##### Table of Contents



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 September 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)

|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|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)

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
November 1, 2001 was 17,388,720.

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TABLE OF CONTENTS



|                          |                                                                                               |  |  |  |  |  |  | 
|------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|                          | 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                           
|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                                                     
|SIGNATURE                



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##### Table of Contents



AMERICAN BANK NOTE HOLOGRAPHICS, INC.

FORM 10-Q

INDEX

|                                                                                              |                                                                                                              |  |      |   | 
|--------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------ |  | ---- | - | 
|                                                                                              |                                                                                                              |  | PAGE
|                                                                                              |                                                                                                              |  | NO. 
|PART I  FINANCIAL INFORMATION                                                                |                                                                                                              |  |      |  
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                              |                                                                                                              |  |      |  
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|Item 1. Financial Statements                                                                  |                                                                                                              |  |      |  
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                              |                                                                                                              |  |      |  
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                              | Condensed Balance Sheets as of
September 30, 2001 (Unaudited) and December 31, 2000                          |  |      | 3 | 
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                              |                                                                                                              |  |      |  
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                              | Unaudited Condensed Statements of Operations
For the Three and Nine Months Ended September 30, 2001 and 2000 |  |      | 4 | 
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                              |                                                                                                              |  |      |  
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                              | Unaudited Condensed Statements of Cash Flows
For the Nine Months Ended September 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 4. Submission of Matters to a Vote of Securities Holders                                 |                                                                                                              |  | 12   |  
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                              |                                                                                                              |  |      |  
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|Item 6. Exhibits and Reports on Form 8-K                                                      |                                                                                                              |  | 13   |  

2



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

|                                                                                                                       |                                                                                                                |                            |                                      |        |        |               |        |              |        |  |  | 
|---------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------- | -------------------------- | ------------------------------------ | ------ | ------ | ------------- | ------ | ------------ | ------ |  |  | 
|                                                                                                                       |                                                                                                                |                            |                                      |        |        | September 30, |        | December 31,
|                                                                                                                       |                                                                                                                |                            |                                      |        |        | 2001          |        | 2000        
|                                                                                                                       |                                                                                                                |                            |                                      |        |        |               |        |             
|                                                                                                                       |                                                                                                                |                            |                                      |        |        | (Unaudited)   |        |              |        | 
|                                                                                                                       |                                                                                                                |                            |                                      | ASSETS |        |               |        |              |        |  |  | 
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|Current Assets:                                                                                                        |                                                                                                                |                            |                                      |        |        |               |        |             
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                       | Cash and cash equivalents                                                                                      |                            | $                                    | 6,868  |        |               | $      | 7,926        |       
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                       | Accounts receivable, net of allowance for
doubtful accounts of $100 and $75                                    |                            |                                      | 3,854  |        |               |        | 3,000        |       
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                       | Inventories, net of allowances of $782 and $678                                                                |                            |                                      | 3,333  |        |               |        | 3,015        |       
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                       | Deferred income taxes                                                                                          |                            |                                      | 1,258  |        |               |        | 1,191        |       
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                       | Prepaid expenses and other                                                                                     |                            |                                      | 759    |        |               |        | 391          |       
|                                                                                                                       |                                                                                                                |                            |                                      |        |        |               |        |             
|                                                                                                                       |                                                                                                                | Total current assets       |                                      |        | 16,072 |               |        |              | 15,523 | 
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|Machinery, equipment and leasehold improvements,
net of accumulated depreciation and amortization
of $8,245 and $7,709 |                                                                                                                |                            | 4,933                                |        |        |               | 5,117  |             
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|Deferred income taxes                                                                                                  |                                                                                                                |                            | 238                                  |        |        |               | 727    |             
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|Goodwill, net of accumulated amortization
of $2,867 and $2,608                                                         |                                                                                                                |                            | 7,494                                |        |        |               | 7,753  |             
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|Other assets                                                                                                           |                                                                                                                |                            | 41                                   |        |        |               | 14     |             
|                                                                                                                       |                                                                                                                |                            |                                      |        |        |               |        |             
|Total Assets                                                                                                           |                                                                                                                | $                          | 28,778                               |        |        | $             | 29,134 |             
|                                                                                                                       |                                                                                                                |                            |                                      |        |        |               |        |             
|                                                                                                                       |                                                                                                                |                            | LIABILITIES AND STOCKHOLDERS EQUITY |        |        |               |        |              |        |  | 
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|Current Liabilities:                                                                                                   |                                                                                                                |                            |                                      |        |        |               |        |             
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                       | Accounts payable                                                                                               |                            | $                                    | 1,883  |        |               | $      | 2,298        |       
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                       | Accrued expenses                                                                                               |                            |                                      | 2,193  |        |               |        | 2,687        |       
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                       | Customer advances                                                                                              |                            |                                      | 82     |        |               |        | 161          |       
|                                                                                                                       |                                                                                                                |                            |                                      |        |        |               |        |             
|                                                                                                                       |                                                                                                                | Total current liabilities  |                                      |        | 4,158  |               |        |              | 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
40,000,000 shares; issued and outstanding 18,483,720 shares |                            |                                      | 185    |        |               |        | 185          |       
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                       | Additional paid-in-capital                                                                                     |                            |                                      | 23,994 |        |               |        | 23,994       |       
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                       | Retained earnings (deficit)                                                                                    |                            |                                      | 441    |        |               |        | (191         | )     
|                                                                                                                       |                                                                                                                |                            |                                      |        |        |               |        |             
|                                                                                                                       |                                                                                                                | Total Stockholders Equity |                                      |        | 24,620 |               |        |              | 23,988 | 
|                                                                                                                       |                                                                                                                |                            |                                      |        |        |               |        |             
|Total Liabilities and Stockholders Equity                                                                             |                                                                                                                | $                          | 28,778                               |        |        | $             | 29,134 |             
|                                                                                                                       |                                                                                                                |                            |                                      |        |        |               |        |             

