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:
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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 Fee
computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
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(1) |
Title of each class of securities to which transaction applies: |
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Common Stock, no par value |
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(2) |
Aggregate number of securities to which transaction applies: |
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600,000 shares of Common Stock |
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(3) |
Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 |
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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. |
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(Set forth the amount on which the filing fee is calculated and
state how it was determined): |
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(4) |
Proposed maximum aggregate value of transaction: |
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þ |
Fee paid previously with preliminary materials. |
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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. |
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(1) |
Amount Previously Paid: |
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(2) |
Form, Schedule or Registration Statement No.: |
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:
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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; |
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2. To elect five (5) directors to hold office until
the next Annual Meeting of Shareholders or until their
successors are elected and qualified; |
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3. To approve the Companys 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; |
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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 |
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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.
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Sincerely, |
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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.
TABLE OF CONTENTS
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i
EXHIBIT LIST
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Exhibit A ACP Audited Financial
Statements for the One(1) Year Period Ended
December 31, 2004
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A-1 |
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Exhibit A-1 ACP Unaudited Financial
Statements for Quarter One Ended March 31, 2005
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A-1-1 |
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Exhibit B Planet Form 10-KSB Filed
With SEC March 31, 2005
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B-1 |
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Exhibit B-1 Planet Form 10-QSB
Filed with the SEC May 16, 2005
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B-1-1 |
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Exhibit C Agreement and Plan of Merger
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C-1 |
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Exhibit D California Corporations Code
Sections 1300-1312
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D-1 |
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ii
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
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Date, Time and Place of Annual Meeting |
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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. |
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Record Date: Shareholders Entitled to Vote; Quorum |
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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. |
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Vote Required |
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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. |
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Recommendation of Board
of Directors |
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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
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Companies Involved in the Merger |
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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. |
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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 |
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In the Merger, the Company will issue and deliver to the
sole-shareholder of ACP approximately 600,000 shares of the
Companys 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. |
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Reasons for the Merger |
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In approving the Merger and in recommending that the
Companys shareholders approve the Agreement and Plan of
Merger and the Merger, the Companys Board of Directors
considered a number of factors. The Company considered the
impact on combining the Companys business with ACPs
business, and the potential positive results of combining the
operations and technology of ACP with the operations and
technology of the Company. |
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Accounting Treatment |
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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. |
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Background and Negotiations Related to the Merger |
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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. |
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Material Tax Consequences to the Company and its Shareholders |
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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. |
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Dissenters Rights |
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If the Merger is approved by the required vote of the
Companys shareholders and is not abandoned or terminated,
holders of the Companys 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 Companys 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 Companys shareholders who did not vote in favor of
the Merger. |
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Vote Required to Approve Asset Purchase and Merger |
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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
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Nominees |
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There are five board nominees for the five board positions
presently authorized by the Companys current bylaws. The
names of the nominees are H. M. Busby; Scott L. Glenn; Eric B.
Freedus, Ellen Preston; and Michael Trinkle. |
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Voting |
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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. |
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PROPOSAL 3 AMENDMENT TO THE 2000 STOCK OPTION
PLAN
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Description of the 2000 Plan, as Amended |
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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. |
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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. |
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Tax Consequences |
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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. |
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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. |
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Vote Required to Approve |
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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
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Engagement of Accountant |
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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. |
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Vote Required to Approve |
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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. |
vi
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 Companys 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.
1
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
Companys 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:
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Proposal |
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Vote Required to Approve |
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Proposal 1 (Adopt and approve Agreement and Plan of Merger
and the Merger)
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Holders of a majority of the outstanding common stock. |
Proposal 2 (Elect directors)
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The five persons with the most number of votes will be elected. |
Proposal 3 (Amend 2000 Stock Option Plan)
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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)
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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
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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 Companys proxy statement and form of proxy for the
Companys 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 Companys current Bylaws, which contain additional
requirements with respect to advance notice of shareholder
proposals and director nominations.
2
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
Companys and ACPs 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:
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market acceptance of and continuing demand for its products; |
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the Companys ability to protect its intellectual property; |
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the impact of competitive products, pricing and customer service
and support; |
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the Companys ability to obtain additional financing to
support their operations; |
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obtaining and maintaining regulatory approval where required; |
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changing market conditions; and |
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other risks detailed in this proxy statement. |
You should not place undue reliance on any forward-looking
statements, which reflect the views of the Companys and
ACPs 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
Companys acquisition of ACPs 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
Companys 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.
