þ Preliminary Proxy Statement | ||
o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | ||
o Definitive Proxy Statement | ||
o Definitive Additional Materials | ||
o Soliciting Material Pursuant to §240.14a-11(c) or §240.14a-12 |
o | No fee required. |
(1) | Title of each class of securities to which transaction applies: |
Common Stock, no par value |
(2) | Aggregate number of securities to which transaction applies: |
600,000 shares of Common Stock |
(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 |
The proposed aggregate value of the transaction for purposes of calculating the filing fee is $1,050,000. The aggregate value was determined by (a) multiplying (i) 600,000 shares of common stock that are proposed to be exchanged by (ii) $1.75 which represents the market value of each share of Common Stock to be acquired in the acquisition. |
(Set forth the amount on which the filing fee is calculated and state how it was determined): |
(4) | Proposed maximum aggregate value of transaction: |
$1,050,000 |
(5) | Total fee paid: |
$123.59 |
þ | Fee paid previously with preliminary materials. |
o | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
(1) | Amount Previously Paid: |
(2) | Form, Schedule or Registration Statement No.: |
(3) | Filing Party: |
(4) | Date Filed: |
1. To adopt and approve the Agreement and Plan of Merger, dated March 7, 2005, among Allergy Control Products, Inc., a Delaware corporation (“ACP”) and Jonathan T. Dawson, an individual and the sole shareholder of ACP, and the Company, and to approve the merger between ACP Acquisition Corp., a wholly owned subsidiary of the Company and ACP (the “Merger”) pursuant to which ACP will become a wholly owned subsidiary of the Company and the sole shareholder will receive 600,000 shares of the common stock of the Company; | |
2. To elect five (5) directors to hold office until the next Annual Meeting of Shareholders or until their successors are elected and qualified; | |
3. To approve the Company’s 2000 Stock Option Plan, as amended, to increase the aggregate number of shares of common stock reserved for issuance under such plan from 100,000 to 350,000; | |
4. To approve the engagement of J.H. Cohn LLP, its independent registered public accounting firm, for the fiscal year ending December 31, 2005; and | |
5. To transact such other business as may properly come before the Annual Meeting or any adjournment thereof. |
Sincerely, | |
Scott L. Glenn |
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Exhibit “A” — ACP Audited Financial Statements for the One(1) Year Period Ended December 31, 2004 | A-1 | |||
Exhibit “A-1” — ACP Unaudited Financial Statements for Quarter One Ended March 31, 2005 | A-1-1 | |||
Exhibit “B” — Planet Form 10-KSB Filed With SEC March 31, 2005 | B-1 | |||
Exhibit “B-1” — Planet Form 10-QSB Filed with the SEC May 16, 2005 | B-1-1 | |||
Exhibit “C” — Agreement and Plan of Merger | C-1 | |||
Exhibit “D” — California Corporations Code Sections 1300-1312 | D-1 |
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Date, Time and Place of Annual Meeting | The Annual Meeting will be held on July 29, 2005, beginning at 10:00 a.m., La Jolla time, at 800 Silverado Street, La Jolla, CA 92037. | |
Record Date: Shareholders Entitled to Vote; Quorum | Only holders of record of Planet common stock on June 15, 2005, are entitled to notice of and to vote at the Annual Meeting. As of the record date, there were 2,280,368 shares of Planet common stock outstanding. The presence, in person or by proxy, of the holders of a majority of our common stock will constitute a quorum. | |
Vote Required | Holders of a majority of the outstanding common stock are required to vote in favor of Proposal 1 for such proposal to pass; the five persons with the most number of votes will be elected directors pursuant to Proposal 2; and assuming a quorum is present, the affirmative vote of a majority of the shares represented and voting, either present in person or represented by proxy at the meeting are required to vote in favor of Proposals 3 and 4 for such proposals to pass. | |
Recommendation of Board of Directors | Our Board of Directors unanimously approved each of the Proposals to be considered at the Annual Meeting. The Board recommends that the stockholders vote “FOR” each proposal. |
Companies Involved in the Merger | Planet Technologies, Inc. is engaged in the business of designing, manufacturing, selling, and distributing consumer products for use by allergy sensitive persons, including air filters, bedding and similar products. | |
Allergy Control Products, Inc. is engaged in the business of developing and marketing environmental controls to reduce allergen exposure. Such environmental control products include: allergen proof pillow and mattress encasings, HEPA filter air cleaners, HEPA filter vacuum cleaners, carpet treatments and respiratory products. |
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Summary of the Merger | In the Merger, the Company will issue and deliver to the sole-shareholder of ACP approximately 600,000 shares of the Company’s common stock (or 300 shares of Company common stock for each one share of ACP common stock outstanding). As a condition to, and simultaneously with, the effective time of the Merger, the Company shall cause to be paid to Jonathan T. Dawson the sum of $1,500,000 cash in full payment of all indebtedness of ACP to Mr. Dawson, its sole-shareholder. | |
Reasons for the Merger | In approving the Merger and in recommending that the Company’s shareholders approve the Agreement and Plan of Merger and the Merger, the Company’s Board of Directors considered a number of factors. The Company considered the impact on combining the Company’s business with ACP’s business, and the potential positive results of combining the operations and technology of ACP with the operations and technology of the Company. | |
Accounting Treatment | For Accounting purposes Planet will be deemed Acquirer. The transaction will be accounted for as a purchase with Planet as the accounting acquirer. At the consummation of the transaction, the purchase price will be allocated to the fair value of the assets acquired with the excess attributed to goodwill. There are no other identifiable intangible assets involved with the transaction. At this stage of the transaction, given the current nature of the assets of ACP, (i.e. accounts receivable and inventory) the book value has been assumed to equal the fair market value and the excess of the purchase price over that value has been assumed to be goodwill. | |
Background and Negotiations Related to the Merger | The Company and ACP have been discussing the possibility of merger since late 2004. The discussions led to entering into the Agreement and Plan of Merger on March 7, 2005. | |
Material Tax Consequences to the Company and its Shareholders | The Merger should not result in any material tax consequences to either the Company or its shareholders. We believe the Merger will qualify as a “reorganization” as defined in Section 368 of the Internal Revenue Code as either a statutory merger, or a stock for stock acquisition. We have not obtained or requested an opinion of tax counsel or a revenue ruling from the IRS regarding the tax consequences of the transaction. In addition, we do not believe that there is significant appreciation in the carrying value for federal or state income tax purposes of the assets of either ACP or Planet, which if the transaction was recharacterized as a purchase and sale would result in material taxable income to either Planet or ACP which would not be offset by current losses or loss carry forwards. The shareholders of Planet will not be distributed any cash or other consideration in connection with the Merger transaction and we therefore believe that there will be no material tax consequence to our shareholders. Again, we have not requested or obtained a tax opinion or revenue ruling regarding the tax consequences to our shareholders. | |
Dissenters Rights | If the Merger is approved by the required vote of the Company’s shareholders and is not abandoned or terminated, holders of the Company’s common stock who did not vote in favor of the Merger |
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and who notify the Company in writing of their intent to demand payment of their shares if the Merger is consummated, may, by complying with Sections 1300 through 1312 of the California Corporations Code, be entitled to dissenters’ rights as described therein. The Company’s shareholders must notify the Company of their intent to dissent within 30 days of the date that the notice of approval of the Merger is mailed to all the Company’s shareholders who did not vote in favor of the Merger. | ||
Vote Required to Approve Asset Purchase and Merger | The affirmative vote of holders of the majority of outstanding common stock is required to approve the Agreement and Plan of Merger and the Merger. |
Nominees | There are five board nominees for the five board positions presently authorized by the Company’s current bylaws. The names of the nominees are H. M. Busby; Scott L. Glenn; Eric B. Freedus, Ellen Preston; and Michael Trinkle. | |
Voting | Shares represented by executed proxies will vote, if authority to do so is not withheld, for the election of the nominees. In the event that any nominee should be unavailable for election as a result of an unexpected occurrence, such shares will be voted for the election of such substitute nominee as management may propose. Each person nominated for election has agreed to serve if elected and management has no reason to believe that any nominee will be unable to serve. | |
Description of the 2000 Plan, as Amended | The Company proposes to increase the number of shares reserved for issuance under the 2000 Plan from 100,000 shares to 350,000 shares. The purpose of the increase is to reserve an adequate number of shares of Common Stock for awards pursuant to the 2000 Plan sufficient to accommodate the retention of the current Board of Directors and executive officers of the Company and Edward Steube as President/ CEO of ACP, as a subsidiary of the Company, and in the future, other key employees, officers and directors. The number of shares available for issuance will be subject to adjustment to prevent dilution in the event of stock splits, stock dividends or other changes in the capitalization of the Company. | |
As part of the Merger, and for his remaining the President/ CEO of ACP, Edward Steube will be granted the right to the option to purchase 100,000 shares of Company common stock. This represents the total number of shares under the 2000 Plan awarded pursuant to the Merger. In addition, the Company has issued a total of 125,000 options to officers and directors of the Company for services provided that are subject to shareholder approval of this Proposal 3. | ||
Tax Consequences | For Federal Income Tax purposes, the grant to an optionee of a non-incentive option generally will not constitute a taxable event to |
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the optionee or to the Company. Similarly, for Federal Income Tax purposes, in general, neither the grant nor the exercise of an incentive option will constitute a taxable event to the optionee or to the Company, assuming the incentive option qualifies as an “Incentive Stock Option” under Internal Revenue Code Section 422. | ||
Proposal 1 is dependent upon the approval of this Proposal 3. If Proposal 3 is not approved, the Company does not have sufficient shares available for issuance under the 2000 Plan in order to grant options to Edward Steube. | ||
Vote Required to Approve | The affirmative votes of the holders of the majority of common stock present in person or represented by proxy and which constitute a quorum at the meeting are required to approve the amendment to the 2000 stock option plan. |
Engagement of Accountant | We have approved retaining J.H. Cohn LLP to serve as our independent registered public accounting firm for the 2005 fiscal year and we seek stockholder ratification of that decision. | |
Vote Required to Approve | The affirmative votes of the holders of the majority of common stock present in person or represented by proxy at the meeting are required to ratify the selection of independent registered public accounting firm. |
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1
Proposal | Vote Required to Approve | |
Proposal 1 (Adopt and approve Agreement and Plan of Merger and the Merger) | Holders of a majority of the outstanding common stock. | |
Proposal 2 (Elect directors) | The five persons with the most number of votes will be elected. | |
Proposal 3 (Amend 2000 Stock Option Plan) | Assuming a quorum is present, the affirmative vote of a majority of the shares represented and voting, either present in person or represented by proxy at the meeting are required to vote in favor. | |
Proposal 4 (Ratify Appointment of Independent Registered Public Accounting Firm) | Assuming a quorum is present, the affirmative vote of a majority of the shares represented and voting, either present in person or represented by proxy at the meeting are required to vote in favor. | |
Other Business | Assuming a quorum is present, the affirmative vote of a majority of the shares represented and voting, either present in person or represented by proxy at the meeting are required to vote in favor. |
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• | 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. |
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• | 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. | |
Planet Technologies, Inc. | |
6835 Flanders Drive, Suite 100 | |
San Diego, California 92121 | |
(858) 457-4742 | |
Attention: Scott L. Glenn | |
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• | the cost of manufacturing our products; | |
• | developing new markets for our products; | |
• | competing technological and market developments; and | |
• | the costs involved in filing, prosecuting and enforcing patent claims. | |
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• | elect or defeat the election of our directors; | |
• | amend or prevent amendment of our articles or incorporation or bylaws; | |
• | effect or prevent a merger, sale of assets or other corporate transaction; and | |
• | control the outcome of any other matter submitted to the shareholders for vote. | |
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• | Information concerning the Company’s and ACP’s respective businesses, prospects, business plans, financial performance and condition, results of operations, technology and competitive positions; | |
