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Document And Entity Information

v2.4.0.6
Document And Entity Information (USD $)
12 Months Ended
Dec. 31, 2011
Feb. 28, 2012
Jun. 30, 2011
Document and Entity Information [Abstract]      
Entity Registrant Name Applied Nanotech Holdings, Inc    
Document Type 10-K    
Current Fiscal Year End Date --12-31    
Entity Common Stock, Shares Outstanding   119,137,919  
Entity Public Float     $ 46,685,333
Amendment Flag false    
Entity Central Index Key 0000891417    
Entity Current Reporting Status Yes    
Entity Voluntary Filers No    
Entity Filer Category Smaller Reporting Company    
Entity Well-known Seasoned Issuer No    
Document Period End Date Dec. 31, 2011    
Document Fiscal Year Focus 2011    
Document Fiscal Period Focus FY    

CONSOLIDATED BALANCE SHEETS

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CONSOLIDATED BALANCE SHEETS (USD $)
Dec. 31, 2011
Dec. 31, 2010
Current assets:    
Cash and cash equivalents $ 3,071,783 $ 2,732,570
Accounts receivable, trade – net of allowance for doubtful accounts 839,863 757,507
Prepaid expenses and other current assets 153,021 116,784
Total current assets 4,064,667 3,606,861
Property and equipment, net 303,055 215,289
Other assets 28,745 22,233
Total assets 4,396,467 3,844,383
Current liabilities:    
Accounts payable 324,333 545,973
Convertible notes payable 1,486,510  
Obligations under capital lease 40,701 17,317
Accrued liabilities 379,675 566,623
Deferred revenue 200,000 320,000
Total current liabilities 2,431,219 1,449,913
Obligations under capital lease, long-term 48,559 13,819
Convertible notes payable   1,570,571
Total liabilities 2,479,778 3,034,303
Commitments and contingencies      
Shareholders’ equity :    
Preferred stock, $1.00 par value, 2,000,000 shares authorized; no shares issued and outstanding      
Common stock, 160,000,000 shares authorized, $.001 par value, 118,915,698 and 109,967,628 shares issued and outstanding, respectively 118,916 109,968
Additional paid-in capital 114,654,026 110,986,117
Accumulated deficit (112,856,253) (110,286,005)
Total shareholders’ equity 1,916,689 810,080
Total liabilities and shareholders’ equity $ 4,396,467 $ 3,844,383

CONSOLIDATED BALANCE SHEETS (Parentheticals)

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CONSOLIDATED BALANCE SHEETS (Parentheticals) (USD $)
Dec. 31, 2011
Dec. 31, 2010
Preferred stock par value (in Dollars per share) $ 1.00 $ 1.00
Preferred stock, shares authorized 2,000,000 2,000,000
Preferred stock, shares issued 0 0
Preferred stock, shares outstanding 0 0
Common stock par value (in Dollars per share) $ 0.01 $ 0.01
Common stock, shares authorized 160,000,000 160,000,000
Common stock, shares issued 118,915,698 109,967,628
Common stock, shares outstanding 118,915,698 109,967,628

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

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CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (USD $)
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Revenues      
Contract research $ 1,102,428 $ 1,137,370 $ 1,767,144
Government contracts 2,956,717 2,920,030 1,694,082
License fees and royalties 1,999,638 3,750,000 500,000
Other 428,678 236,395 91,520
Total revenues 6,487,461 8,043,795 4,052,746
Operating costs      
Research and development 5,652,631 4,839,556 3,662,323
Selling, general and administrative expenses 3,037,700 2,781,483 2,540,816
Total operating costs 8,690,331 7,621,039 6,203,139
Gain on sale of assets and other intellectual property   1,022,264 6,000
Income (Loss) from operations (2,202,870) 1,445,020 (2,144,393)
Other income (expense):      
Interest income 16,714 2,031 1,877
Interest expense (384,092) (421,704) (10,089)
Other   4,707  
Total other income (expense) (367,378) (414,966) (8,212)
Income (loss) before taxes (2,570,248) 1,030,054 (2,152,605)
Provision for taxes   618,750  
Net income (loss) applicable to common shareholders $ (2,570,248) $ 411,304 $ (2,152,605)
Earnings (loss) per share      
Basic and diluted (in Dollars per share) $ (0.02) $ 0.00 $ (0.02)
Weighted average common shares outstanding      
Basic (in Shares) 116,851,588 108,835,772 107,427,877
Diluted (in Shares) 116,851,588 109,069,524 107,427,877

APPLIED NANOTECH HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)

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APPLIED NANOTECH HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT) (USD $)
Preferred Stock [Member]
Common Stock [Member]
Additional Paid-in Capital [Member]
Retained Earnings [Member]
Total
Balance December 31 at Dec. 31, 2008    $ 107,395 $ 109,295,595 $ (108,544,704) $ 858,286
Balance December 31 (in Shares)   107,473,133      
Conversion rights associated with issuance of convertible notes     35,000   35,000
Issuance of common stock options as compensation     160,505   160,505
Issuance of restricted common stock as compensation   78 27,898   27,976
Issuance of restricted common stock as compensation (in Shares)   77,917      
Net income (loss)       (2,152,605) (2,152,605)
Balance December 31 at Dec. 31, 2009   107,473 109,518,998 (110,697,309) (1,070,838)
Balance December 31 (in Shares)   109,967,628      
Conversion rights associated with issuance of convertible notes     612,250   612,250
Issuance of common stock options as compensation     227,124   227,124
Issuance of restricted common stock as compensation   75 (75)    
Issuance of restricted common stock as compensation (in Shares)   75,118      
Issuance of shares upon conversion of Accounts Payable   353 89,647   90,000
Issuance of shares upon conversion of Accounts Payable (in Shares)   352,657      
Issuance of common shares for cash   1,000 199,000   200,000
Issuance of common shares for cash (in Shares)   1,000,000      
Issuance of common stock as the result of the exercise of employee stock options   18 4,350   4,368
Issuance of common stock as the result of the exercise of employee stock options (in Shares)   18,200      
Committed to be released shares     126,168   126,168
Conversion of notes   1,049 208,655   209,704
Conversion of notes (in Shares)   1,048,520      
Net income (loss)       411,304 411,304
Balance December 31 at Dec. 31, 2010   109,968 110,986,117 (110,286,005) 810,080
Balance December 31 (in Shares)   118,915,698      
Issuance of common stock options as compensation     462,431   462,431
Issuance of shares upon conversion of Accounts Payable   301 119,699   120,000
Issuance of shares upon conversion of Accounts Payable (in Shares)   300,752      
Issuance of common shares for cash   6,579 2,493,421   2,500,000
Issuance of common shares for cash (in Shares)   6,578,948      
Issuance of common stock as the result of the exercise of employee stock options   200 51,551   51,751
Issuance of common stock as the result of the exercise of employee stock options (in Shares)   200,454      
Employee restricted stock, including committed to be released shares   104 185,177   185,281
Employee restricted stock, including committed to be released shares (in Shares)   103,772      
Conversion of notes   1,764 355,630   357,394
Conversion of notes (in Shares)   1,764,144      
Net income (loss)       (2,570,248) (2,570,248)
Balance December 31 at Dec. 31, 2011   $ 118,916 $ 114,654,026 $ (112,856,253) $ 1,916,689

