----

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Index

**UNITED        STATES**

**SECURITIES        AND EXCHANGE COMMISSION**

**WASHINGTON,        DC 20549**

**FORM        10-Q**

**COMMISSION        FILE NO. 1-11602**

**NANO-PROPRIETARY,        INC.**

| **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) |

| xYes | oNo |
|------|-----|

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

----

----

----

**NANO-PROPRIETARY,        INC.**

**INDEX**

| Part                  I.  Financial Information | **Page**                                                                                                                                                                                                                                                                       |
|------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                 |                                                                                                                                                                                                                                                                           |   |   |
|                                                 | Item                  1.  Financial Statements                                                                                                                                                                                                                            |   |
|                                                 |                                                                                                                                                                                                                                                                           |   |   |
|                                                 |                                                                                                                                                                                                                                                                           | Consolidated                  Balance Sheets--September 30, 2007 and                  December 31, 2006 | 3 |
|                                                 |                                                                                                                                                                                                                                                                           |   |   |
|                                                 |                                                                                                                                                                                                                                                                           | Consolidated                  Statements of Operations --Three Months and Nine                  Months Ended      September                  30, 2007 and 2006 |  4 |
|                                                 |                                                                                                                                                                                                                                                                           |   |   |
|                                                 |                                                                                                                                                                                                                                                                           | Consolidated                  Statements of Cash Flows --Nine Months                  Ended          September                  30, 2007 and 2006 |  5 |
|                                                 |                                                                                                                                                                                                                                                                           |   |   |
|                                                 |                                                                                                                                                                                                                                                                           | Notes  to                  Consolidated Financial                  Statements | 6 |
|                                                 |                                                                                                                                                                                                                                                                           |   |   |
|                                                 | Item                  2. Management’s Discussion and Analysis of Financial                  Condition                                      and Results of Operations |  10 |
|                                                 |                                                                                                                                                                                                                                                                           |   |   |
|                                                 | Item                  3.  Quantitative and Qualitative                  Disclosures about Market Risk                                                                                                                                                                | 13 |
|                                                 |                                                                                                                                                                                                                                                                           |   |   |
|                                                 | Item                  4.  Controls and Procedures                                                                                                                                                                                                                    | 13 |
|                                                 |                                                                                                                                                                                                                                                                           |   |   |
| Part                  II.  Other Information    |                                                                                                                                                                                                                                                                           |
|                                                 |                                                                                                                                                                                                                                                                           |   |   |
|                                                 | Item                  1.  Legal Proceedings                                                                                                                                                                                                                          | 14 |
|                                                 |                                                                                                                                                                                                                                                                           |   |   |
|                                                 | Item                  4.  Submission of Matters to a Vote of                  Security Holders                                                                                                                                                                       | 15 |
|                                                 |                                                                                                                                                                                                                                                                           |   |
|                                                 | Item                  6.  Exhibits                                                                                                                                                                                                                                        | 16 |
|                                                 |                                                                                                                                                                                                                                                                           |   |   |
| Signatures                                           | 17                                                                                                                                                                                                                                                                             |

