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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, 2006
Commission File No. 0-26804
 PLANET TECHNOLOGIES, INC.
 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, 2006
 TABLE OF CONTENTS
 ItemNumber
    
    PagePART I.1. Description of Business
    
    
    32. Description of Property
    
    
    113. Legal Proceedings
    
    
    114. Submission of Matters to a Vote of Security Holders
    
    
    11PART II.5. Market for Common Equity, Related Stockholders Matters and Small Business Issuer
Purchases of Equity Securities
    
    
    116. Managements Discussion and Analysis or Plan of Operation
    
    
    127. Financial Statements
    
    
    178. Changes in and Disagreements With Accountants on Accounting and Financial Disclosures
    
    
    178A. Controls and Procedures
    
    
    178B. Other Information
    
    
    18PART III.9. Directors, and Executive Officers of the Registrant
    
    
    1810. Executive Compensation
    
    
    2111. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    2512. Certain Relationships and Related Transactions
    
    
    2713. Exhibits
    
    
    2714. Principal Accountant Fees and Services
    
    
    30Signatures
    
    
    31
 EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2
   2




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##### Table of Contents



PART I.
  
 ITEM 1. DESCRIPTION OF BUSINESS
 General
     Products
 Ò
 Allergen Barrier Bedding:
 3




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##### Table of Contents



Encasings Ò Ò
 Blankets
 Comforters :
 Pillows :
 Air Filters Ò
 Permanent Filters : Ò
 Disposable Filters: Ò
 Flexible filters : Ò
 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.
 4




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Product Registrations
  Environmental Law
  Licensed Technology and Intellectual Property
 Ò
 Research and Development
  Government Requirements
    5




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Customers of Planet
   Suppliers of Planet
  Sales and Marketing
  Competition
  Employees
  Properties
  6




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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.
   Our independent registered public accounting firm has raised substantial doubt about our ability to
continue as a going concern.
 We will be required to evaluate our internal control over financial reporting under Section 404 of
the Sarbanes-Oxley Act.
  7




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Internet Sales Risk:
 Amendments to the Telemarketing Sales Rule (the TSR).
   8




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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.
 The departure of certain key personnel could harm the financial condition of the Company.
 We face various competitors.
 9




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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.
 Our directors and executive officers beneficially own approximately 50.3% of our stock, including
stock options and warrants exercisable within 60 days of January 1, 2007; 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.
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Absence of Dividends.
 
 ITEM 2. DESCRIPTION OF PROPERTY
  
 ITEM 3. LEGAL PROCEEDINGS
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 PART II.
 
 ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
  Trade PricesHigh
    
    LowFiscal year ended December 31, 2005First Quarter
    
    $
    3.00
    
    
    $
    0.70Second Quarter
    
    
    4.25
    
    
    
    1.25Third Quarter
    
    
    5.00
    
    
    
    2.70Fourth Quarter
    
    
    5.00
    
    
    
    1.25Fiscal year ended December 31, 2006First Quarter
    
    
    4.00
    
    
    
    1.55Second Quarter
    
    
    3.50
    
    
    
    1.32Third Quarter
    
    
    2.50
    
    
    
    1.00Fourth Quarter
    
    
    4.40
    
    
    
    1.01
  11




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Recent Sales of Unregistered Securities
  
 ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
 Overview
  Revenue Recognition
  Allowances for Doubtful Accounts
  Impairment of Long-Lived Assets
  12




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Statements of Operations Data
  Years Ended December 31, 2006 and 2005
 Favorable(Unfavorable)2006
    
    
    2005
    
    
    Change
    
    
    %Net sales
    
    $
    8,036,449
    
    
    $
    3,903,970
    
    
    $
    4,132,479
    
    
    
    106Cost of sales
    
    
    4,720,893
    
    
    
    2,185,551
    
    
    
    2,535,342
    
    
    
    116Gross profit
    
    
    3,315,556
    
    
    
    1,718,419
    
    
    
    1,597,137
    
    
    
    93Operating expenses
    
    
    4,625,754
    
    
    
    3,083,036
    
    
    
    (1,542,718
    )
    
    
    50Loss from operations
    
    
    (1,310,198
    )
    
    
    (1,364,617
    )
    
    
    54,419
    
    
    
    (4
    )Other income (expense)
    
    
    107,956
    
    
    
    (143,578
    )
    
    
    251,534
    
    
    
    (175
    )Net loss
    
    $
    (1,202,242
    )
    
    $
    (1,508,195
    )
    
    $
    305,953
    
    
    
