SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C.  20549
                                  ____________

                                    FORM 10-K

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

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001

                                       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                           96-11-3349733
          ----------------------                    ---------------
     (STATE  OR  OTHER  JURISDICTION  OF           (I.R.S.  EMPLOYER
     INCORPORATION  OR  ORGANIZATION)               IDENTIFICATION  NO.)


             350  WIRELESS  BOULEVARD,  HAUPPAUGE,  NEW  YORK  11788
             -------------------------------------------------------
            (ADDRESS  OF  PRINCIPAL  EXECUTIVE  OFFICES)  (ZIP  CODE)

     REGISTRANT'S  TELEPHONE  NUMBER,  INCLUDING  AREA  CODE:  (631)  232-2100
                                                               ---------------

       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 (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 disclosure of delinquent filers pursuant to Item 405
of  Regulation  S-K  is not contained herein, and will not 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-K or any
amendment  to  this  Form  10-K.  X

At  March  27,  2002,  the  aggregate  market  value of the voting stock held by
non-affiliates of the Registrant was approximately $4,000,000 million based upon
the  closing price of such securities on the OTC Bulletin Board on that date. At
March  27,  2002,  the  Registrant  had  outstanding 61,542,872 shares of Common
Stock.

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

None.

<PAGE>
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                                     PART I
                                     ------


Item  1.     Business.
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FORMATION  OF  THE  COMPANY;  GENERAL

     Sentry  Technology Corporation ("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 "Merger."

     The  Merger  was  accounted  for  under  the purchase method of accounting.
Although former Video shareholders received a majority voting interest in Sentry
based  upon  their  common  stock  ownership  percentage,  generally  accepted
accounting principles requires consideration of a number of factors, in addition
to voting interest, in determining the acquiring entity for purposes of purchase
accounting  treatment.  As  a result of these factors, and solely for accounting
and  financial  reporting  purposes,  the  Merger was accounted for as a reverse
acquisition  of  Video by Knogo.  Accordingly, the financial statements of Knogo
are  the  historical  financial statements of Sentry and the results of Sentry's
operations  include the results of operations of Video after the Effective Date.

     Knogo  is  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  designs, manufactures, markets, installs and services 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 acts as a system integrator for conventional CCTV products that it markets,
installs  and  services.  Video's  predecessor  was founded in 1990 and made its
first  sales  in  1992.  Video  was  merged  into Knogo as of December 31, 2000.

RECENT  DEVELOPMENTS

     Our  strategy  following  the Merger in 1997 was to use Knogo's engineering
staff  and excess manufacturing capacity resulting from a 1994 restructuring for
the  reengineering  and  production of its proprietary and patented SentryVision
programmable  traveling closed circuit television surveillance ("CCTV") systems.
With  the  reengineering  completed,  management  believed  that  sales  of
SentryVision,  which  had  fallen  in  the  final year that Video was a separate
corporation,  would  rebound.

     While  the  engineering  staff was able to resolve substantially the design
and  manufacturing  problems  associated  with  SentryVision  , the sales of the
system  did  not  achieve  the  levels  anticipated  by  the  Company.

     Furthermore,  while  still  profitable, sales of Knogo's Electronic Article
Surveillance  ("EAS")  systems  have  continued to erode due to the attention we
gave  to the reengineering and marketing of SentryVision  as well as competition
from  lower-priced  "off-the-shelf"  systems  and  competition  from  larger,
better-financed  competitors  such  as  Sensomatic  Electronics  Corporation and
Checkpoint  Systems  Inc.  In  addition,  due to a non-compete provision entered
into  by Knogo in 1994, we were not permitted to market our EAS products outside
of  the  United States and Canada.  The non-compete provision expired at the end
of  1999.

     We  recognized  that,  because  of  our continuing operating losses and the
depletion  of  our  tangible  assets  to fund ongoing operations, our ability to
continue  to  market  our existing SentryVision  and EAS products and to develop
new  products  and  product  extensions  to allow us to remain competitive would
require  additional  investment.

     On  January  8,  2001,  Dutch  A&A  Holding  B.V.  ("Dutch  A&A")  acquired
23,050,452  shares  of the Company's common stock for $3.0 million, $1.0 million
of  which  was paid in January 2001, and the remaining balance was paid in equal
$1.0  million installments on April 30, 2001 and August 31, 2001. Dutch A&A is a
Netherlands  company  which,  through  its  subsidiaries,  is in the business of
development, manufacture, sale and distribution of various kinds of RFID, access
control and anti-theft electronic article surveillance products and accessories.

     Dutch  A&A  currently  owns 37.5 percent of the outstanding common stock of
the  Company.  At  any time prior to January 8, 2002, Dutch A&A had the right to
increase  its  ownership  of the Company's common stock to a total of 51% of the
shares  of  common  stock  then outstanding.  If the average market value of the
Company's  common stock, measured over any ten-day trading period during the one
year  period following January 8, 2001, was at least $15.0 million, the purchase
price  for  the additional shares was to be determined by multiplying the actual
number  of  shares to be purchased by $.001; otherwise, the purchase price would
be  $1.5  million.  At any time prior to January 8, 2003, Dutch A&A may increase
its  ownership  of the Company's common stock to a total of 60% of the shares of
common  stock  then  outstanding.  The  purchase price for the additional shares
shall  be  determined  as  follows:  If  the  average market value of the common
stock,  measured over a ten-day period during the two years preceding January 8,
2003,  is  at  least  $25.0  million,  the purchase price shall be determined by
multiplying  the actual number of shares to be purchased by $.001.  If Dutch A&A
previously  exercised  its  right to acquire shares increasing its investment to
51% of the Company's common stock, but the average market value test was not met
at  the  time  of  the  second  purchase,  then the purchase price shall be $3.5
million.  In  November  2001,  the  first  average market value threshold of $15
million  was  achieved  entitling Dutch A&A to 51% ownership.  At the request of
Dutch  A&A,  Sentry  agreed  to  extend the expiration of this purchase right to
January  8,  2003.  In  addition,  Dutch  A&A  agreed to extend its distribution
agreement  with Sentry for an additional year.  As a condition to the investment
by  Dutch  A&A,  the stockholders of the Company elected three nominees of Dutch
A&A  to  the Board of Directors at a Special Meeting of Stockholders on December
8,  2000.  If  Dutch  A&A  has not acquired 51% of the Company's common stock by
January  8,  2003,  one  of  the  three nominees of Dutch A&A will resign and be
replaced,  with  the  consent of Dutch A&A, by a nominee of the directors of the
Company  who  are  not  nominated  by  Dutch  A&A.

     In  addition to the election of three nominees of Dutch A&A to the Board of
Directors,  other  matters  which  were approved at the December 8, 2000 Special
Meeting  of  Stockholders,  and  became  effective  as  of January 8, 2001, were
proposals  to  amend  the Company's certificate of incorporation to:  (i) permit
the payment of a dividend of additional shares of Class A Preferred Stock at the
rate  of  0.075  shares  of  Class  A  Preferred Stock for each share of Class A
Preferred Stock held;  (ii) to reclassify Class A Preferred Stock into shares of
common stock on a ratio of five shares of common stock for each share of Class A
Preferred  Stock outstanding; and (iii)  to increase the number of the Company's
authorized  shares  of  common  stock  to  140,000,000.

     In  addition,  on  December  28, 2000, our Board of Directors increased the
number  of  Directors from five to seven effective upon the closing of the Dutch
A&A  investment.  Upon  the  resignation  of one Board member in March 2001, the
Board  presently  has  six  members.

THE  SENTRYVISION  SYSTEM

     SentryVision  refers  to our family of traveling CCTV surveillance systems.
Over  the  years,  Video  has  developed  various  generations of traveling CCTV
surveillance  systems  including  the  H-System,  OH-System,  the  original
SentryVision  and  currently  the  new  and  improved  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
carriage  track  and  enclosure are designed to custom lengths for more complete
viewing.  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  using  dedicated  phone  lines  or  internet  technology.

     Unlike  our  previous  products,  our  recently  developed  SentryVision
SmartTrack  system  features  one  or  two  state-of-the-art  pan, tilt and zoom
("PTZ")  domes  providing  for  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
products.


     Video's  proprietary  CCTV  system,  called  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,  warehouses,  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.  As
of  December  31,  2001,  1,170  SentryVision  systems  had  been  installed  in
approximately  500  customer  locations  in  North  America.  Current  customers
include  Lowe's  Home  Centers,  Target  Stores,  Mills  Fleet Farm, Winn Dixie,
Federal  Express, Symbol Technologies, Menards, UPS, J.C. Penney, Canadian Tire,
Reno  Depot, Este  Lauder, Kohl's Department Stores, Disney Direct Marketing and
Duke  University.  In  addition,  during  2001,  the  Company's  international
distributors  installed  19  SentryVision  systems  in  13 customer locations in
Western  Europe,  Latin  America  and Asia.  Our international customers include
Carrefour,  Auchon,  Cora,  Castorama,  B  &  Q,  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 Video's
customers  to  date, we believe SentryVision  is a cost-effective solution which
can  improve  the  operations  of  our  customers.

     Video  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.

     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.  Video 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  Video's  current  installations
indicate  significant  improvements in detecting shoplifting and employee theft.

     More  recently,  retailers  have  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.

Retail  Market  Applications
----------------------------
-     Home  Centers.  Video  has  installed  771  systems in more than 307 store
locations  for  7  customers  in  the  home center segment of the retail market.
Typical  of our customers in this market are Lowe's Home Centers, with more than
750  stores  in  42  states, and Mills Fleet Farm, a 29 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 Chains.  Video has installed 96 systems for customers in
this  segment,  including  Sears, Navy Exchange and Target Stores.  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.  Video  has installed 31 systems in 29 store locations for 7
supermarket customers.  The targeted coverage in most of these installations has
been  the  entire  retail space.  Supermarket chains using SentryVision  include
Kroger,  Marsh,  Cub  Foods,  Winn-Dixie  and  Fiesta  Mart.

Industrial  Market  Applications
--------------------------------
-     Distribution  Centers.  Video  also  provides loss prevention surveillance
for  distribution  centers  and  warehouses,  and  has  installed  85 systems in
distribution  centers  for  37  different  retailers including Kohl's Department
Stores,  Target  Stores, Borders Group, Disney Direct Marketing, Barnes & Noble,
Robinsons-May,  Ross,  Saks,  Guess,  Tower  Records,  Big  Dog 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.  So far SentryVision  use in
factories has been limited but the benefits of continuous tracking of industrial
operations  and  processes  indicate  future growth.  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  Symbol Technologies, AT&T Wireless, Federal
Express,  UPS,  Wyeth-Ayerst  Labs,  USF  Logistics  and  Thompson  Electronics.

-     Internet  Data  Centers.  Video  markets  SentryVision systems to internet
data  centers  (IDC's).  Most IDC's are full service business internet providers
with  state-of-the-art  systems that host, monitor and maintain mission-critical
web-sites,  e-commerce  platforms  and business applications for small to medium
sized  businesses.  SentryVision  systems  are used to heighten security through
remote video monitoring.  Installations include FirstWorld Communications, Inc.,
Savvis  and  The  Discovery  Channel.

Institutional  Market  Applications
-----------------------------------
-     Parking,  Corrections, and Government Institutions.  We have installed 108
systems  in three parking garages at Duke University's Medical Center with major
benefits  identified  as  savings  in  guard costs, vandalism, safety and theft.
SentryVision  has  been installed in correctional facilities in Texas, Michigan,
New Mexico and Illinois, with reported safety benefits of continuous coverage in
dormitory,  recreation  and  visitation areas.  SentryVision  installations have
also been completed in various government agencies including the Federal Reserve
Bank,  US  Postal  Service  and  US  Immigration  Service.

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,  VCR's,  monitors,  switchers, multiplexers and controllers.  As all of
this  equipment is manufactured for Video by outside vendors, we can provide our
customers with state-of-the-art equipment for specific applications at favorable
costs.  We  believe  that,  while  less  profitable  than  SentryVision  and
traditional  EAS  products,  the CCTV products complement our other surveillance
systems and provide retailers 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.  We have received indications that our
largest single SentryVision  customer, Lowe's Home Centers, continues to project
that  the  bulk  of  its  orders  in 2002 will be for conventional CCTV systems.

     Remote  video transmission and digital recording are other potential growth
areas  for  Video.  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.  Video  markets  digital  video
recording  and a remote video transmission unit developed by third-party vendors
including  Kalatel,  Integral  and  Trakonic.

     We  now  are  the exclusive provider of Trakonic's proprietary solution for
remote  control of traveling CCTV camera images and movement over wireless local
area  networks,  using  a hand held Personal Digital Assistant (PDA).  Under our
agreement,  we now have the exclusive right to market the Trakonic solution with
traveling  CCTV systems.  Using a PDA, security personnel and operation managers
are free to tour their facilities while maintaining full view and control of the
video  surveillance  system  both  for  security and operational purposes, using
local  area wireless networks.  All viewed images are simultaneously stored on a
digital  video  recorder,  which  is  an  added  value component of the Trakonic
system.

     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.  The use of CCTV surveillance also continues to
grow  in  both  new and existing correctional facilities and Sentry now has CCTV
installations  in  both  state  and  county  facilities.

     In  2001,  we  continued  marketing  CCTV to the school market.  Successful
installations  were  completed  with  reported  benefits  including  decreased
vandalism  and  improved  safety.  In schools, conventional CCTV is an extremely
cost  effective  security  option  with  Digital  Recording  and  Remote  Video
Transmission  becoming  attractive  options  for  large  school  districts.

     Our largest single school CCTV installation was at the Norristown (PA) High
School with 111 cameras, using digital recording and fiber optic cabling.  It is
an  advanced  cost  effective  system  with  video  from  all  cameras instantly
accessible on their network.  The contract value was approximately $0.3 million.


EAS  SYSTEMS

     EAS  systems consist of detection devices which 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  which  Knogo
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  Magnetic  ("Knoscape  MM  ") system uses very low frequency electromagnetic
signals  in the range of 218 hertz to nine kilohertz.  Knogo also manufactures a
non-electronic  dye-stain  pin  ("KnoGlo  ").  Since  1996,  Knogo  has  been an
authorized  distributor  of the library security systems and related products of
Minnesota  Mining  and  Manufacturing  Company  ("3M").

     The  principal  application  of  Knogo'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, Knogo'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.

     The  U.S.  market  for retail EAS systems and tags is estimated by industry
sources  at  $570  million  and is growing at an estimated rate of 8 percent per
year.

     At  December 31, 2001, the approximate number of EAS Systems sold or leased
by  Knogo  and  its  predecessors  exceeded  25,000.

Radio  Frequency  and  Ranger  Detection  Systems

     Knogo  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.  Knogo 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  which  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 (Silver Cloud)
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  reusable  tag is removed from the
protected  article,  usually  by  a  clerk  at  the  checkout  desk, 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  Knogo'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.

Magnetic  Detection  Systems

     The  primary  application  of  Knoscape  MM  systems is to detect and deter
theft in "hard goods" applications such as supermarkets, bookstores and in other
specialty  stores  such as video, drug, liquor, shoe, record and sporting goods.

     Knoscape  MM  systems  use  detection  monitors  which  are  activated  by
electromagnetically sensitized strips.  The MM 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 Knoscape MM  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 MM targets can
be manufactured to be activated and deactivated repeatedly while attached to the
articles to be protected.  Accurate deactivation is also very important when the
item  to  be protected is a personal accessory that will be carried by its owner
from  place  to  place, such as pocket books, pens, lipstick, shoes, camera film
and  cameras.

     The  Knoscape MM  system offers retailers several features not available in
Knoscape  RF  and  Ranger   systems.  Since the target is very small, relatively
inexpensive  and  may  be  inserted at the point of manufacture or packaging, it
provides  retailers  with  a  great  deal  of  flexibility  and is practical for
permanent  attachment  to  a  wide  variety  of  hard  goods,  especially  low
profit-margin  products.  The  target  can  be  automatically  deactivated  at
check-out, eliminating the risk of triggering alarms when merchandise leaves the
store  and  saving  sales  personnel  valuable  time.  Since  the targets can be
incorporated  directly  into  a  price  tag  or  the  article  itself,  they are
convenient  to  use.

KnoGlo

     KnoGlo , a non-electronic, dye-stain pin, releases an indelible liquid when
tampered with.  Used with passive locking mechanisms without electronics, KnoGlo
is  often  a retailer's first step in loss prevention.  KnoGlo  is also employed
in  stores with EAS systems as an extra layer of protection.  Such protection is
useful  in  problem  areas (near mall door openings, for example) or where users
must  maximize  selling  space.

BOOKINGS

     Of Sentry's bookings for the year ended December 31, 2001, approximately 23
percent  were  attributable  to SentryVision , 40 percent to CCTV, 31 percent to
EAS  and 6 percent to 3M library security systems.  Of Sentry's bookings for the
year  ended  December  31,  2000,  approximately 17 percent were attributable to
SentryVision , 39 percent to CCTV, 39 percent to EAS and 5 percent to 3M library
security  systems.  For  the  year  ended  December  31,  1999, approximately 13
percent  were  attributable  to SentryVision , 39 percent to CCTV, 42 percent to
EAS,  and  6  percent  to  3M  library  security  systems


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 2001, 2000 and 1999, Lowe's Home Centers accounted
for  22%, 14% and 19%, respectively, of total revenues.  In 2001, 2000 and 1999,
Goody's  Family  Clothing  accounted for 11%, 15% and 14% respectively, of total
revenues.  While we believe that one or more major customers could account for a
significant  portion of our sales for at least the next two years, we anticipate
that our customer base will continue to expand and that in the future we will be
less  dependent  on  major  customers.

PRODUCTION

     In October 1998, we ceased manufacturing at our Cidra, Puerto Rico facility
and  consolidated  all  manufacturing  and  assembly  at our Hauppauge, New York
facility.  The Puerto Rico facility was sold in February 1999. The consolidation
was  intended  to  reduce operating costs and increase manufacturing controls by
allowing  management  and  engineering  staffs  to  interface real time with the
manufacturing  process.  However,  as a result of product design and reliability
issues  identified  throughout  the  year  in  2000,  redesign  initiatives were
implemented  addressing  both  quality  and  manufacturability.  In addition, in
2001,  an  enhanced  quality  assurance  department  was staffed, test equipment
procured  and  measures  implemented  to  address  and resolve quality concerns.

Video
-----

     Video's  manufacturing  operations consist primarily of the assembly of its
camera  carriages  and control units using materials and manufactured components
purchased  from  third  parties.  Video  is  not  dependent  upon any particular
supplier  for  these  materials  or  components.  Some  parts  are  stock,
"off-the-shelf"  components,  and  other  materials  and  system  components are
designed  by  Video  and manufactured to Video's specifications.  Final assembly
operations  are  conducted  at  the Company's facilities in Hauppauge, New York.
System components and parts include cameras, circuit boards, electric motors and
a  variety  of  machined  parts.  Each  system  component  and finished assembly
undergoes  a  quality  assurance  check  by  Video  prior  to its shipment to an
installation  site.  All  SmartTrack  electronic  circuit  board  enclosures are
tested  and  burned  in  for  72 hours. Upon completion, the finished product is
tested  and  run  for  an  additional  24 hours resulting in approximately 3,000
travel  and PTZ cycles prior to quality assurance sign off. Video is not subject
to any state or federal environmental laws, regulations or obligations to obtain
related  licenses  or  permits in connection with its manufacturing and assembly
operations.

Knogo
-----

     Knogo  produces  at  our  facilities  in  Hauppauge, New York, or purchases
through  suppliers,  its  Knoscape  RF, Ranger, Knoscape MM and KnoGlo, or their
components.  Production  consists  of  final  assembly  operations  of  printed
circuitry,  electronic  and  mechanical  components  that  Knogo  purchases from
various  suppliers.  Independent  contractors  using  existing molds and tooling
produce  plastic cases and antenna coils for the tags to Knogo's specifications.
Through  product  redesign  efforts,  final  assembly  machines were modified to
reduce  production  complexities. As a result, increased production run rates of
this  product  have  been realized, simultaneously increasing production quality
and  reducing  manpower.  Knogo is not dependent on any one supplier or group of
suppliers  of  components  for  its  systems.  Our policy is to maintain Knogo's
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 Knogo at competitive prices in sufficient quantities as
and  when  needed.

MARKETING

     We  market  our  products  for Video and Knogo, jointly, through the direct
efforts  of  approximately  15 salespersons located in select metropolitan areas
across  the  United  States  and  Canada,  as  well  as  through  a  network  of
dealers/system  integrators.  Marketing  efforts  include participation in trade
shows,  advertising  in  trade  publications,  targeted  direct  mailings  and
telemarketing.   In  addition, the effort is augmented through our Website which
provides  enhanced  product and market oriented information. Internationally, we
market SentryVision  through large system integrators and distributors including
Ultrak,  Chubb,  Cegelec  and  Intrepid.

Video
-----

     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.

     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  Video  also emphasized a dealer program for institutional, industrial
and  international  prospects.

     Beginning  in  mid-1998, we began a program to 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 are able to reach a far larger
number  of  SentryVision  prospects  and penetrate the market more rapidly.  The
program  has  generated much interest through trade advertising, direct mail and
trade  show  participation.  By  the  end  of  2001,  non-exclusive  contractual
relationships  with  security  dealers  were  established including Professional
Security Association (PSA), a group of 200 dealers with combined annual sales of
approximately  $800  million.  Since then PSA has promoted SentryVision  through
its  CCTV  integrators.  These  and  additional dealers are expected to generate
significant  SentryVision  installations  in  industrial  and  institutional
facilities  in  2002.  Recent  sales were made through ADT, STG, Siemans, Mosler
and  Security  Link.

     In  addition,  we  market  SentryVision  internationally  using independent
distributors.  The distribution agreements generally appoint a distributor for a
specified  term  as  the  exclusive  distributor for a specified territory.  The
agreements  require  the  distributor to purchase a minimum dollar amount of the
Company's  product  during  the term of the agreement to retain exclusivity.  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, 2001, we have distributors in Canada, UK,
France,  Mexico,  Belgium,  Holland,  Italy,  Singapore,  Brazil  and Argentina.

     During  2001,  Video  placed  in service 97 SentryVision  systems and 4,257
CCTV  cameras, as compared to 84 SentryVision  systems and 3,424 CCTV cameras in
2000  and  58  SentryVision  systems  and  5,066  CCTV  cameras  in  1999.

Knogo
-----

     Knogo EAS systems are marketed on both a direct sales and lease basis, with
direct  sales  representing  the  majority  of  the  business.  The terms of the
standard  leases  are  generally  from  one to five years.  The sales prices and
lease  rates  vary based upon the type of system purchased or leased, number and
types of targets included, the sophistication of the system employed and, in the
case  of  a lease, its term.  In the case of the Knoscape MM  systems, detection
targets  which  are permanently attached to the item to be protected are sold to
the customer even when the system is leased.  Therefore, in the case of either a
sale  or  lease  of  a  Knoscape  MM  system,  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.

     During  each  of  the  years  ended December 31, 2001, 2000 and 1999  Knogo
placed  in  service  675,  347 and 439, respectively, Knoscape RF , Ranger , and
Knoscape  MM   systems.

     RF  and Ranger systems continue to be used by apparel and department stores
which  have  wide  exit areas and a desire for deterrence based on reusable hard
tags.  Both the Silver Cloud  and Knoscape RF systems are universal in that they
can  detect  both 2 MHz hard tags and 8 MHz labels.  In the latter part of 1999,
Knogo  introduced  a  new  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.

     Supermarkets,  bookstores,  video  stores  and specialty stores remain good
prospects  for  MM  systems due to the small size and low cost of Micro-Magnetic
strips.  Since  2000,  Knoscape  MM Systems feature updated digital electronics.
Knoscape  MM Systems 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  a  substantial market for magnetic
technology.  In  March  1996,  3M and Knogo entered into a strategic alliance to
provide  universal  asset  protection  to  libraries  across North America.  The
agreement,  effective  through March 2002, permits Knogo to act as a distributor
of  all of 3M's library products, including the 3M Tattle-Tape  Security Strips,
detection  systems,  3M  SelfCheck  System  hardware  and  software and other 3M
library  materials  flow management products and accessories to public, academic
and  government  libraries.  In  1998,  we  designed  and developed for 3M a new
library  specific  magnetic  EAS  system which in turn was added to this product
listing.  Under  the agreement, 3M provides service and installation for all new
and  existing Knogo library customers throughout North America.  In exchange for
these  agreements,  we agreed not to compete against 3M for sales and service of
EAS  Systems  in  the  library  market  until  March  2004.

DUTCH  A&A  SECURITY  PRODUCTS

     In February 2001, we introduced a new EAS system manufactured by Dutch A&A,
which  is housed in slender self-contained Plexiglas panels. The new 9000 PL 8.2
MHz  system  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. The
Plexiglas  RF  system  is the first in a series of new products being brought to
market by the Company as a result of a distribution agreement with Dutch A&A. In
addition,  Dutch  A&A  will  introduce through Sentry, LaserFuse, a new RF label
technology,  which  is compatible with, and an alternative to the labels offered
by  Checkpoint Systems, Inc. In the future, we will also sell Dutch A&A products
in  the  proximity  access  control  and  RFID  markets.

BACKLOG

     Our  backlog of orders was approximately $6.0 million at December 31, 2001,
as  compared  with  approximately  $5.8  million  at  December 31, 2000 and $3.2
million  at  December  31,  1999.  We  anticipate  that substantially all of the
backlog  present  at  the  end  of  2001  will  be  delivered  during  2002.

SEASONAL  ASPECTS  OF  THE  BUSINESS

     Our  current  customers  are  primarily dependent on retail sales which are
seasonal and subject to significant fluctuations which 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 for Video and Knogo are performed
primarily  by  the Company's personnel.  All products sold or leased are covered
by  a  warranty  period.  Generally,  Video's  products  provide  for a one-year
warranty and Knogo's products for a 90-day warranty.  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.

     Throughout  the  first  half of 1999, we focused on recruiting and training
entry  level  installers  for  SentryVision  and  CCTV.  As the travel costs for
these  employees  rose  unacceptably, in the second half of the year we expanded
our  program of hiring local sub-contractors for installation work and refocused
our  employee  efforts  on  service  and  maintenance  work.

     A  great  deal  of  our  efforts  was  directed  at  servicing the existing
SentryVision  systems,  as  reliability  problems  were not completely resolved.
Our  engineering  efforts  were directed at resolving electronic problems, which
resulted  in  numerous  service  calls  and  in the re-design of printed circuit
boards  to  upgrade  them and increase their performance and reliability.  These
issues  were  substantially  resolved  in  the  first  half of 1999.  Mechanical
reliability  issues  then  became our focus in the latter half of 1999 as system
problems  continued.  These issues appear to have been largely resolved with the
development  and introduction in 1999 of new drive and idler wheels, brush block
assemblies  and  wire  harnesses.

     The  use  of  subcontractors  supervised  by  Company employees proved cost
effective  with no sacrifice in quality.  A network of qualified contractors was
established.  In  the second half of 1999, we released 34 installation employees
and retained only our most technically skilled employees.  We intend to continue
to  focus  on  EAS, SentryVision  and CCTV technical service and maintenance and
continue  to  expand  our  contractor  network  for  installation  work.

     This  strategy  has  resulted in significant cost savings.  In addition, we
retain  our reputation of technical expertise within the industry and management
efforts  can  be  focused  on  increased electronics training for our employees,
distributors  and  sub-contractors.

     Since  2000, we have added 19 Service Partners and installation contractors
in  20  key market areas. In total, we have more than 60 factory trained service
technicians in the field to augment service provided by Company employees.  Many
of  these  partners  are  factory  trained  and  have contractual commitments to
provide  prompt, quality service at our direction.  The field service management
structure  was  also  modified so that two of our most experienced managers will
focus  exclusively  on  quality  control  with  our  service  partners.

     In  addition,  our  Call  Center  was  reorganized  and  a  new  supervisor
appointed.  Technical  support  functions  were transferred to our Design Center
personnel  and  all service requests are now screened extensively via telephone.
Initial  results  have  been highly successful in lowering the number of on-site
visits  required  to  resolve  service  issues.

     In 2001, we focused on improving the quality of our service delivery system
and  we  were  successful.  Telephone surveys were conducted after installations
were  completed  and  we achieved a 96% approval rating.  Our employees remained
focused  on technical service and maintenance.  Technician headcount was reduced
to  41 at the end of 2001 as we continued to develop expertise among our service
and  installation  partner  companies.

     Our  Design  Center  personnel continued to screen all service requests and
were  able to close almost 500 calls 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.

     Customer service is a priority and we are focused on continued improvements
in  2002.   Since  the  introduction  of  the new and more reliable SentryVision
SmartTrack  System,  we  expect sales to increase.  We anticipate that increased
installation  and  service  work  can be supported by the existing headcount and
infrastructure.

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  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 (recently purchased by Tyco),
Checkpoint  Systems,  Inc., Philips, Inc., Pelco Manufacturing, Inc., Panasonic,
Inc., and Ultrak, Inc. are the Company's principal competitors.  Sensormatic has
also  begun marketing a traveling CCTV system in the US.  Outside the US, we are
aware  of  other  companies  that  market  other types of traveling CCTV systems
including  Lextar  Technologies, Ltd. in Australia, T.E.B., Sensormatic and DETI
in  France  and Moving Cameras Ltd. in the UK.  Some of our competitors have far
greater  financial  resources,  more  experienced  marketing organizations and a
greater  number  of  employees  than  the  Company.

     In  connection  with  the merger of Knogo's international EAS business with
Sensormatic in December 1994, Knogo agreed with Sensormatic that Knogo would not
compete  with Sensormatic in selling EAS and conventional CCTV products in areas
outside  of  the United States, Canada and Puerto Rico through the period ending
December  29,  1999.  Since  then,  Sentry has promoted selected EAS systems and
tags  through a distribution network outside of North America although Sentry is
not  permitted  to  use  the Knogo name outside of the United States and Canada.

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.

Video
-----

     Video  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 in 2000 for
improvements  made  to  the original technology which has been incorporated into
the SmartTrack product.  Video also has received a corresponding European patent
and  eleven  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 Video.  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  Video.

     We  are  not  aware of any infringement of patents or intellectual property
held by third parties.  However, if Video is determined to have infringed on the
rights  of  others,  Video and/or the Company 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.

     Video 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 Video's proprietary technology
and  developments through patents, trademark registration, trade secret laws and
confidentiality  agreements,  we do not rely on such protection to establish and
maintain  Video's  position  in  the  marketplace.  Management  believes  that
improvement  of  Video'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.

Knogo
-----

     Knogo has 28 United States and Canadian patents and one patent applications
relating  to  (i)  the  method  and  apparatus  for the detection of movement of
articles  and  persons and accessory equipment employed by Knogo in its Knoscape
RF  ,  Ranger  and Knoscape MM  systems, (ii) various specific improvements used
in  the  Knoscape  RF  ,  Ranger  and  Knoscape  MM   systems  and (iii) various
electrical  theft  detection  methods,  apparatus and improvements not presently
used  in  any  of  Knogo's  EAS  systems.

     Sensormatic  and Knogo license certain patent rights and technology to each
other,  for  use  in  their  respective  territories,  pursuant  to  the License
Agreement  dated  December  29,  1994,  entered into in connection with the 1994
Sensormatic  transaction.

RESEARCH  AND  DEVELOPMENT

     At  December  31, 2001, Sentry had 6 employees located in the United States
engaged full-time in research and engineering and product development. Under our
relationship with Dutch A&A, we receive benefit from R&D activities of Dutch A&A
subsidiaries,  which  is  expected  to  leverage  our  research  and development
expenditures  particularly in the area of EAS and RFID products. In addition, we
may  from  time  to time retain consultants for specific project assistance. For
the  years  ended  December 31, 2001, 2000 and 1999, approximately $0.6 million,
$0.9  million  and $1.3 million, respectively, was expended on Company-sponsored
research.

     Responding  to  high numbers of service calls for systems in the field, the
majority  of  our  research  and  development  expenditures in 2000 was directed
towards  improving  the reliability and performance of the SentryVision  product
line.  Enhancements were made to the mechanical, electrical and optical portions
of the system.  These changes were so significant that they led to the design of
a  completely  new  product  called SmartTrack.  Extensive software enhancements
were  built  in  to provide programmability, user friendliness and field service
diagnostics.

     The  mechanical  aspects of the systems were designed around one or two 360
pan,  tilt  and  zoom  camera  modules.  Electronics  were redesigned for easier
serviceability.  Reliability  and  video  quality  were  also  improved.

     SmartTrack  was  field  tested  in  the  fourth  quarter  of  2000 and full
production  of  this  new system began in the third quarter of 2001.  SmartTrack
will  replace  earlier  generations  in  our  line  of  Sentry Vision  products.

     In  addition  to  the  creation  of  SmartTrack,  our  engineers  worked on
continued  enhancements  to  our  Magnetic  EAS  systems  during  2001.

REGULATION

     Because  Knogo's  EAS systems and Video's surveillance 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 new products
are  developed  by  the  Company,  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.

     Sentry's  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.  Sentry intends to apply for certification of
its  products  to  comply  with  the  requirements  under the regulations of the
countries  in  which it plans to market its 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.

     Industry  Canada,  the  department  of the Canadian federal government that
regulates  and  licenses  the radio frequency spectrum in Canada, has brought to
our  attention  that  several  hundred of the units of the earlier generation of
Ranger  1  and 2 EAS devices sold by our Knogo subsidiary to retailers in Canada
do  not  comply  with  the relevant Industry Canada technical standards, and may
cause  interference  to  other users of the radio spectrum.  Industry Canada has
written  to  the  customers  concerned  to apprise them of the situation, and to
demand  that  the  non-compliant  devices  be removed or replaced with compliant
ones.  The  Company  has  been  working  with  Industry Canada officials and the
retailers  concerned  to  put in place a replacement program and a schedule that
will  satisfy  both  the  retailers  and  Industry  Canada.  A majority of these
retailers  have  subsequently upgraded to compliant EAS devices, and discussions
are  continuing  with  others.  Under  the  Radiocommunication Act (Canada) (the
"Act")  which  it  administers,  Industry  Canada has extensive powers to, among
other  measures,  confiscate  radio  equipment  that  is  non-compliant,  and to
initiate prosecutions for alleged violations of the regulatory provisions in the
Act.  However,  Industry  Canada's  normal  practice  is  to  use  co-operative
approaches to problems of technical non-compliance or radio interference, and to
work  with  the  parties  concerned to resolve such problems within a reasonable
time frame.  As a result of our continuing efforts in co-operating with Industry
Canada, we  believe that the few remaining issues  relating  to  the  Ranger 1
and 2 problems will be resolved in 2002.

EMPLOYEES

     At  December  31,  2001,  the  Company  and  its  subsidiaries employed 130
full-time  employees,  of  whom  20 were employed in administrative and clerical
capacities,  6 in engineering, research and development, 32 in production, in 23
marketing  and  sales  and  49  in  customer  service  and support.  None of our
employees are employed pursuant to collective bargaining agreements.  We believe
that  our  relations  with  employees  are  good.

Item  2.     Properties.
-------      ----------

     The  Company's  principal  executive, sales and administrative offices, and
its production, research and development and distribution facilities are located
in  Hauppauge, New York, in a 68,000 square foot facility leased by the Company.
At  December  31,  1998, we owned a 55,000 square foot manufacturing facility in
Cidra,  Puerto  Rico  and a one-story building consisting of approximately 6,000
square  feet  in  Villa  Park,  Illinois.  Both facilities were sold in February
1999.

Item  3.     Legal  Proceedings.
-------      ------------------

     Although  we are involved in ordinary, routine litigation incidental to our
business,  we  are  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 the fiscal year ended December 31, 2001, 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.
-------

     (a)     Price  Range  of  Common  Stock.

     The  following  table  sets forth, for the periods indicated, the high, low
and  closing  sales prices per share of common stock as reported on the American
Stock Exchange composite tape until March 31, 2000 and thereafter as reported on
the  over-the-counter  bulletin  board.

                                     Stock Prices
                                     ------------
                                High       Low       Close
                                ----       ---       -----
2000
    First Quarter            $ 0.688    $ 0.156    $ 0.250
    Second Quarter             0.500      0.063      0.094
    Third Quarter              0.250      0.063      0.141
    Fourth Quarter             0.250      0.045      0.063

2001
    First  Quarter           $ 0.093    $ 0.040    $ 0.045
    Second  Quarter            0.210      0.045      0.125
    Third  Quarter             0.200      0.080      0.110
    Fourth  Quarter            0.255      0.100      0.150

2002
     First  Quarter          $ 0.220    $ 0.130    $ 0.130
     (through March 27, 2002)

     Effective March 31, 2000, the Company's Common and Class A Preferred Stocks
were  delisted  from  trading on the American Stock Exchange (Amex), because the
Company  did not satisfy the current Amex guidelines for continued listing.  The
Company's  Common  Stock is now quoted on the OTC Bulletin Board ("OTCBB") using
the  symbol SKVY.  The Company's Class A Preferred Stock ("SKVYP") traded on the
OTCBB  prior  to  its  redemption  effective  January  8,  2001.

     (b)     Holders  of  Common  Stock.

     The  Common  Stock began trading on the American Stock Exchange on February
13,  1997  under the symbol "SKV."  Prior to such date, no public market for the
Common  Stock  existed.  As of March 27, 2002, the Company had 61,542,872 shares
of Common Stock issued and outstanding, which were held by 256 holders of record
and  approximately  2,900  beneficial  owners.

     (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 agreement prohibit the
Company  from  paying  cash  dividends  without  the  consent  of  the  lender.

     (d)     Redemption  of  Class  A  Preferred  Stock.

     At  a  special meeting of shareholders held on December 8, 2000, a proposal
was  adopted  to  pay  a one-time stock dividend of .075 of a share of preferred
stock  to  preferred  stockholders  on  the  effective  date  of  the  Dutch A&A
investment,  and  immediately  thereafter  each  share  of  preferred  stock was
reclassified  into  five  shares of common stock.  The Dutch A&A investment took
place  on  January 8, 2001, at which time the preferred shares were reclassified
into  28,666,660  shares  of  common  stock.

     For additional information with respect to the Class A Preferred Stock, see
Note  1  to  the  Consolidated  Financial  Statements.

Item  6.     Selected  Financial  Data
-------      -------------------------

     The  table below sets forth selected consolidated historical financial data
of the Company for the years ended December 31, 1997, 1998, 1999, 2000 and 2001.
This  consolidated  financial  data  includes  certain assets and liabilities of
Knogo,  on  a  historical  basis,  relating  to Knogo's operations in the United
States,  Canada  and  Puerto  Rico  prior  to February 12, 1997 and includes the
results  of  operations  of  Video  Sentry  after  that  date.  The  selected
consolidated  historical  financial  data should be read in conjunction with the
audited  Consolidated Financial Statements of the Company included in Item 8 and
"Management's  Discussion  and  Analysis  of  Financial Condition and Results of
Operations"  included  in  Item  7.

