SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C.  20549
                                  ____________

                                   FORM 10-KSB

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

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003

                                       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.)


                   1881  LAKELAND  AVENUE,  RONKONKOMA,  NY  11779
                   -----------------------------------------------
               (ADDRESS  OF  PRINCIPAL  EXECUTIVE  OFFICES)  (ZIP  CODE)

     REGISTRANT'S  TELEPHONE  NUMBER,  INCLUDING  AREA  CODE:  (631)  739-2000
                                                               ---------------


                   350 WIRELESS BOULEVARD, HAUPPAUGE, NY 11788
                   -------------------------------------------
                 (FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)

       SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:  NONE.


           SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

                              TITLE OF EACH CLASS:
                              --------------------

                          COMMON STOCK, $.001 PAR VALUE


Indicate by check mark whether the Registrant (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-KSB or any
amendment  to  this  Form  10-KSB.

The  issuer's  revenues  for  the  latest  fiscal  year  were  $13,009,000.

At  March  12,  2004,  the  aggregate  market  value of the voting stock held by
non-affiliates  of  the  Registrant  was approximately $6,786,000 based upon the
closing  price  of  such  securities on the OTC Bulletin Board on that date.  At
March  12,  2004,  the  Registrant  had  outstanding 85,755,610 shares of Common
Stock.

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

None.

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

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."

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  Sensormatic  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, Dialoc ID Holdings, B.V. ("Dialoc ID"), formerly known as
Dutch  A&A  Holding,  B.V.,  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.  Dialoc  ID  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.  Concurrent  with  the  share
purchase  agreement,  the  Company  entered  into  a distribution agreement with
Dialoc  ID allowing the Company access to new products of Dialoc ID and allowing
Dialoc  ID  access  to  the Company's products for an initial period of not less
than  two years. As a result of the issuance of shares in settlement of past due
debt  obligations,  Dialoc ID currently owns 49.1% of the Company's common stock
outstanding.


As  of  January  8, 2001, Dialoc ID owned 37.5 percent of the outstanding common
stock  of  the Company. Under the share purchase agreement, at any time prior to
January  8,  2002,  Dialoc  ID  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
was  to 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 Dialoc ID's purchase right
until January 8, 2003 in exchange for an extension of the distribution agreement
for  one  year.  On  May  14,  2002, Dialoc ID exercised their right to purchase
14,500,000  additional  common  stock  shares  at  a  price  of $.001 per share,
increasing  its  percentage  of  our  outstanding  common  stock to 48.1% of the
Company's  common  stock.  On  January  7,  2003,  Dialoc exercised its right to
purchase 4,516,475 additional shares of our common stock at a price of $.001 per
share,  increasing  its percentage of our outstanding common stock to 51% and it
total  common  stock  ownership  to  42,066,927  shares.

In  addition  to  the  election  of  three nominees of Dialoc ID 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.  As a result of the dividend
and  reclassification,  28,666,660  common  shares were issued to former Class A
Preferred  Stockholders.

We  have  incurred  reduced  revenue  levels,  decreased  financial position and
recurring  operating losses over the past several years.  As a result, the Board
of  Directors approved a restructuring plan for 2003 to strengthen the Company's
operating  efficiencies and to better align its operations with current economic
and  market  conditions.  To  date,  we have made significant progress under our
revised  business plan including the downsizing of operations, the settlement of
past due trade vendors, the relocation to smaller facilities and the outsourcing
of  all  non-essential  manufacturing  and  assembly  operations  to  qualified
subcontractors.  The  successful  implementation  of  this  restructuring  has
resulted  in  substantial  gross margin improvements and reductions in operating
expenses  beginning  in  the second half of 2003.  However, our Company has been
operating  in a cash flow deficit and has borrowed the maximum amounts available
under  our  credit line.  We have supplemented our cash requirements through the
use of purchase order financing, at significantly higher costs than conventional
borrowing.  Dialoc  ID  is  not  able  to  provide  us with additional financial
support.

We  continue to pursue additional debt or equity financing through our financial
advisors  and  on  February  26,  2004,  Sentry  signed  a  term  sheet to raise
$2,000,000  in  secured  convertible  debt  with  a venture fund ("the VC Fund")
managed  by  a  multibillion-dollar  North  American  company.

Key  terms  of  the  transaction  are  as  follows:

-     Four  year  term.
-     Interest  rate  of  8%.
-     Redeemable  at  Sentry's  option  after  18  months.
-     Conversion  price equal to the market price, at time of conversion, less a
      discount  of  30%  with  a  maximum  conversion  price  of  $0.12  per
      share.
-     Conversion  is  at  the  option  of the VC Fund when market share price is
      equal to or greater than $0.17 per share or with the approval of Sentry's
      Board of Directors  when  the  market  share  price  is  less than $0.17
      per share.
-     Sentry  will  provide  most  favored pricing to all VC Fund affiliates and
      expects  to  be  a  supplier  of  security  and  identification  products
      to the affiliates  of  the  VC  Fund.
-     The  VC Fund will be issued warrants for 5,000,000 shares of Sentry common
      stock,  priced  at  $0.15  per  share, exercisable anytime within the next
      four years.
-     The  VC  Fund will be entitled to one seat on Sentry's Board of Directors.
-     As  a  condition  of  the financing, Sentry will be required to acquire ID
      Security Systems Canada Inc. ("ID Canada") and ID Systems USA Inc.,
      Collectively referred  to  as  "ID  Systems."

Sentry's  Board of Directors and shareholders owning a majority of Sentry common
stock  have  approved  the  proposed  transaction  with  the  VC  Fund  and  the
acquisition  of ID Systems, both of which are subject to customary due diligence
and  expected  to  close  during  the  next  45  days.

In  a related transaction, Dialoc ID Holdings B.V. ("Dialoc") has agreed to sell
39,066,927  Sentry  common  shares  (representing approximately 46% of the total
issued  and outstanding shares of Sentry) and all of the stock of ID Systems, to
Saburah  Investments  Inc.  ("Saburah").  ID  Systems is a Toronto based company
engaged  in  anti-shoplifting  technology,  security  labeling,  radio frequency
identification  (RFID),  access control and library security.  Peter L. Murdoch,
President  and  CEO  of  Sentry  and  President  of  ID Systems, is the owner of
Saburah.  The  price  to be paid to Dialoc by Saburah and Murdoch for Sentry and
ID  Systems  shares  in  cash,  debt  assumption  and  other  consideration  is
approximately  $3.6  million  plus  the  surrender  of Murdoch's 15% interest in
Dialoc.  Saburah has also agreed to make a payment to Dialoc in the future equal
to  approximately  6%  of  any  payment it receives from Checkpoint Systems Inc.
resulting from litigation brought by ID Canada against Checkpoint.  ID Canada is
appealing the reduction of the original jury award of $79.2 million.  The appeal
is  scheduled  to  be  heard  during  the  last  week  of  March.

As  a  condition  of  the  VC  Fund  financing, Sentry has agreed to purchase ID
Systems from Saburah in exchange for 30,000,000 Sentry common shares.  The price
to  be  paid  per Sentry share will be approximately $0.12.  An opinion has been
provided  to  a  special  committee  of Sentry's Board of Directors by Corporate
Valuation Services confirming that both the price paid for the acquisition of ID
Systems  and  the  agreed conversion price of the proposed VC Fund debt are fair
from  the point of view of Sentry shareholders.  Although Sentry will not obtain
an interest in the Checkpoint Systems litigation, Saburah and Sentry have agreed
that  Sentry  may  require Saburah to purchase additional Sentry shares equal to
approximately  4.5%  of  any  amount  received  by  Saburah  from the Checkpoint
litigation,  to a maximum of $1,000,000.  The price per share will be determined
by  market conditions if and when the call is made.  This transaction represents
the maximum future benefit that may flow to Sentry and ID Systems as a result of
the  Checkpoint  lawsuit.

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

-     ID  Systems  and Sentry continue as the exclusive distributor in North and
      South  America  for  a  period  of  five years for all Dialoc products
      Including Laserfuse  radio  frequency  security  labels  and  all  RFID
      products.
-     Dialoc  becomes  the  exclusive  distributor  in Europe and Asia of labels
      manufactured  by  ID  Systems'  security  label manufacturing subsidiary,
      Custom Security  Industries  Inc.  ("CSI").
-     CSI  acquires  the right to purchase Laserfuse raw material for processing
      into  finished  security labels in its Toronto plant in order to reduce
      the cost of  production.
-     CSI acquires the option to purchase a non-exclusive license to manufacture
      complete  Laserfuse  security  labels  for  a  period of 10 years subject
      to the payment  of  $500,000  and  a  running  royalty  of  $0.001  per
      label.
-     Dialoc will continue to be a distributor for Sentry products in Europe and
      Asia.


ID Systems' management including Dr. Morton Roseman, President of CSI, and Peter
Murdoch  will  invest $100,000 each to complete the proposed transaction between
Saburah  and  Dialoc.  Furst  Capital  Partners  LLC  and associates will invest
$900,000  of  equity  in  the  combined  transaction.  Mr.  Robert  Furst  is  a
long-standing  member  of  Sentry's Board of Directors.   On completion of these
transactions and prior to the VC Fund conversion of the proposed $2,000,000 debt
transaction,  Peter  Murdoch,  directly  or  indirectly through his ownership of
Saburah,  will  own  or control 47.4% of the outstanding common stock of Sentry.

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 that the proposed convertible debt transaction with the VC Fund or
other  equity  financing  will  be  available  on terms that are satisfactory to
Sentry,  or that any such debt or equity financing will be sufficient to provide
the  full amount of funding necessary. 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.  Sentry  will  require  liquidity  and  working capital to
finance  increases  in  receivables  and inventory associated with sales growth,
payments  to past due vendors and, to a lesser extent, for capital expenditures.
If  we  are  not  able to raise additional debt or equity financing, we could be
forced  into  a  bankruptcy  or  be  required  to liquidate our assets.  In this
scenario,  most  likely,  our  secured  lender  would  receive  the  bulk of any
proceeds.


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.

Sentry'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, 2003, 1,401 SentryVision  systems had been installed in customer
locations  in  North  America.  Current  customers  include Lowe's Home Centers,
Target  Stores,  Mills  Fleet  Farm, Winn Dixie, Federal Express, Cabellas, Fred
Meyer,  Symbol  Technologies,  Menards,  UPS,  J.C.  Penney, Canadian Tire, Reno
Depot,  Estee Lauder, Kohl's Department Stores, Disney Direct Marketing and Duke
University.  In  addition, during 2003, the Company's international distributors
installed  98 SentryVision  systems in customer locations throughout Western and
Eastern Europe, Latin America and Asia. Our international customers include ASDA
Wal-Mart,  Carrefour, Auchon, Cora, Castorama, B & Q, Tesco and Coop. We believe
that,  by  providing  expanded surveillance coverage and enhanced flexibility to
select  the  locations  watched,  SentryVision  has  enabled  customers  to
significantly  reduce inventory shrinkage, increase theft apprehension rates and
improve safety and security. Based on the price of its system and the experience
of  Sentry's  customers  to  date,  we believe SentryVision  is a cost-effective
solution,  which  can  improve  the  operations  of  our  customers.

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

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.

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

Recently,  we  have  introduced SmartTrack Mobile, which allows the user to view
and  control  video  images  from  the  SmartTrack traveling CCTV system using a
mobile  hand  held  computer  and wireless communication network. The SmartTrack
Mobile  product released in 2002, operated on a wireless Personal Digital Assist
(PDA)  using  Windows  CE.  The new version now runs on the latest, tablet style
wireless  computer under Windows XP and is significantly faster than the earlier
PDA version. The increased speed and computing power offered by the tablet gives
the  user  real  time  video viewing. Customers are no longer required to sit in
front  of  a  video  console  to  manage  the  SmartTrack  system.


RETAIL  MARKET  APPLICATIONS
----------------------------
- Home Centers. Video has installed 911 systems in more than 379 store locations
for  9 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 950 stores in
45  states,  and Mills Fleet Farm, a 24 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 222 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  39  systems in 38 store locations for 9
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  115  systems  in
distribution  centers for 42 different retailers including Big Lots, Home Depot,
Kohl's Department Stores, Target Stores, Borders Group, Disney Direct Marketing,
Barnes  &  Noble, Robinsons-May, Ross, Saks, Guess, Tower Records, Big Dog, Food
Lion,  the  Gap,  Bealls  and  J.C. Penney. Traveling through a facility from an
overhead  position,  the  SentryVision  system  can monitor activities occurring
between the stacked rows of cartons or lines of hanging garments. The system can
also  move a surveillance camera into position to monitor shipping and receiving
docks  and  parked  delivery  trucks.  To  achieve  surveillance  capabilities
equivalent  to those of the SentryVision  system, a conventional PTZ dome system
or  fixed-mount  CCTV camera would have to be installed at every desired vantage
point, requiring numerous cameras, additional equipment and wiring and increased
installation  and  operating  costs.

-  Manufacturing  and  Transportation  Facilities.  So  far SentryVision  use in
factories  has  been  limited,  but  the  benefits  of  continuous  tracking  of
industrial  operations and processes indicate future growth potential. Continued
expansion  of the SentryVision  dealer program is expected to generate increased
installations in factories manufacturing electronics, pharmaceuticals, computers
and  other  high  value  products  and  in  various  wholesale  distribution and
transportation  facilities.  Express  package  and  other  high  throughput
distribution  facilities  are also good prospects for a continuous tracking CCTV
system  for  theft prevention. Installations include Watkins Motor Lines, 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
-----------------------------------
-  Corrections  and Government Institutions. SentryVision  has been installed in
correctional  facilities  in  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, U.S. Postal Service,
Central  Intelligence  Agency  and  U.S.  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,  digital  video recorders, 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.

Remote  video transmission and digital recording are continuing 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 GE Interlogix
and  Telewatch.

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

The  school  market  is  another  CCTV  segment.  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.


EAS  SYSTEMS

EAS  systems  consist  of  detection devices that are triggered when articles or
persons  tagged  with reusable tags or disposable labels, (referred to as tags),
pass  through the detection device. The EAS systems that Sentry manufactures are
based upon three distinct technologies. One, the Radio Frequency ("Knoscape RF")
System,  uses  medium radio frequency transmissions in the two to nine megahertz
range.  Second,  the "Ranger " system uses ultra-high frequency radio signals in
the  902 megahertz and 928 megahertz bands. Third, the Magnetic ("Knoscape MM ")
system uses very low frequency electromagnetic signals in the range of 218 hertz
to  nine  kilohertz.  Previously,  Sentry  was  an authorized distributor of the
library  security  systems  and  related  products  of  Minnesota  Mining  and
Manufacturing  Company  ("3M").  We cancelled our distribution agreement with 3M
effective  December  31,  2002.

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

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,  2003, the approximate number of EAS Systems sold or leased by
Sentry  and  its  predecessors  exceeded  25,725.

RADIO  FREQUENCY  AND  RANGER  DETECTION  SYSTEMS

Sentry  manufactures  and  distributes  the  Knoscape  RF  system, the principal
application  of  which  is to detect and deter shoplifting and employee theft of
clothing  and  hard goods in retail establishments. Sentry also manufactures and
distributes  the  Ranger  system,  which  the Company believes is a particularly
useful  and  cost  efficient EAS system for high fashion retail stores with wide
mall-type exit areas 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.


BOOKINGS

Of  Sentry's  bookings  for  the  year ended December 31, 2003, approximately 52
percent  were  attributable  to SentryVision , 30 percent to CCTV, 17 percent to
EAS  and  1% to Access Control. Of Sentry's bookings for the year ended December
31,  2002,  approximately  32  percent  were  attributable  to SentryVision , 45
percent to CCTV, 20 percent to EAS and 3 percent to 3M library security systems.
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.


