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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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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, 2001
Commission File No. 0-26804



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PLANET POLYMER TECHNOLOGIES, INC.

(Name of small business issuer in its charter)


|                                                                                 |  |                                             
|-------------------------------------------------------------------------------- |  | --------------------------------------------
|CALIFORNIA
(State or other jurisdiction of
incorporation of organization)        |  | 33-0502606
(IRS Employer identification No.)
|                                                                                
|9985 Businesspark Avenue, San Diego, CA
(Address of principal executive offices) |  | 92131
(Zip Code)                            

Issuers telephone number (858) 549-5130

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

Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past
90 days.  [X] Yes  
[   ] No

Check if there is no disclosure of delinquent filers in response to Items
405 of Regulation S-B in this form, and no disclosure will be contained, to the
best of registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [   ]

The issuers revenues for the year ending December 31, 2001 were $563,928.

The aggregate market value of the voting stock held by non-affiliates of
the Issuer as of March 1, 2002 was $899,554, based on the average of the 4:00
p.m. closing bid and ask prices of $0.19 as reported on the Over-the-Counter
Bulletin Board.

As of March 1, 2002, 9,207,884 shares of the Companys Common Stock were
outstanding and no shares of the Companys Series A Preferred Stock were
outstanding.

Transitional Small Business Disclosure Format (check one) [   ]  yes  
[X]  no



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TABLE OF CONTENTS



|             |                                                                                                                         |  |  |  |  |  |  | 
|------------ | ----------------------------------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I.     
|             | ITEM 1. DESCRIPTION OF BUSINESS                                                                                        
|             | 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                                                       
|             | ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                          
|             | ITEM 7. FINANCIAL STATEMENTS                                                                                           
|             | ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES                          
|PART III.   
|             | ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
|             | ITEM 10. EXECUTIVE COMPENSATION                                                                                        
|             | ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                                                
|             | ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                                
|PART IV.    
|             | ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.                                                                             
|SIGNATURES  
|EXHIBIT 23.1
|EXHIBIT 23.3



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PLANET POLYMER TECHNOLOGIES, INC.

FORM-10KSB
Year Ended December 31, 2001

TABLE OF CONTENTS

|       |  |                                                                                                                 |  |     
|------ |  | --------------------------------------------------------------------------------------------------------------- |  | ----
|Item   |  |                                                                                                                 |  |     
|Number |  |                                                                                                                 |  | Page
|       |  |                                                                                                                 |  |     
|       |  | PART I.                                                                                                         |  |     
|      
|1.     |  | Description of Business                                                                                         |  | 2   
|2.     |  | Description of Property                                                                                         |  | 10  
|3.     |  | Legal Proceedings                                                                                               |  | 10  
|4.     |  | Submission of Matters to a Vote of Security Holders                                                             |  | 10  
|      
|       |  | PART II.                                                                                                        |  |     
|      
|5.     |  | Market for Common Equity and Related Stockholders Matters                                                       |  | 11  
|6.     |  | Managements Discussion and Analysis of Financial
Condition and Results of Operations                           |  | 12  
|7.     |  | Financial Statements                                                                                            |  | 14  
|8.     |  | Changes in and Disagreements With Accountants on
Accounting and Financial Disclosures                           |  | 14  
|      
|       |  | PART III.                                                                                                       |  |     
|      
|9.     |  | Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act |  | 15  
|10.    |  | Executive Compensation                                                                                          |  | 17  
|11.    |  | Security Ownership of Certain Beneficial Owners and Management                                                  |  | 20  
|12.    |  | Certain Relationships and Related Transactions                                                                  |  | 21  
|      
|       |  | PART IV.                                                                                                        |  |     
|      
|13.    |  | Exhibits and Reports on Form 8-K                                                                                |  | 22  
|       |  | Signatures                                                                                                      |  | 25  
|       |  | Power of Attorney                                                                                               |  | 25  





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The letter to Shareholders and this Annual Report on Form 10-KSB contain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended. The Company intends that such statements shall be protected
by the safe harbors provided for in such sections. Such statements are subject
to risks and uncertainties that could cause the Companys actual results to
vary materially from those projected in such forward-looking statements.
Factors that could cause or contribute to such differences include, but are not
limited to those discussed in this section as well as those sections entitled
Risk Factors, and in Item 6  Managements Discussion and Analysis of
Financial Condition and Results of Operations.




PART I.




ITEM 1. DESCRIPTION OF BUSINESS

Planet Polymer Technologies, Inc.

Planet Polymer Technologies, Inc. is an advanced materials company that
develops and licenses unique hydro-soluble polymer and biodegradable materials.
With the sale and disposition of the Companys AQUAMIM® Metal Injection
Molding technology and manufacturing assets in December, 2001, the resulting
restructuring of assets and activities has allowed the Company to become more
highly focused on the Companys agricultural projects, in particular assisting
Agway Inc. in the commercialization of those specific polymer technologies
Planet developed for Agway. Agway is marketing these products under the
trademarks Optigen 1200 and FreshSeal. Additionally, the Company will
continue to pursue commercial partners for the Companys other proprietary
polymer materials, marketed under the trademarks EnviroPlastic® and Aquadro®.
EnviroPlastic and Aquadro can be used to produce films, coatings and injection
molded parts that serve as environmentally compatible alternatives to
conventional plastics.

Planets primary focus is on the technologies listed below:



| |  |  | EnviroPlastic CRT controlled-release technology  Polymer coating
technologies for use in agriculture and produce products
| | - |  | --------------------------------------------------------------------------------------------------------------------------
|
| |  |  | EnviroPlastic Z  Biodegradable and compostable polymers                                                                  
|
| |  |  | Aquadro  Hydrodegradable (water dispersible) polyvinyl alcohol resin                                                     

To date, Planet has commercialized EnviroPlastic controlled-release
technologies with Agway, has had limited market acceptance of its EnviroPlastic
Z materials and has sold pilot production quantities of Aquadro products that
are being evaluated in a variety of commercial applications.

Planets research and development facility is located in San Diego,
California.

Planet was incorporated under the laws of California in August 1991.
Planets principal executive offices are located at 9985 Businesspark Avenue,
San Diego, CA 92131, and its telephone number is (858) 549-5130.

Products and Technologies

Planet is using its polymer chemistry expertise to provide water soluble
and degradable technology-based solutions to the current and emerging needs of
the industrial and agricultural markets.

EnviroPlastic® Controlled-Release Technology.Planets patented
EnviroPlastic controlled-release technology is a proprietary polymer coating
product line with broad application. One use application of this technology
allows fertilizer to be controlled for release over 120 days. The Company has
sought to develop strategic alliances with potential partners and customers and
since 1995 Planet has had a license relationship with Agrium Inc. (Agrium) to
conduct development work in the use of coatings of fertilizer products. In
June 1999, the Company entered into an Amending Agreement with Agrium to allow
Planet and Agway to pursue the development of certain technologies involving
controlled-released coatings.

This coating technology is also utilized to control the release and
transfer rates of nitrogen and oxygen, to assist in controlling the ripening of
fruits and vegetables. Planet entered into a licensing agreement with Agway in
1999 to

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develop commercial coatings for use on fruits, vegetables, floral and
nursery applications that has resulted in the launch, in October 2000, of
FreshSeal® coating for use on fruits and vegetables. Agway is in the early
stages of the commercial rollout of this product family and it resulted in a
very modest royalty-generating license in 2001.

The Company has also highly engaged in development work with Agway since
1999 on the use of its controlled-release technology for animal feed. It is
being evaluated as a specialty coating for urea to allow for more efficient,
controlled release of nitrogen for dairy cows. The product named Optigen ®1200
by Agways Country Products Group, is in field testing while it petitions the
FDA for product approval as a feed additive.

EnviroPlastic® Z Biodegradable and Compostable Plastics.The Companys
patented EnviroPlastic Z materials are biodegradable and compostable polymers
based on the polymer cellulose acetate. Product features include transparency,
fast molding cycles, outstanding processability and controlled degradation
rates from 3 months to 3 years. EnviroPlastic Z materials have been
successfully injection molded and extruded into sheet film and have found
limited acceptance in the irrigation industry. EnviroPlastic Z materials are
targeted for use in products in the packaging and the industrial markets.

Aquadro® Water Soluble Plastics.The Companys patented Aquadro materials
are a polyvinyl alcohol based compound family developed by Planet to provide
cost effective product solutions for the medical disposable, industrial
manufacturing and specialty packaging films markets. Aquadro can be
manufactured into blown film, extrusion cast film, and injection molded
products. Aquadro resins are highly versatile and can be engineered for
flexible or rigid applications. Aquadro can also be designed to dissolve in
hot or cold water environments. The development of Aquadro is an advancement
of Planets patented EnviroPlastic H technology. While no applications have
been commercialized to date, the Company has seen positive results in a number
of trial evaluations that may lead to business in the future.

Markets and Applications

Planet is focusing on specific market opportunities where the Company
believes that its polymer chemistry expertise, EnviroPlastic CRT
controlled-release technology, EnviroPlastic Z and Aquadro technologies, may
address current or emerging market requirements. However, there can be no
assurance that the Companys products or that new products, if developed, will
be capable of capturing market share and also be profitable.

Planet is currently targeting the following markets:

Agricultural Feed & Fruit/Vegetable Initiatives.The Companys
controlled-release technology for animal feed is currently being marketed and
developed through a strategic alliance with Agways Country Products Group.
It is being utilized in a product under field testing by Agway as a
concentrated source of controlled release nitrogen for dairy cows while it
petitions the FDA for product approval. The global feed additive market for
this product is in excess of 10 billion dollars annually. Additionally, Agway
has commercialized and launched a coating package, trademarked FreshSeal, for
use in controlling the ripening of tropical fruits and vegetables and is in
various trials and test markets around the world. This product will allow
Agway to compete for a niche portion of the global 75 billion dollar fresh
vegetable and fruit market The Company believes that Agway will continue to
expand the market area and opportunity for both of these technologies.

Medical Disposables and Specialty Packaging.The Companys Aquadro
technology offers both product enhancements and environmental benefits in both
film and injection molded applications to a wide range of applications. The
chemical characteristics of the Companys products in this area have shown
significant promise in providing packaging and film products with an excellent
combination of clarity, toughness, printability and economics. Rigid injection
moldable grades of the product have been evaluated in disposable medical
devices, where environmental sensitivity is a major consideration. Film
versions of the polymers have been tested in water-soluble packaging and
specialty printing applications. While commercial success has not yet been
achieved with these technologies the range of potential applications continues
to grow.

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Strategic Alliances

To facilitate the development and commercialization of Planets products,
Planet has pursued a strategy of aligning itself with a number of companies in
the areas of product development and marketing.

Agrium Technology Development and License Agreement.In January 1995,
Planet entered into a ten year technology and license agreement with Cominco
Fertilizers Ltd., now named Agrium Inc., pursuant to which Agrium desired to
have Planet conduct further development work on the use of coatings to control
release of fertilizers and to protect products containing biological
inoculants. Planets controlled-release technology polymer for fertilizer was
developed for Agrium under this agreement. Under the terms of the agreement,
Agrium owns all technology developed under the agreement, including, among
other things, compositions of matter, new chemical complexes, association
compounds, blends, mixtures or compositions of coating materials, or new
products, or new processes relating thereto developed by Planet or by Agrium.
In addition, Agrium has the exclusive right to grant licenses and sublicenses
on the technology developed under the agreement to other parties. In return
for the rights granted to Agrium, Agrium is required to pay royalties to Planet
determined in accordance with the terms of the agreement. On June 23, 1999,
Planet entered into an Amending Agreement with Agrium, Inc. to amend the
Technology Development and License Agreement dated as of January 30, 1995. The
Amending Agreement allows Planet to enter into an arrangement or agreement with
Agway with respect to the development of technologies involving
controlled-released coatings. If Planet enters into such arrangements or
agreements with Agway, then Planet will grant Agrium, among other items, an
option to acquire a license and a right to produce, market and distribute such
technologies on the same terms and conditions as those offered to Agway.

Agway Strategic Alliance.In November 1998, Planet entered into a
strategic investment agreement with Agway Inc. to assist in the funding of
Planet Polymer Technologies, Inc. Through stock purchases and warrant
exercises, Agways actions have resulted in the acquisition of approximately a
34% ownership stake in Planet.

Contemporaneously, Planet and Agway entered into an agreement relating to
the funding by Agway of a feasibility study of Planets polymer technology for
use in agricultural products, other than fertilizers and other biological
products, and food products. Under the terms of the feasibility study
agreement, Planet is reimbursed for qualifying research and development costs
related to staffing, materials, equipment, equipment time, outside testing and
travel from Agway.

Also in November 1998, Planet granted Agway an exclusive worldwide license
to all current and future products that utilize Planets polymer technology for
agricultural and food related purposes, other than products already covered by
existing agreements. Agways field of business is broadly related to
agricultural products and food products, but does not include fertilizers for
purposes of the license. In March 2000, Planet and Agway entered into a
sub-agreement with respect to animal feed products incorporating Planets
patented/patent pending coatings and/or polymer systems. Also in March 2000,
Planet and Agway entered into another sub-agreement with respect to Planets
patented/patent pending coatings and/or polymer systems sold for use on fruits,
vegetables, floral and nursery items.

In November, 2000 Planet agreed to sell, assign and transfer to Agway the
patent rights related to controlled release technology for animal feed and
fruit/produce initiatives, involving four (4) patents and/or applications, for
cash and the royalty payments equal to the payments Planet would otherwise be
entitled to receive pursuant to its existing license agreements dated November
12, 1998 and Sub-Agreements dated March 1, 2000. Concurrently, Agway agreed to
grant Planet an irrevocable, exclusive, worldwide, royalty-free license to use
and commercially exploit all rights related to the patents for all uses other
than food and agricultural initiatives. The License term is for the life of the
patents and any patents derived from the patents.

Planet intends to continue developing other strategic relationships that
may help it promote its products or that might extend the range of product
solutions provided by Planets technologies. Planet has entered into
non-disclosure agreements providing for the confidential exchange of
information and discussion with potential strategic partners and customers.
There can be no assurance that any such agreements will result in any
development and license agreements or commercial relationships. There can be
no assurance that Planet will be able to negotiate acceptable customer
relationships in the future, or that its existing joint development and
licensing agreements will be successful. There can also be no assurance that
Planet and its potential strategic partners will be able to develop any
products or that the new products, if developed, and their pricing will be
acceptable to customers.

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Sales and Marketing

Planet primarily relies on direct sales efforts and strategic marketing
alliances to market Planets products and technologies. Many of these direct
sales efforts are based on the initiatives of Planets senior management.
Planet believes that these efforts have provided Planet with significant market
exposure and have continued the educational process required to commercialize
its technologies. In order to leverage its sales and marketing efforts, Planet
has also developed strategic alliances with Agway and Agrium. See Strategic
Alliances.

Most of Planets technologies are designed to be custom or specially
engineered to enhance, and become incorporated into, customers products. Due
to this high degree of product specialization, Planet expects the average sales
cycle for its products to be approximately 24 to 48 months. This average sales
cycle includes initial customer contacts, specification writing, engineering
design, prototype construction, pilot testing, regulatory approval, if any,
sales and marketing and commercial manufacture. A significant amount of time
and energy is required by Planets staff to educate the customer, understand
the customers unique application requirements and recommend and develop the
appropriate solution.

Competition

In the manufacture and marketing of controlled-release fertilizer, Planet
competes indirectly with Pursell Inc. and The Scotts Company in the United
States and Haifa Chemical Company in Israel. Planet believes that its
EnviroPlastic controlled-release technology is a lower cost alternative that
can be targeted towards the broader agricultural market rather than the turf
nursery and ornamental market segment being served today.

The primary source of competition for Planets EnviroPlastic and Aquadro
products currently comes from suppliers of conventional non-degradable plastic
materials and products. The use of non-degradable products and current methods
of solid waste disposal are well established and accepted by both consumers and
the industry, many of whom may be indifferent to the benefits offered by
Planets technologies. Many of Planets competitors, who provide these
non-degradable products, have significantly greater financial, technical and
human resources than Planet. Direct competition with respect to degradable
polymer materials is limited. Technologies that Planet believes to be
potentially competitive include polyvinyl alcohol, starch-based polymers and
polylactic acid. A lessening of political or consumer concern for environmental
aspects of waste disposal could significantly harm Planets competitive
position.

There can be no assurance that any one of these potentially competitive
technologies will not obtain a significant market share prior to the
commercialization of Planets products. The development of a competing or
superior technology or the commercialization of such technology by any one of
Planets potential competitors could have a material adverse effect on Planets
sales or operating profits.

Manufacturing and Suppliers

Planet manufactures polymer materials in pellet form from base raw
materials purchased from third party vendors. Planet has manufactured only
limited production quantities of its products at its facility in San Diego,
California and plans to utilize contract manufacturers to produce larger
quantities of materials when required. The components for Planets polymer
blends, alloys and coating products are available from several suppliers such
as Union Carbide Corporation, The Dow Chemical Company, Dupont, Eastman
Chemical Company and Air Products and Chemicals, Inc. as well as other sources.
Planet has not executed long-term supply agreements with any of its vendors.

To date, Planet has obtained adequate quantities of raw materials on
acceptable terms to meet its requirements and with volume purchase orders on
some items in order to obtain quantity discounts. Planet does not anticipate
significant difficulties in obtaining raw materials in sufficient quantities to
meet its anticipated needs. Should supply problems arise, however, Planets
inability to develop alternative cost-effective sources could materially impair
Planets ability to manufacture and deliver products. Additionally, an
interruption or reduction in the source of supply of any of the component
materials, or an unanticipated increase in vendor prices, could materially and
adversely affect Planets operating results and damage customer relationships.

