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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     |
|--------|--------|--------|--------|--------|--------|
|   |   |   |   |   |   |

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

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

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| Part      I.  Financial Information | Page                                                                                                               |
|------------------------------------------|--------------------------------------------------------------------------------------------------------------------|
|                                     |                                                                                                               |   |   |
|                                     | Item      1.  Financial Statements                                                                            |   |
|                                     |                                                                                                               |   |   |
|                                     |                                                                                                               | Consolidated      Balance Sheets September 30, 2009 and December 31, 2008 | 3 |
|                                     |                                                                                                               |   |   |
|                                     |                                                                                                               | Consolidated      Statements of Operations —Three Months      and Nine Months Ended September      30, 2009 and 2008 | 4 |
|                                     |                                                                                                               |   |   |
|                                     |                                                                                                               | Consolidated      Statements of Cash Flows — Nine Months      Ended September      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)September      30,2009 |         |   | December      31,2008 |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|--------------|--------|-----------------------|--------|
| Current      assets:                                                                                                                                                                             |   |                              |         |   |                  |   |
| Cash      and cash equivalents                                                                                                                                                                   |   | $                                 | 637,140      |   |                  | $      | 710,111 |   |
| Accounts      receivable – net of allowance for doubtful accounts                                                                                                                          |   |                              | 199,580      |   |                  |   | 661,704 |   |
| Prepaid      expenses and other current assets                                                                                                                                                   |   |                              | 76,948       |   |                  |   | 121,920 |   |
|                                                                                                                                                                                             |   |                              |         |   |                  |   |   |   |
|                      Total current assets                                                                             |   |                              | 913,668      |   |                  |   | 1,493,735 |   |
|                                                                                                                                                                                             |   |                              |         |   |                  |   |   |   |
| Property      and equipment, net                                                                                                                                                                 |   |                              | 280,814      |   |                  |   | 278,853 |   |
| Other      assets                                                                                                                                                                                |   |                              | 22,884       |   |                  |   | 19,901 |   |
|                      Total assets                                                                                     |   | $                                 | 1,217,366    |   |                  | $      | 1,792,489 |   |
|                                                                                                                                                                                             |   |                              |         |   |                  |   |   |   |
| LIABILITIES      AND STOCKHOLDERS’ EQUITY (DEFICIT)                                                                                                                                        |   |                              |         |   |                  |   |   |   |
|                                                                                                                                                                                             |   |                              |         |   |                  |   |   |   |
| Current      liabilities:                                                                                                                                                                        |   |                              |         |   |                  |   |   |   |
| Accounts      payable                                                                                                                                                                            |   | $                                 | 835,655      |   |                  | $      | 438,878 |   |
| Obligations      under capital lease                                                                                                                                                             |   |                              | 26,938       |   |                  |   | 35,012 |   |
| Accrued      liabilities                                                                                                                                                                         |   |                              | 379,737      |   |                  |   | 207,809 |   |
| Deferred      revenue                                                                                                                                                                            |   |                              | 380,000      |   |                  |   | 224,595 |   |
|                                                                                                                                                                                             |   |                              |         |   |                  |   |   |   |
|                      Total current liabilities                                                                        |   |                              | 1,622,330    |   |                  |   | 906,294 |   |
|                                                                                                                                                                                             |   |                              |         |   |                  |   |   |   |
| Obligations      under capital lease, long-term                                                                                                                                                  |   |                              | 36,873       |   |                  |   | 27,909 |   |
|  Total      Liabilities                                                                                                                                                                     |   |                              | 1,659,203    |   |                  |   | 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, 107,473,133      and 107,395,216 shares issued and outstanding at September      30, 2009 and December 31, 2008, respectively |   |                              | 107,473      |   |                  |   | 107,395 |   |
| Additional      paid-in capital                                                                                                                                                                  |   |                              | 109,486,970  |   |                  |   | 109,295,595 |   |
| Accumulated      deficit                                                                                                                                                                         |   |                              | (110,036,280 | )      |                  |   | (108,544,704 | ) |
|                                                                                                                                                                                             |   |                              |         |   |                  |   |   |   |
|                      Total stockholders equity (deficit)                                                              |   |                              | (441,837     | )      |                  |   | 858,286 |   |
|                                                                                                                                                                                             |   |                              |         |   |                  |   |   |   |
|                      Total liabilities and stockholders equity (deficit)                                              |   | $                                 | 1,217,366    |   |                  | $      | 1,792,489 |   |