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 2003, 2002 and 2001, Lowe's Home Centers accounted for
44%,  40%  and  22%,  respectively,  of total revenues. In  2001, Goody's Family
Clothing  accounted for 11% 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

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

Sentry's  manufacturing  operations continued the shift to out-sourcing in 2003.
Although  we  are not dependent upon any particular supplier, Sentry has made an
investment  in  material  and  training  with selected sub-contractors to supply
major  portions of our SmartTrack system.  Most system parts are "off-the-shelf"
components, and other materials and system components are designed by Sentry and
manufactured  to  Sentry's  specifications.  Some  final assembly operations are
conducted at the Company's facilities in Ronkonkoma, New York. System components
and  parts  include  cameras,  circuit  boards, electric motors and a variety of
machined  parts. Each system component and finished assembly undergoes a quality
assurance  check  by  Sentry  prior to its shipment to an installation site. All
SentryVision  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.  Sentry 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.

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

Sentry  produces at our facilities in Ronkonkoma, New York, or purchases through
suppliers, its Knoscape RF, Ranger, Knoscape MM and KnoGlo, or their components.
Production  consists  of final assembly  operations of electronic and mechanical
components that Sentry purchases from various suppliers. Independent contractors
using existing molds and tooling produce plastic cases and antenna coils for the
tags  to  Sentry's  specifications.  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. Sentry is
not  dependent  on  any one supplier or group of suppliers of components for its
systems.  Our  policy is to maintain our inventory at a level that is sufficient
to meet projected demand for its products. We do not anticipate any difficulties
in  continuing  to  obtain  suitable  components for EAS products at competitive
prices  in  sufficient  quantities  as  and  when  needed.


MARKETING

We  marketed  our products through the direct efforts of salespersons located in
select  metropolitan  areas  across  the  United  States  and Canada, as well as
through  dealers/system integrators. In 2003, as part of our restructuring plan,
we have reduced the number of direct salespersons to four, whose efforts are now
supplemented  through  six  in-house  sales  support staff and independent sales
representatives.  We  market  our  products  primarily  through participation in
trade  shows and through telemarketing. In addition, these efforts are augmented
through  our  Website  which  provides  enhanced  product  and  market  oriented
information.  Internationally,  we  market  SentryVision  through  large  system
integrators  and  distributors including Honeywell, Chubb, Cegelec, Intrepid and
BSC.


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

To  date,  most  SentryVision  and conventional CCTV Systems have been sold on a
direct  sale  basis.  Typical  billing  arrangements  for  SentryVision  systems
involve  invoicing 50% of total sale upon shipment of the product and 50% on the
completion  of  the  installation.

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 expected to be able to reach a far
larger  number of SentryVision  prospects and penetrate the market more rapidly.
The  program  has  generated interest through trade advertising, direct mail and
trade  show  participation.  Domestic  dealers  did  not  generate  significant
SentryVision  installations  in industrial and institutional facilities in 2003.
Prior  sales  were  made  through  ADT,  STG, Siemans, Mosler and Security Link.

In  addition,  we  market  SentryVision  internationally  using  independent
distributors.  The  agreements  require  the  distributor  to purchase a minimum
dollar  amount  of  the  Company's  product  during the term of the agreement to
retain  distributor  status. 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, 2003, we have
distributors  in  Canada,  UK,  France, Mexico, Belgium, Holland, Italy, Poland,
Singapore,  Russia,  Spain,  Brazil, Argentina, Hungary, Romania, Taiwan and the
United  Arab  Emirates.

During  2003,  Video  placed in service 227 SentryVision  systems and 2,996 CCTV
cameras, as compared to 186 SentryVision  systems and 4,449 CCTV cameras in 2002
and  97  SentryVision  systems  and  4,257  CCTV  cameras  in  2001.

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

Sentry  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  the  years ended December 31, 2003 and 2002 Sentry placed in service 226
and  590  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.  Knogo also markets an 8MHz P-2000
RF  system  designed for both hard and soft good customers. The P-2000 system is
economical  and  self-installable  by  the  customer.

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.  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  Sentry  entered  into a strategic alliance to provide
universal  asset  protection  to  libraries across North America.  The agreement
permitted  Sentry  to  act  as a distributor of all of 3M's library products and
other  3M  library materials flow management products and accessories to public,
academic and government libraries.  Under the agreement, 3M provided service and
installation  for all new and existing Sentry 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.

Sales  of 3M library products declined in 2002 and 2001 due to 3M's direct sales
practices  in  competition  with  Sentry  making  it  uneconomical to sell these
products.  As  a result, we have discontinued our distribution agreement with 3M
effective  December  31,  2002.


DIALOC  ID  SECURITY  PRODUCTS

We  also  distribute  EAS systems manufactured by Dialoc ID.  The 9000-P 8.2 MHz
system,  which  is  housed in slender, self-contained Plexiglas panels, provides
retailers  with  clear lines of sight at the front end along with the durability
of  solid  Plexiglas.  The panels can be custom printed with the retailer's logo
for enhanced image and trade name awareness. The system's electronics, which are
built-in  to  the  base  of  the Plexiglas antenna, provide detection of 8.2 MHz
labels  and  hard  tags  in  aisles  up  to six feet wide. The 9000 PL system is
offered  in both single and dual aisle configurations and is compatible with all
existing  8.2  MHz tags and checkout accessories. The Plexiglas RF system is one
of  the  products  being  brought  to  market  by  the  Company as a result of a
distribution  agreement  with Dialoc ID.  In addition, through Sentry, Dialoc ID
anticipates  it  will introduce LaserFuse, a new RF label technology, which will
be  compatible  with,  and  an  alternative to, the labels offered by Checkpoint
Systems,  Inc.  In  the future, we will also sell Dialoc ID products in the RFID
markets.  We  also  sell products manufactured by ID Systems including proximity
access  control,  time  and  attendance  and  security  labeling.


BACKLOG

Our  backlog  of  orders was approximately $3.2 million at December 31, 2003, as
compared  to  approximately  $5.2 million at December 31, 2002 and approximately
$6.0  million  at December 31, 2001.  We have noticed a trend, particularly with
our  major  customers,  of  receiving fewer long-term blanket orders than in the
past.  We  anticipate  that  substantially  all  of  the  backlog  present as of
December  31,  2003  will  be  delivered  within  12  months.


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  are  performed  primarily  by  the Company's
personnel.  All  products  sold  or  leased  are  covered  by a warranty period,
generally,  one  year.  After  the  warranty  period, we offer our customers the
option  of  entering  into a maintenance contract with the Company or paying for
service  on  a  per  call  basis.

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

The  use of subcontractors supervised by Company employees proved cost effective
with  no  sacrifice  in  quality.  A  network  of  qualified  contractors  was
established.  As  part  of  our  restructuring  plan  in  2003,  we  released 17
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.

We  currently have a network of 63 Service Partners and installation contractors
throughout  the  United States 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. 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.

Technician  headcount  was  reduced  to 23 in 2003 as we continued to develop
expertise  among  our  service  and  installation  partner  companies.  Company
employees  now  perform  only technical service and our well-established partner
network performs all installations.  The model remains cost-effective and allows
us  to  scale  our efforts up or down as business requires without the risk of a
fixed  cost  structure.

Our  Design  Center  personnel continued to screen all service requests and were
able  to  close  almost  720  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
2004.  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  (acquired  by Tyco/ADT),
Checkpoint  Systems,  Inc., GE Interlogix, Pelco Manufacturing, Inc., Panasonic,
Inc. and Honeywell are the Company's principal competitors. Outside the U.S., we
are  aware  of other companies that market other types of traveling CCTV systems
including  Lextar  Technologies, Ltd. in Australia, T.E.B., 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.


PATENTS  AND  OTHER  INTELLECTUAL  PROPERTY

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

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

Sentry  has  a  United  States  patent covering the cable-free transmission of a
video  signal  to and from the carriage. This technology prevents degradation of
the  video  signal  which can result from the movement of and prolonged friction
caused  by  the  carriage.  Three  additional  U.S.  patents  were received  for
improvements  made  to  the original technology which has been incorporated into
the SmartTrack product. Sentry 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 Sentry. There can be no assurance that
any  patents  applied for will be issued, or that the patents currently held, or
new  patents,  if  issued,  will  be  valid  if  contested  or  will provide any
significant  competitive  advantage  to  Sentry.

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

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

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

Sentry  has  21  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 Sentry 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
Sentry's  EAS  systems.


RESEARCH  AND  DEVELOPMENT

As of December 31, 2003, Sentry Technology Corporation had 8 full time employees
engaged  in research, engineering, product development and design.  In addition,
the  Company  may  retain  consultants  to  assist  in specific areas related to
research, engineering and product development.  For the years ended December 31,
2003,  2002 and 2001, approximately $0.7 million, $0.5 million and $0.7 million,
respectively,  was  expended  on  Company-sponsored  research.

Continued  product improvement efforts focused most engineering tasks in 2003 on
adding  features  to  the  SmartTrack  System  and  towards reducing the cost of
manufactured  products.  Enhancements  were  made  to  the  electro-mechanical,
electronic,  software,  and  optical  portions  of  the  SmartTrack  System.

Mechanical  reliability  and  extended  service  life  was  accomplished through
various improvements in material and the application of new assembly techniques.

Extensive  development  in  software  during  2003  resulted  in  improved  user
interfaces,  additional support for industry protocols, and allowed the use of a
wider  range  of  camera  options.

Additional  projects  included  revisions  to  EAS  products.

RF  systems have been enhanced through improvements in the electronics resulting
in shorter installation times and greater system stability.  Introducing acrylic
antenna panels for a more modern look enhanced visual aesthetics of the Knoscape
RF  product.

The  Ranger  system  has  been  upgraded  to  use  recently available integrated
circuits  resulting  in  greater  system  stability.


REGULATION

Because Sentry's EAS and CCTV systems use radio transmission and electromagnetic
wave  principles,  such  systems  are  subject  to  regulation  by  the  Federal
Communications Commission ("FCC") under the Communications Act of 1934. In those
instances  where it has been required, certification of such products by the FCC
has  been  obtained.  As  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 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 worked 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.  All  identified  retailers  have  subsequently  upgraded  to
compliant  EAS  devices.  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 cooperative 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 cooperating with Industry Canada, we believe
that  all  remaining  issues  relating  to the Ranger 1 and 2 problems have been
resolved.


EMPLOYEES

As  part  of  our restructuring plan, our headcount was reduced by approximately
47%  on  March  7, 2003.  At December 31, 2003, the Company and its subsidiaries
employed  64 full-time employees, of whom 15 were employed in administrative and
clerical  capacities,  8  in  engineering,  research  and  development,  8  in
manufacturing  support,  4 in sales and 29 in customer service and support. None
of  our  employees  are  employed  pursuant to collective bargaining agreements.


ITEM  2.  PROPERTIES
--------------------

The  Company's  principal  executive, sales and administrative offices, research
and development and distribution facilities are located in Ronkonkoma, New York,
in  a  20,000  square  foot  facility  leased  by  the  Company.


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 fiscal year ended December 31, 2003, 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 and low
sales  prices  per  share  of  common  stock:

<TABLE>
<CAPTION>
<S>                                            <C>    <C>
                                               High   Low
                                               -----  -----

2002
 First Quarter. . . . . . . . . . . . . . . .  $0.22  $0.12
 Second Quarter . . . . . . . . . . . . . . .   0.21   0.08
 Third Quarter. . . . . . . . . . . . . . . .   0.10   0.05
 Fourth Quarter . . . . . . . . . . . . . . .   0.07   0.01

2003
 First Quarter. . . . . . . . . . . . . . . .  $0.03  $0.01
 Second Quarter . . . . . . . . . . . . . . .   0.08   0.01
 Third Quarter. . . . . . . . . . . . . . . .   0.14   0.02
 Fourth Quarter . . . . . . . . . . . . . . .   0.21   0.09

2004
 First Quarter  . .(through March 15, 2004) .  $0.25  $0.13
</TABLE>

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

(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 12, 2004, the Company had 85,755,610 shares
of Common Stock issued and outstanding, which were held by 293 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.


ITEM  6.     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.

Revenue  Recognition  --  We  offer  our security devices for sale or lease.  We
recognize  revenue  when  installation  is  complete  or  other  post-shipment
obligations  have  been  satisfied.  Service revenues are recognized when earned
and  maintenance  revenues  are  recognized  ratably  over  the service contract
period.

Related Party Transactions -- Details of related party transactions are included
in  Item  12  and  in  Notes  2  and 13 of the Financial Statements of this Form
10-KSB.

<PAGE>

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

The  table  below  sets forth selected consolidated historical financial data of
the  Company  for  the years ended December 31, 1999, 2000, 2001, 2002 and 2003.
The  selected  consolidated  historical  financial  data  should  be  read  in
conjunction  with  the  audited Consolidated Financial Statements of the Company
included  in  Item  7.



<TABLE>
<CAPTION>


(AMOUNTS IN THOUSANDS EXCEPT FOR PER SHARE DATA)

<S>                                                                <C>        <C>        <C>       <C>       <C>
Years Ended December 31,. . . . . . . . . . . . . . . . . . . . .      1999       2000      2001      2002      2003
                                                                   ---------  ---------  --------  --------  --------

SELECTED STATEMENT OF OPERATIONS DATA:
Total revenues. . . . . . . . . . . . . . . . . . . . . . . . . .  $ 22,281   $ 19,865   $17,299   $14,536   $13,009
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . .    14,339     11,120     8,879     7,382     5,179
Customer service expenses . . . . . . . . . . . . . . . . . . . .     5,457      4,464     4,361     4,240     3,977
Selling, general and administrative
     expenses . . . . . . . . . . . . . . . . . . . . . . . . . .     9,169      7,576     5,773     5,119     3,575
Restructuring and impairment
    charges . . . . . . . . . . . . . . . . . . . . . . . . . . .     3,026      2,981         -         -         -
Gain on sale of assets. . . . . . . . . . . . . . . . . . . . . .       503          -         -         -         -
Loss before income taxes. . . . . . . . . . . . . . . . . . . . .   (11,034)    (7,821)   (2,911)   (3,356)   (1,049)

Extraordinary item - Gain on extinguishment of debt . . . . . . .         -          -         -         -       738

Cumulative effect of change in accounting principal . . . . . . .         -        301         -         -         -
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . .   (11,034)    (8,122)   (2,911)   (3,356)      181
Preferred stock dividends . . . . . . . . . . . . . . . . . . . .     1,326      1,337        25         -         -

Return to common shareholders from redemption of preferred stock.         -          -    27,198         -         -
Net income (loss) available to
   common shareholders. . . . . . . . . . . . . . . . . . . . . .   (12,360)    (9,459)   24,262    (3,356)      181
Net income (loss) per common share:
   Basic. . . . . . . . . . . . . . . . . . . . . . . . . . . . .     (1.27)     (0.97)     0.40     (0.05)     0.00
   Diluted. . . . . . . . . . . . . . . . . . . . . . . . . . . .     (1.27)     (0.97)     0.39     (0.05)     0.00

As of December 31,

SELECTED BALANCE SHEET DATA:. . . . . . . . . . . . . . . . . . .      1999       2000      2001      2002      2003
                                                                   ---------  ---------  --------  --------  --------
Working capital . . . . . . . . . . . . . . . . . . . . . . . . .  $  6,290   $  2,173   $ 2,235   $  (768)  $  (285)
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . .    22,007     13,845    11,561     7,992     4,093
Property, plant and equipment, net. . . . . . . . . . . . . . . .     3,934      3,324     2,962     2,563       209
Obligations under capital leases. . . . . . . . . . . . . . . . .     3,058      2,892     2,751     2,652        18
Redeemable cumulative preferred stock . . . . . . . . . . . . . .    27,843     29,180         -         -         -

