##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-KSB
 ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2005
 Commission File No. 0-26804
 
 PLANET TECHNOLOGIES, INC.
 (Formerly Planet Polymer Technologies, Inc.)
(Name of small business issuer in its charter)
 CALIFORNIA
    
    33-0502606(State or other jurisdiction of
    
    (IRS Employer identification No.)incorporation of organization)96 Danbury RoadRidgefield, CT
    
    06877(Address of principal executive offices)
    
    (Zip Code)
 Issuers telephone number (800)-255-3749
 Securities registered under Section 12(b) of the Exchange Act:
None
 Securities registered under Section 12(g) of the Exchange Act:
Common Stock, No Par Value
 o þ
 o
  o þ
   o þ




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##### 



PLANET TECHNOLOGIES, INC.
 FORM-10KSB
Year Ended December 31, 2005
 TABLE OF CONTENTS
  
 ItemNumber
    
    PagePART I.1. Description of Business
    
    
    32. Description of Property
    
    
    103. Legal Proceedings
    
    
    104. Submission of Matters to a Vote of Security Holders
    
    
    10PART II.5. Market for Common Equity, Related Stockholders Matters and Issuer Purchases of
Equity Securities
    
    
    116. Managements Discussion and Analysis or Plan of Operation
    
    
    117. Financial Statements
    
    
    168. Changes in and Disagreements With Accountants on Accounting and Financial Disclosures
    
    
    168A. Controls and Procedures
    
    
    168B. Other Information
    
    
    17PART III.9. Directors, and Executive Officers of the Registrant
    
    
    1810. Executive Compensation
    
    
    2011. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    2612. Certain Relationships and Related Transactions
    
    
    2713. Exhibits
    
    
    2814. Principal Accountant Fees and Services
    
    
    30Signatures
    
    
    31EXHIBIT 10.28EXHIBIT 10.29EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2
  2




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##### Table of Contents



PART I.
  
 ITEM 1. DESCRIPTION OF BUSINESS
 General
 ®
    3




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##### Table of Contents



Products
 ® Ò
 Allergen Barrier Bedding:
 Encasings Ò ® ® Ò
 Blankets ® ®
 Comforters : ®
 Pillows : ® ®
 Air Filters Ò
 Permanent Filters : Ò ®
 Disposable Filters: Ò ®
 Flexible filters : Ò ®
 4




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##### Table of Contents



® Ò
 
    
    Bedding: Comforel® mattress cushions, Wamsutta® sheets and pillowcases.
    
    Carpets and Laundry: Allersearch®, Capture®, DustMite®, Bissell® and De-mite®.
    
    Vacuums: A variety of Miele® vacuums, at differing price points.
    
    Air Cleaners: Austin Air®, Blueair®, Honeywell® and Whirlpool®..
    
    Respiratory (Nebulizers and Compressors): Omron® and Pari® brands.
 Product Registrations
  Environmental Law
  Licensed Technology and Intellectual Property
 Ò
 Research and Development
  Government Requirements
  5




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##### Table of Contents



Customers of Planet
   Suppliers of Planet
  Sales and Marketing
  Competition
  6




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##### Table of Contents



Employees
  Properties
   Risk Factors
 We have experienced losses, we expect future losses and we may not become profitable.
  We will require additional capital, which may not be available.
 
    
    the cost of information technology upgrades and enhancements;
    
    The cost of developing existing and new markets for our products; and
    
    regulatory and associated costs of being a public entity.
     7




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Amendments to the Telemarketing Sales Rule (the TSR).
   We are subject to penny stock regulations.
  Any inability to adequately retain or protect our employees, customer relationships and proprietary
brands competitive positioning could harm our ability to compete.
 8




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The departure of certain key personnel could harm the financial condition of the Company.
 We face various competitors.
 There are risks associated with our planned growth.
    Future sales of our common stock by existing shareholders under Rule 144 could decrease the trading
price of our common stock.
 9




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##### Table of Contents



Our directors and executive officers beneficially own approximately 45.2% of our stock, including
stock options and warrants exercisable within 60 days of January 1, 2006; their interests could
conflict with yours; significant sales of stock held by them could have a negative effect on our
stock price; shareholders may be unable to exercise control.
 
    
    elect or defeat the election of our directors;
    
    amend or prevent amendment of our articles of incorporation or bylaws;
    
    effect or prevent a merger, sale of assets or other corporate transaction; and
    
    control the outcome of any other matter submitted to the shareholders for vote.
  Absence of Dividends.
 
 ITEM 2. DESCRIPTION OF PROPERTY
   
 ITEM 3. LEGAL PROCEEDINGS
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  10




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PART II.
 
 ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
  Trade PricesHigh
    
    LowFiscal year ended December 31, 2004First Quarter
    
    $
    12.50
    
    
    $
    1.75Second Quarter
    
    
    10.50
    
    
    
    3.00Third Quarter
    
    
    3.50
    
    
    
    2.50Fourth Quarter
    
    
    3.50
    
    
    
    0.70Fiscal year ended December 31, 2005First Quarter
    
    
    3.00
    
    
    
    0.70Second Quarter
    
    
    4.25
    
    
    
    1.25Third Quarter
    
    
    5.00
    
    
    
    2.70Fourth Quarter
    
    
    5.00
    
    
    
    1.25
   Recent Sales of Unregistered Securities
  
 ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
 Overview
  11




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Revenue Recognition
  Allowances for Doubtful Accounts
  Impairment of Long-Lived Assets
  Statements of Operations Data
  Years Ended December 31, 2005 and 2004
 2005
    
    
    2004
    
    
    Change
    
    
    %Sales
    
    $
    3,923,498
    
    
    $
    1,180,382
    
    
    $
    2,743,116
    
    
    
    232Cost of Sales
    
    
    2,205,079
    
    
    
    407,811
    
    
    
    1,797,268
    
    
    
    441Gross Profit
    
    
    1,718,419
    
    
    
    772,571
    
    
    
    945,848
    
    
    
    122Operating Expenses
    
    
    3,083,036
    
    
    
    1,298,812
    
    
    
    1,784,224
    
    
    
    137Loss from Operations
    
    
    (1,364,617
    )
    
    
    (526,241
    )
    
    
    (838,376
    )
    
    
    159Other Income (Expense)
    
