SECURITIES AND EXCHANGE COMMISSION

[X]     Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2004

OR

[  ]     Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission file number: 0-9463

AMERICAN BUILDING CONTROL, INC.

Registrant’s telephone number, including area code: (210) 477-5400

Securities registered pursuant to Section 12(b) of the Act: NONE

Securities registered pursuant to Section 12(g) of the Act:

COMMON STOCK, $.01 PAR VALUE

     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 [  ]

     Indicate by check mark whether the registrant is an accelerated filer as defined in Rule 12b-2 of the Securities Exchange Act of 1934. Yes [  ] No [X]

     The aggregate market value of the voting stock held by non-affiliates of the registrant, as of June 30, 2004 was $22,681,751. As of that date 14,633,388 shares of the Registrant’s Common Stock were outstanding.

AMERICAN BUILDING CONTROL, INC.
FORM 10-Q
TABLE OF CONTENTS

Forward Looking Statements

     Certain statements contained or incorporated in this report on Form 10-Q, which are not statements of historical fact, constitute “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Reform Act”). Forward looking statements are made in good faith by American Building Control, Inc. (the “Company” or “ABC”) pursuant to the “safe harbor” provisions of the Reform Act. These statements may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements to differ materially from any future results, performance or achievements, whether expressed or implied. These risks, uncertainties and factors include the timely development and acceptance of new products and services, the impact of competitive pricing, fluctuations in operating results, the ability to introduce new products and services, technological changes, reliance on intellectual property and other risks. The objectives set forth in this Form 10-Q are subject to change due to global market and economic conditions beyond the control of the Company.

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PART I

ITEM 1. FINANCIAL STATEMENTS

AMERICAN BUILDING CONTROL, INC. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)

The accompanying notes are an integral part of the consolidated financial statements.

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AMERICAN BUILDING CONTROL, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)

The accompanying notes are an integral part of the consolidated financial statements.

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AMERICAN BUILDING CONTROL, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)

The accompanying notes are an integral part of the consolidated financial statements.

5

AMERICAN BUILDING CONTROL, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

The accompanying notes are an integral part of the consolidated financial statements.

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American Building Control, Inc.

Notes to Consolidated Financial Statements

Note 1: Basis of Presentation and Nature of Operations

     The accompanying financial statements have been derived from the accounts of American Building Control, Inc. and its subsidiaries (the “Company”). The interim financial statements are prepared on an unaudited basis in accordance with accounting principles for interim reporting and do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America for complete financial statements. All adjustments which are, in the opinion of management, necessary for a fair presentation of the results of operations for the interim periods, have been made and are of a recurring nature unless otherwise disclosed herein. The results of operations for such interim periods are not necessarily indicative of results of operations for a full year. For further information, refer to the consolidated financial statements and notes to the consolidated financial statements for the year ended December 31, 2003 included in the Company’s Annual Report on Form 10-K.

     On July 1, 2004, the Company sold its SecurityandMore and Industrial Vision Source distribution businesses to Mace Security International, Inc. (“Mace”). The SecurityandMore and Industrial Vision Source businesses are presented as discontinued operations.

     On December 20, 2002, the Company sold its closed-circuit television (“CCTV”) business to Honeywell International, Inc. (“Honeywell”) for $36 million, subject to post-closing adjustments, plus the transfer of certain liabilities (“Honeywell Asset Sale”). The CCTV business is presented as discontinued operations.

     In 2003, following the Honeywell Asset Sale, the Company reorganized its business activities in order to focus on designing, marketing, selling and servicing niche security products for use in industrial, governmental and consumer surveillance markets. The Company formed two separate operating segments: Professional Security Group (“PSG”) and Diversified Sales Group (“DSG”). Following the sale of the units comprising substantially all of the DSG segments to Mace, the Company is now able to focus its resources and efforts on the further development of its core business which is primarily comprised of MDI™ Security Systems, Inc. (“MDI”) and ABM™ Data Systems (“ABM”). The Company is now organized into a single segment.

