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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, D.C. 20549




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FORM 10-KSB


ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2002
Commission File No. 0-26804



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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)                   |  |                                  
|                                                 |  |                                  
|9985 Businesspark Avenue, Suite C, San Diego, CA |  | 92131                            
|(Address of principal executive offices)         |  | (Zip Code)                       

Issuers telephone number (858) 549-5130

Securities registered under Section 12(b) of the Exchange Act:
None

Securities registered under Section 12(g) of the Exchange Act:
Common Stock, No Par Value

Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. x Yes
 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 ended December 31, 2002 were $162,073.

The aggregate market value of the voting stock held by non-affiliates of
the Issuer as of March 19, 2003 was $368,315, based on the average of the 4:00
p.m. closing bid and ask prices of $0.04 as reported on the Over-the-Counter
Bulletin Board.

As of March 19, 2003, 9,207,884 shares of the Companys Common Stock were
outstanding and no shares of the Companys Series A Preferred Stock were
outstanding.

Transitional Small Business Disclosure Format (check one) o  yes
x  no





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TABLE OF CONTENTS



|                          |                                                                                                                         |  |  |  |  |  |  | 
|------------------------- | ----------------------------------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I.                  
|                          | ITEM 1. DESCRIPTION OF BUSINESS                                                                                        
|                          | ITEM 2. DESCRIPTION OF PROPERTY                                                                                        
|                          | ITEM 3. LEGAL PROCEEDINGS                                                                                              
|                          | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                            
|PART II.                 
|                          | ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS                                                       
|                          | ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                          
|                          | ITEM 7. FINANCIAL STATEMENTS                                                                                           
|                          | ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES                          
|PART III.                
|                          | ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
|                          | ITEM 10. EXECUTIVE COMPENSATION                                                                                        
|                          | ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                                                
|                          | ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                                
|                          | ITEM 13. CONTROLS AND PROCEDURES                                                                                       
|PART IV.                 
|                          | ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K.                                                                             
|SIGNATURES               
|POWER OF ATTORNEY        
|SECTION 302 CERTIFICATION
|EXHIBIT 10.37            
|EXHIBIT 10.38            
|EXHIBIT 10.39            
|EXHIBIT 10.40            
|EXHIBIT 10.41            
|EXHIBIT 10.42            
|EXHIBIT 23.2             
|EXHIBIT 99.1             



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PLANET POLYMER TECHNOLOGIES, INC.

FORM-10KSB
Year Ended December 31, 2002

TABLE OF CONTENTS

|       |  |                                                                                                                 |  |     
|------ |  | --------------------------------------------------------------------------------------------------------------- |  | ----
|Item   |  |                                                                                                                 |  |     
|Number |  |                                                                                                                 |  | Page
|       |  |                                                                                                                 |  |     
|       |  | PART I.                                                                                                         |  |     
|1.     |  | Description of Business                                                                                         |  | 2   
|2.     |  | Description of Property                                                                                         |  | 10  
|3.     |  | Legal Proceedings                                                                                               |  | 10  
|4.     |  | Submission of Matters to a Vote of Security Holders                                                             |  | 10  
|       |  | PART II.                                                                                                        |  |     
|5.     |  | Market for Common Equity and Related Stockholders Matters                                                       |  | 11  
|6.     |  | Managements Discussion and Analysis of Financial
Condition and Results of Operations                           |  | 12  
|7.     |  | Financial Statements                                                                                            |  | 16  
|8.     |  | Changes in and Disagreements With Accountants on
Accounting and Financial Disclosures                           |  | 16  
|       |  | PART III.                                                                                                       |  |     
|9.     |  | Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act |  | 17  
|10.    |  | Executive Compensation                                                                                          |  | 17  
|11.    |  | Security Ownership of Certain Beneficial Owners and Management                                                  |  | 17  
|12.    |  | Certain Relationships and Related Transactions                                                                  |  | 17  
|       |  | PART IV.                                                                                                        |  |     
|13.    |  | Controls and Procedures                                                                                         |  | 17  
|14.    |  | Exhibits and Reports on Form 8-K                                                                                |  | 18  
|       |  | Signatures                                                                                                      |  | 21  
|       |  | Power of Attorney                                                                                               |  | 21  
|       |  | Certification                                                                                                   |  | 22  





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




PART I.




ITEM 1. DESCRIPTION OF BUSINESS

Planet Polymer Technologies, Inc.

Planet Polymer Technologies, Inc. is an advanced materials company that
developed and licensed unique hydro-soluble polymer and biodegradable
materials. With the sale and disposition of the Companys AQUAMIM® Metal
Injection Molding technology and manufacturing assets in December, 2001 to Ryer
Industries, LLC and the sale and licensing of the Companys EnviroPlastic CRT
controlled-released technologies for agricultural feed and produce products to
Agway Inc., the resulting restructuring of assets and activities has narrowed
the Companys focus to assisting Agway in the commercialization of those
specific polymer technologies Planet developed for Agway, through the Companys
provision of consulting services. Agway is marketing the agricultural feed and
fruit and vegetable products under the trademarks Optigen 1200 and
FreshSeal, respectively. Prior to its default under a Forbearance
Agreement, Ryer Industries was commercializing the AQUAMIM technologies, which
were previously sold to Ryer under an asset purchase agreement on December 28,
2001 but which Planet expects to recover due to Ryers aforementioned default.
Once the AQUAMIM® assets are recovered Planet intends to seek a new buyer
for the assets.

Planets other patented development technologies are listed below:



| |  |  | EnviroPlastic CRT controlled-release technology - Polymer coating
technologies for use other than agriculture and produce products
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | EnviroPlastic Z - Biodegradable and compostable polymers                                                                          
|
| |  |  | Aquadro - Hydrodegradable (water dispersible) polyvinyl alcohol resin                                                             
|
| |  |  | AQUAMIM® Metal Injection Molding - Moldable metal filled polymers                                                                 

To date Planet has been unsuccessful in identifying commercial
partnerships for developing and marketing any of these technologies beyond
evaluation in a variety of commercial applications.

Planets research and development facility is located in San Diego,
California. Planet is currently not developing any new products but solely
providing consulting to Agway and Ryer Industries.

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

Products and Technologies

Planet is using its polymer chemistry expertise to provide water soluble
and degradable technology-based solutions to the current and emerging needs of
the agricultural market through its licensing arrangement with Agway noted
above and a license agreement with Agrium Inc. for possible use in fertilizer
applications.

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

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an Amending Agreement with Agrium to allow Planet
and Agway to pursue the development of certain technologies involving
controlled-released coatings.

This coating technology is also utilized to control the release and
transfer rates of nitrogen and oxygen, to assist in controlling the ripening of
fruits and vegetables. Planet entered into a licensing agreement with Agway in
1999 to develop commercial coatings for use on fruits, vegetables, floral and
nursery applications that has resulted in the launch, in October 2000, of
FreshSeal® coating for use on fruits and vegetables. Agway is in the early
stages of the extended multi-year commercial rollout of this product family.
Agways product reception and success to date in the marketplace has been
encouraging and resulted in a very modest royalty-generating license in 2001.

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

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

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

AQUAMIM® Metal Injection Molding.AQUAMIM® is designed for the
production of precision metal components utilizing a water debinding process,
which eliminates the need for hazardous solvents or acids. AQUAMIM®
feedstock is a mixture of metal powders and the Companys proprietary water
soluble polymer binder. Various industrial and consumer products can be
manufactured by the AQUAMIM® technology. The Company currently offers
stainless steel compounds, 316L,17-4PH, and 420; iron-nickel; tool steels M2,
and M4; and heavy metal alloys, tungsten copper and tungsten carbide cobalt.
The patents for AQUAMIM® are No. 5,977,230 and No. 6,008,281. Although the
AQUAMIM® technologies were sold to Ryer Industries in 2001, Planet expects to
recover these assets as a result of Ryers default under a Forbearance
Agreement.

Markets and Applications

Through its sale and licensing agreements with Agway, Planet is now
focused on specific market opportunities where Agway believes that Planets
polymer chemistry expertise may address current or emerging market
requirements. However, there can be no assurance that Agway will be able to
commercialize the Companys products or technologies to capture market share
and generate profits so as to produce royalties and monies for Planet.

Agricultural Feed & Fruit/Vegetable Initiatives.On March 25, 2003, the
U.S. Bankruptcy Court gave its approval to Agway to enter into the two Sale and
Licensing Agreements with the Company with respect to the Companys
agricultural feed and fruit/produce technologies. Under the agricultural feed
agreement, Agways Country Products Group will continue to market and develop
the Companys controlled-release technology for animal feed under the tradename
Optigen 1200. The technology is currently being utilized in a product under
field testing by Agway as a concentrated source of controlled release nitrogen
for dairy cows while it petitions the FDA for product approval. The global
feed additive market for this product is in excess of 10 billion dollars
annually. Under the fruit/produce agreement, Agway will continue to
commercialize and launch a coating package, trademarked FreshSeal, for use in
controlling the ripening of tropical fruits and vegetables and conduct various
trials and test markets around the world. This product will allow Agway to
compete for a niche portion of the global 75 billion dollar fresh vegetable and
fruit market. The Company believes that Agway will continue to expand the
market area and opportunity for both of these technologies.

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Metal Injection Molded (MIM) Feedstocks. The Companys AQUAMIM®
technology had been offered to the metals design and molded products
communities by Ryer Industries, LLC, with whom the Company had a royalty
agreement for technology sold to Ryer in 2001. It offered both product
enhancements and environmental benefits to alternative MIM formulations and
traditional machining techniques of manufacturing metal products. Primary
markets pursued included metal forming, die cutting tools, medical devices and
recreational sports equipment.

Strategic Alliances

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

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

Agway Strategic Alliance.In November 1998, Planet entered into a
strategic investment agreement with Agway Inc. to assist in the funding of
Planet Polymer Technologies, Inc. Through stock purchases and warrant
exercises, Agways actions have resulted in the acquisition of more than 10% of
the Companys Common Stock.

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

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

In a letter agreement dated November 14, 2000 Planet agreed to sell,
assign and transfer to Agway the patent rights related to controlled release
technology for animal feed and fruit/produce initiatives, involving four (4)
patents and/or applications, for cash and the royalty payments equal to the
payments Planet would otherwise be entitled to receive pursuant to its existing
license agreements dated November 12, 1998 and Sub-Agreements dated March 1,
2000. Concurrently, Agway agreed to grant Planet an irrevocable, exclusive,
worldwide, royalty-free license to use and commercially exploit all rights
related to the patents for all uses other than food and agricultural
initiatives. The License term was to be for the life of the patents and any
patents derived from the patents.

On October 1, 2002, Agway, Inc. filed a voluntary petition for
reorganization under Chapter 11 of the United States Bankruptcy Code. The Sub
Agreement covering the FreshSeal technology and license provided for a minimum
royalty of $300,000 on or before October 31, 2002 to maintain exclusivity.
This payment was not

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received or accrued by Planet. Pursuant to the Sub-Agreement, Planet
notified Agway that the payment was not received. Under the terms of the
Sub-Agreement, Agway had sixty (60) days during which Agway could make the
necessary payment and retain market exclusivity for this technology. Agway did
not make payment of the minimum royalty as of December 31, 2002. As a result
of this failure by Agway to make payment, Planet had the right to issue
additional non-exclusive licenses for this technology to other interested
parties in the fruit, vegetable, nuts and flowers segments of the agricultural
products industry.

To consummate the sale and assignment contemplated by the letter agreement
dated November 14, 2000, the Company and Agway agreed on the form of two
separate Sale and Licensing Agreements with respect to the agricultural feed
technologies and the fruit/produce technologies. On March 25, 2003 the U.S.
Bankruptcy Court gave its approval to Agway to enter into the two separate Sale
and Licensing Agreements with the Company. Under the Sale and Licensing
Agreements, the Company confirmed (i) the assignment of its agricultural feed
related patent rights and fruit/produce related patent rights and (ii) the
license of its technology related to the agricultural feed products and
fruit/produce products, to Agway. In return, the Company will receive an
up-front payment of $30,000 for its execution of the agricultural feed
agreement and a payment of $100,000 for its execution of the fruit/produce
agreement, and will also receive a sales royalty based on net revenues
generated from product sales. Agway will also grant the Company exclusive,
irrevocable, worldwide, royalty-free limited licenses to use the assigned
patents rights for uses other than food and agricultural initiatives. In
connection with the agricultural feed agreement, Agway also agreed to assign
and transfer to the Company all of Agways shares of Planet capital stock.
Additionally, under the fruit/produce agreement, Agway may enter into an
agreement to sell all or substantially all of the assets of its FreshSeal
business, which would include the fruit/produce patent rights assigned by the
Company, within 12 months of the date of that agreement. Upon such sale, Agway
must pay the Company, among other things, a percentage of the net sales
proceeds, up to $200,000. Management cannot assure that the Company will
receive significant, if any, royalties and monies under these Sale and
Licensing Agreements.