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

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CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (USD $)
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Cash flows from operating activities:      
Net income (loss) $ (2,570,248) $ 411,304 $ (2,152,605)
Depreciation and amortization expense 75,741 63,356 64,353
Stock and options issued for services 647,712 353,292 188,481
Amortization of discount on debt 241,939 270,987 834
Changes in assets and liabilities:      
Accounts receivable, trade (82,356) (508,343) 412,540
Prepaid expenses and other assets (42,749) (48,793) 51,597
Accounts payable (101,640) 23,294 513,801
Accrued expenses (155,554) 309,698 274,820
Deferred revenue and other current liabilities (120,000) 10,000 85,405
Total adjustments 463,093 473,491 1,591,831
Net cash provided by (used in) operating activities (2,107,155) 884,795 (560,774)
Cash flows from investing activities:      
Capital expenditures (78,138) (11,637) (20,901)
Net cash used in investing activities (78,138) (11,637) (20,901)
Proceeds from issuance of common stock 2,551,751 204,368  
Proceeds of long term debt   1,730,000 200,000
Repayment of short-term notes payable   (340,000)  
Repayment of capital lease obligations (27,245) (21,927) (41,465)
Net cash provided by financing activities 2,524,506 1,572,441 158,535
Net increase (decrease) in cash and cash equivalents 339,213 2,445,599 (423,140)
Cash and cash equivalents, beginning of year 2,732,570 286,971 710,111
Cash and cash equivalents, end of year $ 3,071,783 $ 2,732,570 $ 286,971

1.Organization, Operations, and Liquidity:

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1.Organization, Operations, and Liquidity:
12 Months Ended
Dec. 31, 2011
Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]
1.
Organization, Operations, and Liquidity:

Applied Nanotech Holdings, Inc. and its subsidiaries (“the Company”) are engaged in using nanotechnology to develop products for applications in the thermal management,  nanomaterials, nanosensors, and nanoelectronics areas, as well as the performance of significant research in those areas. We intend to obtain development revenues for applying our technology to specific applications for our development partners, to obtain royalty revenues from licensing this technology to those partners and others, and to sell products using this technology.

We incurred an operating loss in 2011, but expect to be profitable in 2012; however; unless we are able to operate profitably on a continuous basis as a result of revenues from either reimbursed research or license agreements, we may be required to seek additional funds through the equity markets, or raise funds through debt instruments to allow us to maintain operations. There is no assurance that additional license agreements will be signed, that commercialization of our technology and products will result in income from operations, or that funds will be available in the equity or debt markets, if needed. Management believes it will be able to operate profitability and if not, be able to secure additional funding, if needed.

The principal source of our liquidity since the time of our initial public offering in 1993 has been from the funds received from exempt offerings of common stock, preferred stock, and convertible debt securities, as well as license and development revenues. We may receive additional funds from the exercise of employee stock options. We may also seek to increase our liquidity through bank borrowings or other financings, although this is not likely. There can be no assurance that any of these financing alternatives can be arranged on commercially acceptable terms. We believe that our success in reaching sustained profitability will depend on the viability of our technology and products using that technology, their acceptance in the marketplace, and our ability to obtain additional debt or equity financings in the future, if needed.

A portion of our research and development has been funded by others. To the extent that other funding is not available, research and development may be internally funded by us or curtailed; however, our primary objective is to focus our resources on projects for which we receive funding.

The Company has a history of net losses and negative cash flow from operations, although these negative cash flows from operations have been decreasing over the past several years. We were profitable in 2010 and had positive cash flows from operations in 2010, and we expect to be profitable and have positive cash flow from operations in 2012. The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern, and do not include any adjustments that may be required if it were unable to continue as a going concern. Management believes that actions currently being taken, which primarily involve increasing revenues, will allow the Company to achieve profitability and allow the Company to continue as a going concern.

2.Summary of Significant Accounting Policies:

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2.Summary of Significant Accounting Policies:
12 Months Ended
Dec. 31, 2011
Significant Accounting Policies [Text Block]
2.
Summary of Significant Accounting Policies:

Principles of consolidation

The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries, Applied Nanotech, Inc. (“ANI”), and Electronic Billboard Technology, Inc. (“EBT”), after the elimination of all significant intercompany accounts and transactions. ANI is primarily involved in developing products for applications using the Company’s proprietary nanocomposites, nanosensors, nanoelectronics, thermal management, and field emission technologies. EBT was primarily involved in the commercialization of electronic digitized sign technology, but has now sold its technology and is inactive.

Management’s estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses, as well as the disclosure of contingent assets and liabilities. Actual results could differ from those estimates. Significant estimates include deferred tax asset reserves, bad debt reserves, assumptions used in calculating share based compensation, and depreciation.