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Research and Development

Research and development expenditures for the years ended December 31,
2001 and 2000 were approximately $353,000 and $298,000, respectively. Planet
believes that its long-term success depends on the continued development and
commercialization of cost-effective solutions consisting of engineered
environmentally compatible polymer materials. As of December 31, 2001, Planet
had one Ph.D. polymer scientist engaged in product development programs, which
include polymer synthesis, polymer blending, process development, pilot and
full scale manufacturing and testing. Planet does, however, aim to design and
develop new products internally and, where appropriate, acquire existing
technologies for commercialization, although Planet currently has no plans for
any such acquisitions. Planet anticipates that some of the 2002 research and
development expenditures in the agricultural feed and fruit/vegetable coatings
area will be reimbursed by Agway under its Feasibility Agreement. For the
years ended December 31, 2001 and 2000, Planet recorded reimbursable research
and development costs of approximately $63,000 and $175,000, respectively, from
Agway.

Intellectual Property and Proprietary Technologies

Planet believes that, although the ownership and licensing of patents is a
significant competitive advantage in its business, its success also depends on
the innovative skills, technical competence, and marketing ability of its
personnel. Planet intends to continue to design and develop proprietary
engineered environmentally compatible polymer blends and alloys, as well as
enhancements and improvements on existing products, and will seek patent and
trademark protection for such inventions, improvements and enhancements as
appropriate.

In November, 2000 Planet agreed to sell, assign and transfer to Agway the
patent rights related to controlled release technology for animal feed and
fruit/produce initiatives, involving four (4) patents and/or applications, for
cash and the royalty payments equal to the payments Planet would otherwise be
entitled to receive pursuant to its existing license agreements dated November
12, 1998 and Sub-Agreements dated March 1, 2000. Contemporaneously with the
sale of the patents, Agway agreed to grant Planet an irrevocable, exclusive,
worldwide, royalty-free license to use and commercially exploit all rights
related to the patents for all uses other than food and agricultural
initiatives. The License term is for the life of the patents and any patents
derived from the patents.

In December 2001, Planet agreed to sell to Ryer Industries, LLC (Ryer)
all right, title and interest in all issued patents, patent applications,
trademarks, existing intellectual property (including trade secrets),
knowledge, know-how and ongoing intellectual property being developed relating
to its AQUAMIM Metal Injection Molding (MIM) technology and the manufacture
and composition thereof. Additionally, Planet agreed to sell to Ryer all
manufacturing, pilot plant and production equipment related to the manufacture
of AQUAMIM feedstocks, as well as all raw materials and finished goods on hand
at Planet at the time of the sales of these assets. In consideration of this
sale, Planet received from Ryer (1) payment of $300,000, comprised of cash in
2001 of $30,000 and a note, with varying payments due during 2002, of $270,000,
(2) an eight-year royalty agreement for all sales of AQUAMIM feedstocks and
certain tungsten carbide cobalt feedstock formulations and (3) a one-year
consulting agreement to provide technical support to Ryer.

While Planet believes that a competitor with substantial financial
resources and technical expertise could develop polymer materials equivalent to
Planets, Planet believes that its lead times, continued research and
development efforts and relationship driven strategic alliances with customers
provide it with a competitive advantage. Planet relies on trade secrets,
proprietary know-how and process technology, which it seeks to protect, in
part, by confidentiality agreements with its employees, consultants and
customers. There can be no assurance that these agreements will not be
breached, that Planet would have adequate remedies for any breach or that
Planets trade secrets and proprietary know-how will not otherwise become known
or be independently discovered by others.

In addition, there can be no assurance that Planets pending patent
applications will be approved, that Planet will develop additional proprietary
materials or processes that are patentable, that any patents issued to Planet
or any of its licenses will provide Planet with competitive advantages or will
not be successfully challenged by third parties or that the patents of others
will not have an adverse effect on the ability of Planet to conduct its
business. Furthermore, there can be no assurance that others will not
independently develop similar or superior technologies, duplicate any of
Planets processes or design around the patented materials developed by Planet.
Planet believes that its products, patents, trademarks and other proprietary
rights do not infringe the property rights of third parties. There can be no
assurance, however, that third parties will not assert infringement claims in
the future. It is possible that Planet may need to acquire licenses to, or to
contest the validity of, issued or pending patents of third parties relating to
Planets technology. There can be no assurance that licenses under such
patents would be made available to Planet on

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acceptable terms, if at all, or that Planet would prevail in any such
contest. In addition, Planet could incur substantial costs defending itself in
suits brought against the Company with respect to patents or in bringing suits
against other parties.

Government Regulation

Some end products into which Planets products are incorporated may be
subject to significant regulation and approval by federal, state and local
entities such as the Food and Drug Administration and the Environmental
Protection Agency. Similar regulatory agencies exist worldwide. Planet may be
required to provide its customers with technical information on its products to
be used by the customer in the regulatory process. Planets customers will
have primary responsibility for obtaining any required governmental approvals.
The approval process could be costly and lengthy and potential sales of
Planets products could be significantly delayed and/or eliminated as to end
products subject to such regulatory approval.

Employees

As of December 31, 2001 Planet had four full-time or part-time employees
at its corporate headquarters in San Diego, California. Beginning January 1,
2002, Planet had two employees, one engaged full-time in research and
development activities and one in commission only sales and administration.
With the Companys stated objective of refocusing effort and development
activity to commercialize already developed technologies in the agricultural
fields, the Company does not foresee any increase in employees in 2002. Planet
has an employment agreement with two key employees, Robert J. Petcavich and
Richard C. Bernier. None of Planets employees are covered by collective
bargaining agreements, and management considers relations with employees to be
good.

Risk Factors

Our History of Operating Losses.We have incurred losses since inception.
For the years ended December 31, 2001 and 2000, we had net losses of
approximately $1,051,000 and $1,174,000, respectively. As of December 31,
2001, we had an accumulated deficit of approximately $13.7 million. Since
inception, Planet has generated minimal revenues from product sales.

Future Capital Needs; Uncertainty of Additional Funding.Our future
capital requirements will depend on many factors, including:



| |  |  | the timing of market acceptance of our products;                      
| | - |  | ----------------------------------------------------------------------
|
| |  |  | competing technological and market developments; and                  
|
| |  |  | the costs involved in filing, prosecuting and enforcing patent claims.

We anticipate that our existing resources will be sufficient to maintain
our current and planned operations through at least December, 2002. We cannot
guarantee that changes in our plans or other events affecting our operating
expenses will not result in the expenditure of such resources before such time.

We intend to seek additional funding through strategic partnership
arrangements or the extension of existing arrangements or through public or
private equity or debt financing. We cannot guarantee that additional financing
will be available on acceptable terms, or at all. Insufficient funds may
require us to delay, scale back or eliminate some or all of our activities or
to obtain funds through arrangements with third parties that may require us to
relinquish rights to certain of our technologies, product candidates or
products that we would otherwise seek to develop or commercialize ourselves.

Continued Quotation On Over-the-Counter Bulletin Board.Planet was
advised by the Nasdaq SmallCap Market that the Company was no longer in
compliance with certain listing criteria, namely of having a minimum of $2
million net tangible assets, as well as also having a stock price trading below
$1.00 for a period of more than thirty (30) days. The Companys stock was
delisted, effective July 19, 2001, and became active on the Over-the-Counter
Bulletin Board on September 7, 2001.

Penny Stock Regulations.With the delisting from Planets Common Stock
from the Nasdaq SmallCap Market and subsequent listing on Over-the-Counter
Bulletin Board, trading in our Common Stock is subject to the requirements of
Rule 15g-9 promulgated under the Securities Exchange Act of 1934, as amended
(the Exchange

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Act). Under such rule, broker/dealers who recommend such low-priced
securities to persons other than established customers and accredited investors
must satisfy special sales practice requirements, including a requirement that
they make an individualized written suitability determination for the purchaser
and receive the purchasers written consent prior to the transaction. The
Securities Enforcement Remedies and Penny Stock Reform Act of 1990 also
requires additional disclosure in connection with any trades involving a stock
defined as a penny stock (generally, according to recent regulations adopted by
the Commission, any equity security not traded on an exchange or quoted on
Nasdaq that has a market price of less than $5.00 per share, subject to certain
exceptions), including delivery, prior to any penny stock transaction, of a
disclosure schedule explaining the penny stock market and the risks associated
therewith. Such requirements could severely limit the market liquidity of our
Common Stock and the ability purchasers of our Common Stock to sell such shares
in the secondary market.

Uncertainty of Market Acceptance.Our success is dependent upon the
commercial acceptance of our technologies by the various industries targeted by
our products. There can be no certainty as to the amount of time required to
achieve full-scale commercialization, and the commercialization process of any
new product could take several years. We cannot guarantee that our products
will receive broad market acceptance as an economically acceptable alternative.
Broad market acceptance of our products will depend upon our ability to
demonstrate to potential customers that our products can compete favorably with
alternative solutions. Beginning in 2002, the Company is focusing on research
and development for Agways FreshSeal commercial program and Optigen
development activities and other agricultural initiatives.

Technological Uncertainty.We develop innovative approaches to address
problems and concerns. We cannot guarantee that unforeseen problems will not
develop with respect to our technology or products or that we will be
successful in completing the development.

Reliance on Strategic Relationships.Our technologies are designed to
serve multiple industries. An important part of our strategy is to promote
acceptance of our products through technology and product alliances with
certain customers. Our dependence on these customers raises certain risks with
respect to the future success of our business. We have focused our product
development efforts by working in close collaboration with our customers. Our
success is dependent on the successful completion and commercial deployment of
our products and on the future commitment of our customers to our products and
technology. We cannot guarantee that our collaboration with our customers will
result in products that are accepted by our customers or widely accepted in the
marketplace. In addition, our reliance on collaborations with third parties
may require us to relinquish rights to certain of our technologies, product
candidates or products that we would otherwise seek to develop or commercialize
ourselves. For example, pursuant to our License Agreement and sale of patent
rights to Agway, Agway has certain rights to our technologies and we must rely
upon them to produce, market and distribute the technologies licensed or sold
to them. In addition, the Agway agreement places certain limitations on us
with respect to the use of our technologies in certain areas of business. We
may enter into similar collaborations in the future.

Competition.The primary source of competition for our EnviroPlastic and
Aquadro products currently comes from suppliers of conventional non-degradable
plastic products. The use of non-degradable products is well-established and
accepted by both consumers and the industry, many of whom may be indifferent to
the benefits offered by our products. Many of our competitors who provide
these non-degradable products have significantly greater financial, technical
and human resources than we do. Changes in political and consumer emphasis on
environmental factors in waste disposal could significantly harm our
competitive position relative to these established solutions with respect to
certain of our products whose principal advantage is degradability. Such
changes may be imminent in light of the current political climate, the
unlikelihood of increased environmental regulation and the possibility of a
reduction in environmental regulation. In addition, we are subject to
competition from other specialty chemical companies offering alternative
solutions.

We cannot guarantee that our competitors will not succeed in developing
products or technologies that are more effective than any which have been or
are being developed by us or which would render our technology and products
obsolete and noncompetitive. Accordingly, our competitors may succeed in
obtaining market acceptance for products more rapidly than we do. Furthermore,
if we obtain market acceptance of our products, we will also be competing with
respect to volume manufacturing efficiency and marketing capabilities, areas in
which we have limited or no experience.

Dependence on Key Personnel.Our success depends to a significant extent
upon the continued service of Robert J. Petcavich, our Chairman and Chief
Technology Officer, and the loss of Dr. Petcavich could have a material adverse
effect on our business or results of operations.

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Uncertainty of Protection of Patents and Proprietary Rights.Planet
relies on a combination of patent and trade secret protection, non-disclosure
agreements and licensing arrangements to establish and protect our proprietary
rights. We have filed and intend to file applications as appropriate for
patents covering our products. We cannot guarantee that patents will issue
from any of the pending applications or, if patents do issue, that claims
allowed will be sufficiently broad to protect our technology. In addition, we
cannot guarantee that any issued patents will not be challenged, invalidated or
circumvented, or that the rights granted thereunder will provide proprietary
protection to us. Since U.S. patent applications are maintained in secrecy
until patents issue, and since publication of inventions in the technical or
patent literature tend to lag behind such inventions by several months, we
cannot be certain that we were the first creator of inventions covered by our
issued patents or pending patent applications or that we were the first to file
patent applications for such inventions. Despite our efforts to safeguard and
maintain our proprietary rights, we cannot guarantee that we will be successful
in doing so or that our competitors will not independently develop or patent
technologies that are substantially equivalent or superior to our technologies.

Shares Eligible for Future Sale.Sales of substantial amounts of our
Common Stock in the public market or the prospect of such sales by existing
shareholders could materially adversely affect the market price of our Common
Stock. As of December 31, 2001, we had outstanding 9,165,618 shares of Common
Stock. Virtually all of our outstanding shares of Common Stock are either
registered and therefore freely tradable or may be transferred pursuant to Rule
144(k) under the Securities Act, unless held by our affiliates as that term
is defined in Rule 144 under the Securities Act. On November 13, 2000, a
Registration Statement on Form SB-2 to register up to 2,000,000 shares of
Common Stock issuable to Triton West Group, Inc. under a Private Equity Line of
Credit Agreement that we entered into with Triton on August 15, 2000 was
declared effective. Under the Equity Line of Credit, we may request Triton to
purchase up to a certain number of shares of Common Stock based upon the price
and average trading volume of our Common Stock. Under current levels, we are
unable to exercise this line of credit. The Registration Statement also
covered 5,000 shares of Common Stock and 125,000 shares issuable under a
warrant previously issued to Triton in connection with Tritons execution of
the Private Equity Line of Credit Agreement. We have also filed Registration
Statements on Form S-8 under the Securities Act each covering 500,000 shares of
Common Stock reserved for issuance under our 2000 Stock Incentive Plan and 1995
Stock Option Plan. Upon issuance, shares registered under these two
Registration Statements will be, subject to Rule 144 volume limitations
applicable to our affiliates, available for sale in the open market.

Government Regulation.Certain end products into which our products are
expected to be incorporated are subject to extensive government regulation in
the United States by federal, state and local agencies including the EPA and
FDA. Similar regulatory agencies exist worldwide. Our customers who
incorporate our products into consumer products will bear primary
responsibility for obtaining any required regulatory approvals. The process of
obtaining and maintaining FDA and any other required regulatory approvals for
products is lengthy, expensive and uncertain, and regulatory authorities may
delay or prevent product introductions or require additional tests prior to
introduction. We cannot guarantee that changes in existing regulations or the
adoption of new regulations will not occur, which could prevent us or our
customers from obtaining approval or delay the approval of various products or
could adversely affect market demand for our products.

Product Liability.Product liability claims may be asserted against us
in the event that the use of our products or products which incorporate our
products are alleged to have caused injury or other adverse effects, and such
claims may involve large amounts of alleged damages and significant defense
costs. We do not maintain product liability insurance. If we obtain product
liability insurance in the future, we cannot guarantee that the liability
limits or the scope of our insurance policy would be adequate to protect
against such potential claims. Additionally, we may not be able to obtain
product liability insurance. Whether or not we obtain such insurance, a
successful claim against us could have a material adverse effect on us. In
addition, our business reputation could be adversely affected by product
liability claims, regardless of their merit or eventual outcome.

Absence of Dividends.We have not paid any cash dividends on our Common Stock
since our inception and do not anticipate paying cash dividends in the
foreseeable future.

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ITEM 2. DESCRIPTION OF PROPERTY

Our executive offices and research laboratory are located in approximately
6,080 square feet of leased office space in San Diego, California. On August
1, 1999, the Company entered into a new three-year standard industrial lease.
The lease will expire on July 31, 2002 and the monthly rental payment is $5,536
until expiration. The Company believes its current facility is suitable for
its present needs and will assess in early 2002 whether anticipated future
facility needs indicate or require a change in facilities.




ITEM 3. LEGAL PROCEEDINGS

None




ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

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PART II.




ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Companys Common Stock traded on the Nasdaq SmallCap tier of the
Nasdaq Stock Market (Nasdaq) under the symbol POLY, from the Companys
initial public offering on September 21, 1995 until July 18, 2001. The
Companys Common Stock now trades on the OTC.BB. The following table sets
forth the high and low sales prices of the Companys Common Stock for the
period from January 1, 2000 through December 31, 2001 as furnished by Nasdaq
and the OTC.BB. These prices reflect prices between dealers without retail
markups, markdowns or commissions, and may not necessarily represent actual
transactions:

|                                    |                |  |              |        |     |  |  |         | 
|----------------------------------- | -------------- |  | ------------ | ------ | --- |  |  | ------- | 
|                                    |                |  | Trade Prices
|                                    |                |  |             
|                                    |                |  | High         |        | Low
|                                    |                |  |              |        |    
|Fiscal year ended December 31, 2000 |                |  |              |        |     |  |  |        
|                                    | First Quarter  |  |              | 5      |     |  |  | 2 17/32 | 
|                                    | Second Quarter |  |              | 3 1/4  |     |  |  | 2 1/16  | 
|                                    | Third Quarter  |  |              | 2 5/8  |     |  |  | 1 1/2   | 
|                                    | Fourth Quarter |  |              | 2 1/32 |     |  |  | 9/16    | 
|Fiscal year ended December 31, 2001 |                |  |              |        |     |  |  |        
|                                    | First Quarter  |  |              | 1.875  |     |  |  | 0.344   | 
|                                    | Second Quarter |  |              | 0.688  |     |  |  | 0.350   | 
|                                    | Third Quarter  |  |              | 0.430  |     |  |  | 0.110   | 
|                                    | Fourth Quarter |  |              | 0.190  |     |  |  | 0.040   | 

On March 1, 2002, the last reported sale price of the Companys Common
Stock on the Over-the-Counter Bulletin Board was $0.19. As of March 1, 2002,
there were approximately 152 holders of record of the Companys Common Stock
with 9,207,884 shares outstanding. The market price of shares of Common Stock,
like that of the common stock of many other emerging growth companies, has been
and is likely to continue to be highly volatile.

