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| TEXAS                                    | 76-0273345                           |
|------------------------------------------|--------------------------------------|
| (State or other jurisdiction of          | (I.R.S. Employer Identification No.) |
| incorporation or organization)           |                                 |
|                                     |                                 |
| 3006 Longhorn Blvd., Suite 107           |                                 |   |
| Austin, Texas                            | 78758                                |   |
| (Address of principal executive offices) | (Zip Code)                           |   |

| (512) 339-5020                                       |
|------------------------------------------------------|
| (Registrant's telephone number, including area code) |

|   | x | Yes |   | o | No |
|--------|---|-----|--------|---|----|

|   | x | Yes |   | o | No |
|--------|---|-----|--------|---|----|

|   | o | Yes |   | x | No |
|--------|---|-----|--------|---|----|

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| Part I.  Financial Information | Page                                                                                                                                                                                                                        |
|-------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                |                                                                                                                                                                                                                        |   |   |
|                                | Item 1.  Financial Statements                                                                                                                                                                                          |   |
|                                |                                                                                                                                                                                                                        |   |   |
|                                |                                                                                                                                                                                                                        |  Consolidated Balance Sheets--June 30, 2009 and December 31, 2008 | 3 |
|                                |                                                                                                                                                                                                                        |   |   |
|                                |                                                                                                                                                                                                                        |  Consolidated Statements of Operations --Three Months and Six Months Ended          June 30, 2009 and 2008 |  4 |
|                                |                                                                                                                                                                                                                        |   |   |
|                                |                                                                                                                                                                                                                        |  Consolidated Statements of Cash Flows --Six Months Ended          June 30, 2009 and 2008 |  5 |
|                                |                                                                                                                                                                                                                        |   |   |
|                                |                                                                                                                                                                                                                        |  Notes  to Consolidated Financial Statements | 6 |
|                                |                                                                                                                                                                                                                        |   |   |
|                                | Item 2. Management’s Discussion and Analysis of Financial Condition                     and Results of Operations |  8 |
|                                |                                                                                                                                                                                                                        |   |   |
|                                | Item 3.  Quantitative and Qualitative Disclosures about Market Risk                                                                                                                                               | 11 |
|                                |                                                                                                                                                                                                                        |   |   |
|                                | Item 4.  Controls and Procedures                                                                                                                                                                                  | 11 |
|                                |                                                                                                                                                                                                                        |   |   |
| Part II.  Other Information    |                                                                                                                                                                                                                        |
|                                |                                                                                                                                                                                                                        |   |   |
|                                | Item 1.  Legal Proceedings                                                                                                                                                                                        | 12 |
|                                |                                                                                                                                                                                                                        |   |   |
|                                | Item 6.  Exhibits                                                                                                                                                                                                      | 12 |
|                                |                                                                                                                                                                                                                        |   |   |
| Signatures                          | 13                                                                                                                                                                                                                          |

