NANO-PROPRIETARY, INC. ENTERS INTO RESEARCH AGREEMENT WITH LEADING INDUSTRIAL CHEMICAL PRODUCTS COMPANY

August 31, 2006 - Austin, Texas-based Nano-Proprietary, Inc. (OTC BB: NNPP), today announced that its subsidiary, Applied Nanotech, Inc. (“ANI”) entered into a research and development partnership agreement with a leading industrial chemical products company in Japan to develop technical inks. Technical inks are inks that can be deposited using additive processes such as printing, in particular inkjet and screen printing. The target markets for technical inks are printed circuit boards, flexible electronics and displays, communications instrumentation, and RFIDs .

The purpose of the partnership is to strategize and identify specific applications, and then develop technical inks to address each unique situation. One of the first areas of research for the partnership will involve conductive inks using functionalized nanoparticles that will be manufactured and commercialized by the chemical company.

The project will start October 1, 2006 and the R&D partnership will be located at ANI’s facilities in Austin, Texas. ANI will provide the laboratory space, equipment and the necessary installations. During the first twelve months, ANI will receive $500,000 in research funding. According to this agreement, ANI’s partner has the option of licensing the intellectual property developed under the R&D partnership.

“Functionalization of nanomaterials for improving carbon nanotube electron emission, achieving new polymeric and metallic composites with improved properties, is one of our core technologies. Applying our expertise to technical inks is a natural extension of our technology and business strategy”, said Dr. Zvi Yaniv, President and CEO of ANI.

”I am very pleased that our company will be partnered with such an outstanding company in this exciting initiative. I am confident that this is the beginning of a long and profitable relationship between the two companies. This research agreement is just one more example of ANI’s growing strength in the field of applied nanotechnology”, said Dan Burck, Chief Executive Office of Nano-Proprietary, Inc.

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.