• | The compatibility of the Company’s business with that of ACP’s business. In the past ACP like Planet has obtained additional financing from existing shareholders and debt from banks. ACP anticipates it could require up to an addition $500,000 in working capital support to cover expenses of this transaction and normal operations; | |
• | The due diligence investigation conducted by the Company’s management; | |
• | The terms of the Agreement and Plan of Merger, including price and structure, which were considered by the Company board of directors to provide a fair and equitable basis for the Merger; and | |
• | The current financial market conditions and historical stock market prices, volatility and trading information. |
• | A stronger and more compelling portfolio of products created by the addition of ACP’s product line, including a broader range of allergen proof pillow and mattress encasings, HEPA filter air cleaners, HEPA filter vacuum cleaners, carpet treatments and respiratory products, as a result of the Merger; | |
• | ACP’s expertise and experience in marketing to the medical professional; | |
• | ACP’s access to distribution channels not previously utilized effectively by the Company; and |
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• | Operational synergies expected to reduce the combined operating expenses. Although the Company’s principal executive office will remain in San Diego, California, the Company plans to consolidate operations of the Company and ACP into ACP’s operations in Ridgefield, Connecticut, under the direction of Edward J. Steube as President of the ACP subsidiary. |
• | the risk that the potential benefits sought in the Merger might not be fully realized; | |
• | the dilution to the Company’s existing shareholders; | |
• | the potential negative effect on the Company’s stock price associated with public announcement of the proposed Merger; | |
• | the potential negative effect on the Company’s stock price if revenue, earnings and cash flow expectations of the Company following the Merger are not met; | |
• | the potential dilutive effect on the Company’s common stock price if revenue and earnings expectations for ACP’s business operations are not met; | |
• | the ability to successfully manage the combined operations of the Company and ACP; and | |
• | the other risks and uncertainties discussed under “Risk Factors.” |
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• | The Company’s shareholders and ACP’s shareholder must have approved and adopted the Agreement and Plan of Merger and the related Merger. | |
• | No injunction or other order shall have been issued to prohibit consummation of the Merger. | |
• | The representations and warranties of the Company and ACP shall be true and correct as of the date of the Agreement and Plan of Merger and the Effective Time of the Merger. | |
• | The Company and ACP shall have performed all obligations required to be performed under the Agreement and Plan of Merger. | |
• | The Company shall have retained Edward Steube as President and Chief Executive Officer of ACP, as a subsidiary of the Company. | |
• | The Company shall have caused to be paid to Jonathan T. Dawson cash in the amount of $1,500,000 in full repayment of all obligations of ACP to Mr. Dawson. These obligations represent cash loans made by Mr. Dawson to ACP. No debt will be outstanding to Mr. Dawson after issuance of the 600,000 shares and the $1,500,000 cash to Mr. Dawson. | |
• | by mutual written consent; | |
• | by either party, if the Acquisition has not been completed by September 30, 2005 through no fault of the terminating party; | |
• | by the Company, if ACP has entered into discussions or has received a proposal regarding a merger, reorganization, share exchange, consolidation or similar transaction involving ACP, or any purchase of all or substantially all of the assets of ACP or more than 10% of the outstanding equity securities of ACP, and continue said discussions with any third party for more than 15 Business Days after receipt of the proposal or beginning discussions; and |
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• | by either party, if there has been a material breach by the other party of any representation, warranty, covenant or agreement in the Acquisition, and the breach has not been cured within 30 days after written notice (except that no cure period shall be required for a breach which cannot be amended within 30 days). |
• | If ACP terminates the Agreement because: |
• | The Company has breached a representation or warranty of the Company as provided in the Agreement, the Company shall pay to ACP $150,000 as a termination fee; or | |
• | ACP accepts an acquisition or other similar proposal from a third party, then ACP must pay to the Company $150,000 as a termination fee. |
• | ACP is duly organized, validly existing and in good standing under the laws of the State of Delaware and all other states and foreign jurisdictions in which it conducts its business; | |
• | There are 2,000 shares of ACP common stock currently outstanding; | |
• | ACP has no subsidiaries; | |
• | ACP has the corporate power to carry on its business as it is now being conducted and to own all of its assets and properties; | |
• | ACP has the corporate authority to enter into the Agreement and Plan of Merger, enforceability of the Agreement and Plan of Merger, and the ACP board of directors has determined it is in the best interest of ACP and its shareholders to enter into the Agreement and Plan of Merger and recommend shareholder approval to complete the Merger; | |
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• | There are no consents or approvals of, or waivers by, or filings or registrations with any governmental authority or with any third party required to be made or obtained by ACP in connection with the Agreement and Plan of Merger; | |
• | ACP financial reports are in accordance with GAAP and there are no undisclosed liabilities; | |
• | No litigation, claim or other proceeding before any court or governmental agency is pending against ACP; | |
• | ACP is in substantial compliance with all applicable state, federal, local and foreign statutes, laws and regulations; | |
• | ACP is not in default under any contract or other commitment; | |
• | ACP is neither a party to nor bound by any collective bargaining agreement, or other agreement, with a labor union or labor organization; | |
• | ACP has complied at all times with applicable environmental laws and regulations; | |
• | ACP tax returns have been, or will be, filed in a timely manner; | |
• | ACP books and records have been fully, properly and accurately maintained in all material respects; | |
• | ACP is insured with reputable insurers against such risks and in such amounts as the management of ACP reasonably has determined to be prudent in accordance with industry practices; | |
• | None of the premises or properties of ACP is subject to any current or potential interests of third parties or other restrictions that would impair or be inconsistent in any material respect with the current use of such property by ACP; | |
• | Each of the leases in ACP’s name are valid and existing in full force and effect; and | |
• | ACP has good title to its properties and assets. | |
• | The Company is duly organized, validly existing and in good standing under the laws of the State of California and all other states and foreign jurisdictions in which it conducts its business; | |
• | The Company has the corporate authority to enter into the Agreement and Plan of Merger, enforceability of the Agreement and Plan of Merger, and the Company Board of Directors has determined it is in the best interest of the Company and its shareholders to enter into the Agreement and Plan of Merger and recommend shareholder approval to complete the Merger; | |
• | The Company common stock to be issued pursuant to the Merger, when issued in accordance with the terms of the Agreement and Plan of Merger, will be duly authorized, validly issued, fully paid and non-assessable and the issuance thereof is not subject to any preemptive right; | |
• | Company has no subsidiaries; | |
• | Company has the corporate power to carry on its business as it is now being conducted and to own all of its assets and properties; | |
• | There are no consents or approvals of, or waivers by, or filings or registrations with any governmental authority or with any third party required to be made or obtained by the Company in connection with the Agreement and Plan of Merger; | |
• | Company Financial reports and SEC documents have been, or will be, filed in a timely manner and comply in all material respects necessary to make the statements therein; | |
• | Except as disclosed in previous SEC filings, no event has occurred reasonably likely to have a material adverse effect with respect to the Company; |
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• | No litigation, claim or other proceeding before any court or governmental agency is pending against the Company; | |
• | The Company has complied at all times with applicable environmental laws and regulations; and | |
• | The Company is insured with reputable insurers against such risks and in such amounts as the management of the Company reasonably has determined to be prudent in accordance with industry practices. | |
General |
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Trade Prices | |||||||||
High | Low | ||||||||
Fiscal year ended December 31, 2003 | |||||||||
First Quarter | $ | 4.00 | $ | 0.50 | |||||
Second Quarter | 5.00 | 2.50 | |||||||
Third Quarter | 3.00 | 2.50 | |||||||
Fourth Quarter | 3.50 | 1.50 | |||||||
Fiscal year ended December 31, 2004 | |||||||||
First Quarter | 12.50 | 1.75 | |||||||
Second Quarter | 10.50 | 3.00 | |||||||
Third Quarter | 3.50 | 2.50 | |||||||
Fourth Quarter | 3.50 | 0.70 | |||||||
2005 | |||||||||
First Quarter | 3.00 | 0.70 |
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General |
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Seasonality of ACP’s Business, Competitive Conditions, Regulatory Environment. |
Products and Technologies |
• | Encasings: ACP offers three encasing product lines, each with distinct levels of allergen barrier effectiveness, comfort, durability and price. It’s Pristine® Complete and Pristine® Relief encasings use micro-fiber fabrics. ACP’s Economy encasings use laminated fabrics. | |
• | Blankets: ACP offers Snuggable® blankets, which are made from a top quality 300-weight Polartec® fleece, which has a high level of softness and warmth without extra weight. Allergy sufferers benefit from their use specifically because the blankets hold up exceptionally well through repeated hot water washing, which is the recommended process to eliminate allergens. | |
• | Comforters: As with it’s Pristine® Complete encasings, ACP’s comforters are manufactured with the most advanced Pristine® encasing fabric. It delivers complete dust mite and pet allergen protection, is luxuriously soft and breathable like fine cotton linens and also includes an anti-microbial treatment. The comforters are available in both light and heavier weights. | |
• | Pillows: ACP offers two Allergy Control®l Pristine® Deluxe pillow styles — a contour neck style and a gusseted style. As in the case of ACP’s branded comforters, allergy sufferers who use these branded pillows do not require encasings, since the product itself is manufactured with highly effective and comfortable allergen barrier fabric. |
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• | Bedding: Comforel® mattress cushions, Wamsutta® sheets and pillowcases. | |
• | Carpets and Laundry: Allersearch®, Capture®, DustMite®, Bissell® and De-mite® branded products. | |
• | Vacuums: A variety of Miele® vacuums, at differing price points. | |
• | Air Cleaners: Austin Air®, Blueair®, Honeywell® and Whirlpool® brands. | |
• | Air Filters: 3M®, Allergy Pro® and Allergy Zone® brands. | |
• | Respiratory (Nebulizers and Compressors): Omron® and Pari® brands. |
Product Registrations |
Licensed Technology and Intellectual Property |
Research and Development |
Customers of ACP |
Suppliers of ACP |
• | Precision Fabrics Group (micro-woven allergen barrier fabric) | |
• | Shawmut Mills (laminated allergen barrier fabric) |
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Sales and Marketing |
Employees of ACP |
Physician Sales/ Service | 3 | |||
Executive/ Administrative | 5 | |||
Shipping/ Receiving/ Warehouse | 5 | |||
Call Center/ Customer Service | 12 | |||
Wholesale (Int’l and Domestic) | 2 | |||
Operations/ IT | 3 | |||
Marketing | 1 | |||
Purchasing | 2 | |||
TOTAL | 33 |
Properties |
Legal Proceedings |
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2004 | 2003 | Change | % | |||||||||||||
Sales | $ | 7,714,653 | $ | 8,266,863 | $ | (552,210 | ) | (6.7 | )% | |||||||
Cost of Sales | $ | 4,581,795 | $ | 5,232,904 | $ | (651,109 | ) | (12.4 | )% | |||||||
Gross Profit | $ | 3,132,858 | $ | 3,033,959 | $ | 98,899 | 3.3 | % | ||||||||
Operating Expenses | $ | 3,439,875 | $ | 3,772,358 | $ | (332,483 | ) | (8.8 | )% | |||||||
Loss from Operations | $ | (307,017 | ) | $ | (738,399 | ) | $ | (431,382 | ) | (58.4 | )% | |||||
Other Income (Expense) | $ | (10,916 | ) | $ | (25,742 | ) | $ | (14,826 | ) | (57.6 | )% | |||||
Net Loss | $ | (317,933 | ) | $ | (764,141 | ) | $ | (446,208 | ) | (58.4 | )% |
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• | accompanying notes to the Unaudited Pro Forma Condensed Combined Financial Statements; | |
• | separate historical financial statements of ACP as of and for the years ended December 31, 2004 and 2003, included as an Exhibit to this document; | |
• | separate historical financial statements of Planet as of and for the years ended December 31, 2004 and 2003, included as an Exhibit to this document; | |
• | separate historical condensed financial statements of ACP as of and for the three months ended March 31, 2005, included as an Exhibit to this document; and | |
• | separate historical condensed financial statements of Planet as of and for the three months ended March 31, 2005, included as an Exhibit to this document. | |
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Planet | Allergy | |||||||||||||||||
Technologies, | Control | Pro Forma | Pro Forma | |||||||||||||||
Inc. | Products, Inc. | Adjustments | Consolidated | |||||||||||||||
ASSETS | ||||||||||||||||||
Current assets: | ||||||||||||||||||
Cash and cash equivalents | $ | 128,806 | $ | 79,753 | $ | 1,500,000 | b | $ | 208,559 | |||||||||
(1,500,000 | )c | |||||||||||||||||
Accounts receivable, less allowance for doubtful accounts of $5,500 | 5,514 | 209,144 | 214,658 | |||||||||||||||
Inventories | 19,798 | 712,053 | 731,851 | |||||||||||||||
Other current assets | 34,822 | 139,761 | 174,583 | |||||||||||||||
Total current assets | 188,940 | 1,140,711 | — | 1,329,651 | ||||||||||||||