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

<S>                                                                <C>        <C>       <C>        <C>        <C>
Years Ended December 31, . . . . . . . . . . . . . . . . . . . . .     1997      1998       1999       2000      2001
                                                                   ---------  --------  ---------  ---------  --------

SELECTED STATEMENT OF OPERATIONS DATA:
Sales, service, rentals and other . . . . . . . . . . . . . . . .  $ 21,996   $26,364   $ 20,198   $ 18,259   $17,212
Sales to Sensormatic. . . . . . . . . . . . . . . . . . . . . . .     2,570     1,792      2,083      1,606        87
Total revenues. . . . . . . . . . . . . . . . . . . . . . . . . .    24,566    28,156     22,281     19,865    17,299
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . .    12,882    14,412     14,339     11,120     8,879
Customer service expenses . . . . . . . . . . . . . . . . . . . .     4,772     6,253      5,457      4,464     4,361
Selling, general and administrative
      Expenses. . . . . . . . . . . . . . . . . . . . . . . . . .     9,629    10,118      9,169      7,576     5,773
Purchased in-process research and
development . . . . . . . . . . . . . . . . . . . . . . . . . . .    13,200         -          -          -         -

Restructuring and impairment charges. . . . . . . . . . . . . . .         -         -      3,026      2,981         -
Gain on sale of assets. . . . . . . . . . . . . . . . . . . . . .         -         -        503          -         -
Loss before income taxes  . . . . . . . . . . . . . . . . . . . .   (17,743)   (4,483)   (11,034)    (7,821)   (2,911)
Loss before cumulative effect
      of change in accounting principal . . . . . . . . . . . . .   (17,917)   (4,504)   (11,034)    (7,821)   (2,911)

Cumulative effect of change in accounting     principal . . . . .         -         -          -        301         -
Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . .   (17,917)   (4,504)   (11,034)    (8,122)   (2,911)
Preferred stock dividends . . . . . . . . . . . . . . . . . . . .     1,067     1,263      1,326      1,337        25

Return to common shareholders from redemption of preferred stock.         -         -          -          -    27,198
Net income (loss) available to
common shareholders . . . . . . . . . . . . . . . . . . . . . . .   (18,984)   (5,767)   (12,360)    (9,459)   24,262
Net income (loss) per common share:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     (2.08)    (0.59)     (1.27)     (0.97)     0.40
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     (2.08)    (0.59)     (1.27)     (0.97)     0.39


As of December 31, . . . . . . . . . . . . . . . . . . . . . . . .    1997      1998       1999       2000      2001
                                                                    ---------  --------  ---------  ---------  --------
SELECTED BALANCE SHEET DATA:

Working capital . . . . . . . . . . . . . . . . . . . . . . . . .  $ 12,415   $12,668   $  6,290   $  2,173   $ 2,235
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . .    35,937    33,496     22,007     13,845    11,561
Property, plant and equipment, net. . . . . . . . . . . . . . . .     6,948     4,348      3,934      3,324     2,962
Obligations under capital leases. . . . . . . . . . . . . . . . .     3,313     3,241      3,058      2,892     2,751
Redeemable cumulative preferred stock . . . . . . . . . . . . . .    25,254    26,517     27,843     29,180         -
Total common shareholders' equity (deficit) . . . . . . . . . . .     1,792    (3,975)   (16,335)   (25,794)    2,891
</TABLE>


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

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.

     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.

     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.

     Related Party Transactions -- Details of related party transactions are
included in Item 13 of this Form 10-K.


RESULTS  OF  OPERATIONS

YEAR  ENDED  DECEMBER  31,  2001  COMPARED  WITH  YEAR  ENDED  DECEMBER 31, 2000

     Consolidated  revenues  were  13% lower in the year ended December 31, 2001
than  in  the  year  ended  December  31,  2000.  Our  overall domestic revenues
continued  to  be  impacted  by  the  soft  economic  environment resulting in a
slowdown  or  delay  in  new retail store openings of some of our customers.  As
part  of  our reorganization of our sales department, more than one-third of our
account  executives  were terminated by June 2001.  Following the release to the
sales  force in September of the new SmartTrack traveling camera system, we were
able  to  hire  qualified  replacements in the middle of the fourth quarter.  In
addition,  some large contracts expected earlier in the last quarter of the year
were  not  received  until  the  latter  part of December 2001, delaying revenue
recognition  until the installations could be completed in 2002.  The backlog of
orders,  which  we  expect  to  deliver  within twelve months, increased to $6.0
million  at  December 31, 2001 as compared to $5.8 million at December 31, 2000.
Also  Sensormatic stopped ordering EAS OEM equipment resulting in a $1.5 million
reduction  of revenues.  Total revenues for the periods presented are broken out
as  follows:

<TABLE>
<CAPTION>

<S>                                        <C>             <C>            <C>
                                           2001            2000           Change
                                         -----------------------          -------
                                                  (in thousands)
EAS . . . . . . . . . . . . . . . . . .$  5,600          $ 7,545          (26%)
CCTV. . . . . . . . . . . . . . . . . .   4,833            5,340           (9%)
SentryVision. . . . . . . . . . . . . .   1,772            1,713            3%
3M library products . . . . . . . . . .     622            1,103          (44%)
                                         -----------------------          -------
Total sales . . . . . . . . . . . . . .  12,827           15,701          (18%)
Service, installation and other . . . .   4,472            4,164            7%
                                         -----------------------          -------
Total revenues. . . . . . . . . . . . .$ 17,299          $19,865          (13%)
                                         =======================          =======
</TABLE>

     The  decline  in EAS sales in 2001 is primarily a result of lower OEM sales
to  Sensormatic  and  lower  sales  to  one  of  our major customers.  We do not
currently  expect an increase in sales to Sensormatic in the future. The decline
in  CCTV  was primarily related to a decrease in sales to the same customer.  We
are  encouraged  by  the increase in SentryVision  SmartTrack sales which gained
momentum  since  the product was released to production in September 2001.  Part
of  our  sales strategy was to offer system trials to new and existing customers
under  a  "Test-A-Track"  program.  Under this program, we install a system on a
nominal  cost  trial basis.  At the end of the trial, if satisfied, the customer
purchases the system.  To date, we have received only positive feedback from our
customers  on  the features and reliability of SmartTrack resulting in new sales
opportunities.  In addition, we have offered new SmartTrack carriage upgrades to
existing  customers that result in lower revenue than new system sales.  We have
been  successful  selling  SmartTrack  to  several  domestic  and  international
large-scale security dealer integrators with repeat order opportunities.  We see
a  growing  trend  for product acceptance and increased market opportunities for
traveling  camera  systems  both  domestically and internationally.  Sales of 3M
library  products  declined  as  we focused our sales efforts on Sentry produced
products.  Service  revenues  increased  as  a  result  of  the higher installed
equipment  base  of  systems  no  longer  under  warranty.

     Cost  of sales as a percentage of sales were 69% in 2001 as compared to 64%
in  2000,  excluding  special  charges described below.  Higher scrap and rework
costs  and  production inefficiencies due to reduced volume in our manufacturing
operations  were  the  primary  cause  of  the increase in the percentage in the
current  year.  In  2000, as part of our restructuring plan, we included in cost
of  sales, special charges of $1.0 million primarily representing provisions for
obsolete  or  excess  inventory.  Those  charges,  in  2000,  were a result of a
combination of the introduction of SmartTrack, which replaced earlier generation
SentryVision  systems,  and  the substitution of certain Dutch A&A systems which
were  expected  to  replace  systems  in  our  EAS  product  lines.

     Customer  service expenses decreased 2% in 2001 as compared to 2000 and the
department  generated  a  small  profit  due  primarily  to  the  successful
implementation of a new service delivery model which included a reduction in the
number  of our customer service representatives and increased use of trained and
qualified  installation  and  service  partners.

     Selling,  general and administrative expenses decreased 24% to $5.8 million
in  2001  from  $7.6  million  in  2000 primarily as a result of continuing cost
saving  measures,  reduced infrastructure, lower selling expenses due to reduced
sales  and  the  elimination  of  the  amortization  of  the goodwill, which was
written-off  in  2000.

     Research  and development costs continued to decrease in 2001 when compared
to  the  previous  year due to further consolidation of facilities.  The primary
emphasis  in the current year continued to be directed towards the completion of
the  new SentryVision SmartTrack system, which was released to production at the
end  of  the third quarter.  Additional savings were achieved through the shared
research  and  development  activities  with  Dutch  A&A  as  a  result of their
investment.

     Interest  expense decreased by $0.1 million in 2001 over 2000 primarily due
to  lower  average  borrowings  under  our  revolving credit agreement and lower
interest  rates.

     In  February  1997,  we  acquired the SentryVision product line through the
merger with Video Sentry Corporation and assigned a value of $4.4 million to its
patent  and  existing technology. At that time, we assigned a seven-year life to
the  technology.  After the merger, we encountered severe liquidity problems due
to  declining  sales  of  this  premier  product  due to design faults, repeated
repairs  and  the  customer's  perception  that  SentryVision  was  a costly and
unreliable  product. The cost of conventional CCTV products also declined during
that period and added features made these systems more competitive when compared
to  SentryVision.  In  addition,  several  competitors, including the industry's
leader  -  Sensormatic,  produced  their own cable free traveling camera systems
that  competed  directly  with  us.  We  considered  pursuing a claim for patent
infringement  against  Sensormatic,  but have decided not to pursue the claim at
this  time.  We  have  made such significant changes from the original traveling
CCTV system acquired from Video Sentry that they have become the basis for a new
product,  which  we  have  named  SmartTrack.  With  the  development  of  the
SentryVision  SmartTrack  system  completed  in  the  fourth quarter of 2000, we
re-assessed the remaining carrying value of the intangible assets related to the
original  SentryVision  products.  Based  on  our  review  of  the technological
developments  in the marketplace, we determined that the original traveling CCTV
surveillance  system  goodwill  and  related patents no longer provide us with a
competitive advantage, and as a result, we recorded an impairment charge in 2000
of  approximately $3.0 million related to these assets. These impairment charges
were  calculated by comparing future discounted net cash flows to the goodwill's
carrying  value.  Factors  leading  to  the  impairment  were  a  combination of
historical  losses  and  insufficient  estimated  future  cash  flows  from  the
SentryVision  system.

     Due  to  net losses, we have not provided for income taxes in either of the
periods presented. The book benefit for taxable losses generated in both periods
presented  was  offset  by  recording a full valuation allowance. Such valuation
allowance  was recorded because management does not believe that the utilization
of  the  tax benefits from operating losses, and other temporary differences are
"more  likely  than  not"  to  be realized, as required by accounting principles
generally  accepted  in  the  United  States  of  America.

     As  a result of the foregoing, Sentry had a net loss of $2.9 million in the
year  ended  December  31, 2001 as compared to a net loss of $8.1 million in the
year  ended  December  31,  2000.

     We  recorded  preferred stock dividends of $25,000 and $1.3 million in 2001
and  2000.  In  connection  with the waiver of certain financial covenants under
the  agreement  with  our  commercial  lender,  we  were not allowed to pay cash
dividends,  including  the  cash  dividend  on  our  preferred stock which would
otherwise  have  been  payable in August of 1999, February and August 2000. At a
special meeting of shareholders held on December 8, 2000, a proposal was adopted
to  pay  a one-time stock dividend of .075 of a share of Class A Preferred Stock
to  preferred stockholders in lieu of accrued dividends on the effective date of
the Dutch A&A investment, and immediately thereafter to reclassify each share of
preferred stock into five shares of common stock.  The Dutch A&A investment took
place  on  January 8, 2001.  The reclassification of the Class A Preferred Stock
resulted  in  a  return  to  the common shareholders of $27.2 million, which was
recorded  in  the  first quarter of 2001.  This amount represents the difference
between the fair market value of the common stock issued and the carrying amount
of  the  preferred  stock  redeemed.

YEAR  ENDED  DECEMBER  31,  2000  COMPARED  WITH  YEAR  ENDED  DECEMBER 31, 1999

     Consolidated  revenues  were  11% lower in the year ended December 31, 2000
than in the year ended December 31, 1999.  We anticipated some of the reductions
due  to  the  downsizing  of the sales and promotional budgets due to our fiscal
constraints.  However,  delays  in  the  installation  schedules  of  our  major
customers  also  impacted  reported  revenues.  The  backlog of orders, which we
expect  to  deliver  within twelve months, was $5.8 million at December 31, 2000
compared  to  $3.2  million  at  December  31,  1999.  Revenues from third party
customers,  other  than  Sensormatic,  were  92%  of  total  revenues in 2000 as
compared  to  91%  in 1999.  Total revenues for the periods presented are broken
out  as  follows:

<TABLE>
<CAPTION>
<S>                          <C>          <C>          <C>
                                2000         1999      Change
                             -------      -------      -------
                               (in thousands)
EAS . . . . . . . . . . . .  $ 7,545      $ 8,982        (16%)
CCTV. . . . . . . . . . . .    5,340        6,035        (12%)
SentryVision. . . . . . . .    1,713        1,593          8%
3M library products . . . .    1,103        1,056          4%
                             -------      -------      -------
Total sales . . . . . . . .   15,701       17,666        (11%)
Service revenues and other.    4,164        4,615        (10%)
                             -------      -------      -------
Total revenues. . . . . . .  $19,865      $22,281        (11%)
                             =======      =======      =======
</TABLE>


     The  decline  in  EAS  sales  in  2000  was  a result of lower sales of our
magnetic  products  and lower OEM sales to Sensormatic.  The decline in CCTV was
primarily  related  to a decrease in sales to one of our major customers.  While
we  had  improved  SentryVision's reliability and performance through technical
modifications,  it was still plagued by ongoing customer perception issues which
resulted  in  no  substantial  sales  increases.

     Cost  of sales as a percentage of sales were 64% in 2000 as compared to 69%
in  1999,  excluding  special  charges  described below.  Lower scrap and rework
costs  relating  to  the  SentryVision  product  line  and  better  production
efficiencies  in  our  manufacturing  operations  were  the primary cause of the
decrease  in  the  percentage  in the current year.  In addition, as part of our
restructuring  plan  initiated  in  1999,  and  in line with our future business
plans, Sentry included in cost of sales, special charges of $1.0 million in 2000
and  $2.1  million  in 1999.  These amounts primarily represented provisions for
obsolete  or  excess  inventory.  In  2000,  the  charges  were  a  result  of a
combination  of  the  introduction  of  SmartTrack  which  will  replace earlier
generation  SentryVision  systems  and  the  substitution  of  certain Dutch A&A
systems  which  will  replace  systems  in  our EAS product lines.  In 1999, the
charges  were  required  as  a  result of modifications and upgrades made to the
Company's  various  product  lines.

     Customer  service  expenses  decreased  18% in 2000 as compared to 1999 due
primarily  to a reduction in the number of customer service representatives as a
result  of our restructuring of operations, which took place at the end of 1999.

     Selling,  general and administrative expenses decreased 17% to $7.6 million
in  2000  from  $9.2 million in 1999 primarily as a result of the savings from a
reduced infrastructure, lower sales promotion expenses and lower amortization of
goodwill.

     Research  and development costs were 33% lower in 2000 when compared to the
previous  year  due to a 50% reduction in headcount and a more focused effort on
product  support.  The  primary  emphasis  in the current year has been directed
towards  the  development  of  the  new  SentryVision  SmartTrack  system.

     Interest  expense increased by $0.1 million in 2000 over 1999 primarily due
to  higher average borrowings under the Company's revolving credit agreement and
higher  interest  rates.

     During  the  first  quarter  of  1999,  the  Company  sold  its Puerto Rico
manufacturing  facility  and  Illinois  design  center  for net cash proceeds of
approximately  $2.2  million  that  resulted  in  a net gain on the sale of $0.5
million.

     In  2000,  we  recorded  an impairment charge of approximately $3.0 million
related to the carrying value of goodwill from the merger with Video Sentry more
fully  referred  to above. These impairment charges were calculated by comparing
future  discounted  net  cash  flows  to the goodwill's carrying value.  Factors
leading  to  the  impairment  were  a  combination  of  historical  losses  and
insufficient  estimated  future  cash  flows  from  the  SentryVision  system.

     During the fourth quarter of 1999, faced with continued losses and sales of
the  original  SentryVision  below  projected  levels,  we undertook significant
downsizing  and operational changes, which resulted in restructuring and special
charges  of  $3.0 million.  These charges included involuntary termination costs
of  $0.6 million and workforce reductions of approximately 23% across almost all
operating  departments.  In  addition,  we  incurred  non-cash  charges  of $2.4
million related to a write-down of goodwill based on revised estimates of future
sales  of  the  original  SentryVision  product.

     Due  to  net losses, we have not provided for income taxes in either of the
periods  presented.

     In  December  1999,  the  Securities  and  Exchange Commission issued Staff
Accounting  Bulletin  No.  101  (SAB  101),  Revenue  Recognition  in  Financial
Statements.  The  SAB  summarizes  certain  of  the  staff's  views  in applying
generally accepted accounting principles to revenue recognition in the financial
statements.  In  accordance  with SAB 101, we have changed our accounting method
for recognizing revenue on the sale of equipment where post-shipment obligations
exist.  Previously,  we recognized revenue for equipment when title transferred,
generally upon shipment. Beginning with the first quarter of year 2000, we began
recognizing  revenue  when  installation  is  complete  or  other  post-shipment
obligations  have  been  satisfied.  The  cumulative  effect  of  the  change in
accounting  method  is  a non-cash reduction in net earnings of $0.3 million, or
$0.03  per  share.

     As  a result of the foregoing, Sentry had a net loss of $8.1 million in the
year  ended  in  December 31, 2000 as compared to a net loss of $11.0 million in
the  year  ended  December  31,  1999.

     We  recorded  preferred  stock  dividends  of $1.3 million in both 2000 and
1999.  Dividends  accrued through February 12, 1999 were paid-in-kind as of that
date.

LIQUIDITY  AND  CAPITAL  RESOURCES

     As  a result of the continued reduced revenue levels, continuing losses and
potential  cash  flow deficiencies, we initiated actions in 1999 which included,
among  others,  (a)  reducing the number of employees, (b) attempting to improve
our  working  capital,  (c) closing and/or consolidating some of our facilities,
(d)  consolidating  some  administrative  functions,  and (e) evaluating certain
business  lines to ensure that our resources are deployed in the most profitable
operations.  Our  initial efforts to rationalize our operations commenced in the
fourth  quarter  of  1999.  Through  2000, the results of these efforts were not
sufficient  to  prevent significant operating losses.  During 2000, we primarily
funded  our  operations  through borrowings under our revolving credit facility,
including an amendment to our borrowing base formula that provided for increased
availability  by up to $0.5 million through 2000, with periodic reductions until
July 2001 when the excess facility expired.  We were increasingly dependent upon
future  transactions,  including  the  timely  release  of  backlog  orders from
customers  and subsequent cash collections, in order to generate sufficient cash
flows  and  return  to profitability.  We had sold all available assets to raise
cash  to  finance our operations.  We were, therefore, increasingly dependent on
borrowings under our revolving credit facility to finance our cash requirements.

     To  strengthen  our  financial  position,  we  continued  to  solicit other
businesses  within the security industry to ascertain the level of interest in a
possible  joint  venture  or  equity  investment. Since October of 1999, several
parties  had  indicated  interest  in  investment or merger with our company. In
February  2000 we began discussions with Dutch A&A about a possible transaction.
After  many  discussions and the exchange of information, we announced on August
8,  2000 that we had entered into an agreement pursuant to which Dutch A&A would
invest  $3  million  in  newly  issued  shares  of  our  common  stock. For this
investment,  Dutch  A&A would receive 37.5% of our common stock then outstanding
on  a  fully-diluted  basis,  after giving effect to the reclassification of our
preferred  stock  into  common  stock.  In  addition, Dutch A&A has the right to
acquire  additional  shares during the two year period following the closing, up
to  an aggregate holding of 60% of the common stock then outstanding. Currently,
under  the  terms  of  the  share purchase agreement, Dutch A&A has the right to
acquire  51%  of  the  common  stock.  The  transaction was conditioned upon our
shareholders'  approval,  including  approval  by  our  preferred  and  common
stockholders,  each voting as a class, to amend our certificate of incorporation
to:  (i)  permit  the  payment  of  a  dividend  of additional shares of Class A
Preferred  Stock  at  a rate of 0.075 shares of Class A Preferred Stock for each
share  of  Class  A  Preferred  Stock  held;  and (ii) to reclassify the Class A
Preferred  Stock into shares of common stock at a ratio of five shares of common
stock  for  each  share  of  Class  A  Preferred Stock outstanding, and (iii) to
increase  the number of the authorized shares of common stock to 140,000,000. At
the  Special  Meeting  held on December 8, 2000, the shareholders approved these
amendments.


     On  January  8,  2001,  Dutch  A&A acquired 23,050,452 shares of our common
stock  for $3.0 million, $1.0 million of which was paid in January 2001, and the
remaining  balance paid in equal $1.0 million installments on April 30, 2001 and
August 31, 2001. Concurrent with the share purchase agreement, we entered into a
distribution  agreement  with  Dutch  A&A  allowing us access to new products of
Dutch  A&A and allowing Dutch A&A access to our products for a period of no less
than  three  years.  The  consummation  of  this  transaction  has substantially
enhanced  our  liquidity  and  financial  condition.

     To  further  address  the  continuing  losses,  our  business plan for 2002
includes  the  following:

-     Addition  of  new  products, including high-end EAS systems and disposable
tags  and  labels,  proximity  access control and RFID, through our distribution
agreement  with  Dutch  A&A.

-     Increased  promotion  of  SmartTrack,  our  new  entry in the SentryVision
family  of  products.

-     Strengthening  our  international  dealer  network  with  new  and  more
financially  stronger  business  partners.

-     Sharing  of  marketing resources, and research and development, with Dutch
A&A.

-     Joint participation with Dutch A&A in trade show activity and a refocus on
expanding  business  with  existing  customers.

-     Continuation  and  expansion  of  our  Service  Partner program to augment
service  provided  by  our  employees.

-     Further  subletting  of  office  space  in  our  corporate  offices.

-     Additional  cost  cutting  measures.

     We  have  a  revolving  credit  facility  with  GE Capital Corporation that
permits  us  to  borrow  up  to  $8  million,  subject  to availability, under a
borrowing  formula  based  on  accounts  receivable and inventories.  The credit
agreement,  which  was  due to expire on December 31, 2001, was extended through
March  31,  2002.  The facility is secured by a lien on substantially all of our
assets.  At  December 31, 2001, we had borrowings of approximately $2.6 million,
the  maximum  amount  available  under  the  facility.  On February 21, 2002, we
signed a commitment letter for a new revolving credit facility with CIT Business
Credit.  The  amount of the facility and the terms are substantially the same as
the  expiring  facility.  We  closed on the new facility on March 22, 2002.  The
new  facility  is  for  a  period  of  three  years  expiring on March 22, 2005.

     We  will  require  liquidity  and  working  capital to finance increases in
receivables  and inventory associated with sales growth and, to a lesser extent,
for  capital  expenditures.  We  had no material capital expenditure or purchase
commitments  as  of  December  31,  2001.


     We  believe  that  current  cash reserves and cash generated by operations,
together  with  borrowings  under  the  new  revolving  credit facility, will be
sufficient  to  meet  our  working  capital  and  future  capital  expenditure
requirements  over  the  next  twelve  months.


     We  will  require  positive  cash  flow from operations to meet our working
capital needs over the next twelve months.  In the event that positive cash flow
from  operations  is  not  generated,  we  may  be  required  to seek additional
financing  to  meet  working capital needs.  We anticipate revenue growth in new
and  existing  markets.  We are striving to improve our gross margin and control
our  selling expenses and our 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  financing.  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, and the extent thereof, (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  may  need to seek additional financing from Dutch A&A or to
others  to  satisfy  potential  operating  cash  flow  deficiencies.

     The  table  below  summarizes  aggregate maturities of future minimum lease
payments  under  noncancelable  operating  and capital leases as of December 31,
2001.


Contractual                      Less than      1-3        4-5         After 5
Obligations           Total        1 Year      Years      Years         Years
                                     (In  Thousands)

Operating  Leases   $ 2,328       $ 155      $  465      $  310      $  1,398
Capital  Leases       5,623         351       1,138         752         3,382
                     ------       -----      ------      ------      --------
Total               $ 7,951       $ 506      $1,603      $1,062      $  4,780
                    =======       =====      ======      ======      ========


RECENT  ACCOUNTING  PRONOUNCEMENTS

     In  June  1998,  the  Financial  Accounting Standards Board ("FASB") issued
Statement  of  Financial  Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative  Instruments  and Hedging Activities".  SFAS No. 133 is effective for
all  fiscal  years  beginning after June 15, 2000.  SFAS No. 133, as amended and
interpreted,  establishes  accounting  and  reporting  standards  for derivative
instruments,  including  certain  derivative  instruments  embedded  in  other
contracts,  and  for hedging activities.  All derivatives, whether designated in
hedging  relationships  or not, are required to be recorded on the balance sheet
at  fair  value.  If  the  derivative  is  designated in a fair value hedge, the
changes in the fair value of the derivative and the hedged item is recognized in
earnings.  If  the derivative is designated in a cash-flow hedge, changes in the
fair  value  of  the derivative is recorded in other comprehensive income and is
recognized  in the income statement when the hedged item affects earnings.  SFAS
No.  133  defines  new requirements for designation and documentation of hedging
relationships as well as ongoing effectiveness assessments in order to use hedge
accounting.  For  a derivative that does not qualify as a hedge, changes in fair
value  are  recognized  in earnings.  We adopted SFAS No. 133 on January 1, 2001
and  the  implementation  did  not  have  a  material impact on our consolidated
financial  statements.

     In  June  2001,  the  Financial Accounting Standards Board issued Financial
Accounting Standards No. 141 ("SFAS No. 141"), "Business Combinations." SFAS No.
141  applies prospectively to all business combinations initiated after June 30,
2001  and  to  all business combinations accounted using the purchase method for
which the date of acquisition is July 1, 2001, or later. This statement requires
all  business  combinations  to  be accounted for using one method, the purchase
method.  Under  previously existing accounting rules, business combinations were
accounted  for  using one of two methods, the pooling-of-interests method or the
purchase  method. The adoption of SFAS No. 141 did not have a material impact on
our  financial  statements.

     In  June  2001,  the  Financial Accounting Standards Board issued Financial
Accounting  Standards  No.  142 ("SFAS No. 142"), "Goodwill and Other Intangible
Assets."  SFAS No. 142 addresses financial accounting and reporting for acquired
goodwill  and  other  intangible  assets.  Under SFAS No. 142, goodwill and some
intangible  assets  will  no  longer  be  amortized,  but  rather  reviewed  for
impairment on a periodic basis. The provisions of this Statement are required to
be  applied  starting  with fiscal years beginning after December 15, 2001. This
Statement  is  required  to  be applied at the beginning of the Company's fiscal
year and to be applied to all goodwill and other intangible assets recognized in
its  financial  statements  at  that  date.  Impairment  losses for goodwill and
certain  intangible  assets  that  arise  due to the initial application of this
Statement are to be reported as resulting from a change in accounting principle.
Goodwill  and  intangible  assets  acquired after June 30, 2001, will be subject
immediately to the provisions of this Statement. The adoption of SFAS No. 142 is
not  expected  to  have  a  material  impact  on  our  financial  statements.

     In  August  2001,  the  FASB  issued  SFAS  No.  143, "Accounting for Asset
Retirement  Obligations."  SFAS  No.  143  addresses  financial  accounting  and
reporting  for obligations associated with the retirement of tangible long-lived
assets  and  the associated asset retirement costs. The adoption of SFAS No. 143
is  not  expected  to  have  a  material  impact  on  our  financial statements.


     In  August  2001,  the  FASB  issued  SFAS  No.  144,  "Accounting  for the
Impairment  or  Disposal of Long-Lived Assets." SFAS No. 144 addresses financial
accounting  and  reporting  for the impairment or disposal of long-lived assets.
The  adoption  of  SFAS No. 144 is not expected to have a material impact on our
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 of Financial Condition and
Results  of  Operations"  and  other sections of this Annual Report on Form
10-K  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 two 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 due to its current financial condition
(vi) the risk that the borrowing availability under the new credit facility
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."


Item  8.      Financial  Statements  and  Supplementary  Data.
-------       -----------------------------------------------

SENTRY  TECHNOLOGY  CORPORATION  AND  SUBSIDIARIES

TABLE  OF  CONTENTS
-------------------
                                                                            PAGE

INDEPENDENT  AUDITORS'  REPORT                                               30

CONSOLIDATED  FINANCIAL  STATEMENTS:

     Consolidated  Balance  Sheets  as  of  December  31,  2001  and 2000    31

     Consolidated  Statements  of  Operations  for  the  Years  Ended
          December  31,  2001,  2000  and  1999                              32

     Consolidated  Statements  of  Shareholders'  Equity  for  the  Years  Ended
          December  31,  2001,  2000  and  1999                              33

     Consolidated  Statements  of  Cash  Flows  for  the  Years  Ended
          December  31,  2001,  2000  and  1999                              34

     Notes  to  Consolidated  Financial  Statements                       35-49


SCHEDULE  II  -  Valuation  and  Qualifying  Accounts                        50


INDEPENDENT  AUDITORS'  REPORT

To  the  Board  of  Directors  and  Stockholders  of
Sentry  Technology  Corporation
Hauppauge,  New  York


We  have  audited  the  accompanying  consolidated  balance  sheets  of  Sentry
Technology  Corporation and subsidiaries (the "Company") as of December 31, 2001
and  2000,  and the related consolidated statements of operations, shareholders'
equity  and  cash flows for each of the three years in the period ended December
31,  2001.  Our  audits also included the financial statement schedule listed in
the  Index  at  item  14(a)(2).  These  financial  statements  and the financial
statement  schedule  are  the  responsibility  of the Company's management.  Our
responsibility is to express an opinion on the consolidated financial statements
and  the  financial  statement  schedule  based  on  our  audits.

We conducted our audits in accordance with auditing standards generally accepted
in  the  United  States  of  America.  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  that  our  audits  provide  a
reasonable  basis  for  our  opinion.

In  our  opinion,  such consolidated financial statements present fairly, in all
material  respects,  the financial position of Sentry Technology Corporation and
subsidiaries  as  of  December  31,  2001  and  2000,  and  the results of their
operations  and their cash flows for each of the three years in the period ended
December  31,  2001, in conformity with accounting principles generally accepted
in  the United States of America. Also, in our opinion, such financial statement
schedule,  when  considered  in  relation  to  the  basic consolidated financial
statements  taken  as  a  whole,  presents  fairly  in all material respects the
information  set  forth  therein.

Deloitte  &  Touche  LLP
Jericho,  New  York
March  22,  2002

<PAGE>

SENTRY  TECHNOLOGY  CORPORATION  AND  SUBSIDIARIES
CONSOLIDATED  BALANCE  SHEETS
DECEMBER  31,  2001  AND  2000
(IN  THOUSANDS,  EXCEPT  PAR  VALUE  AMOUNTS)
<TABLE>
<CAPTION>
<S>                                                                <C>        <C>
                                                                       2001       2000
ASSETS
CURRENT ASSETS:
  Cash and cash equivalents . . . . . . . . . . . . . . . . . . .  $    423   $    927
  Accounts receivable, less allowance for doubtful accounts
    of $763 and $890, respectively. . . . . . . . . . . . . . . .     2,713      3,178
  Net investment in sales-type leases - current portion . . . . .        61         84
  Inventories . . . . . . . . . . . . . . . . . . . . . . . . . .     4,740      5,274
  Prepaid expenses and other current assets . . . . . . . . . . .       338        202
                                                                   ---------  ---------
      Total current assets. . . . . . . . . . . . . . . . . . . .     8,275      9,665
NET INVESTMENT IN SALES-TYPE LEASES - Noncurrent portion. . . . .        35        100
SECURITY DEVICES ON LEASE - Net . . . . . . . . . . . . . . . . .        11         36
PROPERTY, PLANT AND EQUIPMENT - Net . . . . . . . . . . . . . . .     2,962      3,324
INTANGIBLES, including patent costs,
  less accumulated amortization of $296 and $298, respectively. .       234        247
OTHER ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . .        44        473
                                                                   ---------  ---------
                                                                   $ 11,561   $ 13,845
                                                                   =========  =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
  Revolving line of credit. . . . . . . . . . . . . . . . . . . .  $  2,599   $  2,920
  Accounts payable. . . . . . . . . . . . . . . . . . . . . . . .     1,153      1,463
  Accrued liabilities . . . . . . . . . . . . . . . . . . . . . .     1,864      2,633
  Obligations under capital leases - current portion. . . . . . .       121        124
  Deferred income . . . . . . . . . . . . . . . . . . . . . . . .       303        352
                                                                   ---------  ---------
      Total current liabilities . . . . . . . . . . . . . . . . .     6,040      7,492
OBLIGATIONS UNDER CAPITAL LEASES - Noncurrent portion . . . . . .     2,630      2,768
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY. . . . . . . . . . .         -        199
                                                                   ---------  ---------
      Total liabilities . . . . . . . . . . . . . . . . . . . . .     8,670     10,459

COMMITMENTS AND CONTINGENCIES (Notes 2, 10 and 15)
REDEEMABLE CUMULATIVE PREFERRED STOCK . . . . . . . . . . . . . .         -     29,180
COMMON SHAREHOLDERS' EQUITY (DEFICIT):
  Common stock, $0.001 par value; authorized 140,000 shares,
    issued and outstanding 61,543 and 9,751 shares, respectively.        62         10
  Additional paid-in capital. . . . . . . . . . . . . . . . . . .    44,403     12,859
  Accumulated deficit . . . . . . . . . . . . . . . . . . . . . .   (41,574)   (38,663)
                                                                   ---------  ---------
      Total common shareholders' equity (deficit) . . . . . . . .     2,891    (25,794)
                                                                   ---------  ---------
                                                                   $ 11,561   $ 13,845
                                                                   =========  =========
See  notes  to  consolidated  financial  statements.
</TABLE>

<PAGE>
SENTRY  TECHNOLOGY  CORPORATION  AND  SUBSIDIARIES
CONSOLIDATED  STATEMENTS  OF  OPERATIONS
YEARS  ENDED  DECEMBER  31,  2001,  2000  AND  1999
(IN  THOUSANDS,  EXCEPT  PER  SHARE  AMOUNTS)
<TABLE>
<CAPTION>
<S>                                                    <C>       <C>       <C>
                                                          2001      2000       1999
REVENUES:
  Sales . . . . . . . . . . . . . . . . . . . . . . .  $12,827   $15,701   $ 17,666
  Service revenues and other. . . . . . . . . . . . .    4,472     4,164      4,615
                                                       --------  --------  ---------
                                                        17,299    19,865     22,281
                                                       --------  --------  ---------
COSTS AND EXPENSES:
  Cost of sales . . . . . . . . . . . . . . . . . . .    8,879    11,120     14,339
  Customer services expenses. . . . . . . . . . . . .    4,361     4,464      5,457
  Selling, general and administrative expenses. . . .    5,773     7,576      9,169
  Research and development. . . . . . . . . . . . . .      661       862      1,289
  Restructuring and impairment charges (Note 20). . .        -     2,981      3,026
  Gain on sale of assets (Note 18). . . . . . . . . .        -         -       (503)
                                                       --------  --------  ---------
                                                        19,674    27,003     32,777
                                                       --------  --------  ---------
OPERATING LOSS. . . . . . . . . . . . . . . . . . . .   (2,375)   (7,138)   (10,496)
INTEREST EXPENSE. . . . . . . . . . . . . . . . . . .      536       683        538
                                                       --------  --------  ---------
LOSS BEFORE INCOME TAXES AND CUMULATIVE
  EFFECT ON CHANGE IN ACCOUNTING PRINCIPLE. . . . . .   (2,911)   (7,821)   (11,034)
INCOME TAXES. . . . . . . . . . . . . . . . . . . . .        -         -          -
                                                       --------  --------  ---------
NET LOSS BEFORE CUMULATIVE EFFECT OF
  CHANGE IN ACCOUNTING PRINCIPLE. . . . . . . . . . .   (2,911)   (7,821)   (11,034)
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
  PRINCIPLE . . . . . . . . . . . . . . . . . . . . .        -      (301)         -
                                                       --------  --------  ---------
NET LOSS. . . . . . . . . . . . . . . . . . . . . . .   (2,911)   (8,122)   (11,034)
PREFERRED STOCK DIVIDENDS . . . . . . . . . . . . . .      (25)   (1,337)    (1,326)
RETURN TO COMMON SHAREHOLDERS FROM
  REDEMPTION OF PREFERRED STOCK . . . . . . . . . . .   27,198         -          -
                                                       --------  --------  ---------
NET INCOME (LOSS) ATTRIBUTED TO
COMMON SHAREHOLDERS . . . . . . . . . . . . . . . . .  $24,262   $(9,459)  $(12,360)
                                                       ========  ========  =========

NET INCOME (LOSS) PER COMMON SHARE BEFORE CUMULATIVE
  EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE:
    Basic . . . . . . . . . . . . . . . . . . . . . .  $  0.40   $ (0.94)  $  (1.27)
                                                       ========  ========  =========
    Diluted . . . . . . . . . . . . . . . . . . . . .  $  0.39   $ (0.94)  $  (1.27)
                                                       ========  ========  =========

NET INCOME (LOSS) PER COMMON SHARE:
    Basic . . . . . . . . . . . . . . . . . . . . . .  $  0.40   $ (0.97)  $  (1.27)
                                                       ========  ========  =========
    Diluted . . . . . . . . . . . . . . . . . . . . .  $  0.39   $ (0.97)  $  (1.27)
                                                       ========  ========  =========

WEIGHTED AVERAGE COMMON SHARES:
    Basic . . . . . . . . . . . . . . . . . . . . . .   60,468     9,751      9,751
                                                       ========  ========  =========
    Diluted . . . . . . . . . . . . . . . . . . . . .   62,008     9,751      9,751
                                                       ========  ========  =========
See  notes  to  consolidated  financial  statements
</TABLE>

<PAGE>

SENTRY  TECHNOLOGY  CORPORATION  AND  SUBSIDIARIES
CONSOLIDATED  STATEMENTS  OF  SHAREHOLDERS'  EQUITY
YEARS  ENDED  DECEMBER  31,  2001,  2000  AND  1999
(IN  THOUSANDS)

<TABLE>
<CAPTION>
<S>                                            <C>             <C>           <C>            <C>               <C>
                                                                              RETAINED          TOTAL         REDEEMABLE
                                                               ADDITIONAL      EARNINGS         COMMON        CUMULATIVE
                                                COMMON STOCK     PAID-IN     (ACCUMULATED     SHAREHOLDERS'    PREFERRED
                                               SHARES   AMOUNT   CAPITAL       DEFICIT)     EQUITY (DEFICIT)     STOCK
</TABLE>
<TABLE>
<CAPTION>

<S>                                               <C>     <C>    <C>          <C>            <C>              <C>
BALANCE, JANUARY 1, 1999 . . . . . . . . . . . .   9,751  $10    $15,522      $(19,507)      $  (3,975)       $ 26,517

  Net loss and comprehensive loss. . . . . . . .       -    -        -         (11,034)        (11,034)         -

  Preferred stock dividends (Note 1) . . . . . .       -    -     (1,326)         -             (1,326)          1,326
                                                  ------  ---    --------     ---------      ----------       ---------

BALANCE, DECEMBER 31, 1999 . . . . . . . . . . .   9,751   10     14,196       (30,541)        (16,335)         27,843

  Net loss and comprehensive loss. . . . . . . .       -    -        -          (8,122)         (8,122)         -

  Preferred stock dividends (Note 1) . . . . . .       -    -     (1,337)         -             (1,337)          1,337
                                                  ------  ---    --------     ---------      ----------       ---------

BALANCE, DECEMBER 31, 2000 . . . . . . . . . . .   9,751   10     12,859       (38,663)        (25,794)         29,180

  Net loss and comprehensive loss. . . . . . . .       -    -        -          (2,911)         (2,911)           -

  Preferred stock dividends (Note 1) . . . . . .       -    -       (25)          -                (25)             25

  Redemption of preferred stock
       for common stock (Note 2) . . . . . . . .  28,667   29    29,176           -             29,205         (29,205)

  Net proceeds from common stock
      issued to Dutch A&A. . . . . . . . . . . .  23,050   23     2,388           -              2,411             -

  Exercise of stock options. . . . . . . . . . .      75    -         5           -                  5             -
                                                  ------  ---  --------       ---------       ---------       ---------

BALANCE, DECEMBER 31, 2001 . . . . . . . . . . .  61,543  $62   $44,403       $(41,574)         $2,891         $   -
                                                  ======  ===  ========       =========       =========       =========

See notes to consolidated financial statements.
</TABLE>

<PAGE>

SENTRY  TECHNOLOGY  CORPORATION  AND  SUBSIDIARIES
CONSOLIDATED  STATEMENTS  OF  CASH  FLOWS
YEARS  ENDED  DECEMBER  31,  2000,  1999  AND  1998
(IN  THOUSANDS)

<TABLE>
<CAPTION>
<S>                                                                  <C>       <C>       <C>
                                                                        2001      2000       1999
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $(2,911)  $(8,122)  $(11,034)
  Adjustments to reconcile net loss to net cash provided by
    (used in) operating activities:
    Gain on sale of assets. . . . . . . . . . . . . . . . . . . . .        -         -       (503)
    Depreciation and amortization of security devices and property,
      plant and equipment . . . . . . . . . . . . . . . . . . . . .      505       632        744
    Amortization of intangibles and other assets. . . . . . . . . .       33     1,010      1,594
  Provision for bad debts . . . . . . . . . . . . . . . . . . . . .       37       224        192
  Loss on impairment of assets. . . . . . . . . . . . . . . . . . .        -     2,981      2,440
  Changes in operating assets and liabilities:
    Accounts receivable . . . . . . . . . . . . . . . . . . . . . .      428     3,436      2,278
    Net investment in sales-type leases . . . . . . . . . . . . . .       88       317        539
    Inventories . . . . . . . . . . . . . . . . . . . . . . . . . .      534       (16)     2,124
    Prepaid expenses and other assets . . . . . . . . . . . . . . .       94      (534)       263
    Accounts payable and accrued liabilities. . . . . . . . . . . .   (1,079)      239       (480)
    Deferred income . . . . . . . . . . . . . . . . . . . . . . . .      (49)      133        (30)
                                                                     --------  --------  ---------
        Net cash provided by (used in) operating activities . . . .   (2,320)      300     (1,873)
                                                                     --------  --------  ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of property, plant and equipment . . . . . . . . . . . .     (124)       23       (294)
  Proceeds from sale of assets. . . . . . . . . . . . . . . . . . .        -         -      2,182
  Security devices on lease . . . . . . . . . . . . . . . . . . . .        6       (15)       (25)
  Intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . .      (20)      (11)       (39)
                                                                     --------  --------  ---------
        Net cash provided by (used in) investing activities . . . .     (138)       (3)     1,824
                                                                     --------  --------  ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Net borrowings under the revolving line of credit . . . . . . . .     (321)     (155)       310
  Repayment of obligations under capital leases . . . . . . . . . .     (141)     (166)      (183)
    Proceeds from exercise of stock options . . . . . . . . . . . .        5         -          -
  Proceeds of sale of stock, net. . . . . . . . . . . . . . . . . .    2,411         -          -
                                                                     --------  --------  ---------
        Net cash provided by (used in) financing activities . . . .    1,954      (321)       127
                                                                     --------  --------  ---------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS. . . . . . . . . .     (504)      (24)        78
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR. . . . . . . . . . . .      927       951        873
                                                                     --------  --------  ---------
CASH AND CASH EQUIVALENTS, END OF YEAR. . . . . . . . . . . . . . .  $   423   $   927   $    951
                                                                     ========  ========  =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Cash paid during the period for:
    Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . .  $   548   $   680   $    577
                                                                     ========  ========  =========
    Income taxes. . . . . . . . . . . . . . . . . . . . . . . . . .  $     -   $     -   $      -
                                                                     ========  ========  =========
</TABLE>
See  notes  to  consolidated  financial  statements.

