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

                                   FORM 10-K


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

                  For the fiscal year ended December 31, 2008


                        COMMISSION FILE NUMBER:  1-12727
                       __________________________________


                         SENTRY TECHNOLOGY CORPORATION
     (Exact  name  of  the  Registrant  as  specified  in  its  charter)

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


                1881  LAKELAND  AVENUE,  RONKONKOMA,  NY  11779
                -----------------------------------------------
           (Address  of  principal  executive  offices)  (Zip  Code)

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



       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




<PAGE>
Indicate  by  check  mark  if the registrant is a well-known seasoned issuer, as
defined  in  Rule  405  of  the  Securities  Act.
Yes  ____   No  X
               ----

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

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding  12  months  (or  for such shorter period that the registrant was
required  to  file  such  reports),  and  (2)  has  been  subject to such filing
requirements  for  the  past  90  days.
Yes  X      No  ____
    ----

Indicate  by  check mark if 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 registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or  any  amendment
to  this  Form  10-K.
                      ---

Indicate  by  check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company.  See
the  definitions  of "large accelerated filer," "accelerated filer" and "smaller
reporting  company"  in  Rule  12b-2  of  the  Exchange  Act.

Large accelerated filer  _____          Accelerated filer         _____

Non-accelerated filer    _____          Smaller reporting company   X
(Do not check if a smaller reporting company)                     -----


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

The  issuer's  revenues  for  the  latest  fiscal  year  were  $12,708,000.

At March 13, 2009, the aggregate  market value of the voting stock held by
non-affiliates  of  the  registrant  was  approximately $824,000 based upon the
closing  price  of  such  securities on the OTC Bulletin Board on that date.

At March 13, 2009, the registrant had outstanding 120,743,804 shares of Common
Stock.

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

None.

Transitional Small Business Disclosure  Format  (check  one)  Yes ___  No  X
                                                                          ---
<PAGE>

                                     ------
                                     PART I
                                     ------
ITEM  1.   DESCRIPTION  OF  BUSINESS
------------------------------------

GENERAL

Sentry  designs,  manufactures,  sells  and  installs  a  complete line of Video
Surveillance  Systems  (VSS),  Electro-Magnetic  (EM)  and  Radio  Frequency
Identification  (RFID)  based  Library  Management  systems  as  well  as  Radio
Frequency  (RF)  and Electro-Magnetic (EM) Electronic Article Surveillance (EAS)
systems.  The VSS product line features SentryVision, SmartTrack, a proprietary,
patented  traveling Surveillance System, and includes conventional pan, tilt and
zoom  ("PTZ") and fixed camera video systems. The Company's products are used by
libraries  to secure inventory and improve operating efficiency, by retailers to
deter  shoplifting  and  internal  theft  and  by  industrial  and institutional
customers  to  protect  assets  and  people.

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

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

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

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

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


EQUITY  TRANSACTIONS

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

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

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

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

-     ID Systems and Sentry continue as a distributor in North and South America
      for Dialoc products.
-     Dialoc became a distributor in Europe and Asia of labels manufactured by
      ID Systems' security label manufacturing subsidiary, Custom Security
      Industries Inc. ("CSI").
-     Dialoc will continue to be a dealer for Sentry products in Europe and
      Asia.

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

Key  terms  of  the  transaction  are  as  follows:

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

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

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

Certain  other  warrants to purchase 425,000 common shares of Sentry at exercise
prices ranging from $0.18 to $0.20 per share were issued in conjunction with the
convertible  debenture.  The  warrants were exercisable over one to three years.
The  fair  value  of these warrants ($49,000) was charged to operations over the
life  of  the  warrants.  During  the  year ended December 31, 2008, nil (2007 -
$5,000)  was  recorded  in  interest  and  financing  expenses  related to these
warrants.  These  options  expired  during  2007.

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

On April 11, 2008, Brookfield extended its maturity of the debenture to December
31,  2008.  The  5,000,000  warrants  that  were  originally issued expired.  In
consideration  of  this  renewal,  Brookfield  received  fully- vested, two-year
warrants to purchase 5 million common shares of the Company at an exercise price
of $0.10 per share.  The fair value of these warrants of $150,000 was determined
in accordance with SFAS No. 123R and beginning in May 2008 was taken into income
over  the  period  of  the  guarantee,  which  was eight months.  This extension
expired  on December 31, 2008.  On November 24, 2008 Brookfield further extended
its  maturity  of  the  debenture  to July 30, 2009.  There is no assurance that
further  extensions  will  be  obtained.

Mr. Murdoch, directly or indirectly through his ownership of Saburah Investments
Inc.,  owns  or  controls 49.5% of the outstanding common stock of Sentry, which
does  not include the amount of shares to which Mr. Murdoch would be entitled to
upon  exercise  of  warrants.


THE  SENTRYVISION  SYSTEM

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

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

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

SentryVision  is  designed  to  provide enhanced loss prevention surveillance in
retail  stores  and  distribution  centers  as well as to provide monitoring and
deterrence of illegal and unsafe activities in a variety of other locations such
as  parking  garages, correctional facilities, transportation centers and public
transit  terminals.  SentryVision  may  also  be  employed  in  a broad range of
operational  and process monitoring applications in commercial manufacturing and
industrial  settings. SentryVision  is now installed in four of the top five and
six  of  the  top  ten  Global Retailers.  As of December 31, 2008, SentryVision
systems had been installed at the following customer locations in North America:
Kmart, Navy Exchange, Lowe's Home Centers, Target Stores, Mills Fleet Farm, Winn
Dixie,  Federal  Express,  Cabellas,  Fred  Meyer,  Motorola,  UPS, J.C. Penney,
Canadian  Tire,  Reno  Depot,  Estee Lauder, Kohl's Department Stores and Disney
Direct  Marketing.  In  addition,  during  2008,  the  Company's  international
distributors  installed  SentryVision  systems  in customer locations throughout
Western  and Eastern Europe, Latin America and Asia. Our international customers
include ASDA Wal-Mart, Boot Drug Stores, Carrefour, Auchan, Cora, Castorama, B &
Q,  Tesco and Coop. We believe that, by providing expanded surveillance coverage
and  enhanced  flexibility  to  select  the locations watched, SentryVision  has
enabled  customers  to  significantly reduce inventory shrinkage, increase theft
apprehension  rates  and  improve safety and security. Based on the price of its
system and the experience of Sentry's customers to date, we believe SentryVision
is a cost-effective solution, which can improve the operations of our customers.

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

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

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

Retailers  have  also  integrated  SentryVision  with  "front  end"  packages of
conventional  video  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 video applications. Customers using the
SentryVision  system  have  reported  significant  reductions  in  theft-related
inventory  shrinkage.

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

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

RETAIL  MARKET  APPLICATIONS
----------------------------
Home  Centers:  Sentry  has  installed systems in the home center segment of the
retail market. Typical of our customers in this market is Mills Fleet Farm, a 32
store  regional  hardware,  home  supply  and discount retail chain. The company
requires  systems  for  total  floor  coverage.

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

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

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

-     Manufacturing  and  Transportation  Facilities.  SentryVision  use  in
factories  has  been  limited,  but  the  benefits  of  continuous  tracking  of
industrial  operations and processes indicate future growth potential. Continued
expansion  of the SentryVision  dealer program is expected to generate increased
installations in factories manufacturing electronics, pharmaceuticals, computers
and  other  high  value  products  and  in  various  wholesale  distribution and
transportation  facilities.  Express  package  and  other  high  throughput
distribution  facilities  are  also good prospects for a continuous tracking VSS
system  for  theft  prevention.  Installations  include FedEx Freight, Motorola,
Federal  Express  Air  &  Ground and UPS.  In Cape Town, South Africa, The Metro
Rail  Network  has  installed  10 tracks at several terminal stations to monitor
passengers  at the junction of bus, railway and taxi services.  SmartTrack is an
integral  part  of  an overall crime prevention and deterrence program including
central management of all video devices over a network.  In addition, the Mexico
City  Metro  purchased  more  than  100  SmartTrack systems to manage safety and
security  for  one  of  the  world's  largest  subway  systems.


CONVENTIONAL  VIDEO  SURVEILLANCE  SYSTEMS

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

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

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

<PAGE>
We  continue  to  expand  conventional  video  installations  in  industrial and
institutional  facilities.  Significant installations have been made for express
package  companies,  including  Federal  Express.

EAS  SYSTEMS

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

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

RADIO  FREQUENCY  AND  RANGER  DETECTION  SYSTEMS

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

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

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

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

<PAGE>
ELECTROMAGNETIC  (EM)  DETECTION  SYSTEMS

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

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


PATRON  SELF  CHECK  BOOK  BORROWING  SYSTEMS

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


RADIO  FREQUENCY  IDENTIFICATION  (RFID)

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


DIALOC  ID  SECURITY  PRODUCTS

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


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 2008, a sale to a dealer serving the Mexico City Metro
accounted  for  11%  of  total  revenues and sales to FedEx accounted for 10% of
total  revenues.  In  2007, Steve and Barry's accounted for approximately 18% of
total  revenues.


PRODUCTION

SENTRYVISION  AND  VIDEO  SURVEILLANCE  SYSTEMS
-----------------------------------------------

By  the  end  of 2006, Sentry had outsourced substantially all of its SmartTrack
manufacturing  operations.  Although  we  are  not dependent upon any particular
supplier,  Sentry  has made an investment in material and training with selected
sub-contractors  to supply major portions of our SmartTrack system.  Most system
parts  are "off-the-shelf" components, and other materials and system components
are  designed  by  Sentry  and  manufactured  to  Sentry's specifications.  Some
minimal  final  assembly operations are conducted at the Company's facilities in

<PAGE>
Ronkonkoma,  New  York.  System  components  and  parts include cameras, circuit
boards,  electric motors and a variety of machined parts. Each finished assembly
undergoes  a  quality  assurance  check  by  Sentry  prior to its shipment to an
installation  site.  All SentryVision  carriage assemblies are tested and burned
in for 24 hours, resulting in approximately 3,000 travel and PTZ cycles prior to
quality  assurance  sign off.  Sentry is not required under any state or federal
environmental  law  or  regulations  to  obtain  related  licenses or permits in
connection  with  its  manufacturing  and  assembly  operations.

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

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

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

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

We  have a 51% interest in Custom Securities Industries Inc. ("CSI"), an Ontario
company.  Since its founding in 1988, CSI has established a worldwide reputation
for  innovation  and  excellence  in  the  Electronic Article Surveillance (EAS)
Industry.  Extensive  experience  and  know-how in the leading EAS technologies,
combined  with  expertise  in  materials  converting,  in-house  development  of
proprietary  products  and  the  use of specially designed converting equipment,
enables  CSI  to  offer custom tailored solutions with a rapid turn around time.
Over the years, CSI has acquired a wide range of knowledge and developed its own
trade  secrets  and  manufacturing  procedures  to ensure competitive pricing, a
broad range of high quality products, and the ability to supply products in both
small and large volumes. CSI offers EAS products compatible with Radio Frequency
(RF), Electromagnetic (EM), and Acousto-Magnetic (AM) technologies. Whatever the
particular  application,  from  standard  EM  pressure  sensitive  labels  to
sequentially  printed  barcode  labels,  products  are  available.

CSI products are sold through distributors around the world in over 25 countries
and  every  continent.

CSI  also  manufactures  a broad range of Source Tagging Solutions for the Radio
Frequency  and  Acousto-Magnetic  technologies.  These products are successfully
meeting  the  needs  of  retailers  in  the hardware, auto aftermarket, food and
general  merchandise  categories.  CSI has recently added a sales person to work
with packagers and brand owners in the North American market to promote the sale
of  Source  Tagging  Solutions.

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

CSI's  manufacturing  equipment  incorporates  computer  and control technology,
including  PLC's,  Motion  Controllers,  Servo  Motors,  many different types of
position  and movement sensors, along with a very large inventory of specialized
tooling  and  dies. Besides providing security labels to Sentry, CSI's customers
include  Tyco,  Checkpoint,  Dialoc,  Gateway/Gunnebo  and  Retailers
Advantage.

MARKETING

We  market  our  SentryVision  and conventional video systems through the direct
efforts  of  salespersons located in select metropolitan areas across the United
States  and  Canada,  as well as through dealers/system integrators. In 2008, we
employed 8 direct sales representatives, whose efforts were supplemented through
three  in-house  sales  support staff and independent sales representatives.  We

<PAGE>
also  market  our  EAS  products to smaller local and regional retailers through
selected  dealers  and  distributors.  Sales are made into the library market on
both  a  direct  basis  as  well  as  through  catalogs  and  dealers.

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

SENTRYVISION  AND  VIDEO  SURVEILLANCE  SYSTEMS
-----------------------------------------------

To  date,  most SentryVision  and conventional video systems have been sold on a
direct  sale  basis.  Typical  billing  arrangements  for  SentryVision  systems
involve  invoicing 50% of total sale upon shipment of the product and 50% on the
completion  of  the  installation.  The  successful  introduction  of  our
OperationalVideo  program  in  the  fourth quarter of 2007 has created important
large  reference  sites  that  will  help  in  growing  the  business.

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

We also market SentryVision  through qualified security dealers and integrators.
Much  of  the  industrial  and  institutional  SentryVision  / VSS prospects are
serviced  by  local  security companies who design and install integrated video,
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  2008.

In  addition,  we  market  SentryVision  internationally  using  independent
distributors  on  both an exclusive and nonexclusive basis. We sell our products
to  independent  distributors at prices below those charged to end-users because
distributors  typically  make  volume  purchases  and assume marketing, customer
training,  installation,  servicing  and  financing  responsibilities.  As  of
December  31,  2008,  we  have  distributors in the UK, France, Mexico, Belgium,
Holland,  Italy,  Poland,  Singapore, Russia, Spain, Brazil, Argentina, Hungary,
Romania,  Taiwan,  Lebanon,  Australia, Japan, South Africa, South Korea, Israel
and  the  United  Arab  Emirates.

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

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

RF  and Ranger systems continue to be used by apparel and department stores that
have  wide  exit  areas and a desire for deterrence based on reusable hard tags.
Knoscape  RF  systems detect both 2 MHz hard tags and 8 MHz labels.  Sentry also
markets an 8MHz P-2000 RF system designed for both hard and soft good customers.

Bookstores  remain  good  prospects for EM systems due to the small size and low
cost  of  EM  strips. EM systems feature updated digital electronics that detect
virtually  all  manufacturers' magnetic strips and can universally replace older
magnetic  strip  systems  manufactured  by  various  EAS vendors.  Sentry is the
official  supplier  of  the  National  Association  of  College  Stores  (NACS).

The  library  market continues to be the primary market for magnetic technology.

<PAGE>
BACKLOG

Our  backlog  of  orders was approximately $2.6 million at December 31, 2008, as
compared to approximately $2.8 million at December 31, 2007.  We anticipate that
substantially  all  of  the  backlog  present  as  of  December 31, 2008 will be
delivered  within  12  months.


SEASONAL  ASPECTS  OF  THE  BUSINESS

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


SERVICE

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

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

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

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


COMPETITION

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

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

<PAGE>
PATENTS  AND  OTHER  INTELLECTUAL  PROPERTY

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

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

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

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

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

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

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

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

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

RESEARCH  AND  DEVELOPMENT

As of December 31, 2008, Sentry Technology Corporation had 4 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,
2008  and  2007,  approximately $0.6 million and $0.7 million, respectively, was
expended  on  Company-sponsored  research.