Ryer Industries LLC Strategic Alliance. On December 28, 2001, the Company
sold certain assets of the Company relating to its Metal Injection Molding
(MIM) business, including intellectual property, technology, manufacturing
equipment and raw material and finished goods to Ryer Industries LLC (Ryer).
In consideration of these assets, Ryer agreed to pay to the Company cash in the
amount of $328,157, plus a royalty of 6% on sales of custom feedstocks sold
during the period January 1, 2002 and December 31, 2009. Additionally, Ryer
had agreed to pay the Company a royalty on all tungsten carbide feedstock sales
in the amount of $2.50 per net pound during the period July 1, 2002 and June
30, 2010. Ryer and the Company also entered into a Consulting Agreement for
consulting services related to the business and technology sold to Ryer.

In August 2002, Ryer defaulted on its required payments. In October 2002,
the Company and Ryer entered into a Forbearance Agreement which modified the
payment schedule for the remaining obligations to the Company with payments
beginning in December 2002 and continuing through April 2003. Royalty payments
associated with sales from these technologies were deferred and were scheduled
to resume in December 2002. The Company remains in dispute with Ryer over how
certain royalties are calculated and paid, but has agreed to stay resolution of
that dispute until other deferred payments are made or Ryer defaults. The
Forbearance Agreement provided that if Ryer defaulted, the Company would be
allowed to enforce the Confession Judgment given by Ryer to the Company in
connection with the Forbearance Agreement, which provided among other things,
for turnover to the Company of the assets sold by the Company to Ryer. In
January 2003, Ryer again requested a refinancing of the monies due Planet under
the Forbearance Agreement. Planet accommodated Ryer in this request by
amending the Forbearance Agreement and structuring a payment schedule beginning
in February 2003 and continuing through July 2003. After making the required
payment in February 2003, Ryer failed to make requisite payment for March 2003.
Pursuant to the Forbearance Agreement, Planet expects to recover all of the
assets previously sold to Ryer under the December 28, 2001 agreement.

Planet will continue to investigate and entertain developing other
strategic relationships that may help it promote its products or that might
extend the range of product solutions provided by Planets technologies. There
can be no assurance that any such agreements will result in any development and
license agreements or commercial relationships. There can be no assurance that
Planet will be able to negotiate acceptable customer relationships in the
future, or that its existing joint development and licensing agreements will be
successful. There can also be no assurance that Planet and its potential
strategic partners will be able to develop any products or that the new
products, if developed, and their pricing will be acceptable to customers.

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Sales and Marketing

Planet now relies mainly on the strategic marketing alliances it has with
Agway to market Planets products and technologies with respect to the
Companys EnviroPlastic CRT controlled-released technologies for agricultural
feed and produce. With respect to the AQUAMIM technologies it expects to
recover following Ryers default, Planet intends to sell such assets to another
buyer to commercially exploit that technology.

Competition

The amounts of royalties and monies Planet receives from its strategic
partners may depend on the competition faced by those strategic partners. In
the manufacture and marketing of controlled-release fertilizer, there is
indirect competition in Pursell Inc. and The Scotts Company in the United
States and Haifa Chemical Company in Israel. Planet believes that its
EnviroPlastic controlled-release technology marketed by its strategic partners
is a lower cost alternative that can be targeted towards the broader
agricultural market rather than the turf nursery and ornamental market segment
being served today.

There can be no assurance that the potentially competitive technologies
will not obtain a significant market share prior to the commercialization of
Planets products by Planets strategic partners. The development of a
competing or superior technology or the commercialization of such technology by
any one of the potential competitors of Planets strategic partners could have
a material adverse effect on the amount of royalties or monies, if any, Planet
receives.

Manufacturing and Suppliers

Planet no longer has an in-house manufacturing capability. Any and all
potential future work will require the use of third party vendors and contract
manufacturers to produce materials when required.

Research and Development

Research and development expenditures for the years ended December 31,
2002 and 2001 were approximately $118,000 and $353,000, respectively. The
majority of these 2002 research and development expenditures were conducted in
the agricultural feed and fruit/vegetable coatings area and were reimbursed by
Agway under its Feasibility Agreement. For the years ended December 31, 2002
and 2001, Planet recorded revenues from reimbursed research and development
costs of approximately $103,000 and $63,000, respectively, from Agway.

This major reduction in R&D expense reflects the decision of the Company
to curtail all further development and commercialization activity on Planets
engineered environmentally compatible polymer materials unless strategic
partners are identified and secured to bear the cost of these activities.

As of December 31, 2002, Planet had fully completed all employment
contract commitments with its technical personnel and had announced that it
will conduct all future product development programs, which might include
polymer synthesis, polymer blending, process development, pilot and full scale
manufacturing and testing, strictly on an as-needed consulting basis. Planet
has been advised by Agway that there may be some limited 2003 research and
development requirements in the agricultural feed and fruit/vegetable coatings
area. These expenditures will be reimbursed by Agway under its Feasibility
Agreement.

Intellectual Property and Proprietary Technologies

Planet believes that the Company has created an attractive portfolio of
unique, patented and potentially patentable intellectual property in the area
of environmentally sensitive polymers and advanced materials. Planet maintains
either ownership, licensing or strategic alliance relationships with various
partnering companies to commercialize and protect these valued intellectual
assets. Planet will continue to maintain patent and trademark protection for
such inventions, improvements and enhancements as appropriate.

In a letter agreement dated November 14, 2000 Planet agreed to sell,
assign and transfer to Agway the patent rights related to controlled release
technology for animal feed and fruit/produce initiatives, involving four (4)
patents and/or applications, for cash and the royalty payments equal to the
payments Planet would otherwise be entitled to receive pursuant to its existing
license agreements dated November 12, 1998 and Sub-Agreements dated March 1,
2000. Contemporaneously with the sale of the patents, Agway agreed to grant
Planet an irrevocable, exclusive, worldwide, royalty-free license to use and
commercially exploit all rights related to the patents for all uses other

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than food and agricultural initiatives. The License term was to be for the
life of the patents and any patents derived from the patents.

On December 28, 2001, Planet sold to Ryer Industries, LLC (Ryer) all its
right, title and interest in all issued patents, patent applications,
trademarks, existing intellectual property (including trade secrets),
knowledge, know-how and ongoing intellectual property being developed relating
to its AQUAMIM Metal Injection Molding (MIM) technology and the manufacture
and composition thereof. Additionally, Planet sold to Ryer all manufacturing,
pilot plant and production equipment related to the manufacture of AQUAMIM
feedstocks, as well as all raw materials and finished goods on hand at Planet
at the time of the sales of these assets. In consideration of this sale,
Planet received from Ryer certain cash and short term notes with varying
payments due during 2002, an eight-year royalty agreement for all sales of
AQUAMIM feedstocks and certain tungsten carbide cobalt feedstock formulations
and a one-year consulting agreement to provide technical support to Ryer.
Since the sale, Ryer has defaulted on its required payments causing the parties
to enter into a Forbearance Agreement in October 2002 to modify the payment
schedule for the remaining obligations to the Company. At the request of Ryer
in January 2003, Planet and Ryer modified the payment schedule again by
amending the Forbearance Agreement. As a result of Ryers default in March
2003, the Company will pursue all legal avenues to recover the assets
previously sold to Ryer, includingthe enforcement of the Confession Judgment
given by Ryer to the Company in connection with the Forbearance Agreement,
which provides among other things, for turnover to the Company of the assets
sold .

To consummate the sale and assignment contemplated by the letter agreement
dated November 14, 2000, the Company and Agway agreed on the form of two
separate Sale and Licensing Agreements with respect to the agricultural feed
technologies and the fruit/produce technologies. On March 25, 2003 the U.S.
Bankruptcy Court gave its approval to Agway to enter into the two Sale and
Licensing Agreements with the Company. In exchange for cash payments of
up-front royalty, the right to receive future sales royalty and other valuable
consideration, the Company confirmed (i) the assignment of its agricultural
feed related patent rights and fruit/produce related patent rights and (ii) the
license of its technology related to the agricultural feed products and
fruit/produce products, to Agway. Agway also will grant the Company exclusive,
irrevocable, worldwide, royalty-free limited licenses to use the assigned
patents rights for uses other than food and agricultural initiatives.
Additionally, under the fruit/produce agreement, Agway may enter into an
agreement to sell all or substantially all of the assets of its technologies
business, which would include the fruit/produce patent rights assigned by the
Company, within 12 months of the date of that agreement. Upon such sale, Agway
must pay the Company, among other things, a percentage of the net sales
proceeds, up to $200,000. If Agway fails to enter into such agreement to sell,
the Company will have the exclusive license to the patent rights previously
assigned to Agway under the fruit/produce agreement. Under both Sale and
Licensing Agreements, Agway is obligated to assign the subject patent rights
back to Planet in the event that Agway decides to intentionally abandon or
fails to reasonably maintain or defend any of the patent applications and/or
patents covering any of such patent rights.

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

Government Regulation

Some end products into which Planets products are incorporated may be
subject to significant regulation and approval by federal, state and local
entities such as the Food and Drug Administration and the Environmental
Protection Agency. Similar regulatory agencies exist worldwide. Planet may be
required to provide its strategic partners with technical information on its
products to be used by their customers in the regulatory process. Planets
strategic partners and their customers will have primary responsibility for
obtaining any required governmental

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approvals. The approval process could be costly and lengthy and potential
sales of Planets products could be significantly delayed and/or eliminated as
to end products subject to such regulatory approval.

Employees

As of December 31, 2002 all employment contracts for its CEO/President and
Chief Technical Officer terminated by their terms. Beginning January 1, 2003, Planet no longer had any
employees. Since January 1, four persons have provided consulting services to
Planet, one engaged in as-required research and development activities and
three in limited or part time administrative activities. With the Companys
stated objective of limiting all effort to assisting to commercialize already
developed technologies in the agricultural fields and MIM markets, the Company
does not foresee any employees in 2003.

Risk Factors

Our History of Operating Losses.We have incurred losses since inception.
For the years ended December 31, 2002 and 2001, we had net losses of
approximately $667,000 and $1,051,000, respectively. As of December 31, 2002,
we had an accumulated deficit of approximately $14.4 million. Since inception,
Planet has generated minimal revenues from product sales.

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



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

We anticipate that our existing resources will be sufficient to maintain
our scaled back operations through at least May 31, 2003. We cannot guarantee
that changes in our plans or other events affecting our projected expenses will
not result in the expenditure of such resources before such time.

We intend to seek additional funding through strategic partnership
arrangements or the extension of existing arrangements or through public or
private equity or debt financing. We cannot guarantee that additional financing
will be available on acceptable terms, or at all. Insufficient funds may
require the Company to file for bankruptcy protection under Chapter 11 or
Chapter 7 of the Bankruptcy laws.

Continued Quotation On Over-the-Counter Bulletin Board.Planet stock was
delisted from the Nasdaq SmallCap Market effective July 19, 2001, and became
active on the Over-the-Counter Bulletin Board on September 7, 2001, trading
under the symbol (POLY.OB)

Penny Stock Regulations.With the delisting from Planets Common Stock
from the Nasdaq SmallCap Market and subsequent listing on Over-the-Counter
Bulletin Board, trading in our Common Stock is subject to the requirements of
Rule 15g-9 promulgated under the Securities Exchange Act of 1934, as amended
(the Exchange Act). Under such rule, broker/dealers who recommend such
low-priced securities to persons other than established customers and
accredited investors must satisfy special sales practice requirements,
including a requirement that they make an individualized written suitability
determination for the purchaser and receive the purchasers written consent
prior to the transaction. The Securities Enforcement Remedies and Penny Stock
Reform Act of 1990 also requires additional disclosure in connection with any
trades involving a stock defined as a penny stock (generally, according to
recent regulations adopted by the Commission, any equity security not traded on
an exchange or quoted on Nasdaq that has a market price of less than $5.00 per
share, subject to certain exceptions), including delivery, prior to any penny
stock transaction, of a disclosure schedule explaining the penny stock market
and the risks associated therewith. Such requirements could severely limit the
market liquidity of our Common Stock and the ability purchasers of our Common
Stock to sell such shares in the secondary market.

Uncertainty of Market Acceptance.Our success is largely dependent upon
the royalties and monies we receive from licensing agreements as a result of
the commercial acceptance of our technologies by the various industries
targeted by our products. There can be no certainty as to the amount of time
required to achieve full-scale commercialization, and the commercialization
process of any new product could take several years. We cannot guarantee that
our products will receive broad market acceptance as an economically acceptable
alternative. Broad

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market acceptance of our products will depend upon the ability of our
strategic partners to demonstrate to potential customers that our products can
compete favorably with alternative solutions. Beginning in 2002, the Company
focused on research and development and commercial support for Agways
FreshSeal commercial program, Agways Optigen 1200 development activities and
Ryer Industries AQUAMIM Metal Injection Molding commercialization. Although
the Company expects to recover the AQAMIM technologies as a result of Ryers
default under the Forbearance Agreement, which it intends to sell to another
buyer, there can be no assurance that the Company will be able to find a buyer
and/or receive a good price for such assets.

Reliance on Strategic Relationships.Our technologies are designed to
serve multiple industries. An important part of our strategy is to promote
acceptance of our products through technology and product alliances with
certain strategic partners and their customers. Our dependence on these
customers raises certain risks with respect to the future success of our
business. Our success is dependent on the successful completion and commercial
deployment of our products and on the future commitment of these customers to
our products and technology. We cannot guarantee that our collaboration with
these partners and their customers will result in products that are accepted by
the customers or widely accepted in the marketplace.