    (20
    )
      13




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Years Ended December 31, 2005 and 2004
 Favorable(Unfavorable)2005
    
    
    2004
    
    
    Change
    
    
    %Net sales
    
    $
    3,903,970
    
    
    $
    1,180,382
    
    
    $
    2,723,588
    
    
    
    231Cost of sales
    
    
    2,185,551
    
    
    
    407,811
    
    
    
    (1,777,740
    )
    
    
    436Gross 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
       14




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Proforma Statements of Operations Data
  Years Ended December 31, 2006 and 2005
 FavorableActual
    
    
    
    
    
    
    (Unfavorable)2006
    
    
    Proforma 2005
    
    
    Change
    
    
    %Net sales
    
    $
    8,036,449
    
    
    $
    8,689,314
    
    
    $
    (652,865
    )
    
    
    (8)
    )Cost of sales
    
    
    4,720,893
    
    
    
    4,989,547
    
    
    
    268,654
    
    
    
    (5
    )Gross profit
    
    
    3,315,556
    
    
    
    3,699,767
    
    
    
    (384,211
    )
    
    
    (10
    )Operating expenses
    
    
    (4,625,754
    )
    
    
    (5,804,194
    )
    
    
    1,178,440
    
    
    
    (20
    )Loss from operations
    
    
    (1,310,198
    )
    
    
    (2,104,427
    )
    
    
    794,229
    
    
    
    (38
    )Other income (expense)
    
    
    107,956
    
    
    
    (206,929
    )
    
    
    314,885
    
    
    
    (152
    )Net loss
    
    $
    (1,202,242
    )
    
    $
    (2,311,356
    )
    
    $
    1,109,114
    
    
    
    (48
    )
     Off Balance Sheet Arrangements
  15




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Liquidity And Capital Resources
      www.sec.gov
 Recent Accounting Pronouncements
  16




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##### Table of Contents



ITEM 7. FINANCIAL STATEMENTS
  
 ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
  
 ITEM 8A. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control Over Financial Reporting
  17




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ITEM 8B. OTHER INFORMATION
  
 PART III.
 
 ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
 Directors and Executive Officers.
  Name
    
    Age
    
    Principal OccupationScott L. Glenn
    
    
    57
    
    
    Chairman of the Board of Directors, President and Chief Executive Officer and Business ExecutiveEric B. Freedus
    
    
    57
    
    
    Director, AttorneyH.M. Busby
    
    
    68
    
    
    Director, Private InvestorMichael Trinkle
    
    
    54
    
    
    Director, Business ExecutiveEllen M. Preston
    
    
    52
    
    
    Director, Business ConsultantEdward J. Steube
    
    
    63
    
    
    Director, President of Allergy Control Products, Inc.Michael Walsh
    
    
    47
    
    
    Director, Business ExecutiveFrancesca DiNota
    
    
    44
    
    
    Chief Financial Officer, Chief Accounting Officer, SecretaryBret Megargel
    
    
    37
    
    
    Vice President
 18




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19




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Board Meetings and Committees
    Code of Conduct and Ethics
  20




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Section 16(a) Beneficial Ownership Reporting Compliance
   
 ITEM 10. EXECUTIVE COMPENSATION
 Compensation of Directors and Executive Officers
    21




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Summary Compensation Table
 Annual Compensation
    
    
    Long-Term CompensationAwards
    
    
    PayoutsOther
    
    
    Restricted
    
    
    
    
    
    
    Securities
    
    
    LTIP
    
    
    All OtherAnnual
    
    
    Stock
    
    
    
    
    
    
    Underlying
    
    
    Payouts
    
    
    CompensationName and Principal Position
    
    Year
    
    
    Salary ($)
    
    
    Bonus ($)
    
    
    Compensation ($)
    
    
    Awards ($)
    
    
    
    
    
    
    Options/SARs(#)
    
    
    ($)
    
    
    ($)Scott Glenn
    
    
    2006
    
    
    $
    1,199
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    
    
    
    
    $
    
    
    
    $
    Chairman, Chief Executive
    
    
    2005
    
    
    $
    1,289
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    
    99,000
    (1)
    
    $
    
    
    
    $
    Officer
    
    
    2004
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    
    100,543
    (2)
    
    $
    
    
    
    $
    Francesca DiNota
    
    
    2006
    
    
    $
    124,846
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    
    15,000
    (3)
    
    $
    
    
    
    $
    Chief Financial Officer,
    
    
    2005
    
    
    $
    43,846
    (4)
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    
    35,000
    (4)
    