Under the terms of the Securities Purchase Agreement dated as of September
19, 1997, between the Company and Special Situations Private Equity Fund, L.P.,
holder of the Companys Series A Preferred Shares (the Investor), the
Investor was entitled to receive, quarterly as a dividend, payment in the form
of shares of Common Stock. Accordingly, in 2000, the Company issued to the
Investor dividends of 21,836 shares of Common Stock, valued at approximately
$40,869 and in 2001, issued 13,754 shares of Common Stock valued at
approximately $10,450. During March 2001, all remaining shares of Preferred
Stock were converted into shares of Common Stock.

The Company has never declared or paid a cash dividend. The Company has
not paid and does not intend to pay any Common Stock dividends to Common Stock
shareholders in the foreseeable future and intends to retain any future
earnings to fund the Companys operations. Any payment of dividends in the
future will depend upon the Companys earnings, capital requirements, financial
condition and such other factors as the Board of Directors may deem relevant.

On August 23, 2000, Planet entered into a private equity line of credit
agreement with Triton West Group, an institutional investment company. Subject
to the terms and conditions of that agreement, Planet will have, over a 36
month period, access to an equity-based line of credit of up to $7,000,000,
proceeds to be used to provide working capital and funds for the continuation
of the building/expansion and commercialization of Planets technologies. Under
current conditions, Planet does not have access to this capital based upon
current stock price and trading volume.

On November 14, 2000, at the Companys request and with the Companys
offer to reduce the warrant price from $1.00 to $0.75 per share, Agway agreed
to exercise the warrant to acquire a total of 1,000,000 shares of the Companys
Common Stock on all other terms, and subject to conditions, set forth in the
warrant and the Company received $750,000 in connection with such exercise.
Additionally, on November 14, 2000, Planet agreed to sell, assign and transfer
to Agway the patent rights related to controlled release technology for animal
feed and fruit/produce initiatives, involving four (4) patents and/or
applications, for a cash price of $250,000 and the royalty

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payments equal to the payments Planet would otherwise be entitled to
receive pursuant to its existing license agreements dated November 12, 1998 and
Sub Agreements dated March 1, 2000. Contemporaneously with the sale of the
patents, Agway agreed to grant Planet, for the sum of $150,000, an irrevocable,
exclusive, worldwide, royalty-free license to use and commercially exploit all
rights related to the patents for all uses other than food and agricultural
initiatives. The License term is for the life of the patents and any patents
derived from the patents.

Recent Sales of Unregistered Securities

In 2001, the Company paid dividends on the Preferred Stock to the Investor
in the form of Common Stock. The March 15, 2001 and final dividend payments of
11,690 shares and 2,064 shares, respectively, were issued pursuant to an
exemption from registration for transactions not involving a public offering.

After receiving proceeds from Agway, pursuant to its purchase of Common
Stock on November 14, 2000 and that certain Patent Transaction involving
certain patents and potential future patents concerning animal feed additives,
fruit and vegetable coatings and controlled release fertilizer, the Company was
required to (i) pay a $60,000 cash transaction fee to LBC, and (ii) issue LBC
five-year warrants to purchase 50,000 shares of Common Stock with an exercise
price of $4.1625 per share, in exchange for $2,500. These warrants were issued
March 20, 2001 pursuant to an exemption from registration for transactions not
involving a public offering.

On February 6, 2001, Planet issued 8,400 shares of the Companys Common
Stock in exchange for legal services. These shares are exempt from
registration.




ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

Overview

Except for the historical information contained herein, the discussion in
this report contains forward-looking statements that involve certain risks and
uncertainties. The Companys actual results could differ materially from those
discussed in this report. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed in Item 1 -
Description of Business, including the section therein entitled Risk
Factors, this Item 6, and those discussed in any documents incorporated herein
by reference.

Since the Company was founded in 1991, with the exception of resources
expended in connection with the purchase and ongoing operation of Deltco,
substantially all of the Companys resources have been devoted to the
development and commercialization of its technologies and products. This has
included the expenditure of funds to develop the Companys corporate
infrastructure, support the Companys marketing efforts and establish a pilot
production facility, in addition to research and development. In January 2000,
Planet sold its wholly owned subsidiary, Deltco, a manufacturer and reprocessor
of plastic resins located in Ashland, Wisconsin. Planet has incurred operating
losses since inception and had an accumulated deficit as of December 31, 2001
of approximately $13.7 million. Pending commercial deployment of and related
volume orders for the Companys products, the Company expects to incur
additional losses.

Results of Operations

The Companys revenues decreased approximately $104,000 to approximately
$564,000 for the year ended December 31, 2001 from approximately $668,000 for
the year ended December 31, 2000. This decrease was primarily attributable to
lower EnviroPlastic® Z resin sales to the Toro Company. There was also lower
Agway development income. These decreases were partially offset by net royalty
income of $94,000 and increased metal injection molding revenue.

Cost of revenues decreased approximately $170,000 to approximately
$369,000 for the year ended December 31, 2001 from approximately $539,000 for
the year ended December 31, 2000. This decrease was primarily attributable to
lower raw material costs resulting from lower overall revenues from
EnviroPlastic® Z resin and a significant shift in product mix from polymer
resin sales to MIM feedstock sales.

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General and administrative expenses decreased $143,000 to approximately
$810,000 for the year ended December 31, 2001 from approximately $953,000 for
the year ended December 31, 2000. This decrease was primarily attributable to
reduced use of outside services. These decreases were partially offset by
increased salaries resulting from the addition of a new Chief Executive Officer
in October 2000 offset by fewer administrative staff and the reallocation of
the former Chief Executive Officers salary to research and development.
During 2000, the former Chief Executive Officers salary was allocated equally
between general and administrative expenses, marketing expenses and research
and development expenses. Beginning in 2001, with the addition of the new
Chief Executive Officer, his duties and salary are now entirely allocated to
research and development.

Marketing expenses increased $19,000 to approximately $278,000 for the
year ended December 31, 2001 from approximately $259,000 for the year ended
December 31, 2000. This increase was primarily attributable to increased
salaries resulting from the addition of a new Chief Executive Officer in
October 2000, the payment of a bonus and severance costs related to employee
terminations partially offset by the reallocation of the former Chief Executive
Officers salary to research and development and the reduced use of a metal
injection molding consultant.

The Companys research and development expenses increased approximately
$55,000 to approximately $353,000 for the year ended December 31, 2001 from
approximately $298,000 for the year ended December 31, 2000. This increase was
primarily due to a decrease in customer funded research and development, and
the reallocation of the former Chief Executive Officers salary partially
offset by savings related to employee terminations. Beginning in 2001, with
the addition of the new Chief Executive Officer, the former Chief Executive
Officers salary is now entirely allocated to research and development.

Other income, net, decreased approximately $12,000 to approximately
$196,000 for the year ended December 31, 2001 from approximately $208,000 for
the year ended December 31, 2000. This decrease was primarily attributable to
a one time 2001 litigation settlement in the amount of $132,920 and a one time
2000 resolution of an employment tax issue in the amount of $152,000.

The Companys net loss decreased approximately $123,000 to approximately
$1,051,000 during the year ended December 31, 2001 from approximately
$1,174,000 during the year ended December 31, 2000 as a result of the
aforementioned contributing factors.

As of December 31, 2001, the Company had net operating loss carryforwards
for federal income tax purposes of approximately $12,051,000 and for California
state tax purposes of approximately $3,122,000. During the period from 1998
through 2000, certain ownership changes occurred. As a result, the Companys
annual utilization of net operating loss and tax credit carryforwards may be
limited as defined by Sections 382 and 383 of the Internal Revenue Code. Due
to the possible limitation under Sections 382 and 383 of the Internal Revenue
Code and Planets lack of historical earnings, the Company has recorded a full
valuation allowance for deferred tax assets.

The Companys quarterly results of operations have and continue to
fluctuate materially depending on, among other things the mix of products sold,
availability of inventory, costs, price discounts, market acceptance and the
timing and availability of new products by the Company or its customers,
customization of products, and general economic and political conditions.

Liquidity and Capital Resources

From January 2001 to December 2001, the Company recorded reimbursable
research and development costs of approximately $63,000 from Agway under the
Feasibility Agreement. The Company anticipates that some of the 2002 research
and development expenditures in the agrotechnology area will be reimbursed by
Agway under the Feasibility Agreement.

On January 7, 2000, the Company sold all of its common stock shares of
Deltco. In accordance with the Purchase Agreement, the Company received total
proceeds of $1,000,000 in the form of $900,000 in cash and $100,000 in a
secured promissory note in consideration of the sale of its Deltco common
stock. In August 2001, the Company received approximately $84,500 in cash for
repayment of the outstanding portion of the note receivable. The proceeds were
net of a discount for early payment of approximately $4,500, which was recorded
as an expense by the Company.

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The Company used approximately $917,000 for continuing operations for the
year ended December 31, 2001. Such funds were used for research and
development activities, marketing efforts and administrative support.

Net cash provided by investing activities of approximately $102,000 for
the year ended December 31, 2001 primarily resulted from proceeds from the sale
of the AQUAMIM assets and payments on notes receivable, offset by purchases of
equipment and the cost of patents.

Net cash provided by financing activities of approximately $18,000 for the
year ended December 31, 2001 primarily resulted from net proceeds from the
issuance of Common Stock, offset by the repayment of debt and capital lease
obligations.

The Company believes that its existing sources of liquidity and
anticipated revenue will satisfy the Companys projected working capital and
other cash requirements through at least December 2002. There can be no
assurance, however, that future revenue decreases or changes in the Companys
plans or other events affecting the Companys operating expenses will not
result in the expenditure of the Companys resources. The Company expects that
it will need to raise substantial additional funds to continue its current and
planned operations. The Company is evaluating the potential sale or licensing
of other patents and intellectual property, which, if successfully consummated,
could result in a gain or loss to the Company. On July 18, 2001, the Companys
Common Stock was delisted from the Nasdaq Small Cap Stock Market due to
non-compliance with Nasdaqs net tangible assets and minimum bid pricing
requirements. There can be no assurance that the Companys efforts will result
in additional funds or that additional financing will be available on
acceptable terms, or at all.




ITEM 7. FINANCIAL STATEMENTS

The information required by this item is included in the Appendix attached
hereto and incorporated by reference.




ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES

The Registrant as of January 3, 2002 hired J H Cohn, (JHC) as its
independent auditors for the fiscal year ending December 31, 2001.

The Registrant on January 3, 2002 gave notice of dismissal to its former
independent auditors, PricewaterhouseCoopers LLP (PwC). In connection with
its audits for the two most recent fiscal years and through January 3, 2002,
there have been no disagreements with PwC on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure which disagreements if not resolved to the satisfaction of PwC would
have caused them to make reference thereto in their report on the financial
statements for such years. PwCs reports on the financial statements for the
Registrants for the past two fiscal years did not contain any adverse opinion
or disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope, or accounting principles, except that their report on the
financial statements for the year ended December 31, 2000 included an
explanatory paragraph regarding the Registrants ability to continue as a going
concern.

During the two most recent fiscal years and the interim period prior to
January 3, 2002, Registrant has not consulted JHC on the application of
accounting principles to any completed or proposed transaction.

The decision to change auditors was made with the knowledge and approval
of the Registrants audit committee.

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PART III.




ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

DIRECTORS

The existing slate of directors will continue.

|                            |  |     |    |                      |  |                                                                    |  |  |  | 
|--------------------------- |  | --- | -- | -------------------- |  | ------------------------------------------------------------------ |  |  |  | 
|Name                        |  | Age |    | Principal Occupation |  |                                                                    |  | 
|                            |  |     |    |                      |  |                                                                    |  | 
|Robert J. Petcavich, Ph.D.  |  |     | 47 |                      |  | Chairman of the Board of Directors and Chief Technical Officer    
|Richard C. Bernier          |  |     | 55 |                      |  | CEO & President                                                   
|H. M. Busby (2)             |  |     | 63 |                      |  | Director                                                          
|Peter J. ONeill (1)(2)     |  |     | 55 |                      |  | Senior Vice President and Chief Financial Officer of Agway Inc.   
|Gerald R. Seeber (1)        |  |     | 55 |                      |  | Senior Vice President & Chief Administrative Officer of Agway
Inc.
|Ronald B. Sunderland (1)(2) |  |     | 65 |                      |  | Business Executive and Attorney                                   



---

|(1) |  | Member of the Compensation Committee of the Board of Directors
|--- |  | --------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Member of the Audit Committee of the Board of Directors       

Robert J. Petcavichis the founder of the Company and has been Chairman
since August 1991. He currently is Chairman of the Board and Chief Technical
Officer of the Company. Dr. Petcavich is a Director of Molecular Reflections,
Inc. In 1988, Dr. Petcavich founded AlphaScribe Express Inc., an electronic
medical records company, where he served as CEO until 1995. Dr. Petcavich is
the inventor of twenty-one U.S. patents. Dr. Petcavich has a Ph.D. in Polymer
Science, a MS degree in Solid State Science, and a BS degree in Chemistry from
Pennsylvania State University, and has completed an executive management
program (PMD) at the Harvard University Graduate School of Business.

Richard C.
Bernier is the CEO & President of Planet Polymer Technologies,
Inc. From January 1999 until he started at Planet Polymer, Mr. Bernier was the
Principal at Directional Consulting where he serviced industrial and product
driven OE product companies. During the years 1991 to 1998 he was President of
Techcon Systems, Inc., a California-based manufacturer of fluid dispensing
products and valves and a subsidiary of O K Industries. Earlier, he was Vice
President in charge of sales and marketing and then President of Plastimatic,
Inc., a New Jersey-based subsidiary of the British industrial conglomerate
Glynwed International. His entire career has been spent with organizations
involved in engineered industrial products including polymers, plastics,
rubber, resins and epoxies including General Electric and Allied Chemical. Mr.
Bernier earned his BS in Plastics Technology from the University of
Massachusetts, Lowell.

H.M. Mac Busbyhas been a director of the Company since August 1997 when
he was elected by the members of the Board of Directors to fill a vacancy on
the Board. He is currently a director of A-Life Medical, Inc., a San Diego
based company. He is also the Chairman of the Board of Sun-Gard USA, Inc. and
Macs Ventures, Inc., both privately held companies. Mr. Busby began his
career in 1966 at Wisconsin Centrifugal, Inc. which included the position of
Manager of Industrial and Public Relations. Mr. Busby has also served as Vice
President of Human Relations and Administration for MCA Financial, Inc. a
subsidiary of MCA, Inc. Mr. Busby earned his B.S. in Business Administration
from Indiana University.

Peter J. ONeillhas been the Senior Vice President and Chief Financial
Officer for Agway Inc. since October 1992. Mr. ONeill has a degree in
accounting from LeMoyne College and is a Certified Public Accountant. He was a
partner in the accounting firm of Ernst & Young before joining Agway in 1989.

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Gerald (Jerry) Seeberis Senior Vice President and Chief Administrative
Officer of Agway Inc., and Chairman of the Board and President of the Agway
Insurance Group. Mr. Seeber has been with Agways Insurance Division since
1970.

Ronald B. Sunderlandis currently Senior-Vice President of Warners
Domestic Cable Distribution. Previously he was Sr. Vice President Business /
Legal Affairs of AsSeenIn.com and he was the Senior Vice President of Aaron
Spelling Television, Inc. Mr. Sunderland received a Bachelors degree in
Political Science from the University of California at Los Angeles and a Juris
Doctor from Loyola University School of Law. He is an active member of the
State Bar of California.

BOARD COMMITTEES AND MEETINGS

During 2001, the Board of Directors held fourteen (14) meetings. The
Board of Directors has an Audit Committee and a Compensation Committee. The
Company does not have a Nominating Committee.

The Audit Committee is responsible for the engagement of the Companys
independent auditors, J.H. Cohn LLP, consulting with independent auditors
concerning the audit plan and reviewing the comments and recommendations
resulting from the auditors report. The Audit Committee is composed of three
(3) non-employee directors including Messrs. Peter J. ONeill, H.M. Busby, and
Ronald B. Sunderland and met three (3) times during 2001.

The Audit Committee has reviewed and discussed the audited financial
statements with management and it has discussed with the independent auditors,
J.H. Cohn LLP, the matters required to be discussed by SAS 61. Furthermore,
the Audit Committee has received the written disclosures and the letter from
the independent accountants required by Independence Standards Board Standard
No. 1 and has discussed with the independent accountant the independent
accountants independence and based on the review of the financial statements
and discussions with management and the auditors, it recommended to the Board
of Directors that the audited financial statements be included in the companys
10-KSB for year 2001.

