##### 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 September 30, 2006
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 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 September 30, 2006Common Stock, no par value
    
    3,986,368




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##### 



Page No.PART I  Financial StatementsItem 1 Condensed Consolidated Balance Sheets September 30, 2006
(Unaudited) and December 31, 2005
    
    
    2Condensed Consolidated Statements of Operations (Unaudited)
Three and Nine Months Ended September 30, 2006 and 2005
    
    
    3Condensed Consolidated Statement of Shareholders Equity
(Deficiency) (Unaudited) Nine Months Ended September 30, 2006
    
    
    4Condensed Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended September 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
    
    
    18PART II  Other InformationItem 1 Legal Proceedings
    
    
    19Item 2 Changes in Securities
    
    
    19Item 3 Defaults
    
    
    19Item 4 Submission of Matters to a Vote of Security Holders
    
    
    19Item 5 Other Information
    
    
    20Item 6 Exhibits
    
    
    20SIGNATURES
    
    
    21EXHIBIT 12.2EXHIBIT 31.1EXHIBIT 32.1
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##### Table of Contents



PLANET TECHNOLOGIES, INC. AND SUBSIDIARY
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 September 30, 2006
    
    
    December 31, 2005(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    194,874
    
    
    $
    436,844Accounts receivable, less allowance for
doubtful accounts of $9,311 and $4,311 in
2006 and 2005, respectively
    
    
    140,564
    
    
    
    274,727Inventory, net
    
    
    575,470
    
    
    
    577,332Other current assets
    
    
    126,632
    
    
    
    115,560Total current assets
    
    
    1,037,540
    
    
    
    1,404,463Equipment and improvements, net
    
    
    29,749
    
    
    
    70,756Intangibles, net
    
    
    1,243,154
    
    
    
    1,441,904Goodwill
    
    
    1,363,025
    
    
    
    1,363,025Totals
    
    $
    3,673,468
    
    
    $
    4,280,148LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable and accrued expenses
    
    
    1,197,286
    
    
    
    1,503,175Current portion of capital lease obligations
    
    
    983
    
    
    
    19,223Derivative liability
    
    
    27,543
    
    
    
    118,282Accrued warrant liability
    
    
    61,996
    
    
    
    67,500Total current liabilities
    
    
    1,287,808
    
    
    
    1,708,180Notes payable to shareholder
    
    
    500,000
    
    
    
    Convertible note payable to shareholder
    
    
    30,200
    
    
    
    81,606Total liabilities
    
    
    1,818,008
    
    
    
    1,789,786CommitmentsShareholders 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
    
    
    299,827
    
    
    
    7,957Accumulated deficit
    
    
    (6,137,663
    )
    
    
    (5,210,891
    )Total shareholders equity
    
    
    1,855,460
    
    
    
    2,490,362Totals
    
    $
    3,673,468
    
    
    $
    4,280,148
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PLANET TECHNOLOGIES, INC. AND SUBSIDIARY
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
 Three months ended September 30,
    
    
    Nine months ended September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Sales
    
    $
    1,872,047
    
    
    $
    1,183,459
    
    
    $
    6,182,130
    
    
    $
    1,625,720Cost of sales
    
    
    1,142,160
    
    
    
    670,278
    
    
    
    3,672,148
    
    
    
    831,365Gross profit
    
    
    729,887
    
    
    
    513,181
    
    
    
    2,509,982
    
    
    
    794,355Operating expenses:Selling
    
    
    327,523
    
    
    
    388,122
    
    
    
    958,244
    
    
    
    716,040General and administrative
    
    
    830,019
    
    
    
    402,245
    
    
    
    2,605,406
    
    
    
    812,256Total operating expenses
    
    
    1,157,542
    
    
    
    790,367
    
    
    
    3,563,650
    
    
    
    1,528,296Loss from operations
    
    
    (427,655
    )
    
    
    (277,186
    )
    
    
    (1,053,668
    )
    
    
    (733,941
    )Other (expense) income
    
    
    59,974
    
    
    
    (765
    )
    
    
    137,314
    
    
    
    (4,067
    )Credit (charge) for change in derivative liability
    
    
    (20,328
    )
    
    
    
    
    
    
    768
    
    
    
    Interest expense
    
    
    (7,196
    )
    
    
    (2,973
    )
    
    
    (11,186
    )
    
    
    (11,950
    )Net loss
    
    $
    (395,205
    )
    
    $
    (280,924
    )
    
    $
    (926,772
    )
    
    $
    (749,958
    )Net loss per share, basic and diluted
    
    $
    (0.10
    )
    
    $
    (0.09
    )
    
    $
    (0.23
    )
    
    $
    (0.30
    )Weighted average shares used in computing
net loss per share  basic and diluted
    
    
    3,986,368
    
    
    
    3,226,078
    
    
    
    3,986,368
    
    
    
    2,537,394
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##### Table of Contents



PLANET TECHNOLOGIES, INC. AND SUBSIDIARY
 
 CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY (DEFICIENCY)
(UNAUDITED)
Nine Months Ended September 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 principal payments on
convertible promissory note
    
    
    
    
    