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 |       | Nine Months Ended
|                                         |                               |   | September 30,      |       | September 30,    
|                                         |                               |   |                    |       |                  
|                                         |                               |   | 2001               |       | 2000              |   | 2001  |       | 2000
|                                         |                               |   |                    |       |                   |   |       |       |     
|Revenue:                                 |                               |   |                    |       |                   |   |       |       |      |   |        |        |  |   |        |       
|                                        
|                                        
|                                        
|                                        
|                                         | Sales                         |   | $                  | 5,137 |                   |   | $     | 4,598 |      |   | $      | 15,177 |  |   | $      | 13,958 | 
|                                        
|                                        
|                                        
|                                        
|                                         | Royalty income                |   |                    | 106   |                   |   |       | 92    |      |   |        | 316    |  |   |        | 332    | 
|                                         |                               |   |                    |       |                   |   |       |       |      |   |        |        |  |   |        |        | 
|                                         |                               |   | 5,243              |       |                   |   | 4,690 |       |      |   | 15,493 |        |  |   | 14,290 |       
|                                        
|                                        
|                                        
|                                        
|Costs and expenses:                      |                               |   |                    |       |                   |   |       |       |      |   |        |        |  |   |        |       
|                                        
|                                        
|                                        
|                                        
|                                         | Cost of goods sold            |   |                    | 2,457 |                   |   |       | 1,712 |      |   |        | 7,299  |  |   |        | 5,702  | 
|                                        
|                                        
|                                        
|                                        
|                                         | Selling and administrative    |   |                    | 2,029 |                   |   |       | 1,924 |      |   |        | 5,622  |  |   |        | 5,836  | 
|                                        
|                                        
|                                        
|                                        
|                                         | Research and development      |   |                    | 372   |                   |   |       | 224   |      |   |        | 946    |  |   |        | 562    | 
|                                        
|                                        
|                                        
|                                        
|                                         | Depreciation and amortization |   |                    | 271   |                   |   |       | 271   |      |   |        | 795    |  |   |        | 793    | 
|                                         |                               |   |                    |       |                   |   |       |       |      |   |        |        |  |   |        |        | 
|                                         |                               |   | 5,129              |       |                   |   | 4,131 |       |      |   | 14,662 |        |  |   | 12,893 |       
|                                         |                               |   |                    |       |                   |   |       |       |      |   |        |        |  |   |        |        | 
|Operating income                         |                               |   | 114                |       |                   |   | 559   |       |      |   | 831    |        |  |   | 1,397  |       
|                                        
|                                        
|                                        
|                                        
|Interest income (expense)                |                               |   | 57                 |       |                   |   | (368  | )     |      |   | 223    |        |  |   | (613   | )     
|                                         |                               |   |                    |       |                   |   |       |       |      |   |        |        |  |   |        |        | 
|Income before provision for income taxes |                               |   | 171                |       |                   |   | 191   |       |      |   | 1,054  |        |  |   | 784    |       
|                                        
|                                        
|                                        
|                                        
|Provision for income taxes               |                               |   | 68                 |       |                   |   | 76    |       |      |   | 422    |        |  |   | 313    |       
|                                         |                               |   |                    |       |                   |   |       |       |      |   |        |        |  |   |        |        | 
|Net income                               |                               | $ | 103                |       |                   | $ | 115   |       |      | $ | 632    |        |  | $ | 471    |       
|                                         |                               |   |                    |       |                   |   |       |       |      |   |        |        |  |   |        |        | 
|Net income per share:                    |                               |   |                    |       |                   |   |       |       |      |   |        |        |  |   |        |       
|                                        
|                                        
|                                        
|                                        
|                                         | Basic and diluted             |   | $                  | 0.01  |                   |   | $     | 0.01  |      |   | $      | 0.03   |  |   | $      | 0.03   | 
|                                         |                               |   |                    |       |                   |   |       |       |      |   |        |        |  |   |        |        | 

