FORM 10-Q

                       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, 1999

                                       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 registrant as specified in its charter)


           Delaware                                       96-11-3349733
           --------                                       --------------
 (State or other jurisdiction of                         (I.R.S. Employer
 incorporation or organization)                          Identification No.)

  350 Wireless Boulevard, Hauppauge,  New York                11788
------------------------------------------------         ----------------------
 (Address of principal executive offices)                    (Zip Code)

                                  516-232-2100
                                  ------------
              (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
       ----

Number of shares outstanding of issuer's common stock as of May 13, 1999 was
9,750,760.


<PAGE>


                          SENTRY TECHNOLOGY CORPORATION
                                      INDEX


                                                                     PAGE NO.
                                                                     ---------

PART I. FINANCIAL INFORMATION

Item 1.   Financial Statements (Unaudited)

          Consolidated Balance Sheets --
          March 31, 1999 and December 31, 1998                        3

          Condensed Consolidated Statements of Operations --
          Three Months Ended March 31, 1999 and 1998                  4

          Condensed Consolidated Statements of Cash Flows --
          Three Months Ended March 31, 1999 and 1998                  5

          Notes to Condensed Consolidated Financial
          Statements -- March 31, 1999                                6 - 7


Item 2.   Management's Discussion and Analysis of
          Financial Condition and Results of Operations               7 - 9



PART II.  OTHER INFORMATION

Item 6.   Exhibits and Reports on Form 8-K                            9


Signatures                                                            9


<PAGE>


<TABLE>
<CAPTION>

SENTRY TECHNOLOGY CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)


                                                             MARCH 31,   DECEMBER 31,
                                                              1999         1998
                                                              ----         ----

ASSETS
CURRENT ASSETS
<S>                                                          <C>           <C>
   Cash and cash equivalents                                 $1,603        $873
   Accounts receivable, less allowance for doubtful
     accounts of $638 and $651, respectively                  9,047       9,308
   Net investment in sales-type leases -
     current portion                                            570         574
   Inventories                                                7,724       7,382
   Assets held for sale                                        --         1,691
   Prepaid expenses and other current assets                    498         371
                                                           --------    --------
         Total current assets                                19,442      20,199

NET INVESTMENT IN SALES-TYPE LEASES -
    non-current portion                                         350         466
SECURITY DEVICES ON LEASE, net                                   60          65
PROPERTY, PLANT AND EQUIPMENT, net                            4,188       4,348
GOODWILL AND OTHER INTANGIBLES, net                           7,826       8,222
OTHER ASSETS                                                    167         196
                                                           --------    --------

                                                            $32,033     $33,496
                                                           ========    ========


LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
   Revolving line of credit                                  $1,713      $2,765
   Accounts payable                                           2,127       1,257
   Accrued liabilities                                        3,193       3,080
   Obligations under capital leases -
     current portion                                            175         180
   Deferred income                                              230         249
                                                                ---         ---
        Total current liabilities                             7,438       7,531

OBLIGATIONS UNDER CAPITAL LEASES -
     non-current portion                                      3,020       3,061
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY                    352         362
                                                           --------    --------
         Total liabilities                                   10,810      10,954

REDEEMABLE CUMULATIVE PREFERRED STOCK                        26,838      26,517

COMMON SHAREHOLDERS' EQUITY (DEFICIT)
      Common stock                                               10          10
      Additional paid-in capital                             15,201      15,522
      Accumulated deficit                                   (20,826)    (19,507)
                                                           --------    --------
                                                             (5,615)     (3,975)
                                                           --------    --------

                                                            $32,033     $33,496
                                                           ========    ========


See notes to the condensed consolidated financial statements.
</TABLE>


<PAGE>

<TABLE>
<CAPTION>

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


                                                             Three Months Ended
                                                                  March 31,
                                                                  ---------
                                                             1999         1998
                                                             ----         -----

<S>                                                          <C>         <C>
REVENUES                                                     $5,390      $5,198

COSTS AND EXPENSES:
Cost of sales                                                 2,773       2,835
Customer service expenses                                     1,700       1,387
Selling, general and administrative expenses                  2,289       2,468
Research and development                                        313         336
Interest expense                                                137          98
                                                                ---          --

                                                              7,212       7,124
                                                              -----       -----

OPERATING LOSS                                               (1,822)     (1,926)

OTHER INCOME - Gain on sale of facilities (Note E)              503        --
                                                                ---        ---

                                                             (1,319)     (1,926)

INCOME TAXES                                                   --            21
                                                             ------          --

NET LOSS                                                     (1,319)     (1,947)

PREFERRED STOCK DIVIDENDS                                       321         306
                                                                ---         ---