Property, equipment and leasehold improvements, net | 85,129 | 157,741 | 242,870 | |||||||||||||||
Goodwill | 2,487,191 | d | 2,487,191 | |||||||||||||||
Totals | $ | 274,069 | $ | 1,298,452 | $ | 2,487,191 | $ | 4,059,712 | ||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIENCY) | ||||||||||||||||||
Current liabilities: | ||||||||||||||||||
Current portion of convertible notes payable to shareholder | $ | 136,332 | $ | 4,850,000 | $ | (4,850,000 | )c | $ | 136,332 | |||||||||
Advance from related party | 85,000 | 85,000 | ||||||||||||||||
Accounts payable | 71,898 | 826,363 | 100,000 | d | 998,261 | |||||||||||||
Accounts payable, related party | — | |||||||||||||||||
Accrued expenses | 361,024 | 134,384 | 495,408 | |||||||||||||||
Current portion of long-term debt | — | 3,826 | 3,826 | |||||||||||||||
Current portion of obligations under capital lease | — | 3,761 | 3,761 | |||||||||||||||
Interest payable | 1,749 | 1,749 | ||||||||||||||||
Total current liabilities | 656,003 | 5,818,334 | (4,750,000 | ) | 1,724,337 | |||||||||||||
Convertible notes payable to shareholder, net of current portion | 83,495 | 83,495 | ||||||||||||||||
Long-term debt, net of current portion | 14,388 | 14,388 | ||||||||||||||||
Obligations under capital lease, net of current portion | 2,921 | 2,921 | ||||||||||||||||
Total liabilities | 739,498 | 5,835,643 | (4,750,000 | ) | 1,825,141 | |||||||||||||
Shareholders’ equity (deficiency): | ||||||||||||||||||
Preferred stock | — | — | — | |||||||||||||||
Series A convertible preferred stock | — | — | — | |||||||||||||||
Common stock | 3,478,296 | 4,000,000 | 1,500,000 | b | 6,178,296 | |||||||||||||
(4,000,000 | )d | |||||||||||||||||
1,200,000 | d | |||||||||||||||||
Contributed capital | 1,018,873 | 500,000 | a | |||||||||||||||
3,350,000 | c | |||||||||||||||||
(4,868,873 | )d | |||||||||||||||||
Accumulated deficit | (3,943,725 | ) | (9,556,064 | ) | (500,000 | )a | (3,943,725 | ) | ||||||||||
10,056,064 | d | |||||||||||||||||
Total shareholders’ equity (deficiency) | (465,429 | ) | (4,537,191 | ) | 7,237,191 | 2,234,571 | ||||||||||||
Totals | $ | 274,069 | $ | 1,298,452 | $ | 2,487,191 | $ | 4,059,712 | ||||||||||
29
Planet | Allergy | |||||||||||||||||
Technologies, | Control | Pro Forma | Pro Forma | |||||||||||||||
Inc. | Products, Inc. | Adjustments | Consolidated | |||||||||||||||
Net sales | $ | 221,526 | $ | 2,157,955 | $ | — | $ | 2,379,481 | ||||||||||
Cost of sales | 75,505 | 1,296,463 | — | 1,371,968 | ||||||||||||||
Gross profit | 146,021 | 861,492 | — | 1,007,513 | ||||||||||||||
Operating expenses: | ||||||||||||||||||
Selling | 161,194 | 251,416 | — | 412,610 | ||||||||||||||
General and administrative | 218,985 | 693,499 | — | 912,484 | ||||||||||||||
Total operating expenses | 380,179 | 944,915 | — | 1,325,094 | ||||||||||||||
Loss from operations | (234,158 | ) | (83,423 | ) | — | (317,581 | ) | |||||||||||
Other income (expenses), net | (6,871 | ) | 462 | — | (6,409 | ) | ||||||||||||
Net loss | $ | (241,029 | ) | $ | (82,961 | ) | $ | — | $ | (323,990 | ) | |||||||
Net loss per share, basic and diluted | $ | (0.11 | ) | $ | (0.11 | ) | ||||||||||||
Weighted averages shares outstanding — basic and diluted | 2,159,961 | 2,819,961 | ||||||||||||||||
30
Planet | Allergy | |||||||||||||||||
Technologies, | Control | Pro Forma | Pro Forma | |||||||||||||||
Inc. | Products, Inc. | Adjustments | Consolidated | |||||||||||||||
Net sales | $ | 1,180,382 | $ | 7,714,653 | $ | — | $ | 8,895,035 | ||||||||||
Cost of sales | 407,811 | 4,581,795 | — | 4,989,606 | ||||||||||||||
Gross profit | 772,571 | 3,132,858 | — | 3,905,429 | ||||||||||||||
Operating expenses: | — | |||||||||||||||||
Selling | 597,575 | 947,792 | — | 1,545,367 | ||||||||||||||
General and administrative | 689,109 | 2,492,083 | — | 3,181,192 | ||||||||||||||
Total operating expenses | 1,286,684 | 3,439,875 | — | 4,726,559 | ||||||||||||||
Loss from operations | (514,113 | ) | (307,017 | ) | — | (821,130 | ) | |||||||||||
Other expenses, net | (259,445 | ) | (10,916 | ) | — | (270,361 | ) | |||||||||||
Net loss | $ | (773,558 | ) | $ | (317,933 | ) | $ | — | $ | (1,091,491 | ) | |||||||
Net loss per share, basic and diluted | $ | (0.46 | ) | $ | (0.48 | ) | ||||||||||||
Weighted averages shares outstanding — basic and diluted | 1,686,559 | 2,286,559 | ||||||||||||||||
31
(1) | DESCRIPTION OF TRANSACTION AND BASIS OF PRESENTATION |
(2) | PRO FORMA ADJUSTMENTS |
32
Name | Age | Principal Occupation | ||||
Scott L. Glenn | 55 | Chairman of the Board of Directors, President and Chief Executive Officer and Business Executive | ||||
Eric B. Freedus | 55 | Director, Attorney | ||||
H.M. Busby | 66 | Director, Private Investor | ||||
Michael Trinkle | 51 | Business Executive | ||||
Ellen M. Preston | 49 | Business Consultant |
33
34
Name | Age | Position | ||||
Scott L. Glenn | 55 | Chairman of the Board of Directors, President and Chief Executive Officer and Business Executive | ||||
Leslie White | 52 | Chief Financial Officer | ||||
Bret Megargel | 36 | Vice President |
35
36
Beneficial Ownership | ||||||||||
Number of | Percentage of | |||||||||
Title of Class | Beneficial Owner | Shares(1) | Class Owned(2) | |||||||
Common | Scott L. Glenn(3) | 1,095,942 | 48.1 | % | ||||||
6402 Cardeno Drive | ||||||||||
La Jolla, CA 92037 | ||||||||||
Common | Eric B. Freedus(4) | 2,153 | 0.1 | % | ||||||
1202 Ketner Blvd., Ste. 6000 | ||||||||||
San Diego, CA 92101 | ||||||||||
Common | H.M. Busby(5) | 7,012 | 0.3 | % | ||||||
3852 Alameda Place | ||||||||||
San Diego, CA 92103 | ||||||||||
Common | Michael A. Trinkle(5) | 55,873 | 2.5 | % | ||||||
3495 Via Zara Court | ||||||||||
Fallbrook, CA 92028 | ||||||||||
Common | Ellen Preston(5) | 26,565 | 1.2 | % | ||||||
1825 Sheridan Avenue | ||||||||||
San Diego, CA 92103 | ||||||||||
Common | Leslie White(6) | 9,312 | 0.4 | % | ||||||
18479 Calle La Serra | ||||||||||
Rancho Santa Fe, CA 92091 | ||||||||||
Common | All executive officers and directors as a group | 1,196,857 | 52.5 | % | ||||||
Common | William and Lisa Barkett | 308,456 | 13.5 | % | ||||||
7544 Eads #F | ||||||||||
La Jolla, CA 92037 | ||||||||||
Common | J. Roberts Fosberg | 158,382 | 6.9 | % | ||||||
2440 Toyon Road | ||||||||||
Healdsburg, CA 95448 | ||||||||||
Common | Windamere III, LLC(7) | 300,000 | 13 | % | ||||||
6402 Cardeno Dr. | ||||||||||
La Jolla, CA 92037 |
(1) | This table is based upon information supplied by officers, directors and principal shareholders and Schedules 13D and 13G filed with the Securities and Exchange Commission (the “SEC”). Unless otherwise indicated in the footnotes to this table and subject to community property laws where applicable, the Company believes that each of the shareholders named in this table has sole voting and investment power with respect to the shares indicated as beneficially owned. |
(2) | Percentage ownership is based upon the shares outstanding on May 31, 2005. |
(3) | Includes 770,806 shares owned by AF Partners, LLC, which is controlled by Mr. Glenn and 300,000 shares owned by Windamere III, LLC, over which Mr. Glenn shares control (see Note (5) below). Does not include options to purchase 75,407 shares which begin vesting on November 30, 2005. Does not include 25,000 shares issuable upon exercise of stock options which expire on January 25, 2015, and which begin vesting on January 25, 2006. |
37
(4) | Does not include 500 shares issuable upon exercise of stock options which expire on January 18, 2015, and which begin vesting on January 18, 2006, or 10,000 shares issuable upon exercise of stock options which expire on January 25, 2015, and which begin vesting on January 25, 2006. |
(5) | Does not include 500 shares issuable upon exercise of stock options which expire on November 17, 2014, and which begin vesting on November 17, 2005, or 10,000 shares issuable upon exercise of stock options which expire on January 25, 2015, which begin vesting on January 25, 2006. |
(6) | Does not include 30,000 shares issuable upon exercise of stock options which expire on January 31, 2015, and which begin vesting on January 31, 2006. |
(7) | Windamere III, LLC, is under the joint control of Mr. Glenn and St. Paul Traveler’s Companies, Inc., its affiliates Split-Rock Partners, LLC, and St. Paul Fire and Marine Insurance Company, whose business address is 385 Washington Street, St. Paul, Minnesota 55102. |
38
Securities | |||||||||||||||||||
Underlying | |||||||||||||||||||
Name and Principal Position | Year | Salary($) | Bonus($) | Options (#) | Other | ||||||||||||||
Robert J. Petcavich | 2004 | $ | — | $ | — | 500 | (1) | $ | — | ||||||||||
Former Chairman of the Board | 2003 | $ | — | — | $ | 47,180 | (3) | ||||||||||||
and Chief Technical Officer | 2002 | $ | 170,038 | $ | — | — | $ | 3,241 | (2) | ||||||||||
H.M. Busby | 2004 | $ | — | $ | — | 500 | (1) | $ | 29,630 | (7) | |||||||||
Former Chief Executive Officer, | 2003 | $ | — | $ | — | — | $ | 31,677 | (3) | ||||||||||
President and Chief Financial | 2002 | $ | — | $ | — | — | $ | — | |||||||||||
Officer | |||||||||||||||||||
Richard C. Bernier | 2004 | $ | — | $ | — | — | — | ||||||||||||
Former Chief Executive Officer | 2003 | — | $ | — | — | $ | 19,125 | (3) | |||||||||||
and President | 2002 | $ | 117,713 | $ | — | — | $ | — | |||||||||||
Scott Glenn | 2004 | $ | — | $ | — | 100,543 | (4) | $ | — | ||||||||||
Chairman, Chief Executive Officer | 2003 | $ | — | $ | — | — | $ | — | |||||||||||
and President | 2002 | $ | — | $ | — | �� | — | $ | — | ||||||||||
Leslie White(6) | 2004 | $ | 52,031 | (5) | $ | — | — | $ | — | ||||||||||
Secretary and Chief Financial Officer | 2003 | $ | 51,445 | (5) | $ | — | — | $ | — | ||||||||||
2002 | $ | 51,015 | (5) | $ | — | — | $ | — |
(1) | Represents options granted November 17, 2004, for compensation as a director. |
(2) | Represents auto expense reimbursement paid by the Company. |
(3) | Represents consulting fees paid for their services to the Company in 2003. |
(4) | Represents an option granted on November 30, 2004, with an exercise price of $3.50 per share. 25,136 of the Options granted are currently exercisable, and the remaining options to purchase 75,407 shares begin vesting on November 30, 2005. |
(5) | Represents compensation paid by Allergy Free, LLC, prior to December 1, 2004, and by Planet after that date. |
(6) | Ms. White is employed by Conception Technologies, L.P., a California limited partnership (“Conception”), and for the past three years has devoted approximately fifty percent (50%) of her work time to the business of the Allergy Free (and after December 1, 2004 to the business of Planet Technologies, Inc.) Allergy Free (and now Planet) reimbursed Conception for approximately fifty percent (50%) of the compensation Conception pays to Ms. White as reflected in the table. |
(7) | Represents consulting fees paid to Mr. Busby for his services in 2004. |
39
No. of | |||||||||||||||||
Securities | Percent of Total | ||||||||||||||||
Underlying | Options Granted | Exercise Price | |||||||||||||||
Name | Options | to Employees | ($/share) | Expiration Date | |||||||||||||
Scott Glenn | 100,543 | 54.18 | %% | $ | 3.50 | November 30, 2014 | |||||||||||
25,000 | 13.50 | % | $ | 3.00 | January 25, 2015 | ||||||||||||
Brett Megargel | 30,000 | 16.16 | %1 | $ | 3.00 | February 1, 2015 | |||||||||||
Leslie White | 30,000 | 16.16 | % | $ | 3.00 | January 31, 2015 | |||||||||||
Total | 185,543 | 100.00 | % |
Number of Securities | ||||||||||||||||||||||||
Underlying Unexercised | Value of Unexercised | |||||||||||||||||||||||
Options at Fiscal Year | In-the-Money Options | |||||||||||||||||||||||
Shares | End(2) | at Fiscal Year End ($)(1) | ||||||||||||||||||||||
Acquired on | Value | |||||||||||||||||||||||
Name | Exercise (#) | Realized | Exercisable | Unexercisable | Exercisable | Unexercisable | ||||||||||||||||||
R. Petcavich | 1,000 | -0- | 250 | 500 | $ | 0 | $ | 0 | ||||||||||||||||
H. M. Busby | 1,000 | -0- | 360 | 500 | $ | 0 | $ | 0 | ||||||||||||||||
Richard Bernier | 500 | -0- | 0 | 0 | $ | 0 | $ | 0 | ||||||||||||||||
Ronald Sunderland | 2,000 | -0- | 0 | 0 | $ | 0 | $ | 0 | ||||||||||||||||
Scott Glenn | -0- | -0- | 25,136 | 75,407 | $ | 0 | $ | 0 |
(1) | Calculated based on the estimated fair market value of the Company’s Common Stock as of December 31, 2004, less the exercise price payable upon the exercise of such options. Such estimated fair market value as of December 31, 2004, was $.70, the last transaction price posted at the close of trading on December 31, 2004. |
(2) | Certain former directors of Planet surrendered “Out of the Money” stock options including Robert J. Petcavich, 3,294; and H.M. Busby 964. |
(a) | ||||||||||||
Number of Securities | (b) | (c) | ||||||||||
to be Issued | Weighted-Average | Number of Securities Remaining | ||||||||||
Upon Exercise of | Exercise Price of | Available for Future Issuance | ||||||||||
Outstanding | Outstanding | Under Equity Compensation | ||||||||||
Options, | Options, Warrants | Plans (excluding securities | ||||||||||
Plan Category | Warrants and Rights | and Rights | reflected in column (a)) | |||||||||
Equity compensation plans approved by security holders | 107,413 | $ | 8.193 | None(2 | ) | |||||||
Equity compensation plans not approved by security holders(1) | N/A | N/A | N/A | |||||||||
Total | 107,413 | $ | 8.193 | None(2 | ) |
(1) | The Company does not have any equity compensation plans that have not been approved by Shareholders. |
(2) | As of March 31, 2005, the Company has granted options exceeding the number of shares authorized by the shareholders under the 2000 Stock Incentive Plan by 130,913 shares. The Board has approved an amendment to the plan to increase the authorized number of shares to 350,000 shares, which is being submitted to the shareholders as Proposal 3 of this Proxy Statement. |
40
41
42
Name and Position | Dollar Value | Number of Options | ||||||
Executive Officers: | ||||||||
Scott Glenn, President | $ | 3.50/share | 100,543 | |||||
$ | 3.00/share | 25,000 | ||||||
Brett Megargel, Vice President | $ | 3.00/share | 30,000 | |||||
Leslie White, Chief Financial Officer | $ | 3.00/share | 30,000 | |||||
Directors: | ||||||||
Ellen Preston | $ | 3.00/share | 10,000 | |||||
Eric Freedus | $ | 3.00/share | 10,500 | |||||
Michael Trinkle | $ | 3.00/share | 10,000 | |||||
H.M. Busby | $ | 3.00/share | 10,000 |
43
(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. |
44
45
46
Exhibit “A” — ACP Audited Financial Statements for the One(1) Year Period Ended December 31, 2004 | A-1 | |||
Exhibit “A-1” — ACP Unaudited Financial Statements for Quarter One Ended March 31, 2005 | A-1-1 | |||
Exhibit “B” — Planet Form 10KSB Filed With SEC March 31, 2005 | B-1 | |||
Exhibit “B-1” — Planet Form 10QSB Filed with the SEC May 16, 2005 | B-1-1 | |||
