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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
    FORM 10-KSB ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2004
Commission File No. 0-26804    PLANET TECHNOLOGIES, INC. (Formerly Planet
Polymer Technologies, Inc.)
(Name of small business issuer in its charter)
 CALIFORNIA
    
    33-0502606(State or other jurisdiction of
    
    (IRS Employer identification No.)incorporation of organization)6835 Flanders Drive, Suite 100 San Diego, California
    
    92121(Address of principal executive offices)
    
    (Zip Code)
 Issuers telephone number (858) 457-4742 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. þ Yes o 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. o The issuers revenues for the year ending December 31, 2004 were $1,180,382. The aggregate market value of the voting stock held by non-affiliates of the Issuer as of
March 11, 2005, was $1,396,595, based on the average of the 4:00 p.m. closing bid and ask prices of
$1.26 as reported on the Over-the-Counter Bulletin Board. As of March 11, 2005, 2,180,368 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) o
Yes þ No




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PLANET TECHNOLOGIES, INC. FORM-10KSB
Year Ended December 31, 2004 TABLE OF CONTENTS ItemNumber
    
    PagePART I.1. Description of Business
    
    
    22. Description of Property
    
    
    83. Legal Proceedings
    
    
    84. Submission of Matters to a Vote of Security Holders
    
    
    8PART II.5. Market for Common Equity, Related Stockholders Matters and Issuer Purchases of Equity Securities
    
    
    96. Managements Discussion and Analysis or Plan of Operation
    
    
    107. Financial Statements
    
    
    138. Changes in and Disagreements With Accountants on Accounting and Financial Disclosures
    
    
    138A. Controls and Procedures
    
    
    138B. Other Information
    
    
    13PART III.9. Directors, and Executive Officers of the Registrant
    
    
    1410. Executive Compensation
    
    
    1611. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    2012. Certain Relationships and Related Transactions
    
    
    2213. Exhibits
    
    
    2314. Principal Accountant Fees and Services
    
    
    25Signatures
    
    
    26Power of Attorney
    
    
    26EXHIBIT 10.21EXHIBIT 10.22EXHIBIT 10.23EXHIBIT 10.24EXHIBIT 10.25EXHIBIT 10.26EXHIBIT 14.1EXHIBIT 23.1EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2
  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 Technologies, Inc. General On November 30, 2004, Planet acquired the business of Allergy Free, LLC, and is now engaged in
the business of designing, manufacturing, selling, and distributing common products for use by
allergy sensitive persons, including, without limitation, air filters, bedding, room air cleaners,
and related allergen avoidance products. Allergy Free acquired its business on or about November
3, 2000, when it acquired substantially all of the assets and business of Allergy Free, L.P., a
Delaware limited partnership. The business strategy is primarily based upon the marketing and
selling of a complete range of branded, allergen avoidance products to its database of customers
who have purchased the Allergy-Free®Electrostatic Filter. Promotion is executed
primarily through direct telemarketing, supplemented with direct mail, radio, and Internet
advertising. In addition, we will continue to pursue co-marketing opportunities with 2




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appropriate partners in order to increase consumer awareness and expand our customer base. We
will market our products under the Allergy Free® trade name. In conjunction with these
activities, Planet operates an e-commerce website for the sale of Allergy-Free R products at
www.800allergy.com. The allergy avoidance product industry provides products and information that help people
suffering from allergies or asthma to reduce the level of exposure to allergens in their
environment. Market categories include: air filtration products, mold and mildew products, and
products to avoid exposure to dust mites and other allergens. Market distribution channels
include: direct to consumer sales, physician directed sales, the Internet, and retail. Competitors
include National Allergy Supply, Mission Allergy, Allergy Control Products, Allergy Buyers Club, 3M
and Sharper Image. On March 8, 2005, Planet entered into a definitive agreement to acquire Allergy Control
Products, Inc. (ACP). The merger transaction will be structured pursuant to an Agreement and
Plan of Merger agreed upon by both parties, and is subject to approval by each partys respective
shareholders and other contingencies. Pursuant to the terms of the merger transaction the
shareholder of ACP will be issued 600,000 shares of Planet common stock. In addition, ACP debt to
its shareholder in the approximate amount of $1,500,000 will be paid in full by Planet. Products and Technologies There are over 65 million allergy sufferers in the US alone. The American College of Allergy
and Immunology recommends avoidance as the first line of treatment. Allergy Free contracts for the
manufacture and distributes products to address three main allergen areas where avoidance products
can provide reduced exposure. The categories are Air Filtration, Dust Mite/Dander avoidance, and
Mold concerns. Air Filtration Product Category:According to the EPA the air inside houses is 3-5 times more
polluted than outdoor air so providing products to clean the air inside the home is critical to any
allergy management plan. Allergy Free air filters greatly reduce the amount of airborne
contaminants. Planet currently markets three types of filters for forced heating and cooling
systems along with vent filtration kits and HEPA room air cleaners.    The Aller-Pure®Gold Filteris a permanent electrostatic washable filter.
The filter is very efficient in removing particles at the 1-10 micron level. The filter is pleated
and offers 2.5 times the filtering surface area of a flat filter while providing a low resistance
that optimizes airflow. We offer 45 standard sizes and also manufacture custom filters to meet
almost any customer need. The filters have a ten-year warranty.  The Aller-Pure®MAX- (Micro-Allergen Xtractor) is the newest filter offered
by the Company. The Aller-Pure MAX is rated at the highest level for residential filters. It is a
pleated filter with actively electrostatic charged media. The disposable filters life is 2-3
months and is sold in packages of 4 filters. Currently we offer this filter in 11 standard sizes.  We provide the Aller-Pure®Flex filtersfor free-standing air conditioning
units and other types of heating and cooling systems often found in recreational vehicles. The
flex filter is comprised of 3 layers and sewn with a trim. These filters are washable and have a
three-year warranty.  Consumers filter the loose dust from their air ducts using Allergy-Free®Vent Filtration Kits. The vent kits are sold in one month and six week supplies. Consumers are
instructed to change the vent filters when dirty and replace with new product.  Allergy-Free®Filter Cleaner- Used to clean the Aller-Pure®
Gold and Aller-Pure® Flex filters.  Allergy-Free®HEPARoom Air Cleaners are available in five different
configurations to meet an individuals needs. These freestanding units are often used when the
forced heating and cooling system is not in use and/or when an individual does not have a forced
air system. These products reduce the amount of airborne contaminants and dust in the air. The products
are designed for specific customer requirements that vary based on room size, number of rooms in
the house and type of heating and/or cooling system installed. Many customers will purchase and
use a furnace filter, vent filtration kit, and a freestanding HEPA room air cleaner. 3




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Dust Mite/Dander Avoidance Product Category:Microscopic bugs called dust mites produce
potent allergens and thrive in places such as beds, upholstered furniture, and carpets.
Approximately 45% of all allergy sufferers are allergic to dust mites. The Company provides a
complete line of products that reduce the allergy sufferers exposure. Using a variety of the mite
reducing products is recommended to achieve maximum relief. Customer testimonials report fewer
headaches and less congestion once they have implemented a dust mite removal strategy.  
    Allergy-Free®Pristine Bed and Pillow Encasings and Hypoallergenic Pillows:
The Pristine® line of encasings offered by Planet is the first choice in
hypo-allergenic protective bed covers to protect household members from dust mite allergens
while sleeping. The Pristine® line is highly recommended by allergy physicians.
    Anti-Allergen Products for laundry and upholstery: We offer products in this category
from Whirlpool, Alkaline products and Ecology Works.
    Carpet Treatments: Planet markets Capture® Carpet Cleaner, Dust Mite Control and X-Mite
carpet treatments. All of these products work by either killing the dust mites or
denaturing the protein rendering it to a non-allergenic state.
    Electrostatic Mops and Dusters: These mops utilize an electrostatic cloth for maximum
efficiency without the use of harsh chemicals that also can be harmful to the allergy
patient.
    Dander Reducing Treatments: Allerpetsolutions are rubbed directly on to the animal and
reduce the amount of pet dander. Mold Concerns Product Category:Excess mold in the environment can cause severe headaches and
congestion. Allergy Free distributes a full line of products to keep the home environment to an
optimum humidity level. The Damp Check Domes are used in closets and cupboards; the Allersearch
AllerMoldis a product used in showers and tubs. We also recommend and sell mold-free shower
curtains and mats. Product Registrations Planet does not directly manufacture any product requiring EPA or FDA registration. We sell
products that are registered by their manufacturers. Licensed Technology and Intellectual Property Planet licenses technology associated with the production of its Aller-Pure® Gold
Permanent Electrostatic Filter. The licensing agreement is with Rick L. Chapman exclusively for
Allergy Free. Patent number 6,056,809. Permanent Air Filter and Method of Manufacture.
Specifically a washable air filter for filtering inlet air to a heating and/or air conditioning
system comprising an assembly formed of: a deformable, non-electrostatic pad of a high-loft, air
laid, resin bonded polymeric fibers, 2 layers of mesh along with 2 layers of expanded steel glue in
an aluminum frame. The licensing agreement is for a term of 10 years or the life of the patent or
for the period of time in which Planet actively sells the Aller-Pure® Gold Permanent filter. The
agreement provides for a royalty of 1.65% based on net filter sales and is paid monthly. The
original agreement was dated January 1, 1997. Research and Development Planet is not actively developing new products, although the Company has historically worked
with consultants, filter-testing labs, media manufactures and filter manufacturers to develop new
enhanced filters and product line extensions. Government Requirements Planets sales practices are regulated at both the federal and state level. The Telephone
Consumer Protection Act (the TCPA), which was enacted in 1991, authorized and directed the
Federal Communications Commission (the FCC) to enact rules to regulate the telemarketing
industry. In December 1992, the FCC enacted rules, which place restrictions on the methods and
timing of telemarketing sales calls. On July 3, 2003, the FCC issued a Report and Order setting forth amended rules and regulations
implementing the TCPA. The rules, with a few exceptions, became effective August 25, 2003. These
rules included: (1) restrictions on calls made by automatic dialing and announcing devices; (2)
limitations on the use of predictive dialers for outbound calls; (3) institution of a national
do-not-call registry in conjunction with the Federal Trade Commission (the FTC); (4) guidelines
on maintaining an internal do-not-call 4




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list and honoring do-not-call requests; and (5) requirements for transmitting caller
identification information. The do-not-call restrictions took effect October 1, 2003. The
caller identification requirements became effective January 29, 2004. The FCC also included rules
restricting facsimile advertisements. These rules became effective January 1, 2005. The Federal Telemarketing Consumer Fraud and Abuse Act of 1994 authorizes the FTC to issue
regulations designed to prevent deceptive and abusive telemarketing acts and practices. The FTC
issued its Telemarketing Sales Rule (the TSR), which went into effect in January 1996. The TSR
applies to most direct teleservices telemarketing calls and certain operator teleservices
telemarketing calls and generally prohibits a variety of deceptive, unfair or abusive practices in
telemarketing sales. The FTC amended the TSR in January 2003. The majority of the amendments became effective
March 31, 2003. The changes that were adopted that could adversely affect Planet include, but are
not limited to: (1) subjecting a portion of our calls to additional disclosure requirements from
which such calls were previously exempt: (2) prohibiting the disclosure or receipt, for
consideration, of unencrypted consumer account numbers for use in telemarketing; (3) additional
disclosure statements relating to certain products and services; (4) additional authorization
requirements for payment methods that do not have consumer protections comparable to those
available under the Electronic Funds Transfer Act (EFTA) or the truth in Lending Act; and (5)
institution of a national do-not-call registry. The do-not-call restrictions became effective
October 1, 2003. Planet believes it is in compliance with the amendments. The amendments to the TSR in 2003 may have a material impact on both Planets revenue and
profitability. The addition of a national do-not-call list to the growing number of states that
already have do-not-call lists has reduced the number of households that the Company may call.
Approximately seventy-percent (70%) of Planets historical customers have placed their names on the
national do-not-call list. In addition to the federal legislation and regulations, there are numerous state statutes and
regulations governing telemarketing activities, which do or may apply to us. For example, some
states also place restrictions on the methods and timing of telemarketing calls and require that
certain mandatory disclosures be made during the course of a telemarketing call. Some states also
require that telemarketers register in the state before conducting telemarketing business in the
state. We specifically train our telemarketing representatives to handle calls in an approved manner
and believe we comply in all material respects with all federal and state telemarketing
regulations. There can be no assurance, however, that Planet would not be subject to regulatory
challenge for a violation of federal or state law. Annual fees for federal registrations were $7,300 for 2004 and proposed fees for 2005 are
approximately $11,000. In addition, Planet anticipates spending an additional approximately
$5,000-$8,000 on state fees in 2005. Customers of Planet The typical customer for the Companys products is the residential consumer. In excess of one
million customers in this category have purchased the Company products. Additionally, but on a
very limited basis, we sell products to physicians offices as well as HVAC service and duct
cleaning businesses. Suppliers of Planet Planet acquires its products from a variety of manufacturers. The primary suppliers of the
Company products include: American Metal Filter Company (Permanent Electrostatic Filters)
Lifetime Filter Manufacturing, LLC (Disposable Filters)
J. Lamb, Inc. (Bedding Encasings)
Austin Air Systems, LTD (Room Air Cleaners) Sales and Marketing We employ staff to perform and manage sales and marketing functions. Outside resources are
hired on an as-needed basis to augment the internal effort. Currently Planet actively markets on
the Internet, through catalog sales, and inbound and outbound telemarketing. 5