<PAGE>

SENTRY  TECHNOLOGY  CORPORATION  AND  SUBSIDIARIES
NOTES  TO  CONSOLIDATED  FINANCIAL  STATEMENTS
YEARS  ENDED  DECEMBER  31,  2001,  2000  AND  1999
---------------------------------------------------
1.   BASIS  OF  PRESENTATION

     Sentry  Technology  Corporation  ("Sentry")  a  publicly  traded  Delaware
Corporation,  was  established  to effect the merger of Knogo North America Inc.
("Knogo  N.A.")  and  Video  Sentry  Corporation  ("Video  Sentry")  which  was
consummated  on  February 12, 1997.  The merger resulted in Knogo N.A. and Video
Sentry  becoming wholly owned subsidiaries of Sentry.  The term "Company" refers
to  Sentry  as of and subsequent to February 12, 1997 and to Knogo N.A. prior to
such  date.  Prior  to  the  merger,  Video  Sentry  was  engaged in the design,
development  and  marketing  of  a  traveling closed circuit television security
surveillance  system  throughout  the  United  States.

     Pursuant  to  the merger agreement, Sentry issued one share of common stock
for  each  one  share  of Video Sentry common stock outstanding at the effective
time  of  the merger. Sentry also issued one share of common stock and one share
of  Class  A  Preferred  Stock for each 1.2022 shares of Knogo N.A. common stock
outstanding.  The  Sentry  Class A Preferred Stock had a face value of $5.00 per
share  and  a cumulative dividend rate of 5.0% (the first two years of which are
paid-in-kind). The preferred was nonvoting and subject to a mandatory redemption
four  years  from  the date of issuance and optional redemption by Sentry at any
time after one year from the date of issuance. The redemption price was equal to
$5.00  per  preferred  share  (plus  accrued  and  unpaid  dividends  as  of the
redemption  date).  The  preferred stock was non convertible, but the redemption
price  could,  in  certain  circumstances,  be  paid in common stock at Sentry's
option.  The  total  number of Sentry preferred shares authorized is 10,000,000.

     In  January  2001,  we  entered  into  a capital transaction with Dutch A&A
Holding  B.V.  ("Dutch  A&A").  All  preferred  stock was redeemed prior to that
transaction.

2.     INVESTMENT  BY  DUTCH  A&A

     On  January  8,  2001,  Dutch  A&A acquired 23,050,452 shares of our common
stock  for  $3 million, of which $1 million was paid in January 2001, $1 million
was  paid  on April 30, 2001 and the remaining $1 million was paid on August 31,
2001.  Dutch A&A is a Netherlands company which, through its subsidiaries, is in
the business of development, manufacture, sale and distribution of various kinds
of identification, access control and anti-theft electronic article surveillance
systems  and  accessories.  Concurrent  with  the  share purchase agreement, the
Company  entered  into  a  distribution  agreement  with  Dutch A&A allowing the
Company access to new products of Dutch A&A and allowing Dutch A&A access to the
Company's  products  for  an  initial  period  of  not  less  than  two  years.

     As  of  January  8,  2001,  Dutch A&A owned 37.5% of our outstanding common
stock. Under the share purchase agreement, at any time prior to January 8, 2002,
Dutch  A&A had the right to increase its ownership of the Company's common stock
to a total of 51% of the shares of common stock then outstanding. If the average
market  value  of  the  Company's common stock, measured over any 10-day trading
period  during the one year period following January 8, 2001, was at least $15.0
million,  the  purchase  price  for the additional shares shall be determined by
multiplying  the  actual  number of shares to be purchased by $.001. In November
2001,  this  market capitalization threshold was met. At that time, our Board of
Directors  agreed  to extend Dutch A&A's purchase right until January 8, 2003 in
exchange  for  an extension of the distribution agreement for one year. Further,
the share purchase agreement provides that at any time prior to January 8, 2003,
Dutch A&A may increase its ownership of the Company's common stock to a total of
60%  of  the shares of common stock then outstanding. The purchase price for the
additional shares shall be determined as follows: If the average market value of
the  common  stock, measured over a 10-day period during the two years preceding
January 8, 2003, is at least $25 million, the purchase price shall be determined
by  multiplying  the  actual number of shares to be purchased by $.001. If Dutch
A&A  previously  exercised its right to acquire shares increasing its investment
to  51% of the Company's common stock, but the average market value test was not
met  at  the  time of the second purchase, then the purchase price shall be $3.5
million.  As  a  condition  to  the  investment  by  Dutch  A&A,  the  Company's
stockholders  elected three nominees of Dutch A&A to the Board of Directors at a
Special  Meeting  of  Stockholders  on  December  8,  2000. If Dutch A&A has not
acquired  51% of the Company's common stock by January 8, 2003, one of the three
nominees  of  Dutch  A&A  will resign and be replaced, with the consent of Dutch
A&A, by a nominee of the Company's directors who are not nominated by Dutch A&A.

     In  addition to the election of three nominees of Dutch A&A to the Board of
Directors,  other  matters  which  were approved at the December 8, 2000 Special
Meeting  of Stockholders and became effective on January 8, 2001 were amendments
to  the  Company's  certificate of incorporation to: (i) permit the payment of a
dividend  of  additional  shares of Class A Preferred Stock at the rate of 0.075
shares  of  Class  A  Preferred  Stock for each share of Class A Preferred Stock
held;  (ii) to reclassify Class A Preferred Stock into shares of common stock on
a ratio of five shares of common stock for each share of Class A Preferred Stock
outstanding; and (iii) to increase the number of the Company's authorized shares
of  common  stock  to  140,000,000.  As  a  result  of  the  dividend  and
reclassification,  28,666,660  common  shares  were  issued  to  former  Class A
Preferred  shareholders.

     Also,  on December 28, 2000, the Board of Directors increased the number of
directors  from  five  to  seven  effective  upon  the  closing of the Dutch A&A
investment.  The  Board  currently  has  six  directors.

     The  reclassification  of the Class A Preferred Shares resulted in a return
to  the  common  shareholders  of $27.2 million, which was recorded in the first
quarter  of  2001. This amount represents the difference between the fair market
value  of the common stock issued and the carrying amount of the preferred stock
redeemed.

3.     SIGNIFICANT  ACCOUNTING  POLICIES

     BUSINESS  - The Company is engaged in one segment and line of business, the
design,  manufacture, distribution, installation and service of systems designed
to  be  used  by  retailers  to  deter  shoplifting  and  employee  theft and by
commercial,  manufacturing  and  governmental  customers  to  protect people and
assets.

     PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include
the  accounts  of  the  Company  and  its  wholly  owned  and  majority  owned
subsidiaries. All intercompany balances and transactions have been eliminated in
consolidation.

     REVENUE  RECOGNITION  AND  CHANGE  IN  ACCOUNTING  PRINCIPLE  - The Company
manufactures  security  devices  which  it offers for sale or lease. In December
1999,  the  Securities  and Exchange Commission issued Staff Accounting Bulletin
No.  101  (SAB  101),  Revenue  Recognition  in  Financial  Statements.  The SAB
summarizes  certain  of  the  staff's  views  in  applying  generally  accepted
accounting  principles  to  revenue  recognition  in  the  financial statements.

     In  accordance  with SAB 101, the Company has changed its accounting method
for recognizing revenue on the sale of equipment where post-shipment obligations
exist.  Previously,  the  Company  recognized  revenue  for equipment when title
transferred,  generally  upon shipment. Beginning with the first quarter of year
2000,  the  Company  began  recognizing revenue when installation is complete or
other  post-shipment  obligations  have been satisfied. The cumulative effect of
the  change in accounting method is a non-cash increase in net loss of $301,000,
or $0.03 per share for the year ended December 31, 2000. Had the Company adopted
the  provisions  of  SAB  101 at January 1, 1998, the effect on the consolidated
financial  statements  would  have  resulted  in  a  decrease  in  net  loss  of
approximately  $367,000  for  the  year  ended  December  31,  1999.

     For sales-type leases, revenue is recognized at the time of installation or
acceptance by the lessee in an amount equal to the present value of the required
rental  payments  under  the  fixed,  noncancellable  lease term. The difference
between  the  total  lease  payments and the present value is amortized over the
term of the lease so as to produce a constant periodic rate of return on the net
investment  in  the  lease.

     For operating leases, aggregate, rental revenue is recognized over the term
of  the  lease (usually 12-48 months), which commences with date of installation
or  acceptance  by  the  lessee.

     Service  revenues  are  recognized when earned and maintenance revenues are
recognized  ratably  over the service contract period. Warranty costs associated
with products sold with warranty protection are estimated based on the Company's
historical  experience  and  recorded  in  the  period  the  product  is  sold.

     Included  in  accounts receivable at December 31, 2001 and 2000 is unbilled
accounts  receivable  of  $41,000  and  $77,000,  respectively.

CASH  AND  CASH  EQUIVALENTS - The Company considers all highly liquid temporary
investments  with  original  maturities  of  less  then  ninety  days to be cash
equivalents.

INVENTORIES  -  Inventories are stated at the lower of cost (first-in, first-out
method)  or  market.

SECURITY  DEVICES  ON  LEASE  - Security devices on lease are stated at cost and
consist  of  completed  systems  which  have  been  installed.

DEPRECIATION  AND  AMORTIZATION  - Depreciation of security devices on lease and
property,  plant  and  equipment  is provided for using the straight-line method
over  their related estimated useful lives.  Security devices on lease generally
have  estimated  useful  lives of six years, except the cost of security devices
related  to operating leases with purchase options are depreciated over the life
of  the  lease.

INTANGIBLE  ASSETS  -  Cost  and  expenses  incurred  in  obtaining  patents are
amortized  over  the remaining life of the patents, not exceeding 17 years, on a
straight-line  basis.

IMPAIRMENT  OF  LONG-LIVED  ASSETS  - The Company reviews its long-lived assets,
including  security  devices on lease, property and equipment, intangible assets
and  other  assets  for  impairment  whenever events or changes in circumstances
indicate  that the carrying amount of these assets may not be fully recoverable.
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.

FAIR  VALUE  OF  FINANCIAL  INSTRUMENTS  -  It  is  management's belief that the
carrying  amounts  of  the  Company's  financial  instruments  (cash  and  cash
equivalents, accounts receivable, net investment in sales-type leases, revolving
line  of  credit,  accounts  payable  and  obligations  under  capital  leases)
approximate  their  fair  value  at  December 31, 2001 and 2000 due to the short
maturity  of  these  instruments  or  due  to  the  terms  of  such  instruments
approximating instruments with similar terms currently available to the Company.

DEFERRED INCOME - Deferred income consist of rentals related to operating leases
and  maintenance  contracts  billed  or  paid  in  advance.

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.

STOCK-BASED  COMPENSATION  -  The  Company  accounts  for  stock-based awards to
employees  using  the  intrinsic  value  method  in  accordance  with Accounting
Principles  Board  Opinion  No.  25, "Accounting for Stock Issued to Employees."

FOREIGN  CURRENCY TRANSLATION - The functional currency of the Company's foreign
entity  is  the  U.S. dollar.  Unrealized foreign exchange transaction gains and
(losses)  are  included  in  selling,  general  and  administrative expenses and
amounted  to  approximately ($28,000), ($31,000) and $35,000 for the years ended
December  31,  2001,  2000  and  1999,  respectively.

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.

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

RECENT  ACCOUNTING  PRONOUNCEMENTS  -  In  June  1998,  the Financial Accounting
Standards  Board  ("FASB")  issued  Statement  of Financial Accounting Standards
("SFAS")  No.  133,  "Accounting  for  Derivative  Instruments  and  Hedging
Activities".  SFAS  No.  133  is  effective for all fiscal years beginning after
June 15, 2000.  SFAS No. 133, as amended and interpreted, establishes accounting
and reporting standards for derivative instruments, including certain derivative
instruments  embedded  in  other  contracts,  and  for  hedging activities.  All
derivatives, whether designated in hedging relationships or not, are required to
be recorded on the balance sheet at fair value.  If the derivative is designated
in  a  fair value hedge, the changes in the fair value of the derivative and the
hedged  item  is  recognized  in earnings.  If the derivative is designated in a
cash-flow  hedge,  changes  in  the  fair value of the derivative is recorded in
other  comprehensive  income  and is recognized in the income statement when the
hedged  item  affects  earnings.  SFAS  No.  133  defines  new  requirements for
designation  and  documentation  of  hedging  relationships  as  well as ongoing
effectiveness  assessments  in  order to use hedge accounting.  For a derivative
that  does  not  qualify  as  a  hedge,  changes in fair value are recognized in
earnings.  We adopted SFAS No. 133 on January 1, 2001 and the implementation did
not  have  a  material  impact  on  our  consolidated  financial  statements.

     In  June  2001,  the  Financial Accounting Standards Board issued Financial
Accounting Standards No. 141 ("SFAS No. 141"), "Business Combinations." SFAS No.
141  applies prospectively to all business combinations initiated after June 30,
2001  and  to  all business combinations accounted using the purchase method for
which the date of acquisition is July 1, 2001, or later. This statement requires
all  business  combinations  to  be accounted for using one method, the purchase
method.  Under  previously existing accounting rules, business combinations were
accounted  for  using one of two methods, the pooling-of-interests method or the
purchase  method. The adoption of SFAS No. 141 did not have a material impact on
our  financial  statements.

     In  June  2001,  the  Financial Accounting Standards Board issued Financial
Accounting  Standards  No.  142 ("SFAS No. 142"), "Goodwill and Other Intangible
Assets."  SFAS No. 142 addresses financial accounting and reporting for acquired
goodwill  and  other  intangible  assets.  Under SFAS No. 142, goodwill and some
intangible  assets  will  no  longer  be  amortized,  but  rather  reviewed  for
impairment on a periodic basis. The provisions of this Statement are required to
be  applied  starting  with fiscal years beginning after December 15, 2001. This
Statement  is  required  to  be applied at the beginning of the Company's fiscal
year and to be applied to all goodwill and other intangible assets recognized in
its  financial  statements  at  that  date.  Impairment  losses for goodwill and
certain  intangible  assets  that  arise  due to the initial application of this
Statement are to be reported as resulting from a change in accounting principle.
Goodwill  and  intangible  assets  acquired  after June 30, 2001 will be subject
immediately to the provisions of this Statement. The adoption of SFAS No. 142 is
not  expected  to  have  a  material  impact  on  our  financial  statements.

     In  August  2001,  the  FASB  issued  SFAS  No.  143, "Accounting for Asset
Retirement  Obligations."  SFAS  No.  143  addresses  financial  accounting  and
reporting  for obligations associated with the retirement of tangible long-lived
assets  and the associated asset retirement costs.  The adoption of SFAS No. 143
is  not  expected  to  have  a  material  impact  on  our  financial statements.

     In  August  2001,  the  FASB  issued  SFAS  No.  144,  "Accounting  for the
Impairment  or  Disposal of Long-Lived Assets."  SFAS No.144 addresses financial
accounting  and  reporting  for the impairment or disposal of long-lived assets.
The  adoption  of  SFAS No. 144 is not expected to have a material impact on our
financial  statements.

4.     FINANCIAL  CONDITION  AND  LIQUIDITY

     The  Company  has  incurred  reduced  revenue  levels,  decreased financial
position  and  recurring  operating  losses  over  the  past  several years.  To
strengthen  the  Company's  financial position, a number of activities have been
initiated  including:

-    Investment of $3 million in newly issued shares of the Company's common
     stock by Dutch  A&A.  The  transaction  with  Dutch  A&A  has allowed the
     Company to introduce  new products, share resources and simplify the
     Company's capital structure.

-    Improvements  in  existing  products  and  service  capabilities

-    Various  cost  cutting  and  cost  saving  initiatives

     The Company will require liquidity and working capital to finance increases
in  receivables  and  inventory  associated  with  sales growth and, to a lesser
extent,  for  capital  expenditures.  We  had no material capital expenditure or
purchase  commitments  as  of  December  31,  2001.

     The  Company  anticipates  that current cash reserves and cash generated by
operations,  together  with  borrowings under the new revolving credit facility,
will  be  sufficient  to meet our working capital and future capital expenditure
requirements  over  the  next  twelve  months.

     Management  believes  the  Company  will  require  positive  cash flow from
operations to meet its working capital needs over the next twelve months. In the
event  that positive cash flow from operations is not generated, the Company may
be  required to seek additional financing to meet its working capital needs. The
Company  anticipates  revenue growth in new and existing markets. The Company is
striving  to  improve its gross margin and control its selling expenses, and its
general  and  administrative  expenses. There can be no assurance, however, that
changes  in  the  Company's  plans  or  other  events  affecting  the  Company's
operations  will  not  result in accelerated or unexpected cash requirements, or
that  it  will  be successful in achieving positive cash flow from operations or
obtaining  financing.  The  Company's  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, and the extent thereof, (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, the Company may need to seek additional financing
from  Dutch A&A or others to satisfy potential operating cash flow deficiencies.

5.   NET  INVESTMENT  IN  SALES-TYPE  LEASES  AND  OPERATING  LEASE  DATA

     The  Company is the lessor of security devices under agreements expiring in
various years through 2006.  The net investment in sales-type leases consist of:
<TABLE>
<CAPTION>
<S>                                                  <C>             <C>
                                                             DECEMBER 31,
                                                          2001        2000
                                                           (IN THOUSANDS)

Minimum lease payments receivable . . . . . . . . .  $     108       $ 215
Allowance for uncollectible minimum lease payments.         (5)        (10)
Unearned income . . . . . . . . . . . . . . . . . .         (7)        (21)
                                                     ----------      ------

Net investment. . . . . . . . . . . . . . . . . . .         96         184
Less current portion. . . . . . . . . . . . . . . .         61          84
                                                     ----------      ------

Noncurrent portion. . . . . . . . . . . . . . . . .  $      35       $ 100
                                                     ==========      ======
</TABLE>

The  future  minimum  lease  payments  receivable  under  sales-type  leases and
noncancellable  operating  leases  are  as  follows:
<TABLE>
<CAPTION>
<S>                                                  <C>             <C>
                                                     SALES-TYPE       OPERATING
YEAR ENDING                                            LEASES           LEASES
DECEMBER 31,                                              (IN THOUSANDS)

2002                                                 $      70       $  38
2003                                                        38           9
2004                                                         -           9
2005                                                         -           3
2006                                                         -           4
                                                     ----------      ----------
                                                     $     108       $  63
                                                     ==========      ==========
</TABLE>

6.   INVENTORIES
     Inventories  consist  of  the  following:
<TABLE>
<CAPTION>
<S>                                                 <C>              <C>
                                                         DECEMBER 31,
                                                     2001            2000
                                                        (IN THOUSANDS)
Raw materials                                       $  1,016         $  1,479
Work-in-process                                        2,710            2,259
Finished goods                                         1,014            1,536
                                                    --------         --------
                                                    $  4,740         $  5,274
                                                    ========         ========
</TABLE>

     The  components of inventory shown above are net of reserves for excess and
obsolete  inventory  totaling  $3,497,000 and $3,354,000 as of December 31, 2001
and  2000,  respectively.

7.  SECURITY  DEVICES  ON  LEASE
    Security  devices  are  stated  at  cost  and  are  summarized  as follows:

<TABLE>
<CAPTION>
<S>                                                  <C>            <C>
                                                          DECEMBER 31,
                                                     2001           2000
                                                        (IN THOUSANDS)

Security devices on lease                            $  37          $  85
Less allowance for depreciation                         26             49
                                                     ------         ------

                                                     $  11          $  36
                                                     ======         ======

     Depreciation  expense  in  2001, 2000 and 1999 totaled $19,000, $45,000 and
$24,000,  respectively.

</TABLE>


8.   PROPERTY,  PLANT  AND  EQUIPMENT

     Property,  plant  and  equipment  are  stated at cost and are summarized as
     follows:
<TABLE>
<CAPTION>
<S>                                        <C>                <C>           <C>
                                           ESTIMATED USEFUL        DECEMBER 31,
                                            LIVES (YEARS)     2001            2000
                                                                  (IN THOUSANDS)

Building                                         20           $  3,033      $  3,033
Machinery and equipment                        3-10              2,060         2,189
Furniture, fixtures and office equipment       3-10              3,691         3,680
Leasehold improvements                         5-10                312           290
                                                              --------      --------
                                                                 9,096         9,192
Less allowance for depreciation                                  6,134         5,868
                                                              --------      --------
                                                              $  2,962      $  3,324
                                                              ========      ========
</TABLE>
Depreciation  expense  in  2001,  2000  and  1999 totaled $486,000, $587,000 and
$720,000,  respectively.

9.     ACCRUED  LIABILITIES
     Accrued  liabilities  consist  of  the  following:
<TABLE>
<CAPTION>
<S>                                                     <C>        <C>
                                                             DECEMBER 31,
                                                          2001        2000
                                                           (IN THOUSANDS)

Accrued salaries, employee benefits and payroll taxes.  $   621    $  615
Customer deposits. . . . . . . . . . . . . . . . . . .      147       690
Accrued warranty . . . . . . . . . . . . . . . . . . .      337       332
Accrued termination costs. . . . . . . . . . . . . . .       24       228
Other accrued liabilities. . . . . . . . . . . . . . .      735       768
                                                        -------    ------
                                                        $ 1,864    $2,633
                                                        =======    ======
</TABLE>

10.     REVOLVING  LINE  OF  CREDIT

     The Company has a revolving line of credit with a financial institution for
maximum borrowings of $8 million, which are subject to certain limitations based
on  a  percentage  of eligible accounts receivable and inventories as defined in
the  agreement.  The  current  facility, which was due to expire on December 31,
2001,  has  been  extended to March 31, 2002. Interest is payable monthly at the
lender's  Index Rate, as defined (2.02% and 6.65% at December 31, 2001 and 2000,
respectively),  plus 4.5% per annum. The Company is required to pay a commitment
fee of 0.375% per annum on any unused portion of the credit facility. Borrowings
under  the  line  are  secured by substantially all of the Company's assets. The
terms  of  the  agreement, among other matters, requires the Company to maintain
certain minimum net worth levels and places restrictions on capital expenditures
and  prohibits  the payment of dividends. The Company had borrowings on the line
of  credit  totaling $2,599,000 and $2,920,000 as of December 31, 2001 and 2000,
respectively.  In  addition,  on  February  21,  2002,  the  Company  received a
commitment  letter for a new revolving credit facility from CIT Business Credit.
The  amount of the facility and terms are substantially the same as the expiring
facility.  The  Company  closed  on this new facility on March 22, 2002. The new
facility  is  for  a  period  of  three  years  expiring  on  March  22,  2005.

11.     OBLIGATIONS  UNDER  CAPITAL  AND  OPERATING  LEASES

     In December 1996, the Company completed a sale-leaseback transaction on the
Company's  corporate  headquarters.  The  Company  received  net  proceeds  of
approximately  $4.5  million  which approximated the carrying amount of the land
and  building.  The lease covers a period of 20 years with quarterly payments of
$137,000.  The  lease  agreement  allows  for  an increase in lease payments for
years 4 through 20 based on a formula tied to the Consumer Price Index.  Because
the  fair  market value of the land on which the principal premises is built was
greater  than  25  percent of the total fair value of the leased premises at the
inception  of  the  lease, the land and building have been considered separately
for the purposes of applying the criteria of SFAS No. 13, Accounting for Leases.
The land portion of the lease has been classified as an operating lease.  Future
minimum  payments  related  to  the land portion of the lease are as follows (in
thousands):

<TABLE>
<CAPTION>

<S>                                               <C>
YEAR ENDING
DECEMBER 31,

2002. . . . .                                     $  155
2003. . . . .                                        155
2004. . . . .                                        155
2005. . . . .                                        155
2006. . . . .                                        155
Thereafter. .                                      1,553
                                                  ------
                                                  $2,328
                                                  ======
</TABLE>

     Rent  expense  for  2001, 2000 and 1999 was $155,000, $155,000 and $148,000
per  year,  respectively.

     The  building  portion of the lease has been classified as a capital lease.
The  Company also leases certain computer and office equipment and related items
under  noncancellable  capital  lease  arrangements  at  varying  interest rates
expiring  through  2003.

Minimum  annual  rentals  are  as  follows  (in  thousands):
<TABLE>
<CAPTION>
<S>                                <C>
YEAR ENDING
DECEMBER 31,

2002. . . . . . . . . . . . . . .  $  351
2003. . . . . . . . . . . . . . .     386
2004. . . . . . . . . . . . . . .     376
2005. . . . . . . . . . . . . . .     376
2006. . . . . . . . . . . . . . .     376
Thereafter. . . . . . . . . . . .   3,758
                                   ------
                                    5,623
Less amount representing interest   2,872
                                   ------

Present value of minimum rentals.   2,751
Less current portion. . . . . . .     121
                                   ------

Noncurrent portion. . . . . . . .  $2,630
                                   ======
</TABLE>


     As  a  result  of the sale-leaseback transaction, a capitalized lease asset
and  obligation in the amount of $3,033,000 was recorded at the inception of the
lease.  The  net  book  value  of  the building was $2,275,000 and $2,427,000 at
December  31, 2001 and 2000, respectively.  The building is being amortized on a
straight-line  basis  over  the  20-year  lease  term.  The  capitalized  lease
obligation  is  being amortized under the interest method over the 20-year lease
period,  utilizing  an  imputed  interest  rate  of  approximately  11%.

     Computer  and  office  equipment and related items under capital leases are
included  in  property  and  equipment  and  other  assets with a gross value of
$299,000  at  December  31,  2001  and  2000 and a net book value of $65,000 and
$125,000  at  December  31,  2001  and  2000,  respectively.

<PAGE>

12.     COMMON  SHAREHOLDERS'  EQUITY

a.     Earnings  Per  Share  ("EPS")  -  Basic  EPS  is  determined by using the
weighted  average  number  of  common  shares  outstanding  during  each period.
Diluted  EPS  further  assumes  the  issuance  of common shares for all dilutive
potential  common  shares  outstanding.  The calculations for earnings per share
are  as  follows:
<TABLE>
<CAPTION>
<S>                                                  <C>              <C>               <C>
                                                         2001             2000            1999
                                                                     (IN THOUSANDS,
Numerator:. . . . . . . . . . . . . . . . . . .                EXCEPT PER SHARE AMOUNTS)
Net Income (Loss):
  Loss before cumulative effect of accounting
    change. . . . . . . . . . . . . . . . . . .      $    (2,911)     $   (7,821)       $(11,034)
  Effect of preferred stock dividends . . . . .              (25)         (1,337)         (1,326)
  Return to common shareholders from redemption
    of preferred stock. . . . . . . . . . . . .           27,198             -               -
                                                     ------------     -----------       ---------
                                                          24,262          (9,158)        (12,360)
  Cumulative effect of accounting change. . . .             -               (301)            -
                                                     ------------     -----------       ---------
  Net income (loss) attributed to common
    shareholders. . . . . . . . . . . . . . . .      $    24,262      $   (9,459)       $(12,360)
                                                     ============     ===========       =========

Denominator:
  Denominator for basic earnings per share -
    weighted average shares . . . . . . . . . .           60,468           9,751           9,751
  Effect of dilutive stock options. . . . . . .            1,540             -               -
                                                     ------------     -----------       ---------
  Denominator for diluted earnings per share. .           62,008           9,751           9,751
                                                     ============     ===========       =========

Basic Earnings per Common Share:
  Before cumulative effect of accounting change      $      0.40      $    (0.94)       $  (1.27)
  Cumulative effect of accounting change. . . .              -             (0.03)            -
                                                     ------------     ------------      ---------
Basic earnings per common share . . . . . . . .      $      0.40      $    (0.97)       $  (1.27)
                                                     ============     ============      =========

Diluted earnings per common share . . . . . . .      $      0.39      $    (0.97)       $  (1.27)
                                                     ============     ============      =========
</TABLE>

     Since  the  Company  had a net loss for 2000 and 1999, the effect of common
stock  options  and  warrants  would  be  antidilutive.

b.     Stock  Options  -  In  February  1997, the Company adopted the 1997 Stock
Incentive  Plan  of  Sentry  Technology Corporation (the "1997 Plan").  The 1997
Plan  initially  provided  for  grants  up  to 2,250,000 options to purchase the
Company's common stock.  Under the antidilution provisions of the 1997 Plan, the
shares  available  for  grant were increased by 1,719,365 shares, as a result of
the  preferred  stock  redemption  in January 2001.  In March 2001, the Board of
Directors  approved  an  additional  increase  of 3,600,000 shares available for
grant pending ratification by Sentry's shareholders.  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 nonqualified 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.  However, the Dutch A&A
investment constituted a change in control under the 1997 Plan, resulting in the
immediate  vesting  of  all  shares  issued  prior  to  January  8,  2001.  All
outstanding  stock  options  were  issued at not less than the fair value of the
related  common  stock  at  the  date of grant.  At December 31, 2001, 7,008,738
common  shares  were  reserved  for  issuance in connection with the exercise of
stock  options.

In January 2001, the Company issued 2,000,000 non-qualified stock options to Mr.
Murdoch, its new Chief Executive Officer, at the price of $0.06 per share, which
was  the  fair value on the date of the grant.  The options are fully vested and
expire  on  January  8,  2006.

In  connection  with  redemption  of Sentry Class A Preferred Stock described in
Note  2, employees and directors who held options to purchase units of preferred
stock  were  granted  substitute  options  under  the  1997  Plan to purchase an
aggregate  of  1,719,365  shares of Sentry Common Stock at the ratio of five (5)
common  shares  to  each  preferred  share  under  option.

In  October 1999, the Company issued 200,000 non-qualified stock options to
the  Interim  Chief Executive Officer at the price of $0.19 per share, which was
the  fair  value on the date of grant.  The options are fully vested at December
31,  2001  and  expire  on  January  8,  2003.

Stock  option  transactions for the years ended December 31, 2001, 2000 and
1999  are  as  follows:
<TABLE>
<CAPTION>
<S>                                        <C>              <C>
                                           WEIGHTED         AVERAGE
                                           NUMBER           EXERCISE
                                           OF SHARES        PRICE

          Balance, January 1, 1999 .       1,169,361        $    3.17

          Granted. . . . . . . . . .         848,500             0.52
          Exercised. . . . . . . . .               -                -
          Canceled . . . . . . . . .        (359,602)            1.34
                                           ----------       ---------
          Balance, December 31, 1999       1,658,259             2.21

          Granted. . . . . . . . . .         612,000             0.07
          Exercised. . . . . . . . .               -                -
          Canceled . . . . . . . . .        (255,886)            2.66
                                           ----------       ---------
          Balance, December 31, 2000       2,014,373             1.50

          Granted. . . . . . . . . .       4,259,365             0.32
          Exercised. . . . . . . . .         (75,000)            0.07
          Canceled . . . . . . . . .        (377,258)            0.90
                                           ----------       ---------
          Balance, December 31, 2001       5,821,480        $    0.49
                                           ==========       =========
</TABLE>

<PAGE>

     Significant  option  groups  outstanding  at  December 31, 2001 and related
option  price  and  life  information  were  as  follows:
<TABLE>
<CAPTION>
<S>           <C>               <C>            <C>                  <C>
              RANGE OF                         WEIGHTED AVERAGE
              EXERCISE            NUMBER          REMAINING           NUMBER
              PRICE             OUTSTANDING    CONTRACTUAL LIFE     EXERCISABLE
              ---------         -----------    ----------------     -----------
              $0.05 - 0.19       3,152,500              5.32         2,625,000
               0.31 - 0.62       1,288,744              4.00         1,288,744
               1.05 - 3.00       1,380,236              4.55         1,380,236
                                 ---------      ---------------  ----------------
                                 5,821,480              4.85         5,293,980
                                 =========      ===============  ================
</TABLE>

     At  December 31, 2001, options to purchase an aggregate of 5,293,980 common
shares  were  vested  and  currently  exercisable at a weighted average exercise
price of $0.53 and an additional 527,500 options vest at dates extending through
the  year  2006,  expiring  through  2011.  At  December  31,  2001, options for
1,437,258  common  shares  were  available  for  future  grants.

     As  discussed  in  Note  2, the Company accounts for its stock-based awards
using  the intrinsic value method in accordance with Accounting Principles Board
Opinion  No.  25,  Accounting  for  Stock  Issued  to  Employees and its related
interpretations.  Accordingly,  as  all  options  have  been granted at exercise
prices  equal to fair market value on the date of grant, no compensation expense
has been recognized in the financial statements for employee stock arrangements.

     SFAS  No.  123,  Accounting  for  Stock-Based  Compensation,  requires  the
disclosure  of  pro  forma  net  income  and  earnings per share had the Company
adopted  the  fair  value method as of the beginning of fiscal 1995.  Under SFAS
No. 123, the fair value of stock-based awards to employees is calculated through
the  use  of  option  pricing  models, even though such models were developed to
estimate  the  fair value of freely tradable, fully transferable options without
vesting  restrictions,  which  significantly  differ  from  the  Company's stock
options  awards.  These  models  also  require subjective assumptions, including
future  stock  price  volatility  and  expected  time to exercise, which greatly
affect  the  calculated  values.  The weighted average fair value of the options
granted  for  the  year  ended  December 31, 2001, 2000 and 1999 is estimated at
$0.05,  $0.06,  and $0.42, using the Black-Scholes option pricing model with the
following  weighted  average  assumptions:  expected  life  of five years; stock
volatility,  147% in 2001, 260.5% in 2000 and 110.9% in 1999; risk free interest
rates,  4.8% in 2001, 6.2% in 2000 and 4.8% in 1999, and no dividends during the
expected  term.  The  Company's  calculations  are  based  on  a multiple option
valuation  approach  and  forfeitures  are  recognized  as  they  occur.  If the
computed  fair  values  of  the 2001, 2000 and 1999 awards had been amortized to
expense  over  the  vesting  period  of  the awards, pro forma net income (loss)
attributed to common shareholders would have been $23,600,000 ($0.38 per diluted
share)  in  2001,  $(9,929,000)  (($1.02)  per  diluted  share)  in  2000  and
$(12,889,000)  (($1.32)  per  diluted  share)  in  1999.  However, the impact of
outstanding nonvested stock options granted prior to 1995 has been excluded from
the  pro  forma  calculation;  accordingly,  the  2001,  2000 and 1999 pro forma
adjustments  are not indicative of future period pro forma adjustments, when the
calculation  will  apply  to  all  applicable  stock  options.

c.     Warrants  -  At  December  31, 2001, the Company had warrants to purchase
250,000  shares  of common stock at exercise prices ranging from $0.13 to $0.18.
Such  warrants  expire through March 2008.  At December 31, 2001, 250,000 common
shares  were  reserved  for  issuance  in  connection  with  these  warrants.

