News Release

FOR IMMEDIATE RELEASE CONTACT: Peter J. Mundy

Vice President – CFO

(631) 739-2000

SENTRY TECHNOLOGY REPORTS Q2 OPERATING PROFIT

RONKONKOMA, New York, August 12, 2005, -- Sentry Technology Corporation (OTC Bulletin Board: SKVY) today reported financial results for the Company’s second quarter ended June 30, 2005.

Revenues for the second quarter were $4,267,000 compared to revenues of $4,279,000 reported in the second quarter of the prior year. Revenues from the former ID Systems group contributed $1.7 million in EAS sales in the current quarter compared to $0.9 million in the prior year. Operating profit was $119,000 in the second quarter of 2005 compared to $120,000 in the second quarter of 2004. There was a net loss in the second quarter of 2005 of $30,000, or $(0.00) per share, compared to net income of $12,000, or $0.00 per share, in the second quarter of last year.

For the first six months ended June 30, 2005, revenues were $6,760,000 compared to revenues of $7,253,000 reported in the first six months of the prior year. While EAS revenues increased due to the acquisition of ID Systems in April of 2004, the reduction in total revenues was attributable to lower installation and maintenance revenues as well as lower sales of conventional CCTV products and the Company’s proprietary SmartTrack traveling camera systems to domestic customers. Principally as a result of lower revenue levels, Sentry had a net loss of $790,000, or $(0.01) per share in the first half of 2005, compared to a net loss of $180,000, or $(0.00) per share, in the first half of 2004.

“We are pleased with the second quarter results,” said Peter Murdoch, President and CEO of Sentry Technology Corporation. “While total revenues in the second quarter of 2005 are unchanged compared with second quarter of 2004, we achieved this despite a $1.3 million reduction in business from Lowe’s Home Centers compared with the same quarter last year. Non-Lowe’s revenue increased by 45%.”

Mr. Murdoch continued, “The fact that the revenue levels have recovered in such a short time frame is a result of our strategy to focus on core business and to increase the number of sales reps and international dealers. We now have sales reps located across North America and more than 25 dealers in international markets delivering a broad range of security applications in the retail, library, public transportation, commercial and industrial markets. Sentry no longer relies primarily on a single dominant customer to be successful. We believe that this more balanced marketing approach will produce positive results in the future.”

Sentry Technology Corporation designs, manufactures, sells and installs a complete line of Radio Frequency (RF) and Electro-Magnetic (EM) EAS systems and Closed Circuit Television (CCTV) solutions. The CCTV product line features the SentryVisionâ SmartTrack system, a proprietary, patented traveling Surveillance System. The Company’s products are used by retailers to deter shoplifting and internal theft and by industrial and institutional customers to protect assets and people. The recent acquisition of ID Systems expands the Company’s product offering to include proximity Access Control and Radio Frequency Identification (RFID) solutions. For further information, please visit our Web site at www.sentrytechnology.com.

This press release may include information that could constitute forward-looking statements made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Any such forward-looking statements may involve risk and uncertainties that could cause actual results to differ materially from any future results encompassed within the forward-looking statements. Factors that could cause or contribute to such differences include those matters disclosed in the Company's Securities and Exchange Commission filings.

CONSOLIDATED CONDENSED BALANCE SHEETS

(In thousands)

June 30, December 31,

2005 2004

(Unaudited) (Audited)

ASSETS

CURRENT ASSETS

Cash and cash equivalents $ 771 $ 1,965

Accounts receivable, less allowance for doubtful

accounts of $151 and $338, respectively 2,954 3,500

Inventories 3,156 3,314

Prepaid expenses and other current assets 474 525

Total current assets 7,355 9,304

PROPERTY, PLANT AND EQUIPMENT, net 625 689

GOODWILL 1,564 1,564

OTHER ASSETS 624 690

$ 10,168 $ 12,247

LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES

Revolving line of credit and term loan $ 1,492 $ 2,640

Accounts payable 908 799

Accrued liabilities 1,194 1,146

Obligations under capital leases - current portion 6 5

Deferred income 66 169

Total current liabilities 3,666 4,759

NOTES PAYABLE 24 189

OBLIGATIONS UNDER CAPITAL LEASES -

non-current portion 4 8

DEFERRED INCOME TAXES 42 39

CONVERTIBLE DEBENTURES 1,883 1,862

MINORITY INTEREST 1,040 1,045

Total liabilities 6,659 7,902

SHAREHOLDERS’ EQUITY 3,509 4,345

$ 10,168 $ 12,247

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

Three Months Ended Six Months Ended

June 30, June 30,

2005 2004 2005 2004

(Unaudited) (Unaudited)

REVENUES

Sales $ 3,462 $ 3,188 $ 5,375 $ 5,034

Service, installation and other 805 1,091 1,385 2,219

4,267 4,279 6,760 7,253

COSTS AND EXPENSES:

Cost of sales 1,915 1,682 2,895 2,623

Customer service expenses 747 1,105 1,496 2,120

Selling, general and administrative expenses 1,272 1,192 2,493 2,117

Research and development 214 180 447 340

4,148 4,159 7,331 7,200

OPERATING INCOME (LOSS) 119 120 (571) 53

INTEREST AND FINANCING EXPENSES 78 79 169 204

INCOME (LOSS) BEFORE INCOME TAXES

AND MINORITY INTEREST 41 41 (740) (151)

INCOME TAX EXPENSE 37 15 20 15

INCOME (LOSS) BEFORE MINORITY INTEREST 4 26 (760) (166)

MINORITY INTEREST (34) (14) (30) (14)

NET INCOME (LOSS) $ (30) $ 12 $ (790) $ (180)

NET INCOME (LOSS) PER SHARE

Basic and diluted $ (0.00) $ 0.00 $ (0.01) $ (0.00)

WEIGHTED AVERAGE SHARES

Basic and diluted 120,566 105,862 120,559 95,809