NET LOSS ATTRIBUTED TO COMMON SHAREHOLDERS                  $(1,640)    $(2,253)
                                                            =======     =======

NET LOSS PER COMMON SHARE
    Basic                                                     $(.17)      $(.23)
                                                              =====       =====
    Diluted                                                   $(.17)      $(.23)
                                                              =====       =====

WEIGHTED AVERAGE COMMON SHARES
    Basic                                                     9,751       9,751
                                                              =====       =====
    Diluted                                                   9,751       9,751
                                                              =====       =====








See notes to the condensed consolidated financial statements.
</TABLE>


<PAGE>


<TABLE>
<CAPTION>

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


                                                                              Three Months Ended
                                                                                   March 31,
                                                                                   ---------
                                                                            1999       1998
                                                                            ----       ----


CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                        <C>        <C>
    Net loss                                                               $(1,319)   $(1,947)
    Adjustments to reconcile net loss
      to net cash used in operating activities:
      Depreciation and amortization of security
        devices and property, plant and equipment                              203        301
     Amortization of goodwill and intangibles                                  398        397
     Provision for bad debts                                                  --            5
     Gain on sale of facilities                                               (503)      --
    Changes in operating assets and liabilities,
     net of effects of business acquired:
     Accounts receivable                                                       261         69
     Net investment in sales-type leases                                       120        156
     Inventories                                                              (342)      (168)
     Accounts payable                                                          870       (374)
     Accrued liabilities                                                       113         10
     Other, net                                                               (126)      (105)
                                                                              ----       ----

         Net cash used in operating activities                                (325)    (1,656)
                                                                              ----     ------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Proceeds from the sale of facilities                                     2,194       --
    Purchase of property, plant and equipment, net                             (37)       (25)
    Security devices on lease                                                   (1)       (22)
    Intangibles                                                                 (3)        (4)
                                                                                --         -- 

         Net cash provided by (used in) investing activities                 2,153        (51)
                                                                             -----        ---

CASH FLOWS FROM FINANCING ACTIVITIES:
    Increase (decrease) in borrowings under the revolving
      line of credit                                                        (1,052)     1,052
    Repayment of obligations under capital leases                              (46)       (56)
                                                                               ---        ---

         Net cash provided by (used in) financing activities                (1,098)       996
                                                                            ------        ---

INCREASE (DECREASE) IN CASH                                                    730       (711)

CASH, at beginning of period                                                   873      2,146
                                                                               ---      -----
CASH, at end of period                                                      $1,603     $1,435
                                                                            ======     ======






See notes to the condensed consolidated financial statements.
</TABLE>


<PAGE>


SENTRY TECHNOLOGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999


NOTE A -- BASIS OF PRESENTATION - KNOGO NORTH AMERICA INC. AND VIDEO SENTRY
CORPORATION MERGER
Sentry Technology Corporation ("Sentry"), a Delaware Corporation, was
established to effect the merger of Knogo North America Inc. ("Knogo N.A.") and
Video Sentry Corporation ("Video Sentry") which was consummated on February 12,
1997 (the "Effective Date"). The merger resulted in Knogo N.A. and Video Sentry
becoming wholly owned subsidiaries of Sentry. The merger has been accounted for
as a reverse acquisition of Video Sentry by Knogo N.A. Accordingly, the
financial statements of Knogo N.A. are the historical financial statements of
Sentry and the results of Sentry's operations include the results of operations
of Video Sentry after the Effective Date. The term "Company" refers to Sentry as
of and subsequent to February 12, 1997 and to Knogo N.A. prior to such date.

The consolidated financial statements are unaudited. In the opinion of
management, all adjustments, consisting of normal recurring adjustments
necessary for a fair presentation of the financial information for the periods
indicated, have been included. Interim results are not necessarily indicative of
results for a full year.

NOTE B  --  NET INVESTMENT IN SALES-TYPE LEASES
The Company is the lessor of security devices under agreements expiring in
various years through 2003. The net investment in sales-type leases consists of:

<TABLE>
<CAPTION>

                                                                           MARCH 31, 1999      DECEMBER 31, 1998
                                                                           --------------      -----------------
                                                                                        (in thousands)

<S>                                                                         <C>                     <C>
Minimum lease payments receivable                                           $1,055                  $1,204
Allowance for uncollectible minimum lease payments                             (53)                    (60)
Unearned income                                                                (98)                   (120)
Unguaranteed residual value                                                     16                      16
                                                                                --                      --
Net investment                                                                 920                   1,040
Less current portion                                                           570                     574
                                                                               ---                     ---
Non-current portion                                                           $350                    $466
                                                                              ====                    ====
</TABLE>

<TABLE>
<CAPTION>

NOTE C -- INVENTORIES
Inventories consist of the following:

                                                                           MARCH 31, 1999      DECEMBER 31, 1998
                                                                           --------------      -----------------
                                                                                        (in thousands)

<S>                                                                         <C>                     <C>
Raw materials                                                               $2,699                  $2,497
Work-in-process                                                              3,171                   3,058
Finished goods                                                               1,854                   1,827
                                                                             -----                   -----
                                                                           $ 7,724                 $ 7,382
                                                                           =======                 =======
</TABLE>

Reserves for excess and obsolete inventory totaled $1,381,000 and $1,318,000 as
of March 31, 1999 and December 31, 1998, respectively and have been included as
a component of the above amounts.

