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| x                                                 | Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934        |
|---------------------------------------------------|------------------------------------------------------------------------------------------|
|                                              |                                                                                     |
| For the quarterly period ended September 30, 2010 |
|                                              |                                                                                     |
| o                                                 | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |

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

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

|   | Large Accelerated Filer o | Accelerated Filer o              |   |
|--------|---------------------------|----------------------------------|--------|
|   |                      |                             |   |
|   | Non-accelerated Filer x   | Smaller Reporting Company o |   |

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|                                | Page                                                                                                      |
|-------------------------------------|-----------------------------------------------------------------------------------------------------------|
|                                |                                                                                                      |
| Part I.  Financial Information | 3                                                                                                         |
|                                |                                                                                                      |   |
|                                | Item 1.  Financial Statements                                                                        | 3 |
|                                |                                                                                                      |   |
|                                | Consolidated Balance Sheets -- September 30, 2010 and December 31, 2009                                   | 3 |
|                                |                                                                                                      |   |
|                                | Consolidated Statements of Operations --Three Months and Nine Months Ended September 30, 2010 and 2009    | 4 |
|                                |                                                                                                      |   |
|                                | Consolidated Statements of Cash Flows -- Nine Months Ended September 30, 2010 and 2009                    | 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    | 12                                                                                                        |
|                                |                                                                                                      |   |
|                                | Item 1.  Legal Proceedings                                                                      | 12 |
|                                |                                                                                                      |   |
|                                | Item 6.  Exhibits                                                                                    | 12 |
|                                |                                                                                                      |   |
| Signatures                          | 13                                                                                                        |

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| ASSETS                                                                                                                                                                                                                            |   | (Unaudited)September 30,2010 |         |   | December 31,2009 |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------|--------------|--------|------------------|--------|
| Current assets:                                                                                                                                                                                                                   |   |                         |         |   |             |   |
| Cash and cash equivalents                                                                                                                                                                                                         |   | $                            | 1,291,744    |   |             | $      | 286,971 |   |
| Accounts receivable – net of allowance for doubtful accounts                                                                                                                                                                |   |                         | 409,607      |   |             |   | 249,164 |   |
| Prepaid expenses and other current assets                                                                                                                                                                                         |   |                         | 100,858      |   |             |   | 67,340 |   |
|                                                                                                                                                                                                                              |   |                         |         |   |             |   |   |   |
| Total current assets                                                                                                                                                                                                              |   |                         | 1,802,209    |   |             |   | 603,475 |   |
|                                                                                                                                                                                                                              |   |                         |         |   |             |   |   |   |
| Property and equipment, net                                                                                                                                                                                                       |   |                         | 229,025      |   |             |   | 267,008 |   |
| Other assets                                                                                                                                                                                                                      |   |                         | 17,119       |   |             |   | 22,884 |   |
| Total assets                                                                                                                                                                                                                      |   | $                            | 2,048,353    |   |             | $      | 893,367 |   |
|                                                                                                                                                                                                                              |   |                         |         |   |             |   |   |   |
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)                                                                                                                                                                              |   |                         |         |   |             |   |   |   |
|                                                                                                                                                                                                                              |   |                         |         |   |             |   |   |   |
| Current liabilities:                                                                                                                                                                                                              |   |                         |         |   |             |   |   |   |
| Accounts payable                                                                                                                                                                                                                  |   | $                            | 432,262      |   |             | $      | 952,679 |   |
| Notes payable                                                                                                                                                                                                                     |   |                         | 290,000      |   |             |   | – |   |
| Obligations under capital lease                                                                                                                                                                                                   |   |                         | 21,138       |   |             |   | 21,939 |   |
| Accrued liabilities                                                                                                                                                                                                               |   |                         | 499,094      |   |             |   | 482,629 |   |
| Deferred revenue                                                                                                                                                                                                                  |   |                         | 285,455      |   |             |   | 310,000 |   |
|                                                                                                                                                                                                                              |   |                         |         |   |             |   |   |   |
| Total current liabilities                                                                                                                                                                                                         |   |                         | 1,527,949    |   |             |   | 1,767,247 |   |
|                                                                                                                                                                                                                              |   |                         |         |   |             |   |   |   |
| Obligations under capital lease, long-term                                                                                                                                                                                        |   |                         | 15,735       |   |             |   | 31,124 |   |
|                                                                                                                                                                                                                              |   |                         |         |   |             |   |   |   |
| Convertible notes payable, long-term                                                                                                                                                                                              |   |                         | 1,641,986    |   |             |   | 165,834 |   |
|                                                                                                                                                                                                                              |   |                         |         |   |             |   |   |   |
| Total Liabilities                                                                                                                                                                                                                 |   |                         | 3,185,670    |   |             |   | 1,964,205 |   |
|                                                                                                                                                                                                                              |   |                         |         |   |             |   |   |   |
| 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, 160,000,000 shares authorized,     108,974,800 and 107,473,133 shares issued and outstanding at     September 30, 2010 and December 31, 2009, respectively |   |                         | 108,975      |   |             |   | 107,473 |   |
| Additional paid-in capital                                                                                                                                                                                                        |   |                         | 110,656,168  |   |             |   | 109,518,998 |   |
| Accumulated deficit                                                                                                                                                                                                               |   |                         | (111,902,460 | )      |             |   | (110,697,309 | ) |
|                                                                                                                                                                                                                              |   |                         |         |   |             |   |   |   |
| Total stockholders equity (deficit)                                                                                                                                                                                               |   |                         | (1,137,317   | )      |             |   | (1,070,838 | ) |
|                                                                                                                                                                                                                              |   |                         |         |   |             |   |   |   |
| Total liabilities and stockholders equity (deficit)                                                                                                                                                                               |   | $                            | 2,048,353    |   |             | $      | 893,367 |   |

