In The Boardroom With...

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

SecurityStockWatch.com: 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.

SecurityStockWatch.com: 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.

SecurityStockWatch.com: 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.

SecurityStockWatch.com: 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.

SecurityStockWatch.com: 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.

SecurityStockWatch.com: 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%.

SecurityStockWatch.com: 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.

SecurityStockWatch.com: What resources such as streaming video, webinars, webcasts, podcasts, “white papers” and “case studies” are available for end-users on www.SentryTechnology.com?

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.

SecurityStockWatch.com: 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.