13.     INCOME  TAXES

     The  reconciliation between total tax expense and the expected U.S. Federal
income  tax  is  as  follows:
<TABLE>
<CAPTION>

<S>                                    <C>     <C>       <C>
                                        2001      2000      1999
                                            (IN THOUSANDS)
Expected tax expense (benefit) at 34%  $(990)  $(2,761)  $(3,752)
Add (deduct):
Nondeductible expenses                    27       386     1,422
U.S. losses producing no tax benefit.    963     2,375     2,330
                                       ------  --------  --------
                                       $   -   $     -   $     -
                                       ======  ========  ========
</TABLE>

     As  of  December 31, 2001, the Company had net operating loss carryforwards
of  approximately  $26.3  million,  which  expire  through  the  year 2021.  The
utilization  of these net operating loss carryforwards will likely be subject to
substantial annual limitations imposed by the Internal Revenue Code Section 382.

     Significant  components  of deferred tax assets and liabilities at December
31,  2001  and  2000  are  comprised  of:
<TABLE>
<CAPTION>
<S>                                  <C>                    <C>
                                            DEFERRED TAX ASSETS
                                               (LIABILITIES)
                                                     2001      2000
                                                     (IN THOUSANDS)
Assets:
  Accounts receivable . . . . . .    $                305   $   329
  Inventories . . . . . . . . . . .                 1,550     1,241
  Accrued liabilities . . . . . . .                   142       197
  Property, plant and equipment . .                    85        91
  Net operating loss carryforwards.                10,521     8,655
  Tax credit carryforwards. . . . .                   209       209
                                     ---------------------  --------
  Gross deferred tax assets . . . .                12,812    10,722
  Less valuation allowance. . . . .                12,782    10,692
                                     ---------------------  --------
                                                       30        30
                                     ---------------------  --------
Liabilities:
 Tollgate taxes . . . . . . . . . .                   (30)      (30)
                                     ---------------------  --------
 Gross deferred tax liabilities . .                   (30)      (30)
                                     ---------------------  --------
 Net deferred tax asset (liability)  $                  -   $     -
                                     =====================  ========
</TABLE>

The  increase  in  the valuation allowance for the years ended December 31, 2001
and  2000  was  primarily  attributable  to  the  increase in net operating loss
carryforwards.  A  full  valuation  allowance  has been recorded against the net
deferred  tax assets because it is more likely than not that such asset will not
be  realized  in  the  foreseeable  future.

14.   RELATED  PARTY  TRANSACTIONS

     As a result of the Dutch A&A investment, Sentry entered into a distribution
agreement  with Dutch A&A which contemplates a two-way distribution relationship
between the companies.  Under the agreement, Sentry has the rights to sell Dutch
A&A's  EAS,  access  control  and RFID products and accessories and Sentry gives
Dutch  A&A  the  rights  to  sell  its  EAS  and  CCTV products and accessories.
Pricing  for  products  under the agreements are at the lowest prices charged to
affiliates.  In  addition,  Dutch  A&A  received  an  annual  management fee for
product  marketing  and product engineering management from Sentry in the amount
of  $100,000.  Also,  Peter Murdoch, a shareholder of Dutch A&A through a trust,
receives  an  annual  salary of $150,000 in the capacity of President of Sentry.
Purchases from Dutch A&A were $182,000 in 2001.  Services and sales to Dutch A&A
were  $19,000  in  2001.  The net amount payable to Dutch A&A as of December 31,
2001  was  $50,000.

15.     COMMITMENTS  AND  CONTINGENCIES

a.     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  15% of compensation, subject to certain limitations, with the Company making
a  matching  contribution  equal  to  a  designated  percentage  of the eligible
employee's  deferral  election.  The Company may also contribute a discretionary
contribution,  subject  to  certain  conditions,  as  defined  in the Plan.  The
Company  contributed  approximately  $68,000, $117,000, and $123,000 to the Plan
for  the  years  ended  December  31,  2001,  2000  and  1999,  respectively.

b.     Employment  Agreements  -  The Company and several key executives entered
into  employment  agreements  with remaining terms of one to two years for which
the  Company  will  have  a  minimum  commitment  of  $584,000.

c.     Litigation  -  The  Company  is  a  party to other litigation matters and
claims  which  are normal in the course of its operations.  While the results of
such  litigation  and  claims  cannot  be  predicted  with certainty, management
believes  that  the  final  outcome  of  such matters will not have a materially
adverse  effect  on  the  Company's  consolidated financial position, results of
operations  and  cash  flows.

16.     MAJOR  CUSTOMERS  AND  CREDIT  CONCENTRATIONS

     The  Company  grants  credit to customers who are principally in the retail
industry  and  libraries.  During  2001,  2000  and 1999, revenues from a single
customer  represented  approximately  22%,  14%  and  19%  of  total  revenues,
respectively.  During  2001,  2000  and  1999 revenues from a different customer
represented 11%, 15% and 14% of total revenues, respectively.  No other customer
accounted  for  more than 10% of total revenues for fiscal  2001, 2000 and 1999.

17.     JOINT  VENTURE

     The  Company had a controlling interest in K&M Converting Corp. ("KMCC"), a
joint venture with Marian Rubber Products Co., Inc. ("Marian") through 2001 when
it  was  liquidated.  KMCC was the exclusive converter of magnetic material into
disposable targets or labels used in the Company's EAS systems.  The acquisition
of  the  joint venture was accounted for under the purchase method of accounting
and  the  operating  results of KMCC were included in the consolidated operating
results  of  the  Company  through  April  30,  2001.  Sentry recorded a loss of
approximately  $20,000  upon  the  liquidation  of  KMCC.

18.     OTHER  INCOME  -  SALE  OF  ASSETS

     In  February  1999, the Company sold its Puerto Rico manufacturing facility
and  Illinois  CCTV  design  center  and  related  land  for  net  proceeds  of
approximately  $2.2  million.  A gain of $503,000 representing the excess of the
net proceeds over the carrying value of these properties was recognized in 1999.

19.     REVENUE  BY  PRODUCT  LINE
<TABLE>
<CAPTION>
<S>                                        <C>      <C>      <C>
Revenues by product line are as follows:
                                              2001     2000     1999
                                                  (IN THOUSANDS)
EAS . . . . . . . . . . . . . . . . . . .  $ 5,600  $ 7,545  $ 8,982
CCTV. . . . . . . . . . . . . . . . . . .    4,833    5,340    6,035
SentryVision. . . . . . . . . . . . . . .    1,772    1,713    1,593
3M library products . . . . . . . . . . .      622    1,103    1,056
Service revenues and other. . . . . . . .    4,472    4,164    4,615
                                           -------  -------  -------
Total revenues. . . . . . . . . . . . . .  $17,299  $19,865  $22,281
                                           =======  =======  =======
</TABLE>


20.     RESTRUCTURING  AND  IMPAIRMENT  OF  ASSETS

     During  the  fourth  quarter  of  1999,  faced  with  continued  losses and
SentryVision  sales  below projected levels, management authorized and committed
the  Company  to undertake significant downsizing and operational changes, which
resulted in restructuring and impairment charges of $3.0 million.  These charges
included  involuntary termination costs of $0.6 million and workforce reductions
of  approximately  23% across almost all operating departments.  In addition, in
conjunction  with  the  development  of  its  revised business plan, the Company
recorded  a  non-cash  charge  of  $2.4  million  relating  to the impairment of
goodwill.

     In the fourth quarter of 2000, the Company reassessed the carrying value of
the  goodwill  and  related  patents generated from the Video Sentry merger as a
result  of  the  introduction  of  SmartTrack,  the  next  generation  in  the
SentryVision  family  of  products.  Based  on  a  review  of  the technological
developments  in  the  marketplace, the Company determined that the goodwill and
related  patents  associated  with  the  Company's  original  traveling  CCTV
surveillance system no longer provided the Company with a competitive advantage.
As  a  result,  the  Company recorded an impairment charge of $2,981,000 for the
year  ended  December  31,  2000.

     These impairment charges were calculated by comparing future discounted net
cash  flows  to the goodwill's carrying value. Factors leading to the impairment
were  a  combination of historical losses and insufficient estimated future cash
flows  from  the  SentryVision  system.
                                    ******

SENTRY  TECHNOLOGY  CORPORATION  AND  SUBSIDIARIES

SCHEDULE  II   VALUATION  AND  QUALIFYING  ACCOUNTS
DECEMBER  31,  2001,  2000  AND  1999
(IN  THOUSANDS)
---------------
<TABLE>
<CAPTION>
<S>                                             <C>         <C>          <C>        <C>             <C>

    COLUMN A                                    COLUMN B         COLUMN C            COLUMN D       COLUMN E
--------------------------------------          ----------       ---------          -----------     --------
                                                                 ADDITIONS
                                                                 ---------
                                                 BALANCE,   CHARGED TO    OTHER                      BALANCE,
                                                BEGINNING    COST AND    ACCOUNTS/   DEDUCTIONS/      END OF
  DESCRIPTIONS                                   OF YEAR     EXPENSES    DESCRIBE     DESCRIBE        YEAR
                                                                            (1)          (2)
</TABLE>
<TABLE>
<CAPTION>
<S>                                            <C>          <C>          <C>         <C>             <C>
Year ended December 31, 2001:
  Allowance for doubtful accounts              $  890       $   37       $ -         $    164        $   763
                                               ======       ======       ======      ========        =======

  Allowance for uncollectible minimum
  lease payments                               $   10       $   (5)                                  $     5
                                               ======       ======                                   =======

  Reserve for excess and obsolete inventory .  $3,354       $  535                   $    392        $ 3,497
                                               ======       ======                   ========        =======

Year ended December 31, 2000:
  Allowance for doubtful accounts              $  683       $  224       $   42      $     59        $   890
                                               ======       ======       ======      ========        =======

  Allowance for uncollectible minimum lease
  payments                                     $   29       $  (19)                                  $    10
                                               ======       ======                                   =======

  Reserve for excess and obsolete inventory    $3,404       $1,186                   $  1,236        $ 3,354
                                               ======       ======                   ========        =======

Year ended December 31, 1999:
  Allowance for doubtful accounts              $  651       $  192       $   26      $    186        $   683
                                               ======      =======       ======      ========        =======
  Allowance for uncollectible minimum
  lease payments                               $   60       $  (31)                                  $    29
                                               ======       ======                                   =======

  Reserve for excess and obsolete inventory    $1,318       $2,434                   $    348        $ 3,404
                                               ======      =======                   ========        =======

(1)  Recoveries of accounts written off.
(2)  Amounts written off.
</TABLE>


Item  9.      Changes  in  and  Disagreements with Accountants on Accounting and
-------       ------------------------------------------------------------------
              Financial  Disclosure.
              ---------------------
None.

     PART  III
     ---------

Item  10.      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  48,  has  been  the President and Chief Executive
Officer,  Director  and Chairman of the Board since January 8, 2001.  He is also
the  President  of  ID  Security  Systems Canada Inc.  Mr. Murdoch has extensive
experience  in  the  retail  security  industry  as  well  as  in  the  sales of
technology-based products.  He has been 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 Dutch A&A Holding B.V.  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
2003  Annual  Meeting.

     WILLEM  ANGEL,  age  69,  has  been  a  Director of Sentry Technology since
January  8,  2001. Mr. Angel was appointed to the Board of Directors when it was
expanded  from  five  to seven members. Mr. Angel is Chairman & C.E.O. Dutch A&A
Holding  B.V.  and  has  a  long  history in the EAS and identification business
dating  to  the  start  of  ID  Engineering  in  1970.  In 1977 he co-founded ID
Engineering  Europe creating an EAS manufacturing and sales organization serving
Western  Europe.  In 1987, his company expanded into Canada, opening ID Security
Systems Canada Inc, leading to the creation of Dutch A&A Holding in 1989 and the
Dialoc International in 1991 which manufactures and markets EAS, Access Control,
and  RFID  products to dealers and distributors worldwide. Mr. Angel's term as a
Director  expires  at  the  next  Annual  Meeting.

     COR  S.A.  DE  NOOD, age 57, has been a Director of Sentry Technology since
January  8,  2001. Mr. De Nood is the Vice President and Chief Technical Officer
of  Dutch  A&A  Holding  B.V.  In 1977, he co-founded the ID Engineering Europe,
Dutch  A&A  Holding  B.V.  in  1989  and  Dialoc  International B.V. in 1991. As
co-founder  of  ID Engineering, Cor de Nood has more than 30 years of experience
developing,  designing, and manufacturing EAS and identification systems. In his
capacity  as Chief Technical Officer of Dutch A&A, Mr. De Nood has developed key
ongoing relationships with Philips Electronics, TNO (the Dutch research council)
and the University of Eindhoven which greatly assist his companies in developing
products  and  pursuing  fundamental  research projects. Mr. De Nood's term as a
Director  expires  at  the  2003  Annual  Meeting.

     ROBERT  D.  FURST,  JR.,  age  49, 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 the 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. Together with Mr. Perlmuth, Mr. Furst is one
of  the  two continuing directors on the Board of Directors after the completion
of the Dutch A&A Investment.  Mr. Furst's term as a Director expires at the next
Annual  Meeting.

     JONATHAN G. GRANOFF, age 51, 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 2002
Annual  Meeting.

     WILLIAM A. PERLMUTH, age 71, has been a Director of Sentry Technology since
January  1997  and served as Chairman until January 8, 2001.  Prior thereto, Mr.
Perlmuth  served  as  a  Director  of  several  of our predecessors from 1979 to
February  1997.  Mr.  Perlmuth  has  been a partner in the law firm of Stroock &
Stroock  &  Lavan  LLP  in  New  York,  New York for more than five years and is
presently  of  counsel  to such firm.  Such firm and Mr. Perlmuth have performed
legal  services  for  us.  The  aggregate  amount  of  fees we paid to Stroock &
Stroock  &  Lavan  LLP was less than 5% of the law firm's gross revenues for the
last  fiscal  year.  We  believe  that the billing rates for the foregoing legal
services  were  no  less  favorable  to  us  than  could have been obtained from
unaffiliated  New  York  City based law firms for comparable services.  Together
with Mr. Furst, Mr. Perlmuth is one of the two continuing directors on the Board
of  Directors  following  the  completion  of  the  Dutch  A&A  Investment   Mr.
Perlmuth's  term  as  a  Director  expires  at  the  2002  Annual  Meeting.

EXECUTIVE  OFFICERS  EXECUTIVE  OFFICERS

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

NAME                  AGE      OFFICE
----                  ---      ------
Peter  L.  Murdoch     48     Our  President and Chief Executive Officer since
January  8, 2001.  He is also President of ID Security Systems Canada, Inc.  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 Dutch A&A Holding B.V.  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.

Peter  J.  Mundy     45     Our  Vice  President-Finance  and  Chief Financial
Officer.  Mr.  Mundy  also serves as our Secretary and Treasurer.  Mr. Mundy was
Vice  President  -  Finance, Chief Financial Officer, Secretary and Treasurer of
Knogo North America Inc. from December 1994.  Prior thereto, Mr. Mundy served as
an  officer  of  Knogo  Corporation  where  he  was  Vice  President - Corporate
Controller  from  May  1994  and,  prior  to such time, Corporate Controller and
Controller  since  1982.  Mr.  Mundy  is  a  Certified  Public  Accountant.

John  F.  Whiteman     43     Mr.  Whiteman became our Senior Vice President -
Sales and Marketing in January 1998.  Prior thereto he was Senior Vice President
-  Sales  and  Marketing  of  Knogo  North America Inc. since January 1997; Vice
President  Sales  -  West of Knogo North America Inc. and Knogo Corporation from
1994  to  1996;  and, prior to such time, served in various sales positions with
Knogo  Corporation  since  1986.


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
and  the  American  Stock  Exchange.  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 such reports furnished to
the  Company,  or  written  representations  that  no Forms 5 were required, the
Company  believes  that  during  the  fiscal  year  ended December 31, 2001, all
Section  16(a)  filing  requirements  applicable  to its officers, Directors and
greater  than  ten-percent  beneficial  owners  were  complied  with.

<PAGE>
------
Item  11.      Executive  Compensation.
--------       -----------------------

Summary  Compensation  Table

     The  following  table summarizes the compensation for our fiscal year ended
December  31, 2001 of our Chief Executive Officer and each of three of our other
executive  officers:
<TABLE>
<CAPTION>
<S>                                                <C>      <C>              <C>       <C>             <C>
                                                                                          LONG-TERM        ALL OTHER
                                                   ANNUAL COMPENSATION                  COMPENSATION     COMPENSATION (1)
                                                   -------------------                 --------------  -----------------
                                                                                         SECURITIES
NAME AND                                                                                 UNDERLYING
PRINCIPAL POSITION. . . . . . . . . . . . . . . .  YEAR      SALARY           BONUS       OPTIONS(#)
-------------------------------------------------  -----    --------         -------     ------------
Peter L. Murdoch
President and CEO . . . . . . . . . . . . . . . .   2001    $150,000            -         2,000,000             -


Anthony H.N. Schnelling                             2001        -            $30,000
Former Interim President                            2000     240,000(2)         -             -                  -
and CEO . . . . . . . . . . . . . . . . . . . .     1999      50,000            -           200,000


Peter J. Mundy, . . . . . . . . . . . . . . . . .   2001     131,160            -             -            $  2,492
Vice President - Finance, Secretary and Treasurer   2000     126,970          25,394(3)     150,000           4,568
                                                    1999     124,165                         35,000           3,725


John F. Whiteman . . . . . . . . . . . . . . . .    2001     161,051            -             -               3,060
Sr. Vice President Sales and Marketing              2000     155,906          31,181(3)     150,000           5,100
                                                    1999     152,462            -            50,000           4,574
_______________________
</TABLE>

(1)     Amounts shown consist of our matching contributions under the Retirement
        Savings  401(k)  Plan.

(2)     Compensation  to  Mr.  Schnelling was paid to Bridge Associates, LLC, of
        which he is a member and managing director.  Mr. Schnelling resigned on
        January 8, 2001.

(3)     Amounts  represent  retention  bonuses  paid  on  December  31,  2001.

     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  the  lesser of $50,000 or 10% of the annual salary and bonus reported in
the  table  for  such  individual.


OPTIONS  GRANTED  IN  LAST  FISCAL  YEAR  Options  Granted  in  Last Fiscal Year

The  following  table  sets forth certain information concerning options granted
during  2001  to  each  person  named  in  the  Summary  Compensation  Table:

<TABLE>
<CAPTION>
<S>                              <C>              <C>            <C>        <C>         <C>
                                 NUMBER OF        % OF TOTAL                            POTENTIAL  REALIZABLE  VALUE  AT  ASSUMED
NAME                             SECURITIES       GRANTED TO                                ANNUAL  RATE  OF  STOCK  PRICE
----                             UNDERLYING        EMPLOYEES     EXERCISE   EXPIRATION     APPRECIATION FOR OPTION TERM (2)(3)
                                 OPTIONS GRANTED    IN  2001     PRICE(1)      DATE                5%           10%
                                 ---------------  ----------     --------   ----------  -----------------------------------------

Peter L. Murdoch                   2,000,000           79%       $ 0.06       1/8/06          $  75,480        $  191,280
Anthony H.N. Schnelling                -                -            -          -                  -                 -
Peter J. Mundy                         -                -            -          -                  -                 -
John F. Whiteman                       -                -            -          -                  -                 -

</TABLE>

(1)     These  options  were  granted with an exercise price equal to the market
value  of  the  common  stock  on  the  date  of  the  grant.

(2)     Represents  a gain that would be realized assuming the options were held
until expiration and the stock price increased at compounded rates of 5% and 10%
from  the  base  price  per  share.

(3)     The  dollar  amounts  under  these  columns  use the 5% and 10% rates of
appreciation  required  by  the  Securities  and  Exchange  Commission.  This
presentation  is  not  intended  to forecast possible future appreciation of our
common  stock.

AGGREGATED  OPTION  EXERCISES  IN  LAST  FISCAL  YEAR AND FISCAL YEAR END OPTION
VALUES

The  following  table  sets  forth  for each of the persons named in the Summary
Compensation  Table  the  number of options exercised during 2001 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, 2001, both
exercisable  (E) and unexercisable (U), and the value of such options as of that
date.

<TABLE>
<CAPTION>
<S>                      <C>            <C>             <C>                   <C>
                                                        NUMBER  OF            VALUE OF UNEXERCISED IN
                                                        UNEXERCISED OPTIONS    THE  MONEY  OPTIONS  AT
                                                        AT YEAR END (#)             YEAR END ($)
</TABLE>
<TABLE>
<CAPTION>
<S>                      <C>            <C>               <C>                  <C>
                         SHARES
                         ACQUIRED ON    VALUE             EXERCISABLE/         EXERCISABLE/
NAME. . . . . . . . . .  EXERCISE (#)   REALIZED ($)      UNEXERCISABLE        UNEXERCISABLE
-----------------------  -------------  ----------------  -----------------    -------------
Peter L. Murdoch                                          E  2,000,000         E  $180,000
                         -              -                 U          -         U         -

Anthony H.N. Schnelling                                   E    200,000         E         -
                         -              -                 U          -         U         -

Peter J. Mundy                                            E    669,218         E    12,750
                         -              -                 U          -         U         -

John F. Whiteman            75,000      $    10,125       E    307,296         E     6,375
                                                          U          -         U         -

_______________
</TABLE>


COMPENSATION  OF  DIRECTORS

     Directors  who  are  also  our  full-time  employees  receive no additional
compensation for their services as Directors.  In response to Sentry's financial
condition,  the  Directors  agreed  to  waive  their  annual  retainer for 2001.

     In  addition,  each non-employee Director is eligible to participate in our
1997  Stock  Incentive Plan.   On February 20, 2001, each non-employee Director,
at  that  time,  received  a  grant  of options to purchase 30,000 shares of our
common  stock  at an exercise price of $0.0625, vesting in equal portions over a
three-year  period.

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

     The  Board  has  set  Peter  L.  Murdoch's compensation, in the capacity of
President,  at  an  annual  salary  of  $150,000 per year for a term of one year
beginning  January  8,  2001.  In  addition,  he  received options for 2,000,000
shares  of  Sentry  common  stock  at an option price of $0.06 per share.  These
options  shall  be  exercisable  at  any time within five years from the date of
employment.

     Anthony  H.N.  Schnelling  is  a  principal  of  Bridge Associates, LLC, or
"Bridge Associates."  Prior to its name change in August 2000, Bridge Associates
was known as Restoration Management Company, LLC.  We retained Bridge Associates
in  October  1999  to assist in our efforts to reduce operating expenditures, to
return  to  profitability,  and  to  further  our efforts to find an acquisition
partner  or  strategic investor.  Mr. Schnelling was appointed interim President
and  Chief Executive Officer to facilitate the performance of Bridge Associates'
services  to  us.

     Compensation  paid to Bridge Associates was negotiated at arm's length.  In
connection  with  the  negotiation,  Bridge  Associates, through Mr. Schnelling,
requested  and  was  granted  an option to purchase 200,000 shares of our common
stock  at  an  exercise  price of $0.188 (which was the fair market value of our
common  stock  on  the  date  of  grant).  In granting this option, our Board of
Directors  took  into  account  the  nature  of  the  task Bridge Associates was
expected  to perform, the cash fee being paid to Bridge Associates, and the fact
that  the option would have no value to Bridge Associates unless our stock price
increased.

     Bridge  Associates initially received $20,000 per month for services of Mr.
Schnelling,  and  additional fees if other Bridge Associates personnel performed
services  for  us.  Beginning  August 1, 2000, this compensation arrangement was
changed.  Bridge Associates was compensated at the rate of $30,000 per month for
all services rendered by all Bridge Associates personnel, including the services
of  Mr.  Schnelling. In addition, in 2001, Bridge Associates received an initial
success  fee  of  $30,000  relating  to  the  Dutch A&A investment. If Dutch A&A
exercised its purchase right to acquire 51% and then 60% of the Company's common
stock,  we  are  obligated  to  pay  Bridge Associates an additional $15,000 and
$35,000,  respectively.  Mr. Schnelling resigned as an officer of the Company on
January  8,  2001  and  as  a  Director  of  the  Company  on  March  2,  2001.

     Our  Board  of  Directors  approves  the  compensation  paid  to  our other
executive  officers,  approving  or disapproving the recommendation of the Chief
Executive  Officer.  The Board of Directors also determines the amount of shares
and  exercise  prices for any stock option grants under our 1997 Stock Incentive
Plan,  and  the  amount  of  our  matching  contribution  percentage  under  our
Retirement  Savings  401(k)  Plan,  respectively.

     Currently,  two  of  our  executive  officers  are  compensated pursuant to
written  employment  agreements  providing  for  a base salary. These agreements
provide  for  annual  salary increases intended to maintain the executive's base
salary  against increases in the cost of living as measured by the United States
Department  of  Labor.

     The employment agreements of Messrs. Mundy and Whiteman renew automatically
on  January  8 for one-year terms.  Their annual salaries are presently $131,160
and  $161,051,  respectively.

     The  employment  agreements of Messrs. Mundy and Whiteman also provide that
in  the  event of a change in control, the term of each of their employment will
be  automatically  extended for a period of one year, following the date of such
change  in control.  Following such change in control, each of such persons will
have  the  right  to terminate his employment for good reason, as defined, while
continuing  to receive the salary and bonus otherwise payable thereunder for the
remainder  of  the  employment  term.  Additionally,  the  employment agreements
provide  that  in  the  event  of  a  change  in control all options held by the
employee,  whether  or  not  then  vested,  would  fully vest.  If the change in
control  was not approved by a majority of the Existing Directors (as defined in
our  Certificate  of  Incorporation),  each  such  officer  would be entitled to
receive,  for  each  option for which the exercise price is less than the market
price  of  our  common  stock, cash in cancellation of such options in an amount
equal  to  such  difference.

     On July 17, 2000, we established a retention arrangement for several of our
senior  officers, including Messrs. Mundy and Whiteman.  They each were entitled
to  receive  a  bonus  payment equal to 20% of their annual base compensation if
they were our employee on the earlier of December 31, 2000 or the closing of the
Dutch  A&A Investment.  These amounts were paid on December 31, 2000.  Each also
received  a  grant of 150,000 options to purchase our common stock at $0.065 per
share.  These  options  initially were to vest one-third on grant, one-third six
months  from the date of grant, and the remainder on July 17, 2001.  However, as
a  result  of  the  change  of  control,  these  options  became  fully  vested.

     The  Board  of  Directors  endorses the view that the value of compensation
paid  to  our executive officers, and the Chief Executive Officer in particular,
should  be  closely  linked  to  increases  in  the  value  of our common stock.
Accordingly,  our  Board  supports  option awards under our 1997 Stock Incentive
Plan  and  participation  by executive officers in the Retirement Savings 401(k)
Plan,  which includes our common stock fund among its investment alternatives. A
substantial  portion  of  the  total  compensation  of  the  executive officers,
including  the  Chief Executive Officer, is wholly dependent on increases in the
value  of  our  common  stock.

The  number  of stock options granted to executive officers is not determined by
reference  to  any  formulas  but is determined by the Board's evaluation of the
particular  officer's  ability  to  influence  our  long-term  growth  and
profitability.  Our  Board  also  considers  our  performance  against  certain
competitors,  its  general  performance  against  internal  goals established by
management  and  the  executive's  relative  contribution  thereto.

<TABLE>
<CAPTION>
<S>                                     <C>         <C>         <C>         <C>         <C>

SENTRY TECHNOLOGY CORPORATION
STOCK PERFORMANCE DATA
(APPEARS AS A LINE GRAPH)
12/31/97 TO 12/31/01

                                          12/31/97    12/31/98    12/31/99    12/31/00   12/31/01
Sentry Technology Corporation. . . . .  $      100  $       42  $        6  $        4  $      10
S&P 600 Small Cap Index. . . . . . . .  $      100  $       98  $      109  $      121  $     128
S&P Elec. Equip. Index . . . . . . . .  $      100  $      110  $      225  $      186  $      96

</TABLE>


Item  12.      Security  Ownership  of Certain Beneficial Owners and Management.
--------       ----------------------------------------------------------------

     The following table sets forth the beneficial ownership of our common stock
at  March  27,  2002, 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 March 27, 2002,
61,542,872  shares  of  common  stock  were  outstanding.

<TABLE>
<CAPTION>

<S>                                                                 <C>              <C>
                                                                    SHARES OF        PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNERS. . . . . . . . . . . . . . .  COMMON STOCK     OF CLASS(1)
------------------------------------------------------------------  ---------------  -----------
Dutch A&A Holding B.V.
Galvinstraat 24
P.O. Box  311
3840 AH Harderwijk
The Netherlands. . . . . . . . . . . . . . . . . . . . . . . . . .   39,985,478 (2)        51.0%

Walter & Edwin Schloss
Associates L.P.
350 Park Avenue
New York, NY  10022. . . . . . . . . . . . . . . . . . . . . . . .    4,095,958             6.7%

                                                                      SHARES OF       PERCENT
DIRECTORS AND EXECUTIVE OFFICERS . . . . . . . . . . . . . . . . .  COMMON STOCK     OF CLASS(1)
------------------------------------------------------------------  ---------------  -----------
Peter L. Murdoch(7). . . . . . . . . . . . . . . . . . . . . . . .    2,101,500 (3)         3.3%
Peter J. Mundy . . . . . . . . . . . . . . . . . . . . . . . . . .      865,185 (4)         1.4%
John F. Whiteman . . . . . . . . . . . . . . . . . . . . . . . . .      515,676 (5)           *
Willem Angel(7). . . . . . . . . . . . . . . . . . . . . . . . . .       40,000 (6)           *
Cor S. A. De Nood(7) . . . . . . . . . . . . . . . . . . . . . . .       10,000 (6)           *
Jonathan G. Granoff. . . . . . . . . . . . . . . . . . . . . . . .       70,000 (6)           *
William A. Perlmuth
c/o Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, NY  10038. . . . . . . . . . . . . . . . . . . . . . . .    6,193,944 (8)        10.0%

Robert D. Furst, Jr.
3900 Walden Road
Deephaven, MN  55391 . . . . . . . . . . . . . . . . . . . . . . .    1,383,756 (9)         2.2%

All Sentry Directors and executive officers as a group (8 persons)   11,180,063 (10)       17.3%
</TABLE>
___________________
*     Less  than  one  percent

(1)     Based  on  61,542,872 shares of common stock outstanding as of March 27,
2002.  Each  figure  showing  the  percentage of outstanding shares beneficially
owned  has  been  calculated  by treating as outstanding and owned the shares of
common  stock  which  could  be purchased by the indicated person within 60 days
upon  the  exercise  of  stock  options.

(2)     Includes  16,935,026  shares  of  common  stock  issuable  under a stock
purchase  right  exercisable  within  60  days  from  the  date  hereof.

(3)     Includes  2,000,000 shares of common stock issuable upon the exercise of
stock  options  exercisable  within  60  days  of  the  date  hereof.

(4)     Includes  669,218  shares  of common stock issuable upon the exercise of
stock  options  exercisable  within  60  days  from  the  date  hereof.

(5)     Includes  307,296  shares  of common stock issuable upon the exercise of
stock  options  exercisable  within  60  days  of  the  date  hereof.

(6)     Includes  10,000 shares of common stock exercisable upon the exercise of
stock  options  exercisable  within  60  days  from  the  date  hereof.

(7)     Excludes  shares  of  Common  Stock  owned by Dutch A&A of which Messrs.
Murdoch,  Angel  and  DeNood  are  shareholders.

(8)     Consists of (a) 5,199,499 shares of common stock held by Mr. Perlmuth as
Executor  of  the Estate of Arthur J. Minasy, (b) 877,516 shares of common stock
held  by  Mr.  Perlmuth  as trustee under trusts for the benefit of Mr. Minasy's
adult  children, and (c) 23,037 shares of common stock beneficially owned by Mr.
Perlmuth.  Also  includes  93,892  shares  of  common  stock  issuable  upon the
exercise  of  stock  options  exercisable  within  60 days from the date hereof.
Under  the policies of the law firm of which he is of counsel, Mr. Perlmuth will
share  any economic benefits of the options with the other members of such firm.

(9)     Includes  34,000  shares  of  common stock issuable upon the exercise of
stock  options  exercisable  within  60  days  from  the  date  hereof.

(10)     Includes 3,134,406 shares of common stock issuable upon the exercise of
stock  options  exercisable  within  60  days  from  the  date  hereof.


Item  13.        Certain  Relationships  and  Related  Transactions.
--------         --------------------------------------------------

     As a result of the Dutch A&A investment, Sentry entered into a distribution
agreement  with Dutch A&A which contemplates a two-way distribution relationship
between the companies.  Under the agreement, Sentry has the rights to sell Dutch
A&A's  EAS,  access  control  and RFID products and accessories and Sentry gives
Dutch  A&A the rights to sell its EAS and CCTV products and accessories. Pricing
for  products  under  the  agreements  are  at  the  lowest  prices  charged  to
affiliates.  In  addition,  Dutch  A&A  received  an  annual  management fee for
product  marketing  and product engineering management from Sentry in the amount
of  $100,000.  Also,  Peter Murdoch, a shareholder of Dutch A&A through a trust,
receives  an  annual  salary of $150,000 in the capacity of President of Sentry.
Purchases from Dutch A&A were $182,000 in 2001.  Services and sales to Dutch A&A
were  $19,000  in  2001.  The net amount payable to Dutch A&A as of December 31,
2001  was  $50,000.


                                     PART IV
                                     -------

Item  14.  Exhibits,  Financial  Statement  Schedules  and  Reports on Form 8-K.
--------   --------------------------------------------------------------------

(a)     The following documents are filed as a part of this report on Form 10-K:

(1)  (2)     Consolidated  Financial  Statements  of  the  Company  and  its
subsidiaries  for  the  year  ended  December  31,  2001 and Financial Statement
Schedules  required to be filed by Items 8 and 14(d) of Form 10-K.  See Table of
Contents  to  Consolidated Financial Statements of Sentry Technology Corporation
and  its  subsidiaries  on  page  28.

(3)     Exhibits  required  to  be  filed  by  Item  601  of  Regulation  S-K:


     Management  Contracts  or  Compensatory  Plans  or  Arrangements:
     -----------------------------------------------------------------

10.1     1997  Stock  Incentive Plan.  Incorporated by reference to Exhibit 10.5
to  the  Company's  Registration  Statement  on  Form  S-4  (No.  333-20135).

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     Employment  Agreement,  dated  as  of  February  12,  1997, between the
Company  and  Peter  J. Mundy.  Incorporated by reference to Exhibit 10.2 to the
Company's  Registration  Statement  on  Form  S-4  (No.  333-20135).

10.4     Employment  Agreement,  dated  as of March 1, 1998, between the Company
and  John  Whiteman.  Incorporated by reference to Exhibit 10.6 to the Company's
Annual  Report  on  Form  10-K  for  the  year  ended  December  31,  1998.

10.14     Consulting  Agreement,  dated  as  of  October  15,  1999, between the
Company  and  Restoration  Management Company, LLC. Incorporated by reference to
Exhibit  10.15  to  the  Company's Quarterly Report on Form 10-Q for the quarter
ended  September  30,  1999.

10.15     Amendment to Consulting Agreement dated as of November 9, 1999 between
the  Company  and Restoration Management Company, LLC, incorporated by reference
to  Exhibit 10.16 to the Company's Annual Report on Form 10-K for the year ended
December  31,  1999.

Other  Exhibits:
---------------

2.1     Amended  and  Restated  Agreement and Plan of Reorganization and Merger,
dated as of November 27, 1996 among Video 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).

3.1     Amended  and  Restated  Certificate  of  Incorporation  of  the Company,
together  with  Form  of  Certificate  of  Designations  of  Sentry  Technology
Corporation  Class  A Preferred Stock.  Incorporated by reference to Exhibit 3.1
to  Company's  Registration  Statement  on  Form  S-4  (No.  333-20135).

3.2     Bylaws  of  the  Company.  Incorporated  by  reference to Exhibit 3.2 to
Company's  Registration  Statement  on  Form  S-4  (No.  333-20135).

10.5     Loan  Agreement  and  related agreements among the Company, Knogo North
America Inc., Video Sentry Corporation and General Electric Capital Corporation.
Incorporated by reference to Exhibit 10.7 to the Company's annual report on Form
10-K  for  fiscal  1997.

10.6     Contribution  and Divestiture Agreement dated December 29, 1994 between
Knogo  Corporation  and  Knogo  North America Inc.  Incorporated by reference to
Exhibit  10.8  to  the  Company's  annual  report  on Form 10-K for fiscal 1997.

10.7     License Agreement dated December 29, 1994 between Knogo Corporation and
Knogo  North  America  Inc.  Incorporated  by  reference  to Exhibit 10.9 to the
Company's  annual  report  on  Form  10-K  for  fiscal  1997.

10.8     Lease  Agreement  dated  December  24, 1996 between Knogo North America
Inc. and NOG (NY) QRS 12-23, Inc.  Incorporated by reference to Exhibit 10.10 to
the  Company's  annual  report  on  Form  10-K  for  fiscal  1997.

10.9     Distribution Agreement dated March 26, 1996 between Knogo North America
Inc.  and Minnesota Mining and Manufacturing Company.  Incorporated by reference
to  Exhibit  10.11  to the Company's annual report on Form 10-K for fiscal 1997.

10.10     First  Amendment and Waiver to the Loan and Security Agreement Between
the  Company  and  General  Election  Capital  Corporation  Dated June 30, 1998.
Incorporated  by reference to Exhibit 10.12 to the Company's quarterly report on
Form  10-Q  for  the  quarter  ended  June  30,  1998.

10.11     Amendment No. 1 dated December 22, 1998, to the Distribution Agreement
dated  March  26, 1996 between Knogo North America Inc. and Minnesota Mining and
Manufacturing  Company.  Incorporated  by  reference  to  Exhibit  10.13  to the
Company's  annual  report  on  Form  10-K  for  fiscal  1998.

10.12     Second  Amendment  and Third Waiver to the Loan and Security Agreement
between the Company and General Electric Capital Corporation dated May 12, 1999.
Incorporated  by reference to Exhibit 10.12 to the Company's quarterly report on
Form  10-Q  for  the  quarter  ended  June  30,  1999.

