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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q

(Mark One)


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

For the quarterly period ended June 30, 2003

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.

(Exact name of registrant as specified in its charter)


|                                         |  |                            
|---------------------------------------- |  | ---------------------------
|DELAWARE
(State or other jurisdiction    |  | 75-2626358
(I.R.S. Employer
|Of incorporation or organization)        |  | Identification No.)        
|                                         |  |                            
|1301 WATERS RIDGE DRIVE                  |  |                            
|LEWISVILLE, TEXAS                        |  | 75057                      
|(Address of principal executive offices) |  | (Zip Code)                 

Registrants telephone number, including area code: (972) 353-6458

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

As of July 15, 2003, 14,148,388 shares of the Registrants Common Stock were
outstanding.





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TABLE OF CONTENTS



|                                                  |                                                                                               |  |  |  |  |  |  | 
|------------------------------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|Forward Looking Statements                       
|PART I                                           
|                                                  | ITEM 1. FINANCIAL STATEMENTS                                                                 
|                                                  | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                                                  | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                           
|                                                  | ITEM 4. CONTROLS AND PROCEDURES                                                              
|PART II                                          
|                                                  | ITEM 1. LEGAL PROCEEDINGS                                                                    
|                                                  | ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS                                            
|                                                  | ITEM 3. DEFAULTS UPON SENIOR SECURITIES                                                      
|                                                  | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|                                                  | ITEM 5. OTHER INFORMATION                                                                    
|                                                  | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                     
|SIGNATURES                                       
|Index to Exhibits                                
|EX-31.1 Certification of CEO Pursuant to Rule 302
|EX-31.2 Certification of CFO Pursuant to Rule 302
|EX-32.1 Certification of CEO Pursuant to Rule 906
|EX-32.2 Certification of CFO Pursuant to Rule 906



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##### Table of Contents



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

|                                                                                              |   
|--------------------------------------------------------------------------------------------- | --
|FORWARD LOOKING STATEMENTS                                                                    | ii
|PART I  FINANCIAL INFORMATION                                                                | 1 
|ITEM 1: FINANCIAL STATEMENTS                                                                  | 1 
|ITEM 2: MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 21
|ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                            | 25
|ITEM 4: CONTROLS AND PROCEDURES                                                               | 25
|PART II  OTHER INFORMATION                                                                   | 26
|ITEM 1: LEGAL PROCEEDINGS                                                                     | 26
|ITEM 2: CHANGES IN SECURITIES AND USE OF PROCEEDS                                             | 26
|ITEM 3: DEFAULTS UPON SENIOR SECURITIES                                                       | 26
|ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                   | 26
|ITEM 5: OTHER INFORMATION                                                                     | 27
|ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K                                                      | 27
|SIGNATURES                                                                                    | 28
|CERTIFICATIONS                                                                                |   

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Forward Looking Statements



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Certain statements contained or incorporated in this quarterly 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) 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.

ii





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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)

|                            |                                                                      |   |          |       |              |   |        |        | 
|--------------------------- | -------------------------------------------------------------------- | - | -------- | ----- | ------------ | - | ------ | ------ | 
|                            |                                                                      |   | June 30, |       | December 31,
|                            |                                                                      |   | 2003     |       | 2002        
|                            |                                                                      |   |          |       |             
|ASSETS                      |                                                                      |   |          |       |              |   |        |       
|Current Assets:             |                                                                      |   |          |       |              |   |        |       
|                            | Cash and cash equivalents                                            |   | $        | 7,897 |              |   | $      | 16,436 | 
|                            | Marketable securities                                                |   |          | 1,531 |              |   |        |       | 
|                            | Trade accounts receivable, net                                       |   |          | 4,895 |              |   |        | 4,955  | 
|                            | Inventories                                                          |   |          | 3,780 |              |   |        | 4,357  | 
|                            | Receivable from Honeywell International, Inc. - current portion      |   |          | 3,600 |              |   |        | 3,600  | 
|                            | Prepaid expenses and other current assets                            |   |          | 1,397 |              |   |        | 1,165  | 
|                            | Net assets of discontinued operations                                |   |          | 194   |              |   |        | 1,833  | 
|                            |                                                                      |   |          |       |              |   |        |        | 
|Total current assets        |                                                                      |   | 23,294   |       |              |   | 32,346 |       
|Property and Equipment, net |                                                                      |   | 9,729    |       |              |   | 10,518 |       
|Other Assets:               |                                                                      |   |          |       |              |   |        |       
|                            | Goodwill, net                                                        |   |          | 5,228 |              |   |        | 5,332  | 
|                            | Other intangible assets, net                                         |   |          | 188   |              |   |        | 330    | 
|                            | Receivable from Honeywell International, Inc. - less current portion |   |          | 1,800 |              |   |        | 1,800  | 
|                            | Other assets                                                         |   |          | 283   |              |   |        | 290    | 
|                            |                                                                      |   |          |       |              |   |        |        | 
|Total assets                |                                                                      | $ | 40,522   |       |              | $ | 50,616 |       
|                            |                                                                      |   |          |       |              |   |        |        | 

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

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

|                                     |  |                                                                                                                                                                         |   |                                            |          |          |        |              |         |   |        | 
|------------------------------------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ------------------------------------------ | -------- | -------- | ------ | ------------ | ------- | - | ------ | 
|                                     |  |                                                                                                                                                                         |   |                                            |          | June 30, |        | December 31,
|                                     |  |                                                                                                                                                                         |   |                                            |          | 2003     |        | 2002        
|                                     |  |                                                                                                                                                                         |   |                                            |          |          |        |             
|LIABILITIES AND STOCKHOLDERS EQUITY |  |                                                                                                                                                                         |   |                                            |          |          |        |             
|Current Liabilities:                 |  |                                                                                                                                                                         |   |                                            |          |          |        |             
|                                     |  | Trade accounts payable                                                                                                                                                  |   | $                                          | 2,906    |          |        | $            | 3,201   |  
|                                     |  | Accrued expenses                                                                                                                                                        |   |                                            | 3,015    |          |        |              | 4,068   |  
|                                     |  | Accrued compensation                                                                                                                                                    |   |                                            | 1,458    |          |        |              | 1,556   |  
|                                     |  | Royalty claim on assignment agreement                                                                                                                                   |   |                                            | 229      |          |        |              | 715     |  
|                                     |  | Severance - current portion                                                                                                                                             |   |                                            | 1,075    |          |        |              | 792     |  
|                                     |  | Other current liabilities                                                                                                                                               |   |                                            | 986      |          |        |              | 1,115   |  
|                                     |  | Deferred income - current portion                                                                                                                                       |   |                                            | 624      |          |        |              | 1,038   |  
|                                     |  | Net liabilities of discontinued operations                                                                                                                              |   |                                            | 1,339    |          |        |              | 2,145   |  
|                                     |  |                                                                                                                                                                         |   |                                            |          |          |        |              |         |  
|                                     |  |                                                                                                                                                                         |   | Total current liabilities                  |          |          | 11,632 |              |         |   | 14,630 | 
|Long-Term
Liabilities                |  |                                                                                                                                                                         |   |                                            |          |          |        |             
|                                     |  | Financing obligation                                                                                                                                                    |   |                                            | 6,600    |          |        |              | 6,600   |  
|                                     |  | Deferred income - less current portion                                                                                                                                  |   |                                            | 1,363    |          |        |              | 1,038   |  
|                                     |  | Royalty claim on assignment agreement - less current portion                                                                                                            |   |                                            | 203      |          |        |              |        |  
|                                     |  | Severance - less current portion                                                                                                                                        |   |                                            | 88       |          |        |              | 914     |  
|                                     |  |                                                                                                                                                                         |   |                                            |          |          |        |              |         |  
|                                     |  |                                                                                                                                                                         |   | Total long-term liabilities                |          |          | 8,254  |              |         |   | 8,552  | 
|Commitments and Contingencies        |  |                                                                                                                                                                         |  |                                            |          |          |       |             
|Stockholders Equity:                |  |                                                                                                                                                                         |   |                                            |          |          |        |             
|                                     |  | Preferred stock, $5 par value, issuable in series; 2,000,000 shares
authorized; Series A, 12% cumulative convertible;
195,351 shares authorized, issued and outstanding |   |                                            | 977      |          |        |              | 977     |  
|                                     |  | Common stock, $.01 par value; 50,000,000 shares authorized;
17,634,238 and 17,494,238 shares issued at June 30, 2003 and
December 31, 2002, respectively                |   |                                            | 176      |          |        |              | 175     |  
|                                     |  | Additional paid-in-capital                                                                                                                                              |   |                                            | 162,615  |          |        |              | 162,269 |  
|                                     |  | Deferred stock compensation                                                                                                                                             |   |                                            | (124     | )        |        |              |        |  
|                                     |  | Accumulated deficit                                                                                                                                                     |   |                                            | (104,392 | )        |        |              | (97,354 | )
|                                     |  | Accumulated other comprehensive income                                                                                                                                  |   |                                            | 85       |          |        |              | 50      |  
|                                     |  | Treasury stock, at cost (3,485,850 and 3,467,650 common shares at June 30, 2003 and December 31, 2002)                                                                  |   |                                            | (38,701  | )        |        |              | (38,683 | )
|                                     |  |                                                                                                                                                                         |   |                                            |          |          |        |              |         |  
|                                     |  |                                                                                                                                                                         |   | Total stockholders equity                 |          |          | 20,636 |              |         |   | 27,434 | 
|                                     |  |                                                                                                                                                                         |   |                                            |          |          |        |              |         |  
|                                     |  |                                                                                                                                                                         |   | Total liabilities and stockholders equity |          | $        | 40,522 |              |         | $ | 50,616 | 
|                                     |  |                                                                                                                                                                         |   |                                            |          |          |        |              |         |  