Revenue recognition

Our revenues include reimbursements under agreements to perform research and development for government agencies and others. We do not perform research contracts that are contingent upon successful results. Larger projects are sometimes broken down in phases to allow the customer to determine at the end of each phase if they wish to move to the next phase. The agreements with federal government agencies generally provide that, upon completion of a technology development program, the funding agency is granted a royalty-free license to use any technology developed during the course of the program for its own purposes, but not any preexisting technology that we use in connection with the program. We retain all other rights to use, develop, and commercialize the technology and recognize revenue when it is earned pursuant to the terms of the contract. Agreements with nongovernmental entities generally allow the entity the first opportunity to license the technology from us upon completion of the project.

The Company’s revenues also include royalties from licensing its technology, revenue from the sale of products, and other miscellaneous revenues. Many of the company’s projects may involve a combination of these types of revenues. Revenues are recognized as follows:

Government Contracts - Revenue from government contracts is recognized when it is earned pursuant to the terms of the contract. Long-term projects, such as SBIR Phase II grants that usually range from $500,000 to $1,000,000 in total and usually extend for a period of approximately two years, are generally based on reimbursement of costs. These projects are usually billed monthly based on costs, hours, or some other measure of activity during the month. As a general rule, we recognize revenue on these contracts based on the activity level of the contract during the period as compared with total estimated activity. This generally would be a measure of proportional performance on the contract, such as cost incurred compared with total expected cost. The recognition of revenue may not correspond with the billings allowable under the contract. To the extent that billings exceed revenue earned, a portion of the revenue is deferred until such time as it is earned. Short-term projects, such as SBIR Phase I grants that usually are less than $100,000 and usually extend for a period of approximately 6 months, are billed at periodic intervals as specified in the contract.

Other Research Contracts - Revenue from nongovernmental contracts is recognized when it is earned pursuant to the terms of the contract. Each contract is unique and tailored to the needs of the customer and goals of the project. Some contracts may call for a monthly payment for a fixed period of time. Other contracts may be for a fixed dollar amount with an unspecified time period, although there is frequently a targeted completion date. These contracts generally involve some sort of up-front payment. Some contracts may call for the delivery of samples, or may call for the transfer of equipment or other items developed during the project to the customer. As a general rule, we recognize revenue on long term contracts based on the activity level of the contract during the period as compared with total estimated activity. This generally would be a measure of proportional performance on the contract, such as cost incurred compared with total expected cost. However, to the extent there are other significant contract provisions such as the delivery of more than a nominal amount of samples or delivery of equipment, we would modify this as appropriate. For other short term contracts, generally less than $50,000, we recognize revenue when it is billed under the terms of the contract.

Royalty Revenue - The Company recognizes royalty revenues based on the shipment of products by a licensee at the time the underlying product upon which the royalty is based is shipped by the entity paying the royalty, if that is able to be ascertained at the time. For minimum royalty payments paid by a licensee that are required for the licensee to maintain exclusivity, royalty revenue is recognized at the time the minimum royalty payment is due, which normally corresponds somewhat with the time that the payment is received. The Company recognizes license fees due at the time of the signing of a royalty agreement when the licensee has an enforceable commitment to pay. This normally corresponds with, or is reasonably close to, the time of receipt of the payment.

Product Sales - Revenue from product sales is recognized at the time the product shipped. The Company’s primary business is research and development and the licensing of its technology, not the sale of products. Product sales are generally insignificant in number, and are usually limited to the sale of samples, proofs of concepts, prototypes, or other items resulting from its research. Product sales are expected to increase in 2012.

Other Revenue - Other miscellaneous revenue is recognized as deemed appropriate given the facts of the situation and is generally not material.

Cash and cash equivalents

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

Accounts receivable

The Company occasionally provides services or sells products to others on credit; however most  services or sales are to large financially stable companies, or the U.S. Federal government. It is the Company’s policy to record reserves for potential credit losses. Since inception, the Company has experienced minimal credit losses. The Company considered no reserves to be necessary for any of the years presented.

Property and equipment

Property and equipment are recorded at cost, net of accumulated depreciation and amortization. Depreciation is provided on the straight-line method over the estimated useful lives of the assets, which range from three to seven years, or the remaining lease term for leasehold improvements, if less. Expenses for major renewals and betterments that extend the original estimated economic useful lives of the applicable assets are capitalized. Expenses for normal repairs and maintenance are charged to operations as incurred. The cost and related accumulated depreciation of assets sold or otherwise disposed of are removed from the accounts, and any gain or loss is included in income.

Impairment

At each balance sheet date, the Company evaluates the carrying amount and the amortization period for its long-lived assets. If an indicator of impairment exists, it is recorded at that time. There have been no impairment charges recorded in any of the years presented in these financial statements.

Income taxes

The Company accounts for income taxes using the asset and liability method. Under this method, deferred income taxes are recorded to reflect the tax consequences on future years of temporary differences between the tax basis of the assets and liabilities and their financial amounts at year-end. The Company provides a valuation allowance to reduce deferred tax assets to their net realizable value. The Company has determined that no reserve for uncertain tax positions is required; however, tax years 2008 through 2011 remain open for examination by the U.S. Internal Revenue Service.

Research and development expenses

Costs of research and development for Company-sponsored projects are expensed as incurred.

Disclosures about fair value of financial instruments

The following methods and assumptions were used to estimate the fair value of each class of certain financial instruments for which it is practicable to estimate that fair value. For cash equivalents and accounts receivable, the carrying amount approximates fair value because of the short-term nature of these instruments. The fair value of the Company’s capital lease obligations and notes payable is estimated based on the quoted market prices for the same, or similar issues, or on the current rates offered to the Company for obligations of the same remaining maturities with similar collateral requirements. For all years presented, the fair value of the Company’s capital lease obligations and notes payable approximate their carrying values.

Income (loss) per common share

Basic per share amounts are computed, generally, by dividing net income or loss by the weighted average number of common shares outstanding. Diluted per-share amounts assume the conversion, exercise, or issuance of all potential common stock instruments unless the effect is anti-dilutive, thereby reducing the loss or increasing the income per common share. As described in Notes 8, 9 and 10, the Company had options and warrants outstanding as indicated in the table below. In addition, the Company has convertible notes payable, which if converted, would have resulted in additional shares outstanding as indicated in the table below.