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Employees As of January 1, 2005, Planet employed 9 full-time and 2 part-time employees. The company
also uses periodic temporary labor, as needed. Properties The Planet office is located in approximately 5400 square feet of leased office space in San
Diego, California, subject to a sublease which terminates July 31, 2005. The monthly rental
payment is $6,513 triple net. Risk Factors Amendments to the Telemarketing Sales Rule (the TSR).The amendments to the TSR in 2003 may have
a material impact on both Planets revenue and profitability. The addition of a national
do-not-call list to the growing number of states that already have do-not-call lists has
reduced the number of households that the Company may call. Approximately seventy-percent (70%) of
Planets historical customers have placed their names on the national do-not-call list. In addition to the federal legislation and regulations, there are numerous state statutes and
regulations governing telemarketing activities, which do or may apply to us. For example, some
states also place restrictions on the methods and timing of telemarketing calls and require that
certain mandatory disclosures be made during the course of a telemarketing call. Some states also
require that telemarketers register in the state before conducting telemarketing business in the
state. We specifically train our telemarketing representatives to handle calls in an approved manner and
believe we comply in all material respects with all federal and state telemarketing regulations.
There can be no assurance, however, that Planet would not be subject to regulatory challenge for a
violation of federal or state law. We have experienced losses, we expect future losses and we may not become profitable.For the
years ended December 31, 2004, and 2003, we had net losses of
approximately $773,558 and $574,135,
respectively. As of December 31, 2004, we had an accumulated deficit of approximately $3.7
million. Since we have historically incurred net losses, we expect this trend to continue until some
indefinite date in the future. We may not become profitable. If we do achieve profitability, we
may not be able to sustain or increase profitability on a quarterly or annual basis. We may require additional capital in the future which may not be available.Our future capital
requirements will depend on many factors, including:  
    the cost of manufacturing;
    developing new markets for our products;
    competing technological and market developments; and
    the costs involved in filing, prosecuting and enforcing patent claims. We anticipate that our existing resources combined with revenues will enable us to maintain
our current and planned operations through December 31, 2005. However, changes in our plans or
other events affecting our operating expenses, such as acquisition opportunities, may cause us
to expend our existing resources sooner than expected. We may seek additional funding through private placements of stock or strategic
relationships. But the uncertainty as to our future profitability may make it difficult for us
to secure additional financing on acceptable terms, if we are able to secure additional
financing at all. Insufficient funds may require us to delay, scale back or eliminate some or
all of our activities. We are subject to penny stock regulations.Our common stock is not listed or qualified for
listing on NASDAQ or any national securities exchange but is only sporadically traded in the
over-the-counter market in the so-called OTC Bulletin Board. As a result, an investor will find
it difficult to dispose of, and to obtain accurate quotations as to the value of, our common
stock. 6




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Our common stock is classified as a penny stock by the Securities and Exchange Commission.
The classification severely and adversely affects the market liquidity for our common stock. The
Commission has adopted Rule 15g-9, which establishes the definition of a penny stock for the
purposes relevant to us, as any equity security that has a market price of less than $5.00 per
share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For
any transaction involving a penny stock, unless exempt, the rules require: (i) that a broker or
dealer approve a persons account for transactions in penny stocks; and (ii) the broker or dealer
receive from the investor a written agreement to the transaction, setting forth the identity and
quantity of the penny stock to be purchased. In order to approve a persons account for
transactions in penny stocks, the broker or dealer must (i) obtain financial information and
investment experience objectives of the person; and (ii) make a reasonable determination that the
transactions in penny stocks are suitable for that person and the person has sufficient knowledge
and experience in financial matters to be capable of evaluating the risks of transactions in penny
stocks. The broker or dealer must also deliver, prior to any transaction in a penny stock, a
disclosure schedules prepared by the Commission relating to the penny stock market, which, in
highlight form, sets forth (i) the basis on which the broker or dealer made the suitability
determination and (ii) that the broker or dealer received a signed, written agreement from the
investor prior to the transaction. Disclosure also has to be made about the risks of investing in
penny stocks in public offerings and secondary trading and about the commissions payable to the
broker-dealer and registered representative, current quotations for the securities and the rights
and remedies available to an investor in case of fraud in penny stock transaction. Finally,
monthly statements have to be sent disclosing recent price information for the penny stock held in
the account and information on the limited market in penny stocks. Any inability to adequately retain or protect our employees, customer relationships and proprietary
technology could harm our ability to compete.Our future success and ability to compete depends in
part upon our employees, customer relationships, proprietary technology and trademarks, which we
attempt to protect with a combination of trademark and trade secret claims. These legal
protections afford only limited protection. Further, despite our efforts, we may be unable to
prevent third parties from soliciting our employees or customers or infringing upon or
misappropriating our intellectual property. Our employees, customer relationships and intellectual
property may not be adequate to provide us with a competitive advantage or to prevent competitors
from entering the markets for our product and services. Additionally, our competitors could
independently develop non-infringing technologies that are competitive with, and equivalent or
superior to, our products. We will monitor infringement and/or misappropriation of our proprietary
rights. However, even if we do detect infringement or misappropriation of our proprietary rights,
litigation to enforce these rights could cause us to divert financial and other resources away from
our business operations. The departure of certain key personnel could harm the financial condition of the Company.Several
of our employees are intimately involved in our business and have day-to-day relationships with
critical customers. Planet is not able to afford additional staff to supplement these key
personnel. Competition for highly skilled business, product development, marketing and other
personnel is intense, and there can be no assurance that we will be successful in recruiting new
personnel or in retaining our existing personnel. A failure on our part to retain the services of
these key personnel could have a material adverse effect on our operating results and financial
condition. We do not maintain key man life insurance on any of our employees. We face numerous competitors.We have many competitors with comparable characteristics and
capabilities that compete for the same group of customers. Our competitors are competent and
experienced and are continuously working to take market share away from us. Our competitors have
greater financial, technical, marketing and other resources than we do. Our ability to compete
effectively may be adversely affected by the ability of these competitors to devote greater
resources to the sales and marketing of their products and services than are available to us. There are risks associated with our planned growth.We plan to grow the Companys revenues and
profits by adding to our existing customer base through internal growth and by the acquisition of
other companies. Management believes that Planet can grow through the acquisitions of other allergy control
related companies as part of a roll-up strategy. The acquisition of other companies is uncertain
and contains a variety of business risks, including: cultural differences, the retention of key
personnel, competition, protection of intellectual property, profitability, industry changes and
others. Although we do not have an agreement to acquire any specific company at this time, other than
Allergy Control Products, we intend to attempt to expand our operations through the acquisition of
other companies. Acquisitions and attempted acquisitions may place a strain on our limited
personnel, financial and other resources. Our ability to manage this growth, should it occur, will
require expansion of our capabilities and personnel. We may not be able to find qualified
personnel to fill additional positions or be able to successfully manage a larger organization. We have very limited assets upon which to rely for adjusting to business variations and for
growing new businesses. While 7




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we are likely to look for new funding to assist in the acquisition of other profitable
businesses, it is uncertain whether such funds will be available. There can be no assurance that
we will be successful in raising a sufficient amount of additional capital, or if we are
successful, that we will be able to raise capital on reasonable terms. If we do raise additional
capital, our existing shareholders may incur substantial and immediate dilution. Future sales of our common stock by existing shareholders under Rule 144 or this offering could
decrease the trading price of our common stock.As of December 31, 2004, a total of approximately
1,955,397 shares of outstanding common stock were restricted securities and could be sold in the
public markets only in compliance with rule 144 adopted under the Securities Act of 1933 or other
applicable exemptions from registration. Rule 144 provides that a person holding restricted
securities for a period of one year may thereafter sell, in brokerage transactions, an amount not
exceeding in any three-month period the greater of either (i) 1% of the issuers outstanding common
stock or (ii) the average weekly trading volume in the securities during a period of four calendar
weeks immediately preceding the sale. Persons who are not affiliated with the issuer and who have
held their restricted securities for at least two years are not subject to the volume limitation.
Possible or actual sales of our common stock by present shareholders under Rule 144 could have a
depressive effect on the price of our common stock. We have filed a registration statement to
register many of these shares, which may be sold without the above limitations when and if the
registration statement becomes effective. Our directors and executive officers beneficially own approximately 50% of our stock, including
stock options and warrants exercisable within 60 days of January 1, 2005; their interests could
conflict with yours; significant sales of stock held by them could have a negative effect on our
stock price; shareholders may be unable to exercise control.As of January 1, 2005, our executive
officers, directors and affiliated persons were the beneficial owners of approximately 50% of our
common stock, including stock options exercisable within 60 days of January 1, 2005. As a result,
our executive officers, directors and affiliate persons will have significant ability to:  
    elect or defeat the election of our directors;
    amend or prevent amendment of our articles or incorporation or bylaws;
    effect or prevent a merger, sale of assets or other corporate transaction; and
    control the outcome of any other matter submitted to the shareholders for vote. As a result of their ownership and positions, our directors and executive officers
collectively, are able to significantly influence all matters requiring shareholder approval,
including the election of directors and approval of significant corporate transactions. In
addition, sales of significant amounts of shares held by our directors and executive officers, or
the prospect of these sales, could adversely affect the market price of our common stock.
Managements stock ownership may discourage a potential acquirer from making a tender offer or
otherwise attempting to obtain control of us, which in turn could reduce our stock price or prevent
our shareholders from realizing a premium over our stock price. 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. 
 ITEM 2. DESCRIPTION OF PROPERTY The executive offices are located in approximately 5,400 square feet of leased office space
located at 6835 Flanders Drive, Suite 100, San Diego, California, 92121 subject to a sublease which
terminates July 31, 2005. The sublease may be extended on a month-to-month basis after July 31,
2005. 
 ITEM 3. LEGAL PROCEEDINGS None. 
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Planet held its annual meeting on November 17, 2004 and continued that meeting on November 29,
2004. Only holders of record of Planet common stock on September 30, 2004 were entitled to notice
of and to vote at the Annual Meeting. As of the record date, there were 6,582,884 (or 131,658 post
reverse stock split) shares of Planet common stock outstanding. The following matters were voted on and approved by Planet shareholders: (1) the Asset
Purchase Agreement between Planet and Allergy Free, LLC (Allergy Free), wherein Planet acquired
all of the assets of Allergy Free and assumed certain of the 8