The  SmartTrack  System  continued  to  benefit from product improvement efforts
focused  on  adding  software  features  and  reducing  the cost of manufactured
products.  Other  developments during 2008 incorporated improvements in business
applications  for  retail  operational  management.

Additional  projects  included  revisions  to  EAS  products.

Developments to EM systems included the mechanical design of a second-generation
"WAM2"  Library  system  and  a  "WAM2"  tuning  board prototype.  The system is
expected  to  be  released  in  the  second  quarter  of  2009.

<PAGE>
QuickCheck  system  developments  included  continuing cost reductions in system
components  and software upgrades to improve product capabilities and functions.
In  addition,  we  made  improvements  in  software  to incorporate a new height
measurement  sensor  to  prevent  theft at the self-check station.  A patent has
been filed to protect important intellectual property.  Management believes that
this  feature will offer a unique competitive position in the library self-serve
market.

CSI  is supporting a long term research effort at cole Polytechnique, University
of  Montreal,  in  conjunction with the National Science and Research Council of
Canada,  to  develop  improved  magnetic  sensors  for  antishoplifting  and
authentication.


REGULATION

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

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

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


EMPLOYEES

At  December  31,  2008,  the Company and its subsidiaries employed 65 full-time
employees, of whom 13 were employed in administrative and clerical capacities, 4
in  engineering,  research  and  development, 21 in production and manufacturing
support,  12 in sales and marketing and 15 in customer service and support. None
of  our  employees  are  employed  pursuant to collective bargaining agreements.


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

Our  principal  executive,  administrative offices, research and development and
distribution  facilities are located in Ronkonkoma, New York, in a 20,000 square
foot  facility  leased  by  the  Company.   In  addition,  we  maintain a sales,
administrative and distribution office in a leased 3,250 square foot facility in
Toronto,  Ontario.  Our  CSI  subsidiary leases facilities for manufacturing and
distribution  totaling  7,000  square  feet  located  in  Thornhill,  Ontario.


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

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

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


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

During  the fourth quarter of fiscal year ended December 31, 2008, there were no
matters  submitted  to  a  vote  of  the  Company's security holders through the
solicitation  of  proxies  or  otherwise.


                                     -------
                                     PART II
                                     -------

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

(a)     Price  Range  of  Common  Stock.

The  following  table  sets  forth,  for the periods indicated, the high and low
sales  prices  per  share  of  common  stock:

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

2008
     First Quarter        $   0.12       $    0.06
     Second Quarter           0.10            0.05
     Third Quarter            0.09            0.01
     Fourth Quarter           0.06            0.01

2009
     First  Quarter       $   0.03       $    0.01
     (through  March 13,  2009)

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

(b)     Holders  of  Common  Stock.

As  of March 13, 2009, the Company had 120,743,804 shares of Common Stock issued
and outstanding,  which  were  held  by  approximately 346 holders of record.

(c)     Dividends.

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

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

For  a description of the Company's equity securities authorized for issuance as
described in Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation,"  see  Notes to our Financial Statements, Note [3.o.] "Significant
Accounting  Policies,  Stock-Based  Compensation,"  and  Note [15], "Stock Based
Compensation."

The  Company  did  not repurchase any of its equity securities during the fourth
quarter  of  the  fiscal  year  ended  December  31,  2008.


ITEM 6.  SELECTED FINANCIAL DATA
--------------------------------

The  table  below  sets forth selected consolidated historical financial data of
the  Company  for  the years ended December 31, 2004, 2005, 2006, 2007 and 2008.
The  selected  consolidated  historical  financial  data  should  be  read  in
conjunction  with  the Consolidated Financial Statements of the Company included
in  Item  8.

<TABLE>
<CAPTION>

(AMOUNTS IN THOUSANDS EXCEPT FOR PER SHARE DATA)

<S>                                                            <C>      <C>       <C>       <C>       <C>
Years Ended December 31,                                          2004     2005      2006      2007      2008
                                                               -------  --------  --------  --------  --------
SELECTED STATEMENT OF OPERATIONS DATA:
Total revenues                                                 $16,863  $13,570   $12,135   $13,498   $12,708
Cost of sales                                                    6,351    5,960     5,374     6,215     6,261
Customer service expenses                                        4,175    2,654     2,209     2,474     2,115
Selling, general and administrative expenses                     4,840    5,348     5,296     4,787     4,339
Goodwill impairment                                                  -        -         -     1,564         -
Income (loss) before income taxes and minority interest            253   (1,581)   (2,055)   (3,755)     (933)
Net income (loss)                                                   31   (1,690)   (2,304)   (3,678)   (1,138)
Net income (loss) per common share:
   Basic and diluted                                              0.00    (0.01)    (0.02)    (0.03)    (0.01)


As of December 31,                                               2004     2005      2006      2007      2008
                                                               -------  --------  --------  --------  --------

SELECTED BALANCE SHEET DATA:
Working capital.                                               $ 4,545  $ 3,037   $ 1,276   $(1,817)  $(2,337)
Total assets.                                                   12,247    9,395     8,834     8,532     5,970
Property, plant and equipment, net.                                689      637       609       634       439
Bank indebtedness, demand loan and revolving line of credit.     2,604    2,039     3,030     4,551     3,418
Convertible debentures                                           1,862    1,904     1,945     1,986     2,000
Minority interest                                                1,045    1,140     1,237     1,200     1,311
Total common stockholders' equity (deficit)                      4,345    2,698       648    (2,238)   (3,071)

</TABLE>
<PAGE>

ITEM  7.     MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OR  PLAN  OF  OPERATION
--------     ----------------------------------------------------------------

CRITICAL ACCOUNTING POLICIES

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

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

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

Impairment of long-lived assets -- We review our long-lived assets, property and
equipment,  intangible assets, goodwill and other assets for impairment whenever
events  or  changes  in circumstances indicate that the carrying amount of these
assets  may not be fully recoverable.  Impairment is measured at fair value.  If
impairment  indicators  exist,  we  determine whether the projected undiscounted
cash  flows  will be sufficient to cover the carrying value of such assets. This
requires  us  to make significant judgments about the expected future cash flows
of  the asset group. The future cash flows are dependent on general and economic
conditions  and  are  subject  to change.  The Company was unable to justify the
carrying  value  of  the goodwill at December 31, 2007 as a result of inadequate
cash  flows; therefore, a charge to income in 2007 of $1,564,000 was recognized,
representing  the  entire  balance  of  goodwill.

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

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

Related Party Transactions -- Details of related party transactions are included
in  Item  13  and  in  Note  [13] of the Financial Statements of this Form 10-K.

<PAGE>

RESULTS  OF  OPERATIONS

YEAR ENDED DECEMBER 31, 2008 COMPARED WITH YEAR ENDED DECEMBER 31, 2007

Consolidated  revenues were 6% lower in the year ended December 31, 2008 than in
the  year ended December 31, 2007.  Our backlog of orders was approximately $2.6
million  at  December  31,  2008, a decrease of 7%, as compared to approximately
$2.8  million at December 31, 2007.  We anticipate that substantially all of the
backlog  present  as  of  December  31, 2008 will be delivered within 12 months.
Total  revenues  for  the  periods  presented  are  broken  out  as  follows:

                                                                         %
                                              2008         2007       Change
                                              ----         ----       ------
                                                (In Thousands)
Electronic  Article  Surveillance (EAS)     $ 5,484      $ 6,656       (18)
Video  Surveillance  Systems  (VSS)             510          501         2
SentryVision                                  4,865        3,894        25
                                            -------      -------      ----
Total  sales                                 10,859       11,051        (2)
Service,  maintenance  and  installation      1,849        2,447       (24)
                                            -------      -------      ----
Total  revenues                             $12,708      $13,498        (6)
                                            =======      =======      ====

North  American  revenues  represented  $8.8 million or 69% of total revenues in
2008  compared  to  $11.2  million  or  83%  of  total  revenues in 2007.  Total
international  sales were $3.9 million in 2008 compared to $2.3 million in 2007.
Our  sales  to  international  dealers  and distributors are denominated in U.S.
dollars, therefore fluctuations of the Euro and other foreign currencies against
the  U.S.  dollar  in  2008  had  no  impact  on  reported  revenues.  The  most
significant  impact on total revenues on a comparative basis was the loss of one
major  domestic  customer  of  $2.4  million  which  was offset partially by the
increase  in  one  new  international  customer  for  $1.3  million.

EAS sales decreased by 18% or $1,172,000 in 2008 compared to 2007.  Domestic EAS
sales  were  $4.7  million  in  2008  compared  to  $5.9  million  in  2007  and
international  EAS sales were $.8 million in both periods.  This decrease is due
to  a  de-emphasis  on  legacy  EAS sales to retailers, as well as a decrease in
label sales from our 51% owned subsidiary.  VSS sales were up by 2% or $9,000 in
2008  compared  to 2007.  SentryVision  sales were up by 25% or $971,000 in 2008
as  compared  to  2007.  Domestic  SentryVision  sales were $1.7 million in 2008
compared  to  $2.5 million in 2007.  This decrease is due to a loss of one major
customer  (Steve  &  Barry's),  offset  slightly  by increases in sales to other
customers  including FedEx.  International SentryVision  sales were $3.2 million
in 2008 compared to $1.4 million in 2007.  This increase is primarily the result
of  a  sale  to  a  dealer  serving  the  Mexico  City  Metro.

Service,  maintenance  and  installation  revenues  were  24%  lower  in 2008 as
compared to 2007 due to lower domestic sales revenue including the non-recurring
installation  revenue  we  received  from Steve & Barry's during the prior year.

Cost  of  sales  was  58%  in  2008  compared  to  56% in 2007.  The increase in
percentage  is  primarily due to an increase in the percentage of total sales to
foreign  dealers  where  we  obtain  lower  margins.

The 15% decrease in customer service expenses in 2008 over 2007 is primarily due
to  lower  subcontractor  labor,  installation  material and travel costs due to
lower  domestic  revenues  from installed products.  Outside service contractors
are  used  in  order  to  better  manage our total customer service requirements
during  fluctuations  in  activity  levels.

Selling,  general  and administrative expenses were 9% lower in 2008 as compared
to  2007.  This  decrease is principally due to a reduction in domestic warranty
expenses,  sales  salaries  and  travel and freight expenses, offset somewhat by
higher  professional  fees.

Research  and development costs were 18% lower in 2008 as compared to 2007.  The
decrease  in  expenses  in 2008 is primarily a result of decreased headcount and
prototype  costs.

The  Company  recognized  a  foreign  exchange  gain of $0.8 million during 2008
compared  to a loss of $0.6 million in 2007 due to the strengthening of the U.S.
dollar  compared  to the Canadian dollar during 2008.  The gain is principally a

<PAGE>
result of short-term designated payables denominated in Canadian dollars and the
impact  of  receivables  denominated  in  U.S.  dollars.

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

Net  interest expense remained approximately the same in 2008 of $545,000 versus
$546,000 in 2007.  This is primarily due to lower interest rates during 2008 vs.
2007,  which  was  offset  by  a  higher  average  outstanding  debt  in  2008.

Non-cash  amortization  costs related to financing increased in 2008 by $264,000
as  compared  to  2007.  This  increase  is primarily a result of an increase in
amortization  expense  resulting  from  the  issuance  of additional warrants to
Brookfield  granted in connection with the extension of their debenture, as well
as  additional  warrants  issued  to  two  of  the  Company's directors for loan
guarantee  extensions.

The income tax expense of $94,000 in 2008 is principally a result of the taxable
income  of  Custom Security Industries (CSI), our 51% owned Canadian subsidiary,
which cannot be offset by Sentry's net operating loss carryforwards.  The income
tax  benefit  of $40,000 in 2007 is a result of a reduction in the year-end 2007
estimated  taxes  of  CSI.

As  a  result  of the foregoing, we had net loss of $1,138,000 in the year ended
December  31,  2008,  as  compared  to  net loss of $3,678,000 in the year ended
December  31,  2007.


LIQUIDITY  AND  CAPITAL  RESOURCES

During 2008, the Company continued to finance its operations principally through
the  loan  guarantee  extensions  given from two of the Company's directors, Mr.
Murdoch  and  Mr.  Furst,  to  the  Company's  principal  lenders.

At  December  31,  2008, we had cash and short term investments of $0.9 million,
working  capital  of  ($2.3)  million  and  total  assets of $6.0 million.  Cash
provided  by  operating  activities  was  $1.6  million.  Cash  was  principally
provided  by  the  collection  of accounts receivable and reduction in inventory
levels.  This  was  partially  offset  by  cash  used  to  pay  down  vendors.

Cash used in investing activities was $168,000 substantially due to the increase
in  short-term  investments,  changes  in  other  assets  and  the  purchase  of
manufacturing  equipment  at  our  51%  owned  labeling  plant.  There  are  no
significant  projected  capital expenditure requirements anticipated in the near
term.

Cash  used  by  financing  activities  was  $550,000  during  2008.  Borrowing
availability under the credit facilities has been based upon the combined levels
of  receivables  and  inventory,  which  were  lower  during  2008.  Due  to the
continued  decline  in the Company's financial position, RBC further reduced the
maximum  borrowing  availability under its credit facility requiring the Company
to  pay  down  the  loan  during  2008  by  $550,000.


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

The  maximum  borrowing under the demand loan facility was Canadian $3.6 million
(U.S.  $2.9  million). RBC increased the borrowing base formula by Canadian $1.0
million  (U.S.  $817,000) in exchange for additional security provided by two of
the  Company's  directors.  Borrowings under the facility are subject to certain
limitations  based on a percentage of eligible accounts receivable and inventory
as  defined  in the agreement. Interest is payable at a rate of RBC's prime rate
(3.5%  at  December  31,  2008),  plus  2.75%  per  annum. Borrowings under this
facility  are  secured  by  substantially  all  of  the  Company's assets. As of
December 31, 2008, the Company exceeded its facilities under the lending formula
by  approximately  Canadian  $670,000  (U.S.  $547,000)  (subject  to  the above
limitations)  under  the demand loan. RBC agreed to forbear from the exercise of
its  rights and remedies under the security in respect of the indebtedness until
October  31,  2008  or  earlier  in  the  event  of the occurrence of default in
accordance  with the Forbearance Agreement, which was finalized on May 29, 2008.
In accordance with the Forbearance Agreement the maximum borrowings were reduced
to  Canadian  $3,175,000  (U.S.  $2,593,000) and the interest rate was increased
from  RBC's  prime  rate plus 2.75% per annum to RBC's prime rate plus 3.25% per
annum.

<PAGE>
As of October 31, 2008, the Forbearance Agreement with RBC expired.  On November
12,  2008,  the  Company  and  RBC extended the Forbearance Agreement to May 15,
2009.  In  accordance  with  the  Forbearance  Agreement  extension, the maximum
borrowings  were  reduced  to  Canadian  $3,000,000  (U.S.  $2,449,800)  and the
interest  rate  was further increased from RBC's prime rate plus 3.25% per annum
to  RBC's prime rate plus 3.75% per annum.  At December 31, 2008 borrowings were
at  Canadian  $2,900,000  (U.S. $2,368,000).  There is no assurance that further
extensions  will  be  obtained.

