SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549
                                  ____________

                                  FORM 10-KSB

 X   ANNUAL  REPORT  PURSUANT  TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
---  ACT  OF  1934

                  For the fiscal year ended December 31, 2007

                                       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  the  Registrant  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)

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

                                not applicable
             ----------------------------------------------------
                (Former address, if changed since last report)

       Securities registered pursuant to Section 12(b) of the Act:  None.

          Securities registered pursuant to Section 12(g) of the Act:

                              Title of each class:
                              --------------------

                         Common Stock, $.001 par value

Indicate  by  check  mark whether the registrant is not required to file reports
pursuant  to  Section  13  or  15(d)  of  the  Exchange  Act.
Yes ____  No X

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 ____

Indicate  by  check mark if there is no disclosure of delinquent filers pursuant
to  Item  405  of  Regula-tion  S-B  contained herein, and no disclosure will be
contained,  to  the  best  of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or  any  amendment  to  this  Form  10-KSB.  X
                                            ----

Indicate  by check mark whether the registrant is a shell company (as defined in
Rule  12b-2  of  the  Exchange  Act).  Yes ____ No X

The  issuer's  revenues  for  the  latest  fiscal  year  were  $13,498,000.

At April 11,  2008,  the  aggregate  market  value  of the voting stock held by
non-affiliates  of  the  registrant  was approximately $3,297,000 based upon the
closing  price  of  such  securities on the OTC Bulletin Board on that date.  At
April 11, 2008,  the  registrant  had  outstanding 120,743,804 shares of Common
Stock.

Documents  Incorporated  by  Reference
--------------------------------------

None.

Transitional  Small  Business  Disclosure  Format  (check  one)  Yes ___ No X

<PAGE>
                                     ------
                                     PART I
                                     ------
ITEM  1.   DESCRIPTION  OF  BUSINESS
------------------------------------

GENERAL

Sentry  designs,  manufactures,  sells  and  installs  a complete line of Closed
Circuit  Television  (CCTV)  solutions,  Electro-Magnetic  (EM)  and  RFID based
Library  Management systems as well as Radio Frequency (RF) and Electro-Magnetic
(EM)  EAS  systems.  The CCTV product line features SentryVision, SmartTrack , a
proprietary, patented traveling Surveillance System.  The Company's products are
used  by  libraries  to  secure  inventory  and improve operating efficiency, by
retailers  to  deter  shoplifting  and  internal  theft  and  by  industrial and
institutional  customers  to  protect  assets  and  people.

Sentry  was  incorporated  in  Delaware in 1996.  Its corporate predecessors had
been  in  business for more than 30 years.  Sentry was formed in connection with
the  February  1997  merger of Knogo North America Inc., a Delaware corporation,
and  Video  Sentry  Corporation,  a  Minnesota  corporation.  As a result of the
merger,  we  became  the  parent  corporation  of  two  wholly-owned  Delaware
subsidiaries:  Knogo  North  America Inc. ("Knogo") and Video Sentry Corporation
("Video"). This series of transactions is referred to herein collectively as the
"Initial  Merger."

Knogo  was  engaged in the design, manufacture, sale, installation and servicing
of  a  complete  line  of  electronic article surveillance equipment.  Knogo was
incorporated in Delaware in October 1996. Its corporate predecessors had been in
business  for  more  than  30  years.

Video  designed,  manufactured,  marketed, installed and serviced a programmable
traveling  closed  circuit  television  surveillance system that delivers a high
quality  video  picture, which is used in a wide variety of applications.  Video
also  acted  as  a  system  integrator  for  conventional  CCTV products that it
marketed,  installed  and serviced.  Video's predecessor was founded in 1990 and
made  its  first  sales in 1992.  Video was merged into Knogo as of December 31,
2000.

On  April  30, 2004, Sentry acquired all the outstanding common stock and Series
"A"  preference  shares  of  ID  Security  Systems  Canada,  Inc.,  an  Ontario
corporation,  and  all  the outstanding capital stock of ID Systems USA, Inc., a
Pennsylvania corporation, (collectively "ID Systems").  The acquisition expanded
our  product offering to include library security and process management systems
including electromagnetic and radio frequency identification (RFID) based patron
self-service systems.  Effective January 1, 2005, ID Systems changed the name of
ID  Security  Systems  Canada  Inc. and ID Systems USA Inc. to Sentry Technology
Canada  Inc.  and  Sentry  Technology  USA Inc., (collectively "Sentry Canada").

On  March  22,  2005,  Sentry was merged into its subsidiary Knogo pursuant to a
plan  of  merger  in  which Knogo was the surviving corporation.  The merger was
effective  for  accounting purposes on January 1, 2005.  Pursuant to the Plan of
Merger,  Knogo  changed  its  name  to  Sentry  Technology  Corporation.


EQUITY  TRANSACTIONS

On  April  19,  2004,  Dialoc ID Holdings B.V. ("Dialoc") sold 39,066,927 Sentry
common  shares  (representing  approximately  46%  of  the  total  issued  and
outstanding  shares  of  Sentry) to a group of investors.  Of the group, Saburah
Investments  Inc.  ("Saburah")  acquired  22,758,155  shares,  Mr.  Robert Furst
14,554,386  shares  and Dr. Morton Roseman 1,754,386 shares.  Mr. Peter Murdoch,
President,  CEO and Director of Sentry, is the owner of Saburah.  Mr. Furst is a
long-standing  member  of  Sentry's  Board  of  Directors.

In  addition  to  the  purchase of Sentry's common shares, Saburah also acquired
100%  of  ID  Security  Systems Canada, Inc. and ID Systems USA, Inc.  The price
paid  to Dialoc by Saburah and Murdoch for Sentry and ID Systems shares in cash,
debt  assumption and other consideration was approximately $3.6 million plus the
surrender  of  Murdoch's  15% interest in Dialoc.  Saburah also agreed to make a
payment  to  Dialoc  in  the  future equal to approximately 6% of any payment it
received  from  Checkpoint Systems Inc. ("Checkpoint") resulting from litigation
brought  by  ID  Canada  against  Checkpoint.

On  April  30, 2004, Sentry purchased from Saburah Investments, Inc., an Ontario
corporation,  all  of  the  outstanding  common shares and Series "A" preference
shares  of  ID Security Systems Canada, Inc., an Ontario corporation, and all of
the  outstanding  capital  stock  of  ID  Systems  USA,  Inc.,  a  Pennsylvania
corporation.  ID Systems was a Toronto based company engaged in anti-shoplifting
technology,  security  labeling,  radio  frequency identification (RFID), access
control  and  library  security.  Sentry  acquired  ID  Systems  from Saburah in
exchange  for  30,000,000  Sentry common shares. The price paid per Sentry share
for  the  securities of ID Systems was valued at approximately $0.11.  A special
committee  of  Sentry's  Board  of  Directors received an opinion from Corporate
Valuation  Services  confirming  that  the  price paid for the acquisition of ID
Systems  was fair from the point of view of Sentry shareholders.  As part of the
purchase  agreement,  the  proceeds of the ID Systems litigation settlement were
distributed to the former ID Systems' shareholders.  Sentry's Board of Directors
and  shareholders  owning  a  majority  of  Sentry  common  stock  approved  the
acquisition  of  ID  Systems.

Other benefits flowing to Sentry/ID Systems via the purchase of ID Systems are
as follows:

-    ID Systems and Sentry continue as a distributor in North and South America
     for Dialoc products including Laserfuse radio frequency security labels and
     all RFID products.

-    Dialoc became a distributor in Europe and Asia of labels manufactured by ID
     Systems' security label manufacturing subsidiary, Custom Security
     Industries Inc. ("CSI").

-    CSI acquired the right to purchase Laserfuse raw material for processing
     into finished security labels in its Toronto plant in order to reduce the
     cost of production.

-    CSI acquired the option to purchase a non-exclusive license to manufacture
     complete Laserfuse security labels for a period of 10 years subject to the
     payment of $500,000 and a running royalty of $0.001 per label.

-    Dialoc will continue to be a dealer for Sentry products in Europe and Asia.

On  April  30,  2004,  Sentry  entered  into  a  $2,000,000  secured convertible
debenture  with  Brookfield  Technology  Fund  ("Brookfield"),  an  alternative
investment  fund  established  by Brookfield Asset Management (formerly known as
Brascan  Technology Fund and Brascan Asset  Management, respectively), to invest
in  early  stage,  technology-based  companies  with  high  growth  potential.

Key  terms  of  the  transaction  are  as  follows:

-     Four-year  term.
-     Interest rate of 8% per annum.
-     Redeemable at Sentry's option after 18 months.
-     Conversion price equal to the market price, at time of conversion, less a
      discount of 30% with a maximum conversion price of $0.12 per share.
-     Conversion is at the option of Brookfield when market share price is equal
      to or greater than $0.17 per share or with the approval of Sentry's Board
      of Directors when the market share price is less than $0.17 per share.
-     Sentry will provide most favored pricing to all Brookfield affiliates and
      expects to be a supplier of security and identification products to the
      Brookfield affiliates.
-     Brookfield was issued warrants for 5,000,000 shares of Sentry common
      stock, priced at $0.15 per share, exercisable anytime until April 30,
      2008.
-     Brookfield is entitled to one seat on Sentry's Board of Directors or will
      participate as an observer.

The  Debenture is secured by a general security interest over all the assets and
properties  of  Sentry.  The  amount  is  subordinate  to  the  existing  credit
facilities.  Sentry  acquired  ID  Systems  as  a  condition  of  the financing.

On August 1, 2004, ID Systems and Checkpoint entered into a settlement agreement
effective  July  30,  2004,  pursuant  to  which Checkpoint agreed to pay $19.95
million  in  full  and  final  settlement  of  claims  covered  by the antitrust
litigation.  Payment  in  full  was received on August 5, 2004. As provided when
Sentry  purchased ID Systems, the proceeds of the settlement were distributed to
former  shareholders  of  ID  Systems,  after  payment  of  litigation  fees and
expenses.  The  agreement  includes  mutual  releases  between  the  parties for
complaints  arising  from  activities prior to the date of the agreement, except
for  any  contractual obligations and any future claims for patent, copyright or
trademark  infringement.  The  agreement  is  not  an  acknowledgement  of  any
wrongdoing  or  liability  by  either party. A Stipulation of Dismissal has been
filed  with  the  Third  Circuit  Court of Appeals to finally conclude the legal
proceedings.  During  the  third  quarter  of  2004, Sentry and its subsidiaries
received  $753,000 through the repayment of debt incurred by Dialoc prior to the
ID  Systems  acquisition  and  reimbursement  of  litigation  expenses.

While  Sentry  did  not obtain an interest in the litigation settlement, Saburah
and  Sentry  agreed  that  Sentry  might  require Saburah to purchase additional
Sentry common shares equal to approximately 4.5% of any amount received  (net of
legal fees and expenses) from Checkpoint.  The price per share was set at 80% of
the  previous  20  days  trading  average  prior  to  the  announcement  of  the
settlement.  Our  Board  of Directors has exercised this option and based on the
settlement  amount,  Sentry sold to Saburah approximately 4.8 million shares for
$641,000  on  November  5,  2004.  These  transactions,  totaling  $1.4 million,
represented  the  total  cash  received  by  Sentry directly and indirectly as a
result  of  the  Checkpoint  lawsuit.

Mr.  Murdoch,  directly  or indirectly through his ownership of Saburah, owns or
controls  54.1%  of  the  outstanding  common  stock  of  Sentry.


THE  SENTRYVISION  SYSTEM

SentryVision  refers  to  our  product  line  of  proprietary  traveling  CCTV
surveillance  systems.  Over  the  years,  Sentry  has  continually improved the
product  starting  with  the  H-System,  followed by the OH-System, the original
SentryVision  and  currently  the  latest  SmartTrack  system.

All  versions  of  the  product  consist of a camera carriage unit, a continuous
track  enclosed  with  tinted or mirrored glass enclosure and electronic control
equipment.  The  carriage unit moves within the enclosure and carries one or two
PTZ CCTV cameras, electronic transmission components and motor drives. The track
is  suspended  from the ceiling using 12 foot or 4 meter sections.  The carriage
is  hidden  using  a  tinted  enclosure.  The  carriage unit transmits video and
control  signals from the camera(s) through two copper conductors running inside
the  enclosure  to a receiver unit located at one end of the carriage track. The
copper  conductors also carry power to the camera carriage, eliminating the need
for power or communication cables. From the receiver unit, the video signals are
relayed to a central monitoring location by wire or fiber optics, where a system
operator  can  position  or  move the camera carriage to obtain the best vantage
point  while  viewing  and  recording  the  continuous, live video pictures. The
system  design  supports  conventional  peripheral  devices,  such as analog and
digital  videocassette recorders, alarm inputs, fixed cameras, PTZ dome cameras,
switches/multiplexers,  voice intercom systems, panic buttons and remote viewing
capability  via  the  internet.

Unlike  our  previous products, the SentryVision  SmartTrack system features one
or  two  state-of-the-art  pan,  tilt  and  zoom  ("PTZ")  domes  providing  360
unobstructed  views  to  eliminate  most  blind  spots. Additionally, SmartTrack
utilizes sophisticated software that provides six tours and up to 60 presets per
camera  carriage  to allow programmable viewing and recording with or without an
operator.  The  improvements made to the carriage make the new SmartTrack system
the  fastest and most reliable traveling CCTV surveillance system in the history
of  SentryVision  product  offerings.  SmartTrack  is  our  premier  product,
replacing  all  previous  generations  of  SentryVision  .

SentryVision  is  designed  to  provide enhanced loss prevention surveillance in
retail  stores  and  distribution  centers  as well as to provide monitoring and
deterrence of illegal and unsafe activities in a variety of other locations such
as  parking  garages, correctional facilities, transportation centers and public
transit  terminals.  SentryVision  may  also  be  employed  in  a broad range of
operational  and process monitoring applications in commercial manufacturing and
industrial  settings. SentryVision  is now installed in four of the top five and
six  of  the  top  ten  Global Retailers.  As of December 31, 2007, SentryVision
systems had been installed at the following customer locations in North America:
Kmart,  Steve  and  Barry's,  Navy Exchange, Lowe's Home Centers, Target Stores,
Mills  Fleet  Farm,  Winn  Dixie,  Federal Express, Cabellas, Fred Meyer, Symbol
Technologies,  Menards,  UPS,  J.C.  Penney,  Canadian  Tire,  Reno Depot, Estee
Lauder,  Kohl's  Department  Stores  and  Disney Direct Marketing.  In addition,
during  2007,  the  Company's  international distributors installed SentryVision
systems  in  customer  locations  throughout  Western  and Eastern Europe, Latin
America  and  Asia. Our international customers include ASDA Wal-Mart, Boot Drug
Stores,  Carrefour,  Auchan,  Cora, Castorama, B & Q, Tesco and Coop. We believe
that,  by  providing  expanded surveillance coverage and enhanced flexibility to
select  the  locations  watched,  SentryVision  has  enabled  customers  to
significantly  reduce inventory shrinkage, increase theft apprehension rates and
improve safety and security. Based on the price of its system and the experience
of  Sentry's  customers  to  date,  we believe SentryVision  is a cost-effective
solution,  which  can  improve  the  operations  of  our  customers.

Sentry  sold  its  first  systems  in  1992  for  installation in parking garage
security  surveillance applications, but quickly moved its market focus into the
retail  sector.  In  this sector, we have identified a number of specific market
segments  for  which  SentryVision  is  well  suited  for  loss  prevention
surveillance,  including  home  centers,  mass merchandise chains, supermarkets,
hypermarkets  and  drug stores, as well as related distribution centers. The key
application  is  inventory  loss  prevention  in  the  stores,  stock  rooms and
distribution  centers  as  well as a tool to improve business operations via our
OperationalVideo  system.

SentryVision  is typically installed in large retail stores which use a checkout
area  at  the  front  of  the  store and product display configurations and high
merchandise shelving which form rows and aisles. Sentry specializes in designing
system  applications which are customized to fit a customer's specific needs and
which  integrate  the  customer's  existing surveillance equipment (PTZ dome and
fixed-mount  cameras) with SentryVision .   The flexibility of the system allows
the  customer to specify target-coverage areas ranging from stock rooms to total
store  coverage  and  focus  on  shoplifting,  employee  theft  or  performance
evaluation of client personnel. Typically, SentryVision  has been installed near
the  ceiling  between the rows of cash registers and the ends of the merchandise
aisles.  This  allows  the  retailer  to  easily  observe both the cash handling
activities  of cashiers in the checkout area and customer activities between the
merchandise  rows, despite the presence of hanging signs and other obstructions.
The  entire sales floor can be monitored efficiently by focusing up and down the
aisles and by moving the carriage horizontally from aisle to aisle, or from cash
register  to  cash  register.  In addition, with the use of camera pan, tilt and
zoom  lens features, activities in each area can be monitored in greater detail.
Results from Sentry's current installations indicate significant improvements in
detecting  shoplifting,  employee  theft  and  improving  business  operations.

In 2007 we installed the first OperationalVideo  applications in Kmart and Steve
and  Barry's.  OperationalVideo  delivers  real-time  images  over  the internet
using  Sentry's  SmartTrack  traveling camera system and digital video server to
help  control safety and security as well as remote viewing of store operations,
merchandising,  signage,  displays,  pricing  and employee procedure compliance.
Managers  have  access  to  all  store operations from the home office, regional
offices  and  any fixed or mobile location equipped with an internet connection.
As  well,  security  personnel are able to walk the floor interacting with staff
and  customers  while  maintaining  control  of  the  SmartTrack  system using a
wireless  PDA.  Video  is managed via the SentryVision  Server, a network device
that  provides  real-time remote viewing and user passwords to manage hierarchal
control  of  the  system.

Retailers  have  also  integrated  SentryVision  with  "front  end"  packages of
conventional  CCTV  cameras,  dedicated to monitoring the registers and allowing
users  to  locate  the  traveling  camera  track  where  the maximum coverage of
in-store  traffic  can be monitored. The SentryVision  system is today generally
sold  in  conjunction  with  conventional CCTV applications. Customers using the
SentryVision  system  have  reported  significant  reductions  in  theft-related
inventory  shrinkage.

Our  SentryVision  Mobile  allows the user to view and control video images from
the  SmartTrack  traveling  CCTV  system  using  a mobile hand held computer and
wireless  communication  network.  Customers  are  no  longer required to sit in
front  of  a  video  console  to manage the SmartTrack system.  The SentryVision
Mobile  solution  is being used to manage operations and security in large store
and  distribution  centers  in  the  United  States.

SentryVision  Server  is  an  IP  addressable  digital video server, which gives
users  the  ability  to capture, stream, view and store video images using a web
browser.  The  SentryVision  Server  (SVS)  comes  with  software  that  allows
multiple  users  to  simultaneously  connect  to a variety of SentryVision  DVMS
(Digital Video Management System) via LAN - across TCIP/IP networks.  The system
uses  a  Windows-based  application for configuration and a browser-based client
for  remote  viewing of live and recorded video for quick and easy investigation
of  security  issues,  as  well  as  policies and procedure compliance.  The SVS
server  also  runs  our  OperationalVideo  business  management  solutions  for
retailers.

RETAIL  MARKET  APPLICATIONS
----------------------------
-  Home  Centers. Sentry has installed systems in the home center segment of the
retail  market.  This  market  has  by  far  been  the  greatest  market for the
SmartTrack  systems.  Typical  of  our  customers in this market are Lowe's Home
Centers,  with  more  than 1,375 stores in 49 states, and Mills Fleet Farm, a 30
store  regional  hardware, home supply and discount retail chain. Both companies
required  systems  for  total  floor coverage. We applied different solutions to
this  common  problem in each case. Lowe's Home Centers chose to integrate track
cameras  with  PTZ dome and fixed-mount cameras, while Mills Fleet Farm chose to
use  only  the  track  camera  system.

-     Mass  Merchandise  and  Specialty Chains. Sentry has installed systems for
customers  including  Navy Exchange, Kmart, Walgreens and Steve and Barry's. The
targeted  coverage  varies  extensively  in  these installations from only stock
rooms  to  total  store  coverage.  The  equipment package provided in each case
varies  with  the  application  and  location  of  the  need.

-     Supermarkets.  Sentry  has  installed  systems  in  supermarket  customers
including  ASDA  Wal-Mart, Kroger, Marsh, Cub Foods, Winn-Dixie and Fiesta Mart.
The  targeted coverage in most of these installations has been the entire retail
space.

INDUSTRIAL  MARKET  APPLICATIONS
--------------------------------
-     Distribution  Centers.  Sentry  also provides loss prevention surveillance
for distribution centers and warehouses, and has installed systems for retailers
including  TJ  Maxx,  Big  Lots,  Home  Depot,  Kohl's Department Stores, Target
Stores,  Boots  Drug Stores, Ingram Micro, Navarre, Mastronardi Produce, Borders
Group,  Disney  Direct Marketing, Saks, Guess, Big Dog, Food Lion, Roundy's, the
Gap,  Bealls  and  J.C.  Penney.  Traveling  through a facility from an overhead
position,  the SentryVision  system can monitor activities occurring between the
stacked rows of cartons or lines of hanging garments. The system can also move a
surveillance  camera  into  position to monitor shipping and receiving docks and
parked delivery trucks. To achieve surveillance capabilities equivalent to those
of  the SentryVision  system, a conventional PTZ dome system or fixed-mount CCTV
camera  would  have  to  be  installed at every desired vantage point, requiring
numerous cameras, additional equipment and wiring and increased installation and
operating  costs.

-     Manufacturing  and  Transportation  Facilities.  SentryVision  use  in
factories  has  been  limited,  but  the  benefits  of  continuous  tracking  of
industrial  operations and processes indicate future growth potential. Continued
expansion  of the SentryVision  dealer program is expected to generate increased
installations in factories manufacturing electronics, pharmaceuticals, computers
and  other  high  value  products  and  in  various  wholesale  distribution and
transportation  facilities.  Express  package  and  other  high  throughput
distribution  facilities  are also good prospects for a continuous tracking CCTV
system  for  theft  prevention.  Installations  include  FedEx  Freight,  Symbol
Technologies, Federal Express Air & Ground and UPS.  In Cape Town, South Africa,
The  Metro  Rail Network has installed 10 tracks at several terminal stations to
monitor  passengers  at  the  junction  of  bus,  railway  and  taxi  services.
SmartTrack  is  an  integral  part of an overall crime prevention and deterrence
program  including  central  management  of  all  video  devices over a network.


CONVENTIONAL  CCTV  SYSTEMS

Conventional  CCTV is cost effective in many applications and is the most widely
used  loss  prevention  system  in North America. Conventional CCTV uses all the
basic  components  of  the  video surveillance industry including fixed and dome
cameras,  digital  video  recorders,  monitors,  switchers,  multiplexers  and
controllers.  This  equipment  is manufactured for Sentry by outside vendors. We
believe  that,  while  less  profitable  than  SentryVision  and traditional EAS
products,  the  CCTV  products  complement  our  other  surveillance systems and
provide  customers  with  further protection against internal theft and external
shoplifting activities. CCTV systems can also be electronically connected to EAS
systems, causing a video record to be generated when a theft alarm is triggered.