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liabilities of Allergy Free; (2) the establishment of a Royalty Liquidation Trust (Trust) to
collect royalties and other payments due under the licensing agreements with Agway, Inc. and Ryer
Enterprises, LLC (Royalty Contracts) and distribute any such payments to the shareholders of
record of Planet as of September 30, 2004, subject to paying certain expenses and maintaining a
$30,000 reserve for the payment of future expenses related to the Trust and Royalty Contracts; (3)
the amendment to the Restated Articles of Incorporation to effect a reverse stock split of one-for
fifty; (4) the amendment to the Restated Articles of Incorporation to effect a name change from
Planet Polymer Technologies, Inc. to Planet Technologies, Inc.; (5) the election of H.M. Busby,
Scott L. Glenn, Robert J. Petcavich, Ph.D., Ellen Preston and Michael Trinkle to serve as Planets
Board of Directors; (6) the amendment to the 2000 Stock Option Plan (the Plan) to increase the
number of shares reserved for issuance under the Plan from 500,000 shares to 5,000,000 shares; and
(7) the ratification of the approval of J.H. Cohn LLP to serve as Planets independent registered
public accounting firm for the 2004 fiscal year. Items 5 and 7 were approved on November 17, 2004, and Items 1 through 4 and 6 were approved on
November 29, 2004. Items 1 through 4 required and received the approval of the holders of a majority of the
outstanding common stock of the Company; the five persons elected under Item 5 received the most
number of votes cast; with the required quorum present, Items 6 and 7 required and received the
approval of holders of a majority of the outstanding common stock of the Company present in person
or represented by proxy at the meeting. That Proxy Statement previously filed by Planet with the Securities and Exchange Commission on
October 20, 2004, and mailed out to all shareholders of record as of September 30, 2004, contains a
more complete discussion of Items 1 through 7, as summarized above. 
 PART II. 
 ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Companys Common Stock trades on the OTC.BB under the symbol PLNT.OB. The following
table sets forth the high and low sales prices of the Companys Common Stock for the period from
January 1, 2003 through December 31, 2004 as furnished by the OTC.BB. These prices reflect prices
between dealers without retail markups, markdowns or commissions, and may not necessarily represent
actual transactions. These prices also reflect the reverse stock split effective December 6, 2004: Trade PricesHigh
    
    
    LowFiscal year ended December 31, 2003First Quarter
    
    $
    4.00
    
    
    
    0.50Second Quarter
    
    
    5.00
    
    
    
    2.50Third Quarter
    
    
    3.00
    
    
    
    2.50Fourth Quarter
    
    
    3.50
    
    
    
    1.50Fiscal year ended December 31, 2004First Quarter
    
    
    12.50
    
    
    
    1.75Second Quarter
    
    
    10.50
    
    
    
    3.00Third Quarter
    
    
    3.50
    
    
    
    2.50Fourth Quarter
    
    
    3.50
    
    
    
    0.70
 On March 11, 2005, the last reported sale price of the Companys Common Stock on the
Over-the-Counter Bulletin Board was $1.26 per share. As of March 11, 2005, there were approximately
194 holders of record of the Companys Common Stock with 2,180,368 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. 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. 9




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##### Table of Contents



Recent Sales of Unregistered Securities During the period from November 29, 2004, through December 31, 2004, the Company entered into
subscription agreements with investors for the sale of an aggregate of 258,000 shares of Company
common stock at $2.50 a share. The net proceeds received by the company at December 31, 2004
totaled $645,000. The Company relied upon an exemption from registration pursuant to Section 4(2)
of, and Regulation D, promulgated under, the Securities Act. On November 30, 2004, the Company issued 1,655,670 shares of common stock to AF Partners, LLC,
and certain former members of AF Partners as consideration for the assets of Allergy Free, LLC,
valued at $2.50 per share. The Company relied on Section 4(2)of and Regulation D, promulgated
under, the Securities Act, as a basis of exemption from registration. 
 ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION Overview The preparation of financial statements in accordance with accounting principles generally
accepted in the United States of America requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and related notes. Planet evaluates its
estimates and judgments on an on-going basis. Planet bases its estimates on historical experience
and on assumptions that it believes to be reasonable under the circumstances. Planets experience
and assumptions form the basis for its judgments about the carrying value of its assets and
liabilities that are not readily apparent from other sources. Actual results may vary from what
Planet anticipates and different assumptions or estimates about the future could change Planets
reported results. Planet believes the following accounting policies are the most critical to
Planet, in that they are important to the portrayal of its financial statements and they require
Planets most difficult, subjective or complex judgments in the preparation of its financial
statements: Revenue Recognition Planet recognizes revenue on its products when the product is shipped. Planet accrues a
provision for estimated returns concurrent with revenue recognition. In addition, a provision for
potential warranty claims is provided for at the time of sale, based upon warranty terms and the
Companys prior experience. Allowances for Doubtful Accounts Allowances for doubtful accounts receivable are maintained based on historical payment
patterns, aging of accounts receivable, and actual write-off history. Allowances are also
maintained for future sales returns and allowances based on an analysis of recent trends of product
returns. Impairment of Long-Lived Assets In assessing the recoverability of its long-lived assets, Planet must make assumptions
regarding estimated future cash flows and other factors to determine the fair value of the
respective assets. If these estimates or their related assumptions change in the future, Planet may
be required to record impairment charges for these assets. 10




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##### Table of Contents



Statements of Operations Data The following tables set forth certain items in Planets Statements of Operations for the
periods indicated. Years Ended December 31, 2004 and 2003 2004
    
    
    2003
    
    
    Change
    
    
    %Sales
    
    $
    1,180,382
    
    
    $
    2,258,213
    
    
    
    (1,077,831
    )
    
    
    (47.7
    )Cost of Sales
    
    
    407,811
    
    
    
    730,801
    
    
    
    (322,990
    )
    
    
    (44.2
    )Gross Profit
    
    
    772,571
    
    
    
    1,527,412
    
    
    
    (754,841
    )
    
    
    (49.4
    )Operating Expenses
    
    
    1,286,684
    
    
    
    1,874,398
    
    
    
    (587,714
    )
    
    
    (31.4
    )Loss from Operations
    
    
    (514,113
    )
    
    
    (346,986
    )
    
    
    167,127
    
    
    
    48.2Other Income (Expense)
    
    
    (259,445
    )
    
    
    (227,149
    )
    
    
    32,296
    
    
    
    14.2Net Loss
    
    
    (773,558
    )
    
    
    (574,135
    )
    
    
    199,423
    
    
    
    34.7
 Planets net sales decreased 47.7% from $2,258,213 for the twelve months ended December 31,
2003, to $1,180,382 for the twelve months ended December 31, 2004. This decrease was due to
several factors. First, sales in 2003 were impacted positively both from the effects of radio
advertising in late 2002 and early 2003 and from having two active sales locations, with two active
telemarketing staffs. For most of 2004, the Companys San Diego location was the only
telemarketing group in operation. Sales in 2004 were negatively impacted by the Do Not Call
(DNC) legislation which went into effect during the fourth quarter of 2003. Due to DNC
requirements, the company was unable to telemarket its products to a segment of its existing
customers. Cost of Sales decreased 44.2% from $730,801 for the twelve months ended December 31, 2003, to
$407,811 for the twelve months ended December 31, 2004, due mainly to the associated decrease in
sales revenue (units sold) and a small shift in product mix and higher distribution costs. Overall
gross profit, as a percentage of sales, totaled 65.5% for the twelve months ended December 31,
2004, and 67.6% for the twelve months ended December 31, 2003. This change is due to a shift in
product mix in the first quarter of 2004 and higher distribution and other costs resulting from
the relocation to San Diego. This product mix shift was primarily due to an emphasis in the first
quarter of 2004 on the sale of room air cleaners and up-selling across the Companys product line.
The Company expects its profit margin to be impacted in the future by higher distribution costs as
compared to 2004 and 2003. Selling and general and administrative expenses decreased by 31.4% from $1,874,398 for the
twelve months ended December 31, 2003, to $1,286,684 for the twelve months ended December 31, 2004.
Of the $587,714 decrease, approximately $239,000 was attributable to discontinuing the national
radio advertising campaign and the remainder of the decrease was related to decreased headcount and
facility expenses with only one location active for most of 2004. The Other Income(Expense) category includes interest expense of $197,673 and other expenses of
$62,671 for the twelve months ended December 31, 2004. While interest expense was up slightly
($8,211) over the prior year, other expenses increased $22,934, or 57.7% over the twelve months
ended December 31, 2003. This difference was due mainly to moving costs associated with closing
and moving the Companys Houston operations to San Diego during the first quarter of 2004. 11




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##### Table of Contents



Years Ended December 31, 2003 and 2002 2003
    
    
    2002
    
    
    Change
    
    
    %Sales
    
    $
    2,258,213
    
    
    $
    3,787,164
    
    
    
    (1,528,951
    )
    
    
    (40.4
    )Cost of Sales
    
    
    730,801
    
    
    
    1,211,128
    
    
    
    (480,327
    )
    
    
    (39.7
    )Gross Profit
    
    
    1,527,412
    
    
    
    2,576,036
    
    
    
    (1,048,624
    )
    
    
    (40.7
    )Operating Expenses
    
    
    1,874,398
    
    
    
    2,860,129
    
    
    
    (985,731
    )
    
    
    (34.5
    )Loss from Operations
    
    
    (346,986
    )
    
    
    (284,093
    )
    
    
    62,893
    
    
    
    22.1Other Income (Expense)
    
    
    (227,149
    )
    
    
    (245,449
    )
    
    
    (18,300
    )
    
    
    (7.5
    )Net Loss
    
    
    (574,135
    )
    
    
    (529,542
    )
    
    
    44,593
    
    
    
    8.4
 Net sales decreased 40.4% from $3,787,164 for the year ended December 31, 2002 to $2,258,213
for the year ended December 31, 2003. This decrease was due primarily to the decision to
discontinue the national radio advertising campaign in April 2003. Cost of sales decreased 39.7% from $1,211,128 for the year ended December 2002 to $730,801 for
the year ended December 31, 2003, due to the associated decrease in sales revenue (units sold).
Overall gross profit, as a percentage of sales, was relatively constant for the years ended 2003
and 2002, at 67.6% and 68.0%, respectively. This slight decrease year over year was due to the
relatively consistent product mix during the two years. Selling and general and administrative expenses decreased by 34.5% from $2,860,129 for the
year ended December 31, 2002 to $1,874,398 for the year ended December 31, 2003. Of this $985,731
decrease, $939,000 was due to discontinuing the national radio advertising campaign and
approximately $15,000 due to a reduction in lease expense in Houston during 2003, where the Company
down-sized into a smaller portion of the existing space. The Other Income(Expense) category mainly includes interest expense which totaled $189,462 for
the year ended December 31, 2003, an increase of $28,019 or 17.4% over the prior year due to higher
outstanding borrowings during the 2003 year. Off Balance Sheet Arrangements None. Liquidity And Capital Resources Cash and cash equivalents totaled $374,923 at December 31, 2004, compared to $128,005 at
December 31, 2003. Although the Company used cash totaling $435,833 in its operations during 2004,
an advance from a related party of $120,000 and proceeds from investors notes payable of $142,000
offset some of the cash used in operations. Payments totaling $226,612 were made to pay principal
portions of notes payable during the year. During the fourth quarter of 2004, shares were sold to
investors through a private placement offering which provided operating capital of approximately
$645,000 to pay expenses incurred in the combination of Allergy Free and Planet Polymer and provide
further support for sales and marketing efforts. The Company intends
to continue its Private Placement Offering for an additional 90 days or more in an effort to
provide more working capital and consider acquisition opportunities. No assurance can be given
that the Company will be able to obtain such financing or internally generate cash flows, which may
impact the Companys ability to continue as a going concern. Inventories at December 31, 2004 decreased $65,128 or 77.4% to $19,012 compared to $84,140 at
December 31, 2003. This decrease continues the trend started in 2003, that as sales and customer
demand slipped during the year, inventory levels dropped as well, as management adjusted ordering
levels to meet demand. 12