In  consideration  for  the  guarantees provided by Mr. Murdoch and Mr. Furst to
RBC,  the  Company  paid  a  fee of $43,000, shared between them, paid in twelve
equal  monthly  installments.  As  additional  consideration,  they  received
fully-vested,  two-year warrants to purchase approximately 2.9 million shares of
the  Company's  common stock, at an exercise price of $0.10 per share.  The fair
value  of  these warrants of $120,000 was determined in accordance with SFAS No.
123R  and  beginning  in  June 2006 was taken into income over the period of the
guarantee,  which  was one year.  These guarantees expired in June 2007 and were
subsequently  renewed  in  July  2007 until April 30, 2008.  In consideration of
these  guarantee  renewals, Mr. Murdoch and Mr. Furst received a fee of $40,000,
shared  between  them,  paid  in  ten equal monthly installments.  As additional
consideration,  they  received  fully-vested,  two-  year  warrants  to purchase
approximately  7.4  million common shares of the Company at an exercise price of
$0.065  per  share.  The fair value of these warrants of $164,000 was determined
in  accordance  with  SFAS  No.  123R  and beginning in July 2007 was taken into
income over the period of the guarantee, which was ten months.  These guarantees
expired  in  April 2008 and were subsequently renewed in May 2008 until December
31,  2008.  In  consideration  of  these guarantee renewals, Mr. Murdoch and Mr.
Furst  received  a  fee  of  $33,000,  shared  between them, paid in eight equal
monthly  installments.  As additional consideration, they received fully-vested,
two-year  warrants  to  purchase  approximately  5  million common shares of the
Company  at  an  exercise  price  of  $0.10  per share.  The fair value of these
warrants  of  $150,000  was  determined  in  accordance  with  SFAS No. 123R and
beginning  in  May  2008 was taken into income over the period of the guarantee,
which  was  eight  months.  These  guarantees  expired in December 2008 and were
renewed until July 30, 2009.  In consideration of these guarantees renewals, Mr.
Murdoch  and  Mr. Furst will receive a fee of $24,000, shared between them, paid
in seven equal monthly installments.  As additional consideration, they received
fully-vested,  two-year  warrants  to purchase approximately 13.2 million common
shares  of  the Company at an exercise price of $.018 per share.  The fair value
of  these  warrants  of $124,000 was determined in accordance with SFAS No. 123R
and  beginning in January 2009 is being taken into income over the period of the
guarantee.

During  the  year  ended  December  31,  2008, $49,000 (2007 - $43,000) has been
recorded  in  interest  expense  related to the above warrants.  During the year
ended  December  31,  2008,  $216,000  (2007  -  $148,000)  has been recorded in
non-cash  amortization  costs  related  to  the  above  warrants.


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

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

On  September  25,  2007,  Mr. Murdoch and Mr. Furst agreed to provide Tradition
Capital  Bank  additional personal guarantees totaling $500,000, which increased
the  maximum  the  Company could draw to $1,050,000, until April 30, 2008, under
the  same  terms  and  conditions  as  listed  above.  In  consideration  of the
guarantees,  Mr.  Murdoch  and  Mr.  Furst  received  a  fee  of $15,000, shared

<PAGE>
between  them,  paid  in  seven  equal  monthly  installments.  As  additional
consideration,  they  received  fully-vested,  two-year  warrants  to  purchase
approximately  2.5  million common shares of the Company at an exercise price of
$0.10  per  share. The fair value of these warrants of $89,000 was determined in
accordance  with  SFAS  No.  123R  and  beginning in October 2007 was taken into
income  over  the  period of the guarantee, which was seven months. On April 30,
2008  the  above  loan  facility and related guarantees expired and were renewed
until  December 31, 2008. Interest is payable at the reference rate (Wall Street
Journal  prime, with an interest rate floor of 5.5%, currently 3.25%), plus 1.0%
per  annum.  In  consideration  of these guarantee renewals, Mr. Murdoch and Mr.
Furst  received  a  fee  of  $35,000,  shared  between them, paid in eight equal
monthly  installments.  As additional consideration, they received fully-vested,
two-year  warrants  to  purchase  approximately 5.3 million common shares of the
Company  at  an  exercise  price  of  $0.10  per  share. The fair value of these
warrants  of  $157,000  was  determined  in  accordance  with  SFAS No. 123R and
beginning  in  May  2008 was taken into income over the period of the guarantee,
which was eight months. On December 31, 2008 the above loan facility and related
guarantees  expired and were renewed until July 31, 2009 under similar terms and
conditions.  At  December  31,  2008  borrowings  were  at  the  maximum  amount
available.  In  consideration  of  these guarantee renewals, Mr. Murdoch and Mr.
Furst  will  receive  a fee of $31,000, shared between them, paid in seven equal
monthly  installments.  As additional consideration, they received fully-vested,
two-year  warrants  to  purchase approximately 17.0 million common shares of the
Company  at  an  exercise  price  of  $.018  per  share. The fair value of these
warrants  of  $160,000  was  determined  in  accordance  with  SFAS No. 123R and
beginning  in  January  2009  is  being taken into income over the period of the
guarantee,  which is seven months. There is no assurance that further extensions
will  be  obtained.

During  the  year  ended  December  31,  2008, $53,000 (2007 - $31,000) has been
recorded  in  interest  expense  related to the above warrants.  During the year
ended  December  31,  2008,  $245,000  (2007  -  $178,000)  has been recorded in
non-cash  amortization  costs  related  to  the  above  warrants.

In  August 2007, Mr. Murdoch agreed to provide a personal guarantee for a Letter
of  Credit  of  $49,350  for  a period of one year in favor of Palm Beach Public
Library  that the Company was unable to obtain on its own in order to complete a
sale  of  the  Company's self-service library systems.  In consideration of this
guarantee  Mr.  Murdoch  received  a  fee of $2,000 paid in twelve equal monthly
installments.  As  additional  consideration, he received fully-vested, two-year
warrants  to  purchase approximately 0.2 million common shares of the Company at
an  exercise  price  of  $0.10  per  share.  The fair value of these warrants of
$10,000  was  determined in accordance with SFAS No. 123R "Share-Based Payment,"
and  beginning  in  August  2007  was  taken  into income over the period of the
guarantee,  which was twelve months. This letter of credit and related guarantee
expired  in August 2008 and was subsequently renewed in August 2008 until August
2009. In consideration of this guarantee renewal, Mr. Murdoch will receive a fee
of  $2,000  paid  over  the next twelve months.  As additional consideration, he
received  fully-vested,  two-year warrants to purchase approximately 1.4 million
common shares of the Company at an exercise price of $0.018 per share.  The fair
value  of  these  warrants  of $13,000 is determined in accordance with SFAS No.
123R  "Share-Based  Payment,"  and  beginning in August 2008 is being taken into
income  over  the  period  of the guarantee, which is twelve months.  During the
year  ended  December  31,  2008,  $1,000  (2007  - $1,000) has been recorded in
interest  expense  related  to the above warrants and $1,000 will be expensed in
2009.  During the year ended December 31, 2008, $11,000 (2007 - $4,000) has been
recorded  in  non-cash  amortization  costs  related  to  the above warrants and
$8,000  will  be  expensed  in  2009.

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

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

On April 11, 2008, Brookfield extended its maturity of the debenture to December
31,  2008.  The  5,000,000  warrants  that  were  originally issued expired.  In
consideration  of  this  renewal,  Brookfield  received  fully- vested, two-year
warrants to purchase 5 million common shares of the Company at an exercise price
of $0.10 per share.  The fair value of these warrants of $150,000 was determined
in accordance with SFAS No. 123R and beginning in May 2008 was taken into income
over  the  period  of  the  guarantee,  which  was eight months.  This extension

<PAGE>
expired  on December 31, 2008.  On November 24, 2008 Brookfield further extended
its  maturity  of  the  debenture  to July 30, 2009.  There is no assurance that
further  extensions  will  be  obtained.

We  will require positive cash flows from operations to meet our working capital
needs over the next twelve months.  While the Company has shown decreased levels
of  revenues,  it  achieved  a  small  operating  profit  of $248,000, which was
achieved  in  part  as  a  result of a $817,000 foreign exchange gain.  This has
substantially  reduced  the  Company's  available  cash reserves and limited our
ability  to  secure  additional  bank  financing.

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

The table below summarizes aggregate maturities contractual obligations as of
December 31, 2008.

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

Operating leases            $  236     $  176     $    60     $  -    $    -
Capital leases                   6          2           4        -         -
Notes payable                   36         36           -        -         -
Convertible debentures       2,000      2,000           -        -         -
                            ------     ------     -------     ----    ------
Total                       $2,278     $2,214     $    64     $  -    $    -
                            ======     ======     =======     ====    ======


RECENT  ACCOUNTING  PRONOUNCEMENTS

In  December 2008, FASB issued FASB Staff Position ("FSP") SFAS 140-4 and FIN 46
(R)-8,  "Disclosures  by  Public  Entities  (Enterprises)  about  Transfers  of
Financial  Assets  and Interests in Variable Interest Entities" ("FSP SFAS 140-4
and FIN 46 (R)"). FSP SFAS 140-4 and FIN 46 (R) amends FASB SFAS 140 "Accounting
for  Transfers  and  Servicing  of  Financial  Assets  and  Extinguishments  of
Liabilities", to require public entities to provide additional disclosures about
transfers  of  financial  assets.  It also amends FASB SFAS 46 (revised December
2003),  "Consolidation  of  Variable  Interest  Entities",  to  require  public
enterprises,  including  sponsors  that  have  a variable interest in a variable
interest  entity, to provide additional disclosures about their involvement with
variable  interest entities. Additionally, this FSP requires certain disclosures
to  be  provided  by  a  public enterprise that is (a) a sponsor of a qualifying
special  purpose entity ("SPE") that holds a variable interest in the qualifying
SPE  but  was  not  the  transferor  (nontransferor)  of financial assets to the
qualifying  SPE  and (b) a servicer of a qualifying SPE that holds a significant
variable  interest  in  the  qualifying  SPE  but  was  not  the  transferor
(nontransferor)  of  financial  assets  to  the  qualifying SPE. The disclosures
required  by  FSP  SFAS  140-4  and  FIN 46 (R)" are intended to provide greater
transparency  to  financial  statement  users  about  a  transferor's continuing
involvement  with  transferred  financial assets and an enterprise's involvement
with  variable  interest entities and qualifying SPEs. FSP SFAS 140-4 and FIN 46
(R) is effective for reporting periods (annual or interim) ending after December
15,  2008.  The  Company is currently reviewing the effect, if any; the proposed
guidance  will  have  on  its  consolidated  financial  statements.

In  September  2008,  FASB issued FSP No. 133-1 and FIN 45-4, "Disclosures about
Credit  Derivatives  and  Certain Guarantees: An Amendment of FASB Statement No.
133  and  FASB Interpretation No. 45; and Clarification of the Effective Date of
FASB Statement No. 161" ("FSP SFAS 133-1 and FIN 45-4").  FSP 133-1 and FIN 45-4
to  require  disclosures  by  sellers  of  credit  derivatives, including credit
derivatives  embedded  in a hybrid instrument.  FSP SFAS 133-1 and FIN 45-4 also
amend  FASB  Interpretation  No.  45,  "Guarantor's  Accounting  and  Disclosure
Requirements  for  Guarantees,  Including Indirect Guarantees of Indebtedness of

<PAGE>
Others,"  to  require  an  additional disclosure about the current status of the
payment/performance  risk  of a guarantee.  Further, FSP SFAS 133-1 and FIN 45-4
clarifies the Board's intent about the effective date of FASB Statement No. 161,
"Disclosures  about  Derivative  Instruments  and Hedging Activities."  FSP SFAS
133-1 and FIN 45-4 is effective for reporting periods (annual or interim) ending
after  November 15, 2008.  The adoption of FSP SFAS 133-1 and FIN 45-4 will have
no  impact  on  the  Company's  consolidated  financial  statements.

In  May  2008,  FASB  issued  SFAS No. 162, "The Hierarchy of Generally Accepted
Accounting  Principles"  ("SFAS  162").  SFAS  162  identifies  the  sources  of
accounting principles and the framework for selecting the principles used in the
preparation  of  financial  statements  of  nongovernmental  entities  that  are
presented  in  conformity with generally accepted accounting principles ("GAAP")
in  the  United  States  (the  GAAP  hierarchy).  SFAS  162 is effective 60 days
following  the  SEC's  approval of the Public Company Accounting Oversight Board
amendments  to AU Section 411, "The Meaning of Present Fairly in Conformity With
Generally  Accepted  Accounting  Principles." The Company is currently reviewing
the  effect,  if  any;  the  proposed  guidance  will  have  on its consolidated
financial  statements.

In  May  2008,  FASB  issued  FSP  Accounting  Principles  Board  ("APB")  14-1,
"Accounting  for  Convertible  Debt Instruments That May Be Settled in Cash upon
Conversion  (Including  Partial Cash Settlement)" ("FSP APB 14-1"). FSP APB 14-1
clarifies  that  convertible  debt  instruments that may be settled in cash upon
conversion (including partial cash settlement) are not addressed by paragraph 12
of  APB  Opinion  No.  14, "Accounting for Convertible Debt and Debt Issued with
Stock  Purchase  Warrants." Additionally, FSP APB 14-1 specifies that issuers of
such  instruments  should  separately  account  for  the  liability  and  equity
components  in  a  manner  that  will  reflect  the entity's nonconvertible debt
borrowing  rate  when interest cost is recognized in subsequent periods. FSP APB
14-1  is  effective  for  financial statements issued for fiscal years beginning
after  December  15,  2008, and interim periods within those fiscal years. Early
adoption  is  not  permitted.  The Company is currently reviewing the effect, if
any;  the  proposed guidance will have on its consolidated financial statements.

In  April  2008,  FASB issued FASB Staff Position ("FSP") Statement of Financial
Accounting  Standards  ("SFAS")  No. 142-3, "Determination of the Useful Life of
Intangible  Assets"  ("FSP  SFAS 142-3"). FSP SFAS 142-3 amends the factors that
should  be  considered  in  developing  renewal or extension assumptions used to
determine  the  useful life of a recognized intangible asset under SFAS No. 142,
"Goodwill  and  Other Intangible Assets" ("SFAS 142"). The intent of this FSP is
to  improve  the  consistency between the useful life of a recognized intangible
asset  under  SFAS 142 and the period of expected cash flows used to measure the
fair  value  of the asset under FASB Statement No. 141 (revised 2007), "Business
Combinations," and other U.S. generally accepted accounting principles ("GAAP").
FSP  SFAS  142-3  is  effective for financial statements issued for fiscal years
beginning  after  December  15,  2008,  and  interim periods within those fiscal
years.  The  requirement  for  determining  useful  lives  must  be  applied
prospectively  to  intangible  assets  acquired after the effective date and the
disclosure  requirements  must be applied prospectively to all intangible assets
recognized  as  of,  and  subsequent  to,  the effective date. Early adoption is
prohibited.  The Company is currently reviewing the effect, if any; the proposed
guidance  will  have  on  its  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  or  Plan  of Operation" and other
sections of this Annual Report on Form 10-K contain "forward-looking statements"
(as  defined  in  the  Private  Securities  Litigation Reform Act of 1995 or the
"PSLRA") that are based on current expectations, estimates and projections about
the  industry in which the Company operates, as well as management's beliefs and
assumptions.  Words  such  as  "expects,"  "anticipates"  and  "believes"  and
variations  of  such  words  and  similar  expressions generally indicate that a
statement  is forward-looking. The Company wishes to take advantage of the "safe
harbor"  provisions  of  the  PSLRA  by  cautioning  readers that many important
factors  discussed  herein,  among  others,  may  cause the Company's results of
operations  to  differ  from  those expressed in the forward-looking statements.
These  factors  include:  (i)  the risk that any delay or cancellation of orders
from  one or more of Sentry's 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

<PAGE>
sectors  will  not  develop as expected, whether due to competitive pressures in
these markets or to any other failure to gain market acceptance of the Company's
products;  (iii)  the  risk that anticipated revenue growth through the domestic
and  international  dealers programs does not develop as expected; (iv) the risk
that  the  Company may not find sufficient qualified Service Partners to provide
future  installation services; (v) the risk that the Company will not be able to
retain  key  personnel;  (vi) the risk that the borrowing availability under our
credit  facilities  will  not  be  adequate  to  meet  the  Company's  growth
requirements;  and  (vii)  the  risk  arising from the large market position and
greater  financial  and  other  resources  of Sentry's principal competitors, as
described  under  "Item  1.  Business-Competition."


ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
--------    ----------------------------------------------------------

We are exposed to a variety of market risks, including the effects of changes in
foreign currency exchange rates and interest rates. Market risk is the potential
loss  arising  from  adverse  changes in market rates and prices. The Company is
exposed  to  currency  risk  as  some  of  the Company's sales and purchases are
incurred  in  Canadian  dollars  resulting  in  Canadian  denominated  accounts
receivable  and  accounts  payable.  A  portion  of  its expenses is incurred in
Canadian  dollars  and Euros, which would result in foreign denominated accounts
payable.  In  addition, certain of the Company's cash is denominated in Canadian
dollars.  These  balances  are  therefore  subject  to  gains  and losses due to
fluctuations  in  those  currencies.

We are exposed to interest rate risk primarily through our debt facilities since
some of those instruments bear interest at variable rates. At December 31, 2008,
we  had outstanding borrowings under variable interest rate debt agreements that
totaled  approximately  $3,418,000.

<PAGE>
ITEM  8.     FINANCIAL  STATEMENTS
--------     ---------------------


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


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


                     YEARS ENDED DECEMBER 31, 2008 AND 2007
                     --------------------------------------



                                    CONTENTS
                                    --------

                                                                        Page
                                                                        ----

  Report  of  Independent  Registered  Public  Accounting  Firm          27

  Consolidated  Balance  Sheets                                          28

  Consolidated  Statements  of  Operations                               29

  Consolidated  Statements  of  Stockholders'  Deficit                   30

  Consolidated  Statements  of  Cash  Flows                              31

  Notes  to  Consolidated  Financial  Statements                       32 - 46



<PAGE>



            REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


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


     We  have  audited  the  accompanying  consolidated balance sheets of Sentry
Technology Corporation and Subsidiaries as of December 31, 2008 and 2007 and the
related  consolidated  statements  of operations, stockholders' deficit and cash
flows  for  each  of  the  years in the two year period ended December 31, 2008.
These  financial  statements are the responsibility of the Company's management.
Our  responsibility is to express an opinion on these financial statements based
on  our  audits.

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

     In  our  opinion,  the  consolidated financial statements referred to above
present  fairly,  in  all  material  respects,  the financial position of Sentry
Technology Corporation and Subsidiaries as of December 31, 2008 and 2007 and the
results  of  its  operations and its cash flows for each of the years in the two
year  period  ended  December  31, 2008 in conformity with accounting principles
generally  accepted  in  the  United  States  of  America.

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


                                                  /s/  SF  Partnership,  LLP
                                                  CHARTERED  ACCOUNTANTS

TORONTO,  CANADA
February  27,  2009

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

<TABLE>
<CAPTION>
                                                                                     December 31,
<S>                                                                           <C>             <C>
                                                                                  2008           2007
                                                                              ------------    -----------
ASSETS
----------------------------------------------------------------------------
Current Assets:
 Cash and cash equivalents                                                    $         643     $    256
       Short-term investments                                                           264          202
 Accounts receivable, net of allowance for doubtful accounts
   of $179 in 2008 and $209 in 2007                                                     971        3,014
 Inventory, net                                                                       2,739        3,299
 Prepaid expenses and other current assets                                              682          858
                                                                              --------------    ---------
Total current assets                                                                  5,299        7,629
PROPERTY AND EQUIPMENT, net                                                             439          634
OTHER ASSETS                                                                            232          269
                                                                              --------------    ---------
          TOTAL ASSETS                                                        $       5,970     $  8,532
                                                                              ==============    =========

LIABILITIES AND STOCKHOLDERS' DEFICIT
----------------------------------------------------------------------------
Current Liabilities:
 Bank indebtedness, demand loan and revolving line of credit                  $       3,418     $  4,551
 Accounts payable                                                                       830        1,223
 Accrued liabilities                                                                  1,211        1,539
 Obligations under capital leases - current portion                                       2            2
 Deferred income                                                                        175          145
 Convertible debenture                                                                2,000        1,986
                                                                              --------------    ---------
Total current liabilities                                                             7,636        9,446
Long-term debt -- less current portion:
   Obligations under capital leases                                                       4            7
   Deferred tax liabilities                                                              90          117
                                                                              --------------    ---------
Total long-term liabilities                                                              94          124
                                                                              --------------    ---------
Total liabilities                                                                     7,730        9,570
                                                                              --------------    ---------

MINORITY INTEREST                                                                     1,311        1,200

COMMITMENTS AND CONTINGENCIES (Note 12)

STOCKHOLDERS' DEFICIT:
 Preferred stock, $0.001 par value; authorized 10,000 (2007 - 10,000)
     shares, none issued and outstanding
 Common stock, $0.001 par value; authorized 190,000 (2007 - 190,000)
     shares; issued and outstanding 120,744 (2007 - 120,744) shares                     121          121
 Additional paid-in capital                                                          50,196       49,420
 Accumulated deficit                                                                (53,528)     (52,390)
 Accumulated other comprehensive income                                                 140          611
                                                                              --------------    ---------
Total stockholders' deficit                                                          (3,071)      (2,238)
                                                                              --------------    ---------
          TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                         $       5,970     $  8,532
                                                                              ==============    =========

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

</TABLE>

<PAGE>

                         SENTRY TECHNOLOGY CORPORATION
                         -----------------------------
                                AND SUBSIDIARIES
                                ----------------
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                     -------------------------------------
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
                                                             Years Ended December 31,
                                                             ------------------------
                                                              2008              2007
                                                            --------         ---------
<S>                                                      <C>                    <C>
REVENUES:
 Sales                                                   $    10,859         $  11,051
 Service, installation and maintenance revenues                1,849             2,447
                                                         -----------         ---------
                                                              12,708            13,498
                                                         -----------         ---------
COST OF SALES AND EXPENSES:
 Cost of sales                                                 6,261             6,215
 Customer service expenses                                     2,115             2,474
 Selling, general and administrative expenses                  4,339             4,787
 Research and development                                        562               688
 Foreign exchange (gain) loss                                   (817)              607
                                                         -----------         ---------
                                                              12,460            14,771
                                                         -----------         ---------
INCOME (LOSS) FROM OPERATIONS                                    248            (1,273)
GOODWILL IMPAIRMENT                                                -             1,564
INTEREST EXPENSE, net                                            545               546
NON-CASH AMORTIZATION COSTS RELATED TO FINANCING                 636               372
                                                         -----------         ---------
LOSS BEFORE INCOME TAXES AND MINORITY INTEREST                  (933)           (3,755)
INCOME TAX EXPENSE (RECOVERY)                                     94               (40)
                                                         -----------         ---------
LOSS BEFORE MINORITY INTEREST                                 (1,027)           (3,715)
MINORITY INTEREST EXPENSE (INCOME)                               111               (37)
                                                         -----------         ---------
NET LOSS                                                 $    (1,138)        $  (3,678)
                                                         ===========         =========
LOSS PER SHARE
     Basic and diluted                                   $     (0.01)        $   (0.03)
                                                         ===========         =========

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


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

</TABLE>

<PAGE>

                         SENTRY TECHNOLOGY CORPORATION
                         -----------------------------
                                AND SUBSIDIARIES
                                ----------------
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
                ------------------------------------------------
                                 (IN THOUSANDS)
                     YEARS ENDED DECEMBER 31, 2008 AND 2007
                     --------------------------------------


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

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

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



BALANCE, January 1, 2008                                  120,744  $    121  $  49,420  $   (52,390)  $        611    $ (2,238)
Net loss for the year                                           -         -          -       (1,138)             -      (1,138)
Stock-based compensation                                        -         -         22            -              -          22
Warrants issued                                                 -         -        754            -              -         754
Equity adjustment from foreign currency translation             -         -          -            -           (471)       (471)
                                                     ------------  --------  ----------  ----------   ------------    --------

BALANCE, DECEMBER 31, 2008                                120,744  $    121  $  50,196   $  (53,528)  $        140    $ (3,071)
                                                     ============  ========  =========   ==========   ============    ========


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


</TABLE>
<PAGE>

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

<S>                                                                           <C>                       <C>
                                                                                 2008                      2007
                                                                              ----------                ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net loss                                                                     $   (1,138)               $   (3,678)
 Adjustments to reconcile net loss to net cash
   provided by (used in) operating activities:
   Depreciation and amortization                                                     108                       125
   Amortization of intangibles and other assets                                       66                       133
   Deferred income taxes                                                              (6)                        9
             Non-cash consideration
                     Stock-based compensation                                         22                        26
                     Warrant amortization                                            622                       336
                     Amortization of convertible debenture                            14                        41
              Goodwill impairment                                                      -                     1,564
              Minority interest expense (income) of consolidated subsidiary          111                       (37)
 Changes in operating assets and liabilities:
   Accounts receivable                                                             1,603                      (431)
   Inventory                                                                         459                      (218)
   Prepaid expenses and other current assets                                         272                      (497)
   Accounts payable                                                                 (353)                      583
             Accrued liabilities                                                    (247)                      411
   Deferred income                                                                    38                       (17)
                                                                              ----------                ----------
 Net cash provided by (used in) operating activities                               1,571                    (1,650)
                                                                              ----------                ----------

CASH FLOWS FROM INVESTING ACTIVITIES:
 Changes in short-term investments                                                  (117)                      105
 Purchases of property and equipment                                                 (19)                      (53)
      Changes in other assets                                                        (32)                      (30)
                                                                              ----------                ----------
 Net cash (used in) provided by investing activities                                (168)                       22
                                                                              ----------                ----------

CASH FLOWS FROM FINANCING ACTIVITIES:
 Net borrowing (repayment) on the bank indebtedness,
            demand loan and revolving line of credit                                (548)                    1,047
 Repayment of obligations under capital leases                                        (2)                       (2)
                                                                              -----------               ----------
 Net cash (used in) provided by financing activities                                (550)                    1,045
                                                                              ----------                ----------

EFFECT OF EXCHANGE RATE CHANGES                                                     (466)                      479
                                                                              ----------                ----------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                     387                      (104)
CASH AND CASH EQUIVALENTS, beginning of year                                         256                       360
                                                                              ----------                ----------
CASH AND CASH EQUIVALENTS, end of year                                        $      643                $      256
                                                                              ==========                ==========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
    Cash paid during the year for:
    Interest                                                                  $      609                $      547
                                                                              ==========                ==========
      Income taxes                                                            $        -                $       89
                                                                              ==========                ==========

 Non-cash financial activities:
 Issuance of warrants relating to bank guarantees (Note 7)                    $      754                $      357
                                                                              ==========                ==========


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

</TABLE>
<PAGE>

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

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                     YEARS ENDED DECEMBER 31, 2008 AND 2007
                     --------------------------------------

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

     a.     Business
            --------

     Sentry  Technology Corporation, a publicly traded Delaware Corporation, was
established  on  February  12,  1997.  Its  corporate  predecessors  had been in
business  for  more  than  40  years.  Sentry  Technology  Corporation  and  its
subsidiaries  ("Sentry" or the "Company"), design, manufacture, sell and install
a  complete  line of Video Surveillance Systems (VSS), Electro-Magnetic (EM) and
RFID  based  Library  Management  systems  as  well  as Radio Frequency (RF) and
Electro-Magnetic  (EM)  EAS systems. The VSS product line features SentryVision,
SmartTrack,  a proprietary, patented traveling Surveillance System, and includes
conventional  pan,  tilt  and  zoom  ("PTZ") and fixed camera video systems. The
Company's  products  are  used  by  libraries  to  secure  inventory and improve
operating  efficiency,  by retailers to deter shoplifting and internal theft and
by  industrial  and  institutional  customers  to  protect  assets  and  people.


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

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

     The  Company  has  incurred  losses  and  decreased financial position as a
result of not meeting its business plan. The Company had losses of approximately
$1.1  million  for the year ended December 31, 2008 (2007 - $3.7 million) and as
of  December  31,  2008, the Company had an accumulated deficit of approximately
$53.5 million (2007 - deficit of $52.4 million). The Company's continuation as a
going  concern is uncertain. The Company entered into a Forbearance Agreement on
May  29, 2008, with its primary lender, Royal Bank of Canada ("RBC"), who agreed
to  forbear  from  the  exercise  of their rights and remedies in respect of the
indebtedness until October 31, 2008 or earlier in the event of the occurrence of
a  default  in  the agreement. As of October 31, 2008, the Forbearance Agreement
expired.  On  November  12,  2008,  the Company and RBC extended the Forbearance
Agreement  to  May  15,  2009  with  revised terms and conditions. The Company's
convertible  debenture  holders  and  Tradition Capital Bank initially agreed to
extend  maturity to December 31, 2008, and subsequently agreed to extend to July
30,  2009.  There  is  no  assurance  that  further extensions will be obtained.
Management  plans  to  pursue  raising additional funds through future equity or
debt  financing  to  satisfy  commitments to its primary lenders and convertible
debenture  holders until it achieves profitable operations. Although the Company
plans to pursue additional financing, there can be no assurance that the Company
will  be  able to secure financing when needed or obtain such financing on terms
satisfactory  to  the  Company, if at all. The Company's continuation as a going
concern  depends  upon  its  ability  to  raise  funds  and  achieve and sustain
profitable  operations.

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


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

<PAGE>
     a.     Principles  of  consolidation
            -----------------------------

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

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

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

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

          Included  in  accounts  receivable  at  December 31, 2008 and 2007 are
unbilled  accounts  receivable  of  $3,000  and  $18,000,  respectively.

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

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

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

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

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

          Short-term  investments include highly liquid investments with initial
maturity of between three and twelve months.  Included in short-term investments
in 2008 and 2007 is $82,000 and $100,000, respectively, of restricted funds used
as  collateral  on  Banker's  Acceptances.

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

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

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

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

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

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

<PAGE>
     i.     Property  and  equipment
            ------------------------

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

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

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

     k.     Goodwill
            --------

     Goodwill  represents  the excess of acquisition cost over the fair value of
net  assets  acquired  in business combinations. In accordance with Statement of
Financial  Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible
Assets",  goodwill  is  not  amortized but reviewed annually for impairment. The
Company was unable to justify the carrying value of the goodwill at December 31,
2007 as a result of inadequate cash flows; therefore, a charge to income in 2007
of  $1,564,000  was  recognized,  representing  the  entire balance of goodwill.

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

     The  Company  accounts  for  comprehensive income (loss) in accordance with
SFAS  No.  130,  "Reporting Comprehensive Income" ("SFAS No. 130"). SFAS No. 130
establishes  standards  for  reporting  and presentation of comprehensive income
(loss)  and  its components in a full set of financial statements. Comprehensive
income  (loss)  is  presented  in  the  statements  of stockholders' equity, and
consists  of  net earnings (loss) and unrealized gains (losses) on available for
sale marketable securities; foreign currency translation adjustments; changes in
market  value  of  future contracts that qualify as a hedge; and negative equity
adjustments recognized in accordance with SFAS No. 87 "Employers' Accounting for
Pensions".

