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Sentry Technology Corporation

In The Boardroom With...

Mr. Peter Murdoch
President and CEO
Sentry Technology Corporation
OTC Bulletin Board: SKVY

Update March 14, 2011 Thank you for visiting us again today, Peter! What are the latest developments at Sentry?

Peter Murdoch: In mid 2010 we began shipping our SmartTrack™ traveling camera system to one of the world’s largest security companies under an OEM agreement. More than 100 systems were sold through December. The 2011 program is off to a strong start with an order for 120 systems from a single customer. Overall we expect to more than double our total SmartTrack sales this year. Continued demand for our traveling camera system confirms both the product quality and competitive advantages in comparison with other products available in the market.

Our extensive experience in designing and manufacturing traveling camera systems is being applied to the development of an entirely new SentryVision/VideoRailway™ that is nearing completion. VideoRailway is designed to traverse curves and turn corners with a 6 foot radius. The new system is more compact than the current design with a track and enclosure profile approximately 50% smaller than SmartTrack. VideoRailway will significantly increase the addressable market for travelling camera systems. A smaller more flexible system will be sold in the food, drug and general merchandise retail markets where SmartTrack is under utilized.

We have also completed development and sale of other new products that will add to revenue opportunities in 2011 including GateKeeper™, a software program to manage RFID systems in libraries; an upgrade to our QuickCheck™ library self-service systems to open CD/DVD cases; and a program to allow the payment of fines and fees using QuickCheck. More information is available at our new website launched at the end of February.

Several new internal computer systems have been implemented at Sentry to better manage our sales and customer service process starting with new Customer Relations Management (CRM) system. This month the CRM is being expanded to include all customer service and technical support activities.  

Updated July 19, 2010 What has changed at Sentry?

Peter Murdoch: We expect to report positive EBITDA earnings for the second quarter. That's a major step forward for our company and results from efforts to both reduce costs and increase revenue. In part, revenue increases have come from the sale of the first 60+ SmartTrackT traveling camera systems to our new OEM partner. In addition to new store installations, we are in the process of finalizing software changes to accommodate the customer's very large install base of older track systems which require upgrade to Sentry SmartTrackT.   

Previously I mentioned that Sentry is in the process of developing a new SmartTrackT system. I'm pleased to report that things are progressing well. The new design will add several key features including traveling around corners. A cornering system dramatically increases the addressable market for SmartTrackT. To date, a new ceiling mounted rail has been designed that meets all requirements. We expect to have the new system installed for testing at customer sites before the end of the year.

We have launched Travel Your BusinessT, a marketing concept to promote both our SmartTrackT traveling CCTV system as well as OVportalT, a Software-As-A-Service program to manage retail security, online merchandising and procedure compliance. For an introduction to Travel Your BusinessT visit YouTube .

Our library sector is no less promising. Recently QuickCheckT self-service systems were installed in branches of America's largest public library system. Like many libraries, our customer is experiencing an increasing rate of patrons borrowing CD's and DVD's. This has created the need to integrate an added feature to our self-service system that allows users to open locked CD/DVD cases using QuickCheck. A picture is worth more than a 1,000 words. Have a look at YouTube to see how the system works .

Updated February 25, 2010 Peter, please update us about recent events at Sentry.

Peter Murdoch: We had a strong close to the year end in December and believe we can continue to grow the business in 2010. Many changes where made in 2009 that will contribute to profitability this year.   

First of all fixed costs have been reduced by approximately $1 million. In addition we have signed some important long term agreements including an OEM contract to supply SmartTrack™ to the world’s largest video products supplier with more than 10,000 employees and customers in more than 100 countries. Deliveries will begin in early March. This contract is expected to double our annual sales of SmartTrack™ systems.

While the current SmartTrack™ system is market leading as evidenced by the OEM agreement signed with a major competitor, we are investigating ways to improve our product. As part of this effort, an agreement was signed with an engineering firm to assist in the redesign of SmartTrack™ to add important new features like traveling around a corner. The goal is to reduce production costs while complementing OVportal™, our operational video software for online business management. A new rail design has been selected and the first prototype systems are now being produced.  

