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SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549


FORM 10-Q

|  |  |                                                                                        
|- |  | ---------------------------------------------------------------------------------------
|þ |  | 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

|  |  |                                                                                         
|- |  | ----------------------------------------------------------------------------------------
|o |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________to _________

Commission File Number 1-14227

AMERICAN BANK NOTE HOLOGRAPHICS, INC.

(Exact name of Registrant as specified in its charter)

|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 13-3317668                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)

399 Executive Boulevard
Elmsford, New York, 10523
(Address of principal executive offices, including zip code)

(914) 592-2355
(Registrants telephone number, including area code)

N/A
(Former name, former address, and former fiscal year, if changed from last report)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing for the past 90 days.

X
    Yes
    
    
    No


Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

Yes
    
    X
    No


The aggregate number of shares of common stock, $.01 par value, outstanding on
August 8, 2003 was 18,483,720.

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|                                  |                                                                                               |                                                   |  |  |  |  |  | 
|--------------------------------- | --------------------------------------------------------------------------------------------- | ------------------------------------------------- |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION   
|                                  | Item 1. Financial Statements                                                                 
|                                  |                                                                                               | CONDENSED BALANCE SHEETS                         
|                                  |                                                                                               | UNAUDITED CONDENSED STATEMENTS OF OPERATIONS     
|                                  |                                                                                               | UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS     
|                                  |                                                                                               | NOTES TO UNAUDITED CONDENSED 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. OTHER INFORMATION       
|                                  | ITEM 1. LEGAL PROCEEDINGS                                                                    
|                                  | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS                                
|                                  | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                     
|SIGNATURES                       
|EXHIBIT INDEX                    
|FORM OF INDEMNIFICATION AGREEMENT
|CERTIFICATION OF KENNETH H. TRAUB
|CERTIFICATION OF ALAN GOLDSTEIN  
|CERTIFICATION OF KENNETH H. TRAUB
|CERTIFICATION OF ALAN GOLDSTEIN  



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AMERICAN BANK NOTE HOLOGRAPHICS, INC.

FORM 10-Q

INDEX

|                                                                                              |                                                                                                        |  |      |   | 
|--------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------ |  | ---- | - | 
|                                                                                              |                                                                                                        |  | PAGE
|                                                                                              |                                                                                                        |  | NO. 
|                                                                                              |                                                                                                        |  |     
|PART I  FINANCIAL INFORMATION                                                                |                                                                                                        |  |      |  
|Item 1. Financial Statements                                                                  |                                                                                                        |  |      |  
|                                                                                              | Condensed Balance Sheets as of
June 30, 2003 (Unaudited) and December 31, 2002                         |  |      | 3 | 
|                                                                                              | Unaudited Condensed Statements of Operations
For the Three and Six Months Ended June 30, 2003 and 2002 |  |      | 4 | 
|                                                                                              | Unaudited Condensed Statements of Cash Flows
For the Six Months Ended June 30, 2003 and 2002           |  |      | 5 | 
|                                                                                              | Notes to Unaudited Condensed Financial Statements                                                      |  |      | 6 | 
|Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations |                                                                                                        |  | 8    |  
|Item 3. Quantitative and Qualitative Disclosures
About Market Risk                            |                                                                                                        |  | 12   |  
|Item 4. Controls and Procedures                                                               |                                                                                                        |  | 12   |  
|PART II  OTHER INFORMATION                                                                   |                                                                                                        |  |      |  
|Item 1. Legal Proceedings                                                                     |                                                                                                        |  | 12   |  
|Item 4. Submission of Matters to a Vote of Securities Holders                                 |                                                                                                        |  | 12   |  
|Item 6. Exhibits and Reports on Form 8-K                                                      |                                                                                                        |  | 12   |  

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AMERICAN BANK NOTE HOLOGRAPHICS, INC.
CONDENSED BALANCE SHEETS
(In thousands, except share data)