    
    (143,578
    )
    
    
    (247,317
    )
    
    
    103,739
    
    
    
    (42
    )Net Loss
    
    $
    (1,508,195
    )
    
    $
    (773,558
    )
    
    $
    (734,637
    )
    
    
    95
   12




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##### Table of Contents



Years Ended December 31, 2004 and 2003
 2004
    
    
    2003
    
    
    Change
    
    
    %Sales
    
    $
    1,180,382
    
    
    $
    2,258,213
    
    
    $
    (1,077,831
    )
    
    
    (47.7
    )Cost of Sales
    
    
    407,811
    
    
    
    730,801
    
    
    
    (322,990
    )
    
    
    (44.2
    )Gross Profit
    
    
    772,571
    
    
    
    1,527,412
    
    
    
    (754,841
    )
    
    
    (49.4
    )Operating Expenses
    
    
    1,298,812
    
    
    
    1,874,398
    
    
    
    (575,586
    )
    
    
    (30.7
    )Loss from Operations
    
    
    (526,241
    )
    
    
    (346,986
    )
    
    
    (179,255
    )
    
    
    51.7Other
Expenses
    
    
    (247,317
    )
    
    
    (227,149
    )
    
    
    (20,168
    )
    
    
    8.9Net Loss
    
    $
    (773,558
    )
    
    $
    (574,135
    )
    
    $
    (199,423
    )
    
    
    (34.7
    )
  13




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Proforma Statements of Operations Data
  Years Ended December 31, 2005 and 2004
 2005
    
    
    2004
    
    
    Change
    
    
    %Sales
    
    $
    8,671,686
    
    
    $
    8,895,035
    
    
    $
    (223,349
    )
    
    
    (3
    )Cost of Sales
    
    
    5,092,763
    
    
    
    4,989,606
    
    
    
    103,157
    
    
    
    2Gross Profit
    
    
    3,578,923
    
    
    
    3,905,429
    
    
    
    (326,506
    )
    
    
    (8
    )Operating Expenses
    
    
    (5,683,907
    )
    
    
    (4,738,687
    )
    
    
    (945,220
    )
    
    
    (20
    )Loss from Operations
    
    
    (2,104,984
    )
    
    
    (833,258
    )
    
    
    (1,271,726
    )
    
    
    (153
    )Other Expenses
    
    
    (206,372
    )
    
    
    (258,233
    )
    
    
    51,861
    
    
    
    20Net Loss
    
    $
    (2,311,356
    )
    
    $
    (1,091,491
    )
    
    $
    (1,219,865
    )
    
    
    72
   14




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Off Balance Sheet Arrangements
  Liquidity And Capital Resources
     15




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www.sec.gov
 Recent Accounting Pronouncements
   
 ITEM 7. FINANCIAL STATEMENTS
  
 ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
  
 ITEM 8A. CONTROLS AND PROCEDURES
  
    
    Insufficient accounting staff with the appropriate level of knowledge and a lack of
sufficient historical information regarding sales of ACP products, compounded by the
integration of operations from the California location to Connecticut after the Merger
with ACP.
    
    Insufficient number of staff and lack of adequate data processing support led to the
Companys not being able to file its Form 10-KSB on a timely basis.
 16




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##### Table of Contents




    
    The Companys warranty reserve calculation for sales from Subsidiary sales and the
calculation of deferred taxes was insufficient and
    
    The Company did not have adequate resources to meet the reporting requirements of the
SEC on a timely basis.
    
    
    Hiring of additional 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.
    
    We have completed the integration of the operations from California to Connecticut and
all accounting and reporting is centralized within the Connecticut location.
    
    We have implemented a strict warranty return policy which is designed to track and
monitor all warranty returns and provide the reporting information required for the
warranty reserve on a timely basis.
  
 ITEM 8B. OTHER ITEMS
  17




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PART III.
 
 ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
 Directors and Executive Officers.
  Name
    
    Age
    
    Principal OccupationScott L. Glenn
    
    
    56
    
    
    Chairman of the Board of Directors, President and Chief Executive Officer and Business ExecutiveEric B. Freedus
    
    
    56
    
    
    Director, AttorneyH.M. Busby
    
    
    67
    
    
    Director, Private InvestorMichael Trinkle
    
    
    53
    
    
    Director, Business ExecutiveEllen M. Preston
    
    
    51
    
    
    Director, Business ConsultantEdward J. Steube
    
    
    62
    
    
    Director, President of Allergy Control Products, Inc.Michael Walsh
    
    
    46
    
    
    Director, Business ExecutiveFrancesca DiNota
    
    
    43
    
    
    Chief Financial Officer, Chief Accounting OfficerBret Megargel
    
    
    36
    
    
    Vice President, Secretary
     18




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##### Table of Contents



Board Meetings and Committees
  19




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Code of Conduct and Ethics
  Section 16(a) Beneficial Ownership Reporting Compliance
   
 ITEM 10. EXECUTIVE COMPENSATION
 Compensation of Directors and Executive Officers
   20




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Compensation of Executive Officers
  21




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##### Table of Contents



Summary Compensation Table
 Annual Compensation
    
    Long-Term CompensationAwards
    
    PayoutsOther
    
    Restricted
    
    SecuritiesAnnual
    
    Stock
    
    Underlying
    
    LTIP
    
    All OtherName and Principal Position
    
    Year
    
    Salary ($)
    
    Bonus ($)
    
    Compensation ($)
    
    Awards ($)
    
    Options/SARs(#)
    
    Payouts ($)
    
    Compensation ($)Scott Glenn
    
    
    2005
    
    
    $
    1,289
    
    
    
    $
    
    
    $
    
    
    
    
    $
    
    
    $
    99,000
    (1)
    
    
    $
    
    
    
    $
    Chairman, Chief
Executive
    
    
    2004
    
    
    $
    
    
    
    
    $
    
    
    $
    
    
    
    
    $
    
    
    $
    100,543
    (2)
    
    
    $
    
    
    
    $
    Officer
    
    
    2003
    
    
    $
    
    
    
    
    $
    
    
    $
    
    
    
    
    $
    
    
    $
    
    
    
    
    $
    
    
    
    $
    Edward J. Steube
    
    
    2005
    
    
    $
    73,076
    (3)
    
    
    $
    
    
    $
    
    
    
