##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-QSB
  þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For Quarterly Period Ended March 31, 2006
 o
    
    TRANSITION REPORT UNDER TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT
 Commission File Number: 0-26804
 PLANET TECHNOLOGIES, INC.
  
  CALIFORNIA
    
    33-0502606(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)96 Danbury Road, Ridgefield, Connecticut
    
    06877(Address of principal executive offices)
    
    (Zip Code)
  
  þ o
 o þ
  Class
    
    Outstanding at May 15, 2006Common Stock, no par value
    
    3,986,368




---



##### 



Page No.PART I  Financial StatementsItem 1 Condensed Consolidated Balance Sheets March 31, 2006
(Unaudited) and December 31, 2005
    
    
    2Condensed Consolidated Statements of Operations (Unaudited)
Three Months Ended March 31, 2006 and 2005
    
    
    3Condensed Consolidated Statement of Shareholders Equity
(Unaudited) Three Months Ended March 31, 2006
    
    
    4Condensed Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended March 31, 2006 and 2005
    
    
    5Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    6Item 2 Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    11Item 3 Controls and Procedures
    
    
    14PART II  Other InformationItem 1 Legal Proceedings
    
    
    15Item 2 Changes in Securities and Use of Proceeds
    
    
    15Item 3 Defaults Upon Senior Securities
    
    
    15Item 4 Submission of Matters to a Vote of Security Holders
    
    
    15Item 5 Other Information
    
    
    15Item 6 Exhibits
    
    
    15SIGNATURES
    
    
    16EXHIBIT 31.1EXHIBIT 32.1
  1




---



##### Table of Contents



PLANET TECHNOLOGIES, INC. AND SUBSIDIARY
 
 CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
 March 31, 2006
    
    
    December 31, 2005ASSETSCurrent assets:Cash and cash equivalents
    
    $
    307,314
    
    
    $
    436,844Accounts receivable, less allowance for doubtful accounts of $4,311
    
    
    285,501
    
    
    
    274,727Inventory, net
    
    
    621,203
    
    
    
    577,332Other current assets
    
    
    147,420
    
    
    
    115,560Total current assets
    
    
    1,361,438
    
    
    
    1,404,463Equipment and improvements, net
    
    
    54,659
    
    
    
    70,756Intangibles, net
    
    
    1,375,654
    
    
    
    1,441,904Goodwill
    
    
    1,363,025
    
    
    
    1,363,025Totals
    
    $
    4,154,776
    
    
    $
    4,280,148LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current portion of note and capital lease
    
    $
    17,310
    
    
    $
    19,223Accounts payable and accrued expenses
    
    
    1,711,646
    
    
    
    1,503,175Derivative liability
    
    
    83,495
    
    
    
    118,282Accrued warrant liability
    
    
    47,602
    
    
    
    67,500Total current liabilities
    
    
    1,860,053
    
    
    
    1,708,180Convertible notes payable to shareholder, net of current portion
    
    
    83,494
    
    
    
    81,606Total liabilities
    
    
    1,943,547
    
    
    
    1,789,786Commitments
    
    
    
    Shareholders equity:Preferred stock, no par value, 4,250,000 shares authorized, no
shares issued or outstanding
    
    
    
    
    
    
    Series A convertible preferred stock, no par value, 750,000 shares
authorized, no shares issued or outstanding
    
    
    
    
    
    
    Common stock, no par value, 20,000,000 shares authorized,
3,986,368 shares issued and outstanding
    
    
    7,693,296
    
    
    
    7,693,296Additional paid-in capital
    
    
    66,420
    
    
    
    7,957Accumulated deficit
    
    
    (5,548,487
    )
    
    
    (5,210,891
    )Total shareholders equity
    
    
    2,211,229
    
    
    
    2,490,362Totals
    
    $
    4,154,776
    
    
    $
    4,280,148
  2




---



##### Table of Contents



PLANET TECHNOLOGIES, INC. AND SUBSIDIARY
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
 Three months ended March 31,2006
    
    
    2005Sales
    
    $
    2,317,828
    
    
    $
    221,526Cost of sales
    
    
    1,385,931
    
    
    
    75,505Gross profit
    
    
    931,897
    
    
    
    146,021Operating expenses:Selling
    
    
    369,053
    
    
    
    161,194General and administrative
    
    
    895,047
    
    
    
    218,985Total operating expenses
    
    
    1,264,100
    
    
    
    380,179Loss from operations
    
    
    (332,203
    )
    
    
    (234,158
    )Other expense
    
    
    (2,001
    )
    
    
    (1,949
    )Interest expense
    
    
    (1,504
    )
    
    
    (4,922
    )Charge for change in derivative liability
    
    
    (1,888
    )
    
