<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON, DC 20549

                                    FORM 10-Q

(X)  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

                  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2002

                                       OR

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

              FOR THE TRANSITION PERIOD FROM _________TO _________

                         COMMISSION FILE NUMBER 1-14227

                      AMERICAN BANK NOTE HOLOGRAPHICS, INC.

             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


                Delaware                                     13-3317668
     (State or other jurisdiction of                      (I.R.S. Employer
      incorporation or organization)                     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)

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
---       ---


The aggregate number of shares of common stock, $.01 par value, outstanding on
May 10, 2002 was 17,388,720.



<PAGE>




                      AMERICAN BANK NOTE HOLOGRAPHICS, INC.

                                    FORM 10-Q

                                      INDEX

<TABLE>
<CAPTION>
                                                                   PAGE
                                                                    NO.
                                                                   ----
<S>                                                                <C>
PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

        Condensed Balance Sheets as of
           March 31, 2002 (Unaudited) and December 31, 2001 .       3

        Unaudited Condensed Statements of Operations
           For the Three Months Ended March 31, 2002 and 2001       4

        Unaudited Condensed Statements of Cash Flows
           For the Three Months Ended March 31, 2002 and 2001       5

        Notes to Unaudited Condensed Financial Statements ...       6

Item 2. Management's Discussion and Analysis of
               Financial Condition and Results of Operations        9

Item 3. Quantitative and Qualitative Disclosures
               About Market Risk ............................      12

PART II - OTHER INFORMATION

Item 1. Legal Proceedings ...................................      12

Item 6. Exhibits and Reports on Form 8-K ....................      12
</TABLE>



                                       2
<PAGE>

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

<TABLE>
<CAPTION>
                                                                      March 31,   December 31,
                                                                         2002         2001
                                                                      ---------   ------------
                                                                     (Unaudited)
<S>                                                                    <C>          <C>
                                 ASSETS
Current Assets:
   Cash and cash equivalents ....................................      $ 7,049      $ 7,368
   Accounts receivable, net of allowance for
      doubtful accounts of $75 ..................................        3,511        3,322
   Inventories, net of allowances of $779 and $725 ..............        3,048        3,267
   Deferred income taxes ........................................        1,204        1,232
   Prepaid expenses and other ...................................          509          702
                                                                       -------      -------
      Total current assets ......................................       15,321       15,891
Machinery, equipment and leasehold improvements,
   net of accumulated depreciation and amortization
   of $8,654 and $8,461 .........................................        5,053        5,112
Deferred income taxes ...........................................          121          143
Goodwill, net of accumulated amortization of $2,953 .............        7,408        7,408
Other assets ....................................................           29           32
                                                                       -------      -------

Total Assets ....................................................      $27,932      $28,586
                                                                       =======      =======

                  LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
   Accounts payable .............................................      $ 1,540      $ 1,809
   Accrued expenses .............................................        1,654        2,098
   Customer advances ............................................           92          100
                                                                       -------      -------
      Total current liabilities .................................        3,286        4,007
                                                                       -------      -------

Commitments and contingencies

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
   Retained earnings ............................................          467          400
                                                                       -------      -------
      Total Stockholders' Equity ................................       24,646       24,579
                                                                       -------      -------

Total Liabilities and Stockholders' Equity ......................      $27,932      $28,586
                                                                       =======      =======
</TABLE>



             See Notes to Unaudited Condensed Financial Statements.


                                       3
<PAGE>


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

<TABLE>
<CAPTION>
                                              Three Months Ended
                                                   March 31,
                                              ------------------
                                               2002        2001
                                              ------      ------
<S>                                           <C>         <C>
Revenue:
   Sales ...............................      $4,620      $5,032
   Royalty income ......................         115         105
                                              ------      ------
                                               4,735       5,137
Costs and expenses:
   Cost of goods sold ..................       2,314       2,373
   Selling and administrative ..........       1,819       1,814
   Research and development ............         313         302
   Depreciation and amortization .......         195         261
                                              ------      ------
                                               4,641       4,750
                                              ------      ------
Operating income .......................          94         387

Interest income ........................          23          97
                                              ------      ------

Income before provision for income taxes         117         484
Provision for income taxes .............          50         194
                                              ------      ------

Net income .............................      $   67      $  290
                                              ======      ======

Net income per share:
   Basic and diluted ...................      $   --      $ 0.02
                                              ======      ======
</TABLE>

             See Notes to Unaudited Condensed Financial Statements.