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

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

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

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

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

     There  were  no additions or reductions in unrecognized tax benefits during
the  year  ended  December  31,  2008.

<PAGE>
     o.     Stock-based  compensation
            -------------------------

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

          SFAS  No.  123(R) requires the benefits associated with tax deductions
in  excess  of  recognized  compensation cost to be reported as a financing cash
flow  rather than as an operating cash flow as previously required.  In 2008 and
in 2007, the Company did not record any excess tax benefit generated from option
exercises.

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

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

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

     The  functional  currency  of  the  Company's foreign entities is the local
currency,  which is Canadian dollars. The translation of foreign currencies into
U.S. dollars is performed for balance sheet accounts using the exchange rates in
effect  at  the balance sheet dates and for revenue and expense accounts using a
weighted  average  exchange  rate during the year. The gains or losses resulting
from  the  translation are included in Accumulated Other Comprehensive Income in
the  Consolidated  Statement  of Stockholders' Deficit and are excluded from net
income  (loss). Gains or losses resulting from foreign currency transactions are
included  in  earnings.

<PAGE>
     r.     Shipping  and  handling  costs
            ------------------------------

     Shipping  and  handling  costs  are  included  in  selling,  general  and
administrative expenses and approximated $284,000 and $303,000 in 2008 and 2007,
respectively.


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

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

     t.     Reclassifications
            -----------------

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

     u.     Recent  accounting  pronouncements
            ----------------------------------

     In  December  2008,  FASB issued FASB Staff Position ("FSP") SFAS 140-4 and
FIN  46  (R)-8, "Disclosures by Public Entities (Enterprises) about Transfers of
Financial  Assets  and Interests in Variable Interest Entities" ("FSP SFAS 140-4
and FIN 46 (R)"). FSP SFAS 140-4 and FIN 46 (R) amends FASB SFAS 140 "Accounting
for  Transfers  and  Servicing  of  Financial  Assets  and  Extinguishments  of
Liabilities", to require public entities to provide additional disclosures about
transfers  of  financial  assets.  It also amends FASB SFAS 46 (revised December
2003),  "Consolidation  of  Variable  Interest  Entities",  to  require  public
enterprises,  including  sponsors  that  have  a variable interest in a variable
interest  entity, to provide additional disclosures about their involvement with
variable  interest entities. Additionally, this FSP requires certain disclosures
to  be  provided  by  a  public enterprise that is (a) a sponsor of a qualifying
special  purpose entity ("SPE") that holds a variable interest in the qualifying
SPE  but  was  not  the  transferor  (nontransferor)  of financial assets to the
qualifying  SPE  and (b) a servicer of a qualifying SPE that holds a significant
variable  interest  in  the  qualifying  SPE  but  was  not  the  transferor
(nontransferor)  of  financial  assets  to  the  qualifying SPE. The disclosures
required  by  FSP  SFAS  140-4  and  FIN 46 (R)" are intended to provide greater
transparency  to  financial  statement  users  about  a  transferor's continuing
involvement  with  transferred  financial assets and an enterprise's involvement
with  variable  interest entities and qualifying SPEs. FSP SFAS 140-4 and FIN 46
(R) is effective for reporting periods (annual or interim) ending after December
15,  2008.  The  Company is currently reviewing the effect, if any; the proposed
guidance  will  have  on  its  consolidated  financial  statements.

     In  September  2008,  FASB  issued FSP No. 133-1 and FIN 45-4, "Disclosures
about  Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement
No.  133 and FASB Interpretation No. 45; and Clarification of the Effective Date
of  FASB  Statement No. 161" ("FSP SFAS 133-1 and FIN 45-4").  FSP 133-1 and FIN
45-4  to  require disclosures by sellers of credit derivatives, including credit
derivatives  embedded  in a hybrid instrument.  FSP SFAS 133-1 and FIN 45-4 also
amend  FASB  Interpretation  No.  45,  "Guarantor's  Accounting  and  Disclosure
Requirements  for  Guarantees,  Including Indirect Guarantees of Indebtedness of
Others,"  to  require  an  additional disclosure about the current status of the
payment/performance  risk  of a guarantee.  Further, FSP SFAS 133-1 and FIN 45-4
clarifies the Board's intent about the effective date of FASB Statement No. 161,
"Disclosures  about  Derivative  Instruments  and Hedging Activities."  FSP SFAS
133-1 and FIN 45-4 is effective for reporting periods (annual or interim) ending
after  November 15, 2008.  The adoption of FSP SFAS 133-1 and FIN 45-4 will have
no  impact  on  the  Company's  consolidated  financial  statements.

     In May 2008, FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted
Accounting  Principles"  ("SFAS  162").  SFAS  162  identifies  the  sources  of
accounting principles and the framework for selecting the principles used in the
preparation  of  financial  statements  of  nongovernmental  entities  that  are
presented  in  conformity with generally accepted accounting principles ("GAAP")
in  the  United  States  (the  GAAP  hierarchy).  SFAS  162 is effective 60 days
following  the  SEC's  approval of the Public Company Accounting Oversight Board
amendments  to AU Section 411, "The Meaning of Present Fairly in Conformity With
Generally  Accepted  Accounting  Principles." The Company is currently reviewing
the  effect,  if  any;  the  proposed  guidance  will  have  on its consolidated
financial  statements.

<PAGE>
     In  May  2008,  FASB  issued  FSP Accounting Principles Board ("APB") 14-1,
"Accounting  for  Convertible  Debt Instruments That May Be Settled in Cash upon
Conversion  (Including  Partial Cash Settlement)" ("FSP APB 14-1"). FSP APB 14-1
clarifies  that  convertible  debt  instruments that may be settled in cash upon
conversion (including partial cash settlement) are not addressed by paragraph 12
of  APB  Opinion  No.  14, "Accounting for Convertible Debt and Debt Issued with
Stock  Purchase  Warrants." Additionally, FSP APB 14-1 specifies that issuers of
such  instruments  should  separately  account  for  the  liability  and  equity
components  in  a  manner  that  will  reflect  the entity's nonconvertible debt
borrowing  rate  when interest cost is recognized in subsequent periods. FSP APB
14-1  is  effective  for  financial statements issued for fiscal years beginning
after  December  15,  2008, and interim periods within those fiscal years. Early
adoption  is  not  permitted.  The Company is currently reviewing the effect, if
any;  the  proposed guidance will have on its consolidated financial statements.


     In  April  2008,  FASB  issued  FASB  Staff  Position  ("FSP") Statement of
Financial  Accounting Standards ("SFAS") No. 142-3, "Determination of the Useful
Life of Intangible Assets" ("FSP SFAS 142-3"). FSP SFAS 142-3 amends the factors
that should be considered in developing renewal or extension assumptions used to
determine  the  useful life of a recognized intangible asset under SFAS No. 142,
"Goodwill  and  Other Intangible Assets" ("SFAS 142"). The intent of this FSP is
to  improve  the  consistency between the useful life of a recognized intangible
asset  under  SFAS 142 and the period of expected cash flows used to measure the
fair  value  of the asset under FASB Statement No. 141 (revised 2007), "Business
Combinations," and other U.S. generally accepted accounting principles ("GAAP").
FSP  SFAS  142-3  is  effective for financial statements issued for fiscal years
beginning  after  December  15,  2008,  and  interim periods within those fiscal
years.  The  requirement  for  determining  useful  lives  must  be  applied
prospectively  to  intangible  assets  acquired after the effective date and the
disclosure  requirements  must be applied prospectively to all intangible assets
recognized  as  of,  and  subsequent  to,  the effective date. Early adoption is
prohibited.  The Company is currently reviewing the effect, if any; the proposed
guidance  will  have  on  its  consolidated  financial  statements.


4.     INVENTORY:
       ---------

Inventory consisted of the following:

                                                                December 31,
                                                             ==================
                                                             2008          2007
                                                             ----          ----
                                                              (In Thousands)
                                                              --------------
                                 Raw materials          $  1,039        $  1,288
                                 Work-in-process             178             193
                                 Finished goods            1,522           1,818
                                                        --------        --------
                                                        $  2,739        $  3,299
                                                        ========        ========

       The  components  of inventory shown are net of reserves for excess and
obsolete  inventory  totaling  $1,403,000 and $1,350,000 as of December 31, 2008
and  2007,  respectively.


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

Property  and  equipment  are stated at cost and are summarized as follows:


                                           Estimated
                                         Useful Lives          December 31,
                                             Years          2008        2007
                                         -------------      ----        ----
                                                             (In Thousands)
Mahinery and equipment                      3 - 10       $  1,978     $  2,789
Furniture, fixtures and office equipment    3 - 10          1,820        2,415
Leasehold improvements                      3 - 5              90           96
                                                         --------     --------
                                                            3,888        5,300
Less accumulated depreciation and amortization              3,449        4,666
                                                         --------     --------
                                                         $    439     $    634
                                                         ========     ========

          Net property and equipment located in Canada approximated $430,000 and
$619,000  in  2008 and 2007, respectively.  Depreciation expense on property and
equipment  in  2008  and  2007  totaled  $108,000  and  $125,000,  respectively.

<PAGE>
6.     OTHER  ASSETS:
       -------------

Other assets consist of the following:
                                                                December 31,
                                                            ====================
                                                            2008            2007
                                                            ----            ----
                                                               (In Thousands)

                          Intangibles, net                $  218          $  256
                          Other                               14              13
                                                         -------         -------
                                                          $  232          $  269
                                                         =======         =======

     Amortization  expense  on other assets in 2008 and 2007 totaled $66,000 and
$133,000,  respectively.


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

Balances  under  credit  facilities  consist  of  the  following:

                                                                December 31,
                                                           =====================
                                                            2008           2007
                                                           ------         ------
                                                               (In Thousands)

Royal Bank of Canada ("RBC") - Bank indebtedness          $      -      $     13
Royal Bank of Canada - Demand loan                           2,368         3,488
Tradition Capital Bank - Revolving line of credit            1,050         1,050
                                                          --------      --------
                                                          $  3,418      $  4,551
                                                          ========      ========

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

     The  maximum  borrowing  under  the  demand loan facility was Canadian $3.6
million  (U.S.  $2.9  million).  RBC  increased  the  borrowing  base formula by
Canadian  $1.0  million  (U.S.  $817,000)  in  exchange  for additional security
provided  by  two  of the Company's directors. Borrowings under the facility are
subject  to  certain  limitations  based  on  a  percentage of eligible accounts
receivable  and  inventory as defined in the agreement. Interest is payable at a
rate  of  RBC's  prime  rate  (3.5% at December 31, 2008), plus 2.75% per annum.
Borrowings under this facility are secured by substantially all of the Company's
assets.  As  of December 31, 2008, the Company exceeded its facilities under the
lending  formula  by  approximately Canadian $670,000 (U.S. $547,000)(subject to
the  above  limitations)  under  the demand loan. RBC agreed to forbear from the
exercise  of  its  rights  and  remedies  under  the  security in respect of the
indebtedness until October 31, 2008 or earlier in the event of the occurrence of
default in accordance with the Forbearance Agreement, which was finalized on May
29,  2008.  In  accordance with the Forbearance Agreement the maximum borrowings
were  reduced to Canadian $3,175,000 (U.S. $2,593,000) and the interest rate was
increased  from  RBC's  prime rate plus 2.75% per annum to RBC's prime rate plus
3.25%  per  annum.

     As  of  October  31,  2008, the Forbearance Agreement with RBC expired.  On
November 12, 2008, the Company and RBC extended the Forbearance Agreement to May
15,  2009.  In  accordance with the Forbearance Agreement extension, the maximum
borrowings  were  reduced  to  Canadian  $3,000,000  (U.S.  $2,449,800)  and the
interest  rate  was further increased from RBC's prime rate plus 3.25% per annum
to  RBC's prime rate plus 3.75% per annum.  At December 31, 2008 borrowings were
at  Canadian  $2,900,000  (U.S. $2,368,000).  There is no assurance that further
extensions  will  be  obtained.

     In  consideration  for the guarantees provided by Mr. Murdoch and Mr. Furst
to  RBC,  the Company paid a fee of $43,000, shared between them, paid in twelve
equal  monthly  installments.  As  additional  consideration,  they  received
fully-vested,  two-year warrants to purchase approximately 2.9 million shares of
the  Company's  common stock, at an exercise price of $0.10 per share.  The fair
value  of  these warrants of $120,000 was determined in accordance with SFAS No.
123R  and  beginning  in  June 2006 was taken into income over the period of the
guarantee,  which  was one year.  These guarantees expired in June 2007 and were
subsequently  renewed  in  July  2007 until April 30, 2008.  In consideration of
these  guarantee  renewals, Mr. Murdoch and Mr. Furst received a fee of $40,000,
shared  between  them,  paid  in  ten equal monthly installments.  As additional
consideration,  they  received  fully-vested,  two-  year  warrants  to purchase

<PAGE>
approximately  7.4  million common shares of the Company at an exercise price of
$0.065  per  share.  The fair value of these warrants of $164,000 was determined
in  accordance  with  SFAS  No.  123R  and beginning in July 2007 was taken into
income over the period of the guarantee, which was ten months.  These guarantees
expired  in  April 2008 and were subsequently renewed in May 2008 until December
31,  2008.  In  consideration  of  these guarantee renewals, Mr. Murdoch and Mr.
Furst  received  a  fee  of  $33,000,  shared  between them, paid in eight equal
monthly  installments.  As additional consideration, they received fully-vested,
two-year  warrants  to  purchase  approximately  5  million common shares of the
Company  at  an  exercise  price  of  $0.10  per share.  The fair value of these
warrants  of  $150,000  was  determined  in  accordance  with  SFAS No. 123R and
beginning  in  May  2008 was taken into income over the period of the guarantee,
which  was  eight  months.  These  guarantees  expired in December 2008 and were
renewed until July 30, 2009.  In consideration of these guarantees renewals, Mr.
Murdoch  and  Mr. Furst will receive a fee of $24,000, shared between them, paid
in seven equal monthly installments.  As additional consideration, they received
fully-vested,  two-year  warrants  to purchase approximately 13.2 million common
shares  of  the Company at an exercise price of $.018 per share.  The fair value
of  these  warrants  of $124,000 was determined in accordance with SFAS No. 123R
and  beginning in January 2009 is being taken into income over the period of the
guarantee.

     During  the year ended December 31, 2008, $49,000 (2007 - $43,000) has been
recorded  in  interest  expense  related  to the above warrants. During the year
ended  December  31,  2008,  $216,000  (2007  -  $148,000)  has been recorded in
non-cash  amortization  costs  related  to  the  above  warrants.