However, because of the interest expense associated with the notes payable, inclusion of the notes payable in the calculation of diluted earnings per share would have an anti-dilutive effect. In addition, since the Company incurred losses in 2011 and 2009, the inclusion of any potential common shares in the calculation of diluted loss per-share would have an anti-dilutive effect in those years. A small portion of the options outstanding have a dilutive effect and are included in the calculation of dilutive earnings per share. Because this effect is insignificant, basic and diluted per-share amounts are the same in all years presented.

   
2011
 
2010
 
2009
             
Options
 
6,378,495
 
6,222,972
 
4,430,392
Warrants
 
181,524
 
1,304,353
 
1,304,353
Weighted average exercise price
 
$0.90
 
$1.10
 
$1.60
Convertible Notes Payable
 
9,079,530
 
10,180,301
 
1,004,495

Recently issued accounting pronouncements

There are no recently issued accounting pronouncements which have not been implemented in our financial statements that would have a material impact on our financial statements.

Share-based payments

The Company has a stock based compensation plan described in greater detail in Note 9 to these financial statements. The Company uses the fair value method to account for stock-based compensation. The fair value of each award is estimated on the date of each grant. For restricted stock the fair market value is based on the market value of the stock granted on the date of the grant. For options, it is estimated using the Black Scholes option pricing model that uses the assumptions noted in the following table. Estimated volatilities are based on the historical volatility of the Company’s stock over the same period as the expected term of the options. The expected term of options granted represents the period of time that options granted are expected to be outstanding. The Company uses historical data to estimate option exercise behavior and to determine this term. The risk free rate used is based on the U.S. Treasury yield curve in effect at the time of the grant using a time period equal to the expected option term. The Company has never paid dividends and does not expect to pay any dividends in the future.

   
2011
 
2010
 
2009
             
Expected dividend yield
 
0%
 
0%
 
0%
Risk Free Interest Rate
 
.35%-1.28%
 
.57%-1.40%
 
.37%-1.76%
Expected option term (in years)
 
3.5 – 5.0
 
3.5
 
2.0 - 3.5
Turnover/Forfeiture Rate
 
0%
 
0%
 
0%
Expected volatility
 
93% - 99%
 
98% - 102%
 
95% - 100%
Weighted-average volatility
 
96%
 
100%
 
98%

The Black-Scholes option valuation model and other existing models were developed for usein estimating the fair value of traded options that have no vesting restrictions and are fully transferable. These option valuation models require the input of, and are highly sensitive to, subjective assumptions including the expected stock price volatility. Applied Nanotech Holdings’ stock options have characteristics significantly different from those of traded options, and changes in the subjective input assumptions could materially affect the fair value estimate.

3.Operating Lease Obligations:

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3.Operating Lease Obligations:
12 Months Ended
Dec. 31, 2011
Leases of Lessor Disclosure [Text Block]
3.
Operating Lease Obligations:

The Company leases various facilities and equipment under operating lease agreements having terms expiring at various dates through 2014. Rental expense was $251,566; $190,697; and $194,649 for the years ended December31, 2011, 2010, and 2009,respectively.

Future minimum lease payments under operating leases that have initial or remaining noncancelable lease terms in excess of one year at December 31, 2010, were as follows:

2012
    263,276  
2013
    247,847  
2014
    45,367  
Total future minimum lease payments
  $ 556,490  

4.Convertible Notes Payable:

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4.Convertible Notes Payable:
12 Months Ended
Dec. 31, 2011
Debt Disclosure [Text Block]
4.
Convertible Notes Payable:

Notes payable at December 31, 2011 and 2010 consisted of notes payable to shareholders. The notes are 30 month unsecured notes, bearing interest at 8%, and due in lump sums from June to October 2012, if not converted earlier. These notes, including any accrued interest, are convertible into shares of common stock at the option of the note holder at rates ranging from  $0.20 to $0.25 per share. The original face amount of the notes was $2,146,000; however, the conversion rights were valued at $647,250 and recorded as a discount to the note at the time of issuance. $834 of that discount was amortized to interest expense as of December 31, 2009, $271,821 of the discount was amortized to expense as of December 31, 2010, and $513,760 was amortized to expense as of December 31, 2011.  A total of $200,000 of these notes were converted to common stock in 2010 and an additional $326,000 was converted in 2011. The face amount of the remaining notes outstanding at December 31, 2011 is $1,620,000.  Three notes with a total face value of $500,000 are secured by a blanket security interest in all assets of the company. All of the outstanding notes are expected to be converted to common stock.

5.Capital Lease Obligations:

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5.Capital Lease Obligations:
12 Months Ended
Dec. 31, 2011
Long-term Debt [Text Block]
5.
Capital Lease Obligations:

Capital leases payable at December 31, 2011 and 2010 consisted of the following:

   
2011
   
2010
 
Capital lease equipment due in monthly installments of $3,322 through February 2014. The equipment value and lease obligation was determined using a discount rate of 12.35%. The equipment is included in plant and equipment at December 31, 2011 at a cost of $118,700 and with accumulated amortization of $10,670.
  $ 86,377     $  
Capital lease equipment due in monthly installments of $816 through July 2013. The equipment value and lease obligation was determined using a discount rate of 14.08%. The equipment is included in plant and equipment at December 31, 2011 at a cost of $42,040 and with accumulated amortization of $28,727.
  $ 15,497     $ 25,297  
Capital lease equipment due in monthly installments of $1,492 through July 2011. The equipment value and lease obligation was determined using a discount rate of 12.27%. The equipment is included in plant and equipment at December 31, 2011 at a cost of $47,120, with accumulated amortization of $16,349.
            10,445  
Total capital leases
    101,874       35,742  
Less interest
    12,614       4,606  
Less current portion
    40,701       17,317  
Capital lease obligations, long-term
  $ 48,559     $ 13,819  

These leases result in minimum payments of $49,654; $45,576; and $6,644, respectively, from 2012 to 2014.