    
    $
    
    
    $
    120,000
    (3)
    
    
    $
    
    
    
    $
    Chief Executive Officer,
    
    
    2004
    
    
    $
    
    
    
    
    $
    
    
    $
    
    
    
    
    $
    
    
    $
    
    
    
    
    $
    
    
    
    $
    Subsidiary
    
    
    2003
    
    
    $
    
    
    
    
    $
    
    
    $
    
    
    
    
    $
    
    
    $
    
    
    
    
    $
    
    
    
    $
    Bret Megargel
    
    
    2005
    
    
    $
    155,135
    (4)
    
    
    $
    
    
    $
    
    
    
    
    $
    
    
    $
    48,000
    (4)
    
    
    $
    
    
    
    $
    Vice President,
    
    
    2004
    
    
    $
    
    
    
    
    $
    
    
    $
    
    
    
    
    $
    
    
    $
    
    
    
    
    $
    
    
    
    $
    Secretary Until 4/18/06
    
    
    2003
    
    
    $
    
    
    
    
    $
    
    
    $
    
    
    
    
    $
    
    
    $
    
    
    
    
    $
    
    
    
    $
    Francesca DiNota
    
    
    2005
    
    
    $
    43,846
    (5)
    
    
    $
    
    
    $
    
    
    
    
    $
    
    
    $
    35,000
    (5)
    
    
    $
    
    
    
    $
    Chief Financial Officer
    
    
    2004
    
    
    $
    
    
    
    
    $
    
    
    $
    
    
    
    
    $
    
    
    $
    
    
    
    
    $
    
    
    
    $
    Secretary as of 4/18/06
    
    
    2003
    
    
    $
    
    
    
    
    $
    
    
    $
    
    
    
    
    $
    
    
    $
    
    
    
    
    $
    
    
    
    $
    H.M. Busby
    
    
    2005
    
    
    $
    
    
    
    
    $
    
    
    $
    
    
    
    
    $
    
    
    $
    10,500
    (6)
    
    
    $
    
    
    
    $
    Former Chief Executive
    
    
    2004
    
    
    $
    
    
    
    
    $
    
    
    $
    29,630
    (8)
    
    
    $
    
    
    $
    500
    (7)
    
    
    $
    
    
    
    $
    Officer, President and
Chief Financial Officer
    
    
    2003
    
    
    $
    
    
    
    
    $
    
    
    $
    31,677
    (9)
    
    
    $
    
    
    $
    
    
    
    
    $
    
    
    
    $
    Robert J. Petcavich
    
    
    2005
    
    
    $
    
    
    
    
    $
    
    
    $
    
    
    
    
    $
    
    
    $
    
    
    
    
    $
    
    
    
    $
    Former Chairman and
    
    
    2004
    
    
    $
    
    
    
    
    $
    
    
    $
    
    
    
    
    $
    
    
    $
    500
    (7)
    
    
    $
    
    
    
    $
    Chief Technical Officer
    
    
    2003
    
    
    $
    
    
    
    
    $
    
    
    $
    47,180
    (9)
    
    
    $
    
    
    $
    
    
    
    
    $
    
    
    
    $
    Richard C. Bernier
    
    
    2005
    
    
    $
    
    
    
    
    $
    
    
    $
    
    
    
    
    $
    
    
    $
    
    
    
    
    $
    
    
    
    $
    Former Chief Executive
    
    
    2004
    
    
    $
    
    
    
    
    $
    
    
    $
    
    
    
    
    $
    
    
    $
    
    
    
    
    $
    
    
    
    $
    Officer and President
    
    
    2003
    
    
    $
    
    
    
    
    $
    
    
    $
    19,125
    (9)
    
    
    $
    
    
    $
    
    
    
    
    $
    
    
    
    $
    Leslie White
    
    
    2005
    
    
    $
    29,670
    (10)
    
    
    $
    
    
    $
    
    
    
    
    $
    
    
    $
    30,000
    (11)
    
    
    $
    
    
    
    $
    Former Chief Financial
    
    
    2004
    
    
    $
    52,031
    (10)
    
    
    $
    
    
    $
    
    
    
    
    $
    
    
    $
    
    
    
    
    $
    
    
    
    $
    Officer and Secretary
    
    
    2003
    
    
    $
    51,445
    (10)
    
    
    $
    
    
    $
    
    
    
    
    $
    
    
    $
    
    
    
    
    $
    
    
    
    $
    
 
 (1)
    
    Represents options granted January 25, 2005 for 25,000 shares at an exercise price of
$3.50 and begin vesting on January 25, 2006. Options granted on August 10, 2005 for 74,000
shares at an exercise price of $2.70 which begin vesting on August 10, 2006 are subject to
approval by the shareholders at the next annual meeting.(2)
    
    Represents options granted on November 30, 2004, with an exercise price of $3.50 per
share. 25,136 of the Options granted vested upon grant, with the balance commencing
vesting on November 30, 2005.(3)
    
    Represents compensation paid from date of Merger on August 11, 2005 through December
31, 2005 and stock options granted on August 10, 2005 at an exercise price of $2.70 per
share which begin vesting on August 10, 2006, 16,613 of which are in excess of Plan limits
and subject to shareholder approval at the next shareholders meeting.(4)
    
    Represents compensation paid to Mr. Megargel as Vice President of Marketing and
Business Development and 30,000 options granted January 25, 2005, with an exercise price
of $3.00 which are fully vested as of December 31, 2005. Options granted on August 10,
2005 for 18,000 shares, with an exercise price of $2.70 which begin vesting on August 10,
2006 are in excess of current Plan limits and subject to shareholder approval at the next
annual meeting.(5)
    
    Represents compensation from date of Merger on August 11, 2005 through December 31,
2005 and options granted on August 10, 2005, with an exercise price of $2.70 per share
which begin vesting on August 10, 2006, all of which are in excess of Plan limits and are
subject to shareholder approval at the next shareholders meeting.(6)
    
    Represents options granted November 17, 2004, for compensation as a director.(7)
    
    Represents options granted January 25, 2005, for compensation as a director.(8)
    
    Represents consulting fees paid to Mr. Busby for his services in 2004.(9)
    
    Represents consulting fees paid for their services in 2003.(10)
    