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)

|                                                                     |                        |                                     |                                                      |         |       |                             |            |      |       |        |            | 
|-------------------------------------------------------------------- | ---------------------- | ----------------------------------- | ---------------------------------------------------- | ------- | ----- | --------------------------- | ---------- | ---- | ----- | ------ | ---------- | 
|                                                                     |                        |                                     |                                                      |         |       | Three months ended June 30,
|                                                                     |                        |                                     |                                                      |         |       |                            
|                                                                     |                        |                                     |                                                      |         |       | 2003                        |            | 2002
|                                                                     |                        |                                     |                                                      |         |       |                             |            |     
|Net sales                                                            |                        | $                                   | 9,847                                                |         |       | $                           | 11,861     |     
|Cost of sales (exclusive of depreciation shown seperately below)     |                        |                                     | 7,387                                                |         |       |                             | 8,558      |     
|                                                                     |                        |                                     |                                                      |         |       |                             |            |     
|                                                                     |                        |                                     | Gross profit                                         |         |       | 2,460                       |            |      |       | 3,303  |           
|Other operating costs:                                               |                        |                                     |                                                      |         |       |                             |            |     
|                                                                     |                        | Selling, general and administrative |                                                      |         | 5,459 |                             |            |      | 5,268 |       
|                                                                     |                        | Depreciation and amortization       |                                                      |         | 564   |                             |            |      | 597   |       
|                                                                     |                        |                                     |                                                      |         |       |                             |            |     
|                                                                     |                        |                                     | 6,023                                                |         |       |                             | 5,865      |     
|                                                                     |                        |                                     |                                                      |         |       |                             |            |     
|                                                                     |                        |                                     | Operating loss                                       |         |       | (3,563                      | )          |      |       | (2,562 | )         
|Other income (expense):                                              |                        |                                     |                                                      |         |       |                             |            |     
|                                                                     | Interest expense       |                                     |                                                      | (185    | )     |                             |            | (838 | )    
|                                                                     | Interest income        |                                     |                                                      | 29      |       |                             |            | 11   |      
|                                                                     | Foreign
exchange gains |                                     |                                                      | 25      |       |                             |            |     |      
|                                                                     | Other, net             |                                     |                                                      | 154     |       |                             |            | 361  |      
|                                                                     |                        |                                     |                                                      |         |       |                             |            |     
|                                                                     |                        |                                     | 23                                                   |         |       |                             | (466       | )   
|                                                                     |                        |                                     |                                                      |         |       |                             |            |     
|                                                                     |                        |                                     | Loss before income taxes and discontinued operations |         |       | (3,540                      | )          |      |       | (3,028 | )         
|Income tax benefit                                                   |                        |                                     |                                                     |         |       |                             | 84         |     
|                                                                     |                        |                                     |                                                      |         |       |                             |            |     
|                                                                     |                        |                                     | Loss from continuing operations                      |         |       | (3,540                      | )          |      |       | (2,944 | )         
|Loss from discontinued operations, net of tax expense of $32 in 2002 |                        |                                     | (782                                                 | )       |       |                             | (48        | )   
|                                                                     |                        |                                     |                                                      |         |       |                             |            |     
|                                                                     |                        |                                     | Net loss                                             |         |       | (4,322                      | )          |      |       | (2,992 | )         
|Dividend requirements on preferred stock                             |                        |                                     | (29                                                  | )       |       |                             | (29        | )   
|                                                                     |                        |                                     |                                                      |         |       |                             |            |     
|                                                                     |                        |                                     | Net loss allocable to common stockholders            |         | $     | (4,351                      | )          |      | $     | (3,021 | )         
|                                                                     |                        |                                     |                                                      |         |       |                             |            |     
|Basic and diluted loss per share from:                               |                        |                                     |                                                      |         |       |                             |            |     
|                                                                     |                        |                                     | Continuing operations                                |         | $     | (0.25                       | )          |      | $     | (0.21  | )         
|                                                                     |                        |                                     | Discontinued operations                              |         |       | (0.06                       | )          |      |       | (0.00  | )         
|                                                                     |                        |                                     |                                                      |         |       |                             |            |     
|                                                                     |                        |                                     | Basic and diluted loss per share                     |         | $     | (0.31                       | )          |      | $     | (0.21  | )         
|                                                                     |                        |                                     |                                                      |         |       |                             |            |     
|                                                                     |                        |                                     | Number of common shares used in computations:        |         |       |                             |            |      |       |        |           
|                                                                     |                        |                                     |                                                      | Basic   |       |                             | 14,149,199 |      |       |        | 14,046,588 | 
|                                                                     |                        |                                     |                                                      | Diluted |       |                             | 14,149,199 |      |       |        | 14,046,588 | 

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)

|                                                                                             |                                                                  |                                     |                                                                                |         |        |                           |            |         |       |         |            | 
|-------------------------------------------------------------------------------------------- | ---------------------------------------------------------------- | ----------------------------------- | ------------------------------------------------------------------------------ | ------- | ------ | ------------------------- | ---------- | ------- | ----- | ------- | ---------- | 
|                                                                                             |                                                                  |                                     |                                                                                |         |        | Six months ended June 30,
|                                                                                             |                                                                  |                                     |                                                                                |         |        |                          
|                                                                                             |                                                                  |                                     |                                                                                |         |        | 2003                      |            | 2002   
|                                                                                             |                                                                  |                                     |                                                                                |         |        |                           |            |        
|Net sales                                                                                    |                                                                  | $                                   | 21,242                                                                         |         |        | $                         | 21,632     |        
|Cost of sales (exclusive of depreciation shown seperately below)                             |                                                                  |                                     | 15,159                                                                         |         |        |                           | 15,427     |        
|                                                                                             |                                                                  |                                     |                                                                                |         |        |                           |            |        
|                                                                                             |                                                                  |                                     | Gross profit                                                                   |         |        | 6,083                     |            |         |       | 6,205   |           
|Other operating costs:                                                                       |                                                                  |                                     |                                                                                |         |        |                           |            |        
|                                                                                             |                                                                  | Selling, general and administrative |                                                                                |         | 10,333 |                           |            |         | 9,617 |        
|                                                                                             |                                                                  | Depreciation and amortization       |                                                                                |         | 1,068  |                           |            |         | 1,233 |        
|                                                                                             |                                                                  |                                     |                                                                                |         |        |                           |            |        
|                                                                                             |                                                                  |                                     | 11,401                                                                         |         |        |                           | 10,850     |        
|                                                                                             |                                                                  |                                     |                                                                                |         |        |                           |            |        
|                                                                                             |                                                                  |                                     | Operating loss                                                                 |         |        | (5,318                    | )          |         |       | (4,645  | )         
|Other income (expense):                                                                      |                                                                  |                                     |                                                                                |         |        |                           |            |        
|                                                                                             | Interest expense                                                 |                                     |                                                                                | (484    | )      |                           |            | (1,638  | )    
|                                                                                             | Interest income                                                  |                                     |                                                                                | 48      |        |                           |            | 13      |      
|                                                                                             | Foreign exchange gains                                           |                                     |                                                                                | 25      |        |                           |            |        |      
|                                                                                             | Other, net                                                       |                                     |                                                                                | 192     |        |                           |            | 396     |      
|                                                                                             |                                                                  |                                     |                                                                                |         |        |                           |            |        
|                                                                                             |                                                                  |                                     | (219                                                                           | )       |        |                           | (1,229     | )      
|                                                                                             |                                                                  |                                     |                                                                                |         |        |                           |            |        
|Loss before income taxes, discontinued operations and cumulative effect of accounting change |                                                                  |                                     | (5,537                                                                         | )       |        |                           | (5,874     | )      
|Income tax benefit                                                                           |                                                                  |                                     |                                                                               |         |        |                           | 84         |        
|                                                                                             |                                                                  |                                     |                                                                                |         |        |                           |            |        
|                                                                                             |                                                                  |                                     | Loss from continuing operations                                                |         |        | (5,537                    | )          |         |       | (5,790  | )         
|                                                                                             |                                                                  |                                     | Income (loss) from discontinued operations, net of tax benefit of $397 in 2002 |         |        | (1,446                    | )          |         |       | 1,572   |           
|                                                                                             |                                                                  |                                     |                                                                                |         |        |                           |            |        
|                                                                                             |                                                                  |                                     | Loss before cumulative effect of accounting change                             |         |        | (6,983                    | )          |         |       | (4,218  | )         
|Cumulative effect of accounting change:                                                      |                                                                  |                                     |                                                                                |         |        |                           |            |        
|                                                                                             | Cumulative effect of accounting change - continuing operations   |                                     |                                                                                |        |        |                           |            | (14,762 | )    
|                                                                                             | Cumulative effect of accounting change - discontinued operations |                                     |                                                                                |        |        |                           |            | (11,353 | )    
|                                                                                             |                                                                  |                                     |                                                                                |         |        |                           |            |        
|                                                                                             |                                                                  |                                     | Net loss                                                                       |         |        | (6,983                    | )          |         |       | (30,333 | )         
|Dividend requirements on preferred stock                                                     |                                                                  |                                     | (58                                                                            | )       |        |                           | (58        | )      
|                                                                                             |                                                                  |                                     |                                                                                |         |        |                           |            |        
|                                                                                             |                                                                  |                                     | Net loss allocable to common stockholders                                      |         | $      | (7,041                    | )          |         | $     | (30,391 | )         
|                                                                                             |                                                                  |                                     |                                                                                |         |        |                           |            |        
|Basic and diluted earnings (loss) per share from:                                            |                                                                  |                                     |                                                                                |         |        |                           |            |        
|                                                                                             |                                                                  |                                     | Continuing operations                                                          |         | $      | (0.40                     | )          |         | $     | (0.42   | )         
|                                                                                             |                                                                  |                                     | Discontinued operations                                                        |         |        | (0.10                     | )          |         |       | 0.11    |           
|                                                                                             |                                                                  |                                     | Cumulative effect of accounting change  - continuing operations                |         |        |                          |            |         |       | (1.05   | )         
|                                                                                             |                                                                  |                                     | Cumulative effect of accounting change - discontinued operations               |         |        |                          |            |         |       | (0.81   | )         
|                                                                                             |                                                                  |                                     |                                                                                |         |        |                           |            |        
|                                                                                             |                                                                  |                                     | Basic loss per share                                                           |         | $      | (0.50                     | )          |         | $     | (2.17   | )         
|                                                                                             |                                                                  |                                     |                                                                                |         |        |                           |            |        
|                                                                                             |                                                                  |                                     | Number of common shares used in computations:                                  |         |        |                           |            |         |       |         |           
|                                                                                             |                                                                  |                                     |                                                                                | Basic   |        |                           | 14,084,844 |         |       |         | 14,046,588 | 
|                                                                                             |                                                                  |                                     |                                                                                | Diluted |        |                           | 14,084,844 |         |       |         | 14,046,588 | 

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 CASH FLOWS
(in thousands)

