News Release

FOR IMMEDIATE RELEASE CONTACT: Peter J. Mundy

Vice President – CFO

(631) 739-2000

SENTRY TECHNOLOGY REPORTS SECOND QUARTER RESULTS

RONKONKOMA, New York, August 14, 2006, -- Sentry Technology Corporation (OTC Bulletin Board: SKVY) today reported financial results for the Company’s second quarter ended June 30, 2006.

Revenues for the second quarter were $2,932,000 compared to revenues of $4,267,000 reported in the second quarter of the prior year. Principally as a result of lower revenue levels, Sentry had a net loss of $598,000, or $(0.00) per share, in the second quarter of 2006 compared to net loss of $30,000 or $(0.00) per share, in the second quarter of last year.

For the first six months ended June 30, 2006, revenues were $5,640,000 compared to revenues of $6,760,000 reported in the first six months of the prior year. Sentry had a net loss of $1,328,000, or $(0.01) per share in the first half of 2006, compared to a net loss of $790,000, or $(0.01) per share, in the first half of 2005.

“We are disappointed with our financial results in the second quarter,” said Peter L. Murdoch, President and CEO of Sentry Technology Corporation. “Several large orders were delayed, including high value SmartTrack orders from one of America’s largest retailers due to changes in their management. We expect to receive these orders shortly, which will have a positive impact on both our order backlog and U.S. market presence. In addition, our expanded sales team is attracting new, key customer opportunities and has submitted quotations to large potential customers in big box retail, grocery and public transportation sectors. We expect that these efforts will impact both immediate revenue opportunities as well as expand our base of repeat customers for future hardware sales and service revenues.”

Sentry Technology Corporation designs, manufactures, sells and installs a complete line of Closed Circuit Television (CCTV) solutions, Electro-Magnetic (EM) and RFID based Library Management systems as well as Radio Frequency (RF) and Electro-Magnetic (EM) EAS systems. The CCTV product line features SentryVisionâ, SmartTrack, a proprietary, patented traveling Surveillance System. The Company’s products are used by libraries to secure inventory and improve operating efficiency, by retailers to deter shoplifting and internal theft and by industrial and institutional customers to protect assets and people. For further information, please visit our website at www.sentrytechnology.com.

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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,

2006 2005

(Unaudited) (Audited)

ASSETS

CURRENT ASSETS

Cash and cash equivalents $ 672 $ 842

Accounts receivable, less allowance for doubtful

accounts of $86 and $141, respectively 1,813 2,762

Inventories 3,053 2,709

Prepaid expenses and other current assets 543 318

Total current assets 6,081 6,631

PROPERTY, PLANT AND EQUIPMENT, net 646 637

GOODWILL 1,564 1,564

OTHER ASSETS 458 563

$ 8,749 $ 9,395

LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES

Revolving line of credit and term loan $ 2,020 $ 2,039

Accounts payable 593 489

Accrued liabilities 1,320 925

Obligations under capital leases - current portion 4 6

Deferred income 98 99

Total current liabilities 4,035 3,558

OBLIGATIONS UNDER CAPITAL LEASES -

non-current portion --- 1

DEFERRED TAX LIABILITY 60 58

CONVERTIBLE DEBENTURES 1,924 1,904

MINORITY INTEREST 1,228 1,140

OTHER LIABILITIES 55 36

Total liabilities 7,302 6,697

SHAREHOLDERS’ EQUITY 1,447 2,698

$ 8,749 $ 9,395

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

Three Months Ended Six Months Ended

June 30, June 30,

2006 2005 2006 2005

(Unaudited) (Unaudited)

REVENUES

Sales $ 2,526 $ 3,462 $ 4,811 $ 5,375

Service, installation and other 406 805 829 1,385

2,932 4,267 5,640 6,760

COSTS AND EXPENSES:

Cost of sales 1,302 1,915 2,558 2,895

Customer service expenses 558 747 1,081 1,496

Selling, general and administrative expenses 1,324 1,272 2,677 2,493

Research and development 204 214 404 447

3,388 4,148 6,720 7,331

OPERATING INCOME (LOSS) (456) 119 (1,080) (571)

INTEREST AND FINANCING EXPENSES 86 78 168 169

INCOME (LOSS) BEFORE INCOME TAXES

AND MINORITY INTEREST (542) 41 (1,248) (740)

INCOME TAX EXPENSE 30 37 40 20

INCOME (LOSS) BEFORE MINORITY INTEREST (572) 4 (1,288) (760)

MINORITY INTEREST (26) (34) (40) (30)

NET INCOME (LOSS) $ (598) $ (30) $ (1,328) $ (790)

NET INCOME (LOSS) PER SHARE

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

WEIGHTED AVERAGE SHARES

Basic and diluted 120,729 120,566 120,689 120,559