NANO-PROPRIETARY, INC. RECEIVES HOMELAND SECURITY CONTRACT FOR CARBON NANOTUBE BASED IONIZATION SOURCE

September 13, 2006 - Austin, Texas-based Nano-Proprietary, Inc. (OTC BB: NNPP), announced that its subsidiary, Applied Nanotech, Inc. (“ANI”), has received a new Small Business Innovation Research (SBIR) Phase I contract from the Homeland Security Advanced Research Project Agency (HSARPA) in the amount of approximately $125,000. The contract is for the development of a Carbon Nanotube (“CNT”) based ionizer source to replace nuclear radioactive sources in commercial applications. The contract is expected to take approximately six months to complete.

In recent years, U.S. government agencies have recognized the problem with the increasing number of radioactive sources worldwide. Such sources pose a security risk since radioactive materials can be incorporated into “dirty bombs” or other illicit applications. The successful development of a CNT based gas ionizer will provide a replacement for existing nuclear sources thus reducing the demand for radioactive material. Lowering the need for radioactive material decreases the possibility of accidental radiation exposure, hazardous material shipments, and usage monitoring.

A non-nuclear gas ionization source could provide added benefit to the commercial marketplace by increasing sensor sensitivity and selectivity – at a lower cost - for improved analytical, measurement, and monitoring instrumentation. Potential applications of this innovative technology range from the petrochemical industry to smoke-detection systems in the home.

“We are pleased to be working with the U.S. government on a project with such importance to our national security,” said Dan Burck, Chief Executive Officer of Nano-Proprietary Inc. “This contract, when combined with other SBIR contracts from the Air Force and Department of Homeland Security, brings the total amount of new contracts received in 2006 to over $1,800,000. These contracts demonstrate our continued ability to effectively leverage our existing expertise and skills in the development of our patented technologies into future technological advancements that will benefit government, industry, and national security alike.”

ANI has numerous patents in the field of Carbon Nanotube Electron Source technology. Several patents pending are based on ANI’s CNT ink formulations, application processes and activation techniques that will be applied to this government contract as well as numerous other commercial applications.

“Our patent portfolio, coupled with the commercial application of our technology, establishes us as a leader in the field of Carbon Nanotube development and applications,” stated Dr. Zvi Yaniv, CEO of Applied Nanotech, Inc. “We are excited to see our technology transition from the laboratory to real world products such as Flat Panel TV’s, X-Ray sources, lamps, radar, microwave and communication devices.”

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 positions in the fields of electron emission applications from carbon film/nanotubes, sensors, functionalized nanomaterials, and nanoelectronics. Electronic Billboard Technology, Inc. (EBT) possesses technology related to electronic digitized sign technology. The Companies have over 200 patents or patents 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.