|                                                                                          |                                                     |  |                           |        |      |  |          |        |  
|----------------------------------------------------------------------------------------- | --------------------------------------------------- |  | ------------------------- | ------ | ---- |  | -------- | ------ | -
|                                                                                          |                                                     |  | Six months ended June 30,
|                                                                                          |                                                     |  |                          
|                                                                                          |                                                     |  | 2003                      |        | 2002
|                                                                                          |                                                     |  |                           |        |     
|Operating Activities:                                                                     |                                                     |  |                           |        |      |  |          |       
|Net loss                                                                                  |                                                     |  | ($6,983                   | )      |      |  | ($30,333 | )     
|Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |                                                     |  |                           |        |      |  |          |       
|                                                                                          | Cumulative effect of accounting change              |  |                           |       |      |  |          | 26,115 |  
|                                                                                          | Loss (gain) on disposal of fixed assets             |  |                           | 156    |      |  |          | (12    | )
|                                                                                          | Deferred compensation expense                       |  |                           | 21     |      |  |          |       |  
|                                                                                          | Other compensation expense                          |  |                           | 202    |      |  |          |       |  
|                                                                                          | Amortization of deferred income                     |  |                           | 238    |      |  |          |       |  
|                                                                                          | Depreciation and amortization                       |  |                           | 1,118  |      |  |          | 1,708  |  
|                                                                                          | Provision for losses on accounts receivable         |  |                           | 274    |      |  |          | 11     |  
|                                                                                          | Non-cash charges reversed                           |  |                           | (341   | )    |  |          |       |  
|                                                                                          | Mark-to-market interest rate swap                   |  |                           | 83     |      |  |          |       |  
|Changes in operating assets and liabilities:                                              |                                                     |  |                           |        |      |  |          |       
|                                                                                          | Trade accounts receivable                           |  |                           | (202   | )    |  |          | (726   | )
|                                                                                          | Inventories                                         |  |                           | 597    |      |  |          | (784   | )
|                                                                                          | Prepaid and other current assets                    |  |                           | (8     | )    |  |          | 575    |  
|                                                                                          | Income taxes                                        |  |                           |       |      |  |          | 6,035  |  
|                                                                                          | Other assets                                        |  |                           | 149    |      |  |          | (46    | )
|                                                                                          | Trade accounts payable                              |  |                           | (328   | )    |  |          | 7      |  
|                                                                                          | Accrued and other current liabilities               |  |                           | (2,768 | )    |  |          | 1,384  |  
|                                                                                          |                                                     |  |                           |        |      |  |          |       
|                                                                                          | Net cash provided by (used in) operating activities |  |                           | (7,792 | )    |  |          | 3,934  |  
|                                                                                          |                                                     |  |                           |        |      |  |          |       
|Investing Activities:                                                                     |                                                     |  |                           |        |      |  |          |       
|Purchases of property and equipment                                                       |                                                     |  | (567                      | )      |      |  | (715     | )     
|Proceeds received from sales of property and equipment                                    |                                                     |  | 1,462                     |        |      |  |         |       
|Purchases of marketable securities                                                        |                                                     |  | (1,531                    | )      |      |  |         |       
|Earnout payments on prior acquisitions                                                    |                                                     |  | (73                       | )      |      |  | (237     | )     
|                                                                                          |                                                     |  |                           |        |      |  |          |       
|                                                                                          | Net cash used in investing activities               |  |                           | (709   | )    |  |          | (952   | )
|                                                                                          |                                                     |  |                           |        |      |  |          |       

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

5



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##### Table of Contents



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

|                                               |                                       |              |        |                           |     |      |        |        |       | 
|---------------------------------------------- | ------------------------------------- | ------------ | ------ | ------------------------- | --- | ---- | ------ | ------ | ----- | 
|                                               |                                       |              |        | Six months ended June 30,
|                                               |                                       |              |        |                          
|                                               |                                       |              |        | 2003                      |     | 2002
|                                               |                                       |              |        |                           |     |     
|Financing Activities:                          |                                       |              |        |                           |     |      |        |       
|Net repayments on revolving line of credit     |                                       |              |       |                           |     |      | (4,283 | )     
|Repayments on other debt                       |                                       |              |       |                           |     |      | (177   | )     
|Purchases of treasury stock                    |                                       |              | (18    | )                         |     |      |       |       
|Payment of preferred stock dividends           |                                       |              | (58    | )                         |     |      | (58    | )     
|                                               |                                       |              |        |                           |     |      |        |       
|                                               | Net cash used in financing activities |              |        | (76                       | )   |      |        | (4,518 | )    
|                                               |                                       |              |        |                           |     |      |        |       
|Net decrease in cash and cash equivalents      |                                       |              | (8,577 | )                         |     |      | (1,536 | )     
|Effect of exchange rate changes on cash        |                                       |              | 38     |                           |     |      | 201    |       
|Cash and cash equivalents, beginning of period |                                       |              | 16,436 |                           |     |      | 3,300  |       
|                                               |                                       |              |        |                           |     |      |        |       
|Cash and cash equivalents, end of period       |                                       | $            | 7,897  |                           |     | $    | 1,965  |       
|                                               |                                       |              |        |                           |     |      |        |       
|Supplemental cash flow information:            |                                       |              |        |                           |     |      |        |       
|                                               | Cash paid during the year for:        |              |        |                           |     |      |        |        |      
|                                               |                                       | Interest     |        | $                         | 292 |      |        | $      | 1,086 | 
|                                               |                                       |              |        |                           |     |      |        |       
|                                               |                                       | Income taxes |        | $                         | 7   |      |        | $      | 33    | 
|                                               |                                       |              |        |                           |     |      |        |       

6



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##### Table of Contents



American Building Control, Inc.

Notes to Consolidated Financial Statements

Note 1: Nature of Operations



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Basis of Presentation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| | 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, 2002 included in the Companys Annual Report on Form 10-K.
|
| | 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 financial statements have been
restated to reflect the CCTV business as discontinued operations for all
periods presented.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| | Nature of Operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| | Following the Honeywell Asset Sale, the Company, which is headquartered
in Lewisville, Texas, is focused on designing, marketing, selling and
servicing specialty security products in industrial, governmental and
consumer surveillance markets worldwide. The Company also has a small
operation based in Switzerland.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| | The Company has two operating segments: the Professional Security Group
(PSG), whose primary focus is access control products, and the Diversified
Sales Group (DSG) which markets products to the consumer/ do-it-yourself
business as well as its industrial video and alarm management businesses. A
third segment, Corporate, provides human resources, legal, financial,
information technologies, accounting, internal audit and reporting functions.                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| | Principles of Consolidation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| | The consolidated financial statements include the accounts of American
Building Control, Inc. (formerly known as Ultrak, Inc.), a Delaware
corporation, and its wholly-owned subsidiaries. These companies are
collectively referred to as the Company. All significant inter-company
balances and transactions have been eliminated in consolidation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| | Local currencies are considered the functional currencies for the
Companys Swiss 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

7



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##### Table of Contents





| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Stock-Based Compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| | In December 2002, the FASB issued Statement of Financial Accounting
Standards (SFAS) No. 148, Accounting for Stock-Based
CompensationTransition and Disclosurean amendment of FASB Statement No.
123.This statement amends SFAS No. 123, Accounting for Stock-Based
Compensation,to provide alternative methods of transition for a voluntary
change to the fair value based method of accounting for stock-based employee
compensation. In addition, this statement amends the disclosure requirements
of SFAS No. 123 to require prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results.
|
| | 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. The
Company has adopted the disclosure-only provisions of SFAS No. 123,
Accounting for Stock-Based Compensation.                                                                                                                                                                                                                                                                                                             
|
| | Based on the 2002 Stock Option Incentive, the vesting period varies
based on individual grants and is determined by the Compensation Committee of
the Board of Directors. The Honeywell Asset Sale triggered the change of
control provisions in the Companys stock option plans that provided for the
immediate vesting of all outstanding stock options as of December 20, 2002.                                                                                                                                                                                                                                                                                                                                                     
|
| | With the exception of the options issued as compensation expense to the
Companys former CEO, Mr. George Broady (see note 8 - 2002 Executive and
Management Severance - to the Companys Consolidated Financial Statements),
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. The following table illustrates the effect on operations
and per share data as if the Company had applied the fair value recognition
provisions of SFAS No. 123 to employee stock-based compensation (in
thousands):                               

8



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##### Table of Contents



|                                                                      |                                                                                                   |  |                             |        |      |  |   |        |  
|--------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------- |  | --------------------------- | ------ | ---- |  | - | ------ | -
|                                                                      |                                                                                                   |  | Three months ended June 30,
|                                                                      |                                                                                                   |  |                            
|                                                                      |                                                                                                   |  | 2003                        |        | 2002
|                                                                      |                                                                                                   |  |                             |        |     
|Net loss from continuing operations
allocable to common stockholders: |                                                                                                   |  |                             |        |      |  |   |       
|                                                                      | As reported                                                                                       |  | $                           | (3,569 | )    |  | $ | (2,973 | )
|                                                                      | Deduct: Total stock-based compensation under fair value
based method for all awards, net of taxes |  |                             | (109   | )    |  |   | (232   | )
|                                                                      |                                                                                                   |  |                             |        |      |  |   |        |  
|                                                                      | Pro forma                                                                                         |  | $                           | (3,678 | )    |  | $ | (3,205 | )
|                                                                      |                                                                                                   |  |                             |        |      |  |   |        |  
|Basic and diluted loss per share from continuing operations           |                                                                                                   |  |                             |        |      |  |   |       
|                                                                      | As reported                                                                                       |  | $                           | (0.25  | )    |  | $ | (0.21  | )
|                                                                      | Pro forma                                                                                         |  | $                           | (0.26  | )    |  | $ | (0.23  | )

|                                                                      |                                                                                                   |  |                           |        |      |  |   |        |  
|--------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------- |  | ------------------------- | ------ | ---- |  | - | ------ | -
|                                                                      |                                                                                                   |  | Six months ended June 30,
|                                                                      |                                                                                                   |  |                          
|                                                                      |                                                                                                   |  | 2003                      |        | 2002
|                                                                      |                                                                                                   |  |                           |        |     
|Net loss from continuing operations
allocable to common stockholders: |                                                                                                   |  |                           |        |      |  |   |       
|                                                                      | As reported                                                                                       |  | $                         | (5,595 | )    |  | $ | (5,848 | )
|                                                                      | Deduct: Total stock-based compensation under fair value
based method for all awards, net of taxes |  |                           | (109   | )    |  |   | (464   | )
|                                                                      |                                                                                                   |  |                           |        |      |  |   |        |  
|                                                                      | Pro forma                                                                                         |  | $                         | (5,704 | )    |  | $ | (6,312 | )
|                                                                      |                                                                                                   |  |                           |        |      |  |   |        |  
|Basic and diluted loss per share from continuing operations           |                                                                                                   |  |                           |        |      |  |   |       
|                                                                      | As reported                                                                                       |  | $                         | (0.40  | )    |  | $ | (0.42  | )
|                                                                      | Pro forma                                                                                         |  | $                         | (0.40  | )    |  | $ | (0.45  | )



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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 55 to 80 percent; risk-free interest rates
ranging from 4.0 to 6.5 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.
|
| | The table below shows the roll-forward of warranty accrual for the three
and six months ended June 30, 2003 and 2002 (in thousands):                                                                                                                                                                                                                                                                                                                                                                                                                                

9



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##### Table of Contents



|                   |  |                             |     |      |  |   |     |  
|------------------ |  | --------------------------- | --- | ---- |  | - | --- | -
|                   |  | Three months ended June 30,
|                   |  |                            
|                   |  | 2003                        |     | 2002
|                   |  |                             |     |     
|Beginning balance  |  | $                           | 143 |      |  | $ | 79  |  
|Charged to expense |  |                             | 16  |      |  |   | 15  |  
|Usage              |  |                             |    |      |  |   | (11 | )
|                   |  |                             |     |      |  |   |     |  
|Closing balance    |  | $                           | 159 |      |  | $ | 83  |  
|                   |  |                             |     |      |  |   |     |  

|                   |  |                           |     |      |  |   |     |  
|------------------ |  | ------------------------- | --- | ---- |  | - | --- | -
|                   |  | Six months ended June 30,
|                   |  |                          
|                   |  | 2003                      |     | 2002
|                   |  |                           |     |     
|Beginning balance  |  | $                         | 128 |      |  | $ | 63  |  
|Charged to expense |  |                           | 32  |      |  |   | 31  |  
|Usage              |  |                           | (1  | )    |  |   | (11 | )
|                   |  |                           |     |      |  |   |     |  
|Closing balance    |  | $                         | 159 |      |  | $ | 83  |  
|                   |  |                           |     |      |  |   |     |  