    
    Net loss
    
    $
    (337,596
    )
    
    $
    (241,029
    )Net loss per share, basic and diluted
    
    $
    (.08
    )
    
    $
    (.11
    )Weighted average shares used in computing
net loss per share  basic and diluted
    
    
    3,986,368
    
    
    
    2,159,961
  3




---



##### Table of Contents



PLANET TECHNOLOGIES, INC. AND SUBSIDIARY
 
 CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY (UNAUDITED)
 Three Months Ended March 31, 2006
 Common Stock
    
    
    Additional
    
    
    Accumulated
    
    
    TotalShares
    
    
    Amount
    
    
    Paid-in Capital
    
    
    DeficitBalance at January 1, 2006
    
    
    3,986,368
    
    
    $
    7,693,296
    
    
    $
    7,957
    
    
    $
    (5,210,891
    )
    
    $
    2,490,362Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    55,044
    
    
    
    
    
    
    
    55,044Change in fair value of
options granted to consultant
    
    
    
    
    
    
    
    
    
    
    3,419
    
    
    
    
    
    
    
    3,419Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (337,596
    )
    
    
    (337,596
    )Balance at March 31, 2006
    
    
    3,986,368
    
    
    $
    7,693,296
    
    
    $
    66,420
    
    
    $
    (5,548,487
    )
    
    $
    2,211,229
  4




---



##### Table of Contents



PLANET TECHNOLOGIES, INC. AND SUBSIDIARY
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 Three Months Ended
    
    
    Three Months EndedMarch 31,
    
    
    March 31,2006
    
    
    2005Operating activities:Net loss
    
    $
    (337,596
    )
    
    $
    (241,029
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    82,347
    
    
    
    15,941Non-cash charge for change in derivative liability
    
    
    1,888
    
    
    
    Non-cash change in fair value of warrant liability
    
    
    (19,898
    )
    
    
    Non-cash charge for stock- based compensation
    
    
    55,044
    
    
    
    Non-cash charge for change in fair value of options granted to
consultant
    
    
    3,419
    
    
    
    Changes in operating assets and liabilities:Accounts receivable
    
    
    (10,774
    )
    
    
    (2,438
    )Inventory
    
    
    (43,871
    )
    
    
    (786
    )Other current assets
    
    
    (31,860
    )
    
    
    (12,720
    )Interest payable
    
    
    
    
    
    
    (6,794
    )Accounts payable and accrued expenses
    
    
    208,471
    
    
    
    (145,361
    )Net cash used in operating activities
    
    
    (92,830
    )
    
    
    (393,187
    )Financing activities:Repayments of advances from related party
    
    
    
    
    
    
    (100,000
    )Payment of vendor promissory note
    
    
    (1,913
    )
    
    
    Principal payment on notes payable
    
    
    (34,787
    )
    
    
    (32,930
    )Proceeds from issuance of common stock
    
    
    
    
    
    
    280,000Net cash (used in) provided by financing activities
    
    
    (36,700
    )
    
    
    147,070Net decrease in cash and cash equivalents
    
    
    (129,530
    )
    
    
    (246,117
    )Cash and cash equivalents, beginning of period
    
    
    436,844
    
    
    
    374,923Cash and cash equivalents, end of period
    
    $
    307,314
    
    
    $
    128,806Supplementary disclosure of cash flow data:Cash paid for interest
    
    $
    1,532
    
    
    $
    11,947
  5




---



##### Table of Contents



PLANET TECHNOLOGIES, INC. AND SUBSIDIARY
 
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 1. Basis of Presentation
   2. Going Concern
  3. Acquisition
   Three Months EndedMarch 31, 2005Sales
    
    $
    2,379,481Net loss
    
    $
    (323,990
    )Net loss per share, basic and diluted
    
    $
    (0.12
    )
 6




---



##### Table of Contents



PLANET TECHNOLOGIES, INC. AND SUBSIDIARY
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 4. Accounting Policies
 Revenue Recognition
  Warranty Reserve
  Inventory
  Raw materials
    
    $
    320,593Finished goods
    
    
    378,117Total
    
    
    698,710Less reverse for obsolescence
    
    
    77,507Total
    
    $
    621,203
 Loss Per Share
   5. Stock-Based Compensation
  7




---



##### Table of Contents



PLANET TECHNOLOGIES, INC. AND SUBSIDIARY
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 5. Stock-Based Compensation (continued)
       2005Loss per Share- Basic andNet Loss
    
    
    DilutedAs reported
    
    $
    (241,029
    )
    
    $
    (0.11
    )Stock-based compensation
expense assuming a fair
value-based method had
been used for all awards
    
    
    (46,000
    )
    
    
    (0.02
    )Pro forma
    
    $
    (287,029
    )
    