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

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

     On  September  25,  2007,  Mr.  Murdoch  and  Mr.  Furst  agreed to provide
Tradition  Capital  Bank additional personal guarantees totaling $500,000, which
increased  the  maximum  the  Company  could draw to $1,050,000, until April 30,
2008,  under  the same terms and conditions as listed above. In consideration of
the  guarantees,  Mr.  Murdoch  and  Mr. Furst received a fee of $15,000, shared
between  them,  paid  in  seven  equal  monthly  installments.  As  additional
consideration,  they  received  fully-vested,  two-year  warrants  to  purchase
approximately  2.5  million common shares of the Company at an exercise price of
$0.10  per  share. The fair value of these warrants of $89,000 was determined in
accordance  with  SFAS  No.  123R  and  beginning in October 2007 was taken into
income  over  the  period of the guarantee, which was seven months. On April 30,
2008  the  above  loan  facility and related guarantees expired and were renewed
until  December 31, 2008. Interest is payable at the reference rate (Wall Street
Journal  prime, with an interest rate floor of 5.5%, currently 3.25%), plus 1.0%

<PAGE>

per  annum.  In  consideration  of these guarantee renewals, Mr. Murdoch and Mr.
Furst  received  a  fee  of  $35,000,  shared  between them, paid in eight equal
monthly  installments.  As additional consideration, they received fully-vested,
two-year  warrants  to  purchase  approximately 5.3 million common shares of the
Company  at  an  exercise  price  of  $0.10  per  share. The fair value of these
warrants  of  $157,000  was  determined  in  accordance  with  SFAS No. 123R and
beginning  in  May  2008 was taken into income over the period of the guarantee,
which was eight months. On December 31, 2008 the above loan facility and related
guarantees  expired and were renewed until July 31, 2009 under similar terms and
conditions.  At  December  31,  2008  borrowings  were  at  the  maximum  amount
available.  In  consideration  of  these guarantee renewals, Mr. Murdoch and Mr.
Furst  will  receive  a fee of $31,000, shared between them, paid in seven equal
monthly  installments.  As additional consideration, they received fully-vested,
two-year  warrants  to  purchase approximately 17.0 million common shares of the
Company  at  an  exercise  price  of  $.018  per  share. The fair value of these
warrants  of  $160,000  was  determined  in  accordance  with  SFAS No. 123R and
beginning  in  January  2009  is  being taken into income over the period of the
guarantee,  which is seven months. There is no assurance that further extensions
will  be  obtained.

     During  the year ended December 31, 2008, $53,000 (2007 - $31,000) has been
recorded  in  interest  expense  related  to the above warrants. During the year
ended  December  31,  2008,  $245,000  (2007  -  $178,000)  has been recorded in
non-cash  amortization  costs  related  to  the  above  warrants.

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

 Accrued liabilities consist of the following:
                                                                 December 31,
                                                             ===================
                                                             2008           2007
                                                             ----           ----
                                                                (In Thousands)

Accrued salaries, employee benefits and payroll taxes      $   256      $    280
Customer deposits payable                                      210           305
Other accrued liabilities                                      745           954
                                                           -------      --------
                                                           $ 1,211      $  1,539
                                                           =======      ========

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

                                                                 December 31,
                                                           =====================
                                                             2008           2007
                                                             ----           ----
                                                               (In Thousands)

Expected  tax  benefit  at  40%                       $  (347)        $  (1,419)
Add:
   Goodwill  impairment                                     -               625
   Non-deductible  expenses                                11                13
   U.S.  losses  producing no tax benefit                 336               781
   Foreign tax provision (recovery)                        94               (40)
                                                      --------        ----------
                                                      $    94         $     (40)
                                                      ========        ==========

     Foreign  tax  provision  (recovery)  is principally attributable to foreign
taxes  on  Canadian  operations.

     As  of  December 31, 2008, the Company had net operating loss carryforwards
of  approximately  $38  million,  which  expire  through  the  year  2028.  The
utilization  of these net operating loss carryforwards will likely be subject to
substantial annual limitations imposed by the Internal Revenue Code Section 382.

     The  following  is  a  list  by  year  of  the  expiring net operating loss
carryforwards:
                                                                (In Thousands)
                                                                --------------
                                                        2009     $     776
                                                        2010         1,714
                                                        2011         4,963
                                                        2012         3,003
                                                        2013             -
                                                  Thereafter        27,454
                                                                 ---------
                                                                 $  37,910
                                                                 =========
<PAGE>
     Significant components of deferred tax assets (liabilities) at December 31,
2008  and  2007  are  comprised  of:

                                                                 December 31,
                                                            ====================
                                                              2008          2007
                                                                (In Thousands)

       Assets:
          Accounts  receivable                            $    56      $     40
          Inventory                                           564           529
          Stock-based  compensation                            33            24
          Accrued  liabilities                                110           115
          Property  and  equipment                            399           410
          Net  operating  loss  carryforwards              15,472        15,448
                                                          -------      --------
          Gross  deferred  tax  assets                     16,634        16,566
          Less:  valuation  allowance                      16,555        16,488
                                                          -------      --------
            Deferred  tax  assets                              79            78
       Liabilities:
          Property  and  equipment                            (87)         (107)
          Intangible  assets                                  (58)          (71)
          Other                                               (24)          (17)
                                                           -------      --------
          Gross  deferred  tax  liabilities                  (169)         (195)
                                                           -------      --------
          Deferred  tax  liabilities                      $   (90)     $   (117)
                                                          ========     =========

     The  increase  in  the  valuation allowance for the year ended December 31,
2008  was  primarily  attributable  to  the  increase  in  net  operating  loss
carryforwards.  A valuation allowance has been recorded against the net deferred
tax  assets,  because  it  is  more  likely than not that the assets will not be
realized  in  the  foreseeable  future.


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

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

Key  terms  of  the  transaction  are  as  follows:

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

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

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

     Certain  other  warrants  to  purchase  425,000  common shares of Sentry at
exercise prices ranging from $0.18 to $0.20 per share were issued in conjunction
with  the convertible debenture. The warrants were exercisable over one to three
years. The fair value of these warrants ($49,000) was charged to operations over
the  life  of the warrants. During the year ended December 31, 2008, nil (2007 -
$5,000)  was  recorded  in  interest  and  financing  expenses  related to these
warrants.  These  options  expired  during  2007.

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

     On  April  11,  2008,  Brookfield extended its maturity of the debenture to
December  31, 2008.  The 5,000,000 warrants that were originally issued expired.
In  consideration  of  this renewal, Brookfield received fully- vested, two-year
warrants to purchase 5 million common shares of the Company at an exercise price
of $0.10 per share.  The fair value of these warrants of $150,000 was determined
in accordance with SFAS No. 123R and beginning in May 2008 was taken into income
over  the  period  of  the  guarantee,  which  was eight months.  This extension
expired  on December 31, 2008.  On November 24, 2008 Brookfield further extended
its  maturity  of  the  debenture  to July 30, 2009.  There is no assurance that
further  extensions  will  be  obtained.


11.     COMPREHENSIVE  LOSS:
        -------------------
                                                               December 31,
                                                           ====================
                                                           2008            2007
                                                           --------------------
                                                              (In Thousands)
                                                           --------------------
     Net loss:                                           $(1,138)       $(3,678)
                                                         --------       --------
     Other comprehensive loss:
     Foreign currency translation adjustments               (471)           409
                                                         --------       --------
     Comprehensive loss                                  $(1,609)       $(3,269)
                                                         ========       ========


12.     COMMITMENTS  AND  CONTINGENCIES:
        -------------------------------

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

          The Company leases certain administrative and manufacturing facilities
and equipment under non-cancelable operating leases that expire at various dates
to  2011.  Rent  expense  related  to  operating  leases  for  2008 and 2007 was
$305,000  and $323,000 per year, respectively. Minimum annual rental commitments
are  $176,000  in  2009,  $41,000  in  2010  and  $19,000  in  2011.

     b.    Capital  leases
           ---------------

     The  Company  leases  certain administrative equipment under non-cancelable
capital  leases  that  expire  at  various  dates to 2011. Minimum annual rental
commitments  are  $2,000  in  2009,  $3,000  in  2010  and  $1,000  in  2011.

<PAGE>
     c.     401(k)  Plan
            ------------

          In January 1997, the Company adopted the Sentry Technology Corporation
Retirement  Savings  401(k)  Plan  (the  "Plan").  The  Plan  permits  eligible
employees  to make voluntary contributions to a trust, up to a maximum of 35% of
compensation,  subject  to  certain  limitations.  The  Company  may  elect  to
contribute  a  matching  contribution  equal  to  a designated percentage of the
eligible  employee's deferral election.  The Company may also make discretionary
contributions,  subject  to  certain  conditions,  as  defined  in the Plan.  No
Company  contributions  were  made  in  2008  or  2007.

     d.     Employment  agreements
            ----------------------

          The  Company  and  several  key  executives  entered  into  employment
agreements  with  remaining  terms of up to two years for which the Company will
have  a  commitment of $264,000.  Also, the president of the Company's 51% owned
subsidiary,  Custom  Security Industries Inc., is entitled to receive 10% of its
pretax  profits.

     e.     Litigation
            ----------

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

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


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

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

Mr.  Murdoch,  Sentry's  CEO  and  director,  and  Mr. Furst, a Sentry director,
provided  personal  guarantees  to  existing  loans from Tradition Bank and RBC.
Please  refer  to  Note  7  for  details.

     In  August  2007,  Mr. Murdoch agreed to provide a personal guarantee for a
Letter  of  Credit  of  $49,350  for a period of one year in favor of Palm Beach
Public  Library  that  the  Company  was unable to obtain on its own in order to
complete a sale of the Company's self-service library systems.  In consideration
of  this  guarantee  Mr.  Murdoch  received a fee of $2,000 paid in twelve equal
monthly  installments.  As  additional  consideration, he received fully-vested,
two-year  warrants  to  purchase  approximately 0.2 million common shares of the
Company  at  an  exercise  price  of  $0.10  per share.  The fair value of these
warrants of $10,000 was determined in accordance with SFAS No. 123R "Share-Based
Payment,"  and beginning in August 2007 was taken into income over the period of
the  guarantee,  which  was  twelve  months.  This  letter of credit and related
guarantee  expired  in  August  2008 and was subsequently renewed in August 2008
until  August 2009. In consideration of this guarantee renewal, Mr. Murdoch will
receive  a  fee  of  $2,000  paid  over  the  next twelve months.  As additional
consideration,  he  received  fully-vested,  two-year  warrants  to  purchase
approximately  1.4  million common shares of the Company at an exercise price of
$0.018  per share.  The fair value of these warrants of $13,000 is determined in
accordance  with  SFAS  No.  123R "Share-Based Payment," and beginning in August
2008  is  being  taken  into  income  over the period of the guarantee, which is
twelve  months.  During the year ended December 31, 2008, $1,000 (2007 - $1,000)
has  been  recorded in interest expense related to the above warrants and $1,000
will  be  expensed  in  2009.  During  the year ended December 31, 2008, $11,000
(2007 - $4,000) has been recorded  in non-cash amortization costs related to the
above  warrants  and  $8,000  will  be  expensed  in  2009.

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

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

          The (loss) earnings per share calculations (basic and diluted) for the
years  ended  December  31,  2008  and  2007 are based upon the weighted average
number  of  common  shares  outstanding  during  each  period.  There  were  no
reconciling  items  in  the  numerator  or  denominator  of  the  loss per share
calculations  in either of the periods presented.  Options to purchase 2,150,000
and  2,057,000  shares of common stock with a weighted average exercise price of
$0.09  and  $0.10  were outstanding at December 31, 2008 and 2007, respectively,
but  were  not included in the computation of diluted net loss per share because
their  effect  would be anti-dilutive.  Convertible debentures and warrants were
also  not  included in the weighted average number of shares outstanding because
their  effect  would  be  anti-dilutive.

15.     STOCK-BASED  COMPENSATION:
        --------------------------

     The  Company's 1997 Stock Incentive Plan of Sentry (the "1997 Plan"), which
is shareholder approved, permits the granting of common share options and shares
to  its  employees  for  up  to  6,369,365 shares of common stock as stock-based
compensation.  This  plan expired as of January 14, 2007 and as such, there were
no  remaining  shares  available for grant under this plan at December 31, 2008.
The  plan was renewed on May 18, 2007 (the "2007 Plan"), is shareholder approved
and permits the granting of common share options and shares to its employees for
up  to  5,000,000  shares  of  common  stock as stock-based compensation.  As of
December 31, 2008, there were 4,283,500 common shares available for grants under
this Plan.  The stock option committee may grant awards to eligible employees in
the  form  of  stock  options,  restricted stock awards, phantom stock awards or
stock  appreciation  rights.  Stock  options  may  be granted as incentive stock
options  or  non-qualified  stock  options.  Such  options  normally  become
exercisable  at  a  rate  of 20% per year over a five-year period and expire ten
years  from  the  date  of  grant.

     There was no cash received from exercise of options during either 2008 or
2007.

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

                                     Years Ended December 31,
                                     ========================
                                      2008              2007
                                     ------            ------

 Risk-free interest rate              2.5%              4.82%
 Expected dividend yield               0%                0%
 Expected lives                      2 years          2 - 5 years
 Expected volatility                   77%               80%

The following table represents the Company's stock options granted, forfeited or
expired and exercised during the years ended December 31, 2008 and 2007:
<TABLE>
<CAPTION>
<S>                                  <C>            <C>          <C>           <C>
                                                                 Weighted
                                     Number of      Weighted      Average      Aggregate
                                      Shares         Average     Remaining     Intrinsic
                                     Subject to     Exercise    Contractual      Value
                                     Issuance         Price        Term         ($000)
                                     ----------     --------    -----------    ----------
Outstanding at January 1, 2007        2,145,500      $ 0.16     7.9 years      $     0
Granted                                 511,500        0.06
Exercised                                     -           -                    $     -
Forfeited                              (535,000)       0.10
Expired                                 (65,000)       1.84
                                      ----------     -------
Outstanding at December 31, 2007      2,057,000      $ 0.10     7.5 years      $    71
Granted                                 225,000        0.06
Exercised                                     -           -                    $     -
Forfeited                              (129,000)       0.16
Expired                                  (3,000)       2.37
                                      ----------     -------
Outstanding at December 31, 2008      2,150,000      $ 0.09     6.8  years     $     -
                                     ===========     =======    ==========     ========

EXERCISABLE AT DECEMBER 31, 2008      1,606,000      $ 0.09     6.7 YEARS      $     -
                                     ===========     =======    ==========     ========
</TABLE>
<PAGE>

     The  aggregate  intrinsic  value of options represents the excess of market
price  of  the  Company's  stock over the weighted average exercise price of the
price  of  the  outstanding and exercisable option shares. At December 31, 2008,
the  aggregate  intrinsic  value  of  options  has  been shown as $0 because the
exercise  price  of  outstanding  and  exercisable  option  shares  exceeded the
period-end  market  price  of  the  Company's  common  stock.

     The compensation cost recognized in income for stock-based compensation was
$22,000  for  2008  and  $26,000  for  2007.

     As  of  December  31,  2008,  there  was  $31,000  of  total  unrecognized
compensation  cost,  net of estimated forfeitures, related to all unvested stock
options,  which  is  expected to be recognized over a weighted average period of
approximately  2.1  years.

     The  weighted  average  grant  date fair value of options per share granted
during  the  year  was  $0.03  in  2008  and  $0.04  in  2007.

