DEF 14A

SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934

Filed by the Registrant	n
Filed by a Party other than the Registrant	o

Check the appropriate box:

o             Preliminary Proxy Statement
o             Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
n              Definitive Proxy Statement
o             Definitive Additional Materials
oSoliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12

Planet Polymer Technologies, Inc.
(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box)
o           No fee required.
n            Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

1. Title of each class of securities to which transaction applies:

Common Stock, $.01 par value

2. Aggregate number of securities to which transaction applies:

82,732,970 shares of Common Stock

3. Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11

The proposed aggregate value of the transaction for purposes of calculating the filing fee is $5,000,233.68. The aggregate value was determined by (a) multiplying (i) 82,732,970 shares of common stock that are proposed to be exchanged by (ii) $0.06 which represents the market value of each share of Common Stock to be acquired in the acquisition, plus (b) $274,300.00,which represents the maximum value of the note to be acquired in the acquisition.

(Set forth the amount on which the filing fee is calculated and state how it was determined):

4.	Proposed maximum aggregate value of transaction:
	$5,000,233.68
5.	Total fee paid:
	$1,000.05

n	Fee paid previously with preliminary materials.
o	Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

1.     Amount Previously Paid:

2.     Form, Schedule or Registration Statement No.:

3.     Filing Party:

4.     Date Filed:

PLANET POLYMER TECHNOLOGIES, INC.
6835 Flanders Drive, Suite 100
San Diego, California 92121

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 17, 2004

DEAR SHAREHOLDERS:

Notice is hereby given that the Annual Meeting of Shareholders of Planet Polymer Technologies, Inc., a California corporation (the “Company”), will be held on November 17, 2004, at 10:00 a.m. local time, at 800 Silverado Street, Second Floor, La Jolla, California 92037 for the following purpose:

1.	To adopt and approve the Asset Purchase Agreement, dated March 18, 2004, and as amended June 11, 2004 and October 6, 2004, between Allergy Free, L.L.C., a California limited liability company (“Allergy Free”) and the Company, and to approve the acquisition whereby the Company will acquire substantially all of the assets of Allergy Free and assume certain liabilities of Allergy Free (the “Acquisition”).
2.	To approve the distribution of the cash and right to receive royalty payments to a trust for the benefit of, and distribution to, the Company’s current shareholders;
3.	To approve a reverse stock-split of the Company’s Common Stock whereby each fifty (50) outstanding shares of Common Stock will be consolidated into one (1) share of Common Stock;
4.	To change the name of the Company to Planet Technologies, Inc.;
5.	To elect five (5) directors to hold office until the next Annual Meeting of Shareholders or until their successors are elected and qualified;
6.	To approve the Company’s 2000 Stock Option Plan, as amended, to increase the aggregate number of shares of common stock reserved for issuance under such plan;
7.	To approve the engagement of J.H. Cohn L.L.P. its independent registered public accounting firm for the fiscal year ended December 31, 2004; and
8.	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. The approval of 1 through 4 above are contingent upon all such proposals being approved. The failure to approve any of such proposals will in effect be a failure of all such proposals to be approved. 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 September 30, 2004, are entitled to notice of and to vote at the Annual Meeting and any adjustments thereof. A complete list of shareholders entitled to vote at the Annual Meeting will be available at the meeting.

	Sincerely,
	H. M. Busby
San Diego, California
October 19, 2004

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.

TABLE OF CONTENTS

Proxy Statement Summary Term Sheet	v
The Annual Meeting	v
Proposal 1- Allergy Free Asset Purchase	v
Proposal 2- Distribution of Royalty Rights	vi
Proposal 3- Approve Reverse Split of Common Stock	vii
Proposal 4- Approve Name Change	viii
Proposal 5- Election of Directors	viii
Proposal 6- Amendment to the 2000 Stock Option Plan	viii
Proposal 7- Ratify Appointment of J.H. Cohn LLP,
Independent Registered Public Accounting Firm	ix
Introduction	1
General Information-Solicitation, Voting Rights, and Outstanding Shares	1
How to Vote	2
Revocability of Proxies	2
Votes Required to Approve Proposals	2
Board Recommendations	2
Dissenters’ Rights	3
Shareholder Proposals	3
Statement Regarding Forward-Looking Information	3
Proposal 1 – Allergy Free Asset Purchase	4
Overview	4
The Acquisition	4
Summary of the Acquisition	7
The Asset Purchase Agreement	11
Management’s Discussion of the Company	13
Description of Company’s Business	13
Market for Common Equity and Related Stockholder Matters	15
Recent Sales of Unregistered Securities	15
Management’s Discussions and Analysis of Financial Condition and Results of Operations	15
Financial Statements	16
Changes in and Disagreements with Accountants on Accounting and Financial Disclosures	16
Controls and Procedures	16
Allergy Free’s Business	16
Allergy Free’s Management’s Discussion and Analysis of Financial Condition	20
Allergy Free Financial Statements	23

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The Company’s Unaudited Pro Forma Financial Information	24
Questions and Answers About the Acquisition	30
Risk Factors Associated with the Acquisition	33
Proposal 2- Distribution of Royalty Rights to Trust	38
Description of Trust	38
Questions and Answers about Trust	39
Risk Factors Associated with Trust	41
Proposal 3- Reverse Stock Split	42
Proposal to Amend Articles of Incorporation to Effect a One-For-Fifty Reverse
Stock Split of Common Stock	42
General	42
Reasons for Reverse Stock Split	44
Fractional Shares	44
Increase in Authorized Unissued Shares	44
Implementation of Reverse Stock Split	46
Exchange of Stock Certificates	47
Federal Income Tax Consequences	47
Risks Associated with Reverse Stock Split	48
Proposal 4- Name Change	48
Proposal 5- Election of Directors	49
Nominees	49
Board Committees and Meetings	50
Beneficial Ownership	51
Additional Information	51
Security Ownership of Certain Beneficial Owners and Management	51
Executive Compensation	52
Summary Compensation Table	53
Stock Option Grants and Exercises	53
Aggregated Option Exercises	54
Description of Employee Benefit Plans	55
Employment Agreements and Change in Control Arrangements	55
Certain Relationships and Related Transactions	56
Questions and Answers Regarding Election of Directors	57
Proposal 6- Amendment to the 2000 Stock Option Plan	58
Introduction	58
Description of the 2000 Plan, as Amended	58
Proposal 7- Ratification of Selection of Independent Registered Public Accounting Firm	61

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Proposal 8- Other Matters	61
PROXY	62

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EXHIBIT LIST

Exhibit “A” – Allergy Free Audited Financial Statements and Unaudited
Condensed Financial Statements	A-1
Exhibit “B” – Planet Form 10KSB/ A Filed With SEC August 13, 2004	B-1
Exhibit “B1” – Planet Form 10QSB/ A Filed With SEC August 13, 2004	B1-1
Exhibit “C” – Asset Purchase Agreement	C-1
Exhibit “C1” – First Amendment to Asset Purchase Agreement	C1-1
Exhibit “C2” – Second Amendment to Asset Purchase Agreement	C2-1
Exhibit “D” – Proposed Royalty Liquidation Trust Agreement	D-1
Exhibit “E” – Proposed Amendment to Articles of Incorporation	E-1
Exhibit “F” – California Corporations Code Sections 1300-1312	F-1

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PLANET POLYMER TECHNOLOGIES, INC.
6835 Flanders Drive, Suite 100
San Diego, California 92121

PROXY STATEMENT
SUMMARY TERM SHEET

THIS SUMMARY MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. FOR A MORE COMPLETE UNDERSTANDING OF THE INFORMATION CONTAINED IN THIS PROXY STATEMENT, YOU SHOULD READ THE ENTIRE PROXY STATEMENT CAREFULLY, AS WELL AS THE ADDITIONAL DOCUMENTS TO WHICH IT REFERS.

THE ANNUAL MEETING

Date, Time and Place of Annual
Meeting	The Annual Meeting will be held on November 17, 2004 beginning at 10:00 a.m., La Jolla time, at 800 Silverado Street, La Jolla, CA 92037.
Record Date: Shareholders Entitled
to Vote; Quorum	Only holders of record of Planet common stock on September 30, 2004 are entitled to notice of and to vote at the Annual Meeting. As of the record date, there were 6,582,884 shares of Planet common stock outstanding. The presence, in person or by proxy, of the holders of a majority of our common stock will constitute a quorum.
Vote Required	Holders of a majority of the outstanding common stock are required to vote in favor of Proposals 1, 2, 3, and 4 for such proposals to pass; the five persons with the most number of votes will be elected directors pursuant to Proposal 5; and assuming a quorum is present, holders of a majority of the outstanding common stock present in person or represented by proxy at the meeting are required to vote in favor of Proposals 6 and 7 for such proposals to pass.
Recommendation of Board of
Directors	Our Board of Directors unanimously approved each of the Proposals to be considered at the Annual Meeting. The Board recommends that the stockholders vote “FOR” each proposal.

PROPOSAL 1 – ALLERGY FREE ASSET PURCHASE

Companies Involved in the
Acquisition	Planet Polymer Technologies, Inc. is engaged in the business of developing and licensing unique hydrosoluable polymer and biodegradable materials in the fields of agriculture and industrial manufacturing.
	Allergy Free 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.
Summary of the Acquisition	In the Acquisition, the Company will issue and deliver to Allergy Free approximately 82,732,970 shares of the Company’s common stock. At Closing, the Company also agreed to issue and deliver to Allergy Free a Subordinated Convertible Note in the approximate amount of a $274,300 with interest at 5.5% per annum. The Company will assume approximately $701,229 of Allergy Free’s liabilities as of June 30, 2004 (plus, all obligations

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	arising under assumed contracts which arise after the Closing). Allergy Free will retain certain of its assets.
Reasons for the Acquisition	In approving the Acquisition and in recommending that the Company’s shareholders approve the Asset Purchase Agreement and the Acquisition, the Company’s Board of Directors considered a number of factors. The Company considered the impact on combining the Company’s business with Allergy Free’s business, and the potential positive results of combining the operations of Allergy Free with the technology of the Company. The Company also considered new management and what that might do for the Company’s business.
Background and Negotiations
Related to the Acquisition	The Company and Allergy Free have been discussing the asset purchase since the Fall of 2003.
Material Tax Consequences to the Company and its
Shareholders	The Acquisition by itself should not result in any material tax consequences to either the Company or its shareholders, but the Distribution of Royalty Rights described below will be a taxable transaction and could result in material tax consequences to both the Company and its shareholders.
Dissenters Rights	If the Acquisition is approved by the required vote of the Company’s shareholders and is not abandoned or terminated, holders of the Company’s common stock who did not vote in favor of the Acquisition and who notify the Company in writing of their intent to demand payment of their shares if the Acquisition is consummated, may, by complying with Sections 1300 through 1312 of the California Corporations Code, be entitled to dissenters’ rights as described therein. The Company’s shareholders must notify the Company of their intent to dissent within 30 days of the date that the notice of approval of the Acquisition is mailed to all the Company’s shareholders who did not vote in favor of the Acquisition.
Vote Required to Approve Asset Purchase and
Acquisition	The affirmative vote of holders of the majority of outstanding common stock is required to approve the Asset Purchase Agreement and the Acquisition.
PROPOSAL 2 – DISTRIBUTION OF ROYALTY RIGHTS
Establishment of Trust	Prior to the Acquisition, the Company entered into certain licensing agreements with Agway, Inc. and Ryer Enterprises, LLC whereby the Company licensed its technology to the outside companies (the “Royalty Contacts”). As a part of the Royalty Contracts, the Company has the potential to receive future royalty payments. The amount of such payments is speculative and subject to a number of uncertainties. The Company and Allergy Free agreed to exclude the Royalty Contracts, and any potential payments, from the Acquisition. Instead, the Company has proposed the establishment of the Royalty Liquidation Trust (“Trust”) for the benefit of the Company’s current shareholders and to distribute the right to receive royalty payments and cash, which the company has already received under the Royalty Contracts, to the Trust.
Reasons for the Trust	The sole purpose of the Trust is to collect royalties and other payments due under the Royalty Contracts and distribute any such payments to the shareholders of record of the Company as of September 30, 2004, subject to

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	paying certain expenses and maintaining a $30,000 reserve for the payment of future expenses related to the Trust and Royalty Contracts.
Beneficial Interests in Trust are
not Transferable	No beneficial interest in the Trust will be transferable except upon death or by operation of law.
Tax Consequences	The Company must recognize gain, if any, on the distribution to the Trust of cash and the right to receive royalty payments as if it had transferred such rights to the shareholders for fair market value. The Company believes any such gain would be substantially offset by the Company’s net operating loss carry-forward. However, this is a risk the shareholders must consider.A distribution of cash and royalty rights to the Trust could be considered, in part, a dividend, and to the extent considered a dividend will be reported as dividend income to the shareholders. The amount, if any, treated as a dividend will depend upon whether or not at the end of the year the Company has earnings and profits. Any excess of the cash and fair market value of the royalty rights over the amount considered a dividend will be treated as a return of capital and reduce the shareholder’s tax basis in their shares of Company common stock. If the amount treated as d istributed to a shareholder as a return of capital exceeds the shareholders tax basis, the excess will be treated as a gain from the sale or exchange of property. Currently, the Company has no accumulated earnings and profits, and it will not be known until the end of the calendar year whether the Company has earnings and profits. The Company is not expecting earnings and profits, if any, will be material
Vote Required to Approve Distribution of Royalty
Rights	The affirmative vote of the holders of the majority of the outstanding common stock is required to approve the distribution of cash and royalty rights to the Royalty Trust.

PROPOSAL 3 – APPROVE REVERSE SPLIT OF COMMON STOCK

Amount of Reverse Split	We propose amending our Restated Articles of Incorporation to effect, when and as determined by our Board of Directors in its sole discretion within the 2004 calendar year, a reverse stock split of one-for-fifty. For example, as a result of the reverse split, 500 shares may be converted into 10 shares.
Reasons for Reverse Split	Our objectives in proposing a possible reverse split (which may not be fully achieved) would, among others, be:

§	To reduce the number of outstanding shares to a number more appropriate to a company at our stage of development;
§	To increase the attractiveness of our common stock to investors and the financial community.

Fractional Shares	If a reverse split is effected, we will not issue fractional shares. Fractional shares will be rounded up to the nearest whole share.
Exchange of Certificates	If a reverse split is effected, at the effective date of the reverse split each stockholder’s outstanding shares would automatically be reduced regardless of whether the stock certificate is exchanged. We, or our transfer agent, would send a letter to each stockholder providing instructions to exchange certificates representing pre-split shares into new certificates representing the number of shares after the reverse split.
Tax Consequences	Stockholders who exchange their pre-split stock for stock after a reverse split

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	would not recognize income or other gain or loss for federal income tax purposes. Stockholders’ aggregate tax basis in the stock after a split would be the same as the basis for the pre-split shares. We would not recognize any gain or loss as a result of a reverse split.
Vote Required to Approve
Reverse Stock Split	The affirmative vote of the holders of the majority of outstanding common stock are required to approve the reverse stock split.
PROPOSAL 4 – APPROVE NAME CHANGE
Summary of Amendment	We propose amending our Articles of Incorporation to effect a change of our name to “Planet Technologies, Inc.”
Reasons for Amendment	The Board of Directors of the Company believes that it is advisable and in the best interests of the Company and its shareholders to change the name of the Company from “Planet Polymer Technologies, Inc.” to “Planet Technologies, Inc.” Management believes the name change would be beneficial to the Company for marketing, branding, and other similar purposes.
Votes Required to Approve
Name Change	The affirmative vote of the holders of the majority of outstanding common stock is required to approve the name change.
PROPOSAL 5 – ELECTION OF DIRECTORS
Nominees	There are five board nominees for the five board positions presently authorized by the Company’s current bylaws. The names of the nominees are H. M. Busby; Scott L. Glenn; Robert J. Petcavich, Ph. D.; Ellen Preston; and Michael Trinkle.
Voting	Shares represented by executed proxies will vote, if authority to do so is not withheld, for the election of the nominees, 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.
PROPOSAL 6 – AMENDMENT TO THE 2000 STOCK OPTION PLAN
Description of the 2000 Plan, as
Amended	The Company proposes to increase the number of shares reserved for issuance under the 2000 Plan from 500,000 shares to 5,000,000 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 Scott L. Glenn as President/CEO and Chairman of the Board 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.
Tax Consequences	For Federal Income Tax purposes, the grant to an optionee of a non-incentive option generally will not constitute a taxable event to 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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Vote Required To Approve The affirmative votes of the holders of the majority of common stock present in person or represented by proxy and which constitute a quorum at the meeting are required to approve the amendment to the 2000 stock option plan.

PROPOSAL 7 – RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Engagement of Accountant	We have approved retaining J.H. Cohn LLP to serve as our independent registered public accounting firm for the 2004 fiscal year and we seek stockholder ratification of that decision.
Vote Required to Approve	The affirmative votes of the holders of the majority of common stock present in person or represented by proxy at the meeting are required to ratify the selection of independent registered public accounting firm.

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PLANET POLYMER TECHNOLOGIES, INC.
6835 Flanders Drive, Suite 100
San Diego, California 92121

PROXY STATEMENT

FOR ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD ON NOVEMBER 17, 2004
INFORMATION CONCERNING SOLICITATION AND VOTING

INTRODUCTION

General  Information

                The enclosed proxy is solicited on behalf of the Board of Directors (the “Board”) of Planet Polymer Technologies, Inc., a California corporation (the “Company”), for use at the Annual Meeting of Shareholders to be held on November 17, 2004 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 October 19, 2004, to all shareholders entitled to vote at the Annual Meeting.

Solicitation

                The Company will bear the entire cost of solicitation of proxies including preparation, assembly, printing and mailing of this proxy statement, the proxy and any additional information furnished to shareholders. Copies of solicitation materials will be furnished to banks, brokerage houses, fiduciaries and custodians holding in their names shares of Common Stock beneficially owned by others to forward to such beneficial owners. The Company may reimburse persons representing beneficial owners of Common Stock for their costs of forwarding solicitation materials to such beneficial owners. Original solicitation of proxies by mail may be supplemented by telephone, telegram or personal solicitation by directors, officers or other regular employees of the Company. No additional compensation will be paid to directors, officers or other regular employees for such services.

Voting Rights and Outstanding Shares

                 For purposes of the Annual Meeting, a quorum means a majority of the outstanding shares entitled to vote. Holders of record of the Company’s Common Stock at the close of business on September 30, 2004 (the “Record Date”) will be entitled to notice of and to vote at the Annual Meeting. At the close of business on September 30, 2004, the Company had outstanding and entitled to vote 6,582,884 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. Unless the proxy holders are otherwise instructed, shareholders, by means of the accompanying proxy, will grant proxy holders’ discretionary authority to cumulate votes.

                 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.

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Broker non-votes are counted toward a quorum, but are not counted for any purpose in determining whether a matter has been approved.

How to Vote

                 Please sign, date and return the enclosed proxy card promptly. If your shares are held in the name of a bank, broker, or other holder of record (that is, in “street name”) you will receive instructions from the holder of record that you must follow for your shares to be voted.

Revocability of Proxies

                 Any person giving a proxy pursuant to this solicitation has the power to revoke it at any time before it is voted. It may be revoked by filing with the Secretary of the Company at the Company’s principal executive office, 6835 Flanders Drive, Suite 100, San Diego, California 92121, a written notice of revocation or a duly executed proxy bearing a later date, or it may be revoked by attending the meeting and voting in person. Attendance at the meeting will not, by itself, revoke a proxy.

Votes Required to Approve Proposals

                 Shares represented by executed proxies that are not revoked will be voted in accordance with the instructions in the proxy, or in the absence of instructions, in accordance with the recommendations of the Board of Directors. Assuming a quorum is present at the Annual Meeting, the following table sets forth the votes required to approve each Proposal:

Proposal	Vote Required to Approve
Proposal 1 (Adopt and approve Asset Purchase Agreement and the Acquisition)	Holders of a majority of the outstanding common stock
Proposal 2 (Approve distribution of the right to receive payments to a trust for the benefit of, and distribution to, the Company’s current shareholders)	Holders of a majority of the outstanding common stock
Proposal 3 (Amend the Articles of Incorporation to effect reverse stock split)	Holders of a majority of the outstanding common stock
Proposal 4 (Amend the Articles of Incorporation to change the Company’s name to Planet Technologies, Inc.)	Holders of a majority of the outstanding common stock
Proposal 5 (Elect directors)	The five persons with the most number of votes will be elected.
Proposal 6 (Amend 2000 Stock Option Plan)	Holders of a majority of common stock present in person or represented by proxy at the meeting
Proposal 7 (Ratify Appointment of Auditors)	Holders of a majority of common stock in person or represented by proxy at the meeting
Other Business	Holders of a majority of common stock in person or represented by proxy at the meeting

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.

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Dissenters’ Rights

                 If the Acquisition is approved by the required vote of the Company’s shareholders and is not abandoned or terminated, holders of the Company’s common stock who did not vote in favor of the Acquisition and who notify the Company in writing of their intent to demand payment of their shares if the Acquisition is consummated, may, by complying with Sections 1300 through 1312 of the California Corporations Code, a copy of which is attached hereto as Exhibit “F”, be entitled to dissenters’ rights as described therein. The Company’s shareholders must notify the Company of their intent to dissent within 30 days of the date that the notice of approval of the Acquisition is mailed to all the Company’s shareholders who did not vote in favor of the Acquisition.

Shareholder Proposals

                 The deadline for submitting a shareholder proposal for inclusion in the Company’s proxy statement and form of proxy for the Company’s 2005 Annual Meeting of Shareholders pursuant to Rule 14a-8 of the Securities and Exchange Commission is June 20, 2005. Shareholders are also advised to review the Company’s current Bylaws, which contain additional requirements with respect to advance notice of shareholder proposals and director nominations.

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 Acquisition and other proposals described in this proxy statement are forward-looking statements. You should read forward-looking statements carefully because they may discuss our future expectations, contain projections of the Company’s and Allergy Free’s future results of operations or of our financial position or state other forward-looking information. The Company believes that it is important to communicate its future expectations to their investors. However, there may be events in the future that the Company is not able to accurately predict or control. The factors listed above in the sections captioned “Risk Factors,” as well as any cautionary language in this proxy statement, provide examples of risks, uncertainties and events that may cause the actual results to differ materially from any expectations they describe. Actual results or outcomes may differ materially from those predicted in the forward-looking statements due to the risks and uncertainties inherent in their business, including risks and uncertainties in:

§	market acceptance of and continuing demand for its products;
§	the Company’s ability to protect its intellectual property;
§	the impact of  competitive  products,  pricing  and  customer service and support;
§	the Company’s ability to obtain additional  financing to support their operations;
§	obtaining and maintaining regulatory approval where required;
§	changing  market conditions; and
§	other risks detailed in this proxy statement.

        You should also consider carefully the statements under “Risk Factors” in the other documents filed with the SEC, which address factors that could cause actual results to differ from those set forth in the forward-looking statements. You should not place undue reliance on any forward-looking statements, which reflect the views of the Company’s and Allergy Free’s management only as of the date of this proxy statement. The Company and Allergy Free 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.

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OVERVIEW OF PROPOSAL 1

ALLERGY FREE ASSET PURCHASE

                 Allergy Free, LLC, a California limited liability company (“Allergy Free”), 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.

        On March 18, 2004, the Company entered into an Asset Purchase Agreement (the “Agreement”) with Allergy Free, whereby the Company agreed, subject to shareholder approval, to purchase substantially all of the assets and assume certain liabilities of Allergy Free (the “Acquisition”). On June 11, 2004 and October 6, 2004, the Company and Allergy Free amended the Agreement with the First Amendment to the Asset Purchase Agreement (the “Amendment”). The Asset Purchase Agreement as amended 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. The Amendment is attached to this proxy statement as Exhibit “C-1.” This Agreement as amended provides the terms and conditions that govern the Company’s acquisition of Allergy Free’s assets. We encourage you to read the Asset Purchase 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 Acquisition, the Company will issue and deliver to Allergy Free approximately 82,732,970 shares of the Company’s common stock, subject to adjustment for each day after August 25, 2004 that the closing date occurs. The Company does not expect any adjustment to be material. Allergy Free’s percentage ownership of the Company after the Acquisition will be approximately 92.7%. At Closing, the Company also agreed to issue and deliver to Allergy Free a Subordinated Convertible Note in the approximate amount of a $274,300 with interest at 5.5% per annum. If the Note is converted, Allergy Free’s percentage ownership in the Company would increase to approximately 93.1%.

                The Company will assume approximately $701,229 of Allergy Free’s liabilities as of June 30, 2004 (plus, all obligations arising under assumed contracts which arise after the Closing). Obligations arising under assumed contracts and other commitments after the Closing will consist principally of rent under the sublease for Allergy Free’s Premises in San Diego, California (approximately $6,244.00 per month), license fees for technology associated with the production of Allergy Free’s electrostatic filter at the rate of 1.65% of net filter sales, and obligations under supply, distribution, marketing and other service agreements arising in the ordinary course of business the obligations under which will depend on the volume of Company business and cannot be quantified at this time. Allergy Free will retain certain of its assets.

PROPOSAL 1

THE ACQUISITION

Reasons for the Acquisition

        In approving the Acquisition and in recommending that the Company’s shareholders approve the Asset Purchase Agreement and the Acquisition, the Company board of directors considered a number of factors, including, without limitation, the following factors which the Company believes includes all material factors:

§	Information concerning the Company’s and Allergy Free’s respective businesses, prospects, business plans, financial performance and condition, results of operations, technology and competitive positions;
§	The current state of the Company;
§	The due diligence investigation conducted by the Company’s management, legal, and financial advisors;
§	The terms of the Asset Purchase Agreement, including price and structure, which were considered by the Company board of directors to provide a fair and equitable basis for the Acquisition;

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§	The current financial market conditions and historical stock market prices, volatility and trading information; and
§	The track record of Scott Glenn as a manager and entrepreneur.

        In arriving at its determination that the Acquisition is in the best interest of the Company and its shareholders, the board of directors carefully considered the terms of the Asset Purchase Agreement and the other transaction documents, as well as the potential impact of the purchase on the Company. In authorizing the sale, the board of directors considered the factors set out above as well as the following factors:

§	A stronger and more compelling portfolio of products created by the addition of Allergy Free’s product line, including the air filters, hypoallergenic bedding supplies, and water processors, as a result of the Acquisition;
§	Allergy Free’s expertise and experience in the consumer products business and technology markets in general; and
§	The opportunity to develop new products in the Allergen industry utilizing polymer technology;
§	Establishing the Royalty Liquidation Trust to collect payments, if any, required to be made to the Company pursuant to certain royalty contracts for the benefit of the Company’s current shareholders, and to preserve the potential value of royalty rights for the Company’s shareholders as of September 30, 2004.
	The Company board of directors also considered a number of potentially negative factors, including, but not limited to:

§	the risk that the potential benefits sought in the Acquisition might not be fully realized;
§	the historical losses and financial condition of Allergy Free;
§	the substantial dilution to the Company’s existing shareholders;
§	the potential negative effect on the Company’s stock  price associated with public announcement of  the proposed Acquisition;
§	the potential  negative  effect  on  the Company’s  stock  price if revenue, earnings  and  cash  flow   expectations  of  the Company following the Acquisition are not met;
§	the potential dilutive effect on the Company’s common stock price if  revenue and  earnings expectations  for Allergy Free’s  business operations are not met;
§	the ability to successfully manage the combined operations of the Company and Allergy Free given the Company’s limited management resources; and
§	the other risks and uncertainties discussed under “Risk Factors.”

        In view of the variety of factors considered in connection with its evaluation of the Acquisition, 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 Asset Purchase Agreement and the related Acquisition were advisable and in the best interests of the Company and its shareholders and that the Company should proceed with the Acquisition.

Background and Negotiations Related to the Acquisition

        The Company is an advanced materials company that has in the past developed and licensed unique hydro-soluable and biodegradable materials. The business cycle from product development to commercialization for the Company’s products proved to be significantly longer than anticipated, due in part to delays obtaining FDA

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clearance for the Company’s Optigen product. As a result the Company has not developed regular revenue sources to support ongoing product development and commercialization. The Company’s stock price declined steadily and capital from the financial markets was not readily available. In light of the slow development of revenue sources from existing technology and financial market conditions, the Company had been regularly evaluating a wide variety of different strategies to increase revenue and achieve profitability, and business scenarios to enhance shareholder values, including opportunities for acquisitions of other companies or product lines, possible partnerships or alliances, and other strategic transactions. In particular, during 2003, the Company, considered and investigated other possible strategic transactions, including a possible transaction with The Benchmark Company, LLC (“Benchmark”).

        Beginning in the late Spring or early Summer 2003, Benchmark and the Company entered into preliminary negotiations whereby Benchmark proposed a common share offering for between $200,000 and $300,000. Benchmark and the Company were unable to reach agreement on the terms of the proposed offering. The Company ultimately decided in the Fall 2003, after several discussions not to pursue the transaction. While there were potential advantages to the Company had it completed the transaction including immediate available funds to the Company and Benchmark taking over administrative aspects of the Company’s business (i.e., SEC filings, etc.), the Company determined the disadvantages outweighed the advantages. The disadvantages considered by the Company included dilution, the costs associated with the transaction, and the lack of a definitive business plan following the transaction.

        After deciding not to pursue the Benchmark transaction, on or about November 4, 2003, Scott L. Glenn, the Managing Member of Allergy Free through his affiliated company S.R. Technologies, Inc., a California corporation, and H. Mac Busby, Chief Executive Officer and President, met at the offices of the Company’s counsel, Robert W. Blanchard, who also participated in the meeting. Dr. Robert J. Petcavich, Chairman of the Board, participated by conference telephone. Mr. Glenn and Mr. Busby were introduced to one another by the Company’s counsel Robert W. Blanchard. The Company, Allergy Free, Mr. Glenn, and Mr. Busby had no prior dealings with one another. The purpose of the meeting was to consider a possible transaction between the Company and Allergy Free.

        On November 8, 2003, Mr. Glenn and Dr. Petcavich met to discuss how the Company’s polymer technologies could be integrated into Allergy Free’s products. On November 20, 2004, Mr. Glenn, Mr. Busby and the Company’s counsel Robert W. Blanchard again met to discuss possible terms of the transaction and due diligence by both the Company and Allergy Free.

        In early December 2003, the Company received an inquiry from a Canadian company in the environmental technologies business, regarding acquiring the Company. After a couple of discussions and the exchange of a confidentiality agreement the discussions ended. The Company believes the potential acquirer lost interest in the Company when it became apparent that utilization of the Company’s tax loss carry forward would be significantly limited following completion of any acquisition.

        The Company’s management reviewed Allergy Free’s business plans and operations and determined that combining with Allergy Free was consistent with the Company’s strategy of acquiring or merging with an operating company to re-engage business operations. Similarly, Allergy Free’s management determined that combining with the Company represented the most desirable course of action for its members under current market conditions.

        On January 12, 2004, Mr. Busby, Rick Mager (a principal of Cove Partners) and Robert W. Blanchard, counsel to the Company met and participated in a conference call with Scott Glenn to discuss the valuation of the Company. On January 27, 2004, Mr. Glenn met with Mr. Busby and Mr. Blanchard at Mr. Blanchard’s office to negotiate an initial term sheet. For several weeks, representatives of Allergy Free and the Company negotiated the terms of the transaction and exchanged drafts of term sheets.

        On or about February 13, 2004, Allergy Free proposed a final draft term sheet based on the discussions between the parties. On or about February 17, 2004, the Company held a special meeting of its board of directors to consider the draft. On February 18, 2004, the board of directors met again and at that meeting, the directors reviewed the opportunity presented by Allergy Free, and resolved to approve the draft term sheet. On February 19, 2004 Allergy Free and the Company executed a non-binding letter of intent.

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        On March 3, 2004, Mr. Glenn and Allergy Free’s counsel, Glen Roberts met with Mr. Busby and Mr. Blanchard to discuss the final terms of the transaction. On March 16, 2004, the Company held a special meeting of its board of directors to discuss the terms of the Asset Purchase Agreement. The meeting was attended by all members of the board, in addition Robert W. Blanchard, Esq., counsel to the Company was in attendance. After discussion and considering various issues, the board of directors voted unanimously to approve the Acquisition. The board of directors then directed to complete the negotiations with management of Allergy Free, and to execute the Asset Purchase Agreement, with such changes as deemed necessary and advisable by management of the Company.

        Late on March 18, 2004, the Asset Purchase Agreement and related documents were executed and delivered. There were no material changes in the final executed agreement and the initial term sheet executed February 13, 2004.

On Monday, March 22, 2004, Allergy Free and the Company issued a public announcement of the Acquisition. In early June 2004 there were several conference calls between Allergy Free, its counsel, the Company, and its counsel to discuss amending the Asset Purchase Agreement. On June 11, 2004, Mr. Glenn and Mr. Busby met at the office of the Company’s counsel and amended the Asset Purchase Agreement. On October 6, 2004 Mr. Glenn and Mr. Busby agreed to further amend the Asset Purchase Agreement. The purpose of the amendments was to simplify the terms of the Subordinated Convertible Note (which is described in detail herein); confirm that shareholders of record as of September 30, 2004 are entitled to receive any payments made under the Ryer Note (which is described in detail herein); extend the date for the consummation of the Acquisition until at least November 30, 2004; to change the record date to September 30, 2004; and to set a per share price of $0.05 in the private placement (which is described in detail herein).

SUMMARY OF THE ACQUISITION

General

        In the Acquisition, the Company will issue and deliver to Allergy Free approximately 82,732,970 shares of the Company’s common stock. At Closing, the Company also agreed to issue and deliver to Allergy Free a Subordinated Convertible Note in the approximate amount of a $274,300 with interest at 5.5% per annum.

                The Company will assume approximately $701,229 of Allergy Free’s liabilities as of June 30, 2004 (plus, all obligations arising under assumed contracts which arise after the Closing). Allergy Free will retain certain of its assets. The assets being acquired do not include certain office furniture and equipment used by Allergy Free but owned by Conception Technologies. under the terms of its sub-lease with Conception Technologies. Additionally, as part of a Contract Manufacturing Agreement between Allergy Free and American Metal Filters, Allergy Free agreed to permit American Metal Filters to use in the exclusive manufacture and production of Allergy Free’s products certain manufacturing equipment and fixtures, which American Metal Filters will continue to use after the Closing.

Companies involved in the Acquisition

Planet Polymer Technologies, Inc.
6835 Flanders Drive, Suite 100
San Diego, California 92121
(619) 291-5694
Attention:  H. Mac Busby

        Planet Polymer Technologies, Inc. has been engaged in the business of developing and licensing unique hydrosoluable polymer and biodegradable materials in the fields of agriculture and industrial manufacturing.

Allergy Free, LLC
6835 Flanders Drive, #500
San Diego, California  92121
(800) –ALLERGY [255-3749]
www.allergy-free.com

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        Allergy Free 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.

Completion of the Acquisition

        The Company and Allergy Free are working toward completing the Acquisition as quickly as possible. The Company and Allergy Free intend to complete the Acquisition promptly after the shareholders of the Company approve the Acquisition at the annual shareholders meeting. The Company and Allergy Free expect to complete the Acquisition in the second quarter of 2004.

        The obligations of the Company and Allergy Free to complete the Acquisition are subject to the satisfaction or waiver of several closing conditions, including, in addition to other customary closing conditions, the following:

§	The Company’s shareholders and Allergy Free’s members must have approved and adopted the Asset Purchase Agreement and the related Acquisition.
§	The receipt by the Company of a “No Action Letter” or similar assurance from the SEC relating to the distribution of the right to receive royalty payments to a newly created trust for the benefit of the Company’s shareholders as of the Record Date pursuant to Proposal No. 2 of this Proxy Statement.
§	No injunction or other order shall have been issued to prohibit consummation of the Acquisition.
§	The representations and warranties of the Company and Allergy Free shall be true and correct as of the date of the Asset Purchase Agreement and the Acquisition Date.
§	The Company and Allergy Free shall have performed all obligations required to be performed under the Asset Purchase Agreement.
§	The Company shall have retained Scott L. Glenn as President and Chief Executive Officer of the Company.
§	The Company shall have entered into a consulting agreement with Dr. Robert Petcavich.
§	The Company shall have taken all steps necessary to effect the reverse stock split pursuant to Proposal No. 5 of this Proxy Statement.
§	The Company shall have taken all steps necessary to effect the election of the directors nominated by this Proxy Statement to the Company’s board of directors.
§	The Company shall have taken all steps necessary to effect an unregistered private placement of up to $2 million of the Company’s unregistered common stock at a purchase price equal to $0.05 per share to shareholders of the Company and Members of Allergy Free as of the record date who are accredited investors and up to thirty-five (35) other such investors. If the private placement offering is over-subscribed, shares will first be allocated to Planet shareholders as of the record date for this meeting and then to Allergy Free members. Shares will only be offered pursuant to the Company’s Private Placement Memorandum, which shareholders as the record date for this meeting may request from the Company at 6835 Flanders Drive, Suite 100, San Diego, California, (619) 291-5694.
§	The Company shall have taken all steps necessary to effect the surrender of “out of the money” options to purchase shares of common stock in the Company.
§	The Company shall have taken all steps necessary to effect the distribution of the royalty rights pursuant to Proposal No. 2.

Termination prior to completion of Acquisition

        The Asset Purchase Agreement may be terminated before the Acquisition is completed:

§	by mutual written consent;
§	by either party,  if the Acquisition has not been completed by September 30, 2004 through no fault of the terminating party;
§	by the Company, if the board of directors of the Company accepts or approves an alternate proposal;

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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); and
§	by either party if at or prior to April 15, 2004 such party decides not to pursue the Acquisition following review of due diligence information provided after the Asset Acquisition Agreement was signed.

Termination Fees

       The Company or Allergy Free may be required to pay a termination fee to the other party as follows:

§ If the Company terminates the Asset Purchase Agreement because:

§ an alternate acquisition proposal has been determined by the Board of the Company in good faith to result in a transaction more favorable to the shareholders from a financial point of view.

then the Company must pay a termination fee of $50,000 to Allergy Free.

§ If either the Company or Allergy Free terminates the Asset Purchase Agreement following:

§ review of due diligence information after the Asset Purchase Agreement was signed.

then terminating party must pay a Due Diligence fee of $25,000 to the other party.

Dissenters’ Rights

        If the Acquisition is approved by the required vote of the Company’s shareholders and is not abandoned or terminated, holders of the Company’s common stock who did not vote in favor of the Acquisition and who notify the Company in writing of their intent to demand payment of their shares if the Acquisition is consummated, may, by complying with Sections 1300 through 1312 of the California Corporations Code, a copy of which is attached hereto as Exhibit “F,” be entitled to dissenters’ rights as described therein. The Company’s shareholders must notify the Company of their intent to dissent within 30 days of the date that the notice of approval of the Acquisition is mailed to all the Company’s shareholders who did not vote in favor of the Acquisition.

Shares and Note Issued by Company as Consideration

        In full consideration for the assets purchased pursuant to the Asset Purchase Agreement, the Company plans to pay to Allergy Free the aggregate consideration as follows:

                In the Acquisition, the Company will issue and deliver to Allergy Free approximately 82,732,970 shares of the Company’s common stock. At Closing, the Company also agreed to issue and deliver to Allergy Free a Subordinated Convertible Note in the approximate amount of a $274,300 with interest at 5.5% per annum.

                The Company will assume approximately $701,229 of Allergy Free’s liabilities as of June 30, 2004 (plus, all obligations arising under assumed contracts which arise after the Closing). Allergy Free will retain certain of its assets.

Liabilities to be assumed by the Company

        The Company will assume the following liabilities of Allergy Free as part of the Acquisition:

§	Accrued expenses (includes property and sales tax, legal and accounting, salaries, wages and employee expenses, commissions, insurance and similar expenses) totaling $239,713 as of June 30, 2004;
§	Advances From and Payable to Conception Technologies totaling $135,000 as of June 30, 2004; and

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§ Accounts Payable (includes trade, taxes, and royalties and similar payables) totaling $260,943 as of June 30, 2004.

        In addition, the assumed liabilities will include all obligations under contracts and commitments listed in the Asset Purchase Agreement which the Company intends to honor. Obligations arising under assumed contracts and other commitments after the Closing will consist principally of rent under the sublease for Allergy Free’s Premises in San Diego, California (approximately $6,244.00 per month), license fees for technology associated with the production of Allergy Free’s electrostatic filter at the rate of 1.65% of net filter sales, and obligations under supply, distribution, marketing and other service agreements arising in the ordinary course of business the obligations under which will depend on the volume of Company business and cannot be quantified at this time.

Material Tax Consequences to the Company and its Shareholders

        Although the Acquisition 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, in connection with the Acquisition the Company is proposing to distribute to a Royalty Liquidation Trust, cash received and the Company’s right to receive payments due it under certain contracts. The Trust is being established for the benefit of the Company’s current shareholders who would receive distributions of royalty payments (less costs and expenses of administering the royalty contracts and trust) equal to the shareholder’s ownership interest in the Company on September 30, 2004.

        The transfer of the royalty rights to the Trust by the Company will be treated as a taxable disposition at the fair market value of the royalty rights and the Company will recognize taxable gain equal to the difference between the Company’s basis in the rights and the fair market value. The fair market value of the rights is highly speculative and the Company has not incurred the expense of obtaining an appraisal of the rights. While the Company will recognize a gain upon the distribution, the Company believes any gain will be substantially offset by the Company’s net operating loss carry-forward.

        Additionally, the distribution to the Trust, may, at least in part, be considered a taxable dividend to shareholders, if, at the end of the year, the Company has earnings and profits. The Company has no accumulated earnings and profits from prior years, but it will not be known until the end of the calendar year whether or not the Company will have earnings and profits for the current year. The Company is not expecting earnings and profits for the current year to be material. However, it is possible the Company could report some dividend income to the shareholders. If so, it is also possible that the amount of dividend income reported will exceed cash distributions, if any, to shareholders from the Trust for the current year. Any part of each shareholder’s proportionate share of the distribution which is not treated as a dividend will first reduce each shareholders’ basis in their stock and any excess of distributions over basis will be treated as a gain from the sale or exchange of property.

        Royalty payments received by the Trust from time to time will be taxable to the beneficiaries of the Trust, whether or not distributed. Subject to maintaining a $30,000 reserve for payment of fees and expenses, the Trustee of the Trust will distribute royalty payments received quarterly.

        THIS DISCUSSION DOES NOT ADDRESS TAX CONSEQUENCES THAT MAY VARY WITH, OR ARE CONTINGENT ON, INDIVIDUAL CIRCUMSTANCES. MOREOVER, IT DOES NOT ADDRESS ANY NON-INCOME TAX OR ANY FOREIGN, STATE, OR LOCAL TAX CONSEQUENCES OF THE ACQUISITION. TAX MATTERS ARE VERY COMPLICATED, AND THE TAX CONSEQUENCES OF THE ACQUISITION TO YOU WILL DEPEND UPON THE FACTS OF YOUR PARTICULAR SITUATION. ACCORDINGLY, THE COMPANY STRONGLY URGES YOU TO CONSULT WITH A TAX ADVISOR TO DETERMINE THE PARTICULAR FEDERAL, STATE, LOCAL OR FOREIGN INCOME OR OTHER TAX CONSEQUENCES TO YOU OF THE ACQUISITION.

No Fairness Opinion

        The Company has not obtained the opinion of any financial advisor or other third party as to the fairness of the Acquisition to the shareholders of the Company from a financial point of view, or as to any other matters. The Company was advised by Cove Partners, LLC in connection with evaluating the transaction, but did not request or receive an opinion. The Company has already paid approximately $12,500 to Cove Partners for its advice to date, and the Company estimates the cost of a fairness opinion would be at least an additional $50,000 and could take four

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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 Acquisition 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.

THE ASSET PURCHASE AGREEMENT

        The following is a brief summary of the some of the material terms of the Asset Purchase Agreement. This summary does not purport to be complete, and is qualified in its entirety by reference to the text of the Asset Purchase Agreement, which is attached as Exhibit “C” to this proxy statement. The exhibits to the Asset Purchase Agreement are not attached hereto, but are available for review upon request.

Representations and Warranties

                Allergy Free made representations, and warranties to the Company relating to:

§	Allergy Free’s authority to enter into the Asset Purchase Agreement and the Agreement’s legally binding effect;
§	Allergy Free’s organization and good standing;
§	The members holding 100% of the interests in Allergy Free;
§	The completeness of Allergy Free’s books and records;
§	Allergy Free’s liabilities as of December 31, 2003;
§	That Allergy Free has had no adverse or material changes to the way it operates its business;
§	Allergy Free’s taxes;
§	Title and liens regarding Allergy Free’s assets;
§	Allergy Free’s interests in real property;
§	Allergy Free’s patents, trademarks and copyrights;
§	Allergy Free’s contracts and all of its commitments;
§	Allergy Free’s inventory;
§	Allergy Free’s accounts receivable;
§	Allergy Free’s compliance with laws, restrictions, and permits;
§	Allergy Free’s indebtedness to and from its employees;
§	The validity of certain insurance policies in Allergy Free’s name;
§	Litigation pending;
§	Allergy Free compliance with environmental laws;
§	Suppliers or Customers of Allergy Free affirming their commitments to remain suppliers and customers after the Acquisition;
§	Allergy Free and its Members’ knowledge and experience in financial and business matters; and
§	Allergy Free’s truthfulness regarding the representations and warranties.

The Company made representations and warranties to Allergy Free relating to, among other things:

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§	Due organization in good standing;
§	Corporate authorization to enter into the Asset Purchase Agreement, enforceability of the Asset Purchase Agreement, required board of directors and shareholder approvals to complete the acquisition;
§	Valid issuance of the Company common stock;
§	The Company is in compliance with all SEC recording requirements;
§	Disclosure of all liabilities;
§	No adverse change in the Company’s business;
§	All taxes are current;
§	The Company has good and marketable title to all of its assets;
§	The Company has disclosed all of its interests in real property;
§	The Company has disclosed all information related to any patents, trademarks and copyrights;
§	The Company has disclosed all of its material contracts and commitments;
§	The Company has disclosed that it has no inventory;
§	The Company has disclosed all information relating to its accounts receivables;
§	The Company is in compliance with all laws, restrictions and permits;
§	The compensation of and indebtedness to and from all of the Company’s employees and consultants;
§	The Company has disclosed all information relating to insurance;
§	The Company has disclosed all information relating to litigation;
§	The Company has disclosed all information relating to environmental matters;
§	The Company has disclosed it has no knowledge of customers or suppliers intent to cancel any products or supplies; and
§	The Company has represented and warranted that it has made no untrue statements of material facts regarding the Acquisition.

Competition and Non-Disclosure

        The Asset Purchase Agreement contains provisions prohibiting Allergy Free and certain officers and directors of Allergy Free and the Company from engaging in business competitive with the business of Allergy Free, disclosing information related to the business of Allergy Free other than to the Company, soliciting Allergy Free customers or suppliers with respect to products presently used by Allergy Free or to induce an employee to leave his or her employment with the Company. This agreement against competition and disclosure ends on December 31, 2006.

Additional Agreements

        In the Asset Purchase Agreement, the Company agreed to issue to Allergy Free a Subordinated Convertible Note in the approximate amount of $274,300 with interest at 5.5% per annum. The Note’s maturity date is April 1, 2007 unless there is an event of default or some other unforeseen event which would require payment in full at an earlier date. Such events are described in the Note which is attached to the Asset Purchase Agreement. In the event of default, Allergy Free may declare all outstanding obligations payable by the Company under the Note to be immediately due and payable.

Employment Agreements

        The Company has agreed, following the Acquisition, to employ Scott Glenn (who is currently a member of Allergy Free) as its president and chief executive officer on the terms and conditions set forth in the Asset Purchase

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Agreement.  Scott Glenn has agreed to accept stock options equal to approximately five percent (5%) of the outstanding post closing shares of Planet (estimated to be options to purchase approximately 136,000 shares after taking into account the reverse stock split) in lieu of salary as compensation for his service as president and chief executive officer of the Company, until the Board of Directors determines that the Company can reasonably afford to pay executive cash compensation. Absent Mr. Glenn’s agreement to accept stock options in lieu of cash compensation, the Company expects it would have had to pay compensation of approximately $125,000 per year to its chief executive officer post closing of the Acquisition. The Company shall also extend an offer to employ most of the employees of Allergy Free, who will be determined by the Company and Allergy Free prior to completing the Acquisition. If these employees of Allergy Free accept the Company’s offer of employment, they will be employed on an “at-will” basis following the Acquisition.

MANAGEMENT’S DISCUSSION OF THE COMPANY

Description of the Company’s Business

General

        Planet Polymer Technologies, Inc. is an advanced materials company that developed and licensed unique hydro-soluble polymer and biodegradable materials. The Company’s patented development technologies are listed below:

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

        Planet is currently not developing any new products.

Products and Technologies of the Company

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

        This coating technology is also utilized to control the release and transfer rates of nitrogen and oxygen, to assist in controlling the ripening of fruits and vegetables. Planet entered into a licensing agreement with Agway in 1999 to develop commercial coatings for use on fruits, vegetables, floral and nursery applications that has resulted in the launch, in October 2000, of FreshSeal® coating for use on fruits and vegetables. Agway is in the early stages of the extended multi-year commercial rollout of this product family. Agway’s product reception and success to date in the marketplace has been encouraging and resulted in a very modest royalty-generating license in 2001. Effective January 15, 2004, Agway sold its rights to FreshSeal® to BASF AG.

        The Company has also been highly engaged in development work with Agway since 1999 on the use of its controlled-release technology for animal feed. It is being evaluated as a specialty coating for urea to allow for more efficient, controlled release of nitrogen for dairy cows. The product named Optigen®1200 by Agway’s Country Products Group, was in field testing while it petitioned the FDA for product approval as a feed additive. Effective January 2004, Agway sold its rights to Optigen® to Alltech.

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

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

        AQUAMIM® Metal Injection Molding. AQUAMIM® is designed for the production of precision metal components utilizing a water debinding process, which eliminates the need for hazardous solvents or acids. AQUAMIM® feedstock is a mixture of metal powders and the Company’s proprietary water soluble polymer binder. Various industrial and consumer products can be manufactured by the AQUAMIM® technology. The Company currently offers stainless steel compounds, 316L, 17-4PH, and 420; iron-nickel; tool steels M2, and M4; and heavy metal alloys, tungsten copper and tungsten carbide cobalt. The patents for AQUAMIM® are No. 5,977,230 and No. 6,008,281. Although the AQUAMIM® technologies were sold to Ryer Industries in 2001, in April 2003, Planet recovered these assets as a result of Ryer Industries default under a Forbearance Agreement and subsequently, on May 1, 2003, resold the AQUAMIM® technology to Ryer Enterprises, LLC. The obligations of Ryer Enterprises, LLC under the May 1, 2003 agreement with Planet were assigned to and assumed by Ryer, Inc., a California corporation.

        If the Acquisition is approved and consummated, the right to receive royalties under the agreements relating to FreshSeal®, Optigen® and ACQUAMIM® will be distributed by the Company to the Royalty Liquidation Trust.

                The historical business of the Company is more thoroughly described in the Company’s Form 10-KSB/ A for the year December 31, 2003 a copy of which is included in this proxy statement as Exhibit “B.”

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MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

        The Company’s common stock trades on the OTC.BB under the symbol “POLY.OB.” The following table sets forth the high and low sales prices of the Company’s Common Stock for the period from January 1, 2002 through December 31, 2003 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:

		HIGH		LOW
2002
First Quarter	$	0.350	$	0.110
Second Quarter	$	0.250	$	0.130
Third Quarter	$	0.150	$	0.130
Fourth Quarter	$	0.170	$	0.030
2003
First Quarter	$	0.080	$	0.010
Second Quarter	$	0.100	$	0.050
Third Quarter	$	0.060	$	0.050
Fourth Quarter	$	0.070	$	0.030
2004
First Quarter	$	0.250	$	0.040
Second Quarter	$	0.210	$	0.060

        On October 1, 2004, the last reported sale price of the Company’s Common Stock on the Over-the-Counter Bulletin Board was $0.05. As of October 1, 2004, there were approximately 177 holders of record of the Company’s Common Stock with 6,532,884 shares outstanding. The market price of shares of Common Stock, like that of the common stock of many other emerging growth companies, has been and is likely to continue to be highly volatile.

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

        In connection with the Acquisition, if it is consummated, the Company intends to distribute to holders of record of the Company’s common stock as of September 30, 2004 the right to receive royalties under the agreements relating to the Company’s AQUAMIM, Optigen, and FreshSeal product technologies.

RECENT SALES OF UNREGISTERED SECURITIES

        Since January 1, 2004, the Company has issued and sold 325,000 shares in connection with the exercise of certain stock options by current and former directors of the Company.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

         Please see the Company’s Form 10-KSB/ A, which was filed with the SEC on August 13, 2004, and the Company’s Form 10-QSB/ A, which was filed with the SEC on August 13, 2004, copies of which are attached hereto as Exhibits B and B-1, and for the Company’s management’s discussion and analysis of financial condition and results of operation.

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FINANCIAL STATEMENTS

                Please see the Company’s Form 10-KSB/ A, which was filed with the SEC on August 13, 2004, and the Company’s Form 10-QSB/ A, which was filed with the SEC on August 13, 2004, copies of which are attached hereto as Exhibits “B” and “B-1” for our financial statements.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURES

                None

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

        We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in the reports we file with the SEC is recorded, processed, summarized and reported within the time periods specified in the rules of the SEC. As of December 31, 2003, we carried out an evaluation, under the supervision and the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the design and operation of these disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective in timely alerting him to material information relating to the Company required to be included in our periodic SEC filings.

Changes in Internal Controls

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

ALLERGY FREE’S BUSINESS

General

                Allergy Free is a California limited liability company formed October 11, 2000, which is engaged in the business of designing, manufacturing, selling, and distributing common products for use by allergy sensitive persons, including, without limitation, air filters, bedding and similar 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. Allergy Free’s business strategy is primarily based upon promotion of products directly to the consumer by telemarketing to its database of customers who have purchased the Allergy Free Electrostatic Filter. In addition, Allergy Free continues to pursue co-marketing opportunities with appropriate partners in order to increase consumer awareness and expand its customer base.

                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 quality, mold and mildew, dust mite exposure and other allergens. Market segments include; direct to consumer sales, physician directed sales and retail. Competitors include National Allergy Supply, Mission Allergy, Allergy Control Products, Allergy Buyers Club, 3M and Sharper Image.

Products and Technologies of Allergy Free

                There are over 40 million allergy sufferers in the US alone. The American College of Allergy and Immunology recommends avoidance as the first line of treatment. Allergy Free manufactures and distributes products to address three main allergen areas where avoidance products can provide reduced exposure. The categories are Airborne, Dust Mite/Dander, and Mold concerns.

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Airborne 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. Allergy Free currently markets three types of filters for forced heating and cooling systems along with vent filtration kits and HEPA room air cleaners.

§	The Aller-Pure Gold 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 offering 2.5 times the filtering surface area of a flat filter while providing a low resistance that optimizes airflow. Allergy Free offers 45 standard sizes and can manufacture custom filters to meet almost any customer need. The filters have a ten-year warranty.
§	The newest filter marketed by Allergy Free is the Aller-Pure MAX- (Micro-Allergen Xtractor). The Aller-Pure MAX is rated at the highest level for residential filters. It is a pleated filter with actively electrostatic charged media. The filter life is 2-3 months and is sold in packages of 4 filters. Currently Allergy Free offers this filter in 9 standard sizes.
§	Allergy Free provides the Aller-Pure Flex filters  for free standing air conditioning units and other types of heating and cooling systems often found in recreational vehicles. The flex filter is comprised of 3 layers and sewn with a trim. These filters are washable and have a three-year warranty.
§	Consumers filter the loose dust from their air ducts using Allergy Vent Filtration Kits. The vent kits are sold in one month and six weeks supplies. Consumers are instructed to change the vent filters when dirty and replace with new product.
§	Allergy Free Filter Cleaner- Used to clean the Aller-Pure Gold and Aller-Pure Flex filters.
§	Allergy Free HEPA room air cleaners are available in six different configurations to meet an individual’s needs. These freestanding units are often used when the forced heating and cooling system is not in use and/or when an individual does not have a forced 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 a furnace filter, vent filters along with a freestanding HEPA room air cleaner.

                Dander, Dust and Dust Mite Product Category:  Microscopic bugs called dust mites produce potent allergens that thrive in places such as beds, upholstered furniture, and carpets and live on the skin cells that people and pets shed. Allergy Free provides a complete line of products that reduce the allergy sufferers’ exposure. Using a variety of the mite reducing products is recommended to achieve maximum relief. Customer testimonials report fewer headaches and less congestion once they have implemented a dust mite removal strategy.

§	Allergy Free Pristine Bed and Pillow Encasings and Hypoallergenic Pillows: The Pristine line of encasings offered by Allergy Free is the first choice in hypo-allergenic protective bed covers to protect household members from dust mite allergens while sleeping. The Pristine line is highly recommended by allergy physicians.
§	Anti-Allergen Products for laundry and upholstery: Allergy Free offers products in this category from Whirlpool, Alkaline products and Ecology Works.
§	Carpet Treatments: Allergy Free markets Capture® Carpet Cleaner, Dust Mite Control and X-Mite carpet treatments. All of these products work by either killing the dust mites or denaturing the protein rendering it to a non-allergenic state.
§	Electrostatic Mops and Dusters: These mops utilize an electrostatic cloth for maximum efficiency without the use of harsh chemicals that also can be harmful to the allergy patient.

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§ Dander Reducing Treatments: The Allerpet products are rubbed directly on to the animal and reduce the amount of dander.

Mold 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. Allergy Free also recommends and sells mold-free shower curtains and mats.

Product Registrations

Allergy Free does not directly manufacture any product requiring EPA or FDA registration. Allergy Free sells products that are registered by their manufacturers.

Licensed Technology and Intellectual Property

                Allergy Free 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 Allergy Free actively sells the Aller-Pure Gold Permanent filter. The agreement offers a royalty of 1.65% based on net filter sales and is paid monthly. The original agreement was dated January 1, 1997.

Research and Development

                 Allergy Free currently works with other consultants, filter-testing labs, media manufactures and filter manufacturers to develop new enhanced filters and product line extensions. Annually Allergy Free spends $5,000-$15,000 per year on development efforts. Allergy Free is in the very early stages of developing a three-year life washable filter.

