<PAGE>   1

                       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 JUNE 30, 2001

                                       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)

<TABLE>
<S>                                                         <C>
                   Delaware                                     13-3317668
(State or other jurisdiction of incorporation                (I.R.S. Employer
                or organization)                            Identification No.)
</TABLE>

                            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
August 8, 2001 was 17,388,720.


                                       1
<PAGE>   2
                      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
                June 30, 2001 (Unaudited) and December 31, 2000...........................         3

             Unaudited Condensed Statements of Operations
                For the Three and Six Months Ended June 30, 2001 and 2000.................         4

             Unaudited Condensed Statements of Cash Flows
                For the Six Months Ended June 30, 2001 and 2000...........................         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>   3
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
CONDENSED BALANCE SHEETS
(In thousands, except share data)

<TABLE>
<CAPTION>
                                                                              June 30,     December 31,
                                                                                2001           2000
                                                                                ----           ----
                                                                             (Unaudited)
<S>                                                                          <C>           <C>
                                 ASSETS
Current Assets:
   Cash and cash equivalents.........................................         $   7,062      $  7,926
   Accounts receivable, net..........................................             3,200         3,000
   Inventories, net of allowances of $767 and $678...................             3,673         3,015
   Deferred income taxes.............................................             1,227         1,191
   Prepaid expenses and other........................................               306           391
                                                                              ---------      --------
      Total current assets...........................................            15,468        15,523
Machinery, equipment and leasehold improvements,
   net of accumulated depreciation and amortization
   of $8,061 and $7,709..............................................             4,887         5,117
Deferred income taxes................................................               337           727
Goodwill, net of accumulated amortization
   of $2,780 and $2,608..............................................             7,581         7,753
Other assets.........................................................                44            14
                                                                              ---------      --------

Total Assets.........................................................         $  28,317      $ 29,134
                                                                              =========      ========
                  LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
   Accounts payable..................................................         $   1,594      $  2,298
   Accrued expenses..................................................             2,021         2,687
   Customer advances.................................................               185           161
                                                                              ---------      --------
      Total current liabilities......................................             3,800         5,146
                                                                              ---------      --------

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
      30,000,000 shares; issued and outstanding 18,483,720 shares....               185           185
   Additional paid-in-capital........................................            23,994        23,994
   Retained earnings (deficit).......................................               338          (191)
                                                                              ---------      --------
      Total Stockholders' Equity.....................................            24,517        23,988
                                                                              ---------      --------

Total Liabilities and Stockholders' Equity...........................         $  28,317      $ 29,134
                                                                              =========      ========
</TABLE>

             See Notes to Unaudited Condensed Financial Statements.


                                       3
<PAGE>   4
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
CONDENSED STATEMENTS OF OPERATIONS - UNAUDITED
(In thousands, except per share data)


<TABLE>
<CAPTION>
                                                    Three Months Ended               Six Months Ended
                                                         June 30,                         June 30,
                                                         --------                         --------
                                                   2001            2000             2001            2000
                                                   ----            ----             ----            ----
<S>                                             <C>             <C>              <C>             <C>
Revenue:
   Sales ...............................        $  5,008        $  4,485         $ 10,040        $  9,360
   Royalty income ......................             105              98              210             240
                                                --------        --------         --------        --------
                                                   5,113           4,583           10,250           9,600
Costs and expenses:
   Cost of goods sold ..................           2,469           2,033            4,842           3,990
   Selling and administrative ..........           1,779           1,789            3,593           3,912
   Research and development ............             272             177              574             338
   Depreciation and amortization .......             263             256              524             522
                                                --------        --------         --------        --------
                                                   4,783           4,255            9,533           8,762
                                                --------        --------         --------        --------

Operating income .......................             330             328              717             838

Interest income (expense), net .........              69            (127)             166            (245)
                                                --------        --------         --------        --------

Income before provision for income taxes             399             201              883             593
Provision for income taxes .............             160              80              354             237
                                                --------        --------         --------        --------

Net income .............................        $    239        $    121         $    529        $    356
                                                ========        ========         ========        ========

Net income per share:
   Basic and diluted ...................        $   0.01        $   0.01         $   0.03        $   0.03
                                                ========        ========         ========        ========
</TABLE>

             See Notes to Unaudited Condensed Financial Statements.