NOTE D  --  SUPPLY AGREEMENT
Knogo N.A. had a supply agreement under which Sensormatic Electronics
Corporation ("Sensormatic") was obligated to purchase products from Knogo N.A.
through June 30, 1997. Such products were priced to yield Knogo N.A. a 35% gross
margin. Although the supply agreement officially expired and minimum purchase
obligations ended, Sensormatic continued to purchase certain products at similar
margins. Sales to Sensormatic were $309,000 and $767,000 in the quarters ended
March 31, 1999 and 1998, respectively. Included in accounts receivable as of
March 31, 1999 and December 31, 1998 are amounts due from Sensormatic of
$361,000 and $646,000, respectively.


<PAGE>


SENTRY TECHNOLOGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999


NOTE E  --  OTHER INCOME - GAIN ON SALE OF FACILITIES
In February 1999, the Company sold its Puerto Rico manufacturing facility and
Illinois CCTV design center and related land for net proceeds of approximately
$2.2 million. At December 31, 1998, included in assets held for sale was
approximately $1.7 million representing the net carrying amount of these
properties. A gain representing the excess of the net proceeds over the carrying
value of these properties of $503,000 was recognized in the first quarter of
1999.

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

FORWARD LOOKING STATEMENTS

This report may include information that could constitute forward-looking
statements made pursuant to the safe harbor provision of the Private Securities
Litigation Reform Act of 1995. Any such forward-looking statements may involve
risk and uncertainties that could cause actual results to differ materially from
any future results encompassed within forward-looking statements.

RESULTS OF OPERATIONS:

Consolidated revenues were 4% higher in the quarter ended March 31, 1999 than in
the quarter ended March 31, 1998. Revenues from third party customers, other
than Sensormatic, in the current periods were $5,081,000 or 94% of total
revenues, as compared to $4,431,000 or 85% of total revenues in the prior year
period. These revenues increased 15% over the first quarter in the previous year
(see Note D to the financial statements). Total revenues for the periods
presented are broken out as follows:

<TABLE>
<CAPTION>

                                                             Q-1               Q-1              % Change
                                                             1999              1998             Incr (Decr)
                                                             ----              ----             -----------

<S>                                                       <C>                <C>                     <C>
EAS systems                                               $  1,618           $   1,492               8
CCTV                                                         2,395               1,274              88
SentryVision(R)                                                295                 792             (63)
3M library products                                            237                 377             (37)
-                                                              ---                 ---             ---
                                                             4,545               3,935              16
Service revenues and other                                     536                 496               8
                                                               ---                 ---               -
Third party customer revenues                                5,081               4,431              15
Sales to Sensormatic                                           309                 767             (60)
                                                               ---                 ---             ---
Total revenues                                            $  5,390           $   5,198               4
                                                          ========           =========               =
</TABLE>


The increase in CCTV revenues and decline in SentryVision(R) during the current
period is primarily related to the decision by one of the Company's major
customers to purchase conventional CCTV for the bulk of its security product
orders for 1999.

Cost of sales were 51% of total revenues in the three months ended March 31,
1999 compared to 55% in the same period in the previous year. The reduction in
the percentage in the current year is primarily due to better product sourcing
resulting in lower component costs and lower sales to Sensormatic on an OEM
basis which carry lower margins than normal sales to customers.

Customer service expenses were 23% higher in the first quarter of 1999 than in
the first quarter of 1998 due to a higher number of customer service
representatives required to install and maintain the increasing CCTV and
SentryVision(R) customer base.


<PAGE>


Selling, general and administrative expenses were lower when compared to last
year's first quarter primarily as a result of the savings from the consolidation
of facilities and lower warranty provisions due to fewer expected service calls
in the future. As a percentage of revenues, these expenses decreased by 5% from
47% to 42%.

Research and development costs remained fairly constant when compared to the
previous year's period. Much of the efforts in the current period were directed
towards manufacturing improvements related to the move from Puerto Rico to New
York.