    $
    
    
    
    $
    Secretary as of 4/18/2006
    
    
    2004
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    
    
    
    
    $
    
    
    
    $
    Edward Steube
    
    
    2006
    
    
    $
    200,000
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    
    
    
    
    $
    
    
    
    $
    Chief Executive Officer
    
    
    2005
    
    
    $
    73,076
    (4)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    
    120,000
    (4)
    
    $
    
    
    
    $
    Subsidiary
    
    
    2004
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    
    
    
    
    $
    
    
    
    $
    Bret Megargel
    
    
    2006
    
    
    $
    1,199
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    
    18,000
    (5)
    
    $
    
    
    
    $
    Vice-President,
    
    
    2005
    
    
    $
    155,135
    (6)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    
    48,000
    (6)
    
    $
    
    
    
    $
    Secretary until 4/18/2006
    
    
    2004
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    
    
    
    
    $
    
    
    
    $
    H.M. Busby
    
    
    2006
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    
    10,000
    (7)
    
    $
    
    
    
    $
    Former Chief Executive
    
    
    2005
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    
    10,000
    (8)
    
    $
    
    
    
    $
    Officer, President and
Chief Financial Officer
    
    
    2004
    
    
    $
    
    
    
    $
    
    
    
    $
    29,630
    (9)
    
    $
    
    
    
    
    
    
    
    
    500
    (9)
    
    $
    
    
    
    $
    Robert J. Petcavich
    
    
    2006
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    
    
    
    
    $
    
    
    
    $
    Former Chairman and
    
    
    2005
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    
    
    
    
    $
    
    
    
    $
    Chief Technical Officer
    
    
    2004
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    
    500
    (10)
    
    $
    
    
    
    $
    Leslie White
    
    
    2006
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    
    
    
    
    $
    
    
    
    $
    Former Chief Financial
    
    
    2005
    
    
    $
    29,670
    (11)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    
    30,000
    (12)
    
    $
    
    
    
    $
    Officer and Secretary
    
    
    2004
    
    
    $
    52,031
    (11)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    
    
    
    
    $
    
    
    
    $
    
 
 1.
    
    Options granted January 25, 2005 for 25,000 shares at an exercise price of $3.50 as well as
options granted on August 10, 2005 for 74,000 shares at an exercise price of $2.70.2.
    
    Options granted on November 30, 2004, with an exercise price of $3.50 per share.3.
    
    Options granted on October 17, 2006 at an exercise price of $1.01.4.
    
    Compensation from August 11, 2005 through December 31, 2005 and options granted on August 10,
2005, with an exercise price of $2.70.5.
    
    Options granted on January 24, 2006 at an exercise price of $3.00.6.
    
    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 and options granted
on August 10, 2005 for 18,000 shares, with an exercise price of $2.70.7.
    
    Options granted on October 17, 2006 at an exercise price of $1.01 for compensation as a
director.8.
    
    Options granted January 25, 2005, for compensation as a director.9.
    
    Consulting fees paid to Mr. Busby for his services and options granted November 17, 2004 for
compensation as a director.10.
    
    Options granted November 17, 2004, for compensation as a director.11.
    
    Ms. White is employed by Conception Technologies, L.P., a California limited partnership, and
from 2003 to 2005 devoted approximately fifty percent (50%) of her time to the Allergy Free
business (and after December 1, 2004 to Planet Technologies, Inc.) The Companies reimbursed
Conception for fifty
percent (50%) of the compensation paid to Ms. White as reflected in the table. In 2005, Ms.
White resigned and the table reflects compensation paid through August 31, 2005.12.
    
    Options granted on January 25, 2005 with an exercise price of $3.00. 22




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Stock Option Grants and Exercises
   Percent of Total
    
    ExerciseNo. of Securities
    
    Options Granted to
    
    PriceName
    
    Underlying Options
    
    Employees
    
    ($/share)
    
    Expiration DateFrancesca DiNota
Chief Financial Officer
    
    
    15,000
    
    
    
    18.1
    %
    
    $
    1.01
    
    
    October 17, 2016Bret Megargel, Vice President
    
    
    18,000
    
    
    
    21.7
    %
    
    $
    3.00
    
    
    January 24, 2016
 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
    
    UnexercisableScott Glenn
    
    
    -0-
    
    
    
    -0-
    
    
    
    89,783
    
    
    
    109,760
    
    
    $
    
    
    
    $
    Francesca DiNota
    
    
    -0-
    
    
    
    -0-
    
    
    
