Applied Nanotech Holdings, Inc. is first and foremost a research and development company. We have an extensive portfolio of intellectual property that we have developed over the years and our goal is to develop a portfolio of recurring revenue streams by licensing our intellectual property to others.

Much of our intellectual property relates to next-generation technologies that are not in wide current use and as such, additional development work is required before products can be manufactured using these technologies. Our research and development efforts occur across a continuum moving from concept to commercialization as follows:

To aid in the process of moving our technologies from concept to commercialization, we frequently perform funded research for both government entities and large corporations. This enables us to focus our resources in areas that have the highest level of interest to others, and thus the highest probability for commercialization.

Our research usually takes place in several phases. The initial phase is usually a small project involving less than $100,000 in funding, with the goal of proving the feasibility of the proposed product or technology and moving it from concept to laboratory. In some cases, generally with highly promising projects, we will perform this level of research at our own cost.

The second phase, usually with $100,000 to $1,000,000 of funding involves the actual development of a product using the technology, or moving the technology from the laboratory to development. The majority of our efforts are focused in this area. It is extremely rare that we would move to this level of development for a project without outside funding.

Depending on the complexity of the product involved, a third phase or a pilot line may be required. During the course of these research projects, we normally develop additional intellectual property which is added to our portfolio. Upon completion of the research project, we expect to license our technology to a partner to be used in a commercial product.

We expect our typical royalty agreement to involve both an upfront payment and an ongoing royalty based on sales of products using the technology. If a royalty agreement includes exclusivity for a particular technology or market, it will also include required minimum royalty payments. As additional royalty generating license agreements are signed and products shipped by licensees of our technology begin generating royalties to us, this should result in a highly profitable business model.

We have no manufacturing facilities and have no intention of establishing any such facilities. We intend to work with others that will manufacture products using our technology and license our technology to those manufacturers.