Our WAM anti-theft system for book stores and libraries has been also been redesigned and has been shipped to several domestic and international customers. WAM-2 will reduce the system build cost by approximately 20%.

A new RFID security system for libraries has been manufactured and recently installed along with an RFID Work Station to convert barcode data to RFID tags. The Work Station also processes borrowing transactions at the circulation desk. The introduction of these two key products complement our QuickCheck™ self-service station and  completes our RFID product offering for libraries. This will enable participation in millions of dollars of publicly financed library business. These products will also be offered to our growing list of hundreds of library customers that are expected to convert to RFID as budgets permit.

Updated December 3rd, 2009 How has the worldwide financial meltdown affected your business?

Peter Murdoch: Like so many others, we took some lumps. Steve and Barry’s closed its last store in January 09 with an outstanding contract for Sentry to provide equipment valued at up to $10 million and Goody’s Family Clothing, our largest domestic customer in 2008 declared bankruptcy early this year. Other large retailers worldwide cut back or eliminated capital budgets and the general environment for new store openings was poor.  Fortunately, things have stabilized and we’re seeing an upturn in business along with several significant new developments at Sentry. Despite these more challenging conditions are there any particular "wins" or success stories you would like to talk about?

Peter Murdoch: We have a very compelling traveling video management solution for both stores and distribution centers called SmartTrack™. The systems uses pan, tilt and zoom cameras that travel on a ceiling mounted rail to position the video image exactly where it’s needed. The biggest win of the year was signing an OEM agreement with Tyco Safety Products to sell SmartTrack in Europe, the Mid-East and Africa . Deliveries will begin in early 2010. The Tyco contract is expected to double our annual sales of SmartTrack systems. Other wins include the installation of SmartTrack in a US distribution center of the world’s largest retailer following the successful installation of more than 100 systems in its UK division. SmartTrack was also installed in a new concept store for America ’s fourth largest retailer. In our library market sector, 2009 marked the first large sale of more than 1,000,000 RFID tags to the Toronto Public Library and our first complete RFID installation at the University of Alberta including labels, gate readers and RFID self-service systems. RFID in libraries is an important growth market for Sentry. Please update us about your product line and Sentry Technology solutions.

Peter Murdoch: We have two major products lines, video surveillance systems, featuring SmartTrack and related business management software call Operational Video Portal (OVportal™) as well as our library management systems.

Despite a tough 2009, we have developed several new library products including RFID gate readers and an RFID staff work station to convert barcode to RFID data. The Work Station also processes borrowing transactions at the circulation desk. Other library product developments include a new version of our Wide Aisle Management (WAM) electromagnetic anti-theft system that will reduce the build cost by more than 20%. These products complement our growing library self-service kiosk business and will allow Sentry to participate in millions of dollars of public bids for RFID library management systems.

In October, an agreement was signed with an engineering firm to assist in the redesign of our SmartTrack system. The goal is to reduce production costs while adding significant new features that are specifically designed to complement OVportal. Several initial designs have been identified.

In November, a patent was filed to protect newly developed OVportal intellectual property in the area of online video audits that will increase sales and decrease the cost of operations for retailers. Most important for Sentry, OVportal will create a recurring revenue software licensing model. More than 100 stores where installed OVportal on a no cost basis as part of our effort to develop a market leading product. Compliance audits via on-line video will be a standard procedure used by most retailers in the future and our market ready OVportal design offers several advantages over competitors. What are your key target markets and what are the market drivers from your perspective at this time?

Peter Murdoch: We use a direct sales model in North America with a company employed sales team and an indirect model via dealers and distributors selling our library and SmartTrack product lines in more than 60 countries. Over the coming years, library sales will be driven by the transition to RFID as well as the continued deployment of self-service systems. Our QuickCheck™ self-service system is market leading in both its physical design and software features. More than 300 systems have been installed in North American libraries including RFID versions and hybrid RFID/Barcode systems at the Dallas , Calgary , Palm Beach , and Harris County Public Libraries. Recent product launches including RFID gate antennas, work and conversion stations will help grow our library business both by attracting new customers and by servicing a growing list of hundreds of our existing customers.