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|                                                        |   | For the      Three MonthsEnded      September 30, |        |   | For       the Nine MonthsEnded      September 30, |   |
|-------------------------------------------------------------|--------|--------------------------------------------------------|-------------|--------|--------------------------------------------------------|--------|
|                                                        |   | 2009                                                   |        |   | 2008                                                   |   |   | 2009 |   |   | 2008 |   |
| Revenues                                                    |   |                                                   |        |   |                                                   |   |   |   |   |   |   |   |
| Government      contracts                                   |   | $                                                      | 358,781     |   |                                                   | $      | 625,484 |   |   | $ | 1,231,916 |   |   | $ | 1,782,875 |   |
| Contract      research                                      |   |                                                   | 641,210     |   |                                                   |   | 230,001 |   |   |   | 1,476,107 |   |   |   | 589,358 |   |
| License      Fees and Royalties                             |   |                                                   | 500,000     |   |                                                   |   | – |   |   |   | 500,000 |   |   |   | – |   |
| Other                                                       |   |                                                   | 6,682       |   |                                                   |   | 36,368 |   |   |   | 45,272 |   |   |   | 242,868 |   |
| Total      Revenues                                         |   |                                                   | 1,506,673   |   |                                                   |   | 891,853 |   |   |   | 3,253,295 |   |   |   | 2,615,101 |   |
|                                                        |   |                                                   |        |   |                                                   |   |   |   |   |   |   |   |   |   |   |   |
| Research      and development                               |   |                                                   | 922,669     |   |                                                   |   | 1,167,488 |   |   |   | 2,738,000 |   |   |   | 3,557,379 |   |
| Selling,      general and administrative expenses           |   |                                                   | 586,754     |   |                                                   |   | 1,029,750 |   |   |   | 2,008,246 |   |   |   | 3,091,758 |   |
|                                                        |   |                                                   |        |   |                                                   |   |   |   |   |   |   |   |   |   |   |   |
| Operating      costs and expenses                           |   |                                                   | 1,509,423   |   |                                                   |   | 2,197,238 |   |   |   | 4,746,246 |   |   |   | 6,649,137 |   |
|                                                        |   |                                                   |        |   |                                                   |   |   |   |   |   |   |   |   |   |   |   |
| Gain      on sale of intellectual property and other assets |   |                                                   | –     |   |                                                   |   | 1,225,999 |   |   |   | 6,000 |   |   |   | 1,329,571 |   |
|                                                        |   |                                                   |        |   |                                                   |   |   |   |   |   |   |   |   |   |   |   |
| Loss      from operations                                   |   |                                                   | (2,750      | )      |                                                   |   | (79,386 | ) |   |   | (1,486,951 | )  |   |   | (2,704,465 | )  |
|                                                        |   |                                                   |        |   |                                                   |   |   |   |   |   |   |   |   |   |   |   |
| Other      income (expense), net                            |   |                                                   |        |   |                                                   |   |   |   |   |   |   |   |   |   |   |   |
| Interest      Expense                                       |   |                                                   | (1,999      | )      |                                                   |   | (2,010 | ) |   |   | (6,416 | )  |   |   | (5,008 | )  |
| Interest      Income                                        |   |                                                   | 314         |   |                                                   |   | 6,819 |   |   |   | 1,791 |   |   |   | 42,276 |   |
| Litigation      Settlement                                  |   |                                                   | –     |   |                                                   |   | – |   |   |   | – |   |   |   | 500,000 |   |
|                                                        |   |                                                   |        |   |                                                   |   |   |   |   |   |   |   |   |   |   |   |
| Loss      from continuing operations before taxes           |   |                                                   | (4,435      | )      |                                                   |   | (74,577 | ) |   |   | (1,491,576 | )  |   |   | (2,167,197 | )  |
|                                                        |   |                                                   |        |   |                                                   |   |   |   |   |   |   |   |   |   |   |   |
| Provision      for taxes                                    |   |                                                   | –     |   |                                                   |   | – |   |   |   | – |   |   |   | – |   |
|                                                        |   |                                                   |        |   |                                                   |   |   |   |   |   |   |   |   |   |   |   |
| Net      loss                                               |   | $                                                      | (4,435      | )      |                                                   | $      | (74,577 | ) |   | $ | (1,491,576 | ) |   | $ | (2,167,197 | ) |
|                                                        |   |                                                   |        |   |                                                   |   |   |   |   |   |   |   |   |   |   |   |
| Loss      per share                                         |   |                                                   |        |   |                                                   |   |   |   |   |   |   |   |   |   |   |   |
|                                                        |   |                                                   |        |   |                                                   |   |   |   |   |   |   |   |   |   |   |   |
| Basic      and Diluted                                      |   | $                                                      | (0.00       | )      |                                                   | $      | (0.00 | ) |   | $ | (0.01 | ) |   | $ | (0.02 | ) |
|                                                        |   |                                                   |        |   |                                                   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted      average shares outstanding                    |   |                                                   |        |   |                                                   |   |   |   |   |   |   |   |   |   |   |   |
|                                                        |   |                                                   |        |   |                                                   |   |   |   |   |   |   |   |   |   |   |   |
| Basic      and Diluted                                      |   |                                                   | 107,446,878 |   |                                                   |   | 107,338,332 |   |   |   | 107,412,626 |   |   |   | 107,265,556 |   |