The Compensation Committee is responsible for reviewing the compensation
and benefits of the Companys executive officers, making recommendations to the
Board of Directors concerning the compensation and benefits of the Companys
executive officers and administering the Companys Stock Incentive Plans. The
Compensation Committee is composed of three (3) non-employee directors
including Ronald B. Sunderland, Peter J. ONeill, and Gerald R. Seeber and met
three (3) times during 2001. Mr. Dennis J. LaHood was a member of the
Compensation Committee until he resigned as a director effective July 13, 2001
and Dr. Michael C. Coleman and Mr. Thomas A. Landshof were members of the
Compensation Committee until they resigned as directors effective August 14,
2001.

During 2001, each Board member attended 75% or more of the aggregate of
the meetings of the Board, and of the committees on which he served, held
during the period for which he was a director or committee member,
respectively.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act (Section 16(a)) requires the Companys
directors and executive officers, and persons who own more than ten percent
(10%) of a registered class of the Companys equity securities, to file with
the Securities and Exchange Commission (SEC) initial reports of ownership and
reports of changes in ownership of Common Stock and other equity securities of
the Company. Officers, directors and greater than ten percent (10%)
shareholders are required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms they file.

To the Companys knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 2001, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten percent (10%) beneficial owners were complied with.

16



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##### Table of Contents



MANAGEMENT

Set forth below is information regarding executive officers and key
employees of the Company.

Management

Set forth below is information regarding executive officers and key
employees of the Company.

|                           |  |     |  |                                                    
|-------------------------- |  | --- |  | ---------------------------------------------------
|Name                       |  | Age |  | Position                                           
|                           |  |     |  |                                                    
|Executive Officers *       |  |     |  |                                                    
|Robert J. Petcavich, Ph.D. |  | 47  |  | Chairman of the Board and Chief Technical Officer  
|Richard C. Bernier         |  | 55  |  | CEO & President, and Acting Chief Financial Officer



---

|* |  | Biographical information about Dr. Petcavich and Mr. Bernier are set
forth under Item 9 above.
|- |  | ----------------------------------------------------------------------------------------------




ITEM 10. EXECUTIVE COMPENSATION

Compensation of Directors

Directors may be granted options to purchase Common Stock under the
Companys 2000 Stock Incentive Plan (2000 Incentive Plan). During 2001,
options to purchase shares of the Companys Common Stock were granted to the
Companys directors as follows: in May 2001, the Board of Directors of the
Company approved and granted non-statutory stock option grants to each
non-employee director to purchase 18,000 shares of the Companys Common Stock
at an exercise price of $0.45 per share, vesting fully at the date of grant.
In fiscal year 2002, each non-employee director will receive stock option
grants as deemed appropriate by the Board of Directors.

Directors are reimbursed for reasonable travel expenses incurred in
connection with attendance at Board meetings, or any committee meetings, or
otherwise in connection with their service as a director.

Compensation of Executive Officers

The following table sets forth, for the fiscal years ended December 31,
2001, 2000, and 1999 certain compensation awarded or paid to, or earned by the
Companys Executive Officers.

Summary Compensation Table

|                            |                                       |      |      |           |  |          |         |            |     |           |        |        |     |  |            |         |           |   |        |       |    
|--------------------------- | ------------------------------------- | ---- | ---- | --------- |  | -------- | ------- | ---------- | --- | --------- | ------ | ------ | --- |  | ---------- | ------- | --------- | - | ------ | ----- | ---
|                            |                                       |      |      |           |  |          |         |            |     |           |        |        |     |  | Shares     |         | All Other
|                            |                                       |      |      |           |  |          |         |            |     |           |        |        |     |  | Underlying |         | Compen-  
|Name and Principal Position |                                       | Year |      | Salary($) |  | Bonus($) |         | Options(#) |     | sation($)
|                            |                                       |      |      |           |  |          |         |            |     |          
|Robert J. Petcavich         |                                       |      | 2001 |           |  | $        | 210,000 |            |     | $         | 15,000 | (9)    |     |  |           |         |           | $ | 6,139  | (1)  
|                            | Chairman of the Board                 |      |      | 2000      |  |          | $       | 210,000    |     |           | $      |       |     |  |            |        |           |   | $      | 4,598 | (1)
|                            | and Chief Technical Officer           |      |      | 1999      |  |          | $       | 210,000    |     |           | $      | 25,000 | (2) |  |            |        |           |   | $      | 1,136 | (3)
|                           
|Richard C. Bernier          |                                       |      | 2001 |           |  | $        | 205,000 |            |     |           |        |        |     |  | 100,000    | (10)    |           | $ | 37,471 | (4)   |    
|                            | Chief
Executive Officer and President |      |      | 2000      |  |          | $       | 42,708     | (5) |           | $      | 15,000 | (6) |  |            | 160,000 | (7)       |   | $      | 5,232 | (8)



---

|(1) |  | Represents insurance premiums paid by the Company under a term life
insurance policy insuring Dr. Petcavich and auto expense reimbursement.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Includes $25,000 accrued as a bonus pursuant to a five-year employment
agreement effective January 1, 1999, but paid in March 2000.        

17



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##### Table of Contents



|(3)  |  | Represents insurance premiums paid by the Company under a term life
insurance policy insuring Dr. Petcavich.                                                                          
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|    
|    
|    
|(4)  |  | Temporary living and moving expenses, including tax gross-up as allowed
per employment agreement.                                                                                   
|    
|    
|    
|    
|(5)  |  | Represents a start date of October 16, 2000.                                                                                                                                          
|    
|    
|    
|    
|(6)  |  | Includes signing bonus of 10,000 shares of Common Stock.                                                                                                                              
|    
|    
|    
|    
|(7)  |  | Represents an option granted on October 17, 2000 with an exercise price
of $1.50. Options shall vest in 10,000 shares increments at the end of
each quarter beginning January 1, 2001.
|    
|    
|    
|    
|(8)  |  | Represents temporary living expenses as allowed per employment agreement.                                                                                                             
|    
|    
|    
|    
|(9)  |  | Includes $15,000 accrued as a bonus pursuant to incentive agreement
effective January 1, 2000, but paid in 2001.                                                                      
|    
|    
|    
|    
|(10) |  | Represents an option granted on November 4, 2001 with an exercise price
of $0.06. Options shall fully vest on April 15, 2002.                                                         

Stock Option Grants and Exercises

The Companys Executive Officers are eligible for grants of options under
the Companys 1995 Stock Option Plan (the 1995 Option Plan) and the 2000
Stock Incentive Plan (the 2000 Incentive Plan). As of February 1, 2002,
there were remaining 202,561 shares available for grant under the Option Plans.

There were stock options granted to executive officers in 2001.

The following table sets forth information with respect to the number of
securities underlying unexercised options held by the Executive Officers as of
December 31, 2001 and the value of unexercised in-the-money options (i.e.,
options for which the current fair market value of the Common Stock underlying
such options exceeds the exercise price):

Aggregated Option Exercises Last Fiscal Year and Fiscal Year End Option Values

|                    |  |             |     |          |  |             |     |                            |  |                        |         |                         |  |  |         |  |  |   |   |  |  |   |       |    
|------------------- |  | ----------- | --- | -------- |  | ----------- | --- | -------------------------- |  | ---------------------- | ------- | ----------------------- |  |  | ------- |  |  | - | - |  |  | - | ----- | ---
|                    |  |             |     |          |  |             |     |                            |  | Number of Securities   |         | Value of Unexercised   
|                    |  |             |     |          |  |             |     |                            |  | Underlying Unexercised |         | In-the-Money Options at
|                    |  | Shares      |     |          |  |             |     | Options at Fiscal Year End |  | Fiscal Year End($)(1) 
|                    |  | Acquired on |     | Value    |  |             |     |                           
|NAME                |  | Exercise(#) |     | Realized |  | Exercisable |     | Unexercisable              |  | Exercisable            |         | Unexercisable          
|                    |  |             |     |          |  |             |     |                            |  |                        |         |                        
|Robert J. Petcavich |  |             | -0- |          |  |             | -0- |                            |  |                        | 222,533 |                         |  |  | -0-     |  |  | $ | 0 |  |  | $ | 0     |    
|Richard C. Bernier  |  |             | -0- |          |  |             | -0- |                            |  |                        | 40,000  |                         |  |  | 220,000 |  |  | $ | 0 |  |  | $ | 6,000 | (1)



---

|(1) |  | Calculated based on the estimated fair market value of the Companys
Common Stock as of December 31, 2001, less the exercise price payable upon
the exercise of such options. Such estimated fair market value as of
December 31, 2001 was $0.12, the last price posted at the close of trading
on December 31, 2001.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Employment Agreements

Effective as of November 1, 2001, the Company amended the employment
agreements of Richard C. Bernier and Robert J. Petcavich dated October 17, 2000
and January 1, 1999, respectively. Under Berniers First Amendment to
Executive Agreement (the Bernier Amendment), the employment term was amended
to terminate on December 31, 2002 without an option to extend. As of January
1, 2002, compensation under the Bernier Amendment was amended to be based on
commissions received from the sales of M.I.M. technology, EnviroPlastic,
EnviroPlastic Z and Aquadro technologies, remaining inventories, property and
equipment, and from any increase in the actual ending cash balance compared to
the forecast ending cash balance of each quarter of 2002, the total of all
commissions not to exceed $307,500. Under Petcavichs First Amendment to
Executive Employment Agreement (the Petcavich Amendment), the employment term
was amended to terminate on December 31, 2002, which term will be extended for
an additional one year if the ending cash balance of the Company at October 31,
2002 is at least $350,000 (excluding cash generated through borrowings, capital
infusions, merger, acquisition or similar corporate reorganization, or the
deferral of payments or expenses properly payable at an earlier date), or if
the Company so

18



---



##### Table of Contents



decides. As of the date of the Petcavich Amendment, compensation was
amended such that payment of Petcavichs salary will be subject to the Company
having enough cash on hand sufficient to pay Petcavichs salary and minimum
anticipated expenses for the Company to continue business through December 31
of the current calendar year; provided that his salary is not less than the
amount of consulting and other revenue Petcavich generates from his activities
on behalf of the Company such that adequate resources are retained by the
Company to continue business through December 31 of the current calendar year.
The Petcavich Amendment also provides for the Company to reissue new options to
replace Petcavichs current unexercised options to purchase common stock with
reduced exercise prices based upon the ending cash balance of the Company at
October 31, 2002.

19



---



##### Table of Contents






ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the ownership
of the Companys Stock as of February 1, 2002 by: (i) each director; (ii) each
of the Executive Officers named in the Summary Compensation Table; (iii) all
executive officers and directors of the Company as a group; and (iv) all those
known by the Company to be beneficial owners of more than five percent (5%) of
any class of the Companys Stock.

|         |  |                                                                             |  |                      |           |                 |  |  |       |  
|-------- |  | --------------------------------------------------------------------------- |  | -------------------- | --------- | --------------- |  |  | ----- | -
|         |  |                                                                             |  | Beneficial Ownership
|         |  |                                                                             |  |                     
|Title    |  |                                                                             |  | Number               |           | Percentage of  
|of Class |  | Beneficial Owner                                                            |  | of Shares(1)         |           | Class Owned (2)
|         |  |                                                                             |  |                      |           |                
|Common   |  | Agway Inc.
P.O. Box 4933
Syracuse, NY 13221                                 |  |                      | 3,000,000 |                 |  |  | 32.58 | %
|Common   |  | Robert J. Petcavich, Ph.D. (3)
9985 Businesspark Avenue
San Diego, CA 92131 |  |                      | 912,432   |                 |  |  | 9.68  | %
|Common   |  | Richard Zorn (4)
750 Lexington Avenue, 24th Floor
New York, NY 10022        |  |                      | 540,900   |                 |  |  | 5.87  | %
|Common   |  | Richard C. Bernier (5)                                                      |  |                      | 60,000    |                 |  |  | *     |  
|Common   |  | H.M. Busby (6)                                                              |  |                      | 298,792   |                 |  |  | 3.22  | %
|Common   |  | Peter J. ONeill (7)                                                        |  |                      | 36,000    |                 |  |  | *     |  
|Common   |  | Ronald B. Sunderland (8)                                                    |  |                      | 36,000    |                 |  |  | *     |  
|Common   |  | Gerald R. Seeber (9)                                                        |  |                      | -         |                 |  |  | *     |  
|Common   |  | All executive officers and directors as a group (10)                        |  |                      | 1,343,224 |                 |  |  | 13.96 | %



---

|*   |  | Less than one percent.                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(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.
|   
|   
|   
|   
|(2) |  | Percentage ownership is based upon 9,207,884 shares outstanding on
February 1, 2002, and any shares issuable pursuant to securities
convertible into or exercisable for shares of Common Stock by the person
or group in question on February 1, 2002 or within 60 days thereafter.                                                                                                                                                                                                
|   
|   
|   
|   
|(3) |  | Includes 222,533 shares issuable upon exercise of options that are
exercisable within 60 days of February 1, 2002.                                                                                                                                                                                                                                                                                                                                                                 
|   
|   
|   
|   
|(4) |  | Mr. Zorn is the beneficial owner of 218,300 shares of Common Stock and by
his affiliation with Benchmark has investment discretion over accounts of
its customers that hold 322,600 shares of Common Stock as of February 1,
2002.                                                                                                                                                                                                                                                 
|   
|   
|   
|   
|(5) |  | Includes 50,000 shares of Common Stock issuable upon exercise of options
that are exercisable within 60 days of February 1, 2002.                                                                                                                                                                                                                                                                                                                                                  
|   
|   
|   
|   
|(6) |  | Includes 66,200 shares of Common Stock issuable upon exercise of options
that are exercisable within 60 days of February 1, 2002.                                                                                                                                                                                                                                                                                                                                                  
|   
|   
|   
|   
|(7) |  | Includes 36,000 shares of Common Stock issuable upon exercise of options
that are exercisable within 60 days of February 1, 2002. Mr. ONeill is
the Senior Vice-President and Chief Financial Officer of Agway, Inc.
Agway Inc. is the beneficial owner of 3,000,000 shares of Common Stock.
As a result of his positions                                                                                                                                                         

20



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##### Table of Contents



|     |  | within Agway, Mr. ONeill has indirect shared voting power and indirect
shared investment power of Agways shares of Common Stock.                                                                                                    
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|    
|    
|    
|(8)  |  | Includes 36,000 shares of Common Stock issuable upon exercise of options
that are exercisable within 60 days of February 1, 2002.                                                                                                     
|    
|    
|    
|    
|(9)  |  | Agway Inc. is the beneficial owner of 3,000,000 shares of Common Stock.
As a result of his positions within Agway, Mr. Seeber has indirect shared
voting power and indirect shared investment power of Agways shares of
Common Stock.
|    
|    
|    
|    
|(10) |  | Includes 410,733 shares of Common Stock issuable upon exercise of options
that are exercisable within 60 days of February 1, 2002.                                                                                                    




ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

On November 14, 2000, Planet agreed to sell, assign and transfer patent
rights (the Patent Transaction) to Planets animal feed additives, fruit and
vegetable coatings, and controlled-release fertilizer (the Patents), for a
cash price of $250,000 and continuation of royalty payments equal to the
payments Planet would otherwise be entitled to receive pursuant to its existing
license agreement with Agway and the sublicense agreements related thereto.
Planet, in turn, agreed to pay Agway $150,000 in return for an exclusive
worldwide royalty-free license to use and commercially exploit all rights
related to the Patents for all uses other than food and agricultural
initiatives. As a result of the concurrent execution of the warrant exercise
by Agway on November 14, 2000 (Note 10) and the Patent Transaction, and the
Companys inability to establish separate fair values for the patent sale and
sublicense, the net proceeds of $100,000 has been accounted for as additional
proceeds from the issuance of Common Stock pursuant to the exercise of warrants
in the accompanying financial statements.

In November 1998, the Company and Agway entered into an agreement relating
to the funding by Agway of a feasibility study (the Feasibility Agreement) of
the Companys polymer technology for use in agricultural products (other than
fertilizers and certain biological products) and food products. Under the
terms of the Feasibility Agreement, Planet will be reimbursed for certain
qualifying research and development costs relating to such applications. During
2001, the Company recorded reimbursable research and development costs of
$62,509 from Agway under the Feasibility Agreement.

Also in November 1998, the Company granted Agway an exclusive worldwide
license in connection with the Companys technology for time-release coatings
for a variety of agricultural and food products (the License Agreement). The
License Agreement outlines the general terms and conditions for the rights
granted Agway thereunder. The Company and Agway agreed to execute further
sub-agreements specifying the royalties to be paid to the Company for Agways
use of the Companys technology with certain products. During 2001, the
Company received a $100,000 royalty payment from Agway.

Agway Inc. is a beneficial owner of more than 10% of the Companys Common
Stock since January 11, 1999.

21



---



##### Table of Contents






PART IV.




ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.



| | (a) | 1. | Financial Statements.Financial statements are attached as the
Appendix to this report. The index to the financial statements is found
on page F-1 of the Appendix.
| | --- | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
|

| |  | 2. | Financial Statement Schedules.All schedules are omitted since
the required information is not present or is not present in amounts
sufficient to require a submission of the schedules, or because the
information required is included in the financial statements and notes
thereto.
| |  | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | 3. | Exhibits. See Exhibit Index in part (c), below.                                                                                                                                                                                                                                       
|

| | (b) |  | Reports on Form 8-K:
| | --- |  | --------------------
|

| |  |  | On January 10 2002 the Company filed a Current Report on Form 8-K to
report the change in accountants to J.H. Cohn LLP from
PricewaterhouseCoopers and the sale of the Metal Injection Molding assets
of the Company.
| |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|    |  |                |             |             |  |                                                                                                                                                                                                       
|--- |  | -------------- | ----------- | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(c) |  | Exhibit Number |             | Description
|    |  |                |             |            
|    |  |                | 3.1(1)      |             |  | Restated Articles of Incorporation of the Registrant.                                                                                                                                                 
|    |  |                | 3.2(1)      |             |  | Restated Bylaws of the Registrant.                                                                                                                                                                    
|    |  |                | 3.3(6)      |             |  | Amended and Restated Certificate of Determination of
Preferences of Series A Convertible Preferred Stock.                                                                                             
|    |  |                | 4.1         |             |  | Reference is made to Exhibits 3.1, 3.2 and 3.3.                                                                                                                                                       
|    |  |                | 4.2(1)      |             |  | Form of warrant issued to Underwriters.                                                                                                                                                               
|    |  |                | 4.3(1)      |             |  | Form of Class B Warrant, with related schedule of
warrantholders.                                                                                                                                     
|    |  |                | 4.4(1)      |             |  | Warrant issued to Reynolds Kendrick Stratton.                                                                                                                                                         
|    |  |                | 4.5(1)      |             |  | Form of warrant issued to advisors, with related
schedule of warrantholders.                                                                                                                          
|    |  |                | 4.6(1)      |             |  | Specimen Stock Certificate.                                                                                                                                                                           
|    |  |                | 4.7(2)      |             |  | Non-statutory Stock Options granted in September 1994
to Dr. Petcavich and Messrs. Wright and To.                                                                                                     
|    |  |                | 4.8(1)      |             |  | Warrant issued to Am-Re Services, Inc.                                                                                                                                                                
|    |  |                | 5.1(16)     |             |  | Opinion of Blanchard Krasner & French, APC.                                                                                                                                                           
|    |  |                | 10.1(1)     |             |  | Form of Indemnity Agreement entered into between the
Registrant and each of its executive officers and
directors.                                                                                     
|    |  |                | 10.2(1)     |             |  | Registrants 1995 Stock Option Plan (the 1995 Option
Plan).                                                                                                                                         
|    |  |                | 10.3(1)     |             |  | Form of Incentive Stock Option Grant under the 1995
Option Plan.                                                                                                                                      
|    |  |                | 10.4(1)     |             |  | Form of Non-statutory Stock Option Grant under the 1995
Option Plan.                                                                                                                                  
|    |  |                | 10.5(1)     |             |  | Standard Industrial Gross Lease, dated June 1, 1992,
between the Registrant and The Trustees Under the Will
and of the Estate of James Campbell, Deceased, as
amended August 13, 1992 and May 3, 1994.
|    |  |                | 10.6(1)     |             |  | Agreement to Assign Proprietary Rights between the
Registrant and Dr. Robert J. Petcavich.                                                                                                            
|    |  |                | 10.7(1)     |             |  | Form of Confidential Information Agreement entered into
between the Registrant and its employees.                                                                                                     
|    |  |                | 10.8(3)     |             |  | Purchase and Sale Agreement dated as of January 1,
1996, by and among the Registrant, Deltco of Wisconsin,
Inc., and Jack G. Martinsen.                                                               
|    |  |                | 10.9(4)     |             |  | Executive Employment Agreement dated January 1, 1996,
between the Registrant and Dr. Robert J. Petcavich.                                                                                             
|    |  |                | 10.10(10)   |             |  | Executive Employment Agreement dated November 18, 1998
and effective January 1, 1999, between the Registrant
and Dr. Robert J. Petcavich.                                                             
|    |  |                | 10.11(5)(9) |             |  | Technology Development and License Agreement, dated
January 30, 1995, between the Registrant and Cominco
Fertilizers, Ltd.                                                                            
|    |  |                | 10.12(5)    |             |  | Fourth Amendment to Lease, dated August 1, 1997 between
the Registrant and The Trustees Under the Will and of
the Estate of James Campbell.                                                           
|    |  |                | 10.13(6)    |             |  | Securities Purchase Agreement, dated September 19,
1997, between the Registrant and Special Situations
Private Equity Fund, L.P.                                                                      

22



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##### Table of Contents



| |  |                |              |             |  |                                                                                                                                                                                                                                                      
| |  | -------------- | ------------ | ----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Exhibit Number |              | Description
| |  |                |              |            
| |  |                | 10.14(6)     |             |  | Warrant to Purchase Common Stock, dated September 24,
1997, issued by the Registrant to Special Situations
Private Equity Fund, L.P.                                                                                                                 
| |  |                | 10.15(8)     |             |  | Stock Purchase Agreement, dated November 12, 1998
between the Registrant and Agway Inc.                                                                                                                                                              
| |  |                | 10.16(8)     |             |  | Warrant to Purchase Common Stock, dated January 11,
1999, issued by the Registrant to Agway Inc.                                                                                                                                                     
| |  |                | 10.17(10)    |             |  | Registration Rights Agreement, dated January 11, 1999,
between the Registrant and Agway Inc.                                                                                                                                                         
| |  |                | 10.18(10)    |             |  | Product Feasibility Agreement dated as of November 12,
1998 between the Registrant and Agway Consumer
Products, Inc.                                                                                                                                 
| |  |                | 10.19(10)    |             |  | License Agreement dated as of November 12, 1998 between
the Registrant and Agway Consumer Products, Inc.                                                                                                                                             
| |  |                | 10.20(11)    |             |  | Amendment No.1 dated as of February 25, 1999 to the
Form of the Warrant dated January 11, 1999 issued by
the Registrant to Agway Inc.                                                                                                                
| |  |                | 10.21(13)    |             |  | Warrant to Purchase Common Stock, dated March 29, 1999,
issued by the Registrant to LBC Capital Resources, Inc.                                                                                                                                      
| |  |                | 10.22(12)    |             |  | Amended Technology Development and License Agreement,
dated June 23, 1999, between the Registrant and Agrium
Inc. (formerly known as Cominco Fertilizers Ltd.).                                                                                      
| |  |                | 10.23(13)    |             |  | Sub-Agreement to License Agreement (Animal Feed)
effective as of March 1, 2000 between the Registrant
and Agway Inc.                                                                                                                                 
| |  |                | 10.24(13)    |             |  | Sub-Agreement to License Agreement (Fruits, Vegetables,
Etc.) effective as of March 1, 2000 between the
Registrant and Agway Inc.                                                                                                                    
| |  |                | 10.25(13)    |             |  | Warrant to Purchase Common Stock, dated March 9, 2000,
issued by the Registrant to LBC Capital Resources, Inc.                                                                                                                                       
| |  |                | 10.26(14)    |             |  | Registrants 2000
Stock Incentive Plan (the 2000 Plan).                                                                                                                                                                                              
| |  |                | 10.27(14)    |             |  | Form of Incentive Stock Option Grant under the 2000
Plan.                                                                                                                                                                                            
| |  |                | 10.28(14)    |             |  | Form of Non-statutory Stock Option Grant under the 2000
Plan.                                                                                                                                                                                        
| |  |                | 10.29(16)    |             |  | Private Equity Line of Credit Agreement dated August
15, 2000 and Exhibits.                                                                                                                                                                          
| |  |                | 10.30(16)    |             |  | Letter dated September 11, 2000 amending the Private
Equity Line of Credit Agreement.                                                                                                                                                                
| |  |                | 10.31(17)    |             |  | Employment Agreement with Richard C. Bernier.                                                                                                                                                                                                        
| |  |                | 10.32(17)    |             |  | Warrant to purchase Common Stock, dated March 20, 2001,
issued by the Registrant to LBC Capital Resources, Inc.                                                                                                                                      
| |  |                | 10.33(18)    |             |  | Purchase and Sale Agreement dated as of December 21,
2001 between Planet Polymer Technologies, Inc. and Ryer
Industries LLC and Consulting Agreement between Planet
Polymer Technologies, Inc. and Ryer Industries LLC
dated as of December 21, 2001.
| |  |                | 10.34(18)    |             |  | First Amendment to Executive Agreement for Robert J.
Petcavich, dated December 17, 2001.                                                                                                                                                             
| |  |                | 10.35(18)    |             |  | First Amendment to Executive Agreement for Richard C.
Bernier, dated December 17, 2001.                                                                                                                                                              
| |  |                | 11.1(13)(15) |             |  | Statement of Computation of Common and Common
Equivalent Shares.                                                                                                                                                                                     
| |  |                | 23.1         |             |  | Consent of PricewaterhouseCoopers LLP.                                                                                                                                                                                                               
| |  |                | 23.2         |             |  | Consent of Blanchard Krasner & French, APC. (included
in Exhibit 5.1).                                                                                                                                                                               
| |  |                | 23.3         |             |  | Consent of J.H. Cohn LLP.                                                                                                                                                                                                                            
| |  |                | 24.1         |             |  | Power of Attorney. Reference is made to page 25.                                                                                                                                                                                                     



---

|(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
Registration Statement on Form S-8 (No. 333-1042) filed on February
5, 1996 and incorporated herein by reference.                                                                                
|   
|   
|   
|   
|(3) |  | Previously filed as an exhibit to the Registrants Current
Report on Form 8-K filed on January 11, 1996, as amended by the
Registrants Current Report on Form 8-K/A (Amendment No. 1) filed on
March 15, 1996 and incorporated herein by reference.
|   
|   
|   
|   
|(4) |  | Previously filed as an exhibit to the Registrants Annual
Report on Form 10-KSB filed for the fiscal year ended December 31,
1995 and incorporated herein by reference.                                                                             
|   
|   
|   
|   
|(5) |  | Previously filed as an exhibit to the Registrants Quarterly
Report on Form 10-QSB for the quarter ended June 30, 1997 and
incorporated herein by reference.                                                                                        
|   
|   
|   
|   
|(6) |  | Previously filed as an exhibit to the Registrants
Registration Statement on Form S-3 (No. 333-39845) filed on November
7, 1997, amended on December 31, 1997 and incorporated herein by
reference.                                                 
|   
|   
|   
|   
|(7) |  | Previously filed as an exhibit to the Registrants Annual
Report on Form 10-KSB filed for the fiscal year ended December 31,
1997 and incorporated herein by reference.                                                                             

23



---



##### Table of Contents



|(8)  |  | Previously filed with the Registrants Definitive Proxy
Statement filed on December 14, 1998 and incorporated herein by
reference.                                                                                                
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|    
|    
|    
|(9)  |  | Confidential treatment has been requested with respect to
certain portions of this exhibit. Omitted portions will be filed
separately with the Securities and Exchange Commission.                                                
|    
|    
|    
|    
|(10) |  | Previously filed as an exhibit to the Registrants Annual
Report on Form 10-KSB filed for the fiscal year ended December 31,
1998 and incorporated herein by reference.                                                           
|    
|    
|    
|    
|(11) |  | Previously filed as an exhibit to the Registrants Quarterly
Report on Form 10-QSB for the quarter ended March 31, 1999 and
incorporated herein by reference.                                                                     
|    
|    
|    
|    
|(12) |  | Previously filed as an exhibit to the Registrants Quarterly
Report on Form 10-QSB for the quarter ended June 30, 1999 and
incorporated herein by reference.                                                                      
|    
|    
|    
|    
|(13) |  | 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.                                                                      
|    
|    
|    
|    
|(14) |  | 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.                                                                 
|    
|    
|    
|    
|(15) |  | Previously filed as an exhibit to the Registrants Quarterly
Report on Form 10-QSB for the quarter ended June 30, 2000.                                                                                                           
|    
|    
|    
|    
|(16) |  | Previously filed as an exhibit to the Registrants
Registration Statement on Form SB-2 (No. 333-46474), as amended by
the Registrants Registration Statement on Form SB-2 (Amendment No.
2) and incorporated herein by reference.
|    
|    
|    
|    
|(17) |  | Previously filed as an exhibit to the Registrants Quarterly
Report on Form 10-QSB for the quarter ended March 31, 2001.                                                                                                          
|    
|    
|    
|    
|(18) |  | Previously filed as an exhibit to the Registrants Current
Report on Form 8-K filed on January 10, 2002, and incorporated
herein by reference.                                                                                    

24



---



##### Table of Contents






SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

|                     |                                            |                       
|-------------------- | ------------------------------------------ | ----------------------
|                     | PLANET POLYMER TECHNOLOGIES, INC.         
|                    
|Dated March 21, 2002 | By:                                        | /s/ Richard C. Bernier
|                     |                                           
|                     | Richard C. Bernier
Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Robert J. Petcavich, his attorney-in-fact, each
with the power of substitution, for him, in any and all capacities, to sign any
amendments to this report, and to file the same, with exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and conforming all that each the attorney in-fact,
or his substitute may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

|                                               |  |                                                                                                                 |  |               
|---------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------- |  | --------------
|Signature                                      |  | Title                                                                                                           |  | Date          
|                                               |  |                                                                                                                 |  |               
|                                              
|/s/ Robert J. Petcavich

Robert J. Petcavich   |  | Chairman                                                                                                        |  | March 21, 2002
|                                              
|/s/ Richard C. Bernier

Richard C. Bernier     |  | Director and Chief Executive Officer
(Principal Executive Officer)
(Principal Financial and Accounting Officer) |  | March 21, 2002
|                                              
|/s/ H. M. Busby

H. M. Busby                   |  | Director                                                                                                        |  | March 21, 2002
|                                              
|/s/ Peter J. ONeill

Peter J. ONeill         |  | Director                                                                                                        |  | March 21, 2002
|                                              
|/s/ Gerald R. Seeber

Gerald R. Seeber         |  | Director                                                                                                        |  | March 21, 2002
|                                              
|/s/ Ronald B. Sunderland

Ronald B. Sunderland |  | Director                                                                                                        |  | March 21, 2002

25



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##### Table of Contents



APPENDIX

FINANCIAL STATEMENTS





---



##### Table of Contents



INDEX TO FINANCIAL STATEMENTS  ITEM 7 OF FORM 10-KSB

|                                                                                  |  |  |     | 
|--------------------------------------------------------------------------------- |  |  | --- | 
|Reports of Independent Accountants                                                |  |  | F-2 | 
|Financial Statements and Notes:                                                   |  |  |     | 
|Balance Sheet as of December 31, 2001                                             |  |  | F-4 | 
|Statements of Operations for the Years Ended December 31, 2001 and 2000           |  |  | F-5 | 
|Statements of Shareholders Equity for the Years Ended December 31, 2001
and 2000 |  |  | F-6 | 
|Statements of Cash Flows for the Years Ended December 31, 2001 and 2000           |  |  | F-7 | 
|Notes to Financial Statements                                                     |  |  | F-8 | 

F-1



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##### Table of Contents



REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders
of Planet Polymer Technologies, Inc.

In our opinion, the accompanying statements of operations, of shareholders
equity and of cash flows present fairly, in all material respects, the results
of operations and cash flows of Planet Polymer Technologies, Inc. for the year
ended December 31, 2000, in conformity with accounting principles generally
accepted in the United States of America. These financial statements are the
responsibility of the Companys management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our
audit of these statements in accordance with auditing standards generally
accepted in the United States of America, which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 3 to the
financial statements, the Company has suffered recurring losses from operations
and has an accumulated deficit that raise substantial doubt about its ability
to continue as a going concern. Managements plans in regard to these matters
are also described in Note 3. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

PricewaterhouseCoopers LLP

San Diego, California
February 15, 2001

F-2



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##### Table of Contents



REPORT OF INDEPENDENT ACCOUNTANTS

To the Shareholders of Planet Polymer Technologies, Inc.

We have audited the accompanying balance sheet of PLANET POLYMER TECHNOLOGIES,
INC. as of December 31, 2001, and the related statements of operations,
shareholders equity and cash flows for the year then ended. These financial
statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Planet Polymer Technologies,
Inc. as of December 31, 2001, and its results of operations and cash flows for
the year then ended, in conformity with accounting principles generally
accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 3 to the
financial statements, the Company has sustained net losses from its operations
and, as a result, it has an accumulated deficit at December 31, 2001 of
$13,744,000. These matters, among others, raise substantial doubt about the
Companys ability to continue as a going concern. Managements plans in regard
to these matters are also described in Note 3. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.

J.H. Cohn LLP

San Diego, California
February 20, 2002

F-3



---



##### Table of Contents



PLANET POLYMER TECHNOLOGIES, INC.