While  we  believe  that  conventional  CCTV and SentryVision  are complementary
security  solutions,  many companies have traditionally viewed them as competing
solutions  and  have selected between conventional CCTV systems and SentryVision
systems  for  their  security  solutions.

Remote  video transmission and digital recording are continuing growth areas for
Sentry.  These  systems  allow  customers to monitor remote sites using existing
communication  lines  and  a PC-based system. Video camera images are stored and
manipulated  digitally,  substituting  the  PC  for the VCR and multiplexer, and
eliminating  the  videotape. Sentry markets digital video recording and a remote
video  transmission  unit developed by third-party vendors including GE Security
and  TeleWatch.

We  continue  to  expand  conventional  CCTV  installations  in  industrial  and
institutional  facilities.  Significant installations have been made for express
package  companies,  including Federal Express, United Parcel Service, Emery Air
Freight  and  Airborne  Express.


EAS  SYSTEMS

EAS  (electronic article surveillance) systems consist of detection devices that
are  triggered  when articles or persons tagged with reusable tags or disposable
labels,  (referred  to  as  tags),  pass  through  the detection device. The EAS
systems  that  Sentry  manufactures  are based upon three distinct technologies.
One,  the  Radio  Frequency  ("Knoscape RF") System, uses medium radio frequency
transmissions  in  the two to nine megahertz range. Second, the "Ranger " system
uses  ultra-high  frequency radio signals in the 902 megahertz and 928 megahertz
bands.  Third,  the  Electromagnetic  ("Knoscape  MM  ")  system  uses  very low
frequency  electromagnetic  signals in the range of 218 hertz to nine kilohertz.

The  principal  application  of  Sentry's  products  is  to  detect  and  deter
shoplifting  and  employee theft in supermarket, department, discount, specialty
and  various  other  types of retail stores including bookstores, video, liquor,
drug,  shoe,  sporting goods and other stores. The use of these products reduces
inventory  shrinkage  by  deterring  shoplifting,  increases  sales potential by
permitting  the  more open display of greater quantities of merchandise, reduces
surveillance  responsibilities  of  sales  and  other  store personnel and, as a
result,  increases  profitability  for  the  retailer. In addition, Sentry's EAS
systems  are  used  in  non-retail  establishments to detect and deter theft, in
office  buildings  to  control the loss of office equipment and other assets, in
nursing  homes  and  hospitals  for  both asset and patient protection, and in a
variety  of  other  applications.

RADIO  FREQUENCY  AND  RANGER  DETECTION  SYSTEMS

Sentry  manufactures  and  distributes  the  Knoscape  RF  system, the principal
application  of  which  is to detect and deter shoplifting and employee theft of
clothing  and  hard goods in retail establishments. Sentry also manufactures and
distributes  the  Ranger  system,  which  the Company believes is a particularly
useful  and  cost  efficient EAS system for high fashion retail stores with wide
mall-type  exit areas that ordinarily would require multiple Knoscape RF systems
for  adequate  protection.  The  Knoscape RF and Ranger systems consist of radio
signal  transmission  and  monitoring  equipment installed at exits of protected
areas, such as doorways, elevator entrances and escalator ramps. The devices are
generally  located  in  panels or pedestals anchored to the floor for a vertical
arrangement  or mounted in or suspended from the ceiling (Ranger) and mounted in
or  on  the  floor  in  a  horizontal  arrangement.  The panels or pedestals are
designed  to  harmonize with the decor of the store. The monitoring equipment is
activated  by  tags  containing  electronic  circuitry,  attached to merchandise
transported through the monitored zone. The circuitry in the tag interferes with
the  radio signals transmitted through the monitoring system, thereby triggering
alarms,  flashing lights or indicators at a central control point, or triggering
the  transmission  of an alarm directly to the security authorities. By means of
multiple  installations of horizontal Knoscape RF systems or installation of one
or  more  Ranger systems, the Company's products have the ability to protect any
size  entrance  or  exit.

Non-deactivatable reusable tags are manufactured in a variety of sizes and types
and  are attached directly to the articles to be protected by means of specially
designed  fastener  assemblies.  A clerk at the checkout desk removes a reusable
tag  from the protected article by use of a decoupling device specially designed
to  facilitate  the removal of the fastener assemblies with a minimum of effort.
Removal  of  the  tag  without  a  decoupler  is very difficult and unauthorized
removal  will  usually damage the protected article and thereby reduce its value
to  a  shoplifter.  Optional  reminder  stations  automatically remind the store
clerk, by means of audiovisual indicators, to remove the tag when the article is
placed  on  the  cashier's  desk.

Disposable  labels can be applied to products either by placing them directly on
the  outside  packaging  of  the  item  or  hidden  within  the  product  by the
manufacturer. These labels can be deactivated, at the checkout desk, through the
use  of  a  deactivation  device.

Knoscape  RF  and  Ranger  systems generally have an economic useful life of six
years  (although  many  of  Sentry's  systems  have  been  operating  for longer
periods),  have  a  negligible  false  alarm  rate and are adaptable to meet the
diversified  article  surveillance  needs  of  individual  retailers.

ELECTROMAGNETIC  (EM)  DETECTION  SYSTEMS

The primary application for both our MM1 and WAM electromagnetic theft detection
systems  is  to  detect  and  deter  theft  in  libraries  and  bookstores.

The  EM systems use detection monitors that are activated by electromagnetically
sensitized  strips.  The EM targets are typically attached to the articles to be
protected  and are easily camouflaged on a wide array of products. The detection
monitors  used  by  the systems are installed at three to five foot intervals at
the exits of protected areas. The magnetic targets can be supplied in many forms
and  are  attractively  priced,  making  them  suitable  for a variety of retail
applications.  In  addition,  the EM targets can be manufactured to be activated
and  deactivated  repeatedly  while  attached  to  the articles to be protected.


PATRON  SELF  CHECK  BOOK  BORROWING  SYSTEMS

Libraries  worldwide  are  struggling to reduce operating costs by applying cost
effective  technology  solutions.  The  Sentry QuickCheck patron self check book
borrowing  system  offers  an  ideal solution to gain an increasing share of the
estimated $100 million library security market in North America.  The QuickCheck
system  is  RFID  ready  and  provides  users  access  to  circulation software,
automatic  security  strip  deactivation, automatic return ticket printing, user
access  to  book  renewals,  multi-lingual software interface and on-screen user
instructions.  More  than  250  QuickCheck  systems have been installed in Omaha
Public  Library,  Palm  Beach  Public  Library,  Supreme Court of Canada, Harris
County  Public  Library,  Burlington  Public  Library, Vancouver Public Library,
Ottawa  Public  Library,  McGill  University Library and Calgary Public Library.


RADIO  FREQUENCY  IDENTIFICATION  (RFID)

RFID  is  a wireless electronic data collection system that uses radio frequency
signals to identify and track objects using readers and tiny integrated circuits
in  label  format.  Applications include library management, warehousing, parcel
tracking,  inventory  control, asset protection and supply chain management.  We
are  in  the  initial  stages of introducing ISO standard, RFID labels, tags and
readers  for  library  management.


DIALOC  ID  SECURITY  PRODUCTS

We  also  distribute  EAS systems manufactured by Dialoc ID.  The 9000-P 8.2 MHz
system,  which  is  housed in slender, self-contained Plexiglas panels, provides
retailers  with  clear lines of sight at the front end along with the durability
of  solid  Plexiglas.  The panels can be custom printed with the retailer's logo
for enhanced image and trade name awareness. The system's electronics, which are
built-in  to  the  base  of  the Plexiglas antenna, provide detection of 8.2 MHz
labels  and  hard  tags  in  aisles  up  to six feet wide. The 9000 PL system is
offered  in both single and dual aisle configurations and is compatible with all
existing  8.2  MHz  tags  and  checkout  accessories.


BOOKINGS

Of  Sentry's  bookings  for  the  year ended December 31, 2007, approximately 54
percent  were  attributable to EAS, 43 percent to SentryVision  and 3 percent to
CCTV.  For  the  year  ended  December  31,  2006, approximately 60 percent were
attributable  to  EAS,  36  percent  to  SentryVision  and  4  percent  to CCTV.


MAJOR  CUSTOMERS

Although the composition of our largest customers has changed from year to year,
a  significant portion of our revenues has been attributable to a limited number
of  major  customers. In 2007, Steve and Barry's accounted for approximately 18%
of  total  revenue.  In  2006, no single customer accounted for more than 10% of
total  revenues.


PRODUCTION
----------

SENTRYVISION  AND  CCTV  PRODUCTS
---------------------------------

By the end of 2006, Sentry had outsourced substantially all of its manufacturing
operations.  Although  we are not dependent upon any particular supplier, Sentry
has made an investment in material and training with selected sub-contractors to
supply  major  portions  of  our  SmartTrack  system.  Most  system  parts  are
"off-the-shelf"  components,  and  other  materials  and  system  components are
designed  by  Sentry  and manufactured to Sentry's specifications.  Some minimal
final  assembly  operations  are  conducted  at  the  Company's  facilities  in
Ronkonkoma,  New  York.  System  components  and  parts include cameras, circuit
boards,  electric motors and a variety of machined parts. Each finished assembly
undergoes  a  quality  assurance  check  by  Sentry  prior to its shipment to an
installation  site.  All SentryVision  carriage assemblies are tested and burned
in for 24 hours, resulting in approximately 3,000 travel and PTZ cycles prior to
quality  assurance  sign off.  Sentry is not required under any state or federal
environmental  law  or  regulations  to  obtain  related  licenses or permits in
connection  with  its  manufacturing  and  assembly  operations.

EAS  PRODUCTS
-------------

Sentry  produces at our facilities in Ronkonkoma, New York, or purchases through
suppliers,  its  RF,  Ranger,  and  EM  systems, or their components. Production
consists  of  final  assembly operations of electronic and mechanical components
that  Sentry  purchases  from  various  suppliers. Independent contractors using
existing  molds and tooling produce plastic cases and antenna coils for the tags
to Sentry's specifications. Sentry is not dependent on any one supplier or group
of  suppliers  of  components  for  its  systems.

Our  policy  is  to maintain our inventory at a level that is sufficient to meet
projected  demand  for  its  products.  We do not anticipate any difficulties in
continuing  to obtain suitable components for our products at competitive prices
in  sufficient  quantities  as  and  when  needed.

SECURITY  LABELS
----------------

We  have a 51% interest in Custom Securities Industries Inc. ("CSI"), an Ontario
company.  Since its founding in 1988, CSI has established a worldwide reputation
for  innovation  and  excellence  in  the  Electronic Article Surveillance (EAS)
Industry.  Extensive  experience  and  know-how in the leading EAS technologies,
combined  with  expertise  in  materials  converting,  in-house  development  of
proprietary  products  and  the  use of specially designed converting equipment,
enables  CSI  to  offer custom tailored solutions with a rapid turn around time.

Over the years, CSI has acquired a wide range of knowledge and developed its own
trade  secrets  and  manufacturing  procedures  to ensure competitive pricing, a
broad range of high quality products, and the ability to supply products in both
small  and  large  volumes.

CSI  offers  EAS  products compatible with Radio Frequency (RF), Electromagnetic
(EM),  and  Accousto-Magnetic  (AM)  technologies.  Whatever  the  particular
application,  from standard EM pressure sensitive labels to sequentially printed
barcode labels, products are available.  Recently CSI has also introduced Source
Tagging  Solutions  for  the Radio Frequency and Accousto-Magnetic technologies.
These  products are successfully meeting the needs of retailers in the hardware,
auto  aftermarket,  food and general merchandise categories.  CSI specializes in
custom  solutions  for  hard  to  tag  items.

Long term associations with leading suppliers of EAS sensor materials, films and
papers,  pressure  sensitive  materials  and adhesives enables CSI to handle the
most  demanding of label product needs with either standard or custom solutions.
CSI  offers  a  wide selection of labels and fashion tags. Our products are made
with  high  performance  materials,  such  as extremely low coercivity amorphous
alloys  and  ultra  stable  deactivation  ribbon.

CSI's  manufacturing  equipment  incorporates  computer  and control technology,
including  PLC's,  Motion  Controllers,  Servo  Motors,  many different types of
position  and movement sensors, along with a very large inventory of specialized
tooling  and  dies.

Besides  providing  security  labels  to  Sentry,  CSI's customers include Tyco,
Checkpoint,  Dialoc  ID,  KMA  and  Retailers  Advantage.

MARKETING
---------

We  market  our  SentryVision  and  conventional CCTV Systems through the direct
efforts  of  salespersons located in select metropolitan areas across the United
States  and  Canada,  as well as through dealers/system integrators. In 2007, we
employed 9 direct sales representatives, whose efforts were supplemented through
three  in-house  sales  support staff and independent sales representatives.  We
also  market  our  EAS  products to smaller local and regional retailers through
selected  dealers  and  distributors.  Sales are made into the library market on
both  a  direct  basis  as  well  as  through  catalogs  and  dealers.

We market our products primarily through participation in trade shows, placement
of  ads  in  trade  publications,  direct mailings and through telemarketing. In
addition,  these  efforts  are  augmented  through  our  Website, which provides
enhanced  product  and  market  oriented information. Internationally, we market
SentryVision  through  system  integrators and distributors including Honeywell,
ADT,  Chubb,  Intrepid,  BSC  and  Repromatic.

SENTRYVISION  AND  CCTV  PRODUCTS
---------------------------------

To  date,  most  SentryVision  and conventional CCTV Systems have been sold on a
direct  sale  basis.  Typical  billing  arrangements  for  SentryVision  systems
involve  invoicing 50% of total sale upon shipment of the product and 50% on the
completion  of  the  installation.  The  successful  introduction  of  our
OperationalVideo  program  in  the fourth quarter created important
large  retail  reference  sites  that  will  help  in  growing  the  business.

While  most  of  the current SentryVision  and conventional CCTV sales have been
made to home centers, retail chains and distribution centers, our marketing plan
for  Sentry  also  emphasized a dealer program for institutional, industrial and
international  prospects.

We also market SentryVision  through qualified security dealers and integrators.
Much  of  the  industrial  and  institutional SentryVision  / CCTV prospects are
serviced  by  local  security  companies who design and install integrated CCTV,
access  control  and alarm systems. By working with these companies, we expected
to be able to reach a far larger number of SentryVision  prospects and penetrate
the  market  more  rapidly.  The  program  has  generated interest through trade
advertising,  direct  mail and trade show participation.  In both 2007 and 2006,
our  largest domestic dealer was Tyco's ADT Security division.  Domestic dealers
did  not  generate  significant  SentryVision  installations  in  industrial and
institutional  facilities  in  2007.  Prior  sales  were  made through ADT, STG,
Siemans,  Mosler  and  Security  Link.

In  addition,  we  market  SentryVision  internationally  using  independent
distributors  on  both an exclusive and nonexclusive basis. We sell our products
to  independent  distributors at prices below those charged to end-users because
distributors  typically  make  volume  purchases  and assume marketing, customer
training, installation, servicing and financing responsibilities. As of December
31,  2007,  we  have  distributors  in the UK, France, Mexico, Belgium, Holland,
Italy,  Poland,  Singapore,  Russia, Spain, Brazil, Argentina, Hungary, Romania,
Taiwan,  Lebanon,  Australia,  Japan,  South Africa, South Korea, Israel and the
United  Arab  Emirates.

During  2007,  Sentry  placed  in service 204 SentryVision  systems and 798 CCTV
cameras,  as compared to 131 SentryVision  systems and 480 CCTV cameras in 2006.

EAS  PRODUCTS
-------------

Sentry EAS systems are principally marketed on a direct sales basis. In the case
of  the  electromagnetic  (EM) systems, detection targets, which are sold to the
customer,  are  permanently  attached to the item to be protected. Therefore, as
the  customer replenishes its inventory, additional targets will be required for
those  items  to  be  protected.  We  also  market  a more expensive, removable,
reusable  detection tag for use with the Knoscape MM systems on certain products
such  as  clothing  and  other  soft  goods.

RF  and Ranger systems continue to be used by apparel and department stores that
have  wide  exit  areas and a desire for deterrence based on reusable hard tags.
Knoscape  RF  systems are universal in that they can detect both 2 MHz hard tags
and  8  MHz  labels.  Sentry  also markets an 8MHz P-2000 RF system designed for
both  hard  and  soft  good  customers.  The  P-2000  system  is  economical and
self-installable  by  the  customer.

Bookstores,  video  stores  and  specialty  stores  remain good prospects for EM
systems  due  to  the  small  size and low cost of EM strips. EM systems feature
updated  digital  electronics  that detect virtually all manufacturers' magnetic
strips  and can universally replace older magnetic strip systems manufactured by
various  EAS  vendors.

The  library  market continues to be the primary market for magnetic technology.
We  were subject to an agreement not to compete against 3M for sales and service
of  EAS  Systems  in  the  library  market,  which  expired  in  March  2004.

During  the years ended December 31, 2007 and 2006, Sentry placed in service 413
and 432 EAS systems, respectively.  In addition in 2007 and 2006, we sold 70 and
51  QuickCheck  patron  self  check  book  borrowing  systems  to  libraries.


BACKLOG

Our  backlog  of  orders was approximately $2.8 million at December 31, 2007, as
compared to approximately $1.4 million at December 31, 2006.  We anticipate that
substantially  all  of  the  backlog  present  as  of  December 31, 2007 will be
delivered  within  12  months.


SEASONAL  ASPECTS  OF  THE  BUSINESS

Our  current  video  product  customers are primarily dependent on retail sales,
which  are seasonal and subject to significant fluctuations and are difficult to
predict.


SERVICE

Installation  services  are performed by our personnel and by carefully screened
and  supervised  subcontractors  as well as authorized dealers and distributors.
Repair  and  maintenance  services are performed primarily by our personnel. All
products  sold are covered by a warranty period, generally, one year.  After the
warranty  period,  we  offer  our  customers  the  option  of  entering  into  a
maintenance contract with the Company or paying for service on a per call basis.

Installations of SentryVision  systems typically take from three days to several
weeks  and  involve  mounting  the  enclosures,  installing the controller unit,
installing the carriage assembly, and connecting control and transmission cables
to the central monitoring location. Items such as high voltage power termination
wiring  are  typically  the  responsibility  of  the  end  user.

The  use of subcontractors supervised by Company employees proved cost effective
with  no  apparent  sacrifice  in  quality. We have now established a network of
qualified  contractors  that  perform  most  of  our  SentryVision  and  CCTV
installations.  Our  technical  staff now focuses on EAS, SentryVision  and CCTV
service  and maintenance and we rely on our well-established partner network for
installation  work.  The model remains cost-effective and allows us to scale our
efforts  up  or  down  as  business  requires  without  the risk of a fixed cost
structure.  This  strategy  has  resulted  in  significant  cost  savings.  In
addition,  we retain our reputation for technical expertise within the industry.
We  anticipate  that  this  level of coverage will be adequate, coupled with our
Service  Partner  Network,  to  service  our  customer  base.

Our  Design  Center  personnel continued to screen all service requests over the
telephone,  avoiding  costly  service  calls.  In  addition,  careful  screening
allowed  us  to  ship  replacement  parts in advance of the technician's arrival
increasing  our  ability  to  complete  calls  in  a  single  visit.


COMPETITION

We  operate  in  a  highly competitive market with many companies engaged in the
business of furnishing security services designed to protect against shoplifting
and  theft.  In addition to EAS systems using the concept of tagged merchandise,
such  security services use, among other things, conventional PTZ dome and fixed
mount  CCTV systems, traveling CCTV systems, mirrors, guards, private detectives
and  combinations  of  the foregoing. We compete principally on the basis of the
nature  and  quality  of its products and services and the adaptability of these
products  to  meet  specific  customer  needs  and  price  requirements.

To  our  knowledge,  there  are several other companies that market, directly or
through  distributors,  conventional  closed  circuit  video  systems and/or EAS
equipment  to  retail  stores,  of  which  Sensormatic  (acquired  by Tyco/ADT),
Checkpoint  Systems,  Inc.,  GE  Security, Pelco Manufacturing, Inc., Panasonic,
Inc. and Honeywell are the Company's principal competitors. Outside the U.S., we
are  aware  of other companies that market other types of traveling CCTV systems
including  Lextar  Technologies,  Ltd.  in  Australia,  T.E.B.  in  France  and
Sensormatic  Europe.  Some  of  our  competitors  have  far  greater  financial
resources,  more  experienced  marketing  organizations  and a greater number of
employees  than  the  Company.


PATENTS  AND  OTHER  INTELLECTUAL  PROPERTY

Although  patent  protection  is  advantageous to Sentry, we do not consider any
single patent or patent license we own or hold to be material to our operations.
We  believe  that  our  competitive  position  ultimately  will  depend  on  our
experience,  know-how  and  proprietary data, engineering, marketing and service
capabilities  and  business  reputation,  all  of which are outside the scope of
patent  protection.

SENTRYVISION
------------

Sentry  has  a  United  States  patent covering the cable-free transmission of a
video  signal  to and from the carriage. This technology prevents degradation of
the  video  signal, which can result from the movement of and prolonged friction
caused  by  the  carriage.  Two  additional  U.S.  patents  were  received  for
improvements  made  to the original technology, which has been incorporated into
the  SmartTrack  product. Sentry also has six corresponding European patents and
three  foreign  country patents. We intend to seek patent protection on specific
aspects  of  the  SentryVision  system,  as  well  as for certain aspects of new
systems  which  may  be developed for Sentry. There can be no assurance that any
patents  applied  for will be issued, or that the patents currently held, or new
patents,  if  issued, will be valid if contested or will provide any significant
competitive  advantage  to  Sentry.

We are not aware of any infringement of patents or intellectual property held by
third  parties. However, if Sentry is determined to have infringed on the rights
of  others,  Sentry  may be required to obtain licenses from such other parties.
There  can  be  no  assurance  that the persons or organizations holding desired
technology  would grant licenses at all or, if licenses were available, that the
terms of such licenses would be acceptable to the Company. In addition, we could
be  required  to  expend  significant  resources  to  develop  non-infringing
technology.

Sentry  has  also  relied  on the registration of trademarks and trade names, as
well  as on trade secret laws and confidentiality agreements with its employees.
While  we  intend to continue to seek to protect Sentry's proprietary technology
and  developments  through  patents,  trademark registration and confidentiality
agreements, we do not rely on such protection to establish and maintain Sentry's
position  in  the  marketplace. Management believes that improvement of Sentry's
existing  products,  reliance  upon  trade secrets and on unpatented proprietary
know-how,  and  the  development  of new products will be as important as patent
protection  in  establishing  and  maintaining  a  competitive  advantage.

EAS  PRODUCTS
-------------

Sentry  has  9 United States and Canadian patents relating to (i) the method and
apparatus  for  the  detection  of  movement of articles and accessory equipment
employed  by  Sentry  in  its  RF,  Ranger and EM systems, (ii) various specific
improvements  used in the RF, Ranger and EM systems and (iii) various electrical
theft detection methods, apparatus and improvements not presently used in any of
Sentry's  EAS  systems.


PRODUCT  AUTHENTICATION
-----------------------

Sentry's  Custom  Security  Industry  subsidiary  has  two United States patents
related  to  a product authentication.  One patent is for a system that measures
certain  magnetic  properties of a marker with an electronic reader utilizing an
electromagnetic  search  field  and  the  second  patent  is for a unique reader
suitable  for  this  system.


