                                                                                  -------                   -------

DECREASE IN CASH AND CASH EQUIVALENTS                                               (204)                     (754)

CASH AND CASH EQUIVALENTS, at beginning of period                                    842                     1,965
                                                                                  -------                   -------
CASH AND CASH EQUIVALENTS, at end of period                                       $  638                    $1,211
                                                                                  =======                   =======


See notes to the consolidated financial statements.


</TABLE>


<PAGE>




SENTRY TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2006


NOTE 1 -- Basis of Presentation
-------------------------------
The  consolidated financial statements include the accounts of Sentry Technology
Corporation  ("the  Company")  and  its  majority-owned  subsidiaries.  All
intercompany  accounts  and  transactions have been eliminated in consolidation.

The  accompanying unaudited consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United States
of  America  for interim financial information and with the instructions to Form
10-QSB  and  their  basis of application is consistent with that of the previous
year.  Accordingly,  they  do  not  include all of the information and footnotes
required  by  accounting  principles  generally accepted in the United States of
America  for  complete  financial  statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair  presentation  have  been  included.  Interim  results  are not necessarily
indicative of the results that may be expected for a full year.  These financial
statements should be read in conjunction with the audited consolidated financial
statements  and notes thereto included in Sentry's Annual Report to Stockholders
on  Form  10-KSB  for the fiscal year ended December 31, 2005, as filed with the
Securities  and  Exchange  Commission.

Certain prior period amounts have been reclassified to conform to current period
presentation.

Note 2 -- Recent Accounting Pronouncements
------------------------------------------
In  December  2004,  the  Financial  Accounting  Standards Board ("FASB") issued
Statement  of  Financial  Accounting  Standards ("SFAS") No. 123 (revised 2004),
"Share  Based  Payment" ("SFAS No. 123R"). SFAS No. 123R requires the Company to
measure  the  cost  of  employee  services  received in exchange for an award of
equity  instruments based on the grant date fair value of the award. The cost of
the employee services is recognized as compensation cost over the period that an
employee  provides service in exchange for the award. SFAS No. 123R is effective
January  1,  2006  for  the Company and was adopted using a modified prospective
method  during  the quarter ended March 31, 2006.  Note 8 provides disclosure on
the  effect  of  the  adoption  of  SFAS No. 123R on net income and earnings per
share.

In  March  2006,  the  FASB  issued  Statement 156, "Accounting for Servicing of
Financial  Assets,"  which  amends  SFAS  140,  "Accounting  for  Transfers  and
Servicing  of  Financial  Assets  and  Extinguishments  of  Liabilities."  In  a
significant change to current guidance, SFAS No. 156 permits an entity to choose
either  of  the  following  subsequent  measurement  methods  for  each class of
separately  recognized  servicing  assets  and  servicing  liabilities:  (1)
Amortization  Method  or  (2)  Fair  Value  Measurement Method.  SFAS No. 156 is
effective as of the beginning of an entity's first fiscal year that begins after
September  15, 2006.  The Company is currently reviewing the effect, if any, the
proposed  guidance  will  have  on  its  financial  statements.

In  February  2006, the FASB issued SFAS No. 155, "Accounting for Certain Hybrid
Financial  Instruments-an  amendment  of FASB Statements No. 133 and 140."  This
Statement  permits  fair  value  of  remeasurement  for  any  hybrid  financial
instrument  that  contains  an  embedded derivative that otherwise would require
bifurcation;  clarifies which interest-only strips and principal-only strips are
not  subject  to  the  requirements  of SFAS No. 133, "Accounting for Derivative
Instruments  and  Hedging  Activities";  establishes  a  requirement to evaluate
interests  in  securitized  financial  assets  to  identify  interests  that are
freestanding  derivatives  or that are hybrid financial instruments that contain
an  embedded  derivative requiring bifurcation; clarifies that concentrations of
credit  risk  in  the  form  of  subordination  are  not

<PAGE>

SENTRY TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March  31,  2006


embedded  derivatives;  and  amended SFAS No. 140, "Accounting for Transfers and
Servicing  of Financial Assets and Extinguishments of Liabilities", to eliminate
the prohibition on a qualifying special-purpose entity from holding a derivative
financial  instrument  that pertains to a beneficial interest other than another
derivative  financial  instrument.  SFAS  No. 155 is effective for all financial
instruments  acquired,  issued,  or subject to a remeasurement (new basis) event
occurring after the beginning of an entity's first fiscal year that begins after
September  15, 2006.  The Company is currently reviewing the effect, if any, the
proposed  guidance  will  have  on  its  financial  statements.



