prer14a
 

SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
     
þ  Preliminary Proxy Statement
o  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
o  Definitive Proxy Statement
o  Definitive Additional Materials
o  Soliciting Material Pursuant to §240.14a-11(c) or §240.14a-12
PLANET TECHNOLOGIES, INC.
 
(Name of Registrant as Specified In Its Charter)
 
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
o No fee required.
o     Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
          (1) Title of each class of securities to which transaction applies:
  Common Stock, no par value
 
          (2) Aggregate number of securities to which transaction applies:
  600,000 shares of Common Stock
 
          (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11
  The proposed aggregate value of the transaction for purposes of calculating the filing fee is $1,050,000. The aggregate value was determined by (a) multiplying (i) 600,000 shares of common stock that are proposed to be exchanged by (ii) $1.75 which represents the market value of each share of Common Stock to be acquired in the acquisition.
 
  (Set forth the amount on which the filing fee is calculated and state how it was determined):
 
          (4) Proposed maximum aggregate value of transaction:
  $1,050,000
 
          (5) Total fee paid:
  $123.59
 
þ  Fee paid previously with preliminary materials.
 
o Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
          (1) Amount Previously Paid:
 
          (2) Form, Schedule or Registration Statement No.:
 
          (3) Filing Party:
 
          (4) Date Filed:
 


 

PLANET TECHNOLOGIES, INC.
6835 Flanders Drive, Suite 100
San Diego, California 92121
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 29, 2005
DEAR SHAREHOLDERS:
      Notice is hereby given that the Annual Meeting of Shareholders of Planet Technologies, Inc., a California corporation (the “Company”), will be held on July 29, 2005, at 10:00 a.m. local time, at 800 Silverado Street, Second Floor, La Jolla, California 92037 for the following purpose:
        1. To adopt and approve the Agreement and Plan of Merger, dated March 7, 2005, among Allergy Control Products, Inc., a Delaware corporation (“ACP”) and Jonathan T. Dawson, an individual and the sole shareholder of ACP, and the Company, and to approve the merger between ACP Acquisition Corp., a wholly owned subsidiary of the Company and ACP (the “Merger”) pursuant to which ACP will become a wholly owned subsidiary of the Company and the sole shareholder will receive 600,000 shares of the common stock of the Company;
 
        2. To elect five (5) directors to hold office until the next Annual Meeting of Shareholders or until their successors are elected and qualified;
 
        3. To approve the Company’s 2000 Stock Option Plan, as amended, to increase the aggregate number of shares of common stock reserved for issuance under such plan from 100,000 to 350,000;
 
        4. To approve the engagement of J.H. Cohn LLP, its independent registered public accounting firm, for the fiscal year ending December 31, 2005; and
 
        5. To transact such other business as may properly come before the Annual Meeting or any adjournment thereof.
      The Board of Directors of the Company has approved each of the proposals and recommends that you vote IN FAVOR of each of the proposals as described in the attached materials. Before voting, you should carefully review all of the information contained in the attached proxy statement and in particular you should consider the matters discussed under “Risk Factors” under certain of the Proposals listed above.
      All shareholders are cordially invited to attend the Annual Meeting. Only shareholders of record at the close of business on June 15, 2005, are entitled to notice of and to vote at the Annual Meeting and any adjustments thereof. A complete list of shareholders entitled to vote at the Annual Meeting will be available at the meeting.
  Sincerely,
 
  Scott L. Glenn
San Diego, California
June 30, 2005
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PREPAID IF MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE RECORD HOLDER A PROXY ISSUED IN YOUR NAME.
THE DEADLINE FOR THE RETURN OF YOUR PROXY IS July 28, 2005.


 

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EXHIBIT LIST
         
Exhibit “A” — ACP Audited Financial Statements for the One(1) Year Period Ended December 31, 2004
    A-1  
Exhibit “A-1” — ACP Unaudited Financial Statements for Quarter One Ended March 31, 2005
    A-1-1  
Exhibit “B” — Planet Form 10-KSB Filed With SEC March 31, 2005
    B-1  
Exhibit “B-1” — Planet Form 10-QSB Filed with the SEC May 16, 2005
    B-1-1  
Exhibit “C” — Agreement and Plan of Merger
    C-1  
Exhibit “D” — California Corporations Code Sections 1300-1312
    D-1  

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PLANET TECHNOLOGIES, INC.
6835 Flanders Drive, Suite 100
San Diego, California 92121
PROXY STATEMENT
PRELIMINARY COPY
SUMMARY TERM SHEET
       THIS SUMMARY MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. FOR A MORE COMPLETE UNDERSTANDING OF THE INFORMATION CONTAINED IN THIS PROXY STATEMENT, YOU SHOULD READ THE ENTIRE PROXY STATEMENT CAREFULLY, AS WELL AS THE ADDITIONAL DOCUMENTS TO WHICH IT REFERS.
THE ANNUAL MEETING
Date, Time and Place of Annual Meeting The Annual Meeting will be held on July 29, 2005, beginning at 10:00 a.m., La Jolla time, at 800 Silverado Street, La Jolla, CA 92037.
 
Record Date: Shareholders Entitled to Vote; Quorum Only holders of record of Planet common stock on June 15, 2005, are entitled to notice of and to vote at the Annual Meeting. As of the record date, there were 2,280,368 shares of Planet common stock outstanding. The presence, in person or by proxy, of the holders of a majority of our common stock will constitute a quorum.
 
Vote Required Holders of a majority of the outstanding common stock are required to vote in favor of Proposal 1 for such proposal to pass; the five persons with the most number of votes will be elected directors pursuant to Proposal 2; and assuming a quorum is present, the affirmative vote of a majority of the shares represented and voting, either present in person or represented by proxy at the meeting are required to vote in favor of Proposals 3 and 4 for such proposals to pass.
 
Recommendation of Board
of Directors
Our Board of Directors unanimously approved each of the Proposals to be considered at the Annual Meeting. The Board recommends that the stockholders vote “FOR” each proposal.
PROPOSAL 1 — ALLERGY CONTROL PRODUCTS MERGER
Companies Involved in the Merger Planet Technologies, Inc. is engaged in the business of designing, manufacturing, selling, and distributing consumer products for use by allergy sensitive persons, including air filters, bedding and similar products.
 
Allergy Control Products, Inc. is engaged in the business of developing and marketing environmental controls to reduce allergen exposure. Such environmental control products include: allergen proof pillow and mattress encasings, HEPA filter air cleaners, HEPA filter vacuum cleaners, carpet treatments and respiratory products.

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Summary of the Merger In the Merger, the Company will issue and deliver to the sole-shareholder of ACP approximately 600,000 shares of the Company’s common stock (or 300 shares of Company common stock for each one share of ACP common stock outstanding). As a condition to, and simultaneously with, the effective time of the Merger, the Company shall cause to be paid to Jonathan T. Dawson the sum of $1,500,000 cash in full payment of all indebtedness of ACP to Mr. Dawson, its sole-shareholder.
 
Reasons for the Merger In approving the Merger and in recommending that the Company’s shareholders approve the Agreement and Plan of Merger and the Merger, the Company’s Board of Directors considered a number of factors. The Company considered the impact on combining the Company’s business with ACP’s business, and the potential positive results of combining the operations and technology of ACP with the operations and technology of the Company.
 
Accounting Treatment For Accounting purposes Planet will be deemed Acquirer. The transaction will be accounted for as a purchase with Planet as the accounting acquirer. At the consummation of the transaction, the purchase price will be allocated to the fair value of the assets acquired with the excess attributed to goodwill. There are no other identifiable intangible assets involved with the transaction. At this stage of the transaction, given the current nature of the assets of ACP, (i.e. accounts receivable and inventory) the book value has been assumed to equal the fair market value and the excess of the purchase price over that value has been assumed to be goodwill.
 
Background and Negotiations Related to the Merger The Company and ACP have been discussing the possibility of merger since late 2004. The discussions led to entering into the Agreement and Plan of Merger on March 7, 2005.
 
Material Tax Consequences to the Company and its Shareholders The Merger should not result in any material tax consequences to either the Company or its shareholders. We believe the Merger will qualify as a “reorganization” as defined in Section 368 of the Internal Revenue Code as either a statutory merger, or a stock for stock acquisition. We have not obtained or requested an opinion of tax counsel or a revenue ruling from the IRS regarding the tax consequences of the transaction. In addition, we do not believe that there is significant appreciation in the carrying value for federal or state income tax purposes of the assets of either ACP or Planet, which if the transaction was recharacterized as a purchase and sale would result in material taxable income to either Planet or ACP which would not be offset by current losses or loss carry forwards. The shareholders of Planet will not be distributed any cash or other consideration in connection with the Merger transaction and we therefore believe that there will be no material tax consequence to our shareholders. Again, we have not requested or obtained a tax opinion or revenue ruling regarding the tax consequences to our shareholders.
 
Dissenters Rights If the Merger is approved by the required vote of the Company’s shareholders and is not abandoned or terminated, holders of the Company’s common stock who did not vote in favor of the Merger

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and who notify the Company in writing of their intent to demand payment of their shares if the Merger is consummated, may, by complying with Sections 1300 through 1312 of the California Corporations Code, be entitled to dissenters’ rights as described therein. The Company’s shareholders must notify the Company of their intent to dissent within 30 days of the date that the notice of approval of the Merger is mailed to all the Company’s shareholders who did not vote in favor of the Merger.
 
Vote Required to Approve Asset Purchase and Merger The affirmative vote of holders of the majority of outstanding common stock is required to approve the Agreement and Plan of Merger and the Merger.
PROPOSAL 2 — ELECTION OF DIRECTORS
Nominees There are five board nominees for the five board positions presently authorized by the Company’s current bylaws. The names of the nominees are H. M. Busby; Scott L. Glenn; Eric B. Freedus, Ellen Preston; and Michael Trinkle.
 
Voting Shares represented by executed proxies will vote, if authority to do so is not withheld, for the election of the nominees. In the event that any nominee should be unavailable for election as a result of an unexpected occurrence, such shares will be voted for the election of such substitute nominee as management may propose. Each person nominated for election has agreed to serve if elected and management has no reason to believe that any nominee will be unable to serve.
PROPOSAL 3 — AMENDMENT TO THE 2000 STOCK OPTION PLAN
Description of the 2000 Plan, as Amended The Company proposes to increase the number of shares reserved for issuance under the 2000 Plan from 100,000 shares to 350,000 shares. The purpose of the increase is to reserve an adequate number of shares of Common Stock for awards pursuant to the 2000 Plan sufficient to accommodate the retention of the current Board of Directors and executive officers of the Company and Edward Steube as President/ CEO of ACP, as a subsidiary of the Company, and in the future, other key employees, officers and directors. The number of shares available for issuance will be subject to adjustment to prevent dilution in the event of stock splits, stock dividends or other changes in the capitalization of the Company.
 
As part of the Merger, and for his remaining the President/ CEO of ACP, Edward Steube will be granted the right to the option to purchase 100,000 shares of Company common stock. This represents the total number of shares under the 2000 Plan awarded pursuant to the Merger. In addition, the Company has issued a total of 125,000 options to officers and directors of the Company for services provided that are subject to shareholder approval of this Proposal 3.
 
Tax Consequences For Federal Income Tax purposes, the grant to an optionee of a non-incentive option generally will not constitute a taxable event to

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the optionee or to the Company. Similarly, for Federal Income Tax purposes, in general, neither the grant nor the exercise of an incentive option will constitute a taxable event to the optionee or to the Company, assuming the incentive option qualifies as an “Incentive Stock Option” under Internal Revenue Code Section 422.
 
Proposal 1 is dependent upon the approval of this Proposal 3. If Proposal 3 is not approved, the Company does not have sufficient shares available for issuance under the 2000 Plan in order to grant options to Edward Steube.
 
Vote Required to Approve The affirmative votes of the holders of the majority of common stock present in person or represented by proxy and which constitute a quorum at the meeting are required to approve the amendment to the 2000 stock option plan.
PROPOSAL 4 — RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Engagement of Accountant We have approved retaining J.H. Cohn LLP to serve as our independent registered public accounting firm for the 2005 fiscal year and we seek stockholder ratification of that decision.
 
Vote Required to Approve The affirmative votes of the holders of the majority of common stock present in person or represented by proxy at the meeting are required to ratify the selection of independent registered public accounting firm.

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PLANET TECHNOLOGIES, INC.
6835 Flanders Drive, Suite 100
San Diego, California 92121
PROXY STATEMENT
PRELIMINARY COPY
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON July 29, 2005
INFORMATION CONCERNING SOLICITATION AND VOTING
INTRODUCTION
General Information
      The enclosed proxy is solicited on behalf of the Board of Directors (the “Board”) of Planet Technologies, Inc., a California corporation (the “Company”), for use at the Annual Meeting of Shareholders to be held on July 29, 2005 at 10:00 a.m. local time (the “Annual Meeting”), or at any adjournment or postponement thereof, for the purposes set forth herein and in the accompanying Notice of Annual Meeting. The Annual Meeting will be held at 800 Silverado Street, Second Floor, La Jolla, California 92037. The Company intends to mail this proxy statement and accompanying proxy card on or about July 8, 2005, to all shareholders entitled to vote at the Annual Meeting.
Solicitation
      The Company will bear the entire cost of solicitation of proxies including preparation, assembly, printing and mailing of this proxy statement, the proxy and any additional information furnished to shareholders. Copies of solicitation materials will be furnished to banks, brokerage houses, fiduciaries and custodians holding in their names shares of Common Stock beneficially owned by others to forward to such beneficial owners. The Company may reimburse persons representing beneficial owners of Common Stock for their costs of forwarding solicitation materials to such beneficial owners. Original solicitation of proxies by mail may be supplemented by telephone, telegram or personal solicitation by directors, officers or other regular employees of the Company. No additional compensation will be paid to directors, officers or other regular employees for such services.
Voting Rights and Outstanding Shares
      For purposes of the Annual Meeting, a quorum means a majority of the outstanding shares entitled to vote. Holders of record of the Company’s Common Stock at the close of business on June 15, 2005 (the “Record Date”) will be entitled to notice of and to vote at the Annual Meeting. At the close of business on June 15, 2005, the Company had outstanding and entitled to vote 2,280,368 shares of Common Stock. In determining whether a quorum exists at the Annual meeting, all shares represented in person or by proxy, including abstentions and broker non-votes, will be counted.
      Except as provided below, on all matters to be voted upon at the Annual Meeting, each holder of record of Common Stock on the Record Date will be entitled to one vote for each share held. With respect to the election of directors, shareholders may exercise cumulative voting rights, i.e., each shareholder entitled to vote for the election of directors may cast a total number of votes equal to the number of directors to be elected multiplied by the number of such shareholder shares (on an as converted basis), and may cast such total of votes for one or more candidates in such proportions as such shareholder chooses.
      All votes will be tabulated by the inspector of election appointed for the meeting, who will separately tabulate affirmative and negative votes, abstentions and broker non-votes. Abstentions will be counted towards the tabulation of votes cast on proposals presented to the shareholders and will have the same effect as negative Votes. Broker non-votes are counted toward a quorum, but are not counted for any purpose in determining whether a matter has been approved.

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How to Vote
      Please sign, date and return the enclosed proxy card promptly. If your shares are held in the name of a bank, broker, or other holder of record (that is, in “street name”) you will receive instructions from the holder of record that you must follow for your shares to be voted.
Revocability of Proxies
      Any person giving a proxy pursuant to this solicitation has the power to revoke it at any time before it is voted. It may be revoked by filing with the Secretary of the Company at the Company’s principal executive office, 6835 Flanders Drive, Suite 100, San Diego, California 92121, a written notice of revocation or a duly executed proxy bearing a later date, or it may be revoked by attending the meeting and voting in person. Attendance at the meeting will not, by itself, revoke a proxy.
Votes Required to Approve Proposals
      Shares represented by executed proxies that are not revoked will be voted in accordance with the instructions in the proxy, or in the absence of instructions, in accordance with the recommendations of the Board of Directors. Assuming a quorum is present at the Annual Meeting, the following table sets forth the votes required to approve each Proposal:
     
Proposal   Vote Required to Approve
     
Proposal 1 (Adopt and approve Agreement and Plan of Merger and the Merger)
  Holders of a majority of the outstanding common stock.
Proposal 2 (Elect directors)
  The five persons with the most number of votes will be elected.
Proposal 3 (Amend 2000 Stock Option Plan)
  Assuming a quorum is present, the affirmative vote of a majority of the shares represented and voting, either present in person or represented by proxy at the meeting are required to vote in favor.
Proposal 4 (Ratify Appointment of Independent Registered Public Accounting Firm)
  Assuming a quorum is present, the affirmative vote of a majority of the shares represented and voting, either present in person or represented by proxy at the meeting are required to vote in favor.
Other Business
  Assuming a quorum is present, the affirmative vote of a majority of the shares represented and voting, either present in person or represented by proxy at the meeting are required to vote in favor.
Board Recommendations
      The Board of Directors unanimously approved each of the Proposals to be considered at the Annual Meeting and recommends that shareholders also vote IN FAVOR OF approval of each Proposal.
Shareholder Proposals
      The deadline for submitting a shareholder proposal for inclusion in the Company’s proxy statement and form of proxy for the Company’s 2006 Annual Meeting of Shareholders pursuant to Rule 14a-8 of the Securities and Exchange Commission is January 27, 2006. Shareholders are also advised to review the Company’s current Bylaws, which contain additional requirements with respect to advance notice of shareholder proposals and director nominations.

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STATEMENT REGARDING FORWARD-LOOKING INFORMATION
      This proxy statement contains forward-looking statements that involve substantial risks and uncertainties. In some cases you can identify these statements by forward-looking words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “should,” “will,” and “would” or similar words. In particular, statements regarding expected strategic benefits, advantages and other effects of the Merger and other proposals described in this proxy statement are forward-looking statements. You should read forward-looking statements carefully because they may discuss our future expectations, contain projections of the Company’s and ACP’s future results of operations or of our financial position or state other forward-looking information. The Company believes that it is important to communicate its future expectations to their investors. However, there may be events in the future that the Company is not able to accurately predict or control. The factors listed above in the sections captioned “Risk Factors,” as well as any cautionary language in this proxy statement, provide examples of risks, uncertainties and events that may cause the actual results to differ materially from any expectations they describe. Actual results or outcomes may differ materially from those predicted in the forward-looking statements due to the risks and uncertainties inherent in their business, including risks and uncertainties in:
  •  market acceptance of and continuing demand for its products;
 
  •  the Company’s ability to protect its intellectual property;
 
  •  the impact of competitive products, pricing and customer service and support;
 
  •  the Company’s ability to obtain additional financing to support their operations;
 
  •  obtaining and maintaining regulatory approval where required;
 
  •  changing market conditions; and
 
  •  other risks detailed in this proxy statement.
      You should not place undue reliance on any forward-looking statements, which reflect the views of the Company’s and ACP’s management only as of the date of this proxy statement. The Company and ACP are not obligated to update any forward-looking statements to reflect events or circumstances that occur after the date on which such statement is made.
QUESTIONS AND ANSWERS ABOUT THE MERGER
      Q: WHY IS THE COMPANY MERGING WITH ACP?
      A: The Company intends to expand its product scope and business operations through its merger with ACP. We believe the Company’s acquisition of ACP’s business will provide the Company with an operating business complementary with certain of the allergy products that the Company has developed and currently markets, as well as open new markets for the Company’s products.
      Q: WHAT WILL ACP RECEIVE IN THE MERGER?
      A: In the Merger, each share of ACP common stock shall be converted into the right to receive 300 shares of Company common stock. The sole shareholder of ACP currently holds 2,000 shares of ACP common stock, which is convertible into 600,000 shares of Company common stock, or 300 shares of Company common stock for each one share of ACP common stock outstanding.
      As a condition to, and simultaneously with, the effective time of the Merger, the Company shall cause to be paid to Jonathan T. Dawson, the sole shareholder of ACP, the sum of $1,500,000 cash in full repayment of all indebtedness of ACP to Mr. Dawson.

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      Q: HOW WILL THE COMPANY SHAREHOLDERS BE AFFECTED BY THE MERGER?
      A: The Company shareholders will continue to own the same number of shares of the Company common stock that they owned immediately prior to the Merger. Each share of the Company common stock, however, will represent a smaller ownership percentage of a larger company.
      Q: WHAT ARE THE MATERIAL UNITED STATES TAX CONSEQUENCES OF THE MERGER TO THE COMPANY SHAREHOLDERS?
      A: The Merger standing alone is not expected to result in any material tax consequences to the Company or the Company shareholders for United States income tax purposes.
      We believe the Merger will qualify as a “reorganization” as defined in Section 368 of the Internal Revenue Code as either a statutory merger, or a stock for stock acquisition. We have not obtained or requested an opinion of tax counsel or a revenue ruling from the IRS regarding the tax consequences of the transaction. In addition, we do not believe that there is significant appreciation in the carrying value for federal or state income tax purposes of the assets of either ACP or Planet, which if the transaction was recharacterized as a purchase and sale would result in material taxable income to either Planet or ACP which would not be offset by current losses or loss carry forwards. The shareholders of Planet will not be distributed any cash or other consideration in connection with the Merger transaction and we therefore believe that there will be no material tax consequence to our shareholders. Again, we have not requested or obtained a tax opinion or revenue ruling regarding the tax consequences to our shareholders.
      Q: WHAT SHAREHOLDER VOTES ARE NEEDED TO APPROVE THE MERGER?
      A: The affirmative vote of the holders of a majority of the outstanding shares of the Company common stock is required to approve the proposed Agreement and Plan of Merger and the Merger.
      Q: HOW WILL THE MERGER EFFECT THE DISTRIBUTION OF COMPANY COMMON STOCK AMONG SHAREHOLDERS?
      A: Pre-merger, non-affiliates own 47.5% and affiliates own 52.5% of the outstanding common stock of the Company.
      Post-merger, non-affiliates (excluding Jonathan T. Dawson) would own 37.6%, affiliates would own 41.5% and Jonathan T. Dawson the sole shareholder of ACP would own 21% of the outstanding common stock of the Company.
      Q: WHEN DOES THE COMPANY EXPECT TO COMPLETE THE MERGER?
      A: The Company and ACP are working to complete the Merger as quickly as possible. We expect to complete the Merger as soon as reasonably possible after the requisite shareholder votes have been obtained.
      Q: ARE THE COMPANY SHAREHOLDERS ENTITLED TO DISSENTERS’ RIGHTS?
      A: If the Merger is approved by the required vote of the Company’s shareholders and is not abandoned or terminated, holders of the Company’s common stock who did not vote in favor of the Merger and who notify the Company in writing of their intent to demand payment of their shares if the Merger is consummated, may, by complying with Sections 1300 through 1312 of the California Corporations Code, a copy of which is attached hereto as Exhibit “D”, be entitled to dissenters’ rights as described therein. The Company’s shareholders must notify the Company of their intent to dissent within 30 days of the date that the notice of approval of the Merger is mailed to all the Company’s shareholders who did not vote in favor of the Merger.
      Q: WHAT DO I NEED TO DO NOW?
      A: After carefully reading and considering the information contained in this proxy statement, please complete, sign and date your proxy and return it in the enclosed return envelope as soon as possible, so that your shares may be represented at the annual meeting of the Company shareholders. If you sign, date and return your proxy card but do not include instructions on how to vote your proxy, we will vote your shares IN

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FAVOR of each proposal described in this proxy statement. You may attend the annual meeting, if you are a Company shareholder and vote your shares in person rather than voting by proxy.
      Q: IF MY BROKER HOLDS MY SHARES IN “STREET NAME,” WILL MY BROKER VOTE MY SHARES FOR ME?
      A: Generally your broker will vote your shares only if you provide instructions on how to vote in accordance with the information and procedures provided to you by your broker.
      Q: WHAT HAPPENS IF I DO NOT VOTE?
      A: If you do not submit a proxy or vote at your annual meeting, your shares will not be counted for the purpose of determining the presence of a quorum and your inaction will have the same effect as a vote against Proposal 1 but may have no effect on the outcome of the other proposals. If you submit a proxy and affirmatively elect to abstain from voting, your shares will be counted for the purpose of determining the presence of a quorum but will not be voted at the annual meeting. As a result, your abstention will have the same effect as a vote against Proposal 1 but will have no effect on the outcome of the other proposals.
      Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY?
      A: Yes. You can change your vote at any time before your proxy is voted at the Company’s annual meeting. You can do this in one of three ways:
  •  timely delivery of a valid, later-dated proxy by mail;
 
  •  revoking your proxy by written notice to the corporate secretary of the Company; or
 
  •  voting in person by written ballot at the Company annual meeting.
      If you have instructed a broker to vote your shares, you must follow the directions from your broker on how to change that vote.
      Q: WHAT IS THE DEADLINE FOR THE RETURN OF MY PROXY?
      A. The Company must receive your Proxy no later than July 28, 2005
      Q: ARE THERE ANY RISKS I SHOULD CONSIDER IN DECIDING WHETHER TO VOTE FOR THE PROPOSALS DESCRIBED IN THIS PROXY STATEMENT?
      A: We have listed in the section entitled “Risk Factors” the risks among others that you should consider in deciding whether to vote for Proposal No. 1 described in this proxy statement.
      Q: WHOM SHOULD I CALL WITH QUESTIONS?
      A: If you have any questions about the Merger or about any of the other proposals described in this proxy statement or the enclosed proxy, you should contact:
  Planet Technologies, Inc.
  6835 Flanders Drive, Suite 100
  San Diego, California 92121
  (858) 457-4742
  Attention: Scott L. Glenn
      You may also obtain additional information about the Company from documents filed with the SEC by accessing EDGAR, the SEC’s online filing system at www.sec.gov.
RISK FACTORS
Risk Factors Associated With the Merger
      An investment in the Company’s common stock is subject to many risks. You should carefully consider the risks described below, together with all of the other information included in this proxy statement, including

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the financial statements and the related notes, before you decide whether to approve the Acquisition. The Company’s business, operating results and financial condition could be harmed by any of the following risks. The trading price of the Company’s common stock could decline due to any of these risks, and you could lose all or part of your investment.
      THE COMPANY MAY NOT REALIZE THE INTENDED BENEFITS OF THE MERGER IF THE COMPANY IS UNABLE TO CONSOLIDATE ITS OPERATIONS WITH THOSE OF ACP.
      Achieving the benefits of the Merger will depend in part on growing ACP’s operations, combining the operations of ACP and the Company, and developing new markets for the Company’s and ACP’s products. This integration may be difficult and unpredictable because the Company’s operations are based in San Diego, California, and ACP’s operations are based in Ridgefield, Connecticut. The Company plans to consolidate operations into the Ridgefield facility. If the Company cannot successfully integrate the two businesses, the Company may not realize the expected benefits of the Merger.
      THE MERGER WILL RESULT IN SIGNIFICANT COSTS TO THE COMPANY AND ACP, WHETHER OR NOT THE MERGER IS COMPLETED.
      The Merger will result in significant costs to the Company and ACP. Transaction costs are estimated to be at least $100,000. These costs are expected to consist primarily of fees for attorneys, accountants, filing fees and financial printers. All of these costs will be incurred whether or not the Merger is completed. In addition, if the Agreement and Plan of Merger is terminated under specified circumstances, the Company may be obligated to pay a $150,000 termination fee.
      WE COULD BE EXPOSED TO UNKNOWN LIABILITIES OF ACP.
      If there are liabilities of ACP which we do not know of, as a merger, in all likelihood, Planet would assume these liabilities and may have little or no recourse against the shareholder of ACP who will receive substantially all of the consideration for the transaction. If we discovered that there were intentional misrepresentations made to us by ACP, its shareholder or its representatives, we would explore all possible legal remedies to compensate us for any loss. However, there is no assurance that legal remedies would be available or collectible. The Board considered the possibility that Planet could be subjected to unknown liabilities in connection with evaluating the Merger transaction.
      FAILURE TO COMPLETE THE MERGER COULD CAUSE THE COMPANY’S STOCK PRICE TO DECLINE.
      If the Merger is not completed for any reason, the Company’s stock price may decline because costs related to the Merger, such as legal and accounting, must be paid even if the Merger is not completed. In addition, if the Merger is not completed, the Company’s stock price may decline to the extent that the current market price reflects a market assumption that the Merger will be completed.
      IF THE CONDITIONS TO THE MERGER ARE NOT MET, THE MERGER WILL NOT OCCUR.
      Specified conditions must be satisfied or waived to complete the Merger. These conditions are summarized in the section captioned “Conditions to Completion of the Merger” and are described in detail in the Agreement and Plan of Merger. The Company cannot assure you that each of the conditions will be satisfied. If the conditions are not satisfied or waived, the Merger will not occur or will be delayed and the Company may lose some or all of the intended benefits of the Merger.
      THE COMPANY AND ACP MAY WAIVE ONE OR MORE OF THE CONDITIONS TO THE MERGER WITHOUT RESOLICITING SHAREHOLDER APPROVAL FOR THE MERGER.
      Each of the conditions to the Company’s and ACP’s obligations to complete the Merger may be waived, in whole or in part, to the extent permitted by applicable laws, by agreement of the Company and ACP. The board of directors of the Company will evaluate the materiality of any such waiver to determine whether amendment of this proxy statement and resolicitation of proxies is warranted. However, the Company generally does not expect any such waiver to be sufficiently material to warrant resolicitation of the