Total common shareholders' equity (deficit) . . . . . . . . . . .   (16,335)   (25,794)    2,891      (451)     (125)

</TABLE>


RESULTS  OF  OPERATIONS

YEAR  ENDED  DECEMBER  31,  2003  COMPARED  WITH  YEAR  ENDED  DECEMBER 31, 2002

Consolidated revenues were 11% lower in the year ended December 31, 2003 than in
the  year  ended December 31, 2002.  As part of the Company's restructuring plan
for  2003,  we  reduced the direct sales force from ten to four.  The backlog of
orders,  which  we  expect  to  deliver  within twelve months, decreased to $3.2
million  at  December 31, 2003 as compared to $5.2 million at December 31, 2002.
We  believe  this  is  due  in  part  to  a  trend,  particularly from our major
customers,  of  awarding fewer long-term blanket orders than in the past.  Total
revenues  for  the  periods  presented  are  broken  out  as  follows:


                                     2003           2002           Change
                                     ----           ----           ------
                                       (in  thousands)
EAS                              $  1,817       $  2,530           (28%)
CCTV                                3,601          4,578           (21%)
SentryVision                        3,049          2,368            29%
3M  library  products                  45            256           (82%)
                                  -------       --------
Total  sales                        8,512          9,732           (13%)
Service, installation and other     4,497          4,804            (6%)
                                  -------          -----
Total  revenues                  $ 13,009      $  14,536           (11%)
                                 ========      =========           ====


Direct  sales of EAS products were lower in 2003 as compared to 2002 as a result
of  lower  sales  to  our Mexican Distributor and to smaller boutique customers.
Overall sales of conventional CCTV systems in 2003 have weakened with several of
our existing customers compared to the prior year while sales of our proprietary
SentryVision  Smart  Track system continued to strengthen.  We continue to see a
growing  trend  for  product  acceptance  and increased market opportunities for
traveling  camera  systems both domestically and internationally.  We terminated
our  distribution  agreement with 3M for library products as of the end of 2002,
however,  the  final  installations  were  completed  in  first quarter of 2003.
Service  revenues  decreased primarily as a result of lower maintenance contract
renewals  in  2003  than  in  2002.  Our  sales of SentryVision  products to our
international  dealers  and  distributors  are  denominated  in  U.S.  dollars,
therefore  the  strengthening  of  the  Euro  against  the  U.S.  dollar  had no
significant  impact  on  revenues.

Cost  of  sales were 61% in 2003 compared to 76% in 2002.  In the second quarter
of  2003,  we  began  to outsource all significant manufacturing operations. The
decrease  in the cost of sales percentage in 2003 is primarily the result of the
elimination  of  the  charge  to  cost of sales of under absorbed fixed overhead
costs  due to the termination of in-house manufacturing.  In addition, we made a
concerted  effort  to  sell  inventory  from stock in 2003, of which some of the
inventory  values  had  been  previously  written  down.

Customer  service  expenses,  as  a percentage of service revenues, remained the
same  in  2003  as compared to 2002.  Through a combination of a decrease in the
number  of  customer  service  employees  and  increased  use of outside service
contractor  costs,  we  were  able  to lower total net customer service costs to
compensate  for  the  lower  revenue  levels  2003.

Selling,  general  and  administrative  expenses  were  30%  lower  in 2003 when
compared  to  2002  primarily as a result of lower payroll costs and commissions
partly  as  a  result  of  the  headcount  reduction  as  of  March 7, 2003.  We
anticipate  that  selling,  general  and  administrative  costs will continue to
decline on a comparative basis during 2004, particularly after our relocation to
a  smaller,  less  costly  facility  as  of  October  1,  2003.

Research  and development costs were higher in 2003 when compared to 2002 due to
a reorganization and transfer of employees into the engineering group as part of
our  restructuring.

Total  interest  and financing costs increased by $68,000 in 2003 as compared to
2002.  Bank  interest  expense  declined by $63,000 in 2003 due to lower average
borrowings  and  lower  interest  rates under our revolving credit and term loan
facility.  Interest  under  capital  leases decreased by $159,000 as a result of
the  cancellation of the sale and leaseback agreement on our former headquarters
facility.  However,  total interest and financing costs in 2003 were higher than
in  2002  because  we  were  required  to supplement our financing needs through
increased  use  of  purchase  order  financing with EPK Financial, which carries
substantially  higher  financing  fees  than the revolving credit line. Interest
under  this facility was $290,000 higher in 2003 than in 2002. We expect that PO
financing would be eliminated and interest costs would significantly decrease if
we  were  successful  in  raising  equity  or  debt  financing  in  the  future.

During  2003,  we  entered  into  settlements  with certain vendors for past due
obligations  which resulted in a gain of approximately $526,000 (net of $351,000
income  taxes),  which  represents the difference between the amounts due before
the  settlement  and the total amount payable, including the value of the common
stock,  as a result of the settlement.  In addition, on July 9, 2003, we entered
into  a  settlement agreement with our landlord regarding the termination of its
long-term  capital and operating leases for our facility in Hauppauge, New York.
We  recognized  an extraordinary gain of $212,000 (net of $141,000 income taxes)
in  the  third quarter of 2003, representing the difference between the carrying
amounts  of  outstanding  obligations to the landlord less the net book value of
the  property  on  the  date  of  the  settlement.

The  $492,000  income  tax  provision  recognized on the extraordinary gains was
offset  by equivalent income tax benefits generated from the current year's loss
from operations and the utilization of net operating loss carryforwards.  Due to
net  operating  losses,  we  have  not  provided  for  income  taxes  in  2002.

As  a result of the foregoing, we had a net profit of $181,000 in the year ended
December  31,  2003  as compared to a net loss of $3.4 million in the year ended
December  31,  2002.

LIQUIDITY  AND  CAPITAL  RESOURCES

We  have  incurred  reduced  revenue  levels,  decreased  financial position and
recurring  operating losses over the past several years.  As a result, the Board
of  Directors approved a restructuring plan for 2003 to strengthen the Company's
operating  efficiencies and to better align its operations with current economic
and  market  conditions.  To  date,  we have made significant progress under our
revised  business  plan  including  the  following:

-     Significantly  downsized  our  operations  including  the  elimination  of
      approximately  55  of  117  positions  as  of  March  7,  2003.
-     Negotiated  a settlement with past due trade vendors which has resulted in
      an  $877,000  gain.
-     Negotiated  with  the  previous  landlord  to  move  out  of its Hauppauge
      corporate  facility.  The  lease  termination  resulted  in  a  $353,000
      gain.
-     Relocated  our  corporate  offices  to a smaller and less costly facility.
-     Dedicated  a  substantial  portion  of  our  remaining  resources  towards
      maintaining  and  improving  our  relationships  with  our 30 largest
      customers.
-     Outsourced  all  non-essential  manufacturing  and  assembly operations to
      qualified  subcontractors.
-     Further  expanded  our  Service  Partner  program  to  augment service and
      installations  performed  by  our  employees.

On January 7, 2003, Sentry initiated its restructuring plan.  Due to the size of
the  layoff,  we  were required to give the terminated employees a 60-day notice
period.  The  costs associated with these restructuring activities were expensed
as  incurred.  The  successful implementation of this restructuring has resulted
in  substantial  gross  margin improvements and reductions in operating expenses
beginning  in  the  second  half  of  2003.

As  of  December  31, 2003, we had borrowings of approximately $1.5 million with
CIT,  the  maximum  amount  available  under  the revolving credit and term loan
facility.  Most of our trade vendors require cash in advance or COD payments for
purchases.  Therefore,  we  continue  to supplement our borrowings under the CIT
credit facility with purchase order financing through EPK Financial Corporation.
During  2003,  we funded $2.4 million of inventory purchases under this facility
as  compared  to  $0.6  million  in  2002.  As  of  December  31,  2003, we owed
approximately  $291,000  to  EPK  Financial.

During  2003,  the Company entered into a settlement with certain of its vendors
for past due obligations.  Under the terms of the settlement, each participating
vendor received a note for approximately 10% of their balance due and two shares
of  Sentry  common  stock  for  each  dollar  owed in full satisfaction of their
outstanding balances, which approximated $1.1 million.  The notes, approximating
$112,000,  are  non-interest bearing and are payable in three equal installments
on  January 15, 2004, 2005, and 2006.  The 2,193,263 shares issued in connection
with  this settlement were valued at approximately $105,000, based on the market
value  of  the  stock  at  the  time  of  the  settlement.  As  a result of this
transaction,  the  Company  realized  an  extraordinary  gain  of  $877,000,
representing  the  difference  between the amounts due before the settlement and
the  total  amount payable, including the value of the common stock, as a result
of the settlement.  To date, approximately 82% of past due trade debts have been
settled.  The  first  note payment due January 15, 2004 has been delayed pending
the  proposed  funding  transaction  described  below.

On  July  9,  2003, Sentry entered into a settlement agreement with its landlord
regarding  the termination of its long-term capital and operating leases for its
then  current  facility  in Hauppauge, New York.  Under terms of the settlement,
Sentry  was released from its current and future liabilities under the leases in
exchange  for  a  $250,000, 8% note, payable in 36 equal monthly installments of
$7,834,  including  interest,  commencing  November  1,  2003.  The  note  also
obligates  Sentry  to prepay an amount of $100,000 against the note in the event
of  an  equity  financing,  as defined.  In addition, Sentry issued the landlord
1,000,000  shares  of  common  stock,  for  which  the  fair  value of the stock
($33,000) was determined using the closing price as of July 9, 2003.  Sentry was
also obligated to pay rent of $16,000 per month until it vacated the premises on
September  30,  2003.  The  Company  recognized  a gain of $353,000 in the third
quarter  of  2003,  representing  the difference between the carrying amounts of
outstanding  obligations to the landlord less the net book value of the property
on  the  date  of  the  settlement.

As  of  October  1,  2003,  Sentry  moved its corporate offices and distribution
center  to  a smaller and less costly 20,000 square foot facility in Ronkonkoma,
New  York.  The  Company  entered  into  a three-year lease with annual rents of
$140,000,  $144,200 and $148,600, respectively.  It is anticipated that the move
will  result  in  excess  of  $250,000  in  savings  on  an  annualized  basis.

Dialoc  ID  is  not  able  to  provide us with additional financial support.  We
continue  to  pursue  additional  debt or equity financing through our financial
advisors  and  on  February  26,  2004,  Sentry  signed  a  term  sheet to raise
$2,000,000  in  secured  convertible  debt  with  a venture fund ("the VC Fund")
managed  by  a  multibillion-dollar  North  American  company.

Key  terms  of  the  transaction  are  as  follows:

-     Four  year  term.
-     Interest  rate  of  8%.
-     Redeemable  at  Sentry's  option  after  18  months.
-     Conversion  price equal to the market price, at time of conversion, less a
      discount  of  30%  with  a  maximum  conversion  price  of  $0.12  per
      share.
-     Conversion  is  at  the  option  of the VC Fund when market share price is
      equal to or greater than $0.17 per share or with the approval of Sentry's
      Board of  Directors  when  the  market  share  price  is  less  than
      $0.17 per share.
-     Sentry  will  provide  most  favored pricing to all VC Fund affiliates and
      expects  to  be  a  supplier  of  security  and  identification  products
      to the affiliates  of  the  VC  Fund.
-     The  VC Fund will be issued warrants for 5,000,000 shares of Sentry common
      stock,  priced  at  $0.15  per  share, exercisable anytime within the next
      four years.
-     The  VC  Fund will be entitled to one seat on Sentry's Board of Directors.
-     As  a  condition  of  the financing, Sentry will be required to acquire ID
      Security Systems Canada Inc. ("ID Canada") and ID Systems USA Inc.,
      collectively referred  to  as  "ID  Systems."

Sentry's  Board of Directors and shareholders owning a majority of Sentry common
stock  have  approved  the  proposed  transaction  with  the  VC  Fund  and  the
acquisition  of ID Systems, both of which are subject to customary due diligence
and  expected  to  close  during  the  next  45  days.

In  a related transaction, Dialoc ID Holdings B.V. ("Dialoc") has agreed to sell
39,066,927  Sentry  common  shares  (representing approximately 46% of the total
issued  and outstanding shares of Sentry) and all of the stock of ID Systems, to
Saburah  Investments  Inc.  ("Saburah").  ID  Systems is a Toronto based company
engaged  in  anti-shoplifting  technology,  security  labeling,  radio frequency
identification  (RFID),  access control and library security.  Peter L. Murdoch,
President  and  CEO  of  Sentry  and  President  of  ID Systems, is the owner of
Saburah.  The  price  to be paid to Dialoc by Saburah and Murdoch for Sentry and
ID  Systems  shares  in  cash,  debt  assumption  and  other  consideration  is
approximately  $3.6  million  plus  the  surrender  of Murdoch's 15% interest in
Dialoc.  Saburah has also agreed to make a payment to Dialoc in the future equal
to  approximately  6%  of  any  payment it receives from Checkpoint Systems Inc.
resulting from litigation brought by ID Canada against Checkpoint.  ID Canada is
appealing the reduction of the original jury award of $79.2 million.  The appeal
is  scheduled  to  be  heard  during  the  last  week  of  March.


As  a  condition  of  the  VC  Fund  financing, Sentry has agreed to purchase ID
Systems from Saburah in exchange for 30,000,000 Sentry common shares.  The price
to  be  paid  per Sentry share will be approximately $0.12.  An opinion has been
provided  to  a  special  committee  of Sentry's Board of Directors by Corporate
Valuation Services confirming that both the price paid for the acquisition of ID
Systems  and  the  agreed conversion price of the proposed VC Fund debt are fair
from  the point of view of Sentry shareholders.  Although Sentry will not obtain
an interest in the Checkpoint Systems litigation, Saburah and Sentry have agreed
that  Sentry  may  require Saburah to purchase additional Sentry shares equal to
approximately  4.5%  of  any  amount  received  by  Saburah  from the Checkpoint
litigation,  to a maximum of $1,000,000.  The price per share will be determined
by  market conditions if and when the call is made.  This transaction represents
the maximum future benefit that may flow to Sentry and ID Systems as a result of
the  Checkpoint  lawsuit.

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

-     ID  Systems  and Sentry continue as the exclusive distributor in North and
      South  America  for  a  period  of  five years for all Dialoc products
      Including Laserfuse  radio  frequency  security  labels  and  all  RFID
      products.
-     Dialoc  becomes  the  exclusive  distributor  in Europe and Asia of labels
      manufactured  by  ID  Systems'  security  label manufacturing subsidiary,
      Custom Security  Industries  Inc.  ("CSI").
-     CSI  acquires  the right to purchase Laserfuse raw material for processing
      into  finished  security labels in its Toronto plant in order to reduce
      the cost of  production.
-     CSI acquires the option to purchase a non-exclusive license to manufacture
      complete  Laserfuse  security  labels  for  a  period of 10 years subject
      to the payment  of  $500,000  and  a  running  royalty  of  $0.001  per
      label.
-     Dialoc  will  continue  to  be  a dealer for Sentry products in Europe and
      Asia.

ID Systems' management including Dr. Morton Roseman, President of CSI, and Peter
Murdoch  will  invest $100,000 each to complete the proposed transaction between
Saburah  and  Dialoc.  Furst  Capital  Partners  LLC  and associates will invest
$900,000  of  equity  in  the  combined  transaction.  Mr.  Robert  Furst  is  a
long-standing  member  of  Sentry's Board of Directors.   On completion of these
transactions and prior to the VC Fund conversion of the proposed $2,000,000 debt
transaction,  Peter  Murdoch,  directly  or  indirectly through his ownership of
Saburah,  will  own  or control 47.4% of the outstanding common stock of Sentry.