    Ms. White is employed by Conception Technologies, L.P., a California limited
partnership, and for the past three years has devoted approximately fifty percent (50%) of
her time to the Allergy Free business (and after December 1, 2004 to the business of
Planet Technologies, Inc.) Allergy Free and Planet reimbursed Conception for
approximately fifty percent (50%) of the compensation Conception pays to Ms. White as
reflected in the table. In 2005, Ms. White resigned as Chief Financial Officer and the
table reflects compensation paid to her until her date of resignation on August 31, 2005.(11)
    
    Represents options granted January 25, 2005, with an exercise price of $3.00. 22




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Stock Option Grants and Exercises
   No. of Securities
    
    
    Percent of Total
    
    
    ExerciseUnderlying
    
    
    Options Granted
    
    
    PriceName
    
    Options
    
    
    to Employees
    
    
    ($/share)
    
    
    Expiration DateScott Glenn
    
    
    25,000
    
    
    
    6.4
    %
    
    $
    3.50
    
    
    January 25, 2015Chief Executive Officer
    
    
    74,000
    
    
    
    18.8
    %
    
    $
    2.70
    
    
    August 10, 2015Bret Megargel
    
    
    30,000
    
    
    
    7.6
    %
    
    $
    3.00
    
    
    January 25, 2015Secretary
    
    
    18,000
    
    
    
    4.6
    %
    
    $
    2.70
    
    
    August 10, 2015Francesca DiNota
    
    
    35,000
    
    
    
    8.9
    %
    
    $
    2.70
    
    
    August 10, 2015Chief Financial OfficerEdward J. Steube
    
    
    120,000
    
    
    
    30.5
    %
    
    $
    2.00
    
    
    August 10, 2015Chief Executive
Officer, Subsidiary
 Aggregated Option Exercises Last Fiscal Year and Fiscal Year End Option Values
 Shares
    
    
    
    
    
    Number of Securities
    
    Value of Unexercised In-the-Acquired
    
    
    
    
    
    Underlying Unexercised
    
    Money Options at Fiscal Yearon
    
    Value
    
    Options at Fiscal Year End (2)}
    
    End ($) (1)Name
    
    Exercise(#)
    
    Realized
    
    Exercisable
    
    Unexercisable
    
    Exercisable
    
    UnexercisableBret Megargel
    
    
    -0-
    
    
    
    -0-
    
    
    
    30,000
    
    
    
    
    
    
    $
    0
    
    
    $
    Scott Glenn
    
    
    -0-
    
    
    
    -0-
    
    
    
    27,230
    
    
    
    172,313
    
    
    $
    0
    
    
    $
    22,220Edward J. Steube
    
    
    -0-
    
    
    
    -0-
    
    
    
    
    
    
    
    120,000
    
    
    $
    0
    
    
    $
    36,000Francesca DiNota
    
    
    -0-
    
    
    
    -0-
    
    
    
    
    
    
    
    35,000
    
    
    $
    0
    
    
    $
    10,500
 
 (1)
    
    Calculated based on the estimated fair market value of the Companys Common Stock as of December 31, 2005, less the exercise price payable upon
the exercise of such options. Such estimated fair market value as of December 31, 2005, was $3.00, the last transaction price posted at the close
of trading on December 31, 2005. 23




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##### Table of Contents



Description of Employee Benefit Plans:
 2000 Stock Incentive Plan
    401(k) Plan
  Employment Agreements and Change in Control Arrangements
  24




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##### Table of Contents



th
   25




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##### Table of Contents



ITEM. 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCK HOLDER MATTERS
 Equity Compensation Plan Information
 (a)
    
    
    (b)
    
    
    (c)Number of securitiesNumber of
    
    
    Weighted-
    
    
    remaining available forsecurities to be
    
    
    average exercise
    
    
    future issuance underissued upon
    
    
    price of
    
    
    equity compensationexercise of
    
    
    outstanding
    
    
    plans (excludingoutstanding options,
    
    
    options, warrants
    
    
    securities reflected inPlan category
    
    warrants and rights
    
    
    and rights
    
    
    column (a))Equity compensation
plans approved by security
holders
    
    
    343,500
    
    
    $
    3.90
    
    
    None (2)Equity compensation
plans not approved by
security holders (1)
    
    
    154,113
    
    
    $
    2.70
    
    
    
    N/ATotal
    
    
    497,613
    
    
    $
    3.53
    
    
    None (2)
 
 (1)
    
    As of April 10, 2006, the Company has granted options exceeding
the number of shares authorized by the shareholders under the
2000 Stock Incentive Plan by 154,113 shares. The Board has
approved an amendment to the plan to increase the authorized
number of shares to 500,000 shares, which will be submitted to
the shareholders for approval at the next meeting of
shareholders.(2)
    
    The Company does not have any securities available for issuance
under the 2000 Stock Option Plan.  Beneficial OwnershipPercentage of ClassTitle of Class
    
    Name and Address of Beneficial Owner
    
    Number of Shares (1)
    
    Owned (2)Common
    
    Scott L. Glenn (3)
    
    
    1,690,807
    
    
    
    42.1
    %6402 Cardeno DriveLa Jolla, CA 92037Common
    
    Eric B. Freedus (4)
    
    
    4,138
    
    
    
    0.1
    %1202 Ketner Blvd., Ste. 6000San Diego, CA 92101Common
    
    H.M. Busby (5)
    
    
    5,568
    
    
    
    0.1
    %3852 Alameda PlaceSan Diego, CA 92103Common
    
    Michael A. Trinkle (5)
    
    
    60,267
    
    
    
    1.5
    %3495 Via Zara CourtFallbrook, CA 92028Common
    
    Ellen Preston (5)
    
    
    47,816
    
    
    
    1.2
    %1825 Sheridan AvenueSan Diego, CA 92103Common
    
    Brett Megarge(6)l
    
    
    30,000
    
    
    
    0.7
    %3912 Alameda PlaceSan Diego, CA  92103Common
    
    All executive officers and directors as a group
    
    
    1,838,598
    
    
    
    45.2
    %Common
    
    John Dawson
    
    
    600,000
    
    
    
    15.1
    %Shorehaven RoadSouthport, CT  06855Common
    
    William and Lisa Barkett
    
    
    308,456
    
    
    
    7.7
    %7544 Eads #FLa Jolla, CA  92037Common
    
    Windamere III, LLC (7)
    