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shareholders. In the event that the board of directors of the Company determines any such waiver is not sufficiently material to warrant resolicitation of shareholders, the Company will have the discretion to complete the Merger without seeking further shareholder approval. Any waiver not deemed material by the board of directors, and not put before the shareholders for approval, would not be expected to create a material risk to shareholders.
      SALES OF ACP’S PRODUCTS COULD DECLINE OR BE INHIBITED IF CUSTOMER RELATIONSHIPS ARE DISRUPTED BY THE MERGER.
      The Merger may have the effect of disrupting customer relationships. ACP’s customers or potential customers may delay or alter buying patterns during the pendency of and following the Merger. Customers may defer purchasing decisions as they evaluate the likelihood of successful completion of the Merger. ACP’s customers or potential customers may instead purchase products of competitors. Any significant delay or reduction in orders for ACP’s products could cause the Company’s sales, following the Merger, to decline.
      THE COMPANY MAY ENTER INTO SUBSEQUENT AGREEMENTS TO MERGE OR CONSOLIDATE WITH OTHER COMPANIES, AND IT MAY INCUR SIGNIFICANT COSTS IN THE PROCESS, WHETHER OR NOT THE TRANSACTIONS ARE COMPLETED.
      The Company may enter into other merger agreements, in addition to the Agreement and Plan of Merger with ACP, in furtherance of the Company’s strategy to consolidate with other companies in the allergy market. The Company may not be able to close any mergers on the timetable it anticipates, if at all. The Company may incur significant non-recoverable expenses in these efforts.
      THE COMPANY’S PROSPECTS FOR OBTAINING ADDITIONAL FINANCING ARE UNCERTAIN AND FAILURE TO ACHIEVE PROFITABILITY OR OBTAIN NEEDED FINANCING WILL AFFECT ITS ABILITY TO PURSUE FUTURE GROWTH, HARM ITS BUSINESS OPERATIONS AND AFFECT ITS ABILITY TO CONTINUE AS A GOING CONCERN.
      If the Company is unable to achieve profitability or raise additional debt or equity financing, it will not be able to continue as a going concern. The Company’s future capital requirements will depend upon many factors, including development costs of new products, potential acquisition opportunities, maintenance of adequate contract manufacturing agreements, progress of research and development efforts, expansion of marketing and sales efforts and the status of competitive products. Additional financing may not be available in the future on acceptable terms or at all. The Company’s history of substantial operating losses could also severely limit the Company’s ability to raise additional financing. In addition, given the recent price of its common stock, if the Company raises additional funds by issuing equity securities, additional significant dilution to its shareholders could result.
      If the Company is unable to increase sales, decrease costs, or obtain additional equity or debt financing, the Company may be required to close business or product lines, further restructure or refinance its debt or delay, scale back further or eliminate its research and development program. The Company may also need to obtain funds through arrangements with partners or others that may require it to relinquish its rights to certain technologies or potential products or other assets. The Company’s inability to obtain capital, or its ability to obtain additional capital only upon onerous terms, could very seriously damage its business, operating results and financial condition.
      ISSUING ADDITIONAL SECURITIES AS A MEANS OF RAISING CAPITAL AND THE FUTURE SALES OF THESE SECURITIES IN THE PUBLIC MARKET COULD LOWER THE COMPANY’S STOCK PRICE AND ADVERSELY AFFECT ITS ABILITY TO RAISE ADDITIONAL CAPITAL IN SUBSEQUENT FINANCINGS; IMPAIR ITS ABILITY IN NEW STOCK OFFERINGS TO RAISE FUNDS TO CONTINUE OPERATIONS; AND WILL HAVE A SIGNIFICANT DILUTIVE EFFECT ON THE COMPANY’S EXISTING SHAREHOLDERS.
      The Company intends to rely on debt and equity financings to meet its working capital needs. If the securities that the Company issues in these financings are subsequently sold in the public market, the trading price of its common stock may be negatively affected. As of April 12, 2005, the last reported sale price of the

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Company common stock was $1.25. If the market price of the Company common stock continues to decrease, The Company may not be able to conduct additional financings in the future on acceptable terms or at all, and its ability to raise additional capital will be significantly limited.
      Future sales of the Company’s common stock, particularly shares issued upon the exercise or conversion of outstanding or newly issued securities upon exercise of its outstanding options, could have a significant negative effect on the market price of the Company’s common stock. These sales might also make it more difficult for the Company to sell equity securities or equity-related securities in the future at a time and price that it would deem appropriate. The Company has agreed to use its best efforts to register shares issued to the sole-shareholder of ACP. When these shares are registered, there will be many more shares that may be sold, which could have a significant negative impact on the market price of the Company’s common stock.
      Shares issued in connection with the Merger and the conversion or exercise of convertible securities into shares of the Company’s common stock will result in substantial dilution to the Company’s existing shareholders. In order to consummate the merger with ACP, the Company intends to issue approximately 600,000 shares of common stock to the sole-shareholder of ACP.
      THE COMPANY’S STOCK PRICE HAS BEEN VOLATILE AND HAS EXPERIENCED SIGNIFICANT DECLINE, AND IT MAY CONTINUE TO BE VOLATILE AND CONTINUE TO DECLINE.
      In recent years, the stock market in general, and the market for shares of small capitalization technology stocks in particular, have experienced extreme price fluctuations. These fluctuations have often negatively affected small cap companies such as the Company, and may impact its ability to raise equity capital. Companies with liquidity problems also often experience downward stock price volatility. The Company believes that factors such as announcements of developments relating to its business (including any financings or any resolution of liabilities), announcements of technological innovations or new products or enhancements by the Company or its competitors, sales by competitors, sales of significant volumes of the Company’s common stock into the public market, developments in its relationships with customers, partners, lenders, distributors and suppliers, shortfalls or changes in revenues, gross margins, earnings or losses or other financial results that differ from analysts’ expectations, regulatory developments and fluctuations in results of operations could and have caused the price of the Company common stock to fluctuate widely and decline over the past three or more years during the technology recession. The market price of the Company common stock may continue to decline, or otherwise continue to experience significant fluctuations in the future, including fluctuations that are unrelated to the Company’s performance.
      CONSUMMATION OF THE MERGER WILL RESULT IN DIMINUTION OF VOTING CONTROL BY CURRENT SHAREHOLDERS OF THE COMPANY.
      The proposed terms of the Merger will result in the sole shareholder of ACP acquiring an approximate twenty one (21%) percent of the voting shares of the Company. As a result, each individual shareholder of the Company will not exert the same degree of voting power with respect to the combined company that it did with the Company prior to the consummation of the Merger.
      No fairness Opinion has been obtained. Because of the absence of a fairness opinion, there will be no independent assurance from an expert that the consummation of the Acquisition is fair from a financial point of view to the shareholders of the Company.
Risk Factors of the Merged Company
      Amendments to the Telemarketing Sales Rule (the “TSR”). The amendments to the TSR in 2003 may have a material impact on Planet’s and ACP’s revenue and profitability. The addition of a national “do-not-call” list to the growing number of states that already have “do-not-call” lists has reduced the number of households that the Company may call. Approximately seventy-percent (70%) of Planet’s historical customers have placed their names on the national “do-not-call” list. The Company believes that increasing numbers of its customers will join the DNC list in the future and so has developed direct mailing programs and other sales initiatives to mitigate the effect on future revenues. The Company is also considering regional

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and national radio campaigns to reach new customers and plans to diversify its direct-to-consumer approach via strategic acquisition.
      In addition to the federal legislation and regulations, there are numerous state statutes and regulations governing telemarketing activities, which do or may apply to us. For example, some states also place restrictions on the methods and timing of telemarketing calls and require that certain mandatory disclosures be made during the course of a telemarketing call. Some states also require that telemarketers register in the state before conducting telemarketing business in the state.
      We specifically train our telemarketing representatives to handle calls in an approved manner and believe we comply in all material respects with all federal and state telemarketing regulations. There can be no assurance, however, that Planet would not be subject to regulatory challenge for a violation of federal or state law.
      If ACP and Planet continue to experience losses, then the combined company stock value will be negatively impacted. Future profitability is anticipated, but there is no assurance that ACP and/or Planet will become profitable, or if it does, that either will be able to sustain or increase profitability on a quarterly or annual basis. If ACP and/or Planet continues to run at a deficit, then the combined company will require a further infusion of capital. In addition, if the anticipated profitability of ACP and/or Planet does not come to fruition, this will likely have a negative impact on the combined company stock valuation.
      Planet has experienced losses, we expect future losses and we may not become profitable. For the years ended December 31, 2004, and 2003, we had net losses of approximately $773,558 and $574,135, respectively. As of December 31, 2004, Planet had an accumulated deficit of approximately $3.7 million.
      For the twelve months ended December 31, 2004, 2003 and 2002, ACP reported net losses of $317,933, $764,141 and $3,584,879, respectively. The 2002 loss included a goodwill impairment loss of $3,348,586 from the adoption of FASB No. 142. On December 31, 2004, ACP had an accumulated deficit of approximately $9.5 million.
      Since we have historically incurred net losses, we expect this trend to continue until some indefinite date in the future. We may not become profitable. If we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis.
      We may require additional capital in the future which may not be available. Our future capital requirements will depend on many factors, including:
  •  the cost of manufacturing our products;
 
  •  developing new markets for our products;
 
  •  competing technological and market developments; and
 
  •  the costs involved in filing, prosecuting and enforcing patent claims.
      We anticipate that our existing resources combined with revenues will enable us to maintain our current and planned operations through December 31, 2005. However, changes in our plans or other events affecting our operating expenses, such as acquisition opportunities, may cause us to expend our existing resources sooner than expected.
      We may seek additional funding through private placements of stock or strategic relationships. But the uncertainty as to our future profitability may make it difficult for us to secure additional financing on acceptable terms, if we are able to secure additional financing at all. Insufficient funds may require us to delay, scale back or eliminate some or all of our activities.
      We are subject to penny stock regulations. Our common stock is not listed or qualified for listing on NASDAQ or any national securities exchange but is only sporadically traded in the over-the-counter market in the so-called OTC Bulletin Board. As a result, an investor will find it difficult to dispose of, and to obtain accurate quotations as to the value of, our common stock.

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      Our common stock is classified as a penny stock by the Securities and Exchange Commission. The classification severely and adversely affects the market liquidity for our common stock. The Commission has adopted Rule 15g-9, which establishes the definition of a “penny stock” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require: (i) that a broker or dealer approve a person’s account for transactions in penny stocks; and (ii) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased. In order to approve a person’s account for transactions in penny stocks, the broker or dealer must (i) obtain financial information and investment experience objectives of the person; and (ii) make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedules prepared by the Commission relating to the penny stock market, which, in highlight form, sets forth (i) the basis on which the broker or dealer made the suitability determination and (ii) that the broker or dealer received a signed, written agreement from the investor prior to the transaction. Disclosure also has to be made about the risks of investing in penny stocks in public offerings and secondary trading and about the commissions payable to the broker-dealer and registered representative, current quotations for the securities and the rights and remedies available to an investor in case of fraud in penny stock transaction. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.
      Any inability to adequately retain or protect our employees, customer relationships and proprietary technology could harm our ability to compete. Our future success and ability to compete depends in part upon our employees, customer relationships, proprietary technology and trademarks, which we attempt to protect with a combination of trademark and trade secret claims. These legal protections afford only limited protection. Further, despite our efforts, we may be unable to prevent third parties from soliciting our employees or customers or infringing upon or misappropriating our intellectual property. Our employees, customer relationships and intellectual property may not be adequate to provide us with a competitive advantage or to prevent competitors from entering the markets for our product and services. Additionally, our competitors could independently develop non-infringing technologies that are competitive with, and equivalent or superior to, our products. We will monitor infringement and/or misappropriation of our proprietary rights. However, even if we do detect infringement or misappropriation of our proprietary rights, litigation to enforce these rights could cause us to divert financial and other resources away from our business operations.
      The departure of certain key personnel could harm the financial condition of the Company. Several of our employees are intimately involved in our business and have day-to-day relationships with critical customers. Planet is not able to afford additional staff to supplement these key personnel. Competition for highly skilled business, product development, marketing and other personnel is intense, and there can be no assurance that we will be successful in recruiting new personnel or in retaining our existing personnel. A failure on our part to retain the services of these key personnel could have a material adverse effect on our operating results and financial condition. We do not maintain key man life insurance on any of our employees.
      Edward J. Steube, Chief Executive Officer, is deemed to be a key employee of ACP. His departure would negatively impact the company, creating a temporary leadership and management vacuum, which would be difficult to replace on a timely basis. The company does not anticipate Mr. Steube’s departure as a result of the transaction or, independent of the transaction, as a result of any plans to leave or retire. Mr. Steube has agreed to an employment contract, which will be executed contingent upon completion of the contemplated transaction.
      W. Sanford Miller, currently President of ACP, will be leaving the company just prior to completion of the contemplated transaction under a severance agreement executed between Mr. Miller and ACP’s current stockholder. Mr. Miller is not deemed to be a key employee of ACP, which will have no ongoing financial obligation to Mr. Miller following completion of the transaction.

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      If the combined company is unable to compete with its numerous competitors, then the combined company may lose market share resulting in increased losses. The combined company has many competitors with comparable characteristics and capabilities that compete for the same group of customers. Competitors are competent and experienced and, like the combined company, are continuously working to capture market share. These competitors may have greater financial, marketing and other resources. The combined company’s ability to compete effectively may be adversely affected by the ability of these competitors to devote greater resources to the sales and marketing of their products and services.
      Any inability to retain or protect its customer relationships could harm the combined company’s ability to compete. In the normal course of events, competitors work to replace the combined company as a provider of information and products in each of the company’s delivery channels. Despite its efforts, ACP may be unable to prevent third parties from effectively soliciting its customer relationships. While the combined company is not dependent upon any one customer for a material amount of its revenues, any lost customer relationship would be marginally harmful to the company’s revenue stream until such time as replacement relationships are forthcoming.
      There are risks associated with our planned growth. We plan to grow the Company’s revenues and profits by adding to our existing customer base through internal growth and by the acquisition of other companies.
      Management believes that Planet can grow through the acquisitions of other allergy control related companies as part of a “roll-up” strategy. The acquisition of other companies is uncertain and contains a variety of business risks, including: cultural differences, the retention of key personnel, competition, protection of intellectual property, profitability, industry changes and others.
      Although we do not have an agreement to acquire any specific company at this time, other than Allergy Control Products, we intend to attempt to expand our operations through the acquisition of other companies. Acquisitions and attempted acquisitions may place a strain on our limited personnel, financial and other resources. Our ability to manage this growth, should it occur, will require expansion of our capabilities and personnel. We may not be able to find qualified personnel to fill additional positions or be able to successfully manage a larger organization.
      We have very limited assets upon which to rely for adjusting to business variations and for growing new businesses. While we are likely to look for new funding to assist in the acquisition of other profitable businesses, it is uncertain whether such funds will be available. There can be no assurance that we will be successful in raising a sufficient amount of additional capital, or if we are successful, that we will be able to raise capital on reasonable terms. If we do raise additional capital, our existing shareholders may incur substantial and immediate dilution.
      Future sales of our common stock by existing shareholders under Rule 144 or this offering could decrease the trading price of our common stock. As of December 31, 2004, a total of approximately 1,955,397 shares of outstanding common stock were “restricted securities” and could be sold in the public markets only in compliance with rule 144 adopted under the Securities Act of 1933 or other applicable exemptions from registration. Rule 144 provides that a person holding restricted securities for a period of one year may thereafter sell, in brokerage transactions, an amount not exceeding in any three-month period the greater of either (i) 1% of the issuer’s outstanding common stock or (ii) the average weekly trading volume in the securities during a period of four calendar weeks immediately preceding the sale. Persons who are not affiliated with the issuer and who have held their restricted securities for at least two years are not subject to the volume limitation. Possible or actual sales of our common stock by present shareholders under Rule 144 could have a depressive effect on the price of our common stock. We have filed a registration statement to register many of these shares, which may be sold without the above limitations when and if the registration statement becomes effective.
      In addition to the 1,955,397 shares of outstanding common stock above, AF Partners, LLC, holds a convertible subordinated promissory note in the principal amount of $252,757 at December 31, 2004 with interest at 5.5% per annum, compounded quarterly and computed on the basis of a year consisting of 360 days

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and four quarterly periods each consisting of 90 days. AF Partners, LLC, has the option to convert the principal and accrued interest outstanding at a price of at least $2.50 per share, at any time until the note is paid off in full. Further, LBC Capital Resources, Inc. holds a warrant to purchase up to a maximum of 50,000 shares of Company common stock. This warrant expires on November 29, 2005.
      Certain officers and directors of the Company hold options at various exercise prices, exercise dates and expiration dates that equal the right to purchase 228,653 shares of Company common stock.
      Our directors and executive officers beneficially own approximately 50% of our stock, including stock options and warrants exercisable within 60 days of January 1, 2005; their interests could conflict with yours; significant sales of stock held by them could have a negative effect on our stock price; shareholders may be unable to exercise control. As of January 1, 2005, our executive officers, directors and affiliated persons were the beneficial owners of approximately 50% of our common stock, including stock options exercisable within 60 days of January 1, 2005. As a result, our executive officers, directors and affiliate persons will have significant ability to:
  •  elect or defeat the election of our directors;
 
  •  amend or prevent amendment of our articles or incorporation or bylaws;
 
  •  effect or prevent a merger, sale of assets or other corporate transaction; and
 
  •  control the outcome of any other matter submitted to the shareholders for vote.
      As a result of their ownership and positions, our directors and executive officers collectively, are able to significantly influence all matters requiring shareholder approval, including the election of directors and approval of significant corporate transactions. In addition, sales of significant amounts of shares held by our directors and executive officers, or the prospect of these sales, could adversely affect the market price of our common stock. Management’s stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of us, which in turn could reduce our stock price or prevent our shareholders from realizing a premium over our stock price.
      Absence of Dividends. We have not paid any cash dividends on our Common Stock since our inception and do not anticipate paying cash dividends in the foreseeable future.
      ACP does not possess any proprietary technology. Competitors could independently develop non-infringing technologies that are competitive with, and equivalent or superior to, ACP’s products. In addition to the negative impact such new technologies could have on ACP’s business, if infringement or misappropriation of its proprietary rights is detected, litigation to enforce such rights could cause ACP to divert financial and other resources away from its business operations.
      The departure of certain key personnel could harm the financial condition of the company. Several of our employees are intimately involved in our business and have day-to-day relationships with critical customers and processes. Competition for highly skilled business, product development, marketing and other personnel is intense, and there can be no assurance that the company will be successful in recruiting new personnel or in retaining its existing personnel. A failure to retain the services of these key personnel could have a material adverse effect on ACP’s operating results and financial condition.
      Insurance Reimbursement Systems. An additional risk factor is posed by insurance reimbursement systems in Europe and Canada, where pricing pressure is exerted on the company’s products due to the necessity of conforming to system-imposed price guidelines favoring lower cost products. This is not a risk in the United States, where insurance does not cover the cost of the company’s products.
      Newly Introduced Product Testing Programs. An additional risk factor is posed by newly introduced product testing programs for allergen barrier bedding products in Germany. This has caused the company’s fabric suppliers to reformulate fabric content to comply with guidelines not previously required in Germany. ACP’s current product offerings in Germany have been reformulated and are in compliance with product testing guidelines, but there can be no assurance that future new guidelines will not require additional reformulations.

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PROPOSAL 1
THE MERGER
Overview
      Allergy Control Products, Inc., a Delaware corporation, (“ACP”) is engaged in the business of developing and marketing environmental controls to reduce allergen exposure. Such environmental control products include: allergen proof pillow and mattress encasings, HEPA filter air cleaners, HEPA filter vacuum cleaners, carpet treatments and respiratory products.
      On March 7, 2005, the Company entered into an Agreement and Plan of Merger (the “Agreement”) with ACP, whereby the Company agreed, subject to shareholder approval, to purchase substantially all of the assets and assume certain liabilities of ACP (the “Merger”). The Agreement is the main legal document that governs the transaction and is attached to this proxy statement as Exhibit “C” with the exception of the exhibits thereto which will be provided upon request. We encourage you to read the Agreement carefully. The descriptions of the Agreement set forth below are qualified in their entirety by reference to the full text of the Agreement including all exhibits, schedules and other documents incorporated by reference thereto.
      In the Merger, the Company will issue and deliver to the sole-shareholder of ACP approximately 600,000 shares of the Company’s common stock. As a condition to, and simultaneously with, the effective time of the Merger, the Company shall cause to be paid to Jonathan T. Dawson the sum of $1,500,000 cash. The stock and cash to Dawson represents payment in full payment of all indebtedness of ACP to Mr. Dawson, its sole-shareholder. The combined company will have no debt to Mr. Dawson after the Merger.
Reasons for the Merger
      In approving the Merger and in recommending that the Company’s shareholders approve the Agreement and Plan of Merger and the Merger, the Company board of directors considered a number of factors, including, without limitation, the following factors which the Company believes includes all material factors:
  •  Information concerning the Company’s and ACP’s respective businesses, prospects, business plans, financial performance and condition, results of operations, technology and competitive positions;
 
  •  The compatibility of the Company’s business with that of ACP’s business. In the past ACP like Planet has obtained additional financing from existing shareholders and debt from banks. ACP anticipates it could require up to an addition $500,000 in working capital support to cover expenses of this transaction and normal operations;
 
  •  The due diligence investigation conducted by the Company’s management;
 
  •  The terms of the Agreement and Plan of Merger, including price and structure, which were considered by the Company board of directors to provide a fair and equitable basis for the Merger; and
 
  •  The current financial market conditions and historical stock market prices, volatility and trading information.
      In arriving at its determination that the Merger is in the best interest of the Company and its shareholders, the board of directors carefully considered the terms of the Agreement and Plan of Merger and the other transaction documents, as well as the potential impact of the merger on the Company. In authorizing the merger, the board of directors considered the factors set out above as well as the following factors:
  •  A stronger and more compelling portfolio of products created by the addition of ACP’s product line, including a broader range of allergen proof pillow and mattress encasings, HEPA filter air cleaners, HEPA filter vacuum cleaners, carpet treatments and respiratory products, as a result of the Merger;
 
  •  ACP’s expertise and experience in marketing to the medical professional;
 
  •  ACP’s access to distribution channels not previously utilized effectively by the Company; and

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  •  Operational synergies expected to reduce the combined operating expenses. Although the Company’s principal executive office will remain in San Diego, California, the Company plans to consolidate operations of the Company and ACP into ACP’s operations in Ridgefield, Connecticut, under the direction of Edward J. Steube as President of the ACP subsidiary.
      The Company board of directors also considered the following potentially negative factors:
  •  the risk that the potential benefits sought in the Merger might not be fully realized;
 
  •  the dilution to the Company’s existing shareholders;
 
  •  the potential negative effect on the Company’s stock price associated with public announcement of the proposed Merger;
 
  •  the potential negative effect on the Company’s stock price if revenue, earnings and cash flow expectations of the Company following the Merger are not met;
 
  •  the potential dilutive effect on the Company’s common stock price if revenue and earnings expectations for ACP’s business operations are not met;
 
  •  the ability to successfully manage the combined operations of the Company and ACP; and
 
  •  the other risks and uncertainties discussed under “Risk Factors.”
      In view of the variety of factors considered in connection with its evaluation of the Merger, the Company board of directors did not find it practical to, and did not quantify or otherwise attempt to, assign relative weight to the specific factors considered in reaching its conclusions. Additionally, the Company board of directors did not undertake to make any specific determination as to whether any particular factor, or any aspect of any particular factor, was favorable or unfavorable to its ultimate determination, but rather conducted an overall analysis of the factors described above. In considering the factors described above, individual members of the board of directors may have given different weight to different factors. After taking into account all of the factors set forth above, the members of the Company board of directors concluded that the Agreement and Plan of Merger and the related Merger were advisable and in the best interests of the Company and its shareholders and that the Company should proceed with the Merger.
Accounting Treatment of the Merger
      The transaction will be accounted for as a purchase with Planet as the accounting acquirer. At the consummation of the transaction, the purchase price will be allocated to the fair value of the assets acquired with the excess attributed to goodwill. There are no other identifiable intangible assets involved with the transaction. At this stage of the transaction, given the current nature of the assets of ACP, (i.e. accounts receivable and inventory) the book value has been assumed to equal the fair market value and the excess of the purchase price over that value has been assumed to be goodwill.
Background and Negotiations Related to the Merger
      In January and February 2004, Allergy Free, LLC (“Allergy Free,” now “Planet”) began an analysis of its competitors within the allergy avoidance industry. Allergy Free’s business purpose in analyzing its competitors and the industry as a whole, was to determine whether there existed a potential strategic combination with another company within the industry to better optimize Allergy Free’s business plan moving forward.
      This analysis included looking at companies that sold through high volume retailers such as WalMart or Home Depot, marketers who sold to retailers through television infomercials and companies focused on higher quality products selling through the medical professional.
      After performing the aforementioned industry analysis, the Company came to the conclusion that their product line did not meld with higher volume/lower quality goods. The Company had made its reputation by marketing the highest quality products in the market and an arrangement with a less efficacious product might

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harm the Company’s position in the market. The Company then focused on three companies in the segment of which one was ACP. One of the three was dismissed since its products were promoted over the internet and would not broaden the distribution of product line. The final two companies had product lines that were complementary to those of the Company and they sold the highest quality products available through physicians. The Company identified ACP as the strongest candidate company for a potential strategic combination and the other acquisition candidate was going through recapitalization. Earlier in 2004 Shauna Salzetti of the Company contacted Sanford Miller, Vice President of ACP, to discuss the potential for cross promotion of products between the two companies. Shortly thereafter, Scott L. Glenn, the then Manager of Allergy Free contacted Edward Steube the President of ACP to introduce the idea of a potential strategic alliance between their respective companies.
      In the middle of 2004, Mr. Glenn met with Mr. Steube at ACP’s headquarters in Ridgefield, Connecticut, to tour the ACP facilities in order to gain a greater understanding of the ACP business structure and culture and to further discussions regarding a potential strategic alliance between the companies. Key areas such as the potential to cross merchandize each others products and utilize Planet’s telemarketing services for ACP’s existing customer base were all upsides identified.
      From the initial meetings through December 2004, the Company performed various financial analyses to determine the viability of a strategic alliance with ACP and when deemed viable, the most beneficial form for the alliance. As part of this analysis the parties shared their operating components and outlined a plan for consolidation of operations into ACP’s Ridgefield, CT facility.
      In January 2005, Scott L. Glenn, in the capacity of President of Planet, began discussing the terms of an alliance with Jonathan Dawson, the sole-shareholder of ACP and an employment agreement with Edward Steube as President of ACP. Thereafter, counsel for Planet and counsel for ACP began active discussions regarding preliminary terms and conditions of the Agreement and Plan of Merger.
      In February 2005, an initial draft of the Agreement and Plan of Merger was begun.
      On January 25, 2005, at a regularly scheduled Planet Board of Directors meeting, which included all directors except Mr. Trinkle who was unable to attend due to medical reasons, Mr. Glenn reviewed the possible acquisition of ACP. During a lengthy discussion, the Board reviewed the synergies of the operations including the consolidation into the ACP facility, the complementary distribution avenues with ACP marketing to physicians while Allergy Free markets to consumers and the strengthening of the Company’s overall operations with sales in the $8-9 million range, which could lead to increased shareholder value and a stabilized share price. It was moved, seconded and approved that the Company move forward in its discussions with ACP, for stock and cash, contingent upon shareholder approval.
      On March 7, 2005, at a regularly scheduled Planet Board of Directors meeting, which included all directors except Mr. Trinkle who was unable to attend due to medical reasons, Mr. Glenn reviewed the final proposed merger agreement with ACP. The parties (ACP and Jonathan Dawson) had agreed on the general terms of $1,500,000 cash and 600,000 shares of the Company’s stock. After some discussion on the value of the stock component and the ability of the company to raise the funds required for the merger, it was noted that the stock price has varied from $.60 to $4.00 per share and that this transaction was acceptable within this range. Regarding the ability to raise the funds, the Board recognized this as a risk and agreed to continue the existing private placement on the same terms of $2.50 per share for amount up to an additional $3 million dollars to cover the cost of the acquisition, its associated costs and any upcoming deficits in working capital. The Board gave its unanimous approval for Mr. Glenn to sign the merger agreement with ACP. Subsequent to the Board meeting, the Agreement and Plan of Merger and related documents were executed and delivered. In a separate document the Board, through unanimous consent, approved the extension of the financing.
      On March 10, 2005, ACP and the Company issued a public announcement of the Merger.

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Federal or State Regulatory Approval Requirements.
      None required.
No Fairness Opinion
      The Company has not obtained the opinion of any financial advisor or other third party as to the fairness of the Merger to the shareholders of the Company from a financial point of view, or as to any other matters. The Company estimates the cost of a fairness opinion would be at least $50,000 and could take four to six weeks to obtain. The Board of Directors of the Company did not believe that obtaining such an opinion would be an appropriate use of corporate funds, considering the limited financial resources of the Company. Nevertheless, the Board of Directors of the Company believes that the Merger is in the best interests of the shareholders of the Company.
      Because of the absence of a fairness opinion, there will be no independent assurance from an expert that the consummation of the Acquisition is fair from a financial point of view to the shareholders of the Company.
Completion of the Merger
      The Company and ACP are working toward completing the Merger as quickly as possible. The Company and ACP intend to complete the Merger promptly after the shareholders of the Company approve the Merger at the annual shareholders meeting. The Company and ACP expect to complete the Merger in the second quarter of 2005.
      The obligations of the Company and ACP to complete the Merger are subject to the satisfaction or waiver of several closing conditions, including, in addition to other customary closing conditions, the following:
  •  The Company’s shareholders and ACP’s shareholder must have approved and adopted the Agreement and Plan of Merger and the related Merger.
 
  •  No injunction or other order shall have been issued to prohibit consummation of the Merger.
 
  •  The representations and warranties of the Company and ACP shall be true and correct as of the date of the Agreement and Plan of Merger and the Effective Time of the Merger.
 
  •  The Company and ACP shall have performed all obligations required to be performed under the Agreement and Plan of Merger.
 
  •  The Company shall have retained Edward Steube as President and Chief Executive Officer of ACP, as a subsidiary of the Company.
 