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 that the proposed convertible debt transaction with the VC Fund or
other  equity  financing  will  be  available  on terms that are satisfactory to
Sentry,  or that any such debt or equity financing will be sufficient to provide
the  full amount of funding necessary. 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.  Sentry  will  require  liquidity  and  working capital to
finance  increases  in  receivables  and inventory associated with sales growth,
payments  to past due vendors and, to a lesser extent, for capital expenditures.
If  we  are  not  able to raise additional debt or equity financing, we could be
forced  into  a  bankruptcy  or  be  required  to liquidate our assets.  In this
scenario,  most  likely,  our  secured  lender  would  receive  the  bulk of any
proceeds.


The table below summarizes aggregate maturities of future minimum lease payments
under  noncancelable  operating  and  capital  leases  as  of December 31, 2003.

<TABLE>
<CAPTION>


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

Operating Leases        $  398      $  141      $  257      $ -       $-
Capital Leases              22           7          15        -        -
                        ------      ------      ------      ---       ---
Total                   $  420      $  148      $  272      $ -       $-
                        ======      ======      ======      ===       ===
</TABLE>





RECENT  ACCOUNTING  PRONOUNCEMENTS

In  April 2003, FASB issued Statement of Financial Accounting Standards No. 149,
Amendment  of  Statement  133  on  Derivative Instruments and Hedging Activities
("SFAS  149").  SFAS  149  amends  and  clarifies  accounting  for  derivative
instruments,  including  certain  derivative  instruments  embedded  in  other
contracts,  and for hedging activities under SFAS 133. SFAS 149 is effective for
contracts  and  hedging  relationships  entered  into or modified after June 30,
2003.  We  adopted  the  provisions of SFAS 149 effective June 30, 2003 and such
adoption did not have a material impact on our consolidated financial statements
since  we  have  not  entered  into  any  derivative  or  hedging  transactions.

In  May  2003,  the  FASB issued Statement of Financial Accounting Standards No.
150,  "Accounting for Certain Financial Instruments with Characteristics of both
Liabilities  and  Equity"  ("FAS 150"). This statement establishes standards for
how  an  issuer  classifies  and measures in its statement of financial position
certain  financial  instruments  with  characteristics  of  both liabilities and
equity.  In  accordance  with  the  standard,  financial instruments that embody
obligations for the issuer are required to be classified as liabilities. FAS 150
is  effective  for  financial instruments entered into or modified after May 31,
2003,  and  otherwise  is effective at the beginning of the first interim period
beginning  after June 15, 2003.  We adopted the provisions of SFAS 150 effective
June  30,  2003  and  such  adoption  did  not  have  a  material  impact on our
consolidated  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-KSB contain
"forward-looking  statements"  (as  defined in the Private Securities Litigation
Reform  Act  of  1995  or  the  "PSLRA") that are based on current expectations,
estimates  and  projections about the industry in which the Company operates, as
well  as  management's  beliefs  and  assumptions.  Words  such  as  "expects,"
"anticipates"  and  "believes"  and  variations  of  such  words  and  similar
expressions  generally indicate that a statement is forward-looking. The Company
wishes  to  take  advantage  of  the  "safe  harbor"  provisions of the PSLRA by
cautioning  readers  that many important factors discussed herein, among others,
may  cause the Company's results of operations to differ from those expressed in
the  forward-looking  statements.  These factors include:  (i) the risk that any
delay or cancellation of orders from one or more of Sentry's 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."




<PAGE>






















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

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

                               REPORT ON AUDITS OF
                               -------------------
                        CONSOLIDATED FINANCIAL STATEMENTS
                        ---------------------------------

                     YEARS ENDED DECEMBER 31, 2003 AND 2002
                     --------------------------------------


                                    CONTENTS
                                    --------

                                                                     Page
                                                                     ----
CONSOLIDATED  FINANCIAL  STATEMENTS:

     Independent  auditors'  report                                   24

     Balance  sheets                                                  25

     Statements  of  operations                                       26

     Statements  of  shareholders'  equity                            27

     Statements  of  cash  flows                                      28

     Notes  to  financial  statements                             29  -  43


<PAGE>
                                     ------
                          Independent Auditors' Report
                          ----------------------------


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


We  have  audited  the  accompanying  consolidated  balance  sheets  of  Sentry
Technology  Corporation and subsidiaries (the "Company") as of December 31, 2003
and  2002,  and the related consolidated statements of operations, shareholders'
equity  (deficit)  and  cash  flows  for  the years then ended.  These financial
statements  are  the  responsibility  of  the  Company's  management.  Our
responsibility  is  to  express  an  opinion  on  the  consolidated  financial
statements.

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,  2003  and  2002,  and  the results of their
operations  and  their  cash  flows  for the years then ended in conformity with
accounting  principles  generally  accepted  in  the  United  States of America.

The  accompanying  consolidated financial statements have been prepared assuming
the  Company  will  continue  as a going concern.  As discussed in Note 4 to the
consolidated  financial  statements,  the  Company's  recurring  losses  from
operations  and  negative  cash  flow position raise substantial doubt about its
ability  to  continue as a going concern.  Management's plans in regard to these
matters  are also described in Note 4.  The consolidated financial statements do
not  include  any  adjustments  that  might  result  from  the  outcome  of this
uncertainty.


/s/  Holtz  Rubenstein  &  Co.,  LLP

Melville,  New  York
February  27,  2004


<PAGE>



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


<TABLE>
<CAPTION>
                                                                               December 31,
<S>                                                                     <C>             <C>
                                                                                 2003       2002
                                                                        --------------  ---------
                               ASSETS
----------------------------------------------------------------------
Current Assets:
  Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . .  $         210   $    266
  Accounts receivable, less allowance for doubtful accounts
    of $304 and $303, respectively . . . . . . . . . . . . . . . . . .          1,482      1,472
  Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . .          1,855      3,145
  Prepaid expenses and other current assets. . . . . . . . . . . . . .            126        237
                                                                        --------------  ---------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . .          3,673      5,120
PROPERTY, PLANT AND EQUIPMENT, net . . . . . . . . . . . . . . . . . .            209      2,563
PATENTS, less accumulated amortization of $260 and $338, respectively.            133        207
OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             78        102
                                                                        --------------  ---------
                                                                        $       4,093   $  7,992
                                                                        ==============  =========

                LIABILITIES AND SHAREHOLDERS' EQUITY
----------------------------------------------------------------------
Current Liabilities:
  Revolving line of credit and term loan . . . . . . . . . . . . . . .  $       1,515   $  2,067
  Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . .            566      1,807
  Accrued liabilities. . . . . . . . . . . . . . . . . . . . . . . . .          1,601      1,523
  Obligations under capital leases - current portion . . . . . . . . .              5         97
  Deferred income. . . . . . . . . . . . . . . . . . . . . . . . . . .            271        394
                                                                        --------------  ---------
Total current liabilities. . . . . . . . . . . . . . . . . . . . . . .          3,958      5,888

NOTES PAYABLE. . . . . . . . . . . . . . . . . . . . . . . . . . . . .            247          -

OBLIGATIONS UNDER CAPITAL LEASES, noncurrent portion . . . . . . . . .             13      2,555
                                                                        --------------  ---------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . .          4,218      8,443

COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY (DEFICIT):
  Common stock, $0.001 par value; authorized 140,000 shares,
    issued and outstanding 85,756 and 78,044 shares, respectively. . .             86         78
  Additional paid-in capital . . . . . . . . . . . . . . . . . . . . .         44,658     44,521
  Accumulated deficit. . . . . . . . . . . . . . . . . . . . . . . . .        (44,749)   (44,930)
  Note receivable from shareholder . . . . . . . . . . . . . . . . . .           (120)      (120)
                                                                        --------------  ---------
Total shareholders' equity (deficit) . . . . . . . . . . . . . . . . .           (125)      (451)
                                                                        --------------  ---------
                                                                        $       4,093   $  7,992
                                                                        ==============  =========
</TABLE>


                 See notes to consolidated financial statements










<PAGE>










                          SENTRY TECHNOLOGY CORPORATION
                          -----------------------------
                                AND SUBSIDIARIES
                                ----------------
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      -------------------------------------
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                   Years Ended December 31,
                                                                  --------------------------
<S>                                                                  <C>          <C>
                                                                          2003      2002
                                                                        --------  --------
REVENUES:
 Sales. . . . . . . . . . . . . . . . . . . . . . . .                $     8,512   $ 9,732
 Service revenues and other . . . . . . . . . . . . .                      4,497     4,804
                                                                     -----------  --------
                                                                          13,009    14,536
                                                                     -----------  --------
COST AND EXPENSES:
 Cost of sales. . . . . . . . . . . . . . . . . . . .                      5,179     7,382
 Customer service expenses. . . . . . . . . . . . . .                      3,977     4,240
 Selling, general and administrative expenses . . . .                      3,575     5,119
 Research and development . . . . . . . . . . . . . .                        656       548
                                                                     -----------  --------
                                                                          13,387    17,289
                                                                     -----------  --------
OPERATING LOSS. . . . . . . . . . . . . . . . . . . .                       (378)   (2,753)
INTEREST AND FINANCING EXPENSE, net . . . . . . . . .                        671       603
                                                                     -----------  --------
LOSS BEFORE INCOME TAXES AND
 EXTRAORDINARY ITEM . . . . . . . . . . . . . . . . .                     (1,049)   (3,356)

INCOME TAX BENEFIT. . . . . . . . . . . . . . . . . .                       (492)        -
                                                                     -----------  --------
LOSS BEFORE EXTRAORDINARY ITEM. . . . . . . . . . . .                       (557)   (3,356)

EXTRAORDINARY ITEM - Gain on extinguishment of debt,
 net of $492 income taxes . . . . . . . . . . . . . .                        738         -
                                                                     -----------  --------

NET INCOME (LOSS) . . . . . . . . . . . . . . . . . .                $       181   $(3,356)
                                                                     ===========  ========
BASIC INCOME (LOSS) PER COMMON SHARE:
 Income (loss) before extraordinary item. . . . . . .                $     (0.01)  $ (0.05)
 Extraordinary item . . . . . . . . . . . . . . . . .                       0.01      0.00
                                                                     -----------  --------
 Net income (loss). . . . . . . . . . . . . . . . . .                $      0.00   $ (0.05)
                                                                     ===========  ========

WEIGHTED AVERAGE BASIC COMMON SHARES. . . . . . . . .                     84,153    72,193
                                                                     ===========  ========
</TABLE>







                 See notes to consolidated financial statements











<PAGE>














                                    SENTRY TECHNOLOGY CORPORATION
                                    -----------------------------
                                           AND SUBSIDIARIES
                                           ----------------
                            CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                            -----------------------------------------------
                                            (IN THOUSANDS)
                                YEARS ENDED DECEMBER 31, 2003 AND 2002
                                --------------------------------------

<TABLE>
<CAPTION>


<S>                                                   <C>         <C>          <C>           <C>          <C>         <C>
                                                                                                                         Total
                                                                                                          Note          Common
                                                                               Additional                 Receivable  Shareholders'
                                                         Common Stock           Paid-in      Accumulated    from         Equity
                                                      Shares        Amount      Capital        Deficit    Shareholder   (Deficit)

BALANCE, January 1, 2002 . . . . . . . . . . . . .      61,543    $      62    $    44,403   $  (41,574)  $        -   $   2,891

Net loss and comprehensive loss. . . . . . . . . .           -            -              -       (3,356)           -      (3,356)
Net proceeds from common stock issued to Dialoc ID      14,500           14              -            -            -          14
Exercise of stock options. . . . . . . . . . . . .        2001            2            118            -         (120)          -
                                                      ---------    ---------   -----------   ----------   ----------   ---------

BALANCE, December 31, 2002 . . . . . . . . . . . .      78,044           78         44,521      (44,930)        (120)       (451)

Net income and comprehensive income. . . . . . . .           -            -              -          181            -         181
Settlement of debt and lease obligations . . . . .       3,193            3            137            -            -         140
Net proceeds from common stock issued to Dialoc ID       4,517            5              -            -            -           5
Exercise of stock options. . . . . . . . . . . . .           2            -              -            -            -           -
                                                    ----------    ---------    -----------   ----------   ----------   ---------

BALANCE, December 31, 2003 . . . . . . . . . . . .      85,756    $      86    $    44,658   $  (44,749)  $     (120)  $    (125)
                                                    ==========    =========    ===========   ==========   ==========   =========


</TABLE>







                 See notes to consolidated financial statements
<PAGE>
































                          SENTRY TECHNOLOGY CORPORATION
                          -----------------------------
                                AND SUBSIDIARIES
                                ----------------
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                      -------------------------------------
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                             Years Ended December 31,
                                                                           ---------------------------

<S>                                                                            <C>        <C>
                                                                                2003        2002
                                                                               --------   --------
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $   181    $ (3,356)
 Adjustments to reconcile net income (loss) to net cash
   provided by operating activities:
   Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . . .      262         474
   Amortization of intangibles and other assets . . . . . . . . . . . . . . .       90          42
   Provision for bad debts. . . . . . . . . . . . . . . . . . . . . . . . . .      (16)       (226)
   Extraordinary gain on extinguishments of debt. . . . . . . . . . . . . . .   (1,230)          -
 Changes in operating assets and liabilities:
   Accounts receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . .        6       1,467
   Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    1,290       1,595
   Prepaid expenses and other assets. . . . . . . . . . . . . . . . . . . . .      118         142
   Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . .       65         313
   Deferred income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     (123)         91
                                                                               --------    --------
 Net cash provided by operating activities. . . . . . . . . . . . . . . . . .      643         542
                                                                               --------    --------

CASH FLOWS FROM INVESTING ACTIVITIES:
 Purchase of property, plant and equipment. . . . . . . . . . . . . . . . . .      (81)        (41)
 Intangibles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      (16)        (15)
                                                                               --------    --------
 Net cash used in investing activities. . . . . . . . . . . . . . . . . . . .      (97)        (56)
                                                                               --------    --------

CASH FLOWS FROM FINANCING ACTIVITIES:
 Net payments on the revolving line of credit . . . . . . . . . . . . . . . .   (1,339)       (566)
 Proceeds of term loan. . . . . . . . . . . . . . . . . . . . . . . . . . . .      845         100
 Repayment of term loan . . . . . . . . . . . . . . . . . . . . . . . . . . .      (58)        (67)
 Repayment of obligations under capital leases. . . . . . . . . . . . . . . .      (55)       (124)
 Proceeds of sale of stock, net . . . . . . . . . . . . . . . . . . . . . . .        5          14
                                                                               --------    --------
 Net cash used in financing activities. . . . . . . . . . . . . . . . . . . .     (602)       (643)
                                                                               --------    --------

DECREASE IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . . . . . . . .      (56)       (157)
CASH AND CASH EQUIVALENTS, beginning of year. . . . . . . . . . . . . . . . .      266         423
                                                                               --------    --------
CASH AND CASH EQUIVALENTS, end of year. . . . . . . . . . . . . . . . . . . .  $   210     $   266
                                                                               ========    ========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
 Cash paid during the year for:
 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $   676     $   633
                                                                               ========    ========

 Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $     -     $     -
                                                                               ========    ========

During 2003 the Company issued 3,193,263 shares of its common stock, with a value approximating $138,000,
to certain vendors and its former landlord in connection with the settlement of certain obligations.