6.Details of Certain Balance Sheet Accounts:

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6.Details of Certain Balance Sheet Accounts:
12 Months Ended
Dec. 31, 2011
Supplemental Balance Sheet Disclosures [Text Block]
6.
Details of Certain Balance Sheet Accounts:

Additional information regarding certain balance sheet accounts at December 31, 2011 and 2010 is as follows:

   
December 31,
 
   
2011
   
2010
 
Property and equipment:
           
Plant and equipment
  $ 1,222,309     $ 1,088,216  
Furniture and office equipment
    162,902       156,096  
Leasehold improvements
    41,627       19,019  
Total carrying cost
    1,426,838       1,263,331  
Less accumulated depreciation
    (1,123,783 )     (1,048,042 )
    $ 303,055     $ 215,289  
                 
Accrued liabilities:
               
Payroll and related accruals
  $ 107,044     $ 406,475  
Other
    272,631       160,148  
Total
  $ 379,675     $ 566,623  

Depreciation and amortization for the years ended December 31, 2011, 2010, and 2009 was $75,741; $63,356; and $64,353, respectively. Equipment held under capital leases and accumulated amortization on that equipment is included in these totals.

7.Income Taxes:

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7.Income Taxes:
12 Months Ended
Dec. 31, 2011
Income Tax Disclosure [Text Block]
7.
Income Taxes:

The components of deferred tax assets (liabilities) at December 31, 2011 and 2010, were as follows:

   
December 31,
 
   
2010
   
2009
 
Deferred tax assets:
           
Net operating loss carry forwards
  $ 22,752,000     $ 26,076,000  
Stock based compensation
    2,152,000       2,015,000  
Research and experimentation credits
          61,000  
Partnership asset
    39,000       39,000  
Capitalized intangible assets
    19,000       27,000  
Difference in tax basis of assets
    2,000        
Foreign tax credit
    619,000       619,000  
Accrued expenses not deductible until paid
    109,000       110,000  
Total deferred tax assets
    25,692,000       28,947,000  
                 
Deferred tax liabilities:
               
Depreciation
          (1,000 )
                 
Net deferred tax assets before valuation allowance
    25,692,000       28,946,000  
                 
Valuation allowance
    (25,692,000 )     (28,946,000 )
                 
Net deferred tax asset
               
    $     $  

Page 40

The following is a reconciliation of the amount of the income tax expense (benefit) that would result from applying the statutory federal income tax rates to pretax income (loss) and the reported amount of income tax expense (benefit) for the periods ended December 31, 2011, 2010, and 2009.

   
December 31,
 
   
2011
   
2010
   
2009
 
                   
Expected income tax expense (benefit)
  $ (874,000 )   $ 350,000     $ (732,000 )
Non-deductible expenses
    12,000       15,000       11,000  
Expiration of tax credit carryforwards
    61,000       64,000       145,000  
Expiration of NOL carryforwards
    4,055,000       3,975,000       2,490,000  
Foreign tax credit
          (619,000 )      
Foreign taxes paid
          618,750        
Increase (decrease) in valuation allowance
    (3,254,000 )     (3,785,000 )     (1,914,000 )
Total tax
  $     $ 618,750     $  

As of December 31, 2011, the Company had net operating loss carry forwards of approximately $74 million that expire from 2012 through 2030, that are available to offset future taxable income. The majority of these carry forwards expire after 2012. Additionally, the Company has tax credit carry forwards related to foreign taxes of $619,000 that expire in 2019.

Under certain circumstances issuance of common shares can result in an ownership change under Internal Revenue Code Section 382 which limits the Company’s ability to utilize carry forwards from prior to the ownership change. Any such ownership change resulting from stock issuances could limit the Company’s ability to utilize any net operating loss carry forwards or credits generated before this change in ownership. These limitations tend to relate to the timing of usage, rather than the loss of the ability to use these net operating losses.

The foreign taxes paid in 2010 represent Korean taxes associated with the patent sale/license transaction described in greater detail in Note 18 to these financial statements.

8.Capital Stock:

v2.4.0.6
8.Capital Stock:
12 Months Ended
Dec. 31, 2011
Stockholders' Equity Note Disclosure [Text Block]
8.
Capital Stock:

Preferred stock

The Company has authorization for the issuance of 2,000,000 shares of $1.00 par value preferred stock. There were no shares of preferred stock outstanding for any of the years presented.

Common stock

At its 2010 shareholders meeting, the shareholders of the Company voted to increase the authorized common shares of the Company from 120,000,000 shares to 160,000,000 shares.

No shares were issued in private placements in 2009; however, during 2010 and 2011, the Company issued shares of its common stock in a private placement in an exempt offering under Regulation D of the Securities Act of 1933. The 2010 shares were issued at a price that represented a slight discount to the market price of the stock at the time of the offering. All of these shares were registered to enable the shareholder to be able to sell the shares, with the latest registration statement declared effective November 22, 2010. A total of 1,000,000 shares were issued and proceeds of $200,000 were received. The 2011 shares were issued at the market price at the time of the offering and have not been registered for sale. In 2011, a total of 6,578,948 shares were issued and proceeds of $2.5 million were received.

Committed to be released common shares

As discussed in Note 9, the Company awards restricted stock to employees as compensation. Shares awarded, but not yet issued and outstanding are accounted for as committed to be released shares.

At December 31, 2011, common stock was reserved for the following reasons:

Exercise of stock warrants
    181,524  
Conversion of notes payable and accrued interest
    9,079,530  
Committed to be released common shares
    628,398  
Exercise and future grants of stock options
    7,683,789  
         
Total shares reserved
    17,573,241  

9.Stock Options:

v2.4.0.6
9.Stock Options:
12 Months Ended
Dec. 31, 2011
Share-based Compensation, Option and Incentive Plans, Director Policy [Policy Text Block]
9.
Stock Options:

The Company sponsors a stock-based incentive compensation plan, the 2002 Equity Compensation Plan (the “Plan”), which was established by the Board of Directors of the Company in September 2002.  A total of 5,000,000 shares were initially reserved for issuance under the plan. The plan was amended effective December 31, 2004 to increase the authorized shares to 8,000,000, and again effective December 12, 2007 to increase the authorized shares to 10,000,000. A total of 1,305,294 shares remain available for grant under this plan at December 31, 2011. The compensation cost that has been charged against income for this plan for the years ended December 31, 2011, 2010, and 2009 was $647,712; $353,292; and $188,481, respectively. No income tax benefit was recognized in the income statement and no compensation was capitalized in any of the years presented.