                                       4
<PAGE>


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

<TABLE>
<CAPTION>
                                                                   Three Months Ended
                                                                        March 31,
                                                                  ---------------------
                                                                    2002         2001
                                                                  -------       -------
<S>                                                               <C>           <C>
Cash flows from operating activities:
   Net income ..............................................      $    67       $   290
   Adjustments to reconcile net income to net cash (used in)
      operating activities:
         Depreciation and amortization .....................          195           261
         Deferred income taxes .............................           50           194
      Changes in operating assets and liabilities:
         Accounts receivable ...............................         (189)         (273)
         Inventories .......................................          219          (649)
         Prepaid expenses and other ........................          194           124
         Accounts payable, accrued expenses and other ......         (713)         (771)
         Customer advances .................................           (8)           19
                                                                  -------       -------
Net cash used in operating activities ......................         (185)         (805)
                                                                  -------       -------
Cash flows from investing activities:
   Capital expenditures ....................................         (134)          (65)
                                                                  -------       -------
Net cash used in investing activities ......................         (134)          (65)
                                                                  -------       -------
Cash flows from financing activities:

Net cash used in financing activities ......................           --            --
                                                                  -------       -------

Decrease in cash and cash equivalents ......................         (319)         (870)
Cash and cash equivalents, beginning of period .............        7,368         7,926
                                                                  -------       -------

Cash and cash equivalents, end of period ...................      $ 7,049       $ 7,056
                                                                  =======       =======
Supplemental cash payments:
   Taxes ...................................................      $    17       $    --
                                                                  =======       =======
   Interest ................................................      $    --       $    --
                                                                  =======       =======
</TABLE>


             See Notes to Unaudited Condensed Financial Statements.

                                       5
<PAGE>


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") 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 generally accepted accounting principals 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 required by
generally accepted accounting principles for complete financial statements.
Reference should be made to the Company's audited financial statements included
in the Company's filings made with the Securities and Exchange Commission. The
accompanying unaudited condensed financial statements reflect all adjustments
(consisting of normal recurring accruals) which are, in the opinion of
management, necessary for a fair statement of the results of the interim period
presented but are not necessarily indicative of the results that may be expected
for a full year.

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.

Effective October 1, 2000, the Company adopted Emerging Issues Task Force,
("EITF") 00-10, "Accounting for Shipping and Handling Fees and Costs." Shipping
and handling amounts billed to customers are included in sales and amounted to
$86,000 and $99,000 for the three months ended March 31, 2002 and 2001,
respectively. Shipping and handling costs are included in selling and
administrative expenses. The adoption of EITF has had no impact on the
determination of net income.

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 months ended March 31, 2002 and
2001. 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 months ended March 31, 2002, the
diluted number of weighted average shares outstanding was 18,487,457. For the
three months ended March 31, 2001, the diluted number of weighted average shares
outstanding was the same as the basic number of weighted average shares
outstanding because the exercise price of the outstanding stock options was
greater than the average market value of the underlying common stock for the
period, making them antidilutive.

                                       6
<PAGE>


BUSINESS INFORMATION

Sales to MasterCard were approximately 39% and 33% of sales for the three months
ended March 31, 2002 and 2001, respectively. The Company provides holograms to
MasterCard pursuant to an agreement, as amended, which expires in February 2003,
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 March 31, 2002 and December 31, 2001 accounts
receivable from this customer totaled $1.2 million and $1.0 million,
respectively.

Sales to manufacturers of VISA credit cards were approximately 21% of sales for
each of the three months ended March 31, 2002 and 2001. 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 $1.0
million at both March 31, 2002 and December 31, 2001.

