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PETER MURDOCH - SENTRY TECHNOLOGY CORPORATION (SKVY)
CEO Interview - published 01/10/2005

DOCUMENT # ZAV605

PETER L. MURDOCH has been the President and Chief Executive Officer,
Director and Chairman of the Board of Sentry Technology Corporation
since January 2001. He is also President of ID Security Systems Canada,
Inc. Mr. Murdoch has extensive experience in the retail security
industry as well as in the sales of technology-based products. He has
been Managing Director of ID Security Systems Canada, Inc. since its
inception in 1987. He served as a member of the management committee of
Dialoc ID Holdings B.V. (Sentry's prior majority shareholder) from 1997
to 2004. 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.

Sector: SECURITY & PROTECTION SERVICES

TWST: Would you begin with an introduction to Sentry Technology?


Mr. Murdoch: Sentry Technology Corporation is the merger of Knogo North
America and Video Sentry. Knogo North America has a long history in the
anti-shoplifting business, and Video Sentry was a company specializing
in the manufacturing of a traveling camera system. The companies merged
in 1997, and in 2004, Sentry acquired ID Systems, a profitable company
in the library security, anti-shoplifting and access control business.

TWST: Is the merger complete at this point?


Mr. Murdoch: Yes. The merger was completed at the end of April, and it
was assisted by an investment by Brascan Technology Fund in the form of
a $2 million convertible debenture so that we could both restructure the
company and refinance to grow the business.

TWST: Where do you stand in that reorganization?


Mr. Murdoch: We are almost out the other side. We still have some work
to do to reorganize the operations to create company-wide activities. We
have two offices, one in Long Island and one in Toronto where ID Systems
operates from. So as much as possible, we would like to create one
finance group, one marketing group and one manufacturing group, and we
are still working through those issues. So far, we are pleased with the
results.

TWST: As we look out, now that you've got this reformulated company,
what's the objective, who is the customer, and what are you going to
sell?


Mr. Murdoch: We have several product groups. The primary CCTV product is
SmartTrack, a traveling video surveillance system. We've had success
attracting large customers all over the world. In the United States, we
sell to customers like Lowe's, Target, Home Depot, Federal Express, Food
Lion, and Watkins Motor Lines. We've attracted international
distributors in Europe, selling through companies like Siemens, Chubb
and Honeywell. We've also done very well in the UK market selling
through Intrepid Security to customers like Tesco and ASDA Wal-Mart, the
leaders in the food retail sector. Other major customers in Europe
include international retailers such as Carrefour and Ikea.

TWST: What does the product do?


Mr. Murdoch: SmartTrack provides unobstructed video surveillance using
two pan tilt and zoom cameras mounted on a carriage that travels in a
ceiling mounted track. The carriage travels within a tub of tinted
plastic so that the cameras can be positioned covertly anywhere along
the track that can be up to 500 feet in length. The carriage is operated
either by a conventional joy stick video control console or by a mobile,
wireless hand held device. One of the major advantages of the SmartTrack
system is that a single, two camera carriage can cover a large retail
store or warehouse that would otherwise require 100 or more conventional
cameras. As well, with SmartTrack, because the camera can be positioned
to any viewing angle, there are none of the blind spots associated with
conventional camera systems.

TWST: So the benefit versus a fixed camera is broader coverage?


Mr. Murdoch: Broader, total coverage because there are no blind spots.
As a result, SmartTrack offers our customers a fantastic price
performance ratio, particularly for larger facilities. If a conventional
CCTV system requires over 100 cameras to cover a particular facility and
SmartTrack offers unobstructed viewing with a single traveling camera
carriage, the Sentry solution clearly has price and performance benefits
for the user including, lower capital cost, less video to manage, lower
maintenance costs and continuous tracking of events.

TWST: What's the potential? How big is that market and what kind of
growth is it seeing?


Mr. Murdoch: We are seeing a big market with substantial growth
opportunities. Video surveillance is growing worldwide. We've
established international distribution in Europe and this year we
started with ADT as a dealer in Mexico with the expectation that the
relationship will grow to include other Latin American markets. We have
started distribution in Asia through dealers in Taiwan, Korea, and
Japan. We see the opportunity to double our export business this year.
In addition to new geographic markets we are discovering new
applications for SmartTrack. In Asia, SmartTrack is now being offered in
large electronics manufacturing plants and in hydro electric plants in
North America.

TWST: Who do you compete with in this market?