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|                                                          | For       the Nine Months EndedSeptember      30, |   |
|---------------------------------------------------------------|--------------------------------------------------------|--------|
|                                                          | 2009                                                   |   |   | 2008 |   |
| Cash      flows from operating activities:                    |                                                   |   |   |   |   |   |
| Net      loss                                                 |                                                   | $      | (1,491,576 | ) |   | $ | (2,167,197 | ) |
| Adjustments      to reconcile net loss to net                 |                                                   |   |   |   |   |   |   |   |
| cash      used in operating activities:                       |                                                   |   |   |   |   |   |   |   |
| Depreciation      and amortization expense                    |                                                   |   | 48,313 |   |   |   | 51,900 |   |
| Stock      based compensation expense                         |                                                   |   | 191,453 |   |   |   | 481,705 |   |
| Changes      in assets and liabilities:                       |                                                   |   |   |   |   |   |   |   |
| Accounts      receivable, trade                               |                                                   |   | 462,124 |   |   |   | (271,622 | ) |
| Prepaid      expenses, other current assets, and other assets |                                                   |   | 41,989 |   |   |   | 64,451 |   |
| Accounts      payable and accrued liabilities                 |                                                   |   | 568,705 |   |   |   | 249,838 |   |
| Deferred      revenue                                         |                                                   |   | 155,405 |   |   |   | (261,337 | ) |
|                                                          |                                                   |   |   |   |   |   |   |   |
| Total      adjustments                                        |                                                   |   | 1,467,989 |   |   |   | 314,935 |   |
|                                                          |                                                   |   |   |   |   |   |   |   |
| Net      cash used in operating activities                    |                                                   |   | (23,587 | ) |   |   | (1,852,262 | ) |
|                                                          |                                                   |   |   |   |   |   |   |   |
| Cash      flows from investing activities:                    |                                                   |   |   |   |   |   |   |   |
| Purchases      of fixed assets                                |                                                   |   | (18,667 | ) |   |   | (36,705 | ) |
| Net      cash used in investing activities                    |                                                   |   | (18,667 | ) |   |   | (36,705 | ) |
|                                                          |                                                   |   |   |   |   |   |   |   |
| Cash      flows from financing activities:                    |                                                   |   |   |   |   |   |   |   |
| Repayment      of capital leases                              |                                                   |   | (30,717 | ) |   |   | (22,566 | ) |
| Proceeds      from stock issuance, net of costs               |                                                   |   | – |   |   |   | 61,250 |   |
|                                                          |                                                   |   |   |   |   |   |   |   |
| Net      cash provided by (used in) financing activities      |                                                   |   | (30,717 | ) |   |   | 38,684 |   |
|                                                          |                                                   |   |   |   |   |   |   |   |
| Net      (decrease) in cash and cash equivalents              |                                                   |   | (72,971 | ) |   |   | (1,850,283 | ) |
|                                                          |                                                   |   |   |   |   |   |   |   |
| Cash      and cash equivalents, beginning of period           |                                                   |   | 710,111 |   |   |   | 3,020,096 |   |
|                                                          |                                                   |   |   |   |   |   |   |   |
| Cash      and cash equivalents, end of period                 |                                                   | $      | 637,140 |   |   | $ | 1,169,813 |   |

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

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

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

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

----

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

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

|                                                 |   | ANI    |       |   | EBT    |   |   | All      Other |   |   | Total    |   |
|------------------------------------------------------|--------|--------|------------|--------|--------|--------|--------|----------------|--------|--------|----------|--------|
| 2009                                                 |   |   |       |   |   |   |   |           |   |   |     |   |
| Revenue                                              |   | $      | 3,253,295  |   |   | $      | -      |           |   | $      | -        |   |   | $ | 3,253,295 |   |
|                                                 |   |   |       |   |   |   |   |           |   |   |     |   |   |   |   |   |
| Profit      (Loss)                                   |   |   | (894,361   | )      |   |   | 5,459  |           |   |   | (602,674 | )      |   |   | (1,491,576 | ) |
|                                                 |   |   |       |   |   |   |   |           |   |   |     |   |   |   |   |   |
| Expenditures      for                                |   |   |       |   |   |   |   |           |   |   |     |   |   |   |   |   |
|      long-lived      assets |   |   | 16,975     |   |   |   | -      |           |   |   | 1,692    |   |   |   | 18,667 |   |
|                                                 |   |   |       |   |   |   |   |           |   |   |     |   |   |   |   |   |
| 2008                                                 |   |   |       |   |   |   |   |           |   |   |     |   |   |   |   |   |
| Revenue                                              |   | $      | 2,615,101  |   |   | $      | -      |           |   | $      | -        |   |   | $ | 2,615,101 |   |
|                                                 |   |   |       |   |   |   |   |           |   |   |     |   |   |   |   |   |
| Loss                                                 |   |   | (1,245,088 | )      |   |   | (520   | )              |   |   | (921,589 | )      |   |   | (2,167,197 | ) |
|                                                 |   |   |       |   |   |   |   |           |   |   |     |   |   |   |   |   |
| Expenditures      for                                |   |   |       |   |   |   |   |           |   |   |     |   |   |   |   |   |
|      long-lived      assets |   |   | 36,705     |   |   |   | -      |           |   |   | -        |   |   |   | 36,705 |   |

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|                                                     | APPLIED      NANOTECH HOLDINGS, INC.(Registrant)                                                                                                                                                                                                                                                                                                                                                                                                        |
|----------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|                                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| Date:     November      2, 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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