The Company has historically purchased certain key materials used in the
manufacture of its holograms from single suppliers, with which it does not have
supply contracts. Any problems that occur with respect to the delivery, quality
or cost of any such materials could have a material adverse effect on the
financial position, results of operations and cash flows of the Company.

IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standard ("SFAS") No. 141, "Business Combinations" and
SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires all
business combinations initiated after June 30, 2001 to be accounted for using
the purchase method and defines criteria for recognition of acquired intangible
assets. Under SFAS No. 142, goodwill and intangible assets with indefinite lives
are no longer amortized but are reviewed annually (or more frequently if
impairment indicators arise) for impairment. Separable intangible assets that
are not deemed to have indefinite lives will continue to be amortized over their
useful lives (but with no maximum life). Effective January 1, 2002, the Company
adopted SFAS No. 142 and is in the process of performing the required
transitional fair value impairment test on its goodwill. As a result of the
adoption of SFAS No. 142, the amortization of goodwill ceased as of January 1,
2002. Had goodwill amortization been recorded in the first quarter of 2002,
goodwill amortization expense of $86,000 would have been included in the
accompanying unaudited statement of operations for the three months ended March
31, 2002.

In July 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations," which requires obligations associated with the retirement of
long-lived assets to be recorded as increases in costs of the related asset.
Also, on October 3, 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS No. 144 supercedes SFAS No.
121, "Accounting for the Impairment or Disposal of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of." SFAS No. 144 develops one accounting model
for determining impairment based on the model in SFAS No. 121, and for
long-lived assets that are to be disposed of by sale, requires them to be
disposed of at the lower of book value or fair value less cost to sell. SFAS No.
144 expands the scope of "discontinued operations." The implementation of these
statements did not have a material impact on the Company's financial statements.

RECLASSIFICATIONS

Certain prior year amounts have been reclassified to conform to current year
presentation.


                                       7
<PAGE>



NOTE B - INVENTORIES

Inventories consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                 March 31,    December 31,
                                                    2002          2001
                                                 ---------    ------------
                                                (Unaudited)
<S>                                               <C>           <C>
Finished goods .............................      $ 1,903       $ 1,822
Finished goods on consignment with customers          191           287
Work in process ............................          986         1,047
Raw materials ..............................          747           836
                                                  -------       -------
                                                    3,827         3,992
Less:  Reserve for obsolescence ............         (779)         (725)
                                                  -------       -------
                                                  $ 3,048       $ 3,267
                                                  =======       =======
</TABLE>


NOTE C - COMMITMENTS AND CONTINGENCIES

SEC INVESTIGATION

On February 9, 1999, the Division of Enforcement of the SEC issued a Formal
Order Directing Private Investigation in connection with matters giving rise to
the need to restate the Company's previously issued financial statements for the
years ended December 31, 1997 and 1996 and the first three quarters of 1998 that
were filed by former management. The SEC has concluded its investigation of the
Company and has accepted the Company's offer of settlement. On March 16, 2001,
the Commissioners of the SEC approved an order making findings and imposing a
cease and desist order on any future violations of Section 17(a) of the
Securities Act, Sections 10(b), 13(a), 13(b)(2)(A) and (B), and 30A of the
Exchange Act, and Exchange Act Rules 10b-5, 12b-20, and 13a-13. Without
admitting or denying any liability the Company paid a $75,000 fine to the SEC
because certain former senior officers of the Company allegedly violated
provisions of the Foreign Corrupt Practices Act. The Company recorded the fine
as a charge to its statement of operations in the fourth quarter of 2000. The
order was approved and filed by the Secretary of the SEC on July 18, 2001.