See Notes to Unaudited Condensed Financial Statements.

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

|                                                 |                                                                                             |                                              |                                       |      |                   |      |        |        |     |      |  
|------------------------------------------------ | ------------------------------------------------------------------------------------------- | -------------------------------------------- | ------------------------------------- | ---- | ----------------- | ---- | ------ | ------ | --- | ---- | -
|                                                 |                                                                                             |                                              |                                       |      | Nine Months Ended
|                                                 |                                                                                             |                                              |                                       |      | September 30,    
|                                                 |                                                                                             |                                              |                                       |      |                  
|                                                 |                                                                                             |                                              |                                       |      | 2001              |      | 2000  
|                                                 |                                                                                             |                                              |                                       |      |                   |      |       
|Cash flows from operating activities:            |                                                                                             |                                              |                                       |      |                   |      |        |       
|                                                
|                                                
|                                                
|                                                
|                                                 | Net income                                                                                  |                                              | $                                     | 632  |                   |      | $      | 471    |    
|                                                
|                                                
|                                                
|                                                
|                                                 | Adjustments to reconcile net income to net cash (used in)
provided by operating activities: |                                              |                                       |      |                   |      |        |        |    
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                             | Depreciation and amortization                |                                       |      | 795               |      |        |        | 793 |     
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                             | Deferred income taxes                        |                                       |      | 422               |      |        |        | 313 |     
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                             | Deferred financing costs                     |                                       |      |                  |      |        |        | 235 |     
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                             | Changes in operating assets and liabilities: |                                       |      |                   |      |        |        |     |     
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                             |                                              | Accounts receivable                   |      |                   | (854 | )      |        |     | (860 | )
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                             |                                              | Inventories                           |      |                   | (318 | )      |        |     | (603 | )
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                             |                                              | Prepaid expenses and other            |      |                   | (395 | )      |        |     | (208 | )
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                             |                                              | Accounts payable and accrued expenses |      |                   | (909 | )      |        |     | (950 | )
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                             |                                              | Customer advances                     |      |                   | (79  | )      |        |     | (410 | )
|                                                 |                                                                                             |                                              |                                       |      |                   |      |        |        |    
|Net cash used in operating activities            |                                                                                             |                                              | (706                                  | )    |                   |      | (1,219 | )     
|                                                 |                                                                                             |                                              |                                       |      |                   |      |        |        |    
|Cash flows from investing activities:            |                                                                                             |                                              |                                       |      |                   |      |        |       
|                                                
|                                                
|                                                
|                                                
|                                                 | Capital expenditures                                                                        |                                              |                                       | (352 | )                 |      |        | (346   | )  
|                                                 |                                                                                             |                                              |                                       |      |                   |      |        |        |    
|Net cash used in investing activities            |                                                                                             |                                              | (352                                  | )    |                   |      | (346   | )     
|                                                 |                                                                                             |                                              |                                       |      |                   |      |        |        |    
|Cash flows from financing activities:            |                                                                                             |                                              |                                       |      |                   |      |        |       
|                                                
|                                                
|                                                
|                                                
|                                                 | Revolving credit repayment, net                                                             |                                              |                                       |     |                   |      |        | (74    | )  
|                                                
|                                                
|                                                
|                                                
|                                                 | Notes payable repayment                                                                     |                                              |                                       |     |                   |      |        | (134   | )  
|                                                
|                                                
|                                                
|                                                
|                                                 | Long-term debt repayment                                                                    |                                              |                                       |     |                   |      |        | (1,000 | )  
|                                                
|                                                
|                                                
|                                                
|                                                 | Equity financing, net of costs                                                              |                                              |                                       |     |                   |      |        | 9,143  |    
|                                                 |                                                                                             |                                              |                                       |      |                   |      |        |        |    
|Net cash provided by financing activities        |                                                                                             |                                              |                                      |      |                   |      | 7,935  |       
|                                                 |                                                                                             |                                              |                                       |      |                   |      |        |        |    
|(Decrease) increase in cash and cash equivalents |                                                                                             |                                              | (1,058                                | )    |                   |      | 6,370  |       
|                                                
|                                                
|                                                
|                                                
|Cash and cash equivalents, beginning of period   |                                                                                             |                                              | 7,926                                 |      |                   |      | 266    |       
|                                                 |                                                                                             |                                              |                                       |      |                   |      |        |        |    
|Cash and cash equivalents, end of period         |                                                                                             | $                                            | 6,868                                 |      |                   | $    | 6,636  |       
|                                                 |                                                                                             |                                              |                                       |      |                   |      |        |        |    
|Supplemental cash payments:                      |                                                                                             |                                              |                                       |      |                   |      |        |       
|                                                
|                                                
|                                                
|                                                
|                                                 | Taxes                                                                                       |                                              | $                                     |     |                   |      | $      | 20     |    
|                                                 |                                                                                             |                                              |                                       |      |                   |      |        |        |    
|                                                 | Interest                                                                                    |                                              | $                                     |     |                   |      | $      | 504    |    
|                                                 |                                                                                             |                                              |                                       |      |                   |      |        |        |    

