FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended March 31, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 1-12727
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SENTRY TECHNOLOGY CORPORATION
-----------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 96-11-3349733
---------- -------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
350 Wireless Boulevard, Hauppauge, New York 11788
--------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
631-232-2100
------------
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
-
As of May 13, 2003, there were 82,560,347 shares of Common Stock outstanding.
SENTRY TECHNOLOGY CORPORATION
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INDEX
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Page No.
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PART I. FINANCIAL INFORMATION
- ---------------------------------
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets --
March 31, 2003 and December 31, 2002 3
Condensed Consolidated Statements of Operations --
Three Months Ended March 31, 2003 and 2002 4
Condensed Consolidated Statements of Cash Flows --
Three Months Ended March 31, 2003 and 2002 5
Notes to Condensed Consolidated Financial
Statements -- March 31, 2003 6 - 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8 - 11
Item 3. Controls and Procedures 11
PART II. OTHER INFORMATION
- ------------------------------
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 11
PART I. FINANCIAL INFORMATION
- ---------------------------------
Item 1. Financial Statements (Unaudited)
SENTRY TECHNOLOGY CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
March 31, December 31,
2003 2002
----------- --------------
ASSETS
- --------------------------------------------------------------
CURRENT ASSETS
Cash and cash equivalents. . . . . . . . . . . . . . . . . . $ 201 $ 266
Accounts receivable, less allowance for doubtful
accounts of $233 and $303, respectively . . . . . . . . . 1,257 1,472
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . 2,457 3,145
Prepaid expenses and other current assets. . . . . . . . . . 218 237
----------- --------------
Total current assets . . . . . . . . . . . . . . . . . . . 4,133 5,120
PROPERTY, PLANT AND EQUIPMENT, net . . . . . . . . . . . . . . 2,481 2,563
OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . 294 309
----------- --------------
$ 6,908 $ 7,992
=========== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
- --------------------------------------------------------------
CURRENT LIABILITIES
Revolving line of credit and term loan . . . . . . . . . . . $ 1,536 $ 2,067
Accounts payable . . . . . . . . . . . . . . . . . . . . . . 1,882 1,807
Accrued liabilities. . . . . . . . . . . . . . . . . . . . . 1,478 1,523
Obligations under capital leases -
current portion . . . . . . . . . . . . . . . . . . . . . 89 97
Deferred income. . . . . . . . . . . . . . . . . . . . . . . 331 394
----------- --------------
Total current liabilities. . . . . . . . . . . . . . . . . 5,316 5,888
OBLIGATIONS UNDER CAPITAL LEASES -
non-current portion. . . . . . . . . . . . . . . . . . . . . 2,532 2,555
----------- --------------
Total liabilities. . . . . . . . . . . . . . . . . . . . . 7,848 8,443
SHAREHOLDERS' EQUITY
Common stock . . . . . . . . . . . . . . . . . . . . . . . . 83 78
Additional paid-in capital . . . . . . . . . . . . . . . . . 44,521 44,521
Accumulated deficit. . . . . . . . . . . . . . . . . . . . . (45,424) (44,930)
Note receivable from shareholder . . . . . . . . . . . . . . (120) (120)
----------- --------------
Total shareholders' equity (deficit) . . . . . . . . . . . (940) (451)
----------- --------------
$ 6,908 $ 7,992
=========== ==============
See notes to the condensed consolidated financial statements.
SENTRY TECHNOLOGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Three Months Ended
March 31,
--------------------
2003 2002
-------------------- --------
REVENUES. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,574 $ 4,742
COSTS AND EXPENSES:
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . 1,652 2,148
Customer service expenses . . . . . . . . . . . . . . . . . 1,121 1,279
Selling, general and administrative expenses. . . . . . . . 1,024 1,382
Research and development. . . . . . . . . . . . . . . . . . 160 151
-------------------- --------
3,957 4,960
-------------------- --------
OPERATING LOSS. . . . . . . . . . . . . . . . . . . . . . . . (383) (218)
INTEREST EXPENSE. . . . . . . . . . . . . . . . . . . . . . . 111 132
-------------------- --------
LOSS BEFORE INCOME TAXES. . . . . . . . . . . . . . . . . . . (494) (350)
INCOME TAXES --- ---
-------------------- --------
NET LOSS. . . . . . . . . . . . . . . . . . . . . . . . . . . $ (494) $ (350)
==================== ========
NET LOSS PER SHARE
Basic and diluted. . . . . . . . . . . . . . . . . . . $ (0.01) $ (0.01)
==================== ========
WEIGHTED AVERAGE SHARES
Basic and diluted. . . . . . . . . . . . . . . . . . . 82,259 61,654
==================== ========
See notes to the condensed consolidated financial statements.