    12,031
    
    
    
    37,969
    
    
    $
    
    
    
    $
    14,850Edward J. Steube
    
    
    -0-
    
    
    
    -0-
    
    
    
    41,250
    
    
    
    78,750
    
    
    $
    
    
    
    $
    Bret Megargel
    
    
    -0-
    
    
    
    -0-
    
    
    
    48,000
    
    
    
    18,000
    
    
    $
    
    
    
    $
    
 
 (1)
    
    Calculated based on the estimated fair market value of the Companys Common Stock as of December 31, 2006, less the exercise price payable upon
the exercise of such options. Such estimated fair market value as of December 31, 2006 was $2.00, the last transaction price posted at the close
of trading on December 31, 2006. Description of Employee Benefit Plans:
 2000 Stock Incentive Plan
  23




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401(k) Plan
  Employment Agreements and Change in Control Arrangements
  th
  24




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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 securities
    
    Weighted-average
    
    remaining available forto be issued upon
    
    exercise price of
    
    future issuance underexercise of
    
    outstanding
    
    equity compensationoutstanding options,
    
    options, warrants
    
    plans (excludingPlan category
    
    warrants and rights
    
    and rights
    
    securities in column (a)Equity compensation
plans approved by
securityholders
    
    
    569,613
    
    
    $
    2.86
    
    
    
    1,430,387
    (2)Equity compensation
plans not approved
by securityholders
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/ATotal
    
    
    569,613
    
    
    $
    2.86
    
    
    
    1,430,387
    (2)
 
 (1)
    
    There are no equity compensation plans not approved by the Shareholders.(2)
    
    The Company has 1,430,387 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)
    
    
    1,754,903
    
    
    
    44.0
    %6402 Cardeno DriveLa Jolla, CA 92037Common
    
    Michael A. Trinkle (4)
    
    
    61,581
    
    
    
    1.5
    %3495 Via Zara CourtFallbrook, CA 92028Common
    
    Brett Megargel       (5)
    
    
    53,063
    
    
    
    1.3
    %3912 Alameda PlaceSan Diego, CA  92103Common
    
    Ellen Preston (4)
    
    
    50,316
    
    
    
    1.3
    %1825 Sheridan AvenueSan Diego, CA 92103Common
    
    Edward J. Steube   (6)
    
    
    46,250
    
    
    
    1.2
    %313 Central ParkwayMt. Vernon, NY  10552
 25




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##### Table of Contents



Beneficial OwnershipPercentage of ClassTitle of Class
    
    Name and Address of Beneficial Owner
    
    Number of Shares (1)
    
    Owned (2)Common
    
    Francesca DiNota  (7)
    
    
    13,490
    
    
    
    0.3
    %22 Post Gate RoadTrumbull, CT  06611Common
    
    H.M. Busby (8)
    
    
    12,730
    
    
    
    0.3
    %3852 Alameda PlaceSan Diego, CA 92103Common
    
    Eric B. Freedus (9)
    
    
    6,861
    
    
    
    0.1
    %1202 Ketner Blvd., Ste. 6000San Diego, CA 92101Common
    
    Michael Walsh (10)
    
    
    4,354
    
    
    
    0.1
    %P.O. Box 3215Del Mar, CA  92014Common
    
    All executive officers and directors as a group
    
    
    2,003,549
    
    
    
    50.3
    %Common
    
    Windamere III, LLC (11)
    
    
    886,000
    
    
    
    22.2
    %6402 Cardeno Dr.La Jolla, CA  92037Common
    
    John Dawson
    
    
    600,000
    
    
    
    15.1
    %Shorehaven RoadSouthport, CT  06855Common
    
    Fog City Fund, LLC
    
    
    500,000
    
    
    
    12.5
    %2100 Green Street, #102San Francisco, CA  94123Common
    
    William and Lisa Barkett
    
    
    308,456
    
    
    
    7.7
    %7544 Eads #FLa Jolla, CA  92037
 
 (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
include shares granted under the 2000 Stock Option Plan.(2)
    
    Percentage ownership is based upon the shares outstanding on February 28, 2007.(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 (11) below).
Includes 69,576 shares issuable upon exercise of stock options which expire in 2014 and began
vesting in 2005, as well as 28,521 shares which expire on August 10, 2015 and began vesting on
August 10, 2006.(4)
    
    Includes 500 shares issuable upon exercise of stock options which expire on November 17, 2014
and 5,208 shares which expire on January 25, 2015 and began vesting on January 25, 2006.(5)
    