3
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
Companys shareholders and is not abandoned or terminated,
holders of the Companys 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 Companys
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 Companys 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 Companys annual meeting. You can do
this in one of three ways:
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timely delivery of a valid, later-dated proxy by mail; |
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revoking your proxy by written notice to the corporate secretary
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voting in person by written ballot at the Company annual meeting. |
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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:
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Planet Technologies, Inc. |
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6835 Flanders Drive, Suite 100 |
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San Diego, California 92121 |
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(858) 457-4742 |
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Attention: Scott L. Glenn |
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You may also obtain additional information about the Company
from documents filed with the SEC by accessing EDGAR, the
SECs online filing system at www.sec.gov.
RISK FACTORS
Risk Factors Associated With the Merger
An investment in the Companys 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
5
the financial statements and the related notes, before you
decide whether to approve the Acquisition. The Companys
business, operating results and financial condition could be
harmed by any of the following risks. The trading price of the
Companys 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 ACPs operations, combining the operations of ACP
and the Company, and developing new markets for the
Companys and ACPs products. This integration may be
difficult and unpredictable because the Companys
operations are based in San Diego, California, and
ACPs 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 COMPANYS
STOCK PRICE TO DECLINE.
If the Merger is not completed for any reason, the
Companys 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 Companys 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 Companys and ACPs
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 ACPS PRODUCTS COULD DECLINE OR BE INHIBITED IF
CUSTOMER RELATIONSHIPS ARE DISRUPTED BY THE MERGER.
The Merger may have the effect of disrupting customer
relationships. ACPs 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. ACPs customers or potential customers may instead
purchase products of competitors. Any significant delay or
reduction in orders for ACPs products could cause the
Companys 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 Companys 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 COMPANYS 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 Companys 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 Companys
history of substantial operating losses could also severely
limit the Companys 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
Companys 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 COMPANYS 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 COMPANYS 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 Companys 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 Companys 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
Companys common stock.
Shares issued in connection with the Merger and the conversion
or exercise of convertible securities into shares of the
Companys common stock will result in substantial dilution
to the Companys 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 COMPANYS 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 Companys
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 Companys 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 Planets and ACPs 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 Planets 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:
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the cost of manufacturing our products; |
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developing new markets for our products; |
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competing technological and market developments; and |
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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
persons 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 persons 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. Steubes 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 ACPs 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 companys 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 companys 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 companys 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 companys revenue stream
until such time as replacement relationships are forthcoming.
There are risks associated with our planned growth. We
plan to grow the Companys 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 issuers 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:
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elect or defeat the election of our directors; |
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amend or prevent amendment of our articles or incorporation or
bylaws; |
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effect or prevent a merger, sale of assets or other corporate
transaction; and |
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control the outcome of any other matter submitted to the
shareholders for vote. |
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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. Managements 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, ACPs products. In addition to the negative
impact such new technologies could have on ACPs 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 ACPs 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 companys
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 companys 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 companys fabric suppliers to reformulate
fabric content to comply with guidelines not previously required
in Germany. ACPs 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
Companys 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
Companys 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:
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Information concerning the Companys and ACPs
respective businesses, prospects, business plans, financial
performance and condition, results of operations, technology and
competitive positions; |
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The compatibility of the Companys business with that of
ACPs 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; |
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The due diligence investigation conducted by the Companys
management; |
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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 |
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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:
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A stronger and more compelling portfolio of products created by
the addition of ACPs 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; |
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ACPs expertise and experience in marketing to the medical
professional; |
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ACPs 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 Companys principal executive office
will remain in San Diego, California, the Company plans to
consolidate operations of the Company and ACP into ACPs
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:
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the risk that the potential benefits sought in the Merger might
not be fully realized; |
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the dilution to the Companys existing shareholders; |
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the potential negative effect on the Companys stock price
associated with public announcement of the proposed Merger; |
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the potential negative effect on the Companys stock price
if revenue, earnings and cash flow expectations of the Company
following the Merger are not met; |
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the potential dilutive effect on the Companys common stock
price if revenue and earnings expectations for ACPs
business operations are not met; |
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the ability to successfully manage the combined operations of
the Company and ACP; and |
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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
Frees 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 Frees 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 Companys 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 ACPs 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 Planets telemarketing
services for ACPs 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 ACPs 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 Companys 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 Companys 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:
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The Companys shareholders and ACPs shareholder must
have approved and adopted the Agreement and Plan of Merger and
the related Merger. |
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No injunction or other order shall have been issued to prohibit
consummation of the Merger. |
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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. |
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The Company and ACP shall have performed all obligations
required to be performed under the Agreement and Plan of Merger. |
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The Company shall have retained Edward Steube as President and
Chief Executive Officer of ACP, as a subsidiary of the Company. |
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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. |
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Termination prior to completion of Merger
The Agreement and Plan of Merger may be terminated before the
Merger is completed:
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by mutual written consent; |
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by either party, if the Acquisition has not been completed by
September 30, 2005 through no fault of the terminating
party; |
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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:
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If ACP terminates the Agreement because: |
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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 |
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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
Companys shareholders and is not abandoned or terminated,
holders of the Companys 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 Companys
shareholders must notify the Company of their intent to dissent
and submit to the Company at its principal office the
shareholders 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
Companys shareholders who did not vote in favor of the
Merger.