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| ASSETS                                                                                                                                                                                                                                                                                                                                   |   | (Unaudited)June 30,2009 |         |   | December 31,2008 |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------|--------------|--------|------------------|--------|
| Current assets:                                                                                                                                                                                                                                                                                                                          |   |                    |         |   |             |   |
| Cash and cash equivalents                                                                                                                                                                                                                                                                                                                |   | $                       | 467,746      |   |             | $      | 710,111 |   |
| Accounts receivable – net of allowance for doubtful accounts                                                                                                                                                                                                                                                                       |   |                    | 218,699      |   |             |   | 661,704 |   |
| Prepaid expenses and other current assets                                                                                                                                                                                                                                                                                                |   |                    | 76,712       |   |             |   | 121,920 |   |
|                                                                                                                                                                                                                                                                                                                                     |   |                    |         |   |             |   |   |   |
|                 Total current assets                                                                                                                                                                                                                          |   |                    | 763,157      |   |             |   | 1,493,735 |   |
|                                                                                                                                                                                                                                                                                                                                     |   |                    |         |   |             |   |   |   |
| Property and equipment, net                                                                                                                                                                                                                                                                                                              |   |                    | 249,097      |   |             |   | 278,853 |   |
| Other assets                                                                                                                                                                                                                                                                                                                             |   |                    | 19,901       |   |             |   | 19,901 |   |
|                 Total assets                                                                                                                                                                                                                                  |   | $                       | 1,032,155    |   |             | $      | 1,792,489 |   |
|                                                                                                                                                                                                                                                                                                                                     |   |                    |         |   |             |   |   |   |
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)                                                                                                                                                                                                                                                                                     |   |                    |         |   |             |   |   |   |
|                                                                                                                                                                                                                                                                                                                                     |   |                    |         |   |             |   |   |   |
| Current liabilities:                                                                                                                                                                                                                                                                                                                     |   |                    |         |   |             |   |   |   |
| Accounts payable                                                                                                                                                                                                                                                                                                                         |   | $                       | 661,389      |   |             | $      | 438,878 |   |
| Obligations under capital lease                                                                                                                                                                                                                                                                                                          |   |                    | 19,916       |   |             |   | 35,012 |   |
| Accrued liabilities                                                                                                                                                                                                                                                                                                                      |   |                    | 324,834      |   |             |   | 207,809 |   |
| Deferred revenue                                                                                                                                                                                                                                                                                                                         |   |                    | 505,000      |   |             |   | 224,595 |   |
|                                                                                                                                                                                                                                                                                                                                     |   |                    |         |   |             |   |   |   |
|                 Total current liabilities                                                                                                                                                                                                                     |   |                    | 1,511,139    |   |             |   | 906,294 |   |
|                                                                                                                                                                                                                                                                                                                                     |   |                    |         |   |             |   |   |   |
| Obligations under capital lease, long-term                                                                                                                                                                                                                                                                                               |   |                    | 24,367       |   |             |   | 27,909 |   |
|    Total Liabilities                                                                                                                                                                                                                                                                                                      |   |                    | 1,535,506    |   |             |   | 934,203 |   |
|                                                                                                                                                                                                                                                                                                                                     |   |                    |         |   |             |   |   |   |
| Commitments and contingencies                                                                                                                                                                                                                                                                                                            |   |                    | –      |   |             |   | – |   |
|                                                                                                                                                                                                                                                                                                                                     |   |                    |         |   |             |   |   |   |
| Stockholders' equity (deficit):                                                                                                                                                                                                                                                                                                          |   |                    |         |   |             |   |   |   |
|      Preferred stock, $1.00 par value, 2,000,000 shares authorized;            No shares issued and outstanding                                                                                                                                     |   |                    | –      |   |             |   | – |   |
|      Common stock, $.00l par value, 120,000,000 shares authorized,            107,395,216 shares issued and outstanding at            June 30, 2009 and December 31, 2008, respectively |   |                    | 107,395      |   |             |   | 107,395 |   |
| Additional paid-in capital                                                                                                                                                                                                                                                                                                               |   |                    | 109,421,099  |   |             |   | 109,295,595 |   |
| Accumulated deficit                                                                                                                                                                                                                                                                                                                      |   |                    | (110,031,845 | )      |             |   | (108,544,704 | ) |
|                                                                                                                                                                                                                                                                                                                                     |   |                    |         |   |             |   |   |   |
|                 Total stockholders equity (deficit)                                                                                                                                                                                                           |   |                    | (503,351     | )      |             |   | 858,286 |   |
|                                                                                                                                                                                                                                                                                                                                     |   |                    |         |   |             |   |   |   |
|                 Total liabilities and stockholders equity (deficit)                                                                                                                                                                                           |   | $                       | 1,032,155    |   |             | $      | 1,792,489 |   |