10.13     Third  Amendment to the Loan and Security Agreement dated December 29,
1999,  between  General  Electric  Capital  Corporation and Knogo North America,
Inc.,  incorporated  by reference to Exhibit 10.17 to Company's annual report on
Form  10-K  for  fiscal  1999.

10.16     First  Amendment,  dated September 18, 2000, to Lease Agreement (dated
December  24,  1996)  between  the  Company  and  NOG  (NY)  QRS  12-23,  Inc.,
incorporated  by  reference to Exhibit 10.19 to Company's Registration Statement
on  Form  S-4  (No.  333-47018).

10.17     Agreement  between  the  Company,  Thomas  Nicolette,  and  Nicolette
Consulting  Group,  Ltd.,  dated  June  12,  2000,  incorporated by reference to
Exhibit  10.20  to Company's Registration Statement on Form S-4 (No. 333-47018).

10.18     Warrant  between the Company and General Electric Capital Corporation,
dated  May  11,  2000  for  100,000  shares  at $0.18 per share, incorporated by
reference  to Exhibit 10.21 to Company's Registration Statement on Form S-4 (No.
333-47018).

10.19     Warrant  between  the  Company  and  NOG  (NY)  QRS 12-23, Inc., dated
September  13,  2000,  for   150,000 shares at $0.125 per share, incorporated by
reference  to Exhibit 10.22 to Company's Registration Statement on Form S-4 (No.
333-47018).

<PAGE>

10.20     Fourth Amendment and Consent to the Loan and Security Agreement, dated
May  11,  2000,  between  General  Electric  Capital Corporation and Knogo North
America,  Inc.,  incorporated  by  reference  to  Exhibit  10.23  to  Company's
Registration  Statement  on  Form  S-4  (No.  333-47018).

10.21     Fifth  Amendment and Consent to the Loan and Security Agreement, dated
August  24,  2000,  between General Electric Capital Corporation and Knogo North
America,  Inc.,  incorporated  by  reference  to  Exhibit  10.24  to  Company's
Registration  Statement  on  Form  S-4  (No.  333-47018).


10.22     Sixth  Amendment and Consent to the Loan and Security Agreement, dated
September  1,  2000 between General Electric Capital Corporation and Knogo North
America,  Inc.,  incorporated  by  reference  to  Exhibit  10.25  to  Company's
Registration  Statement  on  Form  S-4  (No.  333-47018).

10.23     Seventh  Amendment  and  Consent  to  the Loan and Security Agreement,
dated  September  1, 2000 between General Electric Capital Corporation and Knogo
North  America,  Inc.,  incorporated  by reference to Exhibit 10.25 to Company's
annual  report  on  Form  10-K  for  fiscal  2000.

10.24     Securities  Purchase  Agreement,  dated August 8, 2000, between Sentry
Technology  Corporation and Dutch A&A, incorporated by reference to Exhibit 10.1
to  Company's  Current  Report  on  Form  8-K,  dated  August  10,  2000.

10.25     Distribution  Agreement,  dated  January  8,  2001, between Sentry and
Dutch  A&A,  incorporated  by  reference  to  Exhibit  B  of Exhibit 10.1 to the
Company's  Current  Report  on  Form  8-K,  dated  August  10,  2000.

10.26      Waiver  and Eighth Amendment to the Loan and Security Agreement,
dated  August  10,  2001, between General Electric Capital Corporation and Knogo
North  America Inc., incorporated by reference to Exhibit 10.28 to the Company's
quarterly  report  on  Form  10-Q  for  the  quarter  ended  June  30,  2001.

10.27     Ninth  Amendment to the Loan and Security Agreement, dated December
28, 2001,  between General Electric Capital Corporation and Knogo North America
Inc.

10.28     Tenth Amendment to the Loan and Security Agreement, dated January
15,  2001,  between  General  Electric  Capital Corporation and Knogo North
America  Inc.

10.29     Financing  Agreement  between  Knogo  North  America  Inc. and The CIT
Group/Business  Credit,  Inc.  dated  March  22,  2002.

21     Subsidiaries  of the Company.  Incorporated by reference to Exhibit 21 to
the  Company's  annual  report  on  Form  10-K  for  fiscal  1997.

23     Consent  of  Deloitte  &  Touche  LLP


                                   SIGNATURES
                                   ----------

     Pursuant  to  the  requirements  of  Section  13 or 15(d) of the Securities
Exchange  Act  of  1934, the Company has duly caused this report to be signed on
its  behalf  by  the  undersigned,  thereunto  duly  authorized.

                                           SENTRY  TECHNOLOGY  CORPORATION


                                           By:   /s/  Peter  J.  Mundy
                                                 ---------------------
                                                 Peter  J.  Mundy
                                                 Vice  President-Finance,
                                                 Chief  Financial  Officer,
                                                 Secretary  and  Treasurer

Dated:  March  27,  2002

     Pursuant  to  the requirements of the Securities Exchange Act of 1934, this
Annual Report on Form 10-K has been signed below by the following persons in the
capacities  and  on  the  date  indicated.

Signature     Title
---------     -----

/s/  Peter  L.  Murdoch           Chief  Executive  Officer  and  Director
--------------------------
Peter  L.  Murdoch

/s/  Peter  J.  Mundy             Vice  President-Finance,
--------------------------        Chief Financial and Accounting Officer,
Peter  J.  Mundy                  Secretary  and  Treasurer

/s/  William  A.  Perlmuth        Director
--------------------------
William  A.  Perlmuth

/s/  Willem  Angel                Director
--------------------------
Willem  Angel

/s/  Robert D. Furst, Jr.         Director
--------------------------
Robert  D.  Furst,  Jr.

/s/  Jonathan  G.  Granoff        Director
--------------------------
Jonathan  G.  Granoff

/s/  Cor  S.A.  De  Nood          Director
--------------------------
Cor  S.A.  De  Nood


Dated:  March  27,  2002


<PAGE>


EXHIBIT  INDEX

     10.27     Ninth  Amendment  to  the  Loan  and  Security  Agreement, dated
December 28, 2001, between General Electric Capital Corporation and Knogo North
America  Inc.

     10.28     Tenth Amendment to the Loan and Security Agreement, dated January
15,  2001,  between  General  Electric  Capital Corporation and Knogo North
America  Inc.

     10.29     Financing  Agreement between Knogo North America Inc. and The CIT
Group/Business Credit,  Inc.  dated  March  22,  2002.

     23     Consent  of  Deloitte  &  Touche  LLP

<PAGE>



                                             Exhibit  10.27


               NINTH AMENDMENT TO THE LOAN AND SECURITY AGREEMENT


     Ninth  Amendment  dated  as  of December 28, 2001 (this "AMENDMENT") to the
Loan  and  Security  Agreement,  dated  as  of December 31, 1997 (as amended and
modified,  the  "LOAN AGREEMENT"), among GENERAL ELECTRIC CAPITAL CORPORATION, a
Delaware  corporation  ("LENDER")  and  KNOGO  NORTH  AMERICA  INC.,  a Delaware
corporation ("BORROWER"), and the other Credit Parties executing this Amendment.

                                  WITNESSETH :
                                  ----------

     WHEREAS,  Borrower  has requested that Lender extend the Stated Expiry Date
to  January  15,  2002;

     WHEREAS,  Lender  is  willing  to extend the Stated Expiry Date only on the
terms  and  conditions  set  forth  herein;

     NOW,  THEREFORE,  in  consideration  of  the  premises,  the  covenants and
agreements  contained herein, and for other good and valuable consideration, the
receipt  and  adequacy  of  which are hereby acknowledged, the parties do hereby
agree  that  all  capitalized terms used herein shall have the meanings ascribed
thereto  in  the  Loan  Agreement  and  do  hereby  further  agree  as  follows:

                               STATEMENT OF TERMS
                               ------------------

     3.     OUTSTANDING  OBLIGATIONS.  Each  Credit  Party  hereby  affirms  and
            ------------------------
acknowledges  that  (i)  as of December 28, 2001, there is presently outstanding
under the Loan Agreement loans and advances in the aggregate principal amount of
$2,733,740.46,  together with accrued interest thereon, fees, costs and expenses
(collectively,  the  "Amount")  and (ii) the Amount is a valid obligation of the
Borrower  and is due and owing without defense, claim, setoff or counterclaim of
any  kind  or  nature  whatsoever.

     4.     AMENDMENT.  Subject  to the satisfaction of the conditions precedent
            ----------
set  forth in Section 4 of this Amendment, each Credit Party and Lender agree to
amend  the  Loan  Agreement  as  follows:

     (a)     Schedule  A  of  the  Loan  Agreement  is  amended  by amending the
definition  of  "Stated  Expiry  Date"  as  follows:

          "Stated  Expiry  Date"  shall  mean  January  15,  2002.


(b)     The  Transaction  Summary is amended to reflect the changes made in this
Amendment.

     5.     INVENTORY  RESERVE.  Notwithstanding  anything  to  the  contrary
            ------------------
contained  in  the  Loan  Agreement, effective January 12, 2002 reserves against
inventory  shall  be  increased  from the current level of $125,000 to $150,000.


     6.     REPRESENTATIONS AND WARRANTIES.  To induce Lender to enter into this
            -------------------------------
Amendment, each Credit Party hereto hereby warrants, represents and covenants to
Lender  that:  (a)  each  representation  and warranty of the Credit Parties set
forth  in  the  Loan  Agreement  is  hereby  restated and reaffirmed as true and
correct on and as of the date hereof after giving affect to this Amendment as if
such  representation  or warranty were made on and as of the date hereof (except
to  the  extent  that any such representation or warranty expressly relates to a
prior  specific  date  or period in which case it is true and correct as of such
prior  date  or  period), and no Default or Event of Default has occurred and is
continuing  as of this date under the Loan Agreement after giving effect to this
Amendment;  (b) each Credit Party hereto has the power and is duly authorized to
enter into, deliver and perform this Amendment, and this Amendment is the legal,
valid  and  binding  obligation  of  such Credit Party enforceable against it in
accordance  with  its terms; and (c) the bank accounts at Fleet Bank and Toronto
Dominion Bank which are subject to the Blocked Account Agreements constitute the
only  deposit  accounts  utilized  by  any  Credit  Party.

     7.     CONDITIONS  PRECEDENT  TO  EFFECTIVENESS  OF  THIS  AMENDMENT.  The
            -------------------------------------------------------------
effectiveness  of  this Amendment is subject to the fulfillment of the following
conditions  precedent:

(a)     Lender  shall  have  received  one  or  more  counterparts  of this
Amendment  duly  executed  and  delivered  by  the  Credit  Parties  hereto;

(b)     Any  and  all  guarantors of the Obligations shall have consented to the
execution,  delivery  and  performance  of  this  Amendment  and  all  of  the
transactions  contemplated  hereby  by  signing one or more counterparts of this
Amendment in the appropriate space indicated below and returning same to Lender;
and

(c)     Borrower  shall  have  paid  to Lender an amendment fee in the amount of
$15,000  which  shall  be charged to Borrower's loan account on the date of this
Amendment  together with all of Lender's legal fees, costs and expenses incurred
in  connection with the preparation, negotiation, execution and delivery of this
Amendment.  Upon  payment  of  the foregoing amendment fee, no further amendment
fee  shall  be  required  in  connection  with  the  execution  of  a subsequent
amendment  to  this  Loan Agreement the purpose of which is to extend the Stated
Expiry  Date  to  March  31,  2002.

     8.     CONTINUING  EFFECT OF LOAN AGREEMENT.  Except as expressly set forth
            ------------------------------------
herein,  the provisions of the Loan Agreement, and the Liens granted thereunder,
are  and  shall  remain in full force and effect and the waiver set forth herein
shall  be  limited precisely as drafted and shall not constitute a waiver of any
other  provisions  of  the  Loan  Agreement.

     9.     COUNTERPARTS.  This  Amendment  may  be  executed  in  multiple
            ------------
counterparts  each  of  which shall be deemed to be an original and all of which
when  taken  together  shall  constitute  one  and  the  same  instrument.

     10.     GOVERNING  LAW.  THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED
             ---------------
IN  ACCORDANCE  WITH,  THE  INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS  MADE  AND  PERFORMED  IN  SUCH STATE WITHOUT REGARD TO THE PRINCIPLES
THEREOF  REGARDING  CONFLICTS  OF  LAWS.


<PAGE>
     IN  WITNESS  WHEREOF,  the  parties hereto have caused this Amendment to be
duly  executed  and  delivered as of the day and year specified at the beginning
hereof.

                    KNOGO  NORTH  AMERICA  INC.,
                    as  Borrower

                    By:     /s/  Peter  J.  Mundy
                            ---------------------
                    Name:       Peter  J.  Mundy
                    Title:       V.P.  -  CFO

                    SENTRY  TECHNOLOGY  CORPORATION,
                    as  Credit  Party

                    By:     /s/  Peter  J.  Mundy
                            ---------------------
                    Name:       Peter  J.  Mundy
                    Title:       V.P.  -  CFO

                    VIDEO  SENTRY  CORPORATION,
                    as  Credit  Party

                    By:     /s/  Peter  J.  Mundy
                            ---------------------
                    Name:       Peter  J.  Mundy
                    Title:       V.P.  -  CFO

                    KNOGO  CARIBE,  INC.,
                    as  Credit  Party

                    By:     /s/  Peter  J.  Mundy
                            ---------------------
                    Name:       Peter  J.  Mundy
                    Title:       V.P.  -  CFO

                    GENERAL  ELECTRIC  CAPITAL  CORPORATION,
                    as  Lender

                    By:     /s/  Jorge  A.  Chiluisa
                            ------------------------
                    Name:     Jorge  A.  Chiluisa
                    Title:     Duly  Authorized  Signatory
<PAGE>
                              CONSENT OF GUARANTORS

     Each  of  the  undersigned guarantors does hereby consent to the execution,
delivery  and performance of the within and foregoing Amendment and confirms the
continuing  effect of such guarantor's guarantee of the Obligations after giving
effect  to  the  foregoing  Amendment.

     IN  WITNESS  WHEREOF,  each of the undersigned guarantors has executed this
Consent  to  Guarantors  as  of  the  day  and  year  first  above  set  forth.

                    GUARANTORS:

                    SENTRY  TECHNOLOGY  CORPORATION


                    By:     /s/  Peter  J.  Mundy
                            ---------------------
                    Name:     Peter  J.  Mundy
                    Title:     VP  -  CFO

                    VIDEO  SENTRY  CORPORATION


                    By:     /s/  Peter  J.  Mundy
                            ---------------------
                    Name:     Peter  J.  Mundy
                    Title:     VP  -  CFO

                    KNOGO  CARIBE,  INC.


                    By:     /s/  Peter  J.  Mundy
                            ---------------------
                    Name:     Peter  J.  Mundy
                    Title:     Treasurer


<PAGE>
                                             Exhibit  10.28


               TENTH AMENDMENT TO THE LOAN AND SECURITY AGREEMENT


     Tenth Amendment dated as of January 15, 2002 (this "AMENDMENT") to the Loan
and  Security Agreement, dated as of December 31, 1997 (as amended and modified,
the  "LOAN  AGREEMENT"),  among GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware
corporation  ("LENDER")  and  KNOGO  NORTH  AMERICA INC., a Delaware corporation
("CREDIT  PARTY"),  and  the  other  Credit  Parties  executing  this Amendment.

                                  WITNESSETH :
                                  ----------

     WHEREAS,  Credit  Party  has requested that Lender extend the Stated Expiry
Date  to  March  31,  2002;

     WHEREAS,  Lender  is  willing  to extend the Stated Expiry Date only on the
terms  and  conditions  set  forth  herein;

     NOW,  THEREFORE,  in  consideration  of  the  premises,  the  covenants and
agreements  contained herein, and for other good and valuable consideration, the
receipt  and  adequacy  of  which are hereby acknowledged, the parties do hereby
agree  that  all  capitalized terms used herein shall have the meanings ascribed
thereto  in  the  Loan  Agreement  and  do  hereby  further  agree  as  follows:

                               STATEMENT OF TERMS
                               ------------------

1.     OUTSTANDING  OBLIGATIONS.  Each  Credit  Party  hereby  affirms  and
       ------------------------
acknowledges  that  (i)  as  of January 14, 2002, there is presently outstanding
under the Loan Agreement loans and advances in the aggregate principal amount of
$2,693,981.98,  together  with  accrued  interest  thereon, fees, costs and
expenses  (collectively, the "Amount") and (ii) the Amount is a valid obligation
of  each  Credit  Party  and  is due and owing without defense, claim, setoff or
counterclaim  of  any  kind  or  nature  whatsoever.

2.     AMENDMENT.  Subject  to  the satisfaction of the conditions precedent set
       ----------
forth  in  Section  4  of  this Amendment, each Credit Party and Lender agree to
amend  the  Loan  Agreement  as  follows:

(a)     Section 1.5(a) is amended by inserting the following sentence at the end
thereof:

          "Notwithstanding  the  foregoing,  on  and  after January 15, 2002 the
Revolving Credit Rate shall be a floating rate equal to the Index Rate plus 6.5%
per  annum."

     (b)     Schedule  A  of  the  Loan  Agreement  is  amended  by amending the
definition  of  "Stated  Expiry  Date"  as  follows:

          "Stated  Expiry  Date"  shall  mean  March  31,  2002.

(c)     Schedule  E  is  amended  by  adding  a  new  Paragraph  7  as  follows:

"7.  EXTENSION  FEES.  Credit  Party will pay Lender an extension fee of $30,000
payable on the fifteenth day of January, 2002 unless Credit Party has refinanced
the  obligations owing to Lender prior to such date.  Except as set forth in the
last  sentence  of  this paragraph, the extension fee shall be earned in full on
January  15,  2002  and  not  be  subject  to  proration.  Notwithstanding  the
foregoing,  (i)  if  the  Credit  Party  has refinanced the obligations owing to
Lender  on  or  prior  to  January  31, 2002, Lender shall refund $15,000 of the
extension  fee, and (ii) if Credit Party has refinanced the obligations owing to
Lender after January 31, 2002 but on or prior to February 28, 2002, Lender shall
refund  $7,500  of  the  extension  fee.

(d)     The  Transaction  Summary is amended to reflect the changes made in this
Amendment.

3.     Inventory Reserve.  Notwithstanding anything to the contrary contained in
       -----------------
     the  Loan  Agreement,  during  the  following time periods reserves against
inventory  availability  shall  be increased from the $125,000 level as follows:
<TABLE>
<CAPTION>
<S>                              <C>
                                    Amount of
     Time Period                 Inventory Reserve
     ------------                -----------------

  January 12-January 25 .        $    150,000
  January 26-February 8 .        $    175,000
  February 9-February 22.        $    200,000
  February 23-March 8 . .        $    225,000
  March 9- March 22 . . .        $    250,000
  March 23 and thereafter        $    275,000
</TABLE>


Lender shall reconsider the level of inventory reserves based upon receipt of an
inventory  appraisal,  at Borrower's expense, in form and substance satisfactory
to  Lender.  In  the event Lender receives a copy of either (x) a fully executed
commitment  letter  from Tyco Capital to Credit Party for a refinancing facility
in an amount of at least $7,000,000, or (y) a letter from Tyco Capital to Credit
Party  stating  that  Tyco  Capital  is  seeking Credit Committee approval for a
refinancing  facility in an amount of at least $7,000,000 and is proceeding with
documenting  the  proposed  refinancing  facility  pending  receipt  of  Credit
Committee  approval,  then  if the letter under either (x) or (y) is received by
Lender  (1)  on  or  before  February  22,  2002, then the maximum amount of the
reserve  against  inventory  availability shall be limited to $200,000 until the
Stated  Expiry  Date,  or  (2) after February 22, 2002 but before March 8, 2002,
then  the  maximum amount of the reserve against inventory availability shall be
reduced  to  $200,000  until  the  Stated  Expiry  Date.

4.     Representations  and  Warranties.  To  induce  Lender  to enter into this
       ---------------------------------
Amendment, each Credit Party hereto hereby warrants, represents and covenants to
Lender  that:  (a)  each  representation  and warranty of the Credit Parties set
forth  in  the  Loan  Agreement  is  hereby  restated and reaffirmed as true and
correct on and as of the date hereof after giving affect to this Amendment as if
such  representation  or warranty were made on and as of the date hereof (except
to  the  extent  that any such representation or warranty expressly relates to a
prior  specific  date  or period in which case it is true and correct as of such
prior  date  or  period), and no Default or Event of Default has occurred and is
continuing  as of this date under the Loan Agreement after giving effect to this
Amendment;  (b) each Credit Party hereto has the power and is duly authorized to
enter into, deliver and perform this Amendment, and this Amendment is the legal,
valid  and  binding  obligation  of  such Credit Party enforceable against it in
accordance  with its terms; and (c) Credit Party shall keep Lender apprised on a
current  basis  of  the  status  of  the proposed refinancing and shall promptly
inform  Lender if Tyco Capital has imposed conditions upon the refinancing which
Credit  Party  believes  it  will  be  unable  to  meet,  or if Tyco Capital has
indicated  the  proposed  refinancing  will  not occur on or before February 28,
2002.

5.     Waiver.  Each  Credit Party waives and affirmatively agrees not to allege
       ------
or  otherwise  pursue  any or all defenses, affirmative defenses, counterclaims,
claims,  causes  of  action, setoffs or other rights that it may have to contest
(a)  any provision of the Loan Documents or the Loan Agreement; (b) the security
interest  of  Lender  in  any  property,  whether  real or personal, tangible or
intangible,  or  any  right  or  other  interest,  now  or  hereafter arising in
connection  with  the  Collateral; or (c) the conduct of Lender in administering
the  financing  arrangements  between  Credit  Parties  and  Lender.

6.     Release.  Each Credit Party hereby releases, remises, acquits and forever
       -------
discharges  Lender and Lender's employees, agents, representatives, consultants,
attorneys,  fiduciaries, officers, directors, partners, predecessors, successors
and assigns, subsidiary corporations, parent corporations, and related corporate
divisions (all of the foregoing hereinafter called the "Released Parties"), from
any  and  all actions and causes of action, judgments, executions, suits, debts,
claims, demands, liabilities, obligations, damages and expenses of any and every
character,  known  or  unknown,  direct and/or indirect, at law or in equity, of
whatsoever  kind or nature, for or because of any matter or things done, omitted
or suffered to be done by any of the Released Parties prior to and including the
date  of  execution hereof, and in any way directly or indirectly arising out of
or  in any way connected to the Loan Agreement or the Loan Documents (all of the
foregoing  hereinafter  called  the  "Released  Matters").  Each  Credit  Party
acknowledges  that  the  agreements  in  this Section are intended to be in full
satisfaction  of  all  or  any alleged injuries or damages arising in connection
with  the  Released  Matters.

7.     Conditions  Precedent  to  Effectiveness  of  this  Amendment.  The
       -------------------------------------------------------------
effectiveness  of  this Amendment is subject to the fulfillment of the following
conditions  precedent:

(a)     Lender  shall  have  received one or more counterparts of this Amendment
duly  executed  and  delivered  by  the  Credit  Parties  hereto;  and

(b)     Any  and  all  guarantors of the Obligations shall have consented to the
execution,  delivery  and  performance  of  this  Amendment  and  all  of  the
transactions  contemplated  hereby  by  signing one or more counterparts of this
Amendment in the appropriate space indicated below and returning same to Lender.

8.     Continuing  Effect of Loan Agreement.  Except as expressly set forth
       ------------------------------------
herein,  the provisions of the Loan Agreement, and the Liens granted thereunder,
are  and  shall  remain in full force and effect and the waiver set forth herein
shall  be  limited precisely as drafted and shall not constitute a waiver of any
other  provisions  of  the  Loan  Agreement.

9.     Counterparts.  This  Amendment  may  be  executed  in  multiple
       ------------
counterparts  each  of  which shall be deemed to be an original and all of which
when  taken  together  shall  constitute  one  and  the  same  instrument.

10.     Governing  Law.  THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED
        ---------------
IN  ACCORDANCE  WITH,  THE  INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS  MADE  AND  PERFORMED  IN  SUCH STATE WITHOUT REGARD TO THE PRINCIPLES
THEREOF  REGARDING  CONFLICTS  OF  LAWS.


<PAGE>
     IN  WITNESS  WHEREOF,  the  parties hereto have caused this Amendment to be
duly  executed  and  delivered as of the day and year specified at the beginning
hereof.

                    KNOGO  NORTH  AMERICA  INC.,
                    as  Credit  Party

                    By:     /s/  Peter  J.  Mundy
                            ---------------------
                    Name:     Peter  J.  Mundy
                    Title:     VP  -  CFO


                    SENTRY  TECHNOLOGY  CORPORATION,
                    as  Credit  Party

                    By:     /s/  Peter  J.  Mundy
                            ---------------------
                    Name:     Peter  J.  Mundy
                    Title:     VP  -  CFO


                    VIDEO  SENTRY  CORPORATION,
                    as  Credit  Party

                    By:     /s/  Peter  J.  Mundy
                            ---------------------
                    Name:     Peter  J.  Mundy
                    Title:     VP  -  CFO


                    KNOGO  CARIBE,  INC.,
                    as  Credit  Party

                    By:     /s/  Peter  J.  Mundy
                            ---------------------
                    Name:       Peter  J.  Mundy
                    Title:       TREASURER

                    GENERAL  ELECTRIC  CAPITAL  CORPORATION,
                    as  Lender

                    By:     /s/  Jorge  Chiluisa
                            --------------------
                    Name:
                    Title:     Duly  Authorized  Signatory
<PAGE>

                              CONSENT OF GUARANTORS

     Each  of  the  undersigned guarantors does hereby consent to the execution,
delivery  and performance of the within and foregoing Amendment and confirms the
continuing  effect  of  such  guarantor's  guarantee  (the  "Guaranty")  of  the
Obligations  after  giving  effect  to  the  foregoing  Amendment.

     Each  of  the  undersigned  hereby  releases,  remises, acquits and forever
discharges  Lender  and the Released Parties from any and all actions and causes
of  action,  judgments,  executions, suits, debts, claims, demands, liabilities,
obligations,  damages and expenses of any and every character, known or unknown,
direct  and/or  indirect, at law or in equity, of whatsoever kind or nature, for
or  because  of any matter or things done, omitted or suffered to be done by any
of  the  Released Parties prior to and including the date of execution hereof or
after  the  date hereof, and in any way directly or indirectly arising out of or
in  any  way connected to the Guaranty, the Loan Agreement or the Loan Documents
(all  of  the  foregoing  hereinafter  called the "Guarantor Released Matters").
Each  of the undersigned acknowledges that the foregoing agreements are intended
to  be in full satisfaction of all or any alleged injuries or damages arising in
connection  with  the  Guarantor  Released  Matters.

     IN  WITNESS  WHEREOF,  each of the undersigned guarantors has executed this
Consent  to  Guarantors  as  of  the  day  and  year  first  above  set  forth.

                    GUARANTORS:

                    SENTRY  TECHNOLOGY  CORPORATION


                    By:     /s/  Peter  J.  Mundy
                            ---------------------
                    Name:     Peter  J.  Mundy
                    Title:     VP  -  CFO

                    VIDEO  SENTRY  CORPORATION


                    By:     /s/  Peter  J.  Mundy
                            ---------------------
                    Name:     Peter  J.  Mundy
                    Title:     VP  -  CFO

                    KNOGO  CARIBE,  INC.


                    By:     /s/  Peter  J.  Mundy
                            ---------------------
                    Name:     Peter  J.  Mundy
                    Title:     Treasurer

<PAGE>



                                                          Exhibit  10.29






                               FINANCING AGREEMENT
                               -------------------




                       THE CIT GROUP/BUSINESS CREDIT, INC.

                                   (AS LENDER)


                                       AND


                            KNOGO NORTH AMERICA INC.

                                  (AS BORROWER)


                             DATED:  MARCH 22, 2002







<PAGE>
                                TABLE OF CONTENTS
     Page
SECTION  1.   Definitions     80
              -----------
SECTION  2.   Conditions  Precedent     89
              ---------------------
SECTION  3.   Revolving  Loans     92
              ----------------
SECTION  4.   Term  Loan     94
              ----------
SECTION  5.   Intentionally  Omitted     95
             -----------------------
SECTION  6.   Collateral     95
              ----------
SECTION  7.   Representations,  Warranties  and  Covenants     32
              --------------------------------------------
SECTION  8.   Interest,  Fees  and  Expenses     104
              ------------------------------
SECTION  9.   Powers     107
              ------
SECTION  10.  Events  of  Default  and  Remedies     107
              ----------------------------------
SECTION  11.  Termination     110
              -----------
SECTION  12.   Miscellaneous     110
               -------------


EXHIBIT
-------

     Exhibit  A  -  Form  of  Term  Loan  Promissory  Note


SCHEDULES
---------

Schedule  1  -Collateral  Information

<PAGE>

     THE  CIT  GROUP/BUSINESS CREDIT, INC., a New York corporation, with offices
located  at  1211 Avenue of the Americas, New York, New York, 10036 (hereinafter
"CIT"),  is  pleased  to  confirm the terms and conditions under which CIT shall
make  revolving  loans,  term  loans and other financial accommodations to KNOGO
NORTH AMERICA INC., a Delaware             corporation with a principal place of
business  at  350  Wireless  Boulevard,  Hauppauge,  New York, 11788 (herein the
"Company").

SECTIONSECTION  1.   Definitions  1.   Definitions
                     -----------------------------
ACCOUNTS  shall mean all of the Company's now existing and future:  (A) accounts
--------
(as  defined  in  the  UCC),  and  any and all other receivables (whether or not
specifically  listed  on  schedules  furnished  to  CIT),  including,  without
limitation,  all  accounts  created  by,  or  arising from, all of the Company's
sales,  leases,  rentals  of  goods  or renditions of services to its customers,
including  but not limited to, those accounts arising under any of the Company's
trade  names  or  styles, or through any of the Company's divisions; (B) any and
all  instruments,  documents, chattel paper (including electronic chattel paper)
(all  as  defined in the UCC); (C) unpaid seller's or lessor's rights (including
rescission,  replevin,  reclamation,  repossession  and  stoppage  in  transit)
relating  to  the  foregoing  or  arising  therefrom;  (D)  rights  to any goods
represented  by any of the foregoing, including rights to returned, reclaimed or
repossessed  goods;  (E) reserves and credit balances arising in connection with
or  pursuant hereto; (F) guarantees, supporting obligations, payment intangibles
and  letter of credit rights (all as defined in the UCC); (G) insurance policies
or  rights  relating to any of the foregoing; (H) general intangibles pertaining
to  any  and  all  of  the foregoing (including all rights to payment, including
those  arising in connection with bank and non-bank credit cards), and including
books  and  records  and  any electronic media and software thereto ; (I) notes,
deposits  or  property  of  account debtors securing the obligations of any such
account  debtors  to the Company; and (J) cash and non-cash proceeds (as defined
in  the  UCC)  of  any  and  all  of  the  foregoing.

ADMINISTRATIVE  MANAGEMENT  FEE shall mean the amount which shall be paid to CIT
-------------------------------
in  accordance  with  Section 8, paragraph 8.8 hereof to offset the expenses and
costs  (excluding  Out-of-Pocket Expenses and auditor fees) of CIT in connection
with  administration,  record  keeping, analyzing and evaluating the Collateral.

ANNIVERSARY  DATE shall mean the date occurring three (3) years from the Closing
-----------------
Date  and  the  same  date  in  every  year  thereafter.

ANNUAL  FACILITY  FEE  shall mean the fee payable to CIT in accordance with, and
---------------------
pursuant  to,  the  provisions  of  Paragraph 8.7 of Section 8 of this Financing
Agreement.


AVAILABILITY  shall mean at any time the amount by which: (a) the Borrowing Base
------------
exceeds  (b)  the  outstanding  aggregate  amount  of all Obligations, including
without  limitation,  all  Obligations  with  respect  to  Revolving  Loans, but
excluding  the  Term  Loan.

AVAILABILITY  RESERVE  shall  mean  the  sum  of:  (a) any reserve which CIT may
---------------------
reasonably  require  from time to time pursuant to this Financing Agreement; (b)
$350,000,  and (c) such other reserves as CIT deems necessary in its  reasonable
judgment  as  a  result of (i) negative forecasts and/or trends in the Company's
business,  industry,  prospects,  profits,  operations or financial condition or
(ii) other issues, circumstances or facts that could otherwise negatively impact
the  Company,  its business, prospects, profits, operations, industry, financial
condition  or  assets.

BORROWING  BASE  shall  mean  the  sum of (a) the sum of (x) eighty-five percent
---------------
(85%)  of  the  Company's  aggregate  outstanding  domestic  Eligible  Accounts
Receivable,  provided,  however, that if the then Dilution Percentage is greater
than  five percent (5%), then the rate of advance herein shall be reduced by the
amount of such excess Dilution Percentage, (y) the lesser of (i) seventy percent
(70%)  of the Company's aggregate outstanding deferred payment Eligible Accounts
Receivable,  provided  that  any  such  Accounts are less than 180 days past the
invoice  date  and  are  to customers which are satisfactory to CIT, (as CIT may
advise  the  Company from time to time), or (ii) $300,000, and (z) the lesser of
(i)  seventy-five  percent  (75%) of the Company's aggregate outstanding foreign
Eligible  Accounts Receivable, provided that any such Accounts are (A) backed by
credit  insurance  policies  which  have  been  assigned  to CIT and in form and
substance  satisfactory to CIT, or (B) secured by letters of credit (in form and
substance  satisfactory  to  CIT)  issued or confirmed by, and payable at, banks
having  a  place  of business in the United States of America, or (ii) up to (x)
$500,000  plus (y) $750,000 for Canadian account debtors; plus (b) the lesser of
(i)  the  sum  of (x) the lesser of eighty-five percent (85%) of the net orderly
liquidation  value  of  the  Company's Eligible Inventory consisting of finished
goods  Inventory  or  thirty-five  percent  (35%)  of the aggregate value of the
Company's  Eligible Inventory consisting of  finished goods Inventory, valued at
the  lower of cost or market, on a first in, first out basis, and (y) the lesser
of  eighty-five  percent  (85%)  of  the  net  orderly  liquidation value of the
Company's  Eligible  Inventory consisting of raw materials Inventory or eighteen
percent  (18%)  of  the  aggregate  value  of  the  Company's Eligible Inventory
consisting  of  raw  materials Inventory, valued at the lower of cost or market,
on  a  first  in,  first out basis, or (ii) the Inventory Loan Cap, less (c) any
applicable  Availability  Reserves.

BUSINESS  DAY  shall  mean any day on which CIT and JPMorgan Chase Bank are open
-------------
for  business.

CAPITAL  EXPENDITURES  shall mean, for any period, the aggregate expenditures of
---------------------
the  Company  during  such  period  on account of, property, plant, equipment or
similar  fixed assets that in conformity with GAAP, are required to be reflected
in  the  balance  sheet  of  the  Company.

CAPITAL IMPROVEMENTS shall mean operating Equipment facilities (other than land)
--------------------
acquired  or  installed  for  use  in  the  Company's  business  operations.

CAPITAL  LEASE  shall  mean  any  lease  of  property (whether real, personal or
--------------
mixed), which, in conformity with GAAP, is accounted for as a capital lease or a
Capital  Expenditure  in  the  balance  sheet  of  the  Company.

CHASE  BANK RATE shall mean the rate of interest per annum announced by JPMorgan
----------------
Chase Bank from time to time as its prime rate in effect at its principal office
in  New  York  City.   (The  prime rate is not intended to be the lowest rate of
interest  charged  by  JPMorgan  Chase  Bank  to  its  borrowers).

CHASE  BANK  RATE  LOANS  shall  mean  any  loans  or  advances pursuant to this
------------------------
Financing  Agreement  made  or  maintained at a rate of interest based upon the
Chase  Bank  Rate.

CLOSING  DATE  shall  mean  the date that this Financing Agreement has been duly
-------------
executed  by  the  parties  hereto  and  delivered  to  CIT.


COLLATERAL  shall  mean  all  present and future Accounts, Equipment, Inventory,
----------
Documents  of  Title, General Intangibles, Investment Property, Pledged Stock of
the  Company  and  the  Company's  subsidiaries  and  Other  Collateral.

COLLECTION  DAYS  shall mean three (3) Business Days to provide for the deposit,
----------------
clearance  and  collection  of  checks  or  other  instruments  representing the
proceeds  of  Collateral, the amount of which has been credited to the Company's
Revolving  Loan  Account, and for which interest may be charged on the aggregate
amount  of such deposits, at the rate provided for in Paragraph 8.1 of Section 8
of  this  Financing  Agreement.

COMMITMENT  LETTER  shall  mean  the Commitment Letter, dated February 21, 2002,
------------------
issued  by  CIT  to,  and  accepted  by,  the  Company.


CONSOLIDATED BALANCE SHEET shall mean a consolidated or compiled, as applicable,
--------------------------
balance  sheet  for the Parent, the Company and the consolidated subsidiaries of
each, eliminating all inter-company transactions and prepared in accordance with
GAAP.

CONSOLIDATING  BALANCE  SHEET  shall  mean  a  Consolidated  Balance  Sheet plus
-----------------------------
individual  balance  sheets  for the Parent, the Company and the subsidiaries of
each,  showing  all  eliminations  of  inter-company  transactions,  including a
balance sheet for the Company exclusively, all prepared in accordance with GAAP.


COPYRIGHTS  shall  mean all present and hereafter acquired copyrights, copyright
----------
registrations,  recordings,  applications,  designs,  styles,  licenses,  marks,
prints  and  labels  bearing any of the foregoing, goodwill, any and all general
intangibles,  intellectual  property and rights pertaining thereto, and all cash
and  non-cash  proceeds  thereof.

CURRENT  ASSETS shall mean those assets of the Company which, in accordance with
---------------
GAAP,  are  classified  as  current.


CURRENT  LIABILITIES  shall  mean  those  liabilities  of  the Company which, in
--------------------
accordance  with  GAAP,  are  classified  as  "current," provided however, that,
notwithstanding  GAAP,  the Revolving Loans and the current portion of Permitted
Indebtedness  shall  be  considered  "current  liabilities."

DEFAULT  shall mean any event specified in Section 10 hereof, whether or not any
-------
requirement  for  the giving of notice, the lapse of time, or both, or any other
condition,  event  or  act,  has  been  satisfied.

DEFAULT  RATE  OF  INTEREST  shall  mean  a  rate  of  interest per annum on any
---------------------------
Obligations  hereunder,  equal  to  the sum of: (a) two percent (2%) and (b) the
applicable  increment  over  the  Chase Bank Rate (as set forth in paragraph 8.1
hereof)  plus  the  Chase  Bank  Rate, which CIT shall be entitled to charge the
Company  on  all  Obligations  due  CIT  by the Company, as further set forth in
Paragraph  10.2  of  Section  10  of  this  Financing  Agreement.