Under California law, a shareholders 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:
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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; |
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There are 2,000 shares of ACP common stock currently
outstanding; |
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ACP has no subsidiaries; |
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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; |
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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; |
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ACP financial reports are in accordance with GAAP and there are
no undisclosed liabilities; |
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No litigation, claim or other proceeding before any court or
governmental agency is pending against ACP; |
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ACP is in substantial compliance with all applicable state,
federal, local and foreign statutes, laws and regulations; |
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ACP is not in default under any contract or other commitment; |
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ACP is neither a party to nor bound by any collective bargaining
agreement, or other agreement, with a labor union or labor
organization; |
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ACP has complied at all times with applicable environmental laws
and regulations; |
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ACP tax returns have been, or will be, filed in a timely manner; |
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ACP books and records have been fully, properly and accurately
maintained in all material respects; |
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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; |
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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; |
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Each of the leases in ACPs name are valid and existing in
full force and effect; and |
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ACP has good title to its properties and assets. |
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The Company made representations and warranties to ACP relating
to, among other things:
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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; |
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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; |
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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; |
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Company has no subsidiaries; |
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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; |
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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 the Company in
connection with the Agreement and Plan of Merger; |
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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; |
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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; |
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The Company has complied at all times with applicable
environmental laws and regulations; and |
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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. |
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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 Companys 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
Companys Board. In addition, Edward J. Steube would,
subject to Board approval, be granted a stock option under the
terms of the Companys 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.
MANAGEMENTS DISCUSSION OF THE COMPANY
Description of the Companys Business
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 Companys business, products, and properties are more
fully described in the Companys 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 Companys 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 Companys 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:
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|
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
Companys 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 Companys 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
Companys operations. Any payment of dividends in the
future will depend upon the Companys earnings, capital
requirements, financial condition and such other factors as the
Board of Directors may deem relevant.
20
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, Planets 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 Companys
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.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Please see the Companys Form 10-KSB, which was filed
with the SEC on March 31, 2005, and the Companys
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 Companys
managements discussion and analysis of financial condition
and results of operation.
FINANCIAL STATEMENTS
Please see the Companys Form 10-KSB, which was filed
with the SEC on March 31, 2005, and the Companys
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
ACPS BUSINESS
Description of ACPs Business
Allergy Control Products, Inc. (ACP) is a supplier
of indoor allergen avoidance products. ACPs core business
strategy is to supply a complete range of high quality products
to physicians 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
21
through ACPs 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 ACPs 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, ACPs primary competitors
are National Allergy Supply, Asthma and Allergies Technology,
Allergy Solutions and Mission Allergy.
|
|
|
Seasonality of ACPs Business, Competitive
Conditions, Regulatory Environment. |
ACPs 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. ACPs 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 ACPs 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. Its Pristine® Complete and
Pristine® Relief encasings use micro-fiber fabrics.
ACPs 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 its Pristine® Complete
encasings, ACPs 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 ACPs 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. |
22
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 ACPs 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. |
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.
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.
The primary customer for ACPs products is the consumer who
is an allergy sufferer. In addition, a limited number of
domestic retailers purchase ACPs 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.
ACPs sales are primarily retail sales. In 2004, ACPs
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.
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
23
100. ACPs 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 ACPs specifications.
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.
As of March 31, 2005, ACP employed 10 full-time and
23 part-time employees.