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|                                                                       |   | For the Three Months Ended June 30, |        |   | For  the Six MonthsEnded June 30, |   |
|----------------------------------------------------------------------------|--------|-----------------------------------------------|-------------|--------|----------------------------------------|--------|
|                                                                       |   | 2009                                          |        |   | 2008                                   |   |   | 2009 |   |   | 2008 |   |
| Revenues                                                                   |   |                                          |        |   |                                   |   |   |   |   |   |   |   |
| Government contracts                                                       |   | $                                             | 321,951     |   |                                   | $      | 611,567 |   |   | $ | 873,135 |   |   | $ | 1,157,391 |   |
| Contract research                                                          |   |                                          | 574,897     |   |                                   |   | 174,999 |   |   |   | 834,897 |   |   |   | 359,357 |   |
| Other                                                                      |   |                                          | 25,249      |   |                                   |   | 66,668 |   |   |   | 38,590 |   |   |   | 206,500 |   |
|           Total Revenues |   |                                          | 922,097     |   |                                   |   | 853,234 |   |   |   | 1,746,622 |   |   |   | 1,723,248 |   |
|                                                                       |   |                                          |        |   |                                   |   |   |   |   |   |   |   |   |   |   |   |
| Research and development                                                   |   |                                          | 887,183     |   |                                   |   | 1,207,756 |   |   |   | 1,815,313 |   |   |   | 2,389,891 |   |
| Selling, general and administrative expenses                               |   |                                          | 687,649     |   |                                   |   | 1,006,738 |   |   |   | 1,421,492 |   |   |   | 2,062,008 |   |
|                                                                       |   |                                          |        |   |                                   |   |   |   |   |   |   |   |   |   |   |   |
| Operating costs and expenses                                               |   |                                          | 1,574,832   |   |                                   |   | 2,214,494 |   |   |   | 3,236,823 |   |   |   | 4,451,899 |   |
|                                                                       |   |                                          |        |   |                                   |   |   |   |   |   |   |   |   |   |   |   |
| Gain on sale of intellectual property and other assets                     |   |                                          | –     |   |                                   |   | 3,572 |   |   |   | 6,000 |   |   |   | 103,572 |   |
|                                                                       |   |                                          |        |   |                                   |   |   |   |   |   |   |   |   |   |   |   |
| Loss from operations                                                       |   |                                          | (652,735    | )      |                                   |   | (1,357,688 | ) |   |   | (1,484,201 | )  |   |   | (2,625,079 | )  |
|                                                                       |   |                                          |        |   |                                   |   |   |   |   |   |   |   |   |   |   |   |
| Other income (expense), net                                                |   |                                          |        |   |                                   |   |   |   |   |   |   |   |   |   |   |   |
| Interest Expense                                                           |   |                                          | (1,632      | )      |                                   |   | (1,400 | ) |   |   | (4,417 | )  |   |   | (2,998 | )  |
| Interest Income                                                            |   |                                          | 340         |   |                                   |   | 14,047 |   |   |   | 1,477 |   |   |   | 35,457 |   |
| Litigation Settlement                                                      |   |                                          | –     |   |                                   |   | – |   |   |   | – |   |   |   | 500,000 |   |
|                                                                       |   |                                          |        |   |                                   |   |   |   |   |   |   |   |   |   |   |   |
|  Loss from continuing operations before taxes                         |   |                                          | (654,027    | )      |                                   |   | (1,345,041 | ) |   |   | (1,487,141 | )  |   |   | (2,092,620 | ) |
|                                                                       |   |                                          |        |   |                                   |   |   |   |   |   |   |   |   |   |   |   |
|  Provision for taxes                                                  |   |                                          | –     |   |                                   |   | – |   |   |   | – |   |   |   | – |   |
|                                                                       |   |                                          |        |   |                                   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss                                                                   |   | $                                             | (654,027    | )      |                                   | $      | (1,345,041 | ) |   | $ | (1,487,141 | ) |   | $ | (2,092,620 | ) |
|                                                                       |   |                                          |        |   |                                   |   |   |   |   |   |   |   |   |   |   |   |
| Loss per share                                                             |   |                                          |        |   |                                   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                       |   |                                          |        |   |                                   |   |   |   |   |   |   |   |   |   |   |   |
| Basic and Diluted                                                          |   | $                                             | (0.01       | )      |                                   | $      | (0.01 | ) |   | $ | (0.01 | ) |   | $ | (0.02 | ) |
|                                                                       |   |                                          |        |   |                                   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average shares outstanding                                        |   |                                          |        |   |                                   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                       |   |                                          |        |   |                                   |   |   |   |   |   |   |   |   |   |   |   |
| Basic and Diluted                                                          |   |                                          | 107,395,216 |   |                                   |   | 107,283,989 |   |   |   | 107,395,216 |   |   |   | 107,228,769 |   |

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|                                                                                          | For  the Six Months EndedJune 30, |   |
|-----------------------------------------------------------------------------------------------|----------------------------------------|--------|
|                                                                                          | 2009                                   |   |   | 2008 |   |
| Cash flows from operating activities:                                                         |                                   |   |   |   |   |   |
|  Net loss                                                                                |                                   | $      | (1,487,141 | ) |   | $ | (2,092,620 | ) |
| Adjustments to reconcile net loss to net                                                      |                                   |   |   |   |   |   |   |   |
| cash used in operating activities:                                                            |                                   |   |   |   |   |   |   |   |
| Depreciation and amortization expense                                                         |                                   |   | 32,909 |   |   |   | 32,913 |   |
| Stock based compensation expense                                                              |                                   |   | 125,504 |   |   |   | 345,288 |   |
| Changes in assets and liabilities:                                                            |                                   |   |   |   |   |   |   |   |
| Accounts receivable, trade                                                                    |                                   |   | 443,005 |   |   |   | (375,475 | ) |
| Prepaid expenses and other current assets                                                     |                                   |   | 45,208 |   |   |   | 67,086 |   |
| Accounts payable and accrued liabilities                                                      |                                   |   | 339,536 |   |   |   | 130,690 |   |
| Deferred revenue                                                                              |                                   |   | 280,405 |   |   |   | (128,940 | ) |
|                                                                                          |                                   |   |   |   |   |   |   |   |
| Total adjustments                                                                             |                                   |   | 1,266,567 |   |   |   | 71,562 |   |
|                                                                                          |                                   |   |   |   |   |   |   |   |
| Net cash used in operating activities                                                         |                                   |   | (220,574 | ) |   |   | (2,021,058 | ) |
|                                                                                          |                                   |   |   |   |   |   |   |   |
| Cash flows from investing activities:                                                         |                                   |   |   |   |   |   |   |   |
| Purchases of fixed assets                                                                     |                                   |   | (3,153 | ) |   |   | (28,893 | ) |
|        Net cash used in investing activities               |                                   |   | (3,153 | ) |   |   | (28,893 | ) |
|                                                                                          |                                   |   |   |   |   |   |   |   |
| Cash flows from financing activities:                                                         |                                   |   |   |   |   |   |   |   |
| Repayment of capital leases                                                                   |                                   |   | (18,638 | ) |   |   | (14,298 | ) |
| Proceeds from stock issuance, net of costs                                                    |                                   |   | – |   |   |   | 56,250 |   |
|                                                                                          |                                   |   |   |   |   |   |   |   |
|        Net cash provided by (used in) financing activities |                                   |   | (18,368 | ) |   |   | 41,952 |   |
|                                                                                          |                                   |   |   |   |   |   |   |   |
| Net (decrease) in cash and cash equivalents                                                   |                                   |   | (242,365 | ) |   |   | (2,007,999 | ) |
|                                                                                          |                                   |   |   |   |   |   |   |   |
| Cash and cash equivalents, beginning of period                                                |                                   |   | 710,111 |   |   |   | 3,020,096 |   |
|                                                                                          |                                   |   |   |   |   |   |   |   |
| Cash and cash equivalents, end of period                                                      |                                   | $      | 467,746 |   |   | $ | 1,012,097 |   |