Government Requirements

                Allergy Free’s sales practices are regulated at both the federal and state level. The Telephone Consumer Protection Act (the “TCPA”), which was enacted in 1991, authorized and directed the Federal Communications Commission (the “FCC”) to enact rules to regulate the telemarketing industry. In December 1992, the FCC enacted rules, which place restrictions on the methods and timing of telemarketing sales calls.

                On July 3, 2003, the FCC issued a Report and Order setting forth amended rules and regulations implementing the TCPA. The rules, with a few exceptions, became effective August 25, 2003. These rules included: (1) restrictions on calls made by automatic dialing and announcing devices; (2) limitations on the use of predictive dialers for outbound calls; (3) institution of a national “do-not-call” registry in conjunction with the Federal Trade Commission (the “FTC”); (4) guidelines on maintaining an internal “do-not-call” list and honoring “do-not-call” requests; and (5) requirements for transmitting caller identification information. The “do-not-call” restrictions took effect October 1, 2003. The caller identification requirements became effective January 29, 2004. The FCC also included rules restricting facsimile advertisements. These rules become 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 may materially adversely affect Allergy Free and its clients include, but are not limited to: (1) subjecting a portion of Allergy Free’s call to additional disclosure requirements from which such calls were previously exempt: (2) prohibiting the disclosure or receipt, for consideration, of unencrypted

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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. Allergy Free believes it is in compliance with the amendments.

                The amendments to the TSR in 2003 may have a material impact on both Allergy Free’s revenue and profitability. The addition of a national “do-not-call” list to the growing number of states that already have “do-not-call” lists has reduced the number of households that Allergy Free may call. Approximately seventy-percent (70%) of Allergy Free’s historical customers have placed their names on the national “do-not-call” list.

                In addition to the federal legislation and regulations, there are numerous state statutes and regulations governing telemarketing activities, which do or may apply to Allergy Free. 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.

                Allergy Free specifically trains its telemarketing representatives to handle calls in an approved manner and believes it complies in all material respects with all federal and state telemarketing regulations. There can be no assurance, however, that Allergy Free would not be subject to regulatory challenge for a violation of federal or state law.

                Annual fees for federal registrations were $7300 for 2004 and proposed fees for 2005 are approximately $11,000. In addition, Allergy Free anticipates spending an additional approximately $5,000-$8,000 on state fees in 2005.

Customers of Allergy Free

                Allergy Free’s primary customer is the residential consumer. In excess of one million customers in this category have purchased products from Allergy Free. Additionally, but on a very limited basis, Allergy Free sells products to Physicians Offices as well as HVAC Service and Duct Cleaning businesses.

Suppliers of Allergy Free

                 Allergy Free acquires its products from a variety of manufacturers. The primary suppliers of Allergy Free include:

American Metal Filters (Permanent Electrostatic Filters)
Lifetime Filters (Disposable Filters)
J. Lamb (Bedding Encasings)
Austin Company (Room Air Cleaners)

Sales and Marketing

                Allergy Free employees manage sales and marketing functions. Outside resources are hired on an as-needed basis to augment the internal effort. Currently Allergy Free actively markets on the Internet, through catalog sales, inbound and outbound telemarketing. Allergy Free is engaged in a market test program funded by Clorox Corporation that includes limited infomercial, newspaper, radio and Internet advertising. Allergy Free is the acting call center and lead fulfillment house for this program. All leads generated by these efforts are the co-property of Allergy Free and Clorox. Allergy Free retains seventy to eighty five percent of all revenue generated as results of these efforts.

Employees of Allergy Free

                As of April 1, 2004, Allergy Free had 10 full time and 4 part-time employees.

Properties

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                The Allergy Free office is located in approximately 5300 square feet of leased office space in San Diego, California, subject to a month-to-month sublease. The monthly rental payment is $6,244.28 triple net. The Company also has approximately 16,000 square feet in Houston, Texas, where, until March 2004, the Company housed its filter manufacturing, shipping and receiving and sales efforts. The facility was closed in February 2004, and all operations were moved to the San Diego location. The Houston lease expires in June 2004. The monthly rental is $9,416.30 triple net.

Legal Proceedings

                From time to time Allergy Free is subject to lawsuits and claims, which arise out of its operations in the normal course of business. Currently, Allergy Free is unaware of any pending lawsuits against it, but is unable to predict if other claims, lawsuits, or other matters will be filed which will significantly impact its operations and financial position.

ALLERGY FREE’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

                Allergy Free’s management’s discussion and analysis of financial condition and results of operations contain forward-looking statements, which involve risks and uncertainties. Allergy Free’s actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth in the section entitled “Risk Factors” of this proxy statement.

Overview

                The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and related notes. Allergy Free evaluates its estimates and judgments on an on-going basis. Allergy Free bases its estimates on historical experience and on assumptions that it believes to be reasonable under the circumstances. Allergy Free’s experience and assumptions form the basis for its judgments about the carrying value of its assets and liabilities that are not readily apparent from other sources. Actual results may vary from what Allergy Free anticipates and different assumptions or estimates about the future could change Allergy Free’s reported results. Allergy Free believes the following accounting policies are the most critical to Allergy Free, in that they are important to the portrayal of its financial statements and they require Allergy Free’s most difficult, subjective or complex judgments in the preparation of its financial statements:

Revenue Recognition

                Allergy Free recognizes revenue on its products when the product is shipped. Allergy Free accrues a provision for estimated returns concurrent with revenue recognition

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, Allergy Free 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, Allergy Free may be required to record impairment charges for these assets.

Statements of Operations Data

                The following tables set forth the percentage of net revenues represented by certain items in Allergy Free’s Statement of Operations for the periods indicated.

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Years Ended December 31, 2003 and 2002

		Dec 31, 2003			Dec 31, 2002		Change		%
Sales	$	2,258,213		$	3,787,164		($1,528,951	)	(40.4	%)
Cost of Sales		756,513			1,255,038		(498,525	)	(39.7	%)
Gross Profit		1,501,700			2,532,126		(1,030,426	)	(40.7	%)
Operating Expenses		1,882,428			2,904,389		(1,021,961	)	(35.2	%)
Loss from Operations		(380,723	)		(372,263	)	(8,460	)	(2.3	%)
Other Income/(Expense)		(193,412	)		(157,279	)	(36,133	)	(23.0	%)
Net Loss		(574,135	)		(529,542	)	(44,593	)	(8.4	%)

                Allergy Free’s 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 to the decision to discontinue the national radio advertising campaign in April 2003.

                Cost of sales decreased 39.7% from $1,255,088 for the year ended December 31, 2002 to $756,513 for the year ended December 31, 2003, due to the associated decrease in sales revenue (units sold). Overall gross profits, as a percentage of sales, was relatively constant for the years ended 2003 and 2002, at 66.5% and 66.9%, 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 35.2% from $2,904,389 for the year ended December 31, 2002 to $1,882,423 for the year ended December 31, 2003. Of this $1,021,966 decrease, $939,000 was due to discontinuing the national radio advertising campaign and $15,259 due to a reduction in lease expense in Houston, where the Company down-sized into a smaller portion of the existing space.

                The Other Income/ (Expense) category mainly includes interest expense which totaled $189,489 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 calendar year.

Six Months Ended June 30, 2004 and 2003

		June 30, 2004			June 30, 2003		Change		%
Sales	$	720,438		$	1,323,956		($603,518	)	(45.6	%)
Cost of Sales		251,895			418,472		($166,577	)	(39.8	%)
Gross Profit		468,543			905,484		($436,941	)	(48.3	%)
Operating Expenses		803,464			1,156,343		(352,879	)	(30.5	%)
Loss from Operations		(334,921	)		(250,859	)	(84,062	)	(33.5	%)
Other Income/(Expense)		(107,391	)		(94,978	)	(12,413	)	13.1	%
Net Loss		(442,312	)		(345,837	)	(96,475	)	(27.9	%)

                Allergy Free’s net sales decreased 45.6% from $1,323,956 for the six months ended June 30, 2003 to

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$720,438 for the six months ended June 30, 2004. This decrease was due to the decision to discontinue the national radio advertising campaign in April 2003.

                Cost of Sales decreased 39.8% from $418,472 for the six months ended June 30, 2003 to $251,895 for the six months ended June 30, 2004, due to the associated decrease in sales revenue (units sold). Overall gross profit, as a percentage of sales, totaled 65.0% for the six months ended June 30, 2004 and 68.4% for the six months ended June 30, 2003. This change is due to a shift in product mix in the first quarter of 2004 and slightly higher distribution and other costs resulting from the relocation to San Diego. This product mix shift was primarily due to an emphasis in the first quarter of 2004 on the sale of room air cleaners and up-selling across the Company’s product line. The Company expects its profit margin to be impacted in the future by higher distribution costs as compared to 2003, and has adjusted its marketing strategies so as to emphasize filter sales, a higher margin item.

                Selling and general and administrative expenses decreased by 30.5% from $1,156,343_ for the six months ended June 30, 2003 to $803,464 for the six months ended June 30, 2004. Of the $352,879 decrease, $238,637 was attributable to discontinuing the national radio advertising campaign.

Liquidity And Capital Resources

                Cash and cash equivalents increased by $57,847 to $128,005 at December 31, 2003 compared to $70,158 at December 31, 2002. Although the Company used cash totaling $110,897 in its operations for the period, an advance from a related party of $65,000 and proceeds of $297,000 from notes payable drove the increase. Cash was also affected by payments totaling $190,164 on a restructured line of credit with a financial institution and a vendor promissory note.

                Inventories at December 31, 2003 decreased $36,643 or 30% to $84,140 compared to $120,783 at December 31, 2002. It has been management’s strategy to carry lower levels of inventory and as sales and customer demand slipped from 2002 to 2003, those lower levels were achievable.

                Other current assets, including prepaid expenses and other receivables, decreased $25,490 from $37,211 on December 31, 2002 to $11,721 at December 31, 2003. This decrease was largely due to the timing of billings and payments in 2002 for rent and health benefit plans.

                Interest payable totaled $201,446 at December 31, 2003 compared to $69,229 at December 31, 2002. This $132,217 increase is primarily related to the accrued but unpaid interest on investor’s notes payable. Prior to mid-2002, monthly and quarterly interest payments were made by the Company.

                Cash and cash equivalents totaled $47,863 at June 30, 2004, a decrease of $80,142 from December 31, 2003. Cash was negatively affected by losses in its operations, and was also impacted by notes payable reductions of $162,219. These negative impacts were offset somewhat by proceeds of $75,000 from investors and a $70,000 advance from a related party.

                Inventories decreased $62,259 from $84,140 at December 31, 2003 to $21,880 at June 30, 2004. The Company sold its raw material inventory to a contract manufacturer in February 2004; the contract manufacturer began manufacturing the Company’s permanent filter line in March 2004. The Company has also carried lower levels of inventory in 2004, as sales levels have decreased.

                The Company incurred $21,886 in legal expenses related to the acquisition during the six months ended June 30, 2004. This expense is carried as a deferred asset on the balance sheet.

                Allergy Free does not believe that its existing sources of liquidity and anticipated revenue will satisfy Allergy Free’s projected working capital and other cash requirements through December 31, 2004. If the Acquisition is approved, the Company and Allergy Free plan to seek additional Capital through a private placement offering to close concurrently with the closing of the Acquisition to provide operating capital and funds of up to $2.0 million to further support sales and marketing efforts and new product development.

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Recent Accounting Pronouncements

                In April 2003, the Financial Accounting Standards Board issued SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities. The statement amends and clarifies accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts, and hedging activities. This statement is designed to improve financial reporting such that contracts with comparable characteristics are accounted for similarly. The statement, which is generally effective for contracts entered into or modified after June 30, 2003, is not anticipated to have a significant effect on Allergy Free’s financial position or results of operations.

                In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity. This statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. This statement is effective for financial instruments entered into or modified after May 31, 2003, and is otherwise effective at the beginning of the first interim period beginning after June 15, 2003. Allergy Free currently has no such financial instruments outstanding or under consideration and therefore adoption of this standard currently has no financial reporting implications.

                In January 2003, the FASB issued FASB Interpretation No. 46, Consolidation of Valuable Interest Entities. This interpretation clarifies rules relating to consolidation where entities are controlled by means other than a majority voting interest and instances in which equity investors do not bear the residual economic risks. This interpretation is effective immediately for variable interest entities created after January 31, 2003 and for interim periods beginning after June 15, 2003 for interests acquired prior to February 1, 2003. Allergy Free currently has no ownership in variable interest entities and therefore adoption of this standard currently has no financial reporting implications.

FINANCIAL STATEMENTS

                Please see Allergy Free’s financial statements which are attached hereto as Exhibit “A”.

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THE COMPANY’S UNAUDITED PRO FORMA FINANCIAL INFORMATION

On March 22, 2004, Planet Polymer Technologies, Inc. (“Planet”) and Allergy Free, L.L.C. (“Allergy”) announced that on March 18, 2004, they had entered into an Asset Purchase Agreement (“Agreement”) as amended on June 11, 2004 and October 6, 2004, in which Planet will acquire all assets of and assume certain of the liabilities of Allergy for which Planet will provide the following consideration: a subordinated note in the principal amount of $274,300 bearing interest at 5.5% per annum and due and payable within three years and 82,732,970 shares of common stock of Planet. As a result, after the closing of the Agreement, the stockholders of Allergy will own approximately 92.7% of the voting shares of Planet. Since the stockholders of Allergy will receive the majority of the voting shares of Planet, the current president of Allergy will become the president of the Company and since representatives of Allergy will hold three of the five seats on the Company’s Board of Directors, the merger will be accounted for as a recapitalization of Allergy, whereby Allergy will be the accounting acquirer (legal acquiree) and Planet will be the accounting acquiree (legal acquirer).

                Immediately prior to the closing, Planet will distribute to a trustee for the benefit of Planet shareholders of record as of September 30, 2004, the right to receive all royalties payable to Planet pursuant to those certain sale and licensing agreements between Planet and Agway, Inc., related to Planet’s Fresh Seal® and Optigen® technology and that certain purchase, sale and license agreement between Planet and Ryer Enterprises, LLC, relating to Planet’s AQUAMIM® technology. Accordingly, at the closing, Planet will be a non-operating shell corporation no longer meeting the definition of a business, as defined in EITF Consensus 98-3. Therefore, the transaction will be accounted for as a recapitalization of Allergy. This transaction is equivalent to Allergy issuing stock for the net liabilities of Planet, accompanied by a recapitalization. The accounting is identical to that resulting from a reverse acquisition, except that there are no adjustments to the historic carrying values of the assets and liabilities. Additionally, any direct costs of the transaction are charged to equity, but only to the extent of Planet’s cash. Costs in excess of cash received are charged to expense.

                The Unaudited Pro Forma Condensed Combined Statements of Operations for the year ended December 31, 2003 and the six months ended June 30, 2004, combine the historical statements of operations of Allergy and Planet giving effect to the merger as if it had been consummated on January 1, 2003. The Unaudited Pro Forma Condensed Combined Balance Sheet combines the historical balance sheet of Allergy and the historical balance sheet of Planet, giving effect to the merger as if it had been consummated on June 30, 2004.

                You should read this information in conjunction with the:

§	accompanying notes to the Unaudited Pro Forma Condensed Combined Financial Statements;
§	separate historical financial statements of Allergy as of and for the years ended December 31, 2003 and 2002, included in this document;
§	separate historical financial statements of Planet as of and for the years ended December 31, 2003 and 2002, included in this document.
§	separate historical unaudited condensed financial statements of Allergy as of and for the six months ended June 30, 2004 and 2003, included in this document.
§	separate historical unaudited condensed financial statements of Planet as of and for the six months ended June 30, 2004 and 2003, included in this document.

                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 June 30, 2004 or on January 1, 2003. In addition, the unaudited pro forma condensed combined financial information does not purport to project the future financial position or operating results of the combined company.

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UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

As of June 30, 2004

		Allergy Free		Planet Polymer Technologies		Pro Forma Adjustments		#		Pro Forma
ASSETS
Cash	$	47,863	$	179,663					$	227,526
Accounts receivable		7,360								7,360
Inventories		21,880								21,880
Prepaid expenses		13,920		941						14,861
Total current assets		91,023		180,604						271,627
Property, plant & equipment		136,077								136,077
Patents, trademarks, licenses				145,961		(145,961	)	a		—
Intangible assets		21,886				(21,886	)	b		—
Totals	$	248,986	$	326,565	$	(167,847	)		$	407,704

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LIABILITIES & EQUITY (DEFICIENCY)
Accounts payable	$	326,516		$	232,531		$	78,114		b	$	637,161
Interest payable		296,818						(296,818	)	c
Accrued salary & wages		239,713										239,713
Current portion of notes payable		129,093						(129,093	)	c
Advance from related party		135,000										135,000
		1,127,140			232,531			(347,797	)			1,011,874
Long term debt		2,493,296						274,300		e		274,300
								(2,493,296	)	c
		3,620,436			232,531			(2,566,793	)			1,286,174
Stockholders’ equity (deficiency):
Common stock					11,678,241			(11,678,241	)	d		2,492,980
								2,492,980		g
Additional paid-in-capital					3,000,000			(3,051,927	)	d		—
								2,919,207		c
								(100,000	)	b
								(274,300	)	e
								(2,492,980	)	g
Accumulated deficit		(3,371,450	)		(14,584,207	)		(145,961	)	a		(3,371,450	)
								14,730,168		d
Total stockholders’ equity (deficiency)		(3,371,450	)		94,034			2,398,946				(878,470	)
Totals	$	248,986		$	326,565		$	(167,847	)		$	407,704

See accompanying notes to unaudited pro forma condensed financial statements.

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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the year ended December 31, 2003
		Allergy Free			Planet Polymer Technologies			Pro Forma Adjustments				Pro Forma
Revenues	$	2,258,213		$	175,082		$	(175,082	)	a	$	2,258,213
Operating Expenses:
Cost of revenues		756,513			4,707			(4,707	)	a		756,513
General and administrative		586,217			390,549							976,766
Marketing		1,296,206										1,296,206
Total operating expenses		2,638,936			395,256			(4,707	)			3,029,485
Loss from operations		(380,723	)		(220,174	)		(170,375	)			(771,272	)
Other income (expense)		(193,412	)		291,482			(15,086	)	f		82,984
Net income (loss)	$	(574,135	)	$	71,308		$	(185,461	)		$	(688,288	)
Net loss per common share											$	(0.01	)
Weighted averages shares outstanding - basic and diluted												129,265,854

See accompanying notes to unaudited pro forma condensed financial statements.

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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS For the six months ended June 30, 2004
	Allergy Free			Planet Polymer Technologies			Pro Forma Adjustments				Pro Forma
Revenues	$	720,438		$	57,444		$	(57,444	)	a	$	720,438
Operating Expenses:
Cost of revenues		251,895			3,703			(3,703	)	a		251,895
General and administrative		455,870			309,047							764,917
Marketing		347,594										347,594
Total operating expenses		1,055,359			312,750			(3,703	)			1,364,406
Loss from operations		(334,921	)		(255,306	)		(53,741	)			(643,968	)
Other income (expense)		(107,391	)		10,715			(7,544	)	f		(104,220	)
Net income (loss)	$	(442,312	)	$	(244,591	)	$	(61,285	)		$	(748,188	)
Net loss per share											$	(0.01	)
Weighted averages shares outstanding - basic and diluted												129,265,854

See accompanying notes to unaudited pro forma condensed financial statements.

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NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS

(1) DESCRIPTION OF TRANSACTION AND BASIS OF PRESENTATION

On March 18, 2004, Planet Polymer Technologies, Inc. (“Planet”) and Allergy Free, L.L.C. (“Allergy”) entered into an Asset Purchase Agreement (“Agreement”) as amended on June 11, 2004 and October 6, 2004, in which Planet will acquire all assets of Allergy for which Planet will provide the following consideration: a subordinated note in the principal amount of $274,300 bearing interest at 5.5% per annum and due and payable within three years and 82,732,970 shares of common stock of Planet. As a result, after the closing of the Agreement and the conversion of the notes and related interest, the stockholders of Allergy will own approximately 92.7% of the voting shares of Planet. Since the stockholders of Allergy will receive the majority of the voting shares of Planet, Allergy will be the accounting acquirer (legal acquiree) and Planet will be the accounting acquiree (legal acquirer). Since at the closing, Planet will be a non-operating shell corporation no longer meeting the definition of a business, as defined by EITF Consensus 98-3, the transaction will be accounted for as a recapitalization of Allergy. This transaction is equivalent to Allergy issuing stock for the net liabilities of Planet, accompanied by a recapitalization. The accounting is identical to that resulting from a reverse acquisition, except that there are no adjustments to the historic carrying values of the assets and liabilities. Additionally, any direct costs of the transaction are charged to equity, but only to the extent of Planet’s cash. Costs in excess of cash received are charged to expense.

(2) PRO FORMA ADJUSTMENTS

(a)	Immediately prior to the closing, Planet will distribute to a trustee for the benefit of Planet shareholders of record as of April 15, 2004, the right to receive all royalties payable to Planet pursuant to those certain sale and licensing agreements between Planet and Agway, Inc., related to Planet’s Fresh Seal® and Optigen® technology and that certain purchase, sale and license agreement between Planet and Ryer Enterprises, LLC, relating to Planet’s AQUAMIM® technology. Accordingly, the assets, liabilities, revenues and expenses related to the assets being distributed have been removed from the pro forma condensed combined amounts.
(b)	To record the estimated additional costs of completing the transaction and to write off the costs of the transaction with a portion being charged to Additional Paid in Capital equal to the cash of Planet being transferred to the continuing entity.
(c)	The transaction is structured as a purchase of the assets and assumption of certain liabilities of Allergy by Planet, but the transaction will be accounted for as a recapitalization of Allergy. This entry removes the liabilities that are to remain with Allergy Free LLC after the transaction thereby treating such debt as a capital contribution to Allergy. Interest expense associated with this debt has not been removed from the Unaudited Pro Forma Condensed Combined Statements of Operations for the year ended December 31, 2003 or six months ended June 30, 2004 to reflect the fact that historically Allergy has financed its operations through borrowings and that it is presumed some level of borrowings will be needed in the future to support future operations. The actual amount of interest that may be incurred to finance operations may be different from the amount presented.
(d)	To eliminate the historical stockholders’ equity accounts of Planet, the accounting acquiree. This adjustment also includes an adjustment to additional paid in capital of $51,927 representing the net liabilities of Planet to be assumed by Allergy.
(e)	To record the issuance of a subordinated note in the principal amount of $274,300 bearing interest at 5.5% per annum and due and payable within three years. This amount

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is due to Allergy Free LLC and, after issuance, represents an asset of Allergy that is not being transferred in the merger.

(f)

To record interest expense associated with the debt issued in the acquisition.

(g)

To transfer the balance in the Additional Paid in Capital account to Common Stock to reflect the fact that the common stock of the surviving entity has no par value. Allergy Free has been historically capitalized by loans from its members and members have made no capital contributions. The business reason loans were made by members instead of capital contributions was to provide for repayment of these amounts with interest prior to any other distributions to members.

(3) SHAREHOLDERS’ EQUITY (DEFICIENCY) RECONCILIATION

The following is a reconciliation of the Allergy’s shareholders’ deficiency prior to the merger transaction to the shareholders’ deficiency as reported in these pro forma condensed financial statements:

		Common Stock		Additional Paid-In Capital			Accumulated Deficit			Total
Allergy’s accumulated deficit at
June 30, 2004						$	(3,371,450	)	$	(3,371,450	)
Allergy’s long-term debt and
interest payable excluded from this
transaction			$	2,919,207						2,919,207
Net liabilities of Planet assumed in
transaction				(51,927	)					(51,927	)
Estimated costs of the transaction				(100,000	)					(100,000	)
Debt issued in connection with this
transaction				(274,300	)					(274,300	)
Transfer balance of Additional Paid-
In Capital to Common Stock	$	2,492,980		(2,492,980	)
Pro forma shareholders’ deficiency	$	2,492,980	$	—		$	(3,371,450	)	$	(878,470	)

QUESTIONS AND ANSWERS ABOUT THE ACQUISITION

        Q:            WHY IS THE COMPANY PURCHASING SUBSTANTIALLY ALL OF THE ASSETS OF ALLERGY FREE?

        A:            The Company and Allergy Free are proposing to combine their business operations by having the Company purchase substantially all of the assets of Allergy Free. We believe the Company’s acquisition of Allergy Free’s business will provide the Company with an operating business complementary with certain of the polymer

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technologies the Company has developed or may develop. The Company’s current business has been limited to licensing technology to third parties.

        Q.            WHAT ASSETS ARE BEING SOLD TO THE COMPANY IN THE ACQUISITION?

        A:            In the Acquisition, the Company will acquire substantially all of the assets used by Allergy Free in the operation of its business.

        Q:            WHAT WILL ALLERGY FREE RECEIVE IN THE ACQUISITION?

        A:            In the Acquisition, the Company will issue and deliver to Allergy Free approximately 82,732,970 shares of the Company’s common stock, subject to adjustment as provided below. At Closing, the Company will also issue and deliver to Allergy Free a Subordinated Convertible Note in the approximate principal amount of a $274,300.

        The Company will assume approximately $701,229 of Allergy Free’s liabilities as of March 31, 2004 (plus, all obligations arising under assumed contracts which arise after the Closing).

        Q:            HOW WILL THE COMPANY SHAREHOLDERS BE AFFECTED BY THE ACQUISITION?

        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 Acquisition, except as adjusted by the 50 to 1 reverse stock split pursuant to Proposal No. 3. Each share of the Company common stock, however, will represent a substantially smaller ownership percentage of a significantly larger company. Additionally, the Company is proposing to distribute to a Royalty Liquidation Trust (See Proposal 2) the Company’s right to receive payments, if any, due it under certain contracts. The Trust is being established for the benefit of the Company’s current shareholders who will receive distributions of any such payments,(less costs and expenses of administering the Trust) equal to the shareholder’s pro-rata ownership interest in the Company on September 30, 2004.

        Q:            WHAT ARE THE MATERIAL UNITED STATES TAX CONSEQUENCES OF THE ACQUISITION TO THE COMPANY SHAREHOLDERS?

        A:            Although the Acquisition 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, in connection with the Acquisition the Company is proposing to distribute to a Royalty Liquidation Trust, cash received and the Company’s right to receive payments due it under certain contracts. The Trust is being established for the benefit of the Company’s current shareholders who would receive distributions of royalty payments (less costs and expenses of administering the royalty contracts and trust) equal to the shareholder’s ownership interest in the Company on September 30, 2004.

        The transfer of the royalty rights to the Trust by the Company will be treated as a taxable disposition at the fair market value of the royalty rights and the Company will recognize taxable gain equal to the difference between the Company’s basis in the rights and the fair market value. The fair market value of the rights is highly speculative and the Company has not incurred the expense of obtaining an appraisal of the rights. While the Company will recognize a gain upon the distribution, the Company believes any gain will be substantially offset by the Company’s net operating losses.

        Additionally, the distribution to the Trust, may, at least in part, be considered a taxable dividend to shareholders, if, at the end of the year, the Company has earnings and profits. The Company has no accumulated earnings and profits from prior years, but it will not be known until the end of the calendar year whether or not the Company will have earnings and profits for the current year. The Company is not expecting earnings and profits for the current year to be material. However, it is possible the Company could report some dividend income to the shareholders. If so, it is also possible that the amount of dividend income reported will exceed cash distributions, if any, to shareholders from the Trust for the current year. Any part of each shareholder’s proportionate share of the distribution which is not treated as a dividend will first reduce each shareholders’ basis in their stock and any excess of distributions over basis will be treated as a gain from the sale or exchange of property.

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        Royalty payments received by the Trust from time to time will be taxable to the beneficiaries of the Trust, whether or not distributed. Subject to maintaining a reserve for payment of fees and expenses, the Trustee of the Trust will distribute royalty payments received quarterly.

        THIS DISCUSSION DOES NOT ADDRESS TAX CONSEQUENCES THAT MAY VARY WITH, OR ARE CONTINGENT ON, INDIVIDUAL CIRCUMSTANCES. MOREOVER, IT DOES NOT ADDRESS ANY NON-INCOME TAX OR ANY FOREIGN, STATE, OR LOCAL TAX CONSEQUENCES OF THE ACQUISITION. TAX MATTERS ARE VERY COMPLICATED, AND THE TAX CONSEQUENCES OF THE ACQUISITION TO YOU WILL DEPEND UPON THE FACTS OF YOUR PARTICULAR SITUATION. ACCORDINGLY, THE COMPANY STRONGLY URGES YOU TO CONSULT WITH A TAX ADVISOR TO DETERMINE THE PARTICULAR FEDERAL, STATE, LOCAL OR FOREIGN INCOME OR OTHER TAX CONSEQUENCES TO YOU OF THE ACQUISITION.

        Q:            WHAT SHAREHOLDER VOTES ARE NEEDED TO APPROVE THE ACQUISITION?

        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 Asset Purchase Agreement and the Acquisition of substantially all of the assets of Allergy Free.

        Q:            WHEN DOES THE COMPANY EXPECT TO COMPLETE THE ACQUISITION?

        A:            The Company and Allergy Free are working to complete the Acquisition as quickly as possible. We expect to complete the Acquisition 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 Acquisition is approved by the required vote of the Company’s shareholders and is not abandoned or terminated, holders of the Company’s common stock who did not vote in favor of the Acquisition and who notify the Company in writing of their intent to demand payment of their shares if the Acquisition is consummated, may, by complying with Sections 1300 through 1312 of the California Corporations Code, a copy of which is attached hereto as Exhibit “F”, be entitled to dissenters’ rights as described therein. The Company’s shareholders must notify the Company of their intent to dissent within 30 days of the date that the notice of approval of the Acquisition is mailed to all the Company’s shareholders who did not vote in favor of the Acquisition.

        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 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 Proposals 1,2,3 and 4, 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

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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 Proposals 1,2,3 and 4, but will have no effect on the outcome of the other proposals.

        Q:            CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY?

        A:            Yes. You can change your vote at any time before your proxy is voted at the Company’s annual meeting. You can do this in one of three ways:

*              timely delivery of a valid, later-dated proxy by mail.

*              revoking your proxy by written notice to the corporate secretary of the Company; or

*              voting in person by written ballot at the Company annual meeting.

        If you have instructed a broker to vote your shares, you must follow the directions from your broker on how to change that vote.

        Q:            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 Acquisition or about any of the other proposals described in this proxy statement or the enclosed proxy, you should contact:

Planet Polymer Technologies, Inc.
6835 Flanders Drive, Suite 100
San Diego, California 92121
(619) 291-5694
Attention:  H. Mac Busby

                You may also obtain additional information about the Company from documents filed with the SEC by accessing EDGAR, the SEC’s online filing system at www.sec.gov.

RISK FACTORS ASSOCIATED WITH THE ACQUISITION

        An investment in the Company’s common stock is subject to many risks. You should carefully consider the risks described below, together with all of the other information included in this proxy statement, including the financial statements and the related notes, before you decide whether to approve the Acquisition. The Company’s business, operating results and financial condition could be harmed by any of the following risks. The trading price of the Company’s common stock could decline due to any of these risks, and you could lose all or part of your investment.

        THE COMPANY MAY NOT REALIZE THE INTENDED BENEFITS OF THE ACQUISITION IF THE COMPANY IS UNABLE TO EXPAND ALLERGY FREE’S OPERATIONS AND DEVELOP NEW INNOVATIVE PRODUCTS.

        Achieving the benefits of the Acquisition will depend in part on growing Allergy Free’s operations and developing new, innovative products. In order for the Company to provide enhanced and more valuable products to customers after the Acquisition, the Company intends to develop new product lines utilizing polymer technologies. This integration may be difficult and unpredictable because the Company’s technology and Allergy Free’s products are highly complex, have been developed independently and were designed without regard to integration. Successful development of new products will require extensive development activities, as well as sales and marketing efforts and personnel. If the Company cannot successfully develop new products and expand Allergy Free’s business, the Company may not realize the expected benefits of the Acquisition.

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        ALLERGY FREE HAS A HISTORY OF LOSSES.

        The Company intends to integrate and enhance Allergy Free’s current product line with its polymer technologies. However, Allergy Free has not been profitable and has a history of financial loss. Because Allergy Free has a history of financial loss, there is a risk whether the Company will be able to enhance Allergy Free’s current product line and make such product line profitable for the Company. If the Company cannot successfully develop new products and expand Allergy Free’s existing products and business, the Company may not realize the expected benefits of the Acquisition.

        THE ACQUISITION WILL RESULT IN SIGNIFICANT COSTS TO THE COMPANY AND ALLERGY FREE, WHETHER OR NOT THE ACQUISITION IS COMPLETED.

        The Acquisition will result in significant costs to the Company and Allergy Free. Transaction costs are estimated to be at least $150,000. 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 Acquisition is completed. In addition, if the Asset Purchase Agreement is terminated under specified circumstances, the Company may be obligated to pay a $50,000 termination fee and/or a $25,000 due diligence fee.

        FAILURE TO COMPLETE THE ACQUISITION COULD CAUSE THE COMPANY’S STOCK PRICE TO DECLINE.

        If the Acquisition is not completed for any reason, the Company’s stock price may decline because costs related to the Acquisition, such as legal and accounting, must be paid even if the Acquisition is not completed. In addition, if the Acquisition is not completed, the Company’s stock price may decline to the extent that the current market price reflects a market assumption that the Acquisition will be completed.

        CERTAIN DIRECTORS OF THE COMPANY MAY HAVE POTENTIAL CONFLICTS OF INTEREST IN RECOMMENDING THAT YOU VOTE IN FAVOR OF APPROVAL OF THE ACQUISITION.

        Two of the directors of the Company who recommend that you vote in favor of the Asset Purchase Agreement and the related Acquisition are expected to join the board of directors of the combined Company immediately upon consummation of the Acquisition. In addition, Dr. Robert Petcavich will be entering into a consulting agreement with the Company. As a result, they may have interests in the Acquisition that differ from yours. The receipt of any compensation as a result of election to the combined Company’s board of directors or any consulting position with the Company may influence these directors in making their recommendation that you vote in favor of the Asset Purchase Agreement and the Acquisition.

        AFFILIATES OF THE COMPANY’S LAW FIRM HAVE INTERESTS IN THE COMPANY AND IN ALLERGY FREE

        Affiliates of Blanchard, Krasner and French (the law firm which serves as counsel to the Company in this transaction) own stock in the Company and have interests in and hold notes of Allergy Free. Additionally, Blanchard, Krasner and French represents Allergy Free in other matters unrelated to the proposed Acquisition. Allergy Free has retained other counsel to represent its interests in matters and issues related to the Acquisition.

        IF THE CONDITIONS TO THE ACQUISITION ARE NOT MET, THE ACQUISITION WILL NOT OCCUR.

        Specified conditions must be satisfied or waived to complete the Acquisition. These conditions are summarized in the section captioned “Conditions to Completion of the Acquisition” and are described in detail in the Asset Purchase Agreement. The Company cannot assure you that each of the conditions will be satisfied. If the conditions are not satisfied or waived, the Acquisition will not occur or will be delayed and the Company may lose some or all of the intended benefits of the Acquisition.

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        THE COMPANY AND ALLERGY FREE MAY WAIVE ONE OR MORE OF THE CONDITIONS TO THE ACQUISITION WITHOUT RESOLICITING SHAREHOLDER APPROVAL FOR THE ACQUISITION.

        Each of the conditions to the Company’s and Allergy Free’s obligations to complete the Acquisition may be waived, in whole or in part, to the extent permitted by applicable laws, by agreement of the Company and Allergy Free. 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 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 Acquisition without seeking further shareholder approval.

        SALES OF ALLERGY FREE’S PRODUCTS COULD DECLINE OR BE INHIBITED IF CUSTOMER RELATIONSHIPS ARE DISRUPTED BY THE ACQUISITION.

        The Acquisition may have the effect of disrupting customer relationships. Allergy Free’s customers or potential customers may delay or alter buying patterns during the pendency of and following the Acquisition. Customers may defer purchasing decisions as they evaluate the likelihood of successful completion of the Acquisition. Allergy Free’s customers or potential customers may instead purchase products of competitors. Any significant delay or reduction in orders for Allergy Free’s products could cause the Company’s sales, following the Acquisition, to decline.

        THE COMPANY’S BUSINESS AND FINANCIAL POSITIONS HAVE DETERIORATED SIGNIFICANTLY.

        The Company’s business and financial position has deteriorated significantly. The Company effectively had no business operations and no employees as of the date of this Proxy Statement. As of December 31, 2003, the Company had an accumulated deficit of approximately $14,339,616. The Company’s financial resources when combined with Allergy Free are inadequate to expand the combined business without additional capital. If the Company cannot raise additional capital the Company may not be able to continue Allergy Free’s business operations.

        The Company’s independent accountants’ opinion on its 2003 financial statements includes an explanatory paragraph indicating substantial doubt about the Company’s ability to continue as a going concern. To continue long term as a going concern, the Company will have to increase its sales, decrease its costs, and raise additional equity financing, and/or raise new debt financing. The Company may not accomplish these tasks.

        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 acquisition agreements, in addition to the Asset Purchase Agreement with Allergy Free, in furtherance of the Company’s strategy to consolidate with other companies in the allergy market. The Company may not be able to close any acquisitions on the timetable it anticipates, if at all. The Company may incur significant non-recoverable expenses in these efforts.

        THE COMPANY’S PROSPECTS FOR OBTAINING ADDITIONAL FINANCING ARE UNCERTAIN AND FAILURE TO ACHIEVE PROFITABILITY OR OBTAIN NEEDED FINANCING WILL AFFECT ITS ABILITY TO PURSUE FUTURE GROWTH, HARM ITS BUSINESS OPERATIONS AND AFFECT ITS ABILITY TO CONTINUE AS A GOING CONCERN.

        If the Company is unable to achieve profitability or raise additional debt or equity financing, it will not be able to continue as a going concern. The Company’s future capital requirements will depend upon many factors, including development costs of new products, potential acquisition opportunities, maintenance of adequate contract manufacturing agreements, progress of research and development efforts, expansion of marketing and sales efforts and the status of competitive products. Additional financing may not be available in the future on acceptable terms or at all. The Company’s and Allergy Free’s history of substantial operating losses could also severely limit the

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Company’s ability to raise additional financing. In addition, given the recent price of its common stock, if the Company raises additional funds by issuing equity securities, additional significant dilution to its shareholders could result.

        If the Company is unable to increase sales, decrease costs, or obtain additional equity or debt financing, the Company may be required to close business or product lines, further restructure or refinance its debt or delay, scale back further or eliminate its research and development program. The Company may also need to obtain funds through arrangements with partners or others that may require it to relinquish its rights to certain technologies or potential products or other assets. The Company’s inability to obtain capital, or its ability to obtain additional capital only upon onerous terms, could very seriously damage its business, operating results and financial condition.

        ISSUING ADDITIONAL SECURITIES AS A MEANS OF RAISING CAPITAL AND THE FUTURE SALES OF THESE SECURITIES IN THE PUBLIC MARKET COULD LOWER THE COMPANY’S STOCK PRICE AND ADVERSELY AFFECT ITS ABILITY TO RAISE ADDITIONAL CAPITAL IN SUBSEQUENT FINANCINGS; IMPAIR ITS ABILITY IN NEW STOCK OFFERINGS TO RAISE FUNDS TO CONTINUE OPERATIONS; AND WILL HAVE A SIGNIFICANT DILUTIVE EFFECT ON THE COMPANY’S EXISTING SHAREHOLDERS.

        The Company intends to rely on debt and equity financings to meet its working capital needs. If the securities that the Company issues in these financings are subsequently sold in the public market, the trading price of its common stock may be negatively affected. As of October 1, 2004, the last reported sale price of the Company common stock was $.05. If the market price of the Company common stock continues to decrease, The Company may not be able to conduct additional financings in the future on acceptable terms or at all, and its ability to raise additional capital will be significantly limited.

        Future sales of the Company’s common stock, particularly shares issued upon the exercise or conversion of outstanding or newly issued securities upon exercise of its outstanding options, could have a significant negative effect on the market price of the Company’s common stock. These sales might also make it more difficult for the Company to sell equity securities or equity-related securities in the future at a time and price that it would deem appropriate. The Company has agreed to use its best efforts to register shares issued to Allergy Free and shares issued as part of the Private Placement. When these shares are registered, there will be many more shares that may be sold, which could have a significant negative impact on the market price of the Company’s common stock.

        Shares issued in connection with the Acquisition and the conversion or exercise of convertible securities into shares of the Company’s common stock will result in substantial dilution to the Company’s existing shareholders. In order to consummate the asset purchase of Allergy Free, the Company intends to issue approximately 82,732,970 shares of common stock to Allergy Free and a Subordinate Convertible Note, in an approximate principal amount of $274,300 with interest at 5.5% per annum.

        Upon completion of the 50 to 1 Reverse Stock Split and the Acquisition, the Company will have over 18,000,000 shares available for issuance. The Company may use these shares to conduct additional financing transactions in which shares of the Company common stock or other securities that are convertible or exercisable for shares of the Company common stock. At the current market price of the Company common stock, any additional financing that involves the issuance of Company common stock or other securities that are convertible into or exercisable for the Company common stock will result in significant dilution to the Company’s shareholders, including Allergy Free following the Acquisition.

        Under the terms of the Asset Purchase Agreement, the Company is obligated to seek to raise in a private placement up to an additional $2.0 million. The Company will offer its shareholders and members of Allergy Free the opportunity to purchase from the Company the Company’s Common Stock at a purchase Price equal to $0.05 per share. Based on the per share price of $0.05, if the offering is fully subscribed, the Company will issue approximately 40,000,000 shares. If the private offering is over subscribed shares will be first offered to Planet shareholders as of September 30, 2004, then to existing Allergy Free investors, and then to other investors.

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        THE COMPANY’S STOCK PRICE HAS BEEN VOLATILE AND HAS EXPERIENCED SIGNIFICANT DECLINE, AND IT MAY CONTINUE TO BE VOLATILE AND CONTINUE TO DECLINE.

        In recent years, the stock market in general, and the market for shares of small capitalization technology stocks in particular, have experienced extreme price fluctuations. These fluctuations have often negatively affected small cap companies such as the Company, and may impact its ability to raise equity capital. Companies with liquidity problems also often experience downward stock price volatility. The Company believes that factors such as announcements of developments relating to its business (including any financings or any resolution of liabilities), announcements of technological innovations or new products or enhancements by the Company or its competitors, sales by competitors, sales of significant volumes of the Company’s common stock into the public market, developments in its relationships with customers, partners, lenders, distributors and suppliers, shortfalls or changes in revenues, gross margins, earnings or losses or other financial results that differ from analysts’ expectations, regulatory developments and fluctuations in results of operations could and have caused the price of the Company common stock to fluctuate widely and decline over the past three or more years during the technology recession. The market price of the Company common stock may continue to decline, or otherwise continue to experience significant fluctuations in the future, including fluctuations that are unrelated to the Company’s performance.

        THE ESTABLISHMENT OF THE ROYALTY LIQUIDATION TRUST COULD RESULT IN TAX LIABILITY TO THE COMPANY.

        The transfer of royalty rights to the Trust by the Company will be treated as a taxable disposition at the fair market value of the royalty rights and the Company will recognize taxable gain equal to the difference between the Company’s basis in the rights and the fair market value. The fair market value of the rights is highly speculative and the Company has not incurred the expense of obtaining an appraisal of the rights. While the Company will recognize a gain upon the distribution, the Company believes any gain will be substantially offset by the Company’s net operating losses.

        THE ESTABLISHMENT OF THE ROYALTY LIQUIDATION TRUST COULD RESULT IN TAX LIABILITY TO THE SHAREHOLDERS.

        Although the Acquisition 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, in connection with the Acquisition the Company is proposing to distribute to a Royalty Liquidation Trust, cash received and the Company’s right to receive payments due it under certain contracts. The Trust is being established for the benefit of the Company’s current shareholders who would receive distributions of royalty payments (less costs and expenses of administering the royalty contracts and trust) equal to the shareholder’s ownership interest in the Company on September 30, 2004.

        The transfer of the royalty rights to the Trust by the Company will be treated as a taxable disposition at the fair market value of the royalty rights and the Company will recognize taxable gain equal to the difference between the Company’s basis in the rights and the fair market value. The fair market value of the rights is highly speculative and the Company has not incurred the expense of obtaining an appraisal of the rights. While the Company will recognize a gain upon the distribution, the Company believes any gain will be substantially offset by the Company’s net operating losses.

        Additionally, the distribution to the Trust, may, at least in part, be considered a taxable dividend to shareholders, if, at the end of the year, the Company has earnings and profits. The Company has no accumulated earnings and profits from prior years, but it will not be known until the end of the calendar year whether or not the Company will have earnings and profits for the current year. The Company is not expecting earnings and profits for the current year to be material. However, it is possible the Company could report some dividend income to the shareholders. If so, it is also possible that the amount of dividend income reported will exceed cash distributions, if any, to shareholders from the Trust for the current year. Any part of each shareholder’s proportionate share of the distribution which is not treated as a dividend will first reduce each shareholders’ basis in their stock and any excess of distributions over basis will be treated as a gain from the sale or exchange of property.

        Royalty payments received by the Trust from time to time will be taxable to the beneficiaries of the Trust, whether or not distributed. Subject to maintaining a reserve for payment of fees and expenses, the Trustee of the Trust will distribute royalty payments received quarterly.

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THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THE ALLERGY FREE ASSET PURCHASE UNLESS MARKED TO THE CONTRARY, PROXIES RECEIVED FROM SHAREHOLDERS WILL BE VOTED IN FAVOR OF PROPOSAL 1.

PROPOSAL 2

DISTRIBUTION OF ROYALTY RIGHTS

        The Board of Directors of the Company, subject to affirmative votes in favor of Proposals 1 through 4, intends to form a trust for the benefit of holders of record of the Company’s common stock as of September 30, 2004 (the “Trust”). The Board of Directors of the Company, subject to shareholder approval of Proposals 1 through 4, further intend to distribute certain cash received and the right to receive all royalties payable to the Company pursuant to those certain sale and licensing agreements between the Company and Agway, Inc., relating to the Company’s FreshSeal and Optigen technology (the “Agway Agreements”) and that certain purchase, sale and license agreement between the Company and Ryer Enterprises, LLC (who assigned, with Planet’s approval, its rights and obligations to Ryer, Inc.), relating to the Company’s MIM technology (the “Ryer Agreement”). A copy of the Trust is attached as Exhibit “D” to this Proxy Statement and the description of the Trust set forth below is qualified in its entirety by reference to the full text of the Trust.

Description of the Trust

        The Declaration of Trust nominates as the initial trustee U.S. Bank. The Trust document directs the trustee to distribute royalties and other payments, including Ryer note payments, if any, received from the Agway Agreements and Ryer Agreement (collectively referred to as the “Sale and Licensing Agreements”) pro rata to the beneficiaries of the Trust on a quarterly basis (less amounts required to pay costs and expenses of the Trust and maintain a reserve to pay costs and expenses).

        The trustee shall maintain a $30,000 cash reserve (which reserve amount may be increased if it is mutually determined by the trustee and the Company that the reserve needs to be increased) from which the trustee may pay its trustee fees, fees of the trust administrator and reimburse costs and expenses incurred by the Trustee, Administrator or Company in connection with enforcing payment of the royalties and Ryer note payments or any obligations under the Sale and Licensing Agreements. In the event pursuant to the Sale and Licensing Agreements, the Company recovers the exclusive or non exclusive rights to exploit technologies under the Sale and Licensing Agreements, the Company may do so for its own account with no obligation to pay royalties to the trustee of the trust.

        The Trust will be administered by an administrator, Planet Royalty Administrator, LLC (“Administrator”), who will service and administer and collect payments due under the sale and Licensing Agreements and will have full power and authority to do any and all things in connection with such administration which it may deem necessary or desirable. The Administrator is also authorized to execute and deliver any and all instruments of satisfaction or cancellation, or of partial or full release or discharge, and all other comparable instruments, with respect to the Sale and Licensing Contracts and, after default of the Sale and Licensing Contracts to commence enforcement proceedings with respect to the Sale and Licensing Contracts. Administrator shall be entitled to reimbursement, from amounts otherwise distributable to Beneficiaries, of all expenses and liabilities incurred by Administrator in connection with its efforts to collect the royalty rights, and enforce the provisions of the Sale and Licensing Contracts. The Administrator shall also be entitled to be paid reasonable compensation for administration of the Trust not to exceed the lesser of (i) $10,000 per year, or (ii) twenty-five percent (25%) of Net Royalties received by the Trust for such year, payable quarterly. Each Quarter the Administrator will forward to the Trustee a report settling forth (i) the aggregate amount of collections received by Administrator, if any, during the preceding quarter, and (ii) a description of collection expenses or other sums, if any, for which Administrator is claiming reimbursement.

Under the terms of the Agway Agreements, the Company retained the exclusive right to utilize the intellectual property related to the FreshSeal and Optigen technology outside of the food and agricultural fields of business, which rights the Company will retain and are not being assigned to the Trust. In addition, if a counter party to one of the sale and licensing agreements chooses to abandon the technology or is in material default in the payment of

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royalties, that sale and licensing agreement could terminate and the Company by that event would recover the technology previously sold and licensed. The Company has not assigned to the Trust the right to recover technologies under those circumstances and would retain such technology solely for the Company’s benefit.

QUESTIONS AND ANSWERS ABOUT TRUST

        Q:            WHAT IS THE PURPOSE OF THE ROYALTY LIQUIDATION TRUST?

        A:            Prior to the Acquisition, the Company entered into certain licensing agreements with Agway, Inc. and Ryer Enterprises, LLC whereby the Company licensed its technology to the outside companies (the “Royalty Contacts”). As a part of the Royalty Contracts, the Company has the potential to receive future royalty payments. The amount of such royalty payments is speculative and subject to a number of uncertainties.

        The Company and Allergy Free agreed to exclude the Royalty Contracts, and any potential royalty and Ryer note payments, from the Acquisition. Instead, the Company has proposed the establishment of the Royalty Liquidation Trust (“Trust”) for the benefit of the Company’s shareholders as of September 30, 2004. The sole purpose of the Trust is to collect royalties, if any, due under the Royalty Contract’s and distribute any such payments along with cash received by Planet in payment of the Ryer Note, less certain expenses, to the shareholders of record as of September 30, 2004 who would become beneficiaries (“Beneficiaries”) under the Trust.

        Q:            IF THE TRUST IS ESTABLISHED, WHO WOULD OWN THE ROYALTY RIGHTS UNDER THE ROYALTY CONTRACTS?

        A:            Technically, the Trust would own the right to receive royalty and note payments and the companies owing payments under the Royalty Contracts will be instructed to issue such payments in the name of the Trust. However, the Trust is being established solely for the benefit of the Company’s shareholders as of September 30, 2004 and the payments (after paying or providing for costs and expenses) would be distributed on a pro-rata basis to those shareholders.

        Q:            WHO WOULD ADMINISTER THE TRUST?

        A:            Under the terms of the Trust, Planet Royalty Administrator, LLC (“Administrator”), would administer the Trust. The sole managers and members of the Administrator are Dr. Robert Petcavich and Mr. H. Mac Busby, both directors of the Company. The Administrator would be responsible for collecting payments due under the Royalty Contracts and monitoring compliance with other obligations under the Royalty Contracts.

        Q:            WHO WILL ACT AS TRUSTEE?

        A:            Under the terms of the Trust, US Bank would serve as trustee (“Trustee”).

        Q:            WHAT HAPPENS TO THE PAYMENTS COLLECTED?

        A:            BASF, Alltech, and Ryer, Inc. will be instructed to make royalty and note payments directly to the trustee. If a payment is not received, the Administrator will evaluate what actions should be taken, if any, and if appropriate, take action to collect payments and report such payments, if any, received to the Trustee on a quarterly basis. The Trustee is to establish a collection account in which all funds collected will be held in certificates of deposit, demand deposits, time deposits in , and money market funds issued by the trustee. After paying costs and expenses of administration of the royalty contracts and trust, the Trustee will make distributions to the Beneficiaries of the Trust on a quarterly basis.

        Q:            ARE THE TRUSTEE AND ADMINISTRATOR PAID FOR THEIR SERVICES?

A:    Under the terms of the Trust, the Trustee will be paid $15,000 per year for its service as Trustee, and will also be entitled to reimbursement of expenses, and compensation for extraordinary services rendered by the Trustee. The Administrator and Planet will be entitled to reimbursement from royalty payments and any other amounts held by the trust for all expenses incurred in collecting royalty payments, enforcing the Royalty Contracts, and performing any obligations required to be performed by Planet under the Royalty Contracts. The Administrator will

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also be entitled to be paid reasonable compensation for administration of the Trust not to exceed the lesser of (i) $10,000, or (ii) 25% of the net payments received by the Trust for a particular year.

        Q:            HOW WILL AVAILABLE FUNDS BE ALLOCATED?

        A:           

§	First, to Trustee
§	Second, to the Company (as grantor) in the unlikely event it incurs expenses.
§	Third, to Administrator
§	Fourth, to Beneficiary

                Q:            HOW WILL I RECEIVE PAYMENT?

        A:            Distributions will be made by check and mailed to Beneficiaries. If any distribution to a Beneficiary would be less than a minimal amount still to be determined (other than a final distribution), the Trustee shall hold such payment until a payment in an amount more than the minimal amount, which said greater amount is still to be determined, can be made.

        Q:            WILL BENEFICIARIES RECEIVE ANNUAL STATEMENTS?

        A:            On or before February 15 of each calendar year, the Trustee will forward to each Beneficiary a statement setting forth, among other information, the total amount collected during the previous calendar year; the total amount distributed during the previous calendar year; the amount of such distribution allocable to royalty payments received by the Trust; the amount of such distribution allocable to other payments received by the Trust; a statement of the assets and liabilities of the Trust; a description of any change in the assets of the Trust and any actions taken by the trustee with respect to the assets of the Trust; and other relevant information. Additionally, the Trustee shall deliver to the beneficiaries such interim reports as may be necessary or advisable to inform beneficiaries of significant events relating to Trust.

        Q:            ARE MY INTERESTS IN THE TRUST TRANSFERABLE?

        A:            No beneficial interest in the Trust will be transferable except upon death or by operation of law. The purpose behind making the beneficial interests non-transferable (except in case of death or by operation of law) is because the amount of money to be received under the Royalty Contracts is unknown. If the beneficial interests were transferable, they would be subject to SEC registration requirements. If the Trust were required to comply with SEC rules and regulations regarding registration, the additional fees and expenses of regulatory compliance would materially diminish or eliminate distributions available from the Trust.

        Q:            WILL I RECEIVE A CERTIFICATE INDICATING MY OWNERSHIP INTEREST IN THE TRUST?

        A:            No certificates or other indication of ownership will be issued. The Trustee will maintain a register which will show the shareholders of record on September 30, 2004 and their respective interests in the Trust, based upon the number of shares of common stock owned on September 30, 2004.

        Q:            WHAT IS THE EXPECTED DURATION OF THE TRUST?

        A:            The Trust will be limited in duration and will expire upon the earlier of: (i) November 17, 2007 unless extended (“Final Trust Termination Date”); or (ii) the day following any Payment Date on or after 5 years from the initial date of the Trust if there have been no net royalties for six consecutive calendar quarters immediately proceeding such Payment Date; or (iii) when it has been determined that all royalties and remedies to enforce such rights have been reasonably exhausted or are of no material value and not reasonably collectable. The Final Trust Termination Date may be extended for one (1) or more 3-year extension periods (or such shorter or longer period as may be allowed by “no action” assurances obtained by the Administrator from the SEC) provided the Administrator certifies to the Trustee that: (i) the Royalty Contracts have commercially reasonable value and that collections with respect to the Royalty Contracts are reasonably expected to exceed the Trustee’s fee and other costs and expenses of

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administering the Trust; and (ii) a “no action” assurance from the SEC that it will not recommend enforcement action if the Final Trust Termination Date is extended for such additional period.

        In the event the Administrator reasonably believes the Trust will terminate prior to the date the last of the Royalty Contract terminates and the Administrator believes the remaining royalty rights have commercial value, the Administrator shall take reasonable steps to solicit cash offers to purchase the Royalty Rights. In the event the Administrator or Trustee receive one or more cash offers to purchase all or any portion of the Royalty Rights, on or before ninety (90) days after the Termination Date of the Trust, the Administrator and Trustee shall take all reasonable steps to accept such offer or offers and consummate such a sale.

        Q:            WHO WILL DETERMINE THAT THE ROYALTIES AND REMEDIES TO ENFORCE SUCH RIGHTS HAVE BEEN EXHAUSTED OR ARE OF NO MATERIAL VALUE?

        A:            The Company (as grantor), the Trustee, and the Administrator must all agree.

        Q:            WHAT RIGHTS DO I, AS A BENEFICIARY, HAVE IF I AM NOT SATISFIED WITH THE PERFORMANCE OF THE TRUSTEE OR ADMINISTRATOR, OR IF I WANT TO ENFORCE MY RIGHTS UNDER THE TRUST?

        A:            If 3 or more beneficiaries holding 5% or more of the beneficial interests in the Trust apply to the Trustee and state that such beneficiaries would like to communicate with other beneficiaries regarding their rights under the Trust agreement, the Trustee must cause to be made available to such Beneficiaries such contact information of other Beneficiaries. Beneficiaries owning not less than 66 2/3% of the interests in the Trust can direct the Trustee to act or excuse its promise under the trust agreement.

RISK FACTORS ASSOCIATED WITH TRUST

        THE ESTABLISHMENT OF THE ROYALTY LIQUIDATION TRUST COULD RESULT IN TAX LIABILITY TO THE COMPANY AND SHAREHOLDERS

        The transfer of the royalty rights to the Trust by the Company will be treated as a taxable disposition at the fair market value of the royalty rights and the Company will recognize taxable gain equal to the difference between the Company’s basis in the rights and the fair market value. The fair market value of the rights is highly speculative and the Company has not incurred the expense of obtaining an appraisal of the rights. While the Company will recognize a gain upon the distribution, the Company believes any gain will be substantially offset by the Company’s net operating losses.

        Additionally, the distribution to the Trust, may, at least in part, be considered a taxable dividend to shareholders, if, at the end of the year, the Company has earnings and profits. The Company has no accumulated earnings and profits from prior years, but it will not be known until the end of the calendar year whether or not the Company will have earnings and profits for the current year. The Company is not expecting earnings and profits for the current year to be material. However, it is possible the Company could report some dividend income to the shareholders. If so, it is also possible that the amount of dividend income reported will exceed cash distributions, if any, to shareholders from the Trust for the current year. Any part of each shareholder’s proportionate share of the distribution which is not treated as a dividend will first reduce each shareholders’ basis in their stock and any excess of distributions over basis will be treated as a gain from the sale or exchange of property.