     MDI is a leader in the access control business and is an important participant in many Homeland Security projects. MDI’s new Security Suite™ of products has been launched successfully. In the Company’s opinion, it is the first fully integrated system incorporating access control, video, audio alarm monitoring, and audit functions. MDI also distributes its PointGuard™ access control product primarily to the small to mid market commercial customer through a dealer network. ABM provides alarm management software to central monitoring stations that are owned by either organizations for their own internal use, such as large universities, or commercial operators such as surveillance companies. The Company also sells monitoring and recording devices to operators of public transit vehicles.

     All significant inter-company balances and transactions have been eliminated in consolidation.

     The local currency is considered the functional currency for the Company’s foreign operations. Assets and liabilities are translated into U.S. Dollars at the rate of exchange in effect at the balance sheet date. Revenues and expenses are translated into U.S. Dollars at the average monthly exchange rates prevailing during the year.

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  Stock-Based Compensation

     The Company accounts for stock-based compensation to employees using the intrinsic value method. Compensation costs for stock options is measured as the excess, if any, of the quoted market price of the Company’s stock at the date of grant over the amount an employee must pay to acquire the stock. No compensation cost related to stock options is reflected in the statements of operations as all options granted under the Company’s option plans had an exercise price equal to the market value of the underlying common stock on the date of grant. For stock options granted under the Company’s 2002 Stock Option Incentive Plan, the vesting period varies by individual grants as determined by the Compensation Committee of the Board of Directors. The following table illustrates the effect on operations and per share data as if the Company had applied the fair value method to employee stock-based compensation (in thousands):

     The fair value of these options was estimated at the date of grant using the Black-Scholes option pricing model with the following assumptions: expected volatility of a range of 85 to 90 percent; risk-free interest rates ranging from 3.2 to 3.9 percent; no dividend yield; and expected lives of one to seven years.

   Warranty Reserves

     Reserves are provided for the estimated warranty costs when revenue is recognized. The costs of warranty obligations are estimated based on warranty policy or applicable contractual warranty, historical experience of known product failure rates and use of materials and service delivery charges incurred in correcting product failures. Specific warranty accruals may be made if unforeseen technical problems arise. If actual experience, relative to these factors, adversely differs from these estimates, additional warranty expense may be required.

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     The table below shows the roll-forward of warranty accrual for the three and six months ended June 30, 2004 and 2003 (in thousands):

  Reclassifications

     Certain amounts have been reclassified in the prior period financial statements to conform to the current period presentation.

Note 2: Receivable from Honeywell International, Inc.

     The CCTV Business sold by the Company in the Honeywell Asset Sale consisted of assets in the United States, Germany, Italy, Poland, South Africa, Australia, Singapore and the United Kingdom. The sale price of $36 million, included a $2.2 million holdback for anticipated royalties for a license agreement as well as a $5.4 million purchase price hold back. The latter was subject to change in the net value of CCTV assets between March 31, 2002 and December 20, 2002 as well as general representations and warranties made by the Company to Honeywell. The $5.4 million purchase price holdback was to be paid to the Company, with accrued interest, over three installments every six months after the close of the sale.

     In April 2003, Honeywell disputed the change in net asset value and, after failing to resolve the differences by August 2003, Honeywell and the Company entered into arbitration. In December 2003, the final resolution rendered by the arbitrator increased the purchase price by approximately $888 thousand. Honeywell made payments for the increase of the purchase price, the first two of the three holdback installments and the accrued interest in December 2003. Under the provisions of the Asset Purchase Agreement between the Company and Honeywell International Inc., a final $1.8 million installment of the purchase price was payable on June 20, 2004.

     In October 2003, Honeywell received notifications that its use of certain assets acquired from the Company may be subject to restrictions. Based on these notifications, Honeywell elected to withhold $1.2 from the $1.8 million final payment until such time as the possible restrictions were resolved. Honeywell paid to the Company $600,000 plus interest in June 2004 and $250,000 plus interest in July 2004. The payment of the remaining $950,000 is subject to resolution of one outstanding issue. The Company and Honeywell are working jointly to resolve the issue and expect to have a resolution in the third quarter.