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Recent Accounting Pronouncements In December 2004, the FASB issued SFAS No. 123R, Share-Based Payment (SFAS 123R), a
revision of SFAS No. 123, Accounting for Stock-Based Compensation, requiring that the
compensation cost relating to share-based payment transactions, including grants of employee stock
options, be measured and recognized in the financial statements using the fair value of the
compensation awards. The provisions of SFAS 123R are effective for us for the first interim or
annual reporting period that begins after December 15, 2005; therefore, the Company will adopt the
new requirements no later than the beginning of its first quarter of fiscal 2006. Adoption of the
expensing requirements will reduce the Companys reported earnings. Management is currently
evaluating the two methods of adoption allowed by SFAS 123R; the modified-prospective transition
method, and the modified-retrospective transition method. In November 2004, the FASB issued SFAS No. 151, Inventory Costs, an amendment of ARB No. 43,
Chapter 4 (SFAS 151). SFAS 151 clarifies that abnormal inventory costs such as costs of idle
facilities, excess freight and handling costs, and wasted materials (spoilage) are required to be
recognized as current period charges. The provisions of SFAS 151 are effective for fiscal years
beginning after June 15, 2005. The adoption of SFAS 151 is not expected to have a significant
impact on the Companys financial position or results of operations. 
 ITEM 7. FINANCIAL STATEMENTS The information required by this item is included in the Appendix attached hereto. 
 ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES None. 
 ITEM 8A. CONTROLS AND PROCEDURES EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES Our independent registered public accounting firm has informed the Company of a material
weakness in the Companys internal control over financial reporting due to a lack of segregation of
duties regarding the reporting and disclosure of information required to be disclosed in the
reports we file with the SEC. Based upon that information, the Company has already hired a
Controller and other personnel to rectify the potential concern. After these recent changes, the
Company carried out an evaluation, under the supervision of our management, including our Chief
Executive Officer and Chief Financial Officer, of the design and operation of these new disclosure
controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, our
Chief Executive Officer and Chief Financial Officer concluded that with the recent changes our
disclosure controls and procedures are effective in timely alerting them to material information
relating to the Company required to be included in our periodic SEC filings. CHANGES IN INTERNAL CONTROLS Based
upon the advice of our independent registered public accounting firm, the Company has
hired a Controller and other personnel to rectify the potential concern. After these recent
changes, the Company carried out an evaluation, under the supervision of our management, including
our Chief Executive Officer and Chief Financial Officer, of the design and operation of these new
disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon that
evaluation, our Chief Executive Officer and Chief Financial Officer concluded that with the recent
changes our disclosure controls and procedures are effective in timely alerting them to material
information relating to the Company required to be included in our periodic SEC filings. 
 ITEM 8B. OTHER ITEMS None. 13




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##### Table of Contents



PART III. 
 ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS Directors and Executive Officers. The names of directors and executive officers and certain information about each person is set
forth below: Name
    
    Age
    
    Principal OccupationScott L. Glenn
    
    
    54
    
    
    Chairman of the Board of Directors, President
and Chief Executive Officer and Business
ExecutiveEric B. Freedus
    
    
    55
    
    
    Director, AttorneyH.M. Busby
    
    
    66
    
    
    Director, Private InvestorMichael Trinkle
    
    
    51
    
    
    Business ExecutiveEllen M. Preston
    
    
    49
    
    
    Business ConsultantLeslie White
    
    
    52
    
    
    Secretary and Chief Financial OfficerBret Megargel
    
    
    36
    
    
    Vice President
 Scott L. Glenn was elected to the Board and appointed Chairman, President and Chief Executive
Officer of Planet in November 2004. Since October 2000 he, or an affiliated entity controlled by
him, has been the Manager and a member of Allergy Free, LLC. Mr. Glenn is also the Managing
Partner of Windamere Venture Partners and its investment funds (Windamere I, LLC, Windamere II,
LLC, and Windamere III, LLC), and has been since 1996. He also currently serves as a director and
founder of GlobalEdge, Inc., Kanisa Pharmaceuticals, Cadence Pharmaceuticals, Veras
Pharmaceuticals, Somaxon Pharmaceuticals, and Conception Technologies through SR Technology
Associates. Previously, from 1988 until 1995, Mr. Glenn served as President/CEO, and then Chairman
of Quidel Corporation, a leading point of care diagnostic business. Before serving in those
capacities from 1983 through 1988, Mr. Glenn was vice president of development/operations of
Quidel. From 1984 to 1992, Mr. Glenn served in numerous management positions, including
Division/General Manager at Allergan Pharmaceuticals, Inc. Mr. Glenn has a Bachelor of Science
degree in Finance and Accounting from California State University at Fullerton. Eric B. Freedus was elected to the Board in January 2005. Mr. Freedus has been an attorney in
private practice since 1974 and is currently the president of the law firm of Frank and Freedus,
APC. Mr. Freedus currently focuses his law practice in the area of special education litigation.
Mr. Freedus received his undergraduate degree from the State University of New York at Buffalo in
1971 and his law degree from the University of Toledo in 1974. H. M. Mac Busby has 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. Mr. Busby was President and
Chief Executive Officer and Chief Financial Officer of the Company from February 2003 until
November 2004. In May 2003, Mr. Busby was appointed Secretary of the Company. 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 was Chairman of Sun
Protective International and Sun-Gard USA. Mr. Busby earned his B.S. in Business Administration
from Indiana University. Michael A. Trinkle currently serves as President of Conception Technologies, LP, and has held
the position since 1993. Mr. Trinkle was also a member of Allergy Free, LLC, and served as its
President from August 2001 to March 31, 2004. During the 15 years prior to joining Conception
Technologies, LP, Mr. Trinkle was employed by Allergan Pharmaceuticals where he held management
positions in the areas of operations, sales, marketing, and quality assurance. Mr. Trinkle was
elected to the Board in November 2004. 14




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##### Table of Contents



Ellen M. Preston was a member of Allergy Free, LLC, since October 2000. In addition to being
a member of Allergy Free, LLC, since 1998, Ms. Preston has been a business consultant advising
medical device companies in the areas of strategic market assessment, business development, brand
development and strategy, and communications. From 2000 until 2002, Ms. Preston was a venture
partner with Windamere Venture Partners. While with Windamere Venture Partners, Ms. Preston was a
founder of Dexcom, Inc., a corporation engaged in the development of an implantable glucose sensor,
and founded Miramedica, Inc. a company specializing in computer-aided detection. Ms. Preston
served as interim president of Miramedica, Inc., which was sold to Kodak in 2003. From 1997-1998,
Ms. Preston was Vice President of Sales and Marketing for Amira Medical, Inc. She held a similar
position with Biopsys Medical, Inc. from 1996-1997. Ms. Preston was elected to the Board in
November 2004. Leslie White has been the Controller of Allergy Free, LLC since late 2000 and is also a member
of the Company. Prior to joining Allergy Free, LLC, Ms. White was Vice President and Controller of
several privately held companies in the San Diego area and from 1990-1994 served as the Finance
Manager and Controller of Quidel Corporation, a publicly-held company. Ms. White worked for the
firm of Ernst & Young and was awarded a CPA certificate in 1989. Ms. White has an MBA from San
Francisco State University . Bret Megargel most recently served from 2002 to 2004 as Vice President of Business Development
for Avera Pharmaceuticals, Inc., a private pharmaceutical development company. Mr. Megargel is a
co-founder of Avera, and during his tenure led the successful licensing or acquisition of three
novel pharmaceutical products from global pharmaceutical companies with combined deal value of
greater than US$100 million. Prior to the founding of Avera, Mr. Megargel served as a Venture
Partner for Windamere Venture Partners, from 1999 to 2003, during his tenure, he served as Vice
President of Business Development for MD Edge, Inc., and Director of Business Development for
Converge Medical, Inc., and was a member of the founding team of Dexcom, Inc. From 1991 to 1996,
Mr. Megargel served as a consultant for Marketing Corporation of America, where he was a case
manager for product development, licensing and acquisition, and marketing strategy projects for
market leading healthcare clients. Mr. Megargel holds a B.A. in Economics from Dartmouth College,
and an M.B.A. from the Stanford University Graduate School of Business. Board Committees and Meetings. During 2004, the Board of Directors held five (5) meetings. The Board of Directors has an
Audit Committee and a Compensation Committee. In addition, in 2004 the Companys entire current
Board acted as the Nominating Committee and nominated Scott Glenn, Michael Trinkle and Ellen
Preston to serve as directors with Robert Petcavich and H. Mac Busby in compliance with the Asset
Purchase Agreement dated March 18, 2004, and entered into by and between the Company and Allergy
Free, LLC. On January 18, 2005, Robert Petcavich tendered his resignation as a director. On that
same date, at a meeting of the Board of Directors, Mr. Eric B. Freedus was elected as a director of
the Company. On November 17, 2004, Michael Trinkle and H. Mac Busby were approved as Audit Committee
members. The Audit Committee is responsible for the engagement of the Companys independent
registered public accounting firm, consulting with that firm concerning the audit plan and
reviewing the comments and recommendations resulting from their audit. The current Audit Committee
Charter was adopted on January 25, 2005. While each of the
members of the Audit Committee has significant knowledge of financial
matters, neither of the Audit Committee members has been designated
as an audit committee financial expert as defined under
Item 401(e)(1) of Regulation S-B of the Securities Exchange
Act of 1934, as amended. The Company believes that the current members
of the Audit Committee can competently perform the functions required
of them as members of the Audit Committee. The Audit Committee has reviewed and discussed the audited financial statements with
management and it has discussed with the independent registered public accounting firm the matters
required to be discussed by SAS 61. Furthermore, the Audit Committee has received the written
disclosures and the letter from the independent registered public accounting firm required by
Independence Standards Board Standard No. 1 and has discussed with the independent registered
public accounting firm their independence and based on the review of the financial statements and
discussions with management and the independent registered public accounting firm, it recommended to the Board
of Directors that the audited financial statements be included in this annual report. On November 17, 2004, Ellen Preston and Robert Petcavich were approved as Compensation
Committee members. Upon the resignation of Robert Petcavich and the election of Eric Freedus as a
director, Mr. Freedus was named to replace Dr. Petcavich as a member of the Compensation Committee.
The Compensation Committee is responsible for reviewing the compensation and benefits of the
Companys executive officers, making recommendations to the Board of Directors concerning the
compensation and benefits of the Companys executive officers and administering the Companys Stock
Incentive Plans. On November 17, 2004, Scott Glenn and Michael Trinkle were approved as Nominating Committee
members The Nominating Committee will be responsible for identifying, evaluating, and recommending
candidates to serve as directors of the Company and to serve as a focal point for communication
between such candidates, the Board, and the Companys management and 15




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##### Table of Contents



will make recommendations to the Board of Directors concerning the nomination of candidates to
be elected by the Companys shareholders as a director of the Company. On January 25, 2005, the Company adopted a code of ethics for its officers and other key
personnel involved in the Companys operations. During 2004, each Board member attended 75% or more of the aggregate of the meetings of the
Board, and of the committees on which he or she served, held during the period for which he or she
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 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 a 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, 2004, all Section 16(a) filing requirements applicable to its officers,
directors and greater than ten percent (10%) beneficial owners were filed. However, certain of the
filings were late: AF Partners, LLC, filed a Form 5 on January 18, 2005, to reflect stock issuance pursuant to
the Asset Purchase Agreement between the Company and Allergy Free, dated November 30, 2004. Ellen Preston filed a Form 5 on January 18, 2005, to reflect stock issuance pursuant to the
Asset Purchase Agreement between the Company and Allergy Free, dated November 30, 2004. Leslie White filed a Form 5 on January 18, 2005, to reflect stock issuance pursuant to the
Asset Purchase Agreement between the Company and Allergy Free, dated November 30, 2004. Mac Busby filed a Form 5 on January 20, 2004, to reflect the issuance of stock option grant on
May 19, 2003. Ronald Sunderland filed a Form 5 for the fiscal year ended December 31, 2004, to reflect his
no longer being a director and therefore no longer subject to Section 16 reporting requirements. 
 ITEM 10. EXECUTIVE COMPENSATION Compensation of Directors and Executive Officers Directors and Executive Officers may be granted options to purchase Common Stock under the
Companys 1995 Stock Option Plan (1995 Option Plan) and the 2000 Stock Incentive Plan (2000
Incentive Plan). As of March 2005, the Board approved an amendment to the 2000 Incentive Plan to
increase the authorized number of shares to 250,000 shares, which will be submitted to the
shareholders at the next meeting of shareholders. During 2004, options to purchase shares of the Companys Common Stock were granted to the
Companys directors as follows: (a) on November 17, 2004, the Board granted stock options to Mr.
Busby, Dr. Petcavich, Mr. Trinkle and Ms. Preston to purchase 500 shares of Planet common stock at
an exercise price of $2.50 per share, and (b) on November 30, 2004, the board granted stock options
to Scott Glenn to purchase 100,543 shares of Planet common stock at an exercise price of $3.50 per
share. During 2005, the Board granted stock options to (a) Eric Freedus to purchase 10,500 shares of
Planet common stock at an exercise price of $3.00 per share as compensation for serving as a
director, (b) Mr. Busby, Mr. Trinkle and Ms. Preston to purchase 10,000 shares of Planet common
stock at an exercise price of $3.00 per share as compensation for serving as a directors, (c) Ms.
White and Mr. Megargel to purchase 30,000 shares of Planet common stock at an exercise price of
$3.00 per share as compensation for serving as officers of the Company, and (d) Mr. Glenn to
purchase 25,000 shares of Planet common stock at an exercise price of $3.00 per share as
compensation for serving as an officer of the Company. 16