  •  The Company shall have caused to be paid to Jonathan T. Dawson cash in the amount of $1,500,000 in full repayment of all obligations of ACP to Mr. Dawson. These obligations represent cash loans made by Mr. Dawson to ACP. No debt will be outstanding to Mr. Dawson after issuance of the 600,000 shares and the $1,500,000 cash to Mr. Dawson.
Termination prior to completion of Merger
      The Agreement and Plan of Merger may be terminated before the Merger is completed:
  •  by mutual written consent;
 
  •  by either party, if the Acquisition has not been completed by September 30, 2005 through no fault of the terminating party;
 
  •  by the Company, if ACP has entered into discussions or has received a proposal regarding a merger, reorganization, share exchange, consolidation or similar transaction involving ACP, or any purchase of all or substantially all of the assets of ACP or more than 10% of the outstanding equity securities of ACP, and continue said discussions with any third party for more than 15 Business Days after receipt of the proposal or beginning discussions; and

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  •  by either party, if there has been a material breach by the other party of any representation, warranty, covenant or agreement in the Acquisition, and the breach has not been cured within 30 days after written notice (except that no cure period shall be required for a breach which cannot be amended within 30 days).
Termination Fees
      The Company or ACP may be required to pay a termination fee to the other party as follows:
  •  If ACP terminates the Agreement because:
  •  The Company has breached a representation or warranty of the Company as provided in the Agreement, the Company shall pay to ACP $150,000 as a termination fee; or
 
  •  ACP accepts an acquisition or other similar proposal from a third party, then ACP must pay to the Company $150,000 as a termination fee.
Dissenters’ Rights
      If the Merger is approved by the required vote of the Company’s shareholders and is not abandoned or terminated, holders of the Company’s common stock who did not vote in favor of the Merger and who notify the Company in writing of their intent to demand payment of their shares if the Merger is consummated, may, by complying with Sections 1300 through 1312 of the California Corporations Code, a copy of which is attached hereto as Exhibit “D,” be entitled to dissenters’ rights as described therein. The Company’s shareholders must notify the Company of their intent to dissent and submit to the Company at its principal office the shareholder’s certificates representing any shares which the shareholder demands that the Company purchase, to be stamped or endorsed with a statement that the share are dissenting shares, or if the shares are uncertificated securities, written notice of the number of shares which the shareholder demands that the Company purchase, within 30 days of the date that the notice of approval of the Merger is mailed to all the Company’s shareholders who did not vote in favor of the Merger.
      Under California law, a shareholder’s failure to vote against a proposal does not constitute a waiver of appraisal rights.
THE AGREEMENT AND PLAN OF MERGER
      The following is a brief summary of the some of the material terms of the Agreement and Plan of Merger. This summary is qualified in its entirety by reference to the text of the Agreement and Plan of Merger, which is attached as Exhibit “C” to this proxy statement. The exhibits to the Agreement and Plan of Merger are not attached hereto, but are available for review upon request.
Representations and Warranties
      ACP made representations, and warranties to the Company relating to:
  •  ACP is duly organized, validly existing and in good standing under the laws of the State of Delaware and all other states and foreign jurisdictions in which it conducts its business;
 
  •  There are 2,000 shares of ACP common stock currently outstanding;
 
  •  ACP has no subsidiaries;
 
  •  ACP has the corporate power to carry on its business as it is now being conducted and to own all of its assets and properties;
 
  •  ACP has the corporate authority to enter into the Agreement and Plan of Merger, enforceability of the Agreement and Plan of Merger, and the ACP board of directors has determined it is in the best interest of ACP and its shareholders to enter into the Agreement and Plan of Merger and recommend shareholder approval to complete the Merger;

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  •  There are no consents or approvals of, or waivers by, or filings or registrations with any governmental authority or with any third party required to be made or obtained by ACP in connection with the Agreement and Plan of Merger;
 
  •  ACP financial reports are in accordance with GAAP and there are no undisclosed liabilities;
 
  •  No litigation, claim or other proceeding before any court or governmental agency is pending against ACP;
 
  •  ACP is in substantial compliance with all applicable state, federal, local and foreign statutes, laws and regulations;
 
  •  ACP is not in default under any contract or other commitment;
 
  •  ACP is neither a party to nor bound by any collective bargaining agreement, or other agreement, with a labor union or labor organization;
 
  •  ACP has complied at all times with applicable environmental laws and regulations;
 
  •  ACP tax returns have been, or will be, filed in a timely manner;
 
  •  ACP books and records have been fully, properly and accurately maintained in all material respects;
 
  •  ACP is insured with reputable insurers against such risks and in such amounts as the management of ACP reasonably has determined to be prudent in accordance with industry practices;
 
  •  None of the premises or properties of ACP is subject to any current or potential interests of third parties or other restrictions that would impair or be inconsistent in any material respect with the current use of such property by ACP;
 
  •  Each of the leases in ACP’s name are valid and existing in full force and effect; and
 
  •  ACP has good title to its properties and assets.
      The Company made representations and warranties to ACP relating to, among other things:
  •  The Company is duly organized, validly existing and in good standing under the laws of the State of California and all other states and foreign jurisdictions in which it conducts its business;
 
  •  The Company has the corporate authority to enter into the Agreement and Plan of Merger, enforceability of the Agreement and Plan of Merger, and the Company Board of Directors has determined it is in the best interest of the Company and its shareholders to enter into the Agreement and Plan of Merger and recommend shareholder approval to complete the Merger;
 
  •  The Company common stock to be issued pursuant to the Merger, when issued in accordance with the terms of the Agreement and Plan of Merger, will be duly authorized, validly issued, fully paid and non-assessable and the issuance thereof is not subject to any preemptive right;
 
  •  Company has no subsidiaries;
 
  •  Company has the corporate power to carry on its business as it is now being conducted and to own all of its assets and properties;
 
  •  There are no consents or approvals of, or waivers by, or filings or registrations with any governmental authority or with any third party required to be made or obtained by the Company in connection with the Agreement and Plan of Merger;
 
  •  Company Financial reports and SEC documents have been, or will be, filed in a timely manner and comply in all material respects necessary to make the statements therein;
 
  •  Except as disclosed in previous SEC filings, no event has occurred reasonably likely to have a material adverse effect with respect to the Company;

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  •  No litigation, claim or other proceeding before any court or governmental agency is pending against the Company;
 
  •  The Company has complied at all times with applicable environmental laws and regulations; and
 
  •  The Company is insured with reputable insurers against such risks and in such amounts as the management of the Company reasonably has determined to be prudent in accordance with industry practices.
Registration Statement.
      The Company has agreed, no later than sixty (60) days after the effective date of the Merger, to file a registration statement on Form SB-2 or other applicable form with the SEC in connection with the issuance of Company common stock to Mr. Dawson in connection with the Merger.
Competition and Non-Disclosure
      The Agreement and Plan of Merger contains provisions prohibiting ACP and certain shareholders, officers and directors of ACP from engaging in business competitive with the business of ACP or the Company, disclosing information related to the business of ACP or the Company other than to the Company, soliciting ACP or Company customers or suppliers with respect to products presently used by ACP or the Company or to induce an employee to leave his or her employment with the Company. This agreement against competition and disclosure ends on December 31, 2007.
Additional Agreements
      None.
Employment Agreements
      The Company has agreed, following the Merger, to retain Edward J. Steube (who is currently the President of ACP) as the President/ CEO of the Company’s ACP subsidiary on the terms and conditions set forth in the Form of Employment Agreement attached as Exhibit “B” to the Agreement and Plan of Merger. Edward J. Steube would be paid an initial annual base salary of $200,000 and would be eligible for annual salary increases. Edward J. Steube would be eligible to earn a discretionary annual performance bonus at the discretion of the Company’s Board. In addition, Edward J. Steube would, subject to Board approval, be granted a stock option under the terms of the Company’s 2000 Stock Incentive Plan to purchase an amount of Company common stock equal to 3% of the then outstanding shares of Company common stock, but not less than 100,000 shares. ACP has verbally represented to the Company that concurrently with or immediately prior to the closing the employment of one officer of ACP will be terminated and the officer paid termination compensation of $500,000, which will be funded by a $500,000 contribution of capital to ACP by its sole shareholder.
MANAGEMENT’S DISCUSSION OF THE COMPANY
Description of the Company’s Business
General
      On November 30, 2004, the Company acquired the business of Allergy Free, LLC, and is now engaged in the business of designing, manufacturing, selling, and distributing common products for use by allergy sensitive persons, including, without limitation, air filters, bedding, room air cleaners, and related allergen avoidance products. Allergy Free acquired its business on or about November 3, 2000, when it acquired substantially all of the assets and business of Allergy Free, L.P., a Delaware limited partnership. The business strategy is primarily based upon the marketing and selling of a complete range of branded, allergen avoidance products to its database of customers who have purchased the Allergy-Free® Electrostatic Filter. Promotion is

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executed primarily through direct telemarketing, supplemented with direct mail, radio, and Internet advertising. In addition, we will continue to pursue co-marketing opportunities with appropriate partners in order to increase consumer awareness and expand our customer base. We will market our products under the Allergy Free® trade name. In conjunction with these activities, the Company operates an e-commerce website for the sale of Allergy-Free® products at www.800allergy.com.
      The allergy avoidance product industry provides products and information that help people suffering from allergies or asthma to reduce the level of exposure to allergens in their environment. Market categories include: air filtration products, mold and mildew products, and products to avoid exposure to dust mites and other allergens. Market distribution channels include: direct to consumer sales, physician directed sales, the Internet, and retail. Competitors include National Allergy Supply, Mission Allergy, Allergy Control Products, Allergy Buyers Club, 3M and Sharper Image.
      The Company’s business, products, and properties are more fully described in the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2004 attached hereto as Exhibit “B.”
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
      The Company’s Common Stock trades on the OTC.BB under the symbol “PLNT.OB.” The following table sets forth the high and low sales prices of the Company’s Common Stock for the period from January 1, 2003 through March 31, 2005 as furnished by the OTC.BB. These prices reflect prices between dealers without retail markups, markdowns or commissions, and may not necessarily represent actual transactions. These prices also reflect the reverse stock split effective December 6, 2004:
                   
    Trade Prices
     
    High   Low
         
Fiscal year ended December 31, 2003
               
 
First Quarter
  $ 4.00     $ 0.50  
 
Second Quarter
    5.00       2.50  
 
Third Quarter
    3.00       2.50  
 
Fourth Quarter
    3.50       1.50  
Fiscal year ended December 31, 2004
               
 
First Quarter
    12.50       1.75  
 
Second Quarter
    10.50       3.00  
 
Third Quarter
    3.50       2.50  
 
Fourth Quarter
    3.50       0.70  
2005
               
 
First Quarter
    3.00       0.70  
      On April 12, 2005, the last reported sale price of the Company’s Common Stock on the Over-the-Counter Bulletin Board was $1.25 per share. As of March 11, 2005, there were approximately 194 holders of record of the Company’s Common Stock with 2,180,368 shares outstanding. The market price of shares of Common Stock, like that of the common stock of many other emerging growth companies, has been and is likely to continue to be highly volatile.
      The Company has never declared or paid a cash dividend. The Company has not paid and does not intend to pay any Common Stock dividends to Common Stock shareholders in the foreseeable future and intends to retain any future earnings to fund the Company’s operations. Any payment of dividends in the future will depend upon the Company’s earnings, capital requirements, financial condition and such other factors as the Board of Directors may deem relevant.

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REVENUE RECOGNITION
      Planet offers its customers a 30-day money back guarantee and is currently experiencing a return rate of less than 1% on that guarantee. During 2004 and 2003, Planet’s return rate was slightly higher, but still considered immaterial. Planet analyzes its return provision periodically. In addition, the Company offers 3 to 10 year warranties for manufacturing defects on its permanent and flexible filter products. A provision for potential warranty claims is provided for at the time of sale, based upon warranty terms and the Company’s prior experience.
Recent Sales of Unregistered Securities
      During the period from January 1, 2005, through May 31, 2005, the Company entered into subscription agreements with investors for the sale of an aggregate of 212,000 shares of Company common stock at $2.50 a share. The net proceeds received by the company for the period January 1, 2005 through March 31, 2005, totaled $530,000. The Company relied upon an exemption from registration pursuant to Section 4(2) of, and Regulation D, promulgated under, the Securities Act. All of the aforementioned transactions occurred without any general solicitation or advertising, were offered only to a limited group of accredited investors and all of the investors are accredited investors as defined in Rule 501 of the Securities Act.
      On November 30, 2004, the Company issued 1,655,670 shares of common stock to AF Partners, LLC, and certain former members of AF Partners as consideration for the assets of Allergy Free, LLC, valued at $2.50 per share. The Company relied on Section 4(2) of and Regulation D, promulgated under, the Securities Act, as a basis of exemption from registration. All of the investors are accredited investors as defined in Rule 501 of the Securities Act with a close prior business or personal relationship with Mr. Glenn.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
      Please see the Company’s Form 10-KSB, which was filed with the SEC on March 31, 2005, and the Company’s Form 10-QSB, which was filed with the SEC on May 16, 2005, copies of which are attached hereto as Exhibit “B” and “B-1,” for the Company’s management’s discussion and analysis of financial condition and results of operation.
FINANCIAL STATEMENTS
      Please see the Company’s Form 10-KSB, which was filed with the SEC on March 31, 2005, and the Company’s Form 10-QSB, which was filed with the SEC on May 16, 2005, copies of which are attached hereto as Exhibit “B” and “B-1,” for our financial statements.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURES
      None
ACP’S BUSINESS
Description of ACP’s Business
General
      Allergy Control Products, Inc. (“ACP”) is a supplier of indoor allergen avoidance products. ACP’s core business strategy is to supply a complete range of high quality products to physician’s patients who are allergy sufferers, as well as to previous customers. Promotion is executed through (a) distribution of catalogs to physicians’ offices, for subsequent re-distribution to patients, (b) distribution of catalogs directly to previous customers and (c) selective e-commerce marketing initiatives. Customer transactions are primarily handled

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through ACP’s in-bound call center and its website. In addition to this core business strategy, ACP also sells selective products on a wholesale basis to domestic retailers as well as to international distributors.
      Products include ACP’s own Allergy Control® branded bedding products, which are effective barriers to the transmission of dust mite allergen and pet dander. ACP also markets other bedding products, carpet cleaning and laundry products, vacuums, air cleaners and air filters, sinus and breathing aids, respiratory products, dehumidifiers, mold prevention and house cleaning products, pet allergy products and certain allergy-related skin and hair care products.
      Market distribution channels (non-wholesale) for allergen avoidance products include: physician-directed sales, direct to consumer sales, the Internet and retail. In the physician-directed sales segment, ACP’s primary competitors are National Allergy Supply, Asthma and Allergies Technology, Allergy Solutions and Mission Allergy.
Seasonality of ACP’s Business, Competitive Conditions, Regulatory Environment.
      ACP’s domestic retail business, which in 2004 accounted for approximately eighty-one percent (81%) of total gross sales, is seasonal. For example, in 2004, the quarterly sales pattern, stated as a percent of total annual sales, was as follows: Q1=27.7%; Q2=22.5%; Q3=23.7%; Q4=26.1%. This quarterly pattern is typical of seasonality experienced in previous years.
      ACP is a leading factor in the physician-directed sales segment. Its competitors include National Allergy Supply, Asthma and Allergies Technology, Allergy Solutions and Mission Allergy. While certain competitors compete primarily on a discount pricing basis, ACP strives to compete on a quality and service basis. ACP’s catalog offers information and products, which are among the highest quality available. ACP also supplies and communicates with its physician office relationships at the highest level of service available.
      ACP is not subject to regulatory authorities governing the approval or sale of its products.
Products and Technologies
      ACP offers the following allergen barrier bedding products under its own Allergy Control® brand. All of these products are contract manufactured to ACP’s specifications for optimal quality and reliability.
  •  Encasings: ACP offers three encasing product lines, each with distinct levels of allergen barrier effectiveness, comfort, durability and price. It’s Pristine® Complete and Pristine® Relief encasings use micro-fiber fabrics. ACP’s Economy encasings use laminated fabrics.
 
  •  Blankets: ACP offers Snuggable® blankets, which are made from a top quality 300-weight Polartec® fleece, which has a high level of softness and warmth without extra weight. Allergy sufferers benefit from their use specifically because the blankets hold up exceptionally well through repeated hot water washing, which is the recommended process to eliminate allergens.
 
  •  Comforters: As with it’s Pristine® Complete encasings, ACP’s comforters are manufactured with the most advanced Pristine® encasing fabric. It delivers complete dust mite and pet allergen protection, is luxuriously soft and breathable like fine cotton linens and also includes an anti-microbial treatment. The comforters are available in both light and heavier weights.
 
  •  Pillows: ACP offers two Allergy Control®l Pristine® Deluxe pillow styles — a contour neck style and a gusseted style. As in the case of ACP’s branded comforters, allergy sufferers who use these branded pillows do not require encasings, since the product itself is manufactured with highly effective and comfortable allergen barrier fabric.

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      In addition to Allergy Control® branded bedding products, ACP offers a comprehensive list of other products for allergy sufferers. The following includes some of the important brand offerings per category in ACP’s current product mix:
  •  Bedding: Comforel® mattress cushions, Wamsutta® sheets and pillowcases.
 
  •  Carpets and Laundry: Allersearch®, Capture®, DustMite®, Bissell® and De-mite® branded products.
 
  •  Vacuums: A variety of Miele® vacuums, at differing price points.
 
  •  Air Cleaners: Austin Air®, Blueair®, Honeywell® and Whirlpool® brands.
 
  •  Air Filters: 3M®, Allergy Pro® and Allergy Zone® brands.
 
  •  Respiratory (Nebulizers and Compressors): Omron® and Pari® brands.
Product Registrations
      ACP does not directly manufacture any product requiring EPA or FDA registration.
Licensed Technology and Intellectual Property
      ACP does not directly license technology associated with its products. ACP does have an agreement with Precision Fabrics Group, Inc (PFG), whereby PFG exclusively provides to ACP its highest quality micro-woven fabric. This agreement was originated in 1998 and was amended in 2004, extending its term until December 31, 2008.
Research and Development
      ACP is not actively developing new products, although ACP has historically worked with various third parties to develop new bedding products and product line extensions.
Customers of ACP
      The primary customer for ACP’s products is the consumer who is an allergy sufferer. In addition, a limited number of domestic retailers purchase ACP’s products for resale to the public. A limited number of international distributors also purchase certain products for resale to various parties located within their respective countries and/or market territories.
      Physician offices are an important intermediary between ACP and the consumer. ACP receives customer orders from patients of more than 5,000 identified physicians. ACP has no distribution agreements with its referring physicians.
      ACP’s sales are primarily retail sales. In 2004, ACP’s delivery channels accounted for the following percentage of total sales: Domestic Retail = 81%; International Wholesale = 10%; Domestic Wholesale = 9%.
      ACP has no customer generating 10% or more of its revenues. ACP has no physicians generating a materially significant portion of its customers.
Suppliers of ACP
      In addition to the already indicated branded product suppliers, ACP purchases raw materials for use in manufactured bedding products from two sources:
  •  Precision Fabrics Group (micro-woven allergen barrier fabric)
 
  •  Shawmut Mills (laminated allergen barrier fabric)
      ACP has no written supply agreements with Shawmut Mills. ACP has no written supply agreements with Precision Fabrics Group, with the exception of its exclusivity agreement on the fabric referred to as Pristine

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100. ACP’s exclusive use of this fabric is contingent upon ACP purchasing a minimum average monthly yardage of the fabric. ACP has exceeded this minimum over the 12-month period ending March 31, 2005.
      Critical materials generally are obtainable from alternative vendors. The primary material used is fabric. Alternative fabrics are available from vendors other than either Shawmut Mills or Precision Fabrics. None of the key raw materials used by ACP are inherently scarce.
      ACP does not engage in manufacturing activity. Raw materials for bedding products are purchased, delivered to contract manufacturers, who in turn generate finished products according to ACP’s specifications.
Sales and Marketing
      ACP employs staff to manage and perform marketing, sales and customer service functions. Currently, ACP actively markets through its physician and customer catalogs, as well as on the Internet.
Employees of ACP
      As of March 31, 2005, ACP employed 10 full-time and 23 part-time employees.
      As of March 31, 2005, ACP’s employee head count, including both part-time and full-time, consists of the following, broken down by functional categories:
         
Physician Sales/ Service
    3  
Executive/ Administrative
    5  
Shipping/ Receiving/ Warehouse
    5  
Call Center/ Customer Service
    12  
Wholesale (Int’l and Domestic)
    2  
Operations/ IT
    3  
Marketing
    1  
Purchasing
    2  
TOTAL
    33  
Properties
      The executive offices and warehouse of ACP are located in approximately 13,317 square feet of leased space at 96 Danbury Road, Ridgefield, CT 06877, subject to a lease, which terminates September 30, 2007.
Legal Proceedings
None
ACP’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
      ACP’s management’s discussion and analysis of financial condition and results of operations contain forward-looking statements, which involve risks and uncertainties. ACP’s actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth in the section entitled “Risk Factors” of this proxy statement.
Overview
      The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and related notes. ACP evaluates its estimates and assumptions on an on-going basis. These estimates are based on historical experience and on assumptions that ACP believes to be reasonable under the circumstances. ACP’s experience and assumptions form the basis for its judgments about the carrying value of its assets and liabilities that are not readily apparent from other sources.

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Actual results may vary from what ACP anticipates and different assumptions or estimates about the future could change ACP’s reported results. ACP believes the following accounting policies are most critical to it, in that they are important to the portrayal of it’s financial statements and they require ACP’s most difficult, subjective or complex judgments in the preparation of its financial statements.
Revenue Recognition
      ACP recognizes revenue when its products are shipped.
      Returns are recognized upon receipt of the products. A provision for warranty costs has not been accrued because, in the opinion of management, warranty costs are not subject to reasonable estimation. Management believes the effects of the foregoing are not material to the financial statements taken as a whole.
      ACP accepts return of products sold if they are returned in salable condition within 30 days, and if defective for the warrantee period of between 90 days and lifetime. Approximately 81% of ACP’s sales are domestic retail sales.
      ACP historically has accounted for returns upon receipt of products. For the year ended December 31, 2004 and 2003, the total cost of product returns from sales in prior years equaled approximately $24,000 and $28,000 respectively. These amounts include both warrantee claims and return of salable items for credit, but these amounts are not segregated. Accrual of potential returns for credit and warrantee claims was judged immaterial.
      Net sales are shown after adjustments for returns and credit card commissions. For the year ended December 31, 2004 and 2003, adjustments for returns totaled approximately $255,000 and $238,000 respectively. Adjustments for credit card commissions totaled approximately $168,000 and $165,000 respectively.
Impairment of Long-Lived Assets
      In assessing the recoverability of its long-lived assets, ACP must make assumptions regarding estimated future cash flows and other factors to determine the fair value of the respective assets. If these estimates or their related assumptions change in the future, ACP may be required to record impairment charges for these assets.
Statement of Operations Data
      The following tables set forth certain items in ACP’s Statements of Operations for the periods indicated.
Years Ended December 31, 2004 and 2003
                                 
    2004   2003   Change   %
                 
Sales
  $ 7,714,653     $ 8,266,863     $ (552,210 )     (6.7 )%
Cost of Sales
  $ 4,581,795     $ 5,232,904     $ (651,109 )     (12.4 )%
Gross Profit
  $ 3,132,858     $ 3,033,959     $ 98,899       3.3 %
Operating Expenses
  $ 3,439,875     $ 3,772,358     $ (332,483 )     (8.8 )%
Loss from Operations
  $ (307,017 )   $ (738,399 )   $ (431,382 )     (58.4 )%
Other Income (Expense)
  $ (10,916 )   $ (25,742 )   $ (14,826 )     (57.6 )%
Net Loss
  $ (317,933 )   $ (764,141 )   $ (446,208 )     (58.4 )%
      Net Sales decreased 6.7% from $8,266,863 for the twelve months ended December 31, 2003, to $7,714,653 for the twelve months ended December 31, 2004. This was primarily due to a decline in sales to international distributors, which was caused by several factors. First, the European economies were relatively weak, particularly in Germany which is the market served by ACP’s largest international distributor. Second, competition and insurance reimbursement systems generally continued to put pressure on pricing for allergen

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barrier bedding products. And third, newly introduced consumer product testing programs in Germany temporarily put ACP’s products at a competitive disadvantage.
      Gross Profit increased 3.3% from $3,033,959 for the twelve months ended December 31, 2003, to $3,132,858 for the twelve months ended December 31, 2004. The net impact of price increases and order discounts implemented during the year contributed to gross margin improvement on catalog and web site customer purchases. Primary raw material cost reductions lowered the cost of goods sold on manufactured bedding products. And overall margins benefited from the fact that lower margin international sales accounted for a smaller percentage of total sales.
      Selling and General and Administrative Expenses decreased 8.8% from $3,772,358 for the twelve months ended December 31, 2003 to $3,439,875 for the twelve months ended December 31, 2004. Selling Expense declined $132,786, or 12.2%. In 2003, ACP implemented an aggressive new physician marketing program, which included substantial catalog re-design expense, as well as increased catalog distribution to prospective referring physicians. In 2004, the company re-focused physician marketing on referring physicians, resulting in reduced catalog distribution expense. General and Administrative Expense declined $199,697, or 7.4%. Of note was lower expense associated with computer leasing, due to completion of the original lease period on the company’s integrated operating system installed in 2001.
RESULT OF OPERATIONS FOR FIRST QUARTER, 2005
      The net loss for the three months ended March 31, 2005, was $82,961 compared to a net loss of $57,565 for the three-month period ending March 31, 2004.
      The Company’s net sales decreased by $78,146, from $2,236,101 for the three months ended March 31, 2004, to $2,157,955 for the same period in 2005. This decrease was due to a decline in domestic wholesale sales. A major contributing factor to the decline in domestic wholesale sales was the completion in 2004 of a non-recurring, co-promotional contract with a major pharmaceutical company.
      Cost of sales decreased to $1,296,463 for the three months ended March 31, 2005, from $1,392,202 for the same period in 2004, despite the decline in sales. Overall gross margin, as a percentage of net sales, increased positively period over period, from 37.7% for the three months ended March 31, 2004 to 39.9% for the three months ended March 31, 2005. This positive increase in gross margin is primarily due to increased product prices, which were introduced beginning in late 2004, as well as to selective raw material cost reductions on manufactured bedding products.
      Total operating expenses increased by $47,625 to $944,915 for the three months ended March 31, 2005, from $897,290 for the three months ended March 31, 2004. This increase was primarily due to audit-related accounting expense which was incurred in the three-month period ending March 31, 2005, but was not incurred during the same period in 2004.
      Other income (expense) was immaterial in both periods. There was other income of $462 for the three months ended March 31, 2005 compared to other expense of $4,174 for the three months ended March 31, 2004.
Off Balance Sheet Arrangements
      None.
Liquidity and Capital Resources
      Cash totaled $78,107 at December 31, 2004, compared to $165,714 at December 31, 2003. Net cash used by operating activities was $25,966 during 2004. During the fourth quarter of 2004, ACP made a payment of short-term borrowings totaling $250,000. Of this amount, $50,000 was provided out of ACP’s working capital and $200,000 was provided out of proceeds of borrowings from the stockholder.

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      Inventories at December 31, 2004 decreased by a net amount of $104,712 or 14.5% to $616,471 compared to $721,183 at December 31, 2003. The net inventory decrease reflects management’s adjustment of ordering levels to increase inventory turn rates during the year.
      As indicated in the financial statements of ACP included as Exhibit A to this proxy, ACP has incurred losses of $317,933 and $764,141 during the years ended December 31, 2004 and 2003, respectively, resulting in an accumulated deficit of $9,473,103 and stockholders’ deficit of $4,848,103 at December 31, 2004. In addition, at December 31, 2004, current liabilities exceeded current assets by $4,997,500.
      Cash and cash equivalents totaled $79,753 at March 31, 2005. The Company used $384,881 for its operations during the quarter. Reflecting all operating, investing and financing activities, net cash increased by $1,646 during the quarter.
      Both inventory levels and accounts payable increased modestly during the quarter. These increases partially reflect somewhat higher than normal fabric purchases, due to the availability of price discounts.
      These factors, among others, raise substantial doubt as to the Company’s ability to continue as a going concern. Management has determined that additional outside financing or a merger with a synergistic partner would be beneficial in alleviating this going concern problem. However, it cannot assure that sufficient financing on acceptable terms will be available. With the merger of ACP and Planet, the combined Company will strive to grow its operations, combine those operations into ACP’s Ridgefield, Connecticut facility and develop new markets for Planet’s and ACP’s products. In addition, the combined Company may also seek additional outside financing. These combined efforts are intended to create a profitable Company with increased liquidity and capital resources to grow the business and remain a going concern. If the Company cannot successfully integrate the two businesses and obtain sufficient financing, the Company may not realize the expected benefits of the merger and eliminate going concern issue for the Company.
Recent Accounting Pronouncements
      In November 2004, the FASB issued SFAS No. 151, “Inventory Costs, an amendment of ARB No. 43, Chapter 4” (“SFAS 151”). SFAS 151 clarifies that abnormal inventory costs such as costs of idle facilities, excess freight and handling costs, and wasted materials (spoilage) are required to be recognized as current period charges. The provisions of SFAS 151 are effective for fiscal years beginning after June 15, 2005. The adoption of SFAS 151 is not expected to have a significant impact on the Company’s financial position or results of operations.
CONTROLS AND PROCEDURES
ACP’s management, with the participation of ACP’s Chief Executive Officer, has evaluated the effectiveness of the ACP’s disclosure controls and procedures as of March 31, 2005. Based on this evaluation, ACP’s Chief Executive Officer concluded that the ACP’s disclosure controls and procedures are effective for gathering, analyzing and disclosing the information ACP is providing in this report.
During the three months ended March 31, 2005, there were no significant changes in ACP’s internal control over financial reporting that materially affected, or are reasonably likely to materially affect, ACP’s internal control over financial reporting.
THE COMPANY’S UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL INFORMATION
      On March 10, 2005, Planet Technologies, Inc. (“Planet”) and Allergy Control Products, Inc. (“ACP”) announced that on March 7, 2005, they had entered into an Agreement and Plan of Merger (“Agreement”) in which ACP will merge with and become a subsidiary of Planet and for which Planet will issue and deliver to the sole-stockholder of ACP approximately 600,000 shares of Planet common stock (or 300 shares of Planet common stock for each one share of ACP common stock outstanding). As a result, after the closing of the Agreement, the sole-shareholder of ACP will own approximately 21% of the voting shares of Planet. As a

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condition to and simultaneously with the effective time of the Merger, Planet shall cause to be paid to Jonathan T. Dawson the sum of $1,500,000 cash in full payment of all indebtedness of ACP to Mr. Dawson, its sole-shareholder. Immediately prior to the merger, Mr. Dawson has advised the Company that he plans to make a $500,000 capital contribution to ACP, which funds will be used to pay termination compensation to an officer of ACP whose employment will be terminated on or prior to the effective time of the merger. The Company will seek additional funding through the private placement of Planet shares in order to satisfy the $1,500,000 payable to Mr. Dawson. Mr. Glenn has advised the Company that should there be a shortfall between the amount raised in the private placement from third parties and the monies due Mr. Dawson, he, or an affiliate of Mr. Glenn, will acquire additional shares of Planet through the private placement sufficient to complete the transaction.
      The Unaudited Pro Forma Condensed Combined Balance Sheet combines the historical balance sheet of ACP and the historical balance sheet of Planet, giving effect to the Merger as if it had been consummated on March 31, 2005. The Unaudited Pro Forma Condensed Combined Statements of Operations for the three months ended March 31, 2005 and year ended December 31, 2004 combine the historical statements of operations of Planet and ACP giving effect to the Merger as if it had been consummated on January 1, 2004.
      You should read this information in conjunction with:
  •  accompanying notes to the Unaudited Pro Forma Condensed Combined Financial Statements;
 
  •  separate historical financial statements of ACP as of and for the years ended December 31, 2004 and 2003, included as an Exhibit to this document;
 
  •  separate historical financial statements of Planet as of and for the years ended December 31, 2004 and 2003, included as an Exhibit to this document;
 
  •  separate historical condensed financial statements of ACP as of and for the three months ended March 31, 2005, included as an Exhibit to this document; and
 
  •  separate historical condensed financial statements of Planet as of and for the three months ended March 31, 2005, included as an Exhibit to this document.
      The pro forma adjustments described in the Notes to Unaudited Pro Forma Condensed Combined Financial Information are based on certain assumptions and other information that are subject to change as additional information becomes available. Accordingly, the actual adjustments included in our historical financial statements issued after the completion of the merger could vary from the adjustments included in this Unaudited Pro Forma Condensed Combined Financial Information.
      We present the Unaudited Pro Forma Condensed Combined Financial Information for informational purposes only. The pro forma information is not necessarily indicative of what our financial position or results of operations actually would have been had we completed the Merger on March 31, 2005 or January 1, 2004. In addition, the Unaudited Pro Forma Condensed Combined Financial Information does not purport to project future financial position or operating results of the combined company.