</TABLE>

                      See notes to consolidated statements







<PAGE>





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

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

                     YEARS ENDED DECEMBER 31, 2003 AND 2002
                     --------------------------------------



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.


2.     INVESTMENT  BY  DIALOC  ID:
       --------------------------

          On  January  8,  2001, Dialoc ID, formerly known as Dutch A&A Holding,
B.V.,  acquired 23,050,452 shares of Sentry common stock for $3 million.  Dialoc
ID  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  Dialoc ID allowing the
Company access to new products of Dialoc ID and allowing Dialoc ID access to the
Company's  products  for  an  initial  period  of  not  less  than  two  years.

          As  of  January  8,  2001,  Dialoc  ID  owned  37.5%  of the Company's
outstanding common stock.  Under the share purchase agreement, at any time prior
to  January  8,  2002,  Dialoc ID 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, the Board of Directors agreed to extend Dialoc
ID's  purchase  right  until January 8, 2003 in exchange for an extension of the
distribution  agreement  for one year.  On May 14, 2002, Dialoc ID exercised its
right  to  purchase  14,500,000 additional common shares at a price of $.001 per
share.  On  January  7,  2003,  they  brought their ownership to 51% through the
exercise  of  4,516,475  additional  shares  of  newly issued common stock at an
exercise  price  of  $0.001 per share.  As of December 31, 2003, Dialoc ID owned
42,066,927  shares.  As a result of the issuance of shares in settlement of past
due  debt  obligations,  Dialoc  ID currently owns 49.1% of the Company's common
stock  outstanding.

          In  addition  to  the  election  of three nominees of Dialoc ID to the
Board  of  Directors,  other matters which were approved at the December 8, 2001
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.


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

     a.     Business
            --------

          The  Company  is  engaged  in  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.


     b.     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.

     c.     Revenue  recognition
            --------------------

          The  Company  offers  its security devices for sale or lease.  For the
years  ended  December  31,  2003  and 2002, leases of security devices were not
material.

          The  Company recognizes revenue when installation is complete or other
post-shipment  obligations  have  been  satisfied.

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

          Included  in  accounts  receivable  at  December 31, 2003 and 2002 are
unbilled  accounts  receivable  of  $41,000  and  $21,000,  respectively.

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

          The  Company  considers  all  highly liquid temporary investments with
original  maturities  of  less  than  ninety  days  to  be  cash  equivalents.

     e.     Allowance  for  doubtful  accounts
            ----------------------------------

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

     f.     Inventories
            -----------

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


     g.     Product  warranty
            -----------------

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

     h.     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.

     i.     Patents
            -------

          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.
Estimated  annual amortization expense for the next five succeeding fiscal years
will  range  from  $15,000  to  $20,000.

     j.     Impairment  of  long-lived  assets
            ----------------------------------

          The  Company  reviews  its  long-lived assets, 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.

     k.     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, revolving
line  of  credit,  accounts  payable  and  obligations  under  capital  leases)
approximate  their  fair  value  at  December 31, 2003 and 2002 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.

     l.     Deferred  income
            ----------------

          Deferred  income  consists  of rentals related to operating leases and
maintenance  contracts  billed  or  paid  in  advance.

     m.     Income  taxes
            -------------

          The  Company  accounts for income taxes under SFAS No. 109, Accounting
for  Income  Taxes,  which requires an asset and liability approach to financial
accounting  and reporting for income taxes.  Deferred tax assets and liabilities
are determined based on differences between financial reporting and tax bases of
assets  and  liabilities,  and are measured using the enacted tax rates and laws
that  will  be  in  effect  when  the  differences  are  expected  to  reverse.

          The  Company  and  its  subsidiaries  file  consolidated  tax returns.

<PAGE>

     n.     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."

          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.  No  options were granted in 2003 or 2002.  The
weighted  average  fair value of the options granted for the year ended December
31,  2001  is  estimated  at $0.05, using the Black-Scholes option pricing model
with  the  following weighted average assumptions:  expected life of five years;
stock  volatility,  147% in 2001; risk free interest rates, 4.8% in 2001, 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  post 1995 awards had been amortized to
expense  over  the vesting period of the awards, pro forma net income attributed
to  common  shareholders  would  have  been  as  follows:

<TABLE>
<CAPTION>

<S>                                      <C>              <C>
                                             2003           2002
                                         -----------     ----------
                                    (In Thousands, Except Per Share Amounts)
          Net income (loss):
            As reported. . . . . . . .   $    181        $   (3,356)
            Pro forma. . . . . . . . .        107            (3,554)

          Net income (loss) per share:
            As reported. . . . . . . .   $      -        $    (0.05)
            Pro forma. . . . . . . . .   $      -        $    (0.05)
</TABLE>



     o.     Foreign  currency  translation
            ------------------------------

          The  functional  currency  of the Company's foreign entity is the U.S.
dollar.  Unrealized  foreign exchange transaction gains (losses) are included in
selling,  general  and  administrative  expenses  and  amounted to approximately
$12,000  and  ($16,000)  for  the  years  ended  December  31,  2003  and  2002,
respectively.

     p.     Shipping  and  handling  costs
            ------------------------------

          The  Company  includes  shipping  and  handling costs in cost of goods
sold.


     q.     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.

<PAGE>

     r.     Reclassifications
            -----------------

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

     s.     Recent  accounting  pronouncements
            ----------------------------------

     In  April 2003, FASB issued Statement of Financial Accounting Standards No.
149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities
("SFAS  149").  SFAS  149  amends  and  clarifies  accounting  for  derivative
instruments,  including  certain  derivative  instruments  embedded  in  other
contracts,  and for hedging activities under SFAS 133. SFAS 149 is effective for
contracts  and  hedging  relationships  entered  into or modified after June 30,
2003.  We  adopted  the  provisions of SFAS 149 effective June 30, 2003 and such
adoption did not have a material impact on our consolidated financial statements
since  we  have  not  entered  into  any  derivative  or  hedging  transactions.

In  May  2003,  the  FASB issued Statement of Financial Accounting Standards No.
150,  "Accounting for Certain Financial Instruments with Characteristics of both
Liabilities  and  Equity"  ("FAS 150"). This statement establishes standards for
how  an  issuer  classifies  and measures in its statement of financial position
certain  financial  instruments  with  characteristics  of  both liabilities and
equity.  In  accordance  with  the  standard,  financial instruments that embody
obligations for the issuer are required to be classified as liabilities. FAS 150
is  effective  for  financial instruments entered into or modified after May 31,
2003,  and  otherwise  is effective at the beginning of the first interim period
beginning  after  June 15, 2003.  The Company adopted the provisions of SFAS 150
effective  June 30, 2003 and such adoption did not have a material impact on our
consolidated  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.  As a
result,  the  Board  of  Directors  approved  a  restructuring  plan for 2003 to
strengthen  the  Company's  operating  efficiencies  and  to  better  align  its
operations  with current economic and market conditions.  Our progress under the
revised  business  plan  is  as  follows:

-     Significantly  downsized  our  operations  including  the  elimination  of
      approximately  55  of  117  positions  as  of  March  7,  2003.
-     Negotiated  a settlement with past due trade vendors which has resulted in
      an  $877,000  gain.
-     Negotiated  with  the  previous  landlord  to  move  out  of its Hauppauge
      corporate  facility.  The  lease termination has resulted in a gain of
      $353,000.
-     Relocated  its  corporate  offices  to a smaller and less costly facility.
-     Dedicated  a  substantial  portion  of  our  remaining  resources  towards
      maintaining  and  improving  our  relationships  with  our 30 largest
      customers.
-     Outsourced  all  non-essential  manufacturing  and  assembly operations to
      qualified  subcontractors.
-     Further  expanded  our  Service  Partner  program  to  augment service and
      installations  performed  by  our  employees.

<PAGE>

          On  January  7, 2003, Sentry initiated its restructuring plan.  Due to
the  size  of the layoff, Sentry was required to give the terminated employees a
60-day  notice period.  The costs associated with these restructuring activities
are  being expensed as they are incurred.  The successful implementation of this
restructuring  has  resulted  in  substantial  gross  margin  improvements  and
reductions  in  operating  expenses  beginning  in  the  second  half  of  2003.

     In  October  2002,  the  Company  entered  into  a purchase order financing
facility  with EPK Financial Corporation ("EPK").  Funding entails EPK providing
funds directly to vendors to allow the Company to secure the inventory needed to
fulfill  customer orders.  Sentry's costs for each financing transaction will be
equal  to 2.75% of Sentry's selling price, plus 1.85% on the maximum outstanding
funded  amount  each  ten calendar days or portion thereof, until EPK is paid in
full,  plus  expenses.  In  connection  with  this  facility,  an  Intercreditor
Agreement  was  entered  into  between  EPK, the CIT Group/Business Credit, Inc.
("CIT"),  with whom the Company has a revolving line of credit (see Note 9), and
Sentry.  Under  this agreement, CIT subordinated its rights and interests in the
collateral  related  to  each transaction to EPK.  Currently, under the terms of
the Intercreditors Agreement, the maximum amount subordinated to EPK at any time
is  limited  to  $650,000.  Sentry uses the funds provided by EPK to fund vendor
purchases  to  complete  orders currently in backlog.  At December 31, 2003, the
amount  owed  to  EPK  was  approximately  $291,000.

     Dialoc  ID is not able to provide us with additional financial support.  We
continue  to  pursue  additional  debt or equity financing through our financial
advisors  and  on  February  26,  2004,  Sentry  signed  a  term  sheet to raise
$2,000,000  in  secured  convertible  debt  with  a venture fund ("the VC Fund")
managed  by  a  multibillion-dollar  North  American  company.

Key  terms  of  the  transaction  are  as  follows:

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

     As  a  condition  of  the  financing, Sentry will be required to acquire ID
Security Systems Canada Inc. ("ID Canada") and ID Systems USA Inc., collectively
referred  to  as  "ID  Systems."

Sentry's  Board of Directors and shareholders owning a majority of Sentry common
stock  have  approved  the  proposed  transaction  with  the  VC  Fund  and  the
acquisition  of ID Systems, both of which are subject to customary due diligence
and  expected  to  close  during  the  next  45  days.

<PAGE>

In  a related transaction, Dialoc ID Holdings B.V. ("Dialoc") has agreed to sell
39,066,927  Sentry  common  shares  (representing approximately 46% of the total
issued  and outstanding shares of Sentry) and all of the stock of ID Systems, to
Saburah  Investments  Inc.  ("Saburah").  ID  Systems is a Toronto based company
engaged  in  anti-shoplifting  technology,  security  labeling,  radio frequency
identification  (RFID),  access control and library security.  Peter L. Murdoch,
President  and  CEO  of  Sentry  and  President  of  ID Systems, is the owner of
Saburah.  The  price  to be paid to Dialoc by Saburah and Murdoch for Sentry and
ID  Systems  shares  in  cash,  debt  assumption  and  other  consideration  is
approximately  $3.6  million  plus  the  surrender  of Murdoch's 15% interest in
Dialoc.  Saburah has also agreed to make a payment to Dialoc in the future equal
to  approximately  6%  of  any  payment it receives from Checkpoint Systems Inc.
resulting from litigation brought by ID Canada against Checkpoint.  ID Canada is
appealing the reduction of the original jury award of $79.2 million.  The appeal
is  scheduled  to  be  heard  during  the  last  week  of  March.

As  a  condition  of  the  VC  Fund  financing, Sentry has agreed to purchase ID
Systems from Saburah in exchange for 30,000,000 Sentry common shares.  The price
to  be  paid  per Sentry share will be approximately $0.12.  An opinion has been
provided  to  a  special  committee  of Sentry's Board of Directors by Corporate
Valuation Services confirming that both the price paid for the acquisition of ID
Systems  and  the  agreed conversion price of the proposed VC Fund debt are fair
from  the point of view of Sentry shareholders.  Although Sentry will not obtain
an interest in the Checkpoint Systems litigation, Saburah and Sentry have agreed
that  Sentry  may  require Saburah to purchase additional Sentry shares equal to
approximately  4.5%  of  any  amount  received  by  Saburah  from the Checkpoint
litigation,  to a maximum of $1,000,000.  The price per share will be determined
by  market conditions if and when the call is made.  This transaction represents
the maximum future benefit that may flow to Sentry and ID Systems as a result of
the  Checkpoint  lawsuit.

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

-     ID Systems and Sentry continue as the exclusive distributor in North and
      South America for a period of five years for all Dialoc products including
      Laserfuse radio frequency security labels and all RFID products.
-     Dialoc  becomes  the  exclusive  distributor  in Europe and Asia of labels
      manufactured  by  ID  Systems'  security  label manufacturing subsidiary,
      Custom Security  Industries  Inc.  ("CSI").
-     CSI  acquires  the right to purchase Laserfuse raw material for processing
      into  finished  security labels in its Toronto plant in order to reduce
      the cost of  production.
-     CSI acquires the option to purchase a non-exclusive license to manufacture
      complete Laserfuse security  labels  for  a  period of 10 years subject to
      the payment  of  $500,000  and  a  running  royalty  of  $0.001 per label.
-     Dialoc  will  continue  to  be  a dealer for Sentry products in Europe and
      Asia.

ID Systems' management including Dr. Morton Roseman, President of CSI, and Peter
Murdoch  will  invest $100,000 each to complete the proposed transaction between
Saburah  and  Dialoc.  Furst  Capital  Partners  LLC  and associates will invest
$900,000  of  equity  in  the  combined  transaction.  Mr.  Robert  Furst  is  a
long-standing  member  of  Sentry's Board of Directors.   On completion of these
transactions and prior to the VC Fund conversion of the proposed $2,000,000 debt
transaction,  Peter  Murdoch,  directly  or  indirectly through his ownership of
Saburah,  will  own  or control 47.4% of the outstanding common stock of Sentry.

<PAGE>

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  that  proposed  convertible debt transaction with the VC Fund or
other  equity  financing  will  be  available  on terms that are satisfactory to
Sentry,  or that any such debt or equity financing will be sufficient to provide
the  full amount of funding necessary. 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.  Sentry  will  require  liquidity  and  working capital to
finance  increases  in  receivables  and inventory associated with sales growth,
payments  to past due vendors and, to a lesser extent, for capital expenditures.
If  we  are  not  able to raise additional debt or equity financing, we could be
forced  into  a  bankruptcy  or  be  required  to liquidate our assets.  In this
scenario,  most  likely,  our  secured  lender  would  receive  the  bulk of any
proceeds.


5.     EXTRAORDINARY  ITEM  -  GAIN  ON  THE  EXTINGUISHMENT  OF  DEBT:
       ---------------------------------------------------------------

     During  2003,  the  Company  entered  into a settlement with certain of its
vendors  for  past  due  obligations.  Under  the  terms of the settlement, each
participating  vendor received a note for approximately 10% of their balance due
and  two shares of Sentry common stock for each dollar owed in full satisfaction
of  their  outstanding  balances,  which  approximated  $1,092,000.  The  notes,
approximating  $112,000, are non-interest bearing and are payable in three equal
installments  on  January 15, 2004, 2005, and 2006.  The 2,193,263 shares issued
in  connection with this settlement were valued at approximately $105,000, based
on  the market value of the stock at the time of the settlement.  As a result of
this  transaction,  the  Company  realized  an  extraordinary  gain of $877,000,
representing  the  difference  between the amounts due before the settlement and
the  total  amount payable, including the value of the common stock, as a result
of  the  settlement.  The  first payment due on the notes as of January 15, 2004
has  been  delayed  due  to  the  pending  transaction  with  the  VC  Fund.