    
    886,000
    
    
    
    22.2
    %6402 Cardeno Dr.La Jolla, CA  92037Common
    
    Fog City Fund, LLC
    
    
    500,000
    
    
    
    12.5
    %2100 Green Street, #102San Francisco, CA  94123
 26




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##### Table of Contents



(1)
    
    This table is based upon information supplied by officers, directors and principal shareholders
and Schedules 13D and 13G filed with the Securities and Exchange Commission (the SEC). Unless
otherwise indicated in the footnotes to this table and subject to community property laws where
applicable, the Company believes that each of the shareholders named in this table has sole voting
and investment power with respect to the shares indicated as beneficially owned. These amounts
included shares granted under the 2000 Stock Option Plan in excess of Plan limits which are subject
to the approval of shareholders at the next annual meeting.(2)
    
    Percentage ownership is based upon the shares outstanding on April 10, 2006.(3)
    
    Includes 770,806 shares owned by AF Partners, LLC, which is controlled by Mr. Glenn and 886,000
shares owned by Windamere III, LLC, over which Mr. Glenn shares control (see Note (7) below).
Includes options to purchase 34,001 shares which began vesting in 2005. Does not include 74,000
shares which expire on August 10, 2015 and which begin vesting on August 10, 2006.(4)
    
    Includes vested portion of 500 shares issuable upon exercise of stock options which expire on
January 18, 2015, and which began vesting on January 18, 2006 and 10,000 shares issuable upon
exercise of stock options which expire on January 25, 2015, and which began vesting on January 25,
2006.(5)
    
    Includes vested portion of 10,000 shares issuable upon exercise of stock options which expire
on January 25, 2015, which began vesting on January 25, 2006.(6)
    
    Includes 30,000 options granted on January 25, 2005 which became fully vested on December 31,
2005. Does not include 18,000 options granted on August 10, 2005 which begin vesting on August 10,
2006 and are subject to shareholders approval at the next shareholders meeting.(7)
    
    Windamere III, LLC, is under the joint control of Mr. Glenn and St. Paul Travelers Companies,
Inc., its affiliates Split-Rock Partners, LLC, and St. Paul Fire and Marine Insurance Company,
whose business address is 385 Washington Street, St. Paul, Minnesota 55102. 
 ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
   27




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##### Table of Contents



ITEM 13. EXHIBITS.
   Exhibit Number
    
    Description.2.1(8)
    
    Asset Purchase Agreement dated March 18, 2004, between the Company and Allergy Free.2.2(12)
    
    Amendments to Asset Purchase Agreement dated March 18, 2004.2.3(14)
    
    Form of Agreement and Plan of Merger dated March 7, 2005, with Allergy Control
Products and Jonathon T. Dawson.3.1(1)
    
    Restated Articles of Incorporation of the Registrant.3.2(1)
    
    Restated Bylaws of the Registrant.3.3(11)
    
    Certificate of Amendment of Articles of Incorporation of Company dated November 30,
2004.4.1
    
    Reference is made to Exhibits 3.1, 3.2 and 3.3.4.2(1)
    
    Specimen Stock Certificate.10.1(1)
    
    Form of Indemnity Agreement entered into between the Registrant and certain of its
executive officers and directors.10.5(1)
    
    Agreement to Assign Proprietary Rights between the Registrant and Dr. Robert J.
Petcavich.10.8(3)
    
    Registrants 2000 Stock Incentive Plan (the 2000 Plan).10.9(3)
    
    Form of Incentive Stock Option Grant under the 2000 Plan.10.10(3)
    
    Form of Non-statutory Stock Option Grant under the 2000 Plan.10.11(5)
    
    Warrant to purchase Common Stock, March 20, 2001, issued by the Registrant to LBC Capital Resources, Inc.10.12(6)
    
    Form of Sale and License Agreement dated March 2003 with Agway, Inc. (animal feed products).10.13(6)
    
    Form of Sale and License Agreement dated March 2003 with Agway, Inc. (fruit and vegetable products).10.14(6)
    
    Form of First Amendment to License Agreement with Agway, Inc.10.16(6)(7)
    
    Form of Purchase Sale and License Agreement dated May 1, 2003, with Ryer Enterprises, LLC.
 28




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##### Table of Contents



Exhibit Number
    
    Description.10.17(9)
    
    Form of Amendment dated January 31, 2004, to Purchase, Sale and License Agreement with Ryer Enterprises, LLC.10.18(10)
    
    Form of Royalty Contract dated on or about June 2004 with Ryer, Inc.10.19(13)
    
    Form of Employment Agreement with Scott Glenn.10.20(13)
    
    Form of subscription agreement for 2004 private placement.10.22 (14)
    
    Form of Sub-Lease Agreement dated November 1, 2003, with Conception Technologies, L.P.10.23 (14)
    
    Form of License Agreement dated January 1, 1997, and amendments thereto, with Rick L. Chapman.10.24 (14)
    
    Form of Supply Agreement dated January 27, 2004, with American Metal Filter Company.10.25 (14)
    
    Form of Royalty Liquidation Trust dated as of November 29, 2004, with U.S. Bank.10.26 (14)
    
    Form of employment agreement effective February 1, 2005, with Bret Megargel10.27(15)
    
    Form of employment agreement effective August 2005, with Edward Steube10.28
    
    Form of employment agreement effective October 1, 2005, with Tina Mendoza10.29
    
    Form of agreement effective August 2005, with Crystal Research.11.1(2)(4)
    
    Statement of Computation of Common and Common Equivalent Shares.14.1 (14)
    
    Code of Business Conduct and Ethics.23.1 (15)
    
    Consent of J.H. Cohn LLP.31.1
    
    Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 (1)
    
    Previously filed as an exhibit to the Registrants Registration Statement on Form SB-2, as amended (No.
33-91984 LA) and incorporated herein by reference.(2)
    
    Previously filed as an exhibit to the Registrants Annual Report on Form 10-KSB filed for the fiscal year
ended December 31, 1999 and incorporated herein by reference.(3)
    
    Previously filed as an exhibit to the Registrants Registration Statement on Form S-8
(No. 333-38500) filed on June 2, 2000 and incorporated herein by reference. 29




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##### Table of Contents



(4)
    