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Marketable Securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| | The Company accounts for its marketable securities, all of which are
designated as available for sale, using SFAS No. 115, Accounting for Certain
Investments in Debt and Equity Securities.Securities available for sale are
reported at fair value, with unrealized gains and losses, net of tax,
excluded from earnings and reported as a separate component of stockholders
equity. Realized gains and losses on securities available for sale are
reported as income in the period of sale.
|
| | Reclassifications                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| | Certain amounts have been reclassified in the prior period financial
statements to conform to the current period presentation.                                                                                                                                                                                                                                                                                                                                                                   

10



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##### Table of Contents



Note 2: Receivable from Honeywell International, Inc.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | On December 20, 2002, the Company consummated the sale of assets and
liabilities related to the closed-circuit television (CCTV) business (the
CCTV Business) to Honeywell International, Inc. (Honeywell) for $36.0
million (the Honeywell Asset Sale or Asset Purchase Agreement). At
December 31, 2002, the Company had a receivable of $5.4 million from
Honeywell resulting from the Honeywell Asset Sale.                                                                                                                                                                                                                                                                                                                                                      
|
| | According to the Asset Purchase Agreement, the $5.4 million receivable
was to be paid to the Company in three equal installments, every six months
beginning in May 2003, less any claims or purchase price adjustments
resulting from changes to the proposed closing balance sheet provided to
Honeywell in March 2003. Adjustments to the purchase price are based on the
difference between the final closing balance sheet and $28,389,000. On March
10, the Company submitted a proposed closing balance sheet that increased the
purchase price by approximately $3.8 million. On April 9,
Honeywell challenged the proposed closing balance sheet and, through several subsequent
amendments, proposed a reduction in the purchase price of approximately $4.7
million.
|
| | As of August 6, 2003, the Company and Honeywell have not resolved their
differences. Pursuant to the terms of the Asset Purchase Agreement, the
Company and Honeywell have engaged an independent accounting firm to render a
binding decision on the dispute. A final resolution is not expected until the
fourth quarter of 2003. Accordingly, payments due under the holdback
provision have not been made according to the payment schedule.                                                                                                                                                                                                                                                                                                                               

Note 3: Trade Accounts Receivable



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

|                                      |  |          |       |              |  |   |       |  
|------------------------------------- |  | -------- | ----- | ------------ |  | - | ----- | -
|                                      |  | June 30, |       | December 31,
|                                      |  | 2003     |       | 2002        
|                                      |  |          |       |             
|Gross trade accounts receivable       |  | $        | 5,450 |              |  | $ | 5,357 |  
|Less: allowance for doubtful accounts |  |          | (555  | )            |  |   | (402  | )
|                                      |  |          |       |              |  |   |       |  
|                                      |  | $        | 4,895 |              |  | $ | 4,955 |  
|                                      |  |          |       |              |  |   |       |  

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 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 three and six months ended June 30, 2003 and 2002, 1,074,635 and
1,446,221 stock options were outstanding, respectively, but were not included
in the computation of diluted earnings (loss) per share because the effect
would have been anti-dilutive. For the three and six months ended June 30,
2003 and 2002, 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. Additionally 300,000
stock purchase warrants are excluded from the computation of diluted
earnings (loss) per share because the effect would have been
anti-dilutive.

Note 5: Income Taxes



| |                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Companys effective income tax rate for the three and six months
ended June 30, 2003 and 2002 differed from the federal statutory rate
primarily due to losses for which no benefit was taken.

11



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##### Table of Contents



Note 6: Comprehensive Loss



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

|                                   |                                          |   |                             |    |      |   |        |       | 
|---------------------------------- | ---------------------------------------- | - | --------------------------- | -- | ---- | - | ------ | ----- | 
|                                   |                                          |   | Three months ended June 30,
|                                   |                                          |   |                            
|                                   |                                          |   | 2003                        |    | 2002
|                                   |                                          |   |                             |    |     
|Net loss                           |                                          | $ | (4,322                      | )  |      | $ | (2,992 | )    
|Other comprehensive income (loss): |                                          |   |                             |    |      |   |        |      
|                                   | Unrealized loss on marketable securities |   |                             | (5 | )    |   |        |      | 
|                                   | Currency translation adjustment          |   |                             | 51 |      |   |        | 1,538 | 
|                                   |                                          |   |                             |    |      |   |        |      
|                                   |                                          | $ | (4,276                      | )  |      | $ | (1,454 | )    
|                                   |                                          |   |                             |    |      |   |        |      

|                                   |                                          |   |                           |    |      |   |         |       | 
|---------------------------------- | ---------------------------------------- | - | ------------------------- | -- | ---- | - | ------- | ----- | 
|                                   |                                          |   | Six months ended June 30,
|                                   |                                          |   |                          
|                                   |                                          |   | 2003                      |    | 2002
|                                   |                                          |   |                           |    |     
|Net loss                           |                                          | $ | (6,983                    | )  |      | $ | (30,333 | )    
|Other comprehensive income (loss): |                                          |   |                           |    |      |   |         |      
|                                   | Unrealized loss on marketable securities |   |                           | (5 | )    |   |         |      | 
|                                   | Currency translation adjustment          |   |                           | 44 |      |   |         | 1,581 | 
|                                   |                                          |   |                           |    |      |   |         |      
|                                   |                                          | $ | (6,945                    | )  |      | $ | (28,752 | )    
|                                   |                                          |   |                           |    |      |   |         |      

Note 7: Goodwill and Other Intangible Assets



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Under SFAS No. 142, Goodwill and Intangible Assets,goodwill impairment
may exist if the net book value of a reporting unit exceeds its estimated
fair value. A reporting unit is an operating segment or one level below an
operating segment referred to as a component. The Professional Security Group
(PSG) segment has two reporting units: U.S. Monitor Dynamics, Inc. (MDI)
and International MDI; the Diversified Sales Group (DSG) segment has four
reporting units: the consumer/do-it-yourself business (SecurityandMore),
ABM Data Systems (ABM), Industrial Vision Source (IVS) and Mobile Video
Products (MVP). In performing its impairment analysis under SFAS 142, the
Company completes a two step process to determine the amount of the
impairment. The first step involves comparison of the fair value of the
reporting unit to the carrying value to determine if an impairment may exist.
If the carrying value of the reporting unit exceeds the fair value, the
second step involves comparison of the implied fair value of the goodwill to
the carrying value of the goodwill. The implied fair value of the goodwill is
determined in the same manner as the amount of goodwill recognized in a
business combination. In calculating an impairment charge, the fair value of
the impaired reporting units underlying the segments are estimated using
discounted cash flow methodology or recent comparable transactions.

12



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##### Table of Contents





| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Company completed its transitional impairment analysis as required
by SFAS No. 142 as of January 1, 2002. As a result, the Company recorded a
non-cash charge of approximately $14.8 million in the U.S. MDI reporting unit
to reduce the carrying value of its goodwill. Such charge is reflected as a
cumulative effect of an accounting change in the accompanying statement of
operations.                                                                            
|
| | Additionally, the Companys transitional impairment resulted in a
non-cash charge of approximately $11.3 million related to the CCTV business.
In calculating the impairment charge, the Company used the two-step process
in SFAS No. 142 and determined the fair value of the CCTV reporting unit
using recent comparable transactions. Such charge is reflected in the
statement of operations as a cumulative effect of an accounting change from
discontinued operations.
|
| | As of June 30, 2003, the net carrying value of the Companys goodwill,
by segment, is as follows (in thousands):                                                                                                                                                                                                                                                                                                                                                              

|                                                      |  |     |       |     |  |       |       |  |  |   |       |  
|----------------------------------------------------- |  | --- | ----- | --- |  | ----- | ----- |  |  | - | ----- | -
|                                                      |  | PSG |       | DSG |  | Total
|                                                      |  |     |       |     |  |      
|Net carrying value at December 31, 2002               |  | $   | 3,953 |     |  | $     | 1,379 |  |  | $ | 5,332 |  
|Settlement of earnout payment on previous acquisition |  |     | (104  | )   |  |       |      |  |  |   | (104  | )
|                                                      |  |     |       |     |  |       |       |  |  |   |       |  
|Net carrying value at June 30, 2003                   |  | $   | 3,849 |     |  | $     | 1,379 |  |  | $ | 5,228 |  
|                                                      |  |     |       |     |  |       |       |  |  |   |       |  



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | On April 25, 2003, the Company negotiated a full and final release of
claims to fulfill its obligation to the former owners of MDI-Switzerland,
formerly known as Multi Concepts Systemes S.A., pursuant to the purchase
agreement executed in April 1999. This claim of $221,000 is being paid in
three equal installments during the second, third and fourth quarters of
2003. As a result of this settlement, the Company reduced its related
liability of $325,000 and goodwill by $104,000.

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| |                                                           
| | ----------------------------------------------------------
| | Intangible assets consist of the following (in thousands):

|                                          |  |              |      |          |  |               |     |                   |  |          |      |              |  |          |     |  |  |     |     |  |  |  |      |   |  |  |     | 
|----------------------------------------- |  | ------------ | ---- | -------- |  | ------------- | --- | ----------------- |  | -------- | ---- | ------------ |  | -------- | --- |  |  | --- | --- |  |  |  | ---- | - |  |  | --- | 
|                                          |  |              |      |          |  | June 30, 2003 |     | December 31, 2002
|                                          |  | Weighted     |      |          |  |              
|                                          |  | average      |      | Gross    |  |               |     |                   |  | Net      |      | Gross        |  |          |     |  |  | Net
|                                          |  | amortization |      | Carrying |  | Accumulated   |     | Carrying          |  | Carrying |      | Accumulated  |  | Carrying
|                                          |  | (years)      |      | Value    |  | Amortization  |     | Value             |  | Value    |      | Amortization |  | Value   
|                                          |  |              |      |          |  |               |     |                   |  |          |      |              |  |         
|Intangible assets subject to amortization |  |              |      |          |  |               |     |                   |  |          |      |              |  |          |     |  |  |     |     |  |  |  |      |   |  |  |     | 
|Patents and trademarks                    |  |              | 17.1 |          |  | $             | 98  |                   |  |          | (47  | )            |  |          | 51  |  |  | $   | 98  |  |  |  | (42  | ) |  |  | 56  | 
|Licensing agreements                      |  |              | 3.7  |          |  |               | 80  |                   |  |          | (80  | )            |  |          |    |  |  |     | 80  |  |  |  | (80  | ) |  |  |    | 
|Loan origination fees                     |  |              | 2.0  |          |  |               | 549 |                   |  |          | (412 | )            |  |          | 137 |  |  |     | 549 |  |  |  | (275 | ) |  |  | 274 | 
|                                          |  |              |      |          |  |               |     |                   |  |          |      |              |  |          |     |  |  |     |     |  |  |  |      |   |  |  |     | 
|Total amortized intangible assets         |  |              |      |          |  | $             | 727 |                   |  |          | (539 | )            |  |          | 188 |  |  | $   | 727 |  |  |  | (397 | ) |  |  | 330 | 
|                                          |  |              |      |          |  |               |     |                   |  |          |      |              |  |          |     |  |  |     |     |  |  |  |      |   |  |  |     | 



| |                                                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Amortization expense related to intangible assets subject to
amortization was $72,000 and $92,000 for the three months ended June 30, 2003
and 2002, respectively.
|
| | Amortization expense related to intangible assets subject to
amortization was $142,000 and $162,000 for the six months ended June 30, 2003
and 2002, respectively.
|
| | The aggregate estimated future amortization expense for intangible
assets for each of the five succeeding years as of June 30, 2003 is as
follows (in thousands): 

|                  |  |   |     | 
|----------------- |  | - | --- | 
|Remainder of 2003 |  | $ | 140 | 
|2004              |  |   | 7   | 
|2005              |  |   | 7   | 
|2006              |  |   | 7   | 
|2007              |  |   | 7   | 
|                  |  |   |     | 
|Total             |  | $ | 168 | 
|                  |  |   |     | 