     On  July  9,  2003,  Sentry  entered  into  a settlement agreement with its
landlord regarding the termination of its long-term capital and operating leases
for  its facility in Hauppauge, New York.  Under terms of the settlement, Sentry
was  released  from  its  current  and  future  liabilities  under the leases in
exchange  for  a  $250,000, 8% note, payable in 36 equal monthly installments of
$7,834,  including  interest,  commencing  November  1,  2003.  The  note  also
obligates  Sentry  to prepay an amount of $100,000 against the note in the event
of  an  equity  financing,  as defined.  In addition, Sentry issued the landlord
1,000,000  shares  of  common  stock,  for  which  the  fair  value of the stock
($33,000) was determined using the closing price as of July 9, 2003.  Sentry was
also obligated to pay rent of $16,000 per month until it vacated the premises on
September  30,  2003.  The  Company  recognized  a gain of $353,000 in the third
quarter  of  2003,  representing  the difference between the carrying amounts of
outstanding  obligations to the landlord less the net book value of the property
on  the  date  of  the  settlement.

     As  of October 1, 2003, Sentry moved its corporate offices and distribution
center  to  a  20,000 square foot facility in Ronkonkoma, New York.  The Company
entered  into  a  three-year  lease  with annual rents of $140,000, $144,200 and
$148,600,  respectively.

<PAGE>

The  $492,000 income tax provision recognized in 2003 on the extraordinary gains
was  offset  by  an  equivalent  income  tax  benefit generated from the current
periods'  loss  from  operations  and  the  utilization  of  net  operating loss
carryforwards.



6.     INVENTORIES
       -----------

     Inventories  consist  of  the  following:
<TABLE>
<CAPTION>
                                                 December 31,
<S>                                         <C>            <C>
                                              2003           2002
                                            --------       --------
                                                 (In Thousands)
                                                -----------------
Raw materials. . .                          $   449        $   513
Work-in-process. .                              283            618
Finished goods . .                            1,123          2,014
                                            --------       --------
                                            $ 1,855        $ 3,145

</TABLE>




          The  components  of inventory shown are net of reserves for excess and
obsolete  inventory  totaling  $2,148,000 and $3,610,000 as of December 31, 2003
and  2002,  respectively.


7.     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
                                           Lives               December 31,
                                           (Years)          2003       2002
                                           ----------    ---------   --------
                                                            (In Thousands)
                                                         --------------------

Building. . . . . . . . . . . . . . . . .          20    $     -     $ 3,033
Machinery and equipment . . . . . . . . .      3 - 10        826       2,076
Furniture, fixtures and office equipment.      3 - 10      2,148       3,700
Leasehold improvements. . . . . . . . . .      3 - 10         66         312
                                                           3,040       9,121
                                                         --------   ---------
Less allowance for depreciation . . . . .                  2,831       6,558
                                                         --------   ---------
                                                         $   209    $  2,563
                                                         =======    =========
</TABLE>

          The  reduction in values of the building and leasehold improvements is
related  to  the  termination  of  the  capital lease of the Hauppauge facility.
Depreciation  expense  on property, plant and equipment in 2003 and 2002 totaled
$261,000  and  $466,000,  respectively.


8.     ACCRUED  LIABILITIES:
       --------------------

     Accrued  liabilities  consist  of  the  following:

<TABLE>
<CAPTION>
                                                                 December 31,

                                                                2003     2002
                                                               ------   ------
                                                                (In Thousands)
                                                               ---------------
<S>                                                            <C>       <C>
Accrued salaries, employee benefits and payroll taxes.         $  417  $  522
Purchase order financing . . . . . . . . . . . . . . .            291       7
Accrued warranty . . . . . . . . . . . . . . . . . . .            227     268
Other accrued liabilities. . . . . . . . . . . . . . .            666     726
                                                               ------  -------
                                                               $1,601  $1,523
                                                               ======  =======
</TABLE>


9.     REVOLVING  LINE  OF  CREDIT:
       ---------------------------

          On  March  22,  2002,  the Company entered into a three-year revolving
line  of  credit  and  term  loan with CIT 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.  Interest on
the revolving line of credit is payable monthly at the JPMorgan Chase Bank prime
rate  (4%  at December 31, 2003), plus 2% 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, places
restrictions on capital expenditures and prohibits the payment of dividends.  In
addition, the Company entered into a $100,000 term loan with CIT.  The principal
was  repaid  to  CIT in twelve equal monthly installments of $8,333, which began
May  1,  2002  and was paid in full on April 1, 2003.  Interest on the term note
was  at  the  JPMorgan  Chase  Bank  prime  plus  2.25%.

          During 2003, CIT also provided the Company with an additional $300,000
over-advance  facility.  On  December  8,  2003,  the  Company  entered  into  a
Forbearance  Agreement with CIT through December 8, 2004.  CIT agreed to forbear
from  (i) establishing additional availability reserves related to the inventory
advance  percentage and (ii) demanding immediate payment of the overadvance.  To
induce  CIT not to take the forbearance actions, it was mutually agreed that the
maximum  borrowings  would  be  reduced  from $8 million to $3 million and would
exclude  eligible  inventory  from  the  borrowing  base;  the existing eligible
inventory  loan of $845,000 would be converted into a term loan with payments of
$25,000  due  in  December  2003  and  $10,000  per  month  thereafter;  certain
limitations  on  eligible  accounts  receivable  from  a major customer would be
established  and  certain  financial  covenants  would be established after June
2004.   The  Company  had borrowings on the line of credit totaling $690,000 and
$2,034,000  as  of December 31, 2003 and 2002, respectively.  The balance on the
term  loan  was  $825,000  at  December  31,  2003.


10.     OBLIGATIONS  UNDER  CAPITAL  AND  OPERATING  LEASES:
        ---------------------------------------------------

          In  December  1996, the Company completed a sale-leaseback transaction
on  the  Company's  former  corporate  headquarters in Hauppauge, New York.  The
Company  received net proceeds of approximately $4.5 million, which approximated
the  carrying amount of the land and building.  The lease covered a period of 20
years with quarterly payments of $145,000.  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  had  been  considered separately for the purposes of applying the
criteria  of  SFAS No. 13, Accounting for Leases.  The land portion of the lease
had  been  classified as an operating lease.  Rent expense for 2003 and 2002 was
$103,000  and  $173,000  per  year,  respectively.

          The  building  portion  of  the lease had been classified as a capital
lease.

          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  building was being amortized on a straight-line basis over
the  20-year  lease  term.  The capitalized lease obligation was being amortized
under  the  interest  method over the 20-year lease period, utilizing an imputed
interest  rate  of  approximately  11%.  In  July 2003, the Company negotiated a
termination  of  the  capital  lease  with  its  landlord.

          The  Company had entered into sublease agreements with two parties for
portions  of  its  former  corporate  facility.  Rental  income  under  these
agreements,  included  in  selling,  general  and  administrative  expenses,
approximated  $217,000  and $370,000 in 2003 and 2002, respectively.  As part of
its  settlement  with  the  Hauppauge landlord, sublease income ended as of June
2003.


11.     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.  Since
the Company had a loss before extraordinary item for both periods presented, the
effect  of  common  stock  options  and  warrants  was  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 Dialoc ID 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,  2003,  7,055,738  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 Chief Executive Officer, at the price of $0.06 per
share,  which  was  the fair value on the date of the grant.  On March 27, 2002,
Mr.  Murdoch  exercised  the option through the issuance of a promissory note in
the  amount  of  $120,000.  The  principal  of the note is secured by the option
shares  and  is  repayable  no later than January 8, 2006.  Mr. Murdoch will not
have  any  personal  liability for the principal of the note if the value of the
option  shares  is not sufficient to repay the note.  The note bears interest at
prime  (currently  4%) less .75%.  The note has been reflected as a reduction of
shareholders'  equity  on  the  consolidated  balance  sheet.

          Stock  option  transactions  for the years ended December 31, 2003 and
2002  are  as  follows:

<TABLE>
<CAPTION>
<S>                         <C>          <C>
                            Weighted     Average
                            Number       Exercise
                            of Shares    Price

Balance, January 1, 2002 .   5,821,480   $    0.49

Granted. . . . . . . . . .           -           -
Exercised. . . . . . . . .  (2,001,000)       0.06
Canceled . . . . . . . . .    (479,188)       0.87
Balance, December 31, 2002   3,341,292        0.69
                            -----------  ---------

Granted. . . . . . . . . .           -           -
Exercised. . . . . . . . .      (2,000)       0.05
Canceled . . . . . . . . .  (1,757,368)       0.79

Balance, December 31, 2003   1,581,924   $    0.57
</TABLE>


     Significant option groups outstanding at December 31, 2003 and related
option  price  and  life  information  were  as  follows:

<TABLE>
<CAPTION>

<S>                 <C>             <C>      <C>            <C>
                                             Weighted
                                             Average
                                             Remaining
   Range of                    Number       Contractual       Number
Exercise Price.              Outstanding       Life         Exercisable
---------------              -----------    -----------     -----------

0.05 - 0.09                    707,500         6.91            493,000
0.31 - 0.62                    451,924         2.21            451,924
1.05 - 3.00                    422,500         2.62            422,500
                            ------------     -------        ------------
                             1,581,924         4.42          1,367,424
                            ============     =======        ============

</TABLE>

          At  December  31,  2003, options to purchase an aggregate of 1,367,424
common  shares  were  vested  and  currently  exercisable  at a weighted average
exercise  price  of  $0.66  and  an  additional  214,500  options  vest at dates
extending  through  the year 2006, expiring through 2011.  At December 31, 2003,
options  for  5,473,814  common  shares  were  available  for  future  grants.

          As  discussed  in  Note  3,  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.

     c.     Warrants
            --------

          In  1999  the  Company  issued  warrants to purchase 150,000 shares of
common  stock  at  an  exercise  price  of  $0.13  to its former landlord.  Such
warrants  were  cancelled  in  July  2003  as a result of the lease termination.


12.     INCOME  TAXES:
        -------------

          The  reconciliation  between  total  tax expense and the expected U.S.
Federal  income  tax  is  as  follows:
                                                2003            2002
                                                ----            ----
                                                   (In Thousands)
                                                   --------------

Expected  tax  benefit  at  34%               $ (357)        $  (1,141)
Add:
 Nondeductible  expenses                          16                26
 U.S.  losses  producing  no  tax  benefit         -             1,115
 Use  of  net operating loss carry forwards
   to offset  tax on extraordinary item         (151)                -
                                              --------       ----------
                                              $ (492)        $       -


          As  of  December  31,  2003,  the  Company  had  net  operating  loss
carryforwards  of approximately $32 million, which expire through the year 2023.
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 at December 31, 2003 and
2002  are  comprised  of:

                                                 Deferred Tax Assets
                                                 2003            2002
                                                 ---------------------
                                                    (In Thousands)
                                                    --------------
Assets:
 Accounts  receivable                          $   121          $  121
 Inventories                                       859           1,569
 Accrued  liabilities                               91             107
 Property,  plant  and  equipment                  221             181
 Net  operating  loss  carryforwards            12,875          11,993
                                               --------        --------
 Gross  deferred  tax  assets                   14,167          13,971
 Less  valuation  allowance                     14,167          13,971
                                               --------        --------
 Net  deferred  tax  asset                     $    -          $  -
                                               ========        ========


          The  increase  in the valuation allowance for the years ended December
31,  2003  and  2002 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.


13.     RELATED  PARTY  TRANSACTIONS:
        ----------------------------

          As  a  result  of  the  Dialoc  ID  investment,  Sentry entered into a
distribution agreement with Dialoc ID, which contemplates a two-way distribution
relationship  between the companies.  Under the agreement, Sentry has the rights
to  sell  Dialoc  ID's EAS, access control and RFID products and accessories and
Sentry  gives  Dialoc  ID  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,  Dialoc  ID  received  an annual
management  fee  for  product  marketing and product engineering management from
Sentry  in the amount of $50,000 in 2002.  Also, Peter Murdoch, a shareholder of
Dialoc  ID through a trust, receives an annual salary of $50,000 in the capacity
of  President of Sentry.  Purchases from Dialoc ID were $173,000 and $140,000 in
2003  and  2002, respectively.  Services and sales to Dialoc ID were $67,000 and
$79,000  in 2003 and 2002, respectively.  The net amount payable to Dialoc ID as
of  December  31,  2003  was  $129,000.




14.     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 35% of
compensation,  subject  to  certain  limitations.  The  Company  may  elect  to
contribute  a  matching  contribution  equal  to  a designated percentage of the
eligible  employee's deferral election.  The Company may also make discretionary
contributions,  subject  to  certain  conditions,  as  defined in the Plan.  The
Company  contributed  approximately  $48,000  to  the  Plan  for  the year ended
December  31,  2002.  No  Company  contribution  was  made  in  2003.

     b.     Employment  agreements
            ----------------------

          The  Company  and  several  key  executives  entered  into  employment
agreements  with  remaining  terms of one year for which the Company will have a
minimum  commitment  of  $339,000.

     c.     Litigation
            ----------

          The  Company  is  a  party to 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.


15.     MAJOR  CUSTOMERS  AND  CREDIT  CONCENTRATIONS:
        ---------------------------------------------

          The  Company  grants  credit  to  customers who are principally in the
retail  industry  and  libraries.  During  2003 and 2002, revenues from a single
customer  represented approximately 44% and 40% of total revenues, respectively.
No  other customer accounted for more than 10% of total revenues for fiscal 2003
and  2002.


<PAGE>
16.     REVENUE  BY  PRODUCT  LINE:
        --------------------------

     Revenues  by  product  line  are  as  follows:

                                         2003          2002
                                         ----          ----
                                           (In Thousands)
                                           --------------

EAS                                   $  1,817       $  2,530
CCTV                                     3,601          4,578
Sentry  Vision                           3,049          2,368
3  M  library  products                     45            256
Service  revenues  and  other            4,497          4,804
                                      ---------      ---------
Total  revenues                       $ 13,009       $ 14,536


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

None.

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

As  of  the  end  of the period covered by this report, our company conducted an
evaluation,  under  the  supervision  and  with  the  participation of our chief
executive  officer  and  chief financial officer, of our disclosure controls and
procedures  (as  defined  in Rules 13a-15(e) of the Exchange Act). Based on this
evaluation,  our  chief  executive officer and chief financial officer concluded
that  our  company's  disclosure controls and procedures are effective to ensure
that  information  required  to  be  disclosed  by us in reports that we file or
submit  under  the  Exchange Act is recorded, processed, summarized and reported
within  the  time  periods specified in Securities and Exchange Commission rules
and  forms.


There  was  no  change  in  our  internal  controls,  which  are included within
disclosure  controls  and  procedures, during our most recently completed fiscal
quarter  that  has  materially  affected,  or is reasonably likely to materially
affect,  our  internal  controls.

     PART  III
     ---------


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

DIRECTORS

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

PETER  L.  MURDOCH,  age 50, 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 Dialoc ID.  Prior to joining ID Security
Systems  Canada,  Inc.,  Mr.  Murdoch  was  Vice President of Sales for Catalyst
International Business Systems.  He is an economics graduate from the University
of Western Ontario.  Mr. Murdoch's term as a Director expires at the next Annual
Meeting.

WILLEM  ANGEL, age 71, 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. of Dialoc ID 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  Dialoc  ID 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 59, has been a Director of Sentry Technology since January
8,  2001.  Mr.  De  Nood  is  the  Vice President and Chief Technical Officer of
Dialoc  ID.  In 1977, he co-founded the ID Engineering Europe, Dialoc ID 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  Dialoc  ID,  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  next  Annual  Meeting.