        Royalty payments received by the Trust from time to time will be taxable to the beneficiaries of the Trust, whether or not distributed. Subject to maintaining a reserve for payment of fees and expenses, the Trustee of the Trust will distribute royalty payments received quarterly.

        THIS DISCUSSION DOES NOT ADDRESS TAX CONSEQUENCES THAT MAY VARY WITH, OR ARE CONTINGENT ON, INDIVIDUAL CIRCUMSTANCES. MOREOVER, IT DOES NOT ADDRESS ANY NON-INCOME TAX OR ANY FOREIGN, STATE, OR LOCAL TAX CONSEQUENCES OF THE ACQUISITION. TAX MATTERS ARE VERY COMPLICATED, AND THE TAX CONSEQUENCES OF THE ACQUISITION TO YOU WILL DEPEND UPON THE FACTS OF YOUR PARTICULAR SITUATION. ACCORDINGLY, THE COMPANY STRONGLY URGES YOU TO CONSULT WITH A TAX ADVISOR TO

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DETERMINE THE PARTICULAR FEDERAL, STATE, LOCAL OR FOREIGN INCOME OR OTHER TAX CONSEQUENCES TO YOU OF THE ACQUISITION.

        BENEFICIARIES UNDER THE TRUST MUST SEEK OUT OTHER BENEFICIARIES IN ORDER TO ENFORCE THEIR RIGHTS UNDER THE TRUST.

        In order to gain access to the contact information of other Beneficiaries, at least 3 Beneficiaries owning at least 5% of the interest in the Trust must band together to force the Trustee to provide access to such contact information.

        Additionally, it takes a supermajority of the beneficial interests in the Trust (66 2/3%) to direct the Trustee to act or exercise its powers.

        BENEFICIARIES DO NOT HAVE THE ABILITY TO DETERMINE THAT THE ROYALTIES AND REMEDIES TO ENFORCE SUCH RIGHTS HAVE BEEN EXHAUSTED OR ARE OF NO MATERIAL VALUE.

        The Company (as Grantor), the Trustee and the Administrator have the power to determine when the benefits of the Royalty Contracts have expired. The interests of the decision makers may be different than those of the Beneficiaries.

        THE INTERESTS IN THE TRUST ARE NOT TRANSFERABLE.

        Except in the cause of death or by operation of law, the beneficial interests of shareholders in the Trust are not transferable. Thus, shareholders will have no liquidity in the value of their interest in the Trust.

        BENEFICIARIES ARE FOURTH IN LINE FOR RECEIPT OF AVAILABLE FUNDS.

        Beneficiaries do not receive distributions until Trustee, Grantor, and Administrator have all been paid their fees and/or been reimbursed expenses incurred. The Beneficiaries run the risk that the available funds will be exhausted before any distributions may be made.

        ADMINISTRATOR CHARGED WITH ADMINISTERING ROYALTY LIQUIDATION TRUST MAY BE DIFFICULT TO REPLACE IF SUCH ADMINISTRATOR RESIGNS OR CEASES TO ACT AS ADMINISTRATOR.

        The Royalty Liquidation Trust requires the appointment of an administrator to administer the Royalty Contracts and to collect payment due under the Royalty Contracts for distribution to the beneficiaries of the trust. The trust contains a provision which the administrator shall not resign from its position as Administrator unless (i) it can no longer act under applicable law, or (ii) unless a successor Administrator acceptable to Beneficiaries representing 50% or more beneficial interests in the Trust consents to such a resignation. It is possible that less than 50% of the Beneficiaries would consent to such a resignation. In such a situation, there is a risk that the Trust could operate for a period of time without an Administrator.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 2. UNLESS MARKED TO THE CONTRARY, PROXIES RECEIVED FROM SHAREHOLDERS WILL BE VOTED IN FAVOR OF PROPOSAL 2.

PROPOSAL 3

PROPOSAL TO AMEND ARTICLES OF INCORPORATION TO EFFECT
A ONE-FOR-FIFTY REVERSE STOCK SPLIT OF COMMON STOCK

General

        The Company’s Board of Directors believes that it may be in the best interests of the Company to amend the Articles of Incorporation to effect a one for fifty reverse stock split.

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        The principal effect of the reverse split would be to decrease the number of issued and outstanding shares of the Company’s common stock (but not the total shares authorized for issuance). Except for adjustments that may result from the treatment of fractional shares as described below, each stockholder would hold the same percentage of common stock immediately following the reverse split as such stockholder held immediately prior to the reverse split. The relative voting and other rights that accompany the shares of common stock would not be affected by the reverse split. In the event that our Board of Directors determines that it is in the best interests of the Company to effect a reverse split in the 2004 calendar year, the Company will file a Form 8-K with the SEC detailing the specific terms of such split.

        As of September 30, 2004, there were outstanding 6,582,884 shares of Common Stock. If the Company does not issue any shares of Common Stock prior to the date the reverse stock split becomes effective (other than the approximately 82,732,970shares being issued to Allergy Free as part of the Company’s purchase of Allergy Free’s assets), the number of outstanding shares of Common Stock will be reduced to approximately 1,786,617. Additionally, under the terms of the Asset Purchase Agreement, the Company is obligated to seek to raise in a private placement up to an additional $2.0 million. These shares will be offered at $0.05 per share. Based on the per share price of $0.05, if the offering is fully subscribed, the Company will issue approximately an additional 40,000,000 shares (prior to adjustment for the split) which will convert to 800,000 post split shares. The number of authorized shares of Common Stock will remain 20,000,000 shares. Except for the issuance of additional whole shares of Common Stock for fractional shares, the reverse stock split will not result in any immediate change in the economic interests or the voting power of a shareholder relative to other shareholders. However, the reverse stock split will result in a substantial increase in the number of shares of Common Stock available for issuance by the Board of Directors.

The reverse split would be accomplished by amending the Company’s Articles of Incorporation as set forth in Exhibit “E” attached hereto and incorporated herein by reference and which includes the following Amended and Restated Article III:

“Article III.

                A.            This Corporation is authorized to issue two classes of stock to be designated, respectively, “Common Stock” and “Preferred Stock.” The total number of shares which the Corporation is authorized to issue is 25 million shares, 20 million shares of which shall be Common Stock (the “Common Stock”) and 5 million shares of which shall be Preferred Stock (the “Preferred Stock”).

                B.            Effective as of the close of business on the date of filing this Amendment to the Articles of Incorporation with the California Secretary of State (the “Effective Time”), the filing of this Amendment shall effect a reverse stock split (the “Reverse Split”) pursuant to which fifty shares of Common Stock, issued and outstanding and held by a single holder, shall be combined into one validly issued, fully paid and nonassessable share of Common Stock. Each stock certificate that prior to the Effective Time represented shares of Common Stock, shall following the Effective Time represent the number of shares into which the shares of the Common Stock represented by such certificate shall be combined as a result of the Reverse Split. The Corporation shall not issue fractional shares or scrip as a result of the Reverse Split, but shall round up to the nearest whole share any fractional share that would otherwise result from the Reverse Split.

                C.            Preferred Stock may be issued in one or more series. The Board of Directors is authorized to fix the number of any such series of Preferred Stock and to determine the designation of any such series, subject to (i) such shareholder approvals as may be provided for herein, and (ii) the number of shares of Preferred Stock authorized at that time by this Article III. Subject to such shareholder approvals as may be provided for herein, the Board of Directors is further authorized to determine or alter the rights, preferences, privileges, and restrictions granted to or imposed upon any wholly unissued series of Preferred Stock and to increase or decrease (but not below the number of shares of such series then outstanding) the number of shares of any series of Preferred Stock. In case the number of shares of any series shall be so decreased, the shares constituting such decrease shall resume the status that they had prior to the adoption of the resolution or amendment originally fixing the number of shares of such series.”

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        The reverse split will become effective on a date determined by the Board.

        Shareholders do not have the statutory right to dissent under California law in connection with the amendment to the Articles of Incorporation to complete the reverse split.

        The Company may use the authorized and unissued shares of Common Stock to raise capital in a public or private offering, to enter into a strategic transaction or to grant options and warrants to employees or others.

        The Company plans to effect an unregistered private placement of up to $2 million of the Company’s unregistered common stock at a purchase price equal to $0.05 per share to shareholders of the Company and Members of Allergy Free as of the record date who are accredited investors and up to thirty-five (35) other investors. If the private placement offering is over-subscribed, shares will first be allocated to Planet shareholders as of the record date for this meeting and then to Allergy Free members. Shares will only be offered pursuant to the Company’s Private Placement Memorandum, which shareholders as of the record date for this meeting may request from the Company at 6835 Flanders Drive, Suite 100, San Diego, California, (619) 291-5694.

Reasons for the Reverse Stock Split

        Management believes that the low per share price of the Company’s Common Stock impairs the acceptability of the stock by the financial community and the investing public. Theoretically, the number of shares outstanding should not, by itself, affect the marketability of the stock, the type of investor who acquires it, or the Company’s reputation in the financial community, but in practice this is not necessarily the case, as many investors look upon low-priced stocks as unduly speculative in nature and, as a matter of policy, avoid investment in such stocks. Management also believes that a low share price reduces the effective marketability of the shares because of the reluctance of many brokerage firms to recommend low-priced stocks to their clients. Certain institutional investors have internal policies preventing the purchase of low-priced stocks and many brokerage houses do not permit low-priced stocks to be used as collateral for margin accounts. A variety of brokerage house policies and practices tend to discourage individual brokers within those firms from dealing in low-priced stocks. Some of those policies and practices pertain to the payment of brokers’ commissions and to time-consuming procedures that function to make the handling of low-priced stocks unattractive to brokers from an economic standpoint. In addition, the structure of trading commissions also tends to have an adverse impact upon holders of low-priced stocks because the brokerage commission on a sale of a low-price stock generally represents a higher percentage of the sales price than the commission on a relatively higher-priced stock.

          The Board of Directors anticipates that the decrease in the number of shares of outstanding Common Stock as a consequence of the reverse stock split will result in an anticipated increased price level, which will encourage interest in the Common Stock and possibly promote greater liquidity for the shareholders, although such liquidity could be adversely affected by the reduced number of shares outstanding after the reverse stock split.

          We cannot assure stockholders that the Reverse Split will have any of the desired consequences described above. Specifically, we cannot assure stockholders that, if effected, the post- Reverse Split market price of our Common Stock will increase proportionately to the ratio for the Reverse Split.

Fractional Shares

        In order to save the expense and inconvenience of issuing fractional shares, the Company will not issue scrip or fractional share certificates evidencing shares of Common Stock in connection with the reverse stock split. The Company will issue one additional whole share to shareholders who would otherwise be entitled to a fractional share. If the same shareholder is the owner of shares under multiple share certificates, then the number of shares the Company will issue in connection with the reverse stock split shall be computed on the basis of the aggregate shares owned under all certificates.

Increase in Authorized Unissued Shares

        The following table shows how the one-for-fifty reverse stock split will increase the number of shares of Common Stock available for issuance by the Board of Directors. The information presented in the table assumes a

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closing on or about August 25, 2004. The table assumes that no shares or other securities convertible into or exercisable for shares of Common Stock will be issued prior to the date upon which the reverse stock split is affected.

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	Number of Shares Prior to Reverse Stock Split	Number of Shares After 1:50 Reverse Stock Split	Shares After 1:50 Reverse Stock Split and Merger with Allergy	Stock Split, Merger with Allergy and Private Placement
			(3)	(4)
Common Stock (1):
Authorized	20,000,000	20,000,000	20,000,000	20,000,000
Outstanding	6,582,884	131,658	1,786,617	2,586,317
Reserved for Issuance on Exercise
of Options and Warrants (2)	204,500	4,090	4,090	4,090
Available for Future Issuance	13,212,616	19,864,252	18,209,593	17,409,593

(1)	Subject to adjustment for the issuance of one additional whole share to shareholders who would otherwise be entitled to a fractional share.
(2)	Represents 100,000 pre-split shares issuable upon the exercise of investor warrants outstanding at July 21, 2004, and 104,500 pre-split shares issuable upon the exercise of options outstanding at July 21, 2004 under the Company’s 2000 and 1995 Stock Option Plans and other options outstanding.
(3)	Increase in the outstanding shares is made up of 1,591,802 shares issuable to Allergy Free in connection with the Asset Purchase.
(4)	Increase in the outstanding shares is made up of 800,000 shares issuable in connection with the Private Placement contemplated in the Asset Purchase Agreement.

Since the total number of authorized shares of Common Stock will remain 20,000,000, following the reverse stock split, the Board of Directors, subject to any applicable shareholder approval requirements imposed by law or regulation, will be able to issue approximately 18,500,00 additional shares of Common Stock. The Company’s Board of Directors does not intend to seek shareholder approval prior to any issuance of additional shares of our Common Stock, except as otherwise required by law or regulation. The outstanding shares of Common Stock have no pre-emptive rights; accordingly, if the Company issues additional shares of Common Stock, shareholders will not have any preferential right to purchase any of the additional shares. Although the Board of Directors believes the increase in authorized unissued shares is in the best interests of the Company and the shareholders, the issuance of additional shares of Common Stock may, depending on the circumstances under which such shares are issued, reduce the shareholders’ equity per share and may reduce the percentage ownership of Common Stock of existing shareholders.

Implementation of Reverse Stock Split

        If the shareholders approve the reverse stock split, the Company will file the Amended and Restated Articles of Incorporation in the form of Exhibit “E” to this Proxy Statement with the Secretary of State of California, and upon such filing the reverse stock split will become effective as of the opening of business on that date.

        Following the effectiveness of the amendment, each certificate representing shares of Common Stock outstanding immediately prior to the reverse stock split will be deemed automatically, without any action on the part of the shareholders, to represent one-fiftieth of the pre-split number of shares. However, no fractional shares will be issued as a result of the reverse stock split. Each shareholder of record owning shares of Common Stock prior to the

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reverse stock split which are not evenly divisible by fifty (50) will receive one additional share for the fractional share that such shareholder would otherwise have been entitled to receive as a result of the reverse stock split. After the reverse stock split becomes effective, shareholders will be asked to surrender their stock certificates in accordance with the procedures set forth in a letter of transmittal. Shareholders should not submit any certificates until requested to do so. Upon such surrender, a new certificate representing the number of shares owned as a result of the reverse stock split will be issued and forwarded to shareholders. However, each certificate representing the number of shares owned prior to the reverse stock split will continue to be valid and represent a number of shares equal to one-fiftieth of the pre-split number of shares.

        Shareholders who do not vote in favor of the reverse stock split may not exercise dissenters’ appraisal rights under the California General Corporation Law.

Exchange of Stock Certificates

        The exchange of shares of Common Stock resulting from the reverse stock split will occur on the date we file the Amended and Restated Articles of Incorporation effecting the reverse stock split, without any further action on the part of our shareholders and without regard to the date or dates certificates formerly representing shares of Common Stock are physically surrendered for certificates representing the post-split number of shares such shareholders are entitled to receive. We will appoint Transfer Online, transfer agent for our Common Stock, exchange agent to act for shareholders in effecting the exchange of their certificates. In the event that the number of shares of Common Stock into which shares of Common Stock will be exchanged or converted includes a fraction, we will issue to the holder of such fraction, in lieu of the issuance of fractional shares, one whole additional share.

        As soon as practicable after the date the reverse stock split becomes effective, transmittal forms will be mailed to each holder of record of certificates formerly representing shares of Common Stock to be used in forwarding their certificates for surrender and exchange for certificates representing the post-split number of shares of Common Stock such shareholders are entitled to receive. After receipt of such transmittal form, each holder should surrender the certificates formerly representing shares of Common Stock and such holder will receive in exchange therefore certificates representing the whole number of shares to which he is entitled, plus one whole share in lieu of any fractional share. The transmittal forms will be accompanied by instructions specifying other details of the exchange. Shareholders should not send in their certificates until they receive a transmittal form.

        On the date the reverse stock split becomes effective, each certificate representing shares of Common Stock will, until surrendered and exchanged as described above, be deemed, for all corporate purposes, to evidence ownership of the number of shares of Common Stock into which the shares evidenced by such certificate have been converted, except that the holder of such unexchanged certificates will not be entitled to receive any dividends or other distributions payable by us after that date with respect to the shares which the shareholder is entitled to receive because of the reverse stock split until the certificates representing such shares of Common Stock have been surrendered. Such dividends and distributions, if any, will be accumulated and, at the time of such surrender, all such unpaid dividends or distributions will be paid without interest.

Federal Income Tax Consequences

        The following description of federal income tax consequences is based upon the Internal Revenue Code of 1986, as amended, the applicable Treasury Regulations promulgated thereunder, judicial authority, and current administrative rulings and practices as in effect on the date of this Proxy Statement. This discussion is for general information only and does not discuss consequences that may apply to special classes of taxpayers (e.g., non-resident aliens, broker-dealers or insurance companies). You are urged to consult with your own tax advisors to determine the particular consequences to you.

        The exchange of shares resulting from the reverse stock split will be a tax-free recapitalization for the Company and its shareholders to the extent that shares of pre-split Common Stock are exchanged for post-split Common Stock. Therefore, shareholders will not recognize gain or loss as a result of that transaction.

        A shareholder’s holding period for shares of post-split common stock, including any additional shares issued in lieu of issuing fractional shares, will include the holding period of shares of pre-split Common Stock

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exchanged therefore, provided that the shares of pre-split Common Stock were capital assets in the hands of the shareholder.

        The shares of post-split Common Stock in the hands of a shareholder, including any additional shares issued in lieu of issuing fractional shares, will have an aggregate basis for computing gain or loss equal to the aggregate basis of shares of pre-split Common Stock held by that shareholder immediately prior to the split.

        Although the issue is not free from doubt, additional shares received in lieu of fractional shares, including shares received as a result of the rounding up of fractional ownership, should be treated in the same manner. However, it is possible that the receipt of additional shares could be wholly or partially taxable.

RISKS ASSOCIATED WITH REVERSE STOCK SPLIT

          We cannot assure stockholders that the Reverse Split will have any of the desired consequences described above. Specifically, we cannot assure stockholders that, if effected, the post- Reverse Split market price of our Common Stock will increase proportionately to the ratio for the Reverse Split.

Recommendation of the Board of Directors

THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE IN FAVOR OF THE REVERSE STOCK SPLIT. UNLESS MARKED TO THE CONTRARY, PROXIES RECEIVED FROM SHAREHOLDERS WILL BE VOTED IN FAVOR OF THE REVERSE STOCK SPLIT.

PROPOSAL 4
NAME CHANGE

        The Board of Directors of the Company believes that it is advisable and in the best interests of the Company and its shareholders to change the name of the Company from “Planet Polymer Technologies, Inc.” to “Planet Technologies, Inc.” Management believes the name change would be beneficial to the Company for marketing, branding, and other similar purposes.

        The Over-The-Counter Bulletin Board (“OTC”) lists the common stock of the company under the symbol “POLY.OB.” As soon as reasonably practicable after the name change, the OTC would list the common stock of the Company under its new name, Planet Technologies, Inc., and would continue using the same symbol to list the Company.

        The Company’s Bylaws require the affirmative vote of the holders of common stock of the Company to amend the Company’s Articles of Incorporation to change the name of the Company. In conformance with the Company’s Bylaws, the Company has attached the proposed amendment to the Articles as Exhibit “E.”

Recommendation of the Board of Directors

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE IN FAVOR OF THE PROPOSED NAME CHANGE. UNLESS MARKED TO THE CONTRARY, PROXIES RECEIVED FROM SHAREHOLDERS WILL BE VOTED IN FAVOR OF THE PROPOSED NAME CHANGE.

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PROPOSAL 5
ELECTION OF DIRECTORS

        There are five (5) nominees for the five Board positions presently authorized by the Company’s current Bylaws. Each director to be elected will hold office until the next Annual Meeting of Shareholders and until his/her successor is elected and has qualified, or until such director’s earlier death, resignation or removal.

        Shares represented by executed proxies will be voted, if authority to do so is not withheld, for the election of the nominees named below, subject to the discretionary power to cumulate votes. In the event that any nominee should be unavailable for election as a result of an unexpected occurrence, such shares will be voted for the election of such substitute nominee as management may propose. Each person nominated for election has agreed to serve if elected and management has no reason to believe that any nominee will be unable to serve.

        In any election of directors, the candidates receiving the highest number of affirmative votes cast at the meeting will be elected directors of the Company up to the authorized number of positions on the Board.

Nominees

                The names of the nominees and certain information about each person is set forth below:

Name	Age	Principal Occupation
Scott L. Glenn	54	Managing Member of Allergy Free and Business Executive
Robert J. Petcavich, Ph.D.	49	Chairman of the Board of Directors and Chief Technical Officer
H.M. Busby	65	Director, Chief Executive Officer, President, Chief Financial Officer and Secretary
Michael A. Trinkle	51	Member of Allergy Free and Business Executive
Ellen M. Preston	49	Member of Allergy Free and Business Consultant

                Three (3) nominees are persons requested by Allergy Free, two (2) nominees, Dr. Petcavich and Mr. Busby, are currently Directors of the Company. Although the existing shareholders of the Company after the acquisition is completed will have only approximately seven percent (7%) of the outstanding common stock, Allergy Free has requested that Dr. Petcavich remain a director and believes that his technical knowledge in the field of polymer coatings will continue to be valuable to the Company and Allergy Free after the Acquisition. As a convenience to the Company and Allergy Free, Mr. Busby has agreed to continue as a director. 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, or an affiliated entity controlled by him, has been the Manager and a member of Allergy Free since October 2000. Mr. Glenn is also the Managing Partner of Windamere Venture Partners and has been since 1996. He also currently serves as a director and founder of Aveva Pharmaceuticals, GlobalEdge, SkinMedica, Veras and Somaxon Pharmaceuticals. Previously, from 1988 until 1995, Mr. Glenn served in various management capacities, including Chairman, CEO, and President 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 also served as a Division/General Manager, Director of Materials, and Production Management for Allergan Pharmaceuticals, Inc. Mr. Glenn has a Bachelor of Science degree in Finance and Accounting from California State University at Fullerton.

        Robert J. Petcavich is currently CTO of Lumera Corporation of Seattle Washington. Dr Petcavich was founder, Chairman and/or CEO of the Company from 1992 until 2003. He was also founder, Chairman and/or CEO from 1996 until 2001 of Alife Medical, Inc., a natural language processing software services provider for the medical billing industry now majority owned by Medquist (NASDAQ:MEDQ) a subsidiary of Philips Electronics. Dr Petcavich has a Ph.D. degree in Polymer Science, a Master of Science Degree in Solid State Science, and a B.S. degree in Chemistry from the Pennsylvania State University, and completed the PMD executive management degree program at Harvard University. He is also a director of Molecular Reflections Inc.

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        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 became President and Chief Executive Officer and Chief Financial Officer of the Company on February 1, 2003. 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 is 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.

        Ellen M. Preston has been a member of Allergy Free 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.

Board Committees and Meetings

        During 2003, the Board of Directors held 3 meetings. The Board of Directors has an Audit Committee and a Compensation Committee. In addition, in 2004 the Company’s entire current Board acted as the Nominating Committee and nominated the current candidates in compliance with the Asset Purchase Agreement dated March 18, 2004, and entered into by and between the Company and Allergy Free, LLC. The shareholders of the Company have the right to vote whether to accept the Asset Purchase Agreement and the Acquisition contemplated therein. The newly elected Board will consider establishing a charter for the Nominating Committee, which provides guidelines for the selection of future directors.

        The Audit Committee is responsible for the engagement of the Company’s independent auditors, consulting with independent auditors concerning the audit plan and reviewing the comments and recommendations resulting from the auditor’s report. During 2003, the Audit Committee was composed of non-employee directors including Messrs. Dr. Petcavich and Ronald B. Sunderland and met 4 times during 2003. The Audit Committee Charter was adopted on May 22, 1997 and was subsequently amended in 2001. The Audit Committee does not currently have an “audit committee financial expert” serving on the audit committee. The Board believed that the Company’s limited activities made it impractical to recruit a financial expert following the resignation of Peter O’Neill, the chief financial officer of Agway, Inc., who had formerly been the chairman of the audit committee. After the Closing, the Board intends to consider recruiting a financial expert to serve on the Board and audit committee.

        The Audit Committee has reviewed and discussed the audited financial statements with management and it has discussed with the independent auditors the matters required to be discussed by SAS 61. Furthermore, the Audit Committee has received the written disclosures and the letter from the independent accountants required by Independence Standards Board Standard No. 1 and has discussed with the independent accountant the independent accountant’s independence and based on the review of the financial statements and discussions with management and the auditors, it recommended to the Board of Directors that the audited financial statements be included in the company’s 10-KSB for year 2003.

        The Compensation Committee is responsible for reviewing the compensation and benefits of the Company’s executive officers, making recommendations to the Board of Directors concerning the compensation and benefits of the Company’s executive officers and administering the Company’s Stock Incentive Plans. The Compensation Committee in 2003 was composed of two non-employee directors including Messrs. H. M. Busby,

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and Ronald B. Sunderland. The Compensation Committee did not meet during 2003 since there were no employees of the Company.

        The Nominating Committee will be responsible for identifying, evaluating, and recommending candidates to serve as directors of the Company and to serve as a focal point for communication between such candidates, the Board, and the Company’s management and will be recommendations to the Board of Directors concerning the nomination of candidates to be elected by the Company’s shareholders as a director of the Company.

The Company has not yet adopted a code of ethics for its officers and other key personnel involved in the Company’s operations. However, upon the election of the new board, the Company plans to adopt such an ethics code and will promptly disclose such adoption to its shareholders and other interested parties.

        During 2003, each Board member attended 75% or more of the aggregate of the meetings of the Board, and of the committees on which he served, held during the period for which he was a director or committee member, respectively.

Section 16(a) Beneficial Ownership Reporting Compliance

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

        To the Company’s knowledge, based solely on a review of the copies of such reports furnished to the Company and written representations that no other reports were required, during the fiscal year ended December 31, 2003, all Section 16(a) filing requirements applicable to its officers, directors and greater than ten percent (10%) beneficial owners were complied with except for the late filing of Form 5 for current directors Busby, Sunderland, and Petcavich relating to options granted during 2003.

ADDITIONAL INFORMATION

Management

                Set forth below is information regarding management of the Company.

Name	Age	Position
Robert J. Petcavich, Ph.D.	49	Chairman of the Board and Chief Technical Officer
H. M. Busby	65	CEO & President, Chief Financial Officer, and Secretary

For biographical information of Dr. Petcavich and Mr. Busby please refer to the section of this proxy listing the nominees for the board of directors of the Company.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

        The following table sets forth certain information regarding the ownership of the Company’s Stock as of April 30, 2004 by: (i) each director and nominee for director; (ii) each of the Executive Officers named in the Summary Compensation Table; (iii) all executive officers and directors of the Company as a group; and (iv) all those known by the Company to be beneficial owners of more than five percent (5%) of any class of the Company’s Stock, based upon information reported to the Company or publicly available reports filed with the SEC.

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		Beneficial Ownership
Title of Class	Beneficial Owner		Number of Shares (1)	Percentage of Class Owned (2)
Common	Robert J. Petcavich, Ph.D. (3) 313 5th Avenue, South Kirkland, WA 98033		754,599	11.4%
Common	Richard Zorn (4) 750 Lexington Avenue, 24th Floor New York, NY 10022		518,900	7.9%
Common	H.M. Busby (5) 3852 Alameda Place San Diego, CA 92103		350,592	5.3%
Common	Ronald B. Sunderland 3728 Regal Vista Dr. Sherman Oaks, CA 91403		100,000	1.5%
Common	Scott L. Glenn 6402 Cardeno Drive La Jolla, CA 92037		0	0%
Common	Michael A. Trinkle		0	0%
Common	Ellen Preston		0	0%
Common	All executive officers and directors as a group		1,205,191	18.3%

(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 April 30, 2004.
(3)	Includes 12,500 shares issuable upon exercise and which expire on 5/19/2013.
(4)	Mr. Zorn is the beneficial owner of 218,300 shares of Common Stock and by his affiliation with Benchmark has shared investment discretion over accounts of its customers that hold 300,600 shares of Common Stock as of May 13, 2003.
(5)	Includes18,000 shares issuable upon exercise and which expire on 5/19/2013.

EXECUTIVE COMPENSATION

Compensation of Directors

        Directors may be granted options to purchase Common Stock under the Company’s 1995 Stock Option Plan (the “1995 Option Plan”) and the 2000 Stock Incentive Plan (“2000 Incentive Plan”). During 2003, options to purchase shares of the Company’s Common Stock were granted to the Company’s directors as follows: (i) in May

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2003, the Board of Directors of the Company approved and granted non-statutory stock option grants to Mr. Busby, Dr. Petcavich and Mr. Sunderland to purchase 50,000 shares of the Company’s Common Stock at an exercise price of $0.06 per share, vesting fully at the date of grant, and (ii) the Board of Directors granted non-statutory stock option grants to Dr. Petcavich to purchase an additional 12,500 shares of the Company’s Stock at an exercise price of $0.14 per share, vesting fully at the date of the grant.

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

Compensation of Executive Officers

        The following table sets forth, for the fiscal years ended December 31, 2003, 2002, and 2001 certain compensation awarded or paid to, or earned by the Company’s Executive Officers.

Summary Compensation Table

Robert J. Petcavich	2003	$	—	$	—		—		$	47,180	(7)
Chairman of the Board	2002	$	170,038	$	—		—		$	3,241	(2)
and Chief Technical Officer	2001	$	210,000	$	15,000	(3)	—		$	6,139	(1)
H.M. Busby	2003	$	—	$	—		—		$	31,677	(7)
Chief Executive Officer,	2002	$	—	$	—		—		$	—
President and Chief Financial	2001	$	—	$	—		—		$	—
Officer
Richard C. Bernier (6)	2003	$	—	$	—		—		$	19,125	(6)
Chief Executive Officer	2002	$	117,713	$	—		—		$	—
and President	2001	$	205,000	$	—		100,000	(4)	$	37,471	(5)

(1)	Represents insurance premiums paid by the Company under a term life insurance policy insuring Dr. Petcavich and auto expense reimbursement.
(2)	Represents auto expense reimbursement paid by the Company.
(3)	Includes $15,000 accrued as a bonus pursuant to an incentive agreement effective January 1, 2000, but paid in 2001.
(4)	Represents an option granted on November 4, 2001 with an exercise price of $0.06. Options vested April 15, 2002.
(5)	Temporary living and moving expenses, including “tax gross-up” as allowed per employment agreement.
(6)	Mr. Bernier served as CEO & President and Acting Chief Financial Officer until his resignation January 31, 2003.
(7)	Represents consulting fees Dr. Petcavich and Mr. Busby were paid for their services to the Company in 2003.

Stock Option Grants and Exercises

        The Company’s Executive Officers are eligible for grants of options under the Company’s 1995 Stock Option Plan (the “1995 Option Plan”) and the 2000 Stock Incentive Plan (the “2000 Incentive Plan”). As of December 31, 2003, there were remaining approximately 447,300 shares available for grant under the Option Plans.

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        The following table sets forth information with respect to the number of securities underlying unexercised options held by the Executive Officers as of December 31, 2003 and the value of unexercised in-the-money options (i.e., options for which the current fair market value of the Common Stock underlying such options exceeds the exercise price):

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

	Shares Acquired on	Value	Number of Securities Underlying Unexercised Options at Fiscal Year End (2)		Value of Unexercised In-the- Money Options at Fiscal Year End ($) (1)
Name	Exercise(#)	Realized	Exercisable	Unexercisable	Exercisable	Unexercisable
Robert J. Petcavich	-0-	-0-	227,182	0	$0	$0
H. M. Busby	-0-	-0-	163,000	0	$0	$0
Richard C. Bernier	-0-	-0-	25,000	0	$0	$0

(1)

Calculated based on the estimated fair market value of the Company’s Common Stock as of December 31, 2003, less the exercise price payable upon the exercise of such options. Such estimated fair market value as of December 31, 2003 was $.04, the last price posted at the close of trading on December 31, 2003.

(2)

The three current directors of Planet, H.M. Busby (100,000), Dr. Robert J. Petcavich (50,000), and Ronald B. Sunderland (50,000) each exercised stock options in March and/ or April 2004 thus reducing the number of options held in a corresponding amount. Additionally, the three current directors surrendered “Out of the Money” stock options in the following amounts: Robert J. Petcavich, 164,182; H.M. Busby 48,200; Ronald B. Sunderland, 18,000.

Equity Compensation Plan Information
	(a)	(b)	(c)
Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity compensation plans approved by security holders	104,500 (2)	$1.52	782,682 (2)
Equity compensation plans not approved by security holders (1)	N/A	N/A	N/A
Total	104,500	$1.52	782,682 (2)

(1) The Company does not have any equity compensation plans that have not been approved by Shareholders.

(2) As of July 21, 2004.

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DESCRIPTION OF EMPLOYEE BENEFIT PLANS

2000 Stock Incentive Plan

        Planet’s 2000 Stock Incentive Plan was approved by Planet’s shareholders at its annual meeting of shareholders on May 1, 2000. The Board of Directors reserved 500,000 shares of common stock for issuance under the 2000 Plan, together with any remaining shares of common stock eligible for issuance under the 1995 Stock Option plan which expire unexercised. A committee consisting of Planet’s Board of Directors or appointed Board members has the sole discretion to determine under which plan stock options and bonuses may be granted.

        The purpose of the 2000 Incentive Plan is similar to that of the 1995 Plan, which was to attract and retain qualified personnel, to provide additional incentives to employees, officers, directors and consultants of the Company and to promote the success of the Company’s business. As was the case under the 1995 Plan, under the 2000 Plan, Planet may grant or issue incentive stock options and non-statutory stock options to eligible participants, provided that incentive stock options may only be granted to employees of Planet. The 2000 Stock Incentive Plan also allows shares of common stock to be issued under a Stock Bonus Program through direct and immediate issuances. Similar to stock options granted under the Plan, stock bonus awards may be subjected to a vesting schedule determined by the Board of Directors. Option grants under both plans are discretionary. Options granted under both plans are subject to vesting as determined by the Board, provided that the option vests as to at least 20% of the shares subject to the option per year. The maximum term of a stock option under both plans is ten years, but if the optionee at the time of grant has voting power over more than 10% of the Company’s outstanding capital stock, the maximum term is five years under both plans. Under both plans if an optionee terminates his or her service to Planet, such optionee may exercise only those option shares vested as of the date of termination, and must affect such exercise within the period of time after termination set forth in the optionee’s option. The exercise price of incentive stock options granted under both plans must be at least equal to the fair market value of the Common Stock of the Company on the date of grant. Under both plans the exercise price of options granted to an optionee who owns stock possessing more than 10% of the voting power of Planet’s outstanding capital stock must equal at least 110% of the fair market value of the common stock on the date of grant. Payment of the exercise price may be made in cash, by delivery of other shares of the Company’s common stock or by any other form of legal consideration that may be acceptable to the Board.

401(K) Plan

        The Company provided a defined contribution 401(k) savings plan (the “401(k) Plan”) in which all full-time employees of the Company were eligible to participate. Eligible employees were permitted to contribute up to fifteen percent (15%) of their pre-tax salary to the 401(k) Plan subject to IRS limitations. Company contributions to the 401(k) Plan were at the discretion of the Board of Directors. There were no Company contributions charged to operations related to the 401(k) Plan in 2002. The Company terminated the 401(k) Plan in 2003, and pursuant to this termination made a full distribution of the plan assets to the plan participants.

EMPLOYMENT AGREEMENTS AND CHANGE IN CONTROL ARRANGEMENTS

        On November 18, 1998, the Company entered into a five-year employment agreement, effective January 1, 1999, with Dr. Petcavich. This agreement increased Dr. Petcavich’s salary to $210,000 and included a termination provision that provided for a consulting agreement in the event of early termination. Also on November 18, 1998 the Company’s Board of Directors granted Dr. Petcavich an incentive stock option to purchase 125,000 shares of Common Stock at an exercise price of $1.65 per share under the 1995 Stock Option Plan.

        In December 31, 2001, the Company and Dr. Petcavich amended the above employment agreement, reducing the length of the agreement to four (4) years, terminating on December 31, 2002. In consideration of this accommodation, the Company agreed to continue Dr. Petcavich’s salary for the 2002 calendar year, as long as the Company had sufficient cash on hand to continue business through the calendar year 2002. Should cash be insufficient to meet these obligations, Dr. Petcavich’s salary would be reduced to a maximum of consulting and other revenues generated by Dr. Petcavich.

        On October 17, 2000, the Company entered into a two-year employment agreement with Richard C. Bernier, to serve as Planet’s President and Chief Executive Officer. Planet had the option to extend the employment

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term for two (2) additional one-year terms, as well as a notice provision of at least 183 days before Mr. Bernier’s employment could be terminated. Mr. Bernier’s compensation consisted of $205,000 as an annual salary, a signing bonus of 10,000 shares of Planet’s common stock, a grant of a stock option to purchase 160,000 shares of common stock at an exercise price of $1.50 per share under the 2000 Stock Incentive Plan, and a year end bonus incentive program for earnings improvement over current Company performance. Mr. Bernier’s agreement also provided for a consulting agreement should he be terminated for any reason other than for cause during the term of employment. On October 17, 2001, the Company and Mr. Bernier amended the term of the agreement to fully terminate on December 31, 2002. Mr. Bernier’s primary duties as CEO were revised to include selling all of the Company’s patents and related technological know-how, excluding the license agreements with Agway, Inc., manage the restructuring of the Company’s business in accordance with the approved restructuring plan and establish the operational and legal structure for the Company for calendar year 2002. In consideration for this accommodation, the Company and Mr. Bernier agreed to a commissions only payment schedule for 2002 based on the successful sale of patents, related technological know-how, inventories, property and equipment associated with the Company’s AQUAMIM Metal Injection Molding, EnviroPlastic, EnviroPlastic Z and Aquadro technologies. Mr. Bernier also received a ten-year option to acquire 100,000 shares of the Company’s common stock at ($0.06 per share), with full vesting on or before April 15, 2002 provided operational and legal restructuring had been completed.

                The Company entered into consulting agreements with Dr. Petcavich and Mr. Bernier effective as of January 1, 2003. Dr. Petcavich’s consulting term is for two (2) years and five (5) months to provide ongoing support and consulting services to the Company’s customers who purchased and/or licensed the Company’s intellectual property. Dr. Petcavich is to receive consulting fees the Company collects from the customers who received Dr. Petcavich’s consulting services, less any expenses incurred by the Company in connection with Dr. Petcavich’s provision of such services. Mr. Bernier’s consulting term was for three months to assist the Company with its SEC reporting obligations for the year ended December 31, 2002, 2003 annual shareholders meeting and the finalization of sale and licensing agreements between the Company and Agway. Mr. Bernier was to receive fees of $100 per hour, not to exceed $25,000 in the aggregate, as well as non-statutory stock options to purchase 25,000 shares of Planet Common Stock under the Company’s 2000 Stock Incentive Plan. The stock options have a ten year term, with a strike price of $0.05 which was the price of the Common Stock at the last trade reported as of January 31, 2003.

        The Company entered into an agreement with H.M. Busby whereby the Company has agreed to pay Mr. $100 per hour for work he performs on behalf of the Company.

        If the Acquisition is approved, the Company plans to retain Scott L. Glenn as President/CEO and Chairman of the Board of the Company. In lieu of cash for his services, the Company plans to offer, and he has agreed to accept, a non-qualified stock option under the Company’s 2000 Plan to purchase 3,480,729 shares of the Company’s Common Stock (prior to adjustment for the reverse stock split discussed in the proxy). Thereafter, the Company agrees to grant 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.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

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

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

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

        Also in November 1998, the Company granted Agway an exclusive worldwide license in connection with the Company’s technology for time-release coatings for a variety of agricultural and food products (the “License Agreement”). The License Agreement outlines the general terms and conditions for the rights granted Agway thereunder. The Company and Agway agreed to execute further sub-agreements specifying the royalties to be paid to the Company for Agway’s use of the Company’s technology with certain products.

        Agway Holdings Inc., an indirect wholly owned subsidiary of Agway, was a beneficial owner of more than 10% of the Company’s Common Stock since January 11, 1999, but in April 2003 all shares were transferred by Agway to the Company and cancelled.

QUESTIONS AND ANSWERS REGARDING ELECTION OF DIRECTORS

        Q.            WHAT HAPPENS TO THE NOMINEES IF THE SHAREHOLDERS DO NOT APPROVE THE ACQUISITION?

        A.            Under the terms of the Asset Purchase Agreement, the Company and Allergy Free are to use their “best efforts” to cause the election of the current nominees to the Board. Board Nominees Scott Glenn, Ellen Preston, and Michael Trinkle are currently members of Allergy Free and have no current interests in the Company. Mr. Glenn, Ms. Preston and Mr. Trinkle will not have any interests in the Company unless the shareholders approve the Acquisition. If the shareholders do not approve the Acquisition, Mr. Glenn, Ms. Preston, and Mr. Trinkle have advised the Company that they will withdraw as candidates for the Board. Under this scenario, the remaining nominees (who are also current directors of the Company), H. Mac Busby and Robert J. Petcavich, would be entitled to fill any such Board vacancies in accordance with the Company’s Bylaws.

THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE IN FAVOR OF THE SLATE OF CANDIDATES FOR THE BOARD OF DIRECTORS.

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PROPOSAL 6

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 500,000 shares to 5,000,000 shares. The purpose behind amending the plan is to allow the Company to retain Scott L. Glenn as President/ CEO and Chairman of the Board of the Company, and possibly, in the future, other key employees, officers and directors. In Mr. Glenn case, in lieu of cash compensation for his services, he has agreed to accept a non-qualified stock option under the Company’s 2000 Plan to purchase 3,480,729 shares of the Company’s common stock (prior to adjustment for the reverse stock split discussed in the proxy). Thereafter, the Company agrees to grant to Mr. Glenn stock options exercisable at the then fair market value at such times as may be required to maintain the aggregate number of stock options granted to Mr. Glenn at an amount not less than five percent (5%) of the issued and outstanding common stock of the Company (on a fully diluted basis), during his three year term of employment.

        By amending the 2000 Plan and increasing the amount of shares reserved under the 2000 Plan, the Company would have enough shares of common stock available to provide a means whereby the Company could fulfill its agreement with Mr. Glenn 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 Scott L. Glenn as President/CEO and Chairman of the Board 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.

        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 relating to the options to be granted under the 2000 Plan, including, without limitation, selection of whether an option will be an incentive stock option or a nonqualified stock option, selection of the individuals to be granted options, the number of shares to be subject to each option, the exercise price per share, the timing of grants and all other terms and conditions of the options.

        Options granted under the 2000 Plan may be “incentive stock options” (“Incentive Options”) within the meaning of Section 422 of the Code or stock options which are not incentive stock options (“Non-Incentive Options” and, collectively with Incentive Options, hereinafter referred to as “Options”). Each Option may be exercised in whole or in part; provided, that only whole shares may be issued pursuant to the exercise of any Option. Subject to any other terms and conditions herein, the Plan Administrator may provide that an Option may not be exercised in whole or in part for a stated period or periods of time during which such Option is outstanding; provided, that the Plan Administrator may rescind, modify, or waive any such limitation (including by the acceleration of the vesting schedule upon a change in control of the Company) at any time and from time to time after the grant date thereof. During an optionee’s lifetime, any Incentive Options granted under the 2004 Plan are personal to such optionee and are exercisable solely by such optionee.

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        The Plan Administrator can determine at the time the Option is granted in the case of Incentive Options, or at any time before exercise in the case of Non-Incentive Options, that additional forms of payment will be permitted. To the extent permitted by the Plan Administrator and applicable laws and regulations (including, without limitation, federal tax and securities laws and regulations and state corporate law), an Option may be exercised by:

(a)   delivery of shares of Common Stock of the Company held by an optionee having a fair market value equal to the exercise price, such fair market value to be determined in good faith by the Plan Administrator;

(b)   delivery of a properly executed notice of exercise, together with irrevocable instructions to a broker, all in accordance with the regulations of the Federal Reserve Board, to promptly deliver to the Company the amount of sale or loan proceeds to pay the exercise price and any federal, state, or local withholding tax obligations that may arise in connection with the exercise; or

(c)   delivery of a properly executed notice of exercise, together with instructions to the Company to withhold from the shares of Common Stock that would otherwise be issued upon exercise that number of shares of Common Stock having a fair market value equal to the option exercise price.

        To the extent permitted by applicable law, the Plan Administrator may also permit any participant to pay the option exercise price upon exercise of an Option by delivering a full-recourse, interest bearing promissory note payable in one or more installments and secured by the purchased shares. The terms of any such promissory note (including the interest rate and the terms of repayment) shall be established by the Plan Administrator in its sole discretion. In no event may the maximum credit available to the participant exceed the sum of (i) the aggregate option exercise price (less the par value of those shares) plus (ii) any federal, state and local income and employment tax liability incurred by the participant in connection with the option exercise.

        Upon a merger or consolidation in which securities possessing more than 25% of the total combined voting power of the Company’s outstanding securities are transferred to a person different from the person holding those securities immediately prior to such transaction, the sale, transfer or other disposition of all or substantially all of the Company’s assets in complete liquidation or dissolution of the Company the sale, transfer or other disposition of all or substantially all of the Company’s assets to an unrelated entity, or a change in the identity of more than three (3) directors over a two-year period each, a (“Corporate Transaction”), any award carrying a right to exercise that was not previously exercisable shall become fully exercisable, the restrictions, deferral limitations and forfeiture conditions applicable to any other award granted shall lapse and any performance conditions imposed with respect to awards shall be deemed to be fully achieved. Notwithstanding the foregoing, any Option granted to an employee shall not become fully vested until such time as the employee experiences an involuntary termination of employment (other than on account of misconduct).

        Incentive Options granted under the 2000 Plan may not be transferred, pledged, mortgaged, hypothecated or otherwise encumbered other than by will or under the laws of descent and distribution, except that the Plan Administrator may permit transfers of awards for estate planning purposes if, and to the extent, such transfers do not cause a participant who is then subject to Section 16 of the Exchange Act to lose the benefit of the exemption under Rule 16b-3 for such transactions.

        Additional rules apply under the Code to the grant of Incentive Options. For instance an Incentive Option must be exercised within 10 years after the date of grant, unless granted to an individual owning more than 10% of the Company’s stock, in which case the exercise period may not exceed five (5) years. Similarly, an Incentive Option must be granted at an exercise price that equals or exceeds 100% of the fair market value of the underlying stock at the time of grant, a threshold that is increased to 110% of such fair market value in the case of a grant to an individual owning more than 10% of the Company’s stock.

        For federal income tax purposes, the grant to an optionee of a Non-Incentive Option generally will not constitute a taxable event to the optionee or to the Company. Upon exercise of a Non-Incentive Option (or, in certain cases, a later tax recognition date), the optionee will recognize compensation income taxable as ordinary income, measured by the excess of the fair market value of the Common Stock purchased on the exercise date (or later tax recognition date) over the amount paid by the optionee for such Common Stock, and will be subject to federal income tax withholding. Upon recognition of income by the optionee, the Company may claim a deduction for the amount of such compensation. The optionee will have a tax basis in the Common Stock purchased equal to the

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amount paid plus the amount of ordinary income recognized upon exercise of the Non-Incentive Option. Upon the subsequent sale of the Common Stock received upon exercise of the Non-Incentive Option, an optionee will recognize capital gain or loss equal to the difference between the amount realized on such sale and his tax basis in the Common Stock, which may be long-term capital gain or loss if the optionee holds the Common Stock for more than one year from the exercise date.

        For federal income tax purposes, in general, neither the grant nor the exercise of an Incentive Option will constitute a taxable event to the optionee or to the Company, assuming the Incentive Option qualifies as an “incentive stock option” under Code §422. If an optionee does not dispose of the Common Stock acquired upon exercise of an Incentive Option during the statutory holding period, any gain or loss upon subsequent sale of the Common Stock will be long-term capital gain or loss, assuming the shares represent a capital asset in the optionee’s hands. The statutory holding period is the later of two years from the date the Incentive Option is granted or one year from the date the Common Stock is transferred to the optionee pursuant to the exercise of the Incentive Option. If the statutory holding period requirements are satisfied, the Company may not claim any federal income tax deduction upon either the exercise of the Incentive Option or the subsequent sale of the Common Stock received upon exercise thereof. If the statutory holding period requirement is not satisfied, the optionee will recognize compensation income taxable as ordinary income on the date the Common Stock is sold (or later tax recognition date) in an amount equal to the lesser of (i) the fair market value of the Common Stock on that date less the amount paid by the optionee for such Common Stock, or (ii) the amount realized on the disposition of the Common Stock less the amount paid by the optionee for such Common Stock; the Company may then claim a deduction for the amount of such compensation income.

        The federal income tax consequences summarized hereinabove are based upon current law and are subject to change.

        The Board may amend, alter, suspend, discontinue or terminate the 2000 Plan at any time, except that any such action shall be subject to shareholder approval at the annual meeting next following such Board action if such shareholder approval is required by federal or state law or regulation or the rules of any exchange or automated quotation system on which the Common Stock may then be listed or quoted, or if the Board of Directors otherwise determines to submit such action for shareholder approval. In addition, no amendment, alteration, suspension, discontinuation or termination to the 2000 Plan may materially impair the rights of any participant with respect to any vested Option granted before amendment without such participant’s consent. Unless terminated earlier by the Board, the 2000 Plan shall terminate upon the earliest to occur of (i) 10 years after the date or which the Board approves the 2004 Plan or (ii) the date on which all shares of Common Stock available for issuance under the 2000 Plan shall have been issued as vested shares. Upon such 2000 Plan 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

        Other than the Company’s agreement with Mr. Glenn, it is presently not determinable as to whether any benefits or amounts will be received by or allocated to the Company’s executive officers, directors or employees. Further, had the 2000 Plan been in effect during the last completed fiscal year, none of the Company’s executive officers, directors or employees would have received benefits or amounts under the 2000 Plan. Information concerning stock option grants to the Company’s executive officers and directors is set forth under “Executive Compensation” beginning on page 6 of this Proxy Statement.

Recommendation of the Board of Directors

THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 6. UNLESS MARKED TO THE CONTRARY, PROXIES RECEIVED FROM SHAREHOLDERS WILL BE VOTED IN FAVOR OF PROPOSAL 6.

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PROPOSAL 7
RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

        The Board of Directors has selected J. H. Cohn LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2004, and has further directed that management submit the selection of independent registered public accounting firm for ratification by the shareholders at the Annual Meeting. J. H. Cohn LLP has audited the Company’s financial statements since 2001. Previously, PricewaterhouseCoopers LLP audited the Company’s financial statements since its inception in 1991. Representatives of J. H. Cohn LLP are expected to be present at the Annual Meeting, will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions.

        Shareholder ratification of the selection of J. H. Cohn LLP as the Company’s independent registered public accounting firm is not required by the Company’s current Bylaws or otherwise. However, the Board is submitting the selection of J. H. Cohn LLP to the shareholders for ratification as a matter of good corporate practice. If the shareholders fail to ratify the selection, the Board will reconsider whether or not to retain that firm. Even if the selection is ratified, the Board in its discretion may direct the appointment of different independent registered public accounting firm at any time during the year if they determine that such a change would be in the best interests of the Company and its shareholders.

        The affirmative vote of the holders of a majority of the shares presented in person or represented by proxy and voting at the Annual Meeting will be required to ratify the selection of J. H. Cohn LLP. For purposes of this vote, abstentions and broker non-votes will not be counted for any purpose in determining whether this matter has been approved.

Audit Fees

        The aggregate fees billed for professional services rendered by J. H. Cohn LLP for the audit of Planet’s annual financial statements for the year ended December 31, 2003 and the reviews of the financial statements included in Planet’s Form 10-QSBs for the year ended December 31, 2003 were $26,850.

        No fees were billed to Planet for professional services rendered by J. H. Cohn LLP relating to the design and implementation of Planet’s financial information systems during the year ended December 31, 2003.

        There were no additional fees billed for other services rendered by J. H. Cohn LLP to Planet.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 7. UNLESS MARKED TO THE CONTRARY, PROXIES RECEIVED FROM SHAREHOLDERS WILL BE VOTED IN FAVOR OF PROPOSAL 7.

PROPOSAL 8
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.

	By order of the Board of Directors
	H. M. Busby
	Chief Executive Officer and President
October 19, 2004

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PLANET POLYMER TECHNOLOGIES, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 17, 2004

                        The undersigned shareholder of Planet Polymer Technologies, Inc., a California corporation, hereby acknowledges the receipt of the Notice of Annual Meeting of Shareholders and Proxy Statement with respect to the Annual Meeting of Shareholders of Planet Polymer Technologies, Inc. to be held on November 17 , 2004 at 10:00 a.m., local time, and hereby appoints ROBERT J. PETCAVICH and H. M. BUSBY, and each of them, as attorneys and proxies of the undersigned, each with full power of substitution, to vote all of the shares of stock of PLANET POLYMER TECHNOLOGIES, INC. which the undersigned may be entitled to vote at such meeting, and at any and all postponements, continuations and adjournments thereof, with all powers that the undersigned would possess if personally present, upon and in respect of the following matters and in accordance with the following instructions, with discretionary authority as to any and all other matters that may properly come before the meeting.

UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED IN FAVOR FOR ALL PROPOSALS AS MORE SPECIFICALLY DESCRIBED IN THE PROXY STATEMENT. IF SPECIFIC INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.

MANAGEMENT RECOMMENDS A VOTE FOR THE NOMINEES
FOR DIRECTOR LISTED BELOW

MANAGEMENT RECOMMENDS A VOTE FOR ALL PROPOSALS

PROPOSAL 1:    To purchase substantially all of the assets of Allergy Free.

o FOR

o AGAINST

o ABSTAIN

PROPOSAL 2:    To distribute royalty rights.

o FOR

o AGAINST

o ABSTAIN

PROPOSAL 3:    To authorize a one-for-fifty reverse stock split of common stock.

o FOR

o AGAINST

o ABSTAIN

PROPOSAL 4:    To change name to “Planet Technologies, Inc.”

o FOR

o AGAINST

o ABSTAIN

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PROPOSAL 5:    To elect directors to hold office until next Annual Meeting of Shareholders and until their successors are elected.

o FOR all nominees listed below (except as marked to the contrary below).

o WITHHOLD AUTHORITY to vote all nominees listed below.

Nominees:             Scott L. Glenn, Robert J. Petcavich, Ph.D., H.M. Busby, Michael Trinkle, Ellen Preston.

To withhold authority to vote for any nominee(s), write such nominee(s)’ name(s) below:

PROPOSAL 6:    To amend the 2000 Stock Option Plan.

o FOR

o AGAINST

o ABSTAIN

PROPOSAL 7:    To ratify the selection of J.H. Cohn LLP, as independent registered public accounting firm of the Company for its fiscal year ending December 31, 2004.

o FOR

o AGAINST

o ABSTAIN

THIS PROXY HAS BEEN SOLICITED BY OR FOR THE BENEFIT OF THE BOARD OF DIRECTORS OF THE COMPANY. I UNDERSTAND THAT I MAY REVOKE THIS PROXY ONLY BY WRITTEN INSTRUCTIONS TO THAT EFFECT, SIGNED AND DATED BY ME, WHICH MUST BE ACTUALLY RECEIVED BY THE COMPANY PRIOR TO THE COMMENCEMENT OF THE ANNUAL MEETING.

DATED:  ____________, 2004	_____________________________________________
	_____________________________________________
	Signature(s)
	Please sign exactly as your name appears hereon. If the stock is registered in the names of two or more persons, each should sign. Executors, administrators, trustees, guardians and attorneys-in-fact should add their titles. If signer is a corporation, please give full corporate name and have a duly authorized officer sign, stating title. If signer is a partnership, please sign in partnership name by authorized person.

Please vote, date and promptly return this proxy in the enclosed return envelope which is postage prepaid if mailed in the United States.