The plan allows the Company to grant incentive stock options, non-qualified stock options, or restricted stock. The incentive stock options are exercisable for up to ten years, at an option price per share not less than the fair market value on the date the option is granted. The incentive stock options are limited to persons who have been regular full-time employees of the Company or its present and future subsidiaries for more than one (1) year and at the date of the grant of any option are in the employ of the Company or its present and future subsidiaries. Historically, the Company has not granted incentive stock options. Non-qualified options may be granted to any person, including, but not limited to, employees, independent agents, consultants and attorneys, who the Company’s Compensation Committee believes have contributed, or will contribute, to the success of the Company. Non-qualified options may be issued at option prices of less than fair market value on the date of grant and are exercisable for up to ten years from date of grant. The option vesting schedule for options granted is determined by the Compensation Committee of the Board of Directors at the time of the grant. The Plan provides for accelerated vesting of unvested options if there is a change in control, as defined in the plan.

The company issues new shares for all options exercised. It does not expect to repurchase any shares to facilitate future option exercises. The following table summarizes information about stock options outstanding, some of which are not expected to ultimately vest, and options currently exercisable under the option plan at December 31, 2011:

 
Options Outstanding
Options Exercisable
         
Range of
Exercise Prices
Number
Outstanding
at 12/31/11
Wgtd. Avg.
Remaining
Contractual
Life
Wgtd. Avg.
Exercise Price
Number
Exercisable
at 12/31/11
Wgtd. Avg.
Remaining
Contractual
Life
Wgtd. Avg.
Exercise Price
             
$0.00 - $0.50
4,319,560
8.0 Years
$0.36
 3,615,444
7.8 Years
$0.34
$0.51 - $1.00
    380,498
5.1 Years
$0.74
    349,249
4.7 Years
$0.76
$1.01 - $2.00
    608,396
5.0 Years
$1.31
    608,396
5.0 Years
$1.31
$2.01 - $3.00
1,070,041
2.6 Years
$2.43
1,070,041
2.6 Years
$2.43
             
Total
6,378,495
6.6 Years
$0.82
5,643,130
5.9 Years
$0.87
             
Aggregate intrinsic value
 
$15,502
   
$15,502
 

The following is a summary of stock option plan activity:

   
Number of
Shares
   
Wgtd. Ave.
Exercise
Price
 
             
Options outstanding at December 31, 2008
    7,889,897     $ 1.36  
                 
Granted
    658,065     $ 0.45  
Exercised
           
Cancelled
    (4,117,570 )   $ 1.31  
                 
Options outstanding at December 31, 2009
    4,430,392     $ 1.28  
                 
Granted
    2,803,538     $ 0.37  
Exercised
    (18,200 )   $ 0.24  
Cancelled
    (992,758 )   $ 1.35  
                 
Options outstanding at December 31, 2010
    6,222,972     $ 0.86  
                 
Granted
    1,303,498     $ 0.43  
Exercised
    (200,454 )   $ 0.26  
Cancelled
    (947,521 )   $ 0.68  
                 
Options outstanding at December 31, 2011
    6,378,495     $ 0.82  

The weighted-average grant-date fair value of options granted during the years ended December 31, 2011, 2010, and 2009 was $0.28, 0.24, and $0.13, respectively. The total intrinsic value of options exercised during the years ended December 31, 2011, and 2010 was $59,635, and $2,002 respectively. No options were exercised in the year ended December 31, 2009. As of December 31, 2011, there was a total of $193,513 of unrecognized compensation cost related to 759,125 non-vested options granted under the plan. These unvested options all vest based on the passage of time over a one to two year period. All of this expense will be recognized in 2012.  The fair value of shares vested during the years ended December 31, 2011, 2010, and 2009 was $462,431; $227,124; and $160,505, respectively.

The 2002 Equity Compensation Plan also allows the issuance of restricted shares of common stock. We issued 59,167 shares of restricted stock in 2009 in connection with the compensation of outside Directors. These shares were fully vested at the time of the grant, had a fair value of $15,383, and were granted at a price of $0.26. We recognized expense in the financial statements of $27,976 in the year ended December 31, 2009 relate to these shares and shares issued in 2008 that vested in 2009. The weighted average fair value of shares granted and vested during 2009 was $0.26. No restricted shares were granted to outside Directors in 2010 or 2011.

In 2010 and 2011, we also granted restricted stock to non-officer employees as part of their compensation. We granted a total of 381,237 shares with a value of $126,168 in 2010 and a total of 432,953 shares with a value of $185,281 in 2011, which represents the market price at the date of grant. A total of 75,118 shares were issued to employees in 2010 and 103,772 in 2011, and are included in issued and outstanding shares at December 31, 2010 and 2011, respectively. The remaining 628,398 shares are classified as committed to be released shares at December 31, 2011.

In November 2009, we offered a voluntary option exchange program to all non-officer employees of the Company. Employees were able to exchange higher priced options for options with an exercise price of $0.30 share. Employees received a fraction of the number of shares exchanged in a ratio equal to $0.30 divided by the original exercise price of the options. A total of 889,917 options were exchanged for 222,768 shares with an exercise price of $0.30 per share. This resulted in a reduction of option expense of $25,664.