See Notes to Unaudited Condensed Financial Statements.

5



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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) 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 later 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 $0.3 million for the three and nine months ended
September 30, 2001, respectively, and $0.1 million and $0.3 million for the
three and nine months ended September 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 was 18,483,720 in each of the three and nine months ended September
30, 2001. The basic weighted average number of shares outstanding were
17,023,720 and 14,785,846 in the three and nine months ended September 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 months ended
September 30, 2001, the diluted number of weighted average shares outstanding
was 18,544,708. For the nine months ended September 30, 2001, the diluted
number of weighted average shares outstanding was the same as the basic
weighted average number of 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. For the
three and nine months ended
September 30, 2000, the diluted number of weighted average shares outstanding
was 17,072,852 and 14,787,266, respectively.

6



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##### Table of Contents



BUSINESS INFORMATION

Sales to MasterCard were approximately 35% and 28% of sales for the nine months
ended September 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 $0.6 million and
$0.4 million at September 30, 2001 and December 31, 2000, respectively.

Sales to manufacturers of VISA credit cards were approximately 22% and 21% of
sales for the nine months ended September 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 $0.9 million and $0.6 million at September 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 position.

RECLASSIFICATIONS

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

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NOTE B  INVENTORIES

Inventories consist of the following (in thousands):

|                                             |  |               |       |              |  |   |       |  
|-------------------------------------------- |  | ------------- | ----- | ------------ |  | - | ----- | -
|                                             |  | September 30, |       | December 31,
|                                             |  | 2001          |       | 2000        
|                                             |  |               |       |             
|                                             |  | (Unaudited)   |       |              |  |  
|                                            
|                                            
|                                            
|                                            
|                                            
|                                            
|                                            
|                                            
|Finished goods                               |  | $             | 1,757 |              |  | $ | 1,744 |  
|                                            
|                                            
|                                            
|                                            
|Finished goods on consignment with customers |  |               | 277   |              |  |   | 435   |  
|                                            
|                                            
|                                            
|                                            
|Work in process                              |  |               | 1,368 |              |  |   | 955   |  
|                                            
|                                            
|                                            
|                                            
|Raw materials                                |  |               | 713   |              |  |   | 559   |  
|                                             |  |               |       |              |  |   |       |  
|                                             |  |               | 4,115 |              |  |   | 3,693 |  
|                                            
|                                            
|                                            
|                                            
|Less: Reserve for obsolescence               |  |               | (782  | )            |  |   | (678  | )
|                                             |  |               |       |              |  |   |       |  
|                                             |  | $             | 3,333 |              |  | $ | 3,015 |  
|                                             |  |               |       |              |  |   |       |  