NOTE 3 -- Inventories
---------------------
Inventories consist of the following:

                                      March 31, 2006          December 31, 2005
                                      --------------          -----------------
                                                  (in thousands)
Raw materials                         $     1,016               $     1,101
Work-in-process                               212                       279
Finished goods                              1,681                     1,329
                                            -----                     -----
                                      $     2,909               $     2,709
                                      ===========               ===========


Reserves  for excess and obsolete inventory totaled $1,085,000 and $1,261,000 as
of  March 31, 2006 and December 31, 2005, respectively and have been included as
a  component  of  the  above  amounts.


NOTE 4 -- Credit Facilities & Subsequent Event
----------------------------------------------
In  May 2005, the Company and certain of its subsidiaries entered into a secured
credit  facility  with Royal Bank of Canada ("RBC") for maximum borrowings of up
to  Canadian  $4.5  million  (U.S.  $3.9  million), which are subject to certain
limitations  based  on  a  percentage  of  eligible  accounts  receivable  and
inventories as defined in the agreement.  Interest is payable at a rate of Royal
Bank  of  Canada  prime  rate  (5.5%  at  March 31, 2006), plus 1.75% per annum.
Borrowings under this facility are secured by substantially all of the Company's
assets.  As  of March 31, 2006, the Company had borrowings of $1.5 million under
this  facility and had excess borrowing capacity of approximately $0.09 million.

In  May 2006, the Company amended the credit agreement with RBC by extending the
term  of  the  agreement  through  May  2007  and  modifying  certain  financial
covenants.  In  addition, the maximum borrowings under the facility were reduced
to  U.S.  $3 million.  However, RBC increased the borrowing base formula Company
by  Canadian  $1.0  million  (U.S. $856,000) in exchange for additional security
provided  by  two  of  the  Company's  directors.


NOTE 5 - Comprehensive Income (Loss)
------------------------------------
Comprehensive  income (loss) is as follows:

                                                          Three Months Ended
                                                              March 31,
                                                         2006             2005
                                                         ----             ----
                                                             (in thousands)
Net income (loss):                                     $  (730)        $  (760)
Other comprehensive income (loss):
Foreign currency translation adjustments                    (2)            (14)
                                                       --------        --------
Comprehensive income (loss)                            $  (732)        $  (774)
                                                       ========        ========



SENTRY TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2006


NOTE 6 -- Related Party Transactions
------------------------------------
In  May  2006,  Mr.  Murdoch,  Sentry's CEO and Director and Mr. Furst, a Sentry
Director,  provided  personal  guarantees  to  RBC, the Company's lender, in the
amount of Canadian $1 million (U.S. $856,000) in exchange for the bank providing
increased  availability  under  its  credit  facility to the Company by the same
amount.  In  consideration  of  these guarantees, Mr. Murdoch and Mr. Furst will
receive  a  fee  of $43,000, to be shared between them, paid in 12 equal monthly
installments.  As  additional consideration, they will receive fully vested, two
year  warrants  to  purchase  approximately  2.9 million shares of the Company's
common  stock, at an exercise price of $0.10 per share.  The fair value of these
warrants will be recorded in accordance with SFAS No. 123R "Share-Based Payment"
in  the  second  quarter  of 2006 and will be written off over the period of the
guarantee.


NOTE 7 -- Earnings Per Share
----------------------------
The  earnings  per  share calculations (basic and diluted) at March 31, 2006 and
2005  are  based  upon  the weighted average number of common shares outstanding
during  each  period.  There  are  no  reconciling  items  in  the  numerator or
denominator  of  the  earnings  per  share calculations in either of the periods
presented.  Options  to  purchase 2,372,000 and 1,299,512 shares of common stock
with  a  weighted  average exercise price of $0.25 and $0.58 were outstanding at
March  31, 2006 and 2005, respectively, but were not included in the computation
of  diluted  net  loss  per  share  because  their effect would be antidilutive.