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##### Table of Contents



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, 2004, 2003, and 2002
certain compensation awarded or paid to, or earned by the Companys Executive Officers. Summary Compensation Table SecuritiesUnderlyingName and Principal Position
    
    Year
    
    
    Salary($)
    
    
    
    
    
    
    Bonus($)
    
    
    Options(#)
    
    
    OtherRobert J. Petcavich
    
    
    2004
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    500
    
    
    
    (1
    )
    
    $
    Former Chairman of the Board
    
    
    2003
    
    
    
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    
    
    
    $
    47,180
    
    
    
    (3
    )and Chief Technical Officer
    
    
    2002
    
    
    $
    170,038
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    
    
    
    $
    3,241
    
    
    
    (2
    )H.M. Busby
    
    
    2004
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    500
    
    
    
    (1
    )
    
    $
    29,630
    
    
    
    (7
    )Former Chief Executive Officer,
    
    
    2003
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    
    
    
    $
    31,677
    
    

    
    (3
    )President and Chief Financial
    
    
    2002
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    
    
    
    $
    OfficerRichard C. Bernier
    
    
    2004
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    
    
    
    
    Former Chief Executive Officer
    
    
    2003
    
    
    
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    
    
    
    $
    19,125
    
    
    
    (3
    )and President
    
    
    2002
    
    
    $
    117,713
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    
    
    
    $
    Scott Glenn
    
    
    2004
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    100,543
    
    
    
    (4
    )
    
    $
    Chairman, Chief Executive Officer
    
    
    2003
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    
    
    
    $
    and President
    
    
    2002
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    
    
    
    $
    Leslie White (6)
    
    
    2004
    
    
    $
    52,031
    
    
    
    (5
    )
    
    $
    
    
    
    
    
    
    
    
    
    
    
    $
    Secretary and Chief Financial Officer
    
    
    2003
    
    
    $
    51,445
    
    
    
    (5
    )
    
    $
    
    
    
    
    
    
    
    
    
    
    
    $
    2002
    
    
    $
    51,015
    
    
    
    (5
    )
    
    $
    
    
    
    
    
    
    
    
    
    
    
    $
    
   (1)
    Represents options granted November 17, 2004, for compensation as a director.(2)
    Represents auto expense reimbursement paid by the Company.(3)
    Represents consulting fees paid for their services to the Company in 2003.(4)
    Represents an option granted on November 30, 2004, with an exercise price of $3.50 per
share. 25,136 of the Options granted are currently exercisable, and the remaining options
to purchase 75,407 shares begin vesting on November 30, 2005.(5)
    Represents compensation paid by Allergy Free, LLC, prior to December 1, 2004, and by
Planet after that date.(6)
    Ms. White is employed by Conception Technologies, L.P., a California limited
partnership (Conception), and for the past three years has devoted approximately fifty
percent (50%) of her work time to the business of the Allergy Free (and after December 1,
2004 to the business of Planet Technologies, Inc.) Allergy Free (and now Planet) reimbursed
Conception for approximately fifty percent (50%) of the compensation Conception pays to Ms.
White as reflected in the table.(7)
    Represents consulting fees paid to Mr. Busby for his services in 2004. 17




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##### Table of Contents



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 December 31, 2004, there were no shares available for grant under the Option Plans,
which was expanded to 100,000 in November 2004. 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, 2004, 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): Name
    
    No. of Securities
Underlying Options
    
    Percent of Total
Options Granted to
Employees
    
    Exercise Price
($/share)
    
    Expiration DateScott Glenn
    
    100,543
    
    100%
    
    $3.50
    
    November 30, 2014
 Aggregated Option Exercises Last Fiscal Year and Fiscal Year End Option Values Shares
    
    
    
    
    
    
    Number of Securities
    
    
    Value of Unexercised In-the-Acquired
    
    
    
    
    
    
    Underlying Unexercised
    
    
    Money Options at Fiscal Yearon
    
    
    Value
    
    
    Options at Fiscal Year End (2)}
    
    
    End ($) (1)Name
    
    Exercise(#)
    
    
    Realized
    
    
    Exercisable
    
    
    Unexercisable
    
    
    Exercisable
    
    
    UnexercisableR Petcavich
    
    
    1,000
    
    
    
    -0-
    
    
    
    250
    
    
    
    500
    
    
    $
    0
    
    
    $
    0H. M. Busby
    
    
    2,000
    
    
    
    -0-
    
    
    
    360
    
    
    
    500
    
    
    $
    0
    
    
    $
    0Scott Glenn
    
    
    -0-
    
    
    
    -0-
    
    
    
    25,136
    
    
    
    75,407
    
    
    $
    0
    
    
    $
    0
   (1)
    Calculated based on the estimated fair market value of the Companys Common Stock as of
December 31, 2004, less the exercise price payable upon the exercise of such options. Such
estimated fair market value as of December 31, 2004, was $.70, the last transaction price
posted at the close of trading on December 31, 2004.(2)
    The certain former directors of Planet surrendered Out of the Money stock options
including Robert J. Petcavich, 3,294; and H.M. Busby 964. Description of Employee Benefit Plans: 2000 Stock Incentive Plan Planets 2000 Stock Incentive Plan was approved by Planets shareholders at its annual meeting
of shareholders on May 1, 2000. The Board of Directors reserved 500,000 shares of common stock for
issuance under the 2000 Plan, together with any remaining shares of common stock eligible for
issuance under the 1995 Stock Option plan which expire unexercised. A committee consisting of
Planets Board of Directors or appointed Board members has the sole discretion to determine under
which plan stock options and bonuses may be granted. The purpose of the 2000 Incentive Plan is similar to that of the 1995 Plan, which was to
attract and retain qualified personnel, to provide additional incentives to employees, officers,
directors and consultants of the Company and to promote the success of the Companys business. As
was the case under the 1995 Plan, under the 2000 Plan, Planet may grant or issue incentive stock
options and non-statutory stock options to eligible participants, provided that incentive stock
options may only be granted to employees of Planet. The 2000 Stock Incentive Plan also allows
shares of common stock to be issued under a Stock Bonus Program through direct and immediate
issuances. Similar to stock options granted under the Plan, stock bonus awards may be subjected to
a vesting schedule determined by the Board of Directors. Option grants under both plans are
discretionary. Options granted under both plans are subject to vesting as determined by the Board,
provided that the option vests as to at least 20% of the shares subject to the option per year.
The maximum term of a stock option under both plans is ten years, but if the optionee at the time
of grant has voting power over more than 10% of the Companys outstanding capital stock, the
maximum term is five years under both plans. Under both plans if an optionee terminates his or her
service to Planet, such optionee may exercise only those option shares vested as of the date of 18




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##### Table of Contents



termination, and must affect such exercise within the period of time after termination set
forth in the optionees option. The exercise price of incentive stock options granted under both
plans must be at least equal to the fair market value of the Common Stock of the Company on the
date of grant. Under both plans the exercise price of options granted to an optionee who owns
stock possessing more than 10% of the voting power of Planets outstanding capital stock must equal
at least 110% of the fair market value of the common stock on the date of grant. Payment of the
exercise price may be made in cash, by delivery of other shares of the Companys common stock or by
any other form of legal consideration that may be acceptable to the Board. 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 are
permitted to contribute 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 have been
no Company contributions to the 401(k) Plan in 2004 or 2003. Employment Agreements and Change in Control Arrangements The Company has entered into an employment agreement with Scott L. Glenn as President/CEO and
Chairman of the Board of the Company for a three-year period, which expires on November 29, 2007,
The Company agrees to pay Mr. Glenn a salary of $100 per month (plus healthcare and other benefits)
until it is determined by the Board that the Company could afford to pay compensation comparable to
CEOs of other similar companies. In exchange for foregoing a salary, the Company granted to Mr.
Glenn stock options exercisable at the then fair market value at such time as may be required to
maintain the aggregate number of stock options granted to Mr. Glenn at an amount not less than five
(5%) percent of the issued and outstanding stock of the Company (on a fully diluted basis) during
his three year term of employment. The Company has entered into a Consulting Agreement with Dr. Petcavich pursuant to which he
retains the 500 options granted to him as a director plus an hourly rate to be determined. Prior to November 30, 2004 the Company had an agreement with H.M. Busby whereby the Company
had agreed to pay Mr. Busby $100 per hour for work he performed on behalf of the Company. In January 2005, the Company agreed to employ Bret Megargel as Vice President of Marketing and
Business Development at an annualized salary of $96,000. In March 2005, Mr. Megargels annual
salary was increased to $192,000. Mr. Megargel was also issued 30,000 stock options under the
2000 Stock Option Plan. 19




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##### Table of Contents






ITEM. 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCK HOLDER MATTERS

Equity Compensation Plan Information

(a)
    
    
    (b)
    
    
    (c)Plan category
    
    
    Number of securities
to be
issued upon exercise of
outstanding options,
warrants and rights
    
    
    Weighted-average
exercise
price of outstanding
\options, warrants and
rights
    
    
    Number of securities
remaining available for
future issuance under
equity compensation
plans
(excluding securities
reflected in column (a))Equity compensation
plans
approved by security
holders
    
    
    107,413
    
    
    $8.193
    
    
    None (2)Equity compensation
plans
not approved by security
holders (1)
    
    
    N/A
    
    
    N/A
    
    
    N/ATotal
    
    
    107,413
    
    
    $8.193
    
    
    None (2)




---

|(1) | The Company does not have any equity compensation plans that have not been approved by
Shareholders.                                                                                                                                                                                                                                                                      
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) | As of March 11, 2005, the Company has granted options exceeding the number of shares
authorized by the shareholders under the 2000 Stock Incentive Plan by 130,913 shares. The
Board has approved an amendment to the plan to increase the authorized number of shares to
250,000 shares, which will be submitted to the shareholders at the next meeting of
shareholders.

20



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##### Table of Contents



The following table sets forth certain information regarding the ownership of the Companys
Stock as of December 31, 2004 by: (i) each director and nominee for 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, based upon information
reported to the Company or publicly available reports filed with the SEC. Beneficial OwnershipPercentage of ClassTitle of Class
    
    Beneficial Owner
    
    Number of Shares (1)
    
    Owned (2)Common
    
    Scott L. Glenn (3)

6402 Cardeno Drive

La Jolla, CA 92037
    
    995,942
    
    45.7%Common
    
    Eric B. Freedus (4)
    
    2,153
    
    0.1%1202 Ketner Blvd., Ste. 6000San Diego, CA 92101Common
    

    H.M. Busby (5)
    
    7,012
    
    0.3%3852 Alameda PlaceSan Diego, CA 92103Common
    
    Michael A. Trinkle (5)
    
    55,873
    
    2.6%3495 Via Zara CourtFallbrook, CA 92028Common
    
    Ellen Preston (5)
    
    26,565
    
    1.2%1825 Sheridan AvenueSan Diego, CA 92103Common
    
    Leslie White (6)
    
    9,312
    
    0.4%18479 Calle La SerraRancho Santa Fe, CA 92091Common
    
    All executive officers and
directors as a group
    
    1,096,857
    
    50.5%Common
    
    William and Lisa Barkett
    
    308,456
    
    14.1%7544 Eads #FLa Jolla, CA 92037Common
    
    J. Roberts Fosberg
    
    158,382
    
    7.3%2440 Toyon RoadHealdsburg, CA 95448Common
    
    Windamere III, LLC (7)
    