RESEARCH  AND  DEVELOPMENT

As of December 31, 2007, Sentry Technology Corporation had 5 full time employees
engaged  in research, engineering, product development and design.  In addition,
the  Company  may  retain  consultants  to  assist  in specific areas related to
research, engineering and product development.  For the years ended December 31,
2007  and  2006,  approximately $0.7 million and $0.8 million, respectively, was
expended  on  Company-sponsored  research.

The  SmartTrack  System  continued  to  benefit from product improvement efforts
focused  on  adding  features  and  reducing  the cost of manufactured products.
Continued  software  developments  during  2007  incorporated  improvements  in
business  applications  for  retail  operational management, preset accuracy and
additional  on-board  diagnostics.

Additional  projects  included  revisions  to  EAS  products.

Developments to EM systems included the mechanical design of a second-generation
"WAM2"  Library  system  and  a  "WAM2"  tuning  board  prototype.

QuickCheck  system  developments  included  continuing cost reductions in system
components  and software upgrades to improve product capabilities and functions.
In  addition,  we  made improvements in software to incorporate a new ultrasonic
item  counter  and introduced the new "ADR1" Deactivator/Reactivator for library
materials.

At  our  Custom  Security label making subsidiary, we commissioned new equipment
that  increased  our  output of EM labels and our productivity.  In addition, we
continued  research  on conversion methods for RFID labels and the design of new
RFID  portals.


REGULATION

Because Sentry's EAS and CCTV systems use radio transmission and electromagnetic
wave  principles,  such  systems  are  subject  to  regulation  by  the  Federal
Communications Commission ("FCC") under the Communications Act of 1934. In those
instances  where it has been required, certification of such products by the FCC
has  been  obtained. As we develop new products, application will be made to the
FCC for certification or licensing when required. No assurance can be given that
such  certification  or  licensing  will  be  obtained or that current rules and
regulations  of  the  FCC  will  not  be  changed  in  an  adverse  manner.

Our  business  plan  calls for the sale and use of Sentry's products in domestic
markets  and,  where  consistent  with contractual obligations, in international
markets.  Sentry's  products  may  be  subject  to  regulation  by  governmental
authorities  in  various  countries  having  jurisdiction  over  electronic  and
communication  use.  We  intend  to  apply  for certification of our products to
comply  with the requirements under the regulations of the countries in which we
plan  to  market our products. No assurance can be given that such certification
will  be  obtained  or that current rules and regulations in such countries will
not  be  changed  in  a  manner  adverse  to  Sentry.

We  believe  we  are in material compliance with applicable United States, state
and  local  laws  and regulations relating to the protection of the environment.


EMPLOYEES

At  December  31,  2007,  the Company and its subsidiaries employed 68 full-time
employees, of whom 13 were employed in administrative and clerical capacities, 5
in  engineering,  research  and  development, 23 in production and manufacturing
support,  11 in sales and marketing and 16 in customer service and support. None
of  our  employees  are  employed  pursuant to collective bargaining agreements.


ITEM  2.  DESCRIPTION  OF  PROPERTIES
-------------------------------------

Our  principal  executive,  administrative offices, research and development and
distribution  facilities are located in Ronkonkoma, New York, in a 20,000 square
foot  facility  leased  by  the  Company.   In  addition,  we  maintain a sales,
administrative and distribution office in a leased 7,400 square foot facility in
Toronto,  Ontario.  Our  CSI  subsidiary leases facilities for manufacturing and
distribution  totaling  7,000  square  feet  located  in  Thornhill,  Ontario.


ITEM  3.  LEGAL  PROCEEDINGS
----------------------------

In  August  2004,  Bi-County  Park  Associates,  Inc.  d/b/a  Ashlind Properties
("Bi-County")  brought an action against the Company in the Supreme Court of New
York,  County of Suffolk, for the recovery of a real estate brokerage commission
in  the  amount  of  approximately  $250,000  relating  to  the  termination  of
Bi-County's  lease  on  its  former Hauppauge facility.   On December 10, 2007 a
jury  ruled  in  favor  of  the  Company  and  no  money  was paid to Bi-County.

Although  the  Company is involved in ordinary, routine litigation incidental to
our  business,  it  is  not presently a party to any other legal proceeding, the
adverse  determination  of which, either individually or in the aggregate, would
be  expected  to  have  a  material  adverse affect on the Company's business or
financial  condition.


ITEM  4.  SUBMISSION  OF  MATTERS  TO  A  VOTE  OF  SECURITY  HOLDERS
---------------------------------------------------------------------

     During  the  fourth  quarter  of fiscal year ended December 31, 2007, there
were  no  matters  submitted to a vote of the Company's security holders through
the  solicitation  of  proxies  or  otherwise.

                                    PART II
                                    -------

ITEM  5.  MARKET  FOR  THE  COMPANY'S  COMMON  EQUITY  AND  RELATED  STOCKHOLDER
--------------------------------------------------------------------------------
MATTERS  AND  SMALL  BUSINESS  ISSUER  PURCHASES  OF  EQUITY  SECURITIES
------------------------------------------------------------------------

(a)     Price  Range  of  Common  Stock.

The  following  table  sets  forth,  for the periods indicated, the high and low
sales  prices  per  share  of  common  stock:
<TABLE>
<CAPTION>
<S>                                            <C>    <C>
                                               High   Low
                                               -----  -----
2006
 First Quarter                                 $0.15  $0.08
 Second Quarter                                 0.12   0.11
 Third Quarter                                  0.10   0.04
 Fourth Quarter                                 0.07   0.05

2007
 First Quarter                                 $0.07  $0.04
 Second Quarter                                 0.08   0.04
 Third Quarter                                  0.11   0.06
 Fourth Quarter                                 0.17   0.09

2008
 First Quarter                                 $0.12  $0.06
 Second Quarter (through April 11, 2008)         0.09   0.06
</TABLE>

The  Company's  Common Stock is quoted on the OTC Bulletin Board ("OTCBB") under
the  symbol  SKVY.

(b)     Holders  of  Common  Stock.

As of April 11, 2008, the Company had 120,743,804 shares of Common Stock issued
and  outstanding,  which  were  held  by  approximately  349  holders of record.

(c)     Dividends.

The  payment  of  future dividends will be a business decision to be made by the
Board  of  Directors  of  Sentry  from  time-to-time  based  upon the results of
operations and financial condition of Sentry and such other factors as the Board
of  Directors  considers  relevant.  Sentry has not paid, and does not presently
intend  to  pay  or  consider  the  payment of, any cash dividends on the Common
Stock.  In  addition,  covenants in the Company's credit agreements prohibit the
Company  from  paying  cash  dividends  without  the  consent  of  the  lenders.

(d)     Securities  Authorized  for  Issuance  Under  Equity Compensation Plans.

For  a description of the Company's equity securities authorized for issuance as
described in Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation,"  see  Notes to our Financial Statements, Note [3.p.] "Significant
Accounting  Policies,  Stock-Based  Compensation,"  and  Note [14], "Stock Based
Compensation."

The  Company  did  not repurchase any of its equity securities during the fourth
quarter  of  the  fiscal  year  ended  December  31,  2007.


ITEM  6.     MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OR  PLAN  OF  OPERATION
--------     ----------------------------------------------------------------

CRITICAL ACCOUNTING POLICIES

Management's  discussion  and  analysis of its financial position and results of
operations are based upon the Company's consolidated financial statements, which
have  been  prepared in accordance with accounting principles generally accepted
in  the United States of America.  The preparation of these financial statements
requires  management  to  make  estimates and judgments that affect the reported
amounts  of assets, liabilities, revenues and expenses and related disclosure of
contingent  assets  and  liabilities.  Actual  results  could  differ from those
estimates.  Management  believes that the critical accounting policies and areas
that  require  the  most  significant  judgments and estimates to be used in the
preparation  of the consolidated financial statements are allowance for doubtful
accounts,  inventory  obsolescence  and  accrued  warranty.

Allowance  for  Doubtful Accounts -- We maintain an allowance for doubtful trade
accounts  receivable  for  estimated  losses resulting from the inability of our
customers  to  make  required payments. In determining collectibility, we review
available  customer  financial  statement  information, credit rating reports as
well  as other external documents and public filings. When it is deemed probable
that  a  specific customer account is uncollectible, that balance is included in
the  reserve calculation. Actual results could differ from these estimates under
different  assumptions.  If  the  financial  condition  of  our  customers
deteriorated,  impairing  their  ability to make payments, additional allowances
may  be  required.

Inventory  Obsolescence --We write down our inventory for estimated obsolescence
or  unmarketable inventory equal to the difference between the cost of inventory
and  the  estimated  market value based upon assumptions about future demand and
market  conditions.  If  actual  future  demand  or  market  conditions are less
favorable  than  those  we  project,  additional  inventory  write-downs  may be
required.

Impairment of long-lived assets -- We review our long-lived assets, property and
equipment,  intangible assets, goodwill and other assets for impairment whenever
events  or  changes  in circumstances indicate that the carrying amount of these
assets  may not be fully recoverable.  Impairment is measured at fair value.  If
impairment  indicators  exist,  we  determine whether the projected undiscounted
cash  flows  will be sufficient to cover the carrying value of such assets. This
requires  us  to make significant judgments about the expected future cash flows
of  the asset group. The future cash flows are dependent on general and economic
conditions  and  are  subject  to  change.  The Company is unable to justify the
carrying  value of the goodwill as a result of inadequate cash, therefore,
a charge to income in 2007 of $1,564,000 was recognized, representing the entire
balance  of  goodwill.

Accrued Warranty -- We provide for the estimated cost of product warranty at the
time  revenue  is  recognized.  We  calculate  the  reserve utilizing historical
product  failure  rates  and service repair costs by product family. These rates
are reviewed and adjusted periodically. We utilize judgment for estimating these
costs  and  adjust  our  estimates  as  actual  results  become  available.

Revenue  Recognition  --  We  recognize revenue when installation is complete or
other  post-shipment  obligations  have  been satisfied.  For those products not
requiring  installation,  or if installation costs are not material, the Company
recognizes  revenues upon shipment.  Service revenues are recognized when earned
and  maintenance  revenues  are  recognized  ratably  over  the service contract
period.

Related Party Transactions -- Details of related party transactions are included
in  Item  12  and  in Note [12] of the Financial Statements of this Form 10-KSB.


Selected  Financial  Data
-------------------------

The  table  below  sets forth selected consolidated historical financial data of
the  Company  for  the years ended December 31, 2003, 2004, 2005, 2006 and 2007.
The  selected  consolidated  historical  financial  data  should  be  read  in
conjunction  with  the Consolidated Financial Statements of the Company included
in  Item  7.

<TABLE>
<CAPTION>
                                                          (AMOUNTS IN THOUSANDS EXCEPT FOR PER SHARE DATA)

<S>                                                       <C>       <C>      <C>       <C>       <C>
Years Ended December 31,                                     2003      2004     2005      2006      2007
                                                          --------  -------  --------  --------  --------

SELECTED STATEMENT OF OPERATIONS DATA:
Total revenues                                            $13,243   $16,863  $13,570   $12,135   $13,498
Cost of sales                                               5,179     6,351    5,960     5,374     6,215
Customer service expenses                                   3,977     4,175    2,654     2,209     2,474
Selling, general and administrative
    expenses                                                3,809     4,840    5,348     5,296     5,394
Goodwill impairment                                             -         -        -         -     1,564
Income (loss) before income taxes and minority interest    (1,049)      253   (1,581)   (2,055)   (3,755)

Extraordinary item - Gain on extinguishment of debt           738         -        -         -         -
Net income (loss)                                             181        31   (1,690)   (2,304)   (3,678)
Net income (loss) per common share:
   Basic and diluted                                         0.00      0.00    (0.01)    (0.02)    (0.03)

As of December 31,

SELECTED BALANCE SHEET DATA:                                 2003      2004     2005      2006      2007
                                                          --------  -------  --------  --------  --------
Working capital                                           $  (285)  $ 4,545  $ 3,037   $ 1,276   $   169
Total assets                                                4,093    12,247    9,395     8,834     8,532
Property, plant and equipment, net                            209       689      637       609       634
Obligations under capital leases                               18        13        7        11         9
Convertible debentures                                          -     1,862    1,904     1,945     1,986
Minority interest                                               -     1,045    1,140     1,237     1,200
Total common stockholders' equity (deficit)                  (125)    4,345    2,698       648    (2,238)
</TABLE>


RESULTS  OF  OPERATIONS

YEAR ENDED DECEMBER 31, 2007 COMPARED WITH YEAR ENDED DECEMBER 31, 2006

Consolidated  revenues  were 11% higher in the year ended December 31, 2007 than
in  the  year  ended December 31, 2006.  Our backlog of orders was approximately
$2.8  million  at  December  31,  2007,  an  increase  of  100%,  as compared to
approximately  $1.4  million  at  December  31,  2006.  We  anticipate  that
substantially  all  of  the  backlog  present  as  of  December 31, 2007 will be
delivered within 12 months.  Total revenues for the periods presented are broken
out  as  follows:

<TABLE>
<CAPTION>
<S>                                             <C>        <C>        <C>
                                                  2007      2006     Change
                                                 ------    ------    ------
                                                   (in thousands)
Electronic Article Surveillance (EAS)           $ 6,656    $ 6,813     (2)
Closed Circuit Television (CCTV)                    501        590    (15)
SentryVision                                      3,894      2,809     39
                                                -------    -------    ----
Total sales                                      11,051     10,212      8
Service, maintenance and installation             2,447      1,923     27
                                                -------    -------    ----
Total revenues                                  $13,498    $12,135     11
                                                =======    =======    ====
</TABLE>

North  American  revenues  represented $11.2 million or 83% of total revenues in
2007  compared  to  $10.1  million  or  83%  of  total  revenues in 2006.  Total
international  sales were $2.3 million in 2007 compared to $2.0 million in 2006.
Our  sales  to  international  dealers  and distributors are denominated in U.S.
dollars,  therefore  the  strengthening of the Euro and other foreign currencies
against  the  U.S.  dollar in 2007 had no impact on reported revenues.  The most
significant  impact  on total revenues on a comparative basis was an increase in
revenues  from one major domestic customer of approximately $2.4 million in 2007
compared  to  2006.

EAS  sales  decreased  by $157,000 or 2% in 2007 compared to 2006.  Domestic EAS
sales  were  $5.9  million  in  2007  compared  to  $6.0  million  in  2006  and
international  EAS sales were $.8 million in both periods.  This decrease is due
to  a de-emphasis on legacy EAS sales to retailers, which was offset by a slight
increase  in  domestic library sales.  CCTV sales were down by $89,000 or 15% in
2007  compared  to 2006, while our overall video business rose as a result of an
increase  in SentryVision  sales in 2007 of $1,085,000 or 39% over 2006 revenue.
Domestic  SentryVision  sales were $2.5 million in 2007 compared to $1.6 million
in 2006.  This increase was primarily due to the addition of one major customer.
International  SentryVision  sales  were  $1.4  million in 2007 compared to $1.2
million  in  2006.

Service,  maintenance  and  installation  revenues  were  27%  higher in 2007 as
compared  to  2006.  Installation  revenue  was  substantially higher in 2007 as
compared to 2006 due to increased SentryVision  sales.  This was offset somewhat
by  lower  service  and  maintenance revenue due to one large customer switching
from  a  maintenance  agreement  to time and materials service and fewer service
calls  overall.

Cost  of  sales  was  56%  in  2007  compared  to  53% in 2006.  The increase in
percentage is primarily due to the lower margins on domestic SentryVision  sales
to our new major customer and lower margins on international SentryVision  sales
due  to unfavorable exchange rates for inventory purchased outside of the United
States.

Customer  service  expenses  increased  by  12%  in  2007 compared to 2006.  The
increase  in  expenses is primarily a result of the use of variable cost outside
service  contractors  and  installation  material  to  support  higher  domestic
revenue,  partially  offset  by lower salaries.  Outside service contractors are
used  in  order  to better manage our total customer service requirements during
fluctuations  in  activity  levels.

Selling,  general and administrative expenses were 2% higher in 2007 as compared
to  2006.  The  increase  in expenses in 2007 is principally a result of foreign
exchange  losses  of  $607,000,  warranty  costs and European warehousing costs.
These  were partially offset by decreases in sales and administrative personnel,
travel,  sales  promotion  and  amortization  expenses.

Research  and development costs were 18% lower in 2007 as compared to 2006.  The
decrease  in  expenses  in 2007 is primarily a result of decreased headcount and
prototype  costs.

The Company is unable to justify the carrying value of the goodwill as a result
of inadequate cash, therefore, a goodwill impairment charge in 2007 of
$1,564,000 was recognized, representing the entire balance of goodwill.

Total  interest  and  financing  costs  were  higher in 2007 compared to 2006 by
$445,000.  This  increase is primarily a result of financing costs including the
non-cash  amortization  of warrants issued of $330,000 in 2007 ($78,000 in 2006)
related  to  the  loan guarantees provided by the Company's directors as well as
increased  interest  expense  on  a  higher  average  outstanding  debt.

The income tax benefit of $40,000 in 2007 is a result of a reduction in the year
end  2007  estimated tax rate of Custom Security Industries (CSI), our 51% owned
Canadian  subsidiary.  The income tax expense of $145,000 in 2006 is principally
a  result  of  the taxable income of CSI, which cannot be offset by Sentry's net
operating  loss  carryforwards.

As  a  result  of the foregoing, we had net loss of $3,678,000 in the year ended
December  31,  2007,  as  compared  to  net loss of $2,304,000 in the year ended
December  31,  2006.


LIQUIDITY  AND  CAPITAL  RESOURCES

At  December  31,  2007, we had cash and short term investments of $0.5 million,
working  capital of $0.2 million and total assets of $8.5 million.  Cash used in
operating  activities  was  $1.7  million.  Cash  was  principally  used  by the
increase  in  accounts  receivable  and to finance increases in inventory levels
purchased  in  anticipation  of higher sales activity levels. This was partially
offset  by  cash  generated  from  an  increase  in accounts payable and accrued
liabilities.

Cash  provided  by investing activities was $22,000 substantially due to the use
of  short-term  investments,  partially  offset by the purchase of manufacturing
equipment  at  our 51% owned labeling plant.  There are no significant projected
capital  expenditure  requirements  anticipated  in the near term.  The level of
spending  will  be  dependent  upon  various  factors,  including  growth of the
business  and  general  economic  conditions.

We generated $1,045,000 in net cash from financing activities in 2007 through an
increase in borrowings under both our Royal Bank of Canada ("RBC") and Tradition
Capital  Bank  credit  facilities,  which  are  described  more  fully  below.

Royal Bank of Canada
--------------------

     In  November  2006, the Company and certain of its subsidiaries amended its
secured  credit  facility  with RBC by converting the facility to a demand loan,
increasing  the interest rate and eliminating financial covenants.  In addition,
during  2006,  the  maximum borrowing under the facility was reduced to Canadian
$3.6  million  (U.S.  $3.6  million).  However, RBC increased the borrowing base
formula  by  Canadian  $1.0 million (U.S. $1,006,000) in exchange for additional
security  provided  by  two  of the Company's directors in the second quarter of
2006.  Borrowings under the facility are subject to certain limitations based on
a  percentage  of  eligible  accounts receivable and inventory as defined in the
agreement.  Interest  is payable at a rate of RBC's prime rate (6.0% at December
31,  2007), plus 2.75% per annum.  Borrowings under this facility are secured by
substantially all of the Company's assets.  As of December 31, 2007, the Company
had borrowings of $3.5 million, which exceeded the maximum available (subject to
the  above  limitations)  under  the  demand  loan.  RBC  agreed  to temporarily
increase  the  availability  to the Company by Canadian $300,000 (U.S. $302,000)
until  March  31,  2008  in  consideration  of  a  further  guarantee by certain
directors.

     In  April  2006,  Mr.  Murdoch, Sentry's CEO and director, and Mr. Furst, a
Sentry  director,  agreed  to provide a personal guarantee to RBC, the Company's
lender,  in  the amount of Canadian $1 million (U.S. $1,006,000) 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  received  a fee of $43,000, shared between them, paid in twelve
equal  monthly  installments.  As  additional consideration, they received 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  of $120,000 was determined in accordance with SFAS No. 123R
"Share-Based  Payment" and beginning in June 2006 was taken into income over the
period  of  the guarantee, which was one year.  These guarantees expired in June
2007  and  were  subsequently  renewed  in  July  2007 until April 30, 2008.  In
consideration  of  these  guarantee  renewals,  Mr.  Murdoch  and Mr. Furst will
receive  a  fee  of  $40,000  shared  between  them  paid  in  ten equal monthly
installments.  As additional consideration, they received fully vested, two year
warrants  to  purchase approximately 7.4 million common shares of the Company at
an  exercise  price  of  $0.065  per share.  The fair value of these warrants of
$164,000  was  determined in accordance with SFAS No. 123R and beginning in July
2007  is  being taken into income over the period of the guarantee, which is ten
months.  During  the year ended December 31, 2007, $148,000 (2006 - $70,000) has
been  recorded  in  interest and financing expense related to these warrants and
$66,000  will  be  expensed  in  2008.

     As  of  April  11,  2008,  Mr. Robert Furst extended his personal guarantee
relating  to  the  RBC loan agreement to December 31, 2008.  In consideration of
this  guarantee, he will receive fully vested warrants for the purchase of up to
2  million common shares of the Company, exercisable until April 30, 2010, at an
exercise  price  of  $0.10  per  share.

     As  of  April 11 2008, the Company exceeded the maximum borrowing available
(subject  to  above  limitations) by approximately $1.0 million under the demand
loan  and  is  in  negotiations with RBC. RBC agreed to waive the violation; but
reserves  all  of  its rights and remedies under the loan agreement on the basis
that  a  forbearance  agreement  be  finalized.


Tradition  Capital  Bank
------------------------

     In  December  2006,  Mr.  Murdoch  and Mr. Furst agreed to provide personal
guarantees  to Tradition Capital Bank in the amount of U.S. $550,000 in exchange
for  the  bank  providing  a new revolving credit facility to the Company in the
same  amount.  In  consideration  of these guarantees, Mr. Murdoch and Mr. Furst
received  a  fee  of  $14,000,  shared  between  them, paid in six equal monthly
installments  beginning  in  December  2006.  As  additional consideration, they
received  fully  vested, two year warrants to purchase approximately 5.2 million
shares  of the Company's common stock, at an exercise price of $0.053 per share.
The  fair  value  of these warrants of $91,000 was determined in accordance with
SFAS  No.  123R  "Share-Based  Payment" and beginning in December 2006 was taken
into  income over the period of the guarantee, which was six months.  The credit
facility  and  related  guarantees  expired  in  June 2007 and were subsequently
renewed  in  July  2007 until April 30, 2008.  In consideration of the guarantee
renewals, Mr. Murdoch and Mr. Furst will receive a fee of $23,000 shared between
them  paid in ten equal monthly installments.  As additional consideration, they
received  fully  vested, two year warrants to purchase approximately 4.2 million
common shares of the Company at an exercise price of $0.065 per share.  The fair
value  of  these  warrants of $94,000 was determined in accordance with SFAS No.
123R  and  beginning  in July 2007 is being taken into income over the period of
the  guarantee,  which  is  ten  months.