----

**PARTI. FINANCIAL        INFORMATION**

**ITEM1. FINANCIAL        STATEMENTS**

**NANO-PROPRIETARY,        INC. AND SUBSIDIARIES**

**CONSOLIDATED        BALANCE SHEETS**

| **ASSETS**                                                                                                                                                                                                                                                                                                                                                                         |   | **(Unaudited)****September                  30,****2007** |         |   | **December                  31,****2006** |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------|--------------|--------|-------------------------------------------|--------|
| Current                  assets:                                                                                                                                                                                                                                                                                                                                                   |   |                                                      |         |   |                                      |   |
| Cash                  and cash equivalents                                                                                                                                                                                                                                                                                                                                         |   | $                                                         | 5,651,932    |   |                                      | $      | 2,085,338 |   |
| Accounts                  receivable, trade – net of allowance for doubtful accounts                                                                                                                                                                                                                                                                                         |   |                                                      | 511,921      |   |                                      |   | 364,718 |   |
| Prepaid                  expenses and other current assets                                                                                                                                                                                                                                                                                                                         |   |                                                      | 140,346      |   |                                      |   | 79,301 |   |
|                                                                                                                                                                                                                                                                                                                                                                               |   |                                                      |         |   |                                      |   |   |   |
|                                  Total current assets                                                                                                                                                                                                                                                   |   |                                                      | 6,304,199    |   |                                      |   | 2,529,357 |   |
|                                                                                                                                                                                                                                                                                                                                                                               |   |                                                      |         |   |                                      |   |   |   |
| Property                  and equipment, net                                                                                                                                                                                                                                                                                                                                       |   |                                                      | 174,621      |   |                                      |   | 154,545 |   |
| Other                  assets                                                                                                                                                                                                                                                                                                                                                      |   |                                                      | 109,540      |   |                                      |   | 9,540 |   |
|                                  Total assets                                                                                                                                                                                                                                                           |   | $                                                         | 6,588,360    |   |                                      | $      | 2,693,442 |   |
|                                                                                                                                                                                                                                                                                                                                                                               |   |                                                      |         |   |                                      |   |   |   |
| **LIABILITIES                  AND STOCKHOLDERS’ EQUITY**                                                                                                                                                                                                                                                                                                                    |   |                                                      |         |   |                                      |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                               |   |                                                      |         |   |                                      |   |   |   |
| Current                  liabilities:                                                                                                                                                                                                                                                                                                                                              |   |                                                      |         |   |                                      |   |   |   |
| Accounts                  payable                                                                                                                                                                                                                                                                                                                                                  |   | $                                                         | 1,959,457    |   |                                      | $      | 1,562,488 |   |
| Accrued                  liabilities                                                                                                                                                                                                                                                                                                                                               |   |                                                      | 88,762       |   |                                      |   | 87,237 |   |
| Deferred                  revenue                                                                                                                                                                                                                                                                                                                                                  |   |                                                      | 724,329      |   |                                      |   | 401,455 |   |
|                                                                                                                                                                                                                                                                                                                                                                               |   |                                                      |         |   |                                      |   |   |   |
|                                  Total current liabilities                                                                                                                                                                                                                                              |   |                                                      | 2,772,458    |   |                                      |   | 2,051,180 |   |
|                                                                                                                                                                                                                                                                                                                                                                               |   |                                                      |         |   |                                      |   |   |   |
| Commitments                  and contingencies                                                                                                                                                                                                                                                                                                                                     |   |                                                      | –      |   |                                      |   | – |   |
|                                                                                                                                                                                                                                                                                                                                                                               |   |                                                      |         |   |                                      |   |   |   |
|  Total                  Liabilities                                                                                                                                                                                                                                                                                                                                           |   |                                                      | 2,772,458    |   |                                      |   | 2,051,180 |   |
|                                                                                                                                                                                                                                                                                                                                                                               |   |                                                      |         |   |                                      |   |   |   |
| Stockholders'                  (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,            107,173,549                  and 104,257,607 shares issued and outstanding at            September                  30, 2007 and December 31, 2006, respectively |   |                                                      | 107,174      |   |                                      |   | 104,258 |   |
| Additional                  paid-in capital                                                                                                                                                                                                                                                                                                                                        |   |                                                      | 108,646,258  |   |                                      |   | 102,139,950 |   |
| Accumulated                  deficit                                                                                                                                                                                                                                                                                                                                               |   |                                                      | (104,937,530 | )      |                                      |   | (101,601,946 | ) |
|                                                                                                                                                                                                                                                                                                                                                                               |   |                                                      |         |   |                                      |   |   |   |
|                                  Total stockholders equity                                                                                                                                                                                                                                              |   |                                                      | 3,815,902    |   |                                      |   | 642,262 |   |
|                                                                                                                                                                                                                                                                                                                                                                               |   |                                                      |         |   |                                      |   |   |   |
|                                  Total liabilities and stockholders equity                                                                                                                                                                                                                              |   | $                                                         | 6,588,360    |   |                                      | $      | 2,693,442 |   |