    Previously filed as an exhibit to the Registrants Quarterly Report on Form 10-QSB for
the quarter ended June 30, 2000.(5)
    
    Previously filed as an exhibit to the Registrants Quarterly Report on Form 10-QSB for
the quarter ended March 31, 2001.(6)
    
    Previously filed as an exhibit to the Registrants Annual Report on Form 10-KSB filed for
the fiscal year ended December 31, 2002 and incorporated herein by reference.(7)
    
    Previously filed as an exhibit to the Registrants Quarterly Report on Form 10-QSB for
the quarter ended March 31, 2003.(8)
    
    Previously filed as an exhibit to the Registrants Form 8K filed March 23, 2004 Report.(9)
    
    Previously filed as an exhibit to the Registrants Annual Report on Form 10-KSB for the
quarter ended December 31, 2003.(10)
    
    Previously filed as an exhibit to the Registrants Quarterly Report on Form 10-QSB for
the quarter ended June 30, 2004.(11)
    
    Previously filed as an exhibit to the Registrants Form 8K filed December 16, 2004 Report.(12)
    
    Previously filed as an exhibit to Registrants Proxy Statement dated October 20, 2004.(13)
    
    Previously filed as an exhibit to Registrants SB-2 dated February 4, 2005.(14)
    
    Previously filed as an exhibit to the Registrants Annual Report on Form 10-KSB for the
quarter ended December 31, 2004.(15)
    
    Previously filed as an exhibit to the Registrants SB-2/A dated October 12, 2005. 
 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
 Audit Fees
  Audit Related Fees
  Tax Fees
  All Other Fees
  30




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SIGNATURES
  PLANET TECHNOLOGIES, INC.Dated May 11, 2006
    
    By: /s/ Scott L. GlennScott L. GlennChief Executive OfficerDated May 11, 2006
    
    By: /s/ Francesca DiNotaFrancesca DiNotaChief Financial Officer and Principal Accounting Officer
  Signature
    
    Title
    
    Date/s/ Ellen Preston
Ellen Preston
    
    Director
    
    May 11, 2006/s/ H. M. Busby

H. M. Busby
    
    Director
    
    May 11, 2006/s/ Michael Trinkle
Michael Trinkle
    
    Director
    
    May 11, 2006/s/ Eric Freedus
Eric Freedus
    
    Director
    
    May 11, 2006/s/ Mike Walsh
Mike Walsh
    
    Director
    
    May 11, 2006/s/ Ed Seube
Ed Steube
    
    Director
    
    May 11, 2006
 31




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Financial Statements and Notes:Consolidated Balance Sheet as of December 31, 2005
    
    
    F-3Consolidated Statements of Operations for the Years Ended December 31, 2005 and 2004
    
    
    F-4Consolidated Statements of Shareholders Equity (Deficiency) for the Years Ended
December 31, 2005 and 2004
    
    
    F-5Consolidated Statements of Cash Flows for the Years Ended December 31, 2005 and 2004
    
    
    F-6Notes to Financial Statements
    
    
    F-7
 F-1




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Report of Independent Registered Public Accounting Firm
 
      
 F-2




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##### Table of Contents



PLANET TECHNOLOGIES, INC. AND SUBSIDIARY
 
 CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2005
 ASSETSCurrent assets:Cash and cash equivalents
    
    $
    436,844Accounts receivable, less allowance for doubtful accounts of $4,311
    
    
    274,727Inventory, net
    
    
    577,332Other current assets
    
    
    115,560Total current assets
    
    
    1,404,463Property and equipment, net
    
    
    70,756Intangibles, net
    
    
    1,441,904Goodwill
    
    
    1,363,025Total
    
    $
    4,280,148LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    1,153,831Accrued expenses
    
    
    349,344Derivative liability
    
    
    118,282Accrued warrant liability
    
    
    67,500Current portion of note and capital lease
    
    
    19,223Total current liabilities
    
    
    1,708,180Convertible note payable to shareholder
    
    
    81,606Total liabilities
    
    
    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
    
    
    7,693,296Additional paid-in capital
    
    
    7,957Accumulated deficit
    
    
    (5,210,891
    )Total shareholders equity
    
    
    2,490,362Total
    
    $
    4,280,148
  F-3




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##### Table of Contents



PLANET TECHNOLOGIES, INC. AND SUBSIDIARY
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2005 AND 2004
 2005
    
    
    2004Net sales
    
    $
    3,923,498
    
    
    $
    1,180,382Cost of sales
    
    
    2,205,079
    
    
    
    407,811Gross profit
    
    
    1,718,419
    
    
    
    772,571Operating expenses:Selling
    
    
    1,081,233
    
    
    
    597,575General and administrative
    
    
    2,001,803
    
    
    
    701,237Totals
    
    
    3,083,036
    
    
    
    1,298,812Loss from operations
    
    
    (1,364,617
    )
    
    
    (526,241
    )Other income (expense):(Loss) gain on sale of assets
    
    
    (47,414
    )
    
    
    899Other expenses
    
    
    
    
    
    
    (50,543
    )Interest expense
    
    
    (14,558
    )
    
    
    (197,673
    )Charge for change in derivative liability
    
    
    (81,606
    )
    
    
    Totals
    
    
    (143,578
    )
    
    
    (247,317
    )Net loss
    
    $
    (1,508,195
    )
    
    $
    (773,558
    )Net loss per share, basic and diluted
    
    $
    (0.52
    )
    
    $
    (0.46
    )Weighted average shares used in computing net loss
per share attributable to common shareholders, basic
and diluted
    
    
    2,902,613
    
    
    
    1,687,270
  F-4




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##### Table of Contents



PLANET TECHNOLOGIES, INC. AND SUBSIDIARY
 
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY (DEFICIENCY)
YEARS ENDED DECEMBER 31, 2005 AND 2004
 Common Stock
    
    
    Additional
    
    
    AccumulatedShares
    
    
    Amount
    
    
    Paid-in Capital
    
    
    Deficit
    
    
    TotalBeginning, January 1, 2004
    
    
    1,655,670
    
    
    $
    2,310,885
    
    
    
    
    
    
    $
    (2,929,138
    )
    
    $
    (618,253
    )Common stock issued in
association with the reverse
acquisition, at $1.39 per share
    
    
    130,691
    
    
    