     On  September  25,  2007,  Mr.  Murdoch  and  Mr.  Furst  agreed to provide
Tradition  Capital  Bank additional personal guarantees totaling $500,000, which
increased  the  maximum the Company can draw to $1,050,000, until April 30, 2008
under  the  same  terms and conditions as listed above.  As of December 31, 2007
borrowings  were  at  the  maximum  amount  available.  In  consideration of the
guarantees,  Mr.  Murdoch  and  Mr.  Furst  will receive a fee of $15,000 shared
between  them  paid  in  seven  equal  monthly  installments.  As  additional
consideration,  they  received  fully  vested,  two  year  warrants  to purchase
approximately  2.5  million common shares of the Company at an exercise price of
$0.10  per share.  The fair value of these warrants of $89,000 was determined in
accordance  with  SFAS  No.  123R "Share-Based Payment" and beginning in October
2007  will be taken into income over the period of the guarantee, which is seven
months.  During  the  year ended December 31, 2007, $178,000 (2006 - $8,000) has
been  recorded  in  interest and financing expense related to these warrants and
$88,000  will  be  expensed  in  2008.

In  August 2007, Mr. Murdoch agreed to provide a personal guarantee for a Letter
of  Credit  of  $49,350  for  a period of one year in favor of Palm Beach Public
Library  that the Company was unable to obtain on its own in order to complete a
sale  of  the  Company's self service library systems.  In consideration of this
guarantee  Mr. Murdoch will receive a fee of $2,000 paid in twelve equal monthly
installments.  As  additional  consideration, he received fully vested, two year
warrants  to  purchase approximately 0.2 million common shares of the Company at
an  exercise  price  of  $0.10  per  share.  The fair value of these warrants of
$10,000  was  determined  in accordance with SFAS No. 123R "Share-Based Payment"
and  beginning  in August 2007 is being taken into income over the period of the
guarantee,  which is twelve months.  Interest and financing expense recorded was
$4,000 for the year ended December 31, 2007 and $6,000 will be expensed in 2008.

In  December 2007, Mr. Murdoch and Mr. Furst agreed to lend the Company $141,000
($81,000  and $60,000, respectively) to secure a bid that the Company was unable
to  obtain  on its own to sell products to an airport facility. In consideration
of  the loans, Mr. Murdoch and Mr. Furst will receive interest for the period of
the  loan  at the Bank of America's prime rate (7.25%) plus 1% per annum. During
the  year  ended  December  31,  2007,  $1,000 has been recorded in interest and
finance  expense  related  to  the loans. The loans were repaid in January 2008.

We  will require positive cash flows from operations to meet our working capital
needs over the next twelve months.  While the Company has shown increased levels
of  revenues,  it  continued  to incur operating losses.  This has substantially
reduced  the Company's available cash reserves and limited our ability to secure
additional  bank financing.  A majority of the Company's cash is held at the 51%
owned  subsidiary.

During  2007,  the  Company  completed  the  successful  installation of its new
OperationalVideo  system  in 33 locations of Steve and Barry's, a leading casual
apparel  retailer  that  offers  high-quality merchandise at low prices for men,
women  and  children.  OperationalVideo  uses  our patented SmartTrack traveling
system  to manage safety and security as well as retail business operations such
as  sign placement, product merchandising and employee procedure compliance over
the  internet.  Also,  OperationalVideo  was  installed  in two Kmart locations.
Management  believes  that  OperationalVideo  will  contribute a significant new
revenue  stream  in  the  future.

We  are  striving  to improve our gross margins and continue to control selling,
general  and  administrative expenses.  There can be no assurance, however, that
changes in our plans or other events affecting our operations will not result in
accelerated  or  unexpected  cash requirements, or that we will be successful in
achieving  positive  cash  flow  from operations or obtaining adequate financing
through  our  credit  facility.  Our  future  cash  requirements are expected to
depend  on  numerous  factors, including, but not limited to: (i) the ability to
generate  positive  cash  flow  from  operations;  (ii)  the  ability  to  raise
additional  capital  or  obtain  additional  financing;  and  (iii)  economic
conditions.  In  the event that sufficient positive cash flow from operations is
not  generated,  we  will seek additional financing to satisfy current operating
cash  flow  deficiencies.  There  can  be no assurance, however, that additional
financing  will  be  available on terms that are satisfactory to the Company, or
that any such financing will be sufficient to provide the full amount of funding
necessary.

On  May  17,  2007,  our  Board  of  Directors and a majority of the outstanding
shareholders  approved  an  increase in the authorized number of Sentry's common
shares  from  160,000,000  to  190,000,000,  principally  in  order  to meet the
requirements  of  the  Brookfield  Technology  Fund  investment.

The table below summarizes aggregate maturities contractual obligations as of
December 31, 2007.

<TABLE>
<CAPTION>
<S>                        <C>           <C>        <C>       <C>     <C>
Contractual                              Less than     1-3     4-5    After 5
Obligations                   Total       1 Year      Years   Years    Years
-----------                              ---------    -----   -----   -------
                                                 (In Thousands)

Operating leases           $     465     $   277    $  184    $  4    $    -
Capital leases                    11           3         6       2         -
Loan to directors                141         141         -       -         -
Notes payable                     36          36         -       -         -
Convertible debentures         2,000       2,000         -       -         -
                           ---------     -------    ------    ------  -------
Total                      $   2,653     $ 2,457    $  190    $  6    $    -
                           =========     =======    ======    ======  =======
</TABLE>

As  of  April  11,  2008,  Brookfield  extended its maturity of the debenture to
December  31,  2008 subject to fully vested warrants for the purchase of up to 5
million  common  shares  of the Company, exercisable until April 30, 2010, at an
exercise  price  of  $0.10  per  share,  registered  in  the name of Brookfield.


RECENT  ACCOUNTING  PRONOUNCEMENTS

In  March  2008, FASB issued SFAS 161, "Disclosures about Derivative Instruments
and  Hedging  Activities - an amendment of FASB Statement No. 133" ("SFAS 161").
SFAS  161  changes  the  disclosure  requirements for derivative instruments and
hedging  activities. Entities are required to provide enhanced disclosures about
(a)  how  and  why  an  entity  uses  derivative instruments, (b) how derivative
instruments  and  related hedged items are accounted for under Statement 133 and
its  related  interpretations,  and  (c)  how derivative instruments and related
hedged  items  affect an entity's financial position, financial performance, and
cash flows. SFAS 161 is effective for fiscal years and interim periods beginning
after November 15, 2008. The Company is currently assessing the potential impact
that  the  adoption  of  SFAS  161  could  have  on  its  financial  statements.

In  February  2008,  FASB  issued  FSP  SFAS  No. 157-2, "Effective date of FASB
Statement No. 157" ("FSP SFAS 157-2").  FSP SFAS 157-2 delays the effective date
of  SFAS  No.  157,  "Fair  Value  Measurement"  to fiscal years beginning after
November  15,  2008,  and  interim  periods  within  those  fiscal  years.

In February 2008, FASB issued FSP SFAS No. 157-1, "Application of FASB Statement
No.  157  to  FASB  Statement  No.  13  and Other Accounting Pronouncements That
Address  Fair  Value  Measurements  for  Purposes  of  Lease  Classification  or
Measurement  under Statement 13" ("FSP SFAS 157-1").  FSP SFAS 157-1 amends SFAS
157  to  exclude  FASB  Statement  No.  13,  "Accounting  for Leases", and other
accounting  pronouncements  that address fair value measurements for purposes of
lease  classification or measurement under FASB Statement No. 13.  However, this
scope  exception  does not apply to assets acquired and liabilities assumed in a
business  combination  that are required to be measured at fair value under FASB
Statement  No.  141, "Business Combinations", or FASB Statement No. 141 (revised
2007),  "Business  Combinations",  regardless  of  whether  those  assets  and
liabilities are related to leases.  FSP SFAS 157-1 is effective upon the initial
adoption  of  SFAS  157.

In February 2008, FASB issued FSP SOP 07-1-1, "Effective Date of AICPA Statement
of  Position 07-1" ("SOP 07-1-1").  SOP 07-1-1 delays indefinitely the effective
date  of  AICPA  Statement  of Position 07-1, "Clarification of the Scope of the
Audit  and  Accounting  Guide  Investment  Companies  and  Accounting  by Parent
Companies  and Equity Method Investors for Investments in Investment Companies''
("SOP  No.  07-1").  SOP  No.  07-1  clarifies  when  an  entity  may  apply the
provisions  of the Guide.  Investment companies that are within the scope of the
Guide  report  investments  at  fair  value;  consolidation or use of the equity
method  for  investments  is  generally  not  appropriate.  SOP  No.  07-1  also
addresses the retention of specialized investment company accounting by a parent
company  in  consolidation  or  by  an  equity  method investor.  The Company is
currently  reviewing  the effect, if any; the proposed guidance will have on its
financial  statements.

In  February  2008,  FASB  issued FASB Staff Position ("FSP") on SFAS No. 140-3,
"Accounting  for  Transfers  of  Financial  Assets  and  Repurchase  Financing
Transactions"  ("FSP  SFAS  140-3").  The  objective  of  this FSP is to provide
guidance  on  accounting  for  a  transfer of a financial asset and a repurchase
financing.  This  FSP presumes that an initial transfer of a financial asset and
a  repurchase  financing  are  considered  part  of the same arrangement (linked
transaction)  under  SFAS  No.  140,  "Accounting for Transfers and Servicing of
Financial  Assets and Extinguishments of Liabilities" ("SFAS 140").  However, if
certain  criteria  are  met, the initial transfer and repurchase financing shall
not be evaluated as a linked transaction and shall be evaluated separately under
SFAS  No.  140.  FSP SFAS 140-3 is effective for financial statements issued for
fiscal years beginning after November 15, 2008, and interim periods within these
fiscal  years.  Earlier  application is not permitted.  The Company is currently
reviewing  the  effect, if any; the proposed guidance will have on its financial
statements.

In  December  2007,  FASB  issued  SFAS  No.  160,  "Noncontrolling Interests in
Consolidated  Financial Statements-amendment of Accounting Research Bulletin No.
51"  ("SFAS  160").  SFAS 160 establishes accounting and reporting standards for
the  noncontrolling  interest  in  a subsidiary and for the deconsolidation of a
subsidiary.  It also clarifies that a noncontrolling interest in a subsidiary is
an  ownership  interest  in  the  consolidated entity that should be reported as
equity  in  the consolidated financial statements. SFAS 160 also changes the way
the  consolidated  income  statement  is presented by requiring consolidated net
income  to  be reported at amounts that include the amounts attributable to both
the  parent and the noncontrolling interest. It also requires disclosure, on the
face of the consolidated statement of income, of the amounts of consolidated net
income  attributable  to the parent and to the noncontrolling interest. SFAS 160
requires  that a parent recognize a gain or loss in net income when a subsidiary
is  deconsolidated  and  requires  expanded  disclosures  in  the  consolidated
financial statements that clearly identify and distinguish between the interests
of  the  parent  owners  and  the  interests  of  the noncontrolling owners of a
subsidiary. SFAS 160 is effective for fiscal periods, and interim periods within
those  fiscal  years,  beginning  on  or after December 15, 2008. The Company is
currently  assessing  the  potential  impact that the adoption of SFAS 160 could
have  on  its  financial  statements.

In  December  2007,  FASB  issued  SFAS  No.  141  (revised  2007),  "Business
Combinations"  ("SFAS  141(R)"). This statement replaces SFAS No. 141, "Business
Combinations"  and  requires  an  acquirer to recognize the assets acquired, the
liabilities assumed, including those arising from contractual contingencies, any
contingent consideration, and any noncontrolling interest in the acquiree at the
acquisition  date,  measured  at their fair values as of that date, with limited
exceptions specified in the statement. SFAS 141(R) also requires the acquirer in
a  business  combination  achieved  in  stages  (sometimes referred to as a step
acquisition)  to  recognize  the identifiable assets and liabilities, as well as
the  noncontrolling  interest in the acquiree, at the full amounts of their fair
values  (or  other  amounts  determined  in  accordance  with  SFAS  141(R)). In
addition,  SFAS  141(R)'s  requirement to measure the noncontrolling interest in
the  acquiree at fair value will result in recognizing the goodwill attributable
to the noncontrolling interest in addition to that attributable to the acquirer.
SFAS  141(R)  amends SFAS No. 109, "Accounting for Income Taxes", to require the
acquirer  to  recognize  changes in the amount of its deferred tax benefits that
are  recognizable  because  of  a  business  combination  either  in income from
continuing  operations  in  the  period  of  the  combination  or  directly  in
contributed  capital,  depending  on the circumstances. It also amends SFAS 142,
"Goodwill and Other Intangible Assets", to, among other things, provide guidance
on the impairment testing of acquired research and development intangible assets
and  assets  that  the  acquirer  intends  not  to  use.  SFAS  141(R)  applies
prospectively  to  business combinations for which the acquisition date is on or
after  the  beginning of the first annual reporting period beginning on or after
December  15, 2008. The Company is currently assessing the potential impact that
the  adoption  of  SFAS  141(R)  could  have  on  its  financial  statements.

In  April  2007,  the  FASB  issued  a  FASB  Statement Position ("FSP") on FASB
Interpretation  ("FIN")  39-1 ("FIN 39-1") which modifies FIN 39, "Offsetting of
Amounts relating to Certain Contracts" ("FIN 39").  FIN 39-1 addresses whether a
reporting  entity  that is party to a master netting arrangement can offset fair
value amounts recognized for the right to reclaim cash collateral (a receivable)
or  the  obligation  to  return  cash  collateral (a payable) against fair value
amounts  recognized  for  derivative instruments that have been offset under the
same  master  netting  arrangement  in accordance with FIN 39.  Upon adoption of
this  FASB  Staff  Position  ("FSP"),  a  reporting entity shall be permitted to
change  its  accounting  policy  to  offset  or  not  offset  fair value amounts
recognized  for  derivative  instruments under master netting arrangements.  The
guidance  in this FSP is effective for fiscal years beginning after November 15,
2007.  The  Company  is currently assessing the potential impact of implementing
this  standard.

In February 2007, FASB issued SFAS No. 159, "The Fair Value Option for Financial
Assets  and  Financial  Liabilities"  ("SFAS 159"). SFAS 159 permits entities to
choose  to  measure many financial instruments, and certain other items, at fair
value.  SFAS  No.  159 applies to reporting periods beginning after November 15,
2007.  The Company is currently assessing the potential impact that the adoption
of  SFAS  159  could  have  on  its  financial  statements.

In  September 2006, FASB issued SFAS No. 158, "Employers' Accounting for Defined
Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements
No.  87,  88,  106,  and  132(R)" ("SFAS 158"). The Company has adopted SFAS 158
except  for the requirement to measure plan assets and benefit obligations as of
the date of the Company's fiscal year-end statement of financial position, which
is  effective  to fiscal years beginning after December 15, 2008. The Company is
currently  assessing  the  potential  impact that the adoption of SFAS 158 could
have  on  its  financial  statements.

In  September  2006,  the  Financial  Accounting Standards Board ("FASB") issued
Statement  of  Financial  Accounting  Standards  ("SFAS")  No.  157, "Fair Value
Measurements"  ("SFAS  157"), which is effective to fiscal years beginning after
November  15,  2007,  and  interim  periods  within those fiscal years. SFAS 157
defines  fair  value,  establishes  a  framework  for  measuring  fair  value in
accordance  with  generally  accepted  accounting  principles,  and  expands
disclosures  about  fair value measurements. SFAS 157 codifies the definition of
fair  value  as  the  price  that  would be received to sell an asset or paid to
transfer  a  liability  in an orderly transaction between market participants at
the measurement date. SFAS 157 clarifies the principle that fair value should be
based on the assumptions market participants would use when pricing the asset or
liability  and  establishes  a  fair  value  hierarchy  that  prioritizes  the
information  used  to  develop  those  assumptions.  The  Company  is  currently
assessing  the  potential impact that the adoption of SFAS 157 could have on its
financial  statements.


INFLATION

The Company does not consider inflation to have a material impact on the results
of  operations.


CAUTIONARY  STATEMENT  REGARDING  FORWARD-LOOKING  STATEMENTS

The  "Management's  Discussion  and  Analysis  or  Plan  of Operation" and other
sections  of  this  Annual  Report  on  Form  10-KSB  contain  "forward-looking
statements"  (as defined in the Private Securities Litigation Reform Act of 1995
or  the  "PSLRA")  that  are  based  on  current  expectations,  estimates  and
projections  about  the  industry  in  which  the  Company  operates, as well as
management's  beliefs  and  assumptions.  Words such as "expects," "anticipates"
and  "believes"  and  variations of such words and similar expressions generally
indicate  that  a  statement  is  forward-looking.  The  Company  wishes to take
advantage  of  the  "safe  harbor" provisions of the PSLRA by cautioning readers
that  many  important  factors  discussed  herein,  among  others, may cause the
Company's  results  of  operations  to  differ  from  those  expressed  in  the
forward-looking statements.  These factors include:  (i) the risk that any delay
or  cancellation of orders from one or more of Sentry's major customers may have
a  material  adverse  effect on the Company's financial condition; (ii) the risk
that  anticipated growth in the demand for the Company's products in the retail,
commercial  and  industrial sectors will not develop as expected, whether due to
competitive  pressures  in  these markets or to any other failure to gain market
acceptance  of  the  Company's products; (iii) the risk that anticipated revenue
growth  through the domestic and international dealers programs does not develop
as  expected;  (iv)  the risk that the Company may not find sufficient qualified
Service  Partners to provide future installation services; (v) the risk that the
Company  will  not  be  able  to  retain  key  personnel; (vi) the risk that the
borrowing  availability under our credit facilities will not be adequate to meet
the  Company's  growth  requirements;  and (vii) the risk arising from the large
market  position and greater financial and other resources of Sentry's principal
competitors,  as  described  under  "Item  1.  Business-Competition."

<PAGE>

ITEM  7.     FINANCIAL  STATEMENTS
--------     ---------------------


                         SENTRY TECHNOLOGY CORPORATION
                         -----------------------------
                                AND SUBSIDIARIES
                                ----------------


                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------


                     YEARS ENDED DECEMBER 31, 2007 AND 2006
                     --------------------------------------



                                    CONTENTS
                                    --------

                                                                        Page
                                                                        ----

Report  of  Independent  Registered  Public  Accounting  Firm            26

Consolidated  Balance  Sheets                                            27

Consolidated  Statements  of  Operations  and  Comprehensive  Loss       28

Consolidated  Statements  of  Stockholders'  (Deficit)  Equity           29

Consolidated  Statements  of  Cash  Flows                                30

Notes  to  Consolidated  Financial  Statements                         31 - 45



<PAGE>


            REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To  the  Board  of  Directors  and  Stockholders  of
Sentry  Technology  Corporation  and  Subsidiaries


     We  have  audited  the  accompanying  consolidated balance sheets of Sentry
Technology Corporation and Subsidiaries as of December 31, 2007 and 2006 and the
related  consolidated  statements  of  operations  and  comprehensive  loss,
stockholders'  (deficit)  equity and cash flows for each of the years in the two
year  period  ended  December  31,  2007.  These  financial  statements  are the
responsibility of the Company's management.  Our responsibility is to express an
opinion  on  these  financial  statements  based  on  our  audits.

     We  conducted  our  audits  in  accordance with the standards of the Public
Company  Accounting  Oversight  Board  (United States).  Those standards require
that  we plan and perform the audit to obtain reasonable assurance about whether
the  financial  statements are free of material misstatement.  An audit includes
examining,  on  a test basis, evidence supporting the amounts and disclosures in
the  financial  statements.  An  audit  also  includes  assessing the accounting
principles  used  and  significant  estimates  made  by  management,  as well as
evaluating  the overall financial statement presentation.  We believe our audits
provide  a  reasonable  basis  for  our  opinion.

     In  our  opinion,  the  consolidated financial statements referred to above
present  fairly,  in  all  material  respects,  the financial position of Sentry
Technology Corporation and Subsidiaries as of December 31, 2007 and 2006 and the
results  of  its  operations and its cash flows for each of the years in the two
year  period  ended  December  31, 2007 in conformity with accounting principles
generally  accepted  in  the  United  States  of  America.

     The  accompanying  consolidated  financial  statements  have  been prepared
assuming  that  the  Company  will continue as a going concern.  As discussed in
Note  2  to  the  consolidated  financial  statements,  the Company has suffered
recurring  losses from operations, lack of profitability and negative cash flows
from operations and decreased consolidated financial position as a result of not
meeting  its  business plan, which raises substantial doubt about its ability to
continue  as a going concern.  Management's plans in regard to these matters are
also  described in Note 2.  The consolidated financial statements do not include
any  adjustments  that  might  result  from  the  outcome  of  this uncertainty.


                                                  /s/  SF  Partnership,  LLP
                                                  CHARTERED  ACCOUNTANTS

TORONTO,  CANADA
April  11,  2008

<PAGE>


                         SENTRY TECHNOLOGY CORPORATION
                         -----------------------------
                                AND SUBSIDIARIES
                                ----------------
                          CONSOLIDATED BALANCE SHEETS
                          ---------------------------
                    (IN THOUSANDS, EXCEPT PAR VALUE AMOUNTS)


<TABLE>
<CAPTION>
                                                                                       December 31,
                                                                                      --------------
<S>                                                                           <C>               <C>
                                                                                     2007         2006
                                                                                   --------     --------
                              ASSETS
                              ------
Current Assets:
 Cash and cash equivalents                                                      $     256       $    360
 Short-term investments                                                               202            259
 Accounts receivable, net of allowance for doubtful accounts
   of $209 and $160, respectively                                                   3,014          2,251
 Inventory                                                                          3,299          3,005
 Prepaid expenses and other current assets                                            858            306
                                                                                ----------      ---------
Total current assets                                                                7,629          6,181
PROPERTY AND EQUIPMENT, net                                                           634            609
GOODWILL                                                                              ---          1,564
OTHER ASSETS                                                                          269            480
                                                                                ----------      ---------
          TOTAL ASSETS                                                          $   8,532       $  8,834
                                                                                ==========      =========

LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
----------------------------------------------------------------------------
Current Liabilities:
 Bank indebtedness, demand loan and revolving line of credit                    $   4,551       $  3,030
 Accounts payable                                                                   1,223            609
 Accrued liabilities                                                                1,539          1,078
 Obligations under capital leases - current portion                                     2              3
 Deferred income                                                                      145            185
                                                                                ----------      ---------
Total current liabilities                                                           7,460          4,905

OBLIGATIONS UNDER CAPITAL LEASES - less current portion                                 7              8
DEFERRED TAX LIABILITY                                                                117             91
CONVERTIBLE DEBENTURE                                                               1,986          1,945
                                                                                ----------      ---------
Total liabilities                                                                   9,570          6,949

MINORITY INTEREST                                                                   1,200          1,237

COMMITMENTS AND CONTINGENCIES (Note 11)

STOCKHOLDERS' (DEFICIT) EQUITY:
       Preferred stock, $0.001 par value; authorized 10,000 (2006 - 10,000)
              shares, none issued and outstanding
 Common stock, $0.001 par value; authorized 190,000 (2006 - 160,000)
             shares; issued and outstanding 120,744 (2006 - 120,744) shares           121            121
 Additional paid-in capital                                                        49,420         49,037
 Accumulated deficit                                                              (52,390)       (48,712)
      Accumulated other comprehensive income                                          611            202
                                                                                ----------      ---------
Total stockholders' (deficit) equity                                               (2,238)           648
                                                                                ----------      ---------
          TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY                  $   8,532       $  8,834
                                                                                ==========      =========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statement.