As of March 31, 2005, ACPs 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 (Intl and Domestic)
|
|
|
2 |
|
Operations/ IT
|
|
|
3 |
|
Marketing
|
|
|
1 |
|
Purchasing
|
|
|
2 |
|
TOTAL
|
|
|
33 |
|
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.
None
ACPS MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION
ACPs managements discussion and analysis of
financial condition and results of operations contain
forward-looking statements, which involve risks and
uncertainties. ACPs 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. ACPs 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.
24
Actual results may vary from what ACP anticipates and different
assumptions or estimates about the future could change
ACPs reported results. ACP believes the following
accounting policies are most critical to it, in that they are
important to the portrayal of its financial statements and
they require ACPs 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 ACPs 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 ACPs
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 ACPs largest international distributor. Second,
competition and insurance reimbursement systems generally
continued to put pressure on pricing for allergen
25
barrier bedding products. And third, newly introduced consumer
product testing programs in Germany temporarily put ACPs
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 companys 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 Companys 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 ACPs
working capital and $200,000 was provided out of proceeds of
borrowings from the stockholder.
26
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
managements 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
Companys 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 ACPs Ridgefield, Connecticut facility and
develop new markets for Planets and ACPs 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 Companys financial position or
results of operations.
CONTROLS AND PROCEDURES
ACPs management, with the participation of ACPs
Chief Executive Officer, has evaluated the effectiveness of the
ACPs disclosure controls and procedures as of
March 31, 2005. Based on this evaluation, ACPs Chief
Executive Officer concluded that the ACPs 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 ACPs internal control over
financial reporting that materially affected, or are reasonably
likely to materially affect, ACPs internal control over
financial reporting.
THE COMPANYS 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
27
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:
|
|
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|
|
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.
28
PLANET TECHNOLOGIES, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
March 31, 2005
|
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|
|
|
|
|
|
|
|
|
|
|
|
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.
29
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.
30
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.
31
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 ACPs 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 Planets 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 ACPs
sole-shareholder.
d. To eliminate ACPs (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 Companys 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 directors 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.
32
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
33
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 Companys 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 Companys 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 Companys executive
officers, making recommendations to the Board of Directors
concerning the compensation and benefits of the Companys
executive officers and administering the Companys 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 Companys management and
will make recommendations to the Board of Directors concerning
the nomination of candidates to be elected by the Companys
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
Companys 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.
34
Section 16(a) Beneficial Ownership Reporting
Compliance
Section 16(a) of the Exchange Act
(Section 16(a)) requires the Companys
directors and executive officers, and persons who own more than
ten percent (10%) of a registered class of the Companys
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 Companys 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.
36
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth certain information regarding the
ownership of the Companys 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 Companys 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. |
|
37
|
|
(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 Travelers 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 Companys 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 Companys
Common Stock were granted to the Companys 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 $3.00 per share as compensation for
serving as an officer of the Company.
Directors are reimbursed for reasonable travel expenses incurred
in connection with attendance at Board meetings, or any
committee meetings, or otherwise in connection with their
service as a director.
38
Compensation of Executive Officers
The following table sets forth, for the fiscal years ended
December 31, 2003, 2002, and 2001 certain compensation
awarded or paid to, or earned by the Companys Executive
Officers.
Summary Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities | |
|
|
|
|
|
|
|
|
|
|
Underlying | |
|
|
Name and Principal Position |
|
Year |
|
Salary($) | |
|
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 $3.50 per share. 25,136 of the Options
granted are currently exercisable, and the remaining options to
purchase 75,407 shares begin vesting on
November 30, 2005. |
|
(5) |
Represents compensation paid by Allergy Free, LLC, prior to
December 1, 2004, and by Planet after that date. |
|
(6) |
Ms. White is employed by Conception Technologies, L.P., a
California limited partnership (Conception), and for
the past three years has devoted approximately fifty percent
(50%) of her work time to the business of the Allergy Free (and
after December 1, 2004 to the business of Planet
Technologies, Inc.) Allergy Free (and now Planet) reimbursed
Conception for approximately fifty percent (50%) of the
compensation Conception pays to Ms. White as reflected in
the table. |
|
(7) |
Represents consulting fees paid to Mr. Busby for his
services in 2004. |
Stock Option Grants and Exercises
The Companys Executive Officers are eligible for grants of
options under the Companys 1995 Stock Option Plan (the
1995 Option Plan) and the 2000 Stock Incentive Plan
(the 2000 Incentive Plan). As of December 31,
2004, there were no shares available for grant under the Option
Plans, which was expanded to 100,000 in November 2004.