    
    
    
    
    
    53,295
    
    
    
    
    
    
    
    53,295Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    222,981
    
    
    
    
    
    
    
    222,981Change in fair value of options
granted to consultant
    
    
    
    
    
    
    
    
    
    
    15,594
    
    
    
    
    
    
    
    15,594Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (926,772
    )
    
    
    (926,772
    )Balance at September 30, 2006
    
    
    3,986,368
    
    
    $
    7,693,296
    
    
    $
    299,827
    
    
    $
    (6,137,663
    )
    
    $
    1,855,460
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##### Table of Contents



PLANET TECHNOLOGIES, INC. AND SUBSIDIARY
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 Nine Months
    
    
    Nine MonthsEnded
    
    
    EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005Operating activities:Net loss
    
    $
    (926,772
    )
    
    $
    (749,958
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    228,432
    
    
    
    57,817Gain on disposition of leased property
    
    
    (2,102
    )
    
    
    Non-cash credit for change in fair value of derivative liability
    
    
    (768
    )
    
    
    Non-cash change in fair value of warrant liability
    
    
    (5,504
    )
    
    
    Non-cash charge for stock- based compensation
    
    
    222,981
    
    
    
    Non-cash charge for change in fair value of options granted to
consultant
    
    
    15,594
    
    
    
    Changes in operating assets and liabilities:Accounts receivable
    
    
    134,163
    
    
    
    29,833Inventory
    
    
    1,862
    
    
    
    (41,070
    )Interest payable
    
    
    
    
    
    
    (8,543
    )Other current assets
    
    
    (11,072
    )
    
    
    5,914Accounts payable and accrued expenses
    
    
    (305,889
    )
    
    
    (423,213
    )Net cash used in operating activities
    
    
    (649,075
    )
    
    
    (1,129,220
    )Investing activities:Deferred acquisition costs
    
    
    
    
    
    
    (133,097
    )Purchase of equipment improvements
    
    
    
    
    
    
    (18,787
    )Investment in ACP
    
    
    
    
    
    
    (1,431,490
    )Net cash used in investing activities
    
    
    
    
    
    
    (1,583,374
    )Financing activities:Repayments of advances from related party
    
    
    
    
    
    
    (185,000
    )Proceeds from notes payable
    
    
    500,000
    
    
    
    Payment of capital lease obligations
    
    
    (4,813
    )
    
    
    (1,038
    )Principal payment on notes payable
    
    
    (88,082
    )
    
    
    (100,161
    )Proceeds from the issuance of stock
    
    
    
    
    
    
    3,295,000Net cash provided by financing activities
    
    
    407,105
    
    
    
    3,008,801Net (decrease) increase in cash and cash equivalents
    
    
    (241,970
    )
    
    
    296,207Cash and cash equivalents, beginning of period
    
    
    436,844
    
    
    
    374,923Cash and cash equivalents, end of period
    
    $
    194,874
    
    
    $
    671,130Supplementary disclosure of cash flow data:Cash paid for interest
    
    $
    2,829
    
    
    $
    20,340Supplementary disclosure of non financing activities:Termination of capital lease obligation
    
    $
    13,427
    
    
    
    
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PLANET TECHNOLOGIES, INC. AND SUBSIDIARY
 
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 1. Basis of Presentation
   2. Going Concern
  3. Acquisition
   Three Months
    
    
    Nine MonthsEnded Sept 30,
    
    
    Ended Sept 30,2005
    
    
    2005Sales
    
    $
    2,010,749
    
    
    $
    6,373,909Net loss
    
    
    (943,275
    )
    
    
    (1,553,117
    )Net loss per share, basic and diluted
    
    $
    (.24
    )
    
    $
    (.51
    )
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PLANET TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 4. Accounting Policies
 Revenue Recognition
  Warranty Reserve
  Inventory
  September 30,
    
    December 31,2006
    
    2005Raw materials
    
    $
    307,153
    
    
    $
    256,413Finished goods
    
    
    334,882
    
    
    
    411,644Total
    
    
    642,035
    
    
    
    668,057Less reserve for obsolescence
    
    
    (66,565
    )
    
    
    (90,725
    )Total
    
    $
    575,470
    
    
    $
    577,332
 Loss Per Share
   Reclassifications
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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 Sept 30, 2005
    
    
    Nine Months Ended Sept 30, 2005Loss per Share
    
    
    
    
    
    
    Loss per Share- Basic and
    
    
    
    
    
    
    - Basic andNet Loss
    
    
    Diluted
    
    
    Net Loss
    
    
    DilutedAs reported
    
    $
    (280,924
    )
    
    $
    (0.09
    )
    
    $
    (749,958
    )
    
    $
    (0.30
    )Stock-based
compensation
expense assuming a
fair value-based
method had been
used for all awards
    
    
    (93,000
    )
    
    
    (0.03
    )
    
    
    (166,000
    )
    
    
    (0.06
    )Pro forma
    
    $
    (373,924
    )
    
    $
    (0.12
    )
    
    $
    (915,958
    )
    