----

**NANO-PROPRIETARY,        INC. AND SUBSIDIARIES**

**CONSOLIDATEDSTATEMENTS        OF OPERATIONS**

**(UNAUDITED)**

|                                                                                        |   | **For the                  Three Months****Ended                  September 30,** |        |   | **For                   the Nine Months****Ended                  September 30,** |   |
|---------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------|-------------|--------|----------------------------------------------------------------------------------------|--------|
|                                                                                        |   | **2007**                                                                               |        |   | **2006**                                                                               |   |   | **2007** |   |   | **2006** |   |
| Revenues                                                                                    |   |                                                                                   |        |   |                                                                                   |   |   |   |   |   |   |   |
| Government                  contracts                                                       |   | $                                                                                      | 664,541     |   |                                                                                   | $      | 109,182 |   |   | $ | 1,741,115 |   |   | $ | 180,296 |   |
| Contract                  research                                                          |   |                                                                                   | 203,708     |   |                                                                                   |   | 60,000 |   |   |   | 721,157 |   |   |   | 185,000 |   |
| Other                                                                                       |   |                                                                                   | 181,500     |   |                                                                                   |   | 44,659 |   |   |   | 460,382 |   |   |   | 125,738 |   |
|           Total                  Revenues |   |                                                                                   | 1,049,749   |   |                                                                                   |   | 213,841 |   |   |   | 2,922,654 |   |   |   | 491,034 |   |
|                                                                                        |   |                                                                                   |        |   |                                                                                   |   |   |   |   |   |   |   |   |   |   |   |
| Research                  and development                                                   |   |                                                                                   | 1,136,220   |   |                                                                                   |   | 962,458 |   |   |   | 3,207,932 |   |   |   | 2,616,767 |   |
| Selling,                  general and administrative expenses                               |   |                                                                                   | 704,222     |   |                                                                                   |   | 1,184,579 |   |   |   | 3,144,294 |   |   |   | 4,092,463 |   |
|                                                                                        |   |                                                                                   |        |   |                                                                                   |   |   |   |   |   |   |   |   |   |   |   |
| Operating                  costs and expenses                                               |   |                                                                                   | 1,840,442   |   |                                                                                   |   | 2,147,037 |   |   |   | 6,352,226 |   |   |   | 6,709,230 |   |
|                                                                                        |   |                                                                                   |        |   |                                                                                   |   |   |   |   |   |   |   |   |   |   |   |
| Gain                  on sale of intellectual property and other assets                     |   |                                                                                   | –     |   |                                                                                   |   | – |   |   |   | – |   |   |   | (1,100,000 | ) |
|                                                                                        |   |                                                                                   |        |   |                                                                                   |   |   |   |   |   |   |   |   |   |   |   |
| Loss                  from operations                                                       |   |                                                                                   | (790,693    | )      |                                                                                   |   | (1,933,196 | ) |   |   | (3,429,572 | ) |   |   | (5,118,196 | ) |
|                                                                                        |   |                                                                                   |        |   |                                                                                   |   |   |   |   |   |   |   |   |   |   |   |
| Other                  income (expense), net                                                |   |                                                                                   |        |   |                                                                                   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                  Expense                                                           |   |                                                                                   | (80         | )      |                                                                                   |   | (222 | ) |   |   | (349 | ) |   |   | (518 | ) |
| Interest                  Income                                                            |   |                                                                                   | 30,863      |   |                                                                                   |   | 2,380 |   |   |   | 94,337 |   |   |   | 7,927 |   |
|                                                                                        |   |                                                                                   |        |   |                                                                                   |   |   |   |   |   |   |   |   |   |   |   |
| Loss                  from continuing operations before taxes                               |   |                                                                                   | (759,910    | )      |                                                                                   |   | (1,931,038 | ) |   |   | (3,335,584 | ) |   |   | (5,110,787 | ) |
|                                                                                        |   |                                                                                   |        |   |                                                                                   |   |   |   |   |   |   |   |   |   |   |   |
| Provision                  for taxes                                                        |   |                                                                                   | –     |   |                                                                                   |   | – |   |   |   | – |   |   |   | – |   |
|                                                                                        |   |                                                                                   |        |   |                                                                                   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  loss                                                                   |   | $                                                                                      | (759,910    | )      |                                                                                   | $      | (1,931,038 | ) |   | $ | (3,335,584 | ) |   | $ | (5,110,787 | ) |
|                                                                                        |   |                                                                                   |        |   |                                                                                   |   |   |   |   |   |   |   |   |   |   |   |
| Loss                  per share                                                             |   |                                                                                   |        |   |                                                                                   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                        |   |                                                                                   |        |   |                                                                                   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                  and Diluted                                                          |   | $                                                                                      | (0.01       | )      |                                                                                   | $      | (0.02 | ) |   | $ | (0.03 | ) |   | $ | (0.05 | ) |
|                                                                                        |   |                                                                                   |        |   |                                                                                   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted                  average shares outstanding                                        |   |                                                                                   |        |   |                                                                                   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                        |   |                                                                                   |        |   |                                                                                   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                  and Diluted                                                          |   |                                                                                   | 107,173,060 |   |                                                                                   |   | 101,862,093 |   |   |   | 106,034,229 |   |   |   | 100,469,473 |   |