|                                                                                                                       |                                                                                                                |                            |        |             |        |              |        |        |        | 
|---------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------- | -------------------------- | ------ | ----------- | ------ | ------------ | ------ | ------ | ------ | 
|                                                                                                                       |                                                                                                                |                            |        | June 30,    |        | December 31,
|                                                                                                                       |                                                                                                                |                            |        | 2003        |        | 2002        
|                                                                                                                       |                                                                                                                |                            |        |             |        |             
|                                                                                                                       |                                                                                                                |                            |        | (Unaudited) |        | (Note A)    
|ASSETS                                                                                                                
|Current Assets:                                                                                                        |                                                                                                                |                            |        |             |        |              |        |       
|                                                                                                                       | Cash and cash equivalents                                                                                      |                            | $      | 9,411       |        |              | $      | 8,659  |       
|                                                                                                                       | Accounts receivable, net of allowance for
doubtful accounts of $210                                            |                            |        | 3,395       |        |              |        | 3,661  |       
|                                                                                                                       | Inventories                                                                                                    |                            |        | 2,558       |        |              |        | 2,541  |       
|                                                                                                                       | Deferred income taxes                                                                                          |                            |        | 1,247       |        |              |        | 1,347  |       
|                                                                                                                       | Prepaid expenses                                                                                               |                            |        | 140         |        |              |        | 396    |       
|                                                                                                                       | Other                                                                                                          |                            |        | 274         |        |              |        | 345    |       
|                                                                                                                       |                                                                                                                |                            |        |             |        |              |        |       
|                                                                                                                       |                                                                                                                | Total current assets       |        |             | 17,025 |              |        |        | 16,949 | 
|Machinery, equipment and leasehold improvements,
net of accumulated depreciation and amortization
of $8,865 and $8,505 |                                                                                                                |                            | 2,608  |             |        |              | 2,782  |       
|Other assets                                                                                                           |                                                                                                                |                            | 218    |             |        |              | 399    |       
|                                                                                                                       |                                                                                                                |                            |        |             |        |              |        |       
|Total Assets                                                                                                           |                                                                                                                | $                          | 19,851 |             |        | $            | 20,130 |       
|                                                                                                                       |                                                                                                                |                            |        |             |        |              |        |       
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                  
|Current Liabilities:                                                                                                   |                                                                                                                |                            |        |             |        |              |        |       
|                                                                                                                       | Accounts payable                                                                                               |                            | $      | 357         |        |              | $      | 966    |       
|                                                                                                                       | Accrued expenses                                                                                               |                            |        | 1,630       |        |              |        | 1,803  |       
|                                                                                                                       | Customer advances                                                                                              |                            |        | 103         |        |              |        | 89     |       
|                                                                                                                       |                                                                                                                |                            |        |             |        |              |        |       
|                                                                                                                       |                                                                                                                | Total current liabilities  |        |             | 2,090  |              |        |        | 2,858  | 
|Deferred income taxes                                                                                                  |                                                                                                                |                            | 980    |             |        |              | 830    |       
|                                                                                                                       |                                                                                                                |                            |        |             |        |              |        |       
|                                                                                                                       | Total liabilities                                                                                              |                            |        | 3,070       |        |              |        | 3,688  |       
|                                                                                                                       |                                                                                                                |                            |        |             |        |              |        |       
|Stockholders Equity:                                                                                                  |                                                                                                                |                            |        |             |        |              |        |       
|                                                                                                                       | Preferred stock, authorized 5,000,000 shares;
no shares issued or outstanding                                  |                            |        |            |        |              |        |       |       
|                                                                                                                       | Common stock, par value $.01 per share, authorized
40,000,000 shares; issued and outstanding 18,483,720 shares |                            |        | 185         |        |              |        | 185    |       
|                                                                                                                       | Additional paid-in-capital                                                                                     |                            |        | 23,994      |        |              |        | 23,994 |       
|                                                                                                                       | Accumulated deficit                                                                                            |                            |        | (7,398      | )      |              |        | (7,737 | )     
|                                                                                                                       |                                                                                                                |                            |        |             |        |              |        |       
|                                                                                                                       |                                                                                                                | Total Stockholders Equity |        |             | 16,781 |              |        |        | 16,442 | 
|                                                                                                                       |                                                                                                                |                            |        |             |        |              |        |       
|Total Liabilities and Stockholders Equity                                                                             |                                                                                                                | $                          | 19,851 |             |        | $            | 20,130 |       
|                                                                                                                       |                                                                                                                |                            |        |             |        |              |        |       

See Notes to Unaudited Condensed Financial Statements.

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AMERICAN BANK NOTE HOLOGRAPHICS, INC.
CONDENSED STATEMENTS OF OPERATIONS  UNAUDITED
(In thousands, except per share data)

|                                         |                               |   |                    |       |                  |   |       |       |      |   |       |       |  |   |       |       | 
|---------------------------------------- | ----------------------------- | - | ------------------ | ----- | ---------------- | - | ----- | ----- | ---- | - | ----- | ----- |  | - | ----- | ----- | 
|                                         |                               |   | Three Months Ended |       | Six Months Ended
|                                         |                               |   | June 30,           |       | June 30,        
|                                         |                               |   |                    |       |                 
|                                         |                               |   | 2003               |       | 2002             |   | 2003  |       | 2002
|                                         |                               |   |                    |       |                  |   |       |       |     
|Revenue:                                 |                               |   |                    |       |                  |   |       |       |      |   |       |       |  |   |       |      
|                                         | Sales                         |   | $                  | 4,275 |                  |   | $     | 4,836 |      |   | $     | 8,813 |  |   | $     | 9,456 | 
|                                         | Royalty income                |   |                    | 3     |                  |   |       | 215   |      |   |       | 47    |  |   |       | 330   | 
|                                         |                               |   |                    |       |                  |   |       |       |      |   |       |       |  |   |       |       | 
|                                         |                               |   | 4,278              |       |                  |   | 5,051 |       |      |   | 8,860 |       |  |   | 9,786 |      
|Costs and expenses:                      |                               |   |                    |       |                  |   |       |       |      |   |       |       |  |   |       |      
|                                         | Cost of goods sold            |   |                    | 1,988 |                  |   |       | 2,506 |      |   |       | 4,004 |  |   |       | 4,820 | 
|                                         | Selling and administrative    |   |                    | 1,628 |                  |   |       | 1,839 |      |   |       | 3,391 |  |   |       | 3,658 | 
|                                         | Research and development      |   |                    | 296   |                  |   |       | 300   |      |   |       | 564   |  |   |       | 613   | 
|                                         | Depreciation and amortization |   |                    | 184   |                  |   |       | 197   |      |   |       | 363   |  |   |       | 392   | 
|                                         |                               |   |                    |       |                  |   |       |       |      |   |       |       |  |   |       |       | 
|                                         |                               |   | 4,096              |       |                  |   | 4,842 |       |      |   | 8,322 |       |  |   | 9,483 |      
|                                         |                               |   |                    |       |                  |   |       |       |      |   |       |       |  |   |       |       | 
|Operating income                         |                               |   | 182                |       |                  |   | 209   |       |      |   | 538   |       |  |   | 303   |      
|Interest income                          |                               |   | 26                 |       |                  |   | 24    |       |      |   | 51    |       |  |   | 47    |      
|                                         |                               |   |                    |       |                  |   |       |       |      |   |       |       |  |   |       |       | 
|Income before provision for income taxes |                               |   | 208                |       |                  |   | 233   |       |      |   | 589   |       |  |   | 350   |      
|Provision for income taxes               |                               |   | 88                 |       |                  |   | 99    |       |      |   | 250   |       |  |   | 149   |      
|                                         |                               |   |                    |       |                  |   |       |       |      |   |       |       |  |   |       |       | 
|Net income                               |                               | $ | 120                |       |                  | $ | 134   |       |      | $ | 339   |       |  | $ | 201   |      
|                                         |                               |   |                    |       |                  |   |       |       |      |   |       |       |  |   |       |       | 
|Net income per share:                    |                               |   |                    |       |                  |   |       |       |      |   |       |       |  |   |       |      
|                                         | Basic and diluted             |   | $                  | 0.01  |                  |   | $     | 0.01  |      |   | $     | 0.02  |  |   | $     | 0.01  | 
|                                         |                               |   |                    |       |                  |   |       |       |      |   |       |       |  |   |       |       | 