BALANCE SHEET



---



|                                                                                       |                                                    |                                         |                                            |             |              |           | 
|-------------------------------------------------------------------------------------- | -------------------------------------------------- | --------------------------------------- | ------------------------------------------ | ----------- | ------------ | --------- | 
|                                                                                       |                                                    |                                         |                                            |             | December 31,
|                                                                                       |                                                    |                                         |                                            |             | 2001        
|                                                                                       |                                                    |                                         |                                            |             |             
|ASSETS                                                                                 |                                                    |                                         |                                            |            
|Current assets:                                                                        |                                                    |                                         |                                            |            
|                                                                                       | Cash                                               |                                         | $                                          | 291,479     |             
|                                                                                       | Accounts receivable                                |                                         |                                            | 125,936     |             
|                                                                                       | Note receivable                                    |                                         |                                            | 256,370     |             
|                                                                                       | Prepaid expenses                                   |                                         |                                            | 58,158      |             
|                                                                                       | Assets held for sale                               |                                         |                                            | 62,159      |             
|                                                                                       |                                                    |                                         |                                            |            
|                                                                                       |                                                    |                                         | Total current assets                       |             |              | 794,102   | 
|Property and equipment, net                                                            |                                                    |                                         | 21,684                                     |            
|Patents, trademarks and license agreements, net of accumulated
amortization of $48,479 |                                                    |                                         | 182,857                                    |            
|Other assets                                                                           |                                                    |                                         | 6,275                                      |            
|                                                                                       |                                                    |                                         |                                            |            
|                                                                                       |                                                    |                                         | Total assets                               |             | $            | 1,004,918 | 
|                                                                                       |                                                    |                                         |                                            |            
|LIABILITIES AND SHAREHOLDERS EQUITY                                                   |                                                    |                                         |                                            |            
|Current liabilities:                                                                   |                                                    |                                         |                                            |            
|                                                                                       | Accounts payable                                   |                                         | $                                          | 40,917      |             
|                                                                                       | Accrued payroll and vacation                       |                                         |                                            | 69,518      |             
|                                                                                       | Accrued sales tax                                  |                                         |                                            | 22,748      |             
|                                                                                       | Short-term debt                                    |                                         |                                            | 31,749      |             
|                                                                                       | Current portion of capital lease obligations       |                                         |                                            | 8,477       |             
|                                                                                       |                                                    |                                         |                                            |            
|                                                                                       |                                                    |                                         | Total liabilities                          |             |              | 173,409   | 
|                                                                                       |                                                    |                                         |                                            |            
|                                                                                      
|Commitments and contingencies                                                          |                                                    |                                         |                                           |            
|Shareholders equity:                                                                  |                                                    |                                         |                                            |            
|                                                                                       | Preferred
Stock, no par value                      |                                         |                                            |             |             
|                                                                                       |                                                    | 4,250,000 shares authorized             |                                            |             |              |          
|                                                                                       |                                                    | No shares issued or outstanding         |                                            |             |             |          
|                                                                                       | Series A Convertible Preferred Stock, no par value |                                         |                                            |             |             
|                                                                                       |                                                    | 750,000 shares authorized               |                                            |             |              |          
|                                                                                       |                                                    | No shares issued or outstanding         |                                            |             |             |          
|                                                                                       | Common Stock, no par value                         |                                         |                                            |             |             
|                                                                                       |                                                    | 20,000,000 shares authorized            |                                            |             |              |          
|                                                                                       |                                                    | 9,165,618 shares issued and outstanding |                                            |             | 14,575,783   |          
|                                                                                       | Accumulated deficit                                |                                         |                                            | (13,744,274 | )           
|                                                                                       |                                                    |                                         |                                            |            
|                                                                                       |                                                    |                                         | Total shareholders equity                 |             |              | 831,509   | 
|                                                                                       |                                                    |                                         |                                            |            
|                                                                                       |                                                    |                                         | Total liabilities and shareholders equity |             | $            | 1,004,918 | 
|                                                                                       |                                                    |                                         |                                            |            

The accompanying notes are an integral part of these financial statements.

F-4



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##### Table of Contents



PLANET POLYMER TECHNOLOGIES, INC.

STATEMENTS OF OPERATIONS



---



|                    |                            |                                                                          |         |                          |            |      |         |         |            |  
|------------------- | -------------------------- | ------------------------------------------------------------------------ | ------- | ------------------------ | ---------- | ---- | ------- | ------- | ---------- | -
|                    |                            |                                                                          |         | Years ended December 31,
|                    |                            |                                                                          |         |                         
|                    |                            |                                                                          |         | 2001                     |            | 2000
|                    |                            |                                                                          |         |                          |            |     
|Revenues            |                            | $                                                                        | 563,928 |                          |            | $    | 668,328 |        
|                    |                            |                                                                          |         |                          |            |      |         |        
|Operating expenses: |                            |                                                                          |         |                          |            |      |         |        
|                    | Cost of revenues           |                                                                          |         | 369,421                  |            |      |         | 539,033 |           
|                    | General and administrative |                                                                          |         | 810,711                  |            |      |         | 953,385 |           
|                    | Marketing                  |                                                                          |         | 278,470                  |            |      |         | 259,226 |           
|                    | Research and development   |                                                                          |         | 352,698                  |            |      |         | 298,469 |           
|                    |                            |                                                                          |         |                          |            |      |         |        
|                    |                            | Total operating expenses                                                 |         |                          | 1,811,300  |      |         |         | 2,050,113  |  
|                    |                            |                                                                          |         |                          |            |      |         |        
|                    |                            | Loss from operations                                                     |         |                          | (1,247,372 | )    |         |         | (1,381,785 | )
|Other income, net   |                            |                                                                          | 196,117 |                          |            |      | 207,555 |        
|                    |                            |                                                                          |         |                          |            |      |         |        
|                    |                            | Net loss                                                                 |         |                          | (1,051,255 | )    |         |         | (1,174,230 | )
|                    |                            | Preferred stock dividends                                                |         |                          | (10,450    | )    |         |         | (40,869    | )
|                    |                            |                                                                          |         |                          |            |      |         |        
|                    |                            | Net loss applicable to common shareholders                               |         | $                        | (1,061,705 | )    |         | $       | (1,215,099 | )
|                    |                            |                                                                          |         |                          |            |      |         |        
|                    |                            | Net loss per share applicable to common shareholders (basic and diluted) |         | $                        | (0.12      | )    |         | $       | (0.16      | )
|                    |                            |                                                                          |         |                          |            |      |         |        
|                    |                            | Weighted average shares outstanding used in per share computations       |         |                          | 9,058,712  |      |         |         | 7,641,123  |  
|                    |                            |                                                                          |         |                          |            |      |         |        

The accompanying notes are an integral part of these financial statements.

F-5



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##### Table of Contents



PLANET POLYMER TECHNOLOGIES, INC.

STATEMENTS OF SHAREHOLDERS EQUITY



---



|                                                                      |  |                          |          |              |  |             |          |        |  |         |           |       |  |   |            |   |  |   |             |   |  |   |            |  
|--------------------------------------------------------------------- |  | ------------------------ | -------- | ------------ |  | ----------- | -------- | ------ |  | ------- | --------- | ----- |  | - | ---------- | - |  | - | ----------- | - |  | - | ---------- | -
|                                                                      |  | Series A Preferred Stock |          | Common Stock |  |             |          |        |  |         |           |      
|                                                                      |  |                          |          |              |  | Accumulated |          |        |  |        
|                                                                      |  | Shares                   |          | Amount       |  | Shares      |          | Amount |  | Deficit |           | Total
|                                                                      |  |                          |          |              |  |             |          |        |  |         |           |      
|Balance at January 1, 2000                                            |  |                          | 500,000  |              |  | $           | 804,435  |        |  |         | 6,875,976 |       |  | $ | 12,426,143 |   |  | $ | (11,467,470 | ) |  | $ | 1,763,108  |  
|Issuance of Common Stock and exercise of warrants
and stock options   |  |                          |         |              |  |             |         |        |  |         | 1,562,686 |       |  |   | 1,234,705  |   |  |   |            |   |  |   | 1,234,705  |  
|Issuance of Common Stock as a dividend on
Convertible Preferred Stock |  |                          |         |              |  |             |         |        |  |         | 21,836    |       |  |   | 40,869     |   |  |   | (40,869     | ) |  |   |           |  
|Conversion of Series A Preferred Stock into
Common Stock              |  |                          | (178,500 | )            |  |             | (287,184 | )      |  |         | 209,996   |       |  |   | 287,184    |   |  |   |            |   |  |   |           |  
|Issuance of Warrants                                                  |  |                          |         |              |  |             |         |        |  |         |          |       |  |   | 5,000      |   |  |   |            |   |  |   | 5,000      |  
|Fair value of stock issued to an employee                             |  |                          |          |              |  |             |          |        |  |         | 10,000    |       |  |   | 15,000     |   |  |   |             |   |  |   | 15,000     |  
|Net loss                                                              |  |                          |         |              |  |             |         |        |  |         |          |       |  |   |           |   |  |   | (1,174,230  | ) |  |   | (1,174,230 | )
|                                                                      |  |                          |          |              |  |             |          |        |  |         |           |       |  |   |            |   |  |   |             |   |  |   |            |  
|Balance at December 31, 2000                                          |  |                          | 321,500  |              |  |             | 517,251  |        |  |         | 8,680,494 |       |  |   | 14,008,901 |   |  |   | (12,682,569 | ) |  |   | 1,843,583  |  
|Conversion of Series A Preferred Stock into
Common Stock              |  |                          | (321,500 | )            |  |             | (517,251 | )      |  |         | 378,235   |       |  |   | 517,251    |   |  |   |            |   |  |   |           |  
|Issuance of Common Stock                                              |  |                          |         |              |  |             |         |        |  |         | 156,735   |       |  |   | 40,801     |   |  |   |            |   |  |   | 40,801     |  
|Issuance of Common Stock for services                                 |  |                          |         |              |  |             |         |        |  |         | 8,400     |       |  |   | 6,300      |   |  |   |            |   |  |   | 6,300      |  
|Issuance of Common Stock as a dividend on
Convertible Preferred Stock |  |                          |         |              |  |             |         |        |  |         | 13,754    |       |  |   | 10,450     |   |  |   | (10,450     | ) |  |   |           |  
|Common Stock received in legal settlement and retired                 |  |                          |          |              |  |             |          |        |  |         | (72,000   | )     |  |   | (7,920     | ) |  |   |             |   |  |   | (7,920     | )
|Net loss                                                              |  |                          |         |              |  |             |         |        |  |         |          |       |  |   |           |   |  |   | (1,051,255  | ) |  |   | (1,051,255 | )
|                                                                      |  |                          |          |              |  |             |          |        |  |         |           |       |  |   |            |   |  |   |             |   |  |   |            |  
|Balance at December 31, 2001                                          |  |                          |         |              |  | $           |         |        |  |         | 9,165,618 |       |  | $ | 14,575,783 |   |  | $ | (13,744,274 | ) |  | $ | 831,509    |  
|                                                                      |  |                          |          |              |  |             |          |        |  |         |           |       |  |   |            |   |  |   |             |   |  |   |            |  

The accompanying notes are an integral part of these financial statements.

F-6



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##### Table of Contents



PLANET POLYMER TECHNOLOGIES, INC.

STATEMENTS OF CASH FLOWS



---



|                                                                  |                                              |                                                                                   |                                                |                                                       |            |                          |           |      |            |          |            |  
|----------------------------------------------------------------- | -------------------------------------------- | --------------------------------------------------------------------------------- | ---------------------------------------------- | ----------------------------------------------------- | ---------- | ------------------------ | --------- | ---- | ---------- | -------- | ---------- | -
|                                                                  |                                              |                                                                                   |                                                |                                                       |            | Years ended December 31,
|                                                                  |                                              |                                                                                   |                                                |                                                       |            |                         
|                                                                  |                                              |                                                                                   |                                                |                                                       |            | 2001                     |           | 2000
|                                                                  |                                              |                                                                                   |                                                |                                                       |            |                          |           |     
|Cash flows from operating activities:                             |                                              |                                                                                   |                                                |                                                       |            |                          |           |     
|                                                                  |                                              | Net loss                                                                          |                                                | $                                                     | (1,051,255 | )                        |           | $    | (1,174,230 | )       
|                                                                  |                                              | Adjustments to reconcile net loss to net cash used
in operating activities:       |                                                |                                                       |            |                          |           |      |            |         
|                                                                  |                                              |                                                                                   | Depreciation and amortization                  |                                                       |            | 86,577                   |           |      |            | 78,991   |           
|                                                                  |                                              |                                                                                   | (Gain) loss on disposal of assets              |                                                       |            | (47,953                  | )         |      |            | 1,461    |           
|                                                                  |                                              |                                                                                   | Non-cash compensation expense                  |                                                       |            |                         |           |      |            | 15,000   |           
|                                                                  |                                              |                                                                                   | Issuance of Common Stock for Services          |                                                       |            | 6,300                    |           |      |            |         |           
|                                                                  |                                              |                                                                                   | Discount on notes receivable                   |                                                       |            | 4,500                    |           |      |            |         |           
|                                                                  |                                              |                                                                                   | Common Stock received in settlement of lawsuit |                                                       |            | (7,920                   | )         |      |            |         |           
|                                                                  |                                              | Changes in assets and liabilities:                                                |                                                |                                                       |            |                          |           |      |            |         
|                                                                  |                                              |                                                                                   | Accounts receivable                            |                                                       |            | (68,828                  | )         |      |            | 80,309   |           
|                                                                  |                                              |                                                                                   | Inventories                                    |                                                       |            | 118,745                  |           |      |            | 34,690   |           
|                                                                  |                                              |                                                                                   | Prepaid expenses and other assets              |                                                       |            | 40,793                   |           |      |            | (4,722   | )         
|                                                                  |                                              |                                                                                   | Accounts payable and accrued expenses          |                                                       |            | 2,188                    |           |      |            | (84,135  | )         
|                                                                  |                                              |                                                                                   | Other liabilities                              |                                                       |            |                         |           |      |            | (152,886 | )         
|                                                                  |                                              |                                                                                   |                                                |                                                       |            |                          |           |     
|                                                                  |                                              |                                                                                   |                                                | Net cash used in operating activities                 |            |                          | (916,853  | )    |            |          | (1,205,522 | )
|                                                                  |                                              |                                                                                   |                                                |                                                       |            |                          |           |     
|Cash flows from investing activities:                             |                                              |                                                                                   |                                                |                                                       |            |                          |           |     
|                                                                  |                                              | Purchases of property and equipment                                               |                                                |                                                       | (24,892    | )                        |           |      | (22,643    | )       
|                                                                  |                                              | Proceeds from the sale of AQUAMIM® assets                                         |                                                |                                                       | 41,025     |                          |           |      |           |         
|                                                                  |                                              | Proceeds from the sale of subsidiary                                              |                                                |                                                       |           |                          |           |      | 814,639    |         
|                                                                  |                                              | Payments on notes receivable                                                      |                                                |                                                       | 89,283     |                          |           |      | 6,217      |         
|                                                                  |                                              | Cost of patents and other                                                         |                                                |                                                       | (3,869     | )                        |           |      | (96,299    | )       
|                                                                  |                                              |                                                                                   |                                                |                                                       |            |                          |           |     
|                                                                  |                                              |                                                                                   |                                                | Net cash provided by investing activities             |            |                          | 101,547   |      |            |          | 701,914    |  
|                                                                  |                                              |                                                                                   |                                                |                                                       |            |                          |           |     
|Cash flows from financing activities:                             |                                              |                                                                                   |                                                |                                                       |            |                          |           |     
|                                                                  |                                              | Proceeds from issuance of Common Stock and exercise of warrants
and stock options |                                                |                                                       | 40,801     |                          |           |      | 1,303,457  |         
|                                                                  |                                              | Proceeds from issuance of warrants                                                |                                                |                                                       |           |                          |           |      | 2,500      |         
|                                                                  |                                              | Principal payments on borrowings and capital lease obligations                    |                                                |                                                       | (22,583    | )                        |           |      | (7,943     | )       
|                                                                  |                                              | Repayments of advances from related party                                         |                                                |                                                       |           |                          |           |      | (61,484    | )       
|                                                                  |                                              |                                                                                   |                                                |                                                       |            |                          |           |     
|                                                                  |                                              |                                                                                   |                                                | Net cash provided by financing activities             |            |                          | 18,218    |      |            |          | 1,236,530  |  
|                                                                  |                                              |                                                                                   |                                                |                                                       |            |                          |           |     
|                                                                  |                                              |                                                                                   |                                                | Net increase (decreases) in cash and cash equivalents |            |                          | (797,088  | )    |            |          | 732,922    |  
|Cash at beginning of year                                         |                                              |                                                                                   | 1,088,567                                      |                                                       |            |                          | 355,645   |     
|                                                                  |                                              |                                                                                   |                                                |                                                       |            |                          |           |     
|Cash at end of year                                               |                                              | $                                                                                 | 291,479                                        |                                                       |            | $                        | 1,088,567 |     
|                                                                  |                                              |                                                                                   |                                                |                                                       |            |                          |           |     
|Supplemental cash flow disclosure: Cash paid during the year for: |                                              |                                                                                   |                                                |                                                       |            |                          |           |     
|                                                                  |                                              | Interest                                                                          |                                                | $                                                     | 3,882      |                          |           | $    | 4,099      |         
|                                                                  | Non-cash investing and financing activities: |                                                                                   |                                                |                                                       |            |                          |           |      |           
|                                                                  |                                              | Conversion of Series A Preferred Stock into Common Stock                          |                                                |                                                       | 517,251    |                          |           |      | 287,184    |         
|                                                                  |                                              | Note receivable accepted as part of sale of assets                                |                                                |                                                       | 256,370    |                          |           |      |           |         
|                                                                  |                                              | Issuance of Common Stock dividends on Preferred Stock                             |                                                |                                                       | 10,450     |                          |           |      | 40,869     |         
|                                                                  |                                              | Insurance purchased under a short-term financing agreement                        |                                                |                                                       | 44,134     |                          |           |      |           |         
|                                                                  |                                              | Issuance of note receivable in connection with sale of subsidiary                 |                                                |                                                       |           |                          |           |      | 100,000    |         
|                                                                  |                                              | Equipment purchased under capital lease obligations                               |                                                |                                                       |           |                          |           |      | 3,813      |         
|                                                                  |                                              | Common Stock issued in obtaining Equity Line of Credit                            |                                                |                                                       |           |                          |           |      | 10,313     |         

The accompanying notes are an integral part of these financial statements.