    Includes 30,000 shares issuable upon exercise of stock options which expire on January 25, 2015
and 18,000 shares which expire on August 10, 2015 as well as 5,063 shares which expire on January
24, 2017 and which began vesting on January 24, 2007.(6)
    
    Includes 46,250 shares issuable upon exercise of stock options which expire August 10, 2015 and
began vesting on August 10, 2006.(7)
    
    Includes 13,490 shares issuable upon exercise of stock options which expire August 10, 2015 and
began vesting on August 10, 2006. 26




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##### Table of Contents



(8)
    
    Includes 360 shares issuable upon exercise of stock options which expire in 2011, 500 shares
which expire on November 17, 2014 and 5,208 which expire on January 25, 2015 and began vesting on
January 25, 2006.(9)
    
    Includes 500 shares issuable upon exercise of stock options which expire on January 18, 2015,
and 5,208 shares which expire on January 25, 2015, and which began vesting on January 25, 2006.(10)
    
    Includes 4,354 shares issuable upon exercise of stock options which expire on August 10, 2015,
which began vesting on August 10, 2006.(11)
    
    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.
    
 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.
 27




---



##### Table of Contents



Exhibit Number
    
    Description.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.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(16)
    
    Form of employment agreement effective October 1, 2005, with Tina Mendoza10.29(17)
    
    Form of agreement effective August 2005, with Crystal Research.
 28




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##### Table of Contents



Exhibit Number
    
    Description.11.1(2)(4)
    
    Statement of Computation of Common and Common Equivalent Shares.12.1 (18)
    
    Form of Agreement dated June 1, 2006 with Windamere III, LLC.12.2 (19)
    
    Form of Agreement dated August 7, 2006 with Windamere III, LLC.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.(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. 29




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##### Table of Contents



(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.(16)
    
    Previously filed as an exhibit to the Registrants Annual Report on Form 10-KSB for the
quarter ended December 31, 2005.(17)
    
    Previously filed as an exhibit to the Registrants Annual Report on Form 10-KSB for the
quarter ended December 31, 2005.(18)
    
    Previously filed as an exhibit to the Registrants Quarterly Report on Form 10-QSB for
the quarter ended June 30, 2006.(19)
    
    Previously filed as an exhibit to the Registrants Quarterly Report on Form 10-QSB for
the quarter ended September 30, 2006. 
 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
 Audit Fees
  Audit Related Fees
  Tax Fees
  All Other Fees
  30




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##### Table of Contents



SIGNATURES
  PLANET TECHNOLOGIES, INC.Dated March 23, 2007
    
    By: /s/ Scott L. GlennScott L. GlennChief Executive OfficerDated March 23, 2007
    
    By: /s/ Francesca DiNotaFrancesca DiNotaChief Financial Officer and Principal Accounting
Officer
  Signature
    
    Title
    
    Date/s/ Ellen Preston

Ellen Preston
    
    Director
    
    March 23, 2007/s/ H. M. Busby

H. M. Busby
    
    Director
    
    March 23, 2007/s/ Michael Trinkle

Michael Trinkle
    
    Director
    
    March 23, 2007/s/ Eric Freedus

Eric Freedus
    
    Director
    
    March 23, 2007/s/ Mike Walsh

Mike Walsh
    
    Director
    
    March 23, 2007/s/ Ed Steube

Ed Steube
    
    Director
    
    March 23, 2007
 31




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Financial Statements and Notes:Consolidated Balance Sheets as of December 31, 2006 and 2005
    
    
    F-3Consolidated Statements of Operations for the Years Ended December 31, 2006 and 2005
    
    
    F-4Consolidated Statements of Shareholders Equity (Deficiency) for the Years Ended
December 31, 2006 and 2005
    
    
    F-5Consolidated Statements of Cash Flows for the Years Ended December 31, 2006 and 2005
    
    
    F-6Notes to Consolidated 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 SHEETS
DECEMBER 31, 2006 AND 2005
 2006
    
    
    2005ASSETSCurrent assets:Cash and cash equivalents
    
    $
    162,160
    
    
    $
    436,844Accounts receivable, less allowance for
doubtful accounts of $34,189 and $4,311
    
    
    196,095
    
    
    
    274,727Inventory, net
    
    
    486,809
    
    
    
    577,332Other current assets
    
    
    86,809
    
    
    
    115,560Total current assets
    
    
    931,873
    
    
    
    1,404,463Property and equipment, net
    
    
    27,349
    
    
    