    200,000
    
    9.2%6402 Cardeno Dr.La Jolla, CA 92037
    21




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##### Table of Contents



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 the shares outstanding on March 11, 2005. (3) Includes 770,806 shares owned by AF Partners, LLC, which is controlled by Mr. Glenn and
200,000 shares owned by Windamere III, LLC, over which Mr. Glenn shares control (see Note (5)
below). Does not include options to purchase 75,407 shares which begin vesting on November 30,
2005. Does not include 25,000 shares issuable upon exercise of stock options which expire on
January 25, 2015, and which begin vesting on January 25, 2006. (4) Does not include 500 shares issuable upon exercise of stock options which expire on
January 18, 2015, and which begin vesting on January 18, 2006, or 10,000 shares issuable upon
exercise of stock options which expire on January 25, 2015, and which begin vesting on January 25,
2006. (5) Does not include 500 shares issuable upon exercise of stock options which expire on
November 17, 2014, and which begin vesting on November 17, 2005, or 10,000 shares issuable upon
exercise of stock options which expire on January 25, 2015, which begin vesting on January 25,
2006. (6) Does not include 30,000 shares issuable upon exercise of stock options which expire on
January 31, 2015, and which begin vesting on January 31, 2006. (7) Windamere III, LLC, is under the joint control of Mr. Glenn and St. Paul Travelers
Companies, Inc., its affiliates Split-Rock Partners, LLC, and St. Paul Fire and Marine Insurance
Company, whose business address is 385 Washington Street, St. Paul, Minnesota 55102. 
 ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. On November 30, 2004, Planet acquired all of the assets of Allergy Free, LLC, which is the
historical business described in this 10-KSB for approximately 1.65 million shares of Planet stock
(after giving effect to the reverse stock split), a convertible note of $274,300, and assumption of
debt. The transaction was completed pursuant to an Asset Purchase Agreement between Planet and
Allergy Free, LLC. (Agreement) As a result of the acquisition, Allergy Frees historical
financial information is included in the consolidated financial results of Planet. Allergy Free,
LLC, was and is controlled by Scott Glenn, who became Planets Chairman, President and CEO. During the period from November 30, 2004, through January 10, 2005, Planet has sold
approximately 314,000 shares to investors, pursuant to subscription agreements and in reliance upon
an exception from registration provided under Regulation D. 200,000 of the shares were sold to a
fund controlled by Scott Glenn. Since
January 1, 2004, the Company has issued and sold 7,500 shares in connection with the
exercise of certain stock options by current and former directors of the Company. Mr. Freedus requested to be named a director and the Company agreed to appoint Mr. Freedus as
a director based upon his and his familys share holdings in Planet and the Companys evaluation of
Mr. Freedus background and qualification to serve as a director. There are no arrangements or
understandings between Mr. Freedus and any other persons regarding how long Mr. Freedus will
continue to serve as a director. Over the previous two (2) year period, there has been no transaction or proposed transaction
between the Company and Mr. Freedus. 22




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##### Table of Contents



ITEM 13. EXHIBITS. (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. Exhibits. Exhibit Number
    
    Description.2.1(8)
    
    Asset Purchase Agreement dated March 18, 2004, between the Company and Allergy
Free.2.2(12)
    
    Amendments to Asset Purchase Agreement dated March 18, 2004.3.1(1)
    
    Restated Articles of Incorporation of the Registrant.3.2(1)
    
    Restated Bylaws of the Registrant.3.3(11)
    
    Certificate of Amendment of Articles of Incorporation of Company dated
November 30, 2004.4.1
    
    Reference is made to Exhibits 3.1, 3.2 and 3.3.4.6(1)
    
    Specimen Stock Certificate.10.1(1)
    
    Form of Indemnity Agreement entered into between the Registrant and certain of
its executive officers and directors.10.2(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)
    
    Agreement to Assign Proprietary Rights between the Registrant and Dr. Robert
J. Petcavich.10.6(1)
    
    Form of Confidential Information Agreement entered into between the Registrant
and certain former employees.10.7(2)
    
    Warrant to Purchase Common Stock, dated March 9, 2000, issued by the
Registrant to LBC Capital Resources, Inc.10.8(3)
    
    Registrants 2000 Stock Incentive Plan (the 2000 Plan).10.9(3)
    
    Form of Incentive Stock Option Grant under the 2000 Plan.10.10(3)
    
    Form of Non-statutory Stock Option Grant under the 2000 Plan.10.11(5)
    
    Warrant to purchase Common Stock, dated March 20, 2001, issued by the
Registrant to LBC Capital Resources, Inc.10.12(6)
    
    Form of Sale and License Agreement dated March 2003 with Agway, Inc. (animal
feed products).
 23




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##### Table of Contents



Exhibit Number
    
    Description.10.13(6)
    
    Form of Sale and License Agreement dated March 2003 with Agway, Inc. (fruit
and vegetable products).10.14(6)
    
    Form of First Amendment to License Agreement with Agway, Inc.10.15(13)
    
    Form of Consulting Agreement with Robert Petcavich.10.16(6)(7)
    
    Form of Purchase Sale and License Agreement dated May 1, 2003, with Ryer
Enterprises, LLC.10.17(9)
    
    Form of Amendment dated January 31, 2004, to Purchase, Sale and License
Agreement with Ryer Enterprises, LLC.10.18(10)
    
    Form of Royalty Contract dated on or about June 2004 with Ryer, Inc.10.19(13)
    
    Form of Employment Agreement with Scott Glenn.10.20(13)
    
    Form of subscription agreement for 2004 private placement.10.21
    
    Form of Agreement and Plan of Merger dated March 7, 2005, with Allergy Control
Products and Jonathon T. Dawson.10.22
    
    Form of Sub-Lease Agreement dated November 1, 2003, with Conception
Technologies, L.P.10.23
    
    Form of License Agreement dated January 1, 1997, and amendments thereto, with
Rick L. Chapman.10.24
    
    Form of Supply Agreement dated January 27, 2004, with American Metal Filter
Company.10.25
    
    Form of Royalty Liquidation Trust dated as of November 29, 2004, with U.S.
Bank.10.26
    
    Form of employment agreement effective February 1, 2005, with Bret Megargel.11.1(2)(4)
    
    Statement of Computation of Common and Common Equivalent Shares.14.1
    
    Code of Business Conduct and Ethics.23.1
    
    Consent of J.H. Cohn LLP.31.1
    
    Certification of Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Chief Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.32.1
    
    Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Chief Financial Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
   (1)
    
    Previously filed as an exhibit to the Registrants Registration Statement on Form SB-2,
as amended (No. 33-91984 LA) and incorporated herein by reference.(2)
    
    Previously filed as an exhibit to the Registrants Annual Report on Form 10-KSB filed for
the fiscal year ended December 31, 1999 and incorporated herein by reference. 24




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##### Table of Contents



(3)
    
    Previously filed as an exhibit to the Registrants Registration Statement on Form S-8
(No. 333-38500) filed on June 2, 2000 and incorporated herein by reference.(4)
    
    Previously filed as an exhibit to the Registrants Quarterly Report on Form 10-QSB for
the quarter ended June 30, 2000.(5)
    
    Previously filed as an exhibit to the Registrants Quarterly Report on Form 10-QSB for
the quarter ended March 31, 2001.(6)
    
    Previously filed as an exhibit to the Registrants Annual Report on Form 10-KSB filed for
the fiscal year ended December 31, 2002 and incorporated herein by reference.(7)
    
    Previously filed as an exhibit to the Registrants Quarterly Report on Form 10-QSB for
the quarter ended March 31, 2003.(8)
    
    Previously filed as an exhibit to the Registrants Form 8K filed March 23, 2004 Report.(9)
    
    Previously filed as an exhibit to the Registrants Annual Report on Form 10-KSB for the
quarter ended December 31, 2003.(10)
    
    Previously filed as an exhibit to the Registrants Quarterly Report on Form 10-QSB for
the quarter ended June 30, 2004.(11)
    
    Previously filed as an exhibit to the Registrants Form 8K filed December 16, 2004
Report.(12)
    
    Previously filed as an exhibit to Registrants Proxy Statement dated October 20, 2004.(13)
    
    Previously filed as an exhibit to Registrants SB-2 dated February 4, 2005. 
 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES Audit Fees For professional services rendered by the independent registered public accounting firm for
the audit of the Companys annual financial statements and review of financial statements included
in the Companys Form 10-QSB. The aggregate fees billed by the Companys independent registered
public accounting firm, J.H. Cohn LLP, for 2004 and 2003 were $34,300 and $21,850, respectively. Audit Related Fees The aggregate fees billed in 2004 and 2003 by the Companys independent registered public
accounting firm for assurance and related services by the independent registered public accounting
firm that are reasonably related to the performance of the audit or review of the Companys
financial statements are in the amount of $10,660 and $0, respectively. Tax Fees No fees were billed in 2004 and 2003 by the Companys independent registered public accounting
firm for tax compliance, tax advice and tax planning. All Other Fees No fees were billed in 2004 and 2003 by the Companys independent registered public accounting
firm for any other services, other than Audit Fees and Audit Related Fees. 25




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##### 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 TECHNOLOGIES, INC.Dated
March 31, 2005
    
    By: /s/ Scott L. GlennScott L. GlennChief Executive OfficerDated
March 31, 2005
    
    By: /s/ Leslie WhiteLeslie WhiteChief Financial Officer and Principal Accounting Officer
 
 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and
appoints H. M. Busby, 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/ Ellen Preston
    
    Director
    
    March 31, 2005Ellen Preston/s/ H. M. Busby
    
    Director
    
    March 31, 2005H. M. Busby/s/ Michael Trinkle
    
    Director
    
    March 31, 2005Michael Trinkle/s/ Eric Freedus
    
    Director
    
    March 31, 2005Eric Freedus
 26




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##### Table of Contents



INDEX TO FINANCIAL STATEMENTS  ITEM 7 OF FORM 10-KSB Report of Independent Registered Public Accounting Firm
    
    F-2Financial Statements and Notes:Balance Sheet as of December 31, 2004
    
    F-3Statements of Operations for the Years Ended December 31, 2004 and 2003
    
    F-4Statements of Shareholders Deficiency for the Years Ended December 31, 2004 and 2003
    
    F-5Statements of Cash Flows for the Years Ended December 31, 2004 and 2003
    
    F-6Notes to Financial Statements
    
    F-7
 F-1




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##### Table of Contents



Report of Independent Registered Public Accounting Firm To the Shareholders and Board of Directors
Planet Technologies, Inc. We have audited the accompanying balance sheet of Planet Technologies, Inc., formerly Planet
Polymer Technologies, Inc., as of December 31, 2004, and the related statements of operations,
shareholders deficiency and cash flows for the years ended December 31, 2004 and 2003. 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 audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). 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 audits provide 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 Technologies, Inc. as of December 31, 2004, and its
results of operations and cash flows for the years ended December 31, 2004 and 2003, 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 2, the Company has experienced recurring net losses resulting
in a shareholders deficiency of $504,400, as of December 31, 2004. In addition, the Company has a
working capital deficiency of $490,715 as of December 31, 2004. These conditions raise substantial
doubt about the Companys ability to continue as a going concern. Managements plans regarding this
matter are also described in Note 2. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty. /s/ J.H. Cohn LLP San Diego, California
March 4, 2005 F-2




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##### Table of Contents



PLANET TECHNOLOGIES, INC. 
 BALANCE SHEET
DECEMBER 31, 2004
 ASSETSCurrent assets:Cash and cash equivalents
    
    $
    374,923Accounts receivable, less allowance for doubtful accounts of $5,500
    
    
    3,076Inventory
    
    
    19,012Other current assets
    
    
    18,575Total current assets
    
    
    415,586Property and equipment, net
    
    
    101,070Other assets
    
    
    3,527Total
    
    $
    520,183LIABILITIES AND SHAREHOLDERS DEFICIENCYCurrent liabilities:Current portion of convertible notes payable to shareholder
    
    $
    134,475Advance from related party
    
    
    185,000Accounts payable
    
    
    224,520Accrued expenses
    
    
    353,763Interest payable
    
    
    8,543Total current liabilities
    
    
    906,301Convertible notes payable to shareholder, net of current portion
    
    
    118,282Total liabilities
    
    
    1,024,583Commitments and contingenciesShareholders deficiency: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,
2,068,361 shares issued and outstanding
    
    
    3,198,296Accumulated deficit
    
    
    (3,702,696
    )Total shareholders deficiency
    
    
    (504,400
    )Total
    
    $
    520,183
 See notes to financial statements. F-3




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PLANET TECHNOLOGIES, INC. 
 STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2004 AND 2003
 2004
    
    
    2003Net sales
    
    $
    1,180,382
    
    
    $
    2,258,213Cost of sales
    
    
    407,811
    
    
    
    730,801Gross profit
    
    
    772,571
    
    
    
    1,527,412Operating expenses:Selling
    
    
    597,575
    
    
    
    1,296,206General and administrative
    
    
    689,109
    
    
    
    578,192Totals
    
    
    1,286,684
    
    
    
    1,874,398Loss from operations
    
    
    (514,113
    )
    
    
    (346,986
    )Other income (expense):Gain on sale of assets
    
    
    899
    
    
    
    2,050Other expenses
    
    
    (62,671
    )
    