NOTE 8 -- Stock Based Compensation
----------------------------------
The  Company's  1997  Plan,  which is shareholder approved, permits the grant of
share  options  and shares to its employees for up to 6,369,365 shares of common
stock  as stock compensation and 3,300,738 shares were available for grant as of
March  31,  2006.  All stock options under the 1997 Plan are granted at the fair
market  value of the common stock at the grant date. Employee stock options vest
ratably  usually  over a three or five-year period and generally expire 10 years
from  the  grant  date.  Stock options granted to non-employee directors usually
vest  immediately.


Accounting  for  Employee  Awards:
----------------------------------
Effective January  1,  2006,  the  Company's  Plan is accounted for in
accordance with the recognition  and measurement provisions of SFAS No. 123R,
which replaces SFAS No. 123,  Accounting  for  Stock-Based  Compensation,  and
supersedes  Accounting Principles  Board  Opinion  ("APB")  No.  25, Accounting
for  Stock  Issued to Employees,  and  related  interpretations. SFAS 123R
requires compensation costs related  to  share-based payment transactions,
including employee stock options, to  be recognized in the financial statements.
In addition, the Company adheres to the guidance  set  forth  within Securities
and Exchange Commission ("SEC") Staff  Accounting  Bulletin  ("SAB")  No.  107,
which provides the Staff's views regarding  the  interaction  between  SFAS
No.  123R  and certain SEC rules and regulations  and provides  interpretations
with  respect  to  the valuation of share-based  payments for public companies.

Prior  to  January  1,  2006,  the Company accounted for similar transactions in
accordance  with  APB  No.  25  which  employed  the  intrinsic  value method of
measuring  compensation  cost.  Accordingly,  compensation  expense  was  not
recognized  for  fixed stock options if the exercise price of the option equaled
or  exceeded  the  fair  value  of  the  underlying  stock  at  the  grant date.


<PAGE>
SENTRY TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March  31,  2006


While  SFAS No. 123R encouraged recognition of the fair value of all stock-based
awards  on  the date of grant as expense over the vesting period, companies were
permitted  to  continue  to apply the intrinsic value-based method of accounting
prescribed  by  APB No. 25 and disclose certain pro-forma amounts as if the fair
value  approach  of  SFAS No. 123R had been applied.  In December 2002, SFAS No.
148,  Accounting  for  Stock-Based  Compensation-Transition  and  Disclosure, an
amendment  of  SFAS  No.  123,  was  issued,  which,  in  addition  to providing
alternative  methods  of  transition  for  a  voluntary change to the fair value
method  of  accounting  for  stock-based  employee  compensation,  required more
prominent  pro-forma  disclosures  in  both  the  annual  and  interim financial
statements.  The  Company  complied  with  these disclosure requirements for all
applicable  periods  prior  to  January  1,  2006.

In  adopting SFAS 123R, the Company applied the modified prospective approach to
transition. Under the modified prospective approach, the provisions of SFAS 123R
are  to  be  applied  to  new  awards  and  to  awards modified, repurchased, or
cancelled after the required effective date. Additionally, compensation cost for
the portion of awards for which the requisite service has not been rendered that
are  outstanding  as  of  the required effective date shall be recognized as the
requisite  service  is  rendered  on  or  after the required effective date. The
compensation  cost  for  that portion of awards shall be based on the grant-date
fair  value  of  those  awards as calculated for either recognition or pro-forma
disclosures  under  SFAS  123R.

As  a  result  of the adoption of SFAS 123R, the Company's results for the three
month  period  ended  March  31,  2006  include share-based compensation expense
totaling  approximately  $6,000.  Such  amounts  have  been  included  in  the
Consolidated Statements of Operations within selling, general and administrative
expenses.  No income tax benefit has been recognized in the income statement for
share-based  compensation  arrangements  as  the  Company  has provided for 100%
valuation  allowance  on net deferred tax assets.   No stock option compensation
expense  was  recorded  under APB No. 25 in the Statements of Operations for the
three  months  ended  March  31,  2005.

Employee  stock  option compensation expense in 2006 is the estimated fair value
of options granted amortized on a straight-line basis over the requisite service
period for entire portion of the award. The Company has not adjusted the expense
by estimated forfeitures, as required by SFAS 123R for employee options, since
the  forfeiture rate based upon historical data was determined to be immaterial.