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 paid a $75,000 fine to the
SEC 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, of which 365,000 have been distributed, 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 other pursuant to the
separation agreement between the Company and the Former Parent, dated July 20,
1998, and

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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 November 1, 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 35% and 28% of sales for the nine months ended September 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. Sales to manufacturers of VISA credit cards were
approximately 22% and 21% of sales for the nine months ended September 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

9



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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
its 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 later 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
September 30, 2001 and December 31, 2000, accounts receivable from this
customer totaled $0.6 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 SEPTEMBER 30, 2001 TO THREE MONTHS ENDED SEPTEMBER 30, 2000

Sales. Sales increased by $0.5 million, or 11.1%, from $4.6 million for the
three months ended September 30, 2000 to $5.1 million for the three months
ended September 30, 2001. The increase in sales was due to an increase in
sales of security holograms for credit cards of $0.4 million and
an increase in
sales for non credit card security holograms of $0.1 million.

Royalty Income. Royalty income increased from $92,000 for the three months
ended September 30, 2000 to $106,000 for the three months ended September 30,
2001 as a result of higher sales reported by a licensee.

Cost of Goods Sold. Cost of goods sold increased by $0.7 million, from $1.7
million for the three months ended September 30, 2000 to $2.4 million for the
three months ended September 30, 2001. As a percentage of sales, cost of goods
sold increased from 37.2% in the three months ended September 30, 2000 to 47.8%
for the same period in 2001. The increase is primarily due to an accrued
product liability insurance settlement in the 2000 period which did not reoccur
in the 2001 period of 16% and an increase in inventory reserves of 4% partially
offset by a decrease in production costs of 2% and a decrease in the Companys
sales mix of 7%.

Selling and Administrative. Selling and administrative expenses increased by
$0.1 million, from $1.9 million in the 2000 period to $2.0 million in the
current period. The increase was primarily due to an increase in selling,
salaries, commissions and benefits of $0.2 million partially offset by
decreases in professional and other administrative
expenses of $0.1 million.

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Depreciation and Amortization. Depreciation and amortization remained
relatively unchanged.

Interest Income (Expense). Interest income (expense) increased by $0.4 million
for the three months ended September 30, 2001 primarily as a result of the
reduction of debt.

COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 2001 TO NINE MONTHS ENDED SEPTEMBER 30, 2000

Sales. Sales increased by $1.2 million, or 8.7%, from $14.0 million for the
nine months ended September 30, 2000 to $15.2 million for the nine months ended
September 30, 2001. The increase in sales was due to increases in sales of
security holograms for credit cards of $1.1 million and increases in sales of
non credit card security holograms of $0.1 million.

Royalty Income. Royalty income decreased from $332,000 for the nine months
ended September 30, 2000 to $316,000 for the nine months ended September 30,
2001 as a result of lower sales reported by a licensee.

Cost of Goods Sold. Cost of goods sold increased by $1.6 million, from $5.7
million for the nine months ended September 30, 2000 to $7.3 million for the
nine months ended September 30, 2001. As a percentage of sales, cost of goods
sold increased from 40.8% in the nine months ended September 30, 2000 to 48.1%
for the same period in 2001. The increase is primarily due to an accrued
product liability insurance settlement in the 2000 period which did not reoccur
in 2001 of 5% and an increase in the Companys sales mix of 2%.

Selling and Administrative. Selling and administrative expenses decreased by
$0.2 million, from $5.8 million for the nine months ended September 30, 2000 to
$5.6 million for the nine months ended June 30, 2001. The decrease was
primarily due to decreases in professional fees of $0.5 million and other
administrative expenses of $0.1 million offset partially by increases in
selling and administrative salaries, commissions and benefits of $0.3 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 $0.8 million
for the nine months ended September 30, 2001 primarily as a result of higher
cash balances for investment and the repayment of debt.