    70,756Intangibles, net
    
    
    1,176,904
    
    
    
    1,441,904Goodwill
    
    
    1,363,025
    
    
    
    1,363,025Total
    
    $
    3,499,151
    
    
    $
    4,280,148LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    729,234
    
    
    $
    1,153,831Accrued expenses
    
    
    518,451
    
    
    
    349,344Notes payable to shareholder
    
    
    500,000
    
    
    
    Derivative liability
    
    
    
    
    
    
    118,282Accrued warrant liability
    
    
    49,908
    
    
    
    67,500Current portion of note and capital lease
    
    
    
    
    
    
    19,223Total current liabilities
    
    
    1,797,593
    
    
    
    1,708,180Convertible note payable to shareholder
    
    
    
    
    
    
    81,606Total liabilities
    
    
    1,797,593
    
    
    
    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
    
    
    421,395
    
    
    
    7,957Accumulated deficit
    
    
    (6,413,133
    )
    
    
    (5,210,891
    )Total shareholders equity
    
    
    1,701,558
    
    
    
    2,490,362Total
    
    $
    3,499,151
    
    
    $
    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, 2006 AND 2005
 2006
    
    
    2005Net sales
    
    $
    8,036,449
    
    
    $
    3,903,970Cost of sales
    
    
    4,720,893
    
    
    
    2,185,551Gross profit
    
    
    3,315,556
    
    
    
    1,718,419Operating expenses:Selling
    
    
    1,264,192
    
    
    
    1,081,233General and administrative
    
    
    3,361,562
    
    
    
    2,001,803Totals
    
    
    4,625,754
    
    
    
    3,083,036Loss from operations
    
    
    (1,310,198
    )
    
    
    (1,364,617
    )Other income (expense):Gain (loss) on disposal of assets
    
    
    2,102
    
    
    
    (47,414
    )Other income
    
    
    127,806
    
    
    
    Interest, net
    
    
    (20,064
    )
    
    
    (14,558
    )Charge for change in derivative liability
    
    
    (1,888
    )
    
    
    (81,606
    )Totals
    
    
    107,956
    
    
    
    (143,578
    )Net loss
    
    $
    (1,202,242
    )
    
    $
    (1,508,195
    )Net loss per share, basic and diluted
    
    $
    (0.30
    )
    
    $
    (0.52
    )Weighted average shares used in computing net loss
per share attributable to common shareholders, basic
and diluted
    
    
    3,986,368
    
    
    
    2,902,613
  F-4




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##### Table of Contents



PLANET TECHNOLOGIES, INC. AND SUBSIDIARY
 
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY (DEFICIENCY)
YEARS ENDED DECEMBER 31, 2006 AND 2005
 Common Stock
    
    
    Additional
    
    
    AccumulatedShares
    
    
    Amount
    
    
    Paid-in Capital
    
    
    Deficit
    
    
    TotalBeginning, January 1, 2005
    
    
    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
    
    
    
    
    
    
    
    
    
    
    
    1,200,000Stock options issued to
non-employees for services at
fair value of $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
    )
    
    
    2,490,362Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    307,150
    
    
    
    
    
    
    
    307,150Reduction of derivative
liability due to repayment of
convertible note payable
    
    
    
    
    
    
    
    
    
    
    83,494
    
    
    
    
    
    
    
    83,494Stock options issued to
non-employees for services at
fair value of $1.99 per share
    
    
    
    
    
    
    
    
    
    
    22,794
    
    
    
    
    
    
    
    22,794Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,202,242
    )
    
    
    (1,202,242
    )Balance at December 31, 2006
    
    
    3,986,368
    
    
    $
    7,693,296
    
    
    $
    421,395
    
    
    $
    (6,413,133
    )
    
    $
    1,701,558
  F-5




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##### Table of Contents



PLANET TECHNOLOGIES, INC. AND SUBSIDIARY
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2006 AND 2005
 2006
    
    
    2005Operating activities:Net loss
    
    $
    (1,202,242
    )
    
    $
    (1,508,195
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    297,082
    
    
    
    183,288Non-cash stock-based compensation
    
    
    307,150
    
    
    
    Non-cash charge for change in derivative liability
    
    
    1,888
    
    
    
    81,606Non-cash charge for change in accrued warrant liability
    
    
    (17,592
    )
    
    
    67,500(Gain) loss on disposal of assets
    
    
    (2,102
    )
    
    
    47,414Issuance of options to non-employees at fair value for services
    
    
    22,794
    
    
    