See Notes to Unaudited Condensed Financial Statements.

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AMERICAN BANK NOTE HOLOGRAPHICS, INC.
CONDENSED STATEMENTS OF CASH FLOWS  UNAUDITED
(In thousands)

|                                               |                                                                                   |                                              |                                       |      |                  |      |       |      |   |        |  
|---------------------------------------------- | --------------------------------------------------------------------------------- | -------------------------------------------- | ------------------------------------- | ---- | ---------------- | ---- | ----- | ---- | - | ------ | -
|                                               |                                                                                   |                                              |                                       |      | Six Months Ended
|                                               |                                                                                   |                                              |                                       |      | June 30,        
|                                               |                                                                                   |                                              |                                       |      |                 
|                                               |                                                                                   |                                              |                                       |      | 2003             |      | 2002 
|                                               |                                                                                   |                                              |                                       |      |                  |      |      
|Cash flows from operating activities:          |                                                                                   |                                              |                                       |      |                  |      |       |     
|                                               | Net income                                                                        |                                              | $                                     | 339  |                  |      | $     | 201  |  
|                                               | Adjustments to reconcile net income to net cash provided by
operating activities: |                                              |                                       |      |                  |      |       |      |  
|                                               |                                                                                   |                                              | Depreciation and amortization         |      |                  | 363  |       |      |   | 392    |  
|                                               |                                                                                   |                                              | Deferred income taxes                 |      |                  | 250  |       |      |   | 149    |  
|                                               |                                                                                   |                                              | Provision for doubtful accounts       |      |                  |     |       |      |   | 25     |  
|                                               |                                                                                   | Changes in operating assets and liabilities: |                                       |      |                  |      |       |      |   |       
|                                               |                                                                                   |                                              | Accounts receivable                   |      |                  | 266  |       |      |   | 119    |  
|                                               |                                                                                   |                                              | Inventories                           |      |                  | (17  | )     |      |   | 705    |  
|                                               |                                                                                   |                                              | Prepaid expenses and other            |      |                  | 505  |       |      |   | 176    |  
|                                               |                                                                                   |                                              | Accounts payable and accrued expenses |      |                  | (782 | )     |      |   | (1,149 | )
|                                               |                                                                                   |                                              | Customer advances                     |      |                  | 14   |       |      |   | 10     |  
|                                               |                                                                                   |                                              |                                       |      |                  |      |       |      |  
|Net cash provided by operating activities      |                                                                                   |                                              | 938                                   |      |                  |      | 628   |     
|                                               |                                                                                   |                                              |                                       |      |                  |      |       |      |  
|Cash flows from investing activities:          |                                                                                   |                                              |                                       |      |                  |      |       |     
|                                               | Capital expenditures                                                              |                                              |                                       | (186 | )                |      |       | (265 | )
|                                               |                                                                                   |                                              |                                       |      |                  |      |       |      |  
|Net cash used in investing activities          |                                                                                   |                                              | (186                                  | )    |                  |      | (265  | )   
|                                               |                                                                                   |                                              |                                       |      |                  |      |       |      |  
|Increase in cash and cash equivalents          |                                                                                   |                                              | 752                                   |      |                  |      | 363   |     
|Cash and cash equivalents, beginning of period |                                                                                   |                                              | 8,659                                 |      |                  |      | 7,368 |     
|                                               |                                                                                   |                                              |                                       |      |                  |      |       |      |  
|Cash and cash equivalents, end of period       |                                                                                   | $                                            | 9,411                                 |      |                  | $    | 7,731 |     
|                                               |                                                                                   |                                              |                                       |      |                  |      |       |      |  
|Supplemental cash payments:                    |                                                                                   |                                              |                                       |      |                  |      |       |     
|                                               | Taxes                                                                             |                                              | $                                     | 5    |                  |      | $     | 17   |  
|                                               |                                                                                   |                                              |                                       |      |                  |      |       |      |  

See Notes to Unaudited Condensed Financial Statements.