On the video side of the business, we have targeted substantial growth in our indirect channel both through existing international dealers and via the new relationship with Tyco International. The Tyco OEM version of SmartTrack will service its large retail customers and dealer channel in Europe, the Middle East and Africa .

The OVportal, Software As A Service (SaaS) model is one of our largest growth opportunities. Retailers are searching for better ways to operate at lower costs. On-line software controls for existing camera systems combined with powerful video tools like SmartTrack will cut travel time and ensure employee compliance with mandated policies and procedures. OVportal will be sold on a recurring revenue model both directly to our customer base of leading retailers and through our international dealer channel. With 2009 coming to a close, how is 2010 shaping up for you? Can you comment on the present backlog and pipeline?

Peter Murdoch: Our backlog has been running at approximately $3 million  which is ahead of quarterly revenue. This does not include a recently signed supply agreement for SmartTrack under which we anticipate selling as many as 250 additional systems during 2010. This business alone is expected to increase our 2010 revenue by approximately 25%. During 2009 we were successful in reducing fixed costs by more than $1,000,000 while bring to market several new products. We believe 2010 will be the year Sentry realizes the benefit of the foundation laid to grow our business. 

SecurityStockWatch: What are the three most important things you'd like to emphasize to the financial community about SKVY.PK at this time.

1.    New agreement to supply SmartTrack to Tyco International

2.    New RFID library products to service publicly funded market

3.    OVportal Software As A Service model to create high margin recurring revenue model

We anticipate that Sentry will be profitable in 2010 based on the significant changes that have been implemented. Thank you for joining us today, Peter. Please give us an overview of your background and a brief history of Sentry Technology.

Peter Murdoch: This October will mark my 20th year in the security industry. At Sentry I’ve have been the President, CEO and Chairman since January 2001 and President of ID Security Systems Canada, Inc. since its inception in 1987 until acquisition by Sentry. From 1997 through 2004, I served as a member of the management committee of Dialoc ID, the controlling shareholder of Sentry between January 2001 and April 2004. Prior to joining ID Systems I was Vice President of Sales for Catalyst International Business Systems a software development company serving the financial services market.

I received a degree in economics from the University of Western Ontario in London.

Sentry Technology Corporation, via its acquisition of Knogo North America Inc., Video Sentry Corporation and ID Systems has a long history in the security industry dating from 1966. Sentry designs, manufactures, markets and services a complete line of CCTV products, Library patron self-service and RFID solutions as well as anti-shoplifting tagging systems. The CCTV product line includes SentryVision® SmartTrack™, a patented traveling CCTV system and SentryVision® Server for local, mobile and remote, control of video images over the internet. Recently we have introduced application software that has increased the market opportunity for our SentryVision® SmartTrack™ traveling CCTV system.

SmartTrack™ is installed in 4 of the world’s 5 largest retailers.

SecurityStockWatch: Peter please update our audience about recent “wins” at Steve & Barry’s and with one of America’s largest retailers.

Peter Murdoch: Sentry will install SmartTrack™ traveling CCTV systems in 33 Steve & Barry’s stores plus their distribution center by the middle of November. This deal is important for us both in terms of its size and the fact that Steve & Barry’s will be implementing our complete OperationalVideo™ solution to manage safety and security as well business operations using SmartTrack. We anticipate installing systems in more than 200 S&B locations.

We believe that this is the beginning of a major market shift in video surveillance. Others agree as evidenced by our installation of three tracks for an OperationalVideo™ test in one of America’s largest retailers. The system is now installed and provides management with detailed views of out of stock positions, signage, displays and general procedure compliance, all over the internet. Following a very positive review of the system performance by the customer’s most senior managers, we expect systems will be installed in many locations in 2008.

SecurityStockWatch: What does your current backlog look like at this point and how does it compare to the prior year backlog at this same time.

Peter Murdoch: Total YTD orders were approximately $11.5 million as the end of August, more than 50% ahead of the same period last year. We are pleased by the trend and expect that orders will continue to increase.