    
    (39,737
    )Interest expense
    
    
    (197,673
    )
    
    
    (189,462
    )Totals
    
    
    (259,445
    )
    
    
    (227,149
    )Net loss
    
    $
    (773,558
    )
    
    $
    (574,135
    )Net loss per share, basic and diluted
    
    $
    (0.46
    )
    
    $
    (0.35
    )Weighted average shares used in computing net loss per
share attributable to common shareholders, basic
and diluted
    
    
    1,686,559
    
    
    
    1,655,670
 See notes to financial statements. F-4




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##### Table of Contents



PLANET TECHNOLOGIES, INC. 
 STATEMENTS OF SHAREHOLDERS DEFICIENCY
 YEARS ENDED DECEMBER 31, 2004 AND 2003
 Common Stock
    
    
    AccumulatedShares
    
    
    Amount
    
    
    Deficit
    
    
    TotalBeginning, January 1, 2003
    
    
    1,655,670
    
    
    $
    2,310,885
    
    
    $
    (2,355,003
    )
    
    $
    (  44,118
    )Net loss
    
    
    
    
    
    
    
    
    
    
    (   574,135
    )
    
    
    (574,135
    )Balance at December 31, 2003
    
    
    1,655,670
    
    
    
    2,310,885
    
    
    
    (2,929,138
    )
    
    
    (618,253
    )Common stock issued in
association with the reverse
acquisition
    
    
    130,691
    
    
    
    182,411
    
    
    
    
    
    
    
    182,411Issuance of common stock for
cash
    
    
    258,000
    
    
    
    645,000
    
    
    
    
    
    
    
    645,000Common stock issued for
services rendered
    
    
    24,000
    
    
    
    60,000
    
    
    
    
    
    
    
    60,000Net loss
    
    
    
    
    
    
    
    
    
    
    (773,558
    )
    
    
    (773,558
    )Balance at December 31, 2004
    
    
    2,068,361
    
    
    $
    3,198,296
    
    
    $
    (3,702,696
    )
    
    $
    (504,400
    )
 See notes to financial statements. F-5




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##### Table of Contents



PLANET TECHNOLOGIES, INC. 
 STATEMENTS OF CASH FLOWS
 YEARS ENDED DECEMBER 31, 2004 AND 2003
 2004
    
    
    2003Operating activities:Net loss
    
    $
    (773,558
    )
    
    $
    (574,135
    )Adjustments to reconcile net loss to net cash
used in operating activities:Depreciation and amortization
    
    
    82,763
    
    
    
    95,979Gain on sale of assets
    
    
    (899
    )
    
    
    (2,050
    )Issuance of stock for services
    
    
    60,000Changes in operating assets and liabilities:Accounts receivable
    
    
    3,682
    
    
    
    (4,196
    )Inventory
    
    
    65,128
    
    
    
    36,643Other assets
    
    
    (9,763
    )
    
    
    25,490Interest payable
    
    
    180,567
    
    
    
    132,217Accounts payable
    
    
    (120,965
    )
    
    
    192,651Accrued expenses
    
    
    77,212
    
    
    
    (13,496
    )Net cash used in operating activities
    
    
    (435,833
    )
    
    
    (110,897
    )Investing activities:Proceeds from sale of property and equipment
    
    
    2,363
    
    
    
    7,000Purchase of property and equipment
    
    
    
    
    
    
    (10,927
    )Net cash provided by (used in) investing activities
    
    
    2,363
    
    
    
    (3,927
    )Financing activities:Advance from related party
    
    
    120,000
    
    
    
    65,000Proceeds from note payable
    
    
    
    
    
    
    80,435Principal payment on notes payable
    
    
    (205,069
    )
    
    
    (190,164
    )Principal payments on notes payable to shareholder
    
    
    (21,543
    )Proceeds from issuance of investors notes payable
    
    
    142,000
    
    
    
    217,400Proceeds from stock sales
    
    
    645,000Net cash provided by financing activities
    
    
    680,388
    
    
    
    172,671Net increase in cash and cash equivalents
    
    
    246,918
    
    
    
    57,847Cash and cash equivalents, beginning of year
    
    
    128,005
    
    
    
    70,158Cash and cash equivalents, end of year
    
    $
    374,923
    
    
    $
    128,005Supplemental disclosure of cash flow data:Interest paid
    
    $
    17,175
    
    
    $
    57,272Supplemental disclosure of noncash financing activity:Account payable converted to note payable
    
    
    
    
    
    $
    236,937Common stock issued in connection with reverse acquisition
    
    $
    182,411
 See notes to financial statements. F-6




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##### Table of Contents



PLANET TECHNOLOGIES, INC. 
 NOTES TO FINANCIAL STATEMENTS Note 1  The Company: Planet Technologies, Inc. (Planet or the Company) formerly known as Planet Polymer
Technologies, Inc. (Planet Polymer) was incorporated in August, 1991, in the State of California,
and, since November 30, 2004, is engaged in the business of designing, manufacturing, selling and
distributing common products for use by allergy sensitive persons, including, without limitation,
air filters, bedding, room air cleaners, and related allergen avoidance products. The business
strategy is primarily based upon promotion of products directly to the consumer by telemarketing to
the Companys database of customers who have purchased the Allergy Free Electrostatic Filter. On November 30, 2004, Planet acquired the business of Allergy Free, LLC (Allergy) for
approximately 1.65 million shares of Planet stock (after giving effect to a 50:1 reverse stock
split), a convertible note of $274,300 bearing interest at 5.5% per annum and due and payable
within three years, and assumption of debt. As a result, Allergy owned approximately 92.7% of the
voting shares of Planet. Since the stockholders of Allergy received the majority of the voting
shares of Planet, the former managing member of Allergy continued on as the president of the
Company, and representatives of Allergy hold three of the five seats on the Companys Board of
Directors, the merger was accounted for as a recapitalization of Allergy, whereby Allergy was the
accounting acquirer (legal acquiree) and Planet was the accounting acquiree (legal acquirer).
Since, at the closing, Planet was a non-operating shell corporation no longer meeting the
definition of a business as defined in EITF Consensus 98-3, Determining Whether a Nonmonetary
Transaction Involves Receipt of Productive Assets or of a Business, the transaction was equivalent
to Allergy issuing stock for the net liabilities of Planet, accompanied by a recapitalization. The
accounting was identical to that resulting from a reverse acquisition, except that there were no
adjustments to the historic carrying values of the assets and liabilities. Accordingly, the
accompanying statements of operations and cash flows are the historical financial statements of
Allergy Free. Immediately prior to the closing of the acquisition, Planet Polymer distributed to a trustee for
the benefit of Planet Polymer shareholders of record as of September 30, 2004, the right to receive
all royalties payable to Planet pursuant to those certain sale and licensing agreements between
Planet and Agway, Inc., related to Planets Fresh Seal® and Optigen® technology and that certain
purchase, sale and license agreement between Planet and Ryer Enterprises, LLC, relating to Planets
AQUAMIM® technology. Prior to acquiring Allergy, Planet Polymer was an advanced materials company that developed and
licensed unique polymer materials. All operations related to Planet Polymer have been discontinued. Note 2  Summary of significant accounting policies: Basis of presentation: The accompanying financial statements have been prepared assuming that the Company will continue as
a going concern. This basis of accounting contemplates the recovery of the Companys assets and the
satisfaction of its liabilities in the normal course of business. Successful transition to
profitable operations is dependent upon obtaining a level of sales adequate to support the
Companys cost structure. The Company has suffered recurring losses resulting in an accumulated
deficit of $3,702,696, a shareholders deficiency of $504,400, and a working capital deficiency of
$490,715 as of December 31, 2004. Management intends to continue to finance operations primarily
through its potential ability to generate cash flows from equity offerings, including restricted
stock sales. However, there can be no assurance that the Company will be able to obtain such financing or
internally generate cash flows from operations, which may impact the Companys ability to continue as a going
concern. The accompanying balance sheet does not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts and classification
of liabilities that may result from the potential inability of the Company to continue as a going
concern. 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
reported amounts and disclosures. Accordingly, actual results may differ from those estimates. Cash and cash equivalents and concentration of credit risk: The Company maintains its cash in bank deposit accounts at various financial institutions.
Highly-liquid investments with original maturities of three months or less when purchased are
considered to be cash equivalents. As of December 31, 2004, the Company had a cash balance that
exceeded the Federal Deposit Insurance Corporation limitation for coverage of $100,000 by $235,047. Inventory: Inventory consists of finished products which are purchased from established vendors. Inventory is
stated at the lower of cost, determined by the First-In, First-Out method, or market. Inventory is
reduced by provisions for excess and slow moving items commensurate with known or estimated
exposures. The Company stopped manufacturing its permanent filters in February 2004, when the
manufacturing was contracted out to a manufacturer. The Companys manufacturing equipment is used
by this vendor to produce its filters. F-7




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##### Table of Contents



PLANET TECHNOLOGIES, INC. NOTES TO FINANCIAL STATEMENTS Note 2  Summary of significant accounting policies (continued): Property and equipment: Property and equipment are stated at cost. Depreciation is provided using the straight-line method
over the estimated useful lives of the assets ranging from two to ten years. Leasehold improvements
are amortized over the shorter of their useful lives or the term of the related lease. Stock-based compensation: Statement of Financial Accounting Standards No. 123 (SFAS 123), Accounting for Stock-Based
Compensation, provides for the use of a fair value based method of accounting for stock-based
compensation. However, SFAS 123 allows an entity to continue to measure compensation cost for stock
options granted to employees using the intrinsic value method of accounting prescribed by
Accounting Principles Board Opinion No. 25 (APB 25), Accounting for Stock Issued to Employees,
which only requires charges to compensation expense for the excess, if any, of the fair value of
the underlying stock at the date a stock option is granted (or at an appropriate subsequent
measurement date) over the amount the employee must pay to acquire the stock. The Company has
elected to account for employee stock options using the intrinsic value method under APB 25. By
making that election, it is required by SFAS 123 and Statement of Financial Accounting Standards
No. 148, Accounting for Stock-Based Compensation  Transition and Disclosure to provide pro forma
disclosures of net loss as if a fair value based method of accounting had been applied. During 2004 and 2003, the Company granted options to its employees and board of directors at the
fair value of the common stock. The weighted-average fair value of these options using the
Black-Scholes option-pricing model was $3.48 and $0.05 utilizing an expected life of 10 and 4
years, an expected volatility of 237% and 223%, no dividend yield and a risk free interest rate of
4.27% and 4.65%, respectively. 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 the Companys plans, the Companys net loss
and net loss per share for 2004 and 2003 would have been increased to the pro forma amounts
indicated below. 2004
    
    
    2003Loss per Share
    
    
    
    
    
    
    Loss per Share- Basic and
    
    
    
    
    
    
    - Basic andNet Loss
    
    
    Diluted
    
    
    Net Loss
    
    
    DilutedAs reported
    
    $
    (773,558
    )
    
    $
    (0.46
    )
    
    $
    (574,135
    )
    
    $
    (0.35
    )Stock based compensation
expense assuming a fair
value based method had
been used for all
awards
    
    
    (95,306
    )
    
    
    (0.06
    )
    
    
    (63,862
    )
    
    
    (0.04
    )Pro forma
    
    $
    (868,864
    )
    
    $
    (0.52
    )
    
    $
    (637,997
    )
    
    $
    (0.39
    )
 In accordance with the provisions of SFAS 123, all other issuances of common stock, warrants, stock
options or other equity instruments to non-employees as the consideration for goods or services
received by the Company are accounted for based on the fair value of the equity instruments issued
(unless the fair value of the consideration received can be more reliably measured). Generally, the
fair value of any options, warrants or similar equity investments will be estimated based on the
Black-Scholes option-pricing model. Net loss per share: Net loss per share is computed using the weighted average number of shares of common stock
outstanding and is presented for basic and diluted loss per share. Basic loss per share is computed
by dividing net loss
by the weighted average number of common shares outstanding during the period. Diluted loss per
share is computed by dividing net by the weighted average number of common shares outstanding
during the period increased to include, if dilutive, the number of additional common shares what
would have been outstanding if the potential common shares had been issued. The Company has excluded all convertible preferred stock and outstanding stock options and warrants
from the calculation of diluted loss per share because all such securities are considered
anti-dilutive. Accordingly, diluted loss per share equals basic loss per share. The total number of
potential common shares excluded from the calculation of diluted loss per share for the years ended
December 31, 2004 and 2003 was 468,494 and 27,333, respectively. Advertising: The Company expenses the cost of advertising and promotions as incurred. Advertising costs charged
to operations were $57,139 and $263,935 in 2004 and 2003, respectively. F-8