                                       4
<PAGE>   5
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
CONDENSED STATEMENTS OF CASH FLOWS - UNAUDITED
(In thousands)


<TABLE>
<CAPTION>
                                                                      Six Months Ended
                                                                           June 30,
                                                                           --------
                                                                     2001            2000
                                                                     ----            ----
<S>                                                               <C>             <C>
Cash flows from operating activities:
   Net income ............................................        $   529         $   356
   Adjustments to reconcile net income to net cash used in
      operating activities:
         Depreciation and amortization ...................            524             522
         Deferred income taxes ...........................            354             237
         Deferred financing costs ........................             --              24
      Changes in operating assets and liabilities:
         Accounts receivable .............................           (200)            663
         Inventories .....................................           (658)           (490)
         Prepaid expenses and other ......................             55             161
         Accounts payable, accrued expenses and other ....         (1,370)         (1,214)
         Customer advances ...............................             24            (395)
                                                                  -------         -------

Net cash used in operating activities ....................           (742)           (136)
                                                                  -------         -------

Cash flows from investing activities:
   Capital expenditures ..................................           (122)           (223)
                                                                  -------         -------

Net cash used in investing activities ....................           (122)           (223)
                                                                  -------         -------

Cash flows from financing activities:
   Revolving credit borrowings, net ......................             --             692
   Notes payable repayment ...............................             --            (130)
   Long-term debt repayment ..............................             --            (100)
   Equity financing, net of costs ........................             --           9,143
                                                                  -------         -------

Net cash provided by financing activities ................             --           9,605
                                                                  -------         -------
(Decrease) increase in cash and cash equivalents .........           (864)          9,246
Cash and cash equivalents, beginning of period ...........          7,926             266
                                                                  -------         -------

Cash and cash equivalents, end of period .................        $ 7,062         $ 9,512
                                                                  =======         =======

Supplemental cash payments:
   Taxes .................................................        $    --         $    20
                                                                  =======         =======

   Interest ..............................................        $    --         $   121
                                                                  =======         =======
</TABLE>

             See Notes to Unaudited Condensed Financial Statements.


                                       5
<PAGE>   6
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
("SEC"). 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 adopted Staff Accounting Bulletin ("SAB") No. 101, "Revenue
Recognition in Financial Statements", during 2000. SAB 101 expresses the view of
the SEC Staff in applying generally accepted accounting principles to certain
revenue recognition issues.

Sales 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
$0.1 million and $0.2 million for the three and six months ended June 30, 2001,
respectively, and $0.1 million and $0.2 million for the three and six months
ended June 30, 2000, 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 and six months ended June 30,
2001. The basic weighted average number of shares outstanding were 13,673,228
and 13,654,614 in the three and six months ended June 30, 2000, 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, 2001, the
diluted number of weighted average shares outstanding were 18,502,239 and
18,493,669, respectively. For the three and six months ended June 30, 2000, the
diluted number of weighted average shares outstanding was 13,803,297 and
13,676,749, respectively.

                                       6
<PAGE>   7
BUSINESS INFORMATION

Sales to MasterCard were approximately 37% and 25% of sales for the six months
ended June 30, 2001 and 2000, respectively. The Company is the exclusive
supplier of holograms to MasterCard pursuant to an agreement, as amended, that
extends until February 2003. The agreement provides for automatic two-year
renewal periods if not terminated by either party. The loss of all or a
substantial portion of the sales to MasterCard would have a material adverse
effect on the financial position, results of operations and cash flows of the
Company. Accounts receivable from this customer approximated $1.1 million and
$0.4 million at June 30, 2001 and December 31, 2000, respectively.

Sales to manufacturers of VISA credit cards were approximately 24% and 19% of
sales for the six months ended June 30, 2001 and 2000, respectively. The loss of
all or 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
$1.1 million and $0.6 million at June 30, 2001 and December 31, 2000,
respectively.

IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statements of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133, as amended by SFAS
No. 137 and SFAS No. 138, establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives) and for hedging
activities, and is effective for all quarters of all fiscal years beginning
after June 15, 2000. The adoption of SFAS No. 133 did not have a material impact
on the Company's results of operations.

In March 2000, the FASB issued Interpretation ("FIN") No. 44, "Accounting for
Certain Transactions Involving Stock Compensation - An Interpretation of APB
Opinion No. 25." FIN 44 clarifies the definition of employees, the criteria for
determining whether a plan qualifies as a non-compensatory plan, the accounting
consequences of various modifications to the terms of a previously fixed stock
option or award and the accounting for an exchange of stock compensation awards
in a business combination. FIN 44 is effective July 1, 2000 but certain
conclusions in the Interpretation cover specific events that occurred after
either December 15, 1998 or January 12, 2000. The Company adopted FIN 44 during
July 2000. The adoption of this interpretation did not have a material impact on
the Company's current or historical financial position, results of operations,
or cash flows.