DEPOSITORY  ACCOUNTS  shall  mean  the collection accounts, which are subject to
--------------------
CIT's instructions, as specified in Paragraph 3.4 of Section 3 of this Financing
Agreement.

DILUTION  PERCENTAGE  shall mean, as of anytime of calculation,  the then sum of
--------------------
the  Borrower's  credits,  claims,  allowances,  discounts, write-offs, contras,
off-sets  and  deductions  divided by the then sum of Trade Accounts Receivable,
all  calculated  on  a  rolling  ninety  (90)  day  average,  as  determined and
calculated  by  CIT  from  time  to  time.

DOCUMENTATION  FEE  shall  mean (A) the sum of $10,000.00 intended to compensate
------------------                              ------
CIT  for  the  use  of  CIT's  in-house  Legal  Department  and  facilities  in
documenting,  in  whole  or in part, the initial transaction solely on behalf of
CIT,  exclusive  of  Out-of-Pocket  Expenses,  and (B) subsequent to the Closing
Date,  CIT's  standard  fees  relating  to  any  and all modifications, waivers,
releases,  amendments  or  additional  collateral with respect to this Financing
Agreement,  the  Collateral  and/or  the  Obligations.

DOCUMENTS  OF  TITLE  shall mean all present and future documents (as defined in
--------------------
the  UCC),  and  any  and  all  warehouse  receipts,  bills  of lading, shipping
documents,  chattel  paper,  instruments  and  similar  documents,  all  whether
negotiable  or not and all goods and Inventory relating thereto and all cash and
non-cash  proceeds  of  the  foregoing.

EARLY  TERMINATION DATE shall mean the date on which the Company terminates this
-----------------------
Financing  Agreement  or  the Revolving Line of Credit which date is prior to an
Anniversary  Date.

EARLY  TERMINATION  FEE  shall:  (A)  mean the fee CIT is entitled to charge the
-----------------------
Company in the event the Company terminates the Revolving Line of Credit or this
Financing  Agreement  on  a  date  prior  to  an  Anniversary  Date;  and (B) be
determined by multiplying the Revolving Line of Credit by (x) three percent (3%)
if  the Early Termination Date occurs on or before one (1) year from the Closing
Date,  (y)  one  percent (1%) if the Early Termination Date occurs after one (1)
year from the Closing Date but on or before two (2) years from the Closing Date;
and  (z)  one-half  of  one  percent (0.5%) if the Early Termination Date occurs
after  two (2) years from the Closing Date but prior to an Anniversary Date.  In
the  event  the  Lender  is  acquired  by General Electric (including GECC), the
foregoing  fee  shall  be  waived.

EBIT  shall  mean,  in  any  period, all earnings of the Company for said period
----
before  all  interest  and  tax  obligations  of  the  Company  for said period,
determined in accordance with GAAP on a consistent basis with the latest audited
financial  statements  of the Company, but excluding the effect of extraordinary
or  non-reoccurring  gains  or  losses  for  such  period.

ELIGIBLE  ACCOUNTS RECEIVABLE shall mean the gross amount of the Company's Trade
-----------------------------
Accounts  Receivable  that are subject to a valid, exclusive, first priority and
fully  perfected  security  interest  in  favor  of  CIT,  which  conform to the
warranties  contained  herein and which, at all times, continue to be acceptable
to  CIT  in  the exercise of its reasonable judgment, less, without duplication,
the  sum  of:  (a) any returns, discounts, claims, credits and allowances of any
nature  (whether  issued,  owing,  granted,  claimed  or  outstanding),  and (b)
reserves  for  any such Trade Accounts Receivable that arise from or are subject
to  or  include:  (i) sales to the United States of America,  any state or other
governmental entity or to any agency, department or division thereof, except for
any  such  sales  as  to  which  the Company has complied with the Assignment of
Claims  Act  of  1940  or  any other applicable statute, rules or regulation, to
CIT's  satisfaction  in  the  exercise of its reasonable business judgment; (ii)
foreign  sales,  other  than  sales which otherwise comply with all of the other
criteria  for eligibility hereunder and are (x) secured by letters of credit (in
form  and substance satisfactory to CIT) issued or confirmed by, and payable at,
banks  having  a  place  of  business in the United States of America, or (y) to
customers  residing  in  Canada provided such Accounts do not exceed $750,000.00
(U.S.  Dollars)  in  the  aggregate  at any one time; (iii) Accounts that remain
unpaid  more  than  ninety  (90)  days  from invoice date, provided that for the
Company's  customers  Lowe's  and Goody's, outstanding invoices to such customer
are  unpaid  more than one hundred and twenty (120) days from invoice date; (iv)
contra  accounts;  (v)  sales  to  Parent,  any  subsidiary,  or  to any company
affiliated  with  the Company or Parent in any way; (vi) bill and hold (deferred
shipment)  or  consignment  sales;  (vii)  sales  to  any customer which is: (A)
insolvent,  (B)  the  debtor  in  any  bankruptcy,  insolvency,  arrangement,
reorganization,  receivership  or similar proceedings under any federal or state
law,  (C)  negotiating, or has called a meeting of its creditors for purposes of
negotiating,  a  compromise of its debts, or (D) financially unacceptable to CIT
or  has a credit rating unacceptable to CIT; (viii) all sales to any customer if
fifty  percent  (50%)  or more of the aggregate dollar amount of all outstanding
invoices  to  such  customer  are unpaid more than ninety (90) days from invoice
date;  (ix)  subject  to  the last sentence of this definition, sales to (A) any
customer  and/or its affiliates to the extent such sales  exceed at any one time
twenty  percent  (20%)  or  more of all Eligible Accounts Receivable, and (B) to
Lowe's  and/or  its  affiliates to the extent such sales  exceed at any one time
forty  percent (40%) or more of all Eligible Accounts Receivable; (x) pre-billed
receivables  and  receivables  arising  from  progress  billing;  (xi) an amount
representing,  historically, returns, discounts, claims, credits, allowances and
applicable terms; (xii) sales not payable in United States or Canadian currency;
and (xiii) any other reasons deemed necessary by CIT in its reasonable judgment,
including  without limitation those which are customary either in the commercial
finance  industry  or  in  the  lending  practices  of  CIT.  In addition to the
foregoing,  CIT  may,  from  time to time, amend the foregoing or establish such
criteria  as  it  may  deem  advisable,  in its sole discretion, relating to the
Company's  sales  on  extended dating terms and concentration levels relating to
specific  account  debtors.

ELIGIBLE  INVENTORY  shall mean the gross amount of the Company's Inventory that
-------------------
is  subject  to  a valid, exclusive, first priority and fully perfected security
interest  in  favor of CIT and which conforms to the warranties contained herein
and which, at all times continues to be acceptable to CIT in the exercise of its
reasonable  judgment,  less,  without  duplication, any (a) work-in-process, (b)
supplies  (other  than  raw  materials), (c) Inventory not present in the United
States of America, (d) Inventory returned or rejected by the Company's customers
(other  than  goods  that  are  undamaged and  resalable in the normal course of
business)  and goods to be returned to the Company's suppliers, (e) Inventory in
transit  to third parties (other than the Company's agents or warehouses), or in
the  possession of a warehouseman, bailee, third party processor, or other third
party,  unless such warehouseman, bailee or third party has executed a notice of
security  interest agreement (in form and substance satisfactory to CIT) and CIT
shall  have  a first priority perfected security interest in such Inventory, and
(f)  less  any  reserves required by CIT in its reasonable discretion, including
without  limitation  for  special  order  goods,  discontinued,  slow-moving and
obsolete  Inventory,  market  value declines, bill and hold (deferred shipment),
consignment  sales,  shrinkage  and  any applicable customs, freight, duties and
Taxes.

EQUIPMENT shall mean all present and hereafter acquired equipment (as defined in
---------
the  UCC)  including,  without limitation, all machinery, equipment, furnishings
and  fixtures,  and  all  additions,  substitutions  and  replacements  thereof,
wherever  located,  together  with all attachments, components, parts, equipment
and accessories installed thereon or affixed thereto and all proceeds thereof of
whatever  sort.

ERISA shall mean the Employee Retirement Income Security Act or 1974, as amended
-----
from time to time and the rules and regulations promulgated thereunder from time
to  time.

EVENT(S)  OF  DEFAULT  shall have the meaning provided for in Section 10 of this
---------------------
Financing  Agreement.


EXECUTIVE  OFFICERS shall mean the Chairman, President, Chief Executive Officer,
-------------------
Chief  Operating  Officer, Chief Financial Officer, Executive Vice President(s),
Senior  Vice  President(s),  Treasurer, Controller and Secretary of the Company.

FISCAL  QUARTER  shall  mean,  with respect to the Company, each three (3) month
---------------
period  ending  on March  31st, June 30th, September 30th, and December 31st of
each  Fiscal  Year.


FISCAL  YEAR  shall mean each twelve (12) month period commencing on January 1st
------------
of  each  year  and  ending  on  the  following  December  31st  of  such  year.


GAAP shall mean generally accepted accounting principles in the United States of
----
America  as  in  effect  from  time  to time and for the period as to which such
accounting  principles  are  to  apply,  provided  that in the event the Company
modifies  its  accounting principles and procedures as applied as of the Closing
Date, the Company shall provide such statements of reconciliation as shall be in
form  and  substance  acceptable  to  CIT.

GENERAL  INTANGIBLES  shall  mean  all  present  and  hereafter acquired general
--------------------
intangibles  (as defined in the UCC), and shall include, without limitation, all
present  and  future  right,  title  and interest in and to: (a) all Trademarks,
tradenames,  corporate  names,  business  names,  logos and any other designs or
sources  of  business identities, (b) Patents, together with any improvements on
said  Patents,  utility  models, industrial models, and designs, (c) Copyrights,
(d)  trade  secrets,  (e) licenses, permits and franchises, (f) all applications
with  respect  to the foregoing, (g) all right, title and interest in and to any
and  all  extensions  and  renewals,  (h)  goodwill  with  respect to any of the
foregoing,  (i)  any  other  forms  of  similar  intellectual  property, (j) all
customer  lists,  distribution  agreements,  supply  agreements,  blueprints,
indemnification  rights and tax refunds, together with all monies and claims for
monies  now or hereafter due and payable in connection with any of the foregoing
or  otherwise,  and  all  cash and non-cash proceeds thereof, including, without
limitation,  the  proceeds  or royalties of any licensing agreements between the
Company  and  any  licensee  of  any  of  the  Company's  General  Intangibles.

GUARANTIES  shall  mean  the  guaranty  documents  executed and delivered by the
----------
Guarantors  guaranteeing  the  Obligations.


GUARANTORS shall mean (i) the Parent, and (ii) each subsidiary of the Parent and
----------
the  Company.

INDEBTEDNESS  shall  mean,  without  duplication, all liabilities, contingent or
------------
otherwise,  which  are  any  of  the  following:  (a)  obligations in respect of
borrowed  money  or  for  the  deferred  purchase price of property, services or
assets, other than Inventory, or (b) lease obligations which, in accordance with
GAAP,  have  been,  or  which  should  be  capitalized.

INSURANCE  PROCEEDS  shall  mean  proceeds or payments from an insurance carrier
-------------------
with  respect  to  any  loss,  casualty  or  damage  to  Collateral.


INVENTORY  shall  mean  all  of  the  Company's  present  and hereafter acquired
---------
inventory  (as  defined  in  the  UCC)  and  including,  without limitation, all
merchandise,  inventory  and  goods,  and  all  additions,  substitutions  and
replacements  thereof,  wherever  located, together with all goods and materials
used  or  usable in manufacturing, processing, packaging or shipping same in all
stages  of  production   from  raw materials through work-in-process to finished
goods  -  and  all  proceeds  thereof  of  whatever  sort.

INVENTORY  LOAN  CAP  shall  mean  the  amount  of  $3,000,000.
--------------------

INVESTMENT  PROPERTY  shall mean all now owned and hereafter acquired investment
--------------------
property  (as  defined  in  the  UCC)  and  all  proceeds  thereof.

LINE  OF CREDIT shall mean the aggregate commitment of CIT to (a) make Revolving
---------------
Loans  pursuant  to  Section 3 of this Financing Agreement and (b) make the Term
Loan  pursuant to Section 4 of this Financing Agreement, in the aggregate amount
equal  to  $8,000,000.

LINE  OF CREDIT FEE shall: (A) mean the fee due CIT at the end of each month for
-------------------
the  Line of Credit, and (B) be determined by multiplying the difference between
(i)  the  Revolving  Line of Credit and (ii) the sum, for said month, of (x) the
average  daily  balance of Revolving Loans outstanding for said month, by 0.375%
per  annum  for  the  number  of  days  in  said  month.

LOAN  DOCUMENTS  shall  mean this Financing Agreement, the Promissory Notes, the
---------------
other  closing  documents  and  any other ancillary loan and security agreements
executed  from  time to time in connection with this Financing Agreement, all as
may  be renewed, amended, extended, increased or supplemented from time to time.

LOAN  FACILITY  FEE  shall  mean  the fee payable to CIT in accordance with, and
-------------------
pursuant  to,  the  provisions  of  Paragraph 8.7 of Section 8 of this Financing
Agreement.


NET WORTH shall mean, at any date of determination, an amount equal to (a) Total
---------
Assets  minus  (b) Total Liabilities, and shall be determined in accordance with
GAAP,  on a consistent basis with the latest audited financial statements of the
Company.

OBLIGATIONS  shall  mean all loans, advances and extensions of credit made or to
-----------
be made by CIT to the Company or to others for the Company's account (including,
without  limitation,  all  Revolving  Loans, Letter of Credit Guaranties and the
Term  Loan);  any  and all indebtedness and obligations which may at any time be
owing  by  the  Company  to  CIT  howsoever arising, whether now in existence or
incurred  by  the  Company  from  time  to  time  hereafter;  whether principal,
interest,  fees,  costs,  expenses or otherwise; whether secured by pledge, lien
upon or security interest in any of the Company's Collateral, assets or property
or  the  assets  or  property  of any other person, firm, entity or corporation;
whether  such  indebtedness is absolute or contingent, joint or several, matured
or  unmatured,  direct  or indirect and whether the Company is liable to CIT for
such  indebtedness  as  principal,  surety,  endorser,  guarantor  or otherwise.
Obligations  shall  also  include indebtedness owing to CIT by the Company under
any  Loan  Document or under any other agreement or arrangement now or hereafter
entered  into  between the Company and CIT; indebtedness or obligations incurred
by,  or  imposed  on, CIT as a result of environmental claims arising out of the
Company's  operations,  premises  or  waste  disposal  practices  or  sites  in
accordance  with  paragraph  7.7  hereof;  any  and  all  costs, fees, expenses,
liabilities,  indebtedness  or  obligations incurred by, or imposed on, CIT as a
result  of the conversion of foreign currency to U.S. Dollars, including without
limitation as a result of any indemnity, hold harmless or similar provision made
by  CIT  to  any  bank that accepts deposits or transfers funds on behalf of the
Company  or  to  CIT  with  respect  to  the  Company's  Accounts; the Company's
liability to CIT as maker or endorser of any promissory note or other instrument
for the payment of money; the Company's liability to CIT under any instrument of
guaranty or indemnity, or arising under any guaranty, endorsement or undertaking
which  CIT  may make or issue to others for the Company's account, including any
letter of credit guaranty or other accommodation extended by CIT with respect to
applications for letters of credit, if applicable, CIT's acceptance of drafts or
CIT's  endorsement  of  notes or other instruments for the Company's account and
benefit; and any and all indebtedness, liabilities or obligations of every kind,
nature  and  description  owing  by  the  Company  to  any  affiliate  of  CIT.

OPERATING  LEASES  shall  mean all leases of property (whether real, personal or
-----------------
mixed)  other  than  Capital  Leases.


OTHER  COLLATERAL  shall  mean  all  now  owned  and hereafter acquired lockbox,
-----------------
blocked  account  and  any  other  deposit  accounts maintained with any bank or
financial  institutions  into  which  the  proceeds  of Collateral are or may be
deposited;  all  other  deposit  accounts; all Investment Property; all cash and
other  monies  and  property  in  the  possession  or control of CIT; all books,
records,  ledger  cards,  disks and related data processing software at any time
evidencing or containing information relating to any of the Collateral described
herein  or  otherwise  necessary  or  helpful  in  the  collection  thereof  or
realization  thereon;  and  all  cash  and  non-cash  proceeds of the foregoing.

OUT-OF-POCKET  EXPENSES  shall  mean  all  of  CIT's present and future expenses
-----------------------
incurred  relative  to  this  Financing  Agreement  or any other Loan Documents,
whether  incurred heretofore or hereafter, which expenses shall include, without
being  limited  to: the cost of record searches, all costs and expenses incurred
by  CIT  in opening bank accounts, depositing checks, receiving and transferring
funds,  and  wire  transfer  charges, any charges imposed on CIT due to returned
items  and  "insufficient  funds"  of  deposited  checks and travel, lodging and
similar  expenses  of  CIT's  personnel  in  connection  with  inspecting  and
monitoring  the  Collateral  from time to time hereunder, any applicable counsel
fees  and  disbursements,  fees  and  taxes  relative to the filing of financing
statements,  all expenses, costs and fees set forth in Paragraph 10.3 of Section
10  of  this  Financing  Agreement.

OVERADVANCE  RATE  shall mean a rate equal to one-half of one percent (1/2%) per
-----------------
annum  in  excess  of  the  applicable  contract  rate of interest determined in
accordance  with  Section  8,  Paragraph  8.1(a)  of  this  Financing Agreement.

OVERADVANCES  shall mean the amount by which (a) the outstanding Revolving Loans
------------
and  advances  made  hereunder  exceed  (b)  the  Borrowing  Base.

PARENT  shall  mean  Sentry  Technology  Corporation.
------

PATENTS  shall mean all of the Company's present and hereafter acquired patents,
-------
patent  applications, registrations, any reissues or renewals thereof, licenses,
any  inventions and improvements claimed thereunder, and all general intangible,
intellectual property and patent rights with respect thereto of the Company, and
all  income,  royalties,  cash  and  non-cash  proceeds  thereof.

PERMITTED  ENCUMBRANCES  shall  mean:  (a)  liens existing on the date hereof on
-----------------------
specific items of Equipment and other liens expressly permitted, or consented to
in  writing  by  CIT;  (b)  Purchase  Money  Liens;  (c) liens of local or state
authorities  for  franchise  or  other  like  Taxes, provided that the aggregate
amounts  of  such liens shall not exceed $100,000.00 in the aggregate at any one
time;  (d)  statutory  liens  of  landlords and liens of carriers, warehousemen,
bailees,  mechanics, materialmen and other like liens imposed by law, created in
the  ordinary course of business and for amounts not yet due (or which are being
contested in good faith, by appropriate proceedings or other appropriate actions
which  are  sufficient  to  prevent imminent foreclosure of such liens) and with
respect  to  which  adequate  reserves or other appropriate provisions are being
maintained  by  the  Company in accordance with GAAP; (e) deposits made (and the
liens  thereon)  in  the  ordinary course of business of the Company (including,
without  limitation, security deposits for leases, indemnity bonds, surety bonds
and  appeal  bonds)  in  connection  with  workers'  compensation,  unemployment
insurance  and  other  types  of  social  security  benefits  or  to  secure the
performance  of  tenders,  bids,  contracts  (other  than  for  the repayment or
guarantee  of  borrowed  money  or  purchase  money  obligations),  statutory
obligations  and  other  similar  obligations  arising  as  a result of progress
payments  under  government  contracts;  (f)  easements  (including,  without
limitation,  reciprocal  easement  agreements  and  utility  agreements),
encroachments,  minor  defects  or  irregularities in title, variation and other
restrictions,  charges  or  encumbrances (whether or not recorded) affecting the
Real  Estate,  if  applicable,  and which in the aggregate (A) do not materially
interfere  with  the occupation, use or enjoyment by the Company of its business
or  property so encumbered and (B) in the reasonable business judgment of CIT do
not materially and adversely affect the value of such Real Estate; and (g) liens
granted  CIT by the Company; (h) liens of judgment creditors provided such liens
do  not  exceed,  in  the  aggregate,  at any time, $50,000.00 (other than liens
bonded  or  insured  to  the reasonable satisfaction of CIT); and (i)  tax liens
which  are  not  yet  due and payable or which are being diligently contested in
good  faith  by  the Company by appropriate proceedings, and which liens are not
(x)  filed  on  any  public records, (y) other than with respect to Real Estate,
senior  to the liens of CIT or (z) for Taxes due the United States of America or
any  state  thereof  having  similar  priority statutes, as further set forth in
paragraph  7.6  hereof.

PERMITTED  INDEBTEDNESS  shall  mean:  (A) current Indebtedness maturing in less
-----------------------
than one year and incurred in the ordinary course of business for raw materials,
supplies,  equipment,  services, Taxes or labor; (B) the Indebtedness secured by
Purchase Money Liens; (C) Subordinated Debt; (D) Indebtedness arising under this
Financing  Agreement;  (E)  deferred  Taxes  and  other expenses incurred in the
ordinary  course  of  business;  (F)  other Indebtedness existing on the date of
execution  of  this  Financing Agreement and listed in the most recent financial
statement delivered to CIT or otherwise disclosed to CIT in writing prior to the
Closing  Date;  and  (g)  a  note in an amount not to exceed $120,000 to certain
officers  of  the  Company relating to the exercise of employee options, on such
terms  as  the Company and CIT may reasonably agree upon, including receipt of a
subordination  agreement  with  respect  thereto,  all  in  form  and  substance
satisfactory  to  CIT.

PROMISSORY  NOTE  shall mean the note, in the form of Exhibit A attached hereto,
----------------
delivered  by  the  Company  to  CIT  to evidence the Term Loan pursuant to, and
repayable  in  accordance  with,  the  provisions of Section 4 of this Financing
Agreement.

PURCHASE  MONEY  LIENS  shall mean liens on any item of Equipment acquired after
----------------------
the  date  of  this  Financing  Agreement provided that (A) each such lien shall
attach  only  to the property to be acquired, (B) a description of the Equipment
so  acquired  is  furnished to CIT, and (C) the debt incurred in connection with
such  acquisitions shall not exceed, in the aggregate, $100,000.00 in any Fiscal
Year.

REAL  ESTATE shall mean the Company's fee and/or leasehold interests in the real
------------
property.

REVOLVING  LINE  OF  CREDIT  shall  mean the aggregate commitment of CIT to make
---------------------------
loans  and  advances  pursuant  to  Section 3 of this Financing Agreement to the
Company, in the aggregate amount equal to $8,000,000 less the outstanding amount
of  the  Term  Loan.

REVOLVING  LOAN  ACCOUNT shall mean the account on CIT's books, in the Company's
------------------------
name,  in  which  the  Company  will  be charged with all Obligations under this
Financing  Agreement.

REVOLVING LOANS shall mean the loans and advances made, from time to time, to or
---------------
for  the  account  of the Company by CIT pursuant to Section 3 of this Financing
Agreement.

SUBORDINATED  DEBT  shall  mean  any  debt due a Subordinating Creditor (and the
------------------
note(s) evidencing such) which hereafter may be subordinated, by a Subordination
Agreement,  to  the  prior  payment  and  satisfaction of the Obligations of the
Company  to  CIT.

SUBORDINATING  CREDITOR shall mean any party hereafter executing a Subordination
-----------------------
Agreement.

SUBORDINATION  AGREEMENT  shall  mean  any  agreement  (in  form  and  substance
------------------------
satisfactory  to  CIT)  among  the  Company,  any Subordinating Creditor and CIT
pursuant  to which any applicable Subordinated Debt is subordinated to the prior
payment  and  satisfaction  of  the  Company's  Obligations  to  CIT.

TAXES  shall  mean  all  federal, state, municipal and other governmental taxes,
-----
levies,  charges,  claims and assessments which are or may be due by the Company
with  respect  to  its  business,  operations,  Collateral  or  otherwise.

TERM  LOAN PROMISSORY NOTE shall mean the promissory note in the form of Exhibit
--------------------------
A  hereto  executed  by  the  Company  to  evidence Term Loan  made by CIT under
Section  4  hereof.

TERM  LOAN  shall  mean  the  term  loan in the principal amounts of $100,000.00
----------
(herein  the  "Term  Loan") made by CIT pursuant to, and repayable in accordance
with,  the  provisions  of  Section  4  of  this  Financing  Agreement.

TOTAL  ASSETS  shall mean  total assets determined in accordance with GAAP, on a
-------------
basis  consistent  with  the latest audited financial statements of the Company.

TOTAL  LIABILITIES  shall  mean  total liabilities determined in accordance with
------------------
GAAP,  on a basis consistent with the latest audited financial statements of the
Company.

TRADE  ACCOUNTS  RECEIVABLE  shall  mean  that portion of the Company's Accounts
---------------------------
which  arises  from  the  sale  of Inventory or the rendition of services in the
ordinary  course  of  the  Company's  business.


TRADEMARKS  shall  mean all present and hereafter acquired trademarks, trademark
----------
registrations,  recordings,  applications,  tradenames,  trade  styles,  service
marks,  prints  and labels (on which any of the foregoing may appear), licenses,
reissues,  renewals,  and  any  other intellectual property and trademark rights
pertaining  to  any  of  the  foregoing,  together  with the goodwill associated
therewith,  and  all  cash  and  non-cash  proceeds  thereof.

UCC  shall  mean  the  Uniform Commercial Code as the same may be amended and in
---
effect  from  time  to  time  in  the  state  of  New  York.

WORKING  CAPITAL  shall  mean  Current  Assets in excess of Current Liabilities.
----------------

WORKING  DAY shall mean any Business Day on which dealings in foreign currencies
------------
and  exchanges  between  banks  may  be  transacted.


SECTION  2.   Conditions  Precedent

     The obligation of CIT to make the initial loans hereunder is subject to the
satisfaction  of,  extension  of  or  waiver  of in writing, on or prior to, the
Closing  Date,  the  following  conditions  precedent:

A)     LIEN  SEARCHES  - CIT shall have received tax, judgment and Uniform
       --------------
Commercial  Code  searches  satisfactory  to  CIT  for  all  locations presently
occupied  or  used  by  the  Company.

(B)     CASUALTY  INSURANCE  -  The Company shall have delivered to CIT evidence
        -------------------
satisfactory  to  CIT that casualty insurance policies listing CIT as additional
insured,  loss  payee  or  mortgagee,  as the case may be, are in full force and
effect,  all  as  set  forth  in  Paragraph  7.5 of Section 7 of  this Financing
Agreement.

(C)     UCC  FILINGS - Any financing statements required to be filed in order to
        ------------
create,  in favor of CIT, a first perfected security interest in the Collateral,
subject  only  to  the Permitted Encumbrances, shall have been properly filed in
each  office  in each jurisdiction required in order to create in favor of CIT a
perfected  lien  on  the  Collateral.  CIT  shall  have received  acknowledgment
copies  of  all such filings (or, in lieu thereof, CIT shall have received other
evidence satisfactory to CIT that all such filings have been made) and CIT shall
have  received  evidence  that  all necessary filing fees and all taxes or other
expenses  related  to  such  filings  have  been  paid  in  full.

(D)     BOARD  RESOLUTION - CIT shall have received a copy of the resolutions of
        -----------------
the  Board  of  Directors of each of the Company and the Guarantors (as the case
may  be)  authorizing  the  execution,  delivery  and  performance  of  (i) this
Financing  Agreement,  (ii) the Guaranties, and (iii) any related agreements, in
each  case  certified by the Secretary or Assistant Secretary of the Company and
the  Guarantors  (as  the  case  may  be) as of the date hereof, together with a
certificate  of  the  Secretary  or  Assistant  Secretary of the Company and the
Guarantors  (as  the  case  may  be)  as  to the incumbency and signature of the
officers  of the Company and/or the Guarantors executing such Loan Documents and
any  certificate  or  other  documents  to be delivered by them pursuant hereto,
together  with  evidence  of  the  incumbency  of  such  Secretary  or Assistant
Secretary.

(E)     CORPORATE  ORGANIZATION  -  CIT  shall  have  received (i) a copy of the
        -----------------------
Certificate  of Incorporation of the Company and the Guarantors certified by the
Secretary  of  State  of  the state of its incorporation, and (ii) a copy of the
By-Laws  of  the  Company  certified  by  the  Secretary  or Assistant Secretary
thereof,  all  as  amended  through  the  date  hereof.

(F)     OFFICER'S  CERTIFICATE  -  CIT shall have received an executed Officer's
        ----------------------
Certificate  of  the  Company,  satisfactory  in  form  and  substance  to  CIT,
certifying that (i) the representations and warranties contained herein are true
and  correct  in  all  material respects on and as of the Closing Date; (ii) the
Company  is in compliance with all of the terms and provisions set forth herein;
and  (iii)  no  Default  or  Event  of  Default  has  occurred

(G)     OPINIONS  -  Counsel  for the Company and the Guarantors shall have
        --------
delivered to CIT opinions satisfactory to CIT opining, inter alia, that, subject
to  the  (i)  filing, priority and remedies provisions of the Uniform Commercial
Code,  (ii)  the provisions of the Bankruptcy Code, insolvency statutes or other
like laws, (iii) the equity powers of a court of law and (iv) such other matters
as  may  be agreed upon with CIT: (x) this Financing Agreement, the Guaranty and
all  other  Loan  Documents  of  the  Company  and the Guarantors are (A) valid,
binding  and  enforceable  according  to  their  terms, (B) are duly authorized,
executed  and  delivered,  and  (C)  do  not  violate  any  terms,  provisions,
representations  or  covenants  in  the charter or by-laws of the Company or the
Guarantors  or,  to  the  best knowledge of such counsel, of any loan agreement,
mortgage,  deed of trust, note, security or pledge agreement, indenture or other
contract  to which the Company or the Guarantors are signatories or by which the
Company  or  the Guarantors or their assets are bound; and (y) the provisions of
all  federal  and  state  securities  laws have been fully complied with or that
compliance  is  not  legally  required  and  the  reasons  supporting  such
non-compliance.

(H)     ABSENCE  OF  DEFAULT  -  No  Default or Event of Default shall have
        --------------------
occurred  and  no  material  adverse change shall have occurred in the financial
condition,  business,  prospects,  profits, operations or assets of the Company,
Parent,  the  Guarantors  or  the  Company's  subsidiaries.

(I)     LEGAL  RESTRAINTS/LITIGATION - As of the Closing Date, there shall
        ----------------------------
be  no: (x) litigation, investigation or proceeding (judicial or administrative)
pending  or  threatened  against the Company , Parent or the Guarantors or their
assets,  by  any  agency,  division  or department of any county, city, state or
federal  government  arising  out  of  the Acquisition and/or the Merger or this
Financing  Agreement;  (y)  injunction, writ or restraining order restraining or
prohibiting  the  consummation  of the financing arrangements contemplated under
this  Financing  Agreement;  or  (z)  suit,  action, investigation or proceeding
(judicial  or  administrative)  pending against the Company or the Guarantors or
their  assets, which, in the opinion of CIT, if adversely determined, could have
a  material  adverse  effect  on  the  business,  operation,  assets,  financial
condition  or  Collateral  of  the  Company  and/or  the  Guarantors.

(J)     GUARANTIES  -  The  Guarantors shall have executed and delivered to
        ----------
CIT  guaranties,  in form acceptable to CIT, guaranteeing all present and future
Obligations  of  the  Company.

(K)     PLEDGE  AGREEMENT  -  Parent  and  the Company, as the case may be,
        -----------------
shall (i) execute and deliver to CIT a pledge and security agreement pledging to
CIT  as  additional  collateral for the Obligations of the Company not less than
100%  of  the issued and outstanding stock of the Company and not less than 100%
of  the  stock  of  all subsidiaries of the Company, and (ii) deliver to CIT the
stock  certificates  evidencing  such  stock  together  with duly executed stock
powers  (undated  and  in-blank) with respect thereto, all in form and substance
satisfactory  to  CIT.

(L)     ADDITIONAL  DOCUMENTS - The Company shall have executed and delivered to
        ---------------------
CIT  all  Loan  Documents  necessary  to  consummate  the  lending  arrangement
contemplated  between  the  Company  and  CIT.

(M)     DISBURSEMENT AUTHORIZATION - The Company shall have delivered to CIT all
        --------------------------
information  necessary  for CIT to issue wire transfer instructions on behalf of
the  Company  for  the  initial  and subsequent loans and/or advances to be made
under  this  Financing  Agreement  including,  but  not limited to, disbursement
authorizations  in  form  acceptable  to  CIT.

(N)     EXAMINATION  &  VERIFICATION  -CIT  shall  have  completed,  to  CIT's
        ----------------------------
satisfaction,  an  examination  and  verification  of  the  Accounts, Inventory,
financial  statements,  books and records of the Company which examination shall
indicate  that,  after  giving  effect  to  all  Revolving  Loans,  advances and
extensions  of  credit  to be made at closing, the Company shall have an opening
additional  Availability  of at least $500,000, as evidenced by a Borrowing Base
certificate  delivered by the Company to CIT as of the Closing Date, all as more
fully  required  by  the  CIT  Commitment  Letter.   It  is understood that such
requirement  contemplates  that  all debts and obligations are current, and that
all  payables  are  being handled in the normal course of the Company's business
and  consistent  with  its  past  practice.

(O)     DEPOSITORY  ACCOUNTS  -  The  Company shall have established a system of
        --------------------
lockbox  and  bank  accounts  with respect to the collection of Accounts and the
deposit of proceeds of Collateral as shall be acceptable to CIT in all respects.
Such  accounts  shall be subject to three party agreements (between the Company,
CIT  and the depository bank), which shall be in form and substance satisfactory
to  CIT.

  (P)     EXISTING  REVOLVING  CREDIT  AGREEMENT - The Company's existing credit
          --------------------------------------
agreement  with  GECC (the "Existing Lender") shall be: (i) terminated; (ii) all
loans  and  obligations of the Company and/or the Guarantors thereunder shall be
paid  or satisfied in full, including through utilization of the proceeds of the
initial  Revolving  Loans  and  the  Term  Loan  to be made under this Financing
Agreement;  and  (iii)  all liens or security interests in favor of the Existing
Lender  on  the  Collateral  and  otherwise  in  connection  therewith  shall be
terminated  and/or  released  upon  such  payment.

     (Q)     SCHEDULES  -  The  Company  or  its  counsel shall provide CIT with
             ---------
schedules of: (a) any of the Parent's or the Company's or their subsidiaries (i)
Trademarks,  (ii)  Patents,  and (iii) Copyrights, as applicable and all in such
detail as to provide appropriate recording information with respect thereto, (b)
any tradenames, (c) monthly rental payments for any leased premises or any other
premises  where  any  Collateral  may be stored or processed,  and (d) Permitted
Liens,  all  of  the  foregoing  in  form  and  substance  satisfactory  to CIT.

     (R)     CIT  COMMITMENT  LETTER - The Company shall have fully complied, to
             -----------------------
the  reasonable satisfaction of CIT, with all of the terms and conditions of the
CIT  Commitment  Letter.


Upon  the  execution of this Financing Agreement and the initial disbursement of
loans  hereunder,  all  of the above Conditions Precedent shall have been deemed
satisfied  except  as  otherwise set forth hereinabove or as the Company and CIT
shall  otherwise  agree  in  writing.

     2.2     CONDITIONS  TO  EACH  EXTENSION  OF  CREDIT
             -------------------------------------------

     Except  to  the extent expressly set forth in this Financing Agreement, the
agreement  of  CIT to make any extension of credit requested to be made by it to
the  Company on any date (including without limitation, the initial extension of
credit)  is  subject  to the satisfaction of the following conditions precedent:

(A)     REPRESENTATIONS  AND  WARRANTIES  - Each of the representations and
        --------------------------------
warranties  made by the Company in or pursuant to this Financing Agreement shall
be  true  and correct in all material respects on and as of such date as if made
on  and  as  of  such  date.

(B)     NO  DEFAULT  - No Default or Event of Default shall have occurred and be
        -----------
continuing  on  such  date  or  after  giving  effect to the extension of credit
requested  to  be  made  on  such  date.

(C)     BORROWING  BASE - Except as may be otherwise agreed to from time to time
        ---------------
by  CIT  and  the  Company  in  writing, after giving effect to the extension of
credit  requested  to  be  made  by  the  Company  on  such  date, the aggregate
outstanding  balance of the Revolving Loans owing by the Company will not exceed
the  lesser  of  (i)  the  Revolving  Line of Credit or (ii) the Borrowing Base.

Each  borrowing  by  the Company hereunder shall constitute a representation and
warranty  by the Company as of the date of such loan or advance that each of the
representations,  warranties  and covenants contained in the Financing Agreement
have  been  satisfied  and  are  true and correct, except as the Company and CIT
shall  otherwise  agree  herein  or  in  a  separate  writing.

SECTIONSECTION  3.   REVOLVING  LOANS
                     ----------------
3.   REVOLVING  LOANS
---------------------
     3.1  CIT  agrees,  subject  to  the  terms and conditions of this Financing
Agreement,  from  time  to  time  (but  subject  to  CIT's  right  to  make
"Overadvances"),  to make loans and advances to the Company on a revolving basis
(i.e.  subject  to  the  limitations  set  forth herein, the Company may borrow,
repay  and  re-borrow  Revolving  Loans).   Such requests for loans and advances
shall  be in amounts not to exceed the lesser of (a) the Availability or (b) the
Revolving  Line  of Credit. All requests for loans and advances must be received
by an officer of CIT no later than 1:00 p.m., New York time, of the Business Day
on  which  any  such Chase Bank Rate Loans and advances are required. Should CIT
for  any  reason honor requests for Overadvances, any such Overadvances shall be
made  in  CIT's  sole  discretion and subject to any additional terms, CIT deems
necessary.

     3.2   In  furtherance of the continuing assignment and security interest in
the  Company's  Accounts  and  Inventory, the Company will, upon the creation of
Accounts and purchase or acquisition of Inventory, execute and deliver to CIT in
such form and manner as CIT may reasonably require, solely for CIT's convenience
in  maintaining  records  of Collateral, such confirmatory schedules of Accounts
and  Inventory  as  CIT  may  reasonably  request  from time to time, including,
without  limitation,  daily  schedules  of  Accounts  and  weekly  schedules  of
Inventory,  all  in  form  and  substance  satisfactory  to  CIT, and such other
appropriate  reports  designating,  identifying  and describing the Accounts and
Inventory  as  CIT  may  reasonably  request,  and provided further that CIT may
request  any  such  information  more  frequently,  from  time to time, upon its
reasonable  prior  request.   In  addition,  the  Company shall provide CIT with
copies of agreements with, or purchase orders from, the Company's customers, and
copies  of  invoices  to customers, proof of shipment or delivery, access to its
computers,  electronic  media  and  software  programs  associated  therewith
(including  any  electronic  records,  contracts  and signatures) and such other
documentation  and information relating to said Accounts and other Collateral as
CIT  may  reasonably require.   Failure to provide CIT with any of the foregoing
shall  in  no  way  affect,  diminish,  modify  or  otherwise limit the security
interests  granted  herein.   The  Company  hereby  authorizes CIT to regard the
Company's  printed  name  or  rubber  stamp signature on assignment schedules or
invoices  as  the  equivalent  of  a  manual  signature  by one of the Company's
authorized  officers  or  agents.

