##### 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 June 30, 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 June 30, 2006Common Stock, no par value
    
    3,986,368




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##### 



Page No.PART I  Financial StatementsItem 1
    
    Condensed Consolidated Balance Sheets June 30, 2006 (Unaudited) and December 31, 2005
    
    
    2Condensed Consolidated Statements of Operations (Unaudited)Three and Six months ended June 30, 2006 and 2005
    
    
    3Condensed Consolidated Statement of Shareholders Equity (Unaudited) Six months ended June 30, 2006
    
    
    4Condensed Consolidated Statements of Cash Flows (Unaudited) Six months ended June 30, 2006 and 2005
    
    
    5Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    6Item 2
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    12Item 3
    
    Controls and Procedures
    
    
    17PART II  Other InformationItem 1
    
    Legal Proceedings
    
    
    18Item 2
    
    Changes in Securities and Use of Proceeds
    
    
    18Item 3
    
    Defaults Upon Senior Securities
    
    
    18Item 4
    
    Submission of Matters to a Vote of Security Holders
    
    
    18Item 5
    
    Other Information
    
    
    18Item 6
    
    Exhibits
    
    
    18SIGNATURES
    
    
    19EXHIBIT 12.1EXHIBIT 31.1EXHIBIT 32.1
  1




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##### Table of Contents



PLANET TECHNOLOGIES, INC. AND SUBSIDIARY
 
 CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
 June 30, 2006
    
    
    December 31, 2005ASSETSCurrent assets:Cash and cash equivalents
    
    $
    186,041
    
    
    $
    436,844Accounts receivable, less allowance for
doubtful accounts of $9,311 and $4,311
in 2006 and 2005, respectively
    
    
    186,168
    
    
    
    274,727Inventory, net
    
    
    575,110
    
    
    
    577,332Other current assets
    
    
    69,367
    
    
    
    115,560Total current assets
    
    
    1,016,686
    
    
    
    1,404,463Equipment and improvements, net
    
    
    43,948
    
    
    
    70,756Intangibles, net
    
    
    1,309,404
    
    
    
    1,441,904Goodwill
    
    
    1,363,025
    
    
    
    1,363,025Totals
    
    $
    3,733,063
    
    
    $
    4,280,148LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current portion of note and capital lease
    
    $
    15,385
    
    
    $
    19,223Accounts payable and accrued expenses
    
    
    1,248,976
    
    
    
    1,503,175Derivative liability
    
    
    25,242
    
    
    
    118,282Accrued warrant liability
    
    
    35,460
    
    
    
    67,500Total current liabilities
    
    
    1,325,063
    
    
    
    1,708,180Note payable to shareholder
    
    
    250,000
    
    
    
    Convertible note payable to shareholder
    
    
    48,227
    
    
    
    81,606Total liabilities
    
    
    1,623,290
    
    
    
    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
    
    
    158,934
    
    
    
    7,957Accumulated deficit
    
    
    (5,742,457
    )
    
    
    (5,210,891
    )Total shareholders equity
    
    
    2,109,773
    
    
    
    2,490,362Totals
    
    $
    3,733,063
    
    
    $
    4,280,148
  2




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PLANET TECHNOLOGIES, INC. AND SUBSIDIARY
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
 Three months ended June 30,
    
    
    Six months ended June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Sales
    
    $
    1,992,255
    
    
    $
    220,735
    
    
    $
    4,310,084
    
    
    $
    442,261Cost of sales
    
    
    1,144,057
    
    
    
    85,582
    
    
    
    2,529,989
    
    
    
    161,087Gross profit
    
    
    848,198
    
    
    
    135,153
    
    
    
    1,780,095
    
    
    
    281,174Operating expenses:Selling
    
    
    261,669
    
    
    
    166,724
    
    
    
    630,722
    
    
    
    327,918General and administrative
    
    
    880,340
    
    
    
    191,026
    
    
    
    1,775,387
    
    
    
    410,011Total operating expenses
    
    
    1,142,009
    
    
    
    357,750
    
    
    
    2,406,109
    
    
    
    737,929Loss from operations
    
    
    (293,811
    )
    
    
    (222,597
    )
    
    
    (626,014
    )
    
    
    (456,755
    )Other income (expense)
    
    
    79,341
    
    
    
    (1,354
    )
    
    
    77,341
    
    
    
    (3,303
    )Interest expense
    
    
    (2,485
    )
    
    
    (4,054
    )
    
    
    (3,989
    )
    
    
    (8,976
    )Credit for change in derivative liability
    
    
    22,984
    
    
    
    
    
    
    
    21,096
    
    
    
    Net loss
    
    $
    (193,971
    )
    
    $
    (228,005
    )
    
    $
    (531,566
    )
    
    $
    (469,034
    )Net loss per share, basic and diluted
    
    $
    (0.05
    )
    
    $
    (0.10
    )
    
    $
    (0.13
    )
    
    $
    (0.21
    )Weighted average shares used in
computing net loss per share  basic and
diluted
    
    
    3,986,368
    
    
    
    2,214,427
    
    
    