Mr. Murdoch: In North America, we are the only company selling this type
of product. SmartTrack is protected by strong patents and over time, we
have developed a very reliable and flexible system. In Europe, we have a
competitor in France and one in Australia.

TWST: Are there some barriers to entry here to keep competition out?


Mr. Murdoch: There are indeed. First, we own patents and second, it's
difficult to manufacture this type of product. Others have tried and
failed. Ultimately, the measurement of how well we're doing is always
provided by the market. I'm pleased tell you that in several key
international accounts, we've been successful in replacing competitor
systems where we've come into an account after the door has been opened
by one of our competitors. Our product was originally introduced in the
mid-1990s and has since gone through several iterations. SmartTrack has
become extremely reliable, with many new software features such as
programmable tours and alarming inputs. An important innovation is the
control of the system using a wireless handheld device so that users are
free to walk the floor of a large facility and keep control of the
camera system both to manage operations and potential security threats.

TWST: That's one part of the business. What's the outlook for the other
parts?


Mr. Murdoch: Sentry also manufactures EAS anti-shoplifting tagging
systems, selling under our Knogo and ID Systems brand names. We sell
those products primarily through ADI, Honeywell's distribution channel
in the United States, with more than 100 branches located across the
country. EAS systems are also sold via our small North American direct
to end user sales team.  Our company also focuses on the library
security sector where radio frequency identification (RFID) has recently
been introduced to control both theft and logistics. We are continuing
to develop RFID product offerings for libraries, in addition to our
conventional anti-theft systems and labels.  Our first RFID product is
QuickCheck', a self-service kiosk that performs like an automatic teller
machine. The library patron gains access to the terminal via a user card
and is able to borrow books using a touch screen user interface.
QuickCheck' processes the transaction by reading either the barcode or
RFID label applied to the book, deactivates the security marker and
prints a transaction receipt telling the patron which specific items are
being borrowed along with the return date. The patron is then free to
exit through the security gate without librarian intervention.  We also
manufacture all types of security strips for libraries and supply
customers such as the Library of Congress, the New York City Board of
Education, the University of Notre Dame and libraries across Canada such
as the University of Toronto, McGill University and the Ottawa Public
Library. Library security is an important and growing part of business
both for RFID and conventional security solutions.

TWST: What's the business model for this? Is this a one-time sale or are
there continuing revenues?


Mr. Murdoch: It could be both. In the library sector, a single library
in a small community might need one detection system with ongoing label
supply to protect newly acquired material. In the case of an
organization like the New York City Board of Ed., they have many schools
and are opening new schools and renovating existing ones on a regular
basis. Whether it's a small library with a single system opportunity or
a large library board in an academic or municipal environment, all
customers need on going technical service and supply of both
conventional or RFID labels. In the case of RFID tags, the market is
just being developed. We believe that over time all libraries will adopt
RFID, offering a long-term opportunity for the sale of hardware,
software, tags and services.  With regard to recurring revenue for
SmartTrack, the initial end user installation marks the beginning of
many years of ongoing service revenue via our network of employees and
service partners located across North America.

TWST: What else is on the platter at this point?


Mr. Murdoch: We want to operate our business better to become more
profitable and to continue growing. We've turned the company back to
profitability, which was an important step for us. During the dark days
of the 2003 restructuring, we cut our sales force in the United States
back to two individuals which ended up being one by the beginning of
2004. We have since built that back again in key markets with
experienced qualified sales representatives. We continue with our
International Sales Director who has been successful in growing that
sector of the business and are now recruiting to an additional sales
representative to serve the growing European customer base.

TWST: What were the issues that got the company in trouble and have they
all been resolved at this point?