Note 3: Trade Accounts Receivable

     Supplemental information on net trade accounts receivable (in thousands):

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Note 4: Earnings Per Share

     The Company computes basic earnings (loss) per share based on the weighted-average number of common shares outstanding. Diluted earnings (loss) per share is computed based on the weighted average number of shares outstanding, plus the number of additional common shares that would have been outstanding if dilutive potential common shares had been issued.

     For the six months ended June 30, 2004 and 2003, 2,730,515 and 1,074,635 stock options were outstanding, respectively, but were not included in the computation of diluted loss per share because the effect would have been anti-dilutive. For the six months ended June 30, 2004 and 2003, 195,351 shares of preferred stock, which convert to 406,981 shares of common stock, were excluded from the computation of diluted loss per share because the effect was anti-dilutive.

Note 5: Comprehensive Loss

     Supplemental information on comprehensive loss is as follows (in thousands):

Note 6: Severance and Other Accrued Expenses

     Accruals for severance, restructuring and settlement expenses are as follows (in thousands):

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   Royalty Claim

     On April 21, 2003, the Company reached a settlement in the amount of approximately $625,000 related to a patent infringement claim. An initial payment of $156,000, representing 25% of the settlement was paid by the Company during April 2003. The remaining amount, plus interest, is being paid in monthly installments of approximately $21,000 over the ensuing 24 months.

  United Kingdom Lease

     In the Honeywell Asset Sale, Honeywell did not assume the lease for the Company’s Warrington (Manchester) facility in the United Kingdom. During the first quarter of 2004, the Company reached a final settlement with the landlord. The final settlement was for $330,000. The Company has paid $262,000 during the first quarter and the remaining $68,000 was paid in June 2004.

  2003 Severance

     At December 31, 2003, unpaid obligations related to executive and management severance was approximately $0.7 million, including $0.3 million related to the separation of Mr. Bryan Tate, our Former CEO. During the first half of 2004, $550 thousand was paid in cash for 2003 severance, and $52 thousand was credited to income to reflect discounting of the obligations due to accelerated payments. As of June 30, 2004, $68 thousand was accrued for remaining severance related to 2003 separations.

  2004 Severance

     Mr. Tate separated as an employee of the Company on December 31, 2003 and as its Chief Executive Officer and Chairman of the Board in November 2003. Mr. Tate resigned his position on the Company’s Board of Directors effective March 31, 2004. Pursuant to an agreement entered into between Mr. Tate and the Company dated April 15, 2004, all employment-related issues between Mr. Tate and the Company have been concluded. Mr. Tate was paid $300,000 in severance. As a condition to receiving the severance payment, Mr. Tate exercised his right to purchase 155,000 shares of the Company’s common stock and paid $161,200 to the Company in April 2004.

     During the first half of 2004 the Company incurred $101,000 and paid $36,000 in cash for severance expenses related to consolidation activities. At June 30, 2004, the total accrued severance was $133,000 comprised of the remaining $68,000 from 2003 and $65,000 for 2004 as of the end of June 2004.

Note 7: Segment Disclosures and Foreign Operations

     The Company’s underlying accounting records are maintained on a legal entity basis for government and public reporting requirements. Segment disclosures are consistent with internal management reporting, and the segment disclosures for prior years have been reclassified to be consistent with the current year presentation. The Company evaluates performance based on operating profit (loss). The accounting policies of these segments are the same as those described in the summary of significant accounting policies (included in the Company’s 10-K for the year ended December 31, 2003).

     Prior to the sale of the DSG businesses to Mace, the Company had two operating segments: the Professional Security Group (“PSG”) and the Diversified Sales Group (“DSG”). In addition to the PSG and DSG operating segments, the Company maintains corporate functions, including human resources, legal, finance, information technologies, accounting, reporting and executive, located in San Antonio, Texas.

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     Following the sale of the DSG businesses, the Company reorganized into a single reporting segment. The Company is now comprised of MDI, MDI Switzerland and ABM.

     Geographic Information (in thousands):