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EX-1

EXHIBIT “A”

ALLERGY FREE AUDITED FINANCIAL STATEMENTS AND UNAUDITED
CONDENSED FINANCIAL STATEMENTS

A-1

ALLERGY FREE, LLC

Index

	Page
Report of Independent Registered Public Accounting Firm	3
Balance Sheets
December 31, 2003 and 2002	4
Statements of Operations and Members’ Deficiency
Years Ended December 31, 2003 and 2002	5
Statements of Cash Flows
Years Ended December 31, 2003 and 2002	6
Notes to Financial Statements	7
Condensed Balance Sheet (Unaudited)	15
June 30, 2004
Condensed Statement of Operations and Members’ Deficiency (Unaudited)	16
Six Months Ended June 30, 2004 and 2003
Condensed Statement of Cash Flows (Unaudited)	17
Six Months Ended June 30, 2004 and 2003
Notes to Condensed Financial Statements	18

A-2

ALLERGY FREE, LLC

Report of Independent Registered Public Accounting Firm

To the Common Members
Allergy Free, LLC

We have audited the accompanying balance sheets of Allergy Free, LLC as of December 31, 2003 and 2002, and the related statements of operations and members’ deficiency and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with 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 Allergy Free, LLC as of December 31, 2003 and 2002, and its results of operations and cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note 1, the Company has experienced recurring net losses resulting in a members’ deficiency of $2,929,138. In addition, the Company has a working capital deficiency of $632,645 as of December 31, 2003. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans as to this matter are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ J.H. Cohn LLP

San Diego, California
April 8, 2004, except for Note 11 as
to which the date is October 6, 2004

A-3

ALLERGY FREE, LLC

BALANCE SHEETS
DECEMBER 31, 2003 AND 2002

ASSETS	2003			2002
Current assets:
Cash and cash equivalents	$	128,005		$	70,158
Accounts receivable, less allowance for doubtful
accounts of $500		6,758			2,562
Inventory		84,140			120,783
Other current assets		11,721			37,211
Total current assets		230,624			230,714
Property and equipment, net		185,297			275,299
Totals	$	415,921		$	506,013
LIABILITIES AND MEMBERS’ DEFICIENCY
Current liabilities:
Current portion of notes payable	$	227,818		$	320,000
Advance from related party		65,000
Accounts payable		92,454			136,740
Accrued expenses		276,551			290,047
Interest payable		201,446			69,229
Total current liabilities		863,269			816,016
Notes payable, net of current potion		219,390
Notes payable - investors		2,262,400			2,045,000
Total liabilities		3,345,059			2,861,016
Commitments
Members’ Contributions		0			0
Members’ deficiency		(2,929,138	)		(2,355,003	)
Totals	$	415,921		$	506,013

A-4

ALLERGY FREE, LLC

STATEMENTS OF OPERATIONS AND MEMBERS’ DEFICIENCY
YEARS ENDED DECEMBER 31, 2003 AND 2002

	2003			2002
Sales	$	2,258,213		$	3,787,164
Cost of sales		756,513			1,255,038
Gross profit		1,501,700			2,532,126
Operating expenses:
Selling		1,296,206			2,265,974
General and administrative expenses		586,217			638,415
Totals		1,882,423			2,904,389
Loss from operations		(380,723	)		(372,263	)
Other income (expense):
Gain on sale of assets		2,050			1,550
Other expense		(6,000	)		(6,000	)
Interest income		27			8,641
Interest expense		(189,489	)		(161,470	)
Totals		(193,412	)		(157,279	)
Net loss		(574,135	)		(529,542	)
Members’ deficiency, beginning of year		(2,355,003	)		(1,825,461	)
Members’ deficiency, end of year	$	(2,929,138	)	$	(2,355,003	)

A-5

ALLERGY FREE, LLC

STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2003 AND 2002

	2003			2002
Operating activities:
Net loss	$	(574,135	)	$	(529,542	)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization		95,979			102,454
Gain on sale of assets		(2,050	)		(1,550	)
Changes in operating assets and liabilities:
Accounts receivable		(4,196	)		7,728
Inventory		36,643			107,413
Other current assets		25,490			(20,855	)
Interest payable		132,217			48,207
Accounts payable		192,651			(33,880	)
Accrued expenses		(13,496	)		(77,370	)
Net cash used in operating activities		(110,897	)		(397,395	)
Investing activities:
Purchases of property and equipment		(10,927	)		(46,708	)
Proceeds from sale of property and equipment		7,000			8,554
Final payment for acquisition of company					(640,000	)
Net cash used in investing activities		(3,927	)		(678,154	)
Financing activities:
Advance from related party		65,000
Proceeds from note payable		80,435			320,000
Principal payment of notes payable		(190,164	)
Proceeds from issuance of notes payable - investors		217,400			170,000
Net cash provided by financing activities		172,671			490,000
Net increase (decrease) in cash and cash equivalents		57,847			(585,549	)
Cash and cash equivalents, beginning of year		70,158			655,707
Cash and cash equivalents, end of year	$	128,005		$	70,158
Supplementary disclosure of cash flow data:
Interest paid	$	57,272		$	113,263
Supplementary disclosure of non-cash financing activity:
Account payable converted to note payable	$	236,937

A-6

ALLERGY FREE, LLC

Note 1 - Nature of activities and summary of significant accounting policies:

Nature of activities and organization:

Allergy Free, LLC (the “Company”) was established to acquire certain assets and liabilities of Allergy Free L.P. The Company is a limited liability company registered in the State of California that designs, markets and manufactures allergen-reducing products. The Company’s products are sold throughout North America.

The liability of the Company’s members (the “Member”) is limited to those stated in the LLC Operating Agreement or to those stated in other agreements to which each Member is a party. The Company shall be dissolved as of the earlier of the following: (a) a judicial dissolution pursuant to Section 17351 of the Corporations Code, (b) the manager elects to dissolve the Company, (c) the sale or other liquidation of all or substantially all of the assets of the Company, or (d) on September 30, 2025, unless extended by vote of Members.

Basis of presentation:

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. This basis of accounting contemplates the recovery of the Company’s assets and the satisfaction of its liabilities in the normal course of business. Successful transition to profitable operations is dependent upon obtaining a level of sales adequate to support the Company’s cost structure. The Company has suffered recurring losses resulting in a members’ deficiency of $2,929,138 and a working capital deficiency of $632,645 as of December 31, 2003. Management intends to continue to finance operations primarily through its potential ability to generate cash flows from equity offerings following its merger with a public company (see Note 10). However, there can be no assurance that the Company will be able to obtain such financing or internally generate cash flows, which may impact the Company’s ability to continue as a going concern. The accompanying balance sheet does not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the potential inability of the Company to continue as a going concern.

Use of estimates:

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect reported amounts and disclosures. Accordingly, actual results may differ from those estimates.

A-7

ALLERGY FREE, LLC

Note 1 - Nature of activities and summary of significant accounting policies (continued):

Cash and cash equivalents:

The Company maintains its cash in bank deposit accounts at various financial institutions. Highly–liquid investments with original maturities of three months or less when purchased are considered to be cash equivalents. The balances, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash.

Inventory:

Inventory primarily consists of finished products which include all direct costs, such as labor and materials, and those indirect costs which are related to production, such as indirect labor, supplies, rent and depreciation costs. Raw materials are stated at the lower of costs (first-in, first-out) or market value. Inventory is reduced by provisions for excess and slow moving commensurate with known or estimated exposures.

Property and equipment:

Property and equipment are stated at cost. Depreciation is provided using the straight-line method over the estimated useful lives of the assets ranging from two to ten years. Leasehold improvements are amortized over the shorter of their useful lives or the term of the related lease.

Advertising:

The Company expenses the cost of advertising and promotions as incurred. Advertising costs charged to operations were $263,935 and $1,190,924 in 2003 and 2002, respectively.

Revenue recognition:

The Company recognizes revenue from product sales upon shipment of goods, with a provision for estimated returns recorded at that time. In addition, a provision for potential warranty claims is provided for at the time of sale, based on warranty terms and the Company’s prior experience.

The Company sells most of its products on a prepaid basis. Once the credit payment has been verified, the Company ships the products. Limited terms are extended to selected customers. Credit is extended for a 30-day term. On a periodic basis, the Company evaluates its accounts receivable and establishes an allowance for doubtful accounts, based on a history of past write-offs and collections and current credit considerations.

A-8

ALLERGY FREE, LLC

Note 1 - Nature of activities and summary of significant accounting policies (concluded):

Income taxes:

The Company is not a tax paying entity for federal income tax purposes, and thus no income tax expense has been recorded in the financial statements. Income of the Company is taxed to the members in their respective returns. However, in the State of California, limited liability companies are subject to an annual fee based on the gross income of the company. This amount is included in other expenses.

Valuation of long-lived assets:

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future net undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset.

Note 2 - Inventory:

Inventory as of December 31, 2003 and 2002 consists of the following:

	2003		2002
Raw materials	$	26,702	$	70,810
Work in process		4,295		6,275
Finished goods		53,143		43,698
Totals	$	84,140	$	120,783

Note 3 - Property and equipment:

Property and equipment as of December 31, 2003 and 2002 consists of the following:

	2003		2002
Furniture and fixtures	$	264,615	$	264,715
Machinery and equipment		82,868		96,368
Computer equipment		66,218		51,132
Leasehold improvements		70,478		74,537
		484,179		486,752
Less accumulated depreciation and amortization		298,882		211,453
Totals	$	185,297	$	275,299

A-9

ALLERGY FREE, LLC

Note 4 - Warranty reserves:

The Company accrues an estimate of its exposure to warranty claims based on both current and historical product sales data and warranty costs incurred. The air filters produced and sold by the Company carry a ten-year warranty. The Company assesses the adequacy of its recorded warranty liability annually and adjusts the amount as necessary. The warranty liability is included in accrued liabilities in the accompanying financial statements. As of December 31, 2003, the warranty accrual was $130,961. The majority of the warranty accrual relates to products that were sold prior to the Company’s acquisition of Allergy Free L.P. in November 2000. As part of the asset purchase agreement, the Company is obligated to provide the warranty coverage on these products through their original warranty period. Changes in the Company’s warranty liability were as follows:

	2003			2002
Warranty accrual, beginning of year	$	130,961		$	124,818
Warranties issued during the year		4,445			8,729
Adjustments to preexisting accruals		(3,745	)
Actual warranty expenditures		(700	)		(2,586	)
Warranty accrual, end of year	$	130,961		$	130,961

Note 5 - Notes payable:

Notes payable at December 31, 2003 and 2002 consists of the following:

	2003		2002
Non-interest bearing promissory note issued to a    vendor, due in May 2004 with interest imputed at 5%	$	98,725
Line of credit with a financial institution restructured    to a term loan in 2003, due in July 2006, in    monthly installments of $12,085 with interest rate    at the bank’s index rate plus 1.5% (5.5% at    December 31, 2003)		348,483	$	320,000
		447,208		320,000
Less current portion		227,818		320,000
Long-term portion	$	219,390	$	—

A-10

ALLERGY FREE, LLC

Note 5 - Notes payable (concluded):

Principal payments on the above obligations in each of the years subsequent to December 31, 2003 are as follows:

Year Ending December 31		Amount
2004	$	227,818
2005		136,590
2006		82,800
Total	$	447,208

Note 6 - Investors’ notes payable:

The Company obtained five separate rounds of funding from a group of investors over the last four years to finance the original acquisition of Allergy Free L.P. and support the operations of the Company. The promissory notes (“Notes”) were issued with convertible preferred membership shares to the investors. The number of preferred shares issued was equal to the product of 1.3 times the principal amount of the Notes. The conversion features of these preferred shares are described in Note 6. Since all existing common membership shares were issued at zero value, the convertible preferred shares issued were also accounted for at zero value.

Investors’ notes payable at December 31, 2003 and 2002 consisted of the following:

	2003		2002
Investors’ notes payable with interest at 8%,
due on December 1, 2010	$	1,500,000	$	1,500,000
Investors’ notes payable with interest at 8%,
due on December 15, 2011		375,000		375,000
Investors’ notes payable with interest at 8%,
due on September 1, 2012		115,000		115,000
Investors’ notes payable with interest at 8%,
due on January 2, 2013		55,000		55,000
Investors’ notes payable with interest at 8%,
due on October 1, 2013		217,400
Totals	$	2,262,400	$	2,045,000

A-11

ALLERGY FREE, LLC

Note 7 - Members’ equity:

Members have made no contributions to equity of the Company. The Company was capitalized through the investor notes payable described in Note 6. Holders of investor notes payable are entitled to payment of principal and interest on their investor notes prior to any distribution with respect to membership interests. Membership interest of the Company consists of two classes: preferred shares and common shares, holders of which are referred to as preferred class members and common class members. The LLC Operating Agreement stipulates the following membership interest, voting rights and allocation of the Company’s profit and losses.

The preferred shares shall automatically convert to common shares upon each payment of principal on the Notes. The number of preferred shares that will convert on a principal payment shall be determined based upon the ratio that the amount of principal paid bears to the original principal amount of the Note. Each five and two-tenths preferred shares that automatically converts shall convert into one common share. In the event that the Notes have not been paid in full on or before five years after the date issued, the preferred shares relating to such Notes, which have not automatically converted, shall be convertible into common shares at the option of the holder of the preferred shares by written notice to the Company at the rate of one common share for each preferred share.

Membership interests have voting rights and share in the Company’s net income, if any, and losses.

The net losses of the Company are allocated as follows: First, until each member’s capital account balance is zero, net losses shall be allocated to the members with positive capital account in accordance with their respective percentage interests. Thereafter, net losses shall be allocated to the members in accordance with their respective percentage interests.

The net income of the Company, if any, will be allocated as follows: First, to the members to the extent of cumulative net losses attributable to operations allocated to each member for all years prior to the allocation of such net income. Second, to the members pro rata based upon their percentage interests.

At December 31, 2003 and 2002, there were 1,730,000 and 1,610,000 common membership interests available and issued, respectively.

At December 31, 2003 and 2002, there were 2,941,120 and 2,658,500 preferred membership interest available and issued, respectively.

A-12

ALLERGY FREE, LLC

Note 8 - Stock-based compensation:

As of December 31, 2003, the Company granted an aggregate of 120,000 common share membership interests as incentive compensation to certain employees. Employee membership interests vest over a four-year period so long as the employee remains affiliated with the Company. Employee members’ affiliation with the Company includes performance of services for the Company. The vesting schedule for the employee members’ interests is 25% after one year from the date of issuance and 1/48^th of the total per month for years 2 through 4.

Neither preferred shareholders nor common shareholders have ever contributed any capital to the Company. Additionally, there is no active market for the trading of membership shares and the Company has never earned a profit. Therefore, all shareholders have zero or negative capital account balances. Since in a liquidation of the assets of the Company the shareholders would not receive anything for their interests, until the Company has earnings, no value has been attributed to the common shares granted to the employees. Hence no incentive compensation was expensed in conjunction with the issuance of these common shares.

Note 9 - Commitments:

License agreements

The Company has a license agreement with a third party for use of its design to manufacture air filters. The license agreement provides for royalty payments based on a percentage of net sales of certain products. The term of the license agreement is the longer of (i) the life of the licensed patent or (ii) ten years from date of first commercial sale of the product. Royalty expenses under the license agreement were $25,712 and $43,920 in 2003 and 2002, respectively.

Operating leases:

The Company has entered into operating leases for office space and office equipment. The office space lease agreements provide for extensions of the leases. Total rent expense for all operating leases was $136,049 and $175,214 in 2003 and 2002, respectively.

Minimum future payments under the operating leases in years subsequent to December 31, 2003 are as follows:

Year Ending December 31,		Amount
2004	$	154,307
2005		56,898
Total	$	211,205

A-13

ALLERGY FREE, LLC

Note 10- Related party transactions:

During 2003, the Company received advances from a related party, which bear interest at 5.5% per annum with no fixed repayment terms. As of December 31, 2003, the accrued and unpaid interest on the advance was insignificant.

The Company also leases office space from the related party. Rent expense relating to this lease amounted to $15,602 and $7,000 in 2003 and 2002, respectively.

Note 11- Subsequent event:

On March 18, 2004, the Company entered into an Asset Purchase Agreement with Planet Polymer Technologies, Inc. (“Planet”) as amended June 11, 2004 and October 6, 2004, in which Planet will acquire all of the assets and assume certain of the liabilities of the Company for a consideration of approximately $274,300 in the form of a subordinated convertible note plus 82,732,970 shares of Planet’s common shares. Since the Members of the Company will receive the majority of the voting shares of Planet, the current president of the Company will become the president of Planet and since representatives of the Company will hold three of the five seats on Planet’s Board of Directors, the merger will be accounted for as a recapitalization of the Company, whereby the Company will be the accounting acquirer (legal acquiree) and Planet will be the accounting acquiree (legal acquirer). The acquisition is expected to be completed in 2004 and will be accounted for using the purchase method.

A-14

ALLERGY FREE, LLC

CONDENSED BALANCE SHEET
(UNAUDITED)

	June 30, 2004
ASSETS
Current assets:
Cash and cash equivalents	$	47,863
Accounts receivable, less allowance for doubtful accounts of $500		7,360
Inventory		21,880
Other current assets		13,920
Total current assets		91,023
Property and equipment, net		136,077
Deferred acquisition costs		21,886
Totals	$	248,986
LIABILITIES AND MEMBERS’ DEFICIENCY
Current liabilities:
Current portion of notes payable	$	129,093
Advance from related party		135,000
Accounts payable		326,516
Accrued expenses		239,713
Interest payable		296,818
Total current liabilities		1,127,140
Notes payable, net of current potion		155,896
Investors’ notes payable		2,337,400
Total long-term liabilities		2,493,296
Total liabilities		3,620,436
Commitments
Members’ deficiency		(3,371,450	)
Totals	$	248,986

A-15

ALLERGY FREE, LLC

CONDENSED STATEMENTS OF OPERATIONS & MEMBERS’ DEFICIENCY
(UNAUDITED)

	Six months ended June 30,
	2004			2003
Sales	$	720,438		$	1,323,956
Cost of sales		251,895			418,472
Gross profit		468,543			905,484
Operating expenses:
Selling		347,594			860,538
General and administrative expenses		455,870			295,805
Totals		803,464			1,156,343
Loss from operations		(334,921	)		(250,859	)
Other income (expense):
Other expense		(3,000	)		(3,000	)
Interest expense		(104,391	)		(91,978	)
Totals		(107,391	)		(94,978	)
Net loss		(442,312	)		(345,837	)
Members’ deficiency - beginning of year		(2,929,138	)		(2,355,003	)
Members’ deficiency - ending of year	$	(3,371,450	)	$	(2,700,840	)

A-16

ALLERGY FREE, LLC
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)

	Six months ended June 30,
	2004			2003
Operating activities:
Net loss	$	(442,312	)	$	(345,837	)
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization		46,856			49,107
Gain on sale of assets
Reduction of inventory reserve
Changes in operating assets and liabilities:
Accounts receivable		(602	)		(2,179	)
Other current assets		(2,199	)		2,218
Inventory		62,260			24,671
Interest payable		95,372			45,532
Accounts payable		141,319			(61,481	)
Accrued expenses		55,905			(31,769	)
Net cash used in operating activities		(43,401	)		(319,738	)
Investing activities:
Purchases of property and equipment
Proceeds from sale of property and equipment		2,364			4,160
Final payment for acquisition of company
Net cash provided by investing activities		2,364			4,160
Financing activities:
Advance from related party		70,000
Proceeds from note payable					80,000
Vendor promissory note					217,195
Principal payment of notes payable		(162,219	)
Proceeds from issuance of investors’ notes payable		75,000
Deferred acquisition costs		(21,886	)
Net cash provided (used) in financing activities		(39,105	)		297,195
Net decrease in cash and cash equivalents		(80,142	)		(18,383	)
Cash and cash equivalents, beginning of year		128,005			70,158
Cash and cash equivalents, end of year	$	47,863		$	51,775
Supplemental disclosures of cash flow data:
Cash paid for interest	$	9,019		$	36,722
Non-cash transactions:
Account payable converted to note payable				$	217,195

A-17

ALLERGY FREE, LLC

1.             Basis of Presentation

                In management’s opinion, the accompanying unaudited financial statements of Allergy Free, LLC (“Allergy Free” or the “Company”) have been prepared in accordance with the interim reporting requirements of the Proxy Statement, pursuant to the rules and regulations of the Securities and Exchange Commission. However, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.

                In management’s opinion, all adjustments (consisting of only normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the six months ended June 30, 2004, are not necessarily indicative of results that may be expected for the year ending December 31, 2004. For additional information, refer to the Company’s financial statements and notes thereto for the year ended December 31, 2003, contained in the Company’s audited financial statements for the fiscal year ended December 31, 2003.

2.             Liquidity and Capital Resources

financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. For the six months ended June 30, 2004 the Company incurred a loss of $442,312. As of June 30, 2004, the Company had an accumulated members’ deficiency of $3,371,450. These matters raise substantial doubt about the Company’s ability to continue as a going concern. Successful transition to profitable operations will be dependent upon obtaining a level of sales adequate to support the Company’s cost structure. Management intends to continue to finance operations primarily through debt and/or equity financing and internally generated cash flows through a merger with a public company, (see Note 5). However, there can be no assurance that the Company will be able to obtain such financing or internally generate cash flows, which may impact the Company’s ability to continue as a going concern. The accompanying balance sheet does not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.

3.             Income taxes

The Company is not a tax paying entity for federal income tax purposes, and thus no income tax expense has been recorded in the financial statements. Income of the Company is taxed to the members in their respective returns. However, in the State of California, limited liability companies are subject to an annual fee based on the gross income of the company. This amount is charged to other expenses.

4.             Notes payable

Notes payable at June 30, 2004 consists of a term note with a financial institution, due in July 2006, payable in monthly installments of $12,085 with interest rate at bank’s index rate plus 1.5%. The outstanding balance of this note at June 30, 2004 was $284,989.

A-18

ALLERGY FREE, LLC

5.             Investors’ notes payable

The Company obtained five separate rounds of funding from a group of investors over the last four years to finance the original acquisition of Allergy Free L.P. and support the operations of the Company. The promissory notes (the “Notes”) were issued with convertible preferred membership shares to the investors. The number of preferred shares issued was equal to the product of 1.3 times the principal amount of the Notes. The conversion features of these preferred shares are described in Note 6. Since all existing common membership shares were issued at zero value, the convertible preferred shares issued were also accounted for at zero value.

6.             Acquisition

On March 18, 2004, the Company entered into an Asset Purchase Agreement with Planet Polymer Technologies, Inc. (“Planet”) as amended June 11, 2004 and October 6, 2004, in which Planet will acquire all assets of and assume certain of the liabilities of the Company for a consideration of approximately $274,300 in the form of a subordinated convertible note plus 82,732,970 shares of Planet’s common shares. Since the Members of the Company will receive the majority of the voting shares of Planet, the current president of the Company will become the president of Planet and since representatives of the Company will hold three of the five seats on Planet’s Board of Directors, the merger will be accounted for as a recapitalization of the Company, whereby the Company will be the accounting acquirer (legal acquiree) and Planet will be the accounting acquiree (legal acquirer). The acquisition is expected to be completed in 2004 and will be accounted for using the purchase method.

A-19

EX-2

EXHIBIT “B”

FORM 10KSB/ A
FILED WITH SEC
AUGUST 13, 2004

B-1

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-KSB/A

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

For the fiscal year ended December 31, 2003
Commission File No. 0-26804

PLANET POLYMER TECHNOLOGIES, INC.
(Name of small business issuer in its charter)

CALIFORNIA	33-0502606
(State or other jurisdiction of	(IRS Employer identification No.)
incorporation of organization)
6835 Flanders Drive, Suite 100 San Diego, California	92121
(Address of principal executive offices)	(Zip Code)

Issuer’s telephone number (619) 291-5694

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. oYes x No

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

The issuer’s revenues for the year ending December 31, 2003 were $175,082.

The aggregate market value of the voting stock held by non-affiliates of the Issuer as of March 22, 2004 was $372,473, based on the average of the 4:00 p.m. closing bid and ask prices of $0.06 as reported on the Over-the-Counter Bulletin Board.

As of March 22, 2004, 6,207,884 shares of the Company’s Common Stock were outstanding and no shares of the Company’s Series A Preferred Stock were outstanding.

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

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PLANET POLYMER TECHNOLOGIES, INC.

FORM-10KSB/A
Year Ended December 31, 2003

TABLE OF CONTENTS

Item Number		Page
	PART I.
1.	Description of Business	B-4
2.	Description of Property	B-11
3.	Legal Proceedings	B-11
4.	Submission of Matters to a Vote of Security Holders	B-11
	PART II.
5.	Market for Common Equity and Related Stockholders Matters	B-11
6.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	B-12
7.	Financial Statements	B-15
8.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosures	B-15
8A.	Controls and Procedures	B-16
	PART III.
9.	Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act	B-16
10.	Executive Compensation	B-18
11.	Security Ownership of Certain Beneficial Owners and Management	B-20
12.	Certain Relationships and Related Transactions	B-23
13.	Exhibits and Reports on Form 8-K	B-24
14.	Principal Accountant Fees and Services	B-29
	Signatures	B-30
	Power of Attorney	B-30

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

PART I.

ITEM 1. DESCRIPTION OF BUSINESS

Planet Polymer Technologies, Inc.

Planet Polymer Technologies, Inc. is an advanced materials company that developed and licensed unique hydro-soluble polymer and biodegradable materials. In April 2003 the Company recovered in lieu of foreclosure the AQUAMIM® Metal Injection Molding technology and manufacturing assets previously sold to Ryer Industries, LLC, and by agreement dated May 1, 2003, resold the assets to Ryer Enterprises, LLC, a newly formed entity which intends to continue the commercial employment of the AQUAMIM® products. In addition, the Company has licensed to Ryer Enterprises, LLC, the patent rights relating to the AQUAMIM® products for royalties which will be payable monthly forty-five (45) days after the close of each month for eight (8) years after which the Company has agreed to transfer the patents to Ryer Enterprises, LLC, provided it is not in default.

Effective January 15, 2004 BASF acquired CPG Technologies, the Fresh Seal® post harvest treatment business from Agway. Also, in January 2004 Agway sold its rights to the agricultural feed products marketed under the trademark Optigen® 1200 to Alltech. Management is hopeful that BASF and Alltech, which have greater financial resources than Agway, will be better able to successfully commercialize the FreshSeal® and Optigen® technologies in the commercialization of the Company’s EnviroPlastic CRT controlled-release technologies developed by Planet for Agway. During 2003, Planet’s activities were limited as the Company awaited and monitored the progress of Agway, Inc.

Planet’s patented development technologies are listed below:

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

Planet is currently not developing any new products. However, on March 18, 2004, Planet entered into an Asset Purchase Agreement with Allergy Free, LLC, pursuant to which Planet has agreed to acquire substantially all of the assets of Allergy Free, LLC. Allergy Free is engaged in the business of designing, manufacturing, selling and distributing consumer products for use by allergy sensitive persons. If the acquisition is approved by Planet’s shareholders and completed as contemplated by the Agreement, Planet, through personnel and facilities acquired from Allergy Free will continue Allergy Free’s business activities and seek to incorporate Planet’s polymer technologies and know-how into developing new products for the Allergy Free business. Investors are encouraged to review our report on Form 8K filed with the Securities and Exchange Commission on March 23, 2004, which discusses more thoroughly the terms of the proposed acquisition and which is available through EDGAR at www.sec.gov, and when available, the Company’s Proxy Statement which will also be available through EDGAR.

Planet was incorporated under the laws of California in August 1991. Planet’s principal executive offices are located at 6835 Flanders Drive, Suite 100, San Diego, California 92121, and its telephone number is (619) 291-5694.

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Products and Technologies

Planet used its polymer chemistry expertise to provide water soluble and degradable technology-based solutions to the current and emerging needs of the agricultural market principally through its arrangement with Agway.

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

This coating technology is also utilized to control the release and transfer rates of nitrogen and oxygen, to assist in controlling the ripening of fruits and vegetables. Planet entered into a licensing agreement with Agway in 1999 to develop commercial coatings for use on fruits, vegetables, floral and nursery applications that has resulted in the launch, in October 2000, of FreshSeal® coating for use on fruits and vegetables. Agway is in the early stages of the extended multi-year commercial rollout of this product family. Agway’s product reception and success to date in the marketplace has been encouraging and resulted in a very modest royalty-generating license in 2001. Effective January 15, 2004, Agway sold its rights to FreshSeal® to BASF AG.

The Company has also been highly engaged in development work with Agway since 1999 on the use of its controlled-release technology for animal feed. It is being evaluated as a specialty coating for urea to allow for more efficient, controlled release of nitrogen for dairy cows. The product named Optigen®1200 by Agway’s Country Products Group, was in field testing while it petitioned the FDA for product approval as a feed additive. Effective January 2004, Agway sold its rights to Optigen® to Alltech.

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

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

AQUAMIM® Metal Injection Molding. AQUAMIM® is designed for the production of precision metal components utilizing a water debinding process, which eliminates the need for hazardous solvents or acids. AQUAMIM® feedstock is a mixture of metal powders and the Company’s proprietary water soluble polymer binder. Various industrial and consumer products can be manufactured by the AQUAMIM® technology. The Company currently offers stainless steel compounds, 316L, 17-4PH, and 420; iron-nickel; tool steels M2, and M4; and heavy metal alloys, tungsten copper and tungsten carbide cobalt. The patents for AQUAMIM® are No. 5,977,230 and No. 6,008,281. Although the AQUAMIM® technologies were sold to Ryer Industries in 2001, in April 2003, Planet recovered these assets as a result of Ryer Industries default under a Forbearance Agreement and subsequently, on May 1, 2003, resold the AQUAMIM® technology to Ryer Enterprises, LLC.

Markets and Applications

Agricultural Feed & Fruit/Vegetable Initiatives. On March 25, 2003, the U.S. Bankruptcy Court gave its approval to Agway to enter into the two Sale and Licensing Agreements with the Company with respect to the Company’s agricultural feed and fruit/produce technologies. Under the agricultural feed agreement, Agway’s Country Products Group continued to market and develop the Company’s controlled-release technology for animal feed under the tradename Optigen 1200. The technology was being utilized in a product under field testing by Agway as a concentrated source of controlled release nitrogen for dairy cows while it petitions the FDA for product approval. In January 2004, Alltech purchased the rights to Optigen® from Agway. The global feed additive market is larger and Alltech has a significant presence in the market. Under the fruit/product agreement, Agway marketed FreshSeal in a niche

B-5

of the global market for fruit and vegetable coatings. In January 2004, Agway transferred FreshSeal to BASF, who is already active in this market.

Metal Injection Molded (MIM) Feedstocks. The Company’s AQUAMIM® technology had been offered to the metals design and molded products communities by Ryer Industries, LLC, with whom the Company had a royalty agreement for technology sold to Ryer Industries in 2001. In April 2003, the Company recovered the technologies from Ryer Industries and on May 1, 2004 entered into a royalty agreement with Ryer Enterprises, LLC. AQUAMIM® technology offers both product enhancements and environmental benefits to alternative MIM formulations and traditional machining techniques of manufacturing metal products. Primary markets pursued include metal forming, die cutting tools, medical devices and recreational sports equipment.

Strategic Alliances

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

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

Agway (BASF and Alltech) Strategic Alliance. In November 1998, Planet entered into a strategic investment agreement with Agway Inc. to assist in the funding of Planet Polymer Technologies, Inc. Through stock purchases and warrant exercises, Agway had accumulated more than 10% of the Company’s Common Stock. In May 2003, Agway assigned and transferred to the Company all of Agway’s shares of Planet Common Stock and no longer holds any stock in the Company.

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

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

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

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

To consummate the sale and assignment contemplated by the letter agreement dated November 14, 2000, the Company and Agway agreed on the form of two separate Sale and Licensing Agreements with respect to the agricultural feed technologies and the fruit/produce technologies. On March 25, 2003 the U.S. Bankruptcy Court gave its approval to Agway to enter into the two separate Sale and Licensing Agreements with the Company. Under the Sale and Licensing Agreements, the Company confirmed (i) the assignment of its agricultural feed related patent rights and fruit/produce related patent rights and (ii) the license of its technology related to the agricultural feed products and fruit/produce products, to Agway. In return, the Company received an up-front payment of $30,000 for its execution of the agricultural feed agreement and a payment of $100,000 for its execution of the fruit/produce agreement. The amended agreements also call for the Company to receive future royalty payments based on varying percentages of future revenues generated by Agway from sales of related products. During the year ended December 31, 2003, the Company received royalties in the amount of approximately $1,400 from the sales of the underlying products. Agway granted the Company exclusive, irrevocable, worldwide, royalty-free limited licenses to use the assigned patents rights for uses other than food and agricultural initiatives. In connection with the agricultural feed agreement, Agway also agreed to assign and transfer to the Company all of Agway’s shares of Planet capital stock (3,000,000 shares). Effective January 15, 2004, Agway entered into an agreement to sell all of the assets of its FreshSeal business, which include the fruit/produce patent rights assigned by the Company, to BASF. Also, in January 2004, Agway sold all of its right and interest to Optigen® to Alltech. Management cannot assure that the Company will receive significant, if any, royalties and monies under these Sale and Licensing Agreements.

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

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

Ryer Enterprises, LLC Strategic Alliance. By agreement dated May 1, 2003, the Company resold certain assets relating to its MIM business to Ryer Enterprises, LLC, a newly formed entity which intends to continue the commercial employment of the AQUAMIM® products. In addition, the Company has licensed to Ryer Enterprises, LLC, the patent rights relating to the AQUAMIM® products for royalties which will be payable monthly forty-five (45) days after the close of each month for eight (8) years after which the Company has agreed to transfer the patents to Ryer Enterprises, LLC, provided it is not in default. Subsequent to December 31, 2003, the Company agreed to forbear the February and March royalty payment from Ryer Enterprises in exchange for a two (2) month extension to the eight (8) year royalty stream plus a royalty payment equal to a one-half (1/2) month payment.

B-7

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

Sales and Marketing

Planet now relies entirely on BASF and Alltech to market Planet’s products and technologies with respect to the Company’s EnviroPlastic CRT controlled-released technologies for agricultural feed and produce, and upon the strategic marketing alliance it has with Ryer Enterprises, LLC to market the Company’s products and technologies with respect to the Company’s AQUAMIM® technologies.

Competition

The amounts of royalties and monies Planet receives from its strategic partners may depend on the competition faced by those strategic partners. In the manufacture and marketing of controlled-release coatings there are a variety of competitors and products. Planet believes that its EnviroPlastic controlled-release technology marketed by its strategic partners can be a lower cost and more effective alternative that can be targeted towards a broad agricultural market.

There are also numerous competitors and products in the market for feedstocks for Metal Injection Molded products which compete with the AQUAMIM® technology.

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

Manufacturing and Suppliers

Planet has no in-house manufacturing activities.

Research and Development

The Company incurred no research and development expenses for the year ended December 31, 2003. Unless and until the Allergy Free acquisition is completed, the Company anticipates limited or no further research and development activities on new products.

Intellectual Property and Proprietary Technologies

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

As previously discussed in this report, Planet has transferred the rights to commercially exploit and market and sell products and intellectual property rights to its principal technologies to third parties. In general, these third parties own, or subject to certain conditions has the right to acquire ownership of, the patents protecting Planet’s proprietary technologies and so long as these third parties perform their obligations with their respective agreements, Planet’s interest in the technologies is limited to the right to receive certain royalty payments.

There can be no assurance that Planet’s pending patent applications will be approved, that Planet will develop additional proprietary materials or processes that are patentable, that any patents issued to Planet or any of its licenses will provide Planet with competitive advantages or will not be successfully challenged by third parties or that the patents of others will not have an adverse effect on the ability of Planet to conduct its business. Furthermore, there can be no assurance that others will not independently develop similar or superior technologies, duplicate any of Planet’s processes or design around the patented materials developed by

B-8

Planet. Planet believes that its products, patents, trademarks and other proprietary rights do not infringe the property rights of third parties. There can be no assurance, however, that third parties will not assert infringement claims in the future. It is possible that Planet may need to acquire licenses to, or to contest the validity of, issued or pending patents of third parties relating to Planet’s technology. There can be no assurance that licenses under such patents would be made available to Planet on acceptable terms, if at all, or that Planet would prevail in any such contest. In addition, Planet could incur substantial costs defending itself in suits brought against the Company with respect to patents or in bringing suits against other parties.

Government Regulation

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

Employees

During the year ended December 31, 2003, the Company had no employees. Since January 1, 2003, four persons have provided consulting services to Planet, one engaged in as-required research and development activities and three in limited or part time administrative activities.

Risk Factors

History of Operating Losses. The year ended December 31, 2003 is the first annual period in which the Company has shown net income. For the year ended December 31, 2002, the Company had net losses of approximately $667,000. For the year ended December 31, 2003, the Company had net income of approximately $71,000 as a result of a gain from the sale of technology and fixed assets. As of December 31, 2003, we had an accumulated deficit of approximately $14.3 million. Since inception, Planet has generated minimal revenues from product sales.

Future Capital Needs; Uncertainty of Additional Funding. The Company’s future capital requirements will depend on when and if the Allergy Free acquisition is completed and on many other factors, including

§	the timing of market acceptance of Company products, including products acquired from Allergy Free;
§	competing technological and market developments;
§	the costs involved in filing, prosecuting and enforcing patent claims, and
§	the receipt of note payments and earned royalties.

We anticipate that our existing resources will be sufficient to maintain our scaled back operations through at least May 31, 2004. We cannot guarantee that changes in our plans or other events affecting our projected expenses will not result in the expenditure of such resources before such time.

We intend to seek additional funding through a private equity offering in connection with the Allergy Free acquisition and may explore funding through other public or private equity or debt financing. We cannot guarantee that additional financing will be available on acceptable terms, or at all. Insufficient funds may require the Company to file for bankruptcy protection under Chapter 11 or Chapter 7 of the Bankruptcy laws.

Allergy Free Acquisition Might Not be Completed. There are many conditions to the completion of the Allergy Free acquisition, including, without limitations, approval of the Company shareholders. If the transaction is not completed, the costs and expenses incurred by Planet in connection with pursuing the transaction will exceed Planet’s currently available funds to pay such expenses, which will heighten the Company’s need for additional funding.

B-9

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

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

Uncertainty of Market Acceptance. Our success prior to the Allergy Free acquisition and thereafter if the acquisition is not completed will be largely dependent upon the royalties and monies we receive from licensing agreements as a result of the commercial acceptance of our technologies by the various industries targeted by our products. There can be no certainty as to the amount of time required to achieve full-scale commercialization, and the commercialization process of any new product could take several years. We cannot guarantee that our products will receive broad market acceptance as an economically acceptable alternative. Broad market acceptance of our products will depend upon the ability of our strategic partners to demonstrate to potential customers that our products can compete favorably with alternative solutions. As in 2002, in 2003 the Company focused on research and development and commercial support for Agway’s FreshSeal commercial program and Agway’s Optigen 1200 development activities. The Company no longer has a relationship with Agway. In 2004, the Company will be focused on working with BASF to promote Fresh Seal® and Alltech to promote Optigen®. In addition, beginning in 2003, the Company focused on research and development, and commercial support for Ryer Enterprises AQUAMIM® Metal Injection Molding commercialization. If the Allergy Free acquisition is completed rights of the Company to receive royalties from existing technology will be transferred to a trust for the benefit of Planet shareholders prior to the acquisition and no longer available to Planet.

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

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

Shares Eligible for Future Sale. Sales of substantial amounts of our Common Stock in the public market or the prospect of such sales by existing shareholders could materially adversely affect the market price of our Common Stock. As of December 31, 2003, we had outstanding 6,207,884 shares of Common Stock. Virtually all of our outstanding shares of Common Stock are either registered and therefore freely tradable or may be transferred pursuant to Rule 144(k) under the Securities Act, unless held by our “affiliates” as that term is defined in Rule 144 under the Securities Act.

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

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

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

ITEM 2. DESCRIPTION OF PROPERTY

Our executive offices are located in approximately 5,000 square feet of leased office space located at 635 Flanders Drive, Suite 100, San Diego, California, 92121, subject to a month-to-month sublease.

ITEM 3. LEGAL PROCEEDINGS

None

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

None.

PART II.

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company’s Common Stock trades on the OTC.BB under the symbol “POLY.OB.” The following table sets forth the high and low sales prices of the Company’s Common Stock for the period from January 1, 2002 through December 31, 2003 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:

	Trade Prices
	High		Low
Fiscal year ended December 31, 2002
First Quarter		0.350	0.110
Second Quarter		0.250	0.130
Third Quarter		0.150	0.130
Fourth Quarter		0.170	0.030
Fiscal year ended December 31, 2003
First Quarter		0.080	0.010
Second Quarter		0.100	0.050
Third Quarter		0.060	0.050
Fourth Quarter		0.070	0.030

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On March 22, 2004, the last reported sale price of the Company’s Common Stock on the Over-the-Counter Bulletin Board was $0.06. As of March 22, 2004, there were approximately 177 holders of record of the Company’s Common Stock with 6,207,884 shares outstanding. The market price of shares of Common Stock, like that of the common stock of many other emerging growth companies, has been and is likely to continue to be highly volatile.

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

However, in connection with the Allergy Free acquisition, if it is consummated, the Company intends to distribute to holders of record of the Company’s common stock as of the record date for the meeting called to vote on approval of the acquisition, the right to receive royalties under the agreements relating to the Company’s AQUAMIM, Optigen, and FreshSeal product technologies investors should read the Proxy Statement to be filed and distributed in connection with soliciting proxies for approval of the acquisition for a discussion of the tax consequences of this distribution.

In May 2003, in connection with the agricultural feed agreement, Agway assigned and transferred to the Company all of Agway’s shares of Planet Common Stock, reducing the current outstanding Common Stock from 9,207,884 to 6,207,884 outstanding.

Recent Sales of Unregistered Securities

No shares were issued or sold by the Company during 2003.

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

Overview

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

Since the Company was founded in 1991, with the exception of resources expended in connection with the purchase and ongoing operation of Deltco, substantially all of the Company’s resources have been devoted to the development and commercialization of its technologies and products. This has included the expenditure of funds to develop the Company’s corporate infrastructure, support the Company’s marketing efforts and establish a pilot production facility, in addition to research and development. In January 2000, Planet sold its wholly-owned subsidiary, Deltco, a manufacturer and reprocessor of plastic resins located in Ashland, Wisconsin. Planet incurred operating losses since inception through December 31, 2002. For the year ended December 31, 2003, Planet showed a net income of approximately $71,000 and reduced its accumulated deficit from approximately $14.4 million to approximately $14.3 million.

On March 18, 2004, the Company and Allergy Free, LLC, a California limited liability company (“Allergy Free”), entered into an Asset Purchase Agreement (“Agreement”) in which the Company will acquire substantially all of the assets of Allergy Free and assume certain of its liabilities for which the Company will provide the following consideration; a subordinated note in the principal amount not to exceed approximately $2.8 million for a term of 3 years and not less than 28,193,900 shares of Common Stock in Planet. At March 18, 2004, the market value of the Company’s common stock was $.06 per share.

Immediately prior to the Closing, the Company will distribute to a trustee for the benefit of Company Shareholders of record as of April 15, 2004 (the “Trust”), the right to receive all royalties payable to the Company pursuant to those certain Sale and Licensing Agreements between the Company and Agway, Inc., relating to Planet’s FreshSeal® and Optigen® technology and that certain Purchase, Sale and License Agreement between the Company and Ryer Enterprises, LLC, relating to Planet’s AQUAMIM® technology.

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The Agreement is subject to a number of conditions including without limitation, approval of Planet shareholders, approval of Allergy Free members, a 50 to 1 reverse stock split, the receipt of a “No Action Letter” from the SEC relating to the distribution of the right to receive royalty payments to the Trust, the hiring of Scott L. Glenn as President and Chief Executive Officer of the Company, and an executed consulting agreement with Dr. Robert Petcavich.

The Application of Critical Accounting Policies

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

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

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

Patents, Trademarks and License Agreements — Costs incurred to obtain patents, trademarks, and license agreements, principally legal fees, are capitalized. The Company amortizes these costs on a straight-line basis over fifteen years.

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

Related Party Transactions

On January 11, 1999, Agway became a beneficial owner of more than 10% of the Company’s Common Stock. Agway retained this interest until December 2003, when, Agway assigned and transferred to the Company all of Agway’s shares of Planet Common Stock. Currently, Agway holds no equity interest in the Company.

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

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

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transaction fee to an advisor. This payment was made on January 24, 2002 and shown in accounts payable at December 31, 2001. No royalties were received or accrued by the Company under the agreement with Agway in 2002.

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

To consummate the sale and assignment contemplated by the letter agreement dated November 14, 2000, the Company and Agway agreed on the form of two separate Sale and Licensing Agreements with respect to the agricultural feed technologies and the fruit/produce technologies. On March 25, 2003, with the approval of the U.S. Bankruptcy Court, the Company and Agway entered into the two separate Sale and Licensing Agreements. Under the Sale and Licensing Agreements, the Company confirmed (i) the assignment of its agricultural feed related patent rights and fruit/produce related patent rights and (ii) the license of its technology related to the agricultural feed products and fruit/produce products, to Agway. In return, the Company will received an up-front payment of $30,000 for its execution of the agricultural feed agreement and a payment of $100,000 for its execution of the fruit/produce agreement, and will also receive a sales royalty based on net revenues generated from product sales. Agway also granted the Company exclusive, irrevocable, worldwide, royalty-free limited licenses to use the assigned patents rights for uses other than food and agricultural initiatives. In connection with the agricultural feed agreement, Agway also agreed to assign and transfer to the Company all of Agway’s shares of Planet common stock. Under the fruit/produce agreement, Agway entered into an agreement to sell all of the assets of its FreshSeal® business, which include the fruit/produce patent rights assigned by the Company, to BASF. In January 2004, Agway also sold all of its right and interest in Optigen® to Alltech. Management cannot assure that the Company will receive significant, if any, royalties and monies under these Sale and Licensing Agreements.

New Accounting Pronouncements

Recent Accounting Pronouncements. Statement of Financial Accounting Standards SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities,” and SFAS No. 150 “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity Interpretation No. 46 (FIN46),” “Consolidation of Variable Interest Entities and Interpretation of ARB No. 51,” and FIN46® which revised certain provisions of FIN46, were recently issued. SFAS No.146, 149 and 150, FIN 45, 46 and FIN46® have no current applicability to us or their effect on the financial statements would not have been significant.

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

Results of Operations

The Company’s revenues increased approximately $13,000 to approximately $175,000 for the year ended December 31, 2003, from approximately $162,000 for the year ended December 31, 2002. This increase is primarily due to the restructuring of the Company’s agreements with Agway, Inc., pursuant to which Agway paid the Company certain royalty and other payments for 2003.

Cost of revenues decreased approximately $105,000 to approximately $5,000 for the year ended December 31, 2003, from approximately $110,000 for the year ended December 31, 2002. This decrease was primarily due to the fact the Company no longer directly sells any products.

General and administrative expenses decreased $78,000 to approximately $390,000 for the year ended December 31, 2003, from approximately $468,000 for the year ended December 31, 2002. This decrease was primarily attributable to the reduction of all remaining staff which was offset in part by increased legal expenses related to the restructuring of the agreements with Agway and the recovery and sale of the AQUAMIM technology and assets.

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The Company incurred no marketing expenses for the year ended December 31, 2003, resulting in a decrease of approximately $100,000 for the same period ended December 31, 2002. The Company anticipates limited or no further marketing activities, until the Allergy Free acquisition is completed.

The Company incurred no research and development expenses for the period ended December 31, 2003, compared to approximately $118,000 for the year ended December 31, 2002. The Company anticipates limited or no further research and development activities on new products.

Other income, net, increased approximately $262,000 to approximately $291,000 for the year ended December 31, 2003, from approximately $29,000 for the year ended December 31, 2002. This increase was primarily attributable to the gain on sale of technology and fixed assets to Ryer Enterprises.

The Company’s net income increased to approximately $71,000 for the year ended December 31, 2003, compared to a net loss of approximately $667,000 during the year ended December 31, 2002.

As of December 31, 2003, the Company had net operating loss carryforwards for federal income tax purposes of approximately $12,600,000 and for California state tax purposes of approximately $3,500,000. During the period from 1998 through 2000, certain ownership changes occurred. As a result, the Company’s annual utilization of net operating loss and tax credit carryforwards may be limited as defined by Sections 382 and 383 of the Internal Revenue Code. Due to the possible limitation under Sections 382 and 383 of the Internal Revenue Code and Planet’s lack of historical taxable income, the Company has recorded a full valuation allowance for deferred tax assets. Utilization of loss carryforwards will be further limited by the change of control that will occur assuming the completion of the Allergy Free acquisition.

Liquidity and Capital Resources

The Company used approximately $140,000 for continuing operations for the year ended December 31, 2003; approximately $51,000 in accounting fees, approximately $61,000 in in-house consulting fees and approximately $33,000 in rent.

Net cash provided by investing activities of approximately $138,000 for the year ended December 31, 2003 primarily resulted from payments on notes receivable and the sale of assets relating to the Purchase Sale and License Agreement dated May 1, 2003, with Ryer Enterprises, LLC.

The Company incurred no expenses related to financing activities for the year ended December 31, 2003.

The Company does not believe that its existing sources of liquidity and anticipated revenue will satisfy the Company’s projected working capital and other cash requirements through December 31, 2004. In connection with the Allergy Free acquisition, the Company plans to raise approximately $2.0 million in a private equity placement. The ability of the Company to raise this additional capital will be dependent on many factors, including how investors in the private equity markets evaluate the combination of the Company with Allergy Free and the combined companies’ prospects going forward. Therefore the Company’s ability to raise $2.0 million of additional capital is uncertain and the Company and Allergy Free may proceed with the acquisition whether or not such additional capital is raised. If the Company is unable to complete the Allergy Free acquisition and raise additional capital, legal and accounting expenses incurred by the Company in connection with the transaction will exceed the liquid assets of the Company to pay such expenses and the Company will need to raise additional capital, explore alternative transactions, or reach agreements with the service providers to provide for the payment of these expenses. Management cannot provide any assurance that the Company will be successful in satisfying future working capital and other cash requirements past May 31, 2004. If it cannot, the Company may have to cease operations and liquidate its assets and liabilities and prepare its financial statements on a liquidation basis instead of a going concern basis.

ITEM 7. FINANCIAL STATEMENTS

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

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

None

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ITEM 8A. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in the reports we file with the SEC is recorded, processed, summarized and reported within the time periods specified in the rules of the SEC. As of December 31, 2003, we carried out an evaluation, under the supervision and the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the design and operation of these disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective in timely alerting him to material information relating to the Company required to be included in our periodic SEC filings.

CHANGES IN INTERNAL CONTROLS

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

PART III

ITEM 9.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The names of the directors and certain information about each director is set forth below:

Name	Age	Principal Occupation
Robert J. Petcavich, Ph.D.(1) (2)	48	Chairman of the Board of Directors and Chief Technical Officer
H. M. Busby	64	Director, President, Chief Financial Officer and Secretary
Ronald B. Sunderland (1)(2)	66	Business Executive and Attorney

        Robert J. Petcavich is currently CTO of Lumera Corporation of Seattle Washington. Dr Petcavich was founder, Chairman and/or CEO of the Company from 1992 until 2003. He was also founder, Chairman and/or CEO from 1996 until 2001 of Alife Medical, Inc., a natural language processing software services provider for the medical billing industry now majority owned by Medquist (NASDAQ:MEDQ) a subsidiary of Philips Electronics. Dr Petcavich has a Ph.D. degree in Polymer Science, a Master of Science Degree in Solid State Science, and a B.S. degree in Chemistry from the Pennsylvania State University, and completed the PMD executive management degree program at Harvard University. He is also a director of Molecular Reflections Inc.

                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 became President and Chief Executive Officer and Chief Financial Officer of the Company on February 1, 2003. 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.

Ronald B. Sunderland has been a director since May 2000. He is currently Sr. Vice President Business / Legal Affairs of Warner Bros. Domestic Cable Distribution where he has been since 1999. From 1997 to 1999, Mr. Sunderland was the Senior Vice President of Aaron Spelling Television, Inc. During the years 1978 to 1996 he was with the American Broadcasting Company, Inc. where he eventually became Executive Vice-President, Business Affairs and Contracts. Mr. Sunderland received a Bachelor’s degree in Political Science from the University of California at Los Angeles and a Juris Doctor from Loyola University School of Law.

Board Committees and Meetings

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        During 2003, the Board of Directors held three (3) meetings. The Board of Directors has an Audit Committee and a Compensation Committee. In addition, in 2004 the Company’s entire current Board acted as the Nominating Committee and nominated Scott Glenn, Michael Trinkle and Ellen Preston to serve as directors with Robert Petcavich and H. Mac Busby in compliance with the Asset Purchase Agreement dated March 18, 2004, and entered into by and between the Company and Allergy Free, LLC. The shareholders of the Company have the right to vote whether to accept the Asset Purchase Agreement and the Acquisition contemplated therein. The newly elected Board will consider establishing a charter for the Nominating Committee, which provides guidelines for the selection of future directors.

        The Audit Committee is responsible for the engagement of the Company’s independent auditors, consulting with independent auditors concerning the audit plan and reviewing the comments and recommendations resulting from the auditor’s report. During 2003, the Audit Committee was composed of non-employee directors including Messrs. Dr. Petcavich and Ronald B. Sunderland and met four (4) times during 2003. The Audit Committee Charter was adopted on May 22, 1997 and was subsequently amended in 2001. The Audit Committee does not currently have an “audit committee financial expert” serving on the audit committee. The Board believed that the Company’s limited activities made it impractical to recruit a financial expert following the resignation of Peter O’Neill, the chief financial officer of Agway, Inc., who had formerly been the chairman of the audit committee. After the Closing, the Board intends to consider recruiting a financial expert to serve on the Board and audit committee.

        The Audit Committee has reviewed and discussed the audited financial statements with management and it has discussed with the independent auditors the matters required to be discussed by SAS 61. Furthermore, the Audit Committee has received the written disclosures and the letter from the independent accountants required by Independence Standards Board Standard No. 1 and has discussed with the independent accountant the independent accountant’s independence and based on the review of the financial statements and discussions with management and the auditors, it recommended to the Board of Directors that the audited financial statements be included in this annual report.

        The Compensation Committee is responsible for reviewing the compensation and benefits of the Company’s executive officers, making recommendations to the Board of Directors concerning the compensation and benefits of the Company’s executive officers and administering the Company’s Stock Incentive Plans. The Compensation Committee in 2003 was composed of two non-employee directors including Messrs. H. M. Busby, and Ronald B. Sunderland. The Compensation Committee did not meet during 2003 since there were no employees of the Company.

        The Nominating Committee will be responsible for identifying, evaluating, and recommending candidates to serve as directors of the Company and to serve as a focal point for communication between such candidates, the Board, and the Company’s management and will be recommendations to the Board of Directors concerning the nomination of candidates to be elected by the Company’s shareholders as a director of the Company.

The Company has not yet adopted a code of ethics for its officers and other key personnel involved in the Company’s operations. However, upon the election of the new board, the Company plans to adopt such an ethics code and will promptly disclose such adoption to its shareholders and other interested parties.

        During 2003, each Board member attended 75% or more of the aggregate of the meetings of the Board, and of the committees on which he served, held during the period for which he was a director or committee member, respectively.

Section 16(a) Beneficial Ownership Reporting Compliance

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

        To the Company’s knowledge, based solely on a review of the copies of such reports furnished to the Company and written representations that no other reports were required, during the fiscal year ended December 31, 2003, all Section 16(a) filing requirements applicable to its officers, directors and greater than ten percent (10%) beneficial owners were complied with except for the late filing of Form 5 for current directors Busby, Sunderland, and Petcavich relating to options granted during 2003.

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Management

                Set forth below is information regarding management of the Company.

Name	Age	Position
Robert J. Petcavich, Ph.D.	49	Chairman of the Board and Chief Technical Officer
H. M. Busby	65	CEO & President, Chief Financial Officer, and Secretary

For biographical information of Dr. Petcavich and Mr. Busby please refer to the section of this annual report listing the board of directors of the Company.

ITEM 10.   EXECUTIVE COMPENSATION

Compensation of Directors

        Directors may be granted options to purchase Common Stock under the Company’s 1995 Stock Option Plan (the “1995 Option Plan”) and the 2000 Stock Incentive Plan (“2000 Incentive Plan”). During 2003, options to purchase shares of the Company’s Common Stock were granted to the Company’s directors as follows: (i) in May 2003, the Board of Directors of the Company approved and granted non-statutory stock option grants to Mr. Busby, Dr. Petcavich and Mr. Sunderland to purchase 50,000 shares of the Company’s Common Stock at an exercise price of $0.06 per share, vesting fully at the date of grant, and (ii) the Board of Directors granted non-statutory stock option grants to Dr. Petcavich to purchase an additional 12,500 shares of the Company’s Stock at an exercise price of $0.14 per share, vesting fully at the date of the grant.

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

Compensation of Executive Officers

        The following table sets forth, for the fiscal years ended December 31, 2003, 2002, and 2001 certain compensation awarded or paid to, or earned by the Company’s Executive Officers.

Summary Compensation Table

Name and Principal Position	Year	Salary($)		Bonus($)			Shares  Underlying  Options(#)			All Other  Compen-  sation($)
Robert J. Petcavich	2003	$	—	$	—			—		$	—
Chairman of the Board	2002	$	170,038	$	—			—		$	3,241	(2)
and Chief Technical Officer	2001	$	210,000	$	15,000	(3)		—		$	6,139	(1)
H.M. Busby	2003	$	—	$	—			—		$	31,677	(7)
Chief Executive Officer,	2002	$	—	$	—			—		$	—
President and Chief Financial	2001	$	—	$	—			—		$	—
Officer
Richard C. Bernier (6)	2003	$	—	$	—			—		$	—
Chief Executive Officer	2002	$	117,713	$	—			—		$	—
and President	2001	$	205,000	$	—			100,000	(4)	$	37,471	(5)

(1)	Represents insurance premiums paid by the Company under a term life insurance policy insuring Dr. Petcavich and auto expense reimbursement.
(2)	Represents auto expense reimbursement paid by the Company.
(3)	Includes $15,000 accrued as a bonus pursuant to an incentive agreement effective January 1, 2000, but paid in 2001.

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(4)	Represents an option granted on November 4, 2001 with an exercise price of $0.06. Options vested April 15, 2002.
(5)	Temporary living and moving expenses, including “tax gross-up” as allowed per employment agreement.
(6)	Mr. Bernier served as CEO & President and Acting Chief Financial Officer until his resignation January 31, 2003.
(7)	Represents a consulting fee Mr. Busby was paid for his services to the Company in 2003.

Stock Option Grants and Exercises

        The Company’s Executive Officers are eligible for grants of options under the Company’s 1995 Stock Option Plan (the “1995 Option Plan”) and the 2000 Stock Incentive Plan (the “2000 Incentive Plan”). As of December 31, 2003, there were remaining approximately 447,300 shares available for grant under the Option Plans.

        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, 2003 and the value of unexercised in-the-money options (i.e., options for which the current fair market value of the Common Stock underlying such options exceeds the exercise price):

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

	Shares Acquired on	Value	Number of Securities Underlying Unexercised Options at Fiscal Year End (2)		Value of Unexercised In-the- Money Options at Fiscal Year End ($) (1)
Name	Exercise(#)	Realized	Exercisable	Unexercisable	Exercisable	Unexercisable
Robert J. Petcavich	-0-	-0-	227,182	0	$0	$0
H. M. Busby	-0-	-0-	163,000	0	$0	$0
Richard C. Bernier	-0-	-0-	25,000	0	$0	$0

(1)

Calculated based on the estimated fair market value of the Company’s Common Stock as of December 31, 2003, less the exercise price payable upon the exercise of such options. Such estimated fair market value as of December 31, 2003 was $.04, the last price posted at the close of trading on December 31, 2003.

(2)

The three current directors of Planet, H.M. Busby (100,000), Dr. Robert J. Petcavich (50,000), and Ronald B. Sunderland (50,000) each exercised stock options in March and/ or April 2004 thus reducing the number of options held in a corresponding amount. Additionally, the three current directors surrendered “Out of the Money” stock options in the following amounts: Robert J. Petcavich, 164,182; H.M. Busby 48,200; Ronald B. Sunderland, 18,000.

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Equity Compensation Plan Information

	(a)	(b)	(c)
Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity compensation plans approved by security holders	104,500 (2)	$1.52	782,682 (2)
Equity compensation plans not approved by security holders (1)	N/A	N/A	N/A
Total	104,500	$1.52	782,682 (2)

(1)	The Company does not have any equity compensation plans that have not been approved by Shareholders.
(2)	As of July 21, 2004.