LIQUIDITY AND CAPITAL RESOURCES

At September 30, 2001, the Company had $6.9 million in cash and cash
equivalents and working capital of $11.9 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 nine
months ended September 30, 2001, compared to used cash of $1.2 million for the
nine months ended September 30, 2000. Cash flows provided by net income and
adjustments to reconcile net income to net cash used in operating activities
remained relatively unchanged in the nine months ended September 30, 2001 from
the comparable period in 2000. Cash used resulting from changes in operating
assets and liabilities decreased by $0.5 million in the nine months ended
September 30, 2001 from the nine months ended September 30, 2000 primarily due
to decreases in cash used for inventories, accounts payable and accrued
expenses and customer advances of $0.7 million offset partially by increases in
cash used by prepaid expenses of $0.2 million.

Investing activities for the nine months ended September 30, 2001 and 2000 used
cash of $352,000 and $346,000, respectively, for capital expenditures.

There were no financing activities for the nine months ended September 30,
2001. The activity in 2000 was comprised of equity financing, net of costs of
$9.1 million and net credit repayments of $1.2 million.

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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). 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS

On August 10, 2001, the Company held its annual meeting of stockholders. For
more information on the following proposals, refer to the Companys proxy
statement dated July 3, 2001, 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 2002 annual meeting of stockholders
or until their successors are elected and qualified:
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                     |  |  |            |  |  |          |        | 
|-------------------- |  |  | ---------- |  |  | -------- | ------ | 
|Director             |  |  | For        |  |  | Withheld
|                     |  |  |            |  |  |          |        | 
|Kenneth H. Traub     |  |  | 16,769,156 |  |  |          | 72,990 | 
|                    
|                    
|                    
|                    
|Salvatore F. DAmato |  |  | 16,769,156 |  |  |          | 72,990 | 
|                    
|                    
|                    
|                    
|Stephen A. Benton    |  |  | 16,769,156 |  |  |          | 72,990 | 
|                    
|                    
|                    
|                    
|Fred J. Levin        |  |  | 16,769,156 |  |  |          | 72,990 | 
|                    
|                    
|                    
|                    
|Douglas A. Crane     |  |  | 16,769,155 |  |  |          | 72,991 | 



|2. |  | The stockholders approved an amendment to our Amended and Restated
Certificate of Incorporation increasing the number of authorized shares
from 30,000,000 to 40,000,000:
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|               |  |            |  |  |  |  |  | 
|-------------- |  | ---------- |  |  |  |  |  | 
|For            |  | 16,424,848 | 
|              
|              
|              
|              
|Against        |  | 407,198    | 
|              
|              
|              
|              
|Abstain        |  | 10,100     | 
|              
|              
|              
|              
|Broker No Vote |  | 0          | 
|               |  |            | 
|Total          |  | 16,842,146 | 
|               |  |            | 

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|3. |  | The stockholders approved an amendment to increase shares available under
the 2000 Stock Incentive Plan:
|-- |  | --------------------------------------------------------------------------------------------------------

|               |  |  |            | 
|-------------- |  |  | ---------- | 
|For            |  |  | 15,613,843 | 
|              
|              
|              
|              
|Against        |  |  | 1,180,453  | 
|              
|              
|              
|              
|Abstain        |  |  | 47,850     | 
|              
|              
|              
|              
|Broker No Vote |  |  | 0          | 
|               |  |  |            | 
|Total          |  |  | 16,842,146 | 
|               |  |  |            | 



|4. |  | The stockholders ratified the selection of Arthur Andersen LLP as the
independent auditors of the Company:
|-- |  | ----------------------------------------------------------------------------------------------------------

|               |  |  |            | 
|-------------- |  |  | ---------- | 
|For            |  |  | 16,775,827 | 
|              
|              
|              
|              
|Against        |  |  | 54,010     | 
|              
|              
|              
|              
|Abstain        |  |  | 12,309     | 
|              
|              
|              
|              
|Broker No Vote |  |  | 0          | 
|               |  |  |            | 
|Total          |  |  | 16,842,146 | 
|               |  |  |            | 




ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K



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



| | 22 |  | The Companys Proxy Statement dated July 3, 2001, containing the
full text of the proposals referred to in Item 4, which was previously
filed electronically, is hereby incorporated by reference.
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




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: November 1, 2001 |  |                                       |  |                                                                                                       

13