UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934
March 9, 2004
Date of Report (Date of earliest reported event)
Sentry Technology Corporation
(Exact name of registrant as specified in its chapter)
Delaware 1-12727 96-11-3349733
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification number)
incorporation)
1881 Lakeland Avenue, Ronkonkoma, New York 11779
(Address of principal executive offices) (Zip Code)
631-232-2100
Registrant's telephone number, including area code
None
(Former name or former address, if changed since last report )
INFORMATION TO BE INCLUDED IN THE REPORT
Item 5. Other Events.
A copy of the Company's News Release issued on March 9, 2004 is filed as an
exhibit to this report and is incorporated in this report by reference.
Item 7. Financial Statements and Exhibits.
Exhibit 99.1 Company News Release dated March 9, 2004
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Sentry Technology Corporation
Date: 3/9/04 /s/ Peter J. Mundy,
- -------------- ---------------------------
Peter J. Mundy, VP and CFO
EXHIBIT INDEX
99.1 Company News Release dated March 9, 2004.
SENTRY TECHNOLOGY CORPORATION
NEWS RELEASE
FOR IMMEDIATE RELEASE CONTACT: Peter J. Mundy
- ----------------------- Vice President - CFO
(631) 739-2000
SENTRY TECHNOLOGY CORPORATION ACHIEVES SECOND CONSECUTIVE QUARTERLY OPERATING
PROFIT
HAUPPAUGE, New York, March 9, 2004, -- Sentry Technology Corporation (OTC
Bulletin Board: SKVY) today reported financial results for the Company's fourth
quarter and year ended December 31, 2003. The Company achieved its second
consecutive operating profit following 7 years of operating losses. This
dramatic change is a result of the very significant restructuring undertaken
throughout 2003, including staff reduction of 50%, relocation of its offices to
a smaller and less costly facility, outsourcing of manufacturing, restructuring
of supplier debt and renegotiation of its credit facility. The Company has
achieved its goals of maintaining key customers, increasing gross margins and
substantially cutting operating costs and is now positioned to attract needed
investment capital in the form of $2,000,000 in convertible subordinated debt.
Revenues for the fourth quarter of 2003 were $3,325,000, compared to
revenues of $3,188,000 reported in the fourth quarter of the prior year. The
Company generated an operating profit for the current quarter of $47,000 as
compared to an operating loss of $646,000 for the same period of 2002. Net loss
was $109,000, or $(0.00) per share, in the fourth quarter of 2003 as compared to
a net loss $873,000, or $(0.01) per share, in the fourth quarter of 2002.
For the year ended December 31, 2003, revenues were $13,009,000, compared
to $14,536,000 reported in the previous year. The decrease in revenues is
primarily related to lower sales of EAS and conventional CCTV products to
several of the Company's larger customers. However, sales of the Company's
proprietary SmartTrack traveling camera systems increased by 29% in 2003, led by
an increase in international sales. Net income was $181,000, or $(0.00) per
share, compared to a net loss of $3,356,000, or $(0.05) per share. Included in
the net income for the year were extraordinary gains of $738,000, or $0.01 per
share, related to the settlement with trade creditors of past due debt and the
termination of its long-term lease with its prior landlord for the Hauppauge,
New York facility.
As announced on February 26th, Sentry has signed a term sheet to raise
$2,000,000 in secured convertible debt with a venture fund (the VC Fund) managed
by a multibillion-dollar North American company. Signing the term sheet was only
possible once the Company could demonstrate the benefits of the restructuring.
After the repayment of certain debts and expenses, the majority of the
$2,000,000 in proceeds will be used for working capital purposes.
As part of the transaction, Sentry will acquire ID Systems, a Toronto based
group of companies engaged in anti-shoplifting technology, security labeling,
radio frequency identification (RFID), access control and library security in
exchange for 30,000,000 Sentry common shares. ID Systems will add new products
and growth opportunities with approximately $6.5 million in sales, $4.5 million
in assets and $700,000 in EBITDA based upon 2003 performance. The acquisition
of ID Systems will increase the number of outstanding Sentry shares to a total
of 115,755,610. Peter Murdoch, President and CEO of Sentry and President of ID
Systems, will indirectly own the newly issued Sentry shares as a result of the
sale of his controlling interest in ID Systems.
By agreement between Peter Murdoch and the VC Fund, no shares owned
directly or indirectly by Murdoch can be sold during the first year following
the VC fund investment. Thereafter, while the debenture is outstanding, Murdoch
is subject to annual selling restrictions. Following the convertible debt
transaction by the VC Fund, Murdoch is expected to own or control 47.4% of the
outstanding common stock of Sentry.
"We are pleased with the progress that has been made in restructuring Sentry,"
said Peter J. Mundy, Vice President and CFO of Sentry Technology Corporation.
"Much has been accomplished during 2003, without the benefit of any additional
working capital. The completion of the proposed $2,000,000 convertible debt
transaction and the ID Systems acquisition will dramatically strengthen Sentry's
financial position. Also through its investment of long term capital, senior
management continues to show its commitment towards the future success of the
combined companies."