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PLANET TECHNOLOGIES, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
March 31, 2005
                                     
    Planet   Allergy        
    Technologies,   Control   Pro Forma   Pro Forma
    Inc.   Products, Inc.   Adjustments   Consolidated
                 
ASSETS
Current assets:
                               
 
Cash and cash equivalents
  $ 128,806     $ 79,753     $ 1,500,000  b   $ 208,559  
                      (1,500,000 )c        
 
Accounts receivable, less allowance for doubtful accounts of $5,500
    5,514       209,144               214,658  
 
Inventories
    19,798       712,053               731,851  
 
Other current assets
    34,822       139,761               174,583  
                         
   
Total current assets
    188,940       1,140,711             1,329,651  
Property, equipment and leasehold improvements, net
    85,129       157,741               242,870  
Goodwill
                    2,487,191  d     2,487,191  
                         
   
Totals
  $ 274,069     $ 1,298,452     $ 2,487,191     $ 4,059,712  
                         
 
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIENCY)
Current liabilities:
                               
 
Current portion of convertible notes payable to shareholder
  $ 136,332     $ 4,850,000     $ (4,850,000 )c   $ 136,332  
 
Advance from related party
    85,000                       85,000  
 
Accounts payable
    71,898       826,363       100,000  d     998,261  
 
Accounts payable, related party
                             
 
Accrued expenses
    361,024       134,384               495,408  
 
Current portion of long-term debt
          3,826               3,826  
 
Current portion of obligations under capital lease
          3,761               3,761  
 
Interest payable
    1,749                       1,749  
                         
   
Total current liabilities
    656,003       5,818,334       (4,750,000 )     1,724,337  
 
Convertible notes payable to shareholder, net of current portion
    83,495                       83,495  
 
Long-term debt, net of current portion
            14,388               14,388  
 
Obligations under capital lease, net of current portion
            2,921               2,921  
                         
   
Total liabilities
    739,498       5,835,643       (4,750,000 )     1,825,141  
                         
Shareholders’ equity (deficiency):
                               
 
Preferred stock
                         
 
Series A convertible preferred stock
                         
 
Common stock
    3,478,296       4,000,000       1,500,000  b     6,178,296  
                      (4,000,000 )d        
                      1,200,000  d        
 
Contributed capital
            1,018,873       500,000  a        
                      3,350,000  c        
                      (4,868,873 )d        
 
Accumulated deficit
    (3,943,725 )     (9,556,064 )     (500,000 )a     (3,943,725 )
                      10,056,064  d        
                         
 
Total shareholders’ equity (deficiency)
    (465,429 )     (4,537,191 )     7,237,191       2,234,571  
                         
   
Totals
  $ 274,069     $ 1,298,452     $ 2,487,191     $ 4,059,712  
                         
See accompanying notes to unaudited pro forma condensed combined financial statements.

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PLANET TECHNOLOGIES, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
Three Months Ended March 31, 2005
                                     
    Planet   Allergy        
    Technologies,   Control   Pro Forma   Pro Forma
    Inc.   Products, Inc.   Adjustments   Consolidated
                 
Net sales
  $ 221,526     $ 2,157,955     $     $ 2,379,481  
Cost of sales
    75,505       1,296,463             1,371,968  
                         
Gross profit
    146,021       861,492             1,007,513  
                         
Operating expenses:
                               
 
Selling
    161,194       251,416             412,610  
 
General and administrative
    218,985       693,499             912,484  
                         
   
Total operating expenses
    380,179       944,915             1,325,094  
                         
Loss from operations
    (234,158 )     (83,423 )           (317,581 )
Other income (expenses), net
    (6,871 )     462             (6,409 )
                         
Net loss
  $ (241,029 )   $ (82,961 )   $     $ (323,990 )
                         
Net loss per share, basic and diluted
  $ (0.11 )                   $ (0.11 )
                         
Weighted averages shares outstanding — basic and diluted
    2,159,961                       2,819,961  
                         
See accompanying notes to unaudited pro forma condensed combined financial statements.

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PLANET TECHNOLOGIES, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
Twelve Months Ended December 31, 2004
                                     
    Planet   Allergy        
    Technologies,   Control   Pro Forma   Pro Forma
    Inc.   Products, Inc.   Adjustments   Consolidated
                 
Net sales
  $ 1,180,382     $ 7,714,653     $     $ 8,895,035  
Cost of sales
    407,811       4,581,795             4,989,606  
                         
Gross profit
    772,571       3,132,858             3,905,429  
                         
Operating expenses:
                             
 
Selling
    597,575       947,792             1,545,367  
 
General and administrative
    689,109       2,492,083             3,181,192  
                         
   
Total operating expenses
    1,286,684       3,439,875             4,726,559  
                         
Loss from operations
    (514,113 )     (307,017 )           (821,130 )
Other expenses, net
    (259,445 )     (10,916 )           (270,361 )
                         
Net loss
  $ (773,558 )   $ (317,933 )   $     $ (1,091,491 )
                         
Net loss per share, basic and diluted
  $ (0.46 )                   $ (0.48 )
                         
Weighted averages shares outstanding — basic and diluted
    1,686,559                       2,286,559  
                         
See accompanying notes to unaudited pro forma condensed combined financial statements.

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NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
(1)  DESCRIPTION OF TRANSACTION AND BASIS OF PRESENTATION
      On March 7, 2005, Planet Technologies, Inc. (“Planet”) and Allergy Control Products, Inc. (“ACP”) entered into an Agreement and Plan of Merger (“Agreement”) in which ACP will merge with and become a subsidiary of Planet and for which Planet will issue and deliver to the sole-shareholder of ACP approximately 600,000 shares of Planet common stock (or 300 shares of Planet common stock for each one share of ACP common stock outstanding). As a result, after the closing of the Agreement, the sole-shareholder of ACP will own approximately 21% of the voting shares of Planet. As a condition to and simultaneously with, the effective time of the Merger, Planet shall cause to be paid to Jonathan T. Dawson the sum of $1,500,000 cash in full payment of all indebtedness of ACP to Mr. Dawson its sole-shareholder.
(2)  PRO FORMA ADJUSTMENTS
      a. To record the ACP’s sole-stockholder cash contribution of $500,000 to capital prior to closing for termination benefits for one of the officers of ACP.
      b. To record proceeds from the private placement of 600,000 shares of Planet’s common stock at $2.50 per share.
      c. To record the cash payment of $1,500,000 for the complete settlement of all indebtedness to ACP’s sole-shareholder.
      d. To eliminate ACP’s (the acquired company) historical shareholders’ equity (deficiency) accounts and to record the issuance of 600,000 shares of Planet common stock for the remaining net assets of ACP. The aggregate cost of the transaction is $2,800,000 comprised of a cash payment of $1,500,000, issuance of stock valued at $1,200,000, and estimated costs of completing the transaction are estimated to total approximately $100,000. The assets and liabilities of ACP had carrying values equal to fair value. The amount of assets acquired net of liabilities assumed totaled $312,809. The aggregate cost of the transaction in excess of the fair value of the net assets acquired is $2,487,191 which will be recorded as goodwill. In estimating the fair value of the assets acquired of ACP, management determined there were no other intangible assets to be recorded as part of the acquisition other than goodwill.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THE ACP MERGER. UNLESS MARKED TO THE CONTRARY, PROXIES RECEIVED FROM SHAREHOLDERS WILL BE VOTED IN FAVOR OF PROPOSAL 1.
PROPOSAL 2
ELECTION OF DIRECTORS
      There are five (5) nominees for the five Board positions presently authorized by the Company’s current Bylaws. Each director to be elected will hold office until the next Annual Meeting of Shareholders and until his/her successor is elected and has qualified, or until such director’s earlier death, resignation or removal.
      Shares represented by executed proxies will be voted, if authority to do so is not withheld, for the election of the nominees named below, subject to the discretionary power to cumulate votes. In the event that any nominee should be unavailable for election as a result of an unexpected occurrence, such shares will be voted for the election of such substitute nominee as management may propose. Each person nominated for election has agreed to serve if elected and management has no reason to believe that any nominee will be unable to serve.
      In any election of directors, the candidates receiving the highest number of affirmative votes cast at the meeting will be elected directors of the Company up to the authorized number of positions on the Board.

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Nominees
      The names of the nominees and certain information about each person is set forth below:
             
Name   Age   Principal Occupation
         
Scott L. Glenn
    55     Chairman of the Board of Directors, President and Chief Executive Officer and Business Executive
Eric B. Freedus
    55     Director, Attorney
H.M. Busby
    66     Director, Private Investor
Michael Trinkle
    51     Business Executive
Ellen M. Preston
    49     Business Consultant
      All of the nominees are currently Directors of the Company. Directors of the Company are elected annually and there are no agreements with respect to nominating or electing any director in the future.
      Scott L. Glenn was elected to the Board and appointed Chairman, President and Chief Executive Officer of Planet in November 2004. Since October 2000 he, or an affiliated entity controlled by him, has been the Manager and a member of Allergy Free, LLC. Mr. Glenn is also the Managing Partner of Windamere Venture Partners and its investment funds (Windamere I, LLC, Windamere II, LLC, and Windamere III, LLC), and has been since 1996. He also currently serves as a director and founder of GlobalEdge, Inc. (a medical education company), Kanisa Pharmaceuticals (an oncology drug development company), Cadence Pharmaceuticals (drug development company for hospital based drugs), Veras Pharmaceuticals (pediatric drug development company), Somaxon Pharmaceuticals (psychiatric drug development company), and Conception Technologies through SR Technology Associates (management company for Windamere Funds that holds a forty percent (40%) interest in Conception Technologies). Previously, from 1988 until 1995, Mr. Glenn served as President/ CEO, and then Chairman of Quidel Corporation, a leading point of care diagnostic business. Before serving in those capacities from 1983 through 1988, Mr. Glenn was vice president of development/operations of Quidel. From 1984 to 1992, Mr. Glenn served in numerous management positions, including Division/ General Manager at Allergan Pharmaceuticals, Inc. Mr. Glenn has a Bachelor of Science degree in Finance and Accounting from California State University at Fullerton.
      Eric B. Freedus was elected to the Board in January 2005. Mr. Freedus has been an attorney in private practice since 1974 and is currently the president of the law firm of Frank and Freedus, APC. Mr. Freedus currently focuses his law practice in the area of special education litigation. Mr. Freedus received his undergraduate degree from the State University of New York at Buffalo in 1971 and his law degree from the University of Toledo in 1974.
      H. M. “Mac” Busby has been a director of the Company since August 1997 when he was elected by the members of the Board of Directors to fill a vacancy on the Board. Mr. Busby was President and Chief Executive Officer and Chief Financial Officer of the Company from February 2003 until November 2004. In May 2003, Mr. Busby was appointed Secretary of the Company. Mr. Busby began his career in 1966 at Wisconsin Centrifugal, Inc. which included the position of Manager of Industrial and Public Relations. Mr. Busby has also served as Vice President of Human Relations and Administration for MCA Financial, Inc., a subsidiary of MCA, Inc. Mr. Busby was Chairman of Sun Protective International and Sun-Gard USA. Mr. Busby earned his B.S. in Business Administration from Indiana University.
      Michael A. Trinkle currently serves as President of Conception Technologies, LP, a medical device company focused on reproductive medicine, and has held the position since 1993. Mr. Trinkle was also a member of Allergy Free, LLC, and served as its President from August 2001 to March 31, 2004. During the 15 years prior to joining Conception Technologies, LP, Mr. Trinkle was employed by Allergan Pharmaceuticals where he held management positions in the areas of operations, sales, marketing, and quality assurance. Mr. Trinkle was elected to the Board in November 2004.
      Ellen M. Preston was a member of Allergy Free, LLC, since October 2000. In addition to being a member of Allergy Free, LLC, since 1998, Ms. Preston has been a business consultant advising medical

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device companies in the areas of strategic market assessment, business development, brand development and strategy, and communications. From 2000 until 2002, Ms. Preston was a venture partner with Windamere Venture Partners. While with Windamere Venture Partners, Ms. Preston was a founder of Dexcom, Inc., a corporation engaged in the development of an implantable glucose sensor, and founded Miramedica, Inc. a company specializing in computer-aided detection. Ms. Preston served as interim president of Miramedica, Inc., which was sold to Kodak in 2003. From 1997-1998, Ms. Preston was Vice President of Sales and Marketing for Amira Medical, Inc. She held a similar position with Biopsys Medical, Inc. from 1996-1997. Ms. Preston was elected to the Board in November 2004.
Board Committees and Meetings
      During 2004, the Board of Directors held five (5) meetings. The Board of Directors has an Audit Committee and a Compensation Committee. In addition, in 2004 the Company’s entire current Board acted as the Nominating Committee and nominated Scott Glenn, Michael Trinkle and Ellen Preston to serve as directors with Robert Petcavich and H. Mac Busby in compliance with the Agreement and Plan of Merger dated March 18, 2004, and entered into by and between the Company and Allergy Free, LLC. On January 18, 2005, Robert Petcavich tendered his resignation as a director. On that same date, at a meeting of the Board of Directors, Mr. Eric B. Freedus was elected as a director of the Company.
      On November 17, 2004, Michael Trinkle and H. Mac Busby were approved as Audit Committee members. The Audit Committee is responsible for the engagement of the Company’s independent registered public accounting firm, consulting with that firm concerning the audit plan and reviewing the comments and recommendations resulting from their audit. The current Audit Committee Charter was adopted on January 25, 2005.
      The Audit Committee has reviewed and discussed the audited financial statements with management and it has discussed with the independent registered public accounting firm the matters required to be discussed by SAS 61. Furthermore, the Audit Committee has received the written disclosures and the letter from the independent registered public accounting firm required by Independence Standards Board Standard No. 1 and has discussed with the independent registered public accounting firm their independence and based on the review of the financial statements and discussions with management and the independent registered public accounting firm, it recommended to the Board of Directors that the audited financial statements be included in the annual report on Form 10-KSB filed with the SEC on March 31, 2005.
      On November 17, 2004, Ellen Preston and Robert Petcavich were approved as Compensation Committee members. Upon the resignation of Robert Petcavich and the election of Eric Freedus as a director, Mr. Freedus was named to replace Dr. Petcavich as a member of the Compensation Committee. The Compensation Committee is responsible for reviewing the compensation and benefits of the Company’s executive officers, making recommendations to the Board of Directors concerning the compensation and benefits of the Company’s executive officers and administering the Company’s Stock Incentive Plans.
      On November 17, 2004, Scott Glenn and Michael Trinkle were approved as Nominating Committee members The Nominating Committee will be responsible for identifying, evaluating, and recommending candidates to serve as directors of the Company and to serve as a focal point for communication between such candidates, the Board, and the Company’s management and will make recommendations to the Board of Directors concerning the nomination of candidates to be elected by the Company’s shareholders as a director of the Company.
      On January 25, 2005, the Company adopted a code of ethics for its officers and other key personnel involved in the Company’s operations.
      During 2004, each Board member attended 75% or more of the aggregate of the meetings of the Board, and of the committees on which he or she served, held during the period for which he or she was a director or committee member, respectively.

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Section 16(a) Beneficial Ownership Reporting Compliance
      Section 16(a) of the Exchange Act (“Section 16(a)”) requires the Company’s directors and executive officers, and persons who own more than ten percent (10%) of a registered class of the Company’s equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of Common Stock and other equity securities of the Company. Officers, directors, and greater than ten percent (10%) shareholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file.
      To the Company’s knowledge, based solely on a review of the copies of such reports furnished to the Company and written representations that no other reports were required, during the fiscal year ended December 31, 2004, and the 1st Quarter ended March 31, 2005, all Section 16(a) filing requirements applicable to its officers, directors and greater than ten percent (10%) beneficial owners were filed. However, certain of the filings were late:
      AF Partners, LLC, filed a Form 5 on January 18, 2005, to reflect stock issuance pursuant to the Agreement and Plan of Merger between the Company and Allergy Free, dated November 30, 2004.
      Ellen Preston filed a Form 5 on January 18, 2005, to reflect stock issuance pursuant to the Agreement and Plan of Merger between the Company and Allergy Free, dated November 30, 2004.
      Leslie White filed a Form 5 on January 18, 2005, to reflect stock issuance pursuant to the Agreement and Plan of Merger between the Company and Allergy Free, dated November 30, 2004.
      Mac Busby filed a Form 5 on January 20, 2004, to reflect the issuance of stock option grant on May 19, 2003.
      Ronald Sunderland filed a Form 5 for the fiscal year ended December 31, 2004, to reflect his no longer being a director and therefore no longer subject to Section 16 reporting requirements.
ADDITIONAL INFORMATION
Management
      Set forth below is information regarding management of the Company.
             
Name   Age   Position
         
Scott L. Glenn
    55     Chairman of the Board of Directors, President and Chief Executive Officer and Business Executive
Leslie White
    52     Chief Financial Officer
Bret Megargel
    36     Vice President
      For biographical information of Scott L. Glenn please refer to the section of this proxy listing the nominees for the board of directors of the Company.
      Leslie White has been the Controller of Allergy Free, LLC since late 2000 and is also a shareholder of the Company. Prior to joining Allergy Free, LLC, Ms. White was Vice President and Controller of several privately held companies in the San Diego area and from 1990-1994 served as the Finance Manager and Controller of Quidel Corporation, a publicly-held company. Ms. White worked for the firm of Ernst & Young and was awarded a CPA certificate in 1989. Ms. White has an MBA from San Francisco State University. Ms. White has advised the Company that she intends to resign as a officer of the Company effective in late July 2005, and the company is searching for a new CFO. Ms. White is resigning to pursue personal interests and not in connection with any disagreement with the Company.
      Bret Megargel most recently served from 2002 to 2004 as Vice President of Business Development for Avera Pharmaceuticals, Inc., a private pharmaceutical development company focused on central nervous system drugs. Mr. Megargel is a co-founder of Avera, and during his tenure led the successful licensing or

35


 

acquisition of three novel pharmaceutical products from global pharmaceutical companies with combined deal value of greater than US$100 million. Prior to the founding of Avera, Mr. Megargel served as a Venture Partner for Windamere Venture Partners, from 1999 to 2003, during his tenure, he served as Vice President of Business Development for MD Edge, Inc. (now known as GlobalEdge, Inc.), a medical education company, and Director of Business Development for Converge Medical, Inc., a cardiovascular medical device company, and was a member of the founding team of Dexcom, Inc. From 1991 to 1996, Mr. Megargel served as a consultant for Marketing Corporation of America, where he was a case manager for product development, licensing and acquisition, and marketing strategy projects for market leading healthcare clients. Mr. Megargel holds a B.A. in Economics from Dartmouth College, and an M.B.A. from the Stanford University Graduate School of Business.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
      The following table sets forth certain information regarding the ownership of the Company’s Stock as of May 31, 2005 by: (i) each director and nominee for director; (ii) each of the Executive Officers named in the Summary Compensation Table; (iii) all executive officers and directors of the Company as a group; and (iv) all those known by the Company to be beneficial owners of more than five percent (5%) of any class of the Company’s Stock, based upon information reported to the Company or publicly available reports filed with the SEC.
                     
        Beneficial Ownership
         
        Number of   Percentage of
Title of Class   Beneficial Owner   Shares(1)   Class Owned(2)
             
Common
  Scott L. Glenn(3)     1,095,942       48.1 %
    6402 Cardeno Drive                
    La Jolla, CA 92037                
Common
  Eric B. Freedus(4)     2,153       0.1 %
    1202 Ketner Blvd., Ste. 6000                
    San Diego, CA 92101                
Common
  H.M. Busby(5)     7,012       0.3 %
    3852 Alameda Place                
    San Diego, CA 92103                
Common
  Michael A. Trinkle(5)     55,873       2.5 %
    3495 Via Zara Court                
    Fallbrook, CA 92028                
Common
  Ellen Preston(5)     26,565       1.2 %
    1825 Sheridan Avenue                
    San Diego, CA 92103                
Common
  Leslie White(6)     9,312       0.4 %
    18479 Calle La Serra                
    Rancho Santa Fe, CA 92091                
Common
  All executive officers and directors as a group     1,196,857       52.5 %
Common
  William and Lisa Barkett     308,456       13.5 %
    7544 Eads #F                
    La Jolla, CA 92037                
Common
  J. Roberts Fosberg     158,382       6.9 %
    2440 Toyon Road                
    Healdsburg, CA 95448                
Common
  Windamere III, LLC(7)     300,000       13 %
    6402 Cardeno Dr.                 
    La Jolla, CA 92037                
 
(1)  This table is based upon information supplied by officers, directors and principal shareholders and Schedules 13D and 13G filed with the Securities and Exchange Commission (the “SEC”). Unless otherwise indicated in the footnotes to this table and subject to community property laws where applicable, the Company believes that each of the shareholders named in this table has sole voting and investment power with respect to the shares indicated as beneficially owned.
 
(2)  Percentage ownership is based upon the shares outstanding on May 31, 2005.
 
(3)  Includes 770,806 shares owned by AF Partners, LLC, which is controlled by Mr. Glenn and 300,000 shares owned by Windamere III, LLC, over which Mr. Glenn shares control (see Note (5) below). Does not include options to purchase 75,407 shares which begin vesting on November 30, 2005. Does not include 25,000 shares issuable upon exercise of stock options which expire on January 25, 2015, and which begin vesting on January 25, 2006.

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(4)  Does not include 500 shares issuable upon exercise of stock options which expire on January 18, 2015, and which begin vesting on January 18, 2006, or 10,000 shares issuable upon exercise of stock options which expire on January 25, 2015, and which begin vesting on January 25, 2006.
 
(5)  Does not include 500 shares issuable upon exercise of stock options which expire on November 17, 2014, and which begin vesting on November 17, 2005, or 10,000 shares issuable upon exercise of stock options which expire on January 25, 2015, which begin vesting on January 25, 2006.
 
(6)  Does not include 30,000 shares issuable upon exercise of stock options which expire on January 31, 2015, and which begin vesting on January 31, 2006.
 
(7)  Windamere III, LLC, is under the joint control of Mr. Glenn and St. Paul Traveler’s Companies, Inc., its affiliates Split-Rock Partners, LLC, and St. Paul Fire and Marine Insurance Company, whose business address is 385 Washington Street, St. Paul, Minnesota 55102.
EXECUTIVE COMPENSATION
Compensation of Directors and Executive Officers
      Directors and Executive Officers may be granted options to purchase Common Stock under the Company’s 1995 Stock Option Plan (“1995 Option Plan”) and the 2000 Stock Incentive Plan (“2000 Incentive Plan”). As of March 2005, the Board approved an amendment to the 2000 Incentive Plan to increase the authorized number of shares to 350,000 shares, which will be submitted to the shareholders at the next meeting of shareholders.
      During 2004, options to purchase shares of the Company’s Common Stock were granted to the Company’s directors as follows: (a) on November 17, 2004, the Board granted stock options to Mr. Busby, Dr. Petcavich, Mr. Trinkle and Ms. Preston to purchase 500 shares of Planet common stock at an exercise price of $2.50 per share, and (b) on November 30, 2004, the board granted stock options to Scott Glenn to purchase 100,543 shares of Planet common stock at an exercise price of $3.50 per share.
      During 2005, the Board granted stock options to (a) Eric Freedus to purchase 10,500 shares of Planet common stock at an exercise price of $3.00 per share as compensation for serving as a director, (b) Mr. Busby, Mr. Trinkle and Ms. Preston to purchase 10,000 shares of Planet common stock at an exercise price of $3.00 per share as compensation for serving as a directors, (c) Ms. White and Mr. Megargel to purchase 30,000 shares of Planet common stock at an exercise price of $3.00 per share as compensation for serving as officers of the Company, and (d) Mr. Glenn to purchase 25,000 shares of Planet common stock at an exercise price of $3.00 per share as compensation for serving as an officer of the Company.
      Directors are reimbursed for reasonable travel expenses incurred in connection with attendance at Board meetings, or any committee meetings, or otherwise in connection with their service as a director.

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Compensation of Executive Officers
      The following table sets forth, for the fiscal years ended December 31, 2003, 2002, and 2001 certain compensation awarded or paid to, or earned by the Company’s Executive Officers.
Summary Compensation Table
                                       
                Securities    
                Underlying    
Name and Principal Position   Year   Salary($)   Bonus($)   Options (#)   Other
                     
Robert J. Petcavich
  2004   $     $       500 (1)   $  
  Former Chairman of the Board   2003           $           $ 47,180 (3)
  and Chief Technical Officer   2002   $ 170,038     $           $ 3,241 (2)
H.M. Busby
  2004   $     $       500 (1)   $ 29,630 (7)
  Former Chief Executive Officer,   2003   $     $           $ 31,677 (3)
  President and Chief Financial   2002   $     $           $  
  Officer                                    
Richard C. Bernier
  2004   $     $              
  Former Chief Executive Officer   2003         $           $ 19,125 (3)
  and President   2002   $ 117,713     $           $  
Scott Glenn
  2004   $     $       100,543 (4)   $  
  Chairman, Chief Executive Officer   2003   $     $           $  
  and President   2002   $     $           $  
Leslie White(6)
  2004   $ 52,031 (5)   $           $  
  Secretary and Chief Financial Officer   2003   $ 51,445 (5)   $           $  
      2002   $ 51,015 (5)   $           $  
 
(1)  Represents options granted November 17, 2004, for compensation as a director.
 
(2)  Represents auto expense reimbursement paid by the Company.
 
(3)  Represents consulting fees paid for their services to the Company in 2003.
 
(4)  Represents an option granted on November 30, 2004, with an exercise price of $3.50 per share. 25,136 of the Options granted are currently exercisable, and the remaining options to purchase 75,407 shares begin vesting on November 30, 2005.
 
(5)  Represents compensation paid by Allergy Free, LLC, prior to December 1, 2004, and by Planet after that date.
 
(6)  Ms. White is employed by Conception Technologies, L.P., a California limited partnership (“Conception”), and for the past three years has devoted approximately fifty percent (50%) of her work time to the business of the Allergy Free (and after December 1, 2004 to the business of Planet Technologies, Inc.) Allergy Free (and now Planet) reimbursed Conception for approximately fifty percent (50%) of the compensation Conception pays to Ms. White as reflected in the table.
 
(7)  Represents consulting fees paid to Mr. Busby for his services in 2004.
Stock Option Grants and Exercises
      The Company’s Executive Officers are eligible for grants of options under the Company’s 1995 Stock Option Plan (the “1995 Option Plan”) and the 2000 Stock Incentive Plan (the “2000 Incentive Plan”). As of December 31, 2004, there were no shares available for grant under the Option Plans, which was expanded to 100,000 in November 2004.

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      The following table sets forth information with respect to the number of securities underlying unexercised options held by the Executive Officers as of March 31, 2005, and the value of unexercised in-the-money options (i.e., options for which the current fair market value of the Common Stock underlying such options exceeds the exercise price):
                                   
    No. of            
    Securities   Percent of Total        
    Underlying   Options Granted   Exercise Price    
Name   Options   to Employees   ($/share)   Expiration Date
                 
Scott Glenn
    100,543       54.18 %%   $ 3.50       November 30, 2014  
      25,000       13.50 %   $ 3.00       January 25, 2015  
Brett Megargel
    30,000       16.16 %1   $ 3.00       February 1, 2015  
Leslie White
    30,000       16.16 %   $ 3.00       January 31, 2015  
 
Total
    185,543       100.00 %                
Aggregated Option Exercises Last Fiscal Year and Fiscal Year End Option Values
                                                 
            Number of Securities    
            Underlying Unexercised   Value of Unexercised
            Options at Fiscal Year   In-the-Money Options
    Shares       End(2)   at Fiscal Year End ($)(1)
    Acquired on   Value        
Name   Exercise (#)   Realized   Exercisable   Unexercisable   Exercisable   Unexercisable
                         
R. Petcavich
    1,000       -0-       250       500     $ 0     $ 0  
H. M. Busby
    1,000       -0-       360       500     $ 0     $ 0  
Richard Bernier
    500       -0-       0       0     $ 0     $ 0  
Ronald Sunderland
    2,000       -0-       0       0     $ 0     $ 0  
Scott Glenn
    -0-       -0-       25,136       75,407     $ 0     $ 0  
 
(1)  Calculated based on the estimated fair market value of the Company’s Common Stock as of December 31, 2004, less the exercise price payable upon the exercise of such options. Such estimated fair market value as of December 31, 2004, was $.70, the last transaction price posted at the close of trading on December 31, 2004.
 