     3.3  The  Company  hereby represents and warrants that:  each Trade Account
Receivable is based on an actual and bona fide sale and delivery of Inventory or
rendition  of  services to customers, made by the Company in the ordinary course
of  its  business;  the  Inventory being sold, and the Trade Accounts Receivable
created,  are the exclusive property of the Company and are not and shall not be
subject  to any lien, consignment arrangement, encumbrance, security interest or
financing  statement  whatsoever,  other  than  the  Permitted Encumbrances; the
invoices  evidencing  such  Trade  Accounts  Receivable  are  in the name of the
Company;  and  the  customers  of  the  Company  have  accepted the Inventory or
services,  owe  and are obligated to pay the full amounts stated in the invoices
according  to  their  terms,  without  dispute, offset, defense, counterclaim or
contra,  except for disputes and other matters arising in the ordinary course of
business  with  respect  to which the Company has complied with the notification
requirements  of  Paragraph 3.5 of this Section 3.   The Company confirms to CIT
that any and all Taxes or fees relating to its business, its sales, the Accounts
or Inventory relating thereto, are its sole responsibility and that same will be
paid  by  the  Company  when  due, subject to Paragraph 7.6 of Section 7 of this
Financing  Agreement, and that none of said Taxes or fees represent a lien on or
claim against the Accounts.   The Company hereby further represents and warrants
that  it  shall  not acquire any Inventory on a consignment basis, nor co-mingle
its  Inventory with any of its customers or any other person, including pursuant
to  any bill and hold sale or otherwise, and that its Inventory is marketable to
its  customers  in  the ordinary course of business of the Company, except as it
may  otherwise  report  in  writing to CIT pursuant to Paragraph 3.5 hereof from
time  to  time.  The  Company also warrants and represents that it is a duly and
validly existing corporation and is qualified in all states where the failure to
so  qualify  would  have an adverse effect on the business of the Company or the
ability  of  the  Company  to  enforce collection of Accounts due from customers
residing  in that state.   The Company agrees to maintain such books and records
regarding  Accounts  and Inventory as CIT may reasonably require and agrees that
the books and records of the Company will reflect CIT's interest in the Accounts
and  Inventory.   All  of the books and records of the Company will be available
to CIT at normal business hours, including any records handled or maintained for
the  Company  by  any  other  company  or  entity.

      3.4   Until  CITBC  has  advised  the  Company  to  the contrary after the
occurrence  of  an  Event of Default, the Company, at its expense, will enforce,
collect  and receive all amounts owing on the Accounts in the ordinary course of
its  business  and  any  proceeds  it  so receives shall be subject to the terms
hereof,  and  held  on  behalf  of  and  in  trust for CIT. Such privilege shall
terminate  at  the  election of CIT, upon the occurrence of an Event of Default.
Any  checks, cash, credit card sales and receipts, notes or other instruments or
property  received  by  the  Company  with  respect to any Collateral, including
Accounts,  shall  be  held  by  the  Company in trust for CIT, separate from the
Company's  own  property  and funds, and promptly turned over to CIT with proper
assignments  or endorsements by deposit to the Depository Accounts.  The Company
shall: (i) indicate on all of its invoices that funds should be delivered to and
deposited  in  a  Depository  Account; (ii) direct all of its account debtors to
deposit  any  and all proceeds of Collateral into the Depository Accounts; (iii)
irrevocably  authorize and direct any banks which maintain the Company's initial
receipt  of cash, checks and other items to promptly wire transfer all available
funds  to a Depository Account; and (iv) advise all such banks of CIT's security
interest in such funds.  The Company shall provide CIT with prior written notice
of any and all deposit accounts opened or to be opened subsequent to the Closing
Date.  Subject  to  Collection  Days,  all amounts received by CIT in payment of
Accounts  will  be credited to the Revolving Loan Account when CIT is advised by
its  bank of its receipt of "collected funds" at CIT's bank account in New York,
New  York  on the Business Day of such advise if advised no later than 1:00 p.m.
EST  or  on the next succeeding Business Day if so advised after 1:00 PM EST. No
checks,  drafts  or  other  instrument  received  by  CIT shall constitute final
payment  to  CIT unless and until such instruments have actually been collected.

     3.5  The  Company  agrees  to  notify CIT: (a) of any matters affecting the
value,  enforceability  or  collectibility  of  any  Account and of all customer
disputes,  offsets,  defenses,  counterclaims,  returns,  rejections  and  all
reclaimed  or repossessed merchandise or goods, and of any adverse effect in the
value  of  its  Inventory,  in  its  daily  and  weekly  collateral  reports (as
applicable)  provided  to  CIT  hereunder,  in such detail and format as CIT may
reasonably require from time to time; and (b) promptly of any such matters which
(i)  are  material,  as  a  whole, to the Accounts and/or the Inventory, or (ii)
which  adversely  affect  the  value of any Account or Inventory in an amount of
$25,000  or  more.  The  Company agrees to issue credit memoranda promptly (with
duplicates  to  be immediately forwarded to CIT, upon its prior written request)
upon  accepting returns or granting allowances.  Upon the occurrence of an Event
of  Default  (which is not waived in writing by CIT) and on notice from CIT, the
Company  agrees that all returned, reclaimed or repossessed merchandise or goods
shall be set aside by the Company, marked with CIT's name (as secured party) and
held  by  the  Company  for  CIT's  account.

     3.6  CIT shall maintain a Revolving Loan Account on its books  in which the
Company will be charged with all loans and advances made by CIT to it or for its
account,  and  with any other Obligations, including any and all costs, expenses
and  reasonable  attorney's  fees  which  CIT  may  incur in connection with the
exercise by or for CIT of any of the rights or powers herein conferred upon CIT,
or  in  the  prosecution  or  defense  of any action or proceeding to enforce or
protect any rights of CIT in connection with this Financing Agreement, the other
Loan Documents or the Collateral assigned hereunder, or any Obligations owing by
the  Company.   The  Company  will  be credited with all amounts received by CIT
from  the  Company or from others for the Company's account, including, as above
set  forth, all amounts received by CIT in payment of Accounts, and such amounts
will  be applied to payment of the Obligations as set forth herein.  In no event
shall  prior  recourse  to  any  Accounts or other security granted to or by the
Company  be  a  prerequisite to CIT's right to demand payment of any Obligation.
Further,  it  is  understood  that  CIT  shall  have no obligation whatsoever to
perform in any respect any of the Company's contracts or obligations relating to
the  Accounts.

     3.7  After  the  end  of  each month, CIT shall promptly send the Company a
statement  showing  the  accounting  for  the charges, loans, advances and other
transactions  occurring  between  CIT  and  the Company during that month.   The
monthly  statements  shall  be  deemed  correct and binding upon the Company and
shall  constitute  an  account  stated  between  the  Company and CIT unless CIT
receives  a  written  statement of the exceptions within thirty (30) days of the
date  of  the  monthly  statement.

     3.8  In  the  event that any requested advance exceeds Availability or that
(a) the outstanding balance of Revolving Loans exceeds (b)(i) the Borrowing Base
or  (ii)  the Revolving Line of Credit, any such nonconsensual Overadvance shall
be  due  and  payable  to  CIT  immediately  upon  CIT's  demand  therefor.

SECTION  4.   Term  Loan
----------

     4.1  The  Company hereby agrees to execute and deliver to CIT the Term Loan
Promissory  Note,  to  evidence  the  Term  Loan  to  be  extended  by  CIT.

     4.2  Upon  receipt  of such Term Loan Promissory Note, CIT hereby agrees to
extend  to  the  Company  the  Term  Loan.

     4.3  The  principal  amount  of the Term Loan shall be repaid to CIT by the
Company  by  twelve (12) equal monthly principal installments of $8,333.34 each,
whereof  the  first  installment shall be due and payable on May 1, 2002 and the
subsequent  installments  shall  be due and payable on the first Business Day of
each  month  thereafter  until  paid  in  full.

     4.4  In  the  event  this  Financing  Agreement  or  the  Line of Credit is
terminated by either CIT or the Company for any reason whatsoever, the Term Loan
shall  become  due  and  payable  on  the  effective  date  of  such termination
notwithstanding  any  provision  to the contrary in the Promissory Notes or this
Financing  Agreement.

      4.5  The  Company  may  prepay  at any time, at its option, in whole or in
part,  the  Term  Loan, provided that on each such prepayment, the Company shall
pay accrued interest on the principal so prepaid to the date of such prepayment,
if  any.

     4.6  Each  prepayment  (whether voluntary or mandatory) shall be applied to
the  then  last  maturing  installments  of  principal  of  the  Term  Loan.

      4.7  The  Company  hereby  authorizes  CIT  to  charge  its Revolving Loan
Account  with  the  amount of all Obligations owing under this Section 4 as such
amounts  become  due.   The  Company  confirms that any charges which CIT may so
make  to  its  Revolving  Loan  Account  as  herein  provided will be made as an
accommodation  to  the  Company  and  solely  at  CIT's  discretion.


SECTION  5.   Intentionally  Omitted


SECTION  6.   Collateral
              ----------
     6.1  As  security  for  the  prompt payment in full of all Obligations, the
Company  hereby  pledges  and  grants to CIT a continuing general lien upon, and
security  interest  in,  all  of  its:

     (A)  Accounts;

     (B)  Inventory;

     (C)  General  Intangibles;

     (D)  Documents  of  Title;

     (E)  Other  Collateral  and  Investment  Property;  and

     (F)   Equipment.


     6.2  The  security  interests granted hereunder shall extend and attach to:

     (A)  All  Collateral  which is owned by the Company or in which the Company
has any interest, whether held by the Company or others for its account, and, if
any Collateral is Equipment, whether the Company's interest in such Equipment is
as  owner,  finance  lessee  or  conditional  vendee;

     (B)  All  Equipment,  whether  the  same  constitutes  personal property or
fixtures,  including,  but without limiting the generality of the foregoing, all
dies,  jigs,  tools, benches, molds, tables, accretions, component parts thereof
and additions thereto, as well as all accessories, motors, engines and auxiliary
parts  used  in  connection  with,  or  attached  to,  the  Equipment;  and

     (C)  All Inventory and any portion thereof which may be returned, rejected,
reclaimed  or  repossessed  by  either  CIT  or  the  Company from the Company's
customers,  as well as to all supplies, goods, incidentals, packaging materials,
labels  and  any  other items which contribute to the finished goods or products
manufactured  or processed by the Company, or to the sale, promotion or shipment
thereof.

     6.3  The  Company  agrees  to safeguard, protect and hold all Inventory for
CIT's  account  and make no disposition thereof except in the ordinary course of
its  business  of  the Company, as herein provided.   The Company represents and
warrants that Inventory will be sold and shipped by the Company to its customers
only  in  the  ordinary  course of the Company's business, and then only on open
account  and  on terms currently being extended by the Company to its customers,
provided  that,  absent  the prior written consent of CIT, the Company shall not
sell  Inventory  on a consignment basis nor retain any lien or security interest
in  any  sold  Inventory.  Upon  the  sale,  exchange,  or  other disposition of
Inventory,  as  herein provided, the security interest in the Inventory provided
for  herein  shall, without break in continuity and without further formality or
act, continue in, and attach to, all proceeds, including any instruments for the
payment  of  money,  Trade  Accounts  Receivable,  documents  of title, shipping
documents,  chattel paper and all other cash and non-cash proceeds of such sale,
exchange  or  disposition.   As to any such sale, exchange or other disposition,
CIT  shall  have  all  of  the rights of an unpaid seller, including stoppage in
transit,  replevin,  rescission  and  reclamation.  The Company hereby agrees to
immediately  forward  any  and  all  proceeds  of  Collateral  to the Depository
Account, and to hold any such proceeds (including any notes and instruments), in
trust  for  CIT pending delivery to CIT. Irrespective of CIT's perfection status
in  any  and all of the General Intangibles, including, without limitations, any
Patents,  Trademarks,  Copyrights  or licenses with respect thereto, the Company
hereby  irrevocably  grants  CIT  a  royalty  free license to sell, or otherwise
dispose  or  transfer,  in  accordance with Paragraph 10.3 of Section 10 of this
Financing  Agreement,  and  the applicable terms hereof, of any of the Inventory
upon  the occurrence of an Event of Default which has not been waived in writing
by  CIT.

     6.4  The  Company  agrees at its own cost and expense to keep the Equipment
in  as  good  and  substantial repair and condition as the same is now or at the
time  the  lien  and  security  interest  granted  herein  shall attach thereto,
reasonable  wear  and tear excepted, making any and all repairs and replacements
when  and  where  necessary.   The Company also agrees to safeguard, protect and
hold  all  Equipment  in  accordance with the terms hereof and subject to  CIT's
security  interest.  Any  sale,  exchange  or other disposition of any Equipment
shall  be  made  by  the Company only with CIT's prior written consent, provided
that  the Company may, in the ordinary course of its business, sell, exchange or
otherwise  dispose of obsolete or surplus Equipment provided, however, that: (a)
the  then  value  of  the  Equipment  so disposed of in any Fiscal Year does not
exceed  $10,000  in  the  aggregate;  and  (b) the proceeds of any such sales or
dispositions  shall  be  held  in  trust  by  the  Company  for CIT and shall be
immediately  delivered  to CIT by deposit to the Depository Account, except that
the  Company  may  retain  and  use  such proceeds (not to exceed $10,000 and on
notice  to  CIT)  to  purchase forthwith replacement Equipment which the Company
determines  in  its  reasonable  business judgment to have a collateral value at
least equal to the Equipment so disposed of or sold; provided, however, that the
aforesaid right shall automatically cease upon the occurrence of a Default or an
Event  of  Default  which  is  not  waived  in  writing  by CIT.  Upon the sale,
exchange,  or  other  disposition  of  the  Equipment,  as  herein provided, the
security  interest  provided  for  herein shall, without break in continuity and
without  further  formality  or  act,  continue in, and attach to, all proceeds,
including  any  instruments  for  the  payment  of money, Accounts, documents of
title,  shipping  documents,  chattel  paper  and  all  other  cash and non-cash
proceeds of such sales, exchange or disposition.   As to any such sale, exchange
or  other  disposition,  CIT  shall  have all of the rights of an unpaid seller,
including  stoppage  in  transit,  replevin,  rescission  and  reclamation.

     6.5  The  rights  and  security  interests  granted to CIT hereunder are to
continue  in  full  force  and  effect,  notwithstanding the termination of this
Financing Agreement or the fact that the Revolving Loan Account may from time to
time be temporarily in a credit position, until the final payment in full to CIT
of  all  Obligations and the termination of this Financing Agreement. Any delay,
or  omission by CIT to exercise any right hereunder shall not be deemed a waiver
thereof,  or  be deemed a waiver of any other right, unless such waiver shall be
in  writing  and  signed  by  CIT.  A  waiver  on  any one occasion shall not be
construed as a bar to, or waiver of, any right or remedy on any future occasion.

     6.6  Notwithstanding  CIT's  security interest in the Collateral and to the
extent  that  the  Obligations  are  now  or  hereafter secured by any assets or
property  other  than the Collateral or by the guarantee, endorsement, assets or
property of any other person, CIT shall have the right in its sole discretion to
determine  which  rights, liens, security interests or remedies CIT shall at any
time  pursue,  foreclose upon, relinquish, subordinate, modify or take any other
action  with  respect to, without in any way modifying or affecting any of them,
or  any  of  CIT's  rights  hereunder.

     6.7  Any  balances  to  the credit of the Company and any other property or
assets  of the Company in the possession or control of CIT may be held by CIT as
security  for  any  Obligations  and applied in whole or partial satisfaction of
such  Obligations  when  due.   The liens and security interests granted herein,
and  any other lien or security interest CIT may have in any other assets of the
Company,  shall  secure  payment  and performance of all now existing and future
Obligations.   CIT may in its discretion charge any or all of the Obligations to
the  Revolving  Loan  Account  when  due.

     6.8  The  Company  possesses  all  General  Intangibles  and rights thereto
necessary  to  conduct  its business as conducted as of the Closing Date and the
Company  shall  maintain  its  rights in, and the value of, the foregoing in the
ordinary course of its business, including, without limitation, by making timely
payment  with  respect  to  any  applicable  licensed  rights. The Company shall
deliver to CIT, and/or shall cause the appropriate party to deliver to CIT, from
time  to  time  such  pledge  or  security  agreements  with  respect to General
Intangibles  (now  or hereafter acquired) of the Company and its subsidiaries as
CIT  shall  require  to  obtain valid first liens thereon. In furtherance of the
foregoing,  the  Company  shall  provide  timely notice to CIT of any additional
Patents,  Trademarks,  tradenames, service marks, Copyrights, brand names, trade
names,  logos and other trade designations acquired or applied for subsequent to
the  Closing  Date  and  the Company shall execute such documentation as CIT may
reasonably  require  to  obtain and perfect its lien thereon. The Company hereby
confirms  that  it  shall  deliver,  or cause to be delivered, any pledged stock
issued  subsequent  to the Closing Date to CIT in accordance with the applicable
terms  of  the  Pledge Agreement and prior to such delivery, shall hold any such
stock  in  trust  for  CIT.  The  Company  hereby  irrevocably  grants  to CIT a
royalty-free,  non-exclusive  license  in  the  General  Intangibles,  including
tradenames, Trademarks, Copyrights, Patents, licenses, and any other proprietary
and  intellectual  property  rights and any and all right, title and interest in
any  of  the foregoing, for the sole purpose, upon the occurrence of an Event of
Default,  of  the  right  to:  (i)  advertise  for sale and sell or transfer any
Inventory  bearing  any  of  the  General  Intangibles, and (ii) make, assemble,
prepare  for  sale  or  complete,  or  cause others to do so, any applicable raw
materials  or Inventory bearing any of the General Intangibles, including use of
the  Equipment  and Real Estate for the purpose of completing the manufacture of
unfinished  goods,  raw  materials  or work-in-process comprising Inventory, and
apply  the  proceeds  thereof  to  the Obligations hereunder, all as further set
forth  in this Financing Agreement and irrespective of CIT's lien and perfection
in  any  General  Intangibles.


SECTION  7.   Representations,  Warranties  and  Covenants
              --------------------------------------------
     7.1  The  Company  warrants  and  represents  that:  (i)  Schedule 1 hereto
correctly  and  completely  sets forth the Company's (A) chief executive office,
(B)  Collateral  locations,  (C)  tradenames , and (D) all the other information
listed  on  said  Schedule;  (ii)  except  for the Permitted Encumbrances, after
filing  of  financing  statements  in the applicable filing clerks office at the
locations  set  forth  in  Schedule 1, this Financing Agreement creates a valid,
perfected  and  first  priority  security  interest  in  the  Collateral and the
security  interests  granted herein constitute and shall at all times constitute
the  first  and  only  liens  on  the Collateral; (iii) except for the Permitted
Encumbrances,  the  Company is, or will be, at the time additional Collateral is
acquired  by it, the absolute owner of the Collateral with full right to pledge,
sell,  consign,  transfer and create a security interest therein, free and clear
of any and all claims or liens in favor of others; (iv) the Company will, at its
expense, forever warrant and, at CIT's request, defend the same from any and all
claims  and  demands  of  any  other  person  other than a holder of a Permitted
Encumbrance; (v) the Company will not grant, create or permit to exist, any lien
upon, or security interest in, the Collateral, or any proceeds thereof, in favor
of  any  other  person other than the holders of the Permitted Encumbrances; and
that the Equipment does not comprise a part of the Inventory of the Company; and
(vi)  the  Equipment is and will only be used by the Company in its business and
will  not  be held for sale or lease, or removed from its premises, or otherwise
disposed  of  by  the  Company  except  as otherwise permitted in this Financing
Agreement.

     7.2  The  Company  agrees  to  maintain books and records pertaining to the
Collateral in accordance with GAAP and in such additional detail, form and scope
as CIT shall reasonably require.   The Company agrees that CIT or its agents may
enter  upon the Company's premises at any time during normal business hours, and
from  time  to  time  in  its  reasonable  business judgment, for the purpose of
inspecting  the  Collateral  and  any  and  all  records pertaining thereto. The
Company  irrevocably authorizes all accountants and third parties (excluding its
legal  counsel)  to  disclose  and  deliver  directly  to  CIT, at the Company's
expense,  all financial statements and information, books, records, work papers,
management  reports  and  other  information  generated  by  them  or  in  their
possession  regarding  the  Company and/or the Collateral. The Company agrees to
afford  CIT  thirty (30) days prior written notice of any change in the location
of  any  Collateral,  other  than to locations, that as of the Closing Date, are
known to CIT and at which CIT has filed financing statements and otherwise fully
perfected  its  liens  thereon.  The  Company is also to advise CIT promptly, in
sufficient detail, of any material adverse change relating to the type, quantity
or  quality  of  the  Collateral  or  on  the  security interests granted to CIT
therein.

     7.3  The  Company  agrees to:  (a) execute and deliver to CIT, from time to
time,  solely  for  CIT's convenience in maintaining a record of the Collateral,
such  written  statements,  and  schedules  as  CIT  may  reasonably  require,
designating,  identifying  or  describing  the  Collateral;  (b) provide CIT, on
request,  with  an  appraisal  of  the Inventory which appraisal shall be at the
Company's expense and otherwise acceptable to CIT; and (c) provide CIT, on CIT's
reasonable  request, but no more frequently than semi-annually, an environmental
audit  report  on  its  leasehold  and  fee  interests,  and  its waste disposal
practices,  which  report  shall  be  (i) at the Company's expense and otherwise
acceptable to CIT and (ii) not disclose or indicate any material liability (real
or  potential)  stemming  from the Company's premises, its operations, its waste
disposal  practices  or waste disposal sites used by the Company.  The Company's
failure,  however,  to promptly give CIT such statements, or schedules shall not
affect,  diminish,  modify  or  otherwise  limit CIT's security interests in the
Collateral.

     7.4  The  Company  agrees  to comply with the requirements of all state and
federal  laws  in  order  to  grant  to  CIT  valid and perfected first security
interests  in  the Collateral, subject only to the Permitted Encumbrances.   CIT
is  hereby  authorized  by  the  Company  to  file  (including  pursuant  to the
applicable  terms  of  the  UCC)  from  time  to  time any financing statements,
continuations  or  amendments  covering  the  Collateral.   The  Company  hereby
consents  to  and  ratifies  any  and  all  execution and/or filing of financing
statements  on  or  prior  to  the Closing Date by CIT. The Company agrees to do
whatever  CIT  may reasonably request, from time to time, by way of:  (a) filing
notices  of  liens, financing statements, amendments, renewals and continuations
thereof; (b) cooperating with CIT's agents and employees; (c) keeping Collateral
records;  (d)  transferring  proceeds of Collateral to CIT's possession; and (e)
performing  such  further  acts as CIT may reasonably require in order to effect
the  purposes  of  this  Financing  Agreement  ,  including  but  not limited to
obtaining  control agreements with respect to deposit accounts and/or Investment
Property.

     7.5(A)  The  Company  agrees  to  maintain  insurance  on  the Real Estate,
Equipment  and  Inventory  under such policies of insurance, with such insurance
companies,  in  such reasonable amounts and covering such insurable risks as are
at  all  times  reasonably  satisfactory to CIT.  All policies covering the Real
Estate,  Equipment  and  Inventory  are, subject to the rights of any holders of
Permitted  Encumbrances holding claims senior to CIT, to be made payable to CIT,
in  case  of  loss,  under  a standard non-contributory "mortgagee", "lender" or
"secured  party"  clause  and  are  to  contain such other provisions as CIT may
require  to  fully  protect CIT's interest in the Inventory and Equipment and to
any  payments  to  be  made under such policies.   All original policies or true
copies  thereof  are  to be delivered to CIT, premiums timely paid in accordance
with  the terms of the applicable policies, with the loss payable endorsement in
CIT's  favor, and shall provide for not less than thirty (30) days prior written
notice  to  CIT of the exercise of any right of cancellation.   At the Company's
request, or if the Company fails to maintain such insurance, CIT may arrange for
such  insurance,  but at the Company's expense and without any responsibility on
CIT's part for:  (i) obtaining the insurance, (ii) the solvency of the insurance
companies, (iii) the adequacy of the coverage, or (iv) the collection of claims.
Upon  the  occurrence  of  an Event of Default which is not waived in writing by
CIT,  CIT  shall, subject to the rights of any holders of Permitted Encumbrances
holding  claims  senior  to  CIT, have the sole right, in the name of CIT or the
Company,  to  file  claims under any insurance policies, to receive, receipt and
give acquittance for any payments that may be payable thereunder, and to execute
any  and  all  endorsements,  receipts,  releases, assignments, reassignments or
other  documents  that  may be necessary to effect the collection, compromise or
settlement  of  any  claims  under  any  such  insurance  policies.

     (B)(I)  In  the  event  of  any  loss  or damage by fire or other casualty,
insurance  proceeds  relating  to  Inventory  shall  first  reduce the Company's
Revolving Loan, then the Term Loan. Upon the occurrence of a Default or Event of
Default, such Insurance Proceeds may be applied to the Obligations in such order
as  CIT  may  elect;

     (II)  In  the  event  any part of the Company's Real Estate or Equipment is
damaged  by fire or other casualty and the Insurance Proceeds for such damage or
other  casualty  is less than or equal to $100,000.00, CIT shall, subject to the
rights  of  any  holders of Permitted Encumbrances holding claims senior to CIT,
promptly  apply such Proceeds to reduce the Company's outstanding balance in the
Revolving  Loan  Account.  Upon the occurrence of a Default or Event of default,
CIT  may  apply  Insurance  Proceeds to the Obligations in such manner as it may
deem  advisable  in  its  sole  discretion.  and

     (III)  In  the  event any part of the Company's Real Estate or Equipment is
damaged  by  fire  or other casualty, and the Insurance Proceeds is greater than
$100,000.00,  CIT  may,  subject  to  the  rights  of  any  holders of Permitted
Encumbrances  holding  claims senior to CIT, apply the Insurance Proceeds to the
payment  of  the  Obligations  in  such  manner  and  in  such  order as CIT may
reasonably  elect.

     7.6  The  Company  agrees to pay, when due, all Taxes, including sales
taxes,  assessments,  claims  and other charges lawfully levied or assessed upon
the  Company  or the Collateral unless such Taxes are being diligently contested
in  good  faith  by the Company by appropriate proceedings and adequate reserves
are  established in accordance with GAAP.  Notwithstanding the foregoing, if any
lien shall be filed or claimed thereunder (a) for Taxes due the United States of
America,  or  (b)  which in CIT's opinion might create a valid obligation having
priority  over the rights granted to CIT herein (exclusive of Real Estate), such
lien shall not be deemed to be a Permitted Encumbrance hereunder and the Company
shall  immediately  pay such tax and remove the lien of record.   If the Company
fails  to  do  so  promptly,  then  at  CIT's  election,  CIT  may (i) create an
Availability  Reserve  in such amount as it may deem appropriate in its business
judgment, or (ii) upon the occurrence of a Default or Event of Default, imminent
risk  of  seizure,  filing  of  any  priority  lien,  forfeiture, or sale of the
Collateral,  pay  Taxes on the Company's behalf, and the amount thereof shall be
an  Obligation  secured  hereby  and  due  on  demand.

     7.7  The  Company:  (a)  agrees to comply with all acts, rules, regulations
and  orders  of  any  legislative,  administrative or judicial body or official,
which the failure to comply with would have a material and adverse impact on the
Collateral,  or  any  material part thereof, or on the business or operations of
the Company, provided that the Company may contest any acts, rules, regulations,
orders and directions of such bodies or officials in any reasonable manner which
will  not,  in  CIT's  reasonable opinion, materially and adversely effect CIT's
rights  or  priority  in  the  Collateral;  (b)  agrees  to  comply  with  all
environmental statutes, acts, rules, regulations or orders as presently existing
or  as  adopted  or  amended  in  the  future, applicable to the Collateral, the
ownership  and/or  use of its real property and operation of its business, which
the  failure  to  comply  with  would  have a material and adverse impact on the
Collateral, or any material part thereof, or on the operation of the business of
the  Company; and (c) shall not be deemed to have breached any provision of this
Paragraph  7.7  if  (i)  the  failure  to  comply  with the requirements of this
Paragraph  7.7  resulted  from  good  faith error or innocent omission, (ii) the
Company  promptly  commences  and  diligently pursues a cure of such breach, and
(iii)  such failure is cured within (30) days following the Company's receipt of
notice  of  such failure, or if such cannot in good faith be cured within thirty
(30)  days,  then such breach is cured within a reasonable time frame based upon
the  extent  and  nature  of  the  breach  and the necessary remediation, and in
conformity  with  any  applicable  consent  order,  consensual  agreement  and
applicable  law.

     7.8  Until  termination  of  this  Financing  Agreement  and  payment  and
satisfaction  of  all Obligations due hereunder, the Company agrees that, unless
CIT  shall have otherwise consented in writing, the Company will furnish to CIT:
(a) within ninety (90) days after the end of each Fiscal Year of the Company, an
audited  Consolidated Balance Sheet, with a Consolidating Balance Sheet attached
thereto,  as  at the close of such year, and statements of profit and loss, cash
flow  and  reconciliation of surplus of Parent, the Company and all subsidiaries
of each for such year, audited by independent public accountants selected by the
Company  and  satisfactory  to  CIT; (b) within sixty (60) days after the end of
each Fiscal Quarter a Consolidated Balance Sheet and Consolidating Balance Sheet
as  at  the  end of such period and statements of profit and loss, cash flow and
surplus  of  Parent,  the  Company and all subsidiaries of each, certified by an
authorized  financial  or  accounting  officer of the Company; (c) within thirty
(30)  days after the end of each (i) fiscal year end and each fiscal quarter, as
applicable,  copies  of  10K's  and 10Q's, and (ii) month a Consolidated Balance
Sheet  as at the end of such period and statements of profit and loss, cash flow
and surplus of the Company and all subsidiaries for such period, certified by an
authorized  financial  or  accounting  officer of the Company; (d) within thirty
(30)  day's  prior  to  each  fiscal  year  end,  detailed  monthly  cash  flow
projections,  in form and substance satisfactory to CIT; (e) without duplication
of  the  foregoing,  promptly  and  in  any  event within five (5) business days
thereof,  copies of all material filings with the SEC, relating to Parent or the
Company  or  any  of their subsidiaries; and (f) from time to time, such further
information  regarding  the  business  affairs  and  financial  condition of the
Parent,  the  Company  and/or  any  subsidiaries  thereof  as CIT may reasonably
request,  including, without limitation (i) the accountant's management practice
letter  and  (ii)  periodic  cash  flow projections in form satisfactory to CIT.
Each  financial statement which the Company is required to submit hereunder must
be  accompanied  by  an  officer's  certificate,  signed  by the President, Vice
President, Controller, or Treasurer, pursuant to which any one such officer must
certify  that: (x) the financial statement(s) fairly and accurately represent(s)
the  Company's  financial  condition  at  the  end  of the particular accounting
period,  as  well  as  the  Company's  operating  results during such accounting
period,  subject  to  year-end  audit adjustments; and (y) during the particular
accounting  period: (A) there has been no Default or Event of Default under this
Financing  Agreement,  provided, however, that if any such officer has knowledge
that  any such Default or Event of Default, has occurred during such period, the
existence  of  and  a  detailed  description  of same shall be set forth in such
officer's  certificate;  (B)  the  Company  has  not  received  any  notice  of
cancellation  with  respect  to its property insurance policies; (C) the Company
has  not  received  any notice that could result in a material adverse effect on
the  value  of the Collateral taken as a whole; and (D) the exhibits attached to
such  financial statement(s) constitute detailed calculations showing compliance
with  all  financial  covenants  contained  in  this  Financing  Agreement.

     7.9  Until  termination  of  the  Financing  Agreement  and  payment  and
satisfaction  of all Obligations hereunder, the Company agrees that, without the
prior  written  consent of CIT, except as otherwise herein provided, the Company
will  not:

(A)     Mortgage, assign, pledge, transfer or otherwise permit any lien, charge,
security  interest,  encumbrance or judgment, (whether as a result of a purchase
money  or title retention transaction, or other security interest, or otherwise)
to  exist  on  any of  the Company's Collateral or any other assets, whether now
owned  or  hereafter  acquired,  except  for  the  Permitted  Encumbrances;

(B)     Incur  or create any Indebtedness other than the Permitted Indebtedness,
provided  that  absent  the  occurrence of a Default or an Event of Default, the
Company  may,  in the ordinary course of its business and on fair and reasonable
terms,  incur  unsecured Indebtedness in an amount not to exceed $100,000 in the
aggregate  during  the  term  of  this  Financing  Agreement;

(C)     Sell,  lease,  assign,  transfer or otherwise dispose of (i) Collateral,
except  as otherwise specifically permitted by this Financing Agreement, or (ii)
either all or substantially all of the Company's assets, which do not constitute
Collateral;

(D)     Merge,  consolidate  or  otherwise  alter  or modify its corporate name,
principal  place  of  business,  structure,  or  existence,  re-incorporate  or
re-organize,  or  enter  into  or engage in any operation or activity materially
different  from  that  presently being conducted by the Company, except that the
Company may change its corporate name or address; provided that: (i) the Company
shall  give  CIT  thirty  (30)  days  prior  written notice thereof and (ii) the
Company  shall  execute  and  deliver,  prior to or simultaneously with any such
action,  any  and  all  documents and agreements requested by CIT to confirm the
continuation and preservation of all security interests and liens granted to CIT
hereunder;

(E)     Assume,  guarantee,  endorse,  or  otherwise  become  liable  upon  the
obligations  of  any  person,  firm,  entity  or  corporation,  except  by  the
endorsement  of  negotiable  instruments  for  deposit  or collection or similar
transactions  in  the  ordinary  course  of  business;

(F)     Declare  or  pay  any  dividend  or  distributions  of  any  kind on, or
purchase,  acquire,  redeem  or  retire,  any  of  the  capital  stock or equity
interest,  of any class whatsoever, whether now or hereafter outstanding, except
that  the  Company may declare and pay dividends or distributions on its capital
stock  in  an  amount sufficient to enable the Parent to pay income or franchise
Taxes  of  the Company due as a result of the filing of a consolidated, combined
or  unitary  tax  return  in  which  the operations of the Company are included;
provided  that,  in  any  instance  under subparagraph (f) a Default or Event of
Default  has  occurred  hereunder,  (y)  after giving effect to such payment, no
Default  and/or  Event  of Default has occurred or would occur hereunder and (z)
the  Company  has  sufficient Working Capital to pay its debts as they come due;

(G)     Make  any  advance  or  loan to, or any investment in, any firm, entity,
person  or  corporation,  or purchase or acquire all or substantially all of the
stock  or  assets  of  any  entity,  person  or  corporation;  or

(H)     Pay  any  management,  consulting  or  other similar fees to any person,
corporation  or other entity affiliated with the Company, provided that,  absent
the  occurrence  of  a  Default  or an Event of Default, the Company may, in the
ordinary  course  of its business, pay consulting fees and similar fees, per the
terms  of  the applicable agreements as in effect as of the Closing Date, to (i)
Dutch A&A for product marketing and engineering management services, and (ii) to
the  president  of the Company pursuant to and in accordance with his consulting
agreement.

     7.10  Until  termination  of  the  Financing  Agreement  and  payment  and
satisfaction  in  full  of  all  Obligations  hereunder,  the  Company  shall:

     (A)  without  the  prior  written  consent  of  CIT,  the Company will not:

     (i)  enter  into  any  Operating  Lease  if after giving effect thereto the
aggregate obligations with respect to Operating Leases of the Company during any
Fiscal  Year  would  exceed  $75,000.00;
                              ------
     (ii)  contract  for,  purchase,  make expenditures for, lease pursuant to a
Capital  Lease  or  otherwise  incur  obligations  with  respect  to  Capital
Expenditures  (whether  subject  to a security interest or otherwise) during any
period  below in the aggregate amount in excess of the amount of $100,000.00 for
the  Fiscal  Year  ending  December  31,  2002,  and for each Fiscal Year ending
thereafter.


     7.11  The Company agrees to advise CIT in writing of:  (a) all expenditures
(actual  or  anticipated)  in  excess  of  $150,000.00  from the budgeted amount
therefor  in  any Fiscal Year for (i) environmental clean-up, (ii) environmental
compliance or (iii) environmental testing and the impact of said expenses on the
Company's  Working  Capital;  and  (b) any notices the Company receives from any
local,  state  or  federal  authority  advising the Company of any environmental
liability  (real  or  potential)  stemming  from  the  Company's operations, its
premises,  its  waste  disposal  practices,  or waste disposal sites used by the
Company  and  to  provide  CIT  with  copies of all such notices if so required.

     7.12  (i)  The Company hereby agrees to indemnify and hold harmless CIT and
its  officers,  directors, employees, attorneys and agents (each an "Indemnified
Party")  from,  and  holds  each  of  them harmless against, any and all losses,
liabilities,  obligations,  claims,  actions,  damages,  costs  and  expenses
(including  attorney's  fees)  and  any  payments  made  by  CIT pursuant to any
indemnity  provided  by  CIT  with  respect to or to which any Indemnified Party
could  be  subject  insofar  as  such  losses, liabilities, obligations, claims,
actions,  damages,  costs,  fees or expenses with respect to the Loan Documents,
including  without  limitation  those which may arise from or relate to: (a) the
Depository  Account,  the  Blocked  Accounts,  the  lockbox  and/or  any  other
depository  account  and/or the agreements executed in connection therewith; and
(b)  any  and  all  claims  or  expenses asserted against CIT as a result of any
environmental  pollution,  hazardous material or environmental clean-up relating
to  the  Real  Estate;  or any claim or expense which results from the Company's
operations  (including,  but  not  limited  to,  the Company's off-site disposal
practices)  and  use  of  the Real Estate, which CIT may sustain or incur (other
than solely as a result of the physical actions of CIT on the Company's premises
which  are  determined to constitute gross negligence or willful misconduct by a
court  of  competent  jurisdiction),  all  whether through the alleged or actual
negligence  of  such person or otherwise, except and to the extent that the same
results  solely  and directly from the gross negligence or willful misconduct of
such  Indemnified  Party as determined by a court of competent jurisdiction. The
Company  hereby  agrees  that  this  indemnity shall survive termination of this
Financing  Agreement,  as  well  as  payments  of  Obligations  which may be due
hereunder.  CIT  may, in its sole business judgment, establish such Availability
Reserves  with  respect thereto as it may deem advisable under the circumstances
and,  upon  any  termination hereof, hold such reserves as cash reserves for any
such  contingent  liabilities.