OTHER

A consolidated class action complaint against ABNH, certain of our former
officers and directors, our former parent company, American Banknote Corporation
("ABN" or the "Former Parent"), the four co-lead underwriters of ABNH's Initial
Public Offering (the "Offering") and our previous auditors, was filed in the
United States District Court for the Southern District of New York (the
"Court"). The complaint alleges violations of the federal securities laws and
seeks to recover damages on behalf of all purchasers of ABNH's common stock
during the class period (July 15, 1998 through February 1, 1999). In October
2000, ABNH, all other defendants and the plaintiffs entered into a definitive
agreement to settle all of the claims that were the subject of the class action,
as well as claims asserted against the Former Parent and other defendants in a
separate class action. The settlement agreement received the final approval of
the Court on December 15, 2000. Under the settlement, the insurance carrier for
ABNH and the Former Parent paid in escrow $12,500,000, the previous auditors
paid in escrow $2,350,000 and ABNH is committed to issue and distribute
1,460,000 shares of its common stock as well as warrants to purchase 863,647
shares of ABNH's common stock, at an exercise price of $6.00 per share. The
shares, of which 365,000 have been distributed as of March 31, 2002, have been
included in shares outstanding in the accompanying financial statements. The
warrants, of which 215,910 have been issued as of March 31, 2002, will be
exercisable through June 18, 2003. In February 2002, the plaintiffs filed a
motion requesting distribution of class settlement funds and securities. In
March 2002, the court entered an order directing that the settlement funds and
the ABNH shares of common stock and warrants be distributed to class members.

On December 8, 1999, the Former Parent filed a petition and plan of
reorganization under Chapter 11 of the Federal Bankruptcy Code. In connection
with negotiations on the Chapter 11 plan, the Company reached an agreement with
the Former Parent which is subject among other things to (i) definitive
documentation, (ii) Court approval of the settlement of the shareholder
litigation, and (iii) approval of the United States Bankruptcy Court in which
the Former Parent's plan of reorganization is pending. The agreement is subject
to consummation of the Chapter 11 plan


                                       8
<PAGE>

and also provides that (i) the parties exchange mutual, general releases for any
obligations each may have to the other pursuant to the separation agreement
between ABNH and the Former Parent dated July 20, 1998, and all sums allegedly
owing by each of ABNH and the Former Parent, and its affiliates, to each other,
(ii) the Company will receive 25,000 shares of stock of the reorganized Former
Parent, (iii) the Former Parent will be responsible for and shall pay all
asserted and unasserted income, franchise or similar tax liabilities of the
Company for the period January 1, 1990 through July 20, 1998 and will indemnify
the Company with respect to any such liabilities and (iv) the Company will
withdraw its claim against the Former Parent in the Chapter 11 case and not
object to the Former Parent's Chapter 11 plan as long as it comports with the
terms of the agreement between the Company and the Former Parent. The above
described settlement between the Company and the Former Parent was made as part
of the Chapter 11 plan which the bankruptcy court confirmed on November 3, 2000.
As a result of the above separation agreement the Company included in the
accompanying statement of operations in 2000, approximately $0.5 million
relating to the reversal of accounts payable and accrued expenses due to the
Former Parent and affiliates.

We understand that ABN's bankruptcy plan has not been consummated, and that ABN
has indicated in its public SEC filings that it can give no assurance that the
bankruptcy plan will be consummated, and that it expects to propose to the
bankruptcy court certain amendments to the bankruptcy plan that would require
the approval of the bankruptcy court after solicitation of any affected
creditors.

On June 30, 2000, the Company entered into a Stock Purchase Agreement (the
"Agreement") with Crane & Co., Inc. ("Crane"). Under the Agreement, the Company
sold 3,387,720 shares of the Company's common stock to Crane for an aggregate
purchase price of $9,316,230. The Agreement also provides Crane with the right
to purchase its proportionate share of any new issuance of the Company's
securities, other than securities issued in connection with an acquisition,
securities issued in connection with any stock option plan or agreement,
securities issued in replacement of any outstanding securities, securities
issued to all holders of shares of common stock on a pro rata basis or any
securities issued in connection with a strategic investment. Also, in the event
that the Company issues shares of common stock and or securities convertible
into or exercisable for shares of common stock in connection with the settlement
of any litigation that was outstanding as of June 29, 2000, Crane will be
allowed to purchase its proportionate share of the Company's common stock at a
price of $3.35 per share. As of May 10, 2002, no proportionate purchase has been
made.