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|                                                   |   | For the Three Months EndedSeptember 30, |        |   | For  the Nine Months EndedSeptember 30, |   |
|--------------------------------------------------------|--------|----------------------------------------------|-------------|--------|----------------------------------------------|--------|
|                                                   |   | 2010                                         |        |   | 2009                                         |   |   | 2010 |   |   | 2009 |   |
| Revenues                                               |   |                                         |        |   |                                         |   |   |   |   |   |   |   |
| Government contracts                                   |   | $                                            | 685,662     |   |                                         | $      | 358,781 |   |   | $ | 1,925,129 |   |   | $ | 1,231,916 |   |
| Contract research                                      |   |                                         | 197,133     |   |                                         |   | 641,210 |   |   |   | 786,098 |   |   |   | 1,476,107 |   |
| License fees and royalties                             |   |                                         | –     |   |                                         |   | 500,000 |   |   |   | 1,000,000 |   |   |   | 500,000 |   |
| Other                                                  |   |                                         | 66,438      |   |                                         |   | 6,682 |   |   |   | 113,581 |   |   |   | 45,272 |   |
| Total revenues                                         |   |                                         | 949,233     |   |                                         |   | 1,506,673 |   |   |   | 3,824,808 |   |   |   | 3,253,295 |   |
|                                                   |   |                                         |        |   |                                         |   |   |   |   |   |   |   |   |   |   |   |
| Research and development                               |   |                                         | 1,244,015   |   |                                         |   | 922,669 |   |   |   | 3,290,001 |   |   |   | 2,738,000 |   |
| Selling, general and administrative expenses           |   |                                         | 644,759     |   |                                         |   | 586,754 |   |   |   | 1,471,942 |   |   |   | 2,008,246 |   |
|                                                   |   |                                         |        |   |                                         |   |   |   |   |   |   |   |   |   |   |   |
| Operating costs and expenses                           |   |                                         | 1,888,774   |   |                                         |   | 1,509,423 |   |   |   | 4,761,943 |   |   |   | 4,746,246 |   |
|                                                   |   |                                         |        |   |                                         |   |   |   |   |   |   |   |   |   |   |   |
| Gain on sale of intellectual property and other assets |   |                                         | –     |   |                                         |   | – |   |   |   | 2,732 |   |   |   | 6,000 |   |
|                                                   |   |                                         |        |   |                                         |   |   |   |   |   |   |   |   |   |   |   |
| Loss from operations                                   |   |                                         | (939,541    | )      |                                         |   | (2,750 | ) |   |   | (934,403 | )   |   |   | (1,486,951 | ) |
|                                                   |   |                                         |        |   |                                         |   |   |   |   |   |   |   |   |   |   |   |
| Other income (expense), net                            |   |                                         |        |   |                                         |   |   |   |   |   |   |   |   |   |   |   |
| Interest expense                                       |   |                                         | (119,812    | )      |                                         |   | (1,999 | ) |   |   | (276,862 | )  |   |   | (6,416 | )  |
| Interest income                                        |   |                                         | 649         |   |                                         |   | 314 |   |   |   | 1,407 |   |   |   | 1,791 |   |
| Other income                                           |   |                                         | 4,707       |   |                                         |   | – |   |   |   | 4,707 |   |   |   | – |   |
|                                                   |   |                                         |        |   |                                         |   |   |   |   |   |   |   |   |   |   |   |
| Loss from continuing operations before taxes           |   |                                         | (1,053,997  | )      |                                         |   | (4,435 | ) |   |   | (1,205,151 | ) |   |   | (1,491,576 | ) |
|                                                   |   |                                         |        |   |                                         |   |   |   |   |   |   |   |   |   |   |   |
| Provision for taxes                                    |   |                                         | –     |   |                                         |   | – |   |   |   | – |   |   |   | – |   |
|                                                   |   |                                         |        |   |                                         |   |   |   |   |   |   |   |   |   |   |   |
| Net loss                                               |   | $                                            | (1,053,997  | )      |                                         | $      | (4,435 | ) |   | $ | (1,205,151 | ) |   | $ | (1,491,576 | ) |
|                                                   |   |                                         |        |   |                                         |   |   |   |   |   |   |   |   |   |   |   |
| Loss  per share                              |   |                                         |        |   |                                         |   |   |   |   |   |   |   |   |   |   |   |
|                                                   |   |                                         |        |   |                                         |   |   |   |   |   |   |   |   |   |   |   |
| Basic and Diluted                                      |   | $                                            | (0.01       | )      |                                         | $      | (0.00 | ) |   | $ | (0.01 | ) |   | $ | (0.01 | ) |
|                                                   |   |                                         |        |   |                                         |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average shares outstanding                    |   |                                         |        |   |                                         |   |   |   |   |   |   |   |   |   |   |   |
|                                                   |   |                                         |        |   |                                         |   |   |   |   |   |   |   |   |   |   |   |
| Basic and diluted                                      |   |                                         | 108,841,403 |   |                                         |   | 107,446,878 |   |   |   | 108,941,722 |   |   |   | 107,412,626 |   |