(ii)  Without  limiting  the  foregoing,  the  Company hereby agrees as follows:

     From  time  to  time,  CIT  may  assist  the  Company in converting foreign
currency  and  entering  into  foreign  exchange transactions, including without
limitation  receipt  of  payment  on  Accounts  from foreign account debtors and
conversion of foreign currency with respect  thereto into United States Dollars.
These  arrangements  shall be handled by CIT subject to the terms and conditions
set  forth  below.

A.     The  Company  confirms  its understanding that CIT may incur expenses and
obligations  to  banks  processing  any  such  foreign  currency  conversion
transactions or other foreign exchange transactions. Any indebtedness, liability
or  obligation  of  any  sort  whatsoever,  however  arising, whether present or
future, fixed or contingent, secured or unsecured, due or to become due, paid or
incurred,  arising  or  incurred  by  CIT  in  connection with any such currency
conversion  or  foreign  exchange  transactions  shall  be  deemed  Obligations
hereunder  and  shall  be incurred solely as an accommodation to the Company and
for  the Company's sole expense and account.  Obligations shall include, without
being  limited  to:  all  amounts  due  or  which  may  become  due  under  such
transactions;  all amounts charged or chargeable to the Company or to CIT by the
bank,  financial  institution  or  correspondent bank with or through which such
transactions  are  entered into; any other applicable bank charges, and any fees
and  commissions,  duties  and  taxes,  costs  of  insurance, and all such other
charges  and  expenses  which  may pertain either directly or indirectly to such
transactions.  CIT  shall  have  the  right, at any time to charge the Company's
account with the amount of any and all such Obligations. Any debit balance which
may exist at any time and from time to time in any deposit accounts with respect
to  the  Company or in which payments of the Company's Accounts may be received,
shall  be  repayable  on demand and shall incur interest at the rate provided in
this  Financing  Agreement  per  paragraph  8.1.

B.     All  Obligations  under  this Financing Agreement are to be repaid to CIT
solely  in United States currency and shall be credited to the Company's account
only  upon  receipt  by  CIT  of  good funds, in U.S. Dollars.  In the event CIT
incurs  any  costs or expenses or has any deemed duty to withhold any amount for
taxes  or  otherwise  as  a  result  of  receipt  by CIT of any such payments or
conversion  of  any  foreign  currency  to  U.S.  Dollars, the Company agrees to
gross-up  the  amount  of  any  such  payment  due  hereunder so that the amount
actually  realized  is  equivalent  to  the amount due by the Company under this
Financing  Agreement.

C.     The  Company  hereby  unconditionally  holds harmless and indemnifies CIT
from  any  and  all losses, claims or liabilities arising from any such currency
conversion  or  foreign  exchange  transactions  and all Obligations thereunder,
including  any  such  losses,  liabilities  or claims due to any act or omission
taken  by  any  bank or other financial institution in any such transaction. The
Company's  unconditional  obligation  to  CIT hereunder shall not be modified or
diminished  for any reason or in any manner whatsoever.  The Company agrees that
any  charges made by any such bank shall be deemed conclusive on CIT without any
requirement  for  further  inquiry  and  may  be charged by CIT to the Company's
account.

D.     CIT  shall  not  be  responsible  for:  fluctuations in the value of U.S.
Dollars  or  any  foreign  currency;  the  time  and  place of any conversion of
currency;  the  validity, sufficiency or authenticity of any documents or of any
endorsements  thereon,  even if such documents should in fact prove to be in any
or  all respects invalid, insufficient, fraudulent or forged; the time, place or
manner  in  which  the  such  transactions  are performed; partial or incomplete
performance of any such transactions; any deviation from instructions; or delay,
default,  or  fraud  by  anyone  in  connection  with  any  such  transactions.

E.     The  Company  warrants  and  represents  that  all  currency  transfer,
conversion  and  foreign  exchange transactions will be transacted in accordance
with  all  applicable  foreign  and  domestic  laws and regulations, and are not
prohibited  by  any  such  laws and regulations.  The Company assumes all risks,
liabilities  and  responsibilities  for,  and  agrees  to pay and discharge, all
present  and  future  local, state, federal or foreign taxes, withholding taxes,
duties,  or  levies  applicable  to  any  such  transactions  or  payment of any
Obligations  hereunder.

F.     Any  rights  and  remedies granted to any bank, or duties and obligations
undertaken  by  the  Company  to  any bank pursuant to or in connection with any
deposit  account  or  any  foreign exchange transactions shall be deemed to have
been  granted  to CIT hereunder and apply in all respects to CIT and shall be in
addition  to  any  rights, remedies, duties or obligations contained herein, and
the  Company  hereby holds harmless and indemnifies CIT upon any act or omission
by  CIT  pursuant  hereto.

      7.13  Without the prior written consent of CIT, the Company agrees that it
will  not  enter  into  any  transaction,  including,  without  limitation,  any
purchase,  sale,  lease,  loan  or  exchange  of property with the Parent or any
subsidiary  or  affiliate of either the Company or Parent, provided that, except
as  otherwise  set forth in this Financing Agreement, the Company may enter into
sale  and  service  transactions  in  the  ordinary  course  of its business and
pursuant  to the reasonable requirements of the Company, and upon standard terms
and  conditions  and fair and reasonable terms, no less favorable to the Company
than  the  Company  could obtain in a comparable arms length transaction with an
unrelated  third  party,  provided  further  that no Default or Event of Default
exists  or  will  occur  hereunder  prior to and after giving effect to any such
transaction.

SECTION 8.   Interest, Fees and Expenses
             ---------------------------
     8.1  (A)  Interest  shall be payable monthly as of the end of each month in
an  amount  equal  to the Chase Bank Rate plus two percent (2%) per annum on the
average  of  the  net balances owing by the Company to CIT in the Revolving Loan
Account at the close of each day during such month.   In the event of any change
in  said Chase Bank Rate the rate hereunder shall change, as of the date of such
change.  The  rate  hereunder shall be calculated based on a 360-day year.   CIT
shall  be entitled to charge the Revolving Loan Account at the rate provided for
herein  when  due  until  all Obligations have been paid in full.  The foregoing
rate  is subject to reduction by one quarter of one percent (0.25%) upon receipt
by  CIT  of  audited  year end statements indicating the Company achieved eighty
percent  (80%)  of  its  projected  net income (defined in accordance with GAAP,
consistently  applied,  and  excluding any extraordinary or non-recurring gains)
for Fiscal Year ending December 31, 2002 and for Fiscal Year ending December 31,
2003,  provided  that  no  Default  or  Event of Default has occurred under this
Financing  Agreement.  For  purposes  of clarification of the foregoing, (i) the
0.25%  reduction  may  occur once for each such year, with an aggregate, maximum
possible  reduction  of  up to 0.5%  (i.e. from 2% to 1.5%), (ii) such reduction
shall occur and be effective on the date of receipt by CIT of the Company's year
end  audited  statements,  which  are in form and substance satisfactory to CIT,
(iii)  calculation shall be based on receipt of yearly projections by CIT, which
are  in form and substance satisfactory to CIT, and (iv) the calculation thereof
shall  be  certified by the Company's independent accountants and shall be based
on  the  consolidated  net  income  of  the  Company  and  its  Parent.

(B)  Notwithstanding  any provision to the contrary contained in this section 8,
in  the  event  that the outstanding Revolving Loans exceed the lesser of either
(x)  the  maximum  aggregate  amount available under Section 3 of this Financing
Agreement  or  (y)  the  Revolving  Line of Credit: (A) as a result of Revolving
Loans  advanced  by  CIT  at  the  request  of  the  Company  (herein "Requested
Overadvances"),  for any one (1) or more days in any month, or (B) for any other
reason  whatsoever  (herein  "Other  Overadvances")  and such Other Overadvances
continue for five (5) or more days in any month , the average net balance of all
Revolving  Loans  for  such  month  shall bear interest at the Overadvance Rate.

(C)  Upon  and after the occurrence of an Event of Default and the giving of any
required  notice  by  CIT  in  accordance  with  the  provisions  of Section 10,
Paragraph  10.2  hereof, all Obligations shall bear interest at the Default Rate
of  Interest.

     8.2   Interest  on  the Term Loan shall be payable monthly as of the end of
each  month  on the unpaid balance or on payment in full prior to maturity in an
amount equal to the Chase Bank Rate plus two and one-quarter percent (2.25%) per
annum.   In  the  event of any change in said Chase Bank Rate the rate hereunder
shall  change,  as  of  the  date  of  such  change. The rate hereunder shall be
calculated  based  on  a  360  day  year.   CIT  shall be entitled to charge the
Revolving  Loan  Account  at  the  rate  provided  for herein when due until all
Obligations  have  been  paid  in  full.

     8.3  Intentionally  Omitted

     8.4  Intentionally  Omitted

     8.5  The  Company  shall reimburse or pay CIT, as the case may be, for: (a)
all  Out-of-Pocket  Expenses,  and  (b)  any  applicable  Documentation  Fee.

     8.6  Upon  the  last  Business  Day  of each month, commencing on March 31,
2002,  the  Company  shall  pay  to  CIT  (i)  the  Line of Credit Fee, and (ii)
interest  on the Collection Days.  Interest will be computed at the rate, and in
the  manner,  set  forth  in  Paragraph  8.1  of  this  Financing  Agreement.

     8.7  To  induce CIT to enter into this Financing Agreement and to extend to
the Company the Revolving Loan and the Term Loan, the Company shall pay to CIT a
(a) Loan Facility Fee in the amount of $100,000.00, as follows: (i) $40,000 paid
upon  issuance  of the Commitment Letter, (ii) $40,000 payable upon execution of
this  Financing  Agreement,  (iii) $3,333.34 payable as of the end of each month
for  the  first six months from the Closing Date, provided that upon any earlier
termination  of  this  Financing  Agreement,  the  outstanding  balance shall be
immediately  due  and payable; and (b) Annual Facility Fee of $45,000 payable on
the  earlier  of  each  anniversary  of  the Closing Date or any earlier date of
termination  of  this  Financing  Agreement.

     8.8  On  the  Closing  Date  and  each  anniversary  of  the  Closing  Date
thereafter,  the  Company  shall pay to CIT the Administrative Management Fee in
the amount of $25,000, which shall be deemed fully earned when paid (and payable
in  monthly installments of $2,083.34, due and payable on the first Business Day
of  each  month).

     8.9  The  Company  shall  pay  CIT's  standard  charges  and fees for CIT's
personnel used by CIT for reviewing the books and records of the Company and for
verifying,  testing, protecting, safeguarding, preserving or disposing of all or
any  part  of  the  Collateral  (which  fees  shall  be  in  addition  to  the
Administrative Management Fee and any Out-of-Pocket Expenses).  CIT's audit fees
are  $750  per  day  as  of  the  Closing  Date,  per  auditor.

     8.10 The Company hereby authorizes CIT to charge the Revolving Loan Account
with  the amount of all payments due hereunder as such payments become due.  The
Company  confirms  that  any charges which CIT may so make to the Revolving Loan
Account  as  herein provided will be made as an accommodation to the Company and
solely  at  CIT's  discretion.

     8.11  In  the event that CIT or any participant hereunder (or any financial
institution  which  may  from  time  to  time  become  a  participant  or lender
hereunder)  shall  have  determined  in  the exercise of its reasonable business
judgment  that,  subsequent to the Closing Date, any change in applicable United
States  (or  any  State  or division thereof) law, rule, regulation or guideline
regarding  capital  adequacy,  or  any  change  in  the  interpretation  or
administration  thereof,  or  compliance by CIT or such participant with any new
request or directive regarding capital adequacy (whether or not having the force
of  law)  of any such authority, central bank or comparable agency, has or would
have  the  effect  of reducing the rate of return on CIT's or such participant's
capital  as  a  consequence  of its obligations hereunder to a level below that
which  CIT or such participant could have achieved but for such adoption, change
or compliance (taking into consideration CIT or such participant's policies with
respect  to  capital  adequacy)  by  an  amount reasonably deemed by CIT or such
participant  to  be  material, then, from time to time, the Company shall pay no
later  than  five  (5)  days  following  demand to CIT or such participant such
additional  amount or amounts as will compensate CIT's or such participant's for
such reduction.  In determining such amount or amounts, CIT or such participant
may  use  any  reason-able  averaging or attribution methods.  The protection of
this Paragraph 8.11 shall be available to CIT or such participant regard-less of
any  possible  contention of invalidity or inapplicability with respect
to  the  applicable  law, regulation or condition.  A certificate of CIT or such
participant  setting  forth  such  amount  or  amounts  as shall be necessary to
compensate  CIT  or  such  participant  with  respect  to this Section 8 and the
calculation  thereof  when  delivered  to the Company shall be conclusive on the
Company  absent  manifest  error.  Notwithstanding anything in this paragraph to
the  contrary,  in  the  event  CIT or such participant has exercised its rights
pursuant  to  this  paragraph,  and  subsequent  thereto  determines  that  the
additional  amounts  paid  by  the Company in whole or in part exceed the amount
which CIT or such participant actually required to be made whole, the excess, if
any,  shall  be  returned  to  the  Company  by  CIT  or  such  participant.

     8.12.   In  the  event  that  any applicable United States (or any State or
division  thereof) law, treaty or governmental regulation, or any change therein
or  in  the interpretation or application thereof, or compliance by CIT or such
participant  with  any  request or directive (whether or not having the force of
law)  from  any  central  bank  or other financial, monetary or other authority,
shall:

     (A)  subject CIT or such participant to any tax of any kind whatsoever with
respect  to this Financing Agreement or change the basis of taxation of payments
to  CIT  or  such  participant  of principal, fees, interest or any other amount
payable  hereunder  or under any other documents (except for changes in the rate
of  tax  on  the  overall  net  income of CIT or such participant by the federal
government  or  the  jurisdiction  in which it maintains its principal office);

     (B)  impose,  modify  or  hold  applicable  any  reserve,  special deposit,
assessment  or similar requirement against assets held by, or deposits in or for
the  account  of,  advances or loans by, or other credit extended by CIT or such
participant  by reason of or in respect to this Financing Agreement and the Loan
Documents,  including (without limitation) pursuant to Regulation D of the Board
of  Governors  of  the  Federal  Reserve  System;  or

     (C)  impose  on CIT or such participant any other condition with respect to
this  Financing  Agreement  or  any other document, and the result of any of the
foregoing is to increase the cost to CIT or such participant of making, renewing
or  maintaining  its  loans  hereunder by an amount that CIT or such participant
deems  to be material in the exercise of its reasonable business judgment or to
reduce  the  amount of any payment (whether of principal, interest or otherwise)
in  respect  of any of the loans by an amount that CIT or such participant deems
to be material in the exercise of its reasonable business judgment, then, in any
case  the  Company  shall  pay  CIT  or  such  participant, within five (5) days
following  its  demand,  such additional cost or such reduction, as the case may
be.   CIT  or such participant shall certify the amount of such additional cost
or  reduced  amount  to  the  Company  and  the  calculation  thereof  and  such
certification  shall  be  conclusive  upon  the  Company  absent manifest error.
Notwithstanding  anything in this paragraph to the contrary, in the event CIT or
such  participant  has  exercised  its  rights  pursuant  to this paragraph, and
subsequent  thereto determine that the additional amounts paid by the Company in
whole  or  in  part  exceed  the  amount  which CIT or such participant actually
required  pursuant  hereto, the excess, if any, shall be returned to the Company
by  CIT  or  such  participant.

     8.13     For  purposes  of  this Financing Agreement and Section 8 thereof,
any  reference to CIT shall include any financial institution which may become a
participant  or  co-lender  subsequent  to  the  Closing  Date.

SECTION  9.   Powers
              ------
     The  Company  hereby  constitutes  CIT,  or  any  person  or  agent CIT may
designate,  as  its  attorney-in-fact,  at  the  Company's  cost and expense, to
exercise  all  of  the  following  powers, which being coupled with an interest,
shall  be  irrevocable  until  all  Obligations  to  CIT have been paid in full:

     (A)  To  receive,  take, endorse, sign, assign and deliver, all in the name
of CIT or the Company, any and all checks, notes, drafts, and other documents or
instruments  relating  to  the  Collateral;

     (B)  To  receive, open and dispose (the latter, upon notice to the Company)
of  all mail addressed to the Company and to notify postal authorities to change
the  address  for  delivery  thereof  to  such  address  as  CIT  may designate;

     (C)  To  request  from  customers  indebted on Accounts at any time, in the
name  of  CIT  information  concerning  the  amounts  owing  on  the  Accounts;

     (D) To request from customers indebted on Accounts at any time, in the name
of  the Company, in the name of certified public accountant designated by CIT or
in  the  name of CIT's designee, information concerning the amounts owing on the
Accounts;

     (E)  To transmit to customers indebted on Accounts notice of CIT's interest
therein and to notify customers indebted on Accounts to make payment directly to
CIT  for  the  Company's  account;  and

     (F)  To  take  or  bring,  in  the  name  of CIT or the Company, all steps,
actions, suits or proceedings deemed by CIT necessary or desirable to enforce or
effect  collection  of  the  Accounts.

     Notwithstanding  anything hereinabove contained to the contrary, the powers
set forth in (b)  and (f) above may only be exercised after the occurrence of an
Event  of  Default  and  until  such  time as such Event of Default is waived in
writing  by  CIT.

SECTION  10.   Events  of Default and Remedies
               -------------------------------

     10.1  Notwithstanding  anything  hereinabove  to  the  contrary,  CIT  may
terminate this Financing Agreement immediately upon the occurrence of any of the
following  Events  of  Default:

(A)     cessation  of  the  business  of  the Company or of the Guarantor or the
calling  of  a  meeting  of the creditors of the Company or of the Guarantor for
purposes  of  compromising  the  debts  and  obligations  of  the Company or the
Guarantor;

(B)     the  failure  of  the  Company or of the Guarantor to generally meet its
debts  as  they  mature;

(C)     (i)  the  commencement  by  the  Company  or  by  the  Guarantor  of any
bankruptcy,  insolvency,  arrangement,  reorganization,  receivership or similar
proceedings  under  any  federal or state law; (ii) the commencement against the
Company  or  the  Guarantor  of  any  bankruptcy,  insolvency,  arrangement,
reorganization,  receivership  or  similar proceeding under any federal or state
law  by creditors of the Company or of the Guarantor, provided that such Default
shall  not  be  deemed  an  Event  of Default if such proceeding is controverted
within  fifteen  (15) days and dismissed and vacated within forty-five (45) days
of  commencement, except in the event that any of the actions sought in any such
proceeding  shall  occur  or  the  Company or the Guarantor shall take action to
authorize  or  effect  any  of  the actions in any such proceeding; or (iii) the
commencement  (x) by Parent or the Company's or the Guarantor's subsidiaries, or
any  one  of  them,  of any bankruptcy, insolvency, arrangement, reorganization,
receivership  or  similar  proceeding  under  any  applicable  state law, or (y)
against  Parent  or the Company's or the Guarantor's subsidiaries, or any one of
them,  of  any  involuntary bankruptcy, insolvency, arrangement, reorganization,
receivership  or  similar  proceeding  under  applicable law, provided that such
Default  shall  not  be  deemed  an  Event  of  Default  if  such  proceeding is
controverted within fifteen (15) days and dismissed or vacated within forty-five
(45) days of commencement, except in the event that any of the actions sought in
any  such  proceeding  shall occur or the Parent's, Company's or the Guarantor's
subsidiaries,  or  any one of them, shall take action to authorize or effect any
of  the  actions  in  any  such  proceeding;

(D)     breach  by  the  Company  of  any  warranty,  representation or covenant
contained herein (other than those referred to in sub-paragraph (e) below) or in
any  other  written  agreement  between  the  Company or CIT, provided that such
Default  by  the  Company of any of the warranties, representations or covenants
referred in this clause (d) shall not be deemed to be an Event of Default unless
and  until  such  Default  shall  remain  unremedied to CIT's satisfaction for a
period  of  fifteen  (15)  days  from  the  date  of  such  breach;

(E)     breach  by  the  Company  of any warranty, representation or covenant of
Paragraphs  3.3  (other  than  the  fourth sentence of Paragraph 3.3) and 3.4 of
Section  3  hereof;  Paragraphs  6.3  and  6.4 (other than the first sentence of
Paragraph  6.4)  of  Section 6 hereof; Paragraphs 7.1, 7.5, 7.6, and 7.8 through
7.14  hereof;

(F)     failure  of  the  Company  to pay any of the Obligations within five (5)
Business  Days  of  the due date thereof, provided that nothing contained herein
shall  prohibit  CIT from charging such amounts to the Revolving Loan Account on
the  due  date  thereof;

(G)     the  Company shall (i) engage in any "prohibited transaction" as defined
in  ERISA,  (ii)  have any "accumulated funding deficiency" as defined in ERISA,
(iii)  have  any  "reportable  event"  as  defined  in ERISA, (iv) terminate any
"plan",  as  defined  in  ERISA or (v) be engaged in any proceeding in which the
Pension Benefit Guaranty Corporation shall seek appointment, or is appointed, as
trustee or administrator of any "plan", as defined in ERISA, and with respect to
this  sub-paragraph (h) such event or condition (x) remains uncured for a period
of  forty-five (45) days from date of occurrence, provided that no lien is filed
with  respect  thereto, and (y) could, in the reasonable opinion of CIT, subject
the  Company  to  any  tax, penalty or other liability material to the business,
operations  or  financial  condition  of  the  Company;

(H)     Intentionally  Omitted;

(I)     the  occurrence  of any default or event of default (after giving effect
to  any  applicable  grace  or  cure  periods) under any instrument or agreement
evidencing  any  other  Indebtedness of the Company having a principal amount in
excess  of  $100,000;

(J)     Peter  Murdoch  ceases for any reason whatsoever (other than as a result
of  death)  to  be  actively  engaged  in  the  management  of  the  Company;

(K)     if  any Guarantor terminates its respective Guaranty or Pledge Agreement
or  otherwise  fails  to  perform  any  of  the  terms of the Guaranty or Pledge
Agreement,  as  applicable, all prior to termination of this Financing Agreement
and  payment  in  full  of  all  Obligations;  or

(L)     any  judgment  or  judgments aggregating in excess of $100,000.00 or any
injunction  or  attachment  is  obtained  or enforced against the Company or any
Guarantor  and  which remains unstayed for more than fifteen (15) Business Days.

     10.2  Upon  the  occurrence of a Default and/or an Event of Default, at the
option  of  CIT,  all  loans,  advances and extensions of credit provided for in
Sections  3,  4  and  5 of this Financing Agreement shall be thereafter in CIT's
sole  discretion  and  the obligation of CIT to make Revolving Loans shall cease
unless such Default is cured to CIT's satisfaction or Event of Default is waived
in  writing by CIT , and at the option of CIT upon the occurrence of an Event of
Default:  (A)  all Obligations shall become immediately due and payable; (B) CIT
may  charge  the Company the Default Rate of Interest on all then outstanding or
thereafter  incurred Obligations in lieu of the interest provided for in Section
8  of  this  Financing  Agreement,  and  (C)  CIT may immediately terminate this
Financing Agreement upon notice to the Company; provided, however, that upon the
occurrence  of  an Event of Default listed in  Paragraph 10.1(c) of this Section
10,  this  Financing Agreement shall automatically terminate and all Obligations
shall  become due and payable, without any action, declaration, notice or demand
by CIT.   The exercise of any option is not exclusive of any other option, which
may  be  exercised  at  any  time  by  CIT.

     10.3  Immediately  upon the occurrence of any Event of Default, CIT may, to
the  extent  permitted  by  law:  (A) remove from any premises where same may be
located  any and all books and records, computers, electronic media and software
programs  associated  with  any  Collateral  (including  any electronic records,
contracts  and signatures pertaining thereto), documents, instruments, files and
records,  and  any  receptacles  or  cabinets  containing  same, relating to the
Accounts,  or  CIT  may  use,  at  the  Company's expense, such of the Company's
personnel,  supplies  or space at the Company's places of business or otherwise,
as  may  be  necessary  to  properly  administer and control the Accounts or the
handling of collections and realizations thereon; (B) bring suit, in the name of
the  Company  or  CIT, and generally shall have all other rights respecting said
Accounts,  including  without limitation the right to:  accelerate or extend the
time  of  payment,  settle,  compromise, release in whole or in part any amounts
owing  on  any Accounts and issue credits in the name of the Company or CIT; (C)
sell,  assign  and  deliver  the  Collateral  and  any  returned,  reclaimed  or
repossessed Inventory, with or without advertisement, at public or private sale,
for  cash,  on credit or otherwise, at CIT's sole option and discretion, and CIT
may  bid  or  become  a  purchaser  at  any  such  sale,  free from any right of
redemption, which right is hereby expressly waived by the Company; (D) foreclose
the security interests in the Collateral created herein or by the Loan Documents
by  any available judicial procedure, or to take possession of any or all of the
Collateral,  including  any Inventory, Equipment and/or Other Collateral without
judicial  process,  and  to enter any premises where any Inventory and Equipment
and/or  Other  Collateral may be located for the purpose of taking possession of
or removing the same; and (E) exercise any other rights and remedies provided in
law,  in  equity,  by  contract  or otherwise. CIT shall have the right, without
notice or advertisement, to sell, lease, or otherwise dispose of all or any part
of the Collateral, whether in its then condition or after further preparation or
processing,  in  the  name  of  the Company or CIT, or in the name of such other
party  as CIT may designate, either at public or private sale or at any broker's
board, in lots or in bulk, for cash or for credit, with or without warranties or
representations  (including  but not limited to warranties of title, possession,
quiet  enjoyment  and the like), and upon such other terms and conditions as CIT
in  its  sole  discretion  may  deem  advisable, and CIT shall have the right to
purchase  at  any  such  sale.   If  any  Inventory  and Equipment shall require
rebuilding,  repairing, maintenance or preparation, CIT shall have the right, at
its  option,  to  do  such  of the aforesaid as is necessary, for the purpose of
putting  the  Inventory  and  Equipment  in such saleable form as CIT shall deem
appropriate  and  any  such  costs shall be deemed an Obligation hereunder.  Any
action  taken  by  CIT  pursuant  to  this paragraph shall not effect commercial
reasonableness  of  the  sale.   The  Company  agrees, at the request of CIT, to
assemble the Inventory and Equipment and to make it available to CIT at premises
of  the  Company  or  elsewhere  and  to  make available to CIT the premises and
facilities  of  the  Company  for  the  purpose  of  CIT's taking possession of,
removing  or putting the Inventory and Equipment in saleable form.  If notice of
intended disposition of any Collateral is required by law, it is agreed that ten
(10)  days  notice  shall constitute reasonable notification and full compliance
with  the  law.   The  net cash proceeds resulting from CIT's exercise of any of
the  foregoing  rights,  (after  deducting  all  charges,  costs  and  expenses,
including  reasonable attorneys' fees) shall be applied by CIT to the payment of
the  Obligations,  whether due or to become due, in such order as CIT may elect,
and the Company shall remain liable to CIT for any deficiencies, and CIT in turn
agrees  to  remit  to  the  Company  or  its  successors or assigns, any surplus
resulting  therefrom.   The  enumeration of the foregoing rights is not intended
to  be  exhaustive and the exercise of any right shall not preclude the exercise
of  any  other  rights,  all  of which shall be cumulative.   The Company hereby
indemnifies CIT and holds CIT harmless from any and all costs, expenses, claims,
liabilities,  Out-of-Pocket Expenses or otherwise, incurred or imposed on CIT by
reason  of  the exercise of any of its rights, remedies and interests hereunder,
including,  without  limitation,  from  any  sale  or  transfer  of  Collateral,
preserving,  maintaining  or securing the Collateral, defending its interests in
Collateral (including pursuant to any claims brought by the Company, the Company
as  debtor-in-possession, any secured or unsecured creditors of the Company, any
trustee  or receiver in bankruptcy, or otherwise), and the Company hereby agrees
to  so indemnify and hold CIT harmless, absent CIT's gross negligence or willful
misconduct  as  finally  determined  by  a  court of competent jurisdiction. The
foregoing  indemnification shall survive termination of this Financing Agreement
until  such  time as all Obligations (including the foregoing) have been finally
and  indefeasibly paid in full.   In furtherance thereof CIT, may establish such
reserves  for Obligations hereunder (including any contingent Obligations) as it
may  deem  advisable  in  its  reasonable  business  judgment.

SECTION  11.  Termination
              -----------
     Except  as  otherwise  permitted  herein,  CIT may terminate this Financing
Agreement  only  as  of  the initial or any subsequent Anniversary Date and then
only  by  giving  the  Company at least ninety (90) days prior written notice of
termination.  Notwithstanding  the  foregoing  CIT  may  terminate the Financing
Agreement  immediately  upon  the  occurrence  of an Event of Default, provided,
however, that if the Event of Default is an event listed in Paragraph 10.1(c) of
Section 10 of this Financing Agreement, this Financing Agreement shall terminate
in  accordance  with  paragraph  10.2  of  Section 10. This Financing Agreement,
unless  terminated  as  herein  provided,  shall  automatically  continue  from
Anniversary Date to Anniversary Date.   The Company may terminate this Financing
Agreement  at  any  time  upon  ninety  (90)  days' prior written notice to CIT,
provided  that  the  Company pays to CIT an Early Termination Fee on or prior to
the  effective  date of such termination.   All Obligations shall become due and
payable  as of any termination hereunder or under Section 10 hereof and, pending
a  final  accounting,  CIT  may  withhold  any balances in the Company's account
(unless  supplied  with  an  indemnity  satisfactory to CIT) to cover all of the
Obligations, whether absolute or contingent, including, but not limited to, cash
reserves for any contingent Obligations. All of CIT's rights, liens and security
interests  shall  continue after any termination until all Obligations have been
paid  and  satisfied  in  full.

SECTION  12.   Miscellaneous
               -------------
     12.1  Except as otherwise explicitly set forth in this Financing Agreement,
the  Company  hereby waives diligence, notice of intent to accelerate, notice of
acceleration, demand, presentment and protest and any notices thereof as well as
notice  of  nonpayment.   No delay or omission of CIT or the Company to exercise
any  right  or  remedy  hereunder,  whether before or after the happening of any
Event  of  Default,  shall  impair  any  such right or shall operate as a waiver
thereof  or  as  a  waiver  of any such Event of Default.   No single or partial
exercise  by  CIT of any right or remedy precludes any other or further exercise
thereof,  or  precludes  any  other  right  or  remedy.

     12.2  This  Financing  Agreement  and  the  Loan  Documents  executed  and
delivered  in  connection  therewith constitute the entire agreement between the
Company  and  CIT;  supersede  any  prior  agreements;  can be changed only by a
writing  signed  by  both  the  Company  and CIT; and shall bind and benefit the
Company  and  CIT  and  their  respective  successors  and  assigns.

     12.3  In  no event shall the Company, upon demand by CIT for payment of any
Indebtedness  relating  hereto,  by  acceleration  of  the  maturity thereof, or
otherwise,  be  obligated  to  pay  interest  and  fees  in excess of the amount
permitted  by law.   Regardless of any provision herein or in any agreement made
in connection herewith, CIT shall never be entitled to receive, charge or apply,
as  interest  on  any  indebtedness relating hereto, any amount in excess of the
maximum  amount  of  interest  permissible  under  applicable law.   If CIT ever
receives,  collects  or  applies  any  such excess, it shall be deemed a partial
repayment  of  principal  and treated as such; and if principal is paid in full,
any  remaining  excess  shall be refunded to the Company.   This paragraph shall
control  every  other  provision  hereof,  the  Loan  Documents and of any other
agreement  made  in  connection  herewith.

     12.4  If  any provision hereof or of any other agreement made in connection
herewith  is  held to be illegal or unenforceable, such provision shall be fully
severable, and the remaining provisions of the applicable agreement shall remain
in  full  force  and  effect  and  shall  not  be  affected  by such provision's
severance.  Furthermore,  in  lieu  of  any such provision, there shall be added
automatically  as  a  part  of  the applicable agreement a legal and enforceable
provision  as  similar  in  terms  to  the severed provision as may be possible.

     12.5  THE  COMPANY  AND CIT EACH HEREBY WAIVE ANY RIGHT TO A  TRIAL BY JURY
IN  ANY  ACTION  OR  PROCEEDING  ARISING  OUT  OF  THE  LOAN  DOCUMENTS  OR  THE
TRANSACTIONS  CONTEMPLATED  THEREUNDER.   THE  COMPANY HEREBY IRREVOCABLY WAIVES
PERSONAL  SERVICE OF PROCESS AND CONSENTS TO  SERVICE OF PROCESS BY CERTIFIED OR
REGISTERED  MAIL, RETURN  RECEIPT REQUESTED.  IN NO EVENT WILL CIT BE LIABLE FOR
LOST  PROFITS  OR  OTHER  SPECIAL,  PUNITIVE  OR  CONSEQUENTIAL  DAMAGES.

     12.6  Except  as  otherwise  herein  provided,  any  notice  or  other
communication  required  hereunder  shall  be  in  writing  (provided  that, any
electronic  communications  from  the  Company  with  respect  to  any  request,
transmission,  document,  electronic  signature,  electronic  mail  or facsimile
transmission  shall  be  deemed  binding  on  the  Company  for purposes of this
Financing  Agreement,  provided  further  that  any  such transmission shall not
relieve  the  Company from any other obligation hereunder to communicate further
in writing), and shall be deemed to have been validly served, given or delivered
when  hand  delivered  or  sent by facsimile, or three days after deposit in the
United State mails, with proper first class postage prepaid and addressed to the
party  to be notified or to such other address as any party hereto may designate
for  itself  by  like  notice,  as  follows:

     (A)  if  to  CIT,  at:

THE  CIT  GROUP/BUSINESS  CREDIT,  INC.
1211  Avenue  of  the  Americas
New  York,  New  York,  10036
Attn:  Regional  Credit  Manager
Fax  No.:   (212)  536-1217
            ---------------


     (B)  if  to  the  Company  at:

KNOGO  NORTH  AMERICA  INC.
350  Wireless  Boulevard
Hauppauge,  New  York,  11788
Attn:    Peter  J.  Mundy,  CFO
Fax  No.:  (631)  232-0954

With  a  courtesy  copy  of  any  material  notice  to the Company's counsel at:

     Mark  Haltzman,  Esq.
     Mark  S.  Haltzman  &  Associates
     One  Belmont  Avenue  -  Suite  300
     Bala  Cynwyd,  PA  19004
     Tel:  610-668-0865
     Fax:  610-668-1915
     e-mail:  mhaltzman@aol.com

provided,  however, that the inadvertent failure of CIT to provide the Company's
counsel  with  a copy of such notice or any late notice shall not invalidate any
notice given to the Company and shall not give the Company any rights, claims or
defenses  due  to  the  failure  of  CIT  to  provide  such  additional  notice.

      12.7  THE  VALIDITY,  INTERPRETATION  AND  ENFORCEMENT  OF THIS  FINANCING
AGREEMENT  AND  THE  OTHER  LOAN  DOCUMENTS SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT ANY OTHER LOAN DOCUMENT INCLUDES AN
EXPRESS  ELECTION  TO  BE  GOVERNED  BY  THE  LAWS  OF  ANOTHER  JURISDICTION.


<PAGE>
IN  WITNESS  WHEREOF, the parties hereto have caused this Financing Agreement to
be  effective, executed, accepted and delivered at New York, by their proper and
duly  authorized  officers  as  of  the  date  set  forth  above.


     THE  CIT  GROUP/BUSINESS  CREDIT,  INC.


     By:        /s/  Richard  Barbera
                ----------------------------
     Title:     Assistant  Vice  President




     KNOGO  NORTH  AMERICA  INC.


     By:        /s/  Peter  Murdoch
                --------------------------
     Title:      President  and
                 Chief  Executive  Officer





     Accepted  in  NY,  NY:

     THE  CIT  GROUP/BUSINESS  CREDIT,  INC.


     By:           /s/  Allan  J.  Marzen
                   ----------------------------
     Title:        Vice  President




<PAGE>

                                    EXHIBIT A
                                    ---------

                            TERM LOAN PROMISSORY NOTE
                            -------------------------


                                                  March  22,  2002

$100,000.00


FOR  VALUE  RECEIVED,  the  undersigned,  KNOGO  NORTH  AMERICA INC., a Delaware
corporation  with  a  principal  place  of  business  at 350 Wireless Boulevard,
Hauppauge,  New York, 11788 (herein the "Company"), promises to pay to the order
of  THE  CIT  GROUP/BUSINESS  CREDIT, INC., a New York corporation, with offices
located  at  1211 Avenue of the Americas, New York, New York, 10036 (hereinafter
"CIT")  at  said  office, in lawful money of the United States of America and in
immediately  available  funds,  the  principal amount of $100,000.00 as follows:
the  principal  amount of the Term Loan shall be repaid to CIT by the Company by
twelve (12) equal monthly principal installments of  $8,333.34 each, whereof the
first  installment  shall  be  due and payable on May 1, 2002 and the subsequent
installments  shall  be  due and payable on the first Business Day of each month
thereafter  until  this  Note  is  paid  in  full.

The Company further agrees to pay interest at said office, in like money, on the
unpaid  principal  amount owing hereunder from time to time from the date hereof
on  the  date and at the rate specified in Section 8 of the Financing Agreement,
of  even  date herewith between the Company and CIT (the "Financing Agreement").
                                                          --------- ---------
Capitalized  terms used herein and defined in the Financing Agreement shall have
the  same  meanings  as  set forth therein unless otherwise specifically defined
herein.

If  any  payment  on  this  Note  becomes  due and payable on a day other than a
Business  Day,  the  maturity  thereof  shall be extended to the next succeeding
Business  Day, and with respect to payments of principal, interest thereon shall
be  payable  at  the  then  applicable  rate  during  such  extension.

This Note is Term Loan Promissory Note A referred to in the Financing Agreement,
evidences  Term  Loan  A  thereunder,  and  is  subject to, and entitled to, all
provisions  and  benefits  thereof  and  is  subject  to  optional and mandatory
prepayment,  in  whole  or  in  part,  as  provided  therein.


<PAGE>
Upon the occurrence of any Event of Default specified in the Financing Agreement
or  upon  termination  of  the  Financing  Agreement, all amounts then remaining
unpaid  on  this  Note may become, or be declared to be, at the sole election of
CIT,  immediately  due  and  payable  as  provided  in  the Financing Agreement.



     KNOGO  NORTH  AMERICA  INC.


     By:    /s/  Peter  Murdoch
            -----------------------

     Title: President  and  CEO
            -----------------------


     Attest:
     By:    /s/  Peter  J. Mundy
            -----------------------

     Title: Vice  President  and  CFO
            -------------------------



<PAGE>

                                             Exhibit  23

INDEPENDENT  AUDITORS'  CONSENT




We  consent  to  the  incorporation by reference in Registration Statement No.'s
333-33580,  333-34929,  and  333-34867  of Sentry Technology Corporation on Form
S-8  of  our report dated March 22, 2002 appearing in this Annual Report on Form
10-K  of  Sentry  Technology  Corporation  for the year ended December 31, 2001.




/s/  DELOITTE  &  TOUCHE  LLP
Jericho,  New  York
March  27,  2002