SENTRY TECHNOLOGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Three Months Ended
March 31,
--------------------
2003 2002
-------------------- ------
CASH FLOWS FROM OPERATING ACTIVITIES:
- -----------------------------------------------------------------
Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (494) $(350)
Adjustments to reconcile net loss
to net cash provided by (used in) operating activities:
Depreciation and amortization. . . . . . . . . . . . . . . . 103 134
Provision for bad debts. . . . . . . . . . . . . . . . . . . 13 10
Changes in operating assets and liabilities:
Accounts receivable. . . . . . . . . . . . . . . . . . . . . 202 (203)
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . 688 106
Accounts payable and accrued liabilities . . . . . . . . . . 30 165
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . (35) (273)
-------------------- ------
Net cash provided by (used in) operating activities . . . . . 507 (411)
-------------------- ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment, net. . . . . . . . . (14) (3)
Intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . (1) (9)
-------------------- ------
Net cash used in investing activities . . . . . . . . . . . . (15) (12)
-------------------- ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under the revolving line of credit and term loan (531) 184
Repayment of obligations under capital leases . . . . . . . . . (31) (34)
Proceeds from sale of stock, net 5 ---
-------------------- ------
Net cash (used in) provided by financing activities . . . . . (557) 150
-------------------- ------
DECREASE IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . . (65) (273)
CASH AND CASH EQUIVALENTS, at beginning of period . . . . . . . . 266 423
-------------------- ------
CASH AND CASH EQUIVALENTS, at end of period . . . . . . . . . . . $ 201 $ 150
==================== ======
See notes to the condensed consolidated financial statements.
SENTRY TECHNOLOGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003
NOTE A -- Basis of Presentation
- ------------------------------------
Sentry Technology Corporation ("Sentry"), a Delaware Corporation, was
established to effect the merger of Knogo North America Inc. ("Knogo N.A.") and
Video Sentry Corporation ("Video Sentry"), which was consummated on February 12,
1997. The merger resulted in Knogo N.A. and Video Sentry becoming wholly owned
subsidiaries of Sentry. The consolidated financial statements include the
accounts of Sentry and its majority-owned subsidiaries. All intercompany
accounts and transactions have been eliminated in consolidation.
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information and with the
instructions to Form 10-QSB. Accordingly, they do not include all of the
information and footnotes required by accounting principles generally accepted
in the United States of America for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Interim
results are not necessarily indicative of the results that may be expected for a
full year. These financial statements should be read in conjunction with the
audited consolidated financial statements and notes thereto included in Sentry's
Annual Report to Stockholders on Form 10-K for the fiscal year ended December
31, 2002, as filed with the Securities and Exchange Commission.
Certain prior period amounts have been reclassified to conform to current period
presentation.
NOTE B -- Investment by Dialoc ID Holdings B.V.
- -------------------------------------------------------
Dialoc ID Holdings B.V. ("Dialoc ID") increased their ownership in Sentry to 51%
on January 7, 2003 through the exercise of 4,516,475 shares of newly issued
common stock at an exercise price of $0.001 per share, in accordance with the
provisions of a share purchase agreement.
NOTE C -- Financial Condition and Liquidity
- -------------------------------------------------
We have incurred reduced revenue levels, decreased financial position and
recurring operating losses over the past several years.As a result, the Board of
Directors approved a restructuring plan for 2003 to strengthen the Company's
operating efficiencies and to better align its operations with current economic
and market conditions. The revised business plan calls for the following:
- - Significantly downsize our operations including the elimination of
approximately 60 of 117 positions to support a business with sales of
approximately $15 million.
- - Negotiate with the current landlord to move out of its present corporate
facility and relocate to a smaller and less costly facility.
- - Dedicate a substantial portion of our remaining resources towards
maintaining and improving our relationships with our 30 largest customers.
- - Outsource all non-essential manufacturing and assembly operations to
qualified subcontractors.