(2)  Certain former directors of Planet surrendered “Out of the Money” stock options including Robert J. Petcavich, 3,294; and H.M. Busby 964.
Equity Compensation Plan Information
                         
    (a)        
    Number of Securities   (b)   (c)
    to be Issued   Weighted-Average   Number of Securities Remaining
    Upon Exercise of   Exercise Price of   Available for Future Issuance
    Outstanding   Outstanding   Under Equity Compensation
    Options,   Options, Warrants   Plans (excluding securities
Plan Category   Warrants and Rights   and Rights   reflected in column (a))
             
Equity compensation plans approved by security holders
    107,413     $ 8.193       None(2 )
Equity compensation plans not approved by security holders(1)
    N/A       N/A       N/A  
Total
    107,413     $ 8.193       None(2 )
 
(1)  The Company does not have any equity compensation plans that have not been approved by Shareholders.
 
(2)  As of March 31, 2005, the Company has granted options exceeding the number of shares authorized by the shareholders under the 2000 Stock Incentive Plan by 130,913 shares. The Board has approved an amendment to the plan to increase the authorized number of shares to 350,000 shares, which is being submitted to the shareholders as Proposal 3 of this Proxy Statement.

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DESCRIPTION OF EMPLOYEE BENEFIT PLANS
2000 Stock Incentive Plan
      Planet’s 2000 Stock Incentive Plan was approved by Planet’s shareholders at its annual meeting of shareholders on May 1, 2000. The Board of Directors reserved 500,000 shares of common stock for issuance under the 2000 Plan, together with any remaining shares of common stock eligible for issuance under the 1995 Stock Option plan which expire unexercised. A committee consisting of Planet’s Board of Directors or appointed Board members has the sole discretion to determine under which plan stock options and bonuses may be granted.
      The purpose of the 2000 Incentive Plan is similar to that of the 1995 Plan, which was to attract and retain qualified personnel, to provide additional incentives to employees, officers, directors and consultants of the Company and to promote the success of the Company’s business. As was the case under the 1995 Plan, under the 2000 Plan, Planet may grant or issue incentive stock options and non-statutory stock options to eligible participants, provided that incentive stock options may only be granted to employees of Planet. The 2000 Stock Incentive Plan also allows shares of common stock to be issued under a Stock Bonus Program through direct and immediate issuances. Similar to stock options granted under the Plan, stock bonus awards may be subjected to a vesting schedule determined by the Board of Directors. Option grants under both plans are discretionary. Options granted under both plans are subject to vesting as determined by the Board, provided that the option vests as to at least 20% of the shares subject to the option per year. The maximum term of a stock option under both plans is ten years, but if the optionee at the time of grant has voting power over more than 10% of the Company’s outstanding capital stock, the maximum term is five years under both plans. Under both plans if an optionee terminates his or her service to Planet, such optionee may exercise only those option shares vested as of the date of termination, and must affect such exercise within the period of time after termination set forth in the optionee’s option. The exercise price of incentive stock options granted under both plans must be at least equal to the fair market value of the Common Stock of the Company on the date of grant. Under both plans the exercise price of options granted to an optionee who owns stock possessing more than 10% of the voting power of Planet’s outstanding capital stock must equal at least 110% of the fair market value of the common stock on the date of grant. Payment of the exercise price may be made in cash, by delivery of other shares of the Company’s common stock or by any other form of legal consideration that may be acceptable to the Board.
401(k) Plan
      The Company provides a defined contribution 401(k) savings plan (the “401(k) Plan”) in which all full-time employees of the Company are eligible to participate. Eligible employees are permitted to contribute pre-tax salary to the 401(k) Plan subject to IRS limitations. Company contributions to the 401(k) Plan are at the discretion of the Board of Directors. There have been no Company contributions to the 401(k) Plan in 2004 or 2003.
EMPLOYMENT AGREEMENTS AND CHANGE IN CONTROL ARRANGEMENTS
      The Company has entered into an employment agreement with Scott L. Glenn as President/ CEO and Chairman of the Board of the Company for a three-year period, which expires on November 29, 2007, The Company agrees to pay Mr. Glenn a salary of $100 per month (plus healthcare and other benefits) until it is determined by the Board that the Company could afford to pay compensation comparable to CEOs of other similar companies. In exchange for foregoing a salary, the Company granted to Mr. Glenn stock options exercisable at the then fair market value at such time as may be required to maintain the aggregate number of stock options granted to Mr. Glenn at an amount not less than five (5%) percent of the issued and outstanding stock of the Company (on a fully diluted basis) during his three year term of employment. There is no severance package provided for in Mr. Glenn’s employment agreement with the Company. For termination for cause, all of the compensation and benefits to which Mr. Glenn was entitled, including, without limitation, the vesting of any stock options, shall cease upon the effective date of such termination. As of the date of this

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Proxy Statement, the Company has issued to Mr. Glenn a total of 125,543 options (25,000 at an exercise price of $3.00/share and 125,543 at an exercise price of $3.50/share). The Company has a continuing obligation to issue options at any time to Mr. Glenn in order to maintain his percentage of stock ownership at five (5%) percent.
      The Company has entered into a Consulting Agreement with Dr. Petcavich wherein Dr. Petcavich will at all times be an independent contractor and pursuant to which he retains the 500 options granted to him as a director plus an hourly rate mutually agreeable to both parties based upon the scope of the project. The agreement is nonassignable by either party and is for a term of one year, automatically renewable for subsequent one year terms, unless terminated by either party in writing with at least thirty days notice.
      Prior to November 30, 2004 the Company had an agreement with H.M. Busby whereby the Company had agreed to pay Mr. Busby $100 per hour for work he performed on behalf of the Company. The Company’s agreement with H.M. Busby has been terminated and all terms and conditions of the agreement have been satisfied.
      In January 2005, the Company agreed to employ Bret Megargel as Vice President of Marketing and Business Development at an annualized salary of $96,000. In March 2005, Mr. Megargel’s annual salary was increased to $192,000. Mr. Megargel was also issued 30,000 stock options under the 2000 Stock Option Plan.
      If the Merger is consummated, the Company intends to enter into an employment agreement with Edward J. Steube to serve as President of the Company’s ACP subsidiary at a base salary of $200,000 per year and grant to Mr. Steube options to purchase up to the greater of 3% of the outstanding common stock of the Company or 100,000 common stock shares.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
      On November 30, 2004, Planet acquired all of the assets of Allergy Free, LLC, which is the historical business described in this 10-KSB for approximately 1.65 million shares of Planet stock (after giving effect to the reverse stock split), a convertible note of $274,300, and assumption of debt. The transaction was completed pursuant to an Agreement and Plan of Merger between Planet and Allergy Free, LLC. (“Agreement”) As a result of the acquisition, Allergy Free’s historical financial information is included in the consolidated financial results of Planet. Allergy Free, LLC, was and is controlled by Scott Glenn, who became Planet’s Chairman, President and CEO.
      During the period from November 30, 2004, through May 31, 2005, Planet has sold approximately 494,000 shares to investors, pursuant to subscription agreements and in reliance upon an exception from registration provided under Regulation D. 300,000 of the shares were sold to Windamere III, LLC, a fund controlled by Scott Glenn, at a price of $2.50 per share.
      Since January 1, 2004, the Company has issued and sold 4,500 shares in connection with the exercise of certain stock options by current and former directors of the Company. H.M. Busby acquired 1,000 shares at $3.00 per share; Robert Petcavich acquired 1,000 shares at $3.00 per share; Rick Bernier acquired 500 shares at $2.50 per share; and Ronald Sunderland acquired a total of 2,000 shares (1,000 at $3.00 per share and 1,000 at $6.50 per share).
      Mr. Freedus requested to be named a director and the Company agreed to appoint Mr. Freedus as a director based upon his and his family’s share holdings in Planet and the Company’s evaluation of Mr. Freedus’ background and qualification to serve as a director. There are no arrangements or understandings between Mr. Freedus and any other persons regarding how long Mr. Freedus will continue to serve as a director.
      Over the previous two (2) year period, there has been no transaction or proposed transaction between the Company and Mr. Freedus.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE IN FAVOR OF THE SLATE OF CANDIDATES FOR THE BOARD OF DIRECTORS.

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PROPOSAL 3
AMENDMENT TO THE 2000 STOCK OPTION PLAN
Introduction
      Subject to Shareholder approval, the Company plans to amend its 2000 Stock Option Plan (the “2000 Plan”) to increase the number of shares of Common Stock issuable under the 2000 Plan from 100,000 shares to 350,000 shares. The purpose behind amending the plan is to allow the Company to retain the services of qualified individuals as directors, officers, employees, agents, consultants and independent contractors of the Company. An amendment to the Plan will allow the Company to retain the services of the current Board of Directors and executive officers of the Company and Edward J. Steube as President/ CEO of ACP, as a subsidiary of the Company, and be able to use such shares in the future for other similar agreement with other directors and selected employees, officers, agents, consultants and independent contractors of the Company.
      The Company makes no guarantee as to the tax consequences described below with respect to the grant or exercise of an option, or sale of the stock covered by an option.
Description of the 2000 Plan, as Amended
      The number of shares of Common Stock with respect to which awards may be granted pursuant to the 2000 Plan will be sufficient to accommodate the retention of the current Board of Directors and executive officers of the Company and of Edward J. Steube as President/ CEO of ACP, as a subsidiary of the Company, and possibly, in the future other key employees, officers and directors. Shares issuable under the 2000 Plan may be either treasury shares or authorized but unissued shares. The number of shares available for issuance will be subject to adjustment to prevent dilution in the event of stock splits, stock dividends or other changes in the capitalization of the Company.
      As a part of the Merger, and pursuant to the proposed employment agreement between Edward Steube, Edward Steube will be granted the right to an option to purchase 100,000 shares of Company common stock.
      In addition, as consideration for services provided the Company, the following options have been granted by the Company, subject to approval of this Proposal 3:
New Plan Benefits
2000 Plan
                 
Name and Position   Dollar Value   Number of Options
         
Executive Officers:
               
Scott Glenn, President
  $ 3.50/share       100,543  
    $ 3.00/share       25,000  
Brett Megargel, Vice President
  $ 3.00/share       30,000  
Leslie White, Chief Financial Officer
  $ 3.00/share       30,000  
Directors:
               
Ellen Preston
  $ 3.00/share       10,000  
Eric Freedus
  $ 3.00/share       10,500  
Michael Trinkle
  $ 3.00/share       10,000  
H.M. Busby
  $ 3.00/share       10,000  
      Subject to compliance with Rule 16b-3 of the Securities Exchange Act of 1934 (the “Exchange Act”), the 2000 Plan shall be administered by the Board of Directors of the Company (the “Board”) or, in the event the Board shall appoint and/or authorize a committee of two or more members of the Board to administer the 2000 Plan, by such committee (the “Plan Administrator”). Except for the terms and conditions explicitly set forth in the 2000 Plan, and subject to applicable provisions of the Internal Revenue Code of 1986, as amended (the “Code”) the Plan Administrator shall have the authority, in its discretion, to determine all matters

43


 

relating to the options to be granted under the 2000 Plan, including, without limitation, selection of whether an option will be an incentive stock option or a nonqualified stock option, selection of the individuals to be granted options, the number of shares to be subject to each option, the exercise price per share, the timing of grants and all other terms and conditions of the options.
      Options granted under the 2000 Plan may be “incentive stock options” (“Incentive Options”) within the meaning of Section 422 of the Code or stock options which are not incentive stock options (“Non-Incentive Options” and, collectively with Incentive Options, hereinafter referred to as “Options”). Each Option may be exercised in whole or in part; provided, that only whole shares may be issued pursuant to the exercise of any Option. Subject to any other terms and conditions herein, the Plan Administrator may provide that an Option may not be exercised in whole or in part for a stated period or periods of time during which such Option is outstanding; provided, that the Plan Administrator may rescind, modify, or waive any such limitation (including by the acceleration of the vesting schedule upon a change in control of the Company) at any time and from time to time after the grant date thereof. During an optionee’s lifetime, any Incentive Options granted under the 2004 Plan are personal to such optionee and are exercisable solely by such optionee.
      The Plan Administrator can determine at the time the Option is granted in the case of Incentive Options, or at any time before exercise in the case of Non-Incentive Options, that additional forms of payment will be permitted. To the extent permitted by the Plan Administrator and applicable laws and regulations (including, without limitation, federal tax and securities laws and regulations and state corporate law), an Option may be exercised by:
        (a) delivery of shares of Common Stock of the Company held by an optionee having a fair market value equal to the exercise price, such fair market value to be determined in good faith by the Plan Administrator;
 
        (b) delivery of a properly executed notice of exercise, together with irrevocable instructions to a broker, all in accordance with the regulations of the Federal Reserve Board, to promptly deliver to the Company the amount of sale or loan proceeds to pay the exercise price and any federal, state, or local withholding tax obligations that may arise in connection with the exercise; or
 
        (c) delivery of a properly executed notice of exercise, together with instructions to the Company to withhold from the shares of Common Stock that would otherwise be issued upon exercise that number of shares of Common Stock having a fair market value equal to the option exercise price.
      To the extent permitted by applicable law, the Plan Administrator may also permit any participant to pay the option exercise price upon exercise of an Option by delivering a full-recourse, interest bearing promissory note payable in one or more installments and secured by the purchased shares. The terms of any such promissory note (including the interest rate and the terms of repayment) shall be established by the Plan Administrator in its sole discretion. In no event may the maximum credit available to the participant exceed the sum of (i) the aggregate option exercise price (less the par value of those shares) plus (ii) any federal, state and local income and employment tax liability incurred by the participant in connection with the option exercise.
      Upon a merger or consolidation in which securities possessing more than 25% of the total combined voting power of the Company’s outstanding securities are transferred to a person different from the person holding those securities immediately prior to such transaction, the sale, transfer or other disposition of all or substantially all of the Company’s assets in complete liquidation or dissolution of the Company the sale, transfer or other disposition of all or substantially all of the Company’s assets to an unrelated entity, or a change in the identity of more than three (3) directors over a two-year period each, a (“Corporate Transaction”), any award carrying a right to exercise that was not previously exercisable shall become fully exercisable, the restrictions, deferral limitations and forfeiture conditions applicable to any other award granted shall lapse and any performance conditions imposed with respect to awards shall be deemed to be fully achieved. Notwithstanding the foregoing, any Option granted to an employee shall not become fully vested until such time as the employee experiences an involuntary termination of employment (other than on account of misconduct).

44


 

      Incentive Options granted under the 2000 Plan may not be transferred, pledged, mortgaged, hypothecated or otherwise encumbered other than by will or under the laws of descent and distribution, except that the Plan Administrator may permit transfers of awards for estate planning purposes if, and to the extent, such transfers do not cause a participant who is then subject to Section 16 of the Exchange Act to lose the benefit of the exemption under Rule 16b-3 for such transactions.
      Additional rules apply under the Code to the grant of Incentive Options. For instance an Incentive Option must be exercised within 10 years after the date of grant, unless granted to an individual owning more than 10% of the Company’s stock, in which case the exercise period may not exceed five (5) years. Similarly, an Incentive Option must be granted at an exercise price that equals or exceeds 100% of the fair market value of the underlying stock at the time of grant, a threshold that is increased to 110% of such fair market value in the case of a grant to an individual owning more than 10% of the Company’s stock.
      For federal income tax purposes, the grant to an optionee of a Non-Incentive Option generally will not constitute a taxable event to the optionee or to the Company. Upon exercise of a Non-Incentive Option (or, in certain cases, a later tax recognition date), the optionee will recognize compensation income taxable as ordinary income, measured by the excess of the fair market value of the Common Stock purchased on the exercise date (or later tax recognition date) over the amount paid by the optionee for such Common Stock, and will be subject to federal income tax withholding. Upon recognition of income by the optionee, the Company may claim a deduction for the amount of such compensation. The optionee will have a tax basis in the Common Stock purchased equal to the amount paid plus the amount of ordinary income recognized upon exercise of the Non-Incentive Option. Upon the subsequent sale of the Common Stock received upon exercise of the Non-Incentive Option, an optionee will recognize capital gain or loss equal to the difference between the amount realized on such sale and his tax basis in the Common Stock, which may be long-term capital gain or loss if the optionee holds the Common Stock for more than one year from the exercise date.
      For federal income tax purposes, in general, neither the grant nor the exercise of an Incentive Option will constitute a taxable event to the optionee or to the Company, assuming the Incentive Option qualifies as an “incentive stock option” under Code §422. If an optionee does not dispose of the Common Stock acquired upon exercise of an Incentive Option during the statutory holding period, any gain or loss upon subsequent sale of the Common Stock will be long-term capital gain or loss, assuming the shares represent a capital asset in the optionee’s hands. The statutory holding period is the later of two years from the date the Incentive Option is granted or one year from the date the Common Stock is transferred to the optionee pursuant to the exercise of the Incentive Option. If the statutory holding period requirements are satisfied, the Company may not claim any federal income tax deduction upon either the exercise of the Incentive Option or the subsequent sale of the Common Stock received upon exercise thereof. If the statutory holding period requirement is not satisfied, the optionee will recognize compensation income taxable as ordinary income on the date the Common Stock is sold (or later tax recognition date) in an amount equal to the lesser of (i) the fair market value of the Common Stock on that date less the amount paid by the optionee for such Common Stock, or (ii) the amount realized on the disposition of the Common Stock less the amount paid by the optionee for such Common Stock; the Company may then claim a deduction for the amount of such compensation income.
      The federal income tax consequences summarized hereinabove are based upon current law and are subject to change.
      The Board may amend, alter, suspend, discontinue or terminate the 2000 Plan at any time, except that any such action shall be subject to shareholder approval at the annual meeting next following such Board action if such shareholder approval is required by federal or state law or regulation or the rules of any exchange or automated quotation system on which the Common Stock may then be listed or quoted, or if the Board of Directors otherwise determines to submit such action for shareholder approval. In addition, no amendment, alteration, suspension, discontinuation or termination to the 2000 Plan may materially impair the rights of any participant with respect to any vested Option granted before amendment without such participant’s consent. Unless terminated earlier by the Board, the 2000 Plan shall terminate upon the earliest to occur of (i) 10 years after the date or which the Board approves the 2004 Plan or (ii) the date on which all shares of Common Stock available for issuance under the 2000 Plan shall have been issued as vested shares. Upon such 2000 Plan

45


 

termination, all Options and unvested stock issuances outstanding under the 2000 Plan shall continue to have full force and effect in accordance with the provisions of the agreements.
New Plan Benefits
      Previously authorized grants of options to certain executive officers and directors of the Company, including Ms. Leslie White, Ms. Ellen Preston, Mr. Scott Glenn, Mr. Bret Megargel, Mr. H. Mac Busby, Mr. Eric Freedus, and Mr. Michael Trinkle would be made effective by this proposed amendment to the Plan. In addition, the amendment to the Plan will allow the Company to retain the services of Mr. Steube as President of the Company’s ACP subsidiary. Information concerning stock option grants to the Company’s executive officers and directors is set forth under “Executive Compensation” beginning on page of this Proxy Statement.
Recommendation of the Board of Directors
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 3. UNLESS MARKED TO THE CONTRARY, PROXIES RECEIVED FROM SHAREHOLDERS WILL BE VOTED IN FAVOR OF PROPOSAL 3.
PROPOSAL 4
RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
      The Board of Directors has selected J. H. Cohn LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2005, and has further directed that management submit the selection of independent registered public accounting firm for ratification by the shareholders at the Annual Meeting. J. H. Cohn LLP has audited the Company’s financial statements since 2001. Previously, PricewaterhouseCoopers LLP audited the Company’s financial statements since its inception in 1991. Representatives of J. H. Cohn LLP are expected to be present at the Annual Meeting, will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions.
      Shareholder ratification of the selection of J. H. Cohn LLP as the Company’s independent registered public accounting firm is not required by the Company’s current Bylaws or otherwise. However, the Board is submitting the selection of J. H. Cohn LLP to the shareholders for ratification as a matter of good corporate practice. If the shareholders fail to ratify the selection, the Board will reconsider whether or not to retain that firm. Even if the selection is ratified, the Board in its discretion may direct the appointment of different independent registered public accounting firm at any time during the year if they determine that such a change would be in the best interests of the Company and its shareholders.
      The affirmative vote of the holders of a majority of the shares presented in person or represented by proxy and voting at the Annual Meeting will be required to ratify the selection of J. H. Cohn LLP. For purposes of this vote, abstentions and broker non-votes will not be counted for any purpose in determining whether this matter has been approved.
Audit Fees
      For professional services rendered by the independent registered public accounting firm for the audit of the Company’s annual financial statements and review of the unaudited financial statements included in the Company’s quarterly reports on Form 10-QSB. The aggregate fees billed by the Company’s independent registered public accounting firm, J.H. Cohn LLP, for 2004 and 2003 were $34,300 and $21,850, respectively.
Audit Related Fees
      The aggregate fees billed in 2004 and 2003 by the Company’s independent registered public accounting firm for assurance and related services by the independent registered public accounting firm that are

46


 

reasonably related to the performance of the audit or review of the Company’s financial statements are in the amount of $10,660 and $0, respectively.
Tax Fees
      No fees were billed in 2004 and 2003 by the Company’s independent registered public accounting firm for tax compliance, tax advice and tax planning.
All Other Fees
      No fees were billed in 2004 and 2003 by the Company’s independent registered public accounting firm for any other services, other than Audit Fees and Audit Related Fees.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 4. UNLESS MARKED TO THE CONTRARY, PROXIES RECEIVED FROM SHAREHOLDERS WILL BE VOTED IN FAVOR OF PROPOSAL 4.
PROPOSAL 5
OTHER MATTERS
      The Board of Directors knows of no other matters that will be presented for consideration at the Annual Meeting. If any other matters are properly brought before the meeting, it is the intention of the persons named in the accompanying proxy to vote on such matters in accordance with their best judgment.
Information attached as Exhibits and incorporated by reference into this Proxy Statement
         
Exhibit “A” — ACP Audited Financial Statements for the One(1) Year Period Ended December 31, 2004
    A-1  
Exhibit “A-1” — ACP Unaudited Financial Statements for Quarter One Ended March 31, 2005
    A-1-1  
Exhibit “B” — Planet Form 10KSB Filed With SEC March 31, 2005
    B-1  
Exhibit “B-1” — Planet Form 10QSB Filed with the SEC May 16, 2005
    B-1-1  
Exhibit “C” — Agreement and Plan of Merger
    C-1  
Exhibit “D” — California Corporations Code Sections 1300-1312
    D-1  
  By order of the Board of Directors
 
  Scott L. Glenn
  Chief Executive Officer and President
June 30, 2005

47


 

EXHIBIT A
ALLERGY CONTROL PRODUCTS, INC.
INDEPENDENT AUDITOR’S REPORT,
FINANCIAL STATEMENTS
AND
OTHER FINANCIAL INFORMATION
DECEMBER 31, 2004

A-1


 

ALLERGY CONTROL PRODUCTS, INC.
CONTENTS
December 31, 2004
         
    Page
     
Independent auditor’s report
    A-1  
FINANCIAL STATEMENTS
    A-2  
Balance sheets
    A-3  
Statements of operations and accumulated deficit
    A-4  
Statements of cash flows
    A-5  
Notes to financial statements
    A-6  

A-2


 

INDEPENDENT AUDITOR’S REPORT
March 29, 2005
Board of Directors and Stockholder
Allergy Control Products, Inc.
96 Danbury Road
Ridgefield, CT 06877
      We have audited the accompanying balance sheets of Allergy Control Products, Inc. (an S corporation) as of December 31, 2004 and 2003, and the related statements of operations and accumulated deficit, and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
      We conducted our audits in accordance with U.S. generally accepted auditing standards. 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 Allergy Control Products, Inc. as of December 31, 2004 and 2003, and the results of its operations and its cash flows for the years then ended in conformity with U.S. generally accepted accounting principles.
      The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 11 to the financial statements, the Company has incurred recurring losses from operations and has a deficiency in assets, which raise substantial doubt about its ability to continue as a going concern at December 31, 2004. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
  /s/ Venman & Co. LLC
Shelton, Connecticut

A-3


 

ALLERGY CONTROL PRODUCTS, INC.
BALANCE SHEETS
                     
    December 31
     
    2004   2003
         

ASSETS
Current assets
               
 
Cash
  $ 78,107     $ 165,714  
 
Trade accounts receivable
    221,699       220,189  
 
Inventory
    616,471       721,183  
 
Prepaid expenses
    209,657       131,310  
             
Total current assets
    1,125,934       1,238,396  
Equipment and leasehold improvements
               
 
Furniture and equipment
    700,534       686,243  
 
Leasehold improvements
    56,100       56,100  
 
Software
    317,985       317,985  
 
Vehicle
    26,529       26,529  
             
      1,101,148       1,086,857  
 
Less accumulated depreciation and amortization
    932,527       855,220  
             
Net equipment and leasehold improvements
    168,621       231,637  
             
TOTAL ASSETS
  $ 1,294,555     $ 1,470,033  
             
 

LIABILITIES AND DEFICIENCY IN ASSETS
Current liabilities
               
 
Note payable, bank
  $     $ 250,000  
 
Note payable, stockholder
    4,850,000       4,650,000  
 
Trade accounts payable
    799,005       481,687  
 
Accounts payable, related party
    393,873       393,873  
 
Accrued expenses
    73,013       107,281  
 
Accrued termination benefits
          93,245  
 
Current portion of long-term debt
    3,819       3,791  
 
Current portion of obligation under capital lease
    3,724       1,159  
             
Total current liabilities
    6,123,434       5,981,036  
Long-term liabilities
               
 
Long-term debt, less current portion
    15,348       19,167  
 
Obligation under capital lease, less current portion
    3,876        
             
Total long-term liabilities
    19,224       19,167  
             
Total liabilities
    6,142,658       6,000,203  
Deficiency in assets
               
 
Common stock — no par value
               
   
Authorized 20,000 shares
               
   
Issued and outstanding — 2,000 shares
    4,000,000       4,000,000  
 
Contributed capital
    625,000       625,000  
 
Accumulated deficit
    (9,473,103 )     (9,155,170 )
             
Deficiency in assets
    (4,848,103 )     (4,530,170 )
             
TOTAL LIABILITIES AND DEFICIENCY IN ASSETS
  $ 1,294,555     $ 1,470,033  
             
The accompanying notes are an integral part of these financial statements.

A-4


 

ALLERGY CONTROL PRODUCTS, INC.
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
                   
    Year Ended December 31
     
    2004   2003
         
Net sales
  $ 7,714,653     $ 8,266,863  
Cost of sales
    4,581,795       5,232,904  
             
Gross profit
    3,132,858       3,033,959  
             
Operating expenses
               
 
Selling
    947,792       1,080,578  
 
General and administrative expenses
    2,492,083       2,691,780  
             
Total operating expenses
    3,439,875       3,772,358  
             
Loss from operations
    (307,017 )     (738,399 )
             
Other income (expense)
               
 
Interest and royalty income
    98       72  
 
Interest expense
    (11,014 )     (25,814 )
             
Net other expense
    (10,916 )     (25,742 )
             
NET LOSS
    (317,933 )     (764,141 )
Accumulated deficit at beginning of year
    (9,155,170 )     (8,391,029 )
             
ACCUMULATED DEFICIT AT END OF YEAR
  $ (9,473,103 )   $ (9,155,170 )
             
The accompanying notes are an integral part of these financial statements.

A-5


 

ALLERGY CONTROL PRODUCTS, INC.
STATEMENTS OF CASH FLOWS
                       
    Year Ended December 31
     
    2004   2003
         
Operating activities
               
 
Net loss
  $ (317,933 )   $ (764,141 )
 
Adjustments to reconcile net loss to net cash used by operating activities:
               
   
Depreciation and amortization
    77,307       183,598  
   
Provision for uncollectible accounts
    19,664       1,375  
   
Provision for obsolete inventory
    (60,000 )     8,000  
   
(Increase) decrease in:
               
     
Trade accounts receivable
    (21,174 )     119,571  
     
Inventory
    164,712       315,850  
     
Prepaid expenses
    (78,347 )     21,477  
   
Increase (decrease) in:
               
     
Trade accounts payable
    317,318       (29,888 )
     
Accrued expenses
    (34,268 )     55,453  
     
Accrued termination benefits
    (93,245 )     (246,550 )
             
Net cash used by operating activities
    (25,966 )     (335,255 )
             
Investing activity — cash used in acquisition of equipment
    (3,076 )     (3,892 )
             
Financing activities
               
 
Payments of short-term borrowings
    (250,000 )     (200,024 )
 
Proceeds of short-term borrowings
          250,000  
 
Proceeds of borrowings from stockholder
    200,000       650,000  
 
Payments of borrowings from officer
          (130,000 )
 
Payments of long-term borrowings
    (3,791 )     (1,571 )
 
Payments of obligation under capital lease
    (4,774 )     (123,123 )
             
Net cash provided (used) by financing activities
    (58,565 )     445,282  
             
Increase (decrease) in cash for the year
    (87,607 )     106,135  
Cash at beginning of year
    165,714       59,579  
             
CASH AT END OF YEAR
  $ 78,107     $ 165,714  
             
SUPPLEMENTAL CASH FLOW DISCLOSURES:
               
 
Cash paid during the year for interest
  $ 11,014     $ 25,814  
             
 
Non-cash investing and financing activities:
               
   
Acquisition of equipment by incurring capital lease obligation
  $ 11,215     $  
             
   
Acquisition of vehicle by issuance of debt
  $     $ 24,529  
             
The accompanying notes are an integral part of these financial statements.