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

Shares Eligible for Future Sale.Sales of substantial amounts of our
Common Stock in the public market or the prospect of such sales by existing
shareholders could materially adversely affect the market price of our Common
Stock. As of December 31, 2002, we had outstanding 9,207,884 shares of Common
Stock. Virtually all of our outstanding shares of Common Stock are either
registered and therefore freely tradable or may be transferred pursuant to Rule
144(k) under the Securities Act, unless held by our affiliates as that term
is defined in Rule 144 under the Securities Act.

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

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

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

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ITEM 2. DESCRIPTION OF PROPERTY

Our executive offices and research laboratory are located in approximately
1,600 square feet of leased office space in San Diego, California. On August
1, 2002, the Company entered into a new three-year standard industrial lease.
The lease will expire on July 31, 2005 and the monthly rental payment is $1,920
the first year, $1,997 the second year and $2,077 the third year. The lease
allows for Planet to have an early termination option after eighteen months.




ITEM 3. LEGAL PROCEEDINGS

None




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

None.

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PART II.




ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Companys Common Stock traded on the Nasdaq SmallCap tier of the
Nasdaq Stock Market (Nasdaq) under the symbol POLY, from the Companys
initial public offering on September 21, 1995 until July 18, 2001. The
Companys Common Stock now trades on the OTC.BB. The following table sets
forth the high and low sales prices of the Companys Common Stock for the
period from January 1, 2001 through December 31, 2002 as furnished by Nasdaq
and the OTC.BB. These prices reflect prices between dealers without retail
markups, markdowns or commissions, and may not necessarily represent actual
transactions:

|                                    |  |              |       |     |  |  |       | 
|----------------------------------- |  | ------------ | ----- | --- |  |  | ----- | 
|                                    |  | Trade Prices
|                                    |  |             
|                                    |  | High         |       | Low
|                                    |  |              |       |    
|Fiscal year ended December 31, 2001
|Second Quarter                      |  |              | 0.688 |     |  |  | 0.350 | 
|Third Quarter                       |  |              | 0.430 |     |  |  | 0.110 | 
|Fourth Quarter                      |  |              | 0.190 |     |  |  | 0.040 | 
|Fiscal year ended December 31, 2002
|First Quarter                       |  |              | 0.350 |     |  |  | 0.110 | 
|Second Quarter                      |  |              | 0.250 |     |  |  | 0.130 | 
|Third Quarter                       |  |              | 0.150 |     |  |  | 0.130 | 
|Fourth Quarter                      |  |              | 0.170 |     |  |  | 0.030 | 

On March 19, 2003, the last reported sale price of the Companys Common
Stock on the Over-the-Counter Bulletin Board was $0.04. As of March 19, 2003,
there were approximately 169 holders of record of the Companys Common Stock
with 9,207,884 shares outstanding. Pursuant to the execution of the Sale and
License Agreement with Agway for animal feed products, Planet will reacquire
3,000,000 shares of Common Stock owned by Agway. 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.

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

During 2002, the Companys management evaluated the Equity Line of Credit
and determined that it is unlikely to sell any additional shares of the
Companys stock to Triton under the Equity Line of Credit. As a result, a
charge was taken against General and Administrative Expenses representing the
amounts capitalized into equity during the transaction that exceeded the net
amounts collected under the agreement.

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

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

Recent Sales of Unregistered Securities

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

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

On January 21, 2002 and February 6, 2001, Planet issued 42,266 and 8,400
shares, respectively, of the Companys Common Stock in exchange for legal
services. These shares are exempt from registration.




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

Overview

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

Since the Company was founded in 1991, with the exception of resources
expended in connection with the purchase and ongoing operation of Deltco,
substantially all of the Companys resources have been devoted to the
development and commercialization of its technologies and products. This has
included the expenditure of funds to develop the Companys corporate
infrastructure, support the Companys marketing efforts and establish a pilot
production facility, in addition to research and development. In January 2000,
Planet sold its wholly-owned subsidiary, Deltco, a manufacturer and reprocessor
of plastic resins located in Ashland, Wisconsin. Planet has incurred operating
losses since inception and had an accumulated deficit as of December 31, 2002
of approximately $14.4 million. Pending royalties on the Companys patents,
the Company expects to incur additional losses.

The Application of Critical Accounting Policies

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

Revenue Recognition - Product sales revenue is recognized when all of the
following conditions are met: the product is shipped, Planet has the right to
invoice the customer at a fixed price, the collection of the receivable is
probable and there are no significant obligations remaining. Research and
development revenues from customers other than Agway and reimbursement of
research and development costs by Agway are not refundable if the research is
unsuccessful. The research and development revenues from customers other than
Agway are recognized when services have been rendered and any related products
have been shipped, at which time the customer is obligated to pay for those
services. The revenues for reimbursed research and development costs for Agway
are

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recognized when costs related to services performed and any related
products have been shipped, at which time Agway is obligated to reimburse these
costs. Royalties are recognized when the amounts are determinable and
collectibility is assured.

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

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

Long-Lived Assets - Long-lived assets, such as property and equipment, are
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Impairment losses
are recognized when events or changes in circumstances indicate that the
undiscounted cash flows estimated to be generated by such assets are less than
their carrying value and, accordingly, all or a portion of such carrying value
may not be recoverable. Impairment losses for assets to be held and used are
then measured based on the excess, if any, of the carrying amounts of the
assets over their fair values. Long-lived assets to be disposed of in a manner
that meets certain criteria are stated at the lower of their carrying amounts
or fair values less costs to sell and are no longer depreciated.

Related Party Transactions

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

In November 1998, the Company and Agway entered into an agreement relating
to the funding by Agway of a feasibility study (the Feasibility Agreement) of
the Companys polymer technology for use in agricultural products (other than
fertilizers and certain biological products) and food products. Under the
terms of the Feasibility Agreement, Planet will be reimbursed for certain
qualifying research and development costs relating to such applications. During
2002 and 2001, the Company recorded revenues for reimbursed research and
development costs of $102,839 and $62,509, respectively, from Agway under the
Feasibility Agreement.

Also in November 1998, the Company granted Agway an exclusive worldwide
license in connection with the Companys technology for time-release coatings
for a variety of agricultural and food products (the License Agreement). The
License Agreement outlines the general terms and conditions for the rights
granted Agway thereunder. The Company and Agway agreed to execute further
sub-agreements specifying the royalties to be paid to the Company for Agways
use of the Companys technology with certain products. In March 2000, the
Company and Agway entered into a Sub-Agreement with respect to animal feed
products incorporating Planets patented/patent pending coatings and/or polymer
systems. Also in March 2000, the Company and Agway entered into another
Sub-Agreement with respect to Planets patented/patent pending coatings and/or
polymer systems sold for use on fruits, vegetables, floral and nursery items.
During 2001, the Company received a $100,000 royalty payment from Agway. After
receiving proceeds from Agway, pursuant to its royalty payment in October 2001,
the Company was required to pay a $6,000 cash transaction fee to an advisor.
This payment was made on January 24, 2002 and shown in accounts payable at
December 31, 2001. No royalties were received or accrued by the Company under
the agreement with Agway in 2002.

On October 1, 2002, Agway, Inc. filed a voluntary petition for
reorganization under Chapter 11 of the United States Bankruptcy Code. The Sub
Agreement covering the FreshSeal technology and license provided for a minimum
royalty of $300,000 on or before October 31, 2002 to maintain exclusivity.
This payment was not received or accrued by Planet. Pursuant to the
Sub-Agreement, Planet notified Agway that the payment was not received. Under
the terms of the Sub-Agreement, Agway had sixty (60) days during which Agway
could make the necessary payment and retain market exclusivity for this
technology. Agway did not make payment of the minimum royalty as of December
31, 2002. As a result of this failure by Agway to make payment, Planet had the
right to issue additional non-exclusive licenses for this technology to other
interested parties in the fruit, vegetable, nuts and flowers segments of the
agricultural products industry.

To consummate the sale and assignment contemplated by the letter agreement
dated November 14, 2000, the Company and Agway agreed on the form of two
separate Sale and Licensing Agreements with respect to the agricultural feed
technologies and the fruit/produce technologies. On March 25, 2003, with the
approval of the U.S. Bankruptcy Court, the Company and Agway entered into the
two separate Sale and Licensing Agreements. Under the Sale and Licensing
Agreements, the Company confirmed (i) the assignment of its agricultural feed
related patent

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rights and fruit/produce related patent rights and (ii) the license of its
technology related to the agricultural feed products and fruit/produce
products, to Agway. In return, the Company will receive an up-front payment of
$30,000 for its execution of the agricultural feed agreement and a payment of
$100,000 for its execution of the fruit/produce agreement, and will also
receive a sales royalty based on net revenues generated from product sales.
Agway will also grant the Company exclusive, irrevocable, worldwide,
royalty-free limited licenses to use the assigned patents rights for uses other
than food and agricultural initiatives. In connection with the agricultural
feed agreement, Agway also agreed to assign and transfer to the Company all of
Agways shares of Planet capital stock. Additionally, under the fruit/produce
agreement, Agway may enter into an agreement to sell all or substantially all
of the assets of its FreshSeal business, which would include the fruit/produce
patent rights assigned by the Company, within 12 months of the date of that
agreement. Upon such sale, Agway must pay the Company, among other things, a
percentage of the net sales proceeds, up to $200,000. Management cannot assure
that the Company will receive significant, if any, royalties and monies under
these Sale and Licensing Agreements.

New Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board (FASB) approved
the issuance of Statement on Financial Accounting Standards No. 142, Goodwill
and Other Intangible Assets (SFAS 142). SFAS 142 requires that goodwill no
longer be amortized to earnings but instead be reviewed at least annually for
impairment. The statement was effective for the Companys fiscal year ended
December 31, 2002.

In July 2001, FASB issued Statement of Financial Accounting Standards No.
143, Accounting for Asset Retirement Obligations (SFAS 143), that requires
recording the fair value of the liability for closure and removal costs
associated with the legal obligations upon retirement or removal of any
tangible long-lived assets. SFAS 143 is required to be effective January 1,
2003.

In December 2002, FASB issued Statement of Financial Accounting Standards
No. 148, Accounting for Stock-Based Compensation  Transition and
Disclosure  an amendment of FASB Statement No. 123 (SFAS 148). SFAS
amends FASB Statement No. 123 to provide alternative methods of transition for
a voluntary change to the fair value based method of accounting for stock-based
employee compensation. In addition, SFAS 148 amends the disclosure
requirements of FASB Statement No. 123 to require prominent disclosures in both
annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results. SFAS 148 is effective for the fiscal years beginning after December
15, 2002.

The adoption of these new pronouncements did not have or is not expected
to have a material effect on the Companys financial position or results of
operations.

Results of Operations

The Companys revenues decreased approximately $402,000 to approximately
$162,000 for the year ended December 31, 2002 from approximately $564,000 for
the year ended December 31, 2001. This decrease was primarily attributable to
no AQUAMIM® sales, resulting from selling all AQUAMIM® assets in December
2001 and no EnviroPlastic® Z sales and lower royalty income partially offset
by higher Agway development income and revenue from research and development
technical consulting. Ryer has defaulted on required payments and Agway has
filed for reorganization under the Bankruptcy Code. As a result, revenues
associated with these activities may decrease.

Cost of revenues decreased approximately $259,000 to approximately
$110,000 for the year ended December 31, 2002 from approximately $369,000 for
the year ended December 31, 2001. This decrease was primarily due to decreased
revenues, a change in product mix away from AQUAMIM® and EnviroPlastic® Z
and lower depreciation and amortization expense resulting from selling all
AQUAMIM® assets in December 2001.

General and administrative expenses decreased $342,000 to approximately
$468,000 for the year ended December 31, 2002 from approximately $811,000 for
the year ended December 31, 2001. This decrease was primarily attributable to
a reduction in staff, reduced use of outside services, lower facility costs
resulting from a new lease agreement in the third quarter and lower
depreciation and amortization expense resulting from selling all AQUAMIM®
assets in December 2001 partially offset by bad debt allowances of $80,000 and
a charge of
$67,000 for expenses originally charged against equity related to the
Triton Equity Line of Credit that exceeded the amounts collected under the
agreement.

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Marketing expenses decreased $179,000 to approximately $100,000 for the
year ended December 31, 2002 from approximately $279,000 for the year ended
December 31, 2001. This decrease was primarily due to a reduction in staff and
reduced promotional expenses.

The Companys research and development expenses decreased approximately
$235,000 to approximately $118,000 for the year ended December 31, 2002 from
approximately $353,000 for the year ended December 31, 2001. This decrease was
primarily due to a reduction in staff, severance costs related to employee
terminations in the first half of 2001, greater research and development
expense reimbursement from Agway and lower depreciation and amortization
expense resulting from selling all AQUAMIM® assets in December 2001.

In June 2002, the Company recorded a charge of approximately $62,000
relating to the write-off of certain EnviroPlastic Z intangible assets held for
sale when it was determined that future undiscounted cash flows associated with
these assets were insufficient to recover their carrying value. The assets
principally represent the Companys historical ownership interest in product
rights and license agreements relating to the Companys EnviroPlastic Z patent.

Other income, net, decreased approximately $167,000 to approximately
$29,000 for the year ended December 31, 2002 from approximately $196,000 for
the year ended December 31, 2001. This decrease was primarily attributable to
a one-time 2001 litigation settlement, the write-off of assets held for sale
and lower cash balances and lower interest rates partially offset by increased
interest related to a note receivable, a gain on the sale of fixed assets and
securities.