- - Further expand our Service Partner program to augment service provided by
our employees.
- - Negotiate a settlement with past due trade vendors.
On January 7, 2003, Sentry initiated its restructuring plan. Due to the size of
the layoff, Sentry was required to give the terminated employees a 60-day notice
period. The costs associated with these restructuring activities are being
expensed as they are incurred. The Company believes the successful
implementation of this restructuring will result in substantial gross margin
improvements and reductions in operating expenses beginning after the first
quarter of 2003.
There can be no assurance, however, that changes in Sentry's plans or other
events affecting its operations will not result in accelerated or unexpected
cash requirements, or that the Company will be successful in achieving positive
cash flow from operations or that additional debt or equity financing will be
available on terms that are satisfactory to Sentry, or that any such debt or
equity financing will be sufficient to provide the full amount of funding
necessary. Sentry's future cash requirements are expected to depend on numerous
factors, including, but not limited to: (i) the ability to generate positive
cash flow from operations, and the extent thereof, (ii) the ability to raise
additional capital or obtain additional financing, and (iii) economic
conditions.
Sentry will require liquidity and working capital to finance increases in
receivables and inventory associated with sales growth, payments to past due
vendors and, to a lesser extent, for capital expenditures. The Company had no
material capital expenditure or purchase commitments as of March 31, 2003.
Currently, Sentry's major shareholder, Dialoc ID, is not able to provide
additional financial support for Sentry. If the Company is not able to raise
additional debt or equity financing, it could be forced into a bankruptcy or be
required to liquidate its assets. In this scenario, most likely, Sentry's
secured lender would receive the bulk of any proceeds.
NOTE D -- Inventories
- ------------------------
Inventories consist of the following:
March 31, 2003 December 31, 2002
---------------- -------------------
(in thousands)
Raw materials $ 402 $ 513
Work-in-process 586 618
Finished goods 1,469 2,014
----- -----
$ 2,457 $ 3,145
= ===== = =====
Reserves for excess and obsolete inventory totaled $3,593,000 and $3,610,000 as
of March 31, 2003 and December 31, 2002, respectively and have been included as
a component of the above amounts.
NOTE E -- Related Party Transactions
- -----------------------------------------
As a result of the Dialoc ID investment, Sentry entered into a distribution
agreement with Dialoc ID, which contemplates a two-way distribution relationship
between the companies. Under the agreement, Sentry has the rights to sell
Dialoc ID's EAS, access control and RFID products and accessories and Sentry
gives Dialoc ID the rights to sell its EAS and CCTV products and accessories.
Pricing for products under the agreements are at the lowest prices charged to
affiliates. Also, Peter Murdoch, a shareholder of Dialoc ID, receives an annual
salary of $50,000 in 2003 in the capacity of President of Sentry. Purchases
from Dialoc ID were $1,000 and $3,000 in the quarters ended March 31, 2003 and
March 31, 2002, respectively. Services and sales to Dialoc ID were $4,000 in
the quarter ended March 31, 2003. The net amount payable to Dialoc ID as of
March 31, 2003 was $120,000.
In addition, on March 27, 2002, Peter Murdoch, our President and CEO, exercised
a stock option for two million shares of Sentry common stock at an exercise
price of $0.06 per share, which was paid for through the issuance of a
promissory note in the amount of $120,000. The principal of the note is secured
by the option shares and is repayable no later than January 8, 2006. Mr.
Murdoch will not have any personal liability for the principal of the note if
the value of the option shares is not sufficient to repay the note. The note
bears interest at prime (currently 4.25%) less .75%. The note has been
reflected as a reduction of shareholders' equity on the balance sheet.
NOTE F -- Earnings Per Share
- ---------------------------------
The earnings per share calculations (basic and diluted) at March 31, 2003 and
2002 are based upon the weighted average number of common shares outstanding
during each period. There are no reconciling items in the numerator or
denominator of the earnings per share calculations in either of the periods
presented. Options to purchase 1,653,884 and 3,788,480 shares of common stock
with a weighted average exercise price of $0.57 and $0.71 were outstanding at
March 31, 2003 and 2002, but were not included in the computation of diluted net
loss per share because their effect would be antidilutive.