39
The following table sets forth information with respect to the
number of securities underlying unexercised options held by the
Executive Officers as of March 31, 2005, and the value of
unexercised in-the-money options (i.e., options for which the
current fair market value of the Common Stock underlying such
options exceeds the exercise price):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No. of | |
|
|
|
|
|
|
|
|
Securities | |
|
Percent of Total | |
|
|
|
|
|
|
Underlying | |
|
Options Granted | |
|
Exercise Price | |
|
|
Name |
|
Options | |
|
to Employees | |
|
($/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
Companys 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. |
40
DESCRIPTION OF EMPLOYEE BENEFIT PLANS
2000 Stock Incentive Plan
Planets 2000 Stock Incentive Plan was approved by
Planets 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 Planets
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 Companys 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 Companys 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 optionees 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 Planets 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 Companys
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. Glenns
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
41
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 Companys 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. Megargels 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 Companys 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
Frees historical financial information is included in the
consolidated financial results of Planet. Allergy Free, LLC, was
and is controlled by Scott Glenn, who became Planets
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 familys share holdings in Planet and the
Companys 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.
42
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 optionees 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
Companys 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
Companys assets in complete liquidation or dissolution of
the Company the sale, transfer or other disposition of all or
substantially all of the Companys 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 Companys 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
Companys 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 optionees 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 participants
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 Companys ACP
subsidiary. Information concerning stock option grants to the
Companys 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
Companys 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 Companys financial statements since 2001. Previously,
PricewaterhouseCoopers LLP audited the Companys 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 Companys independent registered public accounting firm
is not required by the Companys 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 Companys
annual financial statements and review of the unaudited
financial statements included in the Companys quarterly
reports on Form 10-QSB. The aggregate fees billed by the
Companys 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 Companys
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 Companys financial statements are in the amount of
$10,660 and $0, respectively.
Tax Fees
No fees were billed in 2004 and 2003 by the Companys
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 Companys
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 AUDITORS REPORT,
FINANCIAL STATEMENTS
AND
OTHER FINANCIAL INFORMATION
DECEMBER 31, 2004
A-1
ALLERGY CONTROL PRODUCTS, INC.
CONTENTS
December 31, 2004
|
|
|
|
|
|
|
Page | |
|
|
| |
Independent auditors 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 AUDITORS 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 Companys 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.
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 |
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 managements 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.
ACPs trade accounts receivable balance at
December 31, 2004 was $221,699 compared to $220,189 at
December 31, 2003.
ACPs primary business is domestic retail sales, where
payment typically is made by credit card. Accordingly,
ACPs trade accounts receivable balance is relatively
small, currently representing less than 3% of ACPs total
annual net sales.
ACPs international wholesale business, which is
approximately 10% of total sales, is primarily responsible for
ACPs 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 ACPs
trade accounts receivable balance on December 31, 2004
compared to December 31, 2003.
ACPs 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 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 of $452,453 for 2004 and $472,288 for 2003 are
included in cost of sales.
The Company expenses advertising costs as they are incurred.
Advertising expenses amounted to $586,060 in 2004 and $713,085
in 2003.
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 Companys taxable income or
loss is included on the stockholders individual income tax
return.
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.
ACP recognizes revenue upon physical shipment of product.
Management believes that this policy is in compliance with
guidance available in SAB 104.
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.
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
|
|
|
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 Companys
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.
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
managements 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 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 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 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)
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 Companys taxable income or
loss is included on the stockholders individual income tax
return.
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 banks 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
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 Companys
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.
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)
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CALIFORNIA
(State or other jurisdiction of
incorporation of organization) |
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33-0502606
(IRS Employer
identification No.) |
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6835 Flanders Drive, Suite 100
San Diego, California
(Address of principal executive offices)
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92121
(Zip Code) |
Issuers 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 registrants
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 issuers 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
Companys Common Stock were outstanding and no shares of
the Companys 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
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PART I. |
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1. |
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Description of Business
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B-4 |
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2. |
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Description of Property
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B-10 |
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3. |
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Legal Proceedings
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4. |
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Submission of Matters to a Vote of Security Holders
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B-11 |
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PART II. |
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5. |
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Market for Common Equity, Related Stockholders Matters and
Issuer Purchases of Equity Securities
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B-12 |
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6. |
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Managements Discussion and Analysis or Plan of Operation
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B-12 |
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7. |
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Financial Statements
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B-15 |
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8. |
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Changes in and Disagreements With Accountants on Accounting and
Financial Disclosures
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B-15 |
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8A. |
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Controls and Procedures
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B-15 |
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8B. |
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Other Items
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PART III. |
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9. |
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Directors, and Executive Officers of the Registrant
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B-16 |
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10. |
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Executive Compensation
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B-19 |
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11. |
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Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters
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B-22 |
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12. |
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Certain Relationships and Related Transactions
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B-24 |
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13. |
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Exhibits
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B-24 |
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14. |
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Principal Accountant Fees and Services
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B-26 |
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Signatures |
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B-27 |
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Power of Attorney |
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B-27 |
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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 Companys 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 Managements Discussion and
Analysis of Financial Condition and Results of Operations.