    182,411
    
    
    
    
    
    
    
    
    
    
    
    182,411Issuance of common stock for
cash, at $2.50 per share
    
    
    258,000
    
    
    
    645,000
    
    
    
    
    
    
    
    
    
    
    
    645,000Common stock issued for services
rendered, at $2.50 per share
    
    
    24,000
    
    
    
    60,000
    
    
    
    
    
    
    
    
    
    
    
    60,000Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (773,558
    )
    
    
    (773,558
    )Balance at December 31, 2004
    
    
    2,068,361
    
    
    
    3,198,296
    
    
    
    
    
    
    
    (3,702,696
    )
    
    
    (504,400
    )Issuance of common stock for
cash, at $2.50 per share
    
    
    1,318,007
    
    
    
    3,295,000
    
    
    
    
    
    
    
    
    
    
    
    3,295,000Issuance of common stock for
investment in ACP, at $2.00 per
share
    
    
    600,000
    
    
    
    1,200,000
    
    
    
    
    
    
    
    
    
    
    
    1,200,000Fair value of stock options
issued to non-employees for
services at $2.71
per share
    
    
    
    
    
    
    
    
    
    $
    7,957
    
    
    
    
    
    
    
    7,957Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,508,195
    )
    
    
    (1,508,195
    )Balance at December 31, 2005
    
    
    3,986,368
    
    
    $
    7,693,296
    
    
    $
    7,957
    
    
    $
    (5,210,891
    )
    
    $
    2,490,362
  F-5




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##### Table of Contents



PLANET TECHNOLOGIES, INC. AND SUBSIDIARY
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2005 AND 2004
 2005
    
    
    2004Operating activities:Net loss
    
    $
    (1,508,195
    )
    
    $
    (773,558
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    183,288
    
    
    
    82,763Non  cash charge for change in derivative liability
    
    
    81,606
    
    
    
    Non  cash charge for change in accrued warrant liability
    
    
    67,500
    
    
    
    Loss (gain) on disposal of assets
    
    
    47,414
    
    
    
    (899
    )Issuance of stock for services
    
    
    
    
    
    
    60,000Issuance of options at fair value for services
    
    
    7,957
    
    
    
    Changes in operating assets and liabilities, net of effects from purchase
of ACP:Accounts receivable
    
    
    (162,032
    )
    
    
    3,682Other assets
    
    
    (24,311
    )
    
    
    65,128Inventory
    
    
    280,313
    
    
    
    (9,763
    )Interest payable
    
    
    (8,543
    )
    
    
    180,567Accounts payable
    
    
    48,533
    
    
    
    (120,965
    )Accrued expenses
    
    
    (316,973
    )
    
    
    77,212Net cash used in operating activities
    
    
    (1,303,443
    )
    
    
    (435,833
    )Investing activities:Cost of acquiring company, net of cash acquired
    
    
    (1,581,427
    )
    
    
    Purchase of property and equipment
    
    
    (25,794
    )
    
    
    Proceeds from sale of property and equipment
    
    
    
    
    
    
    2,363Net cash (used in) provided by investing activities
    
    
    (1,607,221
    )
    
    
    2,363Financing activities:(Repayment to) advance from related party
    
    
    (185,000
    )
    
    
    120,000Principal payment on notes payable
    
    
    (137,415
    )
    
    
    (205,069
    )Principal payments on notes payable to shareholder
    
    
    
    
    
    
    (21,543
    )Proceeds from issuance of investors notes payable
    
    
    
    
    
    
    142,000Proceeds from stock sales
    
    
    3,295,000
    
    
    
    645,000Net cash provided by financing activities
    
    
    2,972,585
    
    
    
    680,388Net increase in cash and cash equivalents
    
    
    61,921
    
    
    
    246,918Cash and cash equivalents, beginning of year
    
    
    374,923
    
    
    
    128,005Cash and cash equivalents, end of year
    
    $
    436,844
    
    
    $
    374,923Supplemental disclosure of cash flow data:Interest paid
    
    $
    14,558
    
    
    $
    17,175Non-cash transactions:Common stock issued in connection with acquisition
    
    $
    1,200,000Fair value of derivative liability related to convertible debt
    
    $
    252,757Common stock issued in connection with reverse acquisition
    
    
    
    
    
    $
    182,411
  F-6




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PLANET TECHNOLOGIES, INC. AND SUBSIDIARY
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 1  The Company:
     Note 2  Summary of significant accounting policies:
 Basis of presentation:
  F-7




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##### Table of Contents



PLANET TECHNOLOGIES, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 2  Summary of significant accounting policies (continued):
 Principles of Consolidation:
  Use of estimates:
  Reclassification:
  Cash and cash equivalents and concentration of credit risk:
  Inventory:
  Property and equipment:
  F-8




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##### Table of Contents



PLANET TECHNOLOGIES, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 2  Summary of significant accounting policies (continued):
 Goodwill and Other Intangibles Assets:
   Stock-based compensation:
   2005
    
    
    2004Volatility
    
    
    176-221
    %
    
    
    223-227
    %Dividend yield
    
    
    
    
    
    
    Risk free interest rate
    
    
    4.02-4.40
    %
    
    
    4.27
    %Vesting period
    
    4 years
    
    4 yearsExpected life
    
    10 years
    
    10 years
  F-9




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##### Table of Contents



PLANET TECHNOLOGIES, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 2  Summary of significant accounting policies (continued):
 Stock-based compensation (concluded):
 2005
    
    
    2004Loss per Share
    
    
    
    
    
    
    Loss per Share- Basic and
    
    
    
    
    
    
    - Basic andNet Loss
    
    
    Diluted
    
    
    Net Loss
    
    
    DilutedAs reported
    
    $
    (1,508,195
    )
    
    $
    (0.52
    )
    
    $
    (773,558
    )
    
    $
    (0.46
    )Stock-based
compensation
expense assuming a
fair value-based
method had been
used for all awards
    
    
    (278,000
    )
    
    
    (0.10
    )
    
    
    (95,306
    )
    
    
    (0.06
    )Pro forma
    
    $
    (1,786,195
    )
    
    $
    (0.62
    )
    
    $
    (868,864
    )
    