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AMERICAN BANK NOTE HOLOGRAPHICS, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

NOTE A  BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

American Bank Note Holographics, Inc. (the Company or ABNH) originates,
mass-produces, and markets secure holograms. Holograms are used for security,
packaging and promotional applications. The Company operates in one reportable
industry segment.

The accompanying unaudited condensed financial statements have been prepared in
accordance with accounting principles generally accepted in the United States
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the three and
six months ended June 30, 2003 are not necessarily indicative of the results
that may be expected for the year ended December 31, 2003.

The balance sheet at December 31, 2002 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.

For further information, refer to the consolidated financial statements and
footnotes thereto included in the Companys annual report on Form 10-K for the
year ended December 31, 2002, as filed with the United States Securities and
Exchange Commission.

REVENUE RECOGNITION

The Company recognizes revenue in accordance with the provisions of the
Securities and Exchange Commissions (SEC) Staff Accounting Bulletin (SAB)
No. 101, Revenue Recognition. Specifically, sales and the related cost of
goods sold are generally recognized at the latter of the time of shipment or
when title passes to customers. In some situations, the Company has shipped
product where the sale is contingent upon the customers use of the product. In
these situations, the Company does not recognize sales upon product shipment,
but rather when the buyer of the product informs the Company that the product
has been used. Additionally, pursuant to terms with a certain customer,
completed items are stored on behalf of the customer at the Companys on-site
secured facility and, in that instance, sales are recognized when all of the
following have occurred: the customer has ordered the goods, the manufacturing
process is complete, the goods have been transferred to the on-site secured
facility and are ready for shipment, the risk of ownership has passed to the
customer and the customer has been billed for the order.

Customer advances represent payments received from customers for products which
have not yet been shipped. These customer advances are classified as current
liabilities on the accompanying balance sheets.

Shipping and handling amounts billed to customers are included in sales and
amounted to $90,000 and $165,000 for the three and six months ended June 30,
2003, respectively, and $105,000 and $191,000 for the three and six months
ended June 30, 2002, respectively. Shipping and handling costs are included
in selling and administrative expenses.

BASIC AND DILUTED NET INCOME PER SHARE

Basic net income per share is computed based on the weighted average number of
outstanding shares of common stock. The basic weighted average number of shares
outstanding were 18,483,720 in each of the three and six months ended June 30,
2003 and 2002, respectively. Diluted net income per share is computed by
dividing net income by the weighted average number of shares of common stock
outstanding and dilutive potential shares of common stock. For the three and
six months ended June 30, 2003 the diluted number of weighted average shares
outstanding was 18,499,332 and 18,487,691, respectively, which includes
dilutive stock options of 15,612 shares and 3,971 shares, respectively. For the
three and six months ended June 30, 2002, the diluted number of weighted
average shares outstanding was the same as the basic number of weighted average
shares outstanding because the

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exercise price of the outstanding stock options and warrants was greater than
the average market value of the underlying common stock for the period, making
them antidilutive.

BUSINESS INFORMATION

Sales to MasterCard were approximately 25% and 35% of sales for the three
months ended June 30, 2003 and 2002, respectively, and 18% and 37% of sales for
the six months ended June 30, 2003 and 2002, respectively. The Company entered
into an agreement with MasterCard dated February 28, 2003, which replaces the
agreement dated February 1, 1996, as amended. The new agreement expires in
February 2008, subject to automatic renewal if not terminated by either party.
The loss of all or a substantial portion of the sales to MasterCard, however,
would have a material adverse effect on the financial position, results of
operations and cash flows of the Company. At June 30, 2003 and December 31,
2002 accounts receivable from this customer totaled $1.0 million and $1.6
million, respectively.

Sales of VISA holograms to manufacturers of VISA credit cards were
approximately 28% and 25% of sales for the three months ended June 30, 2003 and
2002, respectively, and 30% and 23% of sales for the six months ended June 30,
2003 and 2002, respectively. Sales of VISA holograms for the six months ended
June 30, 2003 include sales of a new VISA hologram which the Company developed
and commenced selling in this period. The loss of a substantial portion of the
sales to these customers would have a material adverse effect on the financial
position, results of operations and cash flows of the Company. Accounts
receivable from these customers approximated $1.3 million and $1.5 million at
June 30, 2003 and December 31, 2002, respectively.

The Company purchases certain key materials used in the manufacture of its
holograms and outsources certain key processes from third party suppliers, some
of which are sole source relationships, with whom the Company does not have
supply contracts. Any problems that occur with respect to the delivery, quality
or cost of any such materials or processes could have a material adverse effect
on the financial position, results of operations and cash flows of the Company.

STOCK-BASED COMPENSATION PLANS

In December 2002, the Financial
Accounting Standards Board (FASB) issued SFAS
No. 148, Accounting for Stock Based CompensationTransition and Disclosurean
amendment of FASB Statement No. 123. SFAS No. 148 provides alternative
methods of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation from the intrinsic
value-based method of accounting prescribed by Accounting Principles Board
(APB) Opinion No. 25, Accounting for Stock Issued to Employees. In
addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123,
Accounting for Stock-Based Compensation. The Company adopted the disclosure
requirements of SFAS No. 148 effective December 31, 2002. As allowed by SFAS
No. 123, the Company has elected to continue to apply the intrinsic value-based
method of accounting prescribed in APB Opinion No. 25 and, accordingly, does
not recognize compensation expense for stock option grants made at an exercise
price equal to or in excess of the fair market value of the stock at the date
of grant.