----

**NANO-PROPRIETARY,        INC. AND SUBSIDIARIES**

**CONSOLIDATEDSTATEMENTS        OF CASH FLOWS**

**(UNAUDITED)**

|                                                            |   | **For                   the Nine Months Ended****September                  30,** |       |
|-----------------------------------------------------------------|--------|----------------------------------------------------------------------------------------|------------|
|                                                            |   | **2007**                                                                               |       |   | **2006** |   |
| Cash                  flows from operating activities:          |   |                                                                                   |       |   |   |   |
| Net                  loss                                       |   | $                                                                                      | (3,335,584 | ) |   | $ | (5,110,787 | ) |
| Adjustments                  to reconcile net loss to net       |   |                                                                                   |       |   |   |   |   |   |
| cash                  used in operating activities:             |   |                                                                                   |       |   |   |   |   |   |
| Depreciation                  and amortization expense          |   |                                                                                   | 31,394     |   |   |   | 32,030 |   |
| Stock                  based compensation expense               |   |                                                                                   | 204,800    |   |   |   | 648,901 |   |
| Issuance                  of shares to ATI                      |   |                                                                                   | –    |   |   |   | 400,000 |   |
| Changes                  in assets and liabilities:             |   |                                                                                   |       |   |   |   |   |   |
| Accounts                  receivable, trade                     |   |                                                                                   | (147,203   | ) |   |   | (93,645 | ) |
| Prepaid                  expenses and other current assets      |   |                                                                                   | (161,045   | ) |   |   | (14,507 | ) |
| Accounts                  payable and accrued liabilities       |   |                                                                                   | 398,494    |   |   |   | 1,551,906 |   |
| Customer                  deposits and deferred revenue         |   |                                                                                   | 322,784    |   |   |   | 284,832 |   |
|                                                            |   |                                                                                   |       |   |   |   |   |   |
| Total                  adjustments                              |   |                                                                                   | 649,224    |   |   |   | 2,809,517 |   |
|                                                            |   |                                                                                   |       |   |   |   |   |   |
| Net                  cash used in operating activities          |   |                                                                                   | (2,686,360 | ) |   |   | (2,301,270 | ) |
|                                                            |   |                                                                                   |       |   |   |   |   |   |
| Cash                  flows from investing activities:          |   |                                                                                   |       |   |   |   |   |   |
| Purchases                  of fixed assets                      |   |                                                                                   | (51,470    | ) |   |   | (65,082 | ) |
| Net                  cash used in investing activities          |   |                                                                                   | (51,470    | ) |   |   | (65,082 | ) |
|                                                            |   |                                                                                   |       |   |   |   |   |   |
| Cash                  flows from financing activities:          |   |                                                                                   |       |   |   |   |   |   |
| Repayment                  of capital leases                    |   |                                                                                   | –    |   |   |   | (4,348 | ) |
| Proceeds                  of stock issuance, net of costs       |   |                                                                                   | 6,304,424  |   |   |   | 2,100,641 |   |
|                                                            |   |                                                                                   |       |   |   |   |   |   |
| Net                  cash provided by financing activities      |   |                                                                                   | 6,304,424  |   |   |   | 2,096,293 |   |
|                                                            |   |                                                                                   |       |   |   |   |   |   |
| Net                  increase in cash and cash equivalents      |   |                                                                                   | 3,566,594  |   |   |   | (270,059 | ) |
|                                                            |   |                                                                                   |       |   |   |   |   |   |
| Cash                  and cash equivalents, beginning of period |   |                                                                                   | 2,085,338  |   |   |   | 897,247 |   |
|                                                            |   |                                                                                   |       |   |   |   |   |   |
| Cash                  and cash equivalents, end of period       |   | $                                                                                      | 5,651,932  |   |   | $ | 627,188 |   |