    $
    (0.52
    )
    Net loss per share:
   Advertising:
  F-10




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PLANET TECHNOLOGIES, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 2  Summary of significant accounting policies (concluded):
 Revenue recognition:
  Shipping and handling costs:
  Income taxes:
  401(k) plan:
  Valuation of long-lived assets:
  F-11




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##### Table of Contents



PLANET TECHNOLOGIES, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 3  Inventory:
  Raw materials
    
    $
    256,413Finished goods
    
    
    411,644Total
    
    
    668,057Less reserve for obsolescence
    
    
    90,725Total
    
    $
    577,332
 Note 4  Property and equipment:
  Furniture and fixtures
    
    $
    28,042Transportation equipment
    
    
    16,761Computer equipment
    
    
    135,357Total
    
    
    180,160Less accumulated depreciation and amortization
    
    
    (109,404
    )Total
    
    $
    70,756
 Note 5  Intangibles
   Years ending December 31,2006
    
    $
    265,0002007
    
    
    265,0002008
    
    
    259,1642009
    
    
    250,0002010
    
    
    250,000Thereafter
    
    
    152,740Total
    
    $
    1,441,904
 F-12




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##### Table of Contents



PLANET TECHNOLOGIES, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 6  Warranty reserve:
  2005
    
    
    2004Warranty accrual, beginning of year
    
    $
    130,961
    
    
    $
    130,961Warranties issued during the year
    
    
    (5,173
    )
    
    
    296Acquired warranty accrual
    
    
    149,427
    
    
    
    Increase (decrease) to warranty accrual
    
    
    15,302
    
    
    
    (296
    )Totals
    
    $
    290,517
    
    
    $
    130,961
 Note 7  Convertible notes payable to shareholder:
   F-13




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##### Table of Contents



PLANET TECHNOLOGIES, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 8  Warrant Liability:
  Note 9  Income taxes:
  2005
    
    
    2004Income tax benefit at statutory rate
    
    $
    (513,000
    )
    
    $
    (263,010
    )State taxes, net of Federal benefit
    
    
    (82,000
    )
    
    
    (46,413
    )Other
    
    
    (1,000
    )
    
    
    69,000Increase in valuation allowance
    
    
    596,000
    
    
    
    240,423Total
    
    $
    
    
    
    $
    
  2005
    
    
    2004Net operating loss carryforwards
    
    $
    703,000
    
    
    $
    4,636,000Product warranty reserve
    
    
    116,000
    
    
    
    52,000Intangibles
    
    
    (577,000
    )
    
    
    Tax credit carryforwards
    
    
    
    
    
    
    142,000Other reserves
    
    
    65,000
    
    
    
    33,000Less: valuation allowances
    
    
    (307,000
    )
    
    
    (4,863,000
    )Net deferred tax assets
    
    $
    
    
    
    $
    
   F-14




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##### Table of Contents



PLANET TECHNOLOGIES, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 9  Income taxes (concluded):
   Note 10  Shareholders equity:
 Warrants:
   Options:
   F-15




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##### Table of Contents



PLANET TECHNOLOGIES, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 10  Shareholders equity (concluded):
 Stock Options:
  2005
    
    
    2004Underlying
    
    
    Weighted Avg
    
    
    Underlying
    
    
    Weighted AvgShares
    
    
    Exercise Price
    
    
    Shares
    
    
    Exercise PriceOutstanding, beginning of year
    
    
    105,413
    
    
    $
    4.40
    
    
    
    15,670
    
    
    $
    40.82Granted
    
    
    238,887
    
    
    
    2.96
    
    
    
    102,543
    
    
    
    3.48Exercised
    
    
    
    
    
    
    
    
    
    
    (7,500
    )
    
    
    4.03Forfeited/expired
    
    
    (1,800
    )
    
    
    22.50
    
    
    
    (5,300
    )
    
    
    94.81Outstanding, end of year
    
    
    342,500
    
    
    $
    3.30
    
    
    
    105,413
    
    
    $
    4.40
  Options Outstanding
    
    Options ExercisableWeighted AverageRemaining
    
    Weighted
    
    
    
    
    
    WeightedExercise Price or
    
    Number of
    
    Contractual Live
    
    Average
    
    Number of
    
    AveragePrice Range
    
    Shares
    
    (years)
    
    Exercise Price
    
    Shares
    
    Exercise Price$2.50 to $3.50
    
    
    341,680
    
    
    
    9.20
    
    
    $
    3.12
    
    
    
    60,300
    
    
    $
    3.19$22.50
    
    
    360
    
    
    
    5.35
    
    
    
    22.50
    
    
    
    360
    
    
    
    22.50$125.00
    
    
    460
    
    
    
    4.33
    
    
    
    125.00
    
    
    
    460
    
    
    
    125.00342,500
    
    
    
    9.19
    
    
    
    3.30
    
    
    
    61,120
    
    
    $
    4.22
  Issuance of Common Stock for Cash
  Note 11  Operating leases:
  F-16




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##### Table of Contents



PLANET TECHNOLOGIES, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 11  Operating leases (concluded):
  Years ending December 31,2006
    
    $
    199,2402007
    
    
    149,1982008
    
    
    11,6662009
    
    
    9,9722010
    
    
    831Total
    
    $
    370,907
  Note 12  Commitments:
 License agreements:
  Employment contracts:
 th
   Note 13  Related party transactions:
  F-17




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##### Table of Contents



PLANET TECHNOLOGIES, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 14- Purchases from significant vendors:
  Note 15- Acquisition:
    Current assets
    
    $
    1,085,910Equipment and improvements
    
    
    71,498Customer list
    
    
    1,500,000Website costs
    
    
    45,000Goodwill
    
    
    1,363,025Total assets acquired
    
    
    4,065,433Current liabilities
    
    
    (1,193,332
    )Long-term debt
    
    
    (22,164
    )Total liabilities assumed
    
    
    (1,215,496
    )Net assets acquired
    
    $
    2,849,937
  F-18




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##### Table of Contents



PLANET TECHNOLOGIES, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 15- Acquisition (concluded):
   Year ended December 31,2005
    
    
    2004Sales
    
    $
    8,671,686
    
    
    $
    8,895,035Net loss
    
    $
    (2,311,356
    )
    
    $
    (1,091,491
    )Net loss per share, basic and diluted
    
    $
    (0.71
    )
    
    $
    (0.48
    )
 F-19