A-6


 

ALLERGY CONTROL PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2004
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
      Allergy Control Products, Inc. (“the Company”) develops and sells products, both retail and wholesale, that decrease allergic reactions resulting from environmental factors. The Company grants credit to its wholesale customers.
CHANGE IN ACCOUNTING BASIS
      Accumulated deficit at January 1, 2003 has been restated to reflect the change from the accounting basis used by the Company for income tax purposes to U.S. generally accepted accounting principles.
TRADE ACCOUNTS RECEIVABLE
      Trade accounts receivable are stated at the amount management expects to collect from balances outstanding at year-end. Based on management’s assessment of the credit history with customers having outstanding balances and current relationships with them, it has concluded that realization losses on balances outstanding at year-end will be immaterial.
      ACP’s trade accounts receivable balance at December 31, 2004 was $221,699 compared to $220,189 at December 31, 2003.
      ACP’s primary business is domestic retail sales, where payment typically is made by credit card. Accordingly, ACP’s trade accounts receivable balance is relatively small, currently representing less than 3% of ACP’s total annual net sales.
      ACP’s international wholesale business, which is approximately 10% of total sales, is primarily responsible for ACP’s trade accounts receivable. Despite lower international sales in the twelve months ended December 31, 2004 compared to the twelve months ended December 31, 2003, international sales in the three months ended December 31, 2004 were actually somewhat higher than international sales in the three months ended December 31, 2003. This period over period increase accounts for the modest increase in ACP’s trade accounts receivable balance on December 31, 2004 compared to December 31, 2003.
      ACP’s trade accounts receivable have payment terms ranging from net 30 days to net 60 days. ACP has experienced immaterial losses due to inability to collect trade accounts receivable, and management knows of no reason to anticipate any change in this experience in the foreseeable future.
INVENTORY
      Inventory is valued at the lower of cost, determined on the first-in, first-out method, or market and consists of:
                 
    December 31
     
    2004   2003
         
Materials
  $ 174,246     $ 200,128  
Work-in-process
    31,395       71,339  
Finished goods, less provision for obsolescence 2004-$133,000; 2003-$193,000
    410,830       449,716  
             
    $ 616,471     $ 721,183  
             

A-7


 

ALLERGY CONTROL PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS — (Continued)
EQUIPMENT AND LEASEHOLD IMPROVEMENTS
      Equipment and leasehold improvements are recorded at cost and include expenditures which materially increase values or extend useful lives. Upon disposition or retirement, the cost and related accumulated depreciation or amortization are eliminated from the respective accounts, and the resulting gain or loss is included in the statement of operations. Expenditures in the nature of normal repairs and maintenance are charged to operations as incurred.
      Depreciation and amortization of equipment and leasehold improvements is recorded over the estimated useful lives of the assets using straight-line and accelerated methods.
SHIPPING COSTS
      Shipping costs of $452,453 for 2004 and $472,288 for 2003 are included in cost of sales.
ADVERTISING
      The Company expenses advertising costs as they are incurred. Advertising expenses amounted to $586,060 in 2004 and $713,085 in 2003.
INCOME TAXES
      The Company has elected by consent of its stockholder to be taxed under the provisions of Subchapter S of the Internal Revenue Code. Under those provisions, the Company does not pay federal or state corporate income taxes on its taxable income and does not receive benefit of net operating loss carryforwards or carrybacks. Instead, the Company’s taxable income or loss is included on the stockholder’s individual income tax return.
USE OF ESTIMATES
      The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
REVENUE RECOGNITION
      ACP recognizes revenue upon physical shipment of product. Management believes that this policy is in compliance with guidance available in SAB 104.
PREPAID EXPENSES
      Prepaid expenses is primarily comprised of deposits, rent related to future periods, and unexpired insurance.
NOTE 2. CONCENTRATION OF CREDIT RISK
      During the year and at the balance sheet date the Company maintained cash balances at a bank in excess of the insurance limits ($100,000) of the Federal Deposit Insurance Corporation.

A-8


 

ALLERGY CONTROL PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS — (Continued)
NOTE 3. NOTE PAYABLE, STOCKHOLDER
      The demand note payable to the stockholder is non-interest bearing.
NOTE 4. ACCOUNTS PAYABLE, RELATED PARTY
      The accounts payable to the related party was paid after year end by a capital contribution made by the sole stockholder.
NOTE 5. LONG-TERM DEBT
                     
    December 31
     
    2004   2003
         
Long-term debt consists of:
               
 
0.74% chattel note payable in monthly installments of $329, including interest, with a balloon payment of $13,436 due in July 2006. The note is secured by a vehicle with an original cost of $26,529
  $ 19,167     $ 22,958  
 
Less current portion
    3,819       3,791  
             
   
TOTAL LONG-TERM DEBT
  $ 15,348     $ 19,167  
             
      The maturities of long-term debt by year and in the aggregate are:
         
Year Ending December 31    
     
2005
  $ 3,819  
2006
    15,348  
       
    $ 19,167  
       
NOTE 6. CAPITAL LEASE COMMITMENT
      The Company is the lessee of $332,298 of equipment under a capital lease agreement expiring in December 2006. The accumulated amortization of the equipment amounted to $299,510 at December 31, 2004 and $276,820 at December 31, 2003. Amortization of the asset under the capital lease is included in depreciation and amortization expense. Future minimum lease payments under the capital lease are:
           
Year Ending December 31    
     
 
2005
  $ 3,960  
 
2006
    3,960  
       
Total minimum lease payment
    7,920  
Less amount representing interest
    320  
       
Present value of minimum lease payments
    7,600  
Less current portion
    3,724  
       
Long-term portion
  $ 3,876  
       
NOTE 7. OPERATING LEASE COMMITMENTS
      The Company leases its office and warehouse facility under a non-cancelable operating lease expiring in October 2007. The lease requires the Company to pay property taxes and maintenance charges.

A-9


 

ALLERGY CONTROL PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS — (Continued)
      The Company also leases a vehicle and office equipment under non-cancelable operating leases that expire through January 2005.
      Rent expense amounted to $221,355 in 2004 and $222,085 in 2003. Future minimum rental payments under the non-cancelable operating leases, excluding property taxes and maintenance charges are:
         
Year Ending December 31    
     
2005
  $ 174,386  
2006
    172,742  
2007
    132,450  
       
    $ 479,578  
       
NOTE 8. CONCENTRATIONS
      The Company purchases all of its fabric for a major product line, which represents 72% of total fabric purchases, from one mill. Additionally, 20% of fabric is purchased from another mill. Although there are comparable products, a change in suppliers could cause delay in acquiring fabric, which could ultimately affect operating results.
      The Company subcontracts approximately 15% of its production activities to a fabricator in Slovakia. Inventory at this fabricator amounted to $80,105 at December 31, 2004 and $65,819 at December 31, 2003.
NOTE 9. EMPLOYEE BENEFIT PLAN
      The Company has a 401(k) retirement plan that provides for elective pretax contributions to the plan by all employees and for discretionary matching contributions by the Company. The Company made no contributions to the plan in 2004 or 2003.
NOTE 10. SUBSEQUENT EVENTS
      As part of an agreement and plan of merger dated March 7, 2005 with Planet Technologies, Inc. (Planet), the Company’s sole stockholder will receive 600,000 shares of Planet stock in exchange for all of his stock in the Company. Additionally, the sole stockholder will receive a payment of $1,500,000 of his note receivable and will contribute the balance of the note in the amount $3,350,000 to capital.
      The stockholder of the Company has also agreed to make a cash contribution of $500,000 to capital prior to closing to provide for termination benefits for one of the officers of the Company.
NOTE 11. GOING CONCERN
      As indicated on the financial statements, the Company has incurred losses in the amount of $317,933 in 2004 and $764,141 in 2003 and the deficiency in assets at December 31, 2004 amounted to $4,848,103. At December 31, 2004 current liabilities exceeded current assets by $4,997,500.
      In the event that the Company is unable to achieve profitable operating results and sufficient cash flow or the stockholder ceases to fund operations, it is uncertain the Company will be able to continue in existence. The accompanying financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and reclassification of liabilities that might be necessary should the Company be unable to continue in existence.

A-10


 

EXHIBIT A-1
ALLERGY CONTROL PRODUCTS, INC.
UNAUDITED FINANCIAL STATEMENTS
MARCH 31, 2005
CONTENTS
         
    Page
     
Balance sheets
    A-1-2  
Statements of operations and accumulated deficit
    A-1-3  
Statements of cash flows
    A-1-4  
Notes to financial statements
    A-1-5  

A-1-1


 

ALLERGY CONTROL PRODUCTS, INC.
BALANCE SHEETS
(UNAUDITED)
                     
    March 31
     
    2005   2004
         
ASSETS
Current assets
               
 
Cash
  $ 79,753     $ 125,295  
 
Trade accounts receivable
    209,144       233,942  
 
Inventory
    712,053       684,059  
 
Prepaid expenses
    139,761       211,424  
             
Total current assets
    1,140,711       1,254,720  
Equipment and leasehold improvements
               
 
Furniture and equipment
    706,009       698,963  
 
Leasehold improvements
    56,100       56,100  
 
Software
    317,985       317,985  
 
Vehicle
    26,529       26,529  
             
      1,106,623       1,099,577  
 
Less accumulated depreciation and amortization
    948,882       874,468  
             
Net equipment and leasehold improvements
    157,741       225,109  
             
TOTAL ASSETS
  $ 1,298,452     $ 1,479,829  
             
 
LIABILITIES AND DEFICIENCY IN ASSETS
Current liabilities
               
 
Note payable, bank
  $     $ 250,000  
 
Note payable, stockholder
    4,850,000       4,650,000  
 
Trade accounts payable
    826,363       643,177  
 
Accounts payable, related party
          393,873  
 
Accrued expenses
    134,384       68,108  
 
Accrued termination benefits
          30,097  
 
Current portion of long-term debt
    3,826       3,799  
 
Current portion of obligation under capital lease
    3,761       3,614  
             
Total current liabilities
    5,818,334       6,042,668  
Long-term liabilities
               
 
Long-term debt, less current portion
    14,388       18,214  
 
Obligation under capital lease, less current portion
    2,921       6,682  
             
Total long-term liabilities
    17,309       24,896  
             
Total liabilities
    5,835,643       6,067,564  
             
Deficiency in assets
               
 
Common stock — no par value
               
   
Authorized 20,000 shares
               
   
Issued and outstanding — 2,000 shares
    4,000,000       4,000,000  
 
Contributed capital
    1,018,873       625,000  
 
Accumulated deficit
    (9,556,064 )     (9,212,735 )
             
Deficiency in assets
    (4,537,191 )     (4,587,735 )
             
TOTAL LIABILITIES AND DEFICIENCY IN ASSETS
  $ 1,298,452     $ 1,479,829  
             
The accompanying notes are an integral part of these financial statements

A-1-2


 

ALLERGY CONTROL PRODUCTS, INC.
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
(UNAUDITED)
                   
    Three Months Ended March 31
     
    2005   2004
         
Net sales
  $ 2,157,955     $ 2,236,101  
Cost of sales
    1,296,463       1,392,202  
             
Gross profit
    861,492       843,899  
             
Operating expenses
               
 
Selling
    251,416       260,796  
 
General and administrative expenses
    693,499       636,494  
             
Total operating expenses
    944,915       897,290  
             
Loss from operations
    (83,423 )     (53,391 )
Other income (expense)
               
 
Interest and royalty income
    570       22  
 
Interest expense
    (108 )     (4,196 )
             
Net other income (expense)
    462       (4,174 )
             
NET LOSS
    (82,961 )     (57,565 )
Accumulated deficit at beginning of period
    (9,473,103 )     (9,155,170 )
             
ACCUMULATED DEFICIT AT END OF PERIOD
  $ (9,556,064 )   $ (9,212,735 )
             
The accompanying notes are an integral part of these financial statements

A-1-3


 

ALLERGY CONTROL PRODUCTS, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
                       
    Three Months Ended
    March 31
     
    2005   2004
         
Operating activities
               
 
Net loss
  $ (82,961 )   $ (57,565 )
 
Adjustments to reconcile net loss to net cash used by operating activities:
               
   
Depreciation and amortization
    16,355       19,248  
   
Provision for uncollectible accounts
    35        
   
Provision for obsolete inventory
    (43,000 )      
   
(Increase) decrease in:
               
     
Trade accounts receivable
    12,520       (13,753 )
     
Inventory
    (52,582 )     37,124  
     
Prepaid expenses
    69,896       (80,114 )
   
Increase (decrease) in:
               
     
Trade accounts payable
    27,358       161,490  
     
Accounts payable, related party
    (393,873 )      
     
Accrued expenses
    61,371       (39,173 )
     
Accrued termination benefits
          (63,148 )
             
Net cash used by operating activities
    (384,881 )     (35,891 )
             
Investing activity — cash used in acquisition of equipment
    (5,475 )     (1,505 )
             
Financing activities
               
 
Payments of long-term borrowings
    (953 )     (945 )
 
Payments of obligation under capital lease
    (918 )     (2,078 )
 
Capital contribution from stockholder
    393,873        
             
Net cash provided (used) by financing activities
    392,002       (3,023 )
             
Increase (decrease) in cash for the period
    1,646       (40,419 )
Cash at beginning of period
    78,107       165,714  
             
CASH AT END OF PERIOD
  $ 79,753     $ 125,295  
             
SUPPLEMENTAL CASH FLOW DISCLOSURES:
               
 
Cash paid for interest during the period
  $ 108     $ 4,196  
             
Non-cash investing and financing activity — acquisition of equipment by capital lease obligation
  $     $ 11,215  
             
The accompanying notes are an integral part of these financial statements

A-1-4


 

ALLERGY CONTROL PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005
(UNAUDITED)
Note 1.  Summary of significant accounting policies
NATURE OF BUSINESS
      Allergy Control Products, Inc. (the “Company”) develops and sells products, both retail and wholesale, that decrease allergic reactions resulting from environmental factors. The Company grants credit to its wholesale customers.
Trade accounts receivable
      Trade accounts receivable are stated at the amount management expects to collect from balances outstanding. Based on management’s assessment of the credit history with customers having outstanding balances and current relationships with them, it has concluded that realization losses on balances outstanding will be immaterial.
Inventory
      Inventory is valued at the lower of cost, determined on the first-in, first-out method, or market and consists of:
                 
    March 31
     
    2005   2004
         
Materials
  $ 283,818     $ 208,994  
Work-in-process
    21,225       36,442  
Finished goods, less provision for obsolescence of $90,000 at March 31, 2005 and $193,000 at March 31, 2004
    407,010       438,623  
             
    $ 712,053     $ 684,059  
             
Equipment and leasehold improvements
      Equipment and leasehold improvements are recorded at cost and include expenditures which materially increase values or extend useful lives. Upon disposition or retirement, the cost and related accumulated depreciation or amortization are eliminated from the respective accounts, and the resulting gain or loss is included in the statement of operations. Expenditures in the nature of normal repairs and maintenance are charged to operations as incurred.
      Depreciation and amortization of equipment and leasehold improvements is recorded over the estimated useful lives of the assets using straight-line and accelerated methods.
Shipping costs
      Shipping costs are included in cost of sales and amounted to $99,873 for the three months ended March 31, 2005 and $162,289 for the three months ended March 31, 2004.
Advertising
      Advertising costs are expensed as incurred and amounted to $137,427 for the three months ended March 31, 2005 and $166,416 for the three months ended March 31, 2004.

A-1-5


 

ALLERGY CONTROL PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS — (Continued)
Income taxes
      The Company has elected by consent of its stockholder to be taxed under the provisions of Subchapter S of the Internal Revenue Code. Under those provisions, the Company does not pay federal or state corporate income taxes on its taxable income and does not receive benefit of net operating loss carryforwards or carrybacks. Instead, the Company’s taxable income or loss is included on the stockholder’s individual income tax return.
Use of estimates
      The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
Note 2.  Concentration of credit risk
      During the periods and at the balance sheet dates the Company maintained cash balances at a bank in excess of the insurance limits ($100,000) of the Federal Deposit Insurance Corporation.
Note 3.  Note payable, bank
      The Company has a line of credit with a bank, which bears interest at the bank’s prime rate. The line of credit is secured by substantially all business assets of the Company and requires, among other things, that the Company meet certain financial ratios and other covenants. The balance outstanding at March 31, 2004 was $250,000; there was no balance outstanding at March 31, 2005.
Note 4.  Note payable, stockholder
      The demand note payable to the stockholder is non-interest bearing.
Note 5.  Long-term debt
                     
    March 31
     
    2004   2003
         
Long-term debt consists of:
               
 
0.74% chattel note payable in monthly installments of $329, including interest, with a balloon payment of $13,436 due in July 2006. The note is secured by a vehicle with an original cost of $26,529
  $ 18,214     $ 22,013  
 
Less current portion
    3,826       3,799  
             
   
TOTAL LONG-TERM DEBT
  $ 14,388     $ 18,214  
             
      The maturities of long-term debt by year and in the aggregate are:
         
Year Ending March 31    
     
2006
  $ 3,826  
2007
    14,388  
       
    $ 18,214  
       

A-1-6


 

ALLERGY CONTROL PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS — (Continued)
Note 6.  Capital lease commitment
      The Company is the lessee of $332,298 of equipment under a capital lease agreement expiring in December 2006. The accumulated amortization on the equipment amounted to $304,376 at March 31, 2005 and $282,492 at March 31, 2004. Amortization of the asset under the capital lease is included in depreciation and amortization expense. Future minimum lease payments under the capital lease are:
           
Year Ending March 31    
     
2006
  $ 3,960  
2007
    2,970  
       
 
Total minimum lease payment
    6,930  
 
Less amount representing interest
    248  
       
 
Present value of minimum lease payments
    6,682  
 
Less current portion
    3,761  
       
 
Long-term portion
  $ 2,921  
       
Note 7.  Operating lease commitments
      The Company leases its office and warehouse facility under a non-cancelable operating lease expiring in October 2007. The lease requires the Company to pay property taxes and maintenance charges.
      Future minimum rental payments under the non-cancelable operating lease, excluding property taxes and maintenance charges are:
         
Year Ending March 31    
     
2006
  $ 171,902  
2007
    174,028  
2008
    88,300  
       
    $ 434,230  
       
      Rent expense amounted to $49,491 for the three months ended March 31, 2005 and $57,288 for the three months ended March 31, 2004.
Note 8.  Contributed capital
      During the three month period ended March 31, 2005 the stockholder contributed capital of $393,873.
Note 9.  Concentrations
      The Company purchases all of its fabric for a major product line, which represents approximately 70% of total fabric purchases from one mill. Additionally, approximately 25% of fabric is purchased from another mill. Although there are comparable products, a change in suppliers could cause delay in acquiring fabric, which could ultimately affect operating results.
      The Company subcontracted approximately 26% of its production activities to a fabricator in Slovakia. The inventory at this fabricator amounted to $91,325 at March 31, 2005 and $154,471 at March 31, 2004.

A-1-7


 

ALLERGY CONTROL PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS — (Continued)
Note 10.  Employee benefit plan
      The Company has a 401(k) retirement plan that provides for elective pretax contributions to the plan by all employees and for discretionary matching contributions by the Company. The Company made no contributions to the plan for the three months ended March 31, 2005 and March 31, 2004.
Note 11.  Agreement and plan of merger
      As part of an agreement and plan of merger dated March 7, 2005 with Planet Technologies, Inc. (Planet), the Company’s sole stockholder will receive 600,000 shares of Planet stock in exchange for all of his stock in the Company. Additionally, the sole stockholder will receive a payment of $1,500,000 of his note receivable and will contribute the balance of the note in the amount $3,350,000 to capital.
      The stockholder of the Company has also agreed to make a cash contribution of $500,000 to capital prior to closing to provide for termination benefits for one of the officers of the Company.
Note 12.  Going concern
      The Company incurred losses in the amount of $317,933 in 2004 and $764,141 in 2003. At March 31, 2005 the deficiency in assets amounted to $4,537,191 and current liabilities exceeded current assets by $4,677,623.
      In the event that the Company is unable to achieve profitable operating results and sufficient cash flow or the stockholder ceases to fund operations, it is uncertain the Company will be able to continue in existence. The accompanying financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and reclassification of liabilities that might be necessary should the Company be unable to continue in existence.

A-1-8


 

EXHIBIT B
FORM 10KSB
FILED WITH SEC
March 31, 2005

B-1


 

 
 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-KSB
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2004
Commission file no. 0-26804
 
PLANET TECHNOLOGIES, INC.
(Formerly Planet Polymer Technologies, Inc.)
(Name of small business issuer in its charter)
     
CALIFORNIA
(State or other jurisdiction of
incorporation of organization)
  33-0502606
(IRS Employer
identification No.)
 
6835 Flanders Drive, Suite 100
San Diego, California
(Address of principal executive offices)
  92121
(Zip Code)
Issuer’s telephone number (858) 457-4742
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, No Par Value
      Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     þ Yes     o No
      Check if there is no disclosure of delinquent filers in response to Items 405 of Regulation S-B in this form, and no disclosure will be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB.     o
      The issuer’s revenues for the year ending December 31, 2004 were $1,180,382.
      The aggregate market value of the voting stock held by non-affiliates of the Issuer as of March 11, 2005, was $1,396,595, based on the average of the 4:00 p.m. closing bid and ask prices of $1.26 as reported on the Over-the-Counter Bulletin Board.
      As of March 11, 2005, 2,180,368 shares of the Company’s Common Stock were outstanding and no shares of the Company’s Series A Preferred Stock were outstanding.
Transitional Small Business Disclosure Format (check one)     o Yes     þ No
 
 

B-2


 

PLANET TECHNOLOGIES, INC.
FORM-10KSB
Year Ended December 31, 2004
TABLE OF CONTENTS
                 
Item        
Number       Page
         
PART I.
  1.    
Description of Business
    B-4  
  2.    
Description of Property
    B-10  
  3.    
Legal Proceedings
    B-10  
  4.    
Submission of Matters to a Vote of Security Holders
    B-11  
PART II.
  5.    
Market for Common Equity, Related Stockholders Matters and Issuer Purchases of Equity Securities
    B-12  
  6.    
Management’s Discussion and Analysis or Plan of Operation
    B-12  
  7.    
Financial Statements
    B-15  
  8.    
Changes in and Disagreements With Accountants on Accounting and Financial Disclosures
    B-15  
  8A.    
Controls and Procedures
    B-15  
  8B.    
Other Items
    B-16  
PART III.
  9.    
Directors, and Executive Officers of the Registrant
    B-16  
  10.    
Executive Compensation
    B-19  
  11.    
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    B-22  
  12.    
Certain Relationships and Related Transactions
    B-24  
  13.    
Exhibits
    B-24  
  14.    
Principal Accountant Fees and Services
    B-26  
Signatures     B-27  
Power of Attorney     B-27  

B-3


 

      The letter to Shareholders and this Annual Report on Form 10-KSB contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company intends that such statements shall be protected by the safe harbors provided for in such sections. Such statements are subject to risks and uncertainties that could cause the Company’s actual results to vary materially from those projected in such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to those discussed in this section as well as those sections entitled “Risk Factors,” and in “Item 6 — Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
PART I.
ITEM 1. DESCRIPTION OF BUSINESS
Planet Technologies, Inc.
General
      On November 30, 2004, Planet acquired the business of Allergy Free, LLC, and is now engaged in the business of designing, manufacturing, selling, and distributing common products for use by allergy sensitive persons, including, without limitation, air filters, bedding, room air cleaners, and related allergen avoidance products. Allergy Free acquired its business on or about November 3, 2000, when it acquired substantially all of the assets and business of Allergy Free, L.P., a Delaware limited partnership. The business strategy is primarily based upon the marketing and selling of a complete range of branded, allergen avoidance products to its database of customers who have purchased the Allergy-Free® Electrostatic Filter. Promotion is executed primarily through direct telemarketing, supplemented with direct mail, radio, and Internet advertising. In addition, we will continue to pursue co-marketing opportunities with appropriate partners in order to increase consumer awareness and expand our customer base. We will market our products under the Allergy Free® trade name. In conjunction with these activities, Planet operates an e-commerce website for the sale of Allergy-Free® products at www.800allergy.com.
      The allergy avoidance product industry provides products and information that help people suffering from allergies or asthma to reduce the level of exposure to allergens in their environment. Market categories include: air filtration products, mold and mildew products, and products to avoid exposure to dust mites and other allergens. Market distribution channels include: direct to consumer sales, physician directed sales, the Internet, and retail. Competitors include National Allergy Supply, Mission Allergy, Allergy Control Products, Allergy Buyers Club, 3M and Sharper Image.
      On March 8, 2005, Planet entered into a definitive agreement to acquire Allergy Control Products, Inc. (“ACP”). The merger transaction will be structured pursuant to an Agreement and Plan of Merger agreed upon by both parties, and is subject to approval by each party’s respective shareholders and other contingencies. Pursuant to the terms of the merger transaction the shareholder of ACP will be issued 600,000 shares of Planet common stock. In addition, ACP debt to its shareholder in the approximate amount of $1,500,000 will be paid in full by Planet.
Products and Technologies
      There are over 65 million allergy sufferers in the US alone. The American College of Allergy and Immunology recommends avoidance as the first line of treatment. Allergy Free contracts for the manufacture and distributes products to address three main allergen areas where avoidance products can provide reduced exposure. The categories are Air Filtration, Dust Mite/ Dander avoidance, and Mold concerns.
      Air Filtration Product Category: According to the EPA the air inside houses is 3-5 times more polluted than outdoor air so providing products to clean the air inside the home is critical to any allergy management plan. Allergy Free air filters greatly reduce the amount of airborne contaminants. Planet currently markets three types of filters for forced heating and cooling systems along with vent filtration kits and HEPA room air cleaners.

B-4


 

    The Aller-Pure® Gold Filter is a permanent electrostatic washable filter. The filter is very efficient in removing particles at the 1-10 micron level. The filter is pleated and offers 2.5 times the filtering surface area of a flat filter while providing a low resistance that optimizes airflow. We offer 45 standard sizes and also manufacture custom filters to meet almost any customer need. The filters have a ten-year warranty.
 
    The Aller-Pure® MAX- (Micro-Allergen Xtractor) is the newest filter offered by the Company. The Aller-Pure MAX is rated at the highest level for residential filters. It is a pleated filter with actively electrostatic charged media. The disposable filter’s life is 2-3 months and is sold in packages of 4 filters. Currently we offer this filter in 11 standard sizes.
 
  •  We provide the Aller-Pure® Flex filters for free-standing air conditioning units and other types of heating and cooling systems often found in recreational vehicles. The flex filter is comprised of 3 layers and sewn with a trim. These filters are washable and have a three-year warranty.
 
  •  Consumers filter the loose dust from their air ducts using Allergy-Free® Vent Filtration Kits. The vent kits are sold in one month and six week supplies. Consumers are instructed to change the vent filters when dirty and replace with new product.
 
    Allergy-Free® Filter Cleaner — Used to clean the Aller-Pure® Gold and Aller-Pure® Flex filters.
 
    Allergy-Free® HEPA Room Air Cleaners are available in five different configurations to meet an individual’s needs. These freestanding units are often used when the forced heating and cooling system is not in use and/or when an individual does not have a forced air system.
      These products reduce the amount of airborne contaminants and dust in the air. The products are designed for specific customer requirements that vary based on room size, number of rooms in the house and type of heating and/or cooling system installed. Many customers will purchase and use a furnace filter, vent filtration kit, and a freestanding HEPA room air cleaner.
      Dust Mite/ Dander Avoidance Product Category: Microscopic bugs called dust mites produce potent allergens and thrive in places such as beds, upholstered furniture, and carpets. Approximately 45% of all allergy sufferers are allergic to dust mites. The Company provides a complete line of products that reduce the allergy sufferers’ exposure. Using a variety of the mite reducing products is recommended to achieve maximum relief. Customer testimonials report fewer headaches and less congestion once they have implemented a dust mite removal strategy.
    Allergy-Free® Pristine Bed and Pillow Encasings and Hypoallergenic Pillows: The Pristine® line of encasings offered by Planet is the first choice in hypo-allergenic protective bed covers to protect household members from dust mite allergens while sleeping. The Pristine® line is highly recommended by allergy physicians.
 
  •  Anti-Allergen Products for laundry and upholstery: We offer products in this category from Whirlpool, Alkaline products and Ecology Works.
 
  •  Carpet Treatments: Planet markets Capture® Carpet Cleaner, Dust Mite Control and X-Mite carpet treatments. All of these products work by either killing the dust mites or denaturing the protein rendering it to a non-allergenic state.
 
  •  Electrostatic Mops and Dusters: These mops utilize an electrostatic cloth for maximum efficiency without the use of harsh chemicals that also can be harmful to the allergy patient.
 
  •  Dander Reducing Treatments: Allerpet solutions are rubbed directly on to the animal and reduce the amount of pet dander.
      Mold Concerns Product Category: Excess mold in the environment can cause severe headaches and congestion. Allergy Free distributes a full line of products to keep the home environment to an optimum humidity level. The Damp Check Domes are used in closets and cupboards; the Allersearch AllerMold is a product used in showers and tubs. We also recommend and sell mold-free shower curtains and mats.