Accounting  for  Non-employee  Awards:
--------------------------------------
The  Company  previously  accounted  for  options  granted  to  its non-employee
consultants  and  non-employee  registered  representatives using the fair value
cost  in accordance with SFAS 123 and EITF No. 96-18.  The adoption of SFAS 123R
and  SAB 107 as of January 1, 2006, had no material impact on the accounting for
non-employee  awards.  The Company continues to consider the additional guidance
set  forth  in EITF Issue No. 96-18, "Accounting for Equity Instruments That Are
Issued to Other Than Employees" ("EITF 96-18").  There was no stock compensation
expense  related to non-employee options for the three month periods ended March
31,  2006  and  2005.

The  weighted average estimated fair value of stock options granted in the three
months  ended  March  31,  2006 and 2005 was $0.07 and $0.08, respectively.  The
fair value of options at the date of grant was estimated using the Black-Scholes
option pricing model.  During 2006, the Company took into consideration guidance
under  SFAS  123R  and  SAB  107  when  reviewing  and  updating  assumptions.


<PAGE>
SENTRY TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March  31,  2006


The  expected  volatility  is  based upon historical volatility of our stock and
other  contributing  factors.  The  expected  term  is based upon observation of
actual  time  elapsed  between  date  of  grant  and exercise of options for all
employees.  Previously  such  assumptions  were  determined  based on historical
data.

The  assumptions  made in calculating the fair values of options are as follows:

                                Three  Months  Ended
                                      March 31,
                                    2006      2005
                                    ----      ----
Risk-free interest rate            4.375%     4.0%
Expected dividend yield                0%      0%
Expected lives                    3 years    1 year
Expected volatility                  104%      94%


The  following  table  illustrates the pro forma effect on net loss and loss per
share  as  if  the  fair  value recognition provisions of SFAS No. 123R had been
applied  to  all  outstanding  and  unvested awards in the prior year comparable
period:

                                                       Three Months Ended
                                                          March 31, 2005
                                                          --------------

Net loss, as reported                                         $  (760)
Add: Stock based compensation expense
     included in reported net loss                                ---
Deduct: Employee stock option compensation
     expense determined under fair value based
     method for all employee awards (no tax effect)                (6)
                                                             ---------
Pro forma net loss                                              $(766)
                                                             =========
Net loss per common share:
  As reported-basic and diluted                               $ (0.01)
                                                             =========
  Pro forma-basic and diluted                                 $ (0.01)
                                                             =========


The following table represents the Company's stock options granted, exercised
and forfeited during the three months ended March 31, 2006:


<TABLE>
<CAPTION>
 <S>                               <C>          <C>       <C>          <C>
                                                          Weighted
                                  Number of    Weighted    Average    Aggregate
                                   Shares      Average    Remaining   Intrinsic
                                  Subject to   Exercise  Contractual    Value
                                  Issuance     Price        Term        ($000)
                                  -----------  --------  -----------  ---------
Outstanding at December 31, 2005   2,431,524       0.35
Granted                              300,000       0.10
Cancelled                           (259,524)      1.05
Exercised                           (100,000)      1.07
                                  -----------  --------
Outstanding at March 31, 2006      2,372,000       0.25   7.72 years       0
                                  ===========  ========  ===========  =========

Exercisable at March 31, 2006        847,000       0.54   2.98 years       0
                                  ===========  ========  ===========  =========
</TABLE>


SENTRY TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March  31,  2006


The  aggregate  intrinsic  value  of  options  has  been shown as $0 because the
weighted  average exercise price of the price of the outstanding and exercisable
option  shares  exceeded  the  quarter  end market price of the Company's common
stock.

A total of 100,000 stock options were exercised the first quarter of 2006 and no
options were exercised in the first quarter of 2005.  The intrinsic value of the
options  exercised  was  $6,000  for  the  period  ended  March  31,  2006.

As  of  March  31,  2006,  there was $119,000 of total unrecognized compensation
cost, net of estimated forfeitures, related to all unvested stock options, which
is expected to be recognized over a weighted average period of approximately 3.9
years.