     The  following  is  a  summary  of  stock  options as of December 31, 2008:
<TABLE>
<CAPTION>
<S>                              <C>            <C>              <C>                    <C>            <C>

                                               Options Outstanding                         Options Exercisable
                                  ---------------------------------------------         --------------------------
                                                                                                        Weighted-
                                                   Weighted-     Weighted-average                        average
                                  Number of         average          Exercise             Number of      Exercise
Range of  Exercise Prices          Options      Remaining Life        Price                Options        Price
-------------------------         ---------     --------------   ----------------       ------------   -----------
$0.05 to $0.07                     934,000        7.2  years       $    0.06               750,000      $   0.06
$0.09 to $015                    1,200,000        6.7  years            0.10               840,000          0.10
$0.31 to $0.62                      16,000        0.3  years            0.56                16,000          0.56
                                 ---------        ----------       ---------            ----------      --------
$0.05 to $0.62                   2,150,000        6.8  years       $    0.09             1,606,000      $   0.09
                                 ---------        ----------       ---------            ----------      --------

</TABLE>

     The  following  is  a  summary  of  stock  options as of December 31, 2007:
<TABLE>
<CAPTION>
<S>                              <C>            <C>              <C>                    <C>            <C>

                                               Options Outstanding                         Options Exercisable
                                  ---------------------------------------------         --------------------------
                                                                                                        Weighted-
                                                   Weighted-     Weighted-average                        average
                                  Number of         average          Exercise             Number of      Exercise
Range of  Exercise Prices          Options      Remaining Life        Price                Options        Price
-------------------------         ---------     --------------   ----------------       ------------   -----------

$0.05 to $0.07                     749,000        7.4  years        $    0.06              499,000      $   0.06
$0.09 to $015                    1,275,000        7.7  years             0.10              690,000          0.11
$0.31 to $0.62                      28,000        1.1  years             0.59               28,000          0.59
$2.00 to $2.37                       5,000        0.1  years             2.22                5,000          2.22
                                 ---------        ----------        ---------            ---------      --------
$0.05 to $2.37                   2,057,000        7.5  years        $    0.10            1,222,000      $   0.11
                                 ---------        ----------        ---------            ---------      --------
</TABLE>

a)     Warrants
       --------

As  of December 31, 2008, Sentry had outstanding warrants for 61,519,488 (2007 -
27,718,123)  common  shares  issued  in  connection  with  various  financing
arrangements.  The  warrants  have  exercise prices ranging from $0.018 to $0.17
(2007  -  $0.05  to $0.17) and expire from January 22, 2009 through November 14,
2010.

<PAGE>

16.     REVENUES  BY  PRODUCT  LINE:
        ---------------------------
                                                      December 31,
                                               =========================
                                                2008               2007
                                               ------             ------
                                                    (In thousands)

Electronic Article Surveillance (EAS)        $   5,484         $  6,656
Video Surveillance Systems (VSS)                   510              501
SentryVision                                     4,865            3,894
Service, installation and other revenues         1,849            2,447
                                             ----------        ---------
Total revenues                               $  12,708         $ 13,498
                                             ==========        =========


17.     FINANCIAL  INSTRUMENTS:
        ----------------------

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

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

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

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

        Financial  instruments,  which  potentially  subject  the  Company  to
concentrations  of  credit  risk,  consist  principally  of accounts receivable.
Concentrations  of  credit risk with respect to these receivables are limited as
the  Company  conducts regular assessments of credit issues.  The Company grants
credit  to  customers  who are principally in the retail industry and libraries.
During  2008,  revenues  from  one  customer  totaled  11% of total revenues and
revenues  from  another  customer  totaled  10%  of  total revenues; no other
customer  accounted  for more than 10% of total revenues.  During 2007, revenues
from  one  customer  represented  approximately  18% of total revenues; no other
customer  accounted  for  more than 10% of total revenues.  The Company believes
that  there  is  no  unusual  exposure  associated  with the collection of these
receivables.

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

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


ITEM  9.     CHANGES  IN  AND  DISAGREEMENTS  WITH ACCOUNTANTS ON ACCOUNTING AND
--------     -------------------------------------------------------------------
FINANCIAL  DISCLOSURE
---------------------

None.

<PAGE>
ITEM 9A.  CONTROLS AND PROCEDURES
---------------------------------

Internal  Controls

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


Changes  in  Internal  Control  Over  Financial  Reporting

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

Annual  Report  of  Management  on  Internal  Control  over  Financial Reporting

Management  is  responsible  for  establishing and maintaining adequate internal
control  over  financial  reporting  (as  defined  in  Rule  15d-15(f) under the
Exchange  Act)  for the Company. Management, with the participation of our Chief
Executive  Officer  and  our  Principal  Financial  Officer,  evaluated  the
effectiveness  of  our  internal control over financial reporting as of December
31,  2008  (the  end  of  our  fiscal year), based on the framework and criteria
established  in  Internal Control - Integrated Framework issued by the Committee
of  Sponsoring  Organizations  of  the  Treadway  Commission.  Based  on  this
evaluation,  management  concluded  that  our  internal  control  over financial
reporting  was  effective  as  of  December  31,  2008.

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

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


ITEM 10.     DIRECTORS  AND  EXECUTIVE  OFFICERS  OF  THE  REGISTRANT
--------     --------------------------------------------------------

DIRECTORS

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

PETER  L.  MURDOCH,  age 55, has been the President and Chief Executive Officer,
Director  and  Chairman  of  the  Board  since January 8, 2001.  Mr. Murdoch has
extensive  experience in the retail security industry as well as in the sales of
technology-based  products.  He  was  Managing  Director  and  President  of  ID
Security  Systems Canada, Inc. since its inception in 1987 until its acquisition
by  Sentry.  From  1997  through  2004,  he  served  as member of the management
committee  of Dialoc ID.  Prior to joining ID Security Systems Canada, Inc., Mr.
Murdoch was Vice President of Sales for Catalyst International Business Systems.
He  is  an  economics  graduate  from  the  University  of Western Ontario.  Mr.
Murdoch's  term  as  a  Director  expires  at  the  next  Annual  Meeting.

ROBERT D. FURST, JR., age 56, 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  58,  has been a Director of Sentry Technology since
January  8, 2001.  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.

 NAME                    AGE      OFFICE
--------------------     ---      ------
Peter  L.  Murdoch       55       Our  President  and  Chief Executive Officer
                                  since January  8,  2001.  Mr.  Murdoch has
                                  extensive experience in the retail security
                                  industry  as well as in the sales of
                                  technology-based products.  He was Managing
                                  Director  of  ID  Security  Systems  Canada,
                                  Inc.  since its inception in 1987.  Beginning
                                  in 1997 he has served as member of the
                                  management committee of Dialoc ID.  Prior to
                                  joining  ID  Security Systems Canada, Inc.,
                                  Mr. Murdoch was Vice President  of  Sales  for
                                  Catalyst  International  Business  Systems.
                                  He is an economics  graduate  from  the
                                  University  of  Western  Ontario.

<PAGE>
Joan  E.  Miller         54       Joan  Miller  has  been the Vice President -
                                  Finance since January  1,  2007.  In  this
                                  capacity  Ms. Miller is responsible for all
                                  accounting functions and financial reporting.
                                  Prior to that, Ms. Miller was the Vice
                                  President  - Controller of Sentry since July
                                  2000, the Controller of Knogo North America
                                  Inc.  since  December  1986  and  Assistant
                                  Controller for Knogo Corporation since
                                  November 1980.  Prior to joining Sentry, Ms.
                                  Miller worked for Harman  Kardon  Inc. as
                                  Assistant Controller from June 1976 to
                                  November 1980 and as Cost Accounting Manager
                                  from December 1975 to June 1976.  Ms. Miller
                                  is a graduate  from  Hofstra  University  and
                                  is  a  Certified  Public  Accountant.


SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

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

Based  solely  on a review of the copies of reports furnished to the Company, or
written  representations, the Company believes that during the fiscal year ended
December  31,  2008,  all  Section  16(a)  filing requirements applicable to its
officers, Directors and greater than ten-percent beneficial owners were complied
with,  except  the  following:  (i) Robert D. Furst, Jr., a member of the Board,
filed  a  late report on Form 5 on March 10, 2009 with the SEC, for the granting
of  warrants  for  4,625,000 shares of the Company's common stock at an exercise
price  of $0.10 per share, which was granted on May 1, 2008 and for the granting
of  stock  options to purchase 75,000 shares of the Company's common stock at an
exercise  price  of  $0.06 per share, which was granted on August 13, 2008; (ii)
Peter  L. Murdoch, the Company's President, CEO and member of the Board, filed a
late  report  on  Form  5  on  March  11, 2009 with the SEC, for the granting of
warrants for 5,625,000 shares of the Company's common stock at an exercise price
of  $0.10  per  share,  which  was  granted on May 1, 2008; and for the grant of
warrants for 1,370,833 shares of the Company's common stock at an exercise price
of  $0.018 per share, which was granted on November 14, 2008; and (iii) Jonathan
G.  Granoff,  a  member of the Board, filed a late report on Form 5 on March 16,
2009  with  the SEC, for the granting of stock options to purchase 75,000 shares
of the Company's common stock at an exercise price of $0.06 per share, which was
granted  on  August  13,  2008.

Please  note  that both Mr. Furst and Mr. Murdoch had warrants and stock options
expire  during  2008.  Mr.  Furst had 3,000 stock options expire on February 12,
2008;  1,150,000  warrants  expired  on  April  28,  2008 and 2,594,340 warrants
expired  on  December  15,  2008.  Mr.  Murdoch had 1,725,000 warrants expire on
April  28,  2008  and  2,594,340  warrants  expired  on  December  15,  2008.

<PAGE>
AUDIT COMMITTEE FINANCIAL EXPERT

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


CODE  OF  ETHICS

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



ITEM  11.  EXECUTIVE  COMPENSATION
----------------------------------

SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
                                                                             NON-EQUITY
                                                                             INCENTIVE     NONQUALIFIED
                                                          STOCK    OPTION      PLAN         DEFERRED        ALL OTHER
                                       SALARY    BONUS    AWARDS   AWARDS   COMPENSATION   COMPENSATION    COMPENSATION     TOTAL
NAME & PRINCIPAL            YEAR         ($)      ($)      ($)       ($)        ($)        EARNINGS ($)        ($)           ($)
  POSITION
<S>                         <C>         <C>       <C>      <C>       <C>        <C>            <C>           <C>             <C>
Peter L. Murdoch,
President & CEO (1)         2007       183,760     -        -         -          -              -            41,894 (2)    225,654
                            2008       184,240     -        -         -          -              -            59,109 (2)    243,349

Joan E. Miller,             2007       124,663     -        -      2,369 (3)     -              -               -          127,032
 VP Finance                 2008       138,327     -        -         -          -              -               -          138,327
</TABLE>

(1)   Mr. Murdoch received no salary increase in 2008.  A portion of his pay
      is designated in Canadian dollars, which translated into higher US dollars
      in 2008 when compared  to  2007.
(2)   Represents interest paid in relation to personal loan guarantees issued.
(3)   Represents the compensation costs recognized for financial statement
      reporting purposes in 2007 for the fair value of stock options in
      accordance with Statement of Financial Accounting Standards No. 123R.
      (See Note 15 under the caption "Stock-Based Compensation" to the
      accompanying financial statements.)

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

OPTIONS GRANTED IN LAST FISCAL YEAR

There  were  no  options  granted  to  executives  during  2008.

<PAGE>
OUTSTANDING EQUITY AWARDS AT 2008 FISCAL YEAR END

The  following  table  sets  forth  for each of the persons named in the Summary
Compensation  Table  the  number of options exercised during 2008 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, 2008, both
exercisable  and  unexercisable,  and the value of such options as of that date.

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

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

Joan E. Miller   100,000         -              -          0.07     7/17/2010      -           -           -              -
                  60,000      40,000            -          0.09     8/12/2015      -           -           -           $ 400
                  31,600      18,400            -          0.07     5/29/2017      -           -           -           $ 200

</TABLE>

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

The  Board set Peter L. Murdoch's compensation, in the capacity of President, at
an  annual  salary  of  approximately  $184,000,  in  2008 and $184,000 in 2007.

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

Currently,  Ms.  Joan  Miller  is  compensated  pursuant to a written employment
agreement.  This agreement renews automatically on April 1st for one-year terms.
Additionally, Ms. Miller will receive three months salary if the contract is not
renewed.   Her  annual  salary  for  2009  is  presently  $140,000.


COMPENSATION OF DIRECTORS

<TABLE>
<CAPTION>
<S>  <C>               <C>          <C>          <C>               <C>           <C>              <C>              <C>
                                                                                  Nonqualified
                       Fees                                                        Deferred
                     Earned or                   Option         Non-Equity       Compensation      All
                    Paid in Cash    Stock         Awards       Incentive Plan      Earnings       Other
     Name             ($) (1)      Awards ($)   ($) (2) (3)   Compensation ($)       ($)       Compensation ($)   Total ($)

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

Robert D. Furst,       5,000           -          1,933 (2)          -                -              -             6,933
  Director

Jonathan G. Granoff,   5,000           -          1,933 (2)          -                -              -             6,933
   Director

Brookfield Technology
Fund, Observer         5,000           -          1,933 (2)          -                -              -             6,933

</TABLE>
<PAGE>

(1)  Each Director and Brookfield Technology Fund, in its capacity as an
     Observer, accrued an annual retainer of $5,000 each for 2008, which has not
     yet been paid. Mr. Murdoch, who is also our full-time employee, receives no
     additional compensation for his service as a Director.

(2)  Represents the compensation costs recognized for financial statement
     reporting purposes in 2008 for the fair value of stock options in
     accordance with Statement of Financial Accounting Standards No. 123R. (See
     Note 15 under the caption "Stock-Based Compensation" to the accompanying
     financial statements.)

(3)  Each non-employee Director is eligible to participate in our 2007 Stock
     Incentive Plan. In August 2008, Mr. Furst, Mr. Granoff and the Brookfield
     Technology Fund each received options to purchase 75,000 shares of our
     common stock at exercise prices of $0.06 per share, which was the market
     price on the date of grant. The options were exercisable immediately and
     expire after 10 years.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
----------------------------------------------------------------------------
RELATED STOCKHOLDER MATTERS
---------------------------

The  following  table sets forth the beneficial ownership of our common stock at
March 13, 2009, 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 13, 2009, 120,743,804
shares  of  common  stock  were  outstanding.

NAME AND ADDRESS OF BENEFICIAL OWNERS
-------------------------------------

                                               SHARES OF              PERCENT
DIRECTORS AND EXECUTIVE OFFICERS              COMMON STOCK          OF CLASS (1)
--------------------------------              ------------          ------------
Peter L. Murdoch (5)                           91,194,356 (2)           59.9%
c/o  Saburah Investments Inc.
28 Voyager Court South
Toronto, Ontario M9W 5M7

Robert D. Furst, Jr.                           42,947,802 (3)           29.5%
c/o Alternative Strategies Advisors LLC
601 Carlson Parkway, Suite 610
Minnetonka, MN 55305

Joan E. Miller                                    264,100 (4)              *
Jonathan G. Granoff                               340,000 (5)              *
All Sentry Directors and executive officers
    as a group (4 persons)                    134,746,258 (6)           75.8%

---------------------------------
*     Less than one percent

1)   Based on 120,743,804 shares of common stock outstanding as of March 13,
     2009. Each figure showing the percentage of outstanding shares beneficially
     owned has been calculated by treating as outstanding and owned the shares
     of common stock that could be purchased by the indicated person within 60
     days upon the exercise of stock options.

2)   Includes 57,553,596 shares of common stock held by Saburah Investments Inc.
     of which Mr. Murdoch is the 100% owner and 31,479,260 shares of common
     stock issuable upon the exercise of stock warrants exercisable within 60
     days of the date hereof.

3)   Includes 25,023,228 shares of common stock issuable upon the exercise of
     stock options or warrants exercisable within 60 days of the date hereof.
     Mr. Furst also holds a warrant to purchase 2,500,000 common shares from
     Saburah investments Inc., which are excluded from the shares owned. Shares
     subject to this warrant will be issued from shares currently owned by
     Saburah.

4)   Includes 191,600 shares of common stock issuable upon the exercise of stock
     options exercisable within 60 days from the date hereof.

5)   Includes 280,000 shares of common stock exercisable upon the exercise of
     stock options exercisable within 60 days from the date hereof.