Note 8: Severance and Other Accrued Expenses



| |                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------
| | As of December 31, 2002, the Company had accruals for severance and
other accrued expenses. A detail of these accruals is as follows (in
thousands):

|                                                 |  |              |       |             |  |         |      |          |  |            |        |   |  |   |       | 
|------------------------------------------------ |  | ------------ | ----- | ----------- |  | ------- | ---- | -------- |  | ---------- | ------ | - |  | - | ----- | 
|                                                 |  | Accrued at   |       |             |  |         |      | Amount   |  | Accrued at
|                                                 |  | December 31, |       | 2003 charge |  | paid in |      | June 30,
|                                                 |  | 2002         |       | (credit)    |  | cash    |      | 2003    
|                                                 |  |              |       |             |  |         |      |         
|Ohio severance                                   |  | $            | 109   |             |  | $       | (27  | )        |  | $          | (82    | ) |  |   |      | 
|2002 Executive and management severance          |  |              | 1,706 |             |  |         | (76  | )        |  |            | (915   | ) |  |   | 715   | 
|Royalty claim                                    |  |              | 715   |             |  |         | (90  | )        |  |            | (193   | ) |  |   | 432   | 
|Zurich lease                                     |  |              | 230   |             |  |         | (148 | )        |  |            | (82    | ) |  |   |      | 
|2003 Corporate and executive headcount reduction |  |              |      |             |  |         | 456  |          |  |            | (8     | ) |  |   | 448   | 
|                                                 |  |              |       |             |  |         |      |          |  |            |        |   |  |   |       | 
|                                                 |  | $            | 2,760 |             |  | $       | 115  |          |  | $          | (1,280 | ) |  | $ | 1,595 | 
|                                                 |  |              |       |             |  |         |      |          |  |            |        |   |  |   |       | 

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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Ohio Severance                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| | On June 5, 2002, the Company announced the closure of its manufacturing
facility in Carroll, Ohio (the Ohio Plant) after evaluating all aspects of
the closure, including operational and economic considerations. As of
December 31, 2002, the Company had accrued $109,000 in severance costs in
connection with the closure of the Ohio Plant. The Company paid approximately
$82,000 in severance costs during the first quarter of 2003 to fulfill its
severance obligations to former employees of the Ohio facility. During the
second quarter of 2003, $27,000 was credited to discontinued
operations due to favorable settlement.                                                                                                                                                                                                                                                                                                                            
|
| | 2002 Executive and Management Severance                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| | During the fourth quarter of 2002, the Company decided to sever a number
of its executives including the past two CEOs, the Chief Operating Officer,
the Senior Vice-President of the domestic sales group and the Vice-President
of Marketing. At December 31, 2002, unpaid obligations related to executive
and management severance was $1,706,000. The Company paid $287,000 related to
these obligations during the first quarter of 2003 and $628,000 during the
second quarter of 2003. Payments during the second quarter included $512,000
paid to the former Chief Executive Officer (CEO), George Broady for the
acceleration of the final 18 months, discounted at 6%, of his three-year
severance, after the Board approved the accelerated payment. As a result of
this accelerated payment, the Company adjusted its liability estimate and
recorded a credit of $76,000 in selling, general and administrative
costs during the
second quarter of 2003.
|
| | Mr. Broady will continue to receive severance payments on a bi-weekly
basis through the end of June 2004. Also in April 2003, Mr. Broadys
employment was re-instated, as an assistant to the current CEO, Mr. Bryan
C.W. Tate, for a 12-month period, at a salary of $2,500 a month plus a grant
of 300,000 stock options at an exercise price of $0.90 per share. These options vested immediately upon issuance and
resulted in a $202,000 expense in the second
quarter of 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| | Royalty Claim                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| | On April 21, 2003, the Company reached a settlement in the amount of
approximately $625,000 for all past royalty claims in connection with a
patent on electronic monitoring and surveillance devices for the purpose of
security and behavior modification in public transportation vehicles. A down
payment of $156,000, representing 25% of the settlement, was paid during
April 2003. The remaining amount, plus interest, will be paid in monthly
installments of $21,000 over the ensuing 24 months. As a result of this
settlement, the Company adjusted its liability estimate and recorded a credit
of $90,000 in the second quarter of 2003.                                                                                                                                                                                                                                                                                                                  

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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Zurich Lease                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| | In May 2003, the Company settled its remaining lease obligation for its
Zurich, Switzerland office for approximately $80,000, which was paid in the
second quarter of 2003. As a result of this settlement, the Company adjusted
its liability estimate and recorded a credit of $148,000 in operating
expenses during the second quarter of 2003.                                                                                                                                                                                            
|
| | 2003 Corporate and Executive Headcount Reduction                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| | After the Honeywell Asset Sale, the Companys management determined that
the ongoing operations could not support the current corporate overhead
structure. On April 30, 2003, the Company terminated certain corporate
personnel, including the Companys Senior Vice-President and General Counsel.
The Company recognized approximately $456,000 in expense related to these
severance obligations during the second quarter of 2003. The
severance obligations will be paid in varying amounts on a bi-weekly
basis through December 2004.

Note 9: 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 on a performance basis consistent with internal management
reporting. The Company evaluates performance based on operating profit (loss).
The Company has two operating segments: the Professional Security Group (PSG)
and the Diversified Sales Group (DSG).

PSG

The PSG segment consists primarily of the access control sales in the
United States to professional security dealers, installers and certain
large-end users of professional security products, including the U.S.
Government. The domestic access control business is supplemented by an
international integration and distribution business based in Switzerland. The
product range for the international unit is the same as the one for the U.S.

DSG

DSG includes four components; the consumer/do-it-yourself business, the
industrial video business, the alarm management business and the mobile video
product business.

The consumer do-it-yourself business, SecurityandMore, includes a call
center and Internet site, SecurityandMore.com, which focuses on consumer
oriented security products.

The Industrial Vision Source (IVS) and Mobile Video Products (MVP)
businesses cater to the video and security needs of manufacturing facilities,
scientific labs, research organizations and mass transit vehicles.

The alarm management business, ABM Data Systems, Inc. (ABM), sells
software products to central monitoring stations that are owned by either
proprietary organizations such as large university campuses or commercial
operators such as surveillance companies.

Corporate

The corporate functions of legal, financial, information technologies,
internal audit, accounting and reporting are located in Lewisville, Texas.
Corporate revenue is derived primarily from the service center.

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|                                             |  |     |        |     |  |           |        |       |  |   |        |   |  |   |        |  
|-------------------------------------------- |  | --- | ------ | --- |  | --------- | ------ | ----- |  | - | ------ | - |  | - | ------ | -
|                                             |  | PSG |        | DSG |  | Corporate |        | Total
|                                             |  |     |        |     |  |           |        |      
|Three months ended June 30, 2003             |  |     |        |     |  |           |        |       |  |   |        |   |  |   |        |  
|Total revenue                                |  | $   | 3,804  |     |  | $         | 5,980  |       |  | $ | 70     |   |  | $ | 9,854  |  
|Intersegment revenue                         |  |     | (7     | )   |  |           |       |       |  |   |       |   |  |   | (7     | )
|                                             |  |     |        |     |  |           |        |       |  |   |        |   |  |   |        |  
|Revenue from external customers              |  | $   | 3,797  |     |  | $         | 5,980  |       |  | $ | 70     |   |  | $ | 9,847  |  
|                                             |  |     |        |     |  |           |        |       |  |   |        |   |  |   |        |  
|Gross profit                                 |  | $   | 1,465  |     |  | $         | 962    |       |  | $ | 33     |   |  | $ | 2,460  |  
|Selling, general and administrative expenses |  |     | 2,435  |     |  |           | 1,423  |       |  |   | 1,601  |   |  |   | 5,459  |  
|Depreciation and amortization expense        |  |     | 265    |     |  |           | 31     |       |  |   | 268    |   |  |   | 564    |  
|                                             |  |     |        |     |  |           |        |       |  |   |        |   |  |   |        |  
|Operating loss                               |  | $   | (1,235 | )   |  | $         | (492   | )     |  | $ | (1,836 | ) |  | $ | (3,563 | )
|                                             |  |     |        |     |  |           |        |       |  |   |        |   |  |   |        |  
|Three months ended June 30, 2002             |  |     |        |     |  |           |        |       |  |   |        |   |  |   |        |  
|Total revenue                                |  | $   | 7,820  |     |  | $         | 6,013  |       |  | $ | 109    |   |  | $ | 13,942 |  
|Intersegment revenue                         |  |     | (1,990 | )   |  |           |       |       |  |   | (90    | ) |  |   | (2,080 | )
|                                             |  |     |        |     |  |           |        |       |  |   |        |   |  |   |        |  
|Revenue from external customers              |  | $   | 5,830  |     |  | $         | 6,013  |       |  | $ | 19     |   |  | $ | 11,862 |  
|                                             |  |     |        |     |  |           |        |       |  |   |        |   |  |   |        |  
|Gross profit                                 |  | $   | 2,152  |     |  | $         | 1,182  |       |  | $ | (31    | ) |  | $ | 3,303  |  
|Selling, general and administrative expenses |  |     | 1,484  |     |  |           | 708    |       |  |   | 3,076  |   |  |   | 5,268  |  
|Depreciation and amortization expense        |  |     | 9      |     |  |           | 31     |       |  |   | 557    |   |  |   | 597    |  
|                                             |  |     |        |     |  |           |        |       |  |   |        |   |  |   |        |  
|Operating profit (loss)                      |  | $   | 659    |     |  | $         | 443    |       |  | $ | (3,664 | ) |  | $ | (2,562 | )
|                                             |  |     |        |     |  |           |        |       |  |   |        |   |  |   |        |  
|Six months ended June 30, 2003               |  |     |        |     |  |           |        |       |  |   |        |   |  |   |        |  
|Total revenue                                |  | $   | 8,850  |     |  | $         | 12,373 |       |  | $ | 70     |   |  | $ | 21,293 |  
|Intersegment revenue                         |  |     | (49    | )   |  |           | (2     | )     |  |   |       |   |  |   | (51    | )
|                                             |  |     |        |     |  |           |        |       |  |   |        |   |  |   |        |  
|Revenue from external customers              |  | $   | 8,801  |     |  | $         | 12,371 |       |  | $ | 70     |   |  | $ | 21,242 |  
|                                             |  |     |        |     |  |           |        |       |  |   |        |   |  |   |        |  
|Gross profit                                 |  | $   | 3,518  |     |  | $         | 2,532  |       |  | $ | 33     |   |  | $ | 6,083  |  
|Selling, general and administrative expenses |  |     | 4,789  |     |  |           | 2,467  |       |  |   | 3,077  |   |  |   | 10,333 |  
|Depreciation and amortization expense        |  |     | 474    |     |  |           | 51     |       |  |   | 543    |   |  |   | 1,068  |  
|                                             |  |     |        |     |  |           |        |       |  |   |        |   |  |   |        |  
|Operating profit (loss)                      |  | $   | (1,745 | )   |  | $         | 14     |       |  | $ | (3,587 | ) |  | $ | (5,318 | )
|                                             |  |     |        |     |  |           |        |       |  |   |        |   |  |   |        |  
|Six months ended June 30, 2002               |  |     |        |     |  |           |        |       |  |   |        |   |  |   |        |  
|Total revenue                                |  | $   | 11,838 |     |  | $         | 13,135 |       |  | $ | 108    |   |  | $ | 25,081 |  
|Intersegment revenue                         |  |     | (3,289 | )   |  |           | (70    | )     |  |   | (90    | ) |  |   | (3,449 | )
|                                             |  |     |        |     |  |           |        |       |  |   |        |   |  |   |        |  
|Revenue from external customers              |  | $   | 8,549  |     |  | $         | 13,065 |       |  | $ | 18     |   |  | $ | 21,632 |  
|                                             |  |     |        |     |  |           |        |       |  |   |        |   |  |   |        |  
|Gross profit                                 |  | $   | 3,278  |     |  | $         | 2,958  |       |  | $ | (31    | ) |  | $ | 6,205  |  
|Selling, general and administrative expenses |  |     | 3,269  |     |  |           | 1,396  |       |  |   | 4,952  |   |  |   | 9,617  |  
|Depreciation and amortization expense        |  |     | 23     |     |  |           | 63     |       |  |   | 1,147  |   |  |   | 1,233  |  
|                                             |  |     |        |     |  |           |        |       |  |   |        |   |  |   |        |  
|Operating profit (loss)                      |  | $   | (14    | )   |  | $         | 1,499  |       |  | $ | (6,130 | ) |  | $ | (4,645 | )
|                                             |  |     |        |     |  |           |        |       |  |   |        |   |  |   |        |  