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

Certain Factors That May Affect Future Results
----------------------------------------------

Information  contained  or  incorporated by reference in this periodic report on
Form  10-QSB  and  in  other  SEC  filings  by  Sentry contains "forward-looking
statements"  within  the meaning of the Private Securities Litigation Reform Act
of  1995  which can be identified by the use of forward-looking terminology such
as  "believes,"  "expects,"  "may,"  "will,"  "should"  or  "anticipates" or the
negative  thereof,  other  variations  thereon  or comparable terminology, or by
discussions  of  strategy.  These  forward-looking  statements  involve  certain
significant  risks  and  uncertainties, and actual results may differ materially
from the forward-looking statements. For further details and discussion of these
risks  and  uncertainties  see  Sentry  Technology  Corporation's  SEC  filings
including,  but  not  limited to, its annual report on Form 10-KSB. No assurance
can  be given that future results covered by the forward-looking statements will
be  achieved,  and  other  factors  could  also  cause  actual  results  to vary
materially  from  the future results covered in such forward-looking statements.
We  do  not  undertake  to  publicly update or revise any of our forward-looking
statements  even if experience or future changes show that the indicated results
or  events  will  not  be  realized.

Results  of  Operations:
------------------------

Consolidated  revenues  were  9%  higher  in the quarter ended March 31, 2006 as
compared  to  the  quarter ended March 31, 2005.  This was despite a decrease in
revenues  from  Lowe's  of  approximately  $0.5  million  on a comparable basis.
Non-Lowe's  revenues increased 39% in the first quarter of 2006.  Our backlog of
orders,  which  we  expect  to  deliver  within the next twelve months, was $2.1
million  at  March  31,  2006  as compared to $1.2 million at December 31, 2005.


<PAGE>
SENTRY TECHNOLOGY CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS  OF  OPERATIONS



Total  revenues  for  the  periods  presented  are  broken  out  as  follows:

                                       Q-1           Q-1         % Change
                                       2006          2005        Incr (Decr)
                                       ----          ----        -----------
                                          (in thousands)

EAS                                 $ 1,511       $ 1,050           44%
CCTV                                    207           313          (34%)
SentryVision                            567           550            3%
                                    -------        ------         -----
Total sales                           2,285         1,913           19%
Service, installation and other         423           580          (27%)
                                    -------        ------         ------
Total revenues                      $ 2,708       $ 2,493            9%
                                    =======       =======         ======

The  increase  in  EAS  sales  is primarily attributable to an increase in North
American  library  sales  of  our  QuickCheck  patron  self check book-borrowing
systems  and  increased  sales  to  Mexico  and  Latin  America.  CCTV  revenues
decreased  principally  as  a  result  of  lower  sales to Lowe's.  There was an
increase  in  domestic  sales of our SentryVision  Smart Track system, which was
offset  somewhat  by  lower sales to our international dealers and distributors.
Our  international  sales  are  denominated  in  U.S.  dollars,  therefore  the
strengthening  of  the Euro and other foreign currencies against the U.S. dollar
had  no  significant  impact on revenues.  Service and maintenance revenues were
substantially  lower  as  a  result  of  cancellation  of the Lowe's maintenance
contract.  Installation  revenues  were  slightly higher in the first quarter of
2006  as compared to the first quarter of 2005.  Even though EAS sales increased
substantially,  the  installation revenues associated with EAS systems are lower
than  for  CCTV  and  SentryVision  sales.

Cost  of sales were 55% of total sales in the three month period ended March 31,
2006  compared  to  51%  in  the  three  month period ended March 31, 2005.  The
increase  in  percentage is principally a result of the increase in dealer sales
in  Mexico  and  Latin  America  that carry lower margins than sales made to end
users.  We  continue  to  see  strong domestic margins in 2006 on the SmartTrack
product  lines  as  a  result  of  our  outsourcing  of  manufacturing.

The  decrease  in  customer  service  expenses  in  the first quarter of 2006 as
compared to the first quarter of 2005 is primarily a result of a decrease in the
number  of  customer  service  employees  and  lower outside service contractors
costs.   Due  to  the  loss  of  the  Lowe's  maintenance agreement in the first
quarter  of  2005, we terminated twelve customer service employees as of the end
of  March  2005.

Selling,  general and administrative expenses were 11% higher in the three month
period  ended  March  31,  2006 when compared to the same period of the previous
year.  The  increases  in  expenses are principally a result of higher sales and
marketing expenses and higher product warranty costs.  We have increased funding
of  sales  and marketing programs, which we expect will continue to increase our
business  with  new  and  existing  customers.  In the first quarter of 2006, we
hired on additional sales person and a new VP of Sales and Marketing, with prior
experience  with  our  industry's largest competitor.  The first quarter of 2006
also  includes  $35,000  resulting  from  the  settlement of audit fees with our
predecessor  auditors.