    $
    (0.36
    )
  2005Volatility
    
    
    176%-221
    %Dividend yield
    
    
    Risk free interest rate
    
    
    4.22%-4.40
    %Vesting period
    
    4 yearsExpected life
    
    10 years
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PLANET TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 5. Stock-Based Compensation (concluded)
  WeightedAverageWeighted
    
    
    Remaining
    
    
    AggregateUnderlying
    
    
    Avg
    
    
    Contractual
    
    
    IntrinsicShares
    
    
    Exercise Price
    
    
    Life (years)
    
    
    ValueOutstanding, beginning of period
    
    
    342,500
    
    
    $
    3.30
    
    
    
    8.94
    
    
    $
    Granted
    
    
    172,113
    
    
    
    2.73
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited/expired
    
    
    (10,000
    )
    
    
    4.00
    
    
    
    Outstanding, end of period
    
    
    504,613
    
    
    $
    3.09
    
    
    
    8.60
    
    
    $
    Exercisable, end of period
    
    
    196,720
    
    
    $
    3.35
    
    
    
    8.81
    
    
    $
    
  2006Volatility
    
    
    293.9
    %Dividend yield
    
    
    Risk free interest rate
    
    
    4.91
    %Vesting period
    
    4 yearsExpected life
    
    10 years
  6. Convertible notes payable to shareholder
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PLANET TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 6. Convertible notes payable to shareholder (concluded)
  7. Notes payable to shareholder
   8. Subsequent Event
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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
 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.
     ®
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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 September 30, 2006 compared to three months ended September 30, 2005
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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
 Actual three months ended September 30, 2006 compared to proforma three months ended September 30,
2005
  Actual
    
    
    Proforma
    
    
    Favorable2006
    
    
    2005
    
    
    (Unfavorable) Change
    
    
    %Sales
    
    $
    1,872,047
    
    
    $
    2,010,749
    
    
    $
    (138,702
    )
    
    
    (6.9
    )Cost of Sales
    
    
    1,142,160
    
    
    
    1,230,392
    
    
    
    88,232
    
    
    
    (7.2
    )Gross Profit
    
    
    729,887
    
    
    
    780,357
    
    
    
    (50,470
    )
    
    
    (6.5
    )Operating Expenses
    
    
    1,157,542
    
    
    
    1,719,518
    
    
    
    561,976
    
    
    
    32.7Loss from Operations
    
    
    (427,655
    )
    
    
    (939,161
    )
    
    
    511,506
    
    
    
    (54.5
    )Other Income (Expense)
    
    
    32,450
    
    
    
    (4,114
    )
    
    
    36,564
    
    
    
    888.8Net Loss
    
    $
    (395,205
    )
    
    $
    (943,275
    )
    
    $
    548,070
    
    
    
    (58.1
    )
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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
 Nine months ended September 30, 2006 compared to nine months ended September 30, 2005
     Actual nine months ended September 30, 2006 compared to proforma nine months ended September 30,
2005
  FavorableActual
    
    
    Proforma
    
    
    (Unfavorable)2006
    
    
    2005
    
    
    Change
    
    
    %Sales
    
    $
    6,182,130
    
    
    $
    6,373,909
    
    
    $
    (191,779
    )
    
    
    (3.0
    )Cost of Sales
    
    
    3,672,148
    
    
    
    3,719,049
    
    
    
    46,901
    
    
    
    1.3Gross Profit
    
    
    2,509,982
    
    
    
    2,654,860
    
    
    
    (144,878
    )
    
    
    (5.5
    )Operating Expenses
    
    
    3,563,650
    
    
    
    4,191,970
    
    
    
    628,320
    
    
    
    15.0Loss from Operations
    
    
    (1,053,668
    )
    
    
    (1,537,110
    )
    
    
    483,442
    
    
    
    31.5Other Income (Expense)
    
    
    126,896
    
    
    
    (16,007
    )
    
    
    142,903
    
    
    
    892.8Net Loss
    
    $
    (926,772
    )
    
    $
    (1,553,117
    )
    
    $
    626,345
    
    
    
    40.3
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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
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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
 www.sec.gov
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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.
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PART II  OTHER INFORMATION
 Planet Technologies, Inc. and Subsidiary
 
   
   
   
    Name
    
    For
    
    
    AgainstScott L. Glenn
    
    
    2,754,647
    
    
    
    16,556H. Mac Busby
    
    
    2,770,040
    
    
    
    1,163Ellen Preston
    
    
    2,754,697
    
    
    
    16,506Michael Trinkle
    
    
    2,754,647
    
    
    
    16,556Eric B. Freedus
    
    
    2,754,697
    
    
    
    16,506Ed Steube
    
    
    2,754,697
    
    
    
    16,556Michael Walsh
    
    
    2,754,697
    
    
    
    16,506
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2

PART II  OTHER INFORMATION
 Planet Technologies, Inc. and Subsidiary
 
  www.sec.gov
 
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Planet Technologies, Inc.
 
   Date: November 13, 2006
    
    Planet Technologies, Inc./s/ Scott L. GlennScott L. GlennChief Executive Officer/s/ Francesca DiNotaFrancesca DiNotaChief Financial Officer andChief Accounting Officer