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Geographic Information (in thousands):

|       |               |   |                             |       |      |   |        |        | 
|------ | ------------- | - | --------------------------- | ----- | ---- | - | ------ | ------ | 
|       |               |   | Three months ended June 30,
|       |               |   |                            
|       |               |   | 2003                        |       | 2002
|       |               |   |                             |       |     
|Sales: |               |   |                             |       |      |   |        |       
|       | United States |   | $                           | 9,545 |      |   | $      | 11,561 | 
|       | Switzerland   |   |                             | 302   |      |   |        | 300    | 
|       |               |   |                             |       |      |   |        |        | 
|       |               | $ | 9,847                       |       |      | $ | 11,861 |       
|       |               |   |                             |       |      |   |        |        | 

|       |               |   |                           |        |      |   |        |        | 
|------ | ------------- | - | ------------------------- | ------ | ---- | - | ------ | ------ | 
|       |               |   | Six months ended June 30,
|       |               |   |                          
|       |               |   | 2003                      |        | 2002
|       |               |   |                           |        |     
|Sales: |               |   |                           |        |      |   |        |       
|       | United States |   | $                         | 19,430 |      |   | $      | 21,062 | 
|       | Switzerland   |   |                           | 1,812  |      |   |        | 570    | 
|       |               |   |                           |        |      |   |        |        | 
|       |               | $ | 21,242                    |        |      | $ | 21,632 |       
|       |               |   |                           |        |      |   |        |        | 

Note 10: Stock Repurchase

On March 12, 2003, the Board of Directors approved a plan to repurchase up
to 200,000 shares of the Companys Common Stock through April 12, 2003. The
Company purchased 18,200 shares for approximately $18,000 under this plan.
There is no immediate plan to purchase more shares.

Note 11: CEO Compensation Package

In April 2003, a compensation package for the Companys Chief Executive
Officer (CEO), Mr. Bryan C.W. Tate, was approved by the Compensation
Committee of the Board of Directors. The package included a base salary of
$250,000 and 280,000 stock options - half of which vested immediately and the
other half vests one year from the grant date. The CEO was also granted 140,000
restricted shares of common stock, pursuant to the Stock Incentive Plan
approved by the stockholders in 2002, which will vest in two equal installments
of 70,000 shares on January 1, 2004 and January 1, 2005, respectively. The
value of the stock on the date of grant was approximately $145,000 and was
recorded as an increase to common stock and additional paid-in capital with a
corresponding increase to deferred stock compensation. The Company will
recognize this compensation expense ratably over the vesting period. During the
second quarter of 2003, the Company recognized approximately $21,000 of
deferred stock compensation as compensation expense. The compensation package
also includes regular benefits, $750 per month car allowance and some relocation
assistance.

Note 12: Sale of Ohio Land and Building

On April 7, 2003, the Company completed the sale of its land and building
in Carroll, Ohio for net cash proceeds of approximately $1,419,000. This
transaction resulted in a net gain from
discontinued operations of approximately $52,000 during the second quarter
of 2003.

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Note 13: Liquidation of International Entities

As a result of the sale of the CCTV business to Honeywell, most of the
Companys international entities no longer have any business activities.
Excluding the access control business in Switzerland, the Company has begun the
process to liquidate most of its international entities. During the liquidation
process, certain claims have been made against the Companys French, Belgian
and German entities. Based on an estimation of settlement, the Company recorded
an accrual for these claims of approximately $330,000 in discontinued
operations during the second quarter of 2003.

Note 14: Marketable Securities

During the second quarter of 2003, the Company purchased $1.5 million in
callable government securities from the Federal Home Loan Bank (FHLB) and the
Federal National Mortgage Association (FNMA). The Company has classified
these investments as available for sale (see note 1 to the Companys
Consolidated Financial Statements for additional detail). The following table
summarizes these securities (in thousands):

|         |  |        |      |          |  |          |           |           |  |            |           |        |  |   |       |  |  |   |   |  |  |   |       | 
|-------- |  | ------ | ---- | -------- |  | -------- | --------- | --------- |  | ---------- | --------- | ------ |  | - | ----- |  |  | - | - |  |  | - | ----- | 
|Security |  | Coupon |      | Callable |  | Maturity |           | Amortized |  | Unrealized |           | Market
|Type     |  | Rate   |      | Date     |  | Date     |           | Cost      |  | Loss       |           | Value 
|         |  |        |      |          |  |          |           |           |  |            |           |       
|FHLB     |  |        | 5.75 | %        |  |          | 8/14/2003 |           |  |            | 8/14/2012 |        |  | $ | 202   |  |  | $ | 1 |  |  | $ | 201   | 
|FHLB     |  |        | 6.53 | %        |  |          | 8/28/2003 |           |  |            | 8/28/2014 |        |  |   | 253   |  |  |   | 1 |  |  |   | 252   | 
|FHLB     |  |        | 6.50 | %        |  |          | 3/15/2004 |           |  |            | 3/15/2017 |        |  |   | 571   |  |  |   | 3 |  |  |   | 568   | 
|FMNA     |  |        | 5.50 | %        |  |          | 4/16/2004 |           |  |            | 4/16/2018 |        |  |   | 510   |  |  |   |  |  |  |   | 510   | 
|         |  |        |      |          |  |          |           |           |  |            |           |        |  |   |       |  |  |   |   |  |  |   |       | 
|         |  |        |      |          |  |          |           |           |  |            |           |        |  | $ | 1,536 |  |  | $ | 5 |  |  | $ | 1,531 | 
|         |  |        |      |          |  |          |           |           |  |            |           |        |  |   |       |  |  |   |   |  |  |   |       | 

The Company accrued $26,000 of interest income in the period for unpaid
interest on these obligations.

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Note 15: New Accounting Pronouncements

In May 2003, the Financial Accounting Standards Board issued SFAS No. 150,
Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity.SFAS No. 150 changes the classification in the
statement of financial position of certain common financial instruments from
either equity or mezzanine presentation to liabilities and requires an issuer
of those financial statements to recognize changes in fair value or redemption
amount, as applicable, in earnings. This statement is effective for
financial instruments entered into or modified after May 31, 2003 and is
effective at the beginning of the first interim period beginning after June 15,
2003. As of June 30, 2003, the Company does not have any instruments that meet
the scope and definition outlined in SFAS No. 150, and therefore does not
believe that the implementation of this statement will have a material effect
on its financial position, results of operations or cash flows.

In June 2003, the Company adopted Emerging Issues Task Force (EITF)
Issue No. 00-21, Revenue Arrangements with Multiple Deliverables.EITF Issue
No. 00-21 addresses how to determine whether an arrangement with multiple
deliverables contains more than one unit of accounting and, if so, how the
arrangement consideration should be measured and allocated to the separate
units of accounting. It applies to all deliverables within contractually
binding arrangements in all industries under which a vendor will perform
multiple revenue-generating activities, with limited exceptions. It is
effective for revenue arrangements entered into in fiscal periods beginning
after June 15, 2003. The Company does not believe that the implementation of
this statement will have a material effect on its financial position, results
of operations or cash flows.

Note 16: Subsequent Events

On July 31, 2003, the Company reached a settlement with Silent Witness with
respect to a patent infringement dispute over U.S. Patent No. RE37,709 (the
Patent). Under the terms of the settlement reached after mediation, Silent
Witness agreed to pay the Company $800,000 royalties for its past use of the
Patent and has entered into a license agreement with the Company covering its
future use of the Patent. The $800,000 payment is to be made over eight annual
installments, with the first payment made in August 2003.

The Patent pertains to electronic monitoring and surveillance devices installed
in public transportation vehicles, for the purpose of security and behavior
modification. The Company acquired the Patent, which was upheld and re-issued
in 2002 after a complete re-examination, from Mr. Jerold Forsberg in 1995. The
Company settled a royalty dispute with Mr. Forsberg in April 2003 (see note 8
to the Companys Consolidated Financial Statements for additional detail).

20



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##### Table of Contents






ITEM 2.     MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Results of Operations

Financial statements for the three and six months ended June 30, 2003 and
2002 report the Companys CCTV Business as discontinued operations (see note 1
to the Companys Consolidated Financial Statements for additional detail).

The results of operations are discussed as a whole, and where appropriate,
by segment (see note 9 to the Companys Consolidated Financial Statements for
additional detail).