    7,957Changes in operating assets and liabilities, net of effects from
purchase of ACP in 2005:Accounts receivable
    
    
    78,632
    
    
    
    (162,032
    )Other current assets
    
    
    28,751
    
    
    
    (24,311
    )Inventory
    
    
    90,523
    
    
    
    280,313Interest payable
    
    
    
    
    
    
    (8,543
    )Accounts payable
    
    
    (424,597
    )
    
    
    48,533Accrued expenses
    
    
    169,107
    
    
    
    (316,973
    )Net cash used in operating activities
    
    
    (650,606
    )
    
    
    (1,303,443
    )Investing activities:Cost of acquiring company, net of cash acquired
    
    
    
    
    
    
    (1,581,427
    )Purchase of property and equipment
    
    
    
    
    
    
    (25,794
    )Net cash used in investing activities
    
    
    
    
    
    
    (1,607,221
    )Financing activities:Repayment to related party
    
    
    
    
    
    
    (185,000
    )Principal payment on notes payable
    
    
    (118,282
    )
    
    
    (137,415
    )Proceeds from notes payable to shareholder
    
    
    500,000
    
    
    
    Payments on vendor promissory note
    
    
    (5,796
    )
    
    
    Proceeds from stock sales
    
    
    
    
    
    
    3,295,000Net cash provided by financing activities
    
    
    375,922
    
    
    
    2,972,585Net (decrease) increase in cash and cash equivalents
    
    
    (274,684
    )
    
    
    61,921Cash and cash equivalents, beginning of year
    
    
    436,844
    
    
    
    374,923Cash and cash equivalents, end of year
    
    $
    162,160
    
    
    $
    436,844Supplemental disclosure of cash flow data:Interest paid
    
    $
    2,804
    
    
    $
    14,558Supplemental disclosure of non cash transactions:Termination of capital lease obligation
    
    $
    13,427
    
    
    $
    Common stock issued in connection with acquisition
    
    $
    
    
    
    $
    1,200,000Fair value of derivative liability related to convertible debt
    
    $
    
    
    
    $
    252,757
  F-6




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##### Table of Contents



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:
   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 (continued):
   Year Ended Dec 31, 2005Loss per ShareNet Loss
    
    
    Basic and DilutedAs reported
    
    $
    (1,508,195
    )
    
    $
    (0.52
    )Stock-based
compensation
expense assuming a
fair value-based
method had been
used for all awards
    
    
    (278,000
    )
    
    
    (0.10
    )Pro forma
    
    $
    (1,786,195
    )
    
    $
    (0.62
    )
  2005Volatility
    
    
    176%-221
    %Dividend yield
    
    
    Risk free interest rate
    
    
    4.22%-4.40
    %Vesting period
    
    4 yearsExpected life
    
    10 years
   F-10




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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):
  Net loss per share:
   Advertising:
  Revenue recognition:
  Shipping and handling costs:
  Income taxes:
  F-11




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##### Table of Contents



PLANET TECHNOLOGIES, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 2  Summary of significant accounting policies (concluded):
 401(k) plan:
  Valuation of long-lived assets:
  Note 3  Inventory:
  2006
    
    
    2005Raw materials
    
    $
    182,846
    
    
    $
    256,413Finished goods
    
    
    361,219
    
    
    
    411,644Total
    
    
    544,065
    
    
    
    668,057Less reserve for obsolescence
    
    
    (57,256
    )
    
    
    (90,725
    )Total
    
    $
    486,809
    
    
    $
    577,332
 Note 4  Property and equipment:
  2006
    
    
    2005Furniture and fixtures
    
    $
    28,042
    
    
    $
    28,042Transportation equipment
    
    
    
    
    
    
    16,761Computer equipment
    
    
    135,357
    
    
    
    135,357Total
    
    
    163,399
    
    
    
    180,160Less accumulated depreciation and amortization
    
    
    (136,050
    )
    
    
    (109,404
    )Total
    
    $
    27,349
    
    
    $
    70,756
  F-12




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##### Table of Contents



PLANET TECHNOLOGIES, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 5  Intangibles:
   Years ending December 31,2007
    
    $
    265,0002008
    
    
    259,1642009
    
    
    250,0002010
    
    
    250,0002011
    
    
    152,740Total
    
    $
    1,176,904
 Note 6  Warranty reserve:
  2006
    
    
    2005Balance, beginning of year
    
    $
    290,517
    
    
    $
    130,961Warranty charges during the year
    
    
    (10,001
    )
    
    
    (5,173
    )Acquired warranty accrual
    
    
    