<PAGE>

                         SENTRY TECHNOLOGY CORPORATION
                         -----------------------------
                                AND SUBSIDIARIES
                                ----------------
          CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
          ------------------------------------------------------------
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
                                                             Years Ended December 31,
                                                            --------------------------
                                                            2007                  2006
                                                           ------                ------
<S>                                                     <C>                    <C>
REVENUES:
 Sales                                                  $   11,051             $   10,212
 Service, installation and other revenues                    2,447                  1,923
                                                        ----------             ----------
                                                            13,498                 12,135
                                                        ----------             ----------
COST OF SALES AND EXPENSES:
 Cost of sales                                               6,215                  5,374
 Customer service expenses                                   2,474                  2,209
 Selling, general and administrative expenses                5,394                  5,296
 Research and development                                      688                    838
                                                        ----------              ---------
                                                            14,771                 13,717
                                                        ----------              ---------
OPERATING LOSS                                              (1,273)                (1,582)
GOODWILL IMPAIRMENT                                          1,564                    ---
INTEREST AND FINANCING EXPENSE, net                            918                    473
                                                        ----------              ---------
LOSS BEFORE INCOME TAXES AND MINORITY INTEREST              (3,755)                (2,055)
INCOME TAX (BENEFIT) EXPENSE                                   (40)                   145
                                                        ----------              ---------
LOSS BEFORE MINORITY INTEREST                               (3,715)                (2,200)
MINORITY INTEREST                                               37                   (104)
                                                        ----------              ---------
NET LOSS                                                $   (3,678)             $  (2,304)
                                                        ==========              =========

OTHER COMPREHENSIVE LOSS:
     Foreign Currency Translation Adjustments                 (409)                   ---
                                                        ----------              ---------
COMPREHENSIVE LOSS                                      $   (3,269)             $  (2,304)
                                                        ==========              =========

LOSS PER SHARE
     Basic and diluted                                  $    (0.03)             $   (0.02)
                                                        ==========              =========

WEIGHTED AVERAGE NUMBER OF COMMON SHARES
     OUTSTANDING
     Basic and diluted                                     120,744                120,716
                                                        ==========              =========

</TABLE>

 The accompanying notes are an integral part of these consolidated financial
 statements.

<PAGE>

                         SENTRY TECHNOLOGY CORPORATION
                         -----------------------------
                                AND SUBSIDIARIES
                                ----------------
           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY
           ---------------------------------------------------------
                                 (IN THOUSANDS)
                     YEARS ENDED DECEMBER 31, 2007 AND 2006
                     --------------------------------------

<TABLE>
<CAPTION>


<S>                                            <C>           <C>       <C>           <C>              <C>            <C>
                                                                                                  Accumulated         Total
                                                                   Additional                        Other         Stockholders'
                                                  Common Stock      Paid-in      Accumulated     Comprehensive        Equity
                                               Shares     Amount    Capital        Deficit           Income         (Deficit)
                                               ------     ------   -----------  -------------    -------------    ---------------

BALANCE, January 1, 2006                      120,629    $  121    $   48,783    $    (46,408)    $      202      $    2,698
Net loss for the period                             -         -             -          (2,304)             -          (2,304)
Exercise of stock options for cash                115         -             7               -              -               7
Stock-based compensation                            -         -            35               -              -              35
Warrants issued                                     -         -           212               -              -             212
                                           -----------   -------   ----------    -------------    -----------     -----------

BALANCE, December 31, 2006                    120,744    $  121    $   49,037    $    (48,712)    $      202      $      648
                                           ===========   =======   ==========    =============    ===========     ===========



BALANCE, January 1, 2007                      120,744    $  121    $   49,037    $    (48,712)    $      202      $      648
Net loss for the period                             -         -             -          (3,678)             -          (3,678)
Stock-based compensation                            -         -            26               -              -              26
Warrants issued                                     -         -           357               -              -             357
Equity adjustment from foreign currency
     translation                                    -         -             -               -            409             409
                                           -----------   -------   -----------   -------------    -----------     -----------

BALANCE, DECEMBER 31, 2007                    120,744    $  121    $   49,420    $    (52,390)    $      611      $   (2,238)

</TABLE>


The accompanying notes are an integral part of these consolidated financial
statements.

<PAGE>

                 SENTRY TECHNOLOGY CORPORATION AND SUBSIDIARIES
                 ----------------------------------------------
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                     -------------------------------------
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                             Years Ended December 31,
                                                                             ------------------------

<S>                                                                       <C>                 <C>
                                                                              2007                2006
                                                                            --------            --------
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net loss                                                                 $  (3,678)          $  (2,304)
 Adjustments to reconcile net loss to net cash
   (used in) provided by operating activities:
   Depreciation                                                                 125                 150
   Amortization of intangibles and other assets                                 133                 188
   Deferred income taxes                                                          9                  33
   Non-cash consideration
       Stock based compensation                                                  26                  35
       Warrant amortization included in interest                                336                  92
       Amortization of convertible debenture included in interest                41                  41
   Goodwill impairment                                                        1,564                 ---
   Minority interest in net income of consolidated subsidiary                   (37)                 97
 Changes in operating assets and liabilities:
   Accounts receivable                                                         (431)                511
   Inventory                                                                   (218)               (296)
   Prepaid expenses and other assets                                           (497)                 12
   Accounts payable                                                             583                 120
   Accrued liabilities                                                          411                 153
   Deferred income                                                              (17)                 50
                                                                            --------          ----------
 Net cash used in operating activities                                       (1,650)             (1,118)
                                                                            --------          ----------

CASH FLOWS FROM INVESTING ACTIVITIES:
 Changes in short-term investments                                              105                 138
 Purchases of property and equipment                                            (53)               (112)
 Other assets                                                                   (30)                 15
                                                                            --------          ----------
 Net cash provided by investing activities                                       22                  41
                                                                            --------          ----------

CASH FLOWS FROM FINANCING ACTIVITIES:
 Net borrowing on the demand loan and revolving line of credit                1,047                 991
 Repayment of obligations under capital leases                                   (2)                 (6)
 Proceeds of sale of stock, net                                                 ---                   7
                                                                            --------          ----------
 Net cash provided by financing activities                                    1,045                 992
                                                                            --------          ----------

EFFECT OF EXCHANGE RATE CHANGES                                                 479                 ---
                                                                            --------          ----------

DECREASE IN CASH AND CASH EQUIVALENTS                                          (104)                (85)
CASH AND CASH EQUIVALENTS, beginning of year                                    360                 445
                                                                            --------          ----------
CASH AND CASH EQUIVALENTS, end of year                                      $   256           $     360
                                                                            ========          ==========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
 Cash paid during the year for:
 Interest                                                                   $   547           $     348
                                                                            ========          ==========
 Income taxes                                                               $    89           $       8
                                                                            ========          ==========

 Non-cash financial activities:
 Issuance of warrants relating to bank guarantees (Note 7)                  $   357           $     211
                                                                            ========          ==========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

<PAGE>

                         SENTRY TECHNOLOGY CORPORATION
                         -----------------------------
                                AND SUBSIDIARIES
                                ----------------

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------

                     YEARS ENDED DECEMBER 31, 2007 AND 2006
                     --------------------------------------


1.     OPERATIONS  AND  ORGANIZATION:
       -----------------------------

     a.     Business
            --------

          Sentry Technology Corporation, a publicly traded Delaware Corporation,
was  established  on  February 12, 1997.  Its corporate predecessors had been in
business  for  more  than  40  years.  Sentry  Technology  Corporation  and  its
subsidiaries  ("Sentry"  or  the  "Company"),  are  engaged  in  the  design,
manufacture,  distribution,  installation  and service of systems designed to be
used  by retailers to deter shoplifting and internal theft and by industrial and
institutional  customers  to  protect  assets  and  people.


2.     GOING  CONCERN:
       --------------

     The  accompanying  consolidated  financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America  with the assumption that the Company will be able to realize its assets
and  discharge  its  liabilities  in  the  normal  course  of  business.

     The  Company has incurred operating losses and decreased financial position
as  a  result  of  not  meeting  its  business  plan.  The Company had losses of
approximately  $3.7  million  for  the year ended December 31, 2007 (2006 - $2.3
million)  and as of December 31, 2007, the Company had an accumulated deficit of
approximately  $2.2  million  (2006  -  equity of $0.6 million).   The Company's
continuation as a going concern is uncertain.  The Company is in discussion with
its  primary  lenders  who  have agreed to waive certain breaches in the lending
agreement  at  April  11,  2008  on  the  basis  that a forbearance agreement be
finalized.  The  Company's  convertible  debenture holders have agreed to extend
maturity  to  December  31,  2008.  Management's  plan  is  to  pursue  raising
additional  funds  through  future  equity  or  debt  financing  to  satisfy its
commitments  to  its primary lenders and meet its obligations to the convertible
debenture holders until it achieves profitable operations.  Although the Company
plans to pursue additional financing, there can be no assurance that the Company
will  be  able  to  secure  financing  when  needed  or  obtain  such  on  terms
satisfactory  to  the Company, if at all.  The Company's continuation as a going
concern  depends  upon  its  ability  to  raise  funds  and  achieve and sustain
profitable  operations.

     The  accompanying  consolidated  financial  statements  do  not include any
adjustments  to  reflect  the  possible future effects on the recoverability and
classification  of  assets or the amounts and classification of liabilities that
may  result  from  the  inability of the Company to continue as a going concern.


3.     SIGNIFICANT  ACCOUNTING  POLICIES:
       ---------------------------------

     a.     Principles  of  consolidation
            -----------------------------

     The  consolidated  financial statements include the accounts of the Company
and  its  wholly-owned (Sentry Technology Canada Inc. and Knogo Caribe Inc.) and
majority-owned  (Custom Security Industries Inc.) subsidiaries. All intercompany
balances  and  transactions  have  been  eliminated  upon  consolidation.

     b.     Revenue  recognition
            --------------------

     The  Company  recognizes  revenue  on  the  sale  of  security devices when
installation is complete or other post-shipment obligations have been satisfied.
For  those  products not requiring installation or if installation costs are not
material,  the  Company  recognizes  revenue  upon  shipment.

     Service revenues are recognized when services are performed and maintenance
revenues  are  recognized  ratably  over  the  service  contract  period.

     Included  in accounts receivable at December 31, 2007 and 2006 are unbilled
accounts  receivable  of  $18,000  and  $97,000,  respectively.

     c.     Deferred  income
            ----------------

     Deferred  income  consists  of  maintenance  contracts  billed  or  paid in
advance.

     d.     Cash  and  cash  equivalents
            ----------------------------

     The Company considers all highly liquid temporary investments with original
maturities  of  less  than  ninety  days  to be cash equivalents. Temporary cash
investments  are  placed  with  high  credit  quality financial institutions. At
times, the Company's cash deposits with any one financial institution may exceed
federally  insured  limits.

     e.     Short-term  investments
            -----------------------

     Short-term  investments  include  highly  liquid  investments  with initial
maturity  of between three and twelve months. Included in short-term investments
in 2007 and 2006 is $100,000 and $85,000, respectively, of restricted funds used
as  collateral  on  Banker's  Acceptances.

     f.     Allowance  for  doubtful  accounts
            ----------------------------------

     Losses  from  uncollectible  accounts  are  provided  for  by utilizing the
allowance  for  doubtful  accounts  method  based  upon management's estimate of
uncollectible  amounts. Management specifically analyzes accounts receivable and
analyzes  potential  bad  debts,  customer  concentrations,  credit  worthiness,
current  economic  trends  and changes in customer payment terms when evaluating
the  allowance  for  doubtful  accounts.

     g.     Inventory
            ---------

     Inventory  is  stated  at the lower of cost (first-in, first-out method) or
market.

     h.     Product  warranty
            -----------------

     Provisions for estimated expenses related to product warranties are made at
the  time  products  are  sold  and  are  included in accrued liabilities. These
estimates are established using historical information on the nature, frequency,
and  average  cost  of  warranty  claims.

     i.     Property  and  equipment
            ------------------------

     Property  and  equipment are  stated  at cost. Depreciation of property and
equipment  is  provided  for  using  the straight-line method over their related
estimated  useful  lives.

     j.     Other  assets
            -------------

     Other  assets  consist  of  security deposits receivable, patents, deferred
charges  and  other  intangibles  (including  trade  secrets  and  customer
relationships).  Cost  and  expenses  incurred  in  obtaining  patents and other
intangibles  are  amortized  over  the  remaining  life of the patents and other
intangibles,  not  exceeding  17  years,  on  a  straight-line  basis.

     k.     Goodwill
            --------

     Goodwill  represents  the excess of acquisition cost over the fair value of
net  assets  acquired  in business combinations. In accordance with Statement of
Financial  Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible
Assets",  goodwill  is  not  amortized but reviewed annually for impairment. The
Company  is  unable to justify the carrying value of the goodwill as a result of
inadequate  cash, therefore, a charge to income in 2007 of $1,564,000 was
recognized,  representing  the  entire  balance  of  goodwill.

     l.     Comprehensive income (loss)
            ---------------------------

     The  Company  accounts  for  comprehensive income (loss) in accordance with
SFAS  No.  130,  "Reporting Comprehensive Income" ("SFAS No. 130"). SFAS No. 130
establishes  standards  for  reporting  and presentation of comprehensive income
(loss)  and  its components in a full set of financial statements. Comprehensive
income  (loss)  is  presented  in  the  statements  of stockholders' equity, and
consists  of  net earnings (loss) and unrealized gains (losses) on available for
sale marketable securities; foreign currency translation adjustments; changes in
market  value  of  future contracts that qualify as a hedge; and negative equity
adjustments recognized in accordance with SFAS No. 87 "Employers' Accounting for
Pensions".  SFAS  No.  130 requires only additional disclosures in the financial
statements  and  does  not affect the Company's financial position or results of
operations.

     m.     Impairment  of  long-lived  assets
            ----------------------------------

     The Company reviews its long-lived assets for impairment whenever events or
changes  in  circumstances indicate that the carrying amount of these assets may
not  be  fully  recoverable  in  accordance  with  SFAS No. 144, "Accounting for
Impairment or Disposal of Long-Lived Assets." To determine recoverability of its
long-lived  assets,  the  Company  evaluates  the  probability  that  future
undiscounted  net  cash  flows,  without interest charges, will be less than the
carrying amount of the assets. Impairment is measured at fair value. The Company
completed  its annual review of impairment and determined that long-lived assets
were  not  impaired.

     n.     Income  taxes
            -------------

     The  Company  accounts for income taxes under SFAS No. 109, "Accounting for
Income  Taxes",  which  requires  an  asset  and liability approach to financial
accounting  and  reporting for income taxes. Deferred tax assets and liabilities
are determined based on differences between financial reporting and tax bases of
assets  and  liabilities,  and are measured using the enacted tax rates and laws
that  will be in effect when the differences are expected to reverse. Management
provides a valuation allowance against deferred tax assets for amounts which are
not  considered  "more  likely  than  not"  to  be  realized.

     The  Company  adopted  the  provisions  of  FASB  Interpretation  No.  48,
"Accounting  for  Uncertainty in Income Taxes" ("Interpretation 48"), on January
1, 2007. There was no effect on the Company's financial statements at January 1,
2007  resulting from the implementation of Interpretation 48 since there were no
unrecognized  tax  benefits  at  January  1,  2007.

     There  were  no additions or reductions in unrecognized tax benefits during
the  year  ended  December  31,  2007.

     o.     Stock-based  compensation
            -------------------------

     The  Company  accounts  for stock-based compensation in accordance with the
provisions  of  SFAS  No.  123(R),  "Share-Based  Payment",  and  related
interpretations, or "SFAS No. 123(R)", using the modified prospective transition
method  and  therefore  will  not restate prior period results.  SFAS No. 123(R)
supersedes  Accounting  Principles Board ("APB") Opinion No. 25, "Accounting for
Stock  Issued  to  Employees",  ("APB No. 25"), and revises guidance in SFAS No.
123,  "Accounting  for  Stock-Based Compensation", ("SFAS No. 123"). Among other
things,  SFAS No. 123(R) requires that compensation expense be recognized in the
financial  statements  for share-based awards based on the grant date fair value
of  those  awards.  The  modified  prospective  transition method applies to (a)
unvested  stock  options  under the 1997 and 2007 Stock Incentive Plans based on
the  grant date fair value estimated in accordance with the pro forma provisions
of  SFAS  No.  123,  and  (b)  any  new share-based awards granted, based on the
grant-date  fair  value  estimated in accordance with the provisions of SFAS No.
123(R).  Additionally, stock-based compensation expense includes an estimate for
pre-vesting  forfeitures and is recognized over the requisite service periods of
the  awards  on  a straight-line basis, which is generally commensurate with the
vesting  term.

     SFAS  No.  123(R)  requires  the benefits associated with tax deductions in
excess  of  recognized compensation cost to be reported as a financing cash flow
rather  than  as  an  operating cash flow as previously required. In 2007 and in
2006,  the  Company  did not record any excess tax benefit generated from option
exercises.

     p.     Convertible  debenture  with  stock  purchase  warrants
            -------------------------------------------------------

     The  Company  has  issued  convertible  debt with non-detachable conversion
features  and  detachable  warrants.  The  values  assigned  to the warrants and
embedded  conversion  feature  of the debt are based on the guidance of Emerging
Issue  Task Force ("EITF") No. 98-5, "Accounting for Convertible Securities with
Beneficial  Conversion  Features  or  Contingently Adjustable Conversion Ratios"
("EITF  No.  98-5"),  EITF  No.  00-19,  "Accounting  for  Derivative  Financial
Instruments  to,  and  Potentially Settled in, a Company's Own Stock" ("EITF No.
00-19"),  SFAS  No.  150,  "Accounting  for  Certain  Financial Instruments with
Characteristics  of  both  Liabilities and Equity" ("SFAS No. 150") and EITF No.
00-27,  "Application of Issue No. 98-5 to Certain Convertible Instruments of the
FASB's  Emerging  Issues  Task  Force"  ("EITF  No.  00-27"). The non-detachable
conversion  feature  and  detachable  warrants are recorded as a discount to the
related  debt  either  as  additional paid-in capital or a derivative liability,
depending  on  the  guidance,  using the intrinsic value method or relative fair
value  method,  respectively. The debt discount associated with the warrants and
embedded  conversion  feature, if any, is amortized to interest expense over the
life  of  the debenture or upon earlier conversion of the debenture using either
the  effective  yield  method  or  the  straight-line  method,  as  appropriate.

     q.     Foreign  currency  translation
            ------------------------------

     The  functional  currency  of  the  Company's foreign entities is the local
currency.  The  translation of foreign currencies into U.S. dollars is performed
for  balance  sheet  accounts  using the exchange rates in effect at the balance
sheet  dates  and  for  revenue  and  expense  accounts using a weighted average
exchange  rate  during  the  year.  The  gains  or  losses  resulting  from  the
translation  are  included  in  Accumulated  Other  Comprehensive  Income in the
Consolidated  Statement  of Stockholders' (Deficit) Equity and are excluded from
net  income  (loss). Foreign exchange transaction gains (losses) are included in
selling,  general  and  administrative  expenses  and  amounted to approximately
($607,000)  and  $42,000  for  the  years  ended  December  31,  2007  and 2006,
respectively.

     r.     Shipping  and  handling  costs
            ------------------------------

     Shipping  and  handling  costs  are  included  in  selling,  general  and
administrative expenses and approximated $303,000 and $322,000 in 2007 and 2006,
respectively.

     s.     Use  of  estimates
            ------------------

     The  preparation  of  financial  statements  in  conformity with accounting
principles  generally  accepted  in  the  United  States  of  America  requires
management to make estimates and assumptions that affect the reported amounts of
assets  and  liabilities  and disclosure of contingent assets and liabilities at
the  date  of  the financial statements and the reported amounts of revenues and
expenses  during  the  reporting  period. Actual results could differ from those
estimates.

     t.     Asset  retirement  obligations
            ------------------------------

     The  Company  accounts  for asset retirement obligations in accordance with
SFAS No. 143, "Accounting for Asset Retirement Obligations", which requires that
the  fair  value of an asset retirement obligation be recorded as a liability in
the  period  in  which  a  company  incurs  the  obligation.

     u.     Reclassifications
            -----------------

     Certain  prior  year  balances have been reclassified to conform to current
year  classifications.

     v.     Recent  accounting  pronouncements
            ----------------------------------

     In  March  2008,  the  Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 161, "Disclosures about
Derivative  Instruments  and Hedging Activities - an amendment of FASB Statement
No.  133"  ("SFAS  161").  SFAS  161  changes  the  disclosure  requirements for
derivative  instruments and hedging activities. Entities are required to provide
enhanced  disclosures  about  (a)  how  and  why  an  entity  uses  derivative
instruments,  (b)  how  derivative  instruments  and  related  hedged  items are
accounted  for  under Statement 133 and its related interpretations, and (c) how
derivative  instruments  and  related  hedged items affect an entity's financial
position,  financial  performance,  and  cash  flows.  SFAS 161 is effective for
fiscal  years and interim periods beginning after November 15, 2008. The Company
is  currently assessing the potential impact that the adoption of SFAS 161 could
have  on  its  consolidated  financial  statements.

     In  February  2008, FASB issued FSP SFAS No. 157-2, "Effective date of FASB
Statement  No. 157" ("FSP SFAS 157-2"). FSP SFAS 157-2 delays the effective date
of  SFAS  No.  157,  "Fair  Value  Measurement"  to fiscal years beginning after
November  15,  2008,  and  interim  periods  within  those  fiscal  years.

     In  February  2008,  FASB  issued  FSP SFAS No. 157-1, "Application of FASB
Statement  No.  157 to FASB Statement No. 13 and Other Accounting Pronouncements
That  Address  Fair  Value  Measurements for Purposes of Lease Classification or
Measurement  under  Statement 13" ("FSP SFAS 157-1"). FSP SFAS 157-1 amends SFAS
157  to  exclude  FASB  Statement  No.  13,  "Accounting  for Leases", and other
accounting  pronouncements  that address fair value measurements for purposes of
lease  classification  or measurement under FASB Statement No. 13. However, this
scope  exception  does not apply to assets acquired and liabilities assumed in a
business  combination  that are required to be measured at fair value under FASB
Statement  No.  141, "Business Combinations", or FASB Statement No. 141 (revised
2007),  "Business  Combinations",  regardless  of  whether  those  assets  and
liabilities  are related to leases. FSP SFAS 157-1 is effective upon the initial
adoption  of  SFAS  157.