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##### Table of Contents



PLANET POLYMER TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

1. The Company

Planet Polymer Technologies, Inc. (Planet or the Company) was
incorporated in August, 1991 in the State of California for the purpose of
engaging in the design, development, manufacture and marketing of degradable
and recycled polymer materials. The Companys proprietary polymer materials are
marketed under the trademarks EnviroPlastic® and Aquadro®. EnviroPlastic and
Aquadro can be used to produce films, coatings and injection molded parts that
serve as environmentally-compatible alternatives to conventional plastics.
Planet has also developed polymer technologies for Agway Inc. (Agway) in 1999
that are being marketed under the trademarks Optigen 1200 and
FreshSeal.
The Company sold certain assets related to its AQUAMIM® business in December
2001. The Companys operations are comprised of one segment, the Research and
Development business segment.

2. Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
those estimates.

Revenue Recognition

Product sales revenue is recognized when all of the following conditions
are met: the product is shipped, Planet has the right to invoice the customer
at a fixed price, the collection of the receivable is probable and there are no
significant obligations remaining. Research and development revenues from
customers other than Agway and reimbursable research and development costs from
Agway are not refundable if the research is unsuccessful. The research and
development revenues from customers other than Agway are recognized when
services have been rendered and/or products have been shipped, at which time
the customer is obligated to pay for those services and /or products. The
reimbursable research and development costs from Agway are recognized when
costs related to services performed and/or products shipped have been paid in
full by Planet, at which time Agway is obligated to reimburse these costs. The
components of revenue are as follows:

|                                  |                  |   |         |         |      |   |         |         | 
|--------------------------------- | ---------------- | - | ------- | ------- | ---- | - | ------- | ------- | 
|                                  |                  |   | 2001    |         | 2000
|                                  |                  |   |         |         |     
|Product sales revenue             |                  | $ | 407,419 |         |      | $ | 401,272 |        
|Research and development revenues |                  |   | 62,509  |         |      |   | 267,056 |        
|Royalties, net                    |                  |   | 94,000  |         |      |   |        |        
|                                  |                  |   |         |         |      |   |         |        
|                                  | Revenues         |   | $       | 563,928 |      |   | $       | 668,328 | 
|                                  |                  |   |         |         |      |   |         |        
|Tangible goods sold               |                  | $ | 293,768 |         |      | $ | 324,232 |        
|Services                          |                  |   | 75,653  |         |      |   | 214,801 |        
|                                  |                  |   |         |         |      |   |         |        
|                                  | Cost of revenues |   | $       | 369,421 |      |   | $       | 539,033 | 
|                                  |                  |   |         |         |      |   |         |        

Research and Development

Company sponsored research and development costs related to future
products and redesign of present products are expensed as incurred.

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##### Table of Contents



PLANET POLYMER TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

2. Summary of Significant Accounting Policies (Continued)

Fair Value of Financial Instruments

The carrying amounts shown for the Companys financial instruments,
including accounts receivable and accounts payable, approximate their fair
values at December 31, 2001 due to the short-term nature of these financial
instruments. The carrying value of the note receivable approximates its fair
value as the rate of interest approximates market rates of interest for similar
instruments.

Property and Equipment

Property and equipment is stated at cost and depreciated using the
straight-line method over the estimated useful lives. The Companys property
and equipment generally are depreciated over the following periods:

|                        |  |              |  | 
|----------------------- |  | ------------ |  | 
|Machinery and equipment |  | 3 - 10 years
|Furniture and fixtures  |  | 5 - 7 years 
|Vehicles and trailers   |  | 5 years     

When assets are sold or retired, the cost and associated accumulated
depreciation are removed from the accounts and any gain or loss is reflected in
operations.

Patents

Costs incurred to obtain patents, principally legal fees, are capitalized.
The Company amortizes these costs on a straight-line basis over fifteen years.

Long-Lived Assets

The Company assesses potential impairments to its long-lived assets when
there is evidence that events or changes in circumstances have made recovery of
the assets carrying value unlikely. An impairment loss would be recognized
when the sum of the expected future net cash flows is less than the carrying
amount of the asset. For similar assets held for sale, an impairment loss is
recognized when the carrying amount exceeds its net realizable value or fair
value less cost to sell. In 2001, the Company recorded approximately $73,000
relating to the write-off of certain intangible assets when it was determined
that future discounted cash flows associated with these assets were
insufficient to recover their carrying value. The impaired assets principally
represent the Companys EnviroPlastic H technology.

Income Taxes

The Company accounts for income taxes using the liability method. Current
income tax expense is the amount of income taxes expected to be payable for the
current year. Deferred income taxes are recognized for the tax consequences in
future years for differences between the tax basis of assets and liabilities
and their financial reporting amounts at each year-end (temporary
differences) based on enacted tax laws and statutory rates applicable to the
periods in which the temporary differences are expected to affect taxable
income. Valuation allowances are established when necessary to reduce deferred
tax assets to the amount expected to be realized.

Stock-Based Compensation

The Company measures compensation expense for its stock-based employee
compensation plans using the intrinsic value method and provides pro forma
disclosures of net loss as if the fair value method had been applied in
measuring compensation expense. Compensation charges for non-employee
stock-based compensation is measured using fair value-based methods.

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PLANET POLYMER TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

2. Summary of Significant Accounting Policies (Continued)

Earnings (Loss) Per Share

Earnings (loss) per share is computed using the weighted average number of
shares of common stock outstanding and is presented for basic and diluted
earnings (loss) per share. Basic earnings (loss) per share is computed by
dividing income (loss) available to common shareholders by the weighted average
number of common shares outstanding for the period. Diluted earnings (loss)
per share is computed by dividing income (loss) available to common
shareholders by the weighted average number of common shares outstanding during
the period increased to include, if dilutive, the number of additional common
shares that would have been outstanding if the potential common shares had been
issued. Dilutive potential common shares consist of the incremental common
shares issuable upon conversion of convertible preferred stock (using the if
converted method) and exercise of stock options and warrants (using the
treasury stock method) for all periods.

The Company has excluded all convertible preferred stock and outstanding
stock options and warrants from the calculation of diluted loss per share for
the years ended December 31, 2001 and 2000 because all such securities are
anti-dilutive for these periods. Accordingly, diluted earnings per share
equals basic earnings per share. The total number of potential common shares
excluded from the calculation of diluted loss per share for the years ended
December 31, 2001 and 2000 was 1,748,729 and 1,985,012, respectively.

401(K) Plan

The Company provides a defined contribution 401(k) savings plan (the
401(k) Plan) in which all full-time employees of the Company are eligible to
participate. Eligible employees may contribute up to fifteen percent (15%) of
their pre-tax salary to the 401(k) Plan subject to IRS limitations. Company
contributions to the 401(k) Plan are at the discretion of the Board of
Directors. There were no Company contributions charged to operations related to
the 401(k) Plan in 2001.

Reclassification

Certain prior year amounts have been reclassified to conform to the
current year presentation.

3. Liquidity and Capital Resources

The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and satisfaction of
liabilities in the ordinary course of business. The Company has incurred
losses since inception. For the years ended December 31, 2001 and 2000, the
Company had net losses of approximately $1,051,000 and $1,174,000,
respectively. As of December 31, 2001, the Company had an accumulated deficit
of approximately $13,744,000. The Company believes that its existing sources
of liquidity and anticipated revenue will satisfy the Companys projected
working capital and other cash requirements through at least the next twelve
months. To meet this plan, the Company has implemented a further reduction in
staff and operating expenses, a reduction or sale of non-Agway or agricultural
assets, while continuing to provide technical research and development for
Agways FreshSeal commercial program and Optigen development activities. The
Companys future capital requirements will be dependent upon many factors,
including, but not limited to, costs associated with the continued research and
development of the Companys proprietary polymer materials, costs associated
with the filing and enforcement of the Companys patents, costs associated with
manufacturing scale-up and market acceptance, and the timing thereof, of the
Companys products. The Company executed a Stock Purchase Agreement with
Triton West, Inc. (Triton) in August 2000 (Note 6). There can be no
assurance that the Triton or any additional financing will be available to the
Company on acceptable terms, or at all. Further, there can be no assurance
that the Company will be able to generate positive cash flows or profitability
in the future.

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##### Table of Contents



PLANET POLYMER TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

4. Disposition of Assets

On December 28, 2001, the Company sold certain assets of the Company
relating to its Metal Injection Molding (MIM) business, including
intellectual property, technology, manufacturing equipment and raw material and
finished goods to Ryer Industries LLC (Ryer) for a gain of $135,796. In
consideration of these assets, Ryer has agreed to pay to the Company cash in
the amount of $328,157, plus a royalty of 6% on sales of custom feedstocks sold
during the period January 1, 2002 and December 31, 2009. Through December 31,
2001, the Company had received $58,157. The present value of the remaining
amounts, $256,370, discounted at 10%, are due in 2002. Additionally, Ryer has
agreed to pay the Company a royalty on all tungsten carbide feedstock sales in
the amount of $2.50 per net pound produced during the period July 1, 2002 and
June 30, 2010, as well as to enter into a Consulting Agreement with the Company
on December 28, 2001, under which Ryer is to compensate the Company for
consulting services related to the business and technology sold to Ryer. The
aforesaid consideration was determined by mutual agreement of the parties.

5. Note Receivable

In August 2001, the Company received approximately $84,500 in cash for
repayment of the outstanding portion of a note receivable. The note related to
the Companys sale of all its common stock shares of Deltco on January 7, 2000.
The proceeds were net of a discount for early payment of approximately $4,500,
which was recorded as an expense by the Company.

6. Equity Line of Credit

On August 15, 2000, the Company entered into a Private Equity Line of
Credit Agreement with Triton. Under this agreement, the Company has the right,
until August 15, 2003, or earlier, to request a drawdown and require that
Triton purchase up to $7,000,000 of the Companys Common Stock. The maximum
amount that Planet can require Triton to purchase at any given time is subject
to a floating number based on the closing bid price and the average trading
volume in a thirty-day period. Planet may not make requests less than fifteen
(15) days apart unless accepted by Triton. Triton is not obligated to accept a
Put on the Private Equity Line of Credit if one of the following occurs: (i)
Planet is not listed on the Nasdaq National Market, the Nasdaq SmallCap Market,
the American Stock Exchange or the New York Stock Exchange; (ii) the put price
is greater than the market price; or (iii) the put amount is less than
$100,000. Since Planet is not listed on one of the required exchanges, Triton
is not obligated to accept a Put on the Private Equity Line.

As compensation for establishing the Equity Line of Credit under the
Private Equity Line of Credit Agreement, Planet issued 5,000 shares of Common
Stock, a warrant to Triton (Note 12) and agreed to pay a commitment fee of
$23,333 per drawdown for the first 6 drawdowns.

On November 27, 2000, the Company sold 15,686 shares of Common Stock for
$20,000 under the Equity Line of Credit. Triton agreed to a reduced commitment
fee of $1,866 related to this drawdown. On June 8, 2001, the Company sold
46,440 shares of Common Stock for $15,000 under the Equity Line of Credit.
Triton agreed to a reduced commitment fee of $1,400 related to this drawdown.
On June 25, 2001, the Company sold 110,295 shares of Common Stock for $30,000
under the Equity Line of Credit. Triton agreed to a reduced commitment fee of
$2,799 related to this drawdown.

7. Concentrations of Credit Risk

Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash and cash equivalents
and trade accounts receivable. The Company invests its excess cash in United
States government securities and money market funds. The Company limits the
amount of credit exposure to any one entity. The Company performs ongoing
credit evaluations of its customers. At December 31, 2001, the Company
maintained cash balances that were $212,391 in excess of Federal Deposit
Insurance Corporation coverage.

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##### Table of Contents



PLANET POLYMER TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

8. Composition of Certain Balance Sheet Components at December 31, 2001

Property and Equipment

|                               |  |   |         |  
|------------------------------ |  | - | ------- | -
|Machinery and equipment        |  | $ | 97,719  |  
|Furniture and fixtures         |  |   | 4,928   |  
|Vehicles and trailers          |  |   | 9,308   |  
|                               |  |   |         |  
|                               |  |   | 111,955 |  
|Less: Accumulated depreciation |  |   | (90,271 | )
|                               |  |   |         |  
|                               |  | $ | 21,684  |  
|                               |  |   |         |  

Depreciation expense charged to operations in 2001 and 2000 was $53,300
and $51,544, respectively.

9. Short-Term Debt

The Company has financed a portion of its general liability and automobile
insurance coverage through August 1, 2002 under a contract dated August 1,
2001. The contract requires nine equal monthly installments beginning
September 1, 2001 of $817 including interest at 11.75% per annum. The balance
of the contract payable at December 31, 2001 was $3,191. The Company has also
financed a portion of its director and officer insurance coverage through
September 21, 2002 under a contract dated September 21, 2001. The contract
requires nine equal monthly installments beginning October 21, 2001 of $4,299
including interest at 10% per annum. The balance of the contract payable at
December 31, 2001 was $25,058.

10. Commitments

The Company leases its facility and certain office equipment under
non-cancelable operating leases, which expire on various dates through October
9, 2004 and provide for renewal options in one-year increments. In the normal
course of business, it is expected that these leases will be renewed or
replaced by leases on other properties. Rent expense charged to operations
in 2001 and 2000 was $75,279 and $70,774, respectively.

The Company also leases certain equipment under agreements that are
classified as capital leases. The cost of equipment under capital leases is
included in the balance sheet as property, plant and equipment and totaled
$38,763 at December 31, 2001. Accumulated amortization of the leased equipment
at December 31, 2001 was $31,561. Amortization of assets under capital leases
is included in depreciation expense.

Future minimum payments under non-cancelable leases as of December 31,
2001 are as follows.

|                                            |      |   |         |       |           |   |        |        | 
|------------------------------------------- | ---- | - | ------- | ----- | --------- | - | ------ | ------ | 
|                                            |      |   | Capital |       | Operating
|                                            |      |   | Leases  |       | Leases   
|                                            |      |   |         |       |          
|                                            | 2002 |   | $       | 9,106 |           |   | $      | 40,866 | 
|                                            | 2003 |   |         |      |           |   |        | 2,113  | 
|                                            | 2004 |   |         |      |           |   |        | 1,585  | 
|                                            |      |   |         |       |           |   |        |       
|Total minimum lease payments                |      |   | 9,106   |       |           | $ | 44,564 |       
|                                            |      |   |         |       |           |   |        |       
|Less: Interest portion                      |      |   | (629    | )     |           |   |        |       
|                                            |      |   |         |       |           |   |        |       
|Present value of net minimum
lease payments |      | $ | 8,477   |       |           |   |        |       
|                                            |      |   |         |       |           |   |        |       

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##### Table of Contents



PLANET POLYMER TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

11. Income Taxes

The differences between income tax (expense) benefit provided at the
Companys effective rate and the federal statutory rate (34%) are as follows:

|                                  |       |   |          |   |      |   |          |   | 
|--------------------------------- | ----- | - | -------- | - | ---- | - | -------- | - | 
|                                  |       |   | 2001     |   | 2000
|                                  |       |   |          |   |     
|Federal benefit at statutory rate |       | $ | (357,427 | ) |      | $ | (399,238 | )
|Permanent differences             |       |   | 1,505    |   |      |   | 27,521   |  
|Valuation allowance               |       |   | 355,922  |   |      |   | 371,717  |  
|                                  |       |   |          |   |      |   |          |  
|                                  | Total |   | $        |  |      |   | $        |  | 
|                                  |       |   |          |   |      |   |          |  

Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Companys deferred tax assets and liabilities at December 31, 2001 are
as follows:

|                                     |                        |   |            |   | 
|------------------------------------ | ---------------------- | - | ---------- | - | 
|                                     |                        |   | 2001      
|                                     |                        |   |           
|Net operating loss carryforwards     |                        | $ | 4,279,360  |  
|Tax credit carryforwards             |                        |   | 119,899    |  
|Reserves, accrued expenses and other |                        |   | 221,572    |  
|Intangible assets                    |                        |   | (48,114    | )
|                                     |                        |   |            |  
|                                     |                        |   | 4,572,717  |  
|Less: Valuation allowance            |                        |   | (4,572,717 | )
|                                     |                        |   |            |  
|                                     | Net deferred tax asset |   | $          |  | 
|                                     |                        |   |            |  

After considering its lack of historical earnings, among other things, the
Company has determined that a full valuation allowance for Federal and
California tax purposes is necessary as it is more likely than not that the
Company will not be able to realize its net deferred tax assets.

At December 31, 2001, the Company had net operating loss carryforwards for
Federal income tax purposes of approximately $12,051,000 and for California
state tax purposes of approximately $3,122,000. The Companys California loss
carryforwards expire in 2002 through 2006 and Federal loss carryforwards begin
to expire in 2006. The Company also has available tax credit carryforwards for
Federal and California tax purposes that aggregate approximately $140,000 that
begin to expire in 2007.

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##### Table of Contents



PLANET POLYMER TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

12. Shareholders Equity

Preferred Stock

The investor of the Series A Convertible Preferred Stock (Series A
Preferred) was entitled to receive quarterly dividends at an annual rate of 6%
payable in shares of the Companys Common Stock. Each share of Series A
Preferred was convertible at the option of the holder into shares of Common
Stock of the Company. During March 2001, all 321,500 shares of Preferred Stock
were converted into 378,235 shares of Common Stock. Additionally, during March
2001, the Company issued dividends of 13,754 shares of Common Stock valued at
approximately $10,450.