ITEM. 11  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

        The following table sets forth certain information regarding the ownership of the Company’s Stock as of April 30, 2004 by: (i) each director and nominee for director; (ii) each of the Executive Officers named in the Summary Compensation Table; (iii) all executive officers and directors of the Company as a group; and (iv) all those known by the Company to be beneficial owners of more than five percent (5%) of any class of the Company’s Stock, based upon information reported to the Company or publicly available reports filed with the SEC.

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		Beneficial Ownership
Title of Class	Beneficial Owner	Number of Shares (1)	Percentage of Class Owned(2)
Common	Robert J. Petcavich, Ph.D. (3) 313 5th Avenue, South Kirkland, WA 98033	754,599	11.4	%
Common	Richard Zorn (4) 750 Lexington Avenue, 24th Floor New York, NY 10022	518,900	7.9	%
Common	H.M. Busby (5) 3852 Alameda Place San Diego, CA 92103	350,592	5.3	%
Common	Ronald B. Sunderland 3728 Regal Vista Dr. Sherman Oaks, CA 91403	100,000	1.5	%
Common	All executive officers and directors as a group	1,205,191	18.3	%

(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 April 30, 2004.
(3)	Includes 12,500 shares issuable upon exercise and which expire on 5/19/2013.
(4)	Mr. Zorn is the beneficial owner of 218,300 shares of Common Stock and by his affiliation with Benchmark has shared investment discretion over accounts of its customers that hold 300,600 shares of Common Stock as of May 13, 2003.
(5)	Includes18,000 shares issuable upon exercise and which expire on 5/19/2013.

Description of Employee Benefit Plans:

2000 Stock Incentive Plan

        Planet’s 2000 Stock Incentive Plan was approved by Planet’s shareholders at its annual meeting of shareholders on May 1, 2000. The Board of Directors reserved 500,000 shares of common stock for issuance under the 2000 Plan, together with any remaining shares of common stock eligible for issuance under the 1995 Stock Option plan which expire unexercised. A committee consisting of Planet’s Board of Directors or appointed Board members has the sole discretion to determine under which plan stock options and bonuses may be granted.

        The purpose of the 2000 Incentive Plan is similar to that of the 1995 Plan, which was to attract and retain qualified personnel, to provide additional incentives to employees, officers, directors and consultants of the Company and to promote the success of the Company’s business. As was the case under the 1995 Plan, under the 2000 Plan, Planet may grant or issue incentive stock options and non-statutory stock options to eligible participants, provided that incentive stock options may only be granted to employees of Planet.

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The 2000 Stock Incentive Plan also allows shares of common stock to be issued under a Stock Bonus Program through direct and immediate issuances. Similar to stock options granted under the Plan, stock bonus awards may be subjected to a vesting schedule determined by the Board of Directors. Option grants under both plans are discretionary. Options granted under both plans are subject to vesting as determined by the Board, provided that the option vests as to at least 20% of the shares subject to the option per year. The maximum term of a stock option under both plans is ten years, but if the optionee at the time of grant has voting power over more than 10% of the Company’s outstanding capital stock, the maximum term is five years under both plans. Under both plans if an optionee terminates his or her service to Planet, such optionee may exercise only those option shares vested as of the date of termination, and must affect such exercise within the period of time after termination set forth in the optionee’s option. The exercise price of incentive stock options granted under both plans must be at least equal to the fair market value of the Common Stock of the Company on the date of grant. Under both plans the exercise price of options granted to an optionee who owns stock possessing more than 10% of the voting power of Planet’s outstanding capital stock must equal at least 110% of the fair market value of the common stock on the date of grant. Payment of the exercise price may be made in cash, by delivery of other shares of the Company’s common stock or by any other form of legal consideration that may be acceptable to the Board.

401(K) Plan

        The Company provided a defined contribution 401(k) savings plan (the “401(k) Plan”) in which all full-time employees of the Company were eligible to participate. Eligible employees were permitted to contribute up to fifteen percent (15%) of their pre-tax salary to the 401(k) Plan subject to IRS limitations. Company contributions to the 401(k) Plan were at the discretion of the Board of Directors. There were no Company contributions charged to operations related to the 401(k) Plan in 2002. The Company terminated the 401(k) Plan in 2003, and pursuant to this termination made a full distribution of the plan assets to the plan participants.

Employment Agreements and Change in Control Arrangements

        On November 18, 1998, the Company entered into a five-year employment agreement, effective January 1, 1999, with Dr. Petcavich. This agreement increased Dr. Petcavich’s salary to $210,000 and included a termination provision that provided for a consulting agreement in the event of early termination. Also on November 18, 1998 the Company’s Board of Directors granted Dr. Petcavich an incentive stock option to purchase 125,000 shares of Common Stock at an exercise price of $1.65 per share under the 1995 Stock Option Plan.

        In December 31, 2001, the Company and Dr. Petcavich amended the above employment agreement, reducing the length of the agreement to four (4) years, terminating on December 31, 2002. In consideration of this accommodation, the Company agreed to continue Dr. Petcavich’s salary for the 2002 calendar year, as long as the Company had sufficient cash on hand to continue business through the calendar year 2002. Should cash be insufficient to meet these obligations, Dr. Petcavich’s salary would be reduced to a maximum of consulting and other revenues generated by Dr. Petcavich.

        On October 17, 2000, the Company entered into a two-year employment agreement with Richard C. Bernier, to serve as Planet’s President and Chief Executive Officer. Planet had the option to extend the employment term for two (2) additional one-year terms, as well as a notice provision of at least 183 days before Mr. Bernier’s employment could be terminated. Mr. Bernier’s compensation consisted of $205,000 as an annual salary, a signing bonus of 10,000 shares of Planet’s common stock, a grant of a stock option to purchase 160,000 shares of common stock at an exercise price of $1.50 per share under the 2000 Stock Incentive Plan, and a year end bonus incentive program for earnings improvement over current Company performance. Mr. Bernier’s agreement also provided for a consulting agreement should he be terminated for any reason other than for cause during the term of employment.

On October 17, 2001, the Company and Mr. Bernier amended the term of the agreement to fully terminate on December 31, 2002. Mr. Bernier’s primary duties as CEO were revised to include selling all of the Company’s patents and related technological know-how, excluding the license agreements with Agway, Inc., manage the restructuring of the Company’s business in accordance with the approved restructuring plan and establish the operational and legal structure for the Company for calendar year 2002. In consideration for this accommodation, the Company and Mr. Bernier agreed to a commissions only payment schedule for 2002 based on the successful sale of patents, related technological know-how, inventories, property and equipment associated with the Company’s AQUAMIM Metal Injection Molding, EnviroPlastic, EnviroPlastic Z and Aquadro technologies. Mr. Bernier also received a ten-year option to acquire 100,000 shares of the Company’s common stock at ($0.06 per share), with full vesting on or before April 15, 2002 provided operational and legal restructuring had been completed.

                The Company entered into consulting agreements with Dr. Petcavich and Mr. Bernier effective as of January 1, 2003. Dr. Petcavich’s consulting term is for two (2) years and five (5) months to provide ongoing support and consulting services to the

B-22

Company’s customers who purchased and/or licensed the Company’s intellectual property. Dr. Petcavich is to receive consulting fees the Company collects from the customers who received Dr. Petcavich’s consulting services, less any expenses incurred by the Company in connection with Dr. Petcavich’s provision of such services. Mr. Bernier’s consulting term was for three months to assist the Company with its SEC reporting obligations for the year ended December 31, 2002, 2003 annual shareholders meeting and the finalization of sale and licensing agreements between the Company and Agway. Mr. Bernier was to receive fees of $100 per hour, not to exceed $25,000 in the aggregate, as well as non-statutory stock options to purchase 25,000 shares of Planet Common Stock under the Company’s 2000 Stock Incentive Plan. The stock options have a ten year term, with a strike price of $0.05 which was the price of the Common Stock at the last trade reported as of January 31, 2003.

        The Company entered into an agreement with H.M. Busby whereby the Company has agreed to pay him $100 per hour for work he performs on behalf of the Company.

        If the Acquisition is approved, the Company plans to retain Scott L. Glenn as President/CEO and Chairman of the Board of the Company. In lieu of cash for his services, the Company plans to offer, and he has agreed to accept, a non-qualified stock option under the Company’s 2000 Plan to purchase 3,480,729 shares of the Company’s Common Stock (prior to adjustment for the reverse stock split discussed in the proxy). Thereafter, the Company agrees to grant 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.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

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

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

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

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        Also in November 1998, the Company granted Agway an exclusive worldwide license in connection with the Company’s technology for time-release coatings for a variety of agricultural and food products (the “License Agreement”). The License Agreement outlines the general terms and conditions for the rights granted Agway thereunder. The Company and Agway agreed to execute further sub-agreements specifying the royalties to be paid to the Company for Agway’s use of the Company’s technology with certain products.

        Agway Holdings Inc., an indirect wholly owned subsidiary of Agway, was a beneficial owner of more than 10% of the Company’s Common Stock since January 11, 1999, but in April 2003 all shares were transferred by Agway to the Company and cancelled.

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

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

        2. Financial Statement Schedules. All schedules are omitted since the required information is not present or is not present in amounts sufficient to require a submission of the schedules, or because the information required is included in the financial statements and notes thereto.

        3. Exhibits. See Exhibit Index in part (c), below.

(b)    Reports on Form 8-K:

1.     On May 14, 2003, the Company filed a Current Report on Form 8-K to report the issuance of a press release dated May 13, 2003, announcing the Company’s financial results for the first quarter of the 2003 fiscal year.

2.     On August 22, 2003, the Company filed a Current Report on Form 8-K to report the issuance of a press release dated August 22, 2003, announcing its financial results for the second quarter of the 2003 fiscal year.

3.     On November 14, 2003, the Company filed a Current Report on Form 8-K to report the issuance of a press release dated November 19, 2003, announcing its financial results for the second quarter of the 2003 fiscal year.

4.     On March 23, 2004, the Company filed a Current Report on Form 8-K to report the issuance of a press release dated March 22, 2004, announcing its financial results for the 2003 fiscal year, the acquisition of the assets of Allergy Free and related matters.

(c)	Exhibit Number	Description.
	2.1(26)	Asset Purchase Agreement dated March 18, 2004, between the Company and Allergy Free.
	3.1(1)	Restated Articles of Incorporation of the Registrant.
	3.2(1)	Restated Bylaws of the Registrant.
	3.3(6)	Amended and Restated Certificate of Determination of Preferences of Series A Convertible Preferred Stock.
	4.1	Reference is made to Exhibits 3.1, 3.2 and 3.3.
	4.2(1)	Form of warrant issued to Underwriters.
	4.3(1)	Form of Class B Warrant, with related schedule of warrantholders.
	4.4(1)	Warrant issued to Reynolds Kendrick Stratton.
	4.5(1)	Form of warrant issued to advisors, with related schedule of warrantholders.

B-24

4.6(1)	Specimen Stock Certificate.
4.7(2)	Non-statutory Stock Options granted in September 1994 to Dr. Petcavich and Messrs. Wright and To.
4.8(1)	Warrant issued to Am-Re Services, Inc.
5.1(16)	Opinion of Blanchard Krasner & French, APC.
10.1(1)	Form of Indemnity Agreement entered into between the Registrant and each of its executive officers and directors.
10.2(1)	Registrant’s 1995 Stock Option Plan (the “1995 Option Plan”).
10.3(1)	Form of Incentive Stock Option Grant under the 1995 Option Plan.
10.4(1)	Form of Non-statutory Stock Option Grant under the 1995 Option Plan.
10.5(1)	Standard Industrial Gross Lease, dated June 1, 1992, between the Registrant and The Trustees Under the Will and of the Estate of James Campbell, Deceased, as amended August 13, 1992 and May 3, 1994.
10.6(1)	Agreement to Assign Proprietary Rights between the Registrant and Dr. Robert J. Petcavich.
10.7(1)	Form of Confidential Information Agreement entered into between the Registrant and its employees.
10.8(3)	Purchase and Sale Agreement dated as of January 1, 1996, by and among the Registrant, Deltco of Wisconsin, Inc., and Jack G. Martinsen.
10.9(4)	Executive Employment Agreement dated January 1, 1996, between the Registrant and Dr. Robert J. Petcavich.
10.10(10)	Executive Employment Agreement dated November 18, 1998 and effective January 1, 1999, between the Registrant and Dr. Robert J. Petcavich.
10.11(5)(9)	Technology Development and License Agreement, dated January 30, 1995, between the Registrant and Cominco Fertilizers, Ltd.
10.12(5)	Fourth Amendment to Lease, dated August 1, 1997 between the Registrant and The Trustees Under the Will and of the Estate of James Campbell.
10.13(6)	Securities Purchase Agreement, dated September 19, 1997, between the Registrant and Special Situations Private Equity Fund, L.P.
10.14(6)	Warrant to Purchase Common Stock, dated September 24, 1997, issued by the Registrant to Special Situations Private Equity Fund, L.P.
10.15(8)	Stock Purchase Agreement, dated November 12, 1998 between the Registrant and Agway Inc.
10.16(8)	Warrant to Purchase Common Stock, dated January 11, 1999, issued by the Registrant to Agway Inc.
10.17(10)	Registration Rights Agreement, dated January 11, 1999, between the Registrant and Agway Inc.

B-25

10.18(10)	Product Feasibility Agreement dated as of November 12, 1998 between the Registrant and Agway Consumer Products, Inc.
10.19(10)	License Agreement dated as of November 12, 1998 between the Registrant and Agway Consumer Products, Inc.
10.20(11)	Amendment No.1 dated as of February 25, 1999 to the Form of the Warrant dated January 11, 1999 issued by the Registrant to Agway Inc.
10.21(13)	Warrant to Purchase Common Stock, dated March 29, 1999, issued by the Registrant to LBC Capital Resources, Inc.
10.22(12)	Amended Technology Development and License Agreement, dated June 23, 1999, between the Registrant and Agrium Inc. (formerly known as Cominco Fertilizers Ltd.).
10.23(13)	Sub-Agreement to License Agreement (Animal Feed) effective as of March 1, 2000 between the Registrant and Agway Inc.
10.24(13)	Sub-Agreement to License Agreement (Fruits, Vegetables, Etc.) effective as of March 1, 2000 between the Registrant and Agway Inc.
10.25(13)	Warrant to Purchase Common Stock, dated March 9, 2000, issued by the Registrant to LBC Capital Resources, Inc.
10.26(14)	Registrants 2000 Stock Incentive Plan (the “2000 Plan).
10.27(14)	Form of Incentive Stock Option Grant under the 2000 Plan.
10.28(14)	Form of Non-statutory Stock Option Grant under the 2000 Plan.
10.29(16)	Private Equity Line of Credit Agreement dated August 15, 2000 and Exhibits.
10.30(16)	Letter dated September 11, 2000 amending the Private Equity Line of Credit Agreement.
10.31(17)	Employment Agreement with Richard C. Bernier.
10.32(17)	Warrant to purchase Common Stock, dated March 20, 2001, issued by the Registrant to LBC Capital Resources, Inc.
10.33(18)	Purchase and Sale Agreement dated as of December 21, 2001 between Planet Polymer Technologies, Inc. and Ryer Industries LLC and Consulting Agreement between Planet Polymer Technologies, Inc. and Ryer Industries LLC dated as of December 21, 2001.
10.34(18)	First Amendment to Executive Agreement for Robert J. Petcavich, dated December 17, 2001.
10.35(18)	First Amendment to Executive Agreement for Richard C. Bernier, dated December 17, 2001.
10.36(19)	Forbearance and Stipulated Confession of Judgment Agreement between Planet Polymer Technologies, Inc. and Ryer Industries LLC.
10.37(20)	Amendment to Forbearance and Stipulated Confession of Judgment Agreement between Planet Polymer Technologies, Inc. and Ryer Industries LLC.
10.38(20)	Form of Sale and License Agreement dated March 2003 with Agway, Inc. (animal feed products).

B-26

10.39(20)	Form of Sale and License Agreement dated March 2003 with Agway, Inc. (fruit and vegetable products).
10.40(20)	Form of First Amendment to License Agreement with Agway, Inc.
10.41(20)	Form of Consulting Agreement with Richard Bernier.
10.42(20)	Form of Consulting Agreement with Robert Petcavich.
10.43(20)(21)	Form of Purchase Sale and License Agreement dated May 1, 2003, with Ryer Enterprises, LLC.
10.44(20)(21)	Form of Secured Promissory Note dated May 1, 2003, with Ryer Enterprises, LLC.
10.45	Form of Amendment dated January 31, 2004, to Purchase, Sale and License Agreement with Ryer Enterprises, LLC.
11.1(13)(15)	Statement of Computation of Common and Common Equivalent Shares.
23.1	Consent of Blanchard Krasner & French, APC. (included in Exhibit 5.1).
23.2	Consent of J.H. Cohn LLP.
24.1	Power of Attorney.
31.1	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.1(23)	Form of Press Release dated May 13, 2003, announcing Company first quarter, 2003 results.
99.2(24)	Form of Press Release dated August 22, 2003, announcing Company second quarter, 2003 results.
99.3(25)	Form of Press Release dated November 19, 2003, announcing Company third quarter, 2003 results.
99.4(26)	Form of Press Release dated March 22, 2004, announcing Company 2003 yearend results and other matters.

(1) Previously filed as an exhibit to the Registrant’s Registration Statement on Form SB-2, as amended (No. 33-91984 LA) and incorporated herein by reference.

(2) Previously filed as an exhibit to the Registrant’s Registration Statement on Form S-8 (No. 333-1042) filed on February 5, 1996 and incorporated herein by reference.

(3) Previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed on January 11, 1996, as amended by the Registrant’s Current Report on Form 8-K/A (Amendment No. 1) filed on March 15, 1996 and incorporated herein by reference.

(4) Previously filed as an exhibit to the Registrant’s Annual Report on Form 10-KSB filed for the fiscal year ended December 31, 1995 and incorporated herein by reference.

(5) Previously filed as an exhibit to the Registrant’s Quarterly Report on Form 10-QSB for the quarter ended June 30, 1997 and incorporated herein by reference.

(6) Previously filed as an exhibit to the Registrant’s Registration Statement on Form S-3 (No. 333-39845) filed on November 7, 1997, amended on December 31, 1997 and incorporated herein by reference.

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(7) Previously filed as an exhibit to the Registrant’s Annual Report on Form 10-KSB filed for the fiscal year ended December 31, 1997 and incorporated herein by reference.

(8) Previously filed with the Registrant’s Definitive Proxy Statement filed on December 14, 1998 and incorporated herein by reference.

(9) Confidential treatment has been requested with respect to certain portions of this exhibit. Omitted portions will be filed separately with the Securities and Exchange Commission.

(10) Previously filed as an exhibit to the Registrant’s Annual Report on Form 10-KSB filed for the fiscal year ended December 31, 1998 and incorporated herein by reference.

(11) Previously filed as an exhibit to the Registrant’s Quarterly Report on Form 10-QSB for the quarter ended March 31, 1999 and incorporated herein by reference.

(12) Previously filed as an exhibit to the Registrant’s Quarterly Report on Form 10-QSB for the quarter ended June 30, 1999 and incorporated herein by reference.

(13) Previously filed as an exhibit to the Registrant’s Annual Report on Form 10-KSB filed for the fiscal year ended December 31, 1999 and incorporated herein by reference.

(14) Previously filed as an exhibit to the Registrant’s Registration Statement on Form S-8 (No. 333-38500) filed on June 2, 2000 and incorporated herein by reference.

(15) Previously filed as an exhibit to the Registrant’s Quarterly Report on Form 10-QSB for the quarter ended June 30, 2000.

(16) Previously filed as an exhibit to the Registrant’s Registration Statement on Form SB-2 (No. 333-46474), as amended by the Registrant’s Registration Statement on Form SB-2 (Amendment No. 2) and incorporated herein by reference.

(17) Previously filed as an exhibit to the Registrant’s Quarterly Report on Form 10-QSB for the quarter ended March 31, 2001.

(18) Previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed on January 10, 2002, and incorporated herein by reference.

(19) Previously filed as an exhibit to the Registrant’s Quarterly Report on Form 10-QSB for the quarter ended September 30, 2002.

(20) Previously filed as an exhibit to the Registrant’s Annual Report on Form 10-KSB filed for the fiscal year ended December 31, 2002 and incorporated herein by reference.

(21) Previously filed as an exhibit to the Registrant’s Quarterly Report on Form 10-QSB for the quarter ended March 31, 2003.

(22) Previously filed as an exhibit to the Registrant’s Quarterly Report on Form 10-QSB for the quarter ended June 30, 2003.

(23) Previously filed as an exhibit to the Registrant’s Form 8K filed May 14, 2003 Report.

(24) Previously filed as an exhibit to the Registrant’s Form 8K filed August 22, 2003 Report.

(25) Previously filed as an exhibit to the Registrant’s Form 8K filed November 14, 2003 Report.

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(26) Previously filed as an exhibit to the Registrant’s Form 8K filed March 23, 2004 Report.

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees

For professional services rendered by the principal accountant for the audit of the Company’s annual financial statements and review of financial statements included in the Company’s Form 10-QSB. The aggregate fees billed by the Company’s principal accountant, J.H. Cohn, LLP, for 2003 and 2002 were $21,850 and $18,255, respectively.

Audit Related Fees

The aggregate fees billed in 2003 and 2002 by the Company’s principal accountant for assurance and related services by the principal accountant that are reasonably related to the performance of the audit or review of the Company’s financial statements are in the amount of $0 and $702, respectively.

Tax Fees

No fees were billed in 2003 and 2002 by the Company’s principal accountant for tax compliance, tax advice and tax planning.

All Other Fees

No fees were billed in 2003 and 2002 by the Company’s principal accountant for any other services, other than Audit Fees and Audit Related Fees.

B-29

SIGNATURES

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

	PLANET POLYMER TECHNOLOGIES, INC.
Dated August 13, 2004	By: /s/ H. M. Busby
	H. M. Busby
	Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints 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/ Robert J. Petcavich	Director	August 13, 2004
Robert J. Petcavich
/s/ H. M. Busby	Director and Chief Executive Officer	August 13, 2004
	(Principal Executive Officer)
H. M. Busby	(Principal financial Accounting Officer)
/s/ Ronald B. Sunderland	Director	August 13, 2004
Ronald B. Sunderland

B-30

INDEX TO FINANCIAL STATEMENTS - ITEM 7 OF FORM 10-KSB/ A

Report of Independent Public Accountants	B-32
Financial Statements and Notes:	B-33
Balance Sheet as of December 31, 2003	B-33
Statements of Operations for the Years Ended December 31, 2003 and 2002	B-34
Statements of Shareholders’ Equity for the Years Ended December 31, 2003 and 2003	B-35
Statements of Cash Flows for the Years Ended December 31, 2003 and 2002	B-36
Notes to Financial Statements	B-37

B-31

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders
Planet Polymer Technologies, Inc.

We have audited the accompanying balance sheet of Planet Polymer Technologies, Inc. as of December 31, 2003, and the related statements of operations, shareholders’ equity and cash flows for the years ended December 31, 2003 and 2002. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Planet Polymer Technologies, Inc. as of December 31, 2003, and its results of operations and cash flows for the years ended December 31, 2003 and 2002, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has an accumulated deficit at December 31, 2003 of $14,339,616. These matters, among others, raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ J. H. Cohn LLP

San Diego, California
March 18, 2004

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PLANET POLYMER TECHNOLOGIES, INC.

BALANCE SHEET

	December 31, 2003
ASSETS
Current assets:
Cash	$	18,544
Accounts receivable		16,507
Note receivable		129,097
Prepaid expenses		3,880
Total current assets		168,028
Patents, trademarks and license agreements, net of accumulated amortization of $77,996		153,340
Note receivable		56,507
Total assets	$	377,875
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities: Accounts payable	$	68,500
Commitments and contingencies
Shareholders’ equity:
Preferred Stock, no par value
4,250,000 shares authorized
No shares issued or outstanding		—
Series A Convertible Preferred Stock, no par value
750,000 shares authorized
No shares issued or outstanding		—
Common Stock, no par value
20,000,000 shares authorized
6,207,884 shares issued and outstanding		11,648,991
Additional paid-in capital		3,000,000
Accumulated deficit		(14,339,616	)
Total shareholders’ equity		309,375
Total liabilities and shareholders’ equity	$	377,875

B-33

PLANET POLYMER TECHNOLOGIES, INC.

STATEMENTS OF OPERATIONS

	Years ended December 31,
	2003			2002
Revenues	$	175,082		$	162,073
Operating expenses:
Cost of revenues		4,707			110,213
General and administrative		390,549			468,024
Marketing		—			99,572
Research and development		—			117,594
Loss from impairment of assets		—			62,159
Total operating expenses		395,256			857,562
Loss from operations		(220,174	)		(695,489	)
Other income, net		291,482			28,839
Net income (loss)	$	71,308		$	(666,650	)
Net income (loss) per share (basic and diluted)	$	0.01		$	(0.07	)
Weighted average shares outstanding used in per share computations		6,947,610			9,205,452

B-34

PLANET POLYMER TECHNOLOGIES, INC.

STATEMENTS OF SHAREHOLDERS’ EQUITY

	Common Stock						Additional		Accumulated
	Shares			Amount			Paid-in Capital		Deficit			TOTAL
Beginning at January 1, 2002		9,165,618		$	14,575,783				$	(13,744,274	)	$	831,509
Issuance of Common Stock for services		42,266			6,340					—			6,340
Write-off of equity issuance costs		—			66,868					—			66,868
Net Loss		—			—					(666,650	)		(666,650	)
Balance at December 31, 2002		9,207,884			14,648,991					(14,410,924	)		238,067
Common Stock received in Agway
contract amendment and retired		(3,000,000	)		(3,000,000	)	$	3,000,000		—			—
Net income		—			—			—		71,308			71,308
Balance at December 31, 2003		6,207,884		$	11,648,991		$	3,000,000	$	(14,339,616	)	$	309,375

B-35

PLANET POLYMER TECHNOLOGIES, INC.

STATEMENTS OF CASH FLOWS

	Years ended December 31,
	2003			2002
Cash flows from operating activities:
Net income (loss)	$	71,308		$	(666,650	)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization		18,997			28,258
Bad debts		10,012			80,000
Loss from impairment of assets		—			62,159
Loss (gain) on sale of property and equipment		2,170			(13,500	)
Gain on sale of long lived assets		(275,610	)		—
Effect of write off of Common Stock offering costs		—			66,868
Issuance of Common Stock for services		—			6,340
Changes in assets and liabilities:
Accounts receivable		8,154			76,263
Prepaid expenses and other assets		12,093			48,461
Accounts payable		40,684			(13,101	)
Accrued expenses		(21,942	)		(70,324	)
Net cash used in operating activities		(134,134	)		(395,226	)
Cash flows from investing activities:
Proceeds from the sale of property and equipment		1,775			13,500
Proceeds from notes receivable		136,122			145,254
Net cash provided by investing activities		137,897			158,754
Cash flows from financing activities:
Principal payments on borrowings and capital lease obligations					(40,226	)
Net cash used in financing activities					(40,226	)
Net increase (decrease) in cash		3,763			(276,698	)
Cash at beginning of year		14,781			291,479
Cash at end of year	$	18,544		$	14,781
Supplemental cash flow disclosure:
Cash paid during the year for:
Interest				$	1,724
Non-cash investing and financing activities:
Note receivable accepted as part of consideration for sale         of AQUAMIM® assets	$	256,854
Issuance of Common Stock for services					6,340

B-36

PLANET POLYMER TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

1. The Company

Planet Polymer Technologies, Inc. (“Planet” or the “Company”) was incorporated in August, 1991 in the State of California for the purpose of engaging in the design, development, manufacture and marketing of degradable and recycled polymer materials. The Company’s proprietary polymer materials are marketed under the trademarks EnviroPlastic® and Aquadro®. EnviroPlastic and Aquadro can be used to produce films, coatings and injection molded parts that serve as environmentally-compatible alternatives to conventional plastics. Planet also developed polymer technologies for Agway Inc. (“Agway”), a major shareholder of the Company, in 1999 that are being marketed under the trademarks Optigen® 1200 and FreshSeal®. The Company sold all of the assets related to its AQUAMIM® business in March 2003. With the sale and disposition of the Company’s AQUAMIM® Metal Injection Molding technology and manufacturing assets in March 2003 to Ryer Enterprises, LLC, (“Ryer Enterprises”) and the sale and licensing of the Company’s EnviroPlastic CRT controlled-released technologies for agricultural feed and produce products to Agway, the resulting restructuring of assets and activities has narrowed the Company’s focus to the royalty rights it holds from specific polymer technologies Planet developed and sold or licensed to third parties. The agricultural feed and fruit and vegetable products are marketed under the trademarks Optigen ® 1200 and FreshSeal ®, respectively. The Company’s operations are comprised of one segment, the “Research and Development” business segment.

2. Summary of Significant Accounting Policies

Use of Estimates

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

Revenue Recognition

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

	2003		2002
Agway Development Income	$	148,620
Product sales revenue			$	2,600
Research and development revenues				102,839
Consulting revenue		25,068		38,030
Royalties, net		1,394		18,604
Revenues	$	175,082	$	162,073
Products sold			$	7,374
Services	$	4,707		102,839
Cost of revenues	$	4,707	$	110,213

B-37

PLANET POLYMER TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

2. Summary of Significant Accounting Policies (Continued)

Research and Development

The Company expenses research and development costs as incurred. The Company did not engage in research and development of future products or redesign of present products in the year ended December 31, 2003. Research and development costs totaled $117,594 in 2002.

Fair Value of Financial Instruments

The carrying amounts shown for the Company’s financial instruments, including accounts receivable and accounts payable, approximate their fair values at December 31, 2003 due to the short-term nature of these financial instruments. The carrying value of the note receivable approximates its fair value as the rate of interest approximates market rates of interest for similar instruments.

Patents, Trademarks and License Agreements

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

Long-Lived Assets

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

Income Taxes

The Company accounts for income taxes using the liability method. Current income tax expense is the amount of income taxes expected to be payable for the current year. Deferred income taxes are recognized for the tax consequences in future years for differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end (“temporary differences”) based on enacted tax laws and statutory rates applicable to the periods in which the temporary differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount that is considered more likely than not to be realized.

Stock-Based Compensation

Pursuant to SFAS 123, the Company recognizes compensation expense for stock options, common stock and other equity instruments issued to non-employees, based upon the fair value of the equity instruments issued, as the services are provided and the options earned.

Pro forma net income (loss) was $7,446 and $(744,826), basic pro forma net income (loss) per share was $.001 and $(.08) per share and diluted pro forma net income (loss) per share was $.001 and $(.08) per share in 2003 and 2002, respectively.

B-38

PLANET POLYMER TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

2. Summary of Significant Accounting Policies (Continued)

Earnings (Loss) Per Share

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

The Company has excluded all convertible preferred stock and outstanding stock options and warrants from the calculation of diluted income (loss) per share for the years ended December 31, 2003 and 2002 because all such securities are anti-dilutive for these periods. Accordingly, diluted income (loss) per share equals basic income (loss) per share. The total number of potential common shares excluded from the calculation of diluted income (loss) per share for the years ended December 31, 2003 and 2002 was 1,366,625 and 1,227,411, respectively.

401  (K) Plan

The Company provides a defined contribution 401(k) savings plan (the “401(k) Plan”) in which all full-time employees of the Company are eligible to participate. Eligible employees may contribute up to 15% of their pre-tax salary to the 401(k) Plan subject to Internal Revenue Code limitations. Company contributions to the 401(k) Plan are at the discretion of the Board of Directors. There were no Company contributions charged to operations related to the 401(k) Plan in 2003 and 2002.

Reclassifications

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

3. Liquidity and Capital Resources

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business and not on a liquidation basis. The year ended December 31, 2003, is the first annual period in which the Company has shown net income resulting from gain on sale of technology and fixed assets. For the year ended December 31, 2002, the Company had net losses of approximately $667,000. For the year ended December 31, 2003, the Company had net income of approximately $71,000. As of December 31, 2003, the Company had an accumulated deficit of approximately $14,339,616.

In January 2004, Agway sold its rights to FreshSeal® to BASF and also sold its rights to Optigen® to Alltech (see Notes 4, 9 and 10). It is uncertain how actively either company will pursue the development and marketing of FreshSeal® and Optigen®, respectively. Also, in 2004 the Company agreed to forebear certain royalty payments from Ryer Enterprises due to Ryer Enterprises present financial condition. These matters raise substantial doubt about the ability of the Company to continue as a going concern. The Company believes that its existing sources of liquidity and anticipated revenue will satisfy the Company’s projected working capital and other cash requirements through May 31, 2004. The Company’s future working capital and other cash requirements will be dependent upon many factors, including, but not limited to, costs associated with the Allergy Free acquisition and costs associated with the filing and enforcement of the Company’s patents, if any.

B-39

PLANET POLYMER TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

3. Liquidity and Capital Resources (Continued)

The Company intends to seek additional funding through strategic partnership arrangements or the extension of existing arrangements or through public or private equity or debt financing. There can be no assurance that any additional financing will be available to the Company on acceptable terms, or at all. Insufficient funds may require the Company to file for bankruptcy protection under Chapter 11 or Chapter 7 of the Bankruptcy laws. Further, there can be no assurance that the Company will be able to generate positive cash flows or profitability in the future. The accompanying financial statements do not include any adjustments related to the recoverability and classification of assets or the amount and classification of liabilities that might result from this uncertainty.

4. Disposition of Assets

On December 28, 2001, the Company sold all of the assets (“AQUAMIM” assets) relating to its Metal Injection Molding (“MIM”) business, including intellectual property, technology, manufacturing equipment and raw material and finished goods, to Ryer Industries LLC (“Ryer Industries”) and recorded a gain of $135,796. As consideration of these assets, Ryer Industries agreed to pay to the Company cash in the amount of $328,157, plus a royalty of 6% on its sales of custom feedstocks during the period from January 1, 2002 through December 31, 2009. Through December 31, 2002, the Company received $194,912 in principal payments and $30,745 in interest and fees. Further, the Company recorded a valuation allowance against this note of $73,500 during 2002.

In August 2002, Ryer Industries defaulted on its required payments. In October 2002, the Company and Ryer Industries entered into a Forbearance Agreement which modified the payment schedule for the remaining obligations to the Company with payments beginning in December 2002 and continuing through April 2003. Royalty payments associated with sales from these technologies were deferred and were scheduled to resume in December 2002. The Forbearance Agreement provided that if Ryer Industries defaulted, the Company would be allowed to enforce the Confession Judgment given by Ryer to the Company in connection with the Forbearance Agreement, which provided among other things, for turnover to the Company of the assets sold by the Company to Ryer Industries. As a result of Ryer Industries default in March 2003, the Company in April 2003, recovered the AQUAMIM® Metal Injection Molding technology and manufacturing assets from Ryer Industries.

By agreement dated May 1, 2003, the Company resold the AQUAMIM® Metal Injection Molding technology and manufacturing assets to Ryer Enterprises, a newly formed entity which intends to continue the commercial employment of the AQUAMIM® products. Pursuant to the terms of the agreement, Ryer Enterprises agreed to pay to Planet $301,000 (“Principal Payment”) ($25,000 paid on May 1, 2003, followed by 24 equal payments of $11,500 payable on or before the first day of each month for the period beginning June 1, 2003, through May 31, 2005) plus royalties based upon qualifying sales by Ryer Enterprises to third parties for the period May 1, 2003, through April 30, 2011 (“Eight Year Term”). In addition, the Company has licensed to Ryer Enterprises the patent rights relating to the AQUAMIM® products for royalties which will be payable monthly forty-five (45) days after the close of each month for eight (8) years after which the Company has agreed to transfer the patents to Ryer Enterprises, provided it is not in default.

The Company recognized royalty fees and consulting fees from Ryer Industries in 2003. The Company further recognized royalty fees from Ryer Enterprises in 2003; however, the Company no longer has a relationship with Ryer Industries, and currently, due to Ryer Enterprises’ financial condition, the Company has agreed to forbear the February and March installment payments from Ryer Enterprises in consideration for a two (2) month extension of the installment payments plus an additional payment of $4,600 due and payable on August 1, 2005.

B-40

PLANET POLYMER TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

5. Concentrations of Credit Risk

Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash, trade accounts receivable and the installment obligations due from Ryer Enterprises. The Company performs ongoing credit evaluations of its customers and adjusts its allowance for doubtful accounts based on its history of past write-offs and collections and current credit conditions.

The Company maintains cash with financial institutions, which from time to time, may exceed federally insured limits. The Company periodically assesses the financial condition of the institutions and believes that the risk of any loss is minimal. As of December 31, 2003, no cash balance with financial institutions exceeded federally insured limits.

The Company’s largest customer, Agway, Inc., accounted for approximately 86% and 60% of the Company’s revenues and 100% and 75% of accounts receivable balances in fiscal 2003 and 2002, respectively. In January 2004, Agway, Inc., under the Sale and Licensing Agreements, sold its rights to FreshSeal® to BASF and its rights to Optigen® to Alltech. It is uncertain how this will affect the Company’s revenues and accounts receivables in the future.

6. Commitments

The Company leases its facility and certain office equipment under non-cancelable operating leases, which expire on various dates through October 9, 2004 and provide for renewal options in one-year increments. In the normal course of business, it is expected that these leases will be renewed or replaced by leases on other properties. Rent expense charged to operations in 2003 and 2002 was $26,925 and $65,394, respectively.

As of December 31, 2003 the Company entered into a month-to-month lease at a monthly rate of $6,245.

7. Income Taxes

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

	2003			2002
Income tax expense (benefit) at statutory rate	$	34,795		$	(227,314	)
Permanent differences					106
Valuation allowance		(34,795	)		227,208
Total	$	—		$	—

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets at December 31, 2003 are as follows:

	2003
Net operating loss carryforwards	$	4,603,975
Tax credit carryforwards		126,560
Reserves, accrued expenses and other		56,501
Less: Valuation allowances		(4,787,036	)
Net deferred tax asset	$	—

B-41

PLANET POLYMER TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

7. Income Taxes (Continued)

As the ultimate realization of the potential benefits of the Company’s net operating loss carryforwards is considered unlikely by management, the Company has offset the deferred tax assets attributable to those potential benefits through valuation allowances in 2003 and 2002 and, accordingly, the Company did not recognize any benefit from income taxes in the accompanying statements of operations to offset its pre-tax loss. The valuation allowance increased (decreased) by $(14,211) and $228,530 in 2003 and 2002, respectively.

At December 31, 2003, the Company had net operating loss carryforwards for Federal income tax purposes of approximately $12,600,000 and for California state tax purposes of approximately $3,500,000. The Company’s California loss carryforwards expire in 2004 through 2007 and Federal loss carryforwards begin to expire in 2006. The Company also has available tax credit carryforwards for Federal and California tax purposes that aggregate approximately $126,560 that begin to expire in 2007.

8. Shareholders’ Equity

Warrants

At December 31, 2003, the following warrants to purchase the Company’s Common Stock were outstanding:

	Underlying Shares		Exercise Price		Expiration Date
Investor warrants		125,000	$	2.578		2004
Other warrants		159,243	$	3.513- 4.163		2004-2006
		284,243

All of the warrants outstanding are exercisable. All per share rights and benefits are subject to anti-dilution and other adjustments upon the occurrence of certain events.

Options

As of December 31, 2003, the Company had two stock option plans, a 2000 Stock Option Plan (the “2000 Option Plan”) and a 1995 Stock Option Plan (the “1995 Option Plan”).

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

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

At December 31, 2003, there were 9,300 shares of the Company’s Common Stock available for future grant under the option plans.

B-42

PLANET POLYMER TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

8. Shareholders’ Equity (Continued)

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

The Company measures compensation expense for its stock-based employee compensation plans using the intrinsic value method and provides pro forma disclosures of net income (loss) as if the fair value method had been applied in measuring compensation expense. Had compensation cost for the Company’s stock-based compensation plans been determined based on the fair value method at the grant dates for awards under the Company’s plans, the Company’s net income and loss per share for 2003 and 2002 would have been increased to the pro forma amounts indicated below:

	2003					2002
	Net Income/Loss			Income per Share		Net Loss			Loss per Share
As reported	$	71,308		$	0.01	$	(666,650	)	$	(0.07	)
Stock based compensation
expense assuming a fair     value based method
had been used
for all awards		(63,862	)				(78,176	)
Pro forma	$	7,446		$	—	$	(744,826	)	$	(0.08	)

The fair value of each stock option is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions for 2003 and 2002: an expected life of 4 years, expected volatility of 222.84% and 177.37%, no dividend yield and a risk-free interest rate of 4.65% and 2.26%, respectively, represented by the interest rate on U.S. Treasury securities with a term of maturity equal to the option’s expected time to exercise on the dates of grant. The weighted average fair value of options granted during 2003 and 2002 was approximately $0.05 and $0.13 per option, respectively.

A summary of stock option activity during 2003 and 2002 follows:

	2000 Stock Option Plan					1995 Stock Option Plan
	Underlying Shares			Weighted Avg. Exercise Price		Underlying Shares			Weighted Avg. Exercise Price
Outstanding at December 31, 2001		509,000		$	1.268		241,439		$	2.171
Granted		100,000		$	0.140		—			—
Exercised							—			—
Forfeited/expired		(13,000	)	$	2.375		(81,239	)	$	3.025
Outstanding at December 31, 2002		596,000		$	1.055		160,200		$	1.739
Granted		187,500		$	0.057
Exercised
Forfeited/expired
Outstanding at December 31, 2003	$	783,500		$	0.816	$	160,200		$	1.739

B-43

PLANET POLYMER TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

	Other Options
	Underlying Shares		Weighted Avg. Exercise Price
Outstanding at December 31, 2001		138,682	$	5.058
Granted		—		—
Exercised		—		—
Forfeited/expired		—		—
Outstanding at December 31, 2002		138,682	$	5.058
Granted		—		—
Exercised		—		—
Forfeited/granted		—		—
Outstanding at December 31, 2003		138,682	$	5.058

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

The following table summarizes information about stock options outstanding and exercisable at December 31, 2003:

	Options Outstanding				Options Exercisable
Range of Exercise Prices	Number of Shares		Weighted Average Remaining Contractual Live (years)		Weighted Average Exercise Price		Number of Shares		Weighted Average Exercise Price
$0.050 to $0.060		187,500		3.36		0.057		187,500		0.067
$0.050 to 1.000		308,000		8.03		0.220		308,000		0.220
$1.250 to $2.400		317,000		5.70		1.590		277,000		1.590
$2.500 to $5.000		175,882		5.02		2.820		175,882		2.820
$5.100 to $6.000		94,000		0.08		5.730		94,003		5.730
		1,082,382		5.36	$	1.42		1,042,385	$	1.37

9. Related Party Transactions

On January 11, 1999, Agway became a beneficial owner of more than 10% of the Company’s Common Stock. Agway retained this interest until December 2003, when, Agway assigned and transferred to the Company all of Agway’s shares of Planet Common Stock. Currently, Agway holds no equity interest in the Company.

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

B-44

PLANET POLYMER TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

9. Related Party Transactions (Continued)

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

Also in November 1998, the Company granted Agway an exclusive worldwide license in connection with the Company’s technology for time-release coatings for a variety of agricultural and food products (the “License Agreement”). The License Agreement outlines the general terms and conditions for the rights granted Agway thereunder. The Company and Agway agreed to execute further sub-agreements specifying the royalties to be paid to the Company for Agway’s use of the Company’s technology with certain products. In March 2000, the Company and Agway entered into a Sub-Agreement with respect to animal feed products incorporating Planet’s patented/patent pending coatings and/or polymer systems. Also in March 2000, the Company and Agway entered into another Sub-Agreement with respect to Planet’s patented/patent pending coatings and/or polymer systems sold for use on fruits, vegetables, floral and nursery items. During 2001, the Company received a $100,000 royalty payment from Agway. After receiving proceeds from Agway, pursuant to its royalty payment in October 2001, the Company was required to pay a $6,000 cash transaction fee to an advisor. This payment was made January 24, 2002 and shown in accounts payable at December 31, 2001. No royalties were received or accrued by the Company under the agreement with Agway in 2003 or 2002.

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

To consummate the sale and assignment contemplated by the letter agreement dated November 14, 2000, the Company and Agway agreed on the form of two separate Sale and Licensing Agreements with respect to the agricultural feed technologies and the fruit/produce technologies. On March 25, 2003, the U.S. Bankruptcy Court gave its approval to Agway to enter into the two separate Sale and Licensing Agreements with the Company. Under the Sale and Licensing Agreements, the Company confirmed (i) the assignment of its agricultural feed related patent rights and fruit/produce related patent rights and (ii) the license of its technology related to the agricultural feed products and fruit/produce products, to Agway. In return, the Company received an up-front payment of $30,000 for its execution of the agricultural feed agreement and a payment of $100,000 for its execution of the fruit/produce agreement. The amended agreements also call for the Company to receive future royalty payments based on varying percentages of future revenues generated by Agway from sales of related products. During the year ended December 31, 2003, the Company received royalties in the amount of approximately $1,400 from the sales of the underlying products. Agway granted the Company exclusive, irrevocable, worldwide, royalty-free limited licenses to use the assigned patents rights for uses other than food and agricultural initiatives. In connection with the agricultural feed agreement, Agway also agreed to assign and transfer to the Company all of Agway’s shares of Planet common stock (3,000,000 shares). Effective January 15, 2004, Agway entered into an agreement to sell all of the assets of its FreshSeal® business, which include the fruit/produce patent rights assigned by the Company, to BASF. Also in January 2004, Agway sold all of its rights to Optigen® to Alltech (see Note 10). Management cannot assure that the Company will receive significant, if any, royalties and monies under these Sale and Licensing Agreements.

B-45

PLANET POLYMER TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

9. Related Party Transactions (Continued)

As of December 31, 2003, Agway had no equity interest in the Company.

10. Subsequent Events

Allergy Free Acquisition.

On March 18, 2004, the Company and Allergy Free, LLC, a California limited liability company (“Allergy Free”), entered into an Asset Purchase Agreement (“Agreement”) in which the Company plans to acquire substantially all assets and assume certain of the liabilities of Allergy Free, for which the Company will provide the following consideration; a subordinated note in the principal amount not to exceed approximately $2.8 million for a term of 3 years and not less than 28,193,900 shares of Common Stock in Planet.

Immediately prior to the Closing, the Company will distribute to a trustee for the benefit of Company Shareholders of record as of April 15, 2004 (“Trust”), the right to receive all royalties payable to the Company pursuant to those certain Sale and Licensing Agreements between the Company and Agway, Inc., relating to Planet’s FreshSeal® and Optigen® technology and that certain Purchase, Sale and License Agreement between the Company and Ryer Enterprises, LLC, relating to Planet’s AQUAMIM® technology.

The transfer of these assets to the Trust will be treated as a dividend at the date of transfer.

The Agreement is subject to a number of conditions set forth in the Agreement including without limitation, approval of Planet shareholders, approval of Allergy Free members, a 50 to 1 reverse stock split, the receipt of a “No Action Letter” from the SEC relating to the distribution of the right to receive royalty payments to the Trust, the hiring of Scott L. Glenn as President and Chief Executive Officer of the Company, and an executed consulting agreement with Dr. Robert Petcavich.

Agway, Inc.

Effective January 15, 2004, Agway sold all of its right and interest in Fresh Seal® to BASF. Also in January 2004, Agway sold all of its right and interest in Optigen® to Alltech. Management cannot assure that the Company will receive significant, if any, royalties and monies from BASF or Alltech.

Ryer Enterprises, LLC

In January 2004, pursuant to the First Amendment to Purchase, Sale and License Agreement, the Company agreed to forebear the Ryer Enterprises February and March royalty payments in consideration for a two (2) month extension of the agreed upon eight (8) year royalty stream plus an additional amount equal to a one-half (1/2) month royalty payment. Management cannot assure that the Company will receive significant, if any, royalties and monies from its Ryer Enterprises agreements.

B-46

EX-3

EXHIBIT “B1”

FORM-10QSB/ A

FILED WITH SEC AUGUST 13, 2004

B1-1

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-QSB

(MARK ONE)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
	For Quarterly Period Ended June 30, 2004
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
Commission File Number: 0-26804
PLANET POLYMER TECHNOLOGIES, INC.
(Exact name of small business issuer as specified in its character)

CALIFORNIA	33-0502606
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
6835 Flanders Drive, Suite 100, San Diego, California	92131
(Address of principal executive offices)	(Zip Code)
(619) 291-5694
(Issuer’s telephone number, including area code)

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

x YES  o NO 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Class	Outstanding at June 30, 2004
Common Stock, no par value	6,582,884

B1-2

INDEX

			Page No.
PART I - Financial Information
	Item 1	Condensed Balance Sheet (Unaudited) June 30, 2004	4
		Condensed Statements of Operations (Unaudited)
		Three and Six Months Ended June 30, 2004 and 2003	5
		Condensed Statement of Shareholders’ Equity (Unaudited)
		Six Months Ended June 30, 2004	6
		Condensed Statements of Cash Flows (Unaudited)
		Six Months Ended June 30, 2004 and 2003	7
		Notes to Unaudited Condensed Financial Statements	8
	Item 2	Management’s Discussion and Analysis of
		Financial Condition and Results of Operations	12
	Item 3	Controls and Procedures	14
PART II - Other Information
	Item 1	Legal Proceedings	14
	Item 2	Changes in Securities and Use of Proceeds	14
	Item 3	Defaults upon Senior Securities	14
	Item 4	Submission of Matters to a Vote of Security Holders	14
	Item 5	Other Information	14
	Item 6	Exhibits and Reports on Form 8-K	15
SIGNATURES			15

B1-3

PLANET POLYMER TECHNOLOGIES, INC.

CONDENSED BALANCE SHEET (UNAUDITED)

	June 30, 2004
ASSETS
Current assets:
Cash	$	179,663
Prepaid expenses		941
Total current assets		180,604
Patents, trademarks and license agreements, net of accumulated amortization of $85,375		145,961
Total assets	$	326,565
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities - accounts payable	$	232,531
Commitments and contingencies
Shareholders’ equity:
Preferred Stock, no par value
4,250,000 shares authorized,
no shares issued or outstanding		—
Series A Convertible Preferred Stock, no par value
750,000 shares authorized,
no shares issued or outstanding		—
Common Stock, no par value,
20,000,000 shares authorized,
6,582,884 shares issued and outstanding		11,678,241
Additional paid-in capital		3,000,000
Accumulated deficit		(14,584,207	)
Total shareholders’ equity		94,034
Total liabilities and shareholders’ equity	$	326,565

SEE NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

B1-4

PLANET POLYMER TECHNOLOGIES, INC.

CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)

	Three months ended June 30,						Six months ended June 30,
	2004			2003			2004			2003
Revenues	$	—		$	10,720		$	57,444		$	166,340
Operating expenses:
Cost of revenues		2,781			1,221			3,703			2,442
General and administrative		127,295			107,347			309,047			270,184
Total operating expenses		130,076			108,568			312,750			272,626
Loss from operations		(130,076	)		(97,848	)		(255,306	)		(106,286	)
Other income, net		9,532			278,548			10,715			287,488
Net income (loss) applicable to common shareholders	$	(120,544	)	$	180,700		$	(244,591	)	$	181,202
Net income (loss) per share applicable to common
shareholders (basic and diluted)	$	(0.02	)	$	0.03		$	(0.04	)	$	0.03
Weighted average shares outstanding used in per share
computations		6,495,796			6,207,884			6,355,137			6,207,884

SEE NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

B1-5

PLANET POLYMER TECHNOLOGIES, INC.

CONDENSED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)
Six Months Ended June 30, 2004

	Common Stock
					Additional Paid-in-Capital		Accumulated Deficit
	Shares		Amount							TOTAL
Balance at January 1, 2004		6,207,884	$	11,648,991	$	3,000,000	$	(14,339,616	)	$	309,375
Exercise of stock options		375,000		29,250		—		—			29,250
Net loss		—		—		—		(244,591	)		(244,591	)
Balance at June 30, 2004		6,582,884	$	11,678,241	$	3,000,000	$	(14,584,207	)	$	94,034

SEE NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

B1-6

Planet Polymer Technologies, Inc.

NOTES TO UNAUDITED CONDENSED
FINANCIAL STATEMENTS

PLANET POLYMER TECHNOLOGIES, INC.

CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

	Six months ended June 30,
	2004			2003
Cash flows from operating activities:
Net income (loss)	$	(244,591	)	$	181,202
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
Depreciation and amortization		7,379			9,768
Bad debts		2,881			—
Gain on sale of property and equipment		—			(1,300	)
Gain on sale of long-lived assets		—			(275,610	)
Changes in operating assets and liabilities:
Accounts receivable		13,626			8,154
Prepaid expenses and other assets		2,939			4,071
Accounts payable		164,031			44,223
Accrued expenses		—			(21,942	)
Net cash used in operating activities		(53,735	)		(51,434	)
Cash flows from investing activities:
Proceeds from the sale of property and equipment		—			1,300
Proceeds from notes receivable		185,604			84,934
Net cash provided by investing activities		185,604			86,234
Cash flows from financing activities - proceeds from exercise of stock options		29,250			—
Net increase in cash		161,119			34,800
Cash at beginning of period		18,544			14,781
Cash at end of period	$	179,663		$	49,581

SEE NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

B1-7

Planet Polymer Technologies, Inc.

NOTES TO UNAUDITED CONDENSED
FINANCIAL STATEMENTS

1.             Basis of Presentation

                In management’s opinion, the accompanying unaudited financial statements of Planet Polymer Technologies, Inc. (“Planet” or the “Company”) have been prepared in accordance with the interim reporting requirements of Form 10-QSB, pursuant to the rules and regulations of the Securities and Exchange Commission. However, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.

                In management’s opinion, all adjustments (consisting of only normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2004, are not necessarily indicative of results that may be expected for the year ending December 31, 2004. For additional information, refer to the Company’s financial statements and notes thereto for the year ended December 31, 2003, contained in the Company’s Form 10-KSB for the fiscal year ended December 31, 2003.

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

2.             Liquidity and Capital Resources

                The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. For the six months ended June 30, 2004, the Company incurred a loss of $244,591. As of June 30, 2004, the Company had an accumulated deficit of $14,584,207. These matters raise substantial doubt about the Company’s ability to continue as a going concern. The Company does not believe that its existing sources of liquidity and anticipated revenue will be adequate to satisfy the Company’s projected working capital and other cash requirements through December 31, 2004, to continue as a public reporting company without raising additional capital or consummating a business combination (see below). For the six months ended June 30, 2004, the Company had no employees and did not conduct any research or development. The Company’s future capital requirements will be dependent upon many factors, including, but not limited to, costs associated with the continued support of licenses on the Company’s proprietary polymer materials, costs associated with the enforcement of the Company’s patents, and costs associated with the administration of the Company. Although possible, it is unlikely that the Company will be able to generate positive cash flow and show a profit through December 31, 2004.

On March 22, 2004, the Company and Allergy Free, LLC (“Allergy Free”) announced that on March 18, 2004, they had entered into an Asset Purchase Agreement (“Agreement”). As subsequently amended, the Agreement provides for the Company to acquire certain assets and assume certain liabilities of Allergy Free for which the Company will provide the following consideration: a subordinated convertible note in the approximate principal amount of $274,300 bearing interest at 5.5% per annum and due and payable within three (3) years and approximately 82,732,970 shares of common stock of the Company. Additionally, the Company will assume approximately $611,000 of Allergy Free’s liabilities as of March 31, 2004 (plus, all obligations arising under assumed contracts which arise after the closing). As a result, after the closing of the Agreement and the conversion of the notes and related interest payable, the members of Allergy Free will own approximately 92.7% of the voting shares of the Company. Since the members of Allergy Free will receive the majority of the voting shares of the

B1-8

Planet Polymer Technologies, Inc.

NOTES TO UNAUDITED CONDENSED
FINANCIAL STATEMENTS

Company, the current president of Allergy Free will become president of the Company and since representatives of Allergy Free will hold three of the five seats on the Company’s Board of Directors, the merger will be accounted for as a reverse acquisition whereby Allergy Free will be the accounting acquirer (legal acquiree) and the Company will be the accounting acquiree (legal acquirer). Investors are encouraged to review, when available, the Company’s Proxy Statement, which will be available through EDGAR at www.sec.gov.

3.             Earnings (Loss) Per Share

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

The Company has excluded all convertible preferred stock and outstanding stock options and warrants from the calculation of diluted loss per share for the three and six months ended June 30, 2004 and 2003, because all such securities are either anti-dilutive for those periods or their impact was insignificant. Accordingly, diluted loss per share equals basic loss per share. The total number of potential common shares excluded from the calculation of diluted loss per share for the six months ended June 30, 2004 and 2003 were as follows:

	2004	2003
Warrants	100,000	255,000
Options	104,500	1,159,941
Total	204,500	1,414,941

4.             Income Taxes

                As the ultimate realization of the potential benefits of the Company’s net operating loss carryforwards is considered unlikely by management, the Company has offset the deferred tax assets attributable to those potential benefits through valuation allowances and, accordingly, the Company did not recognize any benefit for income taxes in the accompanying condensed statements of operations to offset its pre-tax losses.

5.             Stock-Based Compensation

B1-9

Planet Polymer Technologies, Inc.

NOTES TO UNAUDITED CONDENSED
FINANCIAL STATEMENTS

                As explained in Note 10 in the Form 10-KSB, the Company accounts for stock options granted to employees based on their intrinsic values under the recognition and measurement principles of APB Opinion No. 25, “Accounting for Stock Issued to Employees, and Related Interpretations,” and has adopted the disclosure-only provisions of Statement of Financial Accounting Standards (SFAS) No. 123, “Accounting for Stock-Based Compensation,” and the provisions of Statement of Financial Accounting Standards No. 148 “Accounting for Stock-Based Compensation – Transition and Disclosure-an Amendment of FASB Statement No. 123.” Since the exercise price of all of the options granted by the Company to its employees has been equal to or greater than fair value, the Company has not recognized any earned or unearned compensation costs in its financial statements in connection with those options. The Company’s historical net income (loss) per share and pro forma net income (loss) per share for the three and six months ended June 30, 2004 and 2003, assuming compensation cost had been determined based on the fair value of all options at the respective dates of grant determined using a pricing model consistent with the provisions of SFAS 123 are set forth below:

B1-10

Planet Polymer Technologies, Inc.