     In  February  2008,  FASB  issued  FSP SOP 07-1-1, "Effective Date of AICPA
Statement  of  Position 07-1" ("SOP 07-1-1"). SOP 07-1-1 delays indefinitely the
effective  date of AICPA Statement of Position 07-1, "Clarification of the Scope
of  the Audit and Accounting Guide Investment Companies and Accounting by Parent
Companies  and Equity Method Investors for Investments in Investment Companies''
("SOP No. 07-1"). SOP No. 07-1 clarifies when an entity may apply the provisions
of the Guide. Investment companies that are within the scope of the Guide report
investments  at  fair  value;  consolidation  or  use  of  the equity method for
investments  is  generally  not  appropriate.  SOP  No.  07-1 also addresses the
retention  of  specialized  investment company accounting by a parent company in
consolidation  or  by  an  equity  method  investor.  The  Company  is currently
reviewing  the  effect,  if  any;  the  proposed  guidance  will  have  on  its
consolidated  financial  statements.

     In  February  2008,  FASB  issued  FASB  Staff Position ("FSP") on SFAS No.
140-3,  "Accounting  for  Transfers of Financial Assets and Repurchase Financing
Transactions"  ("FSP  SFAS  140-3").  The  objective  of  this FSP is to provide
guidance  on  accounting  for  a  transfer of a financial asset and a repurchase
financing. This FSP presumes that an initial transfer of a financial asset and a
repurchase  financing  are  considered  part  of  the  same  arrangement (linked
transaction)  under  SFAS  No.  140,  "Accounting for Transfers and Servicing of
Financial  Assets  and Extinguishments of Liabilities" ("SFAS 140"). However, if
certain  criteria  are  met, the initial transfer and repurchase financing shall
not be evaluated as a linked transaction and shall be evaluated separately under
SFAS  No.  140.  FSP SFAS 140-3 is effective for financial statements issued for
fiscal years beginning after November 15, 2008, and interim periods within these
fiscal  years.  Earlier  application  is not permitted. The Company is currently
reviewing  the  effect,  if  any;  the  proposed  guidance  will  have  on  its
consolidated  financial  statements.

     In  December  2007,  FASB issued SFAS No. 160, "Noncontrolling Interests in
Consolidated  Financial Statements-amendment of Accounting Research Bulletin No.
51"  ("SFAS  160").  SFAS 160 establishes accounting and reporting standards for
the  noncontrolling  interest  in  a subsidiary and for the deconsolidation of a
subsidiary.  It also clarifies that a noncontrolling interest in a subsidiary is
an  ownership  interest  in  the  consolidated entity that should be reported as
equity  in  the consolidated financial statements. SFAS 160 also changes the way
the  consolidated  income  statement  is presented by requiring consolidated net
income  to  be reported at amounts that include the amounts attributable to both
the  parent and the noncontrolling interest. It also requires disclosure, on the
face of the consolidated statement of income, of the amounts of consolidated net
income  attributable  to the parent and to the noncontrolling interest. SFAS 160
requires  that a parent recognize a gain or loss in net income when a subsidiary
is  deconsolidated  and  requires  expanded  disclosures  in  the  consolidated
financial statements that clearly identify and distinguish between the interests
of  the  parent  owners  and  the  interests  of  the noncontrolling owners of a
subsidiary. SFAS 160 is effective for fiscal periods, and interim periods within
those  fiscal  years,  beginning  on  or after December 15, 2008. The Company is
currently  assessing  the  potential  impact that the adoption of SFAS 160 could
have  on  its  consolidated  financial  statements.

     In  December  2007,  FASB  issued  SFAS  No.  141 (revised 2007), "Business
Combinations"  ("SFAS  141(R)"). This statement replaces SFAS No. 141, "Business
Combinations"  and  requires  an  acquirer to recognize the assets acquired, the
liabilities assumed, including those arising from contractual contingencies, any
contingent consideration, and any noncontrolling interest in the acquiree at the
acquisition  date,  measured  at their fair values as of that date, with limited
exceptions specified in the statement. SFAS 141(R) also requires the acquirer in
a  business  combination  achieved  in  stages  (sometimes referred to as a step
acquisition)  to  recognize  the identifiable assets and liabilities, as well as
the  noncontrolling  interest in the acquiree, at the full amounts of their fair
values  (or  other  amounts  determined  in  accordance  with  SFAS  141(R)). In
addition,  SFAS  141(R)'s  requirement to measure the noncontrolling interest in
the  acquiree at fair value will result in recognizing the goodwill attributable
to the noncontrolling interest in addition to that attributable to the acquirer.
SFAS  141(R)  amends SFAS No. 109, "Accounting for Income Taxes", to require the
acquirer  to  recognize  changes in the amount of its deferred tax benefits that
are  recognizable  because  of  a  business  combination  either  in income from
continuing  operations  in  the  period  of  the  combination  or  directly  in
contributed  capital,  depending  on the circumstances. It also amends SFAS 142,
"Goodwill and Other Intangible Assets", to, among other things, provide guidance
on the impairment testing of acquired research and development intangible assets
and  assets  that  the  acquirer  intends  not  to  use.  SFAS  141(R)  applies
prospectively  to  business combinations for which the acquisition date is on or
after  the  beginning of the first annual reporting period beginning on or after
December  15, 2008. The Company is currently assessing the potential impact that
the adoption of SFAS 141(R) could have on its consolidated financial statements.

     In  April  2007,  the FASB issued a FASB Statement Position ("FSP") on FASB
Interpretation  ("FIN")  39-1 ("FIN 39-1") which modifies FIN 39, "Offsetting of
Amounts relating to Certain Contracts" ("FIN 39").  FIN 39-1 addresses whether a
reporting  entity  that is party to a master netting arrangement can offset fair
value amounts recognized for the right to reclaim cash collateral (a receivable)
or  the  obligation  to  return  cash  collateral (a payable) against fair value
amounts  recognized  for  derivative instruments that have been offset under the
same  master  netting  arrangement  in accordance with FIN 39.  Upon adoption of
this  FASB  Staff  Position  ("FSP"),  a  reporting entity shall be permitted to
change  its  accounting  policy  to  offset  or  not  offset  fair value amounts
recognized  for  derivative  instruments under master netting arrangements.  The
guidance  in this FSP is effective for fiscal years beginning after November 15,
2007.  The  Company  is currently assessing the potential impact of implementing
this  standard.

     In  February  2007,  FASB  issued  SFAS No. 159, "The Fair Value Option for
Financial  Assets  and  Financial  Liabilities"  ("SFAS  159"). SFAS 159 permits
entities  to  choose  to  measure  many financial instruments, and certain other
items,  at fair value. SFAS No. 159 applies to reporting periods beginning after
November  15, 2007. The Company is currently assessing the potential impact that
the  adoption  of  SFAS 159 could have on its consolidated financial statements.

     In  September  2006,  FASB  issued SFAS No. 158, "Employers' Accounting for
Defined  Benefit  Pension  and Other Postretirement Plans - an amendment of FASB
Statements  No.  87,  88, 106, and 132(R)" ("SFAS 158"). The Company has adopted
SFAS  158  except  for  the  requirement  to  measure  plan  assets  and benefit
obligations  as  of  the  date  of  the  Company's  fiscal year-end statement of
financial  position, which is effective to fiscal years beginning after December
15,  2008.  The  Company  is  currently  assessing the potential impact that the
adoption  of  SFAS  158  could  have  on  its consolidated financial statements.

     In  September  2006,  FASB  issued  SFAS No. 157, "Fair Value Measurements"
("SFAS  157"),  which  is effective to fiscal years beginning after November 15,
2007,  and  interim  periods  within  those  fiscal years. SFAS 157 defines fair
value,  establishes  a  framework  for  measuring  fair value in accordance with
generally  accepted  accounting  principles,  and expands disclosures about fair
value  measurements. SFAS 157 codifies the definition of fair value as the price
that  would  be  received to sell an asset or paid to transfer a liability in an
orderly  transaction  between  market participants at the measurement date. SFAS
157  clarifies  the principle that fair value should be based on the assumptions
market  participants  would  use  when  pricing  the  asset  or  liability  and
establishes  a  fair  value  hierarchy  that prioritizes the information used to
develop  those  assumptions.  The  Company  is currently assessing the potential
impact  that  the  adoption of SFAS 157 could have on its consolidated financial
statements.

4.     INVENTORY:
       ---------
<TABLE>
<CAPTION>
Inventory consisted of the following:                 December 31,
                                                    ---------------
<S>                                            <C>         <C>
                                                    2007      2006
                                                    ----      ----
                                                    (In thousands)
                                                    --------------
Raw materials                                  $   1,288   $    938
Work-in-process                                      193        233
Finished goods                                     1,818      1,834
                                               ---------    -------
                                               $   3,299   $  3,005
                                               =========   ========
 </TABLE>


     The  components  of  inventory  shown  are  net  of reserves for excess and
obsolete  inventory  totaling  $1,350,000 and $1,285,000 as of December 31, 2007
and  2006,  respectively.


5.     PROPERTY  AND  EQUIPMENT,  NET:
       ------------------------------

     Property  and  equipment  are stated at cost and are summarized as follows:
<TABLE>
<CAPTION>
<S>                                           <C>        <C>          <C>
                                           Estimated
                                          Useful Lives        December 31,
                                             Years          2007      2006
                                                          ------------------
                                                            (In thousands)
                                                          ------------------

Machinery and equipment                      3 - 10      $  2,789    $  2,451
Furniture, fixtures and office equipment     3 - 10         2,415       2,376
Leasehold improvements                       3 - 5             96          92
                                                         ---------   ---------
                                                            5,300       4,919
Less accumulated depreciation                               4,666       4,310
                                                         ---------   ---------
                                                         $    634    $    609
                                                         =========   =========
</TABLE>


     Net  property  and  equipment  located  in Canada approximated $619,000 and
$553,000  in  2007  and  2006. Depreciation expense on property and equipment in
2007  and  2006  totaled  $125,000  and  $150,000,  respectively.

6.     OTHER  ASSETS:
       -------------
<TABLE>
<CAPTION>
Other assets consist of the following:
                                                       December 31,
<S>                                               <C>         <C>
                                                    2007        2006
                                                    ----------------
                                                     (In thousands)
                                                    ----------------
Deferred charges                                  $     -     $   156
Intangibles, net                                       256        311
Other                                                   13         13
                                                  ---------   --------
                                                  $    269    $   480
                                                  =========   ========
</TABLE>
     Amortization expense on other assets in 2007 and 2006 totaled $133,000
and $188,000, respectively.


7.  BANK INDEBTEDNESS, DEMAND LOAN, REVOLVING LINE OF CREDIT:
    ---------------------------------------------------------

Balances under credit facilities consist of the following:
<TABLE>
<CAPTION>
                                                         December 31,
                                                         ------------
                                                      2007         2006
                                                      ----         ----
                                                        (In thousands)
                                                      -----------------
<S>                                                  <C>          <C>
Royal Bank of Canada ("RBC") - Bank indebtedness     $    13      $    36
Royal Bank of Canada - Demand loan                     3,488        2,519
Tradition Capital Bank - Revolving line of credit      1,050          475
                                                     --------      -------
                                                     $ 4,551      $ 3,030
                                                     ========     ========
</TABLE>

  a)     Royal  Bank  of  Canada
         -----------------------

     In  November  2006, the Company and certain of its subsidiaries amended its
secured  credit  facility  with RBC by converting the facility to a demand loan,
increasing  the interest rate and eliminating financial covenants.  In addition,
during  2006,  the  maximum borrowing under the facility was reduced to Canadian
$3.6  million  (U.S.  $3.6  million).  However, RBC increased the borrowing base
formula  by  Canadian  $1.0 million (U.S. $1,006,000) in exchange for additional
security  provided  by  two  of the Company's directors in the second quarter of
2006.  Borrowings under the facility are subject to certain limitations based on
a  percentage  of  eligible  accounts receivable and inventory as defined in the
agreement.  Interest  is payable at a rate of RBC's prime rate (6.0% at December
31,  2007), plus 2.75% per annum.  Borrowings under this facility are secured by
substantially all of the Company's assets.  As of December 31, 2007, the Company
had borrowings of $3.5 million, which exceeded the maximum available (subject to
the  above  limitations)  under  the  demand  loan.  RBC  agreed  to temporarily
increase  the  availability  to the Company by Canadian $300,000 (U.S. $302,000)
until  March  31,  2008  in  consideration  of  a  further  guarantee by certain
directors.

     At  the  end  of  the second quarter of 2006, Mr. Murdoch, Sentry's CEO and
director,  and  Mr.  Furst,  a  Sentry  director,  agreed  to provide a personal
guarantee  to  RBC,  the  Company's lender, in the amount of Canadian $1 million
(U.S.  $1,006,000)  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 received a fee of $43,000, shared
between  them,  paid  in  twelve  equal  monthly  installments.  As  additional
consideration,  they  received  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 of $120,000 was
determined in accordance with SFAS No. 123R and beginning in June 2006 was taken
into  income  over  the  period  of  the  guarantee,  which was one year.  These
guarantees expired in June 2007 and were subsequently renewed in July 2007 until
April  30,  2008.  In consideration of these guarantee renewals, Mr. Murdoch and
Mr.  Furst  will  receive a fee of $40,000 shared between them paid in ten equal
monthly  installments.  As additional consideration, they received fully vested,
two  year  warrants  to  purchase approximately 7.4 million common shares of the
Company  at  an  exercise  price  of  $0.065 per share.  The fair value of these
warrants  of  $164,000  was  determined  in  accordance  with  SFAS No. 123R and
beginning  in  July  2007  is  being  taken  into  income over the period of the
guarantee,  which  is  ten  months.  During  the  year  ended December 31, 2007,
$148,000  (2006  -  $70,000) has been recorded in interest and financing expense
related  to  these  warrants  and  $66,000  will  be  expensed  in  2008.

     As  of  April  11,  2008,  Mr. Robert Furst extended his personal guarantee
relating  to  the  RBC loan agreement to December 31, 2008.  In consideration of
this  guarantee, he will receive fully vested warrants for the purchase of up to
2  million common shares of the Company, exercisable until April 30, 2010, at an
exercise  price  of  $0.10  per  share.

     As  of  April 11 2008, the Company exceeded the maximum borrowing available
(subject  to  above  limitations) by approximately $1.0 million under the demand
loan  and  is  in  negotiations with RBC. RBC agreed to waive the violation; but
reserves  all  of  its rights and remedies under the loan agreement on the basis
that  a  forbearance  agreement  be  finalized.


   b)     Tradition  Capital  Bank
          ------------------------

     In  December  2006,  the  Company  entered  into a secured revolving credit
agreement  with  Tradition  Capital  Bank.  From  December  15, 2006 through the
expiration of the facility on June 15, 2007, the Company drew up to a maximum of
$550,000  under  the facility.  Interest was payable at Tradition Capital Bank's
prime  rate  (8.50%  at  December 31, 2007), plus 1% per annum. Borrowings under
this  facility  were  secured  by substantially all of the Company's assets in a
second  position  to  RBC.  In  addition, the loan was fully secured by personal
guarantees  of  Mr. Murdoch and Mr. Furst. In consideration of these guarantees,
Mr.  Murdoch and Mr. Furst received a fee of $14,000, between them, paid
in  six  equal  monthly  installments beginning in December 2006.  As additional
consideration,  they  received  fully  vested,  two  year  warrants  to purchase
approximately  5.2  million shares of the Company's common stock, at an exercise
price  of  $0.053  per  share.  The  fair value of these warrants of $91,000 was
determined  in  accordance with SFAS No. 123R and beginning in December 2006 was
taken  into  income over the period of the guarantee, which was six months.  The
credit  facility  and  related  guarantees  expired  in  June  2007  and  were
subsequently renewed in July 2007 until April 30, 2008.  In consideration of the
guarantee  renewals,  Mr.  Murdoch  and  Mr. Furst will receive a fee of $23,000
shared  between  them  paid  in  ten  equal monthly installments.  As additional
consideration,  they  received  fully  vested,  two  year  warrants  to purchase
approximately  4.2  million common shares of the Company at an exercise price of
$0.065 per share.  The fair value of these warrants of $94,000 was determined in
accordance  with  SFAS  No.  123R and beginning in July 2007 is being taken into
income  over  the  period  of  the  guarantee,  which  is  ten  months.

     On  September  25,  2007,  Mr.  Murdoch  and  Mr.  Furst  agreed to provide
Tradition  Capital  Bank additional personal guarantees totaling $500,000, which
increased  the  maximum the Company can draw to $1,050,000, until April 30, 2008
under  the  same  terms and conditions as listed above.  As of December 31, 2007
borrowings  were  at  the  maximum  amount  available.  In  consideration of the
guarantees,  Mr.  Murdoch  and  Mr.  Furst  will receive a fee of $15,000 shared
between  them  paid  in  seven  equal  monthly  installments.  As  additional
consideration,  they  received  fully  vested,  two  year  warrants  to purchase
approximately  2.5  million common shares of the Company at an exercise price of
$0.10  per share.  The fair value of these warrants of $89,000 was determined in
accordance  with  SFAS No. 123R and beginning in October 2007 will be taken into
income over the period of the guarantee, which is seven months.  During the year
ended  December 31, 2007, $178,000 (2006 - $8,000) has been recorded in interest
and  financing expense related to these warrants and $88,000 will be expensed in
2008.

8.  ACCRUED LIABILITIES:
    --------------------
    Accrued liabilities consist of the following:
                                                             December 31,
                                                     --------------------------
                                                       2007              2006
                                                     -------           --------
                                                          (in thousands)
   Accrued salaries, employee benefits
        and payroll taxes                           $    280          $    297
   Customer deposits payable                             305               116
   Other accrued liabilities                             954               665
                                                    ---------         ---------
                                                    $  1,539          $  1,078
                                                    =========         =========

9.  INCOME TAXES:
    -------------
    The reconciliation between total tax expense and the expected U.S. Federal
    income tax is as follows:

                                                             December 31,
                                                     --------------------------
                                                       2007              2006
                                                     -------           --------
                                                          (in thousands)
    Expected tax benefit at 40%                    $  ($1,419)       $    (838)
    Add:
       Goodwill                                           625               --
       Non-deductible expenses                             13               52
       U.S. losses producing no tax benefit               781              786
       Foreign tax provision (recovery)                   (40)             145
                                                   -----------       ----------
                                                   $      (40)       $     145
                                                   ===========       ==========

     The ($40,000) and $145,000 income tax (benefit) expense for 2007 and 2006,
respectively,  are  principally  attributable  to  foreign  taxes  on  Canadian
operations.

     As  of  December 31, 2007, the Company had net operating loss carryforwards
of  approximately  $38  million,  which  expire  through  the  year  2027.  The
utilization  of these net operating loss carryforwards will likely be subject to
substantial annual limitations imposed by the Internal Revenue Code Section 382.

     The  following  is  a  list  by  year  of  the  expiring net operating loss
carryforwards:
                                           (In thousands)
                                           --------------
                                     2008    $    861
                                     2009         776
                                     2010       1,714
                                     2011       4,963
                                     2012       3,003
                               Thereafter      26,643
                                             ---------
                                             $ 37,960
                                             =========

     Significant components of deferred tax assets (liabilities) at December 31,
2007  and  2006  are  comprised  of:

                                                             December 31,
                                                          2007          2006
                                                       ------------------------
                                                            (In thousands)
                                                            --------------
Assets:
 Accounts  receivable                               $      40      $     44
 Inventory                                                529           513
 Stock-based  compensation                                 24            14
 Accrued  liabilities                                     115            91
 Property  and  equipment                                 410           431
 Net  operating  loss  carryforwards                   15,448        14,768
                                                    ----------     ---------
 Gross  deferred  tax  assets                          16,566        15,861
 Less:  valuation  allowance                           16,488        15,754
                                                    ----------     ---------
     Deferred  tax  assets                                 78           107
Liabilities:
 Property  and  equipment                                (107)          (87)
   Intangible  assets                                     (71)          (83)
   Other                                                  (17)          (28)
                                                    ----------     ---------
   Gross  deferred  tax  liabilities                     (195)         (198)
                                                    ----------     ---------
Deferred  tax  liability                            $    (117)     $    (91)
                                                    ==========     =========

     The  increase  in  the  valuation allowance for the year ended December 31,
2007  was  primarily  attributable  to  the  increase  in  net  operating  loss
carryforwards.  A valuation allowance has been recorded against the net deferred
tax  assets,  because  it  is  more  likely  than not that the asset will not be
realized  in  the  foreseeable  future.


10.     CONVERTIBLE  DEBENTURE:
        -----------------------

On  April  30,  2004,  Sentry  entered  into  a  $2,000,000  secured convertible
debenture  with  Brookfield  Technology  Fund  ("Brookfield"),  an  alternative
investment  fund  established  by Brookfield Asset Management (formerly known as
Brascan  Technology  Fund and Brascan Asset Management, respectively), to invest
in  early  stage,  technology-based  companies  with  high  growth  potential.

Key  terms  of  the  transaction  are  as  follows:

-     Four-year  term.
-     Interest rate of 8% per annum.
-     Redeemable at Sentry's option after 18 months.
-     Conversion price equal to the market price, at time of conversion, less a
      discount of 30% with a maximum conversion price of $0.12 per share.
-     Conversion is at the option of Brookfield when market share price is equal
      to or greater than $0.17 per share or with the approval of Sentry's Board
      of Directors when the market share price is less than $0.17 per share.
-     Sentry will provide most favored pricing to all Brookfield affiliates and
      expects to be a supplier of security and identification products to the
      Brookfield affiliates.
-     Brookfield was issued warrants for 5,000,000 common shares of Sentry,
      priced at $0.15 per share, exercisable anytime up to April 30, 2008.
-     Brookfield is entitled to one seat on Sentry's Board of Directors or will
      participate as an observer.

     The  convertible  debenture  is secured by a general security interest over
all  the  assets  and  properties  of  Sentry.  The amount is subordinate to the
existing  credit  facilities.

     The  proceeds  of  the financing, to be used primarily for working capital,
were  initially allocated between the convertible debenture ($1,835,000) and the
warrants  ($165,000)  based  on  their respective fair values in accordance with
Emerging  Issues  Task  Force (EITF) 00-27 "Application of Issue 98-5 to Certain
Convertible Instruments". The difference between the face value of the debenture
and the allocated value is being charged to interest and financing expenses over
the term of the convertible debenture. No beneficial conversion feature has been
recognized  under  the  term  of  the  convertible  debenture.

     Certain  other  warrants  to  purchase  425,000  common shares of Sentry at
exercise prices ranging from $0.18 to $0.20 per share were issued in conjunction
with  the convertible debenture. The warrants were exercisable over one to three
years. The fair value of these warrants ($49,000) is being charged to operations
over  the  life of the warrants. During the year ended December 31, 2007, $5,000
(2006 - $14,000) has been recorded in interest and financing expenses related to
these  warrants.

     Sentry's  Board  of  Directors and shareholders owning a majority of Sentry
common  stock  approved  the  transaction  with  Brookfield.


