Nano-Proprietary, Inc. And Shimane Masuda Electronics Co. Ltd. Enter Into License Agreement For Carbon Nanotube Lighting Device

Austin, Texas – September 28, 2006 – Nano-Proprietary, Inc. (OTC BB: NNPP), today announced that its subsidiary, Applied Nanotech, Inc. ("ANI") entered into a license agreement with Shimane Masuda Electronics, Co., Ltd. ("SME"). This license agreement resulted from successful completion of the joint pilot line project between the two companies.

SME has developed its initial product to be manufactured using this technology, a carbon nanotube electron emission based lighting device, and must now complete the final manufacturing processes to complete commercialization of the first product. Once the first product is in production, SME is expected to develop additional products using the technology.

Under the terms of the license agreement, SME has the non-exclusive right to manufacture carbon cold cathode products in Japan and to sell those products in Asia. The terms of the license agreement are within the parameters of the prenegotiated terms set forth in the press release of November 28, 2005.

"We are pleased that SME successfully completed its pilot period and after a thorough analysis of the results decided to proceed to the commercialization stage," said Dr. Zvi Yaniv, Chief Executive Officer of Applied Nanotech, Inc. "We look forward to working with SME in the development of additional products in the future".

"As one of the results of collaboration between Shimane prefecture in Japan and the State of Texas, SME and ANI decided to establish a joint pilot line (please see press release of November 28, 2005). Based on the development results during 2006, ANI and SME have agreed to enter into this license agreement and we look forward to our mutual success in developing and commercializing products using ANI's technology", - said Mr. Yuzuru Ishikawa, the President and CEO of SME.

"I am confident that this proven technology will lead us into other products in the future that will generate additional income to both companies," said Dan Burck, Chief Executive Officer of Nano- Proprietary, Inc. "We have had a very successful association with SME and look forward to a long lasting and profitable relationship."

About Shimane Masuda Electronics Co., Ltd.

Shimane Masuda Electronics, Co., Ltd. (SME), founded in 1984, is headquartered in Masuda Japan (Shimane Prefecture). SME manufactures a variety of electronic products related to the mobile phone industry; data transmission and radio integrated circuit amplifiers utilizing microelectronic processes, such as surface mount assembly; ceramic packaging; high resolution bonding; and other areas. SME's customers include Mitsubishi, Sony, Sharp and other major manufacturers.

About Nano-Proprietary, Inc.

Nano-Proprietary, Inc. is a holding company consisting of two wholly-owned operating subsidiaries. Applied Nanotech Inc. is a premier research and commercialization organization dedicated to developing applications for nanotechnology with an extremely strong position in the field of electron emission applications from carbon film/nanotubes, sensors, functionalized nanomaterials, and nanoelectronics. Electronic Billboard Technology, Inc. (EBT) has investments related to electronic digitized sign technology. The Companies have over 200 patents or patent applications pending. Nano-Proprietary's business model is to license its technology to partners that will manufacture and distribute products using the technology. Nano-Proprietary's website is www.nano-proprietary.com.

Safe Harbor Statement

This press release contains forward-looking statements that involve risks and uncertainties concerning Nano-Proprietary's business, products, and financial results. Actual results may differ materially from the results predicted. More information about potential risk factors that could affect our business, products, and financial results are included in Nano-Proprietary's annual report on Form 10-K for the fiscal year ended December 31, 2005, and in reports subsequently filed by Nano- Proprietary with the Securities and Exchange Commission ("SEC"). All documents are available through the SEC's Electronic Data Gathering Analysis and Retrieval System (EDGAR) at www.sec.gov or from Nano-Proprietary's web site listed above. Nano-Proprietary hereby disclaims any obligation to publicly update the information provided above, including forward-looking statements, to reflect subsequent events or circumstances.

Company Contact:
Doug Baker
Applied Nanotech Holdings, Inc.
248.391.0612
dbaker(at)appliednanotech.net

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