Had compensation cost for the Companys outstanding stock options been
determined based on the fair value at the grant dates for those options
consistent with SFAS No. 123, the Companys net income and basic and diluted
net income per share would have differed as reflected by the pro forma amounts
indicated below:

|                                                                                                          |                       |   |                                       |    |                  |   |      |    |      |   |     |     |  |   |     |    | 
|--------------------------------------------------------------------------------------------------------- | --------------------- | - | ------------------------------------- | -- | ---------------- | - | ---- | -- | ---- | - | --- | --- |  | - | --- | -- | 
|                                                                                                          |                       |   | Three Months Ended                    |    | Six Months Ended
|                                                                                                          |                       |   | June 30,                              |    | June 30,        
|                                                                                                          |                       |   |                                       |    |                 
|                                                                                                          |                       |   | 2003                                  |    | 2002             |   | 2003 |    | 2002
|                                                                                                          |                       |   |                                       |    |                  |   |      |    |     
|                                                                                                          |                       |   | (In thousands, except per share data)
|Net income, as reported                                                                                   |                       | $ | 120                                   |    |                  | $ | 134  |    |      | $ | 339 |     |  | $ | 201 |   
|Add: Non-cash employee compensation, as reported                                                          |                       |   |                                      |    |                  |   |     |    |      |   |    |     |  |   |    |   
|Deduct: Stock-based employee compensation
expense determined under fair value based
method for all awards |                       |   | 26                                    |    |                  |   | 86   |    |      |   | 39  |     |  |   | 173 |   
|                                                                                                          |                       |   |                                       |    |                  |   |      |    |      |   |     |     |  |   |     |   
|                                                                                                          | Pro forma, net income |   | $                                     | 94 |                  |   | $    | 48 |      |   | $   | 300 |  |   | $   | 28 | 
|                                                                                                          |                       |   |                                       |    |                  |   |      |    |      |   |     |     |  |   |     |   

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| |                                                     |  |                                       |      |                  |  |      |      |      |  |   |      |  |  |   |      | 
| | --------------------------------------------------- |  | ------------------------------------- | ---- | ---------------- |  | ---- | ---- | ---- |  | - | ---- |  |  | - | ---- | 
| |                                                     |  | Three Months Ended                    |      | Six Months Ended
| |                                                     |  | June 30,                              |      | June 30,        
| |                                                     |  |                                       |      |                 
| |                                                     |  | 2003                                  |      | 2002             |  | 2003 |      | 2002
| |                                                     |  |                                       |      |                  |  |      |      |     
| |                                                     |  | (In thousands, except per share data)
| | Basic and diluted net income per share, as reported |  | $                                     | 0.01 |                  |  | $    | 0.01 |      |  | $ | 0.02 |  |  | $ | 0.01 | 
| |                                                     |  |                                       |      |                  |  |      |      |      |  |   |      |  |  |   |     
| | Basic and diluted net income per share, pro forma   |  | $                                     | 0.01 |                  |  | $    | 0.00 |      |  | $ | 0.02 |  |  | $ | 0.00 | 
| |                                                     |  |                                       |      |                  |  |      |      |      |  |   |      |  |  |   |     

WARRANTY COSTS

The Company provides for warranty costs in amounts it estimates will be needed
to cover future warranty obligations for products sold during the year.
Estimates of warranty costs are based on historical experience and are
periodically reviewed and adjusted, when necessary. The Companys product
warranty provision is included in accrued expenses on the accompanying balance
sheets. Changes in the Companys product warranty during the six months ended
June 30, 2003 are as follows (in thousands):

|                            |                     |   |     |     |  
|--------------------------- | ------------------- | - | --- | --- | -
|Balance at January 31, 2003 |                     | $ | 510 |    
|                            | Warranties provided |   |     | 80  |  
|                            | Settlements made    |   |     | (77 | )
|                            |                     |   |     |    
|Balance at June 30, 2003    |                     | $ | 513 |    
|                            |                     |   |     |    

NOTE B  INVENTORIES

Inventories consist of the following (in thousands):

|                                             |  |             |       |              |  |   |       | 
|-------------------------------------------- |  | ----------- | ----- | ------------ |  | - | ----- | 
|                                             |  | June 30,    |       | December 31,
|                                             |  | 2003        |       | 2002        
|                                             |  |             |       |             
|                                             |  | (Unaudited) |       |              |  |  
|Finished goods                               |  | $           | 1,021 |              |  | $ | 1,226 | 
|Finished goods on consignment with customers |  |             | 213   |              |  |   | 377   | 
|Work in process                              |  |             | 870   |              |  |   | 455   | 
|Raw materials                                |  |             | 454   |              |  |   | 483   | 
|                                             |  |             |       |              |  |   |       | 
|                                             |  | $           | 2,558 |              |  | $ | 2,541 | 
|                                             |  |             |       |              |  |   |       | 

NOTE C  COMMITMENTS AND CONTINGENCIES

The Company currently and from time to time is involved in litigation (as both
plaintiff and defendant) incidental to the conduct of its business; however,
the Company is not a party to any lawsuit or proceeding which, in the opinion
of management of the Company, could have a material impact on the Companys
financial position, results of operations or cash flows.