Mr. Murdoch: The restructuring of Sentry is in some ways a classic
turnaround story. The issues that got us in trouble related in part to
the performance of the Track product that had to be fixed, before all
the other important steps could be taken. As mentioned, the traveling
camera system is a difficult product to manufacture and unless it's done
well, you have lots of service troubles. That's why other companies have
entered and exited the marketplace and why Sentry developed financial
problems. SmartTrack, the most recent version of our traveling CCTV
product line, has been well engineered and is highly successful. We
introduced the first version of the re-engineered product in the middle
of 2001, which of course was not a great time to be doing so. It was
necessary to work with customers to convince them that the product was
sound before attacking new business opportunities. It took longer than
expected to satisfy the customer base that we in fact had solved our
technical problems. The strategy at the time was to go back to every one
of our customers and offer an upgrade to the new SmartTrack technology.
Many customers took advantage of the offer and, as a result, we were
able stabilize the customer base and begin selling the new system to
both existing and new customers. After stabilizing the customer base we
had to find capital, and in a company with a history of losses, it's
even more difficult to find the right type of capital that would give
current shareholders a satisfactory position after the refinancing. We
were able to do that by finalizing a $2 million convertible debenture
with Brascan Technology Fund in April 2004. The Brascan Technology Fund
is a limited partnership created by Brascan Corporation, a multibillion
dollar asset management company, specializing in the financial, real
estate and hydro electrical power generation businesses. The President
of Brascan Technology Fund is providing ongoing advice to Sentry via his
participation as an observer on our Board of Directors. Part of the
Brascan financing included the acquisition of ID Systems.  Sentry now
has a much stronger balance sheet, leading products, a strong supportive
customer base, international dealers and profitability.

TWST: What are the goals that you have set for the company for the next
year or two?


Mr. Murdoch: To continue profitability and grow, that's the most
important goal that we can have right now and we've got a great start
achieving it. We've had two profitable quarters and we are optimistic
that we are going to have a solid 2005.

TWST: How profitable can this business be?


Mr. Murdoch: Fortunately for our company, the security industry is
growing world wide and I believe we can take advantage of this growth to
be exceptionally profitable. We have both international and domestic
business serving multiple but related business sectors. The key is to
continue to execute our plan. Now that the company is adequately
financed for the mid-term and our costs are under control, we believe we
can add revenue with only modest cost increases, resulting in strong
returns for our shareholders.

TWST: As this restructuring took place, what did it do to the culture of
the company?


Mr. Murdoch: It changed it. At one point, Knogo Corporation, which was a
predecessor to Sentry, was over $100 million in annual sales prior to
the sale of the majority of the business to a competitor. That size
brings a certain style, a certain structure, and a certain culture that
doesn't necessarily work well in a $20 million company. We went through
many difficult changes both in terms of the structure and psychology, to
reintroduce the entrepreneurial spirit that was needed in order to
reshape the company. The senior managers have hung in through all of the
many changes and are optimistic for the future.

TWST: Do you have the people in place now that you need?


Mr. Murdoch: Not all of them. We are busy reviewing our sales and
marketing group. While we have grown our direct sales team, we'd like to
add several more key people. Both sales and marketing functions were cut
last year and we need to add back to help ensure increasing sales.

TWST: Is adding these people a milestone for investors to keep an eye
on?


Mr. Murdoch: Certainly, although I think the more important milestones
will be the results that any of those people achieve.

TWST: Are stock market investors paying any attention yet?


Mr. Murdoch: Not enough.

TWST: Why not?


Mr. Murdoch: We are a small penny stock company right now. It's a
volatile marketplace, prone to exuberant statements by management that
encourages the volatility in a lot of ways. At this stage in our
business development, time and money are best spent developing the
business rather than promoting our stock. The results will speak for
themselves once we can better demonstrate that we've created a strong
business model with solid growth opportunities. Investor interest will
naturally follow and increase the stock price.

TWST: If you were sitting down with some potential investors as you did
with Brascan, what are the two or three reasons you give them to take a
look at Sentry?


Mr. Murdoch: Sentry has quality products, growth markets, strong
customers, good technology, committed employees and a successful
business model.

TWST: What's the risk? What can go wrong?


Mr. Murdoch: Sometimes what goes wrong is the thing you least expect. By
focusing on what is working, we think that our business will go right.
The future is always uncertain but based on the progress made in the
recent past we're optimistic about the future.

TWST: Is there anything else we should touch on?


Mr. Murdoch: At the current levels we believe our stock is significantly
undervalued.

TWST: Final message?


Mr. Murdoch: After personally making an additional investment of more
than $640,000 in November, the successful restructuring of our business
and the investment by Brascan Technology Fund, we are in a good position
to take advantage of our significant customer base and leading
technology to profitably grow our company.

TWST: Thank you. (TJM)


PETER L. MURDOCH
 Chairman, President & CEO
 Sentry Technology Corporation
 1881 Lakeland Avenue
 Ronkonkoma, NY 11779
 (631) 739-2000
 (631) 739-2124 - FAX
 www.sentrytechnology.com

Copyright 2005 The Wall Street Transcript Corporation
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