Sentry Technology Corporation designs, manufactures, sells and installs a
complete line of Radio Frequency (RF) and Electro-Magnetic (EM) EAS systems and
Closed Circuit Television (CCTV) solutions. The CCTV product line features
SentryVision, a proprietary, patented traveling Surveillance System, including
our latest SmartTrack system. The Company's products are used by retailers to
deter shoplifting and internal theft and by industrial and institutional
customers to protect assets and people. The partnership with Dialoc ID Holdings,
B.V. expands the Company's product offering to include proximity Access Control
and Radio Frequency Identification (RFID) solutions. For further information,
please visit our Web site at www.sentrytechnology.com.
# # #
This press release may include information that could constitute
forward-looking statements made pursuant to the safe harbor provision of the
Private Securities Litigation Reform Act of 1995. Any such forward-looking
statements may involve risk and uncertainties that could cause actual results to
differ materially from any future results encompassed within the forward-looking
statements. Factors that could cause or contribute to such differences include
those matters disclosed in the Company's Securities and Exchange Commission
filings.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Three Months Ended Twelve Months Ended
December 31, December 31,
2003 2002 2003 2002
------------------- ---------------------
REVENUES . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 3,325 $ 3,188 $ 13,009 $14,536
COSTS AND EXPENSES:
Cost of sales . . . . . . . . . . . . . . . . . . . . . . 1,200 1,791 5,179 7,382
Customer service expenses . . . . . . . . . . . . . . . . 1,065 930 3,977 4,240
Selling, general and administrative expenses. . . . . . . 849 980 3,575 5,119
Research and development. . . . . . . . . . . . . . . . . 164 133 656 548
-------- -------- -------- --------
3,278 3,834 13,387 17,289
-------- -------- -------- --------
OPERATING PROFIT (LOSS). . . . . . . . . . . . . . . . . . . . 47 (646) (378) (2,753)
INTEREST AND FINANCING EXPENSE . . . . . . . . . . . . . . . . 158 227 671 603
-------- -------- -------- --------
LOSS BEFORE INCOME TAXES AND . . . . . . . . . . . . . . . . . (111) (873) (1,049) (3,356)
EXTRAORDINARY ITEM
INCOME TAX BENEFIT (1) --- (492) ---
-------- -------- -------- --------
LOSS BEFORE EXTRAORDINARY ITEM. . . . . . . . . . . . . . . . (110) (873) (557) (3,356)
EXTRAORDINARY ITEM - Gain on extinguishment
of debt, net of $1 and $492 income taxes 1 --- 738 ---
-------- -------- -------- --------
NET INCOME (LOSS). . . . . . . . . . . . . . . . . . . . . . .$ (109) $ (873) $ 181 $ (3,356)
======== ======== ======== ========
BASIC INCOME (LOSS) PER COMMON SHARE
Income (loss) before extraordinary item. . . . . . . . . . . .$ (0.00) $ (0.01) $ (0.01) $ (0.05)
Extraordinary item . . . . . . . . . . . . . . . . . . . . . . 0.00 0.00 0.01 0.00
-------- -------- -------- --------
Net income (loss) $ (0.00) $ (0.01) 0.00 $ (0.05)
======== ======== ======== ========
WEIGHTED AVERAGE SHARES . . . . . . . . . . . . . . . . . . . 85,754 78,044 84,153 72,193
======== ======== ======== ========
CONSOLIDATED BALANCE SHEETS
(In thousands)
December 31, December 31,
2003 2002
-------------- --------------
ASSETS
- -----------------------------------------------------
CURRENT ASSETS
Cash and cash equivalents . . . . . . . . . . . . . $ 210 $ 266
Accounts receivable, less allowance for doubtful
accounts of $304 and $303, respectively. . . . . 1,482 1,472
Inventories . . . . . . . . . . . . . . . . . . . . 1,855 3,145
Prepaid expenses and other current assets . . . . . 126 237
-------------- --------------
Total current assets. . . . . . . . . . . . . . . 3,673 5,120
PROPERTY, PLANT AND EQUIPMENT, net. . . . . . . . . . 209 2,563
OTHER ASSETS. . . . . . . . . . . . . . . . . . . . . 211 309
-------------- --------------
$ 4,093 $ 7,992
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
- -----------------------------------------------------
CURRENT LIABILITIES
Revolving line of credit and term loan. . . . . . . $ 1,515 $ 2,067
Accounts payable. . . . . . . . . . . . . . . . . . 566 1,807
Accrued liabilities . . . . . . . . . . . . . . . . 1,601 1,523
Obligations under capital leases - current portion. 5 97
Deferred income . . . . . . . . . . . . . . . . . . 271 394
-------------- --------------
Total current liabilities . . . . . . . . . . . . 3,958 5,888
NOTES PAYABLE 247 ---
OBLIGATIONS UNDER CAPITAL LEASES -
noncurrent portion. . . . . . . . . . . . . . . . . 13 2,555
-------------- --------------
Total liabilities . . . . . . . . . . . . . . . . 4,218 8,443
SHAREHOLDERS' EQUITY (DEFICIT)
Common stock. . . . . . . . . . . . . . . . . . . . 86 78
Additional paid-in capital. . . . . . . . . . . . . 44,658 44,521
Accumulated deficit . . . . . . . . . . . . . . . . (44,749) (44,930)
Note receivable from shareholder. . . . . . . . . . (120) (120)
-------------- --------------
Total shareholders' equity (deficit). . . . . . . (125) (451)
-------------- --------------
$ 4,093 $ 7,992
============== ==============