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|                                                                        |   | For  the Nine Months EndedSeptember 30, |       |
|-----------------------------------------------------------------------------|--------|----------------------------------------------|------------|
|                                                                        |   | 2010                                         |       |   | 2009 |   |
| Cash flows from operating activities:                                       |   |                                         |       |   |   |   |
| Net loss                                                                    |   | $                                            | (1,205,151 | ) |   | $ | (1,491,576 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities: |   |                                         |       |   |   |   |   |   |
| Depreciation and amortization expense                                       |   |                                         | 48,393     |   |   |   | 48,313 |   |
| Amortization of discount on debt                                            |   |                                         | 167,402    |   |   |   | – |   |
| Stock based compensation expense                                            |   |                                         | 205,892    |   |   |   | 191,453 |   |
| Changes in assets and liabilities:                                          |   |                                         |       |   |   |   |   |   |
| Accounts receivable, trade                                                  |   |                                         | (160,443   | )  |   |   | 462,124 |   |
| Prepaid expenses and other assets                                           |   |                                         | (27,753    | )  |   |   | 41,989 |   |
| Accounts payable and accrued liabilities                                    |   |                                         | 143,210    |   |   |   | 568,705 |   |
| Deferred revenue                                                            |   |                                         | (24,545    | )  |   |   | 155,405 |   |
|                                                                        |   |                                         |       |   |   |   |   |   |
| Total adjustments                                                           |   |                                         | 352,156    |   |   |   | 1,467,989 |   |
|                                                                        |   |                                         |       |   |   |   |   |   |
| Net cash used in operating activities                                       |   |                                         | (852,995   | ) |   |   | (23,587 | ) |
|                                                                        |   |                                         |       |   |   |   |   |   |
| Cash flows from investing activities:                                       |   |                                         |       |   |   |   |   |   |
| Purchases of property and equipment                                         |   |                                         | (10,410    | ) |   |   | (18,667 | ) |
| Net cash used in investing activities                                       |   |                                         | (10,410    | ) |   |   | (18,667 | ) |
|                                                                        |   |                                         |       |   |   |   |   |   |
| Cash flows from financing activities:                                       |   |                                         |       |   |   |   |   |   |
| Repayment of capital leases                                                 |   |                                         | (16,190    | ) |   |   | (30,717 | ) |
| Payments on notes payable                                                   |   |                                         | (50,000    | ) |   |   | – |   |
| Proceeds from issuance of convertible notes payable                         |   |                                         | 1,730,000  |   |   |   | – |   |
| Proceeds from stock issuance, net of costs                                  |   |                                         | 204,368    |   |   |   | – |   |
|                                                                        |   |                                         |       |   |   |   |   |   |
| Net cash provided by (used in) financing activities                         |   |                                         | 1,868,178  |   |   |   | (30,717 | ) |
|                                                                        |   |                                         |       |   |   |   |   |   |
| Net increase (decrease) in cash and cash equivalents                        |   |                                         | 1,004,773  |   |   |   | (72,971 | ) |
|                                                                        |   |                                         |       |   |   |   |   |   |
| Cash and cash equivalents, beginning of period                              |   |                                         | 286,971    |   |   |   | 710,111 |   |
|                                                                        |   |                                         |       |   |   |   |   |   |
| Cash and cash equivalents, end of period                                    |   | $                                            | 1,291,744  |   |   | $ | 637,140 |   |