    3,986,368
    
    
    
    2,187,344
  3




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PLANET TECHNOLOGIES, INC. AND SUBSIDIARY
 
 CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY (UNAUDITED)

Six Months Ended June 30, 2006
 Common Stock
    
    
    Additional
    
    
    AccumulatedShares
    
    
    Amount
    
    
    Paid-in Capital
    
    
    Deficit
    
    
    TotalBalance at January 1, 2006
    
    
    3,986,368
    
    
    $
    7,693,296
    
    
    $
    7,957
    
    
    $
    (5,210,891
    )
    
    $
    2,490,362Change in derivative liability
due to principle payments on
convertible promissory note
    
    
    
    
    
    
    
    
    
    
    35,268
    
    
    
    
    
    
    
    35,268Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    108,039
    
    
    
    
    
    
    
    108,039Change in fair value of
options granted to consultant
    
    
    
    
    
    
    
    
    
    
    7,670
    
    
    
    
    
    
    
    7,670Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (531,566
    )
    
    
    (531,566
    )Balance at June 30, 2006
    
    
    3,986,368
    
    
    $
    7,693,296
    
    
    
    158,934
    
    
    $
    (5,742,457
    )
    
    $
    2,109,773
  4




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##### Table of Contents



PLANET TECHNOLOGIES, INC. AND SUBSIDIARY
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 Six Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2005Operating activities:Net loss
    
    $
    (531,566
    )
    
    $
    (469,034
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    159,308
    
    
    
    31,782Non-cash credit for change in fair value of derivative liability
    
    
    (21,096
    )
    
    
    Non-cash change in fair value of warrant liability
    
    
    (32,040
    )
    
    
    Non-cash charge for stock- based compensation
    
    
    108,039
    
    
    
    Non-cash charge for change in fair value of options granted to
consultant
    
    
    7,670
    
    
    
    Changes in operating assets and liabilities:Accounts receivable
    
    
    88,559
    
    
    
    2,916Inventory
    
    
    2,222
    
    
    
    (4,444
    )Other current assets
    
    
    46,193
    
    
    
    7,091Accounts payable and accrued expenses
    
    
    (254,199
    )
    
    
    (134,223
    )Net cash used in operating activities
    
    
    (426,910
    )
    
    
    (565,912
    )Investing activities:Capitalized costs associated with purchase of a business
    
    
    
    
    
    
    (32,759
    )Net cash used in investing activities
    
    
    
    
    
    
    (32,759
    )Financing activities:Repayments of advances from related party
    
    
    
    
    
    
    (100,000
    )Proceeds from note payable
    
    
    250,000
    
    
    
    Payment of vendor promissory note
    
    
    (3,838
    )
    
    
    Principal payment on notes payable
    
    
    (70,055
    )
    
    
    (66,315
    )Proceeds from the issuance of stock
    
    
    
    
    
    
    530,000Net cash provided by financing activities
    
    
    176,107
    
    
    
    363,685Net decrease in cash and cash equivalents
    
    
    (250,803
    )
    
    
    (234,986
    )Cash and cash equivalents, beginning of period
    
    
    436,844
    
    
    
    374,923Cash and cash equivalents, end of period
    
    $
    186,041
    
    
    $
    139,937Supplementary disclosure of cash flow data:Cash paid for interest
    
    $
    2,531
    
    
    $
    14,588
  5




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##### 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
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2005
    
    
    2005Sales
    
    $
    1,983,678
    
    
    $
    4,363,159Net loss
    
    $
    (285,853
    )
    
    $
    (609,843
    )Net loss per share, basic and diluted
    
    $
    (.13
    )
    
    $
    (.28
    )
 6




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##### 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
    
    $
    336,837Finished goods
    
    
    304,838Total
    
    
    641,675Less reserve for obsolescence
    
    
    66,565Total
    
    $
    575,110
 Loss Per Share
   Reclassifications
  7




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PLANET TECHNOLOGIES, INC. AND SUBSIDIARY
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 5. Stock-Based Compensation
 
     8




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PLANET TECHNOLOGIES, INC. AND SUBSIDIARY
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 5. Stock-Based Compensation (continued)
  Three Months Ended June 30, 2005
    
    
    Six Months Ended June 30, 2005Loss per Share
    
    
    
    
    
    
    Loss per Share Basic and
    
    
    
    
    
    
     Basic andNet Loss
    
    
    Diluted
    
    
    Net Loss
    
    
    DilutedAs reported
    
    $
    (228,005
    )
    
    $
    (0.10
    )
    
    $
    (469,034
    )
    
    $
    (0.21
    )Stockbased
compensation
expense assuming a
fair value-based
method had been
used for all awards
    
    
    (46,000
    )
    
    
    (0.02
    )
    
    
    (92,000
    )
    
    
    (0.05
    )Pro forma
    
    $
    (274,005
    )
    
    $
    (0.12
    )
    
    $
    (561,034
    )
    