ROBERT D. FURST, JR., age 51, has been a Director of Sentry Technology since its
inception.  Prior  thereto  he  was  a Director of Video Sentry Corporation, our
predecessor,  from  January  1993  until  February 1997.  He was Chairman of the
Board  of  Video  Sentry  from July 1996 and Chief Executive Officer from August
1996  until  February  1997.  Mr.  Furst was one of the original shareholders of
Video  Sentry.  He  is  also  a  founder  and  managing principal of Alternative
Strategy  Advisers LLC, an alternative investment management firm.  Mr. Furst is
a member of the Chicago Board of Trade and has been a securities and commodities
trader  since 1980. Mr. Furst is a continuing director on the Board of Directors
after  the  completion  of  the  Dialoc  ID  Investment.  Mr.  Furst's term as a
Director  expires  at  the  next  Annual  Meeting.

JONATHAN  G.  GRANOFF,  age  53,  has been a Director of Sentry Technology since
January  8,  2001.  Mr.  Granoff was appointed to the Board of Directors when it
was  expanded  from  five  to seven members. Mr. Granoff is the President of the
Global Security Institute and United Nations representative for Lawyers Alliance
for  World  Security.  He  is  also  Chairman  of  the  American Bar Association
Committee on Arms Control and Disarmament.  Mr. Granoff has been in the practice
of  law  since  1979.  Formerly  Mr.  Granoff served at Nutri Systems Inc. as an
attorney  and Director of Franchising.  Mr. Granoff's term as a Director expires
at  the  next  Annual  Meeting.

EXECUTIVE  OFFICERS

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


 NAME                  AGE    OFFICE
 ----                  ---    ------
Peter  L.  Murdoch     50     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
                              Dialoc ID. Prior to joining ID Security  Systems
                              Canada,  Inc.,  Mr.  Murdoch  was Vice President
                              of Sales for Catalyst  International  Business
                              Systems. He is an economics graduate from the
                              University  of  Western  Ontario.



Peter  J.  Mundy       47     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.



SECTION  16(A)  BENEFICIAL  OWNERSHIP  REPORTING  COMPLIANCE

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

Based  solely  on a review of the copies of reports furnished to the Company, or
written representations that no Forms 5 were required, the Company believes that
during  the  fiscal  year  ended  December  31,  2003,  all Section 16(a) filing
requirements  applicable to its officers, Directors and greater than ten-percent
beneficial  owners  were  complied  with.


<PAGE>
------
Item  10.      Executive  Compensation.
--------       -----------------------

SUMMARY  COMPENSATION  TABLE

The  following  table  summarizes  the  compensation  for our fiscal years ended
December  31,  2003  of our Chief Executive Officer and Chief Financial Officer:

<TABLE>
<CAPTION>



                                                                                   LONG-TERM           ALL OTHER
                                                ANNUAL   COMPENSATION             COMPENSATION       COMPENSATION (1)
                                               ----------------------             -------------      ----------------

<S>                                            <C>      <C>       <C>              <C>
                                                                                   SECURITIES
NAME AND                                                                           UNDERLYING
PRINCIPAL POSITION. . . . . . . . . . . . . .  YEAR     SALARY    BONUS            OPTIONS (#)
---------------------------------------------  ----     ------    -----            -----------


Peter L. Murdoch                               2003     $ 50,000       -                     -                -
President and CEO                              2002       87,500(2)    -                     -                -
                                               2001      150,000                     2,000,000                -


Peter J. Mundy,                                2003       131,160      -                     -           $    -
Vice President - CFO,                          2002       131,160      -                     -              1,967
Secretary and Treasurer                        2001       131,160      -                     -              2,492

________________________
</TABLE>


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

(2)     Mr.  Murdoch  deferred  $62,500  of  salary  in  2002.



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

No  options  were  granted  during  fiscal  year  2003.

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 2003 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, 2003, both
exercisable  (E) and unexercisable (U), and the value of such options as of that
date.

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

Peter J. Mundy           -             -           E          669,218          E              $10,500
                                                   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 2003.

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 set Peter L. Murdoch's compensation, in the capacity of President, at
an  annual  salary  of $150,000 per year for 2001 and 2002 and $50,000 for 2003.
For  2004,  the  amount  has  been  set  at  $50,000.

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,  Mr.  Mundy is compensated pursuant to a written employment agreement
providing  for  his  base  salary.  This  agreement  provides  for annual salary
increases  intended to maintain his base salary against increases in the cost of
living  as  measured  by  the  United States Department of Labor.  Mr. Mundy has
waived  these  increases  for  the  years  2002,  2003 and 2004.  The employment
agreement  for  Mr.  Mundy renews automatically on January 8 for one-year terms.
His  annual  salary  is  presently  $131,160.

The  employment  agreement  for  Mr.  Mundy also provides that in the event of a
change in control, the term of his employment will be automatically extended for
a  period  of one year, following the date of such change in control.  Following
such  change  in  control,  Mr.  Mundy  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 agreement provides that in the event of a change in
control  all  options held by Mr. Mundy, 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), he 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.

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 holdings. A substantial
portion of the total compensation of the executive officers, including the Chief
Executive  Officer,  is 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.

CODE  OF  ETHICS

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


<PAGE>

                               [GRAPHIC  OMITED]

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

SENTRY TECHNOLOGY CORPORATION
STOCK PERFORMANCE DATA
(APPEARS AS A LINE GRAPH)
12/31/99 TO 12/31/03

                                          12/31/99    12/31/00    12/31/01    12/31/02   12/31/03
Sentry Technology Corporation. . . . .  $      100  $       67  $      160  $       21  $     144
S&P 600 Small Cap Index. . . . . . . .  $      100  $      111  $      117  $       99  $     137
S&P Elec. Equip. Index . . . . . . . .  $      100  $       83  $       42  $       20  $      35

</TABLE>




<PAGE>

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

The  following  table sets forth the beneficial ownership of our common stock at
March  3,  2004,  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 28, 2004, 85,755,610
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)
------------------------------------------------------------------  ------------  -------------

Dialoc ID Holdings B.V.
Daltonstraat 42-44
3846 BX Harderwijk
The Netherlands                                                      42,066,927          49.1%


William A. Perlmuth
c/o Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, NY  10038                                                   6,096,049 (2)       7.1%






                                                                      SHARES OF       PERCENT
DIRECTORS AND EXECUTIVE OFFICERS . . . . . . . . . . . . . . . . .  COMMON STOCK    OF CLASS(1)
------------------------------------------------------------------  ------------  -------------
Peter L. Murdoch(5)                                                   2,101,500          2.5%
Peter J. Mundy                                                          865,185 (3)      1.0%
Willem Angel(5)                                                          60,000 (4)        *
Cor S. A. De Nood(5)                                                     30,000 (4)        *
Jonathan G. Granoff                                                      90,000 (4)        *
Robert D. Furst, Jr.                                                  1,737,756 (6)      2.0%
All Sentry Directors and executive officers as a group (6 persons)    4,884,441 (7)      5.6%
</TABLE>

__________________________
* Less  than  one  percent

(1)  Based on 85,755,610 shares of common stock outstanding as of March 3, 2004.
     Each figure showing the percentage of outstanding shares beneficially
     owned has been calculated by treating as outstanding and owned the shares
     of common stock that could be purchased by the indicated person within 60
     days upon the exercise of stock options.

(2)  Consists of (a) 5,199,499 shares of common stock held by Mr. Perlmuth as
     Trustee of the Trust U/W/O of Arthur J. Minasy, (b) 873,513 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. Mr. Perlmuth resigned his position as
     a member of the Board of Directors on June 18, 2002.

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

(4)  Includes  30,000 shares of common stock exercisable upon the exercise of
     stock  options  exercisable  within  60  days  from  the  date  hereof.

(5)  Excludes  shares  of  Common  Stock  owned by Dialoc ID of which Messrs.
     Murdoch,  Angel  and  DeNood  are  shareholders.

(6)  Includes  354,000  shares  of common stock issuable upon the exercise of
     stock  options  and  warrants  exercisable  within 60 days from the date
     hereof.

(7)  Includes  1,113,218 shares of common stock issuable upon the exercise of
     stock  options  and  warrants  exercisable  within 60 days from the date
     hereof.


<PAGE>

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

As  a  result  of  the  Dialoc ID investment, Sentry entered into a distribution
agreement with Dialoc ID, which contemplates a two-way distribution relationship
between  the  companies.  Under  the  agreement,  Sentry  has the rights to sell
Dialoc  ID's  EAS,  access  control and RFID products and accessories and Sentry
gives  Dialoc  ID  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,  Dialoc  ID  received  an  annual  management fee for
product  marketing  and product engineering management from Sentry in the amount
of  $50,000  in 2002.  Also, Peter Murdoch, a shareholder of Dialoc ID through a
trust,  receives  an  annual  salary  of $50,000 in the capacity of President of
Sentry.  Purchases  from  Dialoc ID were $173,000 and $140,000 in 2003 and 2002,
respectively.  Services  and sales to Dialoc ID were $67,000 and $79,000 in 2003
and  2002, respectively.  The net amount payable to Dialoc ID as of December 31,
2003  was  $129,000.



ITEM  13.   EXHIBITS  AND  REPORTS  ON  FORM  8-K
-------------------------------------------------

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

(1)  (2)     Consolidated  Financial  Statements  of  the  Company  and  its
subsidiaries  for  the  year  ended  December  31,  2003 and Financial Statement
Schedules  required  to be filed by Items 8 and 14(d) of Form 10-KSB.  See Table
of  Contents  to  Consolidated  Financial  Statements  of  Sentry  Technology
Corporation  and  its  subsidiaries  on  page  23.

(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).

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).

10.6     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.

10.11    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.

10.16    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).

10.20    Stipulation  of  Settlement  and Lease Termination dated July 29, 2003
         between  Knogo  North    America Inc. and NOG (NY) QRS 12-23, Inc.
         Incorporated by  reference  to  Exhibit  10.34 to the Company's
         Quarterly Report on Form 10-Q dated  November  4,  2003.

10.24    Securities  Purchase  Agreement,  dated August 8, 2000, between Sentry
         Technology  Corporation and Dialoc ID, 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
         Dialoc  ID,  incorporated  by  reference  to  Exhibit  B  of Exhibit
         10.1 to the Company's  Current  Report  on  Form  8-K,  dated  August
         10,  2000.



10.29    Financing  Agreement  between  Knogo  North  America  Inc. and The CIT
         Group/Business  Credit,  Inc. dated March 22, 2002, incorporated by
         reference to Exhibit  10.29  to  Company's  annual  report  on  Form
         10-K  for  fiscal 2001.

10.30    Master  Agreement  between  Sentry  Technology  Corporation  and  EPK
         Financial  Corporation,  dated  October  10,  2002, incorporated by
         reference to Exhibit  10.30 to the Company's Quarterly Report on Form
         10-Q dated November 14, 2002.

10.31    Master  Agreement  between  Knogo North America Inc. and EPK Financial
         Corporation,  dated October 10, 2002, incorporated by reference to
         Exhibit 10.31 to  the  Company's  Quarterly  Report  on  Form  10-Q
         dated  November 14, 2002.

10.32    Intercreditor  Agreement  between  Knogo  North  America  Inc.,  EPK
         Financial Corporation and The CIT Group/Business Credit, Inc., dated
         October 16, 2002,  incorporated  by  reference  to  Exhibit 10.32 to
         the Company's Quarterly Report  on  Form  10-Q  dated  November  14,
         2002.

10.33    Letter  amendment  to  the Intercreditor Agreement between Knogo North
         America Inc., EPK Financial Corporation and The CIT Group/Business
         Credit, Inc., dated  January  14,  2003.  Incorporated  by  reference
         to Exhibit 10.33 to the Company's  annual  report  on  Form  10-KSB
         for  fiscal  2002.

10.34    Letter  amendment  to  the Intercreditor Agreement between Knogo North
         America Inc., EPK Financial Corporation and The CIT Group/Business
         Credit, Inc., dated  July  10,  2003

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

10.36    Forbearance  Agreement between The CIT Group/Business Credit, Inc. and
         Knogo  North  America  Inc.,  dated  December  8,  2003

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

23.1     Consent  of  Holtz  Rubenstein  &  Co.,  LLP

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

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

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

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

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


(b)  Reports  on  Form  8-K.

There  were  no  Forms  8-K filed by the registrant during the fourth quarter of
2003.


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

The  Company's  board  of  directors  reviews and approves audit and permissible
non-audit services performed by its independent accountants, as well as the fees
charged  for  such  services.  In  its  review of non-audit service fees and its
appointment  of  Holtz  Rubenstein  &  Co.,  LLP  as  the  Company's independent
accountants,  the  board  of  directors considered whether the provision of such
services  is  compatible  with  maintaining  independence.  All  of the services
provided  and  fees charged by Holtz Rubenstein & Co., LLP in 2003 were approved
by  the  board  of  directors.



AUDIT  FEES

The  aggregate  fees  billed  by  for professional services for the audit of the
annual  financial  statements  of  the  Company and the reviews of the financial
statements  included  in the Company's quarterly reports on Form 10-QSB for 2003
and  2002  were  $58,000  and  $50,000,  respectively,  net  of  expenses.

AUDIT-RELATED  FEES

There  was  $9,000  of  other  fees billed during 2003 for assurance and related
services  that were reasonably related to the performance of the audit or review
of the Company's financial statements and not reported under "Audit Fees" above.

TAX  FEES

There  were no other fees billed by our independent auditors during the last two
fiscal  years  for  tax  compliance  for  2003  and  2002.

ALL  OTHER  FEES

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



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  15,  2004



     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
Peter  J.  Mundy                       Accounting  Officer,
                                       Secretary  and  Treasurer


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



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



                                       Director
----------------------------
Jonathan  G.  Granoff



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



Dated:  March  15,  2004


<PAGE>
EXHIBIT  INDEX

10.34     Letter  amendment  to  the Intercreditor Agreement between Knogo North
          America Inc., EPK Financial Corporation and The CIT Group/Business
          Credit, Inc., dated  July  10,  2003.

10.36     Forbearance  Agreement between The CIT Group/Business Credit, Inc. and
          Knogo  North  America  Inc.,  dated  December  8,  2003

23.1      Consent  of  Holtz  Rubenstein  &  Co.,  LLP

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

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

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

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



<PAGE>

                                                  EXHIBIT  10.34


LETTER  AMENDMENT  TO  THE  INTERCREDITOR  AGREEMENT BETWEEN KNOGO NORTH AMERICA
INC.,  EPK  FINANCIAL CORPORATION AND THE CIT GROUP/BUSINESS CREDIT, INC., DATED
JULY  10,  2003.




This  letter  shall serve as an amendment to the Intercreditor Agreement between
KNOGO  NORTH  AMERICA  INC. ("KNOGO"), EPK FINANCIAL CORPORATION ("EPK") and THE
CIT  GROUP/BUSINESS  CREDIT,  INC.  ("CIT")  dated  October  16,  2002.

Point  2(a) shall now read as follows:  "Notwithstanding anything herein to the
contrary,  CIT  subordination  of  its  liens hereunder is limited solely to EPK
Collateral  which  has  been  designated  in a Purchase Order Certificate and in
which  EPK  has filed and perfected its security interest and shall apply to EPK
Obligations  not  to  exceed  $650,000.00  "

All  other terms and conditions of the Intercreditor Agreement dated October 16,
2002  and  the  amendment to the Intercreditor Agreement dated November 20, 2002
shall  remain  unchanged.

Dated  on  this  10  day  of  July  2003.

KNOGO  NORTH  AMERICA  INC.


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

Title:             VP-CFO
       --------------------------


EPK  FINANCIAL  CORPORATION


By:           /s/  Edward  King
     ----------------------------

Title:          President
       --------------------------



THE  CIT  GROUP/BUSINESS  CREDIT,  INC.