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,
other than as described above, 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.

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 products. The Company also produces
non-secure holograms for packaging and promotional applications. Our 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 an increased 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.

                                       9
<PAGE>

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, and variations in the timing of such orders can cause
significant fluctuations in the Company's sales. Sales to MasterCard were
approximately 39% and 33% of sales for the three months ended March 31, 2002 and
2001, respectively. The Company provides holograms to MasterCard pursuant to an
agreement, as amended, which expires in February 2003, subject to automatic
renewal if not terminated by either party. Sales to manufacturers of VISA credit
cards were approximately 21% of sales for each of the three months ended March
31, 2002 and 2001. 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 March
31, 2002 and December 31, 2001, accounts receivable from this customer totaled
$1.2 million and $1.0 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 expenses and
expenses associated with being a public company.

COMPARISON OF THREE MONTHS ENDED MARCH 31, 2002 TO THREE MONTHS ENDED
MARCH 31, 2001

Sales. Sales decreased by $0.4 million, or 8.2%, from $5.0 million for the three
months ended March 31, 2001 to $4.6 million for the three months ended March 31,
2002. The decrease was primarily due to a decrease in sales for non credit card
security holograms.

Royalty Income.  Royalty income remained relatively unchanged.

Cost of Goods Sold. Cost of goods sold decreased by $0.1 million, from $2.4
million for the three months ended March 31, 2001 to $2.3 million for the three
months ended March 31, 2002. As a percentage of sales, cost of goods sold
increased from 47.2% in the three months ended March 31, 2001 to 50.1% for the
same period in 2002. The


                                       10
<PAGE>

increase is primarily due to an increase in production costs in the current
period.

Selling and Administrative. Selling and administrative expenses remained
relatively unchanged from the prior period, however, selling expenses increased
approximately $13,000 from $502,000 for the three months ended March 31, 2001 to
$515,000 for the three months ended March 31, 2002, primarily due to an increase
in sales commissions. Administration expenses decreased $8,000 from $1,312,000
for the three months ended March 31, 2001 to $1,304,000 for the same period in
2002. The decrease was primarily due to a decrease in professional fees.

Depreciation and Amortization. Depreciation and amortization decreased by
$66,000 from $261,000 for the three months ended March 31, 2001 to $195,000 for
the three months ended March 31, 2002. The decrease was primarily due to the
ceasing of amortization of goodwill of $86,000 offset by an increase in
depreciation of fixed assets of $20,000.

Interest Income. Interest income decreased by $74,000, from $97,000 for the
three months ended March 31, 2001 to $23,000 for the three months ended March
31, 2002 primarily as a result of lower interest rates in effect during the
current period.

LIQUIDITY AND CAPITAL RESOURCES

At March 31, 2002, the Company had $7.0 million in cash and cash equivalents and
working capital of $12.0 million.

The Company's operating activities used cash of $0.2 million for the three
months ended March 31, 2002, compared to used cash of $0.8 million for the three
months ended March 31, 2001. Cash flows provided by net income and adjustments
to reconcile net income to net cash used in operating activities decreased $0.4
million in the three months ended March 31, 2002 from the comparable period in
2001. Cash flows resulting from changes in operating assets and liabilities
increased by $1.0 million in the three months ended March 31, 2002 from the
three months ended March 31, 2001 primarily due to decreases in cash used for
accounts receivable, inventories and accounts payable.

Investing activities for the three months ended March 31, 2002 and 2001 used
cash of $134,000 and $65,000, respectively, for capital expenditures.

There were no financing activities for the three month periods ended March 31,
2002 and 2001.

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, 2001, which should be
considered in connection with a review of this report.

                                       11
<PAGE>

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.

PART II  OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

Reference is made to the discussion under the caption "Commitments and
Contingencies" in Note C to Notes to Unaudited Condensed Financial Statements in
this quarterly report on Form 10-Q.


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

Current report on Form 8-K dated April 25, 2002.

                                    SIGNATURE

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:  May 15, 2002