    $
    (0.26
    )
  2005Volatility
    
    
    221
    %Dividend yield
    
    
    Risk free interest rate
    
    
    4.22
    %Vesting period
    
    4 yearsExpected life
    
    10 years
   WeightedAverageRemainingUnderlying
    
    
    Weighted Avg
    
    
    Contractual
    
    
    Aggregate IntrinsicShares
    
    
    Exercise Price
    
    
    Life (years)
    
    
    ValueOutstanding, beginning of period
    
    
    342,500
    
    
    $
    3.30
    
    
    
    8.94
    
    
    $
    Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited/expired
    
    
    (10,000
    )
    
    
    4.00
    
    
    
    Outstanding, end of period
    
    
    332,500
    
    
    $
    3.28
    
    
    
    8.69
    
    
    $
    Exercisable, end of period
    
    
    107,014
    
    
    $
    3.81
    
    
    
    7.98
    
    
    $
    
 9




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##### Table of Contents



PLANET TECHNOLOGIES, INC. AND SUBSIDIARY
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 5. Stock-Based Compensation (concluded)
   6. Convertible notes payable to shareholder
   7. Note payable to shareholder
  10




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PLANET TECHNOLOGIES, INC. AND SUBSIDIARY
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 8. Subsequent Event
  11




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##### Table of Contents



PART 1  FINANCIAL INFORMATION
 
 Item 2  Managements Discussion and Analysis of Financial Condition and Results of Operations
 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.
           12




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PART 1  FINANCIAL INFORMATION
Item 2  Managements Discussion and Analysis of Financial Condition and Results of Operations
 Planet Technologies, Inc. and Subsidiary
  Three months ended June 30, 2006 compared to three months ended June 30, 2005
      Proforma three months ended June 30, 2006 compared to three months ended June 30, 2005
  2006
    
    
    2005
    
    
    Change
    
    
    %Sales
    
    $
    1,992,255
    
    
    $
    1,983,678
    
    
    $
    8,577
    
    
    
    .4Cost of Sales
    
    
    1,144,057
    
    
    
    1,116,688
    
    
    
    (27,369
    )
    
    
    2.5Gross Profit
    
    
    848,198
    
    
    
    866,990
    
    
    
    (18,792
    )
    
    
    (2.2
    )Operating Expenses
    
    
    (1,142,009
    )
    
    
    (1,147,358
    )
    
    
    5,349
    
    
    
    (.5
    )Loss from Operations
    
    
    (293,811
    )
    
    
    (280,368
    )
    
    
    (13,443
    )
    
    
    (4.8
    )Other Income (Expense)
    
    
    99,840
    
    
    
    (5,485
    )
    
    
    105,325
    
    
    
    1,920Net Loss
    
    $
    (193,971
    )
    
    $
    (285,853
    )
    
    $
    91,882
    
    
    
    (32
    )
 13




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##### Table of Contents



PART 1  FINANCIAL INFORMATION
Item 2  Managements Discussion and Analysis of Financial Condition and Results of Operations
 Planet Technologies, Inc. and Subsidiary
     Six months ended June 30, 2006 compared to six months ended June 30, 2005
     14




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PART 1  FINANCIAL INFORMATION
Item 2  Managements Discussion and Analysis of Financial Condition and Results of Operations
 Planet Technologies, Inc. and Subsidiary
  Proforma six months ended June 30, 2006 compared to six months ended June 30, 2005
  2006
    
    
    2005
    
    
    Change
    
    
    %Sales
    
    $
    4,310,084
    
    
    $
    4,363,159
    
    
    $
    (53,075
    )
    
    
    (1.2
    )Cost of Sales
    
    
    2,529,989
    
    
    
    2,488,656
    
    
    
    (41,333
    )
    
    
    1.7Gross Profit
    
    
    1,780,095
    
    
    
    1,874,503
    
    
    
    (94,408
    )
    
    
    (5.0
    )Operating Expenses
    
    
    (2,406,109
    )
    
    
    (2,472,452
    )
    
    
    66,343
    
    
    
    (2.7
    )Loss from Operations
    
    
    (626,014
    )
    
    
    (597,949
    )
    
    
    (28,065
    )
    
    
    (4.7
    )Other Income (Expense)
    
    
    94,448
    
    
    
    (11,894
    )
    
    
    106,342
    
    
    
    (894
    )Net Loss
    
    $
    (531,566
    )
    
    $
    (609,843
    )
    
    $
    78,277
    
    
    
    (12.8
    )
     15




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##### Table of Contents



PART 1  FINANCIAL INFORMATION
Item 2  Managements Discussion and Analysis of Financial Condition and Results of Operations
 Planet Technologies, Inc. and Subsidiary
 Off Balance Sheet Arrangements
       www.sec.gov
 16




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##### 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.
    17




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PART II  OTHER INFORMATION
 Planet Technologies, Inc. and Subsidiary
 
   
   
   
   
   
      18




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##### Table of Contents



Planet Technologies, Inc.
 
   Date: August 11, 2006
    
    Planet Technologies, Inc./s/ Scott L. GlennScott L. GlennChief Executive Officer/s/ Francesca DiNotaFrancesca DiNotaChief Financial Officer andChief Accounting Officer