SecurityStockWatch: Care to comment on top line and bottom line guidance for 2007 and 2008?

Peter Murdoch: Our business is improving. We expect to profitable in the second half of 2007 and the outlook for 2008 is excellent. The success we are experiencing with our OperationalVideo™ program is very encouraging and will continue to drive sales growth next year and beyond. You’ve had some really impressive “wins” with Sentry CCTV systems at companies such as: FedEx, Target, and JC Penney, just to name a few. Please tell us about Sentry’s CCTV capabilities.

Peter Murdoch:
We’ve been successful in attracting leading customers to our traveling camera technology. The reason is really very simple. SmartTrack™ is reliable, easy to operate and offers tremendous value. The system uses patented technology to transmit video images from two pan, tilt and zoom cameras traveling along a rail mounted on the ceiling. The system virtually eliminates blind spots. An operator can position the camera angle exactly where needed using a conventional joy stick, wireless hand held controller, or remotely over the internet. The camera carriage travels at speeds of up to 15 feet per second and is ideal for covering large facilities such as big box retail, courier depots, public transportation platforms and distribution centers. We enjoy solid references from market leading U.S., European and Latin American retailers. Sentry has another interesting line of business regarding Electro-Magnetic (EM) and RFID based Library Management systems. In this space, Sentry seems to have also achieved solid traction with customers such as Dallas Public, New York Board of Education, the Library of Congress, and the Supreme Court of Canada. Please give us an overview of the solution Sentry has provided in this market.

Peter Murdoch: We manufacture a fully integrated line of products for Library security and patron self-service including electromagnetic (EM) security labels, EM gate readers at the library exit, EM label deactivators and reactors as well as QuickCheck™ a patron self-service system complete with an RFID reader.

QuickCheck™ operates in a similar fashion to a bank ATM. Patrons gain access to the library’s circulation software via a user card and touch screen video monitor. A barcode or RFID chip on the book is read, security functions performed and a receipt is printed to tell the patron what books have been borrowed and when they are due to be returned. Once the process is complete, the patron exits the library through the security system without any intervention by library staff. The entire process is fast, user friendly and frees library staff from the circulation desk to perform higher level tasks. The system includes statistical usage report software as well as remote diagnostic tools for management of the QuickCheck™ over a local network and via the internet.

Self-service systems both with and without RFID readers are gaining wide acceptance in libraries. As much as 70% of circulation is diverted to QuickCheck™ freeing library staff to perform other duties and giving library management greater flexibility in allocating tight operating budgets.
We are proud to be the security label supplier to the Library of Congress and thousands of libraries world wide that provide continuous repeat label orders to secure each book acquired by the library.

Similar EM theft prevention systems are also used widely in book stores. Sentry is the official security supplier to the National Association of College Stores where our customer base is growing steadily. Are there any other recent “wins” or success stories you’d like to talk about?

Peter Murdoch: Recently we completed a successful in store test of SentryVision® SmartTrack™ traveling CCTV systems including OperationalVideo™ management solutions for a leading national specialty retailer. In our opinion the increasing use of CCTV solutions to manage store operations in addition to safety and security is a significant new market. SmartTrack™ with wireless handheld controls for local management and OperationalVideo™ over the web delivers superior safety and security management as well as remote viewing and control of store operations, merchandising, signage, end-cap displays, pricing and employee procedure compliance.

Retail managers in New York have access to all store operations from the company’s executive offices while remote security monitoring is being performed by staff in Mumbai India. In store security personnel walk the floor interacting with staff and customers and maintain control of the SmartTrack™ system using a wireless PDA. Video is managed via the SentryVision® Server, a network video server that provides real time remote viewing and user passwords to manage hierarchal control of the system. The SentryVision® Server is equipped with mapping software so that users can easily find the area of the store that is of interest. Unlike conventional camera systems, there are no blind spots with SmartTrack™. Dual PTZ cameras are positioned to see around obstructions simply by moving the camera carriage along the ceiling mounted track using a standard joy stick. We expect the success of the initial test to result in a chain wide roll out of OperationalVideo™.