In July 2001, the FASB issued 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. 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). The amortization
provisions of SFAS No. 142 apply to goodwill and intangible assets acquired
after June 30, 2001. With respect to goodwill and intangible assets acquired
prior to July 1, 2001, the Company is required to adopt SFAS No. 142 effective
January 1, 2002. The Company is currently evaluating the effect that adoption of
the provisions of SFAS No. 142 that are effective January 1, 2002 will have on
its results of operations and financial positions.

RECLASSIFICATIONS

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

                                       7
<PAGE>   8
NOTE B - INVENTORIES

Inventories consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                      June 30,       December 31,
                                                        2001            2000
                                                        ----            ----
                                                     (Unaudited)
<S>                                                  <C>             <C>
   Finished goods .............................        $ 2,136         $ 1,744
   Finished goods on consignment with customers            187             435
   Work in process ............................          1,295             955
   Raw materials ..............................            822             559
                                                       -------         -------
                                                         4,440           3,693
   Less:  Reserve for obsolescence ............           (767)           (678)
                                                       -------         -------
                                                       $ 3,673         $ 3,015
                                                       =======         =======
</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 has agreed to pay a $75,000 fine
because 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 the Company, certain of its former
officers and directors, American Banknote Corporation (the "Former Parent"), the
four co-lead underwriters of the Offering and its previous auditors, had been
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 the Company's Common
Stock during the class period (July 15, 1998 through February 1, 1999). The
complaint seeks rescission of the purchase of shares of the Company's Common
Stock or alternatively, unspecified compensatory damages, along with costs and
expenses including attorney's fees.

In October 2000, the Company, all other defendants and the plaintiffs entered
into a definitive agreement to settle all of the claims that are 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. The approval of the Bankruptcy
Court for the Southern District of New York in which the Chapter 11 proceeding
of the Former Parent is pending has already been given. Under the settlement,
the insurance carrier for the Company and the Former Parent paid $12,500,000,
the previous auditors paid $2,350,000 and the Company has issued and will
distribute 1,460,000 shares of its common stock as well as warrants to purchase
863,647 shares of the Company's common stock, at an exercise price of $6.00 per
share. The shares, which will be distributed in 2001 (365,000 have been
distributed through August 8, 2001), have been included in shares outstanding
in the accompanying financial statements. The warrants are exercisable for a 30
month period which commenced on December 11, 2000.

On December 8, 1999, the Former Parent filed a petition and plan of
reorganization under Chapter 11 of the federal Bankruptcy Code. During 2000, the
Company submitted a substantial claim against the Former Parent in the
bankruptcy proceedings. In connection with negotiations on the Chapter 11 plan,
the Company reached an agreement with the Former Parent to exchange mutual,
general releases for any obligations each may have to the


                                       8
<PAGE>   9
other pursuant to the separation agreement between the Company and the Former
Parent, dated July 20, 1998, and all sums allegedly owing by each of the Company
and the Former Parent, and its affiliates, to each other. The agreement is
subject to consummation of the Chapter 11 plan and also provides that (i) the
Company will receive 25,000 shares of stock of the reorganized Former Parent,
(ii) 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 (iii) the Company will withdraw its claim
against the Former Parent in the Chapter 11 case. The above described settlement
between the Company and the Former Parent was made a part of the Chapter 11 plan
which the bankruptcy court approved on November 3, 2000.

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 August 8, 2001, 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 the shareholder litigation described above, the Company is not a
party to any lawsuit or proceeding which, in the opinion of management of the
Company, is likely to 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's ability to control
the diffraction of light ("origination") using proprietary processes in a
secure, controlled manufacturing environment has enabled the Company to become a
market leader in security holography. The Company's products are used by over
150 companies worldwide. The Company also produces non-secure holograms for
packaging and promotional 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.

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 37% and 25% of sales for the six months ended June 30, 2001 and
2000,


                                       9
<PAGE>   10
respectively. The Company is the exclusive supplier of holograms to MasterCard
pursuant to an agreement, as amended, that extends until February 2003. The
agreement provides for automatic two-year renewal periods if not terminated by
either party. Sales to manufacturers of VISA credit cards were approximately 24%
and 19% of sales for the six months ended June 30, 2001 and 2000, respectively.
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, 2001 and December 31, 2000, accounts receivable from this customer totaled
$1.1 million and $0.4 million, respectively.

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
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 and marketing and advertising expenses for the Company's services and
products.