NOTES TO UNAUDITED CONDENSED
FINANCIAL STATEMENTS

		Three Months Ended June 30						Six Months Ended June 30
		2004			2003			2004			2003
Net income (loss), as reported	$	(120,544	)	$	180,700		$	(244,591	)	$	181,202
Stock-based employee compensation expense
assuming a fair value based method had
been used for all awards		(11,447	)		(14,000	)		(22,894	)		(27,400	)
Net income (loss), pro forma	$	(131,991	)	$	166,700		$	(267,485	)	$	153,802
Basic earnings (loss) per share, as reported	$	(0.02	)	$	0.03		$	(0.04	)	$	0.03
Basic earnings (loss) per share, pro forma	$	(0.02	)	$	0.03		$	(0.04	)	$	0.02

6.             Ryer Enterprises, LLC Assignment to Ryer, Inc.

                During the first quarter of 2004, the Company agreed to forbear the February and March installment payments due from Ryer Enterprises, LLC in exchange for a two (2) month extension of the installment payments plus an additional installment payment of $4,600.

                During the period ended June 30, 2004, the obligations of Ryer Enterprises, LLC under the May 1, 2003 Agreement with the Company were assigned, with the Company’s approval, to Ryer, Inc., a California corporation (“Assignment”). As part of the Assignment, Ryer, Inc. paid the April and May 2004 installments to the Company on behalf of Ryer Enterprises, LLC. In addition, on June 23, 2004, the Company received a payment from Ryer, Inc. of approximately $161,000 to satisfy the remaining balance of the note.

B1-11

PART 1 – FINANCIAL INFORMATION
Item 2 – Management’s Discussion and Analysis of Financial
Condition and Results of Operations

Planet Polymer Technologies, Inc.

Except for the historical information contained herein, the discussion in this report contains forward-looking statements that involve certain risks and uncertainties. The Company’s actual results could differ materially from those discussed in this report. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and in the Company’s Form 10-KSB for the fiscal year ended December 31, 2003.

OVERVIEW

                Since Planet Polymer Technologies, Inc. (“Planet” or the “Company”) was founded in 1991 substantially all of the Company’s resources have been devoted to the development and commercialization of its technologies and products. This has included the expenditure of funds to develop the Company’s corporate infrastructure and support the Company’s research and development of products, marketing, licensing of products to third parties and corporate administration. For the six month period ended June 30, 2004, the Company did not engage in any research and development and did not incur any employee expense.

Planet had an accumulated deficit as of June 30, 2004, of approximately $14.6 million. The Company’s only anticipated source of revenues is from royalties from BASF, Alltech and Ryer, Inc., which are not expected to be sufficient to result in a net profit through December 31, 2004.

RESULT OF OPERATIONS

                The net loss for the six months ended June 30, 2004, was $244,591 compared to a net income of $181,202 for the six month period ended June 30, 2003. This decrease is a result of a decline in revenues and the Company incurring higher legal expenses and costs for the six months ended June 30, 2004, due to the pending acquisition agreement with Allergy Free, LLC. The Company had no revenues for the six months ended June 30, 2004 compared to $10,720 for the same period in 2003.

Effective January 15, 2004, Agway entered into an agreement to sell all of the assets of its FreshSeal® business, which include the fruit/produce patent rights assigned by the Company, to BASF. Also, in January 2004, Agway sold all of its right and interest to Optigen® to Alltech. Management cannot assure that the Company will receive significant, if any, royalties and monies under these Sale and Licensing Agreements. The Company is hopeful BASF and Alltech will continue to commercialize the intellectual property and provide future royalty revenue streams to the Company.

In April 2003, the Company recovered the assets sold to Ryer Industries, LLC, and by agreement dated as of May 1, 2003, resold the assets to Ryer Enterprises, LLC (“Ryer Enterprises”). Pursuant to said agreement, the Company licensed to Ryer Enterprises, the patent rights relating to the AQUAMIM® products for royalties which are payable monthly forty-five days after the close of each month for 8 years after which Planet has agreed to transfer the patents to Ryer Enterprises, provided it is not in default. In June 2004, with the approval of the Company, the obligations of Ryer Enterprises under the May 1, 2003 agreement with the Company were assigned to and assumed by Ryer, Inc., a California corporation (“Assignment”). On June 23, 2004, as a result of the Assignment, the Company received a payment

B1-12

PART 1 – FINANCIAL INFORMATION
Item 2 – Management’s Discussion and Analysis of Financial
Condition and Results of Operations

Planet Polymer Technologies, Inc.

from Ryer, Inc. of approximately $161,000 to satisfy the note relating to the AQUAMIM® products and the Agreement. Concurrently, the Company entered into a Royalty Contract with Ryer, Inc. redefining on what sales and how royalty payments are to be made and pursuant to which the Company assigned all patent rights related to AQUAMIM® technology to Ryer, Inc.

                Cost of revenues increased to $2,781 for the three months ended June 30, 2004, from $1,221 for the same period in 2003 due primarily to amortization of intangible assets.

                Total operating expenses increased to $312,750 for the six months ended June 30, 2004, from $272,626 for the same period in 2003. This increase was primarily attributable to higher legal expenses and costs incurred in the six months ended June 30, 2004, due to the pending acquisition agreement with Allergy Free, LLC.

                Similar to the second quarter of 2003, the Company incurred no research and development expenses. Unless and until the Proposed Acquisition is completed, the Company anticipates limited or no further research and development activities on new products.

                Other income, net decreased from approximately $287,488 for the six months ended June 30, 2003, to $10,715 for the same period in 2004. This decrease reflects a one time gain on sale of fixed assets and certain license revenue from Agway in 2003.

LIQUIDITY AND CAPITAL RESOURCES

                The Company had net cash used in operating activities of $53,735 for the six months ended June 30, 2004. This negative cash flow was due primarily to increased accounting and legal expenses resulting from the proposed asset purchase agreement between Allergy Free, LLC and the Company.

                The Company does not believe that its existing sources of liquidity and anticipated revenue will be adequate to satisfy the Company’s projected working capital and other cash requirements through September 2004 to continue operations as a public reporting company without raising additional capital or consummating a business merger (see below).

On March 22, 2004, the Company and Allergy Free, LLC (“Allergy Free”) announced that on March 18, 2004, they had entered into an Asset Purchase Agreement (“Agreement”). As subsequently amended, the Agreement provides for the Company to acquire certain assets and assume certain liabilities of Allergy Free for which the Company will provide the following consideration: a subordinated convertible note in the approximate principal amount of $274,300 bearing interest at 5.5% per annum and due and payable within three (3) years and approximately 82,732,970 shares of common stock of the Company. Additionally, the Company will assume approximately $611,000 of Allergy Free’s liabilities as of March 31, 2004 (plus, all obligations arising under assumed contracts which arise after the closing). As a result, after the closing of the Agreement and the conversion of the notes and related interest payable, the members of Allergy Free will own approximately 92.7% of the voting shares of the Company. Since the members of Allergy Free will receive the majority of the voting shares of the Company, the current president of Allergy Free will become president of the Company and since representatives of Allergy Free will hold three of the five seats on the Company’s Board of Directors, the

B1-13

PART 1 – FINANCIAL INFORMATION
Item 2 – Management’s Discussion and Analysis of Financial
Condition and Results of Operations

Planet Polymer Technologies, Inc.

merger will be accounted for as a reverse acquisition whereby Allergy Free will be the accounting acquirer (legal acquiree) and the Company will be the accounting acquiree (legal acquirer). Investors are encouraged to review, when available, the Company’s Proxy Statement which will be available through EDGAR at www.sec.gov.

If the transaction is completed, immediately prior to or concurrently with the closing, Planet will distribute to a trustee for the benefit of Planet shareholders of record as of April 15, 2004 (“Trust”), the right to receive all royalties payable to Planet pursuant to the Sale and Licensing Agreements between Planet and Agway, Inc., relating to Planet’s FreshSeal® and Optigen® technology and the certain Royalty Agreement between Planet and Ryer, Inc., relating to Planet’s AQUAMIM® technology.

ITEM 3. CONTROLS AND PROCEDURES

                The Company’s management, with the participation of the Company’s Chief Executive Officer who is also the Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures as of June 30, 2004. Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective for gathering, analyzing and disclosing the information the Company is required to disclose in the reports it files under the Securities and Exchange Act of 1934, within the time periods specified in the Securities and Exchange Commission’s rules and forms.

                During the six months ended June 30, 2004, there were no significant changes in the Company’s internal control over financial reporting that materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1 – Legal Proceedings:

             None

Item 2 – Changes in Securities and Use of Proceeds:

             None

Item 3 – Defaults upon Senior Securities:

             None

Item 4 – Submission of Matters to a Vote of Security Holders:

             None

Item 5 – Other Information:

B1-14

PART 1 – FINANCIAL INFORMATION
Item 2 – Management’s Discussion and Analysis of Financial
Condition and Results of Operations

Planet Polymer Technologies, Inc.

None

Item 6 – Exhibits and Reports on Form 8-K

(a) Exhibits

Exhibit 10.1	Royalty Contract between the Company and Ryer, Inc., a California corporation.
Exhibit 31.1	Certification of Principal Executive Officer and Financial Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
Exhibit 32.1	Certification of Principal Executive Officer and Financial Officer pursuant to Section 906 of the Sarbanes Oxley Act of 2002.

 (b)  Reports on Form 8-K

              None.

SIGNATURES

In accordance with the requirements of Exchange Act, the Registrant has duly caused this report on Form 10-QSB to be signed on its behalf by the undersigned, thereunto duly authorized.

Date:  August 16, 2004	Planet Polymer Technologies, Inc.
		/s/ H. M. Busby
		———————————————
		H. M. Busby Chief Executive Officer (On behalf of Registrant and as Registrant’s Principal Financial and Accounting Officer)

B1-15

Exhibit 32.1

CERTIFICATION OF PRINCIPAL EXECUTIVE AND FINANCIAL OFFICER
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, H. M. Busby, certify that:

1.  I have reviewed this quarterly report on Form 10-QSB of Planet Polymer Technologies, Inc.

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

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

4.  I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13(a)-15(f) and 15(d)-15(f)) for the small business registrant and have:

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

b) [Intentionally omitted.]

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this quarterly report my conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this quarterly report based on my evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

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

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date:  August 16, 2004	/s/ H. M. Busby
	———————————————
	H. M. Busby Chief Executive Officer and Chief Financial Officer

B1-16

PART 1 – FINANCIAL INFORMATION
Item 2 – Management’s Discussion and Analysis of Financial
Condition and Results of Operations

Planet Polymer Technologies, Inc.

                In connection with the Quarterly Report of Planet Polymer Technologies, Inc. (the “Company”) on Form 10-QSB for the period ended June 30, 2004 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, H. M. Busby, Chief Executive Officer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

                (1)           The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

                (2)           The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 16, 2004

/s/ H. M. Busby

———————————————

H. M. Busby
Chief Executive Officer and
Chief Financial Officer

B1-17

EX-4

EXHIBIT “C”

ASSET PURCHASE AGREEMENT

C-1

ASSET PURCHASE AGREEMENT

dated as of March 18, 2004

by and among

PLANET POLYMER TECHNOLOGIES, INC.

and

ALLERGY FREE, LLC

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ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT, dated as of March 18, 2004, (this “Agreement”), by and between Planet Polymer Technologies, Inc., a California corporation (“Purchaser”), and Allergy Free, LLC, a California limited liability company (“Seller”).

R E C I T A L S

WHEREAS, Seller is engaged in the business of designing, manufacturing, selling and distributing consumer products for use by allergy sensitive persons, including, without limitation, air filters, bedding and similar products (the “Seller Business”);

WHEREAS, Purchaser is engaged in the business of developing and licensing unique hydrosoluable polymer and biodegradable materials in the fields of agricultural and industrial manufacturing (the “Purchaser Business”);

WHEREAS, Seller desires to sell, and Purchaser desires to purchase, all of the assets, properties and rights relating to the Seller Business, other than the Excluded Assets (as defined below), pursuant to this Agreement.

A G R E E M E N T

NOW, THEREFORE, in reliance on the representations and warranties and agreements and subject to the terms and conditions hereinafter set forth, the parties hereby agree as follows:

1.             Definitions.  The following terms, as used herein, have the following meanings:

“Accounts Receivable” shall mean the Seller Accounts Receivable or the Purchaser Accounts Receivable as the context requires, consistent with the meaning ascribed to such term in Section 2(i).

“Acquisition” shall mean the transaction contemplated by this Agreement.

“Acquisition Date” will have the meaning ascribed to such term in Section 4(d).

“Affiliate” means, with respect to any Person, a Person directly or indirectly controlling, controlled by or under common control with the Person, through the ownership of all or part of the Person.

“Agreement” will have the meaning ascribed to such term in the Preamble.

“Applicable Law” means any domestic or foreign, federal, state or local statute, law, common law, ordinance, policy, guidance, rule, administrative interpretation,

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regulation, order, writ, injunction, directive, judgment, decree, permit or other requirement of any Governmental Authority.

“Arbitrator” will have the meaning ascribed to such term in Section 5(b).

“Assets” shall mean the Seller Assets or the Purchaser Assets as the context requires, consistent with the meaning ascribed to such term in Section 2.

“Assumed Liabilities” will have the meaning ascribed to such term in Section 3.

“best knowledge” or “to the best of knowledge” a Person will be deemed to have knowledge of a particular fact or other matter if: (i) that Person is actually aware of that fact or matter; or (ii) a prudent Person could be expected to discover or otherwise become aware of that fact or matter in the course of conducting an investigation regarding the accuracy of any representation or warranty contained in this Agreement.

“Business” shall mean the Seller Business or the Purchaser Business as the context requires.

“Business Day” means a day of the week (but not a Saturday, Sunday, or holiday) on which banking institutions in San Diego are open. All references to “days” in this Agreement will be to calendar days unless specifically referenced as a Business Day.

“Change of Control” means (i) the acquisition, directly or indirectly, by any person, entity or group (within the meaning of Section 13(d)(3) of the Exchange Act) of the beneficial ownership of securities or more than fifty percent (50%) of the total combined voting power of all outstanding securities of Purchaser; (ii) a merger or consolidation in which Purchaser is not the surviving entity, except for a transaction in which the shareholders immediately prior to such merger or consolidation hold, in the aggregate, securities possessing more than fifty percent (50%) of the total combined voting power of all outstanding voting securities of the surviving entity immediately after such merger or consolidation; (iii) a reverse merger in which Purchaser is the surviving entity but in which securities possessing more than fifty percent (50%) of the total combined voting power of all outstanding voting securities of Purchaser are transferred to or acquired by a Person different from the shareholders of Purchaser immediately prior to such merger; or (iv) the sale, license, transfer and/or other disposition (in one transaction or a series of related transactions) of all or substantially all of the assets of Purchaser.

“Closing” will have the meaning ascribed to such term in Section 4(d).

“Closing Balance Sheet” shall mean a balance sheet of Seller as of the Acquisition Date prepared in accordance with GAAP (other than normal year-end adjustments) delivered by Seller to Purchaser.

“Code” means the Internal Revenue Code of 1986 as amended, and the Treasury Regulations promulgated thereunder.

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“Confidential Information” means all nonpublic information respecting Purchaser or its Affiliate’s business including, but not limited to, the Business and the products, research and development, processes, customer lists, marketing plans and strategies of Purchaser or its Affiliates, whether or not relating to the Business. Confidential Information does not include information that is, or becomes, available to the public unless such availability occurs through an unauthorized act on either Member’s part.

“Consideration Allocation” will have the meaning ascribed to such term in Section 4(c).

 “Contracts” shall mean the Seller Contracts or the Purchaser Contracts as the context requires, consistent with the meaning ascribed to such term in Section 2(h).

“Copyrights” means all of the following: (i) all copyrights, all registrations and recordings thereof, and all applications in connection therewith, including all registrations, recordings and applications in the United States Copyright Office or in any similar office or agency of the United States, any State or territory thereof, or any other country or any political subdivision thereof, and (ii) all reissues, extensions or renewals thereof.

“Damages” means all demands, claims, actions or causes of action, assessments, losses, damages, costs, expenses, liabilities, judgments, awards, fines, sanctions, penalties, charges and amounts paid in settlement, including (i) interest on cash disbursements in respect of any of the foregoing at a rate of five percent (5%) per annum from the date each such cash disbursement is made until the Person incurring the same is indemnified in respect thereof, and (ii) reasonable costs, fees and expenses of attorneys, accountants and other agents of the Person.

“directly or indirectly” means as an individual, general partner, limited partner, shareholder, member, officer, director, principal, agent, employee, consultant, advisor or in any other relationship or capacity.

“Environmental Laws” will have the meaning ascribed to such term in Section 6(r)(i).

“Equipment” means all machinery and equipment, including processing equipment, conveyors, machine tools, tools, tooling, data processing and computer equipment, including embedded software and peripheral equipment and all engineering, processing and manufacturing equipment, office machinery, furniture, materials handling equipment, tools, attachments, accessories, automotive equipment, trailers, trucks, forklifts, molds, dies, stamps, motor vehicles, rolling stock and other equipment of every kind and nature, trade fixtures and fixtures not forming a part of real property, together with all additions and accessions thereto, replacements therefor, all parts therefor, all substitutes for any of the foregoing, fuel therefor, and all manuals, drawings, instructions, warranties and rights with respect thereto, and all products and proceeds thereof and condemnation awards and insurance proceeds with respect thereto.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

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“Excluded Assets” will have the meaning ascribed to such term in Section 2.

“Excluded Liabilities” will have the meaning ascribed to such term in Section 3.

“FDA” means the Food and Drug Administration.

“Financial Statements” will have the meaning ascribed to such term in Section 6(d)(i).

“Fixed Assets” will have the meaning ascribed to such term in Section 2(b).

“Fraud” means any fraud, misrepresentation, theft, embezzlement, dishonesty or moral turpitude.

“GAAP” means generally accepted accounting principles as applied on a consistent basis.

“Governmental Authority” means any foreign or domestic, federal, territorial, state or local governmental authority, instrumentality, court, government commission, tribunal or organization, or any regulatory, administrative or other agency, including the FDA, or any political or other subdivision, department or branch of any of the foregoing.

“Hazardous Substances” means any substance, material or waste that is regulated by any Governmental Authority, including, without limitation, (i) petroleum; (ii) asbestos; and (iii) any material or substance that is defined as a “hazardous waste,” “hazardous material,” “hazardous substance,” “extremely hazardous waste,” or “restricted hazardous waste” under any provision of any Applicable Law, including, without limitation, Section 307 and Section 311 of the Clean Water Act, 33 U.S.C. § 1251 et seq. (33 U.S.C. §§ 1317, 1321), Section 1004 of the Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq. (42 U.S.C. § 6903), and Section 101 of the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. § 9601 et seq. (42 U.S.C. § 9601).

“Indemnified Party” will have the meaning ascribed to such term in Section 14(b).

“Indemnifying Party” will have the meaning ascribed to such term in Section 14(b).

“Independent” means a person who is not and never has been an officer, director, employee, or equity owner or either party or any Affiliate of either party.

“Intangible Property” will have the meaning ascribed to such term in Section 2(c).

“Intellectual Property” will have the meaning ascribed to such term in Section 6(j) and 7(k).

“Inventory” will have the meaning ascribed to such term in Section 2(a).

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“IRS” means the Internal Revenue Service.

“Issued and Outstanding Stock” shall mean the issued and outstanding shares of Purchaser’s common stock as of the Acquisition Date, plus any options, warrants or other rights to acquire common stock of Purchaser, or any stock or instrument convertible into common stock of Purchaser, at a price per common share of less than $1.00, subject to any applicable adjustments.

“Know-how” will have the meaning ascribed to such term in Section 2(d).

“Letter of Credit Rights” means rights to payment or performance under a letter of credit, whether or not Seller, as beneficiary, has demanded or is entitled to demand payment or performance.

“Liability” or “Liabilities” means, with respect to any Person, any liability or obligation of any kind, character or description, whether known or unknown, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, secured or unsecured, joint or several, due or to become due, vested or unvested, executory, determined, determinable or otherwise and whether or not the same is required to be accrued on the financial statements of the Person or is disclosed on any Schedule or Exhibit hereto.

“License” means any rights under any written agreement owned or acquired by a party granting any right (i) to use any Copyright or Copyright registration; (ii) any right with respect to any invention on which a Patent is in existence; (iii) to use any Trademark; or (iv) any other license of rights or interests held or acquired by such party.

“Liens” means any security interests, liens, pledges, charges, options, rights of first refusal, encumbrances, claims or other third party rights of any kind.

“Material Adverse Effect” means a change in, or effect on, the operations, affairs, condition (financial or otherwise), results of operations, assets, properties, Liabilities, earnings, prospects, reserves or any other aspect of the Business that results in a material adverse effect on, or a material adverse change in the Assets or the Business.

“Member” or “Members” shall mean the members of Seller.

“Patents” means all of the following in which either party holds any interest: (i) all letters patent of the United States or of any other country, all registrations and recordings thereof, and all applications for letters patent of the United States or of any other country, including registrations, recordings and applications in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State or territory thereof, or any other country, and (ii) all reissues, continuations, continuations-in-part or extensions thereof.

“Permit” will have the meaning ascribed to such term in Section 6(n)(iv).

“Person” means an individual, corporation, partnership, joint venture, trust, limited liability company or other business entity.

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“Private Stock” means shares of Purchaser’s unregistered common stock, issued to Seller.

“Proceeding” or “Proceedings” means any lawsuit, claim, hearing, arbitration, proceeding (public or private), governmental investigation, or legal, administrative or other action.

“Proprietary Information” will have the meaning ascribed to such term in Section 2(e).

“Purchaser” will have the meaning ascribed to such term in the Preamble.

“Purchaser Indemnitees” will have the meaning ascribed to such term in Section 12.

“Purchaser’s Documents” will have the meaning ascribed to such term in Section 7(b).

“Purchaser SEC Reports” will have the meaning ascribed to such term in Section 7(e).

“Reference Balance Sheet” will have the meaning ascribed to such term in Section 6(d)(i).

“SEC” means the Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended.

“Seller” will have the meaning ascribed to such term in the Preamble.

“Seller’s Documents” will have the meaning ascribed to such term in Section 6(a).

“Stock Price” shall mean $.06 per share of Purchaser’s common stock and where applicable adjusted to reflect the Reverse Stock Split.

“Subordinated Convertible Note” will have the meaning ascribed to such term in Section 4(b) and shall be in the form and content of Exhibit “A” attached hereto and incorporated herein by reference.

“Subsidiary” means, with respect to any Person, (i) any corporation in which such Person, then owns stock possessing more than fifty percent (50%) of the total combined voting power of all classes of stock, (ii) any partnership in which such Person is a general partner or (iii) any limited liability company, partnership or other entity in which such Person possesses a fifty percent (50%) or greater interest in the total capital or total income of such limited liability company, partnership or other entity.

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“Tax” or “Taxes” means any taxes, fees, levies, duties, tariffs, imposts, and governmental impositions or charges of any kind in the nature of (or similar to) taxes, payable to any taxing authority, including any Governmental Authority and any taxing agency thereof, including, without limitation, (i) any federal, state, local or foreign net income tax, alternative or add-on minimum tax, profits or excess profits tax, franchise tax, gross income, adjusted gross income or gross receipts tax, employment related tax (including employee withholding or employer payroll tax, FICA or FUTA), real or personal property tax or ad valorem tax, sales and use tax, excise tax, stamp tax or duty, any withholding or back up withholding tax, value added tax, severance tax, prohibited transaction tax, premiums tax, environmental tax, intangibles tax, occupation tax, net worth tax, estimated tax, transfer and gains tax, (ii) any interest or any penalty, addition to tax or additional amount imposed by any Governmental Authority responsible for the imposition of any such tax, and (iii) any liability with respect to the foregoing as a result of being a member of any affiliated, consolidated, combined, unitary, or similar group, as a result of any transferee liability in respect of the foregoing, as a result of any agreement or otherwise by operation of law.

“Tax Returns” mean any return, report, form or other information filed or required to be filed with the IRS or any other federal, foreign, state local, provincial taxing authority with respect to any Tax, including any claim for refund of Taxes and any amendments or supplements of any of the foregoing.

“Trademarks” means all of the following owned, adopted or acquired by a Party: (i) all trademarks, trade names, corporate names, business names, trade styles, service marks, logos, other source or business identifiers, prints and labels on which any of the foregoing have appeared or appear, designs and general intangibles of like nature (whether registered or unregistered), all registrations and recordings thereof, and all applications in connection therewith, including registrations, recordings and applications in the United States Patent and Trademark Office or in any similar office or agency of the United States, any state or territory thereof, or any other country or any political subdivision thereof; (ii) all reissues, extensions or renewals thereof; and (c) all goodwill associated with or symbolized by any of the foregoing.

2.             Purchase and Sale of Assets.  Subject to the terms and conditions of this Agreement, Seller agrees to sell, transfer, convey, assign, and deliver to Purchaser, and Purchaser agrees to purchase, all of the business assets, properties, real or personal, and rights of every nature, kind and description, tangible and intangible, as reflected on the Closing Balance Sheet used or useable in the Seller Business, owned by, leased by, or in the possession of the Seller (the “Assets”), except that the Assets shall not include any of the assets set forth on Schedule 2 hereto (the “Excluded Assets”) all of which shall be retained by Seller and shall not be sold or conveyed to Purchaser hereunder. Without limiting the generality of the preceding sentence, the Assets include the following:

(a)           Inventory, wherever located, used or useable in the Business (the “Inventory”) consisting of inventory, merchandise, goods and other personal property that are held by or on behalf of Seller for sale or lease or are furnished or are to be furnished under a contract of service, or that constitute raw materials, work in process,

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finished goods, returned goods, or materials or supplies of any kind, nature or description used or consumed or to be used or consumed in Seller’s business or in the processing, production, packaging, promotion, delivery or shipping of the same, including all supplies and embedded software;

(b)           Fixed and other physical assets, wherever located, used or useable in the Business consisting of Equipment, and fixtures (“Fixed Assets”);

(c)           All Patents, Copyrights and Trademarks used or useable in the Business, and all agreements of any nature whatsoever with respect to any of the foregoing (the “Intangible Property”), including, without limitation, the rights to all brand names;

(d)           All inventions, discoveries, improvements, computer software, data, skill, expertise, procedures and processes used or useable in the Business and owned by Seller and all agreements of any nature whatsoever with respect thereto (the “Know-how”);

(e)           All other trade secrets and proprietary information relating to the Business, including customer lists, market surveys and all agreements of any nature whatsoever with respect thereto (the “Proprietary Information”);

(f)            All right, title and interest of Seller in and to Licenses, transferable permits, exemptions, approvals, franchises and privileges relating to the Business to the extent transferable under Applicable Law;

(g)           All books, records, accounts, correspondence and other information which has been reduced to writing relating to or arising out of the Business, including accounting records, legal records, technical information and manuals, designs, blueprints, models, drawings, specifications, patterns and any computer record of any of the foregoing;

(h)           All of Seller’s claims and rights under all leases, contracts, agreements, and purchase and sales orders, whether written or oral, relating in any manner to the Business including, without limitation, those set forth on Schedule 6(k) hereto (collectively, the “Contracts”);

(i)            All accounts owned or acquired by Seller including, accounts receivable, notes and notes receivable, other receivables, book debts and other forms of obligations to Seller and Letter of Credit Rights relating to the Business (“Accounts Receivable”);

(j)            All prepaid items, deposits, bank accounts, certificated securities, all certificates of deposit, and all promissory notes and other evidences of indebtedness and other similar assets relating to the Business;

(k)           All interests in partnerships, joint ventures and other business associations relating to the Business;

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(l)            All rights of Seller under express or implied warranties from the suppliers of Seller with respect to the Assets to the extent transferable under Applicable Law;

(m)          All proceeds under insurance policies (excluding proceeds under insurance policies that relate to Excluded Assets or Excluded Liabilities) ;

(n)           All of Seller’s claims and causes of action against others relating to the Business (except to the extent related to the Excluded Assets or Excluded Liabilities); and

(o)           All goodwill associated with the Business or Assets, together with the right to represent to third parties that Purchaser is the successor to the Business.

3.             Assumed Liabilities; Excluded Liabilities.  Except for the liabilities of Seller relating to the Business set forth on Schedule 3 (the “Assumed Liabilities”), which Purchaser agrees to assume, Purchaser does not assume, agree to perform or discharge, indemnify Seller against, or otherwise have any responsibility for Liabilities of Seller, whether fixed or contingent, known or unknown, matured or unmatured, liquidated or unliquidated, secured or unsecured, and whether arising prior to, on or after the date hereof (collectively, the “Excluded Liabilities”). Without limiting the generality of the preceding sentence, the Excluded Liabilities include the following:

(a)           Any Liability of Seller arising out of or relating to products of Seller to the extent sold on or prior to the Acquisition Date except as set forth on Schedule 6(t);

(b)           Any Liability of Seller under any Contract that arises after the Acquisition Date, but that arises out of any breach thereof by Seller that occurred on or prior to the Acquisition Date;

(c)           Any Liability for Taxes of Seller or any Member, including (i) any Taxes arising as a result of Seller’s operation of the Business or ownership of the Assets occurring on or prior to the Acquisition Date, (ii) any Taxes that will arise as a result of the sale of the Assets pursuant to this Agreement except as otherwise expressly provided in Section 8(e), and (iii) any deferred Taxes of any nature;

(d)           Any Liability arising out of or relating to obligations owed to Members or Seller’s credit facilities or any security interest related thereto except as set forth on Schedule 3(d);

(e)           any Liability resulting from the failure to comply with any Environmental Law by Seller arising out of or relating to the operation of the Business or Seller’s leasing or operation of real property occurring on or prior to the Acquisition Date;

(f)            Any Liability under any employment, severance, retention or termination agreement of Seller with any employee of Seller;

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(g)           Any Liability of Seller arising out of or relating to any employee or independent contractor grievance, including those under any employment, severance, retention or termination agreement of Seller, arising out of facts occurring on or prior to the Acquisition Date;

(h)           Any Liability to distribute to any of Seller’s members any part of the consideration received hereunder;

(i)            Any Liability of Seller based upon the operations of the Business by Seller on or prior to the Acquisition Date arising out of any Proceeding to which Seller is a party pending as of the Acquisition Date;

(j)            Any Liability of Seller arising out of or resulting from Seller’s compliance or noncompliance with any Applicable Law;

(k)           Any Liability of Seller arising out of or resulting from Seller’s compliance or noncompliance with any judgment, order, writ, prohibition, injunction or decree of any Governmental Authority;

(l)            Any Liability of Seller under this Agreement; and

(m)          Any Liability of Seller based upon Seller’s acts or omissions occurring after the Acquisition Date.

4.             Purchase Price and Closing.  In full consideration for the Assets and the confidentiality and non-compete agreements contained in Section 8(a) of this Agreement, Purchaser shall pay to Seller the aggregate consideration as follows:

(a)           Stock Consideration. At the Closing, Purchaser will issue and deliver to Seller 28,193,900 shares of Private Stock (“Stock Consideration”), subject to adjustment as provided in Section 4(b) below.

(b)           Subordinated Convertible Note. At the Closing, purchaser will issue and deliver to Seller the Subordinated Convertible Note in the approximate amount of Two Million Eight Hundred Seventeen Thousand Five Hundred ($2,817,500.00) (the exact principal amount will be determined at the Closing and will be equal to the then principal amount of indebtedness of Seller for money borrowed) (the “Note Payment”). If the principal amount is not more than $450,000 the interest rate shall be 5.5% per annum. Otherwise the interest rate shall be the prime rate as announced from time to time in The Wall Street Journal under “Money Rates.” Seller may elect to accept additional shares of Private Stock as additional Stock Consideration and reduce the principal amount of the Note Payment by a per share amount equal to the per share offering price for the Private Placement described in Section 8(n) up to a maximum $2,450,000.00 reduction of the Note Payment principal amount. The Note Payment and Stock Consideration are collectively referred to as the Purchase Consideration.

(c)           Purchase Consideration Allocation.

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(i)             The parties shall allocate the Purchase Consideration (plus all consideration attributable to the portion of the Assumed Liabilities which are treated as purchase price for federal income tax purposes) to each Asset or groups thereof in accordance with the applicable provisions of Section 1060 of the Code (the “Consideration Allocation”) and generally as set forth in Schedule 4(c).

(ii)            Each party agrees to timely file an IRS Form 8594 reflecting the Consideration Allocation for the taxable year that includes the Acquisition Date.

(iii)          Each party hereto shall adopt and utilize the Consideration Allocation for purposes of all Tax Returns filed by them and shall not voluntarily take any position inconsistent with the foregoing in connection with any examination of any Tax Return, any refund claim, any litigation proceeding or otherwise, except that Purchaser’s cost for the Assets may differ from the amount so allocated to the extent necessary to reflect Purchaser’s capitalized acquisition costs other than the amount realized by Seller. In the event that any taxing authority disputes the Consideration Allocation, the party receiving notice of the dispute sh all promptly notify the other parties hereto of such dispute and the parties hereto shall cooperate in good faith in responding to such dispute in order to preserve the effectiveness of the Consideration Allocation.

(d)           Closing. Upon the terms and subject to the conditions set forth in this Agreement, the closing of the sale and purchase of the Assets (the “Closing”) shall take place on the date as soon as reasonably practicable following satisfaction of the conditions to Closing set forth in Section 9 to this Agreement (“Acquisition Date”), at the offices of Blanchard, Krasner & French, APC, 800 Silverado Street, 2nd Floor, La Jolla, CA 92037.

5.             Post-Acquisition Purchase Consideration Adjustment.

(a)           Indemnity Obligations. If either party is required to indemnify the other party pursuant to Sections 12 and 13 of this Agreement, the Purchase Consideration will be adjusted as provided in this Section 5 of this Agreement.

(b)           Dispute Resolution. In the event that either party disagrees with any demand for indemnification by the other party, such party shall give written notice of its objections thereto within forty-five (45) days of any claim for indemnification (“Dispute Notice”). If a party does not timely deliver a Dispute Notice, the claim for indemnity will be final and binding on the parties. If a party timely delivers a Dispute Notice, then during the 30-day period following such delivery, Seller and Purchaser shall attempt to resolve any differences which they may have with respect to any matters specified in the Dispute Notice (which resolution, if any, shall be final and binding on all parties). If, at the end of such 30-day period Seller and Purchaser shall have failed to reach written agreement with respect to all such matters, then all such matters specified in the Dispute Notice with respect to which an agreement has not been reached (the “Disputed Matters”) shall be submitted to and arbitrated by an independent certified

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public accounting firm selected by Independent members of Purchaser’s Board of Directors (the “Arbitrator”). The Arbitrator shall consider only the Disputed Matters. The Arbitrator shall act promptly, and the Arbitrator’s decision with respect to all Disputed Matters shall be final and binding upon the parties hereto. The prevailing party in the arbitration shall be entitled to the reimbursement from the non-prevailing party of the prevailing party’s reasonable attorney’s and accountant’s fees and costs incurred in connection with the arbitration. The fees and expenses of the Arbitrator incurred in connection with its review and determination of any Disputed Matters shall also be borne by the non-prevailing party.

(c)           Adjustment to Purchase Price. If Seller is the Indemnifying Party, Seller shall cause to be surrendered to the Purchaser shares of Private Stock equal to the dollar amount of Seller’s indemnity obligation divided by the Stock Price, but in no event more than one hundred thousand (100,000) shares (after giving effect to the Reverse Stock Split). If Purchaser is the Indemnifying Party, Purchaser shall cause to be issued to Seller shares of Purchaser common stock equal to the dollar amount of Purchaser’s indemnity obligation divided by the Stock Price, but in no event more than one hundred thousand (100,000) shares (after giving effect to the Reverse Stock Split).

                6.             Representations and Warranties of Seller.  In order to induce Purchaser to enter into this Agreement, as of the Acquisition Date, except as set forth in the Disclosure Schedules attached hereto, Seller represents and warrants to Purchaser that:

(a)           Legal Authority, Binding Effect. Seller has the full capacity, power and authority to execute and deliver this Agreement and to transfer the Assets as contemplated herein. Seller has full capacity, right, power and authority to execute, deliver and perform its obligations under this Agreement and all other agreements, certificates and documents (collectively, the “Seller’s Documents”) executed or delivered or to be executed or delivered by Seller in connection herewith. This Agreement and the other Seller’s Documents constitute legal, valid and binding obligations of Seller, enforceable in accordance with their respective terms.

(b)           Organization, Good Standing. Seller is a limited liability company duly organized, validly existing and in good standing under the laws of the State of California, and has full power and authority to own, lease and operate its assets and properties and to conduct the Business as it is now being conducted. Seller is duly qualified or licensed to do business and is in good standing as a foreign company under the laws of those jurisdictions in which the conduct of its business or the ownership or leasing of its assets requires such qualification. The copies of Seller’s Articles of Organization, as amended (certified by the Secretary of State of California), and Operating Agreement which have been previously delivered to Purchaser or its representative are correct and complete.

(c)           Capitalization. The Members identified on Schedule 6(c) hold one hundred percent (100%) of the membership interests in Seller. Seller has no Subsidiaries

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and has no equity in any corporation, partnership, joint venture or other entity and Seller has conducted its business only through Seller.

(d)           Financial Statements.

(i)            Seller has delivered to Purchaser the unaudited balance sheet of Seller as of December 31, 2003 (the “Reference Balance Sheet”), and the related unaudited statements of operations and members’ equity for the fiscal year then ended (the “Financial Statements”).

(ii)           Except as set forth on Schedule 6(d)(ii), the Financial Statements are complete, are in accordance with Seller’s books and records regularly maintained by management, have been prepared in accordance with GAAP, consistently applied by Seller, and present fairly the financial position, results of operations and changes in financial position of Seller as of the dates and for the periods indicated.

(iii)          There are no liabilities, debts, obligations or claims against the Business or the Assets of any nature, absolute or contingent, which in the aggregate exceeds $10,000, except (a) as and to the extent reflected or reserved against on the Reference Balance Sheet, (b) specifically described and identified as an exception to this paragraph in any of the Schedules delivered to Purchaser pursuant to this Agreement, (c) incurred since the Reference Balance Sheet Date, in the ordinary course of business consistent with prior practice and Section 6(f) hereof, or (d) open purchase or sales orders or agreements for delivery of goods and services in the ordinary course of business consistent with prior practice; provided Seller is not in default thereunder.

(e)           Liabilities. As of December 31, 2003, all liabilities of Seller are set forth or adequately reserved against or otherwise disclosed in the Financial Statements, in each case in accordance with GAAP, consistently applied by Seller. Since December 31, 2003, Seller has incurred no other Liabilities, except for those incurred in the ordinary course of business as theretofore conducted which are not materially adverse to the operations or prospects (financial or otherwise) of the Business, except for the liabilities set forth on Schedule 6(e).

(f)            No Adverse Change. Except as set forth on Schedule 6(f), since December 31, 2003, Seller has operated its business only in the ordinary course of business as theretofore conducted, and there has been no: (i) Material Adverse Effect, or any event or development which, individually or together with other such events, could reasonably be expected to result in a Material Adverse Effect; (ii) suffered any damage or destruction resulting in a loss or cost to Seller of more than $10,000 in the aggregate, whether or not covered by insurance; (iii) amendment of its Articles of Organization or Operating Agreement; (iv) issuance of any additional units or other Seller securities or issuance, sale or grant of any option or right to acquire or otherwise dispose of any of its authorized but unissued units or other company securities; (v) declaration or payment of any distribution in cash or property on its units; (vi) repurchase or redemption of shares

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of its units or other Seller securities; (vii) incurrence, performance or payment or other discharge, of any obligation or liability (absolute or contingent), except for current obligations and liabilities incurred in the ordinary course of business consistent with past practice; (viii) entering into of any employment agreement with, or becoming liable for any bonus, profit-sharing or incentive payment to, or increasing of the compensation or benefits of, any of its officers, directors or employees; (ix) sale, transfer or acquisition of any properties or assets, tangible or intangible, other than in the ordinary course of business; (x) material changes in its customary method of operations including marketing, selling and pricing policies and maintenance of business premises, fixtures, furniture and equipment; (xi) modification, amendment or cancellation of any of its existing leases or entering into any contracts, agreements, leases or understandings other than in the ordinary course of business or entering into of any loan agreements; (xii) investments other than in certificates of deposit or short-term commercial paper; (xiii) capital expenditure or addition or commitment to make a capital expenditure or addition, when considered as a whole is in excess of an aggregate of $10,000; (xiv) Liens or restrictions of any of the Business or the Assets; (xv) commencement of any litigation, action or proceeding before any court, governmental or regulatory body or arbitrational tribunal relating to the Business or the Assets; or (xvi) changes in respect of any election concerning Taxes or Tax Returns, adopted or changed any accounting method, filed any amended Tax Return, entered into any closing agreement with respect to Taxes, settled any Tax claim or assessment or surrendered any right to claim a refund of Taxes or obtained or entered into any Tax ruling, agreement, contract, understanding, arrangement or plan.

(g)           Taxes. Seller has duly, timely and properly filed within the time prescribed by law, all Tax Returns required to be filed by it with respect to the income, business or operations of Seller with the appropriate Governmental Authority in all jurisdictions in which such Tax Returns are required by law to be filed and such Tax Returns were complete and accurate. Seller has paid in full all Taxes due or claimed to be due on or in respect of all such Tax Returns. Seller is not the subject of any pending or, to the best knowledge of Seller, threatened tax examination nor is it a party to any proceeding or inquiry by any governmental authority for the assessment or the proposed assessment or for the collection of Taxes nor has any claim for the assessment or proposed assessment or for the collection of Taxes been asserted against Seller. There are no Liens for Taxes that are due and unpaid on any of the assets or properties of Seller. All amounts required to be withheld by Seller in connection with its business or operations from customers with respect to the sale of goods, or from or on behalf of employees for income, social security and unemployment insurance taxes, have been collected or withheld and either paid to the appropriate governmental agency or set aside and, to the extent required by the Code or other Applicable Law, held in accounts for such purpose.

(h)           Title to Property; Condition; All Assets. Seller has and will transfer to Purchaser good and marketable title to all the Assets, free and clear of all Liens except as described in Schedule 6(h) hereto. Such Assets are in good order and working condition, subject to ordinary wear and tear, and are adequate and suitable for the purposes for which they are presently being used and their use by Seller complies in

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all material respects with Applicable Law. The Assets constitute all of the properties and assets necessary to conduct the Business as it is presently conducted.

(i)            Real Property and Fixed Assets.

(i)            Seller does not own any real property. Schedule 6(i) hereto contains a list and brief description of all real property leased by Seller. Seller’s buildings and other structures (whether leased or owned) are in good operating condition and repair, subject to ordinary wear and tear, and are adequate and suitable for the purposes for which they are presently being used and their use by Seller complies in all material respects with Applicable Law.

(ii)           All leases are valid, binding and enforceable in accordance with their terms and are in full force and effect. No event or condition exists, or to the best knowledge of Seller, is alleged by any of the other parties thereto to exist, which constitutes, or with giving of notice or lapse of time or both would constitute, a default under, or a basis for termination of, any such lease. Seller does not owe any brokerage commissions with respect to any such leased space. Seller has delivered to Purchaser prior to the execution of this Agreement true and complete copies of all such leases (including any amendments and renewal letters).

(j)            Patents, Trademarks and Copyrights. Seller has interests in or the right to use the Intangible Property, the Know-how and the Proprietary Information (collectively, the “Intellectual Property”) disclosed in Schedule 6(j) hereto, each of which Seller has all right, title and interest in or valid and binding rights under contract to use, and the use thereof in the operation of the Business does not and will not infringe the rights of any other Person. Other than the Intellectual Property disclosed in Schedule 6(j) hereto, no other Intellectual Property is necessary in the conduct of the Business of Seller. Except as disclosed in Schedule 6(j), with respect to the Intellectual Property: (i) Seller has the exclusive right to use the Intellectual Property, (ii) all registrations with and applications to any Governmental Authority in respect of the Intellectual Property are valid and in full force and effect and are not subject to the payment of any Taxes or maintenance fees or the taking of any other actions by Seller to maintain their validity or effectiveness, (iii) there are no restrictions on the direct or indirect transfer of any contract, or any interest therein, held by Seller in respect of the Intellectual Property, (iv) Seller has delivered to Purchaser prior to the execution of this Agreement documentation with respect to any invention, process, design, computer program or other know-how or trade secret included in the Intellectual Property, which documentation is accurate in all material respects and reasonably sufficient in detail and content to identify and explain such invention, process, design, computer program or other know-how or trade secret and to facilitate its full and proper use without reliance on the special knowledge or memory of any person, (v) Seller has taken reasonable security measures to protect the secrecy, confidentiality and value of its trade secrets (vi) Seller has not received any notice that it is, in default (or with the giving of notice or lapse of time or both, would be in default) under any contract to use the Intellectual Property, (vii) to the best knowledge of Seller, no Intellectual Property is being infringed by any other Person

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and (viii) Seller does not pay any royalty to a third party with respect to its use of any Intellectual Property.

Except at set forth on Schedule 6(j), Seller has not received notice, either verbally or in writing, that Seller is infringing any Intellectual Property of any other Person in connection with the conduct of the Business, no claim is pending or has been made, either verbally or in writing, to such effect and Seller is not infringing any Intellectual Property of any other Person in connection with the conduct of the Business.

(k)           Contracts and Commitments. Schedule 6(k) contains a list of all material leases, contracts, agreements and purchase and sales orders, whether written, or to Seller’s best knowledge, oral, relating to the Business and to which Seller is a party or and by which any of the Assets is bound. True and complete copies of the foregoing (or, in the case of oral contracts, accurate summaries) have been delivered to Purchaser. Except as set forth on Schedule 6(k), all Contracts are in full force and effect and constitute legal, valid and binding obligations of the respective parties thereto. Seller has performed all obligations required to be performed by it pursuant to the Contracts and no default, or event which with notice or lapse of time or both would constitute a default, exists in respect thereof on the part of Seller or the other parties thereto. Except as set forth on Schedule 6(k), each of the Contracts will according to its terms continue in full force and effect with no change to the material terms thereof following the transfer of the Assets to Purchaser under this Agreement. The continuation, validity and effectiveness of all the Contracts under the current material terms thereof (including without limitation the current rentals under any leases or licenses) will in no way be affected by the transfer of the Assets to Purchaser under this Agreement. All the Contracts have been entered into on an arms-length basis and none is materially burdensome to the Business. Except as set forth on Schedule 6(k), Seller has no contracts, agreements or arrangements (a) providing for the payment of any bonus or commission based on sales or earnings, or (b) with any officer, member, director, consultant (other than fee agreements with Seller’s accountants and attorneys), agent or Affiliate of Seller, or (c) relating to employment or severance or termination benefits (other than employment arrangements terminable at will without liability on the part of Seller and other than for severance or termination benefits required by statute or regulation).

(l)            Inventory. Except as set forth on Schedule 6(l) and to Seller’s best knowledge, the Inventory is in good condition, does not include any items below standard quality, damaged or spoiled, obsolete or of a quality or quantity not usable or salable in the ordinary course of the business of Seller as currently conducted within normal inventory “turn” experience, the value of which has not been fully written down, or with respect to which adequate reserves have not been provided. All items included in the inventory of Seller are the property of Seller, free and clear of any Lien, have not been pledged as collateral, are not held by Seller on consignment from others and conform in all respects to all specifications and warranties applicable to such inventory or its use or sale imposed by any Governmental Authority. All in-process and finished products in the Inventory have been produced in compliance with Seller’s applicable quality control procedures. The values at which such inventory are carried in accordance with GAAP.

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The amount and mix of the Inventory of supplies, in-process and finished products is consistent with Seller’s past business practices.

(m)          Accounts Receivable. All of the Accounts Receivable reflected on the Financial Statements and thereafter acquired through the date hereof constitute only valid claims against third parties not affiliated with Seller or Members arising in the ordinary course of the Business. The Accounts Receivable arose in the ordinary course of business for goods or services delivered or rendered, are payable upon ordinary trade terms, constitute only legal, valid and binding obligations of the respective debtors enforceable in accordance with their terms and are not subject to counterclaims or setoffs.

(n)           Compliance with Laws; Restrictions; Permits.

(i)            Except as set forth on Schedule 6(n)(i), Seller is conducting the Business, and all of its properties and assets are, in compliance with Applicable Law.

(ii)           Seller is not aware and has not received any written or verbal notification of any present or past failure so to comply or of any past or present events, activities or practices of Seller or incidents or actions of Seller or plans of Seller which may be construed to indicate interference with or prevention of continued compliance with Applicable Law or which may give rise to any common law or statutory liability, or otherwise form the basis of any claim, action, suit, proceeding, hearing or investigation.

(iii)          The authorization, execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby do not and will not (1) violate any of the provisions of Seller’s Articles of Organization or Operating Agreement, (2) violate, conflict with, result in a breach of or constitute a default under, require any notice or consent under, give rise to a right of termination of, or accelerate the performance required by, any terms or provisions of any lease, contract, agreement or purchase or sale order, whether written, or oral, to which Seller is a party or is bound, or any of its assets or business is subject, (3) result in the creation of any Lien on any of Seller’s assets or properties or (4) violate any judgment, order, writ, prohibition, injunction or decree of any court or other governmental body to which Seller is a party, subject to or bound by.

(iv)          Set forth on Schedule 6(n)(iv) is a list of all approvals, authorizations, certificates, consents, licenses, orders and permits or other similar authorizations of any Governmental Authority necessary for the operation of the Business in substantially the same manner as currently operated. No other governmental or other registration, filing, application, permit, notice, transfer, consent, approval, order, qualification or waiver (collectively, a “Permit”) is required under Applicable Law to be obtained by Seller or Purchaser by virtue of the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby or to avoid the loss of any such Permit.

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(o)          Compensation of and Indebtedness to and from Employees.

(i)            Schedule 6(o)(i) sets forth a true and complete list of the names of and positions held by each employee of Seller and the current compensation of each such employee, including salary, bonus, other incentive compensation and other perquisites and benefits.

(ii)           Except as set forth in Schedule 6(o)(ii), Seller has no financial obligation and is not otherwise indebted to any person who is an officer, director, member or employee of Seller, or to any relative of any such person or to any entity controlled directly or indirectly by, or otherwise affiliated with, such person, in any amount whatsoever other than for compensation for services rendered since the start of the current pay period of Seller generally utilized for its employees and for normal and customary business expenses, nor is any officer, director, member or employee of Seller, or any relative of such person or any entity controlled directly or indirectly by, or otherwise affiliated with, such person, indebted to Seller except for normal and customary business reimbursement advances made in the ordinary course of business.

(p)           Insurance. Schedule 6(p) hereto lists all insurance policies covering Seller or any aspect of the Business, indicating the type of coverage, name of insured, the insurer, the amount of coverage, the premium and the expiration date of each policy. The insurance coverage provided by any of the policies described above will not terminate or lapse by reason of the transactions contemplated by this Agreement. Each policy listed is valid and binding and in full force and effect, no premiums due thereunder have not been paid, and Seller has not received any notice of cancellation or termination in respect of any such policy or notice that Seller is in default thereunder.

(q)           Litigation. Except as set forth in Schedule 6(q), there are presently no actions, suits, disputes, claims, proceedings or investigations pending or threatened against or affecting Seller, the Business or the Assets, at law or in equity, before or by any court, agency, or other governmental authority, including, without limitation, litigation with competitors, customers or with contractors or suppliers who have performed work on or supplied equipment or materials relating to the Business or the properties of Seller. To the best knowledge of Seller, there is no basis for any such action, suit, dispute, claim, proceeding or investigation and none of the foregoing has been pending during the last three years. There is no outstanding order, injunction or decree of any court, governmental authority or arbitration tribunal against or affecting Seller, the Business or the Assets.

(r)           Environmental Matters.

(i)            Seller’s business, assets and properties are and have been operated and maintained in compliance with all environmental protection laws and regulations of any Applicable Law (the “Environmental Laws”). No event has occurred which, with or without the passage of time or the giving of notice, or

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both, would constitute non-compliance by Seller with, or a violation by Seller of, the Environmental Laws.

(ii)           No real property leased, occupied or used in the Business contains any underground storage tanks or Hazardous Substances. Seller has not caused or permitted to exist, as a result of an intentional or unintentional act or omission, a disposal, discharge or release of Hazardous Substances originating on or from any site which currently is or formerly was owned, leased, occupied or used in connection with the Business, except where such disposal, discharge or release was pursuant to and in compliance with the conditions of a permit issued by the appropriate Governmental Authority. There are no properties owned, leased, occupied or used in connection with the Business which are listed, or proposed for listing, on the National Priorities List pursuant to the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Sections 9601 et seq., or on a registry or inventory of inactive hazardous waste sites maintained by any state (i) which currently is or formerly was owned, leased, occupied or used or (ii) with respect to which Seller has received notice that it is considered to be a potentially responsible person.

(s)           Customers and Suppliers. No supplier or customer of the Business has cancelled or otherwise terminated, or made any written threat to Seller to cancel or otherwise terminate, for any reason, including the consummation of the transactions contemplated hereby, its relationship with the Business or has at any time on or after January 1, 2004, decreased materially its services or supplies to the Business in the case of any such supplier, in each case if and only to the extent that such cancellation, termination or threat, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. To Seller’s best knowledge, no supplier or customer intends to cancel or otherwise terminate or decrease materially its services or supplies to the Business or its usage of the services or products of the Business, as the case may be, in each case if and only to the extent that such cancellation, termination or reduction, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

(t)            Products.

(i)            Schedule 6(t) sets forth all claims asserted or, to the best knowledge of Seller, threatened at any time since January 1, 2002 against the Business in respect of personal injury, wrongful death or property damage alleged to have resulted from products provided by the Business, together with a description of each such claim or action initiated with respect thereto and the disposition thereof.

(ii)           The Business has not experienced product recall or warranty claims, other than warranty claims less than $1,000.00 since the year ended December 31, 2003.

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(u)           Securities Purchase Representations. Seller and each Member of Seller is an accredited investor within the meaning of Rule 501 under the Securities Act. Seller and each Member has such knowledge and experience in financial or business matters as to be able to evaluate the merits and risks of the transactions contemplated by this Agreement. Seller has had an opportunity to ask questions of and to receive answers satisfactory to it from Purchaser in respect of the investment it is making in the Private Stock. Seller and each Member has access to the Purchaser SEC Reports. Seller has not been organized solely for the purpose of acquiring the Private Stock. Seller and each Member to whom Private Stock may be distributed is acquiring the Private Stock solely for its own account for investment, not as a nominee or an agent, and without a view to or in connection with, the sale or distribution of any part thereof.

(v)           Disclosure. No representation or warranty contained in this Agreement, and no statement contained in the Schedules to this Agreement or in any certificate, list or other writing furnished to Purchaser pursuant to any provision of this Agreement (including without limitation the Financial Statements), contains any untrue statement of a material fact, or when taken as a whole, omits to state a material fact necessary in order to make the statements herein or therein, in the light of the circumstances under which they were made, not misleading. There is no fact known to Seller which Seller believes has or could have a Material Adverse Effect on the Business; which has not been set forth in this Agreement, including without limitation any Schedules or Exhibits hereto, the Financial Statements or certificate delivered in accordance with the terms hereof or any document or statement in writing which has been supplied by or on behalf of Seller or by any employee of Seller in connection with the transactions contemplated by this Agreement. Seller has furnished or caused to be furnished to Purchaser complete and correct copies of all agreements, instruments and documents set forth on a Schedule hereto or underlying a disclosure set forth on any Schedule hereto. Each of the Schedules hereto is complete and correct.

7.             Representations and Warranties of Purchaser. As an inducement for Seller to enter into this Agreement and to consummate the transactions contemplated hereby, Purchaser represents and warrants to Seller that:

(a)           Organization and Good Standing. Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the State of California and has full power and authority to own, lease and operate its assets and properties and to conduct Purchaser’s Business as it is now being conducted. Purchaser is duly qualified or licensed to do business and is in good standing as a foreign corporation under the laws of those jurisdictions in which the conduct of its business or the ownership or leasing of its assets requires such qualification. The copies of Seller’s Articles of Incorporation, as amended (certified by the Secretary of State of California), and Bylaws which have been previously delivered to Seller or its representative are correct and complete.

(b)           Legal Authority, Binding Effect. . Purchaser has the full right, power and authority to enter into and perform this Agreement and all other agreements, certificates and documents executed or delivered or to be executed or delivered by Purchaser in connection herewith (collectively, with this Agreement, “Purchaser’s

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Documents”).  The execution, delivery and performance by Purchaser of Purchaser’s Documents have been duly authorized by the Board of Directors of Purchaser and, when approved by the Shareholders of Purchaser by all other necessary corporate action of Purchaser. This Agreement has been duly executed and delivered by Purchaser and Purchaser’s Documents are (or when executed and delivered by Purchaser will be) legal, valid and binding obligations of Purchaser (to the extent each of them is a party thereto), enforceable in accordance with their respective terms.

(c)           Restrictions. Except as set forth on Schedule 7(c), the authorization, execution, delivery and performance of Purchaser’s Documents and the consummation of the transactions contemplated hereby and thereby do not and will not (i) violate any of the provisions of the charter or bylaws of Purchaser (ii) violate, conflict with, result in a breach of or constitute a default under, require any notice or consent under, give rise to a right of termination of, or accelerate the performance required by, any terms or provisions of any agreement, instrument or writing of any nature to which Purchaser is a party or is bound or any of its assets or business is subject, or (iv) violate, conflict with or result in a breach of, or require any notice, filing or consent under, any statute, rule, regulation or other provision of law, or any order, judgment or other direction of a court or other tribunal, or any other governmental requirement, permit, registration, license or authorization applicable to Purchaser.

(d)           Private Stock. As of the Acquisition Date, the Stock Consideration shall be duly authorized and validly issued, fully paid, nonassessable and issued without violation of any preemptive rights.

(e)           Public Filings. Purchaser has filed all required forms, reports and documents (“Purchaser SEC Reports”) with the SEC since January 1, 2002, each of which has complied in all material respects with all applicable requirements of the Securities Act and the Exchange Act, each as in effect on the dates such forms, reports and documents were filed. None of such Purchaser SEC Reports, including, without limitation, any financial statements or schedules included or incorporated by reference therein, contained when filed any untrue statement of a material fact or omitted to state a material fact required to be stated or incorporated by reference therein or necessary in order to make the statements therein in light of the circumstances under which they were made not misleading. The financial statements included in the Purchaser SEC Reports have been prepared in accordance with GAAP applied on a consistent basis by Purchaser (except as may be indicated in the notes thereto), and fairly present in all material respects the consolidated financial position of Purchaser as of the dates thereof and their consolidated results of operations and changes in financial position for the periods then ended, except, in the case of unaudited interim financial statements, for normal year-end audit adjustments and the fact that certain information and notes have been condensed or omitted in accordance with the applicable rules of the SEC.