The following table contains information regarding the percentage of net
sales of certain income and expense items for the three and six months ended
June 30, 2003 and 2002 and the percentage changes in these income and expense
items from year to year:

|                                                                                      |                                     |  |                    |      |                    |  |                   |      |                    |  |                     |      |               |  |       |      |   |  |        |      |                     |  |        |       |  
|------------------------------------------------------------------------------------- | ----------------------------------- |  | ------------------ | ---- | ------------------ |  | ----------------- | ---- | ------------------ |  | ------------------- | ---- | ------------- |  | ----- | ---- | - |  | ------ | ---- | ------------------- |  | ------ | ----- | -
|                                                                                      |                                     |  |                    |      |                    |  |                   |      |                    |  | Percentage Increase |      |               |  |       |      |   |  |        |      | Percentage Increase
|                                                                                      |                                     |  | Percentage of Net  |      | (Decrease) Between |  | Percentage of Net |      | (Decrease) Between
|                                                                                      |                                     |  | Sales              |      | Periods            |  | Sales             |      | Periods           
|                                                                                      |                                     |  |                    |      |                    |  |                   |      |                   
|                                                                                      |                                     |  | Three months ended |      |                    |  |                   |      | Six months ended   |  |                     |      |              
|                                                                                      |                                     |  | June 30,           |      |                    |  |                   |      | June 30,           |  |                     |      |              
|                                                                                      |                                     |  | 2003               |      | 2002               |  | 2003 vs. 2002     |      | 2003               |  | 2002                |      | 2003 vs. 2002
|                                                                                      |                                     |  |                    |      |                    |  |                   |      |                    |  |                     |      |              
|Net Sales                                                                             |                                     |  | 100.0              | %    |                    |  | 100.0             | %    |                    |  | -17.0               | %    |               |  | 100.0 | %    |   |  | 100.0  | %    |                     |  | -1.8   | %    
|Cost of sales                                                                         |                                     |  | 75.0               | %    |                    |  | 72.2              | %    |                    |  | -13.7               | %    |               |  | 71.4  | %    |   |  | 71.3   | %    |                     |  | -1.7   | %    
|Gross profit                                                                          |                                     |  | 25.0               | %    |                    |  | 27.8              | %    |                    |  | -25.5               | %    |               |  | 28.6  | %    |   |  | 28.7   | %    |                     |  | -2.0   | %    
|Operating expenses:                                                                   |                                     |  |                    |      |                    |  |                   |      |                    |  |                     |      |               |  |       |      |   |  |        |      |                     |  |        |      
|                                                                                      | Selling, general and administrative |  |                    | 55.4 | %                  |  |                   | 44.4 | %                  |  |                     | 3.6  | %             |  |       | 48.6 | % |  |        | 44.5 | %                   |  |        | 7.4   | %
|                                                                                      | Depreciation and amortization       |  |                    | 5.7  | %                  |  |                   | 5.0  | %                  |  |                     | -5.5 | %             |  |       | 5.0  | % |  |        | 5.7  | %                   |  |        | -13.4 | %
|Operating loss                                                                        |                                     |  | -36.2              | %    |                    |  | -21.6             | %    |                    |  | 39.1                | %    |               |  | -25.0 | %    |   |  | -21.5  | %    |                     |  | 14.5   | %    
|Other income (expense)                                                                |                                     |  | 0.2                | %    |                    |  | -3.9              | %    |                    |  | -104.9              | %    |               |  | -1.0  | %    |   |  | -5.7   | %    |                     |  | -82.2  | %    
|Loss before taxes, discontinued
operations and cumulative
effect of accounting change |                                     |  | -36.0              | %    |                    |  | -25.5             | %    |                    |  | 16.9                | %    |               |  | -26.3 | %    |   |  | -27.2  | %    |                     |  | -5.7   | %    
|Loss from continuing operations                                                       |                                     |  | -36.0              | %    |                    |  | -24.8             | %    |                    |  | 20.2                | %    |               |  | -26.1 | %    |   |  | -26.8  | %    |                     |  | -4.4   | %    
|Income (loss) from discontinued operations                                            |                                     |  | -7.9               | %    |                    |  | -0.4              | %    |                    |  | 1529.2              | %    |               |  | -6.8  | %    |   |  | 7.3    | %    |                     |  | -192.0 | %    
|Cumulative effect of accounting change                                                |                                     |  | 0.0                | %    |                    |  | 0.0               | %    |                    |  | 0.0                 | %    |               |  | 0.0   | %    |   |  | -120.7 | %    |                     |  | -100.0 | %    
|Net loss                                                                              |                                     |  | -43.9              | %    |                    |  | -25.2             | %    |                    |  | 44.5                | %    |               |  | -32.9 | %    |   |  | -140.2 | %    |                     |  | -77.0  | %    

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Three Months Ended June 30, 2003 Compared to Three Months Ended June 30, 2002

For the three months ended June 30, 2003, net sales were $9.8 million, a
decrease of $2.0 million (17%) over the same period in 2002. Sales in the PSG
segment decreased $2.0 million (35%), to $3.8 million during the second quarter
of 2003 compared to $5.8 million during the same period in 2002. The decrease
was due to a $1.2 million decline in the sales of closed-circuit television
(CCTV) products that were sold as part of the access control projects in the
domestic market, as well as a $0.7 million decrease in the access control
products sold to commercial accounts. After the Honeywell Asset Sale, the
Companys CCTV sales are limited to the Federal Government customers, as part
of the access control projects, as an integrator or to do-it-yourself
customers. Sales in the DSG segment were $6.0 million during the second quarter
of 2003, unchanged from the same period in 2002. The $0.4 million increase in
sales to a national retailer in the consumer do-it-yourself business was offset
by slight declines in the mobile video, industrial video and alarm management
businesses.

Gross profit margins declined from 27.8% during the three months ended
June 30, 2002 to 25.0% during the three months ended June 30, 2003. The margin
decrease is attributed to an additional $0.3 million of charges in the DSG
segment for slow moving and obsolete inventory as a result of changes in
product lines and sales forecasts. Without these charges, the gross profit
margin for the three months ended June 30, 2003 would have been 28.0%. The new
generation of the SAFEnet product line continues to grow as a percentage of
total access control sales and contributed to the improved margins in the PSG
segment.

Selling, general and administrative expenses (SG&A) were $5.5 million
for the three months ended June 30, 2003, an increase of $0.2 million (4%) over
the same period in 2002. Corporate SG&A decreased $1.5 million (48%), related
primarily to expenses for executive positions that were eliminated in 2002. The
positions of President, Chief Operating Officer and Senior Vice President of
Sales were eliminated in 2002 and the Company does not intend to replace them.
The Company also incurred an additional $0.4 million in severance costs and
$0.1 million in legal fees related to patent litigation.
Corporate SG&A also
included $0.2 million in option compensation expense related to the Companys
former CEO. SG&A in the PSG segment went up $1.0 million (64%) during the three
months ended June 30, 2003, for additional investment in engineering, marketing
and customer support infrastructure in California and an increase in the sales
and sales support personnel in Switzerland. SG&A expenses in the DSG segment
were $0.7 million higher during the second quarter of 2003, due to additional
advertising and marketing support for the consumer / do-it-yourself business.

Depreciation and amortization expenses were $0.5 million for the three
months ended June 30, 2003, a decrease of $0.1 million (9%) over the same
period in 2002. This decrease resulted primarily from the $2.7 million
write-down of the Companys SAP system during the fourth quarter of 2002.

Interest expenses during the three months ended June 30, 2003 were $0.2
million, compared to $0.8 million during the same period in 2002. The decrease
was primarily related to $0.5 million of interest and loan amortization costs
incurred in 2002 on the revolving credit facility that the Company paid in full
with the proceeds received from the Honeywell Asset Sale in December 2002.
Other income during the three months ended June 30, 2003 was $0.2 million,
compared to $0.4 million during the same period in 2002. During the second
quarter of 2003, the Company recorded other income for the sale of an
investment and the amortized portion of deferred income related to the
non-compete agreement in the Honeywell Asset Sale. The Company recorded $0.3
million of other income in the second quarter of 2002 related to successful
patent enforcement.

Losses from discontinued operations were $0.8 million during the three
months ended June 30, 2003. The loss consisted of $0.3 million of estimated
legal liabilities and $0.3 million of
accrued legal fees related to claims made against the Company in France,
Belgium and Germany as part of the liquidation of its international entities
(see note 13 to the Companys Consolidated Financial Statements for additional
detail). The loss also included $0.1 million in additional professional fees
related to the Honeywell Asset Sale.

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Six Months Ended June 30, 2003 Compared to Six Months Ended June 30, 2002

For the six months ended June 30, 2003, net sales were $21.2 million, a
decrease of $0.4 million (2%) over the same period in 2002. Sales in the PSG
segment increased $0.3 million (3%) to $8.8 million during the first six months
of 2003 compared to $8.5 million during the same period in 2002, mainly
resulting from a sale to a French casino of approximately $1.1 million during
the first quarter of 2003. The increase was offset by a $1.0 decrease in the
CCTV products sold as part of access control projects as well as a decrease in
access control business with domestic commercial accounts. Sales in the DSG
segment declined $0.7 million (5%) to $12.4 million during the first quarter of
2003, compared to $13.1 million during the same period in 2002. Although sales
in the consumer/do-it-yourself business increased $1.8 million as a result of
additional sales to a national retailer, sales declined in the industrial video
business ($1.4 million), the central station alarm management business ($0.8
million) and the mobile video business ($0.1 million).

Gross profit margins were 28.6% during the six months ended June 30, 2003,
virtually unchanged from the same period in 2002. The gross profit margin of
28.6% was after an additional $0.3 million of charges in DSG segment for slow
moving and obsolete inventory as a result of changes in product lines and sales
forecasts. Without these charges, the gross profit margin for the three months
ended June 30, 2003 would have been 30.0%. The new generation of the SAFEnet
product line continues to grow as a percentage of total access control sales
and contributed to the improved margins in the PSG segment.

The Companys SG&A expenses were $10.3 million for the six months ended
June 30, 2003, an increase of $0.7 million (7%) over the same period in 2002.
SG&A expenses in the PSG segment increased $1.5 million (46%) during the six
months ended June 30, 2003 for additional investment in engineering, marketing
and customer support infrastructure in California and an increase in the sales
and sales support personnel in Switzerland. SG&A expenses in the DSG segment
were $1.1 million higher during the first six months of 2003 due to additional
advertising and marketing support for the consumer/do-it-yourself business.
SG&A in the Corporate segment decreased $1.9 million, related primarily to
expenses for executive positions that were eliminated in 2002. The positions of
President, Chief Operating Officer and Senior Vice President of Sales were
eliminated in 2002 and the Company does not intend to replace them. Corporate
S&A also included $0.2 million in option compensation expense related to the
Companys former CEO. The Company also incurred an additional $0.4 million in
severance costs, $0.2 million in fees paid to former members of the Companys
Board of Directors and $0.1 million in legal fees related to patent litigation.

Depreciation and amortization expenses were $1.0 million for the six
months ended June 30, 2003, a decrease of $0.2 million (15%) over the same
period in 2002. This decrease resulted primarily from the $2.7 million
write-down of the Companys SAP system during the fourth quarter of 2002.

Interest expenses during the first six months of 2003 were $0.5 million,
compared with $1.2 million during the same period in 2002. The decrease was
primarily related to $1.1 million of interest and loan amortization costs
incurred in 2002 on the revolving credit facility that the Company paid off in
December 2002. Other income during the six months ended June 30, 2003 was $0.2
million, compared to $0.4 million during the same period in 2002. During the
second quarter of 2003, the Company recorded other income for the sale of an
investment and the amortized portion of deferred income related to the
non-compete agreement in the Honeywell Asset Sale. The Company recorded $0.3
million of other income in the second quarter of 2002 related to successful
patent enforcement.