Exhibit “C” — Agreement and Plan of Merger | C-1 | |||
Exhibit “D” — California Corporations Code Sections 1300-1312 | D-1 |
By order of the Board of Directors | |
Scott L. Glenn | |
Chief Executive Officer and President |
47
A-1
Page | ||||
Independent auditor’s report | A-1 | |||
FINANCIAL STATEMENTS | A-2 | |||
Balance sheets | A-3 | |||
Statements of operations and accumulated deficit | A-4 | |||
Statements of cash flows | A-5 | |||
Notes to financial statements | A-6 |
A-2
/s/ Venman & Co. LLC |
A-3
December 31 | ||||||||||
2004 | 2003 | |||||||||
ASSETS | ||||||||||
Current assets | ||||||||||
Cash | $ | 78,107 | $ | 165,714 | ||||||
Trade accounts receivable | 221,699 | 220,189 | ||||||||
Inventory | 616,471 | 721,183 | ||||||||
Prepaid expenses | 209,657 | 131,310 | ||||||||
Total current assets | 1,125,934 | 1,238,396 | ||||||||
Equipment and leasehold improvements | ||||||||||
Furniture and equipment | 700,534 | 686,243 | ||||||||
Leasehold improvements | 56,100 | 56,100 | ||||||||
Software | 317,985 | 317,985 | ||||||||
Vehicle | 26,529 | 26,529 | ||||||||
1,101,148 | 1,086,857 | |||||||||
Less accumulated depreciation and amortization | 932,527 | 855,220 | ||||||||
Net equipment and leasehold improvements | 168,621 | 231,637 | ||||||||
TOTAL ASSETS | $ | 1,294,555 | $ | 1,470,033 | ||||||
LIABILITIES AND DEFICIENCY IN ASSETS | ||||||||||
Current liabilities | ||||||||||
Note payable, bank | $ | — | $ | 250,000 | ||||||
Note payable, stockholder | 4,850,000 | 4,650,000 | ||||||||
Trade accounts payable | 799,005 | 481,687 | ||||||||
Accounts payable, related party | 393,873 | 393,873 | ||||||||
Accrued expenses | 73,013 | 107,281 | ||||||||
Accrued termination benefits | — | 93,245 | ||||||||
Current portion of long-term debt | 3,819 | 3,791 | ||||||||
Current portion of obligation under capital lease | 3,724 | 1,159 | ||||||||
Total current liabilities | 6,123,434 | 5,981,036 | ||||||||
Long-term liabilities | ||||||||||
Long-term debt, less current portion | 15,348 | 19,167 | ||||||||
Obligation under capital lease, less current portion | 3,876 | — | ||||||||
Total long-term liabilities | 19,224 | 19,167 | ||||||||
Total liabilities | 6,142,658 | 6,000,203 | ||||||||
Deficiency in assets | ||||||||||
Common stock — no par value | ||||||||||
Authorized 20,000 shares | ||||||||||
Issued and outstanding — 2,000 shares | 4,000,000 | 4,000,000 | ||||||||
Contributed capital | 625,000 | 625,000 | ||||||||
Accumulated deficit | (9,473,103 | ) | (9,155,170 | ) | ||||||
Deficiency in assets | (4,848,103 | ) | (4,530,170 | ) | ||||||
TOTAL LIABILITIES AND DEFICIENCY IN ASSETS | $ | 1,294,555 | $ | 1,470,033 | ||||||
A-4
Year Ended December 31 | |||||||||
2004 | 2003 | ||||||||
Net sales | $ | 7,714,653 | $ | 8,266,863 | |||||
Cost of sales | 4,581,795 | 5,232,904 | |||||||
Gross profit | 3,132,858 | 3,033,959 | |||||||
Operating expenses | |||||||||
Selling | 947,792 | 1,080,578 | |||||||
General and administrative expenses | 2,492,083 | 2,691,780 | |||||||
Total operating expenses | 3,439,875 | 3,772,358 | |||||||
Loss from operations | (307,017 | ) | (738,399 | ) | |||||
Other income (expense) | |||||||||
Interest and royalty income | 98 | 72 | |||||||
Interest expense | (11,014 | ) | (25,814 | ) | |||||
Net other expense | (10,916 | ) | (25,742 | ) | |||||
NET LOSS | (317,933 | ) | (764,141 | ) | |||||
Accumulated deficit at beginning of year | (9,155,170 | ) | (8,391,029 | ) | |||||
ACCUMULATED DEFICIT AT END OF YEAR | $ | (9,473,103 | ) | $ | (9,155,170 | ) | |||
A-5
Year Ended December 31 | |||||||||||
2004 | 2003 | ||||||||||
Operating activities | |||||||||||
Net loss | $ | (317,933 | ) | $ | (764,141 | ) | |||||
Adjustments to reconcile net loss to net cash used by operating activities: | |||||||||||
Depreciation and amortization | 77,307 | 183,598 | |||||||||
Provision for uncollectible accounts | 19,664 | 1,375 | |||||||||
Provision for obsolete inventory | (60,000 | ) | 8,000 | ||||||||
(Increase) decrease in: | |||||||||||
Trade accounts receivable | (21,174 | ) | 119,571 | ||||||||
Inventory | 164,712 | 315,850 | |||||||||
Prepaid expenses | (78,347 | ) | 21,477 | ||||||||
Increase (decrease) in: | |||||||||||
Trade accounts payable | 317,318 | (29,888 | ) | ||||||||
Accrued expenses | (34,268 | ) | 55,453 | ||||||||
Accrued termination benefits | (93,245 | ) | (246,550 | ) | |||||||
Net cash used by operating activities | (25,966 | ) | (335,255 | ) | |||||||
Investing activity — cash used in acquisition of equipment | (3,076 | ) | (3,892 | ) | |||||||
Financing activities | |||||||||||
Payments of short-term borrowings | (250,000 | ) | (200,024 | ) | |||||||
Proceeds of short-term borrowings | — | 250,000 | |||||||||
Proceeds of borrowings from stockholder | 200,000 | 650,000 | |||||||||
Payments of borrowings from officer | — | (130,000 | ) | ||||||||
Payments of long-term borrowings | (3,791 | ) | (1,571 | ) | |||||||
Payments of obligation under capital lease | (4,774 | ) | (123,123 | ) | |||||||
Net cash provided (used) by financing activities | (58,565 | ) | 445,282 | ||||||||
Increase (decrease) in cash for the year | (87,607 | ) | 106,135 | ||||||||
Cash at beginning of year | 165,714 | 59,579 | |||||||||
CASH AT END OF YEAR | $ | 78,107 | $ | 165,714 | |||||||
SUPPLEMENTAL CASH FLOW DISCLOSURES: | |||||||||||
Cash paid during the year for interest | $ | 11,014 | $ | 25,814 | |||||||
Non-cash investing and financing activities: | |||||||||||
Acquisition of equipment by incurring capital lease obligation | $ | 11,215 | $ | — | |||||||
Acquisition of vehicle by issuance of debt | $ | — | $ | 24,529 | |||||||
A-6
NOTE 1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
NATURE OF BUSINESS |
CHANGE IN ACCOUNTING BASIS |
TRADE ACCOUNTS RECEIVABLE |
INVENTORY |
December 31 | ||||||||
2004 | 2003 | |||||||
Materials | $ | 174,246 | $ | 200,128 | ||||
Work-in-process | 31,395 | 71,339 | ||||||
Finished goods, less provision for obsolescence 2004-$133,000; 2003-$193,000 | 410,830 | 449,716 | ||||||
$ | 616,471 | $ | 721,183 | |||||
A-7
EQUIPMENT AND LEASEHOLD IMPROVEMENTS |
SHIPPING COSTS |
ADVERTISING |
INCOME TAXES |
USE OF ESTIMATES |
REVENUE RECOGNITION |
PREPAID EXPENSES |
NOTE 2. | CONCENTRATION OF CREDIT RISK |
A-8
NOTE 3. | NOTE PAYABLE, STOCKHOLDER |
NOTE 4. | ACCOUNTS PAYABLE, RELATED PARTY |
NOTE 5. | LONG-TERM DEBT |
December 31 | ||||||||||
2004 | 2003 | |||||||||
Long-term debt consists of: | ||||||||||
0.74% chattel note payable in monthly installments of $329, including interest, with a balloon payment of $13,436 due in July 2006. The note is secured by a vehicle with an original cost of $26,529 | $ | 19,167 | $ | 22,958 | ||||||
Less current portion | 3,819 | 3,791 | ||||||||
TOTAL LONG-TERM DEBT | $ | 15,348 | $ | 19,167 | ||||||
Year Ending December 31 | ||||
2005 | $ | 3,819 | ||
2006 | 15,348 | |||
$ | 19,167 | |||
NOTE 6. | CAPITAL LEASE COMMITMENT |
Year Ending December 31 | |||||
2005 | $ | 3,960 | |||
2006 | 3,960 | ||||
Total minimum lease payment | 7,920 | ||||
Less amount representing interest | 320 | ||||
Present value of minimum lease payments | 7,600 | ||||
Less current portion | 3,724 | ||||
Long-term portion | $ | 3,876 | |||
NOTE 7. | OPERATING LEASE COMMITMENTS |
A-9
Year Ending December 31 | ||||
2005 | $ | 174,386 | ||
2006 | 172,742 | |||
2007 | 132,450 | |||
$ | 479,578 | |||
NOTE 8. | CONCENTRATIONS |
NOTE 9. | EMPLOYEE BENEFIT PLAN |
NOTE 10. | SUBSEQUENT EVENTS |
NOTE 11. | GOING CONCERN |
A-10
Page | ||||
Balance sheets | A-1-2 | |||
Statements of operations and accumulated deficit | A-1-3 | |||
Statements of cash flows | A-1-4 | |||
Notes to financial statements | A-1-5 |
A-1-1
March 31 | ||||||||||
2005 | 2004 | |||||||||
ASSETS | ||||||||||
Current assets | ||||||||||
Cash | $ | 79,753 | $ | 125,295 | ||||||
Trade accounts receivable | �� | 209,144 | 233,942 | |||||||
Inventory | 712,053 | 684,059 | ||||||||
Prepaid expenses | 139,761 | 211,424 | ||||||||
Total current assets | 1,140,711 | 1,254,720 | ||||||||
Equipment and leasehold improvements | ||||||||||
Furniture and equipment | 706,009 | 698,963 | ||||||||
Leasehold improvements | 56,100 | 56,100 | ||||||||
Software | 317,985 | 317,985 | ||||||||
Vehicle | 26,529 | 26,529 | ||||||||
1,106,623 | 1,099,577 | |||||||||
Less accumulated depreciation and amortization | 948,882 | 874,468 | ||||||||
Net equipment and leasehold improvements | 157,741 | 225,109 | ||||||||
TOTAL ASSETS | $ | 1,298,452 | $ | 1,479,829 | ||||||
LIABILITIES AND DEFICIENCY IN ASSETS | ||||||||||
Current liabilities | ||||||||||
Note payable, bank | $ | — | $ | 250,000 | ||||||
Note payable, stockholder | 4,850,000 | 4,650,000 | ||||||||
Trade accounts payable | 826,363 | 643,177 | ||||||||
Accounts payable, related party | — | 393,873 | ||||||||
Accrued expenses | 134,384 | 68,108 | ||||||||
Accrued termination benefits | — | 30,097 | ||||||||
Current portion of long-term debt | 3,826 | 3,799 | ||||||||
Current portion of obligation under capital lease | 3,761 | 3,614 | ||||||||
Total current liabilities | 5,818,334 | 6,042,668 | ||||||||
Long-term liabilities | ||||||||||
Long-term debt, less current portion | 14,388 | 18,214 | ||||||||
Obligation under capital lease, less current portion | 2,921 | 6,682 | ||||||||
Total long-term liabilities | 17,309 | 24,896 | ||||||||
Total liabilities | 5,835,643 | 6,067,564 | ||||||||
Deficiency in assets | ||||||||||
Common stock — no par value | ||||||||||
Authorized 20,000 shares | ||||||||||
Issued and outstanding — 2,000 shares | 4,000,000 | 4,000,000 | ||||||||
Contributed capital | 1,018,873 | 625,000 | ||||||||
Accumulated deficit | (9,556,064 | ) | (9,212,735 | ) | ||||||
Deficiency in assets | (4,537,191 | ) | (4,587,735 | ) | ||||||
TOTAL LIABILITIES AND DEFICIENCY IN ASSETS | $ | 1,298,452 | $ | 1,479,829 | ||||||
A-1-2
Three Months Ended March 31 | |||||||||
2005 | 2004 | ||||||||
Net sales | $ | 2,157,955 | $ | 2,236,101 | |||||
Cost of sales | 1,296,463 | 1,392,202 | |||||||
Gross profit | 861,492 | 843,899 | |||||||
Operating expenses | |||||||||
Selling | 251,416 | 260,796 | |||||||
General and administrative expenses | 693,499 | 636,494 | |||||||
Total operating expenses | 944,915 | 897,290 | |||||||
Loss from operations | (83,423 | ) | (53,391 | ) | |||||
Other income (expense) | |||||||||
Interest and royalty income | 570 | 22 | |||||||
Interest expense | (108 | ) | (4,196 | ) | |||||
Net other income (expense) | 462 | (4,174 | ) | ||||||
NET LOSS | (82,961 | ) | (57,565 | ) | |||||
Accumulated deficit at beginning of period | (9,473,103 | ) | (9,155,170 | ) | |||||
ACCUMULATED DEFICIT AT END OF PERIOD | $ | (9,556,064 | ) | $ | (9,212,735 | ) | |||
A-1-3
Three Months Ended | |||||||||||
March 31 | |||||||||||
2005 | 2004 | ||||||||||
Operating activities | |||||||||||
Net loss | $ | (82,961 | ) | $ | (57,565 | ) | |||||
Adjustments to reconcile net loss to net cash used by operating activities: | |||||||||||
Depreciation and amortization | 16,355 | 19,248 | |||||||||
Provision for uncollectible accounts | 35 | — | |||||||||
Provision for obsolete inventory | (43,000 | ) | — | ||||||||
(Increase) decrease in: | |||||||||||
Trade accounts receivable | 12,520 | (13,753 | ) | ||||||||
Inventory | (52,582 | ) | 37,124 | ||||||||
Prepaid expenses | 69,896 | (80,114 | ) | ||||||||
Increase (decrease) in: | |||||||||||
Trade accounts payable | 27,358 | 161,490 | |||||||||
Accounts payable, related party | (393,873 | ) | — | ||||||||
Accrued expenses | 61,371 | (39,173 | ) | ||||||||
Accrued termination benefits | — | (63,148 | ) | ||||||||
Net cash used by operating activities | (384,881 | ) | (35,891 | ) | |||||||
Investing activity — cash used in acquisition of equipment | (5,475 | ) | (1,505 | ) | |||||||
Financing activities | |||||||||||
Payments of long-term borrowings | (953 | ) | (945 | ) | |||||||
Payments of obligation under capital lease | (918 | ) | (2,078 | ) | |||||||
Capital contribution from stockholder | 393,873 | — | |||||||||
Net cash provided (used) by financing activities | 392,002 | (3,023 | ) | ||||||||
Increase (decrease) in cash for the period | 1,646 | (40,419 | ) | ||||||||
Cash at beginning of period | 78,107 | 165,714 | |||||||||
CASH AT END OF PERIOD | $ | 79,753 | $ | 125,295 | |||||||
SUPPLEMENTAL CASH FLOW DISCLOSURES: | |||||||||||
Cash paid for interest during the period | $ | 108 | $ | 4,196 | |||||||
Non-cash investing and financing activity — acquisition of equipment by capital lease obligation | $ | — | $ | 11,215 | |||||||
A-1-4
Note 1. | Summary of significant accounting policies |
Trade accounts receivable |
Inventory |
March 31 | ||||||||
2005 | 2004 | |||||||
Materials | $ | 283,818 | $ | 208,994 | ||||
Work-in-process | 21,225 | 36,442 | ||||||
Finished goods, less provision for obsolescence of $90,000 at March 31, 2005 and $193,000 at March 31, 2004 | 407,010 | 438,623 | ||||||
$ | 712,053 | $ | 684,059 | |||||
Equipment and leasehold improvements |
Shipping costs |
Advertising |
A-1-5
Income taxes |
Use of estimates |
Note 2. | Concentration of credit risk |
Note 3. | Note payable, bank |
Note 4. | Note payable, stockholder |
Note 5. | Long-term debt |
March 31 | ||||||||||
2004 | 2003 | |||||||||
Long-term debt consists of: | ||||||||||
0.74% chattel note payable in monthly installments of $329, including interest, with a balloon payment of $13,436 due in July 2006. The note is secured by a vehicle with an original cost of $26,529 | $ | 18,214 | $ | 22,013 | ||||||
Less current portion | 3,826 | 3,799 | ||||||||
TOTAL LONG-TERM DEBT | $ | 14,388 | $ | 18,214 | ||||||
Year Ending March 31 | ||||
2006 | $ | 3,826 | ||
2007 | 14,388 | |||
$ | 18,214 | |||
A-1-6
Note 6. | Capital lease commitment |
Year Ending March 31 | |||||
2006 | $ | 3,960 | |||
2007 | 2,970 | ||||
Total minimum lease payment | 6,930 | ||||
Less amount representing interest | 248 | ||||
Present value of minimum lease payments | 6,682 | ||||
Less current portion | 3,761 | ||||
Long-term portion | $ | 2,921 | |||
Note 7. | Operating lease commitments |
Year Ending March 31 | ||||
2006 | $ | 171,902 | ||
2007 | 174,028 | |||
2008 | 88,300 | |||
$ | 434,230 | |||
Note 8. | Contributed capital |
Note 9. | Concentrations |
A-1-7
Note 10. | Employee benefit plan |
Note 11. | Agreement and plan of merger |
Note 12. | Going concern |
A-1-8
B-1
CALIFORNIA (State or other jurisdiction of incorporation of organization) | 33-0502606 (IRS Employer identification No.) | |
6835 Flanders Drive, Suite 100 San Diego, California (Address of principal executive offices) | 92121 (Zip Code) |
B-2
Item | ||||||||
Number | Page | |||||||
PART I. | ||||||||
1. | Description of Business | B-4 | ||||||
2. | Description of Property | B-10 | ||||||
3. | Legal Proceedings | B-10 | ||||||
4. | Submission of Matters to a Vote of Security Holders | B-11 | ||||||
PART II. | ||||||||