11.     COMMITMENTS  AND  CONTINGENCIES:
        -------------------------------

     a.     Operating  leases
            -----------------

          The Company leases certain administrative and manufacturing facilities
and equipment under non-cancelable operating leases that expire at various dates
to  2011.  Rent  expense  related  to  operating  leases  for  2007 and 2006 was
$323,000  and $316,000 per year, respectively. Minimum annual rental commitments
are  $277,000  in  2008,  $175,000  in 2009, $9,000 in 2010, and $4,000 in 2011.

     b.     401(k)  Plan
            ------------

          In January 1997, the Company adopted the Sentry Technology Corporation
Retirement  Savings  401(k)  Plan  (the  "Plan").  The  Plan  permits  eligible
employees  to make voluntary contributions to a trust, up to a maximum of 35% of
compensation,  subject  to  certain  limitations.  The  Company  may  elect  to
contribute  a  matching  contribution  equal  to  a designated percentage of the
eligible  employee's deferral election.  The Company may also make discretionary
contributions,  subject  to  certain  conditions,  as  defined  in the Plan.  No
Company  contributions  were  made  in  2007  or  2006.

     c.     Employment  agreements
            ----------------------

          The  Company  and  several  key  executives  entered  into  employment
agreements  with  remaining  terms of up to two years for which the Company will
have  a  commitment of $262,000.  Also, the president of the Company's 51% owned
subsidiary,  Custom  Security Industries Inc., is entitled to receive 10% of its
pretax  profits.

     d.     Litigation
            ----------

     In  August  2004,  Bi-County Park Associates, Inc. d/b/a Ashlind Properties
("Bi-County")  brought an action against the Company in the Supreme Court of New
York,  County of Suffolk, for the recovery of a real estate brokerage commission
in  the  amount  of  approximately  $250,000  relating  to  the  termination  of
Bi-County's  lease  on  its  former Hauppauge facility.   On December 10, 2007 a
jury  ruled  in  favor  of  the  Company  and  no  money  was paid to Bi-County.

     Although the Company is involved in ordinary, routine litigation incidental
to  our business, it is not presently a party to any other legal proceeding, the
adverse  determination  of which, either individually or in the aggregate, would
be  expected  to  have  a  material  adverse affect on the Company's business or
financial  condition.


12.     RELATED  PARTY  TRANSACTIONS:
        -----------------------------

     Transactions between related parties are in the normal course of operations
and  are  measured  at the exchange amount, which is the amount of consideration
established  and  agreed  to  by  the  related  parties.

     In December 2007, Mr. Murdoch, Sentry's CEO and director, and Mr. Furst, a
Sentry director, agreed to lend the Company $141,000 ($81,000 and $60,000,
respectively) to secure a bid that the Company was unable to obtain on its own
to sell products to an airport facility. In consideration of the loans, Mr.
Murdoch and Mr. Furst will receive interest for the period of the loan at the
Bank of America's prime rate (7.25%) plus 1% per annum. During the year ended
December 31, 2007, $1,000 has been recorded in interest and finance expense
related to the loans. The loans were repaid in January 2008. Included in accrued
liabilities for 2007 for this transaction is $142,000.


13.     EARNINGS  (LOSS)  PER  SHARE:
        -----------------------------

     The  earnings  per  share  calculations (basic and diluted) at December 31,
2007  and  2006  are  based  upon  the  weighted average number of common shares
outstanding during each period. There were no reconciling items in the numerator
or  denominator  of  the  loss  per  share calculations in either of the periods
presented.  Options  to  purchase 2,057,000 and 2,145,500 shares of common stock
with  a  weighted  average exercise price of $0.10 and $0.16 were outstanding at
December  31,  2007  and  2006,  respectively,  but  were  not  included  in the
computation  of  diluted  net  loss  per  share  because  their  effect would be
anti-dilutive. Convertible debentures and warrants were also not included in the
weighted  average  number  of  shares  outstanding because their effect would be
anti-dilutive.


14.     STOCK-BASED  COMPENSATION:
        --------------------------

     The  Company's 1997 Stock Incentive Plan of Sentry (the "1997 Plan"), which
is shareholder approved, permits the granting of common share options and shares
to  its  employees  for  up  to  6,369,365 shares of common stock as stock-based
compensation.  This  plan expired as of January 14, 2007 and as such, there were
no  remaining  shares available for grant under this plan at September 30, 2007.
The  plan was renewed on May 18, 2007 (the "2007 Plan"), is shareholder approved
and permits the granting of common share options and shares to its employees for
up  to  5,000,000 shares of common stock as stock-based compensation.  The stock
option  committee  may  grant  awards to eligible employees in the form of stock
options,  restricted  stock  awards,  phantom stock awards or stock appreciation
rights.  Stock  options  may  be  granted  as  incentive  stock  options  or
non-qualified stock options.  Such options normally become exercisable at a rate
of  20%  per  year over a five-year period and expire ten years from the date of
grant.

     There was no cash received from exercise of options during 2007 and $7,000
in cash received from exercise of options in 2006.

     The assumptions used for the specified reporting periods and resulting
estimates of weighted average fair value per share of options granted during
those periods were as follows:

<TABLE>
<CAPTION>
                                           Years Ended December 31,
                                          -------------------------
<S>                                         <C>              <C>
                                            2007             2006
                                          -------------------------
Risk-free interest rate                     4.82%           4.46%
Expected dividend yield                       0%              0%
Expected lives                             2-5 YEARS      2-3 years
Expected volatility                          80%             100%

</TABLE>

The following table represents the Company's stock options granted, forfeited or
expired and exercised during the years ended December 31, 2007 and 2006:
<TABLE>
<CAPTION>
                                                             Weighted
                                   Number of     Weighted     Average     Aggregate
                                    Shares       Average     Remaining    Intrinsic
                                   Subject to    Exercise   Contractual     Value
                                   Issuance      Price         Term        ($000)
                                  -----------   ---------   -----------   ---------
<S>                                <C>          <C>          <C>          <C>
Outstanding at January 1, 2006     2,431,524    $    0.35
Granted                              650,000         0.10
Exercised                           (115,000)        0.06                 $    6
Forfeited or expired                (821,024)        0.69
                                  -----------   ---------
Outstanding at December 31, 2006   2,145,500    $    0.16    7.9 years    $    0
                                  ===========   =========    =========    =======
Granted                              511,500         0.06
Exercised                                ---          ---                    ---
Forfeited or expired                (600,000)        0.29
                                  -----------   ---------
Outstanding at December 31, 2007   2,057,000    $    0.10    7.5 years    $   71
                                  ===========   =========    =========    =======

EXERCISABLE AT DECEMBER 31, 2007   1,222,000    $    0.11    7.0 YEARS    $   31
                                  ===========   =========    =========    =======

</TABLE>

     The  aggregate  intrinsic  value of options represents the excess of market
price  of  the  Company's  stock over the weighted average exercise price of the
price  of  the  outstanding  and  exercisable  option  shares.

     The compensation cost recognized in income for stock-based compensation was
$26,000  for  2007  and  $35,000  for  2006.

     As  of  December  31,  2007,  there  was  $51,000  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  3.0  years.

     The  weighted  average  grant date fair value of options granted during the
year  was  $0.04  in  2007  and  $0.06  in  2006.

     The  following  is  a  summary  of  stock  options as of December 31, 2007:

<TABLE>
<CAPTION>
                                                   Options Outstanding                        Options Exercisable
                                    --------------------------------------------------    --------------------------
<S>                                  <C>              <C>               <C>                 <C>            <C>
                                                                                                           Weighted-
                                                      Weighted-       Weighted-average                     average
                                      Number of        average            Exercise         Number of       Exercise
Range of  Exercise Prices              Options      Remaining Life         Price            Options         Price
-------------------------            -----------    --------------    ----------------    -----------     ----------
0.05 to $0.07                          749,000        7.4  years        $  0.06             499,000        $  0.06
0.09 to $015                         1,275,000        7.7  years           0.10             690,000           0.11
0.31 to $0.62                           28,000        1.1  years           0.59              28,000           0.59
2.00 to $2.37                            5,000        0.1  years           2.22               5,000           2.22
                                     ---------       ------------       --------          ---------        -------
0.05 to $2.37                        2,057,000        7.5  years        $  0.10           1,222,000        $  0.11
                                     ---------       ------------       --------          ---------        -------
</TABLE>

          At  December  31,  2007,  options  for  4,488,500  common  shares were
available  for  future grants under the 2007 Plan.  On January 14, 2007 the 1997
Plan  expired; there were no common shares available for future grant under this
Plan

     a)     Warrants
            --------

     As of December 31, 2007, Sentry had outstanding warrants for 27,718,123
     (2006 - 13,788,680) common shares issued in connection with various
     financing arrangements. The warrants have exercise prices ranging from
     $0.05 to $0.17 (2006 - $0.05 to $0.20) and expire from April 28, 2008
     through September 25, 2009.

15.    REVENUES  BY  PRODUCT  LINE:
       ----------------------------

Revenues by product line are as follows:
<TABLE>
<CAPTION>
<S>                                                <C>              <C>
                                                           December 31,
                                                     -----------------------
                                                      2007             2006
                                                     ------           ------
                                                          (In thousands)
                                                          --------------
Electronic Article Surveillance (EAS)              $  6,656         $  6,813
Closed Circuit Television (CCTV)                        501              590
SentryVision                                          3,894            2,809
Service, installation and other revenues              2,447            1,923
                                                   ---------        ---------
Total revenues                                     $ 13,498         $ 12,135
                                                   =========        =========
</TABLE>

16.     FINANCIAL  INSTRUMENTS:
        ----------------------

     Unless  otherwise noted, it is management's opinion that the Company is not
exposed  to  significant  interest,  currency  or  credit risks arising from the
financial instruments.  The fair value of the financial instruments approximates
their  carrying  values,  unless  otherwise  noted.

     Currency  Risk
     --------------

     The  Company is exposed to currency risk as some of the Company's sales and
purchases  are  incurred  in  Canadian dollars resulting in Canadian denominated
accounts  receivable and accounts payable. A portion of its expenses is incurred
in  Canadian  dollars  and  Euros,  which  would  result  in foreign denominated
accounts  payable. In addition, certain of the Company's cash are denominated in
Canadian  dollars.  These balances are therefore subject to gains and losses due
to  fluctuations  in  those  currencies.

     Credit  Risk
     ------------

     Financial  instruments,  which  potentially  subject  the  Company  to
concentrations  of  credit  risk,  consist  principally  of accounts receivable.
Concentrations  of  credit risk with respect to these receivables are limited as
the  Company  conducts  regular assessments of credit issues. The Company grants
credit  to  customers  who are principally in the retail industry and libraries.
During  2007,  revenues from one customer represented approximately 18% of total
revenues;  no  other  customer accounted for more than 10% of total revenues. No
customer  accounted  for  more  than  10% of total revenues in 2006. The Company
believes  that  there  is  no unusual exposure associated with the collection of
these  receivables.


     Interest  Risk
     --------------

     The  Company  is  exposed to interest risk on its bank indebtedness, demand
loan  and  revolving  line  of  credit.


17.     SUBSEQUENT  EVENTS
        ------------------

     As  of  April  11,  2008,  Mr. Robert Furst extended his personal guarantee
relating  to  the  RBC loan agreement to December 31, 2008.  In consideration of
this  guarantee, he will receive fully vested warrants for the purchase of up to
2  million common shares of the Company, exercisable until April 30, 2010, at an
exercise  price  of  $0.10  per  share.

     As  of  April 11 2008, the Company exceeded the maximum borrowing available
(subject  to  above  limitations) by approximately $1.0 million under the demand
loan  and  is  in  negotiations with RBC. RBC agreed to waive the violation; but
reserves  all  of  its rights and remedies under the loan agreement on the basis
that  a  forbearance  agreement  be  finalized.

     As  of April 11, 2008, Brookfield extended its maturity of the debenture to
December  31,  2008 subject to fully vested warrants for the purchase of up to 5
million  common  shares  of the Company, exercisable until April 30, 2010, at an
exercise  price  of  $0.10  per  share,  registered  in  the name of Brookfield.



ITEM  8.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
--------     ---------------------------------------------------------------
             FINANCIAL DISCLOSURE
             --------------------

None.


ITEM 8A.  CONTROLS AND PROCEDURES
---------------------------------

Internal  Controls

We maintain disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) that are designed (i) to collect the information we are
required  to  disclose  in  the  reports  we  file with the SEC; (ii) to record,
process,  summarize  and  disclose  this  information  within  the  time periods
specified  in  the  rules  of  the  SEC; and (iii) to ensure that information is
accumulated  and  communicated  to our management, including our Chief Executive
Officer  and  Principal  Financial  Officer,  as  appropriate  to  allow  timely
decisions  regarding  required  disclosure.


Changes  in  Internal  Control  Over  Financial  Reporting

There  was  no change in the Company's internal control over financial reporting
that  occurred  during  our  most  recently  completed  fiscal  quarter that has
materially  affected, or is reasonably likely to materially affect, our internal
control  over  financial  reporting.

Annual  Report  of  Management  on  Internal  Control  over  Financial Reporting

Management  is  responsible  for  establishing and maintaining adequate internal
control  over  financial  reporting  (as  defined  in  Rule  15d-15(f) under the
Exchange  Act)  for  the  Company.  Management,  with  the  participation of our
principal  executive  officer and our principal financial officer, evaluated the
effectiveness  of  our  internal control over financial reporting as of December
31,  2007  (the  end  of  our  fiscal year), based on the framework and criteria
established  in  Internal Control - Integrated Framework issued by the Committee
of  Sponsoring  Organizations  of  the  Treadway  Commission.  Based  on  this
evaluation,  management  concluded  that  our  internal  control  over financial
reporting  was  effective  as  of  December  31,  2007.

This  annual  report  does  not  include  an attestation report of the Company's
registered  public  accounting  firm  regarding  internal control over financial
reporting.  Management's  report was not subject to attestation by the Company's
registered  public accounting firm pursuant to temporary rules of the Securities
and  Exchange  Commission  that  permit the Company to provide only management's
report  in  this  annual  report.

<PAGE>
                                    PART III
                                    --------


ITEM  9.     DIRECTORS  AND  EXECUTIVE  OFFICERS  OF  THE  REGISTRANT.
--------     ---------------------------------------------------------

DIRECTORS

The following sets forth information regarding the persons serving as Directors
of Sentry:

PETER  L.  MURDOCH,  age 54, has been the President and Chief Executive Officer,
Director  and  Chairman  of  the  Board  since January 8, 2001.  Mr. Murdoch has
extensive  experience in the retail security industry as well as in the sales of
technology-based  products.  He  was  Managing  Director  and  President  of  ID
Security  Systems Canada, Inc. since its inception in 1987 until its acquisition
by  Sentry.  From  1997  through  2004,  he  served  as member of the management
committee  of Dialoc ID.  Prior to joining ID Security Systems Canada, Inc., Mr.
Murdoch was Vice President of Sales for Catalyst International Business Systems.
He  is  an  economics  graduate  from  the  University  of Western Ontario.  Mr.
Murdoch's  term  as  a  Director  expires  at  the  next  Annual  Meeting.

ROBERT D. FURST, JR., age 55, has been a Director of Sentry Technology since its
inception.  Prior  thereto  he  was  a Director of Video Sentry Corporation, our
predecessor,  from  January  1993  until  February 1997.  He was Chairman of the
Board  of  Video  Sentry  from July 1996 and Chief Executive Officer from August
1996  until  February  1997.  Mr.  Furst was one of the original shareholders of
Video  Sentry.  He  is  also  a  founder  and  managing principal of Alternative
Strategy  Advisers LLC, an alternative investment management firm.  Mr. Furst is
a member of the Chicago Board of Trade and has been a securities and commodities
trader  since 1980. Mr. Furst is a continuing director on the Board of Directors
after  the  completion  of  the  Dialoc  ID  Investment.  Mr.  Furst's term as a
Director  expires  at  the  next  Annual  Meeting.

JONATHAN  G.  GRANOFF,  age  57,  has been a Director of Sentry Technology since
January  8,  2001.  Mr.  Granoff was appointed to the Board of Directors when it
was  expanded  from  five  to seven members. Mr. Granoff is the President of the
Global Security Institute and United Nations representative for Lawyers Alliance
for  World  Security.  He  is  also  Chairman  of  the  American Bar Association
Committee on Arms Control and Disarmament.  Mr. Granoff has been in the practice
of  law  since  1979.  Formerly  Mr.  Granoff served at Nutri Systems Inc. as an
attorney  and Director of Franchising.  Mr. Granoff's term as a Director expires
at  the  next  Annual  Meeting.

EXECUTIVE OFFICERS

The  following sets forth information regarding the persons serving as executive
officers  of  the  Company:


NAME                     AGE       OFFICE
----                     ---       ------
Peter  L.  Murdoch       54        President and Chief Executive Officer

Our President and Chief Executive Officer since January 8, 2001. Mr. Murdoch has
extensive  experience in the retail security industry as well as in the sales of
technology-based  products.  He  was  Managing  Director  of ID Security Systems
Canada,  Inc.  since  its  inception in 1987. Beginning in 1997 he has served as
member  of  the  management committee of Dialoc ID. Prior to joining ID Security
Systems  Canada,  Inc.,  Mr.  Murdoch  was  Vice President of Sales for Catalyst
International  Business Systems. He is an economics graduate from the University
of  Western  Ontario.


NAME                     AGE       OFFICE
----                     ---       ------
Joan  E.  Miller         53        Vice President - Finance

Joan Miller has been the Vice President - Finance since January 1, 2007. In this
capacity  Ms.  Miller  is responsible for all accounting functions and financial
reporting.  Prior  to  that,  Ms.  Miller was the Vice President - Controller of
Sentry  since  July  2000,  the  Controller  of  Knogo  North America Inc. since
December  1986  and  Assistant  Controller  for Knogo Corporation since November
1980.  Prior  to  joining  Sentry,  Ms.  Miller worked for Harman Kardon Inc. as
Assistant  Controller  from  June  1976  to November 1980 and as Cost Accounting
Manager  from  December 1975 to June 1976. Ms. Miller is a graduate from Hofstra
University  and  is  a  Certified  Public  Accountant.


SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section  16(a)  of  the  Securities  Exchange  Act  of 1934 (the "Exchange Act")
requires  the Company's officers, Directors and persons who own more than 10% of
a  registered  class  of  the  Company's  equity  securities  to file reports of
ownership  and changes in ownership with the Securities and Exchange Commission.
Officers,  Directors  and  greater than ten-percent Stockholders are required by
Securities  and  Exchange  Commission  regulations  to  furnish the Company with
copies  of  all  such  reports  they  file.

Based  solely  on a review of the copies of reports furnished to the Company, or
written  representations, the Company believes that during the fiscal year ended
December  31,  2007,  all  Section  16(a)  filing requirements applicable to its
officers, Directors and greater than ten-percent beneficial owners were complied
with,  except the following:  Robert D. Furst, Jr., a member of the Board, filed
a  late  report on Form 5 on February 25, 2008 with the SEC, for the granting of
warrants for 5,066,154 shares of the Company's common stock at an exercise price
of  $0.065  per  share,  which was granted on July 16, 2007 and for the grant of
warrants for 1,250,000 shares of the Company's common stock at an exercise price
of  $0.10  per  share,  which  was  granted  on September 25, 2007; and Peter L.
Murdoch,  the  Company's  President,  CEO  and member of the Board, filed a late
report on Form 5 on February 19, 2008 with the SEC, for the granting of warrants
for  6,541,539  shares  of  the  Company's  common stock at an exercise price of
$0.065  per  share,  which  was  granted  on  July 16, 2007 and for the grant of
warrants  for  246,760 shares of the Company's common stock at an exercise price
of  $0.10  per  share, which was granted on August 9, 2007; and for the grant of
warrants for 1,250,000 shares of the Company's common stock at an exercise price
of  $0.10  per  share,  which  was  granted  on  September  25,  2007.


AUDIT COMMITTEE FINANCIAL EXPERT

We  do  not have a separate audit committee and therefore the Board of Directors
in  its  entirety  functions as the audit committee.  We have at least one audit
committee  financial expert serving on our Board of Directors, Mr. Robert Furst.


CODE  OF  ETHICS

We  have  adopted a written Code of Ethics that applies to all of our directors,
officers and employees. A copy of our Code of Ethics is available on our website
at  www.sentrytechnology.com  and  print copies are available to any shareholder
that  requests  a copy. Any amendment to the Code of Ethics or any waiver of the
Code  of  Ethics  will  be  disclosed on our website at www.sentrytechnology.com
promptly  following  the  date  of  such  amendment  or  waiver.



ITEM  10.  EXECUTIVE  COMPENSATION.
----------------------------------

SUMMARY  COMPENSATION  TABLE
<TABLE>
<CAPTION>
                                                                                          NONQUALIFIED
                                                          STOCK    OPTION   NON-EQUITY      DEFERRED        ALL OTHER
                                       SALARY    BONUS    AWARDS   AWARDS    INCENTIVE    COMPENSATION     COMPENSATION     TOTAL
NAME & PRINCIPAL            YEAR         ($)      ($)      ($)       ($)       PLAN        EARNINGS ($)        ($)           ($)
  POSITION
<S>                         <C>         <C>       <C>      <C>       <C>        <C>            <C>           <C>             <C>
Peter L. Murdoch,
President & CEO (1)         2006       181,145     -        -         -          -              -            16,196 (2)    197,341
                            2007       183,760     -        -         -          -              -            41,894 (2)    225,654

Joan E. Miller,             2006       120,727     -        -         -          -              -               -          120,727
 VP Finance                 2007       124,663     -        -      2,369 (3)     -              -               -          127,032

</TABLE>

(1)  Mr.  Murdoch  received  no salary increase in 2007. A portion of his pay is
designated in Canadian dollars, which translated into higher US dollars in 2007
when compared to 2006.

(2)  Represents  interest  paid  in  relation  to  personal  loan  guarantees
     issued.

(3)  SFAS 123R expense equaled $2,369.

As to various items of personal benefits, we have concluded that the aggregate
amount of such benefits with respect to each individual does not exceed $10,000.


OPTIONS GRANTED IN LAST FISCAL YEAR

On  May  29, 2007, we granted an option to purchase 23,000 shares to Joan Miller
at  an exercise price of $0.07 per share, which was the market price on the date
of  grant.  The  shares  vest ratably over a five-year period.  On May 29, 2007,
27,000 fully vested shares were canceled under the 1997 Plan and regranted under
the  2007  Plan  at  an  exercise price of $0.07 per share, which was the market
price  on  the  date  of  grant.  These  shares  were  exercisable  immediately.

OUTSTANDING EQUITY AWARDS AT 2007 FISCAL YEAR END

The  following  table  sets  forth  for each of the persons named in the Summary
Compensation  Table  the  number of options exercised during 2007 and the amount
realized  by  each  such  officer.  In  addition,  the table shows the number of
options  that  the  named  executive  officer held as of December 31, 2007, both
exercisable  and  unexercisable,  and the value of such options as of that date.