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Product Registrations
      Planet does not directly manufacture any product requiring EPA or FDA registration. We sell products that are registered by their manufacturers.
Licensed Technology and Intellectual Property
      Planet licenses technology associated with the production of its Aller-Pure® Gold Permanent Electrostatic Filter. The licensing agreement is with Rick L. Chapman exclusively for Allergy Free. Patent number 6,056,809. Permanent Air Filter and Method of Manufacture. Specifically a washable air filter for filtering inlet air to a heating and/or air conditioning system comprising an assembly formed of: a deformable, non-electrostatic pad of a high-loft, air laid, resin bonded polymeric fibers, 2 layers of mesh along with 2 layers of expanded steel glue in an aluminum frame. The licensing agreement is for a term of 10 years or the life of the patent or for the period of time in which Planet actively sells the Aller-Pure® Gold Permanent filter. The agreement provides for a royalty of 1.65% based on net filter sales and is paid monthly. The original agreement was dated January 1, 1997.
Research and Development
      Planet is not actively developing new products, although the Company has historically worked with consultants, filter-testing labs, media manufactures and filter manufacturers to develop new enhanced filters and product line extensions.
Government Requirements
      Planet’s sales practices are regulated at both the federal and state level. The Telephone Consumer Protection Act (the “TCPA”), which was enacted in 1991, authorized and directed the Federal Communications Commission (the “FCC”) to enact rules to regulate the telemarketing industry. In December 1992, the FCC enacted rules, which place restrictions on the methods and timing of telemarketing sales calls.
      On July 3, 2003, the FCC issued a Report and Order setting forth amended rules and regulations implementing the TCPA. The rules, with a few exceptions, became effective August 25, 2003. These rules included: (1) restrictions on calls made by automatic dialing and announcing devices; (2) limitations on the use of predictive dialers for outbound calls; (3) institution of a national “do-not-call” registry in conjunction with the Federal Trade Commission (the “FTC”); (4) guidelines on maintaining an internal “do-not-call” list and honoring “do-not-call” requests; and (5) requirements for transmitting caller identification information. The “do-not-call” restrictions took effect October 1, 2003. The caller identification requirements became effective January 29, 2004. The FCC also included rules restricting facsimile advertisements. These rules became effective January 1, 2005.
      The Federal Telemarketing Consumer Fraud and Abuse Act of 1994 authorizes the FTC to issue regulations designed to prevent deceptive and abusive telemarketing acts and practices. The FTC issued its Telemarketing Sales Rule (the “TSR”), which went into effect in January 1996. The TSR applies to most direct teleservices telemarketing calls and certain operator teleservices telemarketing calls and generally prohibits a variety of deceptive, unfair or abusive practices in telemarketing sales.
      The FTC amended the TSR in January 2003. The majority of the amendments became effective March 31, 2003. The changes that were adopted that could adversely affect Planet include, but are not limited to: (1) subjecting a portion of our calls to additional disclosure requirements from which such calls were previously exempt: (2) prohibiting the disclosure or receipt, for consideration, of unencrypted consumer account numbers for use in telemarketing; (3) additional disclosure statements relating to certain products and services; (4) additional authorization requirements for payment methods that do not have consumer protections comparable to those available under the Electronic Funds Transfer Act (“EFTA”) or the truth in Lending Act; and (5) institution of a national “do-not-call” registry. The “do-not-call” restrictions became effective October 1, 2003. Planet believes it is in compliance with the amendments.

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      The amendments to the TSR in 2003 may have a material impact on both Planet’s revenue and profitability. The addition of a national “do-not-call” list to the growing number of states that already have “do-not-call” lists has reduced the number of households that the Company may call. Approximately seventy-percent (70%) of Planet’s historical customers have placed their names on the national “do-not-call” list.
      In addition to the federal legislation and regulations, there are numerous state statutes and regulations governing telemarketing activities, which do or may apply to us. For example, some states also place restrictions on the methods and timing of telemarketing calls and require that certain mandatory disclosures be made during the course of a telemarketing call. Some states also require that telemarketers register in the state before conducting telemarketing business in the state.
      We specifically train our telemarketing representatives to handle calls in an approved manner and believe we comply in all material respects with all federal and state telemarketing regulations. There can be no assurance, however, that Planet would not be subject to regulatory challenge for a violation of federal or state law.
      Annual fees for federal registrations were $7,300 for 2004 and proposed fees for 2005 are approximately $11,000. In addition, Planet anticipates spending an additional approximately $5,000-$8,000 on state fees in 2005.
Customers of Planet
      The typical customer for the Company’s products is the residential consumer. In excess of one million customers in this category have purchased the Company products. Additionally, but on a very limited basis, we sell products to physicians offices as well as HVAC service and duct cleaning businesses.
Suppliers of Planet
      Planet acquires its products from a variety of manufacturers. The primary suppliers of the Company products include:
  American Metal Filter Company (Permanent Electrostatic Filters)
  Lifetime Filter Manufacturing, LLC (Disposable Filters)
  J. Lamb, Inc. (Bedding Encasings)
  Austin Air Systems, LTD (Room Air Cleaners)
Sales and Marketing
      We employ staff to perform and manage sales and marketing functions. Outside resources are hired on an as-needed basis to augment the internal effort. Currently Planet actively markets on the Internet, through catalog sales, and inbound and outbound telemarketing.
Employees
      As of January 1, 2005, Planet employed 9 full-time and 2 part-time employees. The company also uses periodic temporary labor, as needed.
Properties
      The Planet office is located in approximately 5400 square feet of leased office space in San Diego, California, subject to a sublease which terminates July 31, 2005. The monthly rental payment is $6,513 triple net.
Risk Factors
      Amendments to the Telemarketing Sales Rule (the “TSR”). The amendments to the TSR in 2003 may have a material impact on both Planet’s revenue and profitability. The addition of a national “do-not-call” list to the growing number of states that already have “do-not-call” lists has reduced the number of households

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that the Company may call. Approximately seventy-percent (70%) of Planet’s historical customers have placed their names on the national “do-not-call” list.
      In addition to the federal legislation and regulations, there are numerous state statutes and regulations governing telemarketing activities, which do or may apply to us. For example, some states also place restrictions on the methods and timing of telemarketing calls and require that certain mandatory disclosures be made during the course of a telemarketing call. Some states also require that telemarketers register in the state before conducting telemarketing business in the state.
      We specifically train our telemarketing representatives to handle calls in an approved manner and believe we comply in all material respects with all federal and state telemarketing regulations. There can be no assurance, however, that Planet would not be subject to regulatory challenge for a violation of federal or state law.
      We have experienced losses, we expect future losses and we may not become profitable. For the years ended December 31, 2004, and 2003, we had net losses of approximately $773,558 and $574,135, respectively. As of December 31, 2004, we had an accumulated deficit of approximately $3.7 million.
      Since we have historically incurred net losses, we expect this trend to continue until some indefinite date in the future. We may not become profitable. If we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis.
      We may require additional capital in the future which may not be available. Our future capital requirements will depend on many factors, including:
  •  the cost of manufacturing;
 
  •  developing new markets for our products;
 
  •  competing technological and market developments; and
 
  •  the costs involved in filing, prosecuting and enforcing patent claims.
      We anticipate that our existing resources combined with revenues will enable us to maintain our current and planned operations through December 31, 2005. However, changes in our plans or other events affecting our operating expenses, such as acquisition opportunities, may cause us to expend our existing resources sooner than expected.
      We may seek additional funding through private placements of stock or strategic relationships. But the uncertainty as to our future profitability may make it difficult for us to secure additional financing on acceptable terms, if we are able to secure additional financing at all. Insufficient funds may require us to delay, scale back or eliminate some or all of our activities.
      We are subject to penny stock regulations. Our common stock is not listed or qualified for listing on NASDAQ or any national securities exchange but is only sporadically traded in the over-the-counter market in the so-called OTC Bulletin Board. As a result, an investor will find it difficult to dispose of, and to obtain accurate quotations as to the value of, our common stock.
      Our common stock is classified as a penny stock by the Securities and Exchange Commission. The classification severely and adversely affects the market liquidity for our common stock. The Commission has adopted Rule 15g-9, which establishes the definition of a “penny stock” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require: (i) that a broker or dealer approve a person’s account for transactions in penny stocks; and (ii) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased. In order to approve a person’s account for transactions in penny stocks, the broker or dealer must (i) obtain financial information and investment experience objectives of the person; and (ii) make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters

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

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businesses, it is uncertain whether such funds will be available. There can be no assurance that we will be successful in raising a sufficient amount of additional capital, or if we are successful, that we will be able to raise capital on reasonable terms. If we do raise additional capital, our existing shareholders may incur substantial and immediate dilution.
      Future sales of our common stock by existing shareholders under Rule 144 or this offering could decrease the trading price of our common stock. As of December 31, 2004, a total of approximately 1,955,397 shares of outstanding common stock were “restricted securities” and could be sold in the public markets only in compliance with rule 144 adopted under the Securities Act of 1933 or other applicable exemptions from registration. Rule 144 provides that a person holding restricted securities for a period of one year may thereafter sell, in brokerage transactions, an amount not exceeding in any three-month period the greater of either (i) 1% of the issuer’s outstanding common stock or (ii) the average weekly trading volume in the securities during a period of four calendar weeks immediately preceding the sale. Persons who are not affiliated with the issuer and who have held their restricted securities for at least two years are not subject to the volume limitation. Possible or actual sales of our common stock by present shareholders under Rule 144 could have a depressive effect on the price of our common stock. We have filed a registration statement to register many of these shares, which may be sold without the above limitations when and if the registration statement becomes effective.
      Our directors and executive officers beneficially own approximately 50% of our stock, including stock options and warrants exercisable within 60 days of January 1, 2005; their interests could conflict with yours; significant sales of stock held by them could have a negative effect on our stock price; shareholders may be unable to exercise control. As of January 1, 2005, our executive officers, directors and affiliated persons were the beneficial owners of approximately 50% of our common stock, including stock options exercisable within 60 days of January 1, 2005. As a result, our executive officers, directors and affiliate persons will have significant ability to:
  •  elect or defeat the election of our directors;
 
  •  amend or prevent amendment of our articles or incorporation or bylaws;
 
  •  effect or prevent a merger, sale of assets or other corporate transaction; and
 
  •  control the outcome of any other matter submitted to the shareholders for vote.
      As a result of their ownership and positions, our directors and executive officers collectively, are able to significantly influence all matters requiring shareholder approval, including the election of directors and approval of significant corporate transactions. In addition, sales of significant amounts of shares held by our directors and executive officers, or the prospect of these sales, could adversely affect the market price of our common stock. Management’s stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of us, which in turn could reduce our stock price or prevent our shareholders from realizing a premium over our stock price.
      Absence of Dividends. We have not paid any cash dividends on our Common Stock since our inception and do not anticipate paying cash dividends in the foreseeable future.
ITEM 2. DESCRIPTION OF PROPERTY
      The executive offices are located in approximately 5,400 square feet of leased office space located at 6835 Flanders Drive, Suite 100, San Diego, California, 92121 subject to a sublease which terminates July 31, 2005. The sublease may be extended on a month-to-month basis after July 31, 2005.
ITEM 3. LEGAL PROCEEDINGS
      None.

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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
      Planet held its annual meeting on November 17, 2004 and continued that meeting on November 29, 2004. Only holders of record of Planet common stock on September 30, 2004 were entitled to notice of and to vote at the Annual Meeting. As of the record date, there were 6,582,884 (or 131,658 post reverse stock split) shares of Planet common stock outstanding.
      The following matters were voted on and approved by Planet shareholders: (1) the Agreement and Plan of Merger between Planet and Allergy Free, LLC (“Allergy Free”), wherein Planet acquired all of the assets of Allergy Free and assumed certain of the liabilities of Allergy Free; (2) the establishment of a Royalty Liquidation Trust (“Trust”) to collect royalties and other payments due under the licensing agreements with Agway, Inc. and Ryer Enterprises, LLC (“Royalty Contracts”) and distribute any such payments to the shareholders of record of Planet as of September 30, 2004, subject to paying certain expenses and maintaining a $30,000 reserve for the payment of future expenses related to the Trust and Royalty Contracts; (3) the amendment to the Restated Articles of Incorporation to effect a reverse stock split of one-for fifty; (4) the amendment to the Restated Articles of Incorporation to effect a name change from “Planet Polymer Technologies, Inc.” to “Planet Technologies, Inc.”; (5) the election of H.M. Busby, Scott L. Glenn, Robert J. Petcavich, Ph.D., Ellen Preston and Michael Trinkle to serve as Planet’s Board of Directors; (6) the amendment to the 2000 Stock Option Plan (the “Plan”) to increase the number of shares reserved for issuance under the Plan from 500,000 shares to 5,000,000 shares; and (7) the ratification of the approval of J.H. Cohn LLP to serve as Planet’s independent registered public accounting firm for the 2004 fiscal year.
      Items 5 and 7 were approved on November 17, 2004, and Items 1 through 4 and 6 were approved on November 29, 2004.
      Items 1 through 4 required and received the approval of the holders of a majority of the outstanding common stock of the Company; the five persons elected under Item 5 received the most number of votes cast; with the required quorum present, Items 6 and 7 required and received the approval of holders of a majority of the outstanding common stock of the Company present in person or represented by proxy at the meeting.
      That Proxy Statement previously filed by Planet with the Securities and Exchange Commission on October 20, 2004, and mailed out to all shareholders of record as of September 30, 2004, contains a more complete discussion of Items 1 through 7, as summarized above.

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PART II.
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
      The Company’s Common Stock trades on the OTC.BB under the symbol “PLNT.OB.” The following table sets forth the high and low sales prices of the Company’s Common Stock for the period from January 1, 2003 through December 31, 2004 as furnished by the OTC.BB. These prices reflect prices between dealers without retail markups, markdowns or commissions, and may not necessarily represent actual transactions. These prices also reflect the reverse stock split effective December 6, 2004:
                   
    Trade Prices
     
    High   Low
         
Fiscal year ended December 31, 2003
               
 
First Quarter
  $ 4.00       0.50  
 
Second Quarter
    5.00       2.50  
 
Third Quarter
    3.00       2.50  
 
Fourth Quarter
    3.50       1.50  
Fiscal year ended December 31, 2004
               
 
First Quarter
    12.50       1.75  
 
Second Quarter
    10.50       3.00  
 
Third Quarter
    3.50       2.50  
 
Fourth Quarter
    3.50       0.70  
      On March 11, 2005, the last reported sale price of the Company’s Common Stock on the Over-the-Counter Bulletin Board was $1.26 per share. As of March 11, 2005, there were approximately 194 holders of record of the Company’s Common Stock with 2,180,368 shares outstanding. The market price of shares of Common Stock, like that of the common stock of many other emerging growth companies, has been and is likely to continue to be highly volatile.
      The Company has never declared or paid a cash dividend. The Company has not paid and does not intend to pay any Common Stock dividends to Common Stock shareholders in the foreseeable future and intends to retain any future earnings to fund the Company’s operations. Any payment of dividends in the future will depend upon the Company’s earnings, capital requirements, financial condition and such other factors as the Board of Directors may deem relevant.
Recent Sales of Unregistered Securities
      During the period from November 29, 2004, through December 31, 2004, the Company entered into subscription agreements with investors for the sale of an aggregate of 258,000 shares of Company common stock at $2.50 a share. The net proceeds received by the company at December 31, 2004 totaled $645,000. The Company relied upon an exemption from registration pursuant to Section 4(2) of, and Regulation D, promulgated under, the Securities Act.
      On November 30, 2004, the Company issued 1,655,670 shares of common stock to AF Partners, LLC, and certain former members of AF Partners as consideration for the assets of Allergy Free, LLC, valued at $2.50 per share. The Company relied on Section 4(2)of, and Regulation D, promulgated under, the Securities Act, as a basis of exemption from registration.
ITEM 6. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Overview
      The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and related notes. Planet evaluates its estimates and judgments

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on an on-going basis. Planet bases its estimates on historical experience and on assumptions that it believes to be reasonable under the circumstances. Planet’s experience and assumptions form the basis for its judgments about the carrying value of its assets and liabilities that are not readily apparent from other sources. Actual results may vary from what Planet anticipates and different assumptions or estimates about the future could change Planet’s reported results. Planet believes the following accounting policies are the most critical to Planet, in that they are important to the portrayal of its financial statements and they require Planet’s most difficult, subjective or complex judgments in the preparation of its financial statements:
Revenue Recognition
      Planet recognizes revenue on its products when the product is shipped. Planet accrues a provision for estimated returns concurrent with revenue recognition. In addition, a provision for potential warranty claims is provided for at the time of sale, based upon warranty terms and the Company’s prior experience.
Allowances for Doubtful Accounts
      Allowances for doubtful accounts receivable are maintained based on historical payment patterns, aging of accounts receivable, and actual write-off history. Allowances are also maintained for future sales returns and allowances based on an analysis of recent trends of product returns.
Impairment of Long-Lived Assets
      In assessing the recoverability of its long-lived assets, Planet must make assumptions regarding estimated future cash flows and other factors to determine the fair value of the respective assets. If these estimates or their related assumptions change in the future, Planet may be required to record impairment charges for these assets.
Statements of Operations Data
      The following tables set forth certain items in Planet’s Statements of Operations for the periods indicated.
Years Ended December 31, 2004 and 2003
                                 
    2004   2003   Change   %
                 
Sales
  $ 1,180,382     $ 2,258,213       (1,077,831 )     (47.7 )
Cost of Sales
    407,811       730,801       (322,990 )     (44.2 )
Gross Profit
    772,571       1,527,412       (754,841 )     (49.4 )
Operating Expenses
    1,286,684       1,874,398       (587,714 )     (31.4 )
Loss from Operations
    (514,113 )     (346,986 )     167,127       48.2  
Other Income
                               
(Expense)
    (259,445 )     (227,149 )     32,296       14.2  
Net Loss
    (773,558 )     (574,135 )     199,423       34.7  
      Planet’s net sales decreased 47.7% from $2,258,213 for the twelve months ended December 31, 2003, to $1,180,382 for the twelve months ended December 31, 2004. This decrease was due to several factors. First, sales in 2003 were impacted positively both from the effects of radio advertising in late 2002 and early 2003 and from having two active sales locations, with two active telemarketing staffs. For most of 2004, the Company’s San Diego location was the only telemarketing group in operation. Sales in 2004 were negatively impacted by the Do Not Call (“DNC”) legislation which went into effect during the fourth quarter of 2003. Due to DNC requirements, the company was unable to telemarket its products to a segment of its existing customers.
      Cost of Sales decreased 44.2% from $730,801 for the twelve months ended December 31, 2003, to $407,811 for the twelve months ended December 31, 2004, due mainly to the associated decrease in sales revenue (units sold) and a small shift in product mix and higher distribution costs. Overall gross profit, as a

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percentage of sales, totaled 65.5% for the twelve months ended December 31, 2004, and 67.6% for the twelve months ended December 31, 2003. This change is due to a shift in product mix in the first quarter of 2004 and higher distribution and other costs resulting from the relocation to San Diego. This product mix shift was primarily due to an emphasis in the first quarter of 2004 on the sale of room air cleaners and up-selling across the Company’s product line. The Company expects its profit margin to be impacted in the future by higher distribution costs as compared to 2004 and 2003.
      Selling and general and administrative expenses decreased by 31.4% from $1,874,398 for the twelve months ended December 31, 2003, to $1,286,684 for the twelve months ended December 31, 2004. Of the $587,714 decrease, approximately $239,000 was attributable to discontinuing the national radio advertising campaign and the remainder of the decrease was related to decreased headcount and facility expenses with only one location active for most of 2004.
      The Other Income (Expense) category includes interest expense of $197,673 and other expenses of $62,671 for the twelve months ended December 31, 2004. While interest expense was up slightly ($8,211) over the prior year, other expenses increased $22,934, or 57.7% over the twelve months ended December 31, 2003. This difference was due mainly to moving costs associated with closing and moving the Company’s Houston operations to San Diego during the first quarter of 2004.
Years Ended December 31, 2003 and 2002
                                 
    2003   2002   Change   %
                 
Sales
  $ 2,258,213     $ 3,787,164       (1,528,951 )     (40.4 )
Cost of Sales
    730,801       1,211,128       (480,327 )     (39.7 )
Gross Profit
    1,527,412       2,576,036       (1,048,624 )     (40.7 )
Operating Expenses
    1,874,398       2,860,129       (985,731 )     (34.5 )
Loss from Operations
    (346,986 )     (284,093 )     62,893       22.1  
Other Income
                               
(Expense)
    (227,149 )     (245,449 )     (18,300 )     (7.5 )
Net Loss
    (574,135 )     (529,542 )     44,593       8.4  
      Net sales decreased 40.4% from $3,787,164 for the year ended December 31, 2002 to $2,258,213 for the year ended December 31, 2003. This decrease was due primarily to the decision to discontinue the national radio advertising campaign in April 2003.
      Cost of sales decreased 39.7% from $1,211,128 for the year ended December 2002 to $730,801 for the year ended December 31, 2003, due to the associated decrease in sales revenue (units sold). Overall gross profit, as a percentage of sales, was relatively constant for the years ended 2003 and 2002, at 67.6% and 68.0%, respectively. This slight decrease year over year was due to the relatively consistent product mix during the two years.
      Selling and general and administrative expenses decreased by 34.5% from $2,860,129 for the year ended December 31, 2002 to $1,874,398 for the year ended December 31, 2003. Of this $985,731 decrease, $939,000 was due to discontinuing the national radio advertising campaign and approximately $15,000 due to a reduction in lease expense in Houston during 2003, where the Company down-sized into a smaller portion of the existing space.
      The Other Income(Expense) category mainly includes interest expense which totaled $189,462 for the year ended December 31, 2003, an increase of $28,019 or 17.4% over the prior year due to higher outstanding borrowings during the 2003 year.
Off Balance Sheet Arrangements
      None.

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Liquidity And Capital Resources
      Cash and cash equivalents totaled $374,923 at December 31, 2004, compared to $128,005 at December 31, 2003. Although the Company used cash totaling $435,833 in its operations during 2004, an advance from a related party of $120,000 and proceeds from investors notes payable of $142,000 offset some of the cash used in operations. Payments totaling $226,612 were made to pay principal portions of notes payable during the year. During the fourth quarter of 2004, shares were sold to investors through a private placement offering which provided operating capital of approximately $645,000 to pay expenses incurred in the combination of Allergy Free and Planet Polymer and provide further support for sales and marketing efforts. The Company intends to continue its Private Placement Offering for an additional 90 days or more in an effort to provide more working capital and consider acquisition opportunities. No assurance can be given that the Company will be able to obtain such financing or internally generate cash flows, which may impact the Company’s ability to continue as a going concern.
      Inventories at December 31, 2004 decreased $65,128 or 77.4% to $19,012 compared to $84,140 at December 31, 2003. This decrease continues the trend started in 2003, that as sales and customer demand slipped during the year, inventory levels dropped as well, as management adjusted ordering levels to meet demand.
Recent Accounting Pronouncements
      In December 2004, the FASB issued SFAS No. 123R, “Share-Based Payment” (“SFAS 123R”), a revision of SFAS No. 123, “Accounting for Stock-Based Compensation,” requiring that the compensation cost relating to share-based payment transactions, including grants of employee stock options, be measured and recognized in the financial statements using the fair value of the compensation awards. The provisions of SFAS 123R are effective for us for the first interim or annual reporting period that begins after December 15, 2005; therefore, the Company will adopt the new requirements no later than the beginning of its first quarter of fiscal 2006. Adoption of the expensing requirements will reduce the Company’s reported earnings. Management is currently evaluating the two methods of adoption allowed by SFAS 123R; the modified-prospective transition method, and the modified-retrospective transition method.
      In November 2004, the FASB issued SFAS No. 151, “Inventory Costs, an amendment of ARB No. 43, Chapter 4” (“SFAS 151”). SFAS 151 clarifies that abnormal inventory costs such as costs of idle facilities, excess freight and handling costs, and wasted materials (spoilage) are required to be recognized as current period charges. The provisions of SFAS 151 are effective for fiscal years beginning after June 15, 2005. The adoption of SFAS 151 is not expected to have a significant impact on the Company’s financial position or results of operations.
ITEM 7. FINANCIAL STATEMENTS
      The information required by this item is included in the Appendix attached hereto.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
      None.
ITEM 8A. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
      Our independent registered public accounting firm has informed the Company of a material weakness in the Company’s internal control over financial reporting due to a lack of segregation of duties regarding the reporting and disclosure of information required to be disclosed in the reports we file with the SEC. Based upon that information, the Company has already hired a Controller and other personnel to rectify the potential concern. After these recent changes, the Company carried out an evaluation, under the supervision of our management, including our Chief Executive Officer and Chief Financial Officer, of the design and operation

B-15


 

of these new disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that with the recent changes our disclosure controls and procedures are effective in timely alerting them to material information relating to the Company required to be included in our periodic SEC filings.
CHANGES IN INTERNAL CONTROLS
      Based upon the advice of our independent registered public accounting firm, the Company has hired a Controller and other personnel to rectify the potential concern. After these recent changes, the Company carried out an evaluation, under the supervision of our management, including our Chief Executive Officer and Chief Financial Officer, of the design and operation of these new disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that with the recent changes our disclosure controls and procedures are effective in timely alerting them to material information relating to the Company required to be included in our periodic SEC filings.
ITEM 8B. OTHER ITEMS
      None.
PART III.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Directors and Executive Officers
      The names of directors and executive officers and certain information about each person is set forth below:
             
Name   Age   Principal Occupation
         
Scott L. Glenn
    54     Chairman of the Board of Directors, President and Chief Executive Officer and Business Executive
Eric B. Freedus
    55     Director, Attorney
H.M. Busby
    66     Director, Private Investor
Michael Trinkle
    51     Business Executive
Ellen M. Preston
    49     Business Consultant
Leslie White
    52     Secretary and Chief Financial Officer
Bret Megargel
    36     Vice President
      Scott L. Glenn was elected to the Board and appointed Chairman, President and Chief Executive Officer of Planet in November 2004. Since October 2000 he, or an affiliated entity controlled by him, has been the Manager and a member of Allergy Free, LLC. Mr. Glenn is also the Managing Partner of Windamere Venture Partners and its investment funds (Windamere I, LLC, Windamere II, LLC, and Windamere III, LLC), and has been since 1996. He also currently serves as a director and founder of GlobalEdge, Inc., Kanisa Pharmaceuticals, Cadence Pharmaceuticals, Veras Pharmaceuticals, Somaxon Pharmaceuticals, and Conception Technologies through SR Technology Associates. Previously, from 1988 until 1995, Mr. Glenn served as President/ CEO, and then Chairman of Quidel Corporation, a leading point of care diagnostic business. Before serving in those capacities from 1983 through 1988, Mr. Glenn was vice president of development/operations of Quidel. From 1984 to 1992, Mr. Glenn served in numerous management positions, including Division/ General Manager at Allergan Pharmaceuticals, Inc. Mr. Glenn has a Bachelor of Science degree in Finance and Accounting from California State University at Fullerton.
      Eric B. Freedus was elected to the Board in January 2005. Mr. Freedus has been an attorney in private practice since 1974 and is currently the president of the law firm of Frank and Freedus, APC. Mr. Freedus

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currently focuses his law practice in the area of special education litigation. Mr. Freedus received his undergraduate degree from the State University of New York at Buffalo in 1971 and his law degree from the University of Toledo in 1974.
      H. M. “Mac” Busby has been a director of the Company since August 1997 when he was elected by the members of the Board of Directors to fill a vacancy on the Board. Mr. Busby was President and Chief Executive Officer and Chief Financial Officer of the Company from February 2003 until November 2004. In May 2003, Mr. Busby was appointed Secretary of the Company. Mr. Busby began his career in 1966 at Wisconsin Centrifugal, Inc. which included the position of Manager of Industrial and Public Relations. Mr. Busby has also served as Vice President of Human Relations and Administration for MCA Financial, Inc., a subsidiary of MCA, Inc. Mr. Busby was Chairman of Sun Protective International and Sun-Gard USA. Mr. Busby earned his B.S. in Business Administration from Indiana University.
      Michael A. Trinkle currently serves as President of Conception Technologies, LP, and has held the position since 1993. Mr. Trinkle was also a member of Allergy Free, LLC, and served as its President from August 2001 to March 31, 2004. During the 15 years prior to joining Conception Technologies, LP, Mr. Trinkle was employed by Allergan Pharmaceuticals where he held management positions in the areas of operations, sales, marketing, and quality assurance. Mr. Trinkle was elected to the Board in November 2004.
      Ellen M. Preston was a member of Allergy Free, LLC, since October 2000. In addition to being a member of Allergy Free, LLC, since 1998, Ms. Preston has been a business consultant advising medical device companies in the areas of strategic market assessment, business development, brand development and strategy, and communications. From 2000 until 2002, Ms. Preston was a venture partner with Windamere Venture Partners. While with Windamere Venture Partners, Ms. Preston was a founder of Dexcom, Inc., a corporation engaged in the development of an implantable glucose sensor, and founded Miramedica, Inc. a company specializing in computer-aided detection. Ms. Preston served as interim president of Miramedica, Inc., which was sold to Kodak in 2003. From 1997-1998, Ms. Preston was Vice President of Sales and Marketing for Amira Medical, Inc. She held a similar position with Biopsys Medical, Inc. from 1996-1997. Ms. Preston was elected to the Board in November 2004.
      Leslie White has been the Controller of Allergy Free, LLC since late 2000 and is also a member of the Company. Prior to joining Allergy Free, LLC, Ms. White was Vice President and Controller of several privately held companies in the San Diego area and from 1990-1994 served as the Finance Manager and Controller of Quidel Corporation, a publicly-held company. Ms. White worked for the firm of Ernst & Young and was awarded a CPA certificate in 1989. Ms. White has an MBA from San Francisco State University.
      Bret Megargel most recently served from 2002 to 2004 as Vice President of Business Development for Avera Pharmaceuticals, Inc., a private pharmaceutical development company. Mr. Megargel is a co-founder of Avera, and during his tenure led the successful licensing or acquisition of three novel pharmaceutical products from global pharmaceutical companies with combined deal value of greater than US$100 million. Prior to the founding of Avera, Mr. Megargel served as a Venture Partner for Windamere Venture Partners, from 1999 to 2003, during his tenure, he served as Vice President of Business Development for MD Edge, Inc., and Director of Business Development for Converge Medical, Inc., and was a member of the founding team of Dexcom, Inc. From 1991 to 1996, Mr. Megargel served as a consultant for Marketing Corporation of America, where he was a case manager for product development, licensing and acquisition, and marketing strategy projects for market leading healthcare clients. Mr. Megargel holds a B.A. in Economics from Dartmouth College, and an M.B.A. from the Stanford University Graduate School of Business.
Board Committees and Meetings
      During 2004, the Board of Directors held five (5) meetings. The Board of Directors has an Audit Committee and a Compensation Committee. In addition, in 2004 the Company’s entire current Board acted as the Nominating Committee and nominated Scott Glenn, Michael Trinkle and Ellen Preston to serve as directors with Robert Petcavich and H. Mac Busby in compliance with the Agreement and Plan of Merger dated March 18, 2004, and entered into by and between the Company and Allergy Free, LLC. On January 18,