The Companys net loss decreased approximately $385,000 to approximately
$667,000 during the year ended December 31, 2002 from approximately $1,051,000
during the year ended December 31, 2001 as a result of the aforementioned
contributing factors.

As of December 31, 2002, the Company had net operating loss carryforwards
for federal income tax purposes of approximately $12,595,000 and for California
state tax purposes of approximately $3,500,000. During the period from 1998
through 2000, certain ownership changes occurred. As a result, the Companys
annual utilization of net operating loss and tax credit carryforwards may be
limited as defined by Sections 382 and 383 of the Internal Revenue Code. Due
to the possible limitation under Sections 382 and 383 of the Internal Revenue
Code and Planets lack of historical earnings, the Company has recorded a full
valuation allowance for deferred tax assets.

Liquidity and Capital Resources

From January 2002 to December 2002, the Company recorded revenues for
reimbursed research and development costs of approximately $103,000 from Agway
under the Feasibility Agreement. The Company anticipates that some of the 2003
research and development expenditures in the agrotechnology area will be
reimbursed by Agway under the Feasibility Agreement.

The Company used approximately $395,000 for continuing operations for the
year ended December 31, 2002. Such funds were used for research and
development activities, marketing efforts, administrative support and expenses
related to the Triton Equity Line of Credit.

Net cash provided by investing activities of approximately $159,000 for
the year ended December 31, 2002 primarily resulted from payments on notes
receivable and the sale of assets.

The Company used approximately $40,000 for financing activities for the
year ended December 31, 2002. Such funds were used for repayment of debt and
capital lease obligations.

The Company does not believe that its existing sources of liquidity and
anticipated revenue will satisfy the Companys projected working capital and
other cash requirements through December 31, 2003. The Company expects that it
will need to raise or generate substantial additional capital to accomplish its
business plan over the next year. The Company has reduced staff and operating
expenses, reduced or sold non-Agway or agricultural
assets, while continuing to provide technical research and development for
Agways FreshSeal commercial program and Optigen development activities, as
well as support of MIM asset utilization at Ryer Industries. Agway has filed

15



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##### Table of Contents



for reorganization and Ryer has defaulted on certain payments. Accordingly,
management cannot provide any assurance that the Company will be successful in
satisfying future working capital and other cash requirements past May 31,
2003. If it cannot, the Company may have to cease operations and liquidate its
assets and liabilities and prepare its financial statements on a liquidation
basis instead of a going concern basis.




ITEM 7. FINANCIAL STATEMENTS

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




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

None

16



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##### Table of Contents






PART III.




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

The information required by this item is incorporated by reference from
Issuers Definitive Proxy Statement to be filed with the Commission pursuant to
Regulation 14A in connection with its 2003 Annual Meeting of Shareholders (the
Proxy Statement) under the headings Proposal 1 - Election of Directors,
Compliance with Section 16(a) of the Securities Exchange Act of 1934, and
Additional Information - Management.




ITEM 10. EXECUTIVE COMPENSATION

The information required by this item is incorporated by reference from
the Proxy Statement under the heading Executive Compensation.




ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this item is incorporated by reference from
the Proxy Statement under the heading Security Ownership of Certain Beneficial
Owners and Management.




ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this item is incorporated by reference to the
Proxy Statement under the heading Certain Relationships and Related
Transactions.




ITEM 13. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures designed to provide
reasonable assurance that information required to be disclosed in the reports
we file with the SEC is recorded, processed, summarized and reported within the
time periods specified in the rules of the SEC. Within 90 days prior to the
filing of this Annual Report on Form 10-KSB, we carried out an evaluation,
under the supervision and the participation of our management, including our
Chief Executive Officer and Chief Financial Officer, of the design and
operation of these 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 our disclosure controls and procedures are
effective in timely alerting him to material information relating to the
Company required to be included in our periodic SEC filings.

CHANGES IN INTERNAL CONTROLS

There were no significant changes in internal controls or other factors
that could significantly affect our internal controls subsequent to the date of
our evaluation.

17



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##### Table of Contents






PART IV.




ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K.



| | (a) |  | 1. Financial Statements.Financial statements are attached as the
Appendix to this report. The index to the financial statements is found
on page F-1 of the Appendix.                                                                                                                    
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | 2. Financial Statement Schedules.All schedules are omitted since
the required information is not present or is not present in amounts
sufficient to require a submission of the schedules, or because the
information required is included in the financial statements and notes
thereto.
|
| |     |  | 3. Exhibits. See Exhibit Index in part (c), below.                                                                                                                                                                                                                                       
|
| | (b) |  | Reports on Form 8-K:                                                                                                                                                                                                                                                                     
|
| |     |  | On January 10 2002 the Company filed a Current Report on Form 8-K to
report the change in accountants to J.H. Cohn LLP from
PricewaterhouseCoopers and the sale of the Metal Injection Molding assets
of the Company.                                                                    

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

18



---



##### Table of Contents



|             |  |                                                                                                                                                                                                                                                      
|------------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.14(6)     |  | Warrant to Purchase Common Stock, dated September 24, 1997,
issued by the Registrant to Special Situations Private Equity Fund,
L.P.                                                                                                                 
|             |  |                                                                                                                                                                                                                                                      
|10.15(8)     |  | Stock Purchase Agreement, dated November 12, 1998 between the Registrant
and Agway Inc.                                                                                                                                                              
|             |  |                                                                                                                                                                                                                                                      
|10.16(8)     |  | Warrant to Purchase Common Stock, dated January 11, 1999, issued by the
Registrant to Agway Inc.                                                                                                                                                     
|             |  |                                                                                                                                                                                                                                                      
|10.17(10)    |  | Registration Rights Agreement, dated January 11, 1999, between
the Registrant
and Agway Inc.                                                                                                                                                         
|             |  |                                                                                                                                                                                                                                                      
|10.18(10)    |  | Product Feasibility Agreement dated as of November 12, 1998
between the Registrant and Agway Consumer Products, Inc.                                                                                                                                 
|             |  |                                                                                                                                                                                                                                                      
|10.19(10)    |  | License Agreement dated as of November 12, 1998 between the
Registrant and
Agway Consumer Products, Inc.                                                                                                                                             
|             |  |                                                                                                                                                                                                                                                      
|10.20(11)    |  | Amendment No.1 dated as of February 25, 1999 to the Form of the
Warrant dated January 11, 1999 issued by the Registrant to Agway
Inc.                                                                                                                
|             |  |                                                                                                                                                                                                                                                      
|10.21(13)    |  | Warrant to Purchase Common Stock, dated March 29, 1999, issued
by the Registrant to LBC Capital Resources, Inc.                                                                                                                                      
|             |  |                                                                                                                                                                                                                                                      
|10.22(12)    |  | Amended Technology Development and License Agreement, dated
June 23, 1999, between the Registrant and Agrium Inc. (formerly
known as Cominco Fertilizers Ltd.).                                                                                      
|             |  |                                                                                                                                                                                                                                                      
|10.23(13)    |  | Sub-Agreement to License Agreement (Animal Feed) effective as
of March 1, 2000 between the Registrant and Agway Inc.                                                                                                                                 
|             |  |                                                                                                                                                                                                                                                      
|10.24(13)    |  | Sub-Agreement to License Agreement (Fruits, Vegetables, Etc.)
effective as of March 1, 2000 between the Registrant and Agway Inc.                                                                                                                    
|             |  |                                                                                                                                                                                                                                                      
|10.25(13)    |  | Warrant to Purchase Common Stock, dated March 9, 2000, issued
by the Registrant to LBC Capital Resources, Inc.                                                                                                                                       
|             |  |                                                                                                                                                                                                                                                      
|10.26(14)    |  | Registrants 2000 Stock Incentive Plan (the 2000 Plan).                                                                                                                                                                                              
|             |  |                                                                                                                                                                                                                                                      
|10.27(14)    |  | Form of Incentive Stock Option Grant under the 2000 Plan.                                                                                                                                                                                            
|             |  |                                                                                                                                                                                                                                                      
|10.28(14)    |  | Form of Non-statutory Stock Option Grant under the 2000 Plan.                                                                                                                                                                                        
|             |  |                                                                                                                                                                                                                                                      
|10.29(16)    |  | Private Equity Line of Credit Agreement dated August 15, 2000 and Exhibits.                                                                                                                                                                          
|             |  |                                                                                                                                                                                                                                                      
|10.30(16)    |  | Letter dated September 11, 2000 amending the Private Equity
Line of Credit Agreement.                                                                                                                                                                
|             |  |                                                                                                                                                                                                                                                      
|10.31(17)    |  | Employment Agreement with Richard C. Bernier.                                                                                                                                                                                                        
|             |  |                                                                                                                                                                                                                                                      
|10.32(17)    |  | Warrant to purchase Common Stock, dated March 20, 2001, issued
by the Registrant to LBC Capital Resources, Inc.                                                                                                                                      
|             |  |                                                                                                                                                                                                                                                      
|10.33(18)    |  | Purchase and Sale Agreement dated as of December 21, 2001
between Planet Polymer Technologies, Inc. and Ryer Industries LLC
and Consulting Agreement between Planet Polymer Technologies, Inc.
and Ryer Industries LLC dated as of December 21, 2001.
|             |  |                                                                                                                                                                                                                                                      
|10.34(18)    |  | First Amendment to Executive Agreement for Robert J. Petcavich,
dated December 17, 2001.                                                                                                                                                             
|             |  |                                                                                                                                                                                                                                                      
|10.35(18)    |  | First Amendment to Executive Agreement for Richard C. Bernier,
dated December 17, 2001.                                                                                                                                                              
|             |  |                                                                                                                                                                                                                                                      
|10.36(19)    |  | Forbearance and Stipulated Confession of Judgment Agreement
between Planet Polymer Technologies, Inc. and Ryer Industries LLC.                                                                                                                       
|             |  |                                                                                                                                                                                                                                                      
|10.37        |  | Amendment to Forbearance and Stipulated Confession of
Judgment Agreement between Planet Polymer Technologies, Inc. and
Ryer Industries LLC.                                                                                                          
|             |  |                                                                                                                                                                                                                                                      
|10.38        |  | Form of Sale and License Agreement dated March 2003 with
Agway, Inc. (animal feed products).                                                                                                                                                         
|             |  |                                                                                                                                                                                                                                                      
|10.39        |  | Form of Sale and License Agreement dated March 2003 with
Agway, Inc. (fruit and vegetable products).                                                                                                                                                 
|             |  |                                                                                                                                                                                                                                                      
|10.40        |  | Form of First Amendment to License Agreement with Agway,Inc.                                                                                                                                                                                         
|             |  |                                                                                                                                                                                                                                                      
|10.41        |  | Form of Consulting Agreement with Richard Bernier.                                                                                                                                                                                                   
|             |  |                                                                                                                                                                                                                                                      
|10.42        |  | Form of Consulting Agreement with Robert Petcavitch.                                                                                                                                                                                                 
|             |  |                                                                                                                                                                                                                                                      
|11.1(13)(15) |  | Statement of Computation of Common and Common Equivalent Shares.                                                                                                                                                                                     
|             |  |                                                                                                                                                                                                                                                      
|23.1         |  | Consent of Blanchard Krasner & French, APC. (included in Exhibit 5.1).                                                                                                                                                                               
|             |  |                                                                                                                                                                                                                                                      
|23.2         |  | Consent of J.H. Cohn LLP.                                                                                                                                                                                                                            
|             |  |                                                                                                                                                                                                                                                      
|24.1         |  | Power of Attorney. Reference is made to page 21.                                                                                                                                                                                                     
|             |  |                                                                                                                                                                                                                                                      
|99.1         |  | CEO and CFO certification                                                                                                                                                                                                                            