NOTE D  STOCK REPURCHASE PLAN

On March 17, 2003, the Companys board of directors authorized the repurchase
of up to $2.0 million of the Companys outstanding common stock. The Company is
authorized to make purchases from time-to-time, either on the open market or
through privately negotiated transactions as conditions warrant. Depending
on market conditions and other factors, these purchases may be suspended or
resumed at any time or from time-to-time without prior notice. As of July 28,
2003, there have been no repurchases of the Companys common stock.




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

The following discussion and analysis should be read in conjunction with the
Companys unaudited financial statements, including the notes thereto,
appearing elsewhere in this report.

OVERVIEW

The Company originates, mass-produces and markets holograms. The Companys
holograms are used primarily for security applications such as counterfeiting
protection for credit and other transaction cards, identification cards and
documents of value, as well as for tamper resistance and authentication of
high-value consumer and industrial

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products. The Company also produces non-secure holograms for packaging and
promotional applications. The Companys sales of holograms for security
applications generally carry higher gross margins than sales for non-security
applications.

Concerns regarding counterfeiting, piracy and other infractions that can result
in lost sales, lost goodwill and product liability claims drive the use of
product authentication holograms. Companies in various industries have utilized
holograms as authentication devices to reduce potential losses. Also, concerns
over counterfeiting and copying have led to the use of holograms on documents
of value, including currency, passports, business cheques, gift certificates,
vouchers, certificates of deposit, stamps (postage and revenue), tickets and
other financial instruments.

A significant portion of the Companys business is derived from orders placed
by certain credit card companies, including MasterCard and manufacturers of
VISA brand credit cards. Variations in the timing of such orders can cause
significant fluctuations in the Companys sales. Sales to MasterCard were
approximately 25% and 35% of sales for the three months ended June 30, 2003 and
2002, respectively, and 18% and 37% of sales for the six months ended June 30,
2003 and 2002, respectively. The Company entered into an agreement with
MasterCard dated February 28, 2003, which replaces the agreement dated February
1, 1996, as amended. The new agreement expires in February 2008, subject to
automatic renewal if not terminated by either party. Sales to manufacturers of
VISA credit cards were approximately 28% and 25% of sales for the three months
ended June 30, 2003 and 2002 respectively, and 30% and 23% of sales for the six
months ended June 30, 2003 and 2002, respectively. Sales of VISA holograms for
the six months ended June 30, 2003 include sales of a new VISA hologram which
the Company developed and commenced selling in this period. The Company does
not have long-term purchase contracts with VISA and supplies holograms to
approximately 50 VISA authorized card manufacturers pursuant to purchase
orders. Currently the Company is one of two companies authorized to manufacture
and sell VISA brand holograms to manufacturers of VISA brand credit cards. If
either MasterCard or VISA were to terminate its respective relationship with
the Company or substantially reduce their orders, there would be a material
adverse effect on the Companys business, financial condition, results of
operations and cash flows.

Holograms are sold under purchase orders and contracts with customers. Sales
and the related cost of goods sold are generally recognized at the latter of
the time of shipment or when title passes to customers. In some situations, the
Company has shipped product where the sale is contingent upon the customers
use of the product. In these situations, the Company does not recognize sales
upon product shipment, but rather when the buyer of the product informs the
Company that the product has been used. Additionally, pursuant to terms with a
certain customer, completed items are stored on behalf of the customer at the
Companys on-site secured facility and, in that instance, sales are recognized
when all of the following have occurred: the customer has ordered the goods,
the manufacturing process is complete, the goods have been transferred to the
on-site secured facility and are ready for shipment, the risk of ownership has
passed to the customer and the customer has been billed for the order. At June
30, 2003 and December 31, 2002, accounts receivable from this customer totaled
$1.0 million and $1.6 million, respectively.

The Company purchases certain key materials used in the manufacture of its
holograms and outsources certain key processes from third party suppliers, some
of whom are sole source relationships, with which it does not have supply
contracts. Any problems that occur with respect to the delivery, quality or
cost of any such materials or processes could have a material adverse effect on
the Companys financial position, results of operations and cash flows.

Sales may fluctuate from quarter to quarter due to changes in customers
ordering patterns. Customers do not typically provide the Company with precise
forecasts of future order quantities. Quarterly demand for holograms may be
materially influenced by customers promotions, inventory replenishment, card
expiration patterns, delivery schedules and other factors which may be
difficult for the Company to anticipate.

Cost of goods sold includes raw materials such as nickel, foils, films and
adhesives; labor costs; manufacturing overhead; and hologram origination costs
(which represent costs of a unique master hologram that is made to customer
specifications and is an integral part of the production process). As a result,
costs of goods sold are affected by product mix, manufacturing yields, costs of
hologram originations and changes in the cost of raw materials and labor.

Selling and administrative expenses primarily consist of salaries, benefits and
commissions for the Companys corporate, sales, marketing and administrative
personnel, marketing and promotion expenses, legal and accounting

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expenses, shipping and handling expenses and expenses associated with being a
public company.

COMPARISON OF THREE MONTHS ENDED JUNE 30, 2003 TO THREE MONTHS ENDED
JUNE 30, 2002

Sales. Sales decreased by $0.5 million, or 11.6%, from $4.8 million for the
three months ended June 30, 2002 to $4.3 million for the three months ended
June 30, 2003. The decrease was due to a decrease in sales to MasterCard of
$0.6 million which was partially offset by an increase in sales to other
customers of $0.1 million.

Royalty Income. Royalty income for the three months ended June 30, 2003
decreased $0.2 million from the three months ended June 30, 2002 due to the
expiration of a patent license agreement.