PART I.
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ITEM 1. |
DESCRIPTION OF BUSINESS |
Planet Technologies, Inc.
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 partys
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.
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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
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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. |
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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 filters life is 2-3 months and is sold in
packages of 4 filters. Currently we offer this filter in 11
standard sizes. |
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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. |
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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. |
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Allergy-Free® Filter Cleaner Used to
clean the Aller-Pure® Gold and Aller-Pure® Flex
filters. |
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Allergy-Free® HEPA Room Air Cleaners are available in
five different configurations to meet an individuals
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.
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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. |
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Anti-Allergen Products for laundry and upholstery: We
offer products in this category from Whirlpool, Alkaline
products and Ecology Works. |
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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. |
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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. |
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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.
B-5
Planet does not directly manufacture any product requiring EPA
or FDA registration. We sell products that are registered by
their manufacturers.
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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.
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.
Planets 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.
B-6
The amendments to the TSR in 2003 may have a material impact on
both Planets 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 Planets 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.
The typical customer for the Companys 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.
Planet acquires its products from a variety of manufacturers.
The primary suppliers of the Company products include:
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American Metal Filter Company (Permanent Electrostatic Filters) |
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Lifetime Filter Manufacturing, LLC (Disposable Filters) |
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J. Lamb, Inc. (Bedding Encasings) |
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Austin Air Systems, LTD (Room Air Cleaners) |
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.
As of January 1, 2005, Planet employed 9 full-time and
2 part-time employees. The company also uses periodic
temporary labor, as needed.
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.
Amendments to the Telemarketing Sales Rule (the
TSR). The amendments to the TSR in 2003 may have
a material impact on both Planets 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
B-7
that the Company may call. Approximately seventy-percent (70%)
of Planets 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:
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the cost of manufacturing; |
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developing new markets for our products; |
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competing technological and market developments; and |
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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
persons 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 persons 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
B-8
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 Companys 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
B-9
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 issuers 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:
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elect or defeat the election of our directors; |
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amend or prevent amendment of our articles or incorporation or
bylaws; |
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effect or prevent a merger, sale of assets or other corporate
transaction; and |
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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. Managements 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.
B-10
|
|
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 Planets 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 Planets 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.
B-11
PART II.
|
|
ITEM 5. |
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS |
The Companys 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 Companys 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
Companys 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 Companys 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
Companys operations. Any payment of dividends in the
future will depend upon the Companys 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. |
MANAGEMENTS 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
B-12
on an on-going basis. Planet bases its estimates on historical
experience and on assumptions that it believes to be reasonable
under the circumstances. Planets 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 Planets 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 Planets 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 Companys 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 Planets
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 |
|
Planets 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
Companys 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
B-13
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 Companys 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 Companys 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.
B-14
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 Companys 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 Companys 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 Companys 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 Companys
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.
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
B-16
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 Companys 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,
B-17
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 Companys 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 Companys executive
officers, making recommendations to the Board of Directors
concerning the compensation and benefits of the Companys
executive officers and administering the Companys 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 Companys management and
will make recommendations to the Board of Directors concerning
the nomination of candidates to be elected by the Companys
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
Companys 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 Companys
directors and executive officers, and persons who own more than
ten percent (10%) of a registered class of the Companys
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 Companys 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 Companys 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 Companys
Common Stock were granted to the Companys 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 $3.00 per share as compensation for
serving as an officer of the Company.
Directors are reimbursed for reasonable travel expenses incurred
in connection with attendance at Board meetings, or any
committee meetings, or otherwise in connection with their
service as a director.