6)   Includes 56,974,088 shares of common stock issuable upon the exercise of
     stock options and warrants exercisable within 60 days from the date hereof.

<PAGE>
------
ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
           INDEPENDENCE
           -----------------------------------------------------------

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

The  maximum  borrowing under the demand loan facility was Canadian $3.6 million
(U.S.  $2.9  million). RBC increased the borrowing base formula by Canadian $1.0
million  (U.S.  $817,000) in exchange for additional security provided by two of
the  Company's  directors.  Borrowings under the facility are subject to certain
limitations  based on a percentage of eligible accounts receivable and inventory
as  defined  in the agreement. Interest is payable at a rate of RBC's prime rate
(3.5%  at  December  31,  2008),  plus  2.75%  per  annum. Borrowings under this
facility  are  secured  by  substantially  all  of  the  Company's assets. As of
December 31, 2008, the Company exceeded its facilities under the lending formula
by  approximately  Canadian  $670,000  (U.S.  $547,000)(subject  to  the  above
limitations)  under  the demand loan. RBC agreed to forbear from the exercise of
its  rights and remedies under the security in respect of the indebtedness until
October  31,  2008  or  earlier  in  the  event  of the occurrence of default in
accordance  with the Forbearance Agreement, which was finalized on May 29, 2008.
In accordance with the Forbearance Agreement the maximum borrowings were reduced
to  Canadian  $3,175,000  (U.S.  $2,593,000) and the interest rate was increased
from  RBC's  prime  rate plus 2.75% per annum to RBC's prime rate plus 3.25% per
annum.

As of October 31, 2008, the Forbearance Agreement with RBC expired.  On November
12,  2008,  the  Company  and  RBC extended the Forbearance Agreement to May 15,
2009.  In  accordance  with  the  Forbearance  Agreement  extension, the maximum
borrowings  were  reduced  to  Canadian  $3,000,000  (U.S.  $2,449,800)  and the
interest  rate  was further increased from RBC's prime rate plus 3.25% per annum
to  RBC's prime rate plus 3.75% per annum.  At December 31, 2008 borrowings were
at  Canadian  $2,900,000  (U.S. $2,368,000).  There is no assurance that further
extensions  will  be  obtained.

In  consideration  for  the  guarantees provided by Mr. Murdoch and Mr. Furst to
RBC,  the  Company  paid  a  fee of $43,000, shared between them, paid in twelve
equal  monthly  installments.  As  additional  consideration,  they  received
fully-vested,  two-year warrants to purchase approximately 2.9 million shares of
the  Company's  common stock, at an exercise price of $0.10 per share.  The fair
value  of  these warrants of $120,000 was determined in accordance with SFAS No.
123R  and  beginning  in  June 2006 was taken into income over the period of the
guarantee,  which  was one year.  These guarantees expired in June 2007 and were
subsequently  renewed  in  July  2007 until April 30, 2008.  In consideration of
these  guarantee  renewals, Mr. Murdoch and Mr. Furst received a fee of $40,000,
shared  between  them,  paid  in  ten equal monthly installments.  As additional
consideration,  they  received  fully-vested,  two-  year  warrants  to purchase
approximately  7.4  million common shares of the Company at an exercise price of
$0.065  per  share.  The fair value of these warrants of $164,000 was determined
in  accordance  with  SFAS  No.  123R  and beginning in July 2007 was taken into
income over the period of the guarantee, which was ten months.  These guarantees
expired  in  April 2008 and were subsequently renewed in May 2008 until December
31,  2008.  In  consideration  of  these guarantee renewals, Mr. Murdoch and Mr.
Furst  received  a  fee  of  $33,000,  shared  between them, paid in eight equal
monthly  installments.  As additional consideration, they received fully-vested,
two-year  warrants  to  purchase  approximately  5  million common shares of the
Company  at  an  exercise  price  of  $0.10  per share.  The fair value of these
warrants  of  $150,000  was  determined  in  accordance  with  SFAS No. 123R and
beginning  in  May  2008 was taken into income over the period of the guarantee,
which  was  eight  months.  These  guarantees  expired in December 2008 and were
renewed until July 30, 2009.  In consideration of these guarantees renewals, Mr.
Murdoch  and  Mr. Furst will receive a fee of $24,000, shared between them, paid
in seven equal monthly installments.  As additional consideration, they received
fully-vested,  two-year  warrants  to purchase approximately 13.2 million common
shares  of  the Company at an exercise price of $.018 per share.  The fair value
of  these  warrants  of $124,000 was determined in accordance with SFAS No. 123R
and  beginning in January 2009 is being taken into income over the period of the
guarantee.

     During  the year ended December 31, 2008, $49,000 (2007 - $43,000) has been
recorded  in  interest  expense  related to the above warrants.  During the year
ended  December  31,  2008,  $216,000  (2007  -  $148,000)  has been recorded in
non-cash  amortization  costs  related  to  the  above  warrants.

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

In  December 2006, the Company entered into a secured revolving credit agreement
with  Tradition Capital Bank.  From December 15, 2006, through the expiration of

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

On  September  25,  2007,  Mr. Murdoch and Mr. Furst agreed to provide Tradition
Capital  Bank  additional personal guarantees totaling $500,000, which increased
the  maximum  the  Company could draw to $1,050,000, until April 30, 2008, under
the  same  terms  and  conditions  as  listed  above.  In  consideration  of the
guarantees,  Mr. Murdoch and Mr. Furst received a fee of $15,000, shared between
them,  paid  in  seven  equal monthly installments. As additional consideration,
they  received  fully-vested,  two-year  warrants  to purchase approximately 2.5
million  common  shares  of the Company at an exercise price of $0.10 per share.
The  fair  value  of these warrants of $89,000 was determined in accordance with
SFAS  No.  123R  and  beginning  in  October 2007 was taken into income over the
period  of  the  guarantee,  which was seven months. On April 30, 2008 the above
loan facility and related guarantees expired and were renewed until December 31,
2008. Interest is payable at the reference rate (Wall Street Journal prime, with
an  interest  rate  floor  of  5.5%,  currently  3.25%), plus 1.0% per annum. In
consideration  of these guarantee renewals, Mr. Murdoch and Mr. Furst received a
fee  of  $35,000, shared between them, paid in eight equal monthly installments.
As  additional  consideration,  they received fully-vested, two-year warrants to
purchase  approximately  5.3 million common shares of the Company at an exercise
price  of  $0.10  per  share.  The  fair value of these warrants of $157,000 was
determined  in accordance with SFAS No. 123R and beginning in May 2008 was taken
into  income  over  the  period  of  the  guarantee,  which was eight months. On
December  31,  2008  the  above loan facility and related guarantees expired and
were renewed until July 31, 2009 under similar terms and conditions. At December
31,  2008  borrowings  were at the maximum amount available. In consideration of
these  guarantee  renewals,  Mr.  Murdoch  and  Mr.  Furst will receive a fee of
$31,000,  shared  between  them,  paid  in  seven equal monthly installments. As
additional  consideration,  they  received  fully-vested,  two-year  warrants to
purchase  approximately 17.0 million common shares of the Company at an exercise
price  of  $.018  per  share.  The  fair value of these warrants of $160,000 was
determined  in  accordance  with  SFAS No. 123R and beginning in January 2009 is
being taken into income over the period of the guarantee, which is seven months.
There  is  no  assurance  that  further  extensions  will  be  obtained.

During  the  year  ended  December  31,  2008, $53,000 (2007 - $31,000) has been
recorded  in  interest  expense  related to the above warrants.  During the year
ended  December  31,  2008,  $245,000  (2007  -  $178,000)  has been recorded in
non-cash  amortization  costs  related  to  the  above  warrants.


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

In  August 2007, Mr. Murdoch agreed to provide a personal guarantee for a Letter
of  Credit  of  $49,350  for  a period of one year in favor of Palm Beach Public
Library  that the Company was unable to obtain on its own in order to complete a
sale  of  the  Company's self-service library systems.  In consideration of this
guarantee  Mr.  Murdoch  received  a  fee of $2,000 paid in twelve equal monthly
installments.  As  additional  consideration, he received fully-vested, two-year
warrants  to  purchase approximately 0.2 million common shares of the Company at
an  exercise  price  of  $0.10  per  share.  The fair value of these warrants of
$10,000  was  determined in accordance with SFAS No. 123R "Share-Based Payment,"
and  beginning  in  August  2007  was  taken  into income over the period of the
guarantee,  which was twelve months. This letter of credit and related guarantee
expired  in August 2008 and was subsequently renewed in August 2008 until August
2009. In consideration of this guarantee renewal, Mr. Murdoch will receive a fee
of  $2,000  paid  over  the next twelve months.  As additional consideration, he
received  fully-vested,  two-year warrants to purchase approximately 1.4 million
common shares of the Company at an exercise price of $0.018 per share.  The fair
value  of  these  warrants  of $13,000 is determined in accordance with SFAS No.
123R  "Share-Based  Payment,"  and  beginning in August 2008 is being taken into
income  over  the  period  of the guarantee, which is twelve months.  During the
year  ended  December  31,  2008,  $1,000  (2007  - $1,000) has been recorded in

<PAGE>
interest  expense  related  to the above warrants and $1,000 will be expensed in
2009.  During the year ended December 31, 2008, $11,000 (2007 - $4,000) has been
recorded  in  non-cash  amortization  costs  related  to  the above warrants and
$8,000  will  be  expensed  in  2009.

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

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

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

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


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

The  Company's  board  of  directors  reviews and approves audit and permissible
non-audit services performed by its independent accountants, as well as the fees
charged  for  such  services.  In  its  review of non-audit service fees and its
appointment of SF Partnership, LLP as the Company's independent accountants, the
board  of  directors  considered  whether  the  provision  of  such  services is
compatible with maintaining independence. The board of directors approved all of
the  services provided and fees charged by SF Partnership, LLP in 2008 and 2007.

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-Q by SF
Partnership,  LLP  in  2008  and  Form  10-QSB in 2007 were $89,000 and $84,000,
respectively,  net  of  expenses.


AUDIT-RELATED  FEES

There  were  no  other  fees for 2008 and 2007 billed by SF Partnership, LLP for
assurance  and  related services that were reasonably related to the performance
of  the  audit  or review of the Company's financial statements and not reported
under  "Audit  Fees"  above.


TAX  FEES

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

ALL  OTHER  FEES

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

<PAGE>
ITEM  15.  EXHIBITS
-------------------

2.1  Stock Purchase Agreement, dated April 29, 2004, by and between Sentry
     Technology Corporation and Saburah Investments, Inc. Incorporated by
     reference to Exhibit 2.1 to Company's Form 8-K as filed with the Securities
     and Exchange Commission on July 14, 2004.

3.1  Amended and Restated Certificate of Incorporation of Sentry Technology
     Corporation, as filed with the Delaware Secretary of State on April 26,
     2005. Incorporated by reference to Exhibit 3.1 to the Company's Form 10-KSB
     as filed with the Securities and Exchange Commission on April 17, 2006.

3.2  Certificate of Amendment of Certificate of Incorporation of Sentry
     Technology Corporation, as filed with the Delaware Secretary of State on
     May 27, 2005. Incorporated by reference to Exhibit 3.2 to the Company's
     Form 10-KSB as filed with the Securities and Exchange Commission on April
     17, 2006.

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

3.4  Amended and Restated Bylaws of the Company. Incorporated by reference to
     Exhibit 3.3 to the Company's Form 10-KSB as filed with the Securities and
     Exchange Commission on April 17, 2006.

4.1  Convertible Debenture, dated April 30, 2004, issued by Sentry Technology
     Corporation to Brascan Technology Fund, Inc. Incorporated by reference to
     Exhibit 4.1 to Company's Form 8-K as filed with the Securities and Exchange
     Commission on July 14, 2004.

4.2  Warrant Certificate, dated April 30, 2004, issued by Sentry Technology
     Corporation to Brascan Technology Fund, Inc. Incorporated by reference to
     Exhibit 4.2 to Company's Form 8-K as filed with the Securities and Exchange
     Commission on July 14, 2004.

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

10.1 2007 Company Stock Incentive Plan. Incorporated by reference to Exhibit
     10.1 to the Company's Form 10-KSB as filed with the Securities and Exchange
     Commission on April 14, 2008.

10.2 Retirement Savings 401(k) Plan. Incorporated by reference to Exhibit 10.6
     to the Company's Registration Statement on Form S-4 as filed with the
     Securities and Exchange Commission on January 21, 1997 (No. 333-20135).

10.3 Lease Agreement dated September 16, 2003 between Sentry Technology
     Corporation and G & J Lakeland Realty Corp. Incorporated by reference to
     Exhibit 10.35 to the Company's Form 10-QSB as filed with the Securities and
     Exchange Commission on November 6, 2003.

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

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

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

10.7 Amendment to Credit Facility Letter Agreement between Sentry Technology
     Canada Inc. and Royal Bank of Canada dated January 23, 2006. Incorporated
     by reference to Exhibit 10.14 to the Company's Form 10-KSB as filed with
     the Securities and Exchange Commission on April 17, 2006.

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

10.9 Amendment to Credit Facility Letter Agreement between Sentry Technology
     Canada Inc. and Royal Bank of Canada dated November 27, 2006. Incorporated
     by reference to Exhibit 10.12 to the Company's Form 10-KSB as filed with
     the Securities and Exchange Commission on March 28, 2007.

<PAGE>
10.10 Revolving Credit Agreement between Tradition Capital Bank and Sentry
     Technology Corporation, dated September 26, 2007. Incorporated by reference
     to Exhibit 10.10 to the Company's Form 10-KSB as filed with the Securities
     and Exchange Commission on April 14, 2008.

10.11 Forbearance Agreement dated May 29, 2008 among Royal Bank of Canada,
     Sentry Technology Canada, Inc., Sentry Technology Corporation and Custom
     Security Industries, Inc. Incorporated by reference to Exhibit 10.1 to the
     Company's Form 10-Q as filed with the Securities and Exchange Commission on
     August 12, 2008.

10.12 Forbearance Agreement - Extension dated as of November 12, 2008 among
     Royal Bank of Canada, Sentry Technology Canada, Inc., Sentry Technology
     Corporation and Custom Security Industries, Inc. Incorporated by reference
     to Exhibit 10.1 to the Company's Form 10-Q as filed with the Securities and
     Exchange Commission on November 14, 2008.

14   2007 Code of Ethics. Incorporated by reference to Exhibit 14 to the
     Company's Form 10-KSB as filed with the Securities and Exchange Commission
     on April 14, 2008.

21   Subsidiaries of the Company. Incorporated by reference to Exhibit 21 to the
     Company's Form 10-KSB as filed with the Securities and Exchange Commission
     on April 17, 2006.

23.1 Consent of SF Partnership, LLP.

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

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

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

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

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


<PAGE>

SIGNATURES
----------

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

                       SENTRY  TECHNOLOGY  CORPORATION


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


Dated:  March 16,  2009


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

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

/s/ Peter L. Murdoch     Chief Executive Officer and Director     March 16, 2009
----------------------
Peter L. Murdoch

/s/ Joan E. Miller       Vice President-Finance and Treasurer     March 16, 2009
----------------------   (Principal Financial and Accounting
Joan  E.  Miller               Officer)

/s/ Robert D. Furst, Jr.          Director                        March 16, 2009
------------------------
Robert D. Furst, Jr.

                                  Director                        March 16, 2009
------------------------
Jonathan G. Granoff



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

23.1     Consent  of  SF  Partnership,  LLP.

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

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

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

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