----

**NANO-PROPRIETARY,        INC. AND SUBSIDIARIES**

**NOTESTO        CONSOLIDATED FINANCIAL STATEMENTS**

**(UNAUDITED)**

----

**NANO-PROPRIETARY,        INC. AND SUBSIDIARIES**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS**

**(UNAUDITED)**

*Litigation*

*Canon        Litigation*

----

**NANO-PROPRIETARY,        INC. AND SUBSIDIARIES**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS**

**(UNAUDITED)**

*Keesmann        litigation*

----

**NANO-PROPRIETARY,        INC. AND SUBSIDIARIES**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS**

**(UNAUDITED)**

|                                                             |   | ANI    |       |   | EBT    |   |    | All                  Other |   |   | Total      |   |
|------------------------------------------------------------------|--------|--------|------------|--------|--------|--------|---------|----------------------------|--------|--------|------------|--------|
| 2007                                                             |   |   |       |   |   |   |    |                       |   |   |       |   |
| Revenue                                                          |   | $      | 2,922,654  |   |   | $      | -       |                       |   | $      | -          |   |   | $ | 2,922,654 |   |
|                                                             |   |   |       |   |   |   |    |                       |   |   |       |   |   |   |   |   |
| Profit                  (Loss)                                   |   |   | (2,365,586 | )      |   |   | (1,298  | )                          |   |   | (968,700   | )      |   |   | (3,335,584 | ) |
|                                                             |   |   |       |   |   |   |    |                       |   |   |       |   |   |   |   |   |
| Expenditures                  for                                |   |   |       |   |   |   |    |                       |   |   |       |   |   |   |   |   |
|      long-lived                  assets |   |   | 51,470     |   |   |   | -       |                       |   |   | -          |   |   |   | 51,470 |   |
|                                                             |   |   |       |   |   |   |    |                       |   |   |       |   |   |   |   |   |
| 2006                                                             |   |   |       |   |   |   |    |                       |   |   |       |   |   |   |   |   |
| Revenue                                                          |   | $      | 491,034    |   |   | $      | -       |                       |   | $      | -          |   |   | $ | 491,034 |   |
|                                                             |   |   |       |   |   |   |    |                       |   |   |       |   |   |   |   |   |
| Profit                  (Loss)                                   |   |   | (4,902,384 | )      |   |   | 933,720 |                       |   |   | (1,142,123 | )      |   |   | (5,110,787 | ) |
|                                                             |   |   |       |   |   |   |    |                       |   |   |       |   |   |   |   |   |
| Expenditures                  for                                |   |   |       |   |   |   |    |                       |   |   |       |   |   |   |   |   |
|      long-lived                  assets |   |   | 65,082     |   |   |   | -       |                       |   |   | -          |   |   |   | 65,082 |   |

----

**ITEM2:  MANAGEMENT'S        DISCUSSION AND ANALYSIS OF        FINANCIAL CONDITION AND RESULTS **
**OF        OPERATIONS**

**FORWARD-LOOKING        STATEMENTS**

**Nine        months ended September 30, 2007 and 2006**

**OVERVIEW**

**OUTLOOK**

----

**ITEM        2:  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND        RESULTS **
**OF        OPERATIONS (cont.)**

**RECENT        DEVELOPMENTS**

**RECENT        ACCOUNTING PRONOUNCEMENTS**

**FINANCIAL        CONDITION AND LIQUIDITY**

----

**ITEM        2:  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND        RESULTS **
**OF        OPERATIONS (cont.)**

**RESULTS        OF OPERATIONS**

----

**ITEM        2:  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND        RESULTS **
**OF        OPERATIONS (cont.)**

**ITEM        3.       QUANTITATIVEAND QUALITATIVE DISCLOSURES        ABOUT MARKET RISK**

**ITEM        4.       CONTROLS AND        PROCEDURES**

----

**PART        II.  OTHER INFORMATION**

**ITEM1.  LEGAL        PROCEEDINGS**

*Canon        Litigation*

*Keesmann        litigation*

----

**ITEM4.       SUBMISSION        OF        MATTERS TO A VOTE OF SECURITY-HOLDERS**

| (1)   | Election                  of Directors. |
|-----------------|-----------------------------------------|