<TABLE>
<CAPTION>
<S>              <C>       <C>               <C>         <C>        <C>         <C>        <C>           <C>               <C>
                                 Option Awards                                              Stock Awards
                                                                                                       Equity
                                                                                                    Incentive Plan
                                        Equity Incentive                                    Market    Awards:       Equity Incentive
                                          Plan Awards:                          Number     Value of   Number of       Plan Awards
                Number       Number of      Number of                          of Shares   Shares or  Unearned      Market or Payout
                  of        Securities    Securities                           or Units    Units of   Shares, Units    Value of
              Securities    Underlying    Underlying                           of Stock      Stock    or Other      Unearned Shares,
              Underlying    Unexercised   Unexercised    Option     Option     That Have   That Have  Rights That    Units or Other
              Options(#)    Options (#)     Unearned     Exercise  Expiration     Not         Not     Have Not      Rights that Have
Name          Exercisable   Unexercisable   Options (#)  Price ($)   Date      Vested(#)   Vested ($)  Vested (#)     Not Vested ($)
(a)               (b)           (c)            (d)          (e)       (f)         (g)         (h)         (i)            (j)

Peter L. Murdoch   -             -              -            -         -           -           -           -              -

Joan E. Miller   100,000         -              -          0.07     7/17/2010      -           -           -              -
                  40,000      60,000            -          0.09     8/12/2015      -           -           -           $ 7,800
                  27,000      23,000            -          0.07     5/29/2017      -           -           -           $ 2,900

</TABLE>


EMPLOYMENT AGREEMENTS AND COMPENSATION OF EXECUTIVE OFFICERS; CHANGE OF CONTROL
ARRANGEMENTS

The  Board set Peter L. Murdoch's compensation, in the capacity of President, at
an  annual  salary  of  approximately  $184,000,  in  2007 and $181,000 in 2006.

The  Chief  Executive  Officer  approves  the  compensation  paid  to  our other
executive  officers.  The Board of Directors determines the amount of shares and
exercise prices for any stock option grants under our 2007 Stock Incentive Plan,
and  the  amount  of  our  matching contribution percentage under our Retirement
Savings  401(k)  Plan,  respectively.

Currently,  Ms.  Joan  Miller  is  compensated  pursuant to a written employment
agreement.  This agreement renews automatically on April 1st for one-year terms.
Additionally, Ms. Miller will receive three months salary if the contract is not
renewed.   Her  annual  salary  for  2008  is  presently  $140,000.

COMPENSATION OF DIRECTORS

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

                (a)         (b)           (c)          (d)             (e)             (f)              (g)             (h)

                                                     75,000
         All Non-employee   $5,000         -       annually at          -               -                -
              Board         annual                 Fair Market
             Members        plus                   Value on Date
                            meeting                  of Grant,
                            fees                   Immediately
                                                      Vested

</TABLE>


Mr.  Murdoch,  who  is  also  our  full-time  employee  receives  no  additional
compensation  for  his  service  as  a  Director.  Each  Director and Brookfield
Technology  Fund,  in its capacity as an Observer, accrued an annual retainer of
$5,000  for  2007,  which  has  not  yet  been  paid.

In  addition,  each non-employee Director is eligible to participate in our 2007
Stock  Incentive  Plan.   In May 2007, Mr. Furst, Mr. Granoff and the Brookfield
Technology  Fund  each  received options to purchase 75,000 shares of our common
stock  at  exercise prices of $0.06 per share, which was the market price on the
date  of  grant.  The  options  were exercisable immediately and expire after 10
years.

<PAGE>
                              [GRAPHIC OMITED]

<TABLE>
<CAPTION>
                                                  PERFORMANCE CHART
                                                  -----------------

<S>                                <C>          <C>           <C>          <C>          <C>
                                    12/31/03     12/31/04     12/31/05     12/31/06     12/31/07
                                   -------------------------------------------------------------
Sentry Technology Corporation      $   100      $   137       $   67       $    43      $   96
S&P 600 Small Cap Index            $   100      $   122       $  130       $   148      $  146
S&P Elec. Equip. Index             $   100      $    92       $   93       $    92      $   91

</TABLE>

<PAGE>

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
          ------------------------------------------------------------------
          RELATED STOCKHOLDER MATTERS
          ---------------------------

The  following  table sets forth the beneficial ownership of our common stock at
April 11,  2008,  as to each (i) beneficial owner of five percent or more of the
common  stock, (ii) Sentry Director, (iii) executive officer of Sentry, and (iv)
all Directors and executive officers as a group.  On April 11, 2008, 120,743,804
shares  of  common  stock  were  outstanding.

NAME AND ADDRESS OF BENEFICIAL OWNERS
-------------------------------------
                                                     SHARES OF        PERCENT
                                                   COMMON STOCK     OF CLASS (1)
                                                   ------------     ------------
DIRECTORS AND EXECUTIVE OFFICERS
--------------------------------
Peter L. Murdoch (5)                               72,072,725 (2)       54.1%
c/o  Saburah Investments Inc.
37 Voyager Court North
Toronto, Ontario M9W 4Y2

Robert D. Furst, Jr.                               28,496,068 (3)       21.7%
c/o Alternative Strategies Advisors LLC
601 Carlson Parkway, Suite 610
Minnetonka, MN 55305

Joan E. Miller                                        244,100 (4)          *
Jonathan G. Granoff                                   265,000 (5)          *
All Sentry Directors and executive officers
as a group (4 persons)                            101,077,893 (6)       70.2%
______________________________________
*     Less than one percent


1)   Based on 120,743,804 shares of common stock outstanding as of April 11,
     2008. Each figure showing the percentage of outstanding shares beneficially
     owned has been calculated by treating as outstanding and owned the shares
     of common stock that could be purchased by the indicated person within 60
     days upon the exercise of stock options.

2)   Includes 57,553,596 shares of common stock held by Saburah Investments Inc.
     of which Mr. Murdoch is the 100% owner and 12,357,629 shares of common
     stock issuable upon the exercise of stock warrants exercisable within 60
     days of the date hereof.

3)   Includes  10,571,494  shares  of common stock issuable upon the exercise of
     stock  options  or  warrants exercisable within 60 days of the date hereof.
     Mr.  Furst  also  holds  a warrant to purchase 2,500,000 common shares from
     Saburah  investments Inc., which are excluded from the shares owned. Shares
     subject  to  this  warrant  will  be  issued from shares currently owned by
     Saburah.

4)   Includes 171,600 shares of common stock issuable upon the exercise of stock
     options  exercisable  within  60  days  from  the  date  hereof.

5)   Includes  205,000  shares  of common stock exercisable upon the exercise of
     stock  options  exercisable  within  60  days  from  the  date  hereof.

6)   Includes  23,305,733  shares  of common stock issuable upon the exercise of
     stock options and warrants exercisable within 60 days from the date hereof.

<PAGE>

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
          -----------------------------------------------------------
          INDEPENDENCE
          ------------

a)     Royal  Bank  of  Canada
       -----------------------

In  November  2006,  the  Company  and  certain  of its subsidiaries amended its
secured  credit  facility  with RBC by converting the facility to a demand loan,
increasing  the interest rate and eliminating financial covenants.  In addition,
during  2006,  the  maximum borrowing under the facility was reduced to Canadian
$3.6  million  (U.S.  $3.6  million).  However, RBC increased the borrowing base
formula  by  Canadian  $1.0 million (U.S. $1,006,000) in exchange for additional
security  provided  by  two  of the Company's directors in the second quarter of
2006.  Borrowings under the facility are subject to certain limitations based on
a  percentage  of  eligible  accounts receivable and inventory as defined in the
agreement.  Interest  is payable at a rate of RBC's prime rate (6.0% at December
31,  2007), plus 2.75% per annum.  Borrowings under this facility are secured by
substantially all of the Company's assets.  As of December 31, 2007, the Company
had borrowings of $3.5 million, which exceeded the maximum available (subject to
the  above  limitations)  under  the  demand  loan.  RBC  agreed  to temporarily
increase  the  availability  to the Company by Canadian $300,000 (U.S. $302,000)
until  March  31,  2008  in  consideration  of  a  further  guarantee by certain
directors.

In  April  2006, Mr. Murdoch, Sentry's CEO and director, and Mr. Furst, a Sentry
director,  agreed  to provide a personal guarantee to RBC, the Company's lender,
in  the amount of Canadian $1 million (U.S. $1,006,000) 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
received  a  fee  of  $43,000, shared between them, paid in twelve equal monthly
installments.  As additional consideration, they received 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  of  $120,000  was  determined  in  accordance  with  SFAS No. 123R and
beginning  in  June 2006 was taken into income over the period of the guarantee,
which was one year.  These guarantees expired in June 2007 and were subsequently
renewed  in July 2007 until April 30, 2008.  In consideration of these guarantee
renewals, Mr. Murdoch and Mr. Furst will receive a fee of $40,000 shared between
them  paid in ten equal monthly installments.  As additional consideration, they
received  fully  vested, two year warrants to purchase approximately 7.4 million
common shares of the Company at an exercise price of $0.065 per share.  The fair
value  of  these warrants of $164,000 was determined in accordance with SFAS No.
123R  and  beginning  in July 2007 is being taken into income over the period of
the  guarantee,  which  is ten months.  During the year ended December 31, 2007,
$148,000  (2006  -  $70,000) has been recorded in interest and financing expense
related  to  these  warrants  and  $66,000  will  be  expensed  in  2008.

As  of April 11, 2008, Mr. Robert Furst extended his personal guarantee relating
to  the  RBC  loan  agreement  to  December  31, 2008.  In consideration of this
guarantee,  he  will  receive  fully vested warrants for the purchase of up to 2
million  common  shares  of the Company, exercisable until April 30, 2010, at an
exercise  price  of  $0.10  per  share.

As  of  April  11  2008,  the  Company  exceeded the maximum borrowing available
(subject  to  above  limitations) by approximately $1.0 million under the demand
loan  and  is  in negotiations with RBC.  RBC agreed to waive the violation; but
reserves  all  of  its rights and remedies under the loan agreement on the basis
that  a  forbearance  agreement  be  finalized.

b)     Tradition  Capital  Bank
       ------------------------

In  December  2006,  Mr.  Murdoch  and  Mr.  Furst  agreed  to  provide personal
guarantees  to Tradition Capital Bank in the amount of U.S. $550,000 in exchange
for  the  bank  providing  a new revolving credit facility to the Company in the
same  amount.  In  consideration  of these guarantees, Mr. Murdoch and Mr. Furst
received  a  fee  of  $14,000,  shared  between  them, paid in six equal monthly
installments  beginning  in  December  2006.  As  additional consideration, they
received  fully  vested, two year warrants to purchase approximately 5.2 million
shares  of the Company's common stock, at an exercise price of $0.053 per share.
The  fair  value  of these warrants of $91,000 was determined in accordance with
SFAS  No.  123R  and  beginning  in December 2006 was taken into income over the
period  of the guarantee, which was six months.  The credit facility and related
guarantees expired in June 2007 and were subsequently renewed in July 2007 until
April 30, 2008.  In consideration of the guarantee renewals, Mr. Murdoch and Mr.
Furst  will  receive  a  fee  of  $23,000  shared between them paid in ten equal
monthly  installments.  As additional consideration, they received fully vested,
two  year  warrants  to  purchase approximately 4.2 million common shares of the
Company  at  an  exercise  price  of  $0.065 per share.  The fair value of these
warrants  of  $94,000  was  determined  in  accordance  with  SFAS  No. 123R and
beginning  in  July  2007  is  being  taken  into  income over the period of the
guarantee,  which  is  ten  months.

On  September  25,  2007,  Mr. Murdoch and Mr. Furst agreed to provide Tradition
Capital  Bank  additional personal guarantees totaling $500,000, which increased
the  maximum  the Company can draw to $1,050,000, until April 30, 2008 under the
same  terms  and conditions as listed above.  As of December 31, 2007 borrowings
were  at  the maximum amount available.  In consideration of the guarantees, Mr.
Murdoch  and Mr. Furst will receive a fee of $15,000 shared between them paid in
seven  equal  monthly  installments.  As additional consideration, they received
fully  vested,  two  year  warrants to purchase approximately 2.5 million common
shares  of  the Company at an exercise price of $0.10 per share.  The fair value
of these warrants of $89,000 was determined in accordance with SFAS No. 123R and
beginning  in  October  2007  will  be  taken into income over the period of the
guarantee,  which  is  seven  months.  During  the year ended December 31, 2007,
$178,000  (2006  -  $8,000)  has been recorded in interest and financing expense
related  to  these  warrants  and  $88,000  will  be  expensed  in  2008.

c)     Palm  Beach  Public  Library  -  Letter  of  Credit
       ---------------------------------------------------

In  August 2007, Mr. Murdoch agreed to provide a personal guarantee for a Letter
of  Credit  of  $49,350  for  a period of one year in favor of Palm Beach Public
Library  that the Company was unable to obtain on its own in order to complete a
sale  of  the  Company's self service library systems.  In consideration of this
guarantee  Mr. Murdoch will receive a fee of $2,000 paid in twelve equal monthly
installments.  As  additional  consideration, he received fully vested, two year
warrants  to  purchase approximately 0.2 million common shares of the Company at
an  exercise  price  of  $0.10  per  share.  The fair value of these warrants of
$10,000  was  determined  in accordance with SFAS No. 123R "Share-Based Payment"
and  beginning  in August 2007 is being taken into income over the period of the
guarantee,  which is twelve months.  Interest and financing expense recorded was
$4,000 for the year ended December 31, 2007 and $6,000 will be expensed in 2008.

d)     Airport  -  Bid  Bond
       ---------------------

     In  December  2007,  Mr.  Murdoch  and Mr. Furst agreed to lend the Company
$141,000  ($81,000  and  $60,000, respectively) to secure a bid that the Company
was  unable  to  obtain  on  its own to sell products to an airport facility. In
consideration  of the loans, Mr. Murdoch and Mr. Furst will receive interest for
the  period  of the loan at the Bank of America's prime rate (7.25%) plus 1% per
annum.  During  the  year  ended  December 31, 2007, $1,000 has been recorded in
interest  and  finance  expense  related  to the loans. The loans were repaid in
January  2008.

e)     Director  Independence
       ----------------------

     Jonathan  G.  Granoff  is  the  sole  independent director as determined in
accordance  with  Rule  4200  of  the  NASD.


ITEM  13.  EXHIBITS
-------------------

2.1  Amended and Restated Agreement and Plan of Reorganization and Merger, dated
     as of November 27, 1996 among Video Sentry Corporation, Knogo North America
     Inc.,  Sentry  Technology Corporation, Viking Merger Corp. and Strip Merger
     Corp.,  as amended by Amendment No. 1 to Amended and Restated Agreement and
     Plan  of  Reorganization  and  Merger,  dated  as  of  January  10,  1997.
     Incorporated  by  reference  to  Exhibit  2.1  to  Company's  Registration
     Statement  on  Form  S-4  (No.  333-20135).

2.2  Plan of  Merger,  merging  Sentry  Technology  Corporation,  a  Delaware
     corporation  into  Knogo North America, Inc., a Delaware corporation, to be
     effective  as  of January 1, 2005. Incorporated by reference to Exhibit 2.2
     to  the  Company's  annual  report  on  Form  10-KSB  for  fiscal  2005.

2.3  Certificate  of  Merger,  merging Sentry Technology Corporation, a Delaware
     corporation  into  Knogo  North  America,  Inc.,  a  Delaware  corporation,
     effective  date  January  1,  2005, as filed with the Delaware Secretary of
     State  on  April  26, 2005. Incorporated by reference to Exhibit 2.3 to the
     Company's  annual  report  on  Form  10-KSB  for  fiscal  2005.

2.4  Stock Purchase  Agreement,  dated  April  29,  2004,  by and between Sentry
     Technology  Corporation  and  Saburah  Investments,  Inc.  Incorporated  by
     reference to Exhibit 2.1 to Company's Current Report on Form 8-K dated July
     14,  2004.

3.1  Amended  and  Restated  Certificate  of  Incorporation of Sentry Technology
     Corporation,  as  filed  with  the Delaware Secretary of State on April 26,
     2005.  Incorporated  by  reference  to  Exhibit 3.1 to the Company's annual
     report  on  Form  10-KSB  for  fiscal  2005.

3.2  Certificate  of  Amendment  of  Certificate  of  Incorporation  of  Sentry
     Technology  Corporation,  as  filed with the Delaware Secretary of State on
     May  27,  2005.  Incorporated  by reference to Exhibit 3.2 to the Company's
     annual  report  on  Form  10-KSB  for  fiscal  2005.

3.3  Certificate of Amendment of Certificate of Incorporation of Sentry
     Technology Corporation, as filed with the Delaware Secretary of State on
     May 17, 2007. Incorporated by reference to Exhibit 3.1 to Company's Current
     Report on Form 8-K dated May 29, 2007.

3.4  Amended and Restated Bylaws of the Company. Incorporated by reference to
     Exhibit 3.3 to the Company's annual report on Form 10-KSB for fiscal 2005.

4.1  Convertible  Debenture,  dated  April 30, 2004, issued by Sentry Technology
     Corporation  to  Brascan Technology Fund, Inc. Incorporated by reference to
     Exhibit  2.1  to  Company's Current Report on Form 8-K dated July 14, 2004.

4.2  Warrant  Certificate,  dated  April  30,  2004, issued by Sentry Technology
     Corporation  to  Brascan Technology Fund, Inc. Incorporated by reference to
     Exhibit  4.2  to  Company's Current Report on Form 8-K dated July 14, 2004.

4.3  Stakeholders  Rights  Agreement,  dated April 30, 2004, by and among Sentry
     Technology  Corporation,  Peter  Murdoch, Robert Furst, Saburah Investments
     Inc., and Brascan Technology Fund Inc. Incorporated by reference to Exhibit
     4.3  to  Company's  Current  Report  on  Form  8-K  dated  July  14,  2004.

10.1 2007 Company Stock  Incentive  Plan.

10.2 Retirement  Savings  401(k) Plan. Incorporated by reference to Exhibit 10.6
     to  the  Company's  Registration  Statement  on  Form  S-4 (No. 333-20135).

10.3 Lease Agreement  dated  September  16,  2003  between  Sentry  Technology
     Corporation  and  G  & J Lakeland Realty Corp. Incorporated by reference to
     Exhibit  10.34  to  the  Company's  Quarterly  Report  on Form 10-QSB dated
     November  4,  2003.

10.4 Credit  Facility Letter Agreement between Sentry Technology Canada Inc. and
     Royal  Bank  of  Canada  dated April 19, 2005. Incorporated by reference to
     Exhibit  10.1  to  the  Company's Current Report on Form 8-K, dated May 18,
     2005.

10.5 Amendment  to  Credit  Facility  Letter Agreement between Sentry Technology
     Canada  Inc.  and  Royal Bank of Canada dated May 12, 2005. Incorporated by
     reference  to  Exhibit  10.2  to  the Company's Current Report on Form 8-K,
     dated  May  18,  2005.

10.6 Postponement  and  Subordination Agreement between Brascan Technology Fund,
     Royal  Bank of Canada and Sentry Technology Canada Inc. dated May 12, 2005.
     Incorporated  by  reference to Exhibit 10.3 to the Company's Current Report
     on  Form  8-K,  dated  May  18,  2005.

10.7 Amendment  to  Credit  Facility  Letter Agreement between Sentry Technology
     Canada  Inc.  and Royal Bank of Canada dated January 23, 2006. Incorporated
     by reference to Exhibit 10.14 to the Company's annual report on Form 10-KSB
     for  fiscal  2005.

10.8 Credit  Facility Letter Agreement between Sentry Technology Canada Inc. and
     Royal  Bank  of  Canada  dated  May  15, 2006. Incorporated by reference to
     Exhibit  10.1  to  the  Company's Current Report on Form 8-K, dated May 31,
     2006.

10.9 Amendment  to  Credit  Facility  Letter Agreement between Sentry Technology
     Canada  Inc. and Royal Bank of Canada dated November 27, 2006. Incorporated
     by reference to Exhibit 10.12 to the Company's annual report on Form 10-KSB
     for  fiscal  2006.

10.10 Revolving  Credit  Agreement  between  Tradition  Capital  Bank and Sentry
     Technology  Corporation, dated September 26, 2007.

14   2007 Code of Ethics for Sentry Technology Corporation and Subsidiaries.

21   Subsidiaries of the Company. Incorporated by reference to Exhibit 21 to the
     Company's  annual  report  on  Form  10-KSB  for  fiscal  2005.

23.1 Consent  of  SF  Partnership,  LLP

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

31.2 Certification by the Principal 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  Principal  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-B, 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.


ITEM  14.  PRINCIPAL  ACCOUNTANTS  FEES  AND  SERVICES
           -------------------------------------------

The  Company's  board  of  directors  reviews and approves audit and permissible
non-audit services performed by its independent accountants, as well as the fees
charged  for  such  services.  In  its  review of non-audit service fees and its
appointment of SF Partnership, LLP as the Company's independent accountants, the
board  of  directors  considered  whether  the  provision  of  such  services is
compatible with maintaining independence. The board of directors approved all of
the  services provided and fees charged by SF Partnership, LLP in 2007 and 2006.

AUDIT  FEES

The  aggregate  fees  billed  by  for professional services for the audit of the
annual  financial  statements  of  the  Company and the reviews of the financial
statements  included  in  the  Company's  quarterly reports on Form 10-QSB by SF
Partnership, LLP in 2007 and 2006 were $84,000 and $78,000, respectively, net of
expenses.

AUDIT-RELATED  FEES

There  were  no  other  fees for 2007 and 2006 billed by SF Partnership, LLP for
assurance  and  related services that were reasonably related to the performance
of  the  audit  or review of the Company's financial statements and not reported
under  "Audit  Fees"  above.

TAX  FEES

There  were no other fees billed by our independent auditors during the last two
fiscal  years  for  tax  compliance.


ALL  OTHER  FEES

There  were  no other fees billed by our independent accountants during the last
two  fiscal  years  for  products  and  services  provided.

<PAGE>

SIGNATURES:
-----------

     In  accordance  with  Section  13 or 15(d) of the Exchange Act, the Company
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

SENTRY  TECHNOLOGY  CORPORATION


By:     /s/  Joan  E.  Miller
        ---------------------
        Joan  E.  Miller
        Vice  President-Finance  and  Treasurer
        (Principal  Financial  and  Accounting  Officer)


Dated:  April  11,  2008


In  accordance with the Exchange Act, this Annual Report on Form 10-KSB has been
signed  below  by  the  following  persons  on  behalf  of the Registrant in the
capacities  and  on  the  date  indicated.

Signature                                Title                       Date
---------                                -----                       ----

/s/ Peter L. Murdoch       Chief Executive Officer             April 13, 2008
---------------------           and Director
Peter L. Murdoch


/s/ Joan E. Miller         Vice President-Finance              April 14, 2008
-------------------             and Treasurer
Joan E. Miller             (Principal Financial and Accounting Officer)



/s/ Robert D. Furst, Jr.   Director                            April 13, 2008
------------------------
Robert D. Furst, Jr.



/s/ Jonathan G. Granoff    Director                            April 13, 2008
-----------------------
Jonathan G. Granoff


<PAGE>


EXHIBIT  INDEX
--------------

10.1     2007 Company Stock Incentive Plan.

10.10    Revolving Credit Agreement between Tradition Capital Bank and Sentry
         Technology Corporation, dated September 26, 2007.

14       2007 Code of Ethics for Sentry Technology Corporation and Subsidiaries.

23.1     Consent  of  SF  Partnership,  LLP.

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

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