Common Stock

In November 1998, the Company entered into a Stock Purchase Agreement with
a subsidiary of Agway whereby Agway purchased 1,000,000 shares of Planets
Common Stock for $1,000,000 and received a warrant to purchase up to 2,000,000
additional shares of Common Stock at a price of $1.00 per share. The stock
purchase transaction was completed in January 1999 with the Companys
shareholders approval.

On each of November 5, 1999 and March 3, 2000, Agway exercised warrants to
purchase 500,000 shares of the Companys Common Stock on the terms, and subject
to the conditions, set forth in the warrant and the Company received cumulative
proceeds of $1,000,000 in connection with such exercises.

Pursuant to an agreement dated November 14, 2000, in response to an offer
by Planet to reduce the warrant exercise price from $1.00 per share to $0.75
per share, Agway agreed to exercise its remaining warrant to purchase 1,000,000
shares of the Companys Common Stock on the terms, and subject to the
conditions, set forth in the warrant and the Company received proceeds of
$750,000 in connection with such exercise (Note 13).

Warrants

On September 24, 1997, the Company issued to the Investor of the Series A
Preferred, for $75,000, a warrant to purchase up to 375,000 shares of the
Companys Common Stock at an exercise price of $2.75 per share. In addition,
as partial consideration for services rendered in connection with the issuance
of the Series A Preferred and the Warrant to the Investor, the Company issued
to the finder, for $2,500, a five-year warrant to purchase up to 50,000 shares
of the Companys Common Stock at an exercise price of $4.16 per share. Upon
receiving the $1,000,000 proceeds from the Common Stock issuance to Agway on
January 11, 1999, the Company was required to make certain anti-dilution
adjustments to the warrant issued to the finder. The number of shares issuable
under the warrant and the exercise price per warrant were adjusted to 64,635
shares and an exercise price of $3.22 per warrant, respectively.

After receiving the $1,000,000 proceeds from Agway pursuant to its
purchase of Common Stock on January 11, 1999, the Company was required to (i)
pay a $60,000 cash transaction fee to the finder, LBC Capital Resources, Inc.
(LBC), and (ii) issue LBC five-year warrants to purchase 50,000 shares of
Common Stock with an exercise price of $4.125 per warrant, in exchange for
$2,500. These warrants were issued March 29, 1999, pursuant to an exemption
from registration for transactions not involving a public offering. In
connection with Agways stock purchase transaction in January 1999 and pursuant
to the terms of the warrants issued to LBC, the Company was required to
increase the number of shares of Common Stock per the warrants to 59,243 and
reduce the exercise price to $3.5131 per warrant.

After receiving proceeds from Agway, pursuant to its purchase of Common
Stock on November 14, 2000, the Company was required to (i) pay a $60,000 cash
transaction fee to LBC, and (ii) issue LBC five-year warrants to purchase
50,000 shares of Common Stock with an exercise price of $4.1625 per warrant, in
exchange for $2,500. These warrants were issued March 20, 2001 pursuant to an
exemption from registration for transactions not involving a public offering.

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PLANET POLYMER TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

12. Shareholders Equity (Continued)

In connection with Agways stock purchase transaction in January 1999 and
pursuant to the terms of the warrants issued to LBC, the Company may be
required to make certain anti-dilution adjustments to the warrants issued to
LBC.

In connection with the Private Equity Line of Credit Agreement with
Triton, Planet issued a warrant to Triton to purchase up to 125,000 shares of
Common Stock at $2.5781, which was equal to 125% of the lowest closing bid
price during the six trading days immediately preceding the initial closing
date. Tritons warrant expires on the close of business on February 23, 2004.

At December 31, 2001, the following exercisable warrants to purchase the
Companys Common Stock were outstanding:

|                  |  |            |         |                |  |                 |                |  |  |  |             | 
|----------------- |  | ---------- | ------- | -------------- |  | --------------- | -------------- |  |  |  | ----------- | 
|                  |  | Underlying |         |                |  |                 |                |  |  | 
|                  |  | Shares     |         | Exercise Price |  | Expiration Date
|                  |  |            |         |                |  |                
|Investor warrants |  |            | 587,444 |                |  | $               | 1.000 - $2.578 |  |  |  | 2002 - 2004 | 
|Advisor warrants  |  |            | 48,286  |                |  | $               | 2.219 - $3.875 |  |  |  | 2003        | 
|Other warrants    |  |            | 223,878 |                |  | $               | 3.220 - $4.163 |  |  |  | 2002 - 2005 | 
|                  |  |            |         |                |  |                 |                |  |  |  |             | 
|                  |  |            | 859,608 |                |  |                 |                |  |  |  |             | 
|                  |  |            |         |                |  |                 |                |  |  |  |             | 

All per share rights and benefits are subject to adjustment upon the
occurrence of certain events. All the numbers in the above table reflect the
anti-dilution adjustments due to the private equity transaction consummated on
January 11, 1999.

Options

As of December 31, 2001, the Company has two stock option plans, a 2000
Stock Option Plan (the 2000 Option Plan) and a 1995 Stock Option Plan (the
1995 Option Plan).

The 2000 Option Plan provides for 500,000 shares of Common Stock for
issuance under the Plan, together with 500,000 additional shares of Common
Stock for issuance to the extent that outstanding options previously granted
under the 1995 Stock Option Plan expire unexercised. The Plan provides for the
discretionary grant of options, stock appreciation rights (SARs), and stock
bonuses to employees and directors of and consultants to the Company. Options
granted under the Plan may be either incentive stock options, as defined in
Section 422 of the Internal Revenue Code of 1986, as amended (the Code), or
non-statutory stock options.

The 1995 Option Plan under which incentive stock options and non-statutory
stock options to acquire an aggregate of 500,000 shares of Common Stock may be
granted to employees, non-employee directors and consultants to the Company.
Incentive stock options may be granted only to employees of the Company whereas
non-statutory options may be granted to employees, directors and consultants.

At December 31, 2001, there were 202,561 shares of the Companys Common
Stock available for future grant under the option plans.

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##### Table of Contents



PLANET POLYMER TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

12. Shareholders Equity (Continued)

Under both stock option plans, the terms of stock options granted are
determined by the Board of Directors. Stock options may be granted for periods
of up to ten years at a price per share not less than the fair market value of
the Companys Common Stock at the date of grant for incentive stock options and
not less than 85% of the fair market value of the Companys Common Stock at the
date of grant for non-statutory stock options. In the case of stock options
granted to employees, directors or consultants who, at the time of grant of
such options, own stock possessing more than 10% of the voting power of all
classes of stock of the Company, the exercise price shall be no less than 110%
of the fair market value of the Companys Common Stock at the date of grant.
Additionally, the term of stock option grants is limited to five years if the
grantee owns in excess of 10% of the voting power of all classes of stock of
the Company at the time of grant. The vesting provisions of individual options
may vary but in each case will provide for vesting of at least 20% per year of
the total number of shares subject to the option.

The Company measures compensation expense for its stock-based employee
compensation plans using the intrinsic value method and provides pro forma
disclosures of net loss as if the fair value method had been applied in
measuring compensation expense. Had compensation cost for the Companys
stock-based compensation plans been determined based on the fair value method
at the grant dates for awards under this plan, the Companys net loss and loss
per share for 2001 and 2000 would have been increased to the pro forma amounts
indicated below:

|            |  |          |            |                |  |          |       |                |  |   |            |   |  |   |       |  
|----------- |  | -------- | ---------- | -------------- |  | -------- | ----- | -------------- |  | - | ---------- | - |  | - | ----- | -
|            |  | 2001     |            | 2000          
|            |  |          |            |               
|            |  | Net Loss |            | Loss per Share |  | Net Loss |       | Loss per Share
|            |  |          |            |                |  |          |       |               
|As reported |  | $        | (1,051,255 | )              |  | $        | (0.12 | )              |  | $ | (1,174,230 | ) |  | $ | (0.16 | )
|Pro forma   |  | $        | (1,185,239 | )              |  | $        | (0.13 | )              |  | $ | (1,447,272 | ) |  | $ | (0.19 | )

The fair value of each stock option is estimated on the date of grant
using the Black-Scholes option-pricing model with the following
weighted-average assumptions for 2001 and 2000: an expected life of 4 years,
expected volatility of 218.10% and 98.05%, no dividend yield and a risk-free
interest rate of 4.01% and 4.91%, respectively, represented by the interest
rate on U.S. Treasury securities with a term of maturity equal to the options
expected time to exercise on the dates of grant. The weighted average fair
value of options granted during 2001 and 2000 was approximately $0.25 and $1.40
per option, respectively.

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PLANET POLYMER TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

12. Shareholders Equity (Continued)

A summary of stock option activity during 2001 and 2000 follows:

|                                 |                     |  |                        |         |                        |  |            |       |               |  |         |          |          |   |       |       | 
|-------------------------------- | ------------------- |  | ---------------------- | ------- | ---------------------- |  | ---------- | ----- | ------------- |  | ------- | -------- | -------- | - | ----- | ----- | 
|                                 |                     |  | 2000 Stock Option Plan |         | 1995 Stock Option Plan
|                                 |                     |  |                        |         |                       
|                                 |                     |  |                        |         |                        |  | Weighted   |       |               |  |         |          | Weighted
|                                 |                     |  | Underlying             |         | Avg. Exercise          |  | Underlying |       | Avg. Exercise
|                                 |                     |  | Shares                 |         | Price                  |  | Shares     |       | Price        
|                                 |                     |  |                        |         |                        |  |            |       |              
|Outstanding at December 31, 1999 |                     |  |                        |         |                        |  |            |       |               |  | 423,922 |          |          | $ | 3.373 |      
|                                 | Granted             |  |                        | 334,500 |                        |  | $          | 2.003 |               |  |         |         |          |   |       |       | 
|                                 | Exercised           |  |                        |        |                        |  |            |      |               |  |         | (42,000  | )        |   |       | 2.430 | 
|                                 | Forfeited / expired |  |                        | (13,000 | )                      |  |            | 2.471 |               |  |         | (38,200  | )        |   |       | 3.667 | 
|                                 |                     |  |                        |         |                        |  |            |       |               |  |         |          |          |   |       |      
|Outstanding at December 31, 2000 |                     |  | 321,500                |         |                        |  | 1.984      |       |               |  | 343,722 |          |          |   | 2.113 |      
|                                 | Granted             |  |                        | 208,000 |                        |  |            | 0.263 |               |  |         |         |          |   |       |      | 
|                                 | Exercised           |  |                        |        |                        |  |            |      |               |  |         |         |          |   |       |      | 
|                                 | Forfeited / expired |  |                        | (20,500 | )                      |  |            | 2.299 |               |  |         | (102,283 | )        |   |       | 1.977 | 
|                                 |                     |  |                        |         |                        |  |            |       |               |  |         |          |          |   |       |      
|Outstanding at December 31, 2001 |                     |  | 509,000                |         |                        |  | 1.268      |       |               |  | 241,439 |          |          |   | 2.171 |      
|                                 |                     |  |                        |         |                        |  |            |       |               |  |         |          |          |   |       |      

|                                 |                     |  |               |         |               |   |          |       | 
|-------------------------------- | ------------------- |  | ------------- | ------- | ------------- | - | -------- | ----- | 
|                                 |                     |  | Other Options
|                                 |                     |  |              
|                                 |                     |  |               |         |               |   | Weighted
|                                 |                     |  | Underlying    |         | Avg. Exercise
|                                 |                     |  | Shares        |         | Price        
|                                 |                     |  |               |         |              
|Outstanding at December 31, 1999 |                     |  | 199,819       |         |               | $ | 4.699    |      
|                                 | Granted             |  |               | 5,000   |               |   |          | 2.500 | 
|                                 | Exercised           |  |               |        |               |   |          |      | 
|                                 | Forfeited / expired |  |               | (66,137 | )             |   |          | 3.780 | 
|                                 |                     |  |               |         |               |   |          |      
|Outstanding at December 31, 2000 |                     |  | 138,682       |         |               |   | 5.058    |      
|                                 | Granted             |  |               |        |               |   |          |      | 
|                                 | Exercised           |  |               |        |               |   |          |      | 
|                                 | Forfeited / expired |  |               |        |               |   |          |      | 
|                                 |                     |  |               |         |               |   |          |      
|Outstanding at December 31, 2001 |                     |  | 138,682       |         |               |   | 5.058    |      
|                                 |                     |  |               |         |               |   |          |      

Other Options listed above include non-statutory stock options issued to
key personnel prior to the adoption of the 1995 Stock Option Plan and a grant
to a former director of the Company during 2000.

The following table summarizes information about stock options outstanding
and exercisable at December 31, 2001:

|                  |  |                     |         |                       |  |                  |      |           |  |                  |      |  |  |  |         |  |  |   |      | 
|----------------- |  | ------------------- | ------- | --------------------- |  | ---------------- | ---- | --------- |  | ---------------- | ---- |  |  |  | ------- |  |  | - | ---- | 
|                  |  | Options Outstanding |         | Options Exercisable  
|                  |  |                     |         |                      
|                  |  |                     |         |                       |  | Weighted Average |      |           |  |                  |      |  |  |  |         |  |  |  
|Range of Exercise |  | Number of           |         | Remaining Contractual |  | Weighted Average |      | Number of |  | Weighted Average
|Prices            |  | Shares              |         | Life (yearsd)         |  | Exercise Price   |      | Shares    |  | Exercise Price  
|                  |  |                     |         |                       |  |                  |      |           |  |                 
|$0.050 to $1.000  |  |                     | 208,000 |                       |  |                  | 4.86 |           |  | $                | 0.26 |  |  |  | 108,000 |  |  | $ | 0.23 | 
|$1.250 to $2.400  |  |                     | 330,000 |                       |  |                  | 4.30 |           |  |                  | 1.62 |  |  |  | 200,250 |  |  |   | 1.01 | 
|$2.500 to $5.000  |  |                     | 257,121 |                       |  |                  | 5.06 |           |  |                  | 2.88 |  |  |  | 257,121 |  |  |   | 2.88 | 
|$5.100 to $6.000  |  |                     | 94,000  |                       |  |                  | 2.08 |           |  |                  | 5.73 |  |  |  | 94,000  |  |  |   | 5.73 | 
|                  |  |                     |         |                       |  |                  |      |           |  |                  |      |  |  |  |         |  |  |   |      | 
|                  |  |                     | 889,121 |                       |  |                  | 4.42 |           |  |                  | 2.10 |  |  |  | 659,371 |  |  |   | 1.87 | 
|                  |  |                     |         |                       |  |                  |      |           |  |                  |      |  |  |  |         |  |  |   |      | 

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PLANET POLYMER TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

13. Related Party Transactions

On November 14, 2000, Planet agreed to sell, assign and transfer patent
rights (the Patent Transaction) to Planets animal feed additives, fruit and
vegetable coatings, and controlled-release fertilizer (the Patents), to Agway
for a cash price of $250,000 and continuation of royalty payments equal to the
payments Planet would otherwise be entitled to receive pursuant to its existing
license agreement with Agway and the sublicense agreements related thereto.
Planet, in turn, agreed to pay Agway $150,000 in return for an exclusive
worldwide royalty-free license to use and commercially exploit all rights
related to the Patents for all uses other than food and agricultural
initiatives. As a result of the concurrent execution of the warrant exercise
by Agway on November 14, 2000 (Note 12) and the Patent Transaction, and the
Companys inability to establish separate fair values for the patent sale and
sublicense, the net proceeds of $100,000 has been accounted for as additional
proceeds from the issuance of Common Stock pursuant to the exercise of warrants
in the accompanying financial statements.

In November 1998, the Company and Agway entered into an agreement relating
to the funding by Agway of a feasibility study (the Feasibility Agreement) of
the Companys polymer technology for use in agricultural products (other than
fertilizers and certain biological products) and food products. Under the
terms of the Feasibility Agreement, Planet will be reimbursed for certain
qualifying research and development costs relating to such applications. During
2001 and 2000, the Company recorded reimbursable research and development costs
of $62,509 and $174,872, respectively, from Agway under the Feasibility
Agreement.

Also in November 1998, the Company granted Agway an exclusive worldwide
license in connection with the Companys technology for time-release coatings
for a variety of agricultural and food products (the License Agreement). The
License Agreement outlines the general terms and conditions for the rights
granted Agway thereunder. The Company and Agway agreed to execute further
sub-agreements specifying the royalties to be paid to the Company for Agways
use of the Companys technology with certain products. In March 2000, the
Company and Agway entered into a Sub-Agreement with respect to animal feed
products incorporating Planets patented/patent pending coatings and/or polymer
systems. Also in March 2000, the Company and Agway entered into another
Sub-Agreement with respect to Planets patented/patent pending coatings and/or
polymer systems sold for use on fruits, vegetables, floral and nursery items.
During 2001, the Company received a $100,000 royalty payment from Agway. After
receiving proceeds from Agway, pursuant to its royalty payment in October 2001,
the Company was required to pay a $6,000 cash transaction fee to LBC. This
payment was made January 24, 2002 and shown in accounts payable at December 31,
2001.

Agway, is a beneficial owner of more than 10% of the Companys Common
Stock since January 11, 1999.

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PLANET POLYMER TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

14. Legal Proceedings

In October 2001, the Company settled certain litigation resulting in
Planet receiving a cash payment of $125,000, Planets insurance carrier paying
$25,000 to the opposing party, the return of approximately 70,000 shares of
Planet stock and the cancellation of certain unexercised stock options.

F-19