SENTRY TECHNOLOGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003
Stock options issued to employees are accounted for under the intrinsic value
method as prescribed by APB Opinion No. 25, "Accounting for Stock Issued to
Employees." No stock-based employee compensation cost is reflected in net income
(loss), as all options granted had an exercise price equal to the market value
of the underlying common stock on the date of grant. The following table
illustrates the effect on net loss and net loss per share if we had applied the
fair value method of accounting for stock options under the provisions of FASB
Statement No. 123, "Accounting for Stock-Based Compensation".
Three Months Ended
March 31, 2003 March 31, 2002
---------------- ----------------
(in thousands)
Net loss, as reported $ (494) $ (350)
Deduct: Total stock-based employee
compensation expense determined under
the fair value method for all awards,
net of related tax effects (19) (110)
------ -------
Pro-forma net loss $ (513) $ (460)
=========== ===========
Net loss per share:
Basic and Diluted - as reported $ (0.01) $ (0.01)
=========== ===========
Basic and Diluted - pro forma $ (0.01) $ (0.01)
=========== ===========
The fair value of each option granted is estimated on the date of grant using
the Black-Scholes option-pricing model. No options were granted in the three
month periods ended March 31, 2003 or 2002.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Certain Factors That May Affect Future Results
- ----------------------------------------------------
Information contained or incorporated by reference in this periodic report on
Form 10-QSB and in other SEC filings by Sentry contains "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 which can be identified by the use of forward-looking terminology such
as "believes," "expects," "may," "will," "should" or "anticipates" or the
negative thereof, other variations thereon or comparable terminology, or by
discussions of strategy. These forward-looking statements involve certain
significant risks and uncertainties, and actual results may differ materially
from the forward-looking statements. For further details and discussion of these
risks and uncertainties see Sentry Technology Corporation's SEC filings
including, but not limited to, its annual report on Form 10-K. No assurance can
be given that future results covered by the forward-looking statements will be
achieved, and other factors could also cause actual results to vary materially
from the future results covered in such forward-looking statements. We do not
undertake to publicly update or revise any of our forward-looking statements
even if experience or future changes show that the indicated results or events
will not be realized.
Results of Operations:
- ------------------------
We sell our products predominantly into the retail market. We recognize that our
domestic revenues will continue to be influenced by the soft economic
environment. As part of our restructuring plan and due to the limitations of our
financial resources, we reduced the number of direct salespersons from thirteen
to four, whose efforts are supplemented by six in-house sales support staff and
two independent sales representatives. Our sales efforts were primarily focused
towards our top 30 customers. The transition to this strategy may result in
large swings in our order flow, based on the timing of new store openings and
the receipt of orders from these customers. This is reflected in the reduction
in our backlog of orders from approximately $4.5 million at March 31, 2002 to
approximately $3.6 million at March 31, 2003. Consolidated revenues were 25%
lower in the quarter ended March 31, 2003 than in the quarter ended March 31,
2002. Total revenues for the periods presented are broken out as follows:
Q-1 Q-1 % Change
2003 2002 Incr (Decr)
---------- -------- -----------
(in thousands)
EAS. . . . . . . . . . . . . . . . . . . . . $ 425 $ 691 (38)
CCTV . . . . . . . . . . . . . . . . . . . . 1,477 1,767 (16)
SentryVision . . . . . . . . . . . . . . . . 373 639 (42)
3M library products. . . . . . . . . . . . . 45 114 (61)
-------- -------- ------
Total sales. . . . . . . . . . . . . . . . . 2,320 3,211 (28)
Service revenues and other . . . . . . . . . 1,254 1,531 (18)
-------- -------- ------
Total revenues . . . . . . . . . . . . . . . $ 3,574 $ 4,742 (25)
======== ======== ======
Direct sales of EAS products were lower in the first quarter of 2003 as compared
to the same period in the prior year as a result of lower sales to smaller
boutique customers. There was a decrease in CCTV and SentryVision revenues
from Lowe's Home Centers of approximately $0.8 million in the first quarter of
2003 as compared to the first quarter of 2002 as result of the timing of the
contracts received, which was partially offset by approximately $0.5 million in
new CCTV orders from Home Depot. While we terminated our distribution agreement
with 3M for library products as of the end of 2002, final installation
completions continued into the first quarter of 2003. Service revenues and
other decreased as a result of lower installation revenue than in the prior
year.