5. | Market for Common Equity, Related Stockholders Matters and Issuer Purchases of Equity Securities | B-12 | ||||||
6. | Management’s Discussion and Analysis or Plan of Operation | B-12 | ||||||
7. | Financial Statements | B-15 | ||||||
8. | Changes in and Disagreements With Accountants on Accounting and Financial Disclosures | B-15 | ||||||
8A. | Controls and Procedures | B-15 | ||||||
8B. | Other Items | B-16 | ||||||
PART III. | ||||||||
9. | Directors, and Executive Officers of the Registrant | B-16 | ||||||
10. | Executive Compensation | B-19 | ||||||
11. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | B-22 | ||||||
12. | Certain Relationships and Related Transactions | B-24 | ||||||
13. | Exhibits | B-24 | ||||||
14. | Principal Accountant Fees and Services | B-26 | ||||||
Signatures | B-27 | |||||||
Power of Attorney | B-27 |
B-3
ITEM 1. | DESCRIPTION OF BUSINESS |
General |
Products and Technologies |
B-4
• | The Aller-Pure® Gold Filteris a permanent electrostatic washable filter. The filter is very efficient in removing particles at the 1-10 micron level. The filter is pleated and offers 2.5 times the filtering surface area of a flat filter while providing a low resistance that optimizes airflow. We offer 45 standard sizes and also manufacture custom filters to meet almost any customer need. The filters have a ten-year warranty. | |
• | The Aller-Pure® MAX- (Micro-Allergen Xtractor) is the newest filter offered by the Company. The Aller-Pure MAX is rated at the highest level for residential filters. It is a pleated filter with actively electrostatic charged media. The disposable filter’s life is 2-3 months and is sold in packages of 4 filters. Currently we offer this filter in 11 standard sizes. | |
• | We provide theAller-Pure® Flex filtersfor free-standing air conditioning units and other types of heating and cooling systems often found in recreational vehicles. The flex filter is comprised of 3 layers and sewn with a trim. These filters are washable and have a three-year warranty. | |
• | Consumers filter the loose dust from their air ducts usingAllergy-Free® Vent Filtration Kits. The vent kits are sold in one month and six week supplies. Consumers are instructed to change the vent filters when dirty and replace with new product. | |
• | Allergy-Free® Filter Cleaner — Used to clean the Aller-Pure® Gold and Aller-Pure® Flex filters. | |
• | Allergy-Free® HEPA Room Air Cleaners are available in five different configurations to meet an individual’s needs. These freestanding units are often used when the forced heating and cooling system is not in use and/or when an individual does not have a forced air system. |
• | Allergy-Free®Pristine Bed and Pillow Encasings and Hypoallergenic Pillows: The Pristine® line of encasings offered by Planet is the first choice in hypo-allergenic protective bed covers to protect household members from dust mite allergens while sleeping. The Pristine® line is highly recommended by allergy physicians. | |
• | Anti-Allergen Products for laundry and upholstery: We offer products in this category from Whirlpool, Alkaline products and Ecology Works. | |
• | Carpet Treatments: Planet marketsCapture® Carpet Cleaner, Dust Mite Control and X-Mitecarpet treatments. All of these products work by either killing the dust mites or denaturing the protein rendering it to a non-allergenic state. | |
• | Electrostatic Mops and Dusters: These mops utilize an electrostatic cloth for maximum efficiency without the use of harsh chemicals that also can be harmful to the allergy patient. | |
• | Dander Reducing Treatments:Allerpetsolutions are rubbed directly on to the animal and reduce the amount of pet dander. |
B-5
Product Registrations |
Licensed Technology and Intellectual Property |
Research and Development |
Government Requirements |
B-6
Customers of Planet |
Suppliers of Planet |
American Metal Filter Company (Permanent Electrostatic Filters) | |
Lifetime Filter Manufacturing, LLC (Disposable Filters) | |
J. Lamb, Inc. (Bedding Encasings) | |
Austin Air Systems, LTD (Room Air Cleaners) |
Sales and Marketing |
Employees |
Properties |
Risk Factors |
B-7
• | the cost of manufacturing; | |
• | developing new markets for our products; | |
• | competing technological and market developments; and | |
• | the costs involved in filing, prosecuting and enforcing patent claims. |
B-8
B-9
• | elect or defeat the election of our directors; | |
• | amend or prevent amendment of our articles or incorporation or bylaws; | |
• | effect or prevent a merger, sale of assets or other corporate transaction; and | |
• | control the outcome of any other matter submitted to the shareholders for vote. |
ITEM 2. | DESCRIPTION OF PROPERTY |
ITEM 3. | LEGAL PROCEEDINGS |
B-10
ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS |
B-11
ITEM 5. | MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS |
Trade Prices | |||||||||
High | Low | ||||||||
Fiscal year ended December 31, 2003 | |||||||||
First Quarter | $ | 4.00 | 0.50 | ||||||
Second Quarter | 5.00 | 2.50 | |||||||
Third Quarter | 3.00 | 2.50 | |||||||
Fourth Quarter | 3.50 | 1.50 | |||||||
Fiscal year ended December 31, 2004 | |||||||||
First Quarter | 12.50 | 1.75 | |||||||
Second Quarter | 10.50 | 3.00 | |||||||
Third Quarter | 3.50 | 2.50 | |||||||
Fourth Quarter | 3.50 | 0.70 |
ITEM 6. | MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION |
B-12
Years Ended December 31, 2004 and 2003 |
2004 | 2003 | Change | % | |||||||||||||
Sales | $ | 1,180,382 | $ | 2,258,213 | (1,077,831 | ) | (47.7 | ) | ||||||||
Cost of Sales | 407,811 | 730,801 | (322,990 | ) | (44.2 | ) | ||||||||||
Gross Profit | 772,571 | 1,527,412 | (754,841 | ) | (49.4 | ) | ||||||||||
Operating Expenses | 1,286,684 | 1,874,398 | (587,714 | ) | (31.4 | ) | ||||||||||
Loss from Operations | (514,113 | ) | (346,986 | ) | 167,127 | 48.2 | ||||||||||
Other Income | ||||||||||||||||
(Expense) | (259,445 | ) | (227,149 | ) | 32,296 | 14.2 | ||||||||||
Net Loss | (773,558 | ) | (574,135 | ) | 199,423 | 34.7 |
B-13
Years Ended December 31, 2003 and 2002 |
2003 | 2002 | Change | % | |||||||||||||
Sales | $ | 2,258,213 | $ | 3,787,164 | (1,528,951 | ) | (40.4 | ) | ||||||||
Cost of Sales | 730,801 | 1,211,128 | (480,327 | ) | (39.7 | ) | ||||||||||
Gross Profit | 1,527,412 | 2,576,036 | (1,048,624 | ) | (40.7 | ) | ||||||||||
Operating Expenses | 1,874,398 | 2,860,129 | (985,731 | ) | (34.5 | ) | ||||||||||
Loss from Operations | (346,986 | ) | (284,093 | ) | 62,893 | 22.1 | ||||||||||
Other Income | ||||||||||||||||
(Expense) | (227,149 | ) | (245,449 | ) | (18,300 | ) | (7.5 | ) | ||||||||
Net Loss | (574,135 | ) | (529,542 | ) | 44,593 | 8.4 |
B-14
ITEM 7. | FINANCIAL STATEMENTS |
ITEM 8. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES |
ITEM 8A. | CONTROLS AND PROCEDURES |
B-15
ITEM 8B. | OTHER ITEMS |
ITEM 9. | DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS |
Name | Age | Principal Occupation | ||||
Scott L. Glenn | 54 | Chairman of the Board of Directors, President and Chief Executive Officer and Business Executive | ||||
Eric B. Freedus | 55 | Director, Attorney | ||||
H.M. Busby | 66 | Director, Private Investor | ||||
Michael Trinkle | 51 | Business Executive | ||||
Ellen M. Preston | 49 | Business Consultant | ||||
Leslie White | 52 | Secretary and Chief Financial Officer | ||||
Bret Megargel | 36 | Vice President |
B-16
B-17
B-18
ITEM 10. | EXECUTIVE COMPENSATION |
B-19
Securities | |||||||||||||||||||||
Underlying | |||||||||||||||||||||
Name and Principal Position | Year | Salary ($) | Bonus ($) | Options (#) | Other | ||||||||||||||||
Robert J. Petcavich | 2004 | $ | — | $ | — | 500 | (1) | $ | — | ||||||||||||
Former Chairman of the Board | 2003 | $ | — | — | $ | 47,180 | (3) | ||||||||||||||
and Chief Technical Officer | 2002 | $ | 170,038 | $ | — | — | $ | 3,241 | (2) | ||||||||||||
H.M. Busby | 2004 | $ | — | $ | — | 500 | (1) | $ | 2,963 | (7) | |||||||||||
Former Chief Executive Officer, | 2003 | $ | — | $ | — | — | $ | 31,677 | (3) | ||||||||||||
President and Chief Financial Officer | 2002 | $ | — | $ | — | — | $ | — | |||||||||||||
Richard C. Bernier | 2004 | $ | — | $ | — | — | — | ||||||||||||||
Former Chief Executive Officer | 2003 | — | $ | — | — | $ | 19,125 | (3) | |||||||||||||
and President | 2002 | $ | 117,713 | $ | — | — | $ | — | |||||||||||||
Scott Glenn | 2004 | $ | — | $ | — | 100,543 | (4) | $ | — | ||||||||||||
Chairman, Chief Executive Officer | 2003 | $ | — | $ | — | — | $ | — | |||||||||||||
and President | 2002 | $ | — | $ | — | — | $ | — | |||||||||||||
Leslie White(6) | 2004 | $ | 52,031 | (5) | $ | — | — | $ | — | ||||||||||||
Secretary and Chief Financial Officer | 2003 | $ | 51,445 | (5) | $ | — | — | $ | — | ||||||||||||
2002 | $ | 51,015 | (5) | $ | — | — | $ | — |
(1) | Represents options granted November 17, 2004, for compensation as a director. |
(2) | Represents auto expense reimbursement paid by the Company. |
(3) | Represents consulting fees paid for their services to the Company in 2003. |
(4) | Represents an option granted on November 30, 2004, with an exercise price of $3.50 per share. 25,136 of the Options granted are currently exercisable, and the remaining options to purchase 75,407 shares begin vesting on November 30, 2005. |
(5) | Represents compensation paid by Allergy Free, LLC, prior to December 1, 2004, and by Planet after that date. |
(6) | Ms. White is employed by Conception Technologies, L.P., a California limited partnership (“Conception”), and for the past three years has devoted approximately fifty percent (50%) of her work time to the business of the Allergy Free (and after December 1, 2004 to the business of Planet Technologies, Inc.) Allergy Free (and now Planet) reimbursed Conception for approximately fifty percent (50%) of the compensation Conception pays to Ms. White as reflected in the table. |
(7) | Represents consulting fees paid to Mr. Busby for his services in 2004. |
B-20
No. of | ||||||||||||||||
Securities | Percent of Total | |||||||||||||||
Underlying | Options Granted | Exercise Price | ||||||||||||||
Name | Options | to Employees | ($/share) | Expiration Date | ||||||||||||
Scott Glenn | 100,543 | 100% | $ | 3.50 | November 30, 2014 |
Number of Securities | ||||||||||||||||||||||||
Underlying Unexercised | Value of Unexercised | |||||||||||||||||||||||
Options at | In-the-Money Options | |||||||||||||||||||||||
Shares | Fiscal Year End(2) | at Fiscal Year End ($)(1) | ||||||||||||||||||||||
Acquired on | Value | |||||||||||||||||||||||
Name | Exercise (#) | Realized | Exercisable | Unexercisable | Exercisable | Unexercisable | ||||||||||||||||||
R Petcavich | 1,000 | -0- | 250 | 500 | $ | 0 | $ | 0 | ||||||||||||||||
H. M. Busby | 2,000 | -0- | 360 | 500 | $ | 0 | $ | 0 | ||||||||||||||||
Scott Glenn | -0- | -0- | 25,136 | 75,407 | $ | 0 | $ | 0 |
(1) | Calculated based on the estimated fair market value of the Company’s Common Stock as of December 31, 2004, less the exercise price payable upon the exercise of such options. Such estimated fair market value as of December 31, 2004, was $.70, the last transaction price posted at the close of trading on December 31, 2004. |
(2) | The certain former directors of Planet surrendered “Out of the Money” stock options including Robert J. Petcavich, 3,294; and H.M. Busby 964. |
2000 Stock Incentive Plan |
B-21
401(k) Plan |
Employment Agreements and Change in Control Arrangements |
ITEM. 11 | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCK HOLDER MATTERS |
(a) | (b) | (c) | ||||||||||
Number of Securities | Weighted-Average | Number of Securities Remaining | ||||||||||
to be Issued | Exercise Price | Available for Future Issuance | ||||||||||
Upon Exercise of | of Outstanding | Under Equity Compensation | ||||||||||
Outstanding Options, | Options, Warrants | Plans (excluding securities | ||||||||||
Plan category | Warrants and rights | and Rights | reflected in column (a)) | |||||||||
Equity compensation plans approved by security holders | 107,413 | $ | 8.193 | None | (2) | |||||||
Equity compensation plans not approved by security holders(1) | N/A | N/A | N/A | |||||||||
Total | 107,413 | $ | 8.193 | None | (2) |
(1) | The Company does not have any equity compensation plans that have not been approved by Shareholders. |
(2) | As of March 11, 2005, the Company has granted options exceeding the number of shares authorized by the shareholders under the 2000 Stock Incentive Plan by 130,913 shares. The Board has approved an amendment to the plan to increase the authorized number of shares to 250,000 shares, which will be submitted to the shareholders at the next meeting of shareholders. |
B-22
Beneficial Ownership | ||||||||
Number of | Percentage of | |||||||
Title of Class | Beneficial Owner | Shares(1) | Class Owned(2) | |||||
Common | Scott L. Glenn(3) | 995,942 | 45.7 | % | ||||
6402 Cardeno Drive La Jolla, CA 92037 | ||||||||
Common | Eric B. Freedus(4) | 2,153 | 0.1 | % | ||||
1202 Ketner Blvd., Ste. 6000 San Diego, CA 92101 | ||||||||
Common | H.M. Busby(5) | 7,012 | 0.3 | % | ||||
3852 Alameda Place San Diego, CA 92103 | ||||||||
Common | Michael A. Trinkle(5) | 55,873 | 2.6 | % | ||||
3495 Via Zara Court Fallbrook, CA 92028 | ||||||||
Common | Ellen Preston(5) | 26,565 | 1.2 | % | ||||
1825 Sheridan Avenue San Diego, CA 92103 | ||||||||
Common | Leslie White(6) | 9,312 | 0.4 | % | ||||
18479 Calle La Serra Rancho Santa Fe, CA 92091 | ||||||||
Common | All executive officers and directors as a group | 1,096,857 | 50.5 | % | ||||
Common | William and Lisa Barkett | 308,456 | 14.1 | % | ||||
7544 Eads #F La Jolla, CA 92037 | ||||||||
Common | J. Roberts Fosberg | 158,382 | 7.3 | % | ||||
2440 Toyon Road Healdsburg, CA 95448 | ||||||||
Common | Windamere III, LLC(7) | 200,000 | 9.2 | % | ||||
6402 Cardeno Dr. La Jolla, CA 92037 |
(1) | This table is based upon information supplied by officers, directors and principal shareholders and Schedules 13D and 13G filed with the Securities and Exchange Commission (the “SEC”). Unless otherwise indicated in the footnotes to this table and subject to community property laws where applicable, the Company believes that each of the shareholders named in this table has sole voting and investment power with respect to the shares indicated as beneficially owned. |
(2) | Percentage ownership is based upon the shares outstanding on March 11, 2005. |
(3) | Includes 770,806 shares owned by AF Partners, LLC, which is controlled by Mr. Glenn and 200,000 shares owned by Windamere III, LLC, over which Mr. Glenn shares control (see Note (5) below). Does not include options to purchase 75,407 shares which begin vesting on November 30, 2005. Does not include 25,000 shares issuable upon exercise of stock options which expire on January 25, 2015, and which begin vesting on January 25, 2006. |
B-23