Cost of Goods Sold. Cost of goods sold decreased by $0.5 million, from $2.5
million for the three months ended June 30, 2002 to $2.0 million for the three
months ended June 30, 2003. As a percentage of sales, cost of goods sold
decreased from 51.8% in the three months ended June 30, 2002 to 46.5% for the
same period in 2003. The decrease of 5% is primarily due to decreases in
provisions for warranty, obsolescence and royalties.

Selling and Administrative. Selling and administrative expenses decreased $0.2
million from $1.8 million for the three months ended June 30, 2002 to $1.6
million for the three months ended June 30, 2003. As a percentage of sales,
selling and administrative expenses decreased from 38.5% for the three months
ended June 30, 2002 to 38.1% for the current period. The decrease was
primarily due to decreases in selling and administrative salaries and benefits
resulting from lower headcount and decreases in other selling and
administrative expenses.

Research and Development. Research and development expenses remained
relatively unchanged.

Depreciation and Amortization. Depreciation and amortization remained
relatively unchanged.

Interest Income. Interest income remained relatively unchanged.

COMPARISON OF SIX MONTHS ENDED JUNE 30, 2003 TO SIX MONTHS ENDED
JUNE 30, 2002

Sales. Sales decreased by $0.7 million, or 6.8%, from $9.5 million for the six
months ended June 30, 2003 to $8.8 million for the six months ended June 30,
2002. The decrease was due to a decrease in sales to MasterCard of $1.9
million which was partially offset by an increase in sales of identification
products of $0.7 million and an increase in sales to other customers of $0.5
million. The Company believes the decline in orders from MasterCard is a
temporary condition and expects sales to MasterCard to be higher in the second
half of 2003 than they were in the first half of 2003.

Royalty Income. Royalty income for the six months ended June 30, 2003
decreased $0.3 million from the six months ended June 30, 2002 due to the
expiration of a patent license agreement.

Cost of Goods Sold. Cost of goods sold decreased by $0.8 million, from $4.8
million for the six months ended June 30, 2002 to $4.0 million for the six
months ended June 30, 2003. As a percentage of sales, cost of goods sold
decreased from 51.0% in the six months ended June 30, 2002 to 45.4% for the
same period in 2003. The decrease of 6% is primarily due to decreases in
provisions for warranty, obsolescence and royalties of 3% and a decrease in
production costs of 3% related to a change in product mix and decreases in
factory personnel and overhead.

Selling and Administrative. Selling and administrative expenses decreased $0.3
million from $3.7 million for the six months ended June 30, 2002 to $3.4
million for the six months ended June 30, 2003. As a percentage of sales,
selling and administrative expenses decreased from 38.7% for the six months
ended June 30, 2002 to 38.5% for the six months ended June 30, 2003. The
decrease was primarily due to decreases in selling and administrative salaries
and benefits due to lower head count of $0.1 million and decreases in other
selling and administrative expenses of $0.2 million primarily related to
professional fees, travel and show expenses.

Research and Development. Research and development expenses decreased $49,000
from $613,000 for the six

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months ended June 30, 2002 to $564,000 for the same period in 2003. The
decrease was primarily due to a decrease in research and development testing
expenses.

Depreciation and Amortization. Depreciation and amortization remained
relatively unchanged.

Interest Income. Interest income remained relatively unchanged.

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2003, the Company had $9.4 million in cash and cash equivalents and
working capital of $14.9 million.

The Companys operating activities provided cash of $0.9 million for the six
months ended June 30, 2003, compared to providing cash of $0.6 million for the
six months ended June 30, 2002. Cash flows provided by net income and non cash
adjustments increased $0.2 million in the six months ended June 30, 2003 from
the comparable period in 2002. Cash flows resulting from changes in operating
assets and liabilities increased by $0.1 million in the six months ended June
30, 2003 from the six months ended June 30, 2002.

Investing activities for the six months ended June 30, 2003 and 2002 used cash
of $186,000 and $265,000, respectively, for capital expenditures.

There were no financing activities for the six month periods ended June 30,
2003 and 2002.

The Company has long-term operating leases for offices, manufacturing
facilities and equipment, which expire through 2007. The Company has renewal
options on some locations, which provide for renewal rents based upon increases
tied to the consumer price index.

The following table quantifies the Companys future obligations at June 30,
2003 (in thousands):

|                     |  |       |       |        |  |           |       |       |  |         |       |           |  |   |       |  |  |   |   | 
|-------------------- |  | ----- | ----- | ------ |  | --------- | ----- | ----- |  | ------- | ----- | --------- |  | - | ----- |  |  | - | - | 
|                     |  |       |       |        |  | Less than |       | 2-3   |  | 4-5     |       | More than
|                     |  | Total |       | 1 Year |  | Years     |       | Years |  | 5 Years
|                     |  |       |       |        |  |           |       |       |  |        
|Lease obligations    |  | $     | 4,113 |        |  | $         | 1,006 |       |  | $       | 1,823 |           |  | $ | 1,284 |  |  | $ |  | 
|Employment contracts |  |       | 870   |        |  |           | 552   |       |  |         | 318   |           |  |   |      |  |  |   |  | 
|                     |  |       |       |        |  |           |       |       |  |         |       |           |  |   |       |  |  |   |   | 
|                     |  | $     | 4,983 |        |  | $         | 1,558 |       |  | $       | 2,141 |           |  | $ | 1,284 |  |  | $ |  | 
|                     |  |       |       |        |  |           |       |       |  |         |       |           |  |   |       |  |  |   |   | 

On March 17, 2003, the Companys board of directors authorized the repurchase
of up to $2.0 million of the Companys outstanding common stock. The Company is
authorized to make purchases from time-to-time, either on the open market or
through privately negotiated transactions as conditions warrant. Depending on
market conditions and other factors, these purchases may be suspended or
resumed at any time or from time-to-time without prior notice. As of July 28,
2003, there have been no repurchases of the Companys common stock.