Cost of sales were 71% of total sales in the three month period ended March 31,
2003 compared to 67% in the same period of the prior year. The reduction in
sales in 2003 and related decrease in production levels resulted in significant
manufacturing inefficiencies, including the under absorption of labor and
overhead. In addition, cost of sales was negatively impacted during the first
quarter of 2003 as Sentry prepared for the outsourcing of all manufacturing
operations.
Customer service expenses were 12% lower in the first quarter of 2003 than in
the first quarter of 2002 primarily as a result of a decrease in the number of
customer service employees and lower outside contractor costs resulting from
lower revenue levels.
Selling, general and administrative expenses were 26% lower in the three month
period ended March 31, 2003 when compared to the same period of the previous
year primarily as a result of lower payroll costs and commissions partly as a
result of the headcount reduction as of March 7, 2003. We anticipate that
selling, general and administrative costs will continue to decline on a
comparative basis during the remainder of 2003.
Research and development costs were higher in the first quarter of 2003 when
compared to the first quarter of 2002 due to a reorganization and transfer of
employees into the engineering group as part of our restructuring.
Net interest expense for the first quarter of 2003 decreased due to lower
average borrowings and lower interest rates under our revolving credit
agreement.
Due to net operating losses, we have not provided for income taxes in any of the
periods presented.
As a result of the foregoing, Sentry had a net loss of $0.5 million in the
quarter ended March 31, 2003 as compared to a net loss of $0.4 million in the
quarter ended March 31, 2002.
Liquidity and Capital Resources as of March 31, 2003
- ------------------------------------------------------------
We have incurred reduced revenue levels, decreased financial position and
recurring operating losses over the past several years. As a result, the Board
of Directors approved a restructuring plan for 2003 to strengthen the
Company's operating efficiencies and to better align its operations with current
economic and market conditions. The revised business plan calls for the
following:
- - Significantly downsize our operations including the elimination of
approximately 60 of 117 positions to support a business with sales of
approximately $15 million.
- - Negotiate with the current landlord to move out of its present corporate
facility and relocate to a smaller and less costly facility.
- - Dedicate a substantial portion of our remaining resources towards
maintaining and improving our relationships with our 30 largest
customers.
- - Outsource all non-essential manufacturing and assembly operations to
qualified subcontractors.
- - Further expand our Service Partner program to augment service provided by
our employees.
- - Negotiate a settlement with past due trade vendors.
On January 7, 2003, Sentry initiated its restructuring plan. Due to the size of
the layoff, Sentry was required to give the terminated employees a 60-day notice
period. The costs associated with these restructuring activities are being
expensed as they are incurred. The Company believes the successful
implementation of this restructuring will result in substantial gross margin
improvements and reductions in operating expenses beginning after the first
quarter of 2003.
As of March 31, 2003, we had borrowings of approximately $1.5 million with CIT,
the maximum amount available under the revolving credit facility. We continue
to supplement our borrowings under this credit facility with purchase order
financing through EPK Financial Corporation. During the first quarter of 2003,
we funded $0.4 million in inventory purchases under this facility, all of which
was repaid before the end of the quarter.
Currently, Sentry has approximately $1.5 million of past due debts with its
unsecured trade creditors. During the quarter, we held a meeting with these
trade creditors and an informal creditors committee was formed to represent
their interests. The committee was provided with Sentry's business plan,
including current and projected future financial statements and cash flows. The
committee and Sentry negotiated a settlement that includes a cash payment of 10%
of the balance owed payable over the next three years commencing January 2004.
In addition, Sentry would issue two shares of common stock for each dollar of
debt owed. That offer has been sent to the trade creditors and to date, the
majority of the trade creditors have accepted.
We continue to pursue additional debt or equity financing through our financial
advisors.
There can be no assurance, however, that changes in Sentry's plans or other
events affecting its operations will not result in accelerated or unexpected
cash requirements, or that the Company will be successful in achieving positive
cash flow from operations or that additional debt or equity financing will be
available on terms that are satisfactory to Sentry, or that any such debt or
equity financing will be sufficient to provide the full amount of funding
necessary. Sentry's future cash requirements are expected to depend on numerous
factors, including, but not limited to: (i) the ability to generate positive
cash flow from operations, and the extent thereof, (ii) the ability to raise
additional capital or obtain additional financing, and (iii) economic
conditions.