(4) | Does not include 500 shares issuable upon exercise of stock options which expire on January 18, 2015, and which begin vesting on January 18, 2006, or 10,000 shares issuable upon exercise of stock options which expire on January 25, 2015, and which begin vesting on January 25, 2006. |
(5) | Does not include 500 shares issuable upon exercise of stock options which expire on November 17, 2014, and which begin vesting on November 17, 2005, or 10,000 shares issuable upon exercise of stock options which expire on January 25, 2015, which begin vesting on January 25, 2006. |
(6) | Does not include 30,000 shares issuable upon exercise of stock options which expire on January 31, 2015, and which begin vesting on January 31, 2006. |
(7) | Windamere III, LLC, is under the joint control of Mr. Glenn and St. Paul Traveler’s Companies, Inc., its affiliates Split-Rock Partners, LLC, and St. Paul Fire and Marine Insurance Company, whose business address is 385 Washington Street, St. Paul, Minnesota 55102. |
ITEM 12. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. |
ITEM 13. | EXHIBITS. |
Exhibit Number | Description | |||
2 | .1(8) | Agreement and Plan of Merger dated March 18, 2004, between the Company and Allergy Free. | ||
2 | .2(12) | Amendments to Agreement and Plan of Merger dated March 18, 2004. | ||
3 | .1(1) | Restated Articles of Incorporation of the Registrant. | ||
3 | .2(1) | Restated Bylaws of the Registrant. | ||
3 | .3(11) | Certificate of Amendment of Articles of Incorporation of Company dated November 30, 2004. | ||
4 | .1 | Reference is made to Exhibits 3.1, 3.2 and 3.3. | ||
4 | .6(1) | Specimen Stock Certificate. |
B-24
Exhibit Number | Description | |||
10 | .1(1) | Form of Indemnity Agreement entered into between the Registrant and certain of its executive officers and directors. | ||
10 | .2(1) | Registrant’s 1995 Stock Option Plan (the “1995 Option Plan”). | ||
10 | .3(1) | Form of Incentive Stock Option Grant under the 1995 Option Plan. | ||
10 | .4(1) | Form of Non-statutory Stock Option Grant under the 1995 Option Plan. | ||
10 | .5(1) | Agreement to Assign Proprietary Rights between the Registrant and Dr. Robert J. Petcavich. | ||
10 | .6(1) | Form of Confidential Information Agreement entered into between the Registrant and certain former employees. | ||
10 | .7(2) | Warrant to Purchase Common Stock, dated March 9, 2000, issued by the Registrant to LBC Capital Resources, Inc. | ||
10 | .8(3) | Registrants 2000 Stock Incentive Plan (the “2000 Plan”). | ||
10 | .9(3) | Form of Incentive Stock Option Grant under the 2000 Plan. | ||
10 | .10(3) | Form of Non-statutory Stock Option Grant under the 2000 Plan. | ||
10 | .11(5) | Warrant to purchase Common Stock, dated March 20, 2001, issued by the Registrant to LBC Capital Resources, Inc. | ||
10 | .12(6) | Form of Sale and License Agreement dated March 2003 with Agway, Inc. (animal feed products). | ||
10 | .13(6) | Form of Sale and License Agreement dated March 2003 with Agway, Inc. (fruit and vegetable products). | ||
10 | .14(6) | Form of First Amendment to License Agreement with Agway, Inc. | ||
10 | .15(13) | Form of Consulting Agreement with Robert Petcavich. | ||
10 | .16(6)(7) | Form of Purchase Sale and License Agreement dated May 1, 2003, with Ryer Enterprises, LLC. | ||
10 | .17(9) | Form of Amendment dated January 31, 2004, to Purchase, Sale and License Agreement with Ryer Enterprises, LLC. | ||
10 | .18(10) | Form of Royalty Contract dated on or about June 2004 with Ryer, Inc. | ||
10 | .19(13) | Form of Employment Agreement with Scott Glenn. | ||
10 | .20(13) | Form of subscription agreement for 2004 private placement. | ||
10 | .21 | Form of Agreement and Plan of Merger dated March 7, 2005, with Allergy Control Products and Jonathon T. Dawson. | ||
10 | .22 | Form of Sub-Lease Agreement dated November 1, 2003, with Conception Technologies, L.P. | ||
10 | .23 | Form of License Agreement dated January 1, 1997, and amendments thereto, with Rick L. Chapman. | ||
10 | .24 | Form of Supply Agreement dated January 27, 2004, with American Metal Filter Company. | ||
10 | .25 | Form of Royalty Liquidation Trust dated as of November 29, 2004, with U.S. Bank. | ||
10 | .26 | Form of employment agreement effective February 1, 2005, with Bret Megargel. | ||
11 | .1(2)(4) | Statement of Computation of Common and Common Equivalent Shares. | ||
14 | .1 | Code of Business Conduct and Ethics. | ||
23 | .1 | Consent of J.H. Cohn LLP. | ||
31 | .1 | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
31 | .2 | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
32 | .1 | Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||
32 | .2 | Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
B-25
(1) | Previously filed as an exhibit to the Registrant’s Registration Statement on Form SB-2, as amended (No. 33-91984 LA) and incorporated herein by reference. | |
(2) | Previously filed as an exhibit to the Registrant’s Annual Report on Form 10-KSB filed for the fiscal year ended December 31, 1999 and incorporated herein by reference. | |
(3) | Previously filed as an exhibit to the Registrant’s Registration Statement on Form S-8 (No. 333-38500) filed on June 2, 2000 and incorporated herein by reference. | |
(4) | Previously filed as an exhibit to the Registrant’s Quarterly Report on Form 10-QSB for the quarter ended June 30, 2000. | |
(5) | Previously filed as an exhibit to the Registrant’s Quarterly Report on Form 10-QSB for the quarter ended March 31, 2001. | |
(6) | Previously filed as an exhibit to the Registrant’s Annual Report on Form 10-KSB filed for the fiscal year ended December 31, 2002 and incorporated herein by reference. | |
(7) | Previously filed as an exhibit to the Registrant’s Quarterly Report on Form 10-QSB for the quarter ended March 31, 2003. | |
(8) | Previously filed as an exhibit to the Registrant’s Form 8K filed March 23, 2004 Report. | |
(9) | Previously filed as an exhibit to the Registrant’s Annual Report on Form 10-KSB for the quarter ended December 31, 2003. |
(10) | Previously filed as an exhibit to the Registrant’s Quarterly Report on Form 10-QSB for the quarter ended June 30, 2004. |
(11) | Previously filed as an exhibit to the Registrant’s Form 8K filed December 16, 2004 Report. |
(12) | Previously filed as an exhibit to Registrant’s Proxy Statement dated October 20, 2004. |
(13) | Previously filed as an exhibit to Registrant’s SB-2 dated February 4, 2005. |
B-26
PLANET TECHNOLOGIES, INC. |
By: | /s/ Scott L. Glenn |
Scott L. Glenn | |
Chief Executive Officer |
By: | /s/ Leslie White |
Leslie White | |
Chief Financial Officer and Principal Accounting Officer |
Signature | Title | Date | ||||
/s/ Ellen Preston | Director | March 31, 2005 | ||||
/s/ H. M. Busby | Director | March 31, 2005 | ||||
/s/ Michael Trinkle | Director | March 31, 2005 | ||||
/s/ Eric Freedus | Director | March 31, 2005 |
B-27
Report of Independent Registered Public Accounting Firm | B-29 | |||
Financial Statements and Notes: | ||||
Balance Sheet as of December 31, 2004 | B-30 | |||
Statements of Operations for the Years Ended December 31, 2004 and 2003 | B-31 | |||
Statements of Shareholders’ Deficiency for the Years Ended December 31, 2004 and 2003 | B-32 | |||
Statements of Cash Flows for the Years Ended December 31, 2004 and 2003 | B-33 | |||
Notes to Financial Statements | B-34 |
B-28
/s/ J.H. Cohn LLP |
B-29
ASSETS | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | 374,923 | ||||
Accounts receivable, less allowance for doubtful accounts of $5,500 | 3,076 | |||||
Inventory | 19,012 | |||||
Other current assets | 18,575 | |||||
Total current assets | 415,586 | |||||
Property and equipment, net | 101,070 | |||||
Other assets | 3,527 | |||||
Total | $ | 520,183 | ||||
LIABILITIES AND SHAREHOLDERS’ DEFICIENCY | ||||||
Current liabilities: | ||||||
Current portion of convertible notes payable to shareholder | $ | 134,475 | ||||
Advance from related party | 185,000 | |||||
Accounts payable | 224,520 | |||||
Accrued expenses | 353,763 | |||||
Interest payable | 8,543 | |||||
Total current liabilities | 906,301 | |||||
Convertible notes payable to shareholder, net of current portion | 118,282 | |||||
Total liabilities | 1,024,583 | |||||
Commitments and contingencies | ||||||
Shareholders’ deficiency: | ||||||
Preferred stock, no par value, 4,250,000 shares authorized, no shares issued or outstanding | — | |||||
Series A convertible preferred stock, no par value, 750,000 shares authorized, no shares issued or outstanding | — | |||||
Common stock, no par value, 20,000,000 shares authorized, 2,068,361 shares issued and outstanding | 3,198,296 | |||||
Accumulated deficit | (3,702,696 | ) | ||||
Total shareholders’ deficiency | (504,400 | ) | ||||
Total | $ | 520,183 | ||||
B-30
2004 | 2003 | |||||||||
Net sales | $ | 1,180,382 | $ | 2,258,213 | ||||||
Cost of sales | 407,811 | 730,801 | ||||||||
Gross profit | 772,571 | 1,527,412 | ||||||||
Operating expenses: | ||||||||||
Selling | 597,575 | 1,296,206 | ||||||||
General and administrative | 689,109 | 578,192 | ||||||||
Totals | 1,286,684 | 1,874,398 | ||||||||
Loss from operations | (514,113 | ) | (346,986 | ) | ||||||
Other income (expense): | ||||||||||
Gain on sale of assets | 899 | 2,050 | ||||||||
Other expenses | (62,671 | ) | (39,737 | ) | ||||||
Interest expense | (197,673 | ) | (189,462 | ) | ||||||
Totals | (259,445 | ) | (227,149 | ) | ||||||
Net loss | $ | (773,558 | ) | $ | (574,135 | ) | ||||
Net loss per share, basic and diluted | $ | (0.46 | ) | $ | (0.35 | ) | ||||
Weighted average shares used in computing net loss per share attributable to common shareholders, basic and diluted | 1,686,559 | 1,655,670 | ||||||||
B-31
Common Stock | ||||||||||||||||
Accumulated | ||||||||||||||||
Shares | Amount | Deficit | Total | |||||||||||||
Beginning, January 1, 2003 | 1,655,670 | $ | 2,310,885 | $ | (2,355,003 | ) | $ | (44,118 | ) | |||||||
Net loss | (574,135 | ) | (574,135 | ) | ||||||||||||
Balance at December 31, 2003 | 1,655,670 | 2,310,885 | (2,929,138 | ) | (618,253 | ) | ||||||||||
Common stock issued in association with the reverse acquisition | 130,691 | 182,411 | 182,411 | |||||||||||||
Issuance of common stock for cash | 258,000 | 645,000 | 645,000 | |||||||||||||
Common stock issued for services rendered | 24,000 | 60,000 | 60,000 | |||||||||||||
Net loss | (773,558 | ) | (773,558 | ) | ||||||||||||
Balance at December 31, 2004 | 2,068,361 | $ | 3,198,296 | $ | (3,702,696 | ) | $ | (504,400 | ) | |||||||
B-32
2004 | 2003 | ||||||||||||
Operating activities: | |||||||||||||
Net loss | $ | (773,558 | ) | $ | (574,135 | ) | |||||||
Adjustments to reconcile net loss to net cash used in operating activities: | |||||||||||||
Depreciation and amortization | 82,763 | 95,979 | |||||||||||
Gain on sale of assets | (899 | ) | (2,050 | ) | |||||||||
Issuance of stock for services | 60,000 | ||||||||||||
Changes in operating assets and liabilities: | |||||||||||||
Accounts receivable | 3,682 | (4,196 | ) | ||||||||||
Inventory | 65,128 | 36,643 | |||||||||||
Other assets | (9,763 | ) | 25,490 | ||||||||||
Interest payable | 180,567 | 132,217 | |||||||||||
Accounts payable | (120,965 | ) | 192,651 | ||||||||||
Accrued expenses | 77,212 | (13,496 | ) | ||||||||||
Net cash used in operating activities | (435,833 | ) | (110,897 | ) | |||||||||
Investing activities: | |||||||||||||
Proceeds from sale of property and equipment | 2,363 | 7,000 | |||||||||||
Purchase of property and equipment | (10,927 | ) | |||||||||||
Net cash provided by (used in) investing activities | 2,363 | (3,927 | ) | ||||||||||
Financing activities: | |||||||||||||
Advance from related party | 120,000 | 65,000 | |||||||||||
Proceeds from note payable | 80,435 | ||||||||||||
Principal payment on notes payable | (205,069 | ) | (190,164 | ) | |||||||||
Principal payments on notes payable to shareholder | (21,543 | ) | |||||||||||
Proceeds from issuance of investors’ notes payable | 142,000 | 217,400 | |||||||||||
Proceeds from stock sales | 645,000 | ||||||||||||
Net cash provided by financing activities | 680,388 | 172,671 | |||||||||||
Net increase in cash and cash equivalents | 246,918 | 57,847 | |||||||||||
Cash and cash equivalents, beginning of year | 128,005 | 70,158 | |||||||||||
Cash and cash equivalents, end of year | $ | 374,923 | $ | 128,005 | |||||||||
Supplemental disclosure of cash flow data: | |||||||||||||
Interest paid | $ | 17,175 | $ | 57,272 | |||||||||
Supplemental disclosure of noncash financing activity: | |||||||||||||
Account payable converted to note payable | $ | 236,937 | |||||||||||
Common stock issued in connection with reverse acquisition | $ | 182,411 | |||||||||||
B-33
Note 1 — | The company: |
Note 2 — | Summary of significant accounting policies: |
Basis of presentation: |
B-34
Use of estimates: |
Cash and cash equivalents and concentration of credit risk: |
Inventory: |
Property and equipment: |
Stock-based compensation: |
B-35
2004 | 2003 | |||||||||||||||
Loss per Share | Loss per Share | |||||||||||||||
— Basic and | — Basic and | |||||||||||||||
Net Loss | Diluted | Net Loss | Diluted | |||||||||||||
As reported | $ | (773,558 | ) | $ | (0.46 | ) | $ | (574,135 | ) | $ | (0.35 | ) | ||||
Stock based compensation expense assuming a fair value based method had been used for all awards | (95,306 | ) | (0.06 | ) | (63,862 | ) | (0.04 | ) | ||||||||
Pro forma | $ | (868,864 | ) | $ | (0.52 | ) | $ | (637,997 | ) | $ | (0.39 | ) | ||||
Net loss per share: |
Advertising: |
Revenue recognition: |
B-36
Shipping and handling costs: |
Income taxes: |
401(k) plan: |
Valuation of long-lived assets: |
Note 3 — | Property and equipment: |
Furniture and fixtures | $ | 262,105 | |||
Machinery and equipment | 82,868 | ||||
Computer equipment | 66,218 | ||||
Leasehold improvements | 70,478 | ||||
Total | 481,669 | ||||
Less accumulated depreciation and amortization | 380,599 | ||||
Total | $ | 101,070 | |||
B-37
Note 4 — | Warranty reserve: |
Warranty accrual, beginning of year | $ | 130,961 | |||
Warranties issued during the year | 296 | ||||
Adjustments to preexisting accruals | (80 | ) | |||
Actual warranty expenditures | (216 | ) | |||
Total | $ | 130,961 | |||
Note 5 — | Convertible notes payable to shareholder: |
Note 6 — | Income taxes: |
Income tax benefit at statutory rate | $ | (263,010 | ) | ||
State taxes, net of Federal benefit | (46,413 | ) | |||
Other | 69,000 | ||||
Increase in valuation allowance | 240,423 | ||||
Total | $ | — | |||
Net operating loss carryforwards | $ | 4,636,000 | |||
Tax credit carryforwards | 142,000 | ||||
Reserves, accrued expenses and other | 85,000 | ||||
Less: valuation allowances | (4,863,000 | ) | |||
Net deferred tax assets | $ | — | |||
B-38
Note 7 — | Shareholders’ equity: |
Warrants: |
Options: |
B-39
2000 Stock Option Plan | 1995 Stock Option Plan | ||||||||||||||||