19



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|     |  |                                                                                                                                                                                                                                                     
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1)  |  | Previously filed as an exhibit to the Registrants
Registration Statement on Form SB-2, as amended (No. 33-91984 LA)
and incorporated herein by reference.                                                                                          
|     |  |                                                                                                                                                                                                                                                     
|(2)  |  | Previously filed as an exhibit to the Registrants
Registration Statement on Form S-8 (No. 333-1042) filed on February
5, 1996 and incorporated herein by reference.                                                                                
|     |  |                                                                                                                                                                                                                                                     
|(3)  |  | Previously filed as an exhibit to the Registrants Current
Report on Form 8-K filed on January 11, 1996, as amended by the
Registrants Current Report on Form 8-K/A (Amendment No. 1) filed on
March 15, 1996 and incorporated herein by reference.
|     |  |                                                                                                                                                                                                                                                     
|(4)  |  | Previously filed as an exhibit to the Registrants Annual
Report on Form 10-KSB filed for the fiscal year ended December 31,
1995 and incorporated herein by reference.                                                                             
|     |  |                                                                                                                                                                                                                                                     
|(5)  |  | Previously filed as an exhibit to the Registrants Quarterly
Report on Form 10-QSB for the quarter ended June 30, 1997 and
incorporated herein by reference.                                                                                        
|     |  |                                                                                                                                                                                                                                                     
|(6)  |  | Previously filed as an exhibit to the Registrants
Registration Statement on Form S-3 (No. 333-39845) filed on November
7, 1997, amended on December 31, 1997 and incorporated herein by
reference.                                                 
|     |  |                                                                                                                                                                                                                                                     
|(7)  |  | Previously filed as an exhibit to the Registrants Annual
Report on Form 10-KSB filed for the fiscal year ended December 31,
1997 and incorporated herein by reference.                                                                             
|     |  |                                                                                                                                                                                                                                                     
|(8)  |  | Previously filed with the Registrants Definitive Proxy
Statement filed on December 14, 1998 and incorporated herein by
reference.                                                                                                                  
|     |  |                                                                                                                                                                                                                                                     
|(9)  |  | Confidential treatment has been requested with respect to
certain portions of this exhibit. Omitted portions will be filed
separately with the Securities and Exchange Commission.                                                                  
|     |  |                                                                                                                                                                                                                                                     
|(10) |  | Previously filed as an exhibit to the Registrants Annual
Report on Form 10-KSB filed for the fiscal year ended December 31,
1998 and incorporated herein by reference.                                                                             
|     |  |                                                                                                                                                                                                                                                     
|(11) |  | Previously filed as an exhibit to the Registrants Quarterly
Report on Form 10-QSB for the quarter ended March 31, 1999 and
incorporated herein by reference.                                                                                       
|     |  |                                                                                                                                                                                                                                                     
|(12) |  | Previously filed as an exhibit to the Registrants Quarterly
Report on Form 10-QSB for the quarter ended June 30, 1999 and
incorporated herein by reference.                                                                                        
|     |  |                                                                                                                                                                                                                                                     
|(13) |  | Filed as an exhibit to the Registrants Annual Report on Form
10-KSB filed for the fiscal year ended December 31, 1999 and
incorporated herein by reference.                                                                                        
|     |  |                                                                                                                                                                                                                                                     
|(14) |  | Previously filed as an exhibit to the Registrants
Registration Statement on Form S-8 (No. 333-38500) filed on June 2,
2000 and incorporated herein by reference.                                                                                   
|     |  |                                                                                                                                                                                                                                                     
|(15) |  | Previously filed as an exhibit to the Registrants Quarterly
Report on Form 10-QSB for the quarter ended June 30, 2000.                                                                                                                             
|     |  |                                                                                                                                                                                                                                                     
|(16) |  | Previously filed as an exhibit to the Registrants
Registration Statement on Form SB-2 (No. 333-46474), as amended by
the Registrants Registration Statement on Form SB-2 (Amendment No.
2) and incorporated herein by reference.                  
|     |  |                                                                                                                                                                                                                                                     
|(17) |  | Previously filed as an exhibit to the Registrants Quarterly
Report on Form 10-QSB for the quarter ended March 31, 2001.                                                                                                                            
|     |  |                                                                                                                                                                                                                                                     
|(18) |  | Previously filed as an exhibit to the Registrants Current
Report on Form 8-K filed on January 10, 2002, and incorporated
herein by reference.                                                                                                      
|     |  |                                                                                                                                                                                                                                                     
|(19) |  | Previously filed as an exhibit to the Registrants Quarterly
Report on Form 10-QSB for the quarter ended September 30, 2002.                                                                                                                        

20



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SIGNATURES

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

|                     |  |                                   |                                    
|-------------------- |  | --------------------------------- | -----------------------------------
|                     |  | PLANET POLYMER TECHNOLOGIES, INC.
|                     |  |                                  
|Dated March 31, 2003 |  | By:                               | /s/ H. M. Busby                    
|                     |  |                                   |                                    
|                     |  |                                   | H. M. Busby
Chief Executive Officer




POWER OF ATTORNEY

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

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

|                                             |  |                                                                                                                 |  |               
|-------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------- |  | --------------
|Signature                                    |  | Title                                                                                                           |  | Date          
|                                             |  |                                                                                                                 |  |               
|                                            
|/s/ Robert J. PetcavichRobert J. Petcavich   |  | Chairman                                                                                                        |  | March 31, 2003
|                                            
|/s/ H. M. BusbyH. M. Busby                   |  | Director and Chief Executive Officer
(Principal Executive Officer)
(Principal Financial and Accounting Officer) |  | March 31, 2003
|                                            
|/s/ Ronald B. SunderlandRonald B. Sunderland |  | Director                                                                                                        |  | March 31, 2003

21



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SECTION 302 CERTIFICATION

I, H. M. Busby, certify that:

1.     I have reviewed this annual report on Form 10-KSB of Planet Polymer
Technologies, Inc.;

2.     Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4.     I am responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and I have:

a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to me by others within those entities, particularly
during the period in which this annual report is being prepared;

b) evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the Evaluation Date); and

c) presented in this annual report my conclusions about the effectiveness
of the disclosure controls and procedures based on my evaluation as of the
Evaluation Date;

5.     I have disclosed, based on my most recent evaluation, to the
registrants auditors and the audit committee of registrants board of
directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and

6.     I have indicated in this annual report whether or not there were
significant changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of my most recent
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.

/s/ H. M. Busby
H. M. Busby, Chief Executive Officer

/s/ H. M. Busby
H. M. Busby, Chief Financial Officer

March 31, 2003

22



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##### Table of Contents



APPENDIX

FINANCIAL STATEMENTS



---



##### Table of Contents



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

|                                                                                  |  |    
|--------------------------------------------------------------------------------- |  | ---
|Report of Independent Public Accountants                                          |  | F-2
|Financial Statements and Notes:                                                   |  |    
|Balance Sheet as of December 31, 2002                                             |  | F-3
|Statements of Operations for the Years Ended December 31, 2002 and 2001           |  | F-4
|Statements of Shareholders Equity for the Years Ended December 31, 2002
and 2001 |  | F-5
|Statements of Cash Flows for the Years Ended December 31, 2002 and 2001           |  | F-6
|Notes to Financial Statements                                                     |  | F-7

F-1



---



##### Table of Contents



REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders
Planet Polymer Technologies, Inc.

We have audited the accompanying balance sheet of PLANET POLYMER TECHNOLOGIES,
INC. as of December 31, 2002, and the related statements of operations,
shareholders equity and cash flows for the years ended December 31, 2002 and
2001. 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 auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
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 Polymer Technologies,
Inc. as of December 31, 2002, and its results of operations and cash flows for
the years ended December 31, 2002 and 2001, in conformity with accounting
principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 3 to the
financial statements, the Company has sustained net losses from its operations
and, as a result, it has an accumulated deficit at December 31, 2002 of
$14,410,924. These matters, among others, raise substantial doubt about the
Companys ability to continue as a going concern. Managements plans in regard
to these matters are also described in Note 3. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.

J.H. Cohn LLP

San Diego, California
February 28, 2003, except for
Note 13 as to which the date
is March 25, 2003

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PLANET POLYMER TECHNOLOGIES, INC.

BALANCE SHEET

|                                                                                       |                                                                                                              |  |                                            |             |              |         | 
|-------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------ |  | ------------------------------------------ | ----------- | ------------ | ------- | 
|                                                                                       |                                                                                                              |  |                                            |             | December 31,
|                                                                                       |                                                                                                              |  |                                            |             | 2002        
|                                                                                       |                                                                                                              |  |                                            |             |             
|ASSETS                                                                                 |                                                                                                              |  |                                            |            
|Current assets:                                                                        |                                                                                                              |  |                                            |            
|                                                                                       | Cash                                                                                                         |  | $                                          | 14,781      |             
|                                                                                       | Accounts receivable                                                                                          |  |                                            | 34,673      |             
|                                                                                       | Note receivable                                                                                              |  |                                            | 46,116      |             
|                                                                                       | Prepaid expenses and other current assets                                                                    |  |                                            | 10,212      |             
|                                                                                       |                                                                                                              |  |                                            |            
|                                                                                       |                                                                                                              |  | Total current assets                       |             |              | 105,782 | 
|Property and equipment, net                                                            |                                                                                                              |  | 8,184                                      |            
|Patents, trademarks and license agreements, net of accumulated amortization of $63,238 |                                                                                                              |  | 168,098                                    |            
|Other assets                                                                           |                                                                                                              |  | 5,761                                      |            
|                                                                                       |                                                                                                              |  |                                            |            
|                                                                                       |                                                                                                              |  | Total assets                               |             | $            | 287,825 | 
|                                                                                       |                                                                                                              |  |                                            |            
|LIABILITIES AND SHAREHOLDERS EQUITY                                                   |                                                                                                              |  |                                            |            
|Current liabilities:                                                                   |                                                                                                              |  |                                            |            
|                                                                                       | Accounts payable                                                                                             |  | $                                          | 27,816      |             
|                                                                                       | Accrued payroll and vacation                                                                                 |  |                                            | 19,031      |             
|                                                                                       | Accrued expenses                                                                                             |  |                                            | 2,911       |             
|                                                                                       |                                                                                                              |  |                                            |            
|                                                                                       |                                                                                                              |  | Total liabilities                          |             |              | 49,758  | 
|                                                                                       |                                                                                                              |  |                                            |            
|Commitments and contingencies                                                          |                                                                                                              |  |                                            |            
|Shareholders equity:                                                                  |                                                                                                              |  |                                            |            
|                                                                                       | Preferred
Stock, no par value
4,250,000 shares authorized
No shares issued or outstanding                    |  |                                            |            |             
|                                                                                       | Series A
Convertible Preferred Stock, no par value
750,000 shares authorized
No shares issued or outstanding |  |                                            |            |             
|                                                                                       | Common
Stock, no par value
20,000,000 shares authorized
9,207,884 shares issued and outstanding              |  |                                            | 14,648,991  |             
|                                                                                       | Accumulated deficit                                                                                          |  |                                            | (14,410,924 | )           
|                                                                                       |                                                                                                              |  |                                            |            
|                                                                                       |                                                                                                              |  | Total shareholders equity                 |             |              | 238,067 | 
|                                                                                       |                                                                                                              |  |                                            |            
|                                                                                       |                                                                                                              |  | Total liabilities and shareholders equity |             | $            | 287,825 | 
|                                                                                       |                                                                                                              |  |                                            |            

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

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PLANET POLYMER TECHNOLOGIES, INC.

STATEMENTS OF OPERATIONS

|                                                                         |                                           |                          |           |                          |         |      |            |         |           | 
|------------------------------------------------------------------------ | ----------------------------------------- | ------------------------ | --------- | ------------------------ | ------- | ---- | ---------- | ------- | --------- | 
|                                                                         |                                           |                          |           | Years ended December 31,
|                                                                         |                                           |                          |           |                         
|                                                                         |                                           |                          |           | 2002                     |         | 2001
|                                                                         |                                           |                          |           |                          |         |     
|Revenues                                                                 |                                           | $                        | 162,073   |                          |         | $    | 563,928    |        
|                                                                         |                                           |                          |           |                          |         |      |            |        
|Operating expenses:                                                      |                                           |                          |           |                          |         |      |            |        
|                                                                         | Cost of revenues                          |                          |           | 110,213                  |         |      |            | 369,421 |          
|                                                                         | General and administrative                |                          |           | 468,024                  |         |      |            | 810,711 |          
|                                                                         | Marketing                                 |                          |           | 99,572                   |         |      |            | 278,470 |          
|                                                                         | Research and development                  |                          |           | 117,594                  |         |      |            | 352,698 |          
|                                                                         | Loss from impairment of intangible assets |                          |           | 62,159                   |         |      |            |        |          
|                                                                         |                                           |                          |           |                          |         |      |            |        
|                                                                         |                                           | Total operating expenses |           |                          | 857,562 |      |            |         | 1,811,300 | 
|                                                                         |                                           |                          |           |                          |         |      |            |        
|Loss from operations                                                     |                                           |                          | (695,489  | )                        |         |      | (1,247,372 | )      
|Other income, net                                                        |                                           |                          | 28,839    |                          |         |      | 196,117    |        
|                                                                         |                                           |                          |           |                          |         |      |            |        
|Net loss                                                                 |                                           |                          | (666,650  | )                        |         |      | (1,051,255 | )      
|Preferred stock dividends                                                |                                           |                          |          |                          |         |      | (10,450    | )      
|                                                                         |                                           |                          |           |                          |         |      |            |        
|Net loss applicable to common shareholders                               |                                           | $                        | (666,650  | )                        |         | $    | (1,061,705 | )      
|                                                                         |                                           |                          |           |                          |         |      |            |        
|Net loss per share applicable to common shareholders (basic and diluted) |                                           | $                        | (0.07     | )                        |         | $    | (0.12      | )      
|                                                                         |                                           |                          |           |                          |         |      |            |        
|Weighted average shares outstanding used in per share computations       |                                           |                          | 9,205,452 |                          |         |      | 9,058,712  |        
|                                                                         |                                           |                          |           |                          |         |      |            |        

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

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PLANET POLYMER TECHNOLOGIES, INC.