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2005, Robert Petcavich tendered his resignation as a director. On that same date, at a meeting of the Board of Directors, Mr. Eric B. Freedus was elected as a director of the Company.
      On November 17, 2004, Michael Trinkle and H. Mac Busby were approved as Audit Committee members. The Audit Committee is responsible for the engagement of the Company’s independent registered public accounting firm, consulting with that firm concerning the audit plan and reviewing the comments and recommendations resulting from their audit. The current Audit Committee Charter was adopted on January 25, 2005. While each of the members of the Audit Committee has significant knowledge of financial matters, neither of the Audit Committee members has been designated as an “audit committee financial expert” as defined under Item 401(e)(1) of Regulation S-B of the Securities Exchange Act of 1934, as amended. The Company believes that the current members of the Audit Committee can competently perform the functions required of them as members of the Audit Committee.
      The Audit Committee has reviewed and discussed the audited financial statements with management and it has discussed with the independent registered public accounting firm the matters required to be discussed by SAS 61. Furthermore, the Audit Committee has received the written disclosures and the letter from the independent registered public accounting firm required by Independence Standards Board Standard No. 1 and has discussed with the independent registered public accounting firm their independence and based on the review of the financial statements and discussions with management and the independent registered public accounting firm, it recommended to the Board of Directors that the audited financial statements be included in this annual report.
      On November 17, 2004, Ellen Preston and Robert Petcavich were approved as Compensation Committee members. Upon the resignation of Robert Petcavich and the election of Eric Freedus as a director, Mr. Freedus was named to replace Dr. Petcavich as a member of the Compensation Committee. The Compensation Committee is responsible for reviewing the compensation and benefits of the Company’s executive officers, making recommendations to the Board of Directors concerning the compensation and benefits of the Company’s executive officers and administering the Company’s Stock Incentive Plans.
      On November 17, 2004, Scott Glenn and Michael Trinkle were approved as Nominating Committee members The Nominating Committee will be responsible for identifying, evaluating, and recommending candidates to serve as directors of the Company and to serve as a focal point for communication between such candidates, the Board, and the Company’s management and will make recommendations to the Board of Directors concerning the nomination of candidates to be elected by the Company’s shareholders as a director of the Company.
      On January 25, 2005, the Company adopted a code of ethics for its officers and other key personnel involved in the Company’s operations.
      During 2004, each Board member attended 75% or more of the aggregate of the meetings of the Board, and of the committees on which he or she served, held during the period for which he or she was a director or committee member, respectively.
Section 16(a) Beneficial Ownership Reporting Compliance
      Section 16(a) of the Exchange Act (“Section 16(a)”) requires the Company’s directors and executive officers, and persons who own more than ten percent (10%) of a registered class of the Company’s equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of Common Stock and other equity securities of the Company. Officers, directors, and greater than ten percent (10%) shareholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file.
      To the Company’s knowledge, based solely on a review of the copies of such reports furnished to the Company and written representations that no other reports were required, during the fiscal year ended

B-18


 

December 31, 2004, all Section 16(a) filing requirements applicable to its officers, directors and greater than ten percent (10%) beneficial owners were filed. However, certain of the filings were late:
      AF Partners, LLC, filed a Form 5 on January 18, 2005, to reflect stock issuance pursuant to the Agreement and Plan of Merger between the Company and Allergy Free, dated November 30, 2004.
      Ellen Preston filed a Form 5 on January 18, 2005, to reflect stock issuance pursuant to the Agreement and Plan of Merger between the Company and Allergy Free, dated November 30, 2004.
      Leslie White filed a Form 5 on January 18, 2005, to reflect stock issuance pursuant to the Agreement and Plan of Merger between the Company and Allergy Free, dated November 30, 2004.
      Mac Busby filed a Form 5 on January 20, 2004, to reflect the issuance of stock option grant on May 19, 2003.
      Ronald Sunderland filed a Form 5 for the fiscal year ended December 31, 2004, to reflect his no longer being a director and therefore no longer subject to Section 16 reporting requirements.
ITEM 10. EXECUTIVE COMPENSATION
Compensation of Directors and Executive Officers
      Directors and Executive Officers may be granted options to purchase Common Stock under the Company’s 1995 Stock Option Plan (“1995 Option Plan”) and the 2000 Stock Incentive Plan (“2000 Incentive Plan”). As of March 2005, the Board approved an amendment to the 2000 Incentive Plan to increase the authorized number of shares to 250,000 shares, which will be submitted to the shareholders at the next meeting of shareholders.
      During 2004, options to purchase shares of the Company’s Common Stock were granted to the Company’s directors as follows: (a) on November 17, 2004, the Board granted stock options to Mr. Busby, Dr. Petcavich, Mr. Trinkle and Ms. Preston to purchase 500 shares of Planet common stock at an exercise price of $2.50 per share, and (b) on November 30, 2004, the board granted stock options to Scott Glenn to purchase 100,543 shares of Planet common stock at an exercise price of $3.50 per share.
      During 2005, the Board granted stock options to (a) Eric Freedus to purchase 10,500 shares of Planet common stock at an exercise price of $3.00 per share as compensation for serving as a director, (b) Mr. Busby, Mr. Trinkle and Ms. Preston to purchase 10,000 shares of Planet common stock at an exercise price of $3.00 per share as compensation for serving as a directors, (c) Ms. White and Mr. Megargel to purchase 30,000 shares of Planet common stock at an exercise price of $3.00 per share as compensation for serving as officers of the Company, and (d) Mr. Glenn to purchase 25,000 shares of Planet common stock at an exercise price of $3.00 per share as compensation for serving as an officer of the Company.
      Directors are reimbursed for reasonable travel expenses incurred in connection with attendance at Board meetings, or any committee meetings, or otherwise in connection with their service as a director.

B-19


 

Compensation of Executive Officers
      The following table sets forth, for the fiscal years ended December 31, 2004, 2003, and 2002 certain compensation awarded or paid to, or earned by the Company’s Executive Officers.
Summary Compensation Table
                                           
                Securities    
                Underlying    
Name and Principal Position   Year   Salary ($)   Bonus ($)   Options (#)   Other
                     
Robert J. Petcavich
    2004     $     $       500 (1)   $  
  Former Chairman of the Board     2003             $           $ 47,180 (3)
  and Chief Technical Officer     2002     $ 170,038     $           $ 3,241 (2)
H.M. Busby
    2004     $     $       500 (1)   $ 2,963 (7)
  Former Chief Executive Officer,     2003     $     $           $ 31,677 (3)
  President and Chief Financial Officer     2002     $     $           $  
Richard C. Bernier
    2004     $     $              
  Former Chief Executive Officer     2003           $           $ 19,125 (3)
  and President     2002     $ 117,713     $           $  
Scott Glenn
    2004     $     $       100,543 (4)   $  
  Chairman, Chief Executive Officer     2003     $     $           $  
  and President     2002     $     $           $  
Leslie White(6)
    2004     $ 52,031 (5)   $           $  
  Secretary and Chief Financial Officer     2003     $ 51,445 (5)   $           $  
        2002     $ 51,015 (5)   $           $  
 
(1)  Represents options granted November 17, 2004, for compensation as a director.
 
(2)  Represents auto expense reimbursement paid by the Company.
 
(3)  Represents consulting fees paid for their services to the Company in 2003.
 
(4)  Represents an option granted on November 30, 2004, with an exercise price of $3.50 per share. 25,136 of the Options granted are currently exercisable, and the remaining options to purchase 75,407 shares begin vesting on November 30, 2005.
 
(5)  Represents compensation paid by Allergy Free, LLC, prior to December 1, 2004, and by Planet after that date.
 
(6)  Ms. White is employed by Conception Technologies, L.P., a California limited partnership (“Conception”), and for the past three years has devoted approximately fifty percent (50%) of her work time to the business of the Allergy Free (and after December 1, 2004 to the business of Planet Technologies, Inc.) Allergy Free (and now Planet) reimbursed Conception for approximately fifty percent (50%) of the compensation Conception pays to Ms. White as reflected in the table.
 
(7)  Represents consulting fees paid to Mr. Busby for his services in 2004.
Stock Option Grants and Exercises
      The Company’s Executive Officers are eligible for grants of options under the Company’s 1995 Stock Option Plan (the “1995 Option Plan”) and the 2000 Stock Incentive Plan (the “2000 Incentive Plan”). As of December 31, 2004, there were no shares available for grant under the Option Plans, which was expanded to 100,000 in November 2004.
      The following table sets forth information with respect to the number of securities underlying unexercised options held by the Executive Officers as of December 31, 2004, and the value of unexercised in-the-money

B-20


 

options (i.e., options for which the current fair market value of the Common Stock underlying such options exceeds the exercise price):
                                 
    No. of            
    Securities   Percent of Total        
    Underlying   Options Granted   Exercise Price    
Name   Options   to Employees   ($/share)   Expiration Date
                 
Scott Glenn
    100,543       100%     $ 3.50       November 30, 2014  
Aggregated Option Exercises Last Fiscal Year and Fiscal Year End Option Values
                                                 
            Number of Securities    
            Underlying Unexercised   Value of Unexercised
            Options at   In-the-Money Options
    Shares       Fiscal Year End(2)   at Fiscal Year End ($)(1)
    Acquired on   Value        
Name   Exercise (#)   Realized   Exercisable   Unexercisable   Exercisable   Unexercisable
                         
R Petcavich
    1,000       -0-       250       500     $ 0     $ 0  
H. M. Busby
    2,000       -0-       360       500     $ 0     $ 0  
Scott Glenn
    -0-       -0-       25,136       75,407     $ 0     $ 0  
 
(1)  Calculated based on the estimated fair market value of the Company’s Common Stock as of December 31, 2004, less the exercise price payable upon the exercise of such options. Such estimated fair market value as of December 31, 2004, was $.70, the last transaction price posted at the close of trading on December 31, 2004.
 
(2)  The certain former directors of Planet surrendered “Out of the Money” stock options including Robert J. Petcavich, 3,294; and H.M. Busby 964.
Description of Employee Benefit Plans:
2000 Stock Incentive Plan
      Planet’s 2000 Stock Incentive Plan was approved by Planet’s shareholders at its annual meeting of shareholders on May 1, 2000. The Board of Directors reserved 500,000 shares of common stock for issuance under the 2000 Plan, together with any remaining shares of common stock eligible for issuance under the 1995 Stock Option plan which expire unexercised. A committee consisting of Planet’s Board of Directors or appointed Board members has the sole discretion to determine under which plan stock options and bonuses may be granted.
      The purpose of the 2000 Incentive Plan is similar to that of the 1995 Plan, which was to attract and retain qualified personnel, to provide additional incentives to employees, officers, directors and consultants of the Company and to promote the success of the Company’s business. As was the case under the 1995 Plan, under the 2000 Plan, Planet may grant or issue incentive stock options and non-statutory stock options to eligible participants, provided that incentive stock options may only be granted to employees of Planet. The 2000 Stock Incentive Plan also allows shares of common stock to be issued under a Stock Bonus Program through direct and immediate issuances. Similar to stock options granted under the Plan, stock bonus awards may be subjected to a vesting schedule determined by the Board of Directors. Option grants under both plans are discretionary. Options granted under both plans are subject to vesting as determined by the Board, provided that the option vests as to at least 20% of the shares subject to the option per year. The maximum term of a stock option under both plans is ten years, but if the optionee at the time of grant has voting power over more than 10% of the Company’s outstanding capital stock, the maximum term is five years under both plans. Under both plans if an optionee terminates his or her service to Planet, such optionee may exercise only those option shares vested as of the date of termination, and must affect such exercise within the period of time after termination set forth in the optionee’s option. The exercise price of incentive stock options granted under both plans must be at least equal to the fair market value of the Common Stock of the Company on the date of grant. Under both plans the exercise price of options granted to an optionee who owns stock possessing more than 10% of the voting power of Planet’s outstanding capital stock must equal at least 110% of the fair market

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value of the common stock on the date of grant. Payment of the exercise price may be made in cash, by delivery of other shares of the Company’s common stock or by any other form of legal consideration that may be acceptable to the Board.
401(k) Plan
      The Company provides a defined contribution 401(k) savings plan (the “401(k) Plan”) in which all full-time employees of the Company are eligible to participate. Eligible employees are permitted to contribute pre-tax salary to the 401(k) Plan subject to IRS limitations. Company contributions to the 401(k) Plan are at the discretion of the Board of Directors. There have been no Company contributions to the 401(k) Plan in 2004 or 2003.
Employment Agreements and Change in Control Arrangements
      The Company has entered into an employment agreement with Scott L. Glenn as President/ CEO and Chairman of the Board of the Company for a three-year period, which expires on November 29, 2007, The Company agrees to pay Mr. Glenn a salary of $100 per month (plus healthcare and other benefits) until it is determined by the Board that the Company could afford to pay compensation comparable to CEOs of other similar companies. In exchange for foregoing a salary, the Company granted to Mr. Glenn stock options exercisable at the then fair market value at such time as may be required to maintain the aggregate number of stock options granted to Mr. Glenn at an amount not less than five (5%) percent of the issued and outstanding stock of the Company (on a fully diluted basis) during his three year term of employment.
      The Company has entered into a Consulting Agreement with Dr. Petcavich pursuant to which he retains the 500 options granted to him as a director plus an hourly rate to be determined.
      Prior to November 30, 2004 the Company had an agreement with H.M. Busby whereby the Company had agreed to pay Mr. Busby $100 per hour for work he performed on behalf of the Company.
      In January 2005, the Company agreed to employ Bret Megargel as Vice President of Marketing and Business Development at an annualized salary of $96,000. In March 2005, Mr. Megargel’s annual salary was increased to $192,000. Mr. Megargel was also issued 30,000 stock options under the 2000 Stock Option Plan.
ITEM. 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCK HOLDER MATTERS
Equity Compensation Plan Information
                         
    (a)   (b)   (c)
    Number of Securities   Weighted-Average   Number of Securities Remaining
    to be Issued   Exercise Price   Available for Future Issuance
    Upon Exercise of   of Outstanding   Under Equity Compensation
    Outstanding Options,   Options, Warrants   Plans (excluding securities
Plan category   Warrants and rights   and Rights   reflected in column (a))
             
Equity compensation plans approved by security holders
    107,413     $ 8.193       None (2)
Equity compensation plans not approved by security holders(1)
    N/A       N/A       N/A  
Total
    107,413     $ 8.193       None (2)
 
(1)  The Company does not have any equity compensation plans that have not been approved by Shareholders.
 
(2)  As of March 11, 2005, the Company has granted options exceeding the number of shares authorized by the shareholders under the 2000 Stock Incentive Plan by 130,913 shares. The Board has approved an amendment to the plan to increase the authorized number of shares to 250,000 shares, which will be submitted to the shareholders at the next meeting of shareholders.

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      The following table sets forth certain information regarding the ownership of the Company’s Stock as of December 31, 2004 by: (i) each director and nominee for director; (ii) each of the Executive Officers named in the Summary Compensation Table; (iii) all executive officers and directors of the Company as a group; and (iv) all those known by the Company to be beneficial owners of more than five percent (5%) of any class of the Company’s Stock, based upon information reported to the Company or publicly available reports filed with the SEC.
                 
        Beneficial Ownership
         
        Number of   Percentage of
Title of Class   Beneficial Owner   Shares(1)   Class Owned(2)
             
Common
  Scott L. Glenn(3)   995,942     45.7 %
    6402 Cardeno Drive
La Jolla, CA 92037
           
Common
  Eric B. Freedus(4)   2,153     0.1 %
    1202 Ketner Blvd.,
Ste. 6000
San Diego, CA 92101
           
Common
  H.M. Busby(5)   7,012     0.3 %
    3852 Alameda Place
San Diego, CA 92103
           
Common
  Michael A. Trinkle(5)   55,873     2.6 %
    3495 Via Zara Court
Fallbrook, CA 92028
           
Common
  Ellen Preston(5)   26,565     1.2 %
    1825 Sheridan Avenue
San Diego, CA 92103
           
Common
  Leslie White(6)   9,312     0.4 %
    18479 Calle La Serra
Rancho Santa Fe, CA 92091
           
Common
  All executive officers and directors as a group   1,096,857     50.5 %
Common
  William and Lisa Barkett   308,456     14.1 %
    7544 Eads #F
La Jolla, CA 92037
           
Common
  J. Roberts Fosberg   158,382     7.3 %
    2440 Toyon Road
Healdsburg, CA 95448
           
Common
  Windamere III, LLC(7)   200,000     9.2 %
    6402 Cardeno Dr.
La Jolla, CA 92037
           
 
(1)  This table is based upon information supplied by officers, directors and principal shareholders and Schedules 13D and 13G filed with the Securities and Exchange Commission (the “SEC”). Unless otherwise indicated in the footnotes to this table and subject to community property laws where applicable, the Company believes that each of the shareholders named in this table has sole voting and investment power with respect to the shares indicated as beneficially owned.
 
(2)  Percentage ownership is based upon the shares outstanding on March 11, 2005.
 
(3)  Includes 770,806 shares owned by AF Partners, LLC, which is controlled by Mr. Glenn and 200,000 shares owned by Windamere III, LLC, over which Mr. Glenn shares control (see Note (5) below). Does not include options to purchase 75,407 shares which begin vesting on November 30, 2005. Does not include 25,000 shares issuable upon exercise of stock options which expire on January 25, 2015, and which begin vesting on January 25, 2006.

B-23


 

(4)  Does not include 500 shares issuable upon exercise of stock options which expire on January 18, 2015, and which begin vesting on January 18, 2006, or 10,000 shares issuable upon exercise of stock options which expire on January 25, 2015, and which begin vesting on January 25, 2006.
 
(5)  Does not include 500 shares issuable upon exercise of stock options which expire on November 17, 2014, and which begin vesting on November 17, 2005, or 10,000 shares issuable upon exercise of stock options which expire on January 25, 2015, which begin vesting on January 25, 2006.
 
(6)  Does not include 30,000 shares issuable upon exercise of stock options which expire on January 31, 2015, and which begin vesting on January 31, 2006.
 
(7)  Windamere III, LLC, is under the joint control of Mr. Glenn and St. Paul Traveler’s Companies, Inc., its affiliates Split-Rock Partners, LLC, and St. Paul Fire and Marine Insurance Company, whose business address is 385 Washington Street, St. Paul, Minnesota 55102.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
      On November 30, 2004, Planet acquired all of the assets of Allergy Free, LLC, which is the historical business described in this 10-KSB for approximately 1.65 million shares of Planet stock (after giving effect to the reverse stock split), a convertible note of $274,300, and assumption of debt. The transaction was completed pursuant to an Agreement and Plan of Merger between Planet and Allergy Free, LLC. (“Agreement”) As a result of the acquisition, Allergy Free’s historical financial information is included in the consolidated financial results of Planet. Allergy Free, LLC, was and is controlled by Scott Glenn, who became Planet’s Chairman, President and CEO.
      During the period from November 30, 2004, through January 10, 2005, Planet has sold approximately 314,000 shares to investors, pursuant to subscription agreements and in reliance upon an exception from registration provided under Regulation D. 200,000 of the shares were sold to a fund controlled by Scott Glenn.
      Since January 1, 2004, the Company has issued and sold 7,500 shares in connection with the exercise of certain stock options by current and former directors of the Company.
      Mr. Freedus requested to be named a director and the Company agreed to appoint Mr. Freedus as a director based upon his and his family’s share holdings in Planet and the Company’s evaluation of Mr. Freedus’ background and qualification to serve as a director. There are no arrangements or understandings between Mr. Freedus and any other persons regarding how long Mr. Freedus will continue to serve as a director.
      Over the previous two (2) year period, there has been no transaction or proposed transaction between the Company and Mr. Freedus.
ITEM 13. EXHIBITS.
      (a) 1. Financial Statements. Financial statements are attached as the Appendix to this report. The index to the financial statements is found on page F-1 of the Appendix.
      2. Exhibits.
         
Exhibit Number   Description
     
  2 .1(8)   Agreement and Plan of Merger dated March 18, 2004, between the Company and Allergy Free.
  2 .2(12)   Amendments to Agreement and Plan of Merger dated March 18, 2004.
  3 .1(1)   Restated Articles of Incorporation of the Registrant.
  3 .2(1)   Restated Bylaws of the Registrant.
  3 .3(11)   Certificate of Amendment of Articles of Incorporation of Company dated November 30, 2004.
  4 .1   Reference is made to Exhibits 3.1, 3.2 and 3.3.
  4 .6(1)   Specimen Stock Certificate.

B-24


 

         
Exhibit Number   Description
     
  10 .1(1)   Form of Indemnity Agreement entered into between the Registrant and certain of its executive officers and directors.
  10 .2(1)   Registrant’s 1995 Stock Option Plan (the “1995 Option Plan”).
  10 .3(1)   Form of Incentive Stock Option Grant under the 1995 Option Plan.
  10 .4(1)   Form of Non-statutory Stock Option Grant under the 1995 Option Plan.
  10 .5(1)   Agreement to Assign Proprietary Rights between the Registrant and Dr. Robert J. Petcavich.
  10 .6(1)   Form of Confidential Information Agreement entered into between the Registrant and certain former employees.
  10 .7(2)   Warrant to Purchase Common Stock, dated March 9, 2000, issued by the Registrant to LBC Capital Resources, Inc.
  10 .8(3)   Registrants 2000 Stock Incentive Plan (the “2000 Plan”).
  10 .9(3)   Form of Incentive Stock Option Grant under the 2000 Plan.
  10 .10(3)   Form of Non-statutory Stock Option Grant under the 2000 Plan.
  10 .11(5)   Warrant to purchase Common Stock, dated March 20, 2001, issued by the Registrant to LBC Capital Resources, Inc.
  10 .12(6)   Form of Sale and License Agreement dated March 2003 with Agway, Inc. (animal feed products).
  10 .13(6)   Form of Sale and License Agreement dated March 2003 with Agway, Inc. (fruit and vegetable products).
  10 .14(6)   Form of First Amendment to License Agreement with Agway, Inc.
  10 .15(13)   Form of Consulting Agreement with Robert Petcavich.
  10 .16(6)(7)   Form of Purchase Sale and License Agreement dated May 1, 2003, with Ryer Enterprises, LLC.
  10 .17(9)   Form of Amendment dated January 31, 2004, to Purchase, Sale and License Agreement with Ryer Enterprises, LLC.
  10 .18(10)   Form of Royalty Contract dated on or about June 2004 with Ryer, Inc.
  10 .19(13)   Form of Employment Agreement with Scott Glenn.
  10 .20(13)   Form of subscription agreement for 2004 private placement.
  10 .21   Form of Agreement and Plan of Merger dated March 7, 2005, with Allergy Control Products and Jonathon T. Dawson.
  10 .22   Form of Sub-Lease Agreement dated November 1, 2003, with Conception Technologies, L.P.
  10 .23   Form of License Agreement dated January 1, 1997, and amendments thereto, with Rick L. Chapman.
  10 .24   Form of Supply Agreement dated January 27, 2004, with American Metal Filter Company.
  10 .25   Form of Royalty Liquidation Trust dated as of November 29, 2004, with U.S. Bank.
  10 .26   Form of employment agreement effective February 1, 2005, with Bret Megargel.
  11 .1(2)(4)   Statement of Computation of Common and Common Equivalent Shares.
  14 .1   Code of Business Conduct and Ethics.
  23 .1   Consent of J.H. Cohn LLP.
  31 .1   Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
  31 .2   Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
  32 .1   Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
  32 .2   Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

B-25


 

 
  (1)  Previously filed as an exhibit to the Registrant’s Registration Statement on Form SB-2, as amended (No. 33-91984 LA) and incorporated herein by reference.
 
  (2)  Previously filed as an exhibit to the Registrant’s Annual Report on Form 10-KSB filed for the fiscal year ended December 31, 1999 and incorporated herein by reference.
 
  (3)  Previously filed as an exhibit to the Registrant’s Registration Statement on Form S-8 (No. 333-38500) filed on June 2, 2000 and incorporated herein by reference.
 
  (4)  Previously filed as an exhibit to the Registrant’s Quarterly Report on Form 10-QSB for the quarter ended June 30, 2000.
 
  (5)  Previously filed as an exhibit to the Registrant’s Quarterly Report on Form 10-QSB for the quarter ended March 31, 2001.
 
  (6)  Previously filed as an exhibit to the Registrant’s Annual Report on Form 10-KSB filed for the fiscal year ended December 31, 2002 and incorporated herein by reference.
 
  (7)  Previously filed as an exhibit to the Registrant’s Quarterly Report on Form 10-QSB for the quarter ended March 31, 2003.
 
  (8)  Previously filed as an exhibit to the Registrant’s Form 8K filed March 23, 2004 Report.
 
  (9)  Previously filed as an exhibit to the Registrant’s Annual Report on Form 10-KSB for the quarter ended December 31, 2003.
(10)  Previously filed as an exhibit to the Registrant’s Quarterly Report on Form 10-QSB for the quarter ended June 30, 2004.
 
(11)  Previously filed as an exhibit to the Registrant’s Form 8K filed December 16, 2004 Report.
 
(12)  Previously filed as an exhibit to Registrant’s Proxy Statement dated October 20, 2004.
 
(13)  Previously filed as an exhibit to Registrant’s SB-2 dated February 4, 2005.
ITEM 14.     PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit Fees
      For professional services rendered by the independent registered public accounting firm for the audit of the Company’s annual financial statements and review of financial statements included in the Company’s Form 10-QSB. The aggregate fees billed by the Company’s independent registered public accounting firm, J.H. Cohn LLP, for 2004 and 2003 were $34,300 and $21,850, respectively.
Audit Related Fees
      The aggregate fees billed in 2004 and 2003 by the Company’s independent registered public accounting firm for assurance and related services by the independent registered public accounting firm that are reasonably related to the performance of the audit or review of the Company’s financial statements are in the amount of $10,660 and $0, respectively.
Tax Fees
      No fees were billed in 2004 and 2003 by the Company’s independent registered public accounting firm for tax compliance, tax advice and tax planning.
All Other Fees
      No fees were billed in 2004 and 2003 by the Company’s independent registered public accounting firm for any other services, other than Audit Fees and Audit Related Fees.

B-26


 

SIGNATURES
      Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
  PLANET TECHNOLOGIES, INC.
  By:  /s/ Scott L. Glenn
  Scott L. Glenn
  Chief Executive Officer
Dated March 31, 2005
  By:  /s/ Leslie White
  Leslie White
  Chief Financial Officer and Principal Accounting Officer
Dated March 31, 2005
POWER OF ATTORNEY
      KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints H. M. Busby, his attorney-in-fact, each with the power of substitution, for him, in any and all capacities, to sign any amendments to this report, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and conforming all that each the attorney in-fact, or his substitute may do or cause to be done by virtue hereof.
      Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
             
Signature   Title   Date
         
 
/s/ Ellen Preston
 
Ellen Preston
  Director   March 31, 2005
 
/s/ H. M. Busby
 
H. M. Busby
  Director   March 31, 2005
 
/s/ Michael Trinkle
 
Michael Trinkle
  Director   March 31, 2005
 
/s/ Eric Freedus
 
Eric Freedus
  Director   March 31, 2005

B-27


 

INDEX TO FINANCIAL STATEMENTS — ITEM 7 OF FORM 10-KSB
         
Report of Independent Registered Public Accounting Firm
    B-29  
Financial Statements and Notes:
       
Balance Sheet as of December 31, 2004
    B-30  
Statements of Operations for the Years Ended December 31, 2004 and 2003
    B-31  
Statements of Shareholders’ Deficiency for the Years Ended December 31, 2004 and 2003
    B-32  
Statements of Cash Flows for the Years Ended December 31, 2004 and 2003
    B-33  
Notes to Financial Statements
    B-34  

B-28


 

Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
Planet Technologies, Inc.
      We have audited the accompanying balance sheet of Planet Technologies, Inc., formerly Planet Polymer Technologies, Inc., as of December 31, 2004, and the related statements of operations, shareholders’ deficiency and cash flows for the years ended December 31, 2004 and 2003. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
      We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
      In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Planet Technologies, Inc. as of December 31, 2004, and its results of operations and cash flows for the years ended December 31, 2004 and 2003, in conformity with accounting principles generally accepted in the United States of America.
      The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2, the Company has experienced recurring net losses resulting in a shareholders’ deficiency of $504,400, as of December 31, 2004. In addition, the Company has a working capital deficiency of $490,715 as of December 31, 2004. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans regarding this matter are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
  /s/ J.H. Cohn LLP
San Diego, California
March 4, 2005

B-29


 

PLANET TECHNOLOGIES, INC.
BALANCE SHEET DECEMBER 31, 2004
             
ASSETS
Current assets:
       
 
Cash and cash equivalents
  $ 374,923  
 
Accounts receivable, less allowance for doubtful accounts of $5,500
    3,076  
 
Inventory
    19,012  
 
Other current assets
    18,575  
       
   
Total current assets
    415,586  
Property and equipment, net
    101,070  
Other assets
    3,527  
       
   
Total
  $ 520,183  
       
 
LIABILITIES AND SHAREHOLDERS’ DEFICIENCY
Current liabilities:
       
 
Current portion of convertible notes payable to shareholder
  $ 134,475  
 
Advance from related party
    185,000  
 
Accounts payable
    224,520  
 
Accrued expenses
    353,763  
 
Interest payable
    8,543  
       
   
Total current liabilities
    906,301  
Convertible notes payable to shareholder, net of current portion
    118,282  
       
   
Total liabilities
    1,024,583  
       
Commitments and contingencies
       
 
Shareholders’ deficiency:
       
 
Preferred stock, no par value, 4,250,000 shares authorized, no shares issued or outstanding
     
 
Series A convertible preferred stock, no par value, 750,000 shares authorized, no shares issued or outstanding
     
 
Common stock, no par value, 20,000,000 shares authorized, 2,068,361 shares issued and outstanding
    3,198,296  
 
Accumulated deficit
    (3,702,696 )
       
   
Total shareholders’ deficiency
    (504,400 )
       
   
Total
  $ 520,183  
       
See notes to financial statements.

B-30


 

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

B-31


 

PLANET TECHNOLOGIES, INC.
STATEMENTS OF SHAREHOLDERS’ DEFICIENCY
Years Ended December 31, 2004 and 2003
                                 
    Common Stock        
        Accumulated    
    Shares   Amount   Deficit   Total
                 
Beginning, January 1, 2003
    1,655,670     $ 2,310,885     $ (2,355,003 )   $ (44,118 )
Net loss
                    (574,135 )     (574,135 )
              &nbs