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| 1.  | Basis of Presentation |
|----------|-----------------------|

| 2.  | Supplemental Cash Flow Information |
|----------|------------------------------------|

| 3.  | Stockholders’ Equity |
|----------|----------------------------|

| 4.  | Share-Based Payments |
|----------|----------------------|

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| 5.  | Contingencies |
|----------|---------------|

| 6.  | Business Segments |
|----------|-------------------|

|                                            |   | ANI    |       |   | EBT    |   |   | All Other |   |   | Total    |   |
|-------------------------------------------------|--------|--------|------------|--------|--------|--------|--------|-----------|--------|--------|----------|--------|
| 2009                                            |   |   |       |   |   |   |   |      |   |   |     |   |
| Revenue                                         |   | $      | 1,746,622  |   |   | $      | -      |      |   | $      | -        |   |   | $ | 1,746,622 |   |
|                                            |   |   |       |   |   |   |   |      |   |   |     |   |   |   |   |   |
| Profit (Loss)                                   |   |   | (1,040,806 | )      |   |   | 5,459  |      |   |   | (451,794 | )      |   |   | (1,487,141 | ) |
|                                            |   |   |       |   |   |   |   |      |   |   |     |   |   |   |   |   |
| Expenditures for                                |   |   |       |   |   |   |   |      |   |   |     |   |   |   |   |   |
|      long-lived assets |   |   | 1,461      |   |   |   | -      |      |   |   | 1,692    |   |   |   | 3,153 |   |
|                                            |   |   |       |   |   |   |   |      |   |   |     |   |   |   |   |   |
| 2008                                            |   |   |       |   |   |   |   |      |   |   |     |   |   |   |   |   |
| Revenue                                         |   | $      | 1,723,248  |   |   | $      | -      |      |   | $      | -        |   |   | $ | 1,723,248 |   |
|                                            |   |   |       |   |   |   |   |      |   |   |     |   |   |   |   |   |
| Loss                                            |   |   | (1,470,759 | )      |   |   | (520   | )         |   |   | (621,341 | )      |   |   | (2,092,620 | ) |
|                                            |   |   |       |   |   |   |   |      |   |   |     |   |   |   |   |   |
| Expenditures for                                |   |   |       |   |   |   |   |      |   |   |     |   |   |   |   |   |
|      long-lived assets |   |   | 28,893     |   |   |   | -      |      |   |   | -        |   |   |   | 28,893 |   |

| 7.  | Subsequent Events |
|----------|-------------------|

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|                                             | APPLIED NANOTECH HOLDINGS, INC.(Registrant)                                                                                                                                                                                                                                                                                                                                                                          |
|--------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                             |                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                                             |                                                                                                                                                                                                                                                                                                                                                                                                                 |
| Date:     July 31, 2009 |      /s/ Douglas P. Baker                                  Douglas P. BakerChief Executive Officer, Chief Financial Officer(Principal Executive Officer, Principal FinancialOfficer, and Principal Accounting Officer) |

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| Exhibit |                                                     |
|---------|----------------------------------------------------------|
| 11      | Computation of (Loss) Per Common Share                   |
|    |                                                     |
| 31.1    | Rule 13a-14(a)/15d-14(a) Certificate of Douglas P. Baker |
|    |                                                     |
| 32.1    | Section 1350 Certificate of Douglas P. Baker             |

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