Regardless of the number of stores being viewed, there is no searching for the right camera to see a required event or display. A standardized graphical user interface delivers the necessary results by simply clicking left to travel left, right to travel right, plus zoom in or zoom out. The system combines exceptional sophistication with ease of use that serves both security personnel and business managers.

With OperationalVideo™ retail managers are able to see the business in real time without leaving their desks. Travel costs are reduced and productivity is greatly enhanced. The system also accommodates multiple users so that product launches, end-cap displays, advertising compliance and customer traffic flows can all be reviewed via a video network meeting in the store. Let’s turn to the international market for a moment. We understand that Sentry has recently participated in a public safety project in South Africa to secure rail and bus transportation lines. Care to elaborate on this project and the market opportunity for Sentry here?

Peter Murdoch: Public transportation security is a worldwide concern. The need for more effective solutions was made even more apparent by the tragic subway and railway bombings in London and Madrid. SmartTrack™ systems have been installed in Cape Town, South Africa on The Metro Rail Network 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. Additional orders are anticipated to secure rail lines being built leading to stadiums hosting the 2010 World Cup Soccer Championship.

The initial success in public transportation security applications has lead to orders from the Metro Transit Authority in New York to secure bus storage facilities. Other large projects are being bid and we expect to be successful installing Track on subway platforms of one the world’s largest systems. What is your perspective on the market drivers for Sentry Technology solutions at this time?

Peter Murdoch: New technology is key, both for our video product line and in the library business. Application software running on the SentryVision® video server makes OperationalVideo™ a reality and SmartTrack™ is a critical component of the success. Retailers immediately see the benefit of being able to visualize store operations. We believe that this is the beginning of a significant new market trend and our solution is leading.

In the library market, directors and financial managers are being challenged to provide more and more services with flat or declining operating budgets. The application of self-service technology improves patron service and gives the library a choice of where to direct a portion of employee salaries once a percentage of borrowing transactions are transferred to QuickCheck™. As a result the use of self-service systems in libraries will continue to grow far beyond the current estimated penetration of less than 10%. We read your recent press release with great interest in which you said that, “Our business opportunities are strong and we are optimistic that Sentry will be profitable in 2007.” Is there any update you’d like to give our audience at this time?

Peter Murdoch: We have made operating budget cuts in all categories while focusing our sales program on two core areas, SmartTrack™ and library security. Both segments have generated significant orders in the second quarter. We believe that these successes combined with anticipated new orders for our OperationalVideo™ solution will significantly increase overall revenue in 2007 resulting in profitability for Sentry. What resources such as streaming video, webinars, webcasts, podcasts, “white papers” and “case studies” are available for end-users on

Peter Murdoch: Streaming video is a great way to demonstrate our products. Sentry’s website has several interactive SmartTrack™ demonstrations where potential customers can really get a feel for how the product operates. We’ve also collected a library of streaming video clips from various applications such as distribution centers, grocery stores, fashion, big box retail and transportation centers so that prospects can envision how SmartTrack™ could provide value in their environments. The more specific the video image, the easier it is for customers to relate. Video clips are really working for us. Thanks again for joining us today, Peter. Are there any other subjects you’d like to discuss?

Peter Murdoch: Video security surveillance using conventional camera configurations has grown into a multibillion dollar industry. Retail in particular has been a large user of this technology. As the retail industry has consolidated over recent years, the industry has become extremely competitive with retailers continually looking for ways to cut costs while increasing sales. At the same time, operations and marketing departments are searching for greater efficiencies.

The internet and increasingly inexpensive bandwidth makes online video for operational controls a viable business tool to achieve competitive advantage. However, conventional video systems are not well suited to the task. Our OperationalVideo™ solution combined with Traveling video lets retailers perform a virtual walkthrough of every store without the headache of switching from camera to camera only to find that the view that’s needed is blocked by a pillar or hanging sign. Plus with SmartTrack™ the entire store can be seen with a single traveling camera image thereby reducing the quantity of video transmitted and increasing the speed to achieve true real time video observation.

We think this is a big deal and one that the market will buy into.