STATEMENTS OF SHAREHOLDERS EQUITY



|                                                                                                 |  |                          |          |              |  |        |          |        |  |  |           |   |  |   |            |  
|------------------------------------------------------------------------------------------------ |  | ------------------------ | -------- | ------------ |  | ------ | -------- | ------ |  |  | --------- | - |  | - | ---------- | -
|                                                                                                 |  | Series A Preferred Stock |          | Common Stock
|                                                                                                 |  |                          |          |             
|                                                                                                 |  | Shares                   |          | Amount       |  | Shares |          | Amount
|                                                                                                 |  |                          |          |              |  |        |          |       
|Balance at January 1, 2001                                                                       |  |                          | 321,500  |              |  | $      | 517,251  |        |  |  | 8,680,494 |   |  | $ | 14,008,901 |  
|Conversion of Series A Preferred Stock into
Common Stock                                         |  |                          | (321,500 | )            |  |        | (517,251 | )      |  |  | 378,235   |   |  |   | 517,251    |  
|Issuance of Common Stock                                                                         |  |                          |         |              |  |        |         |        |  |  | 156,735   |   |  |   | 40,801     |  
|Issuance of Common Stock for services                                                            |  |                          |         |              |  |        |         |        |  |  | 8,400     |   |  |   | 6,300      |  
|Issuance of Common Stock as dividend on
Convertible Preferred Stock                              |  |                          |         |              |  |        |         |        |  |  | 13,754    |   |  |   | 10,450     |  
|Common Stock received in legal settlement and retired                                            |  |                          |          |              |  |        |          |        |  |  | (72,000   | ) |  |   | (7,920     | )
|Net loss                                                                                         |  |                          |         |              |  |        |         |        |  |  |          |   |  |   |           |  
|                                                                                                 |  |                          |          |              |  |        |          |        |  |  |           |   |  |   |            |  
|Balance at December 31, 2001                                                                     |  |                          |         |              |  |        |         |        |  |  | 9,165,618 |   |  |   | 14,575,783 |  
|Issuance of Common Stock for services                                                            |  |                          |         |              |  |        |         |        |  |  | 42,266    |   |  |   | 6,340      |  
|Effect of reclassification of Common Stock offering
costs to general and administrative expenses |  |                          |         |              |  |        |         |        |  |  |          |   |  |   | 66,868     |  
|Net loss                                                                                         |  |                          |         |              |  |        |         |        |  |  |          |   |  |   |           |  
|                                                                                                 |  |                          |          |              |  |        |          |        |  |  |           |   |  |   |            |  
|Balance at December 31, 2002                                                                     |  |                          |         |              |  | $      |         |        |  |  | 9,207,884 |   |  | $ | 14,648,991 |  
|                                                                                                 |  |                          |          |              |  |        |          |        |  |  |           |   |  |   |            |  

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                                                                                 |  |             |             |       |  |   |            |  
|------------------------------------------------------------------------------------------------ |  | ----------- | ----------- | ----- |  | - | ---------- | -
|                                                                                                 |  | Accumulated |             |       |  |  
|                                                                                                 |  | Deficit     |             | Total
|                                                                                                 |  |             |             |      
|Balance at January 1, 2001                                                                       |  | $           | (12,682,569 | )     |  | $ | 1,843,583  |  
|Conversion of Series A Preferred Stock into
Common Stock                                         |  |             |            |       |  |   |           |  
|Issuance of Common Stock                                                                         |  |             |            |       |  |   | 40,801     |  
|Issuance of Common Stock for services                                                            |  |             |            |       |  |   | 6,300      |  
|Issuance of Common Stock as dividend on
Convertible Preferred Stock                              |  |             | (10,450     | )     |  |   |           |  
|Common Stock received in legal settlement and retired                                            |  |             |             |       |  |   | (7,920     | )
|Net loss                                                                                         |  |             | (1,051,255  | )     |  |   | (1,051,255 | )
|                                                                                                 |  |             |             |       |  |   |            |  
|Balance at December 31, 2001                                                                     |  |             | (13,744,274 | )     |  |   | 831,509    |  
|Issuance of Common Stock for services                                                            |  |             |            |       |  |   | 6,340      |  
|Effect of reclassification of Common Stock offering
costs to general and administrative expenses |  |             |            |       |  |   | 66,868     |  
|Net loss                                                                                         |  |             | (666,650    | )     |  |   | (666,650   | )
|                                                                                                 |  |             |             |       |  |   |            |  
|Balance at December 31, 2002                                                                     |  | $           | (14,410,924 | )     |  | $ | 238,067    |  
|                                                                                                 |  |             |             |       |  |   |            |  

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

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PLANET POLYMER TECHNOLOGIES, INC.

STATEMENTS OF CASH FLOWS

|                                      |                                              |                                                                                   |                                                                                                  |                                                     |          |                          |           |      |            |         |          |  
|------------------------------------- | -------------------------------------------- | --------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------ | --------------------------------------------------- | -------- | ------------------------ | --------- | ---- | ---------- | ------- | -------- | -
|                                      |                                              |                                                                                   |                                                                                                  |                                                     |          | Years ended December 31,
|                                      |                                              |                                                                                   |                                                                                                  |                                                     |          |                         
|                                      |                                              |                                                                                   |                                                                                                  |                                                     |          | 2002                     |           | 2001
|                                      |                                              |                                                                                   |                                                                                                  |                                                     |          |                          |           |     
|Cash flows from operating activities: |                                              |                                                                                   |                                                                                                  |                                                     |          |                          |           |     
|                                      |                                              | Net loss                                                                          |                                                                                                  | $                                                   | (666,650 | )                        |           | $    | (1,051,255 | )      
|                                      |                                              | Adjustments to reconcile net loss to net cash used
in operating activities:       |                                                                                                  |                                                     |          |                          |           |      |            |        
|                                      |                                              |                                                                                   | Depreciation and amortization                                                                    |                                                     |          | 28,258                   |           |      |            | 86,577  |         
|                                      |                                              |                                                                                   | Bad debts                                                                                        |                                                     |          | 80,000                   |           |      |            |         |         
|                                      |                                              |                                                                                   | Loss from impairment of intangible assets                                                        |                                                     |          | 62,159                   |           |      |            |         |         
|                                      |                                              |                                                                                   | Gain on disposal of property and equipment                                                       |                                                     |          | (13,500                  | )         |      |            | (47,953 | )       
|                                      |                                              |                                                                                   | Effect of reclassification of Common Stock offering costs to general and
administrative expenses |                                                     |          | 66,868                   |           |      |            |        |         
|                                      |                                              |                                                                                   | Issuance of Common Stock for services                                                            |                                                     |          | 6,340                    |           |      |            | 6,300   |         
|                                      |                                              |                                                                                   | Discount on notes receivable                                                                     |                                                     |          |                         |           |      |            | 4,500   |         
|                                      |                                              |                                                                                   | Common Stock received in legal settlement                                                        |                                                     |          |                         |           |      |            | (7,920  | )       
|                                      |                                              | Changes in assets and liabilities:                                                |                                                                                                  |                                                     |          |                          |           |      |            |        
|                                      |                                              |                                                                                   | Accounts receivable                                                                              |                                                     |          | 76,263                   |           |      |            | (68,828 | )       
|                                      |                                              |                                                                                   | Inventories                                                                                      |                                                     |          |                         |           |      |            | 118,745 |         
|                                      |                                              |                                                                                   | Prepaid expenses and other assets                                                                |                                                     |          | 48,461                   |           |      |            | 40,793  |         
|                                      |                                              |                                                                                   | Accounts payable                                                                                 |                                                     |          | (13,101                  | )         |      |            | 9,201   |         
|                                      |                                              |                                                                                   | Accrued expenses                                                                                 |                                                     |          | (70,324                  | )         |      |            | (7,013  | )       
|                                      |                                              |                                                                                   |                                                                                                  |                                                     |          |                          |           |     
|                                      |                                              |                                                                                   |                                                                                                  | Net cash used in operating activities               |          |                          | (395,226  | )    |            |         | (916,853 | )
|                                      |                                              |                                                                                   |                                                                                                  |                                                     |          |                          |           |     
|Cash flows from investing activities: |                                              |                                                                                   |                                                                                                  |                                                     |          |                          |           |     
|                                      |                                              | Purchases of property and equipment                                               |                                                                                                  |                                                     |         |                          |           |      | (24,892    | )      
|                                      |                                              | Proceeds from the sale of property and equipment                                  |                                                                                                  |                                                     | 13,500   |                          |           |      |           |        
|                                      |                                              | Proceeds from the sale of AQUAMIM® assets                                         |                                                                                                  |                                                     |         |                          |           |      | 41,025     |        
|                                      |                                              | Payments from notes receivable                                                    |                                                                                                  |                                                     | 145,254  |                          |           |      | 89,283     |        
|                                      |                                              | Cost of patents and other assets                                                  |                                                                                                  |                                                     |         |                          |           |      | (3,869     | )      
|                                      |                                              |                                                                                   |                                                                                                  |                                                     |          |                          |           |     
|                                      |                                              |                                                                                   |                                                                                                  | Net cash provided by investing activities           |          |                          | 158,754   |      |            |         | 101,547  |  
|                                      |                                              |                                                                                   |                                                                                                  |                                                     |          |                          |           |     
|Cash flows from financing activities: |                                              |                                                                                   |                                                                                                  |                                                     |          |                          |           |     
|                                      |                                              | Proceeds from issuance of Common Stock and exercise of warrants
and stock options |                                                                                                  |                                                     |         |                          |           |      | 40,801     |        
|                                      |                                              | Principal payments on borrowings and capital lease obligations                    |                                                                                                  |                                                     | (40,226  | )                        |           |      | (22,583    | )      
|                                      |                                              |                                                                                   |                                                                                                  |                                                     |          |                          |           |     
|                                      |                                              |                                                                                   |                                                                                                  | Net cash provided by (used in) financing activities |          |                          | (40,226   | )    |            |         | 18,218   |  
|                                      |                                              |                                                                                   |                                                                                                  |                                                     |          |                          |           |     
|                                      |                                              |                                                                                   |                                                                                                  | Net decrease in cash                                |          |                          | (276,698  | )    |            |         | (797,088 | )
|Cash at beginning of year             |                                              |                                                                                   | 291,479                                                                                          |                                                     |          |                          | 1,088,567 |     
|                                      |                                              |                                                                                   |                                                                                                  |                                                     |          |                          |           |     
|Cash at end of year                   |                                              | $                                                                                 | 14,781                                                                                           |                                                     |          | $                        | 291,479   |     
|                                      |                                              |                                                                                   |                                                                                                  |                                                     |          |                          |           |     
|Supplemental cash flow disclosure:    |                                              |                                                                                   |                                                                                                  |                                                     |          |                          |           |     
|                                      | Cash paid during the year for:               |                                                                                   |                                                                                                  |                                                     |          |                          |           |      |           
|                                      |                                              | Interest                                                                          |                                                                                                  | $                                                   | 1,724    |                          |           | $    | 3,882      |        
|                                      | Non-cash investing and financing activities: |                                                                                   |                                                                                                  |                                                     |          |                          |           |      |           
|                                      |                                              | Conversion of Series A Preferred Stock into Common Stock                          |                                                                                                  |                                                     |         |                          |           |      | 517,251    |        
|                                      |                                              | Note receivable accepted as part of consideration for sale of AQUAMIM® assets     |                                                                                                  |                                                     |         |                          |           |      | 256,370    |        
|                                      |                                              | Issuance of Common Stock as dividend on Convertible Preferred Stock               |                                                                                                  |                                                     |         |                          |           |      | 10,450     |        
|                                      |                                              | Issuance of Common Stock for services                                             |                                                                                                  |                                                     | 6,340    |                          |           |      | 6,300      |        
|                                      |                                              | Insurance purchased under a short-term financing agreement                        |                                                                                                  |                                                     |         |                          |           |      | 44,134     |        

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

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##### Table of Contents



PLANET POLYMER TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

1. The Company

Planet Polymer Technologies, Inc. (Planet or the Company) was
incorporated in August, 1991 in the State of California for the purpose of
engaging in the design, development, manufacture and marketing of degradable
and recycled polymer materials. The Companys proprietary polymer materials are
marketed under the trademarks EnviroPlastic® and Aquadro®. EnviroPlastic and
Aquadro can be used to produce films, coatings and injection molded parts that
serve as environmentally-compatible alternatives to conventional plastics.
Planet also developed polymer technologies for Agway Inc. (Agway), a major
shareholder of the Company, in 1999 that are being marketed under the
trademarks OptigenTM 1200 and FreshSealTM. The Company sold all of the assets
related to its AQUAMIM® business in December 2001. With the sale and
disposition of the Companys AQUAMIM® Metal Injection Molding technology and
manufacturing assets in December 2001 to Ryer Industries, LLC and the sale and
licensing of the Companys EnviroPlastic CRT controlled-released technologies
for agricultural feed and produce products to Agway, the resulting
restructuring of assets and activities has narrowed the Companys focus to
assisting Agway in the commercialization of those specific polymer technologies
Planet developed for Agway, through the Companys provision of consulting
services. Agway is marketing the agricultural feed and fruit and vegetable
products under the trademarks Optigen 1200 and FreshSeal, respectively. The
Companys operations are comprised of one segment, the Research and
Development business segment.