B-19
Compensation of Executive Officers
The following table sets forth, for the fiscal years ended
December 31, 2004, 2003, and 2002 certain compensation
awarded or paid to, or earned by the Companys Executive
Officers.
Summary Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities | |
|
|
|
|
|
|
|
|
|
|
Underlying | |
|
|
Name and Principal Position |
|
Year | |
|
Salary ($) | |
|
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 $3.50 per share. 25,136 of the Options
granted are currently exercisable, and the remaining options to
purchase 75,407 shares begin vesting on
November 30, 2005. |
|
(5) |
Represents compensation paid by Allergy Free, LLC, prior to
December 1, 2004, and by Planet after that date. |
|
(6) |
Ms. White is employed by Conception Technologies, L.P., a
California limited partnership (Conception), and for
the past three years has devoted approximately fifty percent
(50%) of her work time to the business of the Allergy Free (and
after December 1, 2004 to the business of Planet
Technologies, Inc.) Allergy Free (and now Planet) reimbursed
Conception for approximately fifty percent (50%) of the
compensation Conception pays to Ms. White as reflected in
the table. |
|
(7) |
Represents consulting fees paid to Mr. Busby for his
services in 2004. |
Stock Option Grants and Exercises
The Companys Executive Officers are eligible for grants of
options under the Companys 1995 Stock Option Plan (the
1995 Option Plan) and the 2000 Stock Incentive Plan
(the 2000 Incentive Plan). As of December 31,
2004, there were no shares available for grant under the Option
Plans, which was expanded to 100,000 in November 2004.
The following table sets forth information with respect to the
number of securities underlying unexercised options held by the
Executive Officers as of December 31, 2004, and the value
of unexercised in-the-money
B-20
options (i.e., options for which the current fair market value
of the Common Stock underlying such options exceeds the exercise
price):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No. of | |
|
|
|
|
|
|
|
|
Securities | |
|
Percent of Total | |
|
|
|
|
|
|
Underlying | |
|
Options Granted | |
|
Exercise Price | |
|
|
Name |
|
Options | |
|
to Employees | |
|
($/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
Companys 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 |
Planets 2000 Stock Incentive Plan was approved by
Planets 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 Planets
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 Companys 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 Companys 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 optionees 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 Planets outstanding capital stock
must equal at least 110% of the fair market
B-21
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 Companys common stock or by any other form of legal
consideration that may be acceptable to the Board.
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. Megargels 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. |
B-22
The following table sets forth certain information regarding the
ownership of the Companys 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 Companys 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 Travelers 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
Frees historical financial information is included in the
consolidated financial results of Planet. Allergy Free, LLC, was
and is controlled by Scott Glenn, who became Planets
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 familys share holdings in Planet and the
Companys 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.
(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) |
|
Registrants 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 Registrants
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 Registrants 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 Registrants
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 Registrants
Quarterly Report on Form 10-QSB for the quarter ended
June 30, 2000. |
|
|
(5) |
Previously filed as an exhibit to the Registrants
Quarterly Report on Form 10-QSB for the quarter ended
March 31, 2001. |
|
|
(6) |
Previously filed as an exhibit to the Registrants 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 Registrants
Quarterly Report on Form 10-QSB for the quarter ended
March 31, 2003. |
|
|
(8) |
Previously filed as an exhibit to the Registrants
Form 8K filed March 23, 2004 Report. |
|
|
(9) |
Previously filed as an exhibit to the Registrants Annual
Report on Form 10-KSB for the quarter ended
December 31, 2003. |
|
|
(10) |
Previously filed as an exhibit to the Registrants
Quarterly Report on Form 10-QSB for the quarter ended
June 30, 2004. |
|
(11) |
Previously filed as an exhibit to the Registrants
Form 8K filed December 16, 2004 Report. |
|
(12) |
Previously filed as an exhibit to Registrants Proxy
Statement dated October 20, 2004. |
|
(13) |
Previously filed as an exhibit to Registrants 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 Companys
annual financial statements and review of financial statements
included in the Companys Form 10-QSB. The aggregate
fees billed by the Companys 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 Companys
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 Companys financial statements are in the
amount of $10,660 and $0, respectively.
Tax Fees
No fees were billed in 2004 and 2003 by the Companys
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 Companys
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. |
|
|
|
Scott L. Glenn |
|
Chief Executive Officer |
Dated March 31, 2005
|
|
|
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 Companys
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 Companys ability to continue as a going concern.
Managements 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.
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 |