http://www.appliednanotech.net/investors/shareholder_comm_2011-Jun.php

A Periodic Update - June 2, 2011

I wanted to take this opportunity to provide an update on our financial results, some of our recent activities, and to discuss some of our future plans.

Financial Results

We recently filed our 10Q with our first quarter results and it was an excellent quarter for Applied Nanotech. Our revenues exceeded $1.9 million for the quarter; almost double that of the first quarter of 2010. These revenues were primarily research revenues, making one of the best research revenue quarters in the company’s history. We had a revenue backlog of approximately $3.0 million at the end of the quarter, and as a result, expect continued strong revenue in upcoming quarters.

Since these revenues did not include any license revenues, it resulted in a loss for the quarter of approximately $600,000. This is within the range of losses that we would expect in a quarter without license fees. We are still targeting $10 million in revenues in 2011, which includes between $5 and $6 million in research revenues, with the balance coming from upfront license payments and to a lesser extent, ongoing royalty payments. In addition, we are anticipating another profitable year in 2011.

The company’s cash position is strong, with over $4.5 million as of March 31, 2011. If we reach our targeted revenue and income numbers, the company’s cash position would be well in excess of that at the end of 2011.

MDB Capital Conference

We attended the MDB Capital Group Bright Lights Conference on May 10 and 11, 2011 in New York City. Our presentation was well attended and there was interest from potential investors in our story. Attendance at this conference was part of our plan to enhance and expand our investor relations activities. As we continue to achieve milestones and develop predictable revenues and profits, we will continue to expand our investor relations activities and attend more conferences. Our presentation from the conference is available on our website at http://www.appliednanotech.net.

The Bright Lights conference is intended to showcase the best and brightest companies that have developed strong intellectual property portfolios. While at the conference, we were honored to win the MICO award presented by MDB. This award went to the top 5 companies, spanning all industries, with the most potentially disruptive or market changing intellectual property.

Nanoelectronics – Inks Activities

We formally opened our new pilot facility for metallic inks with a ribbon cutting ceremony on May 6, 2011. This facility was primarily funded by our Phase III commercialization award from the U.S. Department of Energy and will greatly expand our ability to provide samples to potential users of our inks. While we have always been able to provide samples from our research laboratories, this pilot facility will enable us to provide larger samples, in a more timely manner, to interested users, which potentially has the effect of speeding our licensing process.

The ribbon cutting ceremony was attended by U.S. Congressman Lloyd Doggett, Austin Mayor Lee Leffingwell, and Texas State Representative Mark Strama. Each of these speakers spoke of the importance of facilities like ours to the acceleration of the introduction of clean energy technologies. We will have some video of this event on our website in the near future. We are in the process of scaling up the capabilities of the facility and are awaiting the delivery of one final piece of equipment to complete the process. We are looking forward to the opportunities that this facility will bring us as we have already had discussions and inquiries from companies worldwide; including Asia, Europe, and North America, related to our solar inks.

The facility also increases our ability to supply samples of our copper ink. Since we have exclusively licensed our copper ink to Ishihara, the goal of our current work with copper inks is to create customers for Ishihara when their product is ready to sell, and generate additional research dollars along the way. Ishihara has been working intensively on the final development of its product and manufacturing processes and will be exhibiting products at the International Electronic Circuit Exhibition in Tokyo this June. We anticipate that Ishihara will have a product on the market by the end of the year and we will begin receiving royalties from Ishihara in 2012. Ishihara expects to market its product to a wide range of industries including LED lighting, solar cells, RFID tags, EL displays, LED displays, medical sensors, intelligent packaging, and others.

Nanomaterials

We have reached a significant milestone in our history with the introduction of a product using our technology by Yonex. We have a licensed our carbon nanotube (CNT) enhanced composites to Yonex for their use in racquets (both tennis and badminton) and golf club shafts. Yonex introduced the golf clubs in late February, the badminton racquets in March, and we are expecting that they will introduce tennis racquets later this year. It is too early to predict the royalties from these products, but we expect to have some initial information from Yonex by the end of July.

Our government programs related to the use of our CNT composites in ballistic protection are also progressing well. In addition, long term, we are still very optimistic about our work with the development of a CNT enhanced vinyl ester material, however we are no longer working with our original partner in this area. We are currently seeking a funding partner to complete development of this material. At this point, we have removed any royalties or license fees from our 2011 projection, but an initial license fee by the end of the year is not completely out of the question.

Other Areas

We are continuing our extensive discussions with Sichuan Anxian Yinhee Construction and Chemical Company (YHCC) and are targeting completion of licensing agreements by the August 31, 2011 date set forth in our letter of intent with YHCC.

As mentioned in our 2010 Form 10K, we have been exploring ways to monetize the intellectual property that we developed and work that we did in the past on our hydrogen sensor technology. We have retained ICAP Patent Brokerage, the intellectual property brokerage division of ICAP plc to market our hydrogen sensor technology. Disposition of this technology will allow us to focus our resources on our other technology platforms.

In conclusion, we continue on very solid footing, with a strong balance sheet, a healthy R&D backlog, a strong pipeline of potential licensees, and with products using our technology in the marketplace. We see 2011 as an important transitional year to establish a strong base for continued revenue growth in 2012 and beyond.



Sincerely,
Doug Baker
Chief Executive Officer


Safe Harbor Statement

This letter contains forward-looking statements that involve risks and uncertainties concerning our 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 our annual report on Form 10-K for the fiscal year ended December 31, 2010, and in reports subsequently filed by us 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 our website at www.appliednanotech.net . We hereby disclaim any obligation to publicly update the information provided above, including forward-looking statements, to reflect subsequent events or circumstances.