    
    
    
    149,427Provision for warranty expense
    
    
    10,001
    
    
    
    15,302Balance, end of year
    
    $
    290,517
    
    
    $
    290,517
 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 7  Convertible notes payable to shareholder (concluded):
   Note 8  Notes payable to related party:
  Note 9  Warrant liability:
  Note 10  Income taxes:
  2006
    
    
    2005Income tax benefit at statutory rate
    
    $
    (351,000
    )
    
    $
    (513,000
    )State taxes, net of Federal benefit
    
    
    (62,000
    )
    
    
    (82,000
    )Other
    
    
    2,000
    
    
    
    (1,000
    )Increase in valuation allowance
    
    
    411,000
    
    
    
    596,000Total
    
    $
    
    
    
    $
    
 F-14




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##### Table of Contents



PLANET TECHNOLOGIES, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 10  Income taxes (concluded):
  2006
    
    
    2005Net operating loss carryforwards
    
    $
    893,000
    
    
    $
    703,000Product warranty reserve
    
    
    116,000
    
    
    
    116,000Intangible assets
    
    
    (471,000
    )
    
    
    (577,000
    )Stock-based compensation
    
    
    123,000
    
    
    
    Other reserves
    
    
    57,000
    
    
    
    65,000Less: valuation allowances
    
    
    (718,000
    )
    
    
    (307,000
    )Net deferred tax assets
    
    $
    
    
    
    $
    
     F-15




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##### Table of Contents



PLANET TECHNOLOGIES, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 11  Shareholders equity:
 Stock options:
    2006
    
    
    2005UnderlyingShares
    
    

    Weighted AvgExercise Price
    
    
    Underlying Shares
    
    
    Weighted AvgExercise PriceOutstanding, beginning of year
    
    
    342,500
    
    
    $
    3.30
    
    
    
    105,413
    
    
    $
    4.40Granted
    
    
    237,113
    
    
    
    2.26
    
    
    
    238,887
    
    
    
    2.96Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited/expired
    
    
    (10,000
    )
    
    
    4.00
    
    
    
    (1,800
    )
    
    
    22.50Outstanding, end of year
    
    
    569,613
    
    
    $
    2.86
    
    
    
    342,500
    
    
    $
    3.30
   2006Volatility
    
    
    293.9  353.6
    %Dividend yield
    
    
    Risk free interest rate
    
    
    4.77 - 4.91
    %Vesting period
    
    4 yearsExpected life
    
    10 years
 F-16




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##### Table of Contents



PLANET TECHNOLOGIES, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 11  Shareholders equity (concluded):
 Stock options:
  Options Outstanding
    
    Options ExercisableWeighted AverageRemaining
    
    Weighted
    
    
    
    
    
    WeightedExercise Price or
    
    Number of
    
    Contractual Life
    
    Average
    
    Number of
    
    AveragePrice Range
    
    Shares
    
    (years)
    
    Exercise Price
    
    Shares
    
    Exercise Price$1.01 to $3.50
    
    
    568,793
    
    
    
    8.52
    
    
    $
    2.75
    
    
    
    231,293
    
    
    $
    3.00$22.50
    
    
    360
    
    
    
    4.35
    
    
    
    22.50
    
    
    
    360
    
    
    
    22.50$125.00
    
    
    460
    
    
    
    3.33
    
    
    
    125.00
    
    
    
    460
    
    
    
    125.00569,613
    
    
    
    8.51
    
    
    $
    2.86
    
    
    
    232,113
    
    
    $
    3.28
   Note 12  Operating leases:
    Years ending December 31,2007
    
    $
    149,1982008
    
    
    11,6662009
    
    
    9,9722010
    
    
    831Total
    
    $
    171,667
 F-17




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##### Table of Contents



PLANET TECHNOLOGIES, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 13  Commitments:
 License agreements:
  Employment contracts:
  th
  Note 14  Purchases from significant vendors:
  Note 15  Acquisition:
  F-18




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##### Table of Contents



PLANET TECHNOLOGIES, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 15  Acquisition (concluded):
   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
   Year ended December 31,Actual 2006
    
    
    Proforma 2005Net sales
    
    $
    8,036,449
    
    
    $
    8,689,314Net loss
    
    $
    (1,202,242
    )
    
    $
    (2,311,356
    )Net loss per share, basic and diluted
    
    $
    (0.30
    )
    
    $
    (0.71
    )
 F-19




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##### Table of Contents



PLANET TECHNOLOGIES, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 16  Website
    F-20