The  reduction  in  research  and  development in the first quarter of 2006 when
compared  to the first quarter of 2004 is principally a result of a reduction in
the  number  of  engineers  offset partially by the increased use of engineering
consulting  firms.


SENTRY TECHNOLOGY CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS  OF  OPERATIONS


Total  interest  and  financing  costs  were  lower in the first quarter of 2006
compared to 2005 as a result of lower average bank debt and lower interest rates
under  the  Royal  Bank  of  Canada  credit  agreement.

The  income  tax  expense  in all the periods presented principally results from
taxable  income of one of our Sentry Canada subsidiaries, which cannot be offset
by  Sentry's  net  operating  loss  carryforwards.

As a result of the foregoing, Sentry had a net loss of $730,000 in the quarter
ended March 31, 2006 as compared to a net loss of $760,000 in the quarter ended
March 31, 2005.

Liquidity  and  Capital  Resources  as  of  March  31,  2006

At March 31, 2006, we had cash of $0.6 million, working capital of $2.4 million,
total assets of $8.9 million and shareholders' equity of $2.0 million.  While we
had  a  loss of $0.7 million in the first three months of 2006, we generated net
cash  from  operating  activities  of  $336,000.  This  was  a  result  of lower
amounts of accounts receivable principally due to improved collection efforts as
well  as  an increase in accounts payable and accrued liabilities.

We  utilized  $0.5  million  in  financing  activities  through  a  reduction in
borrowings  under our credit facility.  Availability under the credit facilities
is  principally  based  on  the  level  of  our receivables and inventory, which
declined  in  the  first  three  months  of  2006.  Net reductions in our credit
facilities  were  funded  through  the  use  of  existing  cash.

The  Company  and  certain  of  its  subsidiaries  entered into a secured credit
facility,  as  amended, with Royal Bank of Canada ("RBC") for maximum borrowings
of up to Canadian $4.5 million (U.S. $3.9 million), which are subject to certain
limitations  based  on  a  percentage  of  eligible  accounts  receivable  and
inventories  as  defined in the agreement.  Interest is payable at a rate of RBC
prime  rate  (5.5%  at  March 31, 2006), plus 1.75% per annum.  Borrowings under
this  facility  are secured by substantially all of the Company's assets.  As of
March 31, 2006, we had borrowings of approximately $1.5 million with RBC and had
excess  borrowing  capacity  of  $0.09  million.

We  will  require  liquidity  and  working  capital  to  finance  increases  in
receivables  and  inventory  associated  with sales growth, payments to past due
vendors  and,  to a lesser extent, for capital expenditures.  We had no material
capital  expenditure or purchase commitments, other than the Dialoc distribution
agreement,  as of March 31, 2006.  Sentry's revenues declined and we incurred an
operating  loss in 2005.  This trend continued through the first quarter of 2006
and  substantially reduced the Company's available cash reserves and limited our
ability  to secure additional bank financing. The Company has instituted certain
plans  to increase its revenue base as well as preserve its cash, including cost
cutting  measures  and  inventory  reduction  initiatives.

In  May  2006,  we  amended  our  credit  agreement by further modifying certain
financial covenants and by extending the term of the agreement through May 2007.
In  addition,  the maximum borrowings under the facility were reduced to U.S. $3
million.  Mr.  Murdoch,  Sentry's  CEO  and  Director  and  Mr.  Furst, a Sentry
Director,  have  agreed  to  provide personal guarantees to RBC in the amount of
Canadian $1 million (U.S. $856,000) in exchange for the bank providing increased
availability  under  its  credit facility to the Company by the same amount.  In
consideration  of these guarantees, Mr. Murdoch and Mr. Furst will receive a fee
of  $43,000,  to  be shared between them, paid in 12 equal monthly installments.
As  additional  consideration, they will receive fully vested, two year warrants
to  purchase  approximately 2.9 million shares of  the  Company's common stock,
at an exercise price $0.10 per share.  The  fair value of  these warrants will
be recorded in accordance with SFAS  No.  123R  "Share-Based Payment" in the
second quarter of 2006 and will be written  off  over  the  period  of the
guarantee. After conversations with RBC, management  believes  that these
amendments will be approved in the near future. Based  upon  the  achievement of
its plans, as well as the additional borrowing availability  as a result of the
Directors guaranties, the Company believes that it  will  have  sufficient cash
to meet its anticipated operating costs, capital expenditures  and debt service
requirements for at least the next twelve months.