SPECIAL NOTE REGARDING FORWARD  LOOKING STATEMENTS

Certain statements in this Form 10-Q constitute forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995 (the
Reform Act). Such forward-looking statements involve known and unknown
risks, uncertainties and other factors which may cause the actual results,
performance or achievements of the Company, or industry results, to be
materially different from any future results, performance, or achievements
expressed or implied by such forward-looking statements. Such factors are
more fully described under the caption Business  Risk Factors in the
Companys Annual Report on Form 10-K for the year ended December 31, 2002,
which should be considered in connection with a review of this report.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company does not engage in significant activity with respect to market risk
sensitive instruments. Accordingly, our risk with respect to market risk
sensitive instruments is immaterial.




ITEM 4. CONTROLS AND PROCEDURES

The Company carried out an evaluation, under the supervision and with the participation
of management, including the Companys Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of  the Companys disclosure
controls and procedures as of the end of the period covered by this report
pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that the Companys
disclosure controls and procedures were effective in timely alerting them to
material information relating to the Company (including its consolidated
subsidiaries) required to be included in our periodic Securities and Exchange
Commission filings. There were no changes in  the Companys internal control over
financial reporting that occurred during  the Companys most
recent fiscal quarter that have materially affected, or are reasonably likely to
materially affect,  the Companys internal control over financial reporting.




PART II. OTHER INFORMATION




ITEM 1. LEGAL PROCEEDINGS

Not applicable




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

On June 26, 2003, the Company held its annual meeting of stockholders. For
more information on the following proposals, refer to the Companys proxy
statement dated May 28, 2003, the relevant portions of which are incorporated
herein by reference.



|1. |  | The stockholders elected each of the five nominees to the Companys Board
of Directors who will serve until the 2004 annual meeting of stockholders
or until their successors are elected and qualified:
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                     |  |     |            |          |  |  |         | 
|-------------------- |  | --- | ---------- | -------- |  |  | ------- | 
|Director             |  | For |            | Withheld
|                     |  |     |            |         
|Kenneth H. Traub     |  |     | 16,898,077 |          |  |  | 780,725 | 
|Salvatore F. DAmato |  |     | 17,622,808 |          |  |  | 55,994  | 
|Stephen A. Benton    |  |     | 17,622,808 |          |  |  | 55,994  | 
|Fred J. Levin        |  |     | 17,622,808 |          |  |  | 55,994  | 
|Douglas A. Crane     |  |     | 17,622,992 |          |  |  | 55,810  | 
|Mark J. Bonney       |  |     | 17,622,808 |          |  |  | 55,994  | 



|2. |  | The stockholders ratified the selection of Ernst & Young LLP as the
independent auditors of the Company:
|-- |  | --------------------------------------------------------------------------------------------------------

|               |  |  |            | 
|-------------- |  |  | ---------- | 
|For            |  |  | 17,623,090 | 
|Against        |  |  | 33,925     | 
|Abstain        |  |  | 21,787     | 
|Broker No Vote |  |  | 0          | 
|               |  |  |            | 
|Total          |  |  | 17,678,802 | 
|               |  |  |            | 




ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K



|(a) |  | Exhibits
|--- |  | --------

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|    |  | 10.1 Form of Indemnification Agreement between the Company and its
directors and officers.                                                                    
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | 31.1 Certification of Kenneth H. Traub pursuant to Exchange Act Rules
13a-14 and 15d-14, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|   
|    |  | 31.2 Certification of Alan Goldstein pursuant to Exchange Act Rules
13a-14 and 15d-14, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.  
|   
|    |  | 32.1 Certification of Kenneth H. Traub 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 Alan Goldstein 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                                                                                                                                           

Current report on Form 8-K dated May 14, 2003, reporting the Companys results
of operations for the quarter ended March 31, 2003.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.



| | AMERICAN BANK NOTE
HOLOGRAPHICS, INC.
| | -------------------------------------



| | By: /s/ Kenneth H. Traub

Kenneth H. Traub
President and Chief Executive Officer
| | --------------------------------------------------------------------------------



| | By: /s/ Alan Goldstein

Alan Goldstein
Vice President,
Chief Financial Officer and
Chief Accounting Officer
| | -----------------------------------------------------------------------------------------------------------

Date: August 12, 2003

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EXHIBIT INDEX

|               |  |                                                                                                                                                          
|-------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description                                                                                                                                              
|               |  |                                                                                                                                                          
|10.1           |  | Form of Indemnification Agreement between the Company and its
directors and officers.                                                                    
|31.1           |  | Certification of Kenneth H. Traub pursuant to Exchange Act Rules
13a-14 and 15d-14, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|31.2           |  | Certification of Alan Goldstein pursuant to Exchange Act Rules
13a-14 and 15d-14, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.  
|32.1           |  | Certification of Kenneth H. Traub 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 Alan Goldstein pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.