| (2)   | To                  approve a proposal to amend the Company’s Amended and Restated Articles of                  Incorporation to eliminate the classification of the Board of                  Directors. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3)   | To                  approve a proposal to amend the Company’s Amended and Restated Bylaws to                  eliminate the classification of the Board of                  Directors. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4)   | To                  approve a proposal to amend the Company’s Amended and Restated 2002 Equity                  Compensation Plan to increase the number of shares authorized by                  such plan                  by 2,000,000 shares to 10,000,000,                  shares. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5)   | To                  ratify the appointment of Sprouse & Anderson, LLP as the Company’s                  independent public accountants for the fiscal year ending December                  31,                  2007. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Item                Submitted to Shareholders           | For   | Against              | Abstain                                                                    | Non-Votes                                                                                       |  Total |
|--------------------------------------------------------------|------------|---------------------------|---------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------|-------------|
|                                                         |       |                      |                                                                            |                                                                                                           |        |
|                                                         |       |                      |                                                                            |                                                                                                           |        |
| (1)                  Election of Directors                   |       |                      |                                                                            |                                                                                                           |        |
| Election                  of Bradford S. Lamb                | 91,232,770 |   589,630       |                             0      |                                                  0 | 91,832,360  |
| Election                  of Howard Westerman                | 91,247,170 |   585,190       |                             0 |                                 0                  | 91,832,360  |
| Election                  of Douglas P. Baker                | 91,239,780 |   592,580       |                             0 |                                 0                  | 91,832,360  |
| Election                  of Dr. Robert Ronstadt             | 91,270,370 |   561,990       |                             0 |                                 0             | 91,832,360  |
| Election                  of Dr. Zvi Yaniv                   | 91,248,645 |   583,715       |                             0 |                                 0             | 91,832,360  |
| Election                  of Dr. Tracy Bramlett              | 91,253,830 |   578,530       |                             0 |                                                  0 | 91,832,360  |
| Election                  of Ronald J. Berman                | 91,161,055 |   671,305       |                             0 |                                                  0 | 91,832,360  |
| Election                  of Patrick V. Stark                | 91,265,970 |   566,390       |                             0 |                                 0                  | 91,832,360  |
| Election                  of Thomas F. Bijou                 | 91,237,205 |   595,155       |                             0 |                                                  0 | 91,832,360  |
| (2)                  Approval of Elimination of              |       |                      |                                                                            |                                                                                                           |        |
| Classified                  Board of Directors               | 89,985,687 | 1,564,375                 |  282,296                                                                   |                                                  0 | 91,832,360  |
| (3)                  Approval of Elimination of              |       |                      |                                                                            |                                                                                                           |        |
| Classified                  Board of Directors               | 90,009,127 | 1,557,174                 |  266,058                                                                   |                                 0        | 91,832,360  |
| (2)                  Approval of Amended 2002                |       |                      |                                                                            |                                                                                                           |        |
| Equity                  Compensation Plan                    | 29,136,581 | 4,649,743                 |  771,556                                                                   | 57,274,480                                                                                                     | 91,832,360  |
| (3)                  Ratification of Sprouse & Anderson, |       |                      |                                                                            |                                                                                                           |        |
| LLP                  as auditors                             | 91,314,967 |    371,253 |  146,138                                                                   |                 0              | 91,832,360  |

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**ITEM        6.     EXHIBITS**

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**SIGNATURES**

|                                                                 | NANO-PROPRIETARY,                  INC.(Registrant)                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|----------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| Date:     October                  30, 2007 |      /s/                  Thomas F. Bijou                                                                     Thomas                  F. BijouChief                  Executive Officer(Principal                  Executive Officer)                                                   |
|                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| Date:     October                  30, 2007 |      /s/                  Douglas P.                  Baker                                                   Douglas                  P. BakerChief                  Financial Officer(Principal                  Financial Officer and PrincipalAccounting                  Officer) |

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**INDEXTO        EXHIBITS**

| Exhibit |                                                                           |
|---------|--------------------------------------------------------------------------------|
|    |                                                                           |
| 11      | Computation                  of (Loss) Per Common Share                        |
|    |                                                                           |
| 31.1    | Rule                  13a-14(a)/15d-14(a) Certificate of Thomas F. Bijou       |
|    |                                                                           |
| 31.2    | Rule                  13a-14(a)/15d-14(a) Certificate of Douglas P. Baker      |
|    |                                                                           |
| 32.1    | Section                  1350 Certificate of Thomas F. Bijou                   |
|    |                                                                           |
| 32.2    | Section                  1350 Certificate of Douglas P.                  Baker |

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