Related  Party  Transactions
----------------------------
Details of related party transactions are included in Note 6 of this Form
10-QSB.


Item  3.  Controls  and  Procedures

As  of  the  end  of  the  period  covered  by  this  report,  Sentry Technology
Corporation  carried  out  an  evaluation,  under  the  supervision and with the
participation  of  the  Company's  management,  including  the  Company's  Chief
Executive  Officer  and  Chief  Financial  Officer,  of the effectiveness of the
design  and  operation  of  the  Company's  disclosure  controls  and procedures
pursuant  to Rule 13a-15 of the Securities and Exchange Act of 1934.  Based upon
that  evaluation,  the  Chief  Executive  Officer  and  Chief  Financial Officer
concluded that the Company's disclosure controls and procedures are effective in
timely  alerting  them  to  material  information related to the Company that is
required to be included in Sentry Technology Corporation's periodic SEC filings.

There  has  been  no  change  in  the  Company's internal control over financial
reporting during the period covered by this report that has materially affected,
or  is  reasonable  likely  to materially affect, the Company's internal control
over  financial  reporting.


PART II  - OTHER INFORMATION


Item 6 - Exhibits

(a)     Exhibits:

31.1 - Certification by the Chief Executive Officer Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.

31.2 - Certification by the Chief Financial Officer Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.

32.1 - Certification by the Chief Executive Officer Pursuant to 18 U.S.C.
Section 1350 Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.***

32.2 - Certification by the Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350 Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.***

***     In  accordance  with Item 601(b)(32)(ii) of Regulation S-K, this exhibit
shall not be deemed "filed" for the purposes of Section 18 of the Securities and
Exchange  Act of 1934 or otherwise subject to the liability of that section, nor
shall  it be deemed incorporated by reference in any filing under the Securities
Act  of  1933  or  the  Securities  Exchange  Act  of  1934.


SIGNATURES


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

                              SENTRY TECHNOLOGY CORPORATION
                              -----------------------------


Date:    May 12, 2006         By:   /s/PETER J. MUNDY
         ------------               -----------------
                                    Peter J. Mundy, Vice President -
                                    Finance and Chief Financial Officer
                                    (Principal Financial and Accounting Officer)

<PAGE>


SECTION 302 CERTIFICATION:
                                                                    EXHIBIT 31.1



 CERTIFICATION PURSUANT TO RULE 13(A) OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
   1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, PETER L. MURDOCH, CERTIFY THAT:

1.   I have reviewed this Quarterly Report on Form 10-QSB of Sentry Technology
Corporation;

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

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

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

     A. Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure the material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being prepared;

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

     C. Evaluated the effectiveness of the Registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and

     D.  Disclosed in this report any change in the Registrant's internal
control over financial reporting that occurred during the Registrant's most
recent fiscal quarter that materially affected, or is reasonably likely to
materially affect, the Registrant's internal control over financial reporting.

5.   The Registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
Registrant's auditors and the Audit Committee of Registrant's Board of Directors
(or persons performing the equivalent function):

     A. All significant deficiencies and material weaknesses in the design or
operation of internal controls over financial reporting which are reasonably
likely to adversely affect the Registrant's ability to record, process,
summarize and report financial information; and

     B. Any fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrant's internal control over
financial reporting.


     DATED:     May 12, 2006


     BY:       /S/ PETER L. MURDOCH
               ----------------------------
     NAME:     Peter L. Murdoch
     TITLE:    President and Chief Executive Officer


<PAGE>

SECTION 302 CERTIFICATION:
                                                                  EXHIBIT 31.2


 CERTIFICATION PURSUANT TO RULE 13(A) OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
    1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 202

I, PETER J. MUNDY, CERTIFY THAT:

1.   I have reviewed this Quarterly Report on Form 10-QSB of Sentry Technology
Corporation;

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

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

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

     A. Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure the material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being prepared;

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

     C. Evaluated the effectiveness of the Registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and

     D.  Disclosed in this report any change in the Registrant's internal
control over financial reporting that occurred during the Registrant's most
recent fiscal quarter that materially affected, or is reasonably likely to
materially affect, the Registrant's internal control over financial reporting.