COMPARISON OF THREE MONTHS ENDED JUNE 30, 2001 TO THREE MONTHS ENDED
JUNE 30, 2000

Sales. Sales increased by $0.5 million, or 11.7%, from $4.5 million for the
three months ended June 30, 2000 to $5.0 million for the three months ended June
30, 2001. The increase in sales was due to an increase in sales of security
holograms for credit cards of $0.6 million, offset partially by a decrease in
non credit card security holograms of $0.1 million.

Royalty Income. Royalty income increased from $98,000 for the three months ended
June 30, 2000 to $105,000 for the three months ended June 30, 2001 as a result
of higher sales reported by a licensee.

Cost of Goods Sold. Cost of goods sold increased by $0.4 million, from $2.0
million for the three months ended June 30, 2000 to $2.4 million for the three
months ended June 30, 2001. As a percentage of sales, cost of goods sold
increased from 45.3% in the three months ended June 30, 2000 to 49.3% for the
same period in 2001. The increase is primarily due to higher production costs
incurred during the current period.

Selling and Administrative. Selling and administrative expenses remained
relatively unchanged due to decreases in bad debt of $0.1 million and
administrative payroll and benefits of $0.1 million offset by increases in
selling expenses of $0.1 million and selling salaries and benefits of $0.1
million.


                                       10
<PAGE>   11
Depreciation and Amortization. Depreciation and amortization remained relatively
unchanged.

Interest Income (Expense). Interest income (expense) increased by $0.2 million
for the three months ended June 30, 2001 primarily as a result of higher cash
balances for investment and the reduction of debt.

COMPARISON OF SIX MONTHS ENDED JUNE 30, 2001 TO SIX  MONTHS ENDED
JUNE 30, 2000

Sales. Sales increased by $0.7 million, or 7.3%, from $9.3 million for the six
months ended June 30, 2000 to $10.0 million for the six months ended June 30,
2001. The increase in sales was due to increases in sales of security holograms
for credit cards.

Royalty Income. Royalty income decreased from $240,000 for the six months ended
June 30, 2000 to $210,000 for the six months ended June 30, 2001 as a result of
lower sales reported by a licensee.

Cost of Goods Sold. Cost of goods sold increased by $0.8 million, from $4.0
million for the six months ended June 30, 2000 to $4.8 million for the six
months ended June 30, 2001. As a percentage of sales, cost of goods sold
increased from 42.6% in the six months ended June 30, 2000 to 48.2% for the same
period in 2001. The increase is primarily due to higher production costs
incurred during the current period.

Selling and Administrative. Selling and administrative expenses decreased by
$0.3 million, from $3.9 million for the six months ended June 30, 2000 to $3.6
million for the six months ended June 30, 2001. The decrease was primarily due
to decreases in professional fees of $0.5 million and bad debt of $0.1 million
offset partially by increases in selling and administrative salaries and
benefits of $0.1 million and other marketing related costs of $0.1 million.

Depreciation and Amortization. Depreciation and amortization remained relatively
unchanged.

Interest Income (Expense). Interest income (expense) increased by $0.4 million
for the six months ended June 30, 2001 primarily as a result of higher cash
balances for investment and the reduction of debt.

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2001, the Company had $7.1 million in cash and cash equivalents and
working capital of $11.7 million. The Company does not currently have any
material commitments that would significantly impact its working capital
position.

The Company's operating activities used cash of $0.7 million for the six months
ended June 30, 2001, compared to used cash of $0.1 million for the six months
ended June 30, 2000. Cash flows provided by net income and adjustments to
reconcile net income to net cash used in operating activities increased $0.3
million in the six months ended June 30, 2001 from the comparable period in
2000. Cash flows resulting from changes in operating assets and liabilities
decreased by $0.9 million in the six months ended June 30, 2001 from the six
months ended June 30, 2000 due to increases in cash used for accounts
receivable, inventories and accounts payable of $1.3 million offset partially by
increases in cash provided by customer advances of $0.4 million.

Investing activities for the six months ended June 30, 2001 and 2000 used cash
of $122,000 and $223,000, respectively, for capital expenditures.

There were no financing activities for the six months ended June 30, 2001. The
activity in 2000 was comprised of equity financing, net of costs of $9.1 million
and net credit borrowings of $0.5 million.

SPECIAL NOTE REGARDING FORWARD - LOOKING STATEMENTS

Certain statements in this Form 10-Q and in certain documents incorporated by
reference herein constitute "forward-looking" statements within the meaning of
the Private Securities Litigation Reform Act of 1995 (the "Reform Act").


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<PAGE>   12
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 in the
Company's filings with the Securities and Exchange Commission, which should be
considered in connection with a review of this report.

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

None.

                                    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: August 8, 2001


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