10.Stock Warrants:

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10.Stock Warrants:
12 Months Ended
Dec. 31, 2011
Derivatives and Fair Value [Text Block]
10.
Stock Warrants:

Common stock warrants

In 2007, we issued 1,304,353 warrants in connection with a private placement of the Company’s stock. These warrants enable the holder to purchase shares of the Company’s common stock at a price of $2.50 per share through  the earlier of April 2011, or the date that the shares acquired in the private placement are sold by the shareholder. In March 2011, the expiration date was extended to the earlier of April 2013, or the date that the shares acquired in the private placement are sold by the shareholder. As of December 31, 2011 shares associated with 900,002 of the warrants are known to have been sold, shares associated with 222,827 of the warrants are assumed to have been sold, and shares associated with the remaining 181,524 warrants are still outstanding.

None of the warrants issued have ever been exercised and it is unlikely that the warrants will be exercised prior to the expiration date of April 2013.

11. Supplemental Cash Flow Information:

v2.4.0.6
11. Supplemental Cash Flow Information:
12 Months Ended
Dec. 31, 2011
Cash Flow, Supplemental Disclosures [Text Block]
11. 
Supplemental Cash Flow Information:

Cash paid for interest was $6,274; $5,764; and $8,356 for 2011, 2010, and 2009, respectively. Cash paid for income taxes in 2010 was $618,750. No cash was paid for income taxes in either 2011 or 2009. The following non-cash transactions have been excluded from the accompanying consolidated statement of cash flows:

   
2011
   
2010
   
2009
 
                   
Non-cash financing activities:
                 
Issuance of common shares in payment of accounts payable
  $ 120,000     $ 90,000     $  
Issuance of note payable in payment of accounts payable
  $     $ 340,000     $  
Conversion of notes payable and accrued interest
  $ 357,394     $ 209,704     $  
Issuance of notes payable to Officers and Directors in payment of accrued expenses
  $     $ 216,000     $  
Capital lease transactions
  $ 85,369     $     $ 31,607  

12.Retirement Plan:

v2.4.0.6
12.Retirement Plan:
12 Months Ended
Dec. 31, 2011
Pension and Other Postretirement Benefits Disclosure [Text Block]
12.
Retirement Plan:

The Company sponsors a defined contribution 401(k) profit sharing plan. Company contributions are discretionary and no company contributions were made in any of the years presented.

13.Commitments and Contingencies:

v2.4.0.6
13.Commitments and Contingencies:
12 Months Ended
Dec. 31, 2011
Commitments and Contingencies Disclosure [Text Block]
13.
Commitments and Contingencies:

Till Keesmann Agreement

In May 2000, we licensed the rights, including the exclusive right to sublicense, to 6 carbon nanotube patents from Till Keesmann. The agreement was amended in 2008 and in May 2010, the sublicensing rights to the patent reverted to Mr. Keesmann. We will receive 50% of any licensing revenue received by Mr. Keesmann up to a maximum of $1.2 million of revenue to us.

In 2008, we also sold a portion of our potential future royalty stream related to the Keesmann patents to IP Verwertungs GmbH (“IPV”) for $1.4 million. A total of $1.226 million has been received and the remaining $174,000 will be offset against future royalties due IPV. IPV will receive 25% of our portion of the Keesmann royalties, if any are received. If we received the maximum potential amount of $1.2 million from Mr. Keesmann, we would be obligated to pay IPV $126,000.

Research and development commitments

As of December 31, 2011, the Company had several research contracts pending and in process. The total amount of those contracts is $4,386,430. Of that total, $2,118,252 has been recognized as revenue and $2,268,178 will be recognized in the future. The revenue to be recognized from these research contracts in 2012 is expected to exceed the cost of this research.

Government contracts

Governmental contractors are subject to many levels of audit and investigation. Among United States agencies that oversee contract performance are: the Defense Contract Audit Agency, the Inspector General, the Defense Criminal Investigative Service, the General Accounting Office, the Department of Commerce, the Department of Justice and Congressional Committees. The Company’s management believes that an audit or investigation, if any, as a result of such oversight would not have any material adverse effect upon the Company’s financial condition or results of operations.

Legal proceedings

On July 20, 1998, TFI Telemark, Inc. filed a complaint in the County Court at Law No. 2 of Travis County, Texas against the Company for debts of its now defunct subsidiary, Plasmatron. The Company was served with notice of this suit on August 5, 1998. The Company believes that no amounts are due to TFI; however, all amounts claimed as owing by TFI are recorded as liabilities in the consolidated financial statements of the Company. There has been no activity on this case in the last year. The Company believes the ultimate resolution of this matter will not have a material impact on the consolidated financial statements of the Company.

From time to time the Company and its subsidiaries are also defendants in various lawsuits that may arise related to minor matters. It is expected that all such lawsuits will be settled for an amount no greater than the liability recorded in the financial statements for such matters. If resolution of any of these suits results in a liability greater than that recorded, it could have a material impact on the Company.

14.Research and Development Contracts:

v2.4.0.6
14.Research and Development Contracts:
12 Months Ended
Dec. 31, 2011
Long-term Contracts or Programs Disclosure [Text Block]
14.
Research and Development Contracts:

The Company makes significant expenditures for research and development. We seek funding for our research and development costs to reduce the cost of such expenditures to the Company. We only seek funding for projects that fit within our strategic vision. A substantial portion of our funded research has been from government contracts. Under government contracts, the government has the right to utilize the results for its purposes, and we have the right to utilize the technology for commercial purposes. Generally, when we contract with other entities, the entity is also conducting its own internal research related to application of our technology to its products and such expenditures by the entity frequently exceeds the amount of funding provided to the Company. Usually the entity has the first opportunity to license the technology at the conclusion of the project, if they desire. The costs of a particular research program may exceed the funding received; however, since the goal of the research is to ultimately lead to a license, our willingness to share part of the development cost is evaluated on a case by case basis.