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|                               |   | ANI    |      |   | EBT    |   |   | All Other |   |   | Total    |   |
|------------------------------------|--------|--------|-----------|--------|--------|--------|--------|-----------|--------|--------|----------|--------|
| 2010                               |   |   |      |   |   |   |   |      |   |   |     |   |
| Revenue                            |   | $      | 3,824,808 |   |   | $      | -      |      |   | $      | -        |   |   | $ | 3,824,808 |   |
|                               |   |   |      |   |   |   |   |      |   |   |     |   |   |   |   |   |
| Net income (Loss)                  |   |   | (423,729  | )      |   |   | (571   | )         |   |   | (780,851 | )      |   |   | (1,205,151 | ) |
|                               |   |   |      |   |   |   |   |      |   |   |     |   |   |   |   |   |
| Expenditures for long-lived assets |   |   | 10,410    |   |   |   | -      |      |   |   | -        |   |   |   | 10,410 |   |
|                               |   |   |      |   |   |   |   |      |   |   |     |   |   |   |   |   |
| 2009                               |   |   |      |   |   |   |   |      |   |   |     |   |   |   |   |   |
| Revenue                            |   | $      | 3,253,295 |   |   | $      | -      |      |   | $      | -        |   |   | $ | 3,253,295 |   |
|                               |   |   |      |   |   |   |   |      |   |   |     |   |   |   |   |   |
| Net income (Loss)                  |   |   | (894,361  | )      |   |   | 5,459  |      |   |   | (602,674 | )      |   |   | (1,491,576 | ) |
|                               |   |   |      |   |   |   |   |      |   |   |     |   |   |   |   |   |
| Expenditures for long-lived assets |   |   | 16,975    |   |   |   | -      |      |   |   | 1,692    |   |   |   | 18,667 |   |

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|                                                | APPLIED NANOTECH HOLDINGS, INC.(Registrant)                                                                                                                                                                                                                                                                                                                                            |
|-----------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                |                                                                                                                                                                                                                                                                                                                                                                                   |
|                                                |                                                                                                                                                                                                                                                                                                                                                                                   |
| Date:     October 29, 2010 | /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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