Net interest expense for the first quarter of 1999 increased by $39,000 over the
first quarter of 1998 due to higher average borrowings under the Company's
revolving credit agreement.

During the quarter ended March 31, 1999, the Company sold its Puerto Rico
manufacturing facility and Illinois design center for net cash proceeds of
approximately $2.2 million which resulted in a net gain on the sale of $503,000.

Sentry's income taxes in the quarter ended March 31, 1998 represents a provision
on the cumulative earning of the Puerto Rico manufacturing operations which were
closed at the end of 1998.

As a result of the foregoing, Sentry had a net loss of $1,319,000 in the quarter
ended March 31, 1999 as compared to a net loss of $1,947,000 in the quarter
ended March 31, 1998.

Preferred stock dividends of $321,000 and $306,000 were recorded in the first
quarters of 1999 and 1998, respectively. Dividends accrued through February 12,
1999 were paid-in-kind as of that date. In connection with the waiver of certain
financial covenants under the Company's agreement with its commercial lender,
the Company is restricted from paying cash dividends, including the cash
dividend on its Class A Preferred Stock which would otherwise be payable in
August. Under the terms of the Class A Preferred Stock, the dividend will
cumulate. After August, Class A Preferred Stockholders, voting as a class, will
be entitled to elect two additional directors to the Company's Board.

LIQUIDITY AND CAPITAL RESOURCES AS OF MARCH 31, 1999

During the quarter the Company funded its operations and capital expenditures
through borrowings under its revolving credit facility and use of existing cash.
The cash proceeds of $2.2 million from the sale of certain facilities, noted
above, were used to reduce borrowings under the revolving credit facility during
the current quarter.

The Company anticipates that current cash reserves, cash generated by operations
and financing arrangements should be sufficient to meet the Company's working
capital requirements as well as future capital expenditure requirements for the
next twelve months.

YEAR 2000 UPDATE

Many existing computer programs were designed and developed without considering
the upcoming change in the century, which could lead to the failure of computer
applications or create erroneous results by or at the Year 2000. On January 1,
2000, any computer system or other equipment using date sensitive software which
uses only two digits to represent the year may recognize "00" as the year 1900
rather than the year 2000. This could result in a system failure or
miscalculations causing disruptions of operations, including among other things,
a temporary inability to process transactions, send invoices, or engage in
similar activities.

Recognizing the potential impact, the Company began actively resolving its Year
2000 compliance issues in early 1997. Using internal and external resources, the
Company analyzed and assessed its business systems, including computer systems,
PC's and network hardware, telephone systems, production process controllers,
access control, office equipment and the product it sells.


<PAGE>


Upgrades to both mid-range and network computer hardware, operating systems and
related infrastructures have been completed and are now Year 2000 compliant. All
critical application software has been reviewed and Year 2000 compliant versions
have been obtained. The Company has completed the process of retrofitting custom
modifications to the upgraded versions. All applications with forward scheduling
impact are now considered to be Year 2000 compliant. The Company believes its
manufactured products are Year 2000 compliant.

The cost of becoming compliant is not expected to exceed $300,000 and
approximately one third has been incurred to date. The remaining costs relate
primarily to hardware upgrades to the Company's PC's and telephone systems which
will be completed by the third quarter of 1999. There can be no assurance that
the Company will not incur unanticipated costs or that it will be able to
successfully address all Year 2000 issues.

The impact of the Year 2000 issue on the Company will also be affected by the
Year 2000 readiness of its business partners, customers, suppliers and vendors
and providers of facilities, equipment and services. Failure by these third
parties to be Year 2000 compliant may adversely affect, among other things, the
Company's production, revenue and the timing of cash receipts. The Company has
begun to make inquiries of such third parties in this regard and based on the
responses to these inquiries, the Company will decide to what extent, if any, a
contingency plan should be developed. To date, however, the Company has received
only preliminary feedback from such third parties and has not independently
confirmed any information received from such third parties with respect to Year
2000 issues. As such, there can be no assurance that such third parties will
address the Year 2000 issue and complete their Year 2000 conversion in a timely
fashion or will not suffer a Year 2000 business disruption that may adversely
affect the Company's business.


PART II - OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

   (a)  List of Exhibits:
        10.14  Second Amendment and Third Waiver to the Loan and Security
               Agreement between the Company and General Electric Capital
               Corporation dated May 12, 1999.
        27.    Financial Data Schedule (For SEC use only)

   (b)  Reports on Form 8-K - There were no reports on Form 8-K filed
        for the three months ended March 31, 1999.


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 13, 1999            By: /S/   PETER J. MUNDY
                                  --------------------------------------------
                                  Peter J. Mundy, Vice President - Finance and
                                  Chief Financial Officer
                                  (Principal Financial and Accounting Officer)