The following schedule summarizes certain information with respect to research and development contracts:

   
2011
   
2010
   
2009
 
Contract research revenues
  $ 4,059,145     $ 4,057,400     $ 3,461,226  
Direct costs incurred included in research and development expense
  $ 2,338,863     $ 2,224,885     $ 1,595,216  
Amount of additional funding commitments at December 31
  $ 2,268,173     $ 3,361,453     $ 2,937,796  

15.Concentrations of Credit Risk:

v2.4.0.6
15.Concentrations of Credit Risk:
12 Months Ended
Dec. 31, 2011
Concentration Risk Disclosure [Text Block]
15.
Concentrations of Credit Risk:

The Company’s financial instruments that are exposed to concentrations of credit risk consist of cash and cash equivalents and receivables. The Company places its cash and cash equivalents with high credit quality financial institutions; however for periods of time during the year, bank balances on deposit were in excess of the Federal Deposit Insurance Corporation insurance limit. The Company had $1,674,684 and $1,351,982 in excess of the FDIC insurance limit on deposit at JP Morgan Chase & Co. at December 31, 2011 and 2010, respectively. There were no funds in excess of the FDIC limit at December 31, 2009. The Company held $261,578 and $720 in excess of the Securities Investor Protection Corporation limits in an account at Charles Schwab & Co. Inc. at December 31, 2011 and 2010, respectively.

The Company’s receivables are uncollateralized and result primarily from its research and development projects performed primarily for U.S. Federal Government Agencies, services performed for large U.S. and multinational corporations, and royalties from large U.S. and multinational corporations. The Company has not incurred any material losses on these receivables.

16.Significant Customers:

v2.4.0.6
16.Significant Customers:
12 Months Ended
Dec. 31, 2011
Concentration Risk, Customer
16.
Significant Customers:

Applied Nanotech, Inc. received research and development revenues from the U.S. Government in the three years as disclosed on the income statement. In addition to the U.S. Government, the Company had three customers from which it has received in excess of 10% of its consolidated revenues in one or more of the past three years as set forth in the following table.

   
Year ended December 31
 
Customer
 
2011
   
2010
   
2009
 
Ishihara Chemical Company, Ltd.
    142,920       1,265,370       1,675,000  
Sichuan Anxian Yinhee Construction and Chemical Company
    1,500,000              
Samsung Electronics Co., Ltd.
          2,500,000        

17.Quarterly Financial Information (Unaudited):

v2.4.0.6
17.Quarterly Financial Information (Unaudited):
12 Months Ended
Dec. 31, 2011
Quarterly Financial Information [Text Block]
17.
Quarterly Financial Information (Unaudited):

   
First
   
Second
   
Third
   
Fourth
   
Total
 
   
Quarter
   
Quarter
   
Quarter
   
Quarter
   
Year
 
2011
                             
Revenues
  $ 1,936,981     $ 1,662,534     $ 2,249,019     $ 638,927     $ 6,487,461  
Operating income (loss)
    (482,308 )     (367,513 )     22,350       (1,375,399 )     (2,202,870 )
Net (loss)
    (613,797 )     (433,119 )     (62,066 )     (1,461,266 )     (2,570,248 )
Earnings (loss) per share
                                       
Basic and Diluted
    (0.01 )     (0.00 )     (0.00 )     (0.01 )     (0.02 )
                                         
2010
                                       
Revenues
  $ 1,009,636     $ 1,865,939     $ 949,233     $ 4,218,987     $ 8,043,795  
Operating income (loss)
    (520,811 )     525,949       (939,541 )     1,839,564       1,445,020  
Net income (loss)
    (569,940 )     418,786       (1,053,997 )     1,616,455       411,304  
Earnings (loss) per share
                                       
Basic and Diluted
    (0.01 )     0.00       (0.01 )     0.01       0.00  
                                         
2009
                                       
Revenues
  $ 824,525     $ 922,097     $ 1,506,673     $ 799,451     $ 4,052,746  
Operating income (loss)
    (831,466 )     (652,735 )     (2,750 )     (657,442 )     (2,144,393 )
Net (loss)
    (833,114 )     (654,027 )     (4,435 )     (661,029 )     (2,152,605 )
Earnings (loss) per share
                                       
Basic and Diluted
    (0.01 )     (0.01 )     (0.00 )     (0.01 )     (0.02 )

Annual earnings (loss) per share may not equal the sum of the four quarterly amounts due to rounding.

18.Related Party Transactions:

v2.4.0.6
18.Related Party Transactions:
12 Months Ended
Dec. 31, 2011
Related Party Transactions Disclosure [Text Block]
18.
Related Party Transactions:

We raised money in 2010 through the use of convertible notes payable. A portion of those notes were issued to Officers and Directors of the company. A total of $2,146,000 was raised from December 2009 through March 2010. Of this amount, $216,000 was from Officers and Directors of the Company. The $1,930,000 raised from outsiders, all of whom are believed to be shareholders, is convertible to common stock at a rate of $0.20 per share, a discount to the market price of the common stock at the time. The $216,000 payable to Officers and Directors is convertible to common stock at a price of $0.25 per share, the market price of the stock at the time. No discount to market was allowed for Officers and Directors. During 2011, a total of $21,000 of these notes were converted to common stock and the remaining $195,000 remain outstanding.

19.Gain on Sale of Intellectual Property and Other Assets:

v2.4.0.6
19.Gain on Sale of Intellectual Property and Other Assets:
12 Months Ended
Dec. 31, 2011
Intangible Assets Disclosure [Text Block]
19.
Gain on Sale of Intellectual Property and Other Assets:

In 2010, we entered into a transaction with Samsung Electronics Co., Ltd whereby we sold 29 patents (11 U.S. and 18 foreign counterparts) and licensed approximately 150 additional patents in exchange for a payment of $3.75 million. The proceeds of $3.75 million were allocated between the patents sold and the patents licensed. A total of $2.5 million was allocated to the license and recorded as license revenue. A total of $1.25 million was allocated to the patents sold. The gain of $1,019,531 represents the sale proceeds of $1.25 million reduced by a prorata share of the expenses associated with the transaction.

20.Subsequent events:

v2.4.0.6
20.Subsequent events:
12 Months Ended
Dec. 31, 2011
Subsequent Events [Text Block]
20.
Subsequent events:

From January 1, 2012 through February 29, 2012, we issued 222,222 shares of common stock to our patent attorney in payment of an accounts payable of $60,000.