(f)            Liabilities. As of December 31, 2003, all liabilities of Purchaser are set forth or adequately reserved against or otherwise disclosed in the Financial Statements, in each case in accordance with GAAP, consistently applied by Purchaser. Since December 31, 2003, Purchaser has incurred no other Liabilities, except for those

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incurred in the ordinary course of business as theretofore conducted which are not materially adverse to the operations or prospects (financial or otherwise) of the Purchaser’s Business, except for the liabilities set forth on Schedule 7(f).

(g)           No Adverse Change. Since December 31, 2003, Purchaser has operated its business only in the ordinary course of business as theretofore conducted, and there has been no: (i) Material Adverse Effect, or any event or development which, individually or together with other such events, could reasonably be expected to result in a Material Adverse Effect; (ii) suffered any damage or destruction resulting in a loss or cost to Purchaser of more than $10,000 in the aggregate, whether or not covered by insurance; (iii) amendment of its Articles of Incorporation or Bylaws; (iv) issuance of any additional shares or other Purchaser securities or issuance, sale or grant of any option or right to acquire or otherwise dispose of any of its authorized but unissued shares or other company securities; (v) declaration or payment of any distribution in cash or property on shares; (vi) repurchase or redemption of shares or other Purchaser securities; (vii) incurrence, performance or payment or other discharge, of any obligation or liability (absolute or contingent), except for current obligations and liabilities incurred in the ordinary course of business consistent with past practice; (viii) entering into of any employment agreement with, or becoming liable for any bonus, profit-sharing or incentive payment to, or increasing of the compensation or benefits of, any of its officers, directors or employees; (ix) sale, transfer or acquisition of any properties or assets, tangible or intangible, other than in the ordinary course of business; (x) material changes in its customary method of operations including marketing, selling and pricing policies and maintenance of business premises, fixtures, furniture and equipment; (xi) modification, amendment or cancellation of any of its existing leases or entering into any contracts, agreements, leases or understandings other than in the ordinary course of business or entering into of any loan agreements; (xii) investments other than in certificates of deposit or short-term commercial paper; (xiii) capital expenditure or addition or commitment to make a capital expenditure or addition, when considered as a whole is in excess of an aggregate of $10,000; (xiv) Liens or restrictions of any of Purchaser’s Business or Purchaser’s Assets; (xv) commencement of any litigation, action or proceeding before any court, governmental or regulatory body or arbitrational tribunal relating to Purchaser’s Business or Purchaser’s Assets; or (xvi) changes in respect of any election concerning Taxes or Tax Returns, adopted or changed any accounting method, filed any amended Tax Return, entered into any closing agreement with respect to Taxes, settled any Tax claim or assessment or surrendered any right to claim a refund of Taxes or obtained or entered into any Tax ruling, agreement, contract, understanding, arrangement or plan.

(h)           Taxes. Purchaser has duly, timely and properly filed within the time prescribed by law, all Tax Returns required to be filed by it with respect to the income, business or operations of Purchaser with the appropriate Governmental Authority in all jurisdictions in which such Tax Returns are required by law to be filed and such Tax Returns were complete and accurate. Purchaser has paid in full all Taxes due or claimed to be due on or in respect of all such Tax Returns. Purchaser is not the subject of any pending or, to the best knowledge of Purchaser and each Member, threatened tax examination nor is it a party to any proceeding or inquiry by any

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governmental authority for the assessment or the proposed assessment or for the collection of Taxes nor has any claim for the assessment or proposed assessment or for the collection of Taxes been asserted against Purchaser. There are no Liens for Taxes that are due and unpaid on any of the assets or properties of Purchaser. All amounts required to be withheld by Purchaser in connection with its business or operations from customers with respect to the sale of goods, or from or on behalf of employees for income, social security and unemployment insurance taxes, have been collected or withheld and either paid to the appropriate governmental agency or set aside and, to the extent required by the Code or other Applicable Law, held in accounts for such purpose.

(i)           Title to Property; Condition; All Assets. Purchaser has good and marketable title to all of Purchaser’s Assets, free and clear of all Liens except as described in Schedule 7(i) hereto. Such Assets are in good order and working condition, subject to ordinary wear and tear, and are adequate and suitable for the purposes for which they are presently being used and their use by Purchaser complies in all material respects with Applicable Law. Purchaser’s Assets constitute all of the properties and assets necessary to conduct Purchaser’s Business as it is presently conducted. There are no individual refundable deposits, prepaid expenses, or deferred charges due Purchaser and Purchaser has made no loans or advances to any Person.

(j)           Real Property and Fixed Assets.

(i)            Purchaser does not own any real property. Schedule 7(j) hereto contains a list and brief description of all real property leased by Purchaser. Purchaser’s buildings and other structures (whether leased or owned) are in good operating condition and repair, subject to ordinary wear and tear, and are adequate and suitable for the purposes for which they are presently being used and their use by Purchaser complies in all material respects with Applicable Law.

(ii)           All leases are valid, binding and enforceable in accordance with their terms and are in full force and effect. No event or condition exists, or to the best knowledge of Purchaser, is alleged by any of the other parties thereto to exist, which constitutes, or with giving of notice or lapse of time or both would constitute, a default under, or a basis for termination of, any such lease. Purchaser does not owe any brokerage commissions with respect to any such leased space. Purchaser has delivered to Purchaser prior to the execution of this Agreement true and complete copies of all such leases (including any amendments and renewal letters).

(k)          Patents, Trademarks and Copyrights. Purchaser has interests in or the right to use the Intangible Property, the Know-how and the Proprietary Information (collectively, the “Intellectual Property”) disclosed in Schedule 7(k) hereto, each of which Purchaser has all right, title and interest in or valid and binding rights under contract to use, and the use thereof in the operation of Purchaser’s Business does not and will not infringe the rights of any other Person. Other than the Intellectual Property disclosed in Schedule 7(k) hereto, no other Intellectual Property is necessary in the conduct of the Business of Purchaser. Except as disclosed in Schedule 7(k), with respect

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to the Intellectual Property: (i) Purchaser has the exclusive right to use the Intellectual Property, (ii) all registrations with and applications to any Governmental Authority in respect of the Intellectual Property are valid and in full force and effect and are not subject to the payment of any Taxes or maintenance fees or the taking of any other actions by Purchaser to maintain their validity or effectiveness, (iii) there are no restrictions on the direct or indirect transfer of any contract, or any interest therein, held by Purchaser in respect of the Intellectual Property, (iv) Purchaser has delivered to Seller prior to the execution of this Agreement documentation with respect to any invention, process, design, computer program or other know-how or trade secret included in the Intellectual Property, which documentation is accurate in all material respects and reasonably sufficient in detail and content to identify and explain such invention, process, design, computer program or other know-how or trade secret and to facilitate its full and proper use without reliance on the special knowledge or memory of any person, (v) Purchaser has taken reasonable security measures to protect the secrecy, confidentiality and value of its trade secrets (vi) Purchaser has not received any notice that it is, in default (or with the giving of notice or lapse of time or both, would be in default) under any contract to use the Intellectual Property, (vii) to the best knowledge of Purchaser and each of its officers and directors, no Intellectual Property is being infringed by any other Person and (viii) Purchaser does not pay any royalty to a third party with respect to its use of any Intellectual Property.

Except as set forth on Schedule 7(k), Purchaser has not received notice, either verbally or in writing, that Purchaser is infringing any Intellectual Property of any other Person in connection with the conduct of Purchaser’s Business, no claim is pending or has been made, either verbally or in writing, to such effect and Purchaser is not infringing any Intellectual Property of any other Person in connection with the conduct of the Business.

(l)            Contracts and Commitments. Schedule 7(l) contains a list of all material leases, contracts, agreements and purchase and sales orders, whether written, or to Purchaser’s best knowledge, oral, relating to Purchaser’s Business and to which Purchaser is a party or and by which any of Purchaser’s Assets is bound. True and complete copies of the foregoing (or, in the case of oral contracts, accurate summaries) have been delivered to Seller. Except as set forth on Schedule 7(l), all of Purchaser’s Contracts are in full force and effect and constitute legal, valid and binding obligations of the respective parties thereto. Purchaser has performed all obligations required to be performed by it pursuant to the Contracts and no default, or event which with notice or lapse of time or both would constitute a default, exists in respect thereof on the part of Purchaser or the other parties thereto. Except as set forth on Schedule 7(l), each of the Contracts will according to its terms continue in full force and effect with no change to the material terms thereof following the transfer of the Closing under this Agreement. The continuation, validity and effectiveness of all the Contracts under the current material terms thereof (including without limitation the current rentals under any leases or licenses) will in no way be affected by the transfer of the Private Stock to Seller under this Agreement or for any reason as a result of Seller entering into the Royalty Liquidation Trust pursuant to Section 8(l) of this Agreement. All the Contracts have been entered into on an arms-length basis and none is materially burdensome to

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Purchaser’s Business. Except as set forth on Schedule 7(l), Purchaser has no contracts, agreements or arrangements (a) providing for the payment of any bonus or commission based on sales or earnings, or (b) with any officer, member, director, consultant (other than fee agreements with Purchaser’s accountants and attorneys), agent or Affiliate of Purchaser, or (c) relating to employment or severance or termination benefits (other than employment arrangements terminable at will without liability on the part of Purchaser and other than for severance or termination benefits required by statute or regulation).

(m)         Inventory. Purchaser has no inventory.

(n)          Accounts Receivable. All of Purchaser’s Accounts Receivable reflected on the financial statements of Purchaser and thereafter acquired through the date hereof constitute only valid claims against third parties not affiliated with Purchaser arising in the ordinary course of Purchaser’s Business. The Accounts Receivable arose in the ordinary course of business for goods or services delivered or rendered, are payable upon ordinary trade terms, constitute only legal, valid and binding obligations of the respective debtors enforceable in accordance with their terms and are not subject to counterclaims or setoffs.

(o)          Compliance with Laws; Restrictions; Permits.

(i)        Except as set forth on Schedule 7(o)(i), Purchaser is conducting its Business, and all of its properties and Assets are, in compliance with Applicable Law.

(ii)       Purchaser is not aware and has not received any written or verbal notification of any present or past failure so to comply or of any past or present events, activities or practices of Purchaser or incidents or actions of Purchaser or plans of Purchaser which may be construed to indicate interference with or prevention of continued compliance with Applicable Law or which may give rise to any common law or statutory liability, or otherwise form the basis of any claim, action, suit, proceeding, hearing or investigation.

(iii)      The authorization, execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby do not and will not (1) violate any of the provisions of Purchaser’s Articles of Incorporation or Bylaws, (2) violate, conflict with, result in a breach of or constitute a default under, require any notice or consent under, give rise to a right of termination of, or accelerate the performance required by, any terms or provisions of any lease, contract, agreement or purchase or sale order, whether written, or oral, to which Purchaser is a party or is bound, or any of its Assets or Business is subject, (3) result in the creation of any Lien on any of Purchaser’s Assets or properties or (4) violate any judgment, order, writ, prohibition, injunction or decree of any court or other governmental body to which Purchaser is a party, subject to or bound by.

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(iv)          Set forth on Schedule 7(o)(iv) is a list of all approvals, authorizations, certificates, consents, licenses, orders and permits or other similar authorizations of any Governmental Authority necessary for the operation of the Business in substantially the same manner as currently operated. No other governmental or other registration, filing, application, permit, notice, transfer, consent, approval, order, qualification or waiver (collectively, a “Permit”) is required under Applicable Law to be obtained by Purchaser or Seller by virtue of the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby or to avoid the loss of any such Permit.

(p)         Compensation of and Indebtedness to and from Employees and Consultants.

                               (i)          Purchaser currently has no employees, but Purchaser has had employees in the past.

(ii)          Except as set forth in Schedule 7(p)(ii), Purchaser has no financial obligation and is not otherwise indebted to any person who is or was an officer, director, shareholder, consultant or former employee of Purchaser, or to any relative of any such person or to any entity controlled directly or indirectly by, or otherwise affiliated with, such person, in any amount whatsoever other than for compensation for services rendered since the start of the current fiscal year of Purchaser generally utilized for its employees and for normal and customary business expenses, nor is any officer, director, shareholder or former employee of Purchaser, or any relative of such person or any entity controlled directly or indirectly by, or otherwise affiliated with, such person, indebted to Purchaser except for normal and customary business reimbursement advances made in the ordinary course of business.

(q)         Insurance. Schedule 7(q) hereto lists all insurance policies covering Purchaser or any aspect of Purchaser’s Business, indicating the type of coverage, name of insured, the insurer, the amount of coverage, the premium and the expiration date of each policy. The insurance coverage provided by any of the policies described above will not terminate or lapse by reason of the transactions contemplated by this Agreement. Each policy listed is valid and binding and in full force and effect, no premiums due thereunder have not been paid, and Purchaser has not received any notice of cancellation or termination in respect of any such policy or notice that Purchaser is in default thereunder.

(r)          Litigation. Except as set forth in Schedule 7(r), there are presently no actions, suits, disputes, claims, proceedings or investigations pending or threatened against or affecting Purchaser, Purchaser’s Business or Purchaser’s Assets, at law or in equity, before or by any court, agency, or other governmental authority, including, without limitation, litigation with competitors, customers or with contractors or suppliers who have performed work on or supplied equipment or materials relating to the Business

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or the properties of Purchaser. To the best knowledge of Purchaser, there is no basis for any such action, suit, dispute, claim, proceeding or investigation and none of the foregoing has been pending during the last three years. There is no outstanding order, injunction or decree of any court, governmental authority or arbitration tribunal against or affecting Purchaser, its Business or its Assets.

(s)           Environmental Matters.

(i)            Purchaser’s business, assets and properties are and have been operated and maintained in compliance with all environmental protection laws and regulations of any Applicable Law (the “Environmental Laws”). No event has occurred which, with or without the passage of time or the giving of notice, or both, would constitute non-compliance by Purchaser with, or a violation by Purchaser of, the Environmental Laws.

(ii)           No real property leased, occupied or used in the Business contains any underground storage tanks or Hazardous Substances. Purchaser has not caused or permitted to exist, as a result of an intentional or unintentional act or omission, a disposal, discharge or release of Hazardous Substances originating on or from any site which currently is or formerly was owned, leased, occupied or used in connection with the Business, except where such disposal, discharge or release was pursuant to and in compliance with the conditions of a permit issued by the appropriate Governmental Authority. There are no properties owned, leased, occupied or used in connection with Purchaser’s Business which are listed, or proposed for listing, on the National Priorities List pursuant to the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Sections 9601 et seq., or on a registry or inventory of inactive hazardous waste sites maintained by any state (i) which currently is or formerly was owned, leased, occupied or used or (ii) with respect to which Purchaser has received notice that it is considered to be a potentially responsible person.

(t)           Customers and Suppliers. No supplier or customer of Purchaser’s Business has cancelled or otherwise terminated, or made any written threat to Purchaser to cancel or otherwise terminate, for any reason, including the consummation of the transactions contemplated hereby, its relationship with the Business or has at any time on or after January 1, 2004, decreased materially its services or supplies to the Business in the case of any such supplier, in each case if and only to the extent that such cancellation, termination or threat, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. To Purchaser’s best knowledge, no supplier or customer intends to cancel or otherwise terminate or decrease materially its services or supplies to the Business or its usage of the services or products of the Business, as the case may be, in each case if and only to the extent that such cancellation, termination or reduction, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

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(u)          Products.

(i)            Schedule 7(u) sets forth all claims asserted or, to the best knowledge of Purchaser, threatened at any time since January 1, 2002 against Purchaser’s Business in respect of personal injury, wrongful death or property damage alleged to have resulted from products provided by the Business, together with a description of each such claim or action initiated with respect thereto and the disposition thereof.

(ii)           Purchaser’s Business has not experienced product recall or warranty claims, other than warranty claims less than $1,000.00 since the year ended December 31, 2003.

(v)          Disclosure. No representation or warranty contained in this Agreement, and no statement contained in the Schedules to this Agreement or in any certificate, list or other writing furnished to Seller pursuant to any provision of this Agreement (including without limitation Purchaser’s Financial Statements), contains any untrue statement of a material fact, or when taken as a whole, omits to state a material fact necessary in order to make the statements herein or therein, in the light of the circumstances under which they were made, not misleading. There is no fact known to Purchaser which Purchaser believes has or could have a Material Adverse Effect on Purchaser’s Business, which has not been set forth in this Agreement, including without limitation any Schedules or Exhibits hereto, the financial statements of Purchaser or certificate delivered in accordance with the terms hereof or any document or statement in writing which has been supplied by or on behalf of Purchaser or by any employee of Purchaser in connection with the transactions contemplated by this Agreement. Purchaser has furnished or caused to be furnished to Seller complete and correct copies of all agreements, instruments and documents set forth on a Schedule hereto or underlying a disclosure set forth on any Schedule hereto. Each of the Schedules hereto is complete and correct.

8.            Covenants of the Parties.

(a)           Covenant Against Competition and Disclosure.

(i)            During the period commencing on the date hereof and ending on December 31, 2006, neither Seller nor any officer, director or controlling person of Seller or Purchaser shall, directly or indirectly, for itself or themselves or on behalf of any other Person, (A) engage in any business competitive with the Seller Business (including within the definition of the Business, without limitation, any business of the type or types conducted by Seller at any time during the two year period preceding the date hereof or under development by Seller on the date hereof) in any county or other political subdivision of any state of the United States of America or of any other country in the world where Seller has conducted any aspect of Business (including the sale of any products) at any time during the two (2) year period preceding the date hereof, (B) disclose to any Person other than Purchaser or Seller, any information

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relating to the business of Seller or Purchaser (including without limitation information relating to accounts, financial dealings, transactions, trade secrets, Intellectual Property, customer lists and pricing lists), whether or not marked or otherwise identified as confidential or secret, (C) solicit, divert, take away or attempt to take away, with respect to the products of either Business as presently conducted, any of Seller’s or Purchaser’s customers or suppliers, or (D) hire any employee or induce or attempt to induce any employee to leave his or her employment with Purchaser without the prior written consent of Purchaser. At the request of Seller and/or Purchaser, Seller and Purchaser shall use their best efforts to cause their respective officer, directors, and controlling persons to enter into agreements for the benefit of Purchaser and Seller consistent with the terms of this Section 8(a)(i) effective as of the Acquisition Date (the “Non-Competition Agreements”)

(ii) Seller acknowledges that the restrictions contained in this Section 8(a) are reasonably necessary to protect the good will transferred to Purchaser and the legitimate business interests of Purchaser and that any violation of such restrictions will result in irreparable injury to Purchaser and the Business acquired by Purchaser hereunder for which damages will not be an adequate remedy. Purchaser shall therefore be entitled to preliminary and injunctive relief as well as to an equitable accounting of earnings, profits and other benefits arising from such violation and any other remedies at law or in equity available to Purchaser. The parties hereto agree that the duration and area for which the covenants set forth in this Section 8(a) are to be effective are reasonable. In the event that any court determines that the time period or the area, or both of them, are unreasonable, the parties hereto agree that the covenants shall remain in full force and effect for the greatest time period and in the greatest area that would not render them unenforceable.

(iii) Purchaser acknowledges that the restrictions contained in this Section 8(a) are reasonably necessary to protect the good will of Purchaser and the legitimate business interests of Purchaser and that any violation of such restrictions will result in irreparable injury to Seller and the Business in which Seller is acquiring a substantial equity interest hereunder for which damages will not be an adequate remedy. Seller shall therefore be entitled to preliminary and injunctive relief as well as to an equitable accounting of earnings, profits and other benefits arising from such violation and any other remedies at law or in equity available to Seller. The parties hereto agree that the duration and area for which the covenants set forth in this Section 8(a) are to be effective are reasonable. In the event that any court determines that the time period or the area, or both of them, are unreasonable, the parties hereto agree that the covenants shall remain in full force and effect for the greatest time period and in the greatest area that would not render them unenforceable.

(b)           Employment of Scott Glenn. Purchaser’s Board of Directors will offer to employ Scott Glenn as the President and Chief Executive Officer of Purchaser for a term of three (3) years after the Acquisition Date subject to the terms of the letter

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agreement attached hereto as Exhibit “B” and incorporated herein by reference, and Seller will cause Scott Glenn to accept such employment.

(c)           Employment of Other Employees. Purchaser will offer employment to all other employees (other than Members) of the Business on terms substantially equivalent to the salary and benefits provided to such employees by Seller. Any such employees so employed will be at-will employees terminable by Purchaser at any time with or without cause, subject to Purchaser’s normal termination policies considering the length of employment of such employee by Purchaser and Seller. Seller agrees to use its best efforts to assist Purchaser in hiring as its employees any employees of Seller under substantially similar terms to the terms under which such employee was employed by Seller. Purchaser will use its best efforts to obtain from H. Mac Busby, Ron Sunderland and Robert Petcavich a general release of all known or unknown claims either may have arising out of or in connection with performing services for the Company as an employee, agent and/or consultant (other than claims for indemnity under the Purchaser’s Articles of Incorporation or Bylaws which arise out of their respective actions taken in good faith as directors or officers of Purchaser).

(d)           Retention of Independent Contractors. Seller agrees to use its best efforts to assist Purchaser in engaging as its independent contractors the current key independent contractors of Seller as set forth on Schedule 8(d) hereto, on substantially similar terms under which such independent contractor was engaged by Seller. Purchaser will offer to engage Robert Petcavich as a consultant to the Company pursuant to a consulting contract on terms and conditions reasonably acceptable to Seller and Dr. Petcavich.

(e)           Sales Taxes. All sales and other transfer taxes relating to the sale of the Seller Assets pursuant to the terms hereof shall be shared equally between Seller and Purchaser.

(f)            Bulk Sales. Seller shall cooperate with Purchaser as reasonably requested by Purchaser to comply with Applicable Law relating to bulk sales or transfers of assets.

(g)           Assignment of Contracts and Rights. Anything in this Agreement to the contrary notwithstanding, this Agreement shall not constitute an agreement to assign any Asset or any claim or right or any benefit arising thereunder or resulting therefrom if an attempted assignment thereof, without the consent of a third party thereto, would constitute a breach or other contravention thereof, be ineffective with respect to any party thereto or in any way adversely affect the rights of Seller or, upon transfer, Purchaser thereunder. Seller agrees that it will use its best efforts to obtain the necessary consents to the assignment of each Seller Contract or other Seller Asset which by its terms requires the consent of any of the other contracting parties thereto to an assignment thereof to Purchaser. If such consent is not obtained with respect to any such Contract or other Asset, Seller and Purchaser will cooperate in an arrangement reasonably satisfactory to Purchaser and Seller under which Purchaser shall obtain, to the extent practicable, the claims, rights and benefits and assume the corresponding obligations

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thereunder in accordance with this Agreement, including subcontracting, sub-licensing or sub-leasing to Purchaser, or under which Seller shall enforce for the benefit of Purchaser, with Purchaser assuming Seller’s obligations, any and all claims, rights and benefits of Seller against a third party thereto. Seller will promptly pay to Purchaser when received all monies received by Seller under any Contract or other Asset or any claim, right or benefit arising thereunder not transferred to Purchaser pursuant to this Section 8(j). Purchaser agrees to perform at its sole expense all of the obligations of Seller to be performed after the Acquisition Date under any such Contract or other Asset the benefits of which Purchaser is receiving pursuant to the provisions of this Section 8(g).

(h)           Power of Attorney. Seller hereby constitutes and appoints Purchaser the true and lawful attorney of Seller, with full power of substitution, in the name of Seller or in the name of Purchaser, but for the benefit of Purchaser and at the expense of Purchaser (provided, however, that, Seller’s obligations will not in any way be limited as a result of Purchaser undertaking such expense) (1) to collect, assert or enforce any claim, right or title of any kind in or to the Assets, to institute and prosecute all actions, suits and proceedings which Purchaser may deem proper in order to collect, assert or enforce any such claim, right or title, to defend and compromise all actions, suits and proceedings in respect of any Asset, and to do all such acts and things in relation thereto as Purchaser shall deem advisable and (2) to endorse, without recourse, the name of Seller on any check or other evidence of indebtedness received by Purchaser on account of any Asset. Seller acknowledges that such powers are coupled with an interest and shall not be revocable by it in any manner or for any reason, including its dissolution, and that Purchaser shall be entitled to retain for its own account any amounts collected pursuant to such powers, including any amounts payable as interest in respect thereof. Such powers shall be granted by such powers of attorney and other instruments as shall be reasonably requested by counsel for Purchaser.

(i)            Change of Name. On the Acquisition Date, Seller will change its name to a name not using the name “Allergy Free” or any name confusingly similar to “Allergy Free.” On the Acquisition Date, subject to availability, Purchaser will change its name to “Planet Technologies, Inc.” 

(j)            Transfer of Trade Names and Trademarks. Prior to the Acquisition Date, Seller will cause all trade names and trademarks which are used in the Seller Business to be transferred to Seller, and Members shall cause any such transfers to be promptly recorded in the appropriate offices in order to give effect to, and to reflect, such transfers.

(k)           Surrender of Certain Options. Purchaser will use its best efforts to cause all options at an exercise price above $1.00 per share, pre split, but considering any applicable anti-dilution adjustments, to be surrendered and cancelled and the closing of the transaction by Seller will be contingent upon the surrender and cancellation of substantially all of such out-of-the-money options.

(l)            Distribution of Royalty Rights. Immediately prior to the Closing, Purchaser shall assign to US Bank, or another Person, as Trustee, for the benefit of

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Purchaser’s shareholders of record as of the record date of the meeting called to vote on the Acquisition, the right to receive all royalties payable to Purchaser pursuant to those certain Sale and Licensing Agreements between Purchaser and Agway, Inc., each dated March 31, 2003, relating to Purchaser’s FreshSeal and Optigen technology (“Agway Agreements”), the rights under which have been sold by Agway to BASF and Alltech, respectively, and that certain Purchase, Sale and License Agreement between Purchaser and Ryer Enterprises, LLC, dated May 1, 2003, relating to Purchaser’s MIM technology (“Ryer Agreement”). The Trustee will be instructed to distribute royalties received, if any, quarterly. The Agway Agreements and Ryer Agreement are collectively referred to as the Sale and Licensing Agreements. Other than the right to receive and collect royalties, Purchaser will retain all other rights and obligations under the Sale and License Agreements. Purchaser will also assign to the Trustee substantially all of the monthly installments received from Ryer post closing, in cash, in one or more payments to create a cash reserve at the Trustee in such amounts as the Trustee and Purchaser shall agree to provide a reserve from which the Trustee may pay its trustee’s fees and reimbursement for costs and expenses incurred by the Trustee in connection with enforcing payment of the royalties. In the event Purchaser incurs costs or expenses in connection with obligations under the Sale and Licensing Agreements, Purchaser shall be entitled to reimbursement from the trust for such costs and expenses to the extent of any undistributed royalties received by the Trustee, provided such rights shall be subordinate to any rights of the Trustee for payment of its fees and expenses. In the event pursuant to the Sale and Licensing Agreement, Purchaser recovers the exclusive or nonexclusive right to exploit such technologies, Purchaser may do so for Purchaser’s own account and with no obligation to pay royalties to the Trustee.

(m)          Reverse Stock Split. Effective as of the Acquisition Date or immediately thereafter, Purchaser will implement a reverse split of it shares by a ratio of 50:1 (the “Reverse Stock Split”).

(n)           Private Placement. Concurrently with the Acquisition, Purchaser will offer to shareholders of Purchaser and Members of Seller the opportunity to purchase from Purchaser Common Stock in an unregistered Private Placement at a purchase price equal to the greater of (i) $0.03 per share or (ii) 70% of weighted average market price of Purchaser Common Stock for the ten (10) Business Day period immediately preceding the Acquisition Date (the “Private Placement”). The aggregate offering will be up to $2,000,000 plus any debt converted by Seller, and subscriptions will be limited to accredited investors and up to thirty-five (35) other investors. If the offering is oversubscribed, shares will first be allocated to Purchaser shareholders on a pro rata basis, second to Seller Members and the balance, if any, to new investors.

(o)           Board of Directors. The parties will use their best efforts to cause the appointment and election of a board of directors of Purchaser effective immediately after closing consisting of Scott L. Glenn, Chairman, Robert Petcavich, H. Mac Busby, Michael Trinkle and Ellen Preston.

(p)           Registration Rights. Prior to the Effective Date, Purchaser and Seller shall enter into a Registration Rights Agreement on reasonable and customary

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terms pursuant to which Purchaser will agree to use its best effort to cause the Private Stock and shares issuable upon conversion of the Subordinated Convertible Note to be registered under the Securities Act within 180 days after the Acquisition Date.

9.             Conditions.

(a)           Conditions to Each Party’s Obligations. The respective obligation of each of the parties hereto to consummate the Acquisition is subject to the fulfillment or written waiver by the parties hereto prior to the Acquisition Date of each of the following conditions:

(i)            Shareholder Approvals. This Agreement shall have been duly approved by the affirmative vote of holders of not less than a majority of the outstanding Members of Seller, in accordance with applicable law. The principal terms of this Agreement shall have been approved by the affirmative vote of the holders of not less than a majority of the outstanding shares of Purchaser, in accordance with applicable law.

(ii)           Regulatory Matters. Purchaser shall have obtained an affirmative response to its “No Action Letter” to the SEC, relating to distribution of the right to receive royalty payments to the Trustee as described in Section 8(l).

(iii)          No Injunction. No Governmental Authority of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, judgment, decree, injunction or other order (whether temporary, preliminary or permanent) which is in effect and prohibits consummation of the transactions contemplated by this Agreement.

(b)          The obligation of the Seller to consummate the Acquisition is also subject to the fulfillment or written waiver prior to the Acquisition Date of each of the following additional conditions:

(i)            Representations and Warranties. The representations and warranties of Purchaser set forth in this Agreement shall be true and correct as of the date of this Agreement and as of the Acquisition Date as though made on and as of the Acquisition Date (except that representations and warranties that by their terms speak as of the date of this Agreement or some other date shall be true and correct as of such date). For purposes of this paragraph, such representations and warranties shall be deemed to be true and correct in all material respects unless the failure or failures of such representations and warranties to be true and correct in all material respects, either individually or in the aggregate, and without giving effect to any materiality, material adverse effect or similar qualifications set forth in such representations and warranties, will have or would reasonably be expected to have a Material Adverse Effect on Purchaser. Purchaser shall have performed, in all material respects, each of its covenants and agreements contained in this Agreement. The Seller shall have received a certificate, dated the Acquisition

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Date, signed on behalf of Purchaser by the Chief Executive Officer and the Chief Financial Officer of Purchaser to such effect.

(ii)           Performance of Obligations of Parent. Purchaser shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Acquisition Date, and the Seller shall have received a certificate, dated the Acquisition Date, signed on behalf of Purchaser by the Chief Executive Officer and the Chief Financial Officer of Purchaser to such effect.

(iii)          Satisfaction of Covenants. Purchaser shall have retained Scott Glenn as President and Chief Executive Officer, entered into a consulting agreement with Robert Petcavich, and taken all steps necessary to effectuate the Reverse Stock Split, election of the board of directors, Private Placement, surrender of out of the money options and distribution of the royalty rights, all as more fully provided in Section 8 of this Agreement.

(c)           The obligation of the Purchaser to consummate the Acquisition is also subject to the fulfillment or written waiver prior to the Acquisition Date of each of the following additional conditions:

(i)            Representations and Warranties. The representations and warranties of Seller set forth in this Agreement shall be true and correct as of the date of this Agreement and as of the Acquisition Date as though made on and as of the Acquisition Date (except that representations and warranties that by their terms speak as of the date of this Agreement or some other date shall be true and correct as of such date). For purposes of this paragraph, such representations and warranties shall be deemed to be true and correct in all material respects unless the failure or failures of such representations and warranties to be true and correct in all material respects, either individually or in the aggregate, and without giving effect to any materiality, material adverse effect or similar qualifications set forth in such representations and warranties, will have or would reasonably be expected to have a Material Adverse Effect on Seller The Purchaser shall have received a certificate, dated the Acquisition Date, signed on behalf of Seller by the Chief Executive Officer and the Chief Financial Officer of Seller to such effect.

(ii)           Performance of Obligations of Purchaser. Seller shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Acquisition Date, and Purchaser shall have received a certificate, dated the Acquisition Date, signed on behalf of Seller by the Chief Executive Officer and the Chief Financial Officer of Seller to such effect.

(iii)          Satisfaction of Covenants. Purchaser shall have retained Scott Glenn as President and Chief Executive Officer, and taken all steps necessary to effectuate the election of the board of directors, the Private

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Placement, and distribution of the royalty rights, all as more fully provided in Section 8 of this Agreement.

10.          Termination.  

(a)          This Agreement may be terminated:

(i)            Mutual Consent. At any time prior to the Acquisition Date, by the mutual consent of Purchaser and Seller.

(ii)           Breach. At any time prior to the Acquisition Date, by Purchaser or Seller in the event of a breach or any representation, warrant, covenant or obligation contained herein by Seller, in the case of termination by Purchaser, or by Purchaser, in the case of termination by Seller, which breach cannot be or has not been cured within thirty (30) days after the giving of written notice to the breaching party or parties of such breach provided that such breach would be reasonably likely, individually or in the aggregate with other breaches, to result in a Material Adverse Effect with respect to Purchaser or Seller, as the case may be.

(iii)          Delay. At any time prior to the Acquisition Date by Purchaser or Seller in the event that the Acquisition is not consummated by June 20, 2004, except that Purchaser or Seller, as the case may be, shall not have the right to terminate pursuant to this Sub-Section 10(a)(iii) to the extent that the failure to close arises out of or results from the knowing action or inaction of the party seeking to terminate pursuant to this Sub-Section 10(a)(iii), which action or inaction is in violation of its obligations under this Agreement.

(iv)          At any time prior to the Acquisition Date, by Purchaser if Purchaser receives a written proposal or offer with respect to a merger, reorganization, share exchange, consolidation or similar transaction involving, or any purchase of all or substantially all of the assets of the Purchaser or more than 50% of the outstanding equity securities, of the Purchaser (any such proposal or offer being hereinafter referred to as an “Acquisition Proposal”), if and only to the extent that, the Board of Purchaser determines in good faith that (i) acceptance of the Acquisition Proposal would be legally required in order for the directors to comply with their respective fiduciary duties under applicable law, (ii) such Acquisition Proposal, if accepted, is reasonably likely to be consummated, taking into account all legal, financial and regulatory aspects of the proposal, and the Person making the proposal, and (iii) if consummated, the Acquisition Proposal would result in a transaction more favorable to the Purchaser’s shareholders from a financial point of view than the transaction contemplated by this Agreement. The Purchaser agrees that its officers or directors shall not, and that it shall direct and use its reasonable best efforts to cause its employees, agents and representatives not to, directly or indirectly, initiate, solicit or otherwise encourage any inquiries or the making of any proposal or offer with respect to an Acquisition Proposal. Purchaser agrees that it will notify Seller immediately if

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any inquiries, proposals or offers are received by, or any discussions or negotiations are sought to be initiated or continued with, Purchaser or any of its representatives relating to a potential Acquisition Proposal.

(v)           Due Diligence. By either party, if at or prior to April 15, 2004, such party notifies the other party that it has decided not to pursue the transaction contemplated by this Agreement, following review of the information regarding the other party not provided to such party prior to the date of this Agreement.

(b)          Effect of Termination. In the event of termination of this Agreement pursuant to this Section 10, no party to this Agreement shall have any liability or obligation to any other party hereunder except as set forth in Sub-Sections (i) and (ii) and provided that termination will not relieve a breaching party and liability for any willful breach of any covenant, agreement, representation or warranty or this Agreement giving rise to such termination.

(i)            If this Agreement is terminated by the Purchaser pursuant to Sub-Section (10)(a)(iv), upon such termination, Purchaser shall pay to the Seller a termination fee of $50,000.00 (the “Termination Fee”).

(ii)           If this Agreement is terminated by either party pursuant to Section 10(a)(v), such party shall pay to the other party upon such termination a due diligence fee of $25,000.00 (“Due Diligence Fee”).

(iii)          Each party agrees that the agreements contained in Sub-Sections (i) and (ii) above are an integral part of the transactions contemplated by this Agreement, that without such agreements the parties would not have entered into this Agreement, and that such amounts do not constitute a penalty.

11.          Deliveries.  Upon the terms and subject to the conditions set forth in this Agreement, at the Closing, the parties shall make the following deliveries:

(a)           Instruments of Conveyance. Seller is delivering to Purchaser bills of sale, instruments of transfer, assignment and conveyance, and other instruments as the parties and their respective counsel shall deem reasonably necessary or appropriate, to convey, transfer and assign to Purchaser and effectively vest in Purchaser all right, title and interest in and to, and good and marketable title to, the Assets.

(b)           Possession. Seller shall transfer and deliver to Purchaser on the Acquisition Date such keys, passwords, codes, lock and safe combinations and other similar items as Purchaser shall require to obtain immediate and full possession and control of the Assets, and shall also make available to Purchaser at their then existing locations the originals of all documents in Seller’s possession that are required to be transferred to Purchaser by this Agreement.

(c)           Opinion of Counsel. Each party shall deliver to the other party an opinion of counsel for such party substantially in the form and content of Exhibit “C”

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addressed to the other party and dated the Acquisition Date. In rendering such opinion, counsel may rely upon certificates of public officials and upon certificates of officers as to factual matters.

(d)           Contract Assumption. Purchaser shall deliver to Seller instruments of assumption of the Contracts listed on Schedule 6(k).

(e)           Closing Balance Sheet. Seller shall deliver to Purchaser the Closing Balance Sheet.

12.          Indemnification by Seller. Subject to the limitations set forth in Section 5(c) and Section 14(c), Seller shall indemnify, defend and save Purchaser and its officers, directors and shareholders (collectively, the “Purchaser Indemnitees”), harmless from, against, for and in respect of any and all Damages suffered, sustained, incurred or required to be paid by any Purchaser Indemnitee caused by, resulting from or arising out of (A) the claims of any broker or finder engaged by Seller, (B) the untruth, inaccuracy or breach of any representation or warranty of Seller contained in or made in connection with this Agreement or any Schedule or Exhibit hereto or any other Seller’s Document, (C) the breach of any agreement or covenant of Seller contained in or made in connection with this Agreement, (D) any failure of Seller to pay, perform or discharge any of the Excluded Liabilities in accordance with the terms thereof, (E) any Liabilities in connection with noncompliance with the provisions of any Applicable Law relating to bulk sales or transfers of assets in connection with the transactions contemplated by this Agreement (other than an Assumed Liability).

13.          Indemnification by Purchaser. Subject to the limitations set forth in Section 5(c) and Section 14(c), subject to the limitations hereinafter set forth, Purchaser shall indemnify, defend and save Seller, and its Members, officers and directors (“Seller Indemnitees”), harmless from, against, for and in respect of any and all Damages suffered, sustained, incurred or required to be paid by any Seller Indemnitee because of (A) the claims of any broker or finder engaged by Purchaser, (B) the untruth, inaccuracy or breach of any representation, warranty, agreement or covenant of Purchaser contained in or made in connection with this Agreement or any Schedule or Exhibit hereto or any other Purchaser’s Document (c) the breach of any agreement or covenant of Purchaser contained in or made in connection with this Agreement, and (D) any Liability arising out of the operation of the Business after the Acquisition Date, except to the extent the foregoing is otherwise subject to indemnification by Seller under this Agreement.

14.          Further Provisions Regarding Indemnification.

(a)           Survival.

(i)            All representations, warranties, covenants, agreements and obligations of each of Seller Purchaser and Purchaser in this Agreement or in Seller’s Documents and Purchaser’s Documents and all claims of an Indemnified Party (as defined below) in respect of any breach of any representation, warranty, covenant, agreement or obligation of any Indemnifying Party (as defined below)

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contained in this Agreement, shall survive the consummation of the transactions contemplated herein and shall expire on the second (2nd) anniversary of the Acquisition Date.

(ii)           Notwithstanding anything herein to the contrary, indemnification for claims for which written notice as provided in Section 14(b) has been given prior to the expiration of the representation, warranty, covenant, agreement or obligation upon which such claim is based shall not expire, and claims for indemnification may be pursued, until the final resolution of such claim.

(iii)          Nothing in this Section 14(a) shall modify in any respect any covenant, agreement or obligation to be performed by any party pursuant to the provisions of this Agreement.

(iv)          Nothing contained in this Agreement or otherwise shall in any way limit any claim, suit, cause of action or remedy that may be available to any party based on Fraud.

(b)          Defense of Claims. Whenever any claim shall arise for indemnification hereunder, the party entitled to indemnification (the “Indemnified Party”) shall promptly notify the other party (the “Indemnifying Party”) in writing of the claim and, when known, the facts constituting the basis for such claim. The Indemnifying Party may, upon written notice to the Indemnified Party within 30 calendar days of receipt of the notice specified in the first sentence of this paragraph, assume the defense of any such claim if the Indemnifying Party acknowledges to the Indemnified Party the Indemnified Party’s right to indemnify pursuant hereto in respect of the entirety of such claim. If the Indemnifying Party assumes the defense of any such claim, the Indemnifying Party shall select counsel acceptable to the Indemnified Party to conduct the defense of such claim, shall take all steps necessary in the defense or settlement thereof and shall at all times diligently and promptly pursue the resolution thereof. If the Indemnifying Party shall have assumed the defense of any claim in accordance with this Section 13(b), the Indemnifying Party shall be authorized to consent to a settlement of, or the entry of any judgment arising from, any such claim, without the prior written consent of the Indemnified Party; provided, however, that (i) the Indemnifying Party shall pay or cause to be paid all amounts arising out of such settlement or judgment concurrently with the effectiveness thereof; (ii) the Indemnifying Party shall not be authorized to encumber any of the assets of the Indemnified Party or to agree to any restriction that would apply to the Indemnified Party or to its conduct of business; and (iii) a condition to any such settlement shall be a complete release of the Indemnified Party with respect to such claim which contains no admission of liability on the part of the Indemnified Party. The Indemnified Party shall be entitled to participate in the defense of any such action, with its own counsel and at the expense of the Indemnifying Party. The Indemnified Party shall, and shall cause each of its Affiliates, officers, employees, consultants and agents to, cooperate fully with the Indemnifying Party in the defense of any claim or Proceeding being defended by the Indemnifying Party pursuant to this Section 14(b). If the Indemnifying Party does not assume the defense of any claim resulting therefrom in

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accordance with the terms of this Section 13(b), the Indemnified Party may defend against such claim in such manner as it may deem appropriate, including settling such claim after giving notice of the same to the Indemnifying Party, on such terms as the Indemnified Party may deem appropriate.

(c)           Indemnification Threshold. No claim for indemnification will be made by any Indemnified Party against any Indemnifying Parties unless the aggregate of all Damages incurred by the Indemnified Parties exceeds $10,000, in which case the Indemnifying Parties shall be liable for such Damages including the initial $10,000.

15.          General Provisions.

(a)           Further Assurances. The parties shall cooperate and take such actions, and execute such other documents subsequent to the Acquisition Date as either may reasonably request in order to carry out the provisions or purpose of this Agreement.

(b)           Notices. All notices or other communications in connection with this Agreement shall be in writing and shall be deemed given (a) if personally delivered, when delivered, (b) if mailed, two Business Days after having been sent by registered or certified mail, postage prepaid, return receipt requested, or (c) if sent through an overnight delivery service in circumstances to which such service guarantees next-day delivery, the day following be so sent, as follows:

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(i)	If to Seller:
	Scott Glenn
	Allergy Free, LLC
	6835 Flanders Drive, Ste 500
	San Diego, California 92121
	With a copy to:
	Glen Roberts, Esq.
	P.O. Box 580
	Del Mar, California 92014

(ii)	If to Purchaser:
	c/o H. Mac Busby
	Planet Polymer Technologies, Inc.
	3852 Alameda Place
	San Diego, California 92103
	With a copy to:
	Blanchard, Krasner & French
	Attn:  Robert W. Blanchard
	800 Silverado Street, Second Floor
	La Jolla, California 92037

(c)           Entire Agreement; Amendment; No Waiver. This Agreement (which includes the Schedules and Exhibits hereto) sets forth the parties final and entire agreement with respect to its subject matter and supersedes any and all prior understandings and agreements. This Agreement can be amended or supplemented, and any provision hereof can be waived, only by a written instrument making specific reference to this Agreement, in the case of amendment or supplement, signed by all the parties hereto, or in the case of a waiver, signed by the party against whom enforcement of such waiver is sought. No waiver by a party of any default, misrepresentation or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent occurrence. No failure or delay by a party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.

(d)           Public Announcements. Seller agrees that they will not make any public announcement, including any announcement to the employees of the Business, or otherwise cause to be publicized in any manner by way of press interviews, responses to press questions or inquiries, press releases or otherwise in any manner designed for

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release to the general or trade press, any aspect or proposed aspect of this transaction (including but not limited to the price paid and other terms of the transaction) without the mutual agreement of Purchaser.

(e)           Successors; Assignment. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, executors, administrators, personal representatives, successors and assigns. This Agreement or any of its rights, interests or obligations hereunder may not be assigned or transferred by either party without the prior written consent of the other party.

(f)            Captions. The section and paragraph headings in this Agreement and in the Schedules hereto are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

(g)           Fees and Expenses. Whether or not the transactions contemplated hereby are consummated, the parties hereto shall pay their own respective expenses.

(h)           Severability; Construction. If any provision of this Agreement shall be held by any court of competent jurisdiction to be illegal, invalid, unenforceable or void, such provision shall be construed and enforced as if it had been more narrowly drawn so as not to be illegal, invalid, unenforceable or void, and such illegality, invalidity or unenforceability shall have no affect upon and shall not impair the enforceability of any other provision of this Agreement. The parties hereto intend that each representation, warranty and covenant contained herein will have independent significance. If any party has breached any representation, warranty or covenant contained herein in any respect, the fact that there exists another representation, warranty or covenant relating to the same subject matter (regardless of the relative levels of specificity) that the party has not breached will not detract from or mitigate the fact that the party is in breach of the first representation, warranty or covenant.

(i)            Governing Law; Exclusive Jurisdiction. This Agreement shall be governed by and construed and interpreted in accordance with the internal law of the State of California (without reference to its rules as to choice or conflict of law). Each of the parties hereto agrees that any legal action or proceeding against it or any of its property with respect to this Agreement or any other agreement executed in connection herewith, except as otherwise provided herein, shall be brought exclusively in the Superior Courts for the County of San Diego, State of California, or the Federal District Court for the Southern District of California, and all related appellate courts, and the parties irrevocably consent to the jurisdiction of such courts.

(j)            Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument.

[The remainder of this page is intentionally left blank]

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IN WITNESS WHEREOF, the parties have duly executed this Agreement on the date first above written.

PLANET POLYMER TECHNOLOGIES, INC.

By:  ______________________________________

H. Mac Busby, President

ALLERGY FREE, LLC

By:  SR Technologies Associates, Manager

By:  ________________________________

Scott Glenn, President

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EX-5

EXHIBIT “C 1”

FIRST AMENDMENT TO THE ASSET PURCHASE AGREEMENT
DATED AS OF MARCH 18, 2004 BY AND AMONG
PLANET POLYMER TECHNOLOGIES, INC. AND ALLERGY FREE, LLC

                This first amendment (“Amendment”) to the Asset Purchase Agreement (“Agreement”) dated as of March 18, 2004 by and among Planet Polymer Technologies, Inc. (“Purchaser”) and Allergy Free, LLC (“Seller”) is made and entered into as of June 11, 2004 by and among the parties to the Agreement and is made with reference to the following:

RECITALS

WHEREAS, the parties entered into the Agreement as of March 18, 2004;

WHEREAS, the ability of the parties to close the transaction has been delayed due to factors outside of the control of either party, the parties now desire to amend the Agreement;

AGREEMENT

NOW THEREFORE, in consideration of the above recitals and the mutual promises and agreements contained in this Amendment, and for valuable consideration, the receipt and sufficiency of which is hereby acknowledged and agreed, the parties hereby agree as follows:

1.             In accordance with Section 4(b) of the Agreement, Seller has elected to reduce the Subordinated Convertible Note to $356,430 and take additional shares of common stock of Purchaser for the balance of the outstanding indebtedness of Allergy Free to its members determined at $.05 per share.

2.             Section 8(l) is hereby amended and restated as follows:

                “(1)         Distribution of Royalty Rights.  Immediately prior to the Closing, Purchaser shall assign to US Bank, or another Person, as Trustee, for the benefit of Purchaser’s shareholders of record on April 15, 2004, the right to receive all royalties payable to Purchaser pursuant to those certain Sale and Licensing Agreements between Purchaser and Agway, Inc., each dated March 31, 2003, relating to Purchaser’s FreshSeal and Optigen technology (“Agway Agreements”), the rights under which have been sold by Agway to BASF and Alltech, respectively, and that certain Purchase, Sale and License Agreement between Purchaser and Ryer Enterprises, LLC, dated May 1, 2003, as amended, relating to Purchaser’s MIM technology (“Ryer Agreement”). The Trustee will be instructed to distribute royalties received, if any, quarterly. The Agway Agreements

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and Ryer Agreement are collectively referred to as the Sale and Licensing Agreements. Purchaser will also assign to US Bank or another Person, as Trustee, for the benefit of Purchaser’s shareholders of record as of April 15, 2004, all proceeds received from Ryer or its Successor in prepayment of the Ryer Note, less fees and expenses related to accepting such prepayment and amending the Ryer Agreement. The terms of the Ryer Note are described more fully in the Ryer Agreement. Other than the right to receive and collect (i) royalties and (ii) proceeds received in prepayment of the Ryer Note, Purchaser will retain all other rights and obligations under the Sale and License Agreements. In the event Purchaser incurs costs or expenses in connection with obligations under the Sale and Licensing Agreements, Purchaser shall be entitled to reimbursement from the trust for such costs and expenses to the extent of any undistributed royalties received by the Trustee, provided such rights shall be subordinate to any rights of the Trustee for payment of its fees and expenses. In the event pursuant to the Sale and Licensing Agreement, Purchaser recovers the exclusive or nonexclusive right to exploit such technologies, Purchaser may do so for Purchaser’s own account and with no obligation to pay royalties to the Trustee.”

3.             Section 10(a)(iii) of the Agreement is hereby amended and restated as follows:

“(iii)  Delay. At any time prior to the Acquisition Date by Purchaser or Seller in the event that the Acquisition is not consummated by August 31, 2004, except that Purchaser or Seller, as the case may be, shall not have the right to terminate pursuant to this Sub-Section 10(a)(iii) to the extent that the failure to close arises out or results from the knowing action or inaction of the party seeking to terminate pursuant to this Sub-Section 10 (a)(iii), which action or inaction is in violation of its obligations under this Agreement.”

4.             Purchaser has selected June 15, 2004 as the “record date” for which shareholders of Purchaser will be entitled to vote on whether to approve the Acquisition.

5.             Section 8(n) of the Agreement is hereby amended and restated as follows:

“8.(n)  Concurrently with the Acquisition, Purchaser will offer to shareholders of Purchaser and Members of Seller the opportunity to purchase from Purchaser Common Stock in an unregistered Private Placement at a purchase price equal to $0.05 per share (the ”Private Placement“). The aggregate offering will be up to $2,000,000 and subscriptions will be limited to accredited investors and up to thirty-five (35) other investors. If the offering is oversubscribed, shares will first be allocated to Purchaser shareholders on a pro rata basis, second to Seller Members and the balance, if any, to new investors.”

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                IN WITNESS WHEREOF, the parties have duly executed the amendment to agreement on the date first written above.

PLANET POLYMER TECHNOLOGIES, INC.
By:	________________________
	H. Mac Busby, President
ALLERGY FREE, LLC
By:  SR Technologies Associates, Manager
	By:	_______________________
		Scott Glenn, President

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EX-7

EXHIBIT “C 2”

SECOND AMENDMENT TO THE ASSET PURCHASE AGREEMENT
DATED AS OF MARCH 18, 2004 BY AND AMONG
PLANET POLYMER TECHNOLOGIES, INC. AND ALLERGY FREE, LLC

                This second amendment (“Amendment”) to the Asset Purchase Agreement (“Agreement”) dated as of March 18, 2004, as amended June 11, 2004, by and among Planet Polymer Technologies, Inc. (“Purchaser”) and Allergy Free, LLC (“Seller”) is made and entered into as of October 6, 2004 by and among the parties to the Agreement and is made with reference to the following:

RECITALS

                WHEREAS, the parties entered into the Agreement as of March 18, 2004, as amended June 11, 2004;

                WHEREAS, the ability of the parties to close the transaction has been delayed due to factors outside of the control of either party, the parties now desire to amend the Agreement;

AGREEMENT

                NOW THEREFORE, in consideration of the above recitals and the mutual promises and agreements contained in this Amendment, and for valuable consideration, the receipt and sufficiency of which is hereby acknowledged and agreed, the parties hereby agree as follows:

1.             In accordance with Section 4(b) of the Agreement, Seller has elected to reduce the Subordinated Convertible Note to $274,300 and the parties agree the balance of the purchase price shall be paid by delivery of 82,732,970 shares of common stock of Purchaser.

2.             Section 8(l) is hereby amended to change the record date for distribution or the Royalty Rights to September 30, 2004.

                3.             Section 10(a)(iii) of the Agreement is hereby amended to replace August 31, 2004 with November 30, 2004.

4.             Purchaser has selected September 30, 2004 as the “record date” for which shareholders of Purchaser will be entitled to vote on whether to approve the Acquisition.

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5.             Section 8(n) of the Agreement is hereby amended to provide that shares not purchased in the Private Placement concurrently with the closing may be purchased up to 30 days after the closing or such later date as the board of Purchaser shall approve.”

                IN WITNESS WHEREOF, the parties have duly executed the amendment to agreement on the date first written above.

PLANET POLYMER TECHNOLOGIES, INC.
By:	________________________
	H. Mac Busby, President
ALLERGY FREE, LLC
By:  SR Technologies Associates, Manager
	By:	_______________________
		Scott Glenn, President

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EX-8

EXHIBIT “D”

PROPOSED ROYALTY LIQUIDATION TRUST

D-1

PLANET POLYMER TECHNOLOGIES, INC.
Grantor and Administrator

and

U.S. BANK
Trustee

ROYALTY LIQUIDATION TRUST

TRUST AGREEMENT
Dated as of _____________, 2004

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THIS TRUST AGREEMENT, dated as of _______________, 2004, is made by and between PLANET POLYMER TECHNOLOGIES, INC, as Grantor, and US BANK, as Trustee.

In consideration of the mutual agreements herein contained, each party agrees as follows for the benefit of the Beneficiaries:

ARTICLE I

DEFINITIONS

Section 1.1             Definitions. Whenever used in this Agreement, the following words and phrases shall have the following meanings:

“Administrator” shall mean Planet Royalty Administrator, LLC and thereafter any Person appointed as successor as herein provided to service the Royalty Contracts.

“Agreement” shall mean this Trust Agreement and all amendments hereof and supplements hereto.

“Available Funds” shall mean collected funds in the Collection Account in excess of the Reserve Amount.

“Beneficiary” shall mean the holders of beneficial interests in the Trust.

“Beneficiaries’ Interest” shall have the meaning specified in Section 4.1.

“Beneficiary Register” shall mean the register maintained pursuant to Section 6.3, providing for the registration of the beneficial interests and transfers and exchanges thereof.

“Business Day” shall mean any day other than a Saturday, a Sunday or a day on which banking institutions or trust companies in New York, New York or San Diego, California are authorized or obligated by law or executive order to be closed.

“Closing Date” shall mean _______________, 2004.

“Collections” shall mean all payments received by the Trustee in respect of the Royalty Contracts in the form of cash, checks, wire transfers, ATM transfers or any other form of payment.

“Collection Account” shall have the meaning specified in subsection 4.2(a).

“Eligible Institution” shall mean a depository institution organized under the laws of the United States or any one of the states thereof, including the District of Columbia,

D-3

the deposits of which are insured by the Federal Deposit Insurance Corporation (“FDIC”).

“Eligible Investments” shall mean (i) negotiable instruments or securities represented by instruments in bearer or registered form which evidence obligations fully guaranteed as to timely payment by the United State of America with a maturity date of one year or less; and (ii) certificates of deposit, demand deposits, time deposits in, and money market funds issued by the Trustee.

“FDIC” shall mean the Federal Deposit Insurance Corporation.

“Governmental Authority” shall mean the United States of America, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

“Grantor” shall mean Planet Polymer Technologies, Inc.

“Internal Revenue Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.

“Net Royalties” shall mean gross royalties received by the Trust during any applicable period less payments to the Trustee, Grantor, and/or Administrator during such period.

“Obligors” shall mean BASF, Alltech, Ryer, Inc., and their respective successors.

“Opinion of Counsel” shall mean a written opinion of legal counsel.

“Paying Agent” shall mean any paying agent appointed pursuant to Section 6.6 and shall initially be the Trustee.

“Payment Date” shall mean the twentieth day of each calendar quarter.

“Person” shall mean any legal person, including any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, governmental entity or other entity of similar nature.

“Record Date” shall mean with respect to any Payment Date the last day of the preceding calendar month and with respect to any meeting or vote of the Beneficiaries, the last day of the calendar month preceding the date notice of such meeting or vote is given.

“Registrar” shall have the meaning specified in Section 6.3(a) and shall initially be the Trustee.

“Reserve Amount” shall mean $30,000.

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“Responsible Officer” shall mean the President, any Executive Vice President, Senior Vice President, Vice President, the Secretary, and, with respect to a particular matter, any other officer to whom such matter is referred because of such officer’s knowledge of and familiarity with the particular subject.

“Royalty Contracts” shall mean that certain Sale and Licensing Agreement (For Certain Technology For Use in Connection with Fruit, Vegetable, Floral, Nursery and Related Products) dated March 31, 2003, between Grantor and Agway, Inc., whose interest has been sold and assigned to BASF; that certain Sale and Licensing Agreement (For Certain Technology In Connection with Animal Feed, Fertilizer, and Related Products) dated March 31, 2003, between Grantor and Agway, Inc, whose interest has been sold and assigned to Alltech; and that certain Purchase, Sale and Licensing Agreement dated May 1, 2003, between Grantor and Ryer Enterprises, LLC.

“Trust” shall mean the trust created by this Agreement.

“Trust Assets” shall have the meaning specified in Section 2.1.

“Trust Office” shall mean the principal office of the Trustee at which at any particular time its trust business shall be administered, which office at the date of the execution of this Agreement is located at _______________________________.

“Trustee” shall initially mean US Bank and thereafter any successor trustee appointed as herein provided.

“Trustee’s Fees” shall mean $15,000.00 per annum.

“UCC” shall mean the Uniform Commercial Code, as amended from time to time, as in effect in any specified jurisdiction.

“Unit” shall  have the meaning specified in Section 6.1.

Section 1.2             Other Definitional Provisions.

(a)           All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein.

(b)           As used herein and in any certificate or other document made or delivered pursuant hereto or thereto, accounting terms not defined in Section 1.1, and accounting terms partly defined in Section 1.1 to the extent not defined, shall have the respective meanings given to them under generally accepted accounting principles or regulatory accounting principles, as applicable. To the extent that the definitions of accounting terms herein are inconsistent with the meanings of such terms under generally accepted

D-5

accounting principles or regulatory accounting principles, the definitions contained herein shall control.

(c)           The words “hereof”, “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement; and Section, subsection, Schedule and Exhibit references contained in this Agreement are references to Sections, subsections, Schedules and Exhibits in or to this Agreement unless otherwise specified.

ARTICLE II

CONVEYANCE OF ROYALTY RIGHTS

Section 2.1             Conveyance To Trust. By execution of this Agreement, the Grantor does hereby transfer, assign, set-over and otherwise convey to the Trust for the benefit of the Beneficiaries, all right, title and interest of the Grantor in and to the right to receive royalty and other payments under the Royalty Contracts (“Royalty Rights”), all monies due or to become due with respect thereto, all “proceeds” (as defined in Section 9-306 of the UCC as in effect in the State of California) thereof, and all insurance proceeds relating thereto, if any (including without limitation, $__________ cash previously received by Grantor with respect to the Royalty Rights). Notwithstanding the foregoing, Grantor reserves the right to receive from the Royalty Rights and other Available Funds reimbursement for any and all expenses Grantor incurs in connection with Royalty Contracts and the Trust. Such property, together with all monies on deposit and Eligible Investments in the Collection Account, if any, shall constitute the assets of the Trust (the “Trust Assets”). The foregoing transfer, assignment, set-over and conveyance does not constitute and is not intended to result in a creation or an assumption by the Trust, the Trustee or any Beneficiary of any obligation of Grantor or any other Person in connection with the Royalty Contracts or any agreement or instrument relating to the Royalty Contracts.

In connection with such transfer, the Grantor further agrees, at its own expense, on or prior to the Closing Date to indicate in its computer files and other business records and accounting statements that the Royalty Rights have been transferred to the Trust pursuant to this Agreement for the benefit of the Beneficiaries, and to endorse, deliver, record and file, at its own expense, such further documents and instruments, in such manner and in such jurisdictions, as may be requested to perfect the transfer and assignment of the Royalty Rights to the Trust.

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Section 2.2             Acceptance by Trustee.

                (a)           The Trustee hereby acknowledges its acceptance on behalf of the Trust of all right, title and interest previously held by Grantor in and to the Royalty Rights and declares that it shall maintain such right, title and interest, upon the trust herein set forth, for the benefit of all Beneficiaries.

(b)           The Trustee shall have no power to create, assume or incur indebtedness or other liabilities or to acquire or dispose of any property in the name of the Trust other than as contemplated in this Agreement.

ARTICLE III

ADMINISTRATION OF ROYALTY CONTRACTS

Section 3.1             Acceptance of Appointment and Other Matters Relating to Administrator.

(a)           The Grantor, in its capacity as originator of the Royalty Contracts hereby appoints Planet Royalty Administrator, LLC to act as the Administrator under this Agreement and Planet Royalty Administrator, LLC hereby agrees to act as the Administrator under this Agreement

(b)           The Administrator shall service and administer the Royalty Contracts and shall collect payments due under the Royalty Contracts in accordance with commercially reasonable standards and shall have full power and authority, acting alone or through any party properly designated by it hereunder to do any and all things in connection with such administration which it may deem necessary or desirable. Without limiting the generality of the foregoing and subject to Section 9.1, the Administrator is hereby authorized and empowered to execute and deliver, on behalf of the Trust for the benefit of the Beneficiaries, any and all instruments of satisfaction or cancellation, or of partial or full release or discharge, and all other comparable instruments, with respect to the Royalty Contracts and, after default of the Royalty Contracts and to the extent permitted under and in compliance with applicable law and regulations, to commence enforcement proceedings with respect to the Royalty Contracts. The Trustee shall furnish the Administrator with any documents necessary or appropriate to enable the Administrator to carry out its administrative duties hereunder.

Section 3.2             Administrative Expense Reimbursement. Administrator shall be entitled to reimbursement, from amounts otherwise distributable to Beneficiaries, of all expenses and liabilities incurred by Administrator in connection with its efforts to collect the Royalty Rights, enforce the provisions of the Royalty Contracts and/or satisfying any indemnity or other obligations of Grantor under the Royalty Contracts. The Administrator shall also be entitled to be paid reasonable compensation for administration of the Trust not to exceed the lesser of (i) $10,000 per year, or (ii) twenty-

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five percent (25%) of Net Royalties received by the Trust for such year, payable quarterly on each Payment Date.

Section 3.3             Quarterly Reports for the Trustee. At least ten (10) Business Days preceding a Payment Date, the Administrator shall forward to the Trustee a report setting forth (i) the aggregate amount of Collections received by Administrator, if any, during the preceding quarter, (ii) a description of collection expenses or other sums, if any, for which Administrator is claiming reimbursement, and a description of any significant event occurring with respect to the Royalty Contracts during such period.

Section 3.4             Tax Treatment. It is the intent of the Grantor and the Beneficiaries that, for United States of America federal and state tax purposes, the Beneficiaries will have an ownership interest in the Royalty Rights and other Trust Assets and royalty income of the Trust will be proportionately allocated to the Beneficiaries, and reported, to the extent required by law, for federal and state income tax purposes.

Section 3.5             Notices to Grantor. In the event that Grantor is no longer acting as Administrator, any Successor Administrator appointed pursuant to Section 8.3 shall deliver or make available to Grantor each report required to be prepared, forwarded or delivered thereafter pursuant to Section 3.3.

ARTICLE IV

RIGHTS OF BENEFICIARIES AND
ALLOCATION AND APPLICATION
OF COLLECTIONS

Section 4.1             Rights of Beneficiaries. Beneficiaries will have an ownership interest in the Royalty Rights and other Trust Assets expressed in terms of Units (as defined in this Agreement) and royalty income of the Trust will be proportionately distributed to the Beneficiaries in accordance with the terms of this Article IV and the Trust

Section 4.2             Establishment and Administration of Collection Account.

(a)           The Collection Account. The Trustee, for the benefit of the Beneficiaries, shall cause to be established and maintained in the name of the Trust with an Eligible Institution (which may be the Trustee) a segregated trust account (“Collection Account”), bearing a designation clearly indicating that the funds and Eligible Investments deposited therein are held for the benefit of the Beneficiaries.

(b)           Administration of the Collection Account. Funds on deposit in the Collection Account shall at the direction of the Trustee be invested by the Trustee in Eligible Investments that will mature so that such funds will be available prior to the Payment Date following such investment. The Trustee shall maintain possession of the negotiable instruments or securities evidencing the Eligible Investments from the time of

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purchase thereof until the time of sale or maturity. Funds on deposit in the Collection Account in excess of the Reserve Amount shall only be invested in Eligible Investments as described in subclause (ii) of the definition of Eligible Investments in Section 1.1 of this Agreement.

Section 4.3            Collections.

(a)           Collections. Administrator shall use good faith efforts to collect and cause to be delivered to Trustee the payments due under the Royalty Contracts on the due dates therefor prior to each Payment Date.

Section 4.4             Application of Available Funds. The Trustee shall make on each Payment Date from Available Funds in the Collection Account with respect to the quarter preceding such Payment Date, the following distributions in the following priorities:

(a)           Payment of Trustee’s Fees and reimbursement of expenses incurred by Trustee;

(b)           Payment to Grantor of expenses and other sums Grantor is entitled to be paid and reimbursed for under this Agreement;

(c)           Payment to Administrator of expenses and other sums Administrator is entitled to be paid and/ or reimbursed for under this Agreement; and

(d)           Distribution to each Beneficiary of record on the preceding Record Date such Beneficiary’s pro rata share (based on the aggregate Units held by such Beneficiary) of Available Funds in the Collection Account. Such distribution shall be made by check mailed to each Beneficiary. If any distribution to a Beneficiary would be less than $5.00, other than with respect to the Final Distribution, Trustee shall hold such distribution amount in trust for such Beneficiary until the Payment Date on which a distribution of $5.00 or more can be made. If any payment to a Beneficiary is returned as “undeliverable” or “address unknown” for two (2) consecutive Payment Dates or distribution checks from the Trustee remain uncashed for a period of six (6) months following two (2) consecutive Payment Dates, the Trustee may cease distributions to such Beneficiary and shall hold such distribution for the benefit of such Beneficiary in the Collection Account until the earlier of (i) receipt of notification of a proper address for such Beneficiary, or (ii) termination of the Trust at which time such amount shall be distributed as provided in Article X of this Agreement.

ARTICLE V

REPORTS TO BENEFICIARIES

Section 5.1            Annual Beneficiaries’ Statements.

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(a)           As of the last day of each calendar year and on or before February 15th of each year, the Trustee shall forward to each Beneficiary a statement setting forth the following information (which shall be stated on the basis of per unit-amount):

(i)	the total amount collected during the calendar year;
(ii)	the total amount distributed during the calendar year;
(iii)	the amount of such distribution allocable to royalty payments received by the Trust;
(iv)	the amount of such distribution allocable to other payments to the Trust;
(v)	a statement of the assets and liabilities of the Trust;
(vi)	a description of any change in the Assets of the Trust and any actions taken by the Trustee with respect to the assets of the Trust;
(vii)	such other information regarding the activities of the Trust as may reasonably be required for Beneficiaries to prepare their Federal and state income tax returns.

                Section 5.2            Interim Reports. The Trustee shall deliver to the Beneficiaries such interim reports as may be necessary or advisable to inform Beneficiaries of significant events relating to the Trust.

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ARTICLE VI

THE BENEFICIARIES

Section 6.1            The Beneficiaries. The Beneficiaries of the Trust are the holders of record of shares of common stock of Grantor as of September 30, 2004 and their permitted successors and assigns. The beneficial interest of a Beneficiary shall be transferable only pursuant to the provisions of Section 6.2. Each Beneficiary shall be deemed to hold the number of units of beneficial ownership (“Units”) equal to the number of issued and outstanding shares of common stock of Grantor held of record as of September 30, 2004 by that Beneficiary.

Section 6.2            Registration of Beneficiaries.

(a)           The Trustee shall cause to be kept at the office or agency to be maintained by a registrar (which initially shall be the Trustee) (the “Registrar”) a register (the “Register”) in which, subject to such reasonable regulations as it may prescribe, the Registrar shall provide for the registration of the name and address of each beneficiary and the number Units held by each Beneficiary of Record. The Trustee shall be permitted to resign as Registrar upon 30 days’ written notice to the Grantor; provided, however, that such resignation shall not be effective and the Trustee shall continue to perform its duties as Registrar until the Grantor has appointed a successor Registrar.

Units of beneficial interest are not transferable except upon death or by operation of law. The Trustee may rely on a death certificate, court order, certificate of any executor of an estate or successor trustee of any trust, or in the case of a corporation, any executive officer of such corporation, in establishing whether the Beneficiary seeking to transfer its beneficial interest(s) may make such transfer. Each transferee shall be required to acknowledge the provisions of this Agreement and shall agree to be bound by the terms of this Agreement as a condition of the transfer of a beneficial interest. Upon the completion of such transfer, the Registrar shall update the Register and name the transferee as the holder of the Unit(s).

No service charge shall be made for any registration of transfer, but the Registrar may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer.

(b)           Prior to the registration of any transfer, the Registrar may request an opinion of counsel in form and content satisfactory to Trustee in its sole discretion that such transfer is in compliance with applicable Federal and state securities laws and that transfer of the beneficial interest is exempt from registration and/or qualification under the Securities Act of 1933 and applicable state law.

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Section 6.3             Appointment of Paying Agent. The Paying Agent shall make distributions to Beneficiaries from the Collection Account as specified in this Agreement. Any Paying Agent shall have the revocable power to withdraw funds from the Collection Account for the purpose of making distributions referred to above. The Trustee may revoke such power and remove the Paying Agent if the Trustee determines in its sole discretion that the Paying Agent shall have failed to perform its obligations under this Agreement in any material respect. The Paying Agent shall initially be the Trustee (“Paying Agent”). The Trustee shall be permitted to resign as Paying Agent upon 30 days’ written notice to the Trustee. In the event that the Trustee shall no longer be the Paying Agent, the Trustee shall appoint a successor to act as Paying Agent. The Trustee shall cause such successor Paying Agent or any additional Paying Agent appointed by the Trustee to execute and deliver to the Trustee an instrument in which such successor Paying Agent or additional Paying Agent shall agree with the Trustee that, as Paying Agent, such successor Paying Agent or additional Paying Agent will hold all sums, if any, held by it for payment to the Beneficiaries in trust for the benefit of the Beneficiaries entitled thereto until such sums shall be paid to such Beneficiaries.

Section 6.4             Access to List of Beneficiaries’ Names and Addresses. The Trustee will furnish or cause to be furnished by the Registrar, to the Administrator or the Paying Agent, within five Business Days after receipt by the Trustee of a request therefor from the Administrator or the Paying Agent, respectively, in writing, a list in such form as the Administrator or the Paying Agent may reasonably require, of the names and addresses of the Beneficiaries. If three or more Beneficiaries (the “Applicants”) representing Units in the Trust aggregating not less than 5% of the outstanding Units apply in writing to the Trustee, and such application states that the Applicants desire to communicate with other Beneficiaries with respect to their rights under this Agreement and is accompanied by a copy of the communication which such Applicants propose to transmit, then the Trustee, after having been adequately indemnified by such Applicants for its costs and expenses, shall afford or shall cause the Registrar to afford such Applicants access during normal business hours to the most recent list of Beneficiaries held by the Trustee, within thirty Business Days after the receipt of such application. Such list shall be as of a date no more than 30 days prior to the date of receipt of such Applicants’ request. Neither the Trustee nor the Registrar, nor any of their respective agents shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the Beneficiaries hereunder, regardless of the source from which such information was derived.

ARTICLE VII

OTHER MATTERS RELATING TO THE GRANTOR

Section 7.1             Limitation on Liability of the Grantor. Neither Grantor, in its capacity as Grantor, nor any of the directors or officers or employees or agents of the Grantor shall be under any liability to the Trust, the Trustee, the Beneficiaries or any other Person for any action taken or for refraining from the taking of any action in its capacity as Grantor pursuant to this Agreement whether arising from express or implied

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duties under this Agreement; provided, however, that this provision shall not protect the Grantor or any such person against any liability which would otherwise be imposed by reason of willful misfeasance, bad faith or gross negligence in the performance of duties or by reason of reckless disregard of obligations and duties hereunder. The Grantor and any director or officer or employee or agent of the Grantor may rely in good faith on any document of any kind prima facie properly executed and submitted by any Person respecting any matters arising hereunder.

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ARTICLE VIII

OTHER MATTERS RELATING TO THE ADMINISTRATOR

Section 8.1             Merger or Consolidation of, or Assumption of the Obligations of, the Administrator. The Administrator shall not consolidate with or merge into any other corporation or convey or transfer its properties and assets substantially as an entirety to any Person, unless the corporation formed by such consolidation or into which the Administrator is merged or the Person which acquires by conveyance or transfer the properties and assets of the Services substantially as an entirety shall assume the performance of every covenant and obligation of the Administrator hereunder.

Section 8.2             Limitation on Liability of the Administrator and Others. Neither the Administrator nor any of the directors or officers or employees or agents of the Administrator shall be under any liability to the Trust, the Trustee, the Beneficiaries or any other person for any action taken or for refraining from the taking of any action in its capacity as Administrator pursuant to this Agreement; provided, however, that this provision shall not protect the Administrator or any such person against any liability which would otherwise be imposed by reason of willful misfeasance, bad faith or gross negligence in the performance of duties or by reason of reckless disregard of obligations and duties hereunder. The Administrator and any director or officer or employee or agent of the Administrator may rely in good faith on any document of any kind prima facie properly executed and submitted by any Person respecting any matters arising hereunder. The Administrator shall not be under any obligation to appear in, prosecute or defend any legal action whether or not incidental to its duties to service the Royalty Contracts in accordance with this Agreement which in its good faith opinion may result in Administrator incurring any expense or liability. In the event the Administrator decides not to pursue legal action in connection with the enforcement of the Royalty Contracts, Grantor, may at its sole option, pursue any such legal action it deems necessary or appropriate to enforce such Royalty Contracts including, without limitation, action to terminate the Royalty Contracts.

Section 8.3             The Administrator Not to Resign. The Administrator shall not resign from the obligations and duties hereby imposed on it unless (i) the performance of its duties hereunder is no longer permissible under applicable law, or (ii) a successor Administrator acceptable to Beneficiaries representing 50% or more of the Units consent in writing to such resignation. No such resignation shall become effective until the Trustee or a Successor Administrator shall have assumed the responsibilities and obligations of the Administrator under this Agreement. If the Administrator fails to perform its duties, the Grantor shall have the right to appoint a Successor Administrator, and if the Grantor fails to appoint a Successor Administrator then the Trustee shall have the right to appoint a Successor Administrator.

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Section 8.4             Access to Certain Documentation and Information Regarding the Royalty Contracts. The Administrator shall provide to the Trustee access to the documentation regarding the Royalty Contracts in such cases where the Trustee is required in connection with the enforcement of the rights of the Beneficiaries, or by applicable statutes or regulations to review such documentation, such access being afforded without charge but only (i) upon reasonable request, (ii) during normal business hours, (iii) subject to the Administrator’s normal security and confidentiality procedures and (iv) at offices designated by the Administrator.

ARTICLE IX

THE TRUSTEE

Section 9.1             Duties of Trustee. (a) The Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Agreement.

(b)           The Trustee, upon receipt of all resolutions, certificates, statements, opinions, reports, documents, orders or other instruments furnished to the Trustee which are specifically required to be furnished pursuant to any provision of this Agreement, shall examine them to determine whether they substantially conform to the requirements of this Agreement.

(c)           Subject to Section 9.1(a) no provision of this Agreement shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act or its own misconduct; provided, however, that:

(i)            The Trustee shall not be personally liable for an error of judgment made in good faith by a Responsible Officer or Responsible Officers of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts;

(ii)           The Trustee shall not be personally liable with respect to any action taken, suffered or omitted to be taken by it in good faith in accordance with the direction of the Beneficiaries evidencing Units in the Trust aggregating not less than 51% of the outstanding beneficial interests relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Agreement; and

(iii)          The Trustee shall not be charged with knowledge of any failure by the Administrator to comply with the obligations of the Administrator unless a Responsible Officer of the Trustee obtains actual knowledge of such failure or the Trustee receives written notice of such failure from the Administrator or any Beneficiaries evidencing Units aggregating not less than 10% of the beneficial interests.

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(d)           The Trustee shall not be required to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if there is reasonable ground for believing that the repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it, and none of the provisions contained in this Agreement shall in any event require the Trustee to perform, or be responsible for the manner of performance of, any obligations of the Administrator under this Agreement.

(e)           Except as provided in Section 2.3 the Trustee shall have no power to vary the corpus of the Trust including, without limitation, the power to add any investment, obligation or security to the Trust or withdraw from the Trust.

Section 9.2            Certain Matters Affecting the Trustee. Except as otherwise provided in Section 9.1:

(a)           The Trustee may rely on and shall be protected in acting on, or in refraining from acting in accord with, any resolution, Officer’s Certificate, certificate of auditors or any other certificate, statement, instrument, opinion, report, notice, request, consent, order, appraisal, bond or other paper or document believed by it to be genuine and to have been signed or presented to it pursuant to this Agreement by the proper party or parties;

(b)           The Trustee may consult with counsel and any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken or suffered or omitted by it hereunder in good faith and in accordance with such Opinion of Counsel;

(c)           The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Agreement, or to institute, conduct or defend any litigation hereunder or in relation hereto, at the request, order or direction of any of the Beneficiaries, pursuant to the provisions of this Agreement, unless such Beneficiaries shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which may be incurred therein or thereby;

(d)           The Trustee shall not be personally liable for any action taken, suffered or omitted by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Agreement;

(e)           The Trustee shall not be bound to make any investigation into the facts of matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, requests, consent, order, approval, bond or other paper or document;

(f)            The Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys or custodian, and the Trustee shall not be responsible for any misconduct or negligence on the part of any such agent, attorney or custodian appointed with due care by it hereunder; and

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(g)           The Trustee, in its capacity as Trustee, shall not be required to make any initial or periodic examination of any documents or records related to the Royalty Contracts for the purpose of establishing the presence or absence of defects or for any other purpose.

Section 9.3             Trustee Not Liable for Recitals. The Trustee assumes no responsibility for the correctness of the recitals contained herein. The Trustee makes no representations as to the validity or sufficiency of this Agreement or of any document related to the Royalty Contracts.

Section 9.4             Trustee May Own Beneficial Interests. The Trustee in its individual or any other capacity may become the owner or pledgee of beneficial interests with the same rights as it would have if it were not the Trustee.

Section 9.5             Trustee’s Fees and Expenses. Trustee shall be entitled to receive reasonable compensation (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust) for all services rendered by it in the execution of the trust hereby created and in the exercise and performance of any of the powers and duties hereunder of the Trustee, and the Trustee shall be entitled to be reimbursed, upon its request, for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any of the provisions of this Agreement (including the reasonable fees and expenses of its agents and counsel) except any such expense, disbursement or advance as may arise from its gross negligence or bad faith and except as provided in the following sentence. The Trustee is authorized to maintain the Reserve Amount in the Collection Account for the payment of the fees and reimbursement of expenses of the Trustee under this Agreement.

Section 9.6             Eligibility Requirements for Trustee. The Trustee hereunder shall at all times be a corporation organized and doing business under the laws of the United States of America or any state thereof authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $10,000,000 and subject to supervision or examination by Federal or state authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purpose of this Section 9.6, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 9.6, the Trustee shall resign immediately in the manner and with the effect specified in Section 9.7.

Section 9.7             Resignation or Removal of Trustee.

(a)           The Trustee may at any time resign and be discharged from the trust hereby created by giving written notice thereof to the Grantor. Upon receiving such notice of resignation, the Grantor shall promptly appoint a successor trustee by written

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instrument, in duplicate, one copy of which instrument shall be delivered to the resigning Trustee and one copy to the successor trustee. If no successor trustee shall have been so appointed and have accepted appointment within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor trustee.

(b)           If at any time the Trustee shall cease to be eligible in accordance with the provisions of Section 9.6 hereof and shall fail to resign after written request therefor by the Grantor, or if at any time the Trustee shall be legally unable to act, or shall be adjudged a bankrupt or insolvent, or if a receiver of the Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then the Grantor, and/or Beneficiaries by vote of more than 50% of the Units, may remove the Trustee and promptly appoint a successor trustee by written instrument, in duplicate, one copy of which instrument shall be delivered to the Trustee so removed and one copy to the successor trustee.

(c)           Any resignation or removal of the Trustee and appointment of successor trustee pursuant to any of the provisions of this Section 9.7 shall not become effective until acceptance of appointment by the successor trustee as provided in Section 9.8 hereof.

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Section 9.8             Successor Trustee.

(a)           Any successor trustee appointed as provided in Section 9.7 hereof shall execute, acknowledge and deliver to the Grantor and to its predecessor Trustee an instrument accepting such appointment pursuant to the terms of this Agreement, and thereupon the resignation or removal of the predecessor Trustee shall become effective and such successor trustee, without any further act, deed or conveyance, shall become fully vested with all the rights, powers, duties and obligations of its predecessor hereunder, with like effect as if originally named as Trustee herein. The predecessor Trustee shall deliver to the successor trustee all documents and statements held by it hereunder; and the Grantor and the predecessor Trustee shall execute and deliver such instruments and do such other things as may reasonably be required for fully and certainly vesting and confirming in the successor trustee all such rights, power, duties and obligations.

(b)           No successor trustee shall accept appointment as provided in this Section 9.8 unless at the time of such acceptance such successor trustee shall be eligible under the provisions of Section 9.6 hereof.

(c)           Upon acceptance of appointment by a successor trustee as provided in this Section 9.8 hereof, such successor trustee shall mail notice of such succession hereunder to all Beneficiaries at their addresses as shown in the Register.

Section 9.9             Merger or Consolidation of Trustee. Any Person into which the Trustee may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any Person succeeding to the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be eligible under the provisions of Section 9.6 hereof, without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding.

Section 9.10           Appointment of Co-Trustee or Separate Trustee.

(a)           Notwithstanding any other provisions of this Agreement, at any time, for the purpose of meeting any legal requirements of any jurisdiction in which any part of the Trust may at the time be located, the Trustee shall have the power and may execute and deliver all instruments to appoint one or more persons to act as a co-trustee or co-trustees, or separate trustee or separate trustees, of all or any part of the Trust, and to vest in such Person or Persons, in such capacity and for the benefit of the Beneficiaries, such title to the Trust, or any part thereof, and, subject to the other provisions of this Section 9.10, such powers, duties, obligations, rights and trusts as the Trustee may consider necessary or desirable. No co-trustee or separate trustee hereunder shall be required to meet the terms of eligibility as a successor trustee under Section 9.6 and no notice to Beneficiaries

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of the appointment of any co-trustee or separate trustee shall be required under Section 9.8 hereof.

(b)           Every separate trustee and co-trustee shall, to the extent permitted by law, be appointed and act subject to the following provisions and conditions:

(i)            All rights, powers, duties and obligations conferred or imposed upon the Trustee shall be conferred or imposed upon and exercised or performed by the Trustee and such separate trustee or co-trustee jointly (it being understood that such separate trustee or co-trustee is not authorized to act separately without the Trustee joining in such act), except to the extent that under any use of any jurisdiction in which any particular act or acts are to be performed (whether as Trustee hereunder or as successor to the Administrator hereunder), the Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding or title to the Trust or any portion thereof in any such jurisdiction) shall be exercised and performed singly by such separate trustee or co-trustee, but solely at the direction of the Trustee;

(ii)           No trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder; and

(iii)          The Trustee may at any time accept the resignation of or remove any separate trustee or co-trustee.

(c)           Any notice, request or other writing given to the Trustee shall be deemed to have been given to each of the then separate trustees and co-trustees, as effectively as if given to each of them. Every instrument appointing any separate trustee or co-trustee shall refer to this Agreement and the conditions of this Article X. Each separate trustee and co-trustee, upon its acceptance of the trusts conferred, shall be vested with the estates or property specified in its instrument of appointment, either jointly with the Trustee or separately, as may be provided therein, subject to all the provisions of this Agreement, specifically including every provision of this Agreement relating to the conduct of, affecting the liability of, or affording protection to, the Trustee. Every such instrument shall be filed with the Trustee and a copy thereof given to the Administrator.

                (d)           Any separate trustee or co-trustee may at any time constitute the Trustee, its agent or attorney-in-fact with full power and authority, to the extent not prohibited by law, to do any lawful act under or in respect to this Agreement on its behalf and in its name. If any separate trustee or co-trustee shall die, become incapable of acting, resign or be removed, all of its estates, properties, rights, remedies and trusts shall vest in and be exercised by the Trustee, to the extent permitted by law, without the appointment of a new or successor trustee.

Section 9.11           Tax Returns. In the event the Trust shall be required to file tax returns, the Trustee shall prepare or shall cause to be prepared any tax returns required to

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be filed by the Trust before such returns are due to be filed. Trustee shall also prepare or shall cause to be prepared all tax information required by law to be distributed to Beneficiaries.

Section 9.12           Trustee May Enforce Claims. All rights of action and claims under this Agreement may be prosecuted and enforced by the Trustee without the possession of any of the beneficial interests, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee. Any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Beneficiaries in respect of which such judgment has been obtained.

Section 9.13           Suits for Enforcement of Royalty Contracts. If the Administrator and Grantor elect not to take action to enforce the Royalty Contracts under this Agreement, the Trustee, in its discretion, may proceed to protect and enforce its rights and the rights of the Beneficiaries under the Royalty Contracts by suit, action or proceeding in equity or at law or otherwise, whether for the specific performance of any covenant or agreement contained in the Royalty Contracts as the Trustee, being advised by counsel, shall deem most effectual to protect and enforce any of the rights of the Trustee or the Beneficiaries in the Royalty Contracts. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Beneficiary any plan of reorganization, arrangement, adjustment or composition affecting the Beneficiaries, or authorize the Trustee to vote in respect of the claim of any Beneficiary in any such proceeding.

Section 9.14           Rights of Beneficiaries to Direct Trustee. Beneficiaries owning not less than 66 2/3 % of the Units shall have the right to direct the time, method, and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee; provided, however, that, subject to Section 9.1, the Trustee shall have the right to decline to follow any such direction if the Trustee being advised by counsel determines that the action so directed may not lawfully be taken, or if the Trustee in good faith shall, by a Responsible Officer or Responsible Officers of the Trustee, determine that the proceedings so directed would be illegal or involve it in personal liability or be unduly prejudicial to the rights of Beneficiaries not parties to such direction; and provided further that nothing in this Agreement shall impair the right of the Trustee to take any action deemed proper by the Trustee and which is not inconsistent with such direction by the Beneficiaries.

ARTICLE X

TERMINATION

Section 10.1           Termination of Trust.

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(a)           The respective obligations and responsibilities of the Grantor, the Administrator and the Trustee created hereby (other than the obligation of the Trustee to make payments to Beneficiaries as hereafter set forth) shall terminate, except with respect to the duties described in subsection 10.2(b), upon the earlier of (i) September 20, 2007, unless extended as provided herein (such date as extended, if applicable, is referred to as the “Final Trust Termination Date”); or (ii) the day following any Payment Date on or after 5 years from the initial date of this Agreement if there have been no Net Royalties for six consecutive calendar quarters immediately proceeding such Payment Date; or (iii) the day following the Payment Date for the quarter period in which the last of the Royalty Contracts has been terminated or Grantor, Administrator and Trustee shall each agree that all Royalty Rights and remedies to enforce such rights have been reasonably exhausted or have no commercially reasonable value.

(b)           The Final Trust Termination Date shall be extended for one (1) or more 3-year extension periods (or such shorter or longer period as may be allowed by “no action” assurances obtained by the Administrator from the Securities and Exchange Commission (“SEC”)) provided the Trustee has received from Administrator a certificate certifying to the best of knowledge of such Administrator that (i) Royalty Rights have commercially reasonable value and that collections with respect to the Royalty Rights are reasonably expected to exceed the Trustee’s fee and other costs and expenses of administering the Trust; and (ii) a “no action” assurance has been obtained from the SEC in reasonable and customary form acknowledging that the SEC will not recommend enforcement action if the Final Trust Termination Date is extended for such additional period.

Section 10.2           Final Distribution.

(a)           Written notice of any termination, specifying the Payment Date for payment of the final distribution, shall be given by the Trustee to Beneficiaries mailed not later than the 5th day of the month of such final distribution specifying (a) the distribution date (which shall be the Payment Date in the month in which the notice is given) upon which final payment will be made, (b) the amount of any such final payment and (c) that the Record Date otherwise applicable to such Payment Date is not applicable. The Trustee shall give such notice to the Registrar and the Paying Agent at the time such notice is given to Beneficiaries.

                (b)           In the event that that the Trustee receives notice or a return of final distribution materials indicating that a Beneficiary did not receive the final distribution materials within six months of the date the first notice was sent, the Trustee shall give a second written notice to that Beneficiary. If Trustee receives notice or a return of the final distribution materials indicating that the Beneficiary did not receive the second notice, or if the Beneficiary otherwise fails to respond to the second notice, the Trustee shall distribute all funds in the Collection Account held for the benefit of such Beneficiary to the Grantor, or its successor-in-interest, or if there shall be no such successor, Trustee shall escheat such funds to the State of California in accordance with applicable law.

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Section 10.3           Disposition of Royalty Rights After Grantor’s Termination.

(a)           In the event the Administrator reasonably believes the Trust will terminate prior to the date the last of the Royalty Contract terminates and the Administrator believes the remaining royalty rights have commercial value, the Administrator shall take reasonable steps to solicit cash offers to purchase the Royalty Rights. In the event the Administrator or Trustee receive one or more cash offers to purchase all or any portion of the Royalty Rights, on or before ninety (90) days after the Termination Date of the Trust, the Administrator and Trustee shall take all reasonable steps to accept such offer or offers and consummate such transactions on or before 90 days after the termination of the Trust, provided, however, in no event shall the Trustee or the Administrator be required to make any representation or warranty of any kind relating to the Royalty Rights, except representations solely in the name of the Trust for which neither the Administrator nor the Trustee have personal responsibility. Administrator and Trustee are authorized to execute any and all documents and instruments of conveyance which may be necessary or appropriate to consummate any such sales.

                (b)           Upon the termination of the Trust pursuant to Section 10.1(i) or (ii), unless the Trustee has sold the Royalty Rights as provided in sub-section (a) of this Section 10.3, the Trustee shall assign and convey to the Grantor (without recourse, representation or warranty) all right, title and interest of the Trust in the Royalty Rights, whether then existing or thereafter created, and all proceeds thereof and insurance proceeds relating thereto. The Trustee shall execute and deliver such instruments of transfer and assignment, in each case without recourse, as shall be reasonably requested by the Grantor to vest in the Grantor all right, title and interest which the Trust had in the Royalty Contracts.

                (c)           In the event any of the Royalty Contracts shall be terminated for any reason prior to the end of the term provided in such Royalty Contract, unless the Trustee has sold the Royalty Rights as provided in sub-section (a) of this Section 10.3, the Trustee shall assign and convey to the Grantor (without recourse, representation or warranty) all right, title and interest of the Trust in the Royalty Rights with respect to the terminated Royalty Contract, whether then existing or thereafter created, and all proceeds thereof and insurance proceeds relating thereto. The Trustee shall execute and deliver such instruments of transfer and assignment, in each case without recourse, as shall be reasonably requested by the Grantor to vest in the Grantor all right, title and interest which the Trust had in the Royalty Contracts.

ARTICLE XI
MISCELLANEOUS PROVISIONS

Section 11.1           Amendment.

(a)           This Agreement may be amended from time to time by unanimous consent of the Administrator, the Grantor and the Trustee, without the consent of any of the

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Beneficiaries, to cure any ambiguity, to correct or supplement any provisions herein which may be inconsistent with any other provisions herein or to add any other provisions with respect to matters or questions raised under this Agreement which shall not be inconsistent with the provisions of this Agreement; provided, however, that such action shall not, as evidenced by an Opinion of Counsel, adversely affect in any material respect the interests of the Beneficiaries. The Trustee may, but shall not be obligated to, enter into any such amendment which affects the Trustee’s rights, duties or immunities under this Agreement or otherwise.

(b)           This Agreement may also be amended from time to time by the Administrator, the Grantor and the Trustee with the consent of the Beneficiaries evidencing not less than 66 2/3% of the outstanding Units, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement or of modifying in any manner the rights of the Beneficiaries; provided, however, that no such amendment shall (i) reduce in any manner the amount of distributions which are required to be made without the consent of such Beneficiary, (ii) change the definition of or the manner of calculating the Beneficiaries’ Interest without the consent of each Beneficiary or (iii) reduce the aforesaid percentage required to consent to any such amendment, in each case without the consent of each Beneficiary.

(c)           Promptly after the execution of any such amendment or consent the Trustee shall furnish written notification of the substance of such amendment to each Beneficiary.

(d)           It shall not be necessary for the consent of Beneficiaries under this Section 11.1 to approve the particular form of any proposed amendment, but it shall be sufficient if such consent shall approve the substance thereof. The manner of obtaining such consents and of evidencing the authorization of the execution thereof by Beneficiaries shall be subject to such reasonable requirements as the Trustee may prescribe.

Section 11.2           Protection of Right, Title and Interest to Trust. The Administrator shall cause this Agreement, all amendments hereto and/or any other necessary documents covering the Beneficiaries and the Trustee’s right, title and interest to the Trust to be properly and promptly recorded and kept, all in such manner and in such places as may be required by law fully to preserve and protect the right, title and interest of the Trustee hereunder to all property comprising the Trust.

Section 11.3           Limitation on Rights of Beneficiaries.

(a)           The death or incapacity of any Beneficiary shall not operate to terminate this Agreement or the Trust, nor shall such death or incapacity entitle such Beneficiary’s legal representatives or heirs to claim an accounting or to take any action or commence any proceeding in any court for a partition or winding up of the Trust, nor otherwise affect the rights, obligations and liabilities of the parties hereto or any of them.

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(b)           Nothing herein set forth shall be construed so as to constitute the Beneficiaries from time to time as partners or members of an association; nor shall any Beneficiary be under any liability to any third person by reason of any action taken by the parties to this Agreement pursuant to any provision hereof.

(c)           No Beneficiary shall have any right by virtue of any provisions of this Agreement to institute any suit, action or proceeding in equity or at law upon or under or with respect to this Agreement, unless such Beneficiary previously shall have given to the Trustee, and unless the Beneficiaries owning not less than 51% of the Units shall have made written request upon the Trustee to institute such action, suit or proceeding in its own name as Trustee hereunder and shall have offered to the Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred therein or thereby, and the Trustee, for 60 days after its receipt of such notice, request and offer of indemnity, shall have neglected or refused to institute any such action, suit or proceeding; it being understood and intended, and being expressly covenanted by each Beneficiary with every other Beneficiary and the Trustee, that no one or more Beneficiaries shall have any right in any manner whatever by virtue or by availing itself or themselves of any provisions of this Agreement to affect, disturb or prejudice the rights of any of the other Beneficiaries, or to obtain or seek to obtain priority over or preference to any other such Beneficiary, or to enforce any right under this Agreement, except in the manner herein provided and for the equal, ratable and common benefit of all Beneficiaries. For the protection and enforcement of the provisions of this Section 11.3, each and every Beneficiary and the Trustee shall be entitled to such relief as can be given either at law or in equity.

Section 11.4           Governing Law. This Agreement shall be construed in accordance with the laws of the State of California, United States of America, without reference to its conflict of law provisions, and the obligations, rights and remedies of the parties hereunder shall be determined in accordance with such laws. Any legal action or proceeding arising out of or in connection with this Agreement, must be brought in the courts of the State of California, located in San Diego County, California, and/or the United States District Court in the Southern District of California.

Section 11.5           Notices. All demands, notices and communications hereunder shall be in writing and shall be deemed to have been duly given if personally delivered at or mailed by registered mail, return receipt requested, to (a) in the case of Grantor or Administrator, to Planet Polymer Technologies, Inc., [3852 Alameda Place, San Diego, California 92103,] Attention: CFO and CEO and (b) in the case of the Trustee, to the Trust Office; or, as to each party, at such other address as shall be designated by such party in a written notice to each other party. Any notice required or permitted to be mailed to a Beneficiary shall be given by personal delivery (courier or other delivery service) or first class mail, postage prepaid, at the address of such Beneficiary as shown in the Register. Any notice so mailed within the time prescribed in this Agreement shall be conclusively presumed to have been duly given, whether or not the Beneficiary receives such notice.

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Section 11.6           Severability of Provisions. If any one or more of the covenants, agreements, provisions or terms of this Agreement shall for any reason whatsoever be held invalid, then such covenants, agreements, provisions or terms shall be deemed severable from the remaining covenants, agreements, provisions or terms of this Agreement and shall in no way affect the validity or enforceability of the other provisions of this Agreement or rights of the Beneficiaries thereof.

Section 11.7           Beneficiaries Not Personally Liable. It is the intention of the parties to this Agreement that the Beneficiaries shall not be personally liable for the obligations of the Trust, and that the beneficial interests in the Trust shall be nonassessable for any losses or expenses of the Trust or for any reason whatsoever.

Section 11.8           Further Assurances. The Grantor and the Administrator agree to do and perform, from time to time, any and all acts and to execute any and all further instruments required or reasonably requested by the Trustee to more fully effect the purposes of this Agreement.

Section 11.9           No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the Trustee or the Beneficiaries, any right, remedy, power or privilege, hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges therein provided are cumulative and not exhaustive of any rights, remedies, powers and privileges provided by law.

Section 11.10         Counterparts. This Agreement may be executed in two or more counterparts (and by different parties on separate counterparts), each of which shall be an original, but all of which together shall constitute one and the same instrument.

Section 11.11         Third-Party Beneficiaries. This Agreement will inure to the benefit of and be binding upon the parties hereto, the Beneficiaries and their respective successors and permitted assigns. Except as otherwise provided in this Article XI, no other person will have any right or obligation hereunder.

Section 11.12         Actions by Beneficiaries.

(a)           Wherever in this Agreement a provision is made that an action may be taken or a notice, demand or instruction given by Beneficiaries, such action, notice or instruction may be taken or given by any Beneficiary, unless such provision requires a specific percentage of Beneficiaries.

(b)           Any request, demand, authorization, direction, notice, consent, waiver or other act by a Beneficiary shall bind such Beneficiary and every subsequent Beneficiary upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done or omitted to be done by the Trustee or the Administrator in reliance thereon.

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Section 11.13         Merger and Integration. Except as specifically stated otherwise herein, this Agreement sets forth the entire understanding of the parties relating to the subject matter hereof, and all prior understandings, written or oral, are superseded by this Agreement. This Agreement may not be modified, amended, waived, or supplemented except as provided herein.

Section 11.14         Headings. The headings herein are for purposes of reference only and shall not otherwise affect the meaning or interpretation of any provision hereof.

IN WITNESS WHEREOF, the Grantor, the Administrator and the Trustee have caused this Agreement to be duly executed by their respective officers as of the day and year first above written.

PLANET POLYMER TECHNOLOGIES, INC.	U.S. BANK
As Grantor	As Trustee
By:    ________________________________	By:_______________________________
________________________________
H. Mac Busby, President	Title:______________________________
PLANET ROYALTY ADMINISTRATOR, LLC
By: _________________________________
H. Mac Busby, Manager

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EX-9

EXHIBIT “E”

AMENDMENT TO ARTICLES OF INCORPORATION

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CERTIFICATE OF AMENDMENT OF

ARTICLES OF INCORPORATION OF

PLANET POLYMER TECHNOLOGIES, INC.

The undersigned certifies that:

1.             He is the President and Secretary of Planet Polymer Technologies, Inc., a California corporation (the “Corporation”).

2.             Article I of the Articles of Incorporation of this Corporation is amended and restated to read in its entirety as follows:

The name of this corporation is “Planet Technologies, Inc.”

3.             Article III of the Articles of Incorporation of this Corporation is amended and restated to read as follows:

“A.         This Corporation is authorized to issue two classes of stock to be designated, respectively, “Common Stock” and “Preferred Stock.” The total number of shares which the Corporation is authorized to issue is 25 million shares, 20 million shares of which shall be Common Stock (the “Common Stock”) and 5 million shares of which shall be Preferred Stock (the “Preferred Stock”).

B.          Effective as of the close of business on the date of filing this Amendment to the Articles of Incorporation with the California Secretary of State (the “Effective Time”), the filing of this Amendment shall effect a reverse stock split (the “Reverse Split”) pursuant to which fifty shares of Common Stock, issued and outstanding and held by a single holder, shall be combined into one validly issued, fully paid and nonassessable share of Common Stock. Each stock certificate that prior to the Effective Time represented shares of Common Stock, shall following the Effective Time represent the number of shares into which the shares of the Common Stock represented by such certificate shall be combined as a result of the Reverse Split. The Corporation shall not issue fractional shares or scrip as a result of the Reverse Split, but shall round up to the nearest whole share any fractional share that would otherwise result from the Reverse Split.

C.         Preferred Stock may be issued in one or more series. The Board of Directors is authorized to fix the number of any such series of Preferred Stock and to determine the designation of any such series,

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subject to (i) such shareholder approvals as may be provided for herein, and (ii) the number of shares of Preferred Stock authorized at that time by this Article III. Subject to such shareholder approvals as may be provided for herein, the Board of Directors is further authorized to determine or alter the rights, preferences, privileges, and restrictions granted to or imposed upon any wholly unissued series of Preferred Stock and to increase or decrease (but not below the number of shares of such series then outstanding) the number of shares of any series of Preferred Stock. In case the number of shares of any series shall be so decreased, the shares constituting such decrease shall resume the status that they had prior to the adoption of the resolution or amendment originally fixing the number of shares of such series.”

4.             The foregoing amendment of Articles of Incorporation has been duly approved by the board of directors.

5.             The foregoing amendment of Articles of Incorporation has been duly approved by the required vote of shareholders in accordance with Section 902, California Corporations Code. The total number of outstanding shares of the corporation is 6,207,884. The number of shares voting in favor of the amendment equaled or exceeded the vote required. The percentage vote required was more than Fifty (50%) Percent.

                I further declare under penalty of perjury under the laws of the State of California that the matters set forth in this certificate are true and correct of my own knowledge.

Dated: ____________, 2004	———————————————
	H.M. Busby President/Secretary

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EX-10

EXHIBIT “F”

CALIFORNIA CORPORATIONS CODE
SECTIONS 1300-1312

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§  1300.  Reorganization or short-form merger; dissenting shares; corporate purchase at fair market value; definitions

(a)  If the approval of the outstanding shares (Section 152) of a corporation is required for a reorganization under subdivisions (a) and (b) or subdivision (e) or (f) of Section 1201, each shareholder of the corporation entitled to vote on the transaction and each shareholder of a subsidiary corporation in a short-form merger may, by complying with this chapter, require the corporation in which the shareholder holds shares to purchase for cash at their fair market value the shares owned by the shareholder which are dissenting shares as defined in subdivision (b). The fair market value shall be determined as of the day before the first announcement of the terms of the proposed reorganization or short-form merger, excluding any appreciation or depreciation in consequence of the proposed action, but adjusted for any stock split, reverse stock split, or share dividend which becomes effective thereafter.

(b)  As used in this chapter, “dissenting shares” means shares which come within all of the following descriptions:

(1)  Which were not immediately prior to the reorganization or short-form merger either (A) listed on any national securities exchange certified by the Commissioner of Corporations under subdivision (o) of Section 25100 or (B) listed on the National Market System of the NASDAQ Stock Market, and the notice of meeting of shareholders to act upon the reorganization summarizes this section and Sections 1301, 1302, 1303 and 1304; provided, however, that this provision does not apply to any shares with respect to which there exists any restriction on transfer imposed by the corporation or by any law or regulation; and provided, further, that this provision does not apply to any class of shares described in subparagraph (A) or (B) if demands for payment are filed with respect to 5 percent or more of the outstanding shares of that class.

(2)  Which were outstanding on the date for the determination of shareholders entitled to vote on the reorganization and (A) were not voted in favor of the reorganization or, (B) if described in subparagraph (A) or (B) of paragraph (1) (without regard to the provisos in that paragraph), were voted against the reorganization, or which were held of record on the effective date of a short- form merger; provided, however, that subparagraph (A) rather than subparagraph (B) of this paragraph applies in any case where the approval required by Section 1201 is sought by written consent rather than at a meeting.

(3)  Which the dissenting shareholder has demanded that the corporation purchase at their fair market value, in accordance with Section 1301.

(4)  Which the dissenting shareholder has submitted for endorsement, in accordance with Section 1302.

(c)  As used in this chapter, “dissenting shareholder” means the recordholder of dissenting shares and includes a transferee of record.

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§  1301. Notice to holders of dissenting shares in reorganizations; demand for purchase; time; contents

(a)  If, in the case of a reorganization, any shareholders of a corporation have a right under Section 1300, subject to compliance with paragraphs (3) and (4) of subdivision (b) thereof, to require the corporation to purchase their shares for cash, such corporation shall mail to each such shareholder a notice of the approval of the reorganization by its outstanding shares (Section 152) within 10 days after the date of such approval, accompanied by a copy of Sections 1300, 1302, 1303, 1304 and this section, a statement of the price determined by the corporation to represent the fair market value of the dissenting shares, and a brief description of the procedure to be followed if the shareholder desires to exercise the shareholder’s right under such sections. The statement of price constitutes an offer by the corporation to purchase at the price stated any dissenting shares as defined in subdivision (b) of Section 1300, unless they lose their status as dissenting shares under Section 1309.

(b)  Any shareholder who has a right to require the corporation to purchase the shareholder’s shares for cash under Section 1300, subject to compliance with paragraphs (3) and (4) of subdivision (b) thereof, and who desires the corporation to purchase such shares shall make written demand upon the corporation for the purchase of such shares and payment to the shareholder in cash of their fair market value. The demand is not effective for any purpose unless it is received by the corporation or any transfer agent thereof (1) in the case of shares described in clause (i) or (ii) of paragraph (1) of subdivision (b) of Section 1300 (without regard to the provisos in that paragraph), not later than the date of the shareholders’ meeting to vote upon the reorganization, or (2) in any other case within 30 days after the date on which the notice of the approval by the outstanding shares pursuant to subdivision (a) or the notice pursuant to subdivision (i) of Section 1110 was mailed to the shareholder.

(c)  The demand shall state the number and class of the shares held of record by the shareholder which the shareholder demands that the corporation purchase and shall contain a statement of what such shareholder claims to be the fair market value of those shares as of the day before the announcement of the proposed reorganization or short-form merger. The statement of fair market value constitutes an offer by the shareholder to sell the shares at such price.

§  1302. Submission of share certificates for endorsement; uncertificated securities

Within 30 days after the date on which notice of the approval by the outstanding shares or the notice pursuant to subdivision (i) of Section 1110 was mailed to the shareholder, the shareholder shall submit to the corporation at its principal office or at the office of any transfer agent thereof, (a) if the shares are certificated securities, the shareholder’s certificates representing any shares which the shareholder demands that the corporation purchase, to be stamped or endorsed with a statement that the shares are dissenting shares or to be exchanged for certificates of appropriate denomination so stamped or endorsed or (b) if the shares are uncertificated securities, written notice of the number of shares which the shareholder demands that the corporation purchase. Upon subsequent transfers of the dissenting shares on the books of the corporation, the new certificates, initial transaction statement, and other written statements issued therefor shall bear a like statement, together with the name of the original dissenting holder of the shares.

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§  1303. Payment of agreed price with interest; agreement fixing fair market value; filing; time of payment

(a)  If the corporation and the shareholder agree that the shares are dissenting shares and agree upon the price of the shares, the dissenting shareholder is entitled to the agreed price with interest thereon at the legal rate on judgments from the date of the agreement. Any agreements fixing the fair market value of any dissenting shares as between the corporation and the holders thereof shall be filed with the secretary of the corporation.

(b)  Subject to the provisions of Section 1306, payment of the fair market value of dissenting shares shall be made within 30 days after the amount thereof has been agreed or within 30 days after any statutory or contractual conditions to the reorganization are satisfied, whichever is later, and in the case of certificated securities, subject to surrender of the certificates therefor, unless provided otherwise by agreement.

§  1304. Action to determine whether shares are dissenting shares or fair market value; limitation; joinder; consolidation; determination of issues; appointment of appraisers

(a)  If the corporation denies that the shares are dissenting shares, or the corporation and the shareholder fail to agree upon the fair market value of the shares, then the shareholder demanding purchase of such shares as dissenting shares or any interested corporation, within six months after the date on which notice of the approval by the outstanding shares (Section 152) or notice pursuant to subdivision (i) of Section 1110 was mailed to the shareholder, but not thereafter, may file a complaint in the superior court of the proper county praying the court to determine whether the shares are dissenting shares or the fair market value of the dissenting shares or both or may intervene in any action pending on such a complaint.

(b)  Two or more dissenting shareholders may join as plaintiffs or be joined as defendants in any such action and two or more such actions may be consolidated.

(c)  On the trial of the action, the court shall determine the issues. If the status of the shares as dissenting shares is in issue, the court shall first determine that issue. If the fair market value of the dissenting shares is in issue, the court shall determine, or shall appoint one or more impartial appraisers to determine, the fair market value of the shares.

§  1305. Report of appraisers; confirmation; determination by court; judgment; payment; appeal; costs

(a)  If the court appoints an appraiser or appraisers, they shall proceed forthwith to determine the fair market value per share. Within the time fixed by the court, the appraisers, or a majority of them, shall make and file a report in the office of the clerk of the court. Thereupon, on the motion of any party, the report shall be submitted to the court and considered on such evidence as the court considers relevant. If the court finds the report reasonable, the court may confirm it.

(b)  If a majority of the appraisers appointed fail to make and file a report within 10 days from the date of their

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appointment or within such further time as may be allowed by the court or the report is not confirmed by the court, the court shall determine the fair market value of the dissenting shares.

(c)  Subject to the provisions of Section 1306, judgment shall be rendered against the corporation for payment of an amount equal to the fair market value of each dissenting share multiplied by the number of dissenting shares which any dissenting shareholder who is a party, or who has intervened, is entitled to require the corporation to purchase, with interest thereon at the legal rate from the date on which judgment was entered.

(d)  Any such judgment shall be payable forthwith with respect to uncertificated securities and, with respect to certificated securities, only upon the endorsement and delivery to the corporation of the certificates for the shares described in the judgment. Any party may appeal from the judgment.

(e)  The costs of the action, including reasonable compensation to the appraisers to be fixed by the court, shall be assessed or apportioned as the court considers equitable, but, if the appraisal exceeds the price offered by the corporation, the corporation shall pay the costs (including in the discretion of the court attorneys’ fees, fees of expert witnesses and interest at the legal rate on judgments from the date of compliance with Sections 1300, 1301 and 1302 if the value awarded by the court for the shares is more than 125 percent of the price offered by the corporation under subdivision (a) of Section 1301).

§  1306. Prevention of immediate payment; status as creditors; interest

To the extent that the provisions of Chapter 5 prevent the payment to any holders of dissenting shares of their fair market value, they shall become creditors of the corporation for the amount thereof together with interest at the legal rate on judgments until the date of payment, but subordinate to all other creditors in any liquidation proceeding, such debt to be payable when permissible under the provisions of Chapter 5.

§  1307. Dividends on dissenting shares

Cash dividends declared and paid by the corporation upon the dissenting shares after the date of approval of the reorganization by the outstanding shares (Section 152) and prior to payment for the shares by the corporation shall be credited against the total amount to be paid by the corporation therefor.

§  1308. Rights of dissenting shareholders pending valuation; withdrawal of demand for payment

Except as expressly limited in this chapter, holders of dissenting shares continue to have all the rights and privileges incident to their shares, until the fair market value of their shares is agreed upon or determined. A dissenting shareholder may not withdraw a demand for payment unless the corporation consents thereto.

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§  1309. Termination of dissenting share and shareholder status

Dissenting shares lose their status as dissenting shares and the holders thereof cease to be dissenting shareholders and cease to be entitled to require the corporation to purchase their shares upon the happening of any of the following:

(a)  The corporation abandons the reorganization. Upon abandonment of the reorganization, the corporation shall pay on demand to any dissenting shareholder who has initiated proceedings in good faith under this chapter all necessary expenses incurred in such proceedings and reasonable attorneys’ fees.

(b)  The shares are transferred prior to their submission for endorsement in accordance with Section 1302 or are surrendered for conversion into shares of another class in accordance with the articles.

(c) The dissenting shareholder and the corporation do not agree upon the status of the shares as dissenting shares or upon the purchase price of the shares, and neither files a complaint or intervenes in a pending action as provided in Section 1304, within six months after the date on which notice of the approval by the outstanding shares or notice pursuant to subdivision (i) of Section 1110 was mailed to the shareholder.

(d)  The dissenting shareholder, with the consent of the corporation, withdraws the shareholder’s demand for purchase of the dissenting shares.

§  1310. Suspension of right to compensation or valuation proceedings; litigation of shareholders’ approval

If litigation is instituted to test the sufficiency or regularity of the votes of the shareholders in authorizing a reorganization, any proceedings under Sections 1304 and 1305 shall be suspended until final determination of such litigation.

§  1311. Exempt shares

This chapter, except Section 1312, does not apply to classes of shares whose terms and provisions specifically set forth the amount to be paid in respect to such shares in the event of a reorganization or merger.

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§  1312. Right of dissenting shareholder to attack, set aside or rescind merger or reorganization; restraining order or injunction; conditions

(a)  No shareholder of a corporation who has a right under this chapter to demand payment of cash for the shares held by the shareholder shall have any right at law or in equity to attack the validity of the reorganization or short-form merger, or to have the reorganization or short-form merger set aside or rescinded, except in an action to test whether the number of shares required to authorize or approve the reorganization have been legally voted in favor thereof; but any holder of shares of a class whose terms and provisions specifically set forth the amount to be paid in respect to them in the event of a reorganization or short-form merger is entitled to payment in accordance with those terms and provisions or, if the principal terms of the reorganization are approved pursuant to subdivision (b) of Section 1202, is entitled to payment in accordance with the terms and provisions of the approved reorganization.

(b)  If one of the parties to a reorganization or short-form merger is directly or indirectly controlled by, or under common control with, another party to the reorganization or short-form merger, subdivision (a) shall not apply to any shareholder of such party who has not demanded payment of cash for such shareholder’s shares pursuant to this chapter; but if the shareholder institutes any action to attack the validity of the reorganization or short- form merger or to have the reorganization or short-form merger set aside or rescinded, the shareholder shall not thereafter have any right to demand payment of cash for the shareholder’s shares pursuant to this chapter. The court in any action attacking the validity of the reorganization or short-form merger or to have the reorganization or short-form merger set aside or rescinded shall not restrain or enjoin the consummation of the transaction except upon 10 days’ prior notice to the corporation and upon a determination by the court that clearly no other remedy will adequately protect the complaining shareholder or the class of shareholders of which such shareholder is a member.

(c)  If one of the parties to a reorganization or short-form merger is directly or indirectly controlled by, or under common control with, another party to the reorganization or short-form merger, in any action to attack the validity of the reorganization or short-form merger or to have the reorganization or short- form merger set aside or rescinded, (1) a party to a reorganization or short- form merger which controls another party to the reorganization or short-form merger shall have the burden of proving that the transaction is just and reasonable as to the shareholders of the controlled party, and (2) a person who controls two or more parties to a reorganization shall have the burden of proving that the transaction is just and reasonable as to the shareholders of any party so controlled.

§  1313. Conversions deemed to constitute a reorganization; application of chapter

A conversion pursuant to Chapter 11.5 (commencing with Section 1150) shall be deemed to constitute a reorganization for purposes of applying the provisions of this chapter, in accordance with and to the extent provided in Section 1159.

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