2. Summary of Significant Accounting Policies

Use of Estimates

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

Revenue Recognition

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

|                                  |                  |   |         |         |      |   |         |         | 
|--------------------------------- | ---------------- | - | ------- | ------- | ---- | - | ------- | ------- | 
|                                  |                  |   | 2002    |         | 2001
|                                  |                  |   |         |         |     
|Product sales revenue             |                  | $ | 2,600   |         |      | $ | 407,419 |        
|Research and development revenues |                  |   | 102,839 |         |      |   | 62,509  |        
|Consulting revenue                |                  |   | 38,030  |         |      |   |        |        
|Royalties, net                    |                  |   | 18,604  |         |      |   | 94,000  |        
|                                  |                  |   |         |         |      |   |         |        
|                                  | Revenues         |   | $       | 162,073 |      |   | $       | 563,928 | 
|                                  |                  |   |         |         |      |   |         |        
|Products sold                     |                  | $ | 7,374   |         |      | $ | 293,768 |        
|Services                          |                  |   | 102,839 |         |      |   | 75,653  |        
|                                  |                  |   |         |         |      |   |         |        
|                                  | Cost of revenues |   | $       | 110,213 |      |   | $       | 369,421 | 
|                                  |                  |   |         |         |      |   |         |        

Research and Development

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

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PLANET POLYMER TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

2. Summary of Significant Accounting Policies (Continued)

Fair Value of Financial Instruments

The carrying amounts shown for the Companys financial instruments,
including accounts receivable and accounts payable, approximate their fair
values at December 31, 2002 due to the short-term nature of these financial
instruments. The carrying value of the note receivable approximates its fair
value as the rate of interest approximates market rates of interest for similar
instruments.

Property and Equipment

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

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

Patents

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

Long-Lived Assets

Long-lived assets, such as property and equipment, are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Impairment losses are
recognized when events or changes in circumstances indicate that the
undiscounted cash flows estimated to be generated by such assets are less than
their carrying value and, accordingly, all or a portion of such carrying value
may not be recoverable. Impairment losses for assets to be held and used are
then measured based on the excess, if any, of the carrying amounts of the
assets over their fair values. Long-lived assets to be disposed of in a manner
that meets certain criteria are stated at the lower of their carrying amounts
or fair values less costs to sell and are no longer depreciated.

Income Taxes

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

Stock-Based Compensation

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

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##### Table of Contents



PLANET POLYMER TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

2. Summary of Significant Accounting Policies (Continued)

Earnings (Loss) Per Share

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

The Company has excluded all convertible preferred stock and outstanding
stock options and warrants from the calculation of diluted loss per share for
the years ended December 31, 2002 and 2001 because all such securities are
anti-dilutive for these periods. 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,
2002 and 2001 was 1,227,411 and 1,748,729, respectively.

401 (K) Plan

The Company provides a defined contribution 401(k) savings plan (the
401(k) Plan) in which all full-time employees of the Company are eligible to
participate. Eligible employees may contribute up to fifteen percent (15%) of
their pre-tax salary to the 401(k) Plan subject to 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 2002 and 2001.

Reclassifications

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

3. Liquidity and Capital Resources

The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and satisfaction of
liabilities in the ordinary course of business and not on a liquidation basis.
The Company has incurred losses since inception. For the years ended December
31, 2002 and 2001, the Company had net losses of approximately $667,000 and
$1,051,000, respectively. As of December 31, 2002, the Company had an
accumulated deficit of approximately $14,411,000. In August 2002, the
purchaser of certain assets defaulted on certain payments and in October 2002 a
major licensee filed for reorganization under the bankruptcy code (see Notes 4,
11 and 13). These matters raise substantial doubt about the ability of the
Company to continue as a going concern. The Company believes that its existing
sources of liquidity and anticipated revenue will satisfy the Companys
projected working capital and other cash requirements through May 31, 2003. To
help assure that its resources will be sufficient to enable it to continue to
operate subsequent to that date, the Company has implemented a further
reduction in operating expenses and a plan for the reduction or sale of
non-Agway or agricultural assets, while continuing to provide technical
research and development for Agways FreshSeal commercial program and Optigen
development activities. The Companys future working capital and other cash
requirements will be dependent upon many factors, including, but not limited
to, costs associated with the continued research and development of the
Companys proprietary polymer materials, costs associated with the filing and
enforcement of the Companys patents, costs associated with manufacturing
scale-up and market acceptance, and the timing thereof, of the Companys
products. The Company intends to seek additional funding through strategic
partnership arrangements or the extension of existing arrangements or through
public or private equity or debt financing. There can be no assurance that any
additional financing will be available to the Company on acceptable terms, or
at all. Insufficient funds may require the Company to file for bankruptcy
protection under Chapter 11 or Chapter 7 of
the Bankruptcy laws. Further, there can be no assurance that the Company will
be able to generate positive cash flows or profitability in the future. The
accompanying financial statements do not include any adjustments related to the
recoverability and classification of assets or the amount and classification of
liabilities that might result from this uncertainty.

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PLANET POLYMER TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

4. Disposition of Assets

On December 28, 2001, the Company sold all of the assets (AQUAMIM
assets) relating to its Metal Injection Molding (MIM) business, including
intellectual property, technology, manufacturing equipment and raw material and
finished goods, to Ryer Industries LLC (Ryer) and recorded a gain of
$135,796. As consideration of these assets, Ryer has agreed to pay to the
Company cash in the amount of $328,157, plus a royalty of 6% on its sales of
custom feedstocks during the period from January 1, 2002 through December 31,
2009. Through December 31, 2002, the Company received $194,912 in principal
payments and $30,745 in interest and fees. Further, the Company recorded a
valuation allowance against this note of $73,500 during 2002. The present
value of the remaining cash payments from the sale of the assets of $46,116,
net of the valuation allowance, was due at December 31, 2002. Additionally,
Ryer has agreed to pay the Company a royalty on all tungsten carbide feedstock
sales in the amount of $2.50 per net pound produced during the period from July
1, 2002 through June 30, 2010. Ryer also entered into a Consulting Agreement
with the Company on December 28, 2001, under which Ryer is to compensate the
Company for consulting services related to the business and technology sold to
Ryer. The aforesaid consideration was determined by mutual agreement of the
parties.

In August 2002, Ryer defaulted on its required payments. In October 2002,
the Company and Ryer entered into a Forbearance Agreement which modified the
payment schedule for the remaining obligations to the Company with payments
beginning in December 2002 and continuing through April 2003. Royalty payments
associated with sales from these technologies were deferred and were scheduled
to resume in December 2002. The Company remains in dispute with Ryer over how
certain royalties are calculated and paid, but has agreed to stay resolution of
that dispute until other deferred payments are made or Ryer defaults. The
Forbearance Agreement provided that if Ryer defaulted, the Company would be
allowed to enforce the Confession Judgment given by Ryer to the Company in
connection with the Forbearance Agreement, which provided among other things,
for turnover to the Company of the assets sold by the Company to Ryer (see Note
13).

The Company recognized consulting fees of $38,030 and royalties of $18,604
in 2002 under the agreements with Ryer. However, due to Ryers financial
difficulties, the Company has stopped accruing revenues as of December 31, 2002
from Ryer.

5. Equity Line of Credit

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

As compensation for establishing the Equity Line of Credit under the
Private Equity Line of Credit Agreement, Planet issued 5,000 shares of Common
Stock and a warrant to Triton (see Note 10) and agreed to pay a commitment fee
of $23,333 per drawdown for the first six drawdowns.

During 2000 and 2001, the Company sold a total of 172,421 shares of Common
Stock for $65,000 under the Equity Line of Credit. Triton agreed to reduced
commitment fees totaling $6,065 related to these drawdowns.

During 2002, the Companys management evaluated the Equity Line of Credit
and determined that it is unlikely to sell any additional shares of the
Companys stock to Triton under the Equity Line of Credit. As a result, a
charge of approximately $67,000, representing the expenses originally charged
against equity related to the agreement that exceeded the net amounts collected
under the agreement, was removed from equity and charged to General and
Administrative Expenses.

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PLANET POLYMER TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

6. Concentrations of Credit Risk

Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of trade accounts receivable.
The Company limits the amount of credit exposure to any one entity. The
Company performs ongoing credit evaluations of its customers and adjusts its
allowance for doubtful accounts based on its history of past write-offs and
collections and current credit conditions.

The Companys largest customer, Agway, accounted for approximately 60% and
11% of the Companys revenues and 75% and 95% of accounts receivable balances
in fiscal 2002 and 2001, respectively.

7. Composition of Certain Balance Sheet Components at December 31, 2002

Property and Equipment

|                               |  |   |         |  
|------------------------------ |  | - | ------- | -
|Machinery and equipment        |  | $ | 70,657  |  
|Furniture and fixtures         |  |   | 4,928   |  
|Vehicles and trailers          |  |   | 9,308   |  
|                               |  |   |         |  
|                               |  |   | 84,893  |  
|Less: Accumulated depreciation |  |   | (76,709 | )
|                               |  |   |         |  
|                               |  | $ | 8,184   |  
|                               |  |   |         |  

Depreciation expense charged to operations in 2002 and 2001 was $13,499
and $53,300, respectively.

8. Commitments

The Company leases its facility and certain office equipment under
non-cancelable operating leases, which expire on various dates through October
9, 2004 and provide for renewal options in one-year increments. In the normal
course of business, it is expected that these leases will be renewed or
replaced by leases on other properties. Rent expense charged to operations
in 2002 and 2001 was $65,394 and $75,279, respectively.

Future minimum payments under non-cancelable leases as of December 31,
2002 are as follows.

|                             |      |   |           |        | 
|---------------------------- | ---- | - | --------- | ------ | 
|                             |      |   | Operating
|                             |      |   | Leases   
|                             |      |   |          
|                             | 2003 |   | $         | 25,537 | 
|                             | 2004 |   |           | 3,582  | 
|                             |      |   |           |       
|Total minimum lease payments |      | $ | 29,119    |       
|                             |      |   |           |       

Capital lease obligations of $8,477 at December 31, 2001 were paid during 2002,
and there were no outstanding capital leases at December 31, 2002.

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PLANET POLYMER TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

9. Income Taxes

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

|                                  |       |   |          |   |      |   |          |   | 
|--------------------------------- | ----- | - | -------- | - | ---- | - | -------- | - | 
|                                  |       |   | 2002     |   | 2001
|                                  |       |   |          |   |     
|Federal benefit at statutory rate |       | $ | (227,314 | ) |      | $ | (357,427 | )
|Permanent differences             |       |   | 106      |   |      |   | 1,505    |  
|Valuation allowance               |       |   | 227,208  |   |      |   | 355,922  |  
|                                  |       |   |          |   |      |   |          |  
|                                  | Total |   | $        |  |      |   | $        |  | 
|                                  |       |   |          |   |      |   |          |  

Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Companys deferred tax assets and liabilities at December 31, 2002 are
as follows:

|                                     |                        |   |            |   | 
|------------------------------------ | ---------------------- | - | ---------- | - | 
|                                     |                        |   | 2002      
|                                     |                        |   |           
|Net operating loss carryforwards     |                        | $ | 4,486,589  |  
|Tax credit carryforwards             |                        |   | 126,560    |  
|Reserves, accrued expenses and other |                        |   | 233,389    |  
|Intangible assets                    |                        |   | (45,291    | )
|                                     |                        |   |            |  
|                                     |                        |   | 4,801,247  |  
|Less: Valuation allowance            |                        |   | (4,801,247 | )
|                                     |                        |   |            |  
|                                     | Net deferred tax asset |   | $          |  | 
|                                     |                        |   |            |  

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 valuation allowances in 2002 and 2001 and, accordingly, the Company did
not recognize any credits for income taxes in the accompanying statements of
operations to offset its pre-tax loss. The valuation allowance increased by
$228,530 and $422,096 in 2002 and 2001, respectively.

At December 31, 2002, the Company had net operating loss carryforwards for
Federal income tax purposes of approximately $12,595,000 and for California
state tax purposes of approximately $3,500,000. The Companys California loss
carryforwards expire in 2003 through 2007 and Federal loss carryforwards begin
to expire in 2006. The Company also has available tax credit carryforwards for
Federal and California tax purposes that aggregate approximately $152,000 that
begin to expire in 2007.

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PLANET POLYMER TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

10. Shareholders Equity

Preferred Stock

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

Warrants

At December 31, 2002, the following warrants to purchase the Companys
Common Stock were outstanding:

|                  |  |            |         |                |  |                 |                |  |  |  |             | 
|----------------- |  | ---------- | ------- | -------------- |  | --------------- | -------------- |  |  |  | ----------- | 
|                  |  | Underlying |         |                |  |                 |                |  |  | 
|                  |  | Shares     |         | Exercise Price |  | Expiration Date
|                  |  |            |         |                |  |                
|Investor warrants |  |            | 125,000 |                |  |                 | $2.578         |  |  |  | 2004        | 
|Advisor warrants  |  |            | 48,286  |                |  | $               | 2.219 - $3.875 |  |  |  | 2003        | 
|Other warrants    |  |            | 159,243 |                |  | $               | 3.513 - $4.163 |  |  |  | 2004 - 2006 | 
|                  |  |            |         |                |  |                 |                |  |  |  |             | 
|                  |  |            | 332,529 |                |  |                 |                |  |  |  |             | 
|                  |  |            |         |                |  |                 |                |  |  |  |             | 

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.

Options

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

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

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

At December 31, 2002, there were 196,800 shares of the Companys Common
Stock available for future grant under the option plans.

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PLANET POLYMER TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

10. Shareholders Equity (Continued)

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

The Company measures compensation expense for its stock-based employee
compensation plans using the intrinsic value method and provides pro forma
disclosures of net loss as if the fair value method had been applied in
measuring compensation expense. Had compensation cost for the Companys
stock-based compensation plans been determined based on the fair value method
at the grant dates for awards under the Companys plans, the Companys net loss
and loss per share for 2002 and 2001 would have been increased to the pro forma
amounts indicated below:

|            |  |          |          |                |  |          |       |                |  |   |            |   |  |   |       |  
|----------- |  | -------- | -------- | -------------- |  | -------- | ----- | -------------- |  | - | ---------- | - |  | - | ----- | -
|            |  | 2002     |          | 2001          
|            |  |          |          |               
|            |  | Net Loss |          | Loss per Share |  | Net Loss |       | Loss per Share
|            |  |          |          |                |  |          |       |               
|As reported |  | $        | (666,650 | )              |  | $        | (0.07 | )              |  | $ | (1,051,255 | ) |  | $ | (0.12 | )
|Pro forma   |  | $        | (744,826 | )              |  | $        | (0.08 | )              |  | $ | (1,185,239 | ) |  | $ | (0.13 | )

The fair value of each stock option is estimated on the date of grant
using the Black-Scholes option-pricing model with the following
weighted-average assumptions for 2002 and 2001: an expected life of 4 years,
expected volatility of 177.37% and 218.10%, no dividend yield and a risk-free
interest rate of 2.26% and 4.01%, respectively, represented by the interest
rate on U.S. Treasury securities with a term of maturity equal to the options
expected time to exercise on the dates of grant. The weighted average fair
value of options granted during 2002 and 2001 was approximately $0.13 and $0.25
per option, respectively.

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PLANET POLYMER TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

10. Shareholders Equity (Continued)

A summary of stock option activity during 2002 and 2001 follows:

|                                 |                     |  |                        |         |                        |   |            |       |               |  |         |          |          |   |       |       | 
|-------------------------------- | ------------------- |  | ---------------------- | ------- | ---------------------- | - | ---------- | ----- | ------------- |  | ------- | -------- | -------- | - | ----- | ----- | 
|                                 |                     |  | 2000 Stock Option Plan |         | 1995 Stock Option Plan
|                                 |                     |  |                        |         |                       
|                                 |                     |  |                        |         |                        |   | Weighted   |       |               |  |         |          | Weighted
|                                 |                     |  | Underlying             |         | Avg. Exercise          |   | Underlying |       | Avg. Exercise
|                                 |                     |  | Shares                 |         | Price                  |   | Shares     |       | Price        
|                                 |                     |  |                        |         |                        |   |            |       |              
|Outstanding at December 31, 2000 |                     |  | 321,500                |         |                        | $ | 1.984      |       |               |  | 343,722 |          |          | $ | 2.113 |      
|                                 | Granted             |  |                        | 208,000 |                        |   | $          | 0.263 |               |  |         |         |          |   |       |      | 
|                                 | Exercised           |  |                        |        |                        |   |            |      |               |  |         |         |          |   |       |      | 
|                                 | Forfeited / expired |  |                        | (20,500 | )                      |   |            | 2.299 |               |  |         | (102,283 | )        |   |       | 1.977 | 
|                                 |                     |  |                        |         |                        |   |            |       |               |  |         |          |          |   |       |      
|Outstanding at December 31, 2001 |                     |  | 509,000                |         |                        |   | 1.268      |       |               |  | 241,439 |          |          |   | 2.171 |      
|                                 | Granted             |  |                        | 100,000 |                        |   |            | 0.140 |               |  |         |         |          |   |       |      | 
|                                 | Exercised           |  |                        |         |                        |   |            |       |               |  |         |         |          |   |       |      | 
|                                 | Forfeited / expired |  |                        | (13,000 | )                      |   |            | 2.375 |               |  |         | (81,239  | )        |   |       | 3.025 | 
|                                 |                     |  |                        |         |                        |   |            |       |               |  |         |          |          |   |       |      
|Outstanding at December 31, 2002 |                     |  | 596,000                |         |                        |   | 1.055      |       |               |  | 160,200 |          |          |   | 1.739 |      
|                                 |                     |  |                        |         |                        |   |            |       |               |  |         |          |          |   |       |      

|                                 |                     |  |               |   |               |   |          |   | 
|-------------------------------- | ------------------- |  | ------------- | - | ------------- | - | -------- | - | 
|                                 |                     |  | Other Options
|                                 |                     |  |              
|                                 |                     |  |               |   |               |   | Weighted
|                                 |                     |  | Underlying    |   | Avg. Exercise
|                                 |                     |  | Shares        |   | Price        
|                                 |                     |  |               |   |              
|Outstanding at December 31, 2000 |                     |  | 138,682       |   |               | $ | 5.058    |  
|                                 | Granted             |  |               |  |               |   |          |  | 
|                                 | Exercised           |  |               |  |               |   |          |  | 
|                                 | Forfeited / expired |  |               |  |               |   |          |  | 
|                                 |                     |  |               |   |               |   |          |  
|Outstanding at December 31, 2001 |                     |  | 138,682       |   |               |   | 5.058    |  
|                                 | Granted             |  |               |  |               |   |          |  | 
|                                 | Exercised           |  |               |  |               |   |          |  | 
|                                 | Forfeited / expired |  |               |  |               |   |          |  | 
|                                 |                     |  |               |   |               |   |          |  
|Outstanding at December 31, 2002 |                     |  | 138,682       |   |               |   | 5.058    |  
|                                 |                     |  |               |   |               |   |          |  

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

The following table summarizes information about stock options outstanding
and exercisable at December 31, 2002:

|                  |  |                     |         |                     |  |                  |      |           |  |          |      |  |  |          |         |  |  |   |      | 
|----------------- |  | ------------------- | ------- | ------------------- |  | ---------------- | ---- | --------- |  | -------- | ---- |  |  | -------- | ------- |  |  | - | ---- | 
|                  |  | Options Outstanding |         | Options Exercisable
|                  |  |                     |         |                    
|                  |  |                     |         |                     |  | Weighted Average |      | Weighted  |  |          |      |  |  | Weighted
|                  |  |                     |         |                     |  | Remaining        |      | Average   |  |          |      |  |  | Average 
|Range of Exercise |  | Number of           |         | Contractual Life    |  | Exercise         |      | Number of |  | Exercise
|Prices            |  | Shares              |         | (years)             |  | Price            |      | Shares    |  | Price   
|                  |  |                     |         |                     |  |                  |      |           |  |         
|$0.050 to $1.000  |  |                     | 308,000 |                     |  |                  | 7.41 |           |  | $        | 0.22 |  |  |          | 308,000 |  |  | $ | 0.22 | 
|$1.250 to $2.400  |  |                     | 317,000 |                     |  |                  | 4.80 |           |  |          | 1.59 |  |  |          | 237,000 |  |  |   | 1.22 | 
|$2.500 to $5.000  |  |                     | 175,882 |                     |  |                  | 6.02 |           |  |          | 2.82 |  |  |          | 175,882 |  |  |   | 2.82 | 
|$5.100 to $6.000  |  |                     | 94,000  |                     |  |                  | 1.08 |           |  |          | 5.73 |  |  |          | 94,000  |  |  |   | 5.73 | 
|                  |  |                     |         |                     |  |                  |      |           |  |          |      |  |  |          |         |  |  |   |      | 
|                  |  |                     | 894,882 |                     |  |                  | 5.55 |           |  |          | 2.10 |  |  |          | 814,882 |  |  |   | 1.87 | 
|                  |  |                     |         |                     |  |                  |      |           |  |          |      |  |  |          |         |  |  |   |      | 

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PLANET POLYMER TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

11. Related Party Transactions

On November 14, 2000, Planet agreed to sell, assign and transfer patent
rights (the Patent Transaction) to Planets animal feed additives, fruit and
vegetable coatings, and controlled-release fertilizer (the Patents), to Agway
for a cash price of $250,000 and continuation of royalty payments equal to the
payments Planet would otherwise be entitled to receive pursuant to its existing
license agreement with Agway and the sublicense agreements related thereto.
Planet, in turn, agreed to pay Agway $150,000 in return for an exclusive
worldwide royalty-free license to use and commercially exploit all rights
related to the Patents for all uses other than food and agricultural
initiatives.

In November 1998, the Company and Agway entered into an agreement relating
to the funding by Agway of a feasibility study (the Feasibility Agreement) of
the Companys polymer technology for use in agricultural products (other than
fertilizers and certain biological products) and food products. Under the
terms of the Feasibility Agreement, Planet will be reimbursed for certain
qualifying research and development costs relating to such applications. During
2002 and 2001, the Company recorded revenues for reimbursed research and
development costs of $102,839 and $62,509, respectively, from Agway under the
Feasibility Agreement.

Also in November 1998, the Company granted Agway an exclusive worldwide
license in connection with the Companys technology for time-release coatings
for a variety of agricultural and food products (the License Agreement). The
License Agreement outlines the general terms and conditions for the rights
granted Agway thereunder. The Company and Agway agreed to execute further
sub-agreements specifying the royalties to be paid to the Company for Agways
use of the Companys technology with certain products. In March 2000, the
Company and Agway entered into a Sub-Agreement with respect to animal feed
products incorporating Planets patented/patent pending coatings and/or polymer
systems. Also in March 2000, the Company and Agway entered into another
Sub-Agreement with respect to Planets patented/patent pending coatings and/or
polymer systems sold for use on fruits, vegetables, floral and nursery items.
During 2001, the Company received a $100,000 royalty payment from Agway. After
receiving proceeds from Agway, pursuant to its royalty payment in October 2001,
the Company was required to pay a $6,000 cash transaction fee to an advisor.
This payment was made January 24, 2002 and shown in accounts payable at
December 31, 2001. No royalties were received or accrued by the Company under
the agreement with Agway in 2002.

On October 1, 2002, Agway, Inc. filed a voluntary petition for
reorganization under Chapter 11 of the United States Bankruptcy Code. The
Sub-Agreement covering the FreshSeal technology and license provided for a
minimum royalty of $300,000 on or before October 31, 2002 to maintain
exclusivity. This payment was not received or accrued by Planet. Pursuant to
the Sub-Agreement, Planet notified Agway that the payment was not received.
Under the terms of the Sub-Agreement, Agway had 60 days during which Agway
could make the necessary payment and retain market exclusivity for this
technology. Agway did not make payment of the minimum royalty as of December
31, 2002. As a result of this failure by Agway to make payment, Planet had the
right to issue additional non-exclusive licenses for this technology to other
interested parties in the fruit, vegetable, nuts and flowers segments of the
agricultural products industry (see Note 13).

As of December 31, 2002, Agway had been a beneficial owner of more than
10% of the Companys Common Stock since January 11, 1999 (see Note 13).

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##### Table of Contents



PLANET POLYMER TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

12. Legal Proceedings

In October 2001, the Company settled certain litigation resulting in
Planet receiving a cash payment of $125,000, Planets insurance carrier paying
$25,000 to the opposing party, the return of approximately 70,000 shares of
Planet stock and the cancellation of certain unexercised stock options. This
settlement resulted in other income in 2001 in the amount of $132,920,
comprised of $125,000 from the cash receipt and $7,920 from the return of
stock.

13. Subsequent Events

Agway, Inc.

To consummate the sale and assignment contemplated by the letter agreement
dated November 14, 2000 (see Note 11), the Company and Agway agreed on the form
of two separate Sale and Licensing Agreements with respect to the agricultural
feed technologies and the fruit/produce technologies. On March 25, 2003 the
U.S. Bankruptcy Court gave its approval to Agway to enter into the two
separate Sale and Licensing Agreements with the Company. Under the Sale and
Licensing Agreements, the Company confirmed (i) the assignment of its
agricultural feed related patent rights and fruit/produce related patent rights
and (ii) the license of its technology related to the agricultural feed
products and fruit/produce products, to Agway. In return, the Company will
receive an up-front payment of $30,000 for its execution of the agricultural
feed agreement and a payment of $100,000 for its execution of the fruit/produce
agreement, and will also receive a sales royalty based on net revenues
generated from product sales. Agway will also grant the Company exclusive,
irrevocable, worldwide, royalty-free limited licenses to use the assigned
patents rights for uses other than food and agricultural initiatives. In
connection with the agricultural feed agreement, Agway also agreed to assign
and transfer to the Company all of Agways shares of Planet capital stock.
Additionally, under the fruit/produce agreement, Agway may enter into an
agreement to sell all or substantially all of the assets of its FreshSeal
business, which would include the fruit/produce patent rights assigned by the
Company, within 12 months of the date of that agreement. Upon such sale, Agway
must pay the Company, among other things, a percentage of the net sales
proceeds, up to $200,000. Management cannot assure that the Company will
receive significant, if any, royalties and monies under these Sale and
Licensing Agreements.

Ryer Industries, LLC

In January 2003, Ryer again requested a refinancing of the monies due
Planet under the Forbearance Agreement. Planet accommodated Ryer in this
request by amending the Forbearance Agreement (see Note 4) and structuring a
payment schedule beginning in February 2003 and continuing through July 2003.
After making the required payment in February 2003, Ryer failed to make
requisite payment for March 2003. Pursuant to the Forbearance Agreement,
Planet expects to recover all of the assets previously sold to Ryer under the
December 28, 2001 agreement.

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