Losses
from discontinued operations were $1.5 million during the six
months ended June 30, 2003. These losses included $0.3 million of write-offs
related to CCTV equipment not transferred to Honeywell, $0.3 million of estimated
legal liabilities and $0.3 million of accrued legal fees related to claims
against the Company in France, Belgium and Germany as part of the liquidation
of its international entities (see note 13 to the Companys Consolidated
Financial Statements for additional detail). The loss also includes $0.2
million in additional professional fees and $0.1 million in additional
personnel expenses in Belgium and Ohio.

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Financial Condition, Liquidity and Capital Resources

In the first six months of 2003, the Companys cash and cash equivalents
decreased from $16.4 million at December 31, 2002 million at June 30, 2003 to
$7.9 million at June 30, 2003.

The
largest components of the net cash used in operations of $7.8 million
were the $7.0 million net loss and the payment of accrued expenses. The Company
used $1.5 million of cash to purchase a series of callable government
securities. This was offset by cash provided by the sale of the Ohio facility
for $1.4 million. Additionally, the Company used cash for capital expenditures
of $0.6 million related to $0.3 million for a new enterprise planning system
and $0.1 million for new technology license for the access control business.

The callable securities have coupon rates ranging from 5.5 to 6.5 percent
and mature from August 2012 to April 2018 (see note 14 to the Companys
Consolidated Financial Statements for additional detail). The Company believes
that based on current interest rate projections, the government will choose to
call these securities on the initial call date. This will limit the Companys
interest rate risk on these securities.

If the Company receives a substantially unfavorable resolution in its
dispute with Honeywell in connection with the Asset Purchase
Agreement, (see note 2 to the Company's Consolidated Financial
Statements for additional detail), the
Companys financial position and future cash flows will be materially and
adversely impacted.

During the next twelve months, the Companys primary source of liquidity
will be its cash and cash equivalents. Although cash requirements will
fluctuate depending on the timing and extent of many factors, the Company
believes that the existing cash balances and marketable securities will be sufficient to satisfy the
Companys liquidity requirements for at least the next 12 months.

Contractual Obligations and Commitments

The following table summarizes the Companys contractual obligations and
commitments with definitive payment terms that will require cash outlays in the
future. These amounts are as of June 30, 2003 (in thousands):

|                                         |  |       |       |      |  |      |       |      |  |      |       |  |  |   |     |  |  |   |    | 
|---------------------------------------- |  | ----- | ----- | ---- |  | ---- | ----- | ---- |  | ---- | ----- |  |  | - | --- |  |  | - | -- | 
|                                         |  | Total |       | 2003 |  | 2004 |       | 2005 |  | 2006
|                                         |  |       |       |      |  |      |       |      |  |     
|Contractual obligations and commitments: |  |       |       |      |  |      |       |      |  |      |       |  |  |   |     |  |  |   |    | 
|Operating leases                         |  | $     | 1,456 |      |  | $    | 813   |      |  | $    | 392   |  |  | $ | 197 |  |  | $ | 54 | 
|Royalty obligation                       |  |       | 532   |      |  |      | 137   |      |  |      | 262   |  |  |   | 108 |  |  |   | 25 | 
|Severance obligations                    |  |       | 1,163 |      |  |      | 733   |      |  |      | 430   |  |  |   |    |  |  |   |   | 
|Compensation obligations                 |  |       | 337   |      |  |      | 199   |      |  |      | 138   |  |  |   |    |  |  |   |   | 
|                                         |  |       |       |      |  |      |       |      |  |      |       |  |  |   |     |  |  |   |    | 
|                                         |  | $     | 3,488 |      |  | $    | 1,882 |      |  | $    | 1,222 |  |  | $ | 305 |  |  | $ | 79 | 
|                                         |  |       |       |      |  |      |       |      |  |      |       |  |  |   |     |  |  |   |    | 

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##### Table of Contents



The
royalty obligation includes $432,000 in future payments for all past
claims (see note 8 - Royalty Claim - to the Companys Consolidated Financial
Statements for additional detail) and a minimum annual payment of $25,000 per
year for future obligations.

The
accrued severance at June 30, 2003 includes various severance
obligations related to certain executive and management positions (see note 8 - 2002 Executive and Management Severance - to
the Companys Consolidated Financials for additional detail).

The accrued compensation obligations represent retention bonus,
change-of-control release payments and special bonuses owed to employees.

In January 2002, the Company sold its corporate headquarters facility for
$6.6 million. It was subsequently leased-back with an option to purchase at
$6.9 million. During the close of the Honeywell Asset Sale, the landlord,
Briarwood Capital Corporation, demanded and obtained an increase to the
purchase price from $6.9 million to $7.55 million. If the Company intends to
exercise this option, it must notify the owner of its intent to purchase no
later than November 30, 2003 and must make payment no later than December 30,
2003. This amount is not included in the table since the Company is not
contractually obligated to exercise this option.




ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Exchange

Since the access control office in Switzerland is the Companys only
significant foreign-based operation, accounting for approximately 3% of the
total consolidated sales during the second quarter of 2003 and 8% of the total
consolidated sales during the six month ended June 30, 2003, the Company does
not expect currency fluctuation to have a material adverse effect on its future
consolidated financial position or results of operation.

Interest Rates

An interest rate swap agreement with Bank One remains in effect through
February 15, 2004. This agreement provides a fixed rate of 6.485% on $5.0
million of debt. This agreement generated net interest expense of $5,000 and
$40,000 for the three and six months ended June 30, 2003, which consisted of
interest due under the swap, offset by changes in the market value of the swap.




ITEM 4.     CONTROLS AND PROCEDURES

An evaluation was performed under the supervision and with the
participation of management, including the Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures within 90 days before the filing of this
quarterly report. Based on that evaluation, the management, including the Chief
Executive Officer and the Chief Financial Officer, concluded that the
disclosure controls and procedures were effective. There have been no
significant changes in the Companys internal controls or in other factors that
could significantly affect internal controls subsequent to their evaluation.

25



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##### Table of Contents






PART II




ITEM 1.      LEGAL PROCEEDINGS

The Company is subject to various legal proceedings and claims, either
asserted or unasserted, that arise in the ordinary course of business. Although
the outcomes of these legal proceedings cannot be predicted with certainty,
management does not believe that any of these existing legal matters will have
a material adverse effect on the Companys financial condition or results of
operations.




ITEM 2.     CHANGES IN SECURITIES AND USE OF PROCEEDS

None.




ITEM 3.     DEFAULTS UPON SENIOR SECURITIES

None.




ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Company held its annual meeting of stockholders (the Meeting) on
June 6, 2003 for the following purposes:

1.          To elect persons as directors to hold office and until their successors
elected and qualified with the nominees listed below receiving the respective
votes set forth opposite their names:

|   |  |                    |  |     |           |          |  |  |           | 
|-- |  | ------------------ |  | --- | --------- | -------- |  |  | --------- | 
|   |  |                    |  | For |           | Withheld
|   |  |                    |  |     |           |         
|a. |  | Lance Borvansky    |  |     | 9,270,651 |          |  |  | 1,064,180 | 
|b. |  | Ronald F. Harnisch |  |     | 9,272,947 |          |  |  | 1,061,884 | 
|c. |  | Carlo R. Loi       |  |     | 9,271,951 |          |  |  | 1,062,880 | 
|d. |  | John C. Macaulay   |  |     | 9,272,951 |          |  |  | 1,061,880 | 
|e. |  | Bryan C. W. Tate   |  |     | 8,478,867 |          |  |  | 1,855,964 | 

|   |  |                                                                                                                                                              
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------
|2. |  | To authorize the companys Board of Directors to effect a reverse
split by a ratio of between 1- for-2 and 1-for-10.                                         
|   |  |                                                                                                                                                              
|3. |  | To approve an amendment to the Companys By-Laws to increase the
stock ownership percentage required to call a special stockholders
meeting from 10% to 25%.
|   |  |                                                                                                                                                              
|4. |  | To ratify the appointment of Grant Thornton LLP as the Companys
independent auditors for the fiscal year ending December 31, 2003.                          

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| |                                                                       
| | ----------------------------------------------------------------------
| | The following votes were cast at the Meeting on Proposals 2 through 4:

|         |  |     |                               |         |  |         |                             |  |  |  |                         | 
|-------- |  | --- | ----------------------------- | ------- |  | ------- | --------------------------- |  |  |  | ----------------------- | 
|Proposal |  | For |                               | Against |  | Abstain
|         |  |     |                               |         |  |        
|2.
3.
4. |  |     | 4,269,018
2,022,371
9,858,997 |         |  |         | 5,755,568
7,475,743
185,233 |  |  |  | 310,245
836,717
290,601 | 

As a result of the above, the five persons named above were confirmed as
directors, Proposal 4 was approved, and Proposals 2 and 3 were not approved.




ITEM 5.     OTHER INFORMATION

None.




ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K

|   |  |                                                                                                                                                                                                                                                           
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|a) |  | Exhibits. The following is a list of the Exhibits filed with this Form
10-Q.                                                                                                                                                                              
|   |  |                                                                                                                                                                                                                                                           
|   |  | 31.1  Certification of the Principal Executive Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.                                                                                         
|   |  |                                                                                                                                                                                                                                                           
|   |  | 31.2  Certification of the Principal Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.                                                                                         
|   |  |                                                                                                                                                                                                                                                           
|   |  | 32.1  Certification of Principal Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.                                                                                             
|   |  |                                                                                                                                                                                                                                                           
|   |  | 32.2  Certification of Principal Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.                                                                                             
|   |  |                                                                                                                                                                                                                                                           
|b) |  | Reports on Form 8-K.                                                                                                                                                                                                                                      
|   |  |                                                                                                                                                                                                                                                           
|   |  | A Form 8-K was filed by the Company with the Securities and Exchange
Commission on April 28, 2003 announcing the settlement of a disputed
patent pertaining to electronic monitoring and surveillance devices
installed in public transportation vehicles.
|   |  |                                                                                                                                                                                                                                                           
|   |  | A Form 8-K was filed by the Company with the Securities and Exchange
Commission on May 14, 2003 filing a press release announcing the
Companys March 31, 2003 financial results.                                                                         

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SIGNATURES



| |                                                                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on behalf by the undersigned, thereunto duly authorized.

|                      |  |                                 |  |                          
|--------------------- |  | ------------------------------- |  | -------------------------
|                      |  | AMERICAN BUILDING CONTROL, INC.
|                      |  |                                 |  |                          
|Dated: August 8, 2003 |  | By:                             |  | /s/ Chris Sharng         
|                      |  |                                 |  |                          
|                      |  |                                 |  | Chris Sharng             
|                      |  |                                 |  | Senior Vice President and
|                      |  |                                 |  | Chief Financial Officer  

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Index to Exhibits



| |  | Exhibit    No.     
        
        
         
        
                
                 
          
               
Description                           
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 31.1  Certification of the Chief Executive Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
| |  |                                                                                                                                                              
| |  | 31.2  Certification of the Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
| |  |                                                                                                                                                              
| |  | 32.1  Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.    
| |  |                                                                                                                                                              
| |  | 32.2  Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.