By:         /s/  Andrew  Hausspiegel
     -------------------------------

Title:           Vice  President
        ----------------------------






                                                               EXHIBIT  10.36

     FORBEARANCE  AGREEMENT
     ----------------------


     December  8,  2003


Knogo  North  America,  Inc.
1881  Lakeland  Avenue
Ronkonkoma,  New  York  11779

Gentlemen:

We refer to the Financing Agreement between us dated March 22, 2002, as amended,
herein  the  "Financing  Agreement").  Capitalized terms used herein and defined
in the Financing Agreement shall have the same meanings specified therein unless
otherwise  specifically  defined  herein.

As  you  know  the updated inventory appraisal performed by Hilco on January 25,
2003 confirmed a significant decline in the net orderly liquidation value.  As a
result  thereof,  we  have  the immediate right under the Financing Agreement to
establish  Availability Reserves to reflect the results of the appraisal and the
adjusted  Inventory  advance percentage.  In addition, if we were to immediately
implement  such  Availability  Reserves  as  a  result of such appraisal and the
adjusted  Inventory  advance  percentage,  the  outstanding  balance  of  your
Overadvance  would  be  significantly  increased.  Pursuant  to  the  Financing
Agreement such Overadvance is due and payable to us at any time upon our demand.

You  have requested that we, and subject to the terms, provisions and conditions
of  this  agreement we have agreed to, forbear from (i) immediately establishing
such Availability Reserves to reflect the results of the Hilco appraisal and the
adjusted  Inventory  advance  percentage and (ii) demanding immediate payment of
the  entire  outstanding  Overadvance  (herein  the  "Forbearance  Actions").

To  induce  us not to take the Forbearance Actions, it is hereby mutually agreed
that:

(A)     effective  immediately,  the  dollar  amount  in  the  definitions  of
"Revolving Line of Credit" and "Line of Credit" shall be reduced from $8,000,000
to  $3,000,000,  and  the  Inventory  Loan Cap which as of November 26, 2003 was
$845,057  shall be reduced to $0 on the date hereof and effective immediately we
shall  no  longer  make revolving advances to you against Eligible Inventory and
Eligible  Inventory  shall  be  excluded  from  the  Borrowing  Base.

(B)     The  outstanding  balance  of loans and advances to you against Eligible
Inventory  was  $845,057 (the "Inventory Loan") on November 26, 2003.  You shall
pay to us an amount equal to $25,000 on December 31, 2003 and an amount equal to
$10,000  commencing  on January 29, 2004 and on the last Wednesday of each month
thereafter  until  June  25,  2004 or until such Inventory Loan is paid in full.
Provided  that after June 25, 2004, we will negotiate in good faith to amend the
monthly payment schedule based on satisfactory future cash flow projections from
the  Company,  provided  further that in the event that we fail to agree upon an
amended  payment  schedule  payments  shall  continue  at $10,000 for each month
thereafter.  You hereby authorize and instruct us to charge each such payment to
your  Revolving  Loan  Account of the respective due date thereof.  In the event
that  any  additional  Overadvance  (based solely upon advances against Eligible
Accounts  Receivable) in excess of $300,000 arises as a result thereof you shall
immediately  pay  such  amount  to  us.

(C)     notwithstanding any provision to the contrary contained in the Financing
Agreement,  the  total  amount of Eligible Accounts Receivable owing to you from
Lowe's  Companies and its subsidiaries and affiliates ("Lowes") shall not exceed
$2,000,000  in  the  aggregate  at  any  time.

(D)     you  shall  at  all times continue to engage the consulting and advisory
services of Clear Thinking Group ("CTG") and shall authorize and instruct CTG to
respond  fully and promptly to any and all inquiries and/or requests that we may
make  upon  them  from  time  to  time.

(E)     until  termination  of the Financing Agreement and full final payment of
all  Obligations  thereunder  you  shall:

(1)     have  at  the end of each Fiscal Quarter set forth below an Fixed Charge
Coverage  Ratio  of  not  less than the ratio set forth below for the applicable
period:





     Period                                                      Ratio
     ------                                                      -----

     (i)   For  the  Fiscal  Quarter  ending
           _____________, 200__                                 ____ to  1.0
     (ii)  For  the  Fiscal  Quarter  ending
           _____________, 200__                                 ____ to  1.0
     (iii) For  the  Fiscal  Quarter  ending
           _____________, 200__                                 ____ to  1.0
     (iv)  For  the  Fiscal  Quarter  ending
           _____________, 200__                                 ____ to  1.0
     (v)   For  the  Fiscal  Quarter  ending
           _____________, 200__  and  for  each
           Fiscal  Quarter  ending  thereafter                  ____ to  1.0

     The  foregoing  ration  shall be calculated on a cumulative quarterly basis
during the first year from _______________ and on a rolling four quarter average
thereafter.

(2)     achieve  EBITDA  of  at  least  the following amounts for the following
periods:

        (A)     $.00  for  the  Fiscal  Quarter  ending,  200;
        (B)     $.00  for  the  Fiscal  Quarter  ending,  200;
        (C)     $.00  for  the  Fiscal  Quarter  ending,  200__;
        (D)     $.00  for  the  Fiscal  Quarter  ending,  200__;
        (E)     $.00  for  the Fiscal Quarter ending, 200__, and for each Fiscal
                Quarter ending  thereafter;  or

EBITDA  shall  mean,  in  any  period, all earning of the company before all (i)
------
interest  and tax obligations, (ii) depreciation and (iii) amortization for said
period,  all  determined  in accordance with GAAP on a consistent basis with the
latest  audited financial statements of the Company, but excluding the effect of
extraordinary  and/or  non-reoccurring  gains  or  losses  for  such  period.

Fixed  Charge Coverage Ratio shall mean, for the relevant period, the ratio
----------------------------
determined by dividing EBITDA by the sum of (a) all interest obligations paid or
due,  (b)  the  amount  of  principal  repaid  or  scheduled to be repaid on all
indebtedness  including  but not limited to the Term Loan and Subordinated Debt,
but  excluding  any  amounts  payable to EPK Financial, (c) Capital Expenditures
actually  incurred, and (d) all federal, state and local income tax expenses due
and  payable.

The  foregoing  financial  covenants  have  been  intentionally  left blank
pending  CIT's  receipt of the Company's business plan and cash flow projections
for  the  applicable  periods.  Such  business  plan  and  projections  shall be
delivered  to  CIT  by  December  31,  2003  and  shall be in form and substance
satisfactory  to CIT.  Upon CIT's receipt of such satisfactory business plan and
projections, CIT and the Company each hereby agrees that financial covenants for
the  applicable  periods shall be (x) negotiated in good faith and (y) set forth
in  a  written  amendment  to Paragraphs (D)(1) and (D)(2) above.  The Company's
failure  to  deliver such satisfactory business plan and projections by December
31,  2003 and/or the failure of CIT and the Company to agree upon such financial
covenants and execute such amendment prior to the expiration of thirty (30) days
after  the  date  hereof  shall  constitute  a  breach of and default under this
Forbearance  Agreement  and  a  Default and Event of Default under the Financing
Agreement.

(F)     you  shall  obtain a cash infusion in an amount not less than $1,000,000
(less  fees)  no  later  than the close of business on the date occurring one(1)
year after the date hereof in the form an equity investment in your common stock
or  subordinated debt, all on such terms, provisions and conditions as shall  be
satisfactory to us.  Such cash infusion may only be used to meet working capital
needs  of  the  Company.

Effective  immediately,  it  is hereby mutually agreed that we will not take the
Forbearance  Actions  provided  that:

     (x)     No  Default and/or Event of Default occurs under the Financing
Agreement;  and

     (y)     you  are  not  in  breach  of  or  default  under any of the terms,
provisions  or  conditions contained herein including but not limited to clauses
(A)  through  (F)  above  (herein  each  a "Forbearance Condition Precedent" and
collectively  the  "Forbearance  Conditions  Precedent").

Your  failure  to  comply  with  or  fulfill  any  of the Forbearance Conditions
Precedent  shall  immediately  constitute  a  Forbearance  Termination  Event.

Upon  the earlier of (x) December 8, 2004 or (y) the occurrence of a Forbearance
Termination  Event,  our  agreement to forebear above shall become null and void
and  of  no  further force or effect between us, and we shall have the immediate
right  without  notice  to  you  to exercise any right or remedy available to us
under  the  Financing  Agreement  and/or  applicable  law  (including,  without
limitation  the  right  to  establish  Availability  Reserves and adjust advance
percentages  against  eligible  collateral  based  upon  the Hilco appraisal and
demand immediate payment of all Overadvances, and the rights to terminate of the
Financing  Agreement,  accelerate  all  Obligations thereunder, realize upon the
Collateral  and/or  charge  the  Default  Rate  of  Interest).

You,  of  course,  understand  that, notwithstanding (i) our decision to refrain
from  exercising  any  of our rights and remedies against you as set forth above
and (ii) our continuing at this time to make advances to you under the Financing
Agreement,  subject to the above terms, provisions and conditions we reserve all
our  rights  and remedies (which we may exercise upon the earlier of December 8,
2004  or  the occurrence of a Forbearance Termination Event) against you and any
guarantors or pledgors, including without limitation the rights to terminate the
Financing  Agreement,  demand payment of all of your Obligations, commence legal
action to enforce collection thereof, and realize upon  your Accounts and/or all
other  Collateral  pledged  to  us  under  or  in  connection with the Financing
Agreement.  Subject  to  the  foregoing terms, provisions and conditions nothing
contained herein shall be construed as a waiver of our rights to exercise at any
time  any  other  right or remedy available to us under the Financing Agreement,
the  guaranties  or  applicable  law.

As  an  inducement  to  our  entering  into this agreement, and in consideration
thereof,  the Company and each Guarantor hereby acknowledges and agrees that (a)
no  right of offset, defense, counterclaim, claim, causes of action or objection
in  favor  of  the Company or any Guarantor against CIT exists arising out of or
with  respect  to  (i)  the  Financing Agreement or any Guaranty, (ii) any other
documents  now  or heretofore evidencing, securing or in any way relating to the
foregoing  or (iii) the administration or funding of the Line of Credit; and (b)
the  Company  and  each  Guarantor  does  hereby  expressly  waive,  release and
relinquish  any and all such offsets, defenses, counterclaims, claims, causes of
action  or  objections,  if  any,  against  CIT.

If  the  foregoing  is  in  accordance  with your understanding of our agreement
kindly  so  indicate  by signing and returning the enclosed copy of this letter.
In  addition, we have asked each of the Guarantors to sign below to confirm that
their  respective guaranties and/or security or pledge agreements shall continue
in  full  force  and  effect  notwithstanding  the  foregoing  agreement.

                                                Very  truly  yours,

                                                THE  CIT  GROUP/BUSINESS
                                                CREDIT,  INC.


                                                By:  /s/  Kim  Nguyen
                                                     ----------------
                                                Title:  Assistant Vice President
                                                        ------------------------

Read  and  Agreed  to:

KNOGO  NORTH  AMERICA  INC.

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

Confirmed:

SENTRY  TECHNOLOGY  CORP.


By:  /s/  Peter  J.  Mundy
     ---------------------
Title: VP-CFO
       ------
<PAGE>























                                                            Exhibit  23.1


CONSENT  OF  INDEPENDENT  CERTIFIED  PUBLIC  ACCOUNTANTS



We  consent  to  the  incorporation  by  reference in Registration Statement No.
333-34929  and  333-34867  of  Sentry  Technology Corporation on Form S-8 of our
report dated February 27, 2004 appearing in this Annual Report on Form 10-KSB of
Sentry  Technology  Corporation  for  the  year  ended  December  31,  2003.



/s/  Holtz  Rubenstein  &  Co.,  LLP


Melville,  New  York
March  15,  2004


<PAGE>
































































SECTION  302  CERTIFICATION:


                                                                Exhibit  31.1

CERTIFICATION  PURSUANT  TO
SECTION  302  OF
THE  SARBANES-OXLEY  ACT  OF  2002

Certification  of  CEO

I,  Peter  L.  Murdoch,  certify  that

1.   I  have  reviewed  this  annual  report on Form 10-KSB of Sentry Technology
Corporation;

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

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

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

a)     designed  such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is  made  known  to  us by others within those entities, particularly during the
period  in  which  this  quarterly  report  is  being  prepared;

b)     evaluated  the  effectiveness of the registrant's disclosure controls and
procedures  and presented in this report our conclusions about the effectiveness
of  the  disclosure controls and procedures, as of the end of the period covered
by  this  report  based  on  such  evaluation;  and

c)     disclosed  in this report any change in the registrant's internal control
over  financial  reporting  that  occurred  during  the registrant's most recent
fiscal  quarter  that  has  materially  affected,  or  is  reasonably  likely to
materially  affect,  the registrant's internal control over financial reporting;
and

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

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

b)     any  fraud,  whether  or  not material, that involves management or other
employees  who  have  a  significant role in the  registrant's internal controls
over  financial  reporting.


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


                                        March  15,  2004










<PAGE>









SECTION  302  CERTIFICATION:


                                                                 Exhibit  31.2

CERTIFICATION  PURSUANT  TO
SECTION  302  OF
THE  SARBANES-OXLEY  ACT  OF  2002

Certification  of  CFO

I,  Peter  J.  Mundy,  certify  that

1.   I  have  reviewed  this  annual  report on Form 10-KSB of Sentry Technology
Corporation;

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

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

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

a)     designed  such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is  made  known  to  us by others within those entities, particularly during the
period  in  which  this  quarterly  report  is  being  prepared;

b)     evaluated  the  effectiveness of the registrant's disclosure controls and
procedures  and presented in this report our conclusions about the effectiveness
of  the  disclosure controls and procedures, as of the end of the period covered
by  this  report  based  on  such  evaluation;  and

c)     disclosed  in this report any change in the registrant's internal control
over  financial  reporting  that  occurred  during  the registrant's most recent
fiscal  quarter  that  has  materially  affected,  or  is  reasonably  likely to
materially  affect,  the registrant's internal control over financial reporting;
and

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

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

b)     any  fraud,  whether  or  not material, that involves management or other
employees  who  have  a  significant role in the  registrant's internal controls
over  financial  reporting.


                                   /s/  PETER  J.  MUNDY
                                   -------------------------------------------
                                   Peter  J.  Mundy
                                   Vice  President and Chief Financial Officer

                                   March  15,  2004





<PAGE>

















SECTION  906  CERTIFICATION:


                                                               Exhibit  32.1

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



Certification  of  CEO

In  connection  with  the  Annual  Report  of Sentry Technology Corporation (the
"Company")  on  Form 10-KSB for the period ended December 31, 2003 as filed with
the  Securities  and  Exchange  Commission  on the date hereof (the Report"), I,
Peter  L.  Murdoch, Chief Executive Officer of the Company, certify, pursuant to
Section 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act  of  2002,  that:

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

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



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

                                         March  15,  2004


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

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






















<PAGE>












SECTION  906  CERTIFICATION:


                                                                 Exhibit  32.2


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



Certification  of  CFO

In  connection  with  the  Annual  Report  of Sentry Technology Corporation (the
"Company")  on  Form 10-KSB for the period ended December 31, 2003 as filed with
the  Securities  and  Exchange  Commission  on the date hereof (the Report"), I,
Peter  J.  Mundy,  Chief  Financial Officer of the Company, certify, pursuant to
Section 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act  of  2002,  that:

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

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



                                   /s/  PETER  J.  MUNDY
                                   --------------------------------------------
                                   Peter  J.  Mundy
                                   Vice  President  and  Chief Financial Officer

                                   March  15,  2004


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

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