    $
    (0.13
    )
 8




---



##### Table of Contents



PLANET TECHNOLOGIES, INC. AND SUBSIDIARY
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 5. Stock-Based Compensation (concluded)
  2005Volatility
    
    
    221
    %Dividend yield
    
    
    Risk free interest rate
    
    
    4.22
    %Vesting period
    
    
    4 yearsExpected life
    
    
    10 years
    WeightedAverageWeighted
    
    
    Remaining
    
    
    AggregateUnderlying
    
    
    Avg Exercise
    
    
    Contractual
    
    
    IntrinsicShares
    
    
    Price
    
    
    Life (years)
    
    
    ValueOutstanding, beginning of period
    
    
    342,500
    
    
    $
    3.30
    
    
    
    8.94
    
    
    $
    Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited/expired
    
    
    
    
    
    
    
    
    
    
    Outstanding, end of period
    
    
    342,500
    
    
    $
    3.30
    
    
    
    8.94
    
    
    $
    
    
    
    
    
    
    
    
    
    
    
    
    Exercisable, end of period
    
    
    99,793
    
    
    $
    2.59
    
    
    
    7.98
    
    
    $
    
   9




---



##### Table of Contents



PLANET TECHNOLOGIES, INC. AND SUBSIDIARY
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 6. Convertible notes payable to shareholder
   10




---



##### Table of Contents



PART
1FINANCIAL INFORMATION
 
 Item 2 Managements Discussion and Analysis of Financial Condition and Results of Operation
 Planet Technologies, Inc. and Subsidiary
 Except for the historical information contained herein, the discussion in this report contains
forward-looking statements that involve certain risks and uncertainties. The Companys actual
results could differ materially from those discussed in this report. Factors that could cause or
contribute to such differences include, but are not limited to those discussed below and in the
Companys Form 10-KSB for the fiscal year ended December 31, 2005.
           11




---



##### Table of Contents



PART 1  FINANCIAL INFORMATION
 Item 2 Managements Discussion and Analysis of Financial Condition and Results of Operation
 Planet Technologies, Inc. and Subsidiary
  Three months ended March 31, 2006 compared to three months ended March 31, 2005
     Proforma Three months ended March 31, 2006 compared to three months ended March 31, 2005
  2006
    
    
    2005
    
    
    Change
    
    
    %Sales
    
    $
    2,317,828
    
    
    $
    2,379,481
    
    
    $
    (61,653
    )
    
    
    (3
    )Cost of Sales
    
    
    1,385,931
    
    
    
    1,371,968
    
    
    
    (13,963
    )
    
    
    (1
    )Gross Profit
    
    
    931,897
    
    
    
    1,007,513
    
    
    
    (75,616
    )
    
    
    (8
    )Operating Expenses
    
    
    (1,264,100
    )
    
    
    (1,325,094
    )
    
    
    60,994
    
    
    
    5Loss from Operations
    
    
    (332,203
    )
    
    
    (317,581
    )
    
    
    (14,622
    )
    
    
    (5
    )Other Expense
    
    
    (5,393
    )
    
    
    (6,409
    )
    
    
    1,016
    
    
    
    16Net Loss
    
    $
    (337,596
    )
    
    $
    (323,990
    )
    
    $
    (13,606
    )
    
    
    (4
    )
    12




---



##### Table of Contents



PART 1  FINANCIAL INFORMATION
 Item 2 Managements Discussion and Analysis of Financial Condition and Results of Operation
 Planet Technologies, Inc. and Subsidiary
    Off Balance Sheet Arrangements
       www.sec.gov
 13




---



##### Table of Contents



PART 1  FINANCIAL INFORMATION
 
 Item 3  Controls and Procedures
 Planet Technologies, Inc. and Subsidiary
  
    
    Insufficient accounting staff with the appropriate level of knowledge and a lack of
sufficient historical information regarding sales of ACP products.
    
    Insufficient number of staff and lack of adequate data processing support.
   
    
    Hiring of additional qualified accounting staff to facilitate the reporting within the
time periods specified by the SEC.
    
    Implementing new accounting reporting software in the short-term to expedite the
reporting function and an upgrade to the overall accounting software system in the
long-term so that analysis and evaluation of information can be better processed within
the time periods required by the SEC.
  14




---



##### Table of Contents



PART II  OTHER INFORMATION
 Planet Technologies, Inc. and Subsidiary
 
   
   
   
   
   
     15




---



##### Table of Contents



Planet Technologies, Inc.
 
   Date: May 22, 2006
    Planet Technologies, Inc./s/ Scott L. GlennScott L. GlennChief Executive Officer/s/ Francesca DiNotaFrancesca DiNotaChief Financial Officer and
Chief Accounting Officer 16