5.   The Registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
Registrant's auditors and the audit committee of Registrant's board of directors
(or persons performing the equivalent function):

     A. All significant deficiencies and material weaknesses in the design or
operation of internal controls over financial reporting which are reasonably
likely to adversely affect the Registrant's ability to record, process,
summarize and report financial information; and

     B. Any fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrant's internal control over
financial reporting.


     Dated:     May 12, 2006

     By:        /s/ Peter J. Mundy
                ----------------------
     Name:      Peter J. Mundy
     Title:     Vice President and Chief Financial Officer


<PAGE>

SECTION 906 CERTIFICATION:


EXHIBIT 32.1


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



Certification of CEO

In  connection  with  the Quarterly Report of Sentry Technology Corporation (the
"Company")  on Form 10-QSB for the period ended March 31, 2006 as filed with the
Securities and Exchange Commission on the date hereof (the Report"), I, Peter L.
Murdoch, Chief Executive Officer of the Company, certify, pursuant to Section 18
U.S.C.  1350,  as  adopted  pursuant to Section 906 of the Sarbanes-Oxley Act of
2002,  that:

(1)     The  Report  fully  complies  with the requirements of Section 13(a) and
15(d)  of  the  Securities  Exchange  Act  of  1934;  and

(2)     The information contained in the Report fairly presents, in all material
respects,  the  financial  condition  and  results of operations of the Company.



                           /s/ PETER L. MURDOCH
                          -------------------------------------------------
                          Peter L. Murdoch
                          President and Chief Executive Officer

                          May 12, 2006


A  signed  original  of this written statement required by Section 906, or other
document authenticating, acknowledging, or otherwise adopting the signature that
appears  in  typed  form  within  the  electronic  version  of  this     written
statement  required by Section 906, has been provided to the Company and will be
retained  by the Company and furnished to the Securities and Exchange Commission
or  its  staff  upon  request.

This  certification  accompanies  this Report on Form 10-QSB pursuant to Section
906  of  the  Sarbanes-Oxley  Act  of  2002  and shall not, except to the extent
required  by such Act, be deemed filed by the Company for purposes of Section 18
of  the Securities Exchange Act of 1934, as amended  (the "Exchange Act").  Such
certification will not be deemed to be incorporated by reference into any filing
under the Securities Act of 1933, as amended, or the Exchange Act, except to the
extent  that  the  Company  specifically  incorporates  it  by  reference.






<PAGE>




SECTION 906 CERTIFICATION:


EXHIBIT 32.2


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



Certification of CFO

In  connection  with  the Quarterly Report of Sentry Technology Corporation (the
"Company")  on Form 10-QSB for the period ended March 31, 2006 as filed with the
Securities and Exchange Commission on the date hereof (the Report"), I, Peter J.
Mundy,  Chief  Financial Officer of the Company, certify, pursuant to Section 18
U.S.C.  1350,  as  adopted  pursuant to Section 906 of the Sarbanes-Oxley Act of
2002,  that:

(1)     The  Report  fully  complies  with the requirements of Section 13(a) and
15(d)  of  the  Securities  Exchange  Act  of  1934;  and

(2)     The information contained in the Report fairly presents, in all material
respects,  the  financial  condition  and  results of operations of the Company.



                           /s/ PETER J. MUNDY
                          -------------------------------------------------

                          Peter J. Mundy
                          Vice President and Chief Financial Officer

                          May 12, 2006


A  signed  original  of this written statement required by Section 906, or other
document authenticating, acknowledging, or otherwise adopting the signature that
appears  in  typed  form  within  the  electronic  version  of  this     written
statement  required by Section 906, has been provided to the Company and will be
retained  by the Company and furnished to the Securities and Exchange Commission
or  its  staff  upon  request.

This  certification  accompanies  this Report on Form 10-QSB pursuant to Section
906  of  the  Sarbanes-Oxley  Act  of  2002  and shall not, except to the extent
required  by such Act, be deemed filed by the Company for purposes of Section 18
of  the Securities Exchange Act of 1934, as amended  (the "Exchange Act").  Such
certification will not be deemed to be incorporated by reference into any filing
under the Securities Act of 1933, as amended, or the Exchange Act, except to the
extent  that  the  Company  specifically  incorporates  it  by  reference.