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##### Table of Contents



PLANET TECHNOLOGIES, INC. NOTES TO FINANCIAL STATEMENTS Note 2  Summary of significant accounting policies (continued): Revenue recognition: The Company recognizes revenue from product sales upon shipment of goods, with a provision for
estimated returns recorded at that time. In addition, a provision for potential warranty claims is
provided for at the time of sale, based upon warranty terms and the Companys prior experience. The Company sells most of its products on a prepaid basis. Once the credit payment has been
verified, the Company ships the products. Limited terms are extended to selected customers. Credit
is extended for a 30-day term. On a periodic basis, the Company evaluates its accounts receivable
and establishes an allowance for doubtful accounts, based on a history of past write-offs and
collections and current credit considerations. Shipping and handling costs: The Company expenses shipping and handling costs as incurred as part of cost of sales. 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 bases of assets
and liabilities and their financial reporting amounts at each year-end (temporary differences)
based on enacted laws and statutory rates applicable for 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 that is considered more than likely not to be
realized. Pre merger losses of Allergy were not subject to the Companys federal and state income tax.
Historically, Allergy has not been a tax paying entity for federal income tax purposes, and thus no
income tax expense had been recorded in the financial statements. Income or losses of the Company
were taxed to the members in their respective returns. However, in the State of California, limited
liability companies were subject to an annual fee based on the gross income of the company. In
addition, the calculation of the tax provision does not include the pre-merger net operating loss of
Planet Polymer, which, had been eliminated against equity accounts as part of the acquisition
agreement and for the purposes of preparing these financial statements. 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
pre-tax amounts to the 401(k) Plan subject to the Internal Revenue Code 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 2004 and 2003. Valuation of long-lived assets: The Company reviews its long-lived assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be recoverable. The
recoverability of assets to be held and used is measured by a comparison of the carrying amount of
an asset to the future net undiscounted cash flows expected to be generated by the asset. If such
assets are considered to be impaired, the impairment to be recognized is measured by the amount by
which the carrying amount of the asset exceeds the fair value of the asset. Note 3  Property and equipment: Property and equipment as of December 31, 2004 consists of the following: Furniture and fixtures
    
    $
    262,105Machinery and equipment
    
    
    82,868Computer equipment
    
    
    66,218Leasehold improvements
    
    
    70,478Total
    
    
    481,669Less accumulated depreciation and amortization
    
    
    380,599Total
    
    $
    101,070
 F-9




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##### Table of Contents



PLANET TECHNOLOGIES, INC. NOTES TO FINANCIAL STATEMENTS Note 4  Warranty reserve: The Company accrues an estimate of its exposure to warranty claims based on both current and
historical product sales data and warranty costs incurred. The air filters produced and sold by
the Company carry a ten-year warranty. The Company assesses the adequacy of its recorded
warranty liability quarterly and adjusts the amount as necessary. The warranty liability is
included in accrued expenses in the accompanying balance sheet. As of December 31, 2004, the
warranty accrual was $130,961. The majority of the warranty accrual relates to products that
were sold prior to the acquisition of Allergy Free L.P. by Allergy Free, LLC in November 2000.
As part of the asset purchase agreement, the Company is obligated to provide the warranty
coverage on these products through their original warranty period. Changes in the Companys
warranty liability were as follows: Warranty accrual, beginning of year
    
    $
    130,961Warranties issued during the year
    
    
    296Adjustments to preexisting accruals
    
    
    (80
    )Actual warranty expenditures
    
    
    (216
    )Total
    
    $
    130,961
 Note 5  Convertible notes payable to shareholder: As of December 31, 2004, the Company has a subordinated convertible note payable to a
shareholder. The uncollateralized note payable is due on December 1, 2007 however; the Company
intends to pay down the note payable with monthly principal and interest payments of $12,085
until full satisfaction of the note payable in October 2006. Interest is due quarterly. At any
time, the holder of the note may, at its sole and exclusive option, convert all or any part of
the principal and accrued interest outstanding into shares of common stock by giving written
notice to the Company specifying the amount of note principal and/or accrued interest to be
converted at a price per share of common stock equal to the fair value. F-10




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##### Table of Contents



PLANET TECHNOLOGIES, INC. NOTES TO FINANCIAL STATEMENTS Note 6  Income taxes: The differences between income tax benefit provided at the Companys effective rate and the federal
statutory rate (34%) at December 31, 2004 are as follows: Income tax benefit at statutory rate
    
    $
    (263,010
    )State taxes, net of Federal benefit
    
    
    (46,413
    )Other
    
    
    69,000Increase in valuation allowance
    
    
    240,423Total
    
    $
    
 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 at December 31, 2004 are
as follows: Net operating loss carryforwards
    
    $
    4,636,000Tax credit carryforwards
    
    
    142,000Reserves, accrued expenses and other
    
    
    85,000Less: valuation allowances
    
    
    (4,863,000
    )Net deferred tax assets
    
    $
    
 As the ultimate realization of the potential benefits of the Companys net operating loss
carryforwards is considered unlikely by management, the Company has offset the deferred tax
assets attributable to those potential benefits through a valuation allowance and, accordingly,
the Company did not recognize any benefit from income taxes in the accompanying statement of
operations. At December 31, 2004, the Company had net operating loss carryforwards for Federal and
California state income tax purposes of approximately $12,981,000 and $3,647,000, respectively.
The Companys California loss carryforwards expire in 2005 through 2014 and Federal loss
carryforwards begin to expire in 2011. The Company also has available tax credit carryforwards
for Federal and California tax purposes that aggregate approximately $142,000 that begin to
expire in 2005. During 2004, as a result of the reverse acquisition with Allergy Free, the Company experienced a
change of ownership event as defined in Section 382 of the IRS Code. Accordingly, utilization of
the net operating loss carryforwards and credits will be subject to a substantial annual
limitation. The annual limitation may result in the expiration of net operating losses and
credits before utilization. Note 7  Shareholders equity: Warrants: At December 31, 2004, warrants to purchase 2,000 shares of the Companys common stock at an
exercise price of $208.125 per share were outstanding. The warrants expire in 2005 and 2006. All of the warrants outstanding are exercisable. All per share rights and benefits are subject to
anti-dilution and other adjustments upon the occurrence of certain events. F-11




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##### Table of Contents



PLANET TECHNOLOGIES, INC. NOTES TO FINANCIAL STATEMENTS Note 7  Shareholders equity (continued): Options: As of December 31, 2004, the Company had 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 100,000 shares of common stock for issuance under the Plan,
together with 100,000 additional shares of common stock for issuance to the extent that outstanding
options previously granted under the 1995 Stock Option Plan expire unexercised. The 2000 Option
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
2000 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. In March 2005, the
Board of Directors approved an amendment to the plan to increase the authorized number of shares to
250,000 shares, which will be submitted to the shareholders for approval at the next meeting of
shareholders. Under the 1995 Option Plan, incentive stock options and non-statutory stock options to acquire an
aggregate of 100,000 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. At December 31, 2004, there were no shares of the Companys common stock available for future grant
under either option plan. 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 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. F-12




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##### Table of Contents



PLANET TECHNOLOGIES, INC. NOTES TO FINANCIAL STATEMENTS Note 7  Shareholders equity (continued): Options (continued): A summary of stock option activity during 2004 follows: 2000 Stock Option Plan
    
    
    1995 Stock Option PlanUnderlying
    
    
    Weighted Avg.
    
    
    Underlying
    
    
    Weighted Avg.Shares
    
    
    Exercise Price
    
    
    Shares
    
    
    Exercise PriceOutstanding at January 1, 2004
    
    
    15,670
    
    
    $
    40.817
    
    
    
    3,204
    
    
    $
    86.929Granted
    
    
    102,543
    
    
    $
    3.479Exercised prior to the merger
    
    
    (7,500
    )
    
    $
    4.033Forfeited/expired
    
    
    (5,300
    )
    
    $
    94.811
    
    
    
    (3,204
    )
    
    $
    86.929Outstanding at December 31, 2004
    
    
    105,413
    
    
    $
    4.399
    
    
    
    
 Other OptionsWeighted Avg.Underlying Shares
    
    
    Exercise PriceOutstanding at January 1, 2004
    
    
    2,774
    
    
    $
    252.888Granted
    
    
    
    
    
    
    Forfeited/expired
    
    
    (2,774
    )
    
    $
    252.888Outstanding at December 31, 2004
    
    
    
 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, 2004: Options Outstanding
    
    
    Options ExercisableWeighted AverageRemaining
    
    
    Weighted
    
    
    
    
    
    
    WeightedExercise Price or
    
    Number of
    
    
    Contractual Live
    
    
    Average
    
    
    Number of
    
    
    AveragePrice Range
    
    Shares
    
    
    (years)
    
    
    Exercise Price
    
    
    Shares
    
    
    Exercise Price$2.50 to $3.50
    
    
    102,793
    
    
    
    9.90
    
    
    $
    3.479
    
    
    
    25,386
    
    
    $
    3.495$22.50
    
    
    2,160
    
    
    
    6.35
    
    
    
    22.500
    
    
    
    2,160
    
    
    
    22.500$125.00
    
    
    460
    
    
    
    5.33
    
    
    
    125.000
    
    
    
    460
    
    
    
    125.000105,413
    
    
    
    9.81
    
    
    
    4.399
    
    
    
    28,006
    
    
    
    6.957
 Note 8  Commitments: License agreements: The Company has a license agreement with a third party for use of its design to manufacture air
filters. The license agreement provides for royalty payments based on a percentage of net sales of
certain products. The term of the license agreement is the longer of (i) the life of the licensed
patent or (ii) ten years from date of first commercial sale of the product. Royalty expenses under
the license agreement was $12,128 and $25,712 in 2004 and 2003, respectively. Operating leases: The Company has sublet office space from a related party through July 31, 2005 for a base rent of
$6,513 per month, a total commitment of $45,591 for 2005. The sublease may be extended on a
month-to-month basis after July 31, 2005. Total rent expense for all operating leases was $163,991
and $136,049 in 2004 and 2003, respectively. F-13




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##### Table of Contents



PLANET TECHNOLOGIES, INC. NOTES TO FINANCIAL STATEMENTS Note 8  Commitments (continued): Employment contracts: In November 2004, the Company entered into an employment agreement with its President and Chief
Executive Officer for a three-year period, which expires on November 29, 2007. The contract
provides for a salary of $100 per month (plus healthcare and other benefits) until it is determined
by the Board of Directors that the Company could afford to pay compensation comparable to CEOs of other similar
companies. In exchange, for forgoing a salary, the Company granted non-qualified stock options to
acquire 100,543 shares of the Companys common stock at $3.50
per share with 25,136, or 25%, of the options vesting on November 30, 2004, and the balance at the rate of 1/36th of the balance per month,
subject to any acceleration as provided under the Companys 2000 Stock Option Plan. Note 9  Related party transactions: During 2004 and 2003, the Company received advances from a related party, which bear interest at
5.5% per annum with no fixed repayment terms. As of December 31, 2004, the accrued and unpaid
interest on the advances totaled $8,391. During January 2005, the Company repaid $100,000 of the
advances. Note 10- Purchases from significant vendors: During 2004 and 2003, the Company purchased from three significant vendors that each accounted for
more that 10% of total purchases. Purchases from these vendors accounted for approximately $100,586
and $98,297 (54% and 37% of total purchases each year), respectively. Accounts payable arising from
such purchases at December 31, 2004 and 2003 were approximately $5,799 and $7,025, respectively. Note 11- Subsequent event: On March 8, 2005, Planet entered into a definitive agreement to acquire Allergy Control Products,
Inc. (ACP), a distributor of products used by allergy sensitive
persons. The merger transaction will be structured pursuant to an Agreement and Plan of Merger
agreed upon by both parties, and is subject to approval by each partys respective shareholders and
other contingencies. Pursuant to the terms of the merger transaction, the shareholder of ACP will
be issued 600,000 shares of Planet common stock with an aggregate
fair value of approximately $1,050,000. In addition, ACP debt to its shareholder in the
approximate amount of $1,500,000 will be paid in full by Planet. F-14