Sentry will require liquidity and working capital to finance increases in
receivables and inventory associated with sales growth, payments to past due
vendors and, to a lesser extent, for capital expenditures. The Company had no
material capital expenditure or purchase commitments as of March 31, 2003.
Currently, Sentry's major shareholder, Dialoc ID, is not able to provide
additional financial support for Sentry. If the Company is not able to raise
additional debt or equity financing, we could be forced into a bankruptcy or be
required to liquidate our assets. In this scenario, most likely, Sentry's
secured lender would receive the bulk of any proceeds.
SENTRY TECHNOLOGY CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Related Party Transactions
- ----------------------------
Details of related party transactions are included in Notes B and E of this Form
10-QSB.
Item 3. Controls and Procedures
The Company's Chief Executive Officer and Chief Financial Officer have
concluded, based on an evaluation conducted within 90 days prior to the filing
date of this Quarterly Report on Form 10-QSB, that the Company's disclosure
controls and procedures have functioned effectively so as to provide those
officers the information necessary whether:
(i) this Quarterly Report on Form 10-QSB contains any untrue statement
of a material fact or omits to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this Quarterly
Report on Form 10-QSB, and
(ii) the financial statements, and other financial information included in
this Quarterly Report on Form 10-QSB, fairly present in all material
respects the financial condition, results of operations and cash flows of the
Company as of, and for, the periods presented in this Quarterly Report
on Form 10-QSB.
There have been no significant changes in the Company's internal controls or in
other factors since the date of the Chief Executive Officer's and Chief
Financial Officer's evaluation that could significantly affect these internal
controls, including any corrective actions with regards to significant
deficiencies and material weaknesses.
PART II - OTHER INFORMATION
- -------------------------------
Item 6. Exhibits and Reports on Form 8-K
(a) List of Exhibits:
99.2 Certification by Chief Executive Officer
99.3 Certification by Chief Financial Officer
(b) Reports on Form 8-K - On January 7, 2003, we filed a Current Report on
Form 8-K disclosing a change in our independent public accountants. On January
22, 2003, we filed a Current Report on Form 8-K disclosing a change of control
in our Company.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant had duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SENTRY TECHNOLOGY CORPORATION
-------------------------------
Date: May 13, 2003 By: /S/ PETER J. MUNDY
-------------- ----------------------
Peter J. Mundy, Vice President
Finance and Chief Financial Officer
(Principal Financial and Accounting Officer)
CERTIFICATIONS
I, Peter L. Murdoch, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Sentry Technology
Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
/s/ PETER L. MURDOCH
-------------------------------------------------
Peter L. Murdoch
President and Chief Executive Officer
May 13, 2003
CERTIFICATIONS
I, Peter J. Mundy, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Sentry Technology
Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
/s/ PETER J. MUNDY
-------------------------------------------------
Peter J. Mundy
Vice President and Chief Financial Officer
May 13, 2003
Exhibit 99.1
CERTIFICATION PURSUANT TO 18 U.S.C.SS.1350, AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-QSB for the quarter
ended March 31, 2003 of Sentry Technology Corporation (the "Company") as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
I, Peter L. Murdoch, President and Chief Executive Officer, certify, pursuant to
18 U.S.C. ss.1350, as adopted pursuant to ss.906 of the Sarbanes-Oxley Act of
2002, that, to the best of my knowledge: (1) the Report fully complies with the
requirements of Section 13(a) of the Securities Exchange Act of 1934; and (2)
the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
/s/ PETER L. MURDOCH
-------------------------------------------------
Peter L. Murdoch
President and Chief Executive Officer
May 13, 2003
Exhibit 99.2
CERTIFICATION PURSUANT TO 18 U.S.C.SS.1350, AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-QSB for the quarter
ended March 31, 2003 of Sentry Technology Corporation (the "Company") as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
I, Peter J. Mundy, Vice President and Chief Financial Officer, certify, pursuant
to 18 U.S.C. ss.1350, as adopted pursuant to ss.906 of the Sarbanes-Oxley Act of
2002, that, to the best of my knowledge: (1) the Report fully complies with the
requirements of Section 13(a) of the Securities Exchange Act of 1934; and (2)
the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
/s/ PETER J. MUNDY
-------------------------------------------------
Peter J. Mundy
Vice President and Chief Financial Officer
May 13, 2003