Underlying | Weighted Avg. | Underlying | Weighted Avg. | ||||||||||||||
Shares | Exercise Price | Shares | Exercise Price | ||||||||||||||
Outstanding at January 1, 2004 | 15,670 | $ | 40.817 | 3,204 | $ | 86.929 | |||||||||||
Granted | 102,543 | $ | 3.479 | ||||||||||||||
Exercised prior to the merger | (7,500 | ) | $ | 4.033 | |||||||||||||
Forfeited/expired | (5,300 | ) | $ | 94.811 | (3,204 | ) | $ | 86.929 | |||||||||
Outstanding at December 31, 2004 | 105,413 | $ | 4.399 | — | |||||||||||||
Other Options | |||||||||
Underlying | Weighted Avg. | ||||||||
Shares | Exercise Price | ||||||||
Outstanding at January 1, 2004 | 2,774 | $ | 252.888 | ||||||
Granted | — | — | |||||||
Forfeited/expired | (2,774 | ) | $ | 252.888 | |||||
Outstanding at December 31, 2004 | — | ||||||||
Options Outstanding | ||||||||||||||||||||
Options Exercisable | ||||||||||||||||||||
Weighted Average | ||||||||||||||||||||
Remaining | Weighted | Weighted | ||||||||||||||||||
Number of | Contractual Life | Average | Number of | Average | ||||||||||||||||
Exercise Price or Price Range | Shares | (Years) | Exercise Price | Shares | Exercise Price | |||||||||||||||
$2.50 to $3.50 | 102,793 | 9.90 | $ | 3.479 | 25,386 | $ | 3.495 | |||||||||||||
$22.50 | 2,160 | 6.35 | 22.500 | 2,160 | 22.500 | |||||||||||||||
$125.00 | 460 | 5.33 | 125.000 | 460 | 125.000 | |||||||||||||||
105,413 | 9.81 | 4.399 | 28,006 | 6.957 | ||||||||||||||||
Note 8 — | Commitments: |
License agreements: |
B-40
Operating leases: |
Employment contracts: |
Note 9 — | Related party transactions: |
Note 10 — | Purchases from significant vendors: |
Note 11 — | Subsequent event: |
B-41
(Mark One) | ||
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 | |
For Quarterly Period Ended March 31, 2005 | ||
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 |
CALIFORNIA (State or other jurisdiction of incorporation or organization) | 33-0502606 (I.R.S. Employer Identification No.) | |
6835 Flanders Drive, Suite 100, San Diego, California (Address of principal executive offices) | 92121 (Zip Code) |
Class | Outstanding at May 1, 2005 | |
Common Stock, no par value | 2,180,368 |
B-1-1
Page No. | ||||||
PART I — Financial Statements | ||||||
Item 1 | Condensed Balance Sheet (Unaudited) March 31, 2005 | B-1-3 | ||||
Condensed Statements of Operations (Unaudited) Three Months Ended March 31, 2005 and 2004 | B-1-4 | |||||
Condensed Statement of Shareholders’ Deficiency (Unaudited) Three Months Ended March 31, 2005 | B-1-5 | |||||
Condensed Statements of Cash Flows (Unaudited) Three Months Ended March 31, 2005 and 2004 | B-1-6 | |||||
Notes to Unaudited Condensed Financial Statements | B-1-7 | |||||
Item 2 | Management’s Discussion and Analysis of Financial Condition and Results of Operations | B-1- | ||||
Item 3 | Controls and Procedures | B-1-11 | ||||
PART II — Other Information | ||||||
Item 1 | Legal Proceedings | B-1-11 | ||||
Item 2 | Changes in Securities and Use of Proceeds Unregistered Sales of Securities and Use of Proceeds | B-1-11 | ||||
Item 3 | Defaults upon Senior Securities | B-1-11 | ||||
Item 4 | Submission of Matters to a Vote of Security Holders | B-1-11 | ||||
Item 5 | Other Information | B-1-11 | ||||
Item 6 | Exhibits | B-1-11 | ||||
SIGNATURES | B-1-12 | |||||
Exhibit 31.1 | B-1-13 | |||||
Exhibit 32.1 | B-1-14 |
B-1-2
March 31, | |||||||
2005 | |||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 128,806 | |||||
Accounts receivable, less allowance for doubtful accounts of $5,500 | 5,514 | ||||||
Inventory | 19,798 | ||||||
Other current assets | 34,822 | ||||||
Total current assets | 188,940 | ||||||
Property and equipment, net | 85,129 | ||||||
Total | $ | 274,069 | |||||
LIABILITIES AND SHAREHOLDERS’ DEFICIENCY | |||||||
Current liabilities: | |||||||
Current portion of convertible notes payable to shareholder | $ | 136,332 | |||||
Advance from related party | 85,000 | ||||||
Accounts payable | 71,898 | ||||||
Accrued expenses | 361,024 | ||||||
Interest payable | 1,749 | ||||||
Total current liabilities | 656,003 | ||||||
Convertible notes payable to shareholder, net of current potion | 83,495 | ||||||
Total liabilities | 739,498 | ||||||
COMMITMENTS AND CONTINGENCIES | |||||||
Shareholders’ deficiency: | |||||||
Preferred stock, no par value, 4,250,000 shares authorized, | |||||||
No shares issued or outstanding | — | ||||||
Series a convertible preferred stock, no par value, 750,000 shares | |||||||
Authorized, no shares issued or outstanding | — | ||||||
Common stock, no par value, 20,000,000 shares authorized, 2,180,368 shares issued and outstanding | 3,478,296 | ||||||
Accumulated deficit | (3,943,725 | ) | |||||
Total shareholders’ deficiency | (465,429 | ) | |||||
TOTAL | $ | 274,069 | |||||
B-1-3
Three Months Ended | Three Months Ended | |||||||||
March 31, | March 31, | |||||||||
2005 | 2004 | |||||||||
NET SALES | $ | 221,526 | $ | 381,262 | ||||||
Cost of sales | 75,505 | 146,015 | ||||||||
Gross profit | 146,021 | 235,247 | ||||||||
OPERATING EXPENSES: | ||||||||||
SELLING | 161,194 | 171,759 | ||||||||
GENERAL AND ADMINISTRATIVE | 218,985 | 248,471 | ||||||||
TOTALS | 380,179 | 420,230 | ||||||||
LOSS FROM OPERATIONS | (234,158 | ) | (184,983 | ) | ||||||
OTHER INCOME (EXPENSE): | ||||||||||
Other expense | (1,949 | ) | (5,342 | ) | ||||||
Interest expense | (4,922 | ) | (51,786 | ) | ||||||
Totals | (6,871 | ) | (57,128 | ) | ||||||
NET LOSS | $ | (241,029 | ) | $ | (242,111 | ) | ||||
NET LOSS PER SHARE, BASIC AND DILUTED | $ | (0.11 | ) | $ | (0.15 | ) | ||||
WEIGHTED AVERAGE SHARES USED IN COMPUTING NET LOSS PER SHARE BASIC AND DILUTED | 2,159,961 | 1,655,803 | ||||||||
B-1-4
Common Stock | |||||||||||||||||
Accumulated | |||||||||||||||||
Shares | Amount | Deficit | Total | ||||||||||||||
Beginning, January 1, 2005 | 2,068,361 | $ | 3,198,296 | $ | (3,702,696 | ) | $ | (504,400 | ) | ||||||||
Issuance of common stock for cash | 112,007 | 280,000 | 280,000 | ||||||||||||||
Net loss | (241,029 | ) | (241,029 | ) | |||||||||||||
Balance at March 31, 2005 | 2,180,368 | 3,478,296 | $ | (3,943,725 | ) | $ | (465,429 | ) | |||||||||
B-1-5
Three Months Ended | Three Months Ended | |||||||||||
March 31, | March 31, | |||||||||||
2005 | 2004 | |||||||||||
Operating activities: | ||||||||||||
Net loss | $ | (241,029 | ) | $ | (242,111 | ) | ||||||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||
Depreciation and amortization | 15,941 | 23,308 | ||||||||||
Changes in operating assets and liabilities: | ||||||||||||
Accounts receivable | (2,438 | ) | 1,990 | |||||||||
Inventory | (786 | ) | 42,493 | |||||||||
Other assets | (12,720 | ) | (34,032 | ) | ||||||||
Interest payable | (6,794 | ) | 47,073 | |||||||||
Accounts payable | (152,622 | ) | 191,668 | |||||||||
Accrued expenses | 7,261 | (75,922 | ) | |||||||||
Net cash used in operating activities | (393,187 | ) | (45,533 | ) | ||||||||
Investing activities — proceeds from sale of property and equipment | — | 1,505 | ||||||||||
Financing activities: | ||||||||||||
Advance from related party | — | 20,000 | ||||||||||
Repayments of advances to related party | (100,000 | ) | — | |||||||||
Principal payments on notes payable | — | (90,778 | ) | |||||||||
Principal payments on notes payable to shareholder | (32,930 | ) | ||||||||||
Proceeds from issuance of investors’ notes payable | — | 25,000 | ||||||||||
Proceeds from issuance of common stock in a private placement | 280,000 | — | ||||||||||
Net cash provided by (used in) financing activities | 147,070 | (45,778 | ) | |||||||||
Net decrease in cash and cash equivalents | (246,117 | ) | (89,806 | ) | ||||||||
Cash and cash equivalents, beginning of year | 374,923 | 128,005 | ||||||||||
Cash and cash equivalents, end of period | $ | 128,806 | $ | 38,199 | ||||||||
Supplementary disclosure of cash flow data: | ||||||||||||
Cash paid for interest | $ | 11,947 | $ | 4,714 | ||||||||
B-1-6
1. | Basis of Presentation |
2. | Liquidity and Capital Resources |
B-1-7
3. | Earnings (Loss) Per Share |
4. | Income Taxes |
5. | Stock-Based Compensation |
B-1-8
2005 | 2004 | |||||||||||||||
Loss per Share — | Loss per Share — | |||||||||||||||
Net Loss | Basic and Diluted | Net Loss | Basic and Diluted | |||||||||||||
As reported | $ | (241,029 | ) | $ | (0.11 | ) | $ | (242,111 | ) | $ | (0.15 | ) | ||||
Stock based compensation expense assuming a fair value based method had been used for all awards | (46,000 | ) | (0.02 | ) | — | |||||||||||
Pro forma | $ | (287,029 | ) | $ | (0.13 | ) | $ | (242,111 | ) | $ | (0.15 | ) | ||||
B-1-9
B-1-10
ITEM 3. | CONTROLS AND PROCEDURES |
Item 1 — | Legal Proceedings: |
Item 2 — | Changes in Securities: |
Item 3 — | Defaults upon Senior Securities: |
Item 4 — | Submission of Matters to a Vote of Security Holders: |
Item 5 — | Other Information: |
Item 6 — | Exhibits |
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-1-11
Date: May 13, 2005 | Planet Technologies, Inc. |
/s/ Scott L. Glenn | |
Scott L. Glenn | |
Chief Executive Officer | |
/s/ Leslie White | |
Leslie White | |
Chief Financial Officer and | |
Chief Accounting Officer | |
B-1-12
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 us 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; | |
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. | |
/s/ Scott Glenn | |
Scott L. Glenn, Chief Executive Officer | |
/s/ Leslie White | |
Leslie White, Chief Financial Officer | |
B-1-13
(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: May 13, 2005 | |
/s/ Scott Glenn | |
Scott L. Glenn | |
Chief Executive Officer | |
/s/ Leslie White | |
Leslie White | |
Chief Financial Officer | |
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ARTICLE I CERTAIN DEFINITIONS | ||||||
1.01 | CERTAIN DEFINITIONS | C-1 | ||||
ARTICLE II THE MERGER | ||||||
2.01 | THE MERGER | C-3 | ||||
2.02 | EFFECTIVE DATE AND EFFECTIVE TIME | C-4 | ||||
ARTICLE III CONSIDERATION; EXCHANGE PROCEDURES | ||||||
3.01 | EFFECT ON CAPITAL STOCK | C-4 | ||||
3.02 | CONVERSION OF ACP COMMON STOCK | C-4 | ||||
3.03 | RIGHTS AS SHAREHOLDER; STOCK TRANSFERS | C-5 | ||||
3.04 | INTENTIONALLY LEFT BLANK | C-5 | ||||
3.05 | EXCHANGE PROCEDURES | C-5 | ||||
3.06 | ANTI-DILUTION PROVISIONS | C-5 | ||||
ARTICLE IV ACTIONS PENDING ACQUISITION | ||||||
4.01 | FOREBEARANCES OF ACP AND PLANET | C-5 | ||||
ARTICLE V REPRESENTATIONS AND WARRANTIES | ||||||
5.01 | DISCLOSURE SCHEDULES | C-7 | ||||
5.02 | STANDARD | C-7 | ||||
5.03 | REPRESENTATIONS AND WARRANTIES OF ACP | C-7 | ||||
5.04 | REPRESENTATIONS AND WARRANTIES OF PLANET | C-13 | ||||
ARTICLE VI COVENANTS | ||||||
6.01 | REASONABLE BEST EFFORTS | C-15 | ||||
6.02 | SHAREHOLDER APPROVAL | C-15 | ||||
6.03 | REGISTRATION STATEMENT | C-15 | ||||
6.04 | PRESS RELEASES | C-16 | ||||
6.05 | ACCESS; INFORMATION | C-16 | ||||
6.06 | EMPLOYMENT OF EDWARD J. STEUBE | C-17 | ||||
6.07 | ACQUISITION PROPOSALS | C-17 | ||||
6.08 | CERTAIN POLICIES | C-17 | ||||
6.09 | BENEFIT PLANS | C-17 | ||||
6.10 | NON-COMPETITION AGREEMENTS | C-18 | ||||
6.11 | NOTIFICATION OF CERTAIN MATTERS | C-18 | ||||
6.12 | HUMAN RESOURCES ISSUES | C-18 | ||||
6.13 | ASSISTANCE WITH THIRD-PARTY AGREEMENTS | C-18 | ||||
6.14 | SHAREHOLDER COVENANTS | C-19 | ||||
6.15 | ADDITIONAL AGREEMENTS | C-20 |
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6.16 | PRE-CLOSING ADJUSTMENTS | C-20 | ||||
6.17 | ACP STOCK OPTIONS AND RIGHTS | C-20 | ||||
6.18 | AUDITED ACP FINANCIAL STATEMENTS | C-20 | ||||
6.19 | TAX TREATMENT OF THE MERGER | C-20 | ||||
6.20 | PAYMENT OF SHAREHOLDER DEBT | C-20 | ||||
ARTICLE VII CONDITIONS TO CONSUMMATION OF THE MERGER | ||||||
7.01 | CONDITIONS TO EACH PARTY’S OBLIGATION TO EFFECT THE MERGER | C-20 | ||||
7.02 | CONDITIONS TO OBLIGATION OF ACP | C-21 | ||||
7.03 | CONDITIONS TO OBLIGATION OF PLANET | C-21 | ||||
ARTICLE VIII TERMINATION | ||||||
8.01 | TERMINATION | C-22 | ||||
8.02 | EFFECT OF TERMINATION AND ABANDONMENT | C-23 | ||||
ARTICLE IX MISCELLANEOUS | ||||||
9.01 | SURVIVAL | C-24 | ||||
9.02 | WAIVER; AMENDMENT | C-24 | ||||
9.03 | COUNTERPARTS | C-24 | ||||
9.04 | GOVERNING LAW, JURISDICTION AND VENUE | C-24 | ||||
9.05 | EXPENSES | C-24 | ||||
9.06 | NOTICES | C-24 | ||||
9.07 | ENTIRE UNDERSTANDING; NO THIRD PARTY BENEFICIARIES | C-25 | ||||
9.08 | EFFECT | C-25 | ||||
9.09 | SEVERABILITY | C-25 | ||||
9.10 | ENFORCEMENT OF THE AGREEMENT | C-25 | ||||
9.11 | INTERPRETATION | C-26 |
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“ACP Common Stock”means the common stock, no par value of ACP. | |
“ACP Stock Options”means the options to acquire ACP Common Stock issued under ACP’s Stock Option Plans. | |
“Acquisition Proposal”has the meaning set forth in Section 6.07. | |
“Agreement”means this Agreement, as amended or modified from time to time in accordance with Section 9.02. | |
“Agreement of Merger”has the meaning set forth in Section 2.01(b). | |
“Articles”means the Articles of Incorporation of ACP or Planet, as amended, as the context requires. | |
“Benefit Plans”has the meaning set forth in Section 5.03(l). | |
“Board”means the Board of Directors of ACP or Planet, as the context requires. | |
“Business Combination”has the meaning set forth in Section 3.06. | |
“Business Day”means Monday through Friday of each week, except a legal holiday recognized as such by the U.S. Government or any day on which banking institutions in the State of California are authorized or obligated to close. | |
“By-Laws”means the By-Laws of ACP or Planet, as the context requires. | |
“California Secretary”means the California Secretary of State. | |
“CGCL”means the California General Corporation Law. |
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“Closing Financial Statements”has the meaning set forth in Section 7.03(g). | |
“Code”has the meaning set forth in the recitals to this Agreement. | |
“Disclosure Schedule”has the meaning set forth in Section 5.01. | |
“Effective Date”has the meaning set forth in Section 2.02. | |
“Effective Time”has the meaning set forth in Section 2.02. | |
“Employees”has the meaning set forth in Section 5.03(l). | |
“Environmental Laws”has the meaning set forth in Section 5.03(n). | |
“ERISA”means the Employee Retirement Income Security Act of 1974, as amended. | |
“ERISA Affiliate”has the meaning set forth in Section 5.03(l). | |
“Exchange Act”means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder. | |
“Exchange Ratio”has the meaning set forth in Section 3.02. | |
“GAAP”means generally accepted accounting principles. | |
“Governmental Authority”means any court, administrative agency or commission or other federal, state or local governmental authority or instrumentality. | |
“Hazardous Substance”has the meaning set forth in Section 5.03(n). | |
“Insurance Policies”has the meaning set forth in Section 5.03(r). | |
“Lien”means any charge, mortgage, pledge, security interest, restriction, claim, lien or encumbrance. | |
“Material Adverse Effect”means, with respect to Planet or ACP any effect that (i) is material and adverse to the financial position, results of operations, business or prospects of Planet or ACP, as the case may be, or (ii) would materially impair the ability of either Planet or ACP to perform its obligations under this Agreement or otherwise materially threaten or materially impede the consummation of the Merger and the other transactions contemplated by this Agreement;provided, however, that Material Adverse Effect shall not be deemed to include the impact of (a) changes in laws of general applicability to the business of Planet and ACP or interpretations thereof by Governmental Authorities, (b) changes in GAAP (c) changes in general economic conditions, (d) any modifications or changes to valuation policies and practices in connection with the Merger or restructuring charges taken in connection with the Merger, in each case in accordance with GAAP and (e) with respect to ACP the effects of any action or omission taken with the prior consent of Planet. | |
“Merger”has the meaning set forth in Section 2.01(a). | |
“Merger Consideration”has the meaning set forth in Section 2.01(a). | |
“NASD”means the National Association of Securities Dealers. | |
“Nasdaq”means The Nasdaq Stock Market, Inc.’s National Market System. | |
“National Labor Relations Act”means the National Labor Relations Act, as amended. | |
“Non-Competition Agreements”has the meaning set forth in the recitals to this Agreement. | |
“Pension Plan”has the meaning set forth in Section 5.03(l). | |
“Person”means any individual, bank, corporation, partnership, association, joint-stock company, business trust, limited liability company or unincorporated organization. | |
“Planet Common Stock”means the common stock, no par value per share, of Planet. |
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“Principal Shareholder”shall mean any person who directly or indirectly owns or controls ten percent (10%) or more of the issued and outstanding stock of a corporation. | |
“Proxy Statement”has the meaning set forth in Section 6.02. | |
“Registration Statement”has the meaning set forth in Section 6.03(a). | |
“Rights”means, with respect to any Person, securities or obligations convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire, or any options, calls or commitments relating to, or any stock appreciation right or other instrument the value of which is determined in whole or in part by reference to the market price or value of, shares of capital stock of such Person. | |
“SEC”means the United States Securities and Exchange Commission. | |
“SEC Documents”has the meaning set forth in Section 5.04(g). | |
“Securities Act”means the Securities Act of 1933, as amended, and the rules and regulations thereunder. | |
“Shareholder”means Jon Dawson. | |
“Shareholder Meeting”has the meaning set forth in Section 6.02. | |
“Stock Option Plans”means any plan or arrangement that provides for the grant of stock options by ACP. | |
“Subsidiary”and“Significant Subsidiary”have the meanings ascribed to those terms in Rule 1-02 of Regulation S-X of the SEC. | |
“Tax”and“Taxes”mean all federal, state, local or foreign taxes, charges, fees, levies or other assessments, however denominated, including, without limitation, all net income, gross income, gains, gross receipts, sales, use, ad valorem, goods and services, capital, production, transfer, franchise, windfall profits, license, withholding, payroll, employment, disability, employer health, excise, estimated, severance, stamp, occupation, property, environmental, unemployment or other taxes, custom duties, fees, assessments or charges of any kind whatsoever, imposed on the income, properties or operations of ACP or its Subsidiary by any taxing authority whether arising before, on or after the Effective Date, together with any interest, additions or penalties thereto and any interest in respect of such interest and penalties. | |
“Tax Returns”means any return, amended return or other report (including elections, declarations, disclosures, schedules, estimates and information returns) required to be filed on or before the Effective Date with respect to any Taxes of ACP. | |
“Termination Fee”has the meaning set forth in Section 8.02. | |
“Treasury Shares”shall mean shares of ACP Common Stock held by ACP or by Planet or any of its Subsidiaries, in each case other than in a fiduciary (including custodial or agency) capacity or as a result of debts previously contracted in good faith. |
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(a) Planet Common Stock. Each share of Planet Common Stock, issued and outstanding immediately prior to the Effective Time of the Merger shall remain an issued and outstanding share of common stock of Planet, and shall not be affected by the Merger; and | |
(b) ACP Common Stock. Each share of ACP Common Stock, issued and outstanding immediately prior to the Effective Time of the Merger (other than shares of Dissenters’ Shares and Treasury Shares, as defined below) shall be converted into the right to receive Planet Common Stock as provided in Section 3.02(a). |
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(a) Ordinary Course. Conduct business other than in the ordinary and usual course or fail to use its best efforts to preserve intact its business organizations and assets and maintain its rights, franchises and existing relations with customers, suppliers, employees and business associates, take any action that would adversely affect or delay the ability of ACP or Planet to perform any of their obligations on a timely basis under this Agreement, or take any action that would be reasonably likely to have a Material Adverse Effect on ACP or Planet. | |
(b) Capital Stock. Other than pursuant to the Rights set forth in the Disclosure Schedule of such party and outstanding on the date hereof and except for the completion by Planet of a private placement |
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of capital stock of up to an additional $2.0 million after the date hereof, (i) issue, sell or otherwise permit to become outstanding, or authorize the creation of, any additional shares of stock or any Rights, (ii) enter into any agreement with respect to the foregoing or (iii) permit any additional shares of stock to become subject to grants of employee or director stock options, other Rights or similar stock-based employee rights. | |
(c) Dividends; Etc. (i) Make, declare, pay or set aside for payment any dividend on or in respect of, or declare or make any distribution on any shares of stock or (ii) directly or indirectly adjust, split, combine, redeem, reclassify, purchase or otherwise acquire, any shares of its capital stock. | |
(d) Compensation; Employment Agreements; Etc. Enter into or amend or renew any employment, consulting, severance or similar agreements or arrangements with any director, officer or employee or grant any salary or wage increase or increase any employee benefit (including incentive or bonus payments), except (i) for normal individual increases in compensation to employees in the ordinary course of business consistent with past practice, provided that no such increase shall result in an annual adjustment of more than 5%, (ii) for other changes that are required by applicable law, (iii) to satisfy contractual obligations existing as of the date hereof and set forth in the Disclosure Schedule of such party or (iv) for grants of awards to newly hired employees consistent with past practice. | |
(e) Hiring. Hire any person as an employee or promote any employee, except (i) to satisfy contractual obligations existing as of the date hereof and set forth in the Disclosure Schedule of such party and (ii) persons hired to fill any vacancies arising after the date hereof and whose employment is terminable at the will, other than any person to be hired who would have a base salary, including any guaranteed bonus or any similar bonus, considered on an annual basis of more than $50,000. | |
(f) Benefit Plans. Enter into, establish, adopt or amend (except (i) as may be required by applicable law or (ii) to satisfy contractual obligations existing as of the date hereof and set forth in the Disclosure Schedule of such party) any pension, retirement, stock option, stock purchase, savings, profit sharing, deferred compensation, consulting, bonus, group insurance or other employee benefit, incentive or welfare contract, plan or arrangement, or any trust agreement (or similar arrangement) related thereto, in respect of any director, officer or employee or take any action to accelerate the vesting or exercisability of stock options, restricted stock or other compensation or benefits payable thereunder. | |
(g) Dispositions. Sell, transfer, mortgage, encumber or otherwise dispose of or discontinue any of its assets, deposits, business or properties except in the ordinary course of business and in a transaction that, together with all other such transactions, is not material to such party. | |
(h) Acquisitions. Acquire (other than in satisfaction of debts previously contracted in good faith, in each case in the ordinary and usual course of business consistent with past practice) all or any portion of the assets, business, deposits or properties of any other entity except in the ordinary course of business consistent with past practice and in a transaction that, together with all other such transactions, is not material to ACP or Planet. | |
(i) Capital Expenditures. Make any capital expenditures other than capital expenditures in the ordinary course of business consistent with past practice in amounts not exceeding $25,000 individually or $50,000 in the aggregate. | |
(j) Governing Documents. Amend its Articles of Incorporation or By-Laws. | |
(k) Accounting Methods. Implement or adopt any change in its accounting principles, practices or methods, other than as may be required by GAAP. | |
(l) Contracts. Except as set forth in the Disclosure Schedule of such party, enter into, renew or terminate, or make any payment not then required under, any contract or agreement that calls for aggregate annual payments of $25,000 or more and which is not terminable at will or with 60 days or less notice without payment of a premium or penalty, other than transactions made in the ordinary course of business. |
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(m) Claims. Enter into any settlement or similar agreement with respect to, or take any other significant action with respect to the conduct of, any action, suit, proceeding, order or investigation to which it is or becomes a party after the date of this Agreement, which settlement, agreement or action involves payment by it of an amount, individually or for all such settlements, that is material to it and/or would impose any material restriction on the business of the Surviving Entity or create precedent for claims that are reasonably likely to be material to the Surviving Entity. | |
(n) Adverse Actions. (a) Take any action which could result in (i) any of its representations and warranties set forth in this Agreement being or becoming untrue at any time at or prior to the Effective Time, (ii) any of the conditions to the Merger set forth in Article 7 not being satisfied or (iii) a material violation of any provision of this Agreement except as may be required by applicable law or regulation. | |
(o) Indebtedness. Incur any indebtedness for borrowed money or assume, guarantee, endorse or otherwise as an accommodation become responsible for the obligations of any other Person, other than draws on existing credit facilities in the ordinary course of business or indebtedness incurred by Planet to repay the debt of ACP to its Shareholder as provided in Section 6.20. | |
(p) Loans. Make any loan, loan commitment or renewal or extension thereof to any Person. | |
(q) Investments. (i) Other than in the ordinary course of business consistent with past practice in individual amounts not to exceed $25,000, make any investment either by contributions to capital, property transfers or purchase of any property or assets of any Person or (ii) other than purchases of direct obligations of the United States of America or obligations of U.S. government agencies which are entitled to the full faith and credit of the United States of America, in any case with a remaining maturity at the time of purchase of two years or less, purchase or acquire securities of any type. | |
(r) Taxes. Take any action which would materially adversely affect the tax position of the Surviving Entity. | |
(s) Commitments. Agree or commit to do any of the foregoing. |
(a) Organization, Standing and Authority. ACP is duly organized, validly existing and in good standing under the laws of the State of Delaware. ACP is duly qualified to do business and is in good standing in the states of the United States and foreign jurisdictions where its ownership or leasing of property or assets or the conduct of its business requires it to be so qualified. ACP has in effect all federal, |
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state, local, and foreign governmental authorizations necessary for it to own or lease its properties and assets and to carry on its business as it is now conducted. | |
(b) ACP Capital Stock. As of the date hereof, the authorized capital stock of ACP consists solely of 20,000 shares of ACP Common Stock, of which 2,000 shares were outstanding as of the date hereof. As of the date hereof, no shares of ACP Stock were held in treasury by ACP or otherwise owned by ACP. The outstanding shares of ACP Common Stock have been duly authorized and are validly issued and outstanding, and subject to no preemptive rights (and were not issued in violation of any preemptive rights). Except as set forth in the Disclosure Schedule, as of the date hereof, there are no shares of ACP Common Stock authorized and reserved for issuance, ACP does not have any Rights issued or outstanding with respect to ACP Common Stock, and ACP does not have any commitment to authorize, issue or sell any ACP Common Stock or Rights. | |
(c) Subsidiaries. |
(i) ACP has no subsidiaries. | |
(ii) ACP does not own beneficially, directly or indirectly, any equity securities or similar interests of any Person or any interests of any Person or any interest in a partnership or joint venture of any kind. |
(d) Corporate Power. ACP has the corporate power and authority to carry on its business as it is now being conducted and to own all its properties and assets; and ACP has the corporate power and authority and has taken all corporate action necessary to execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby. | |
(e) Corporate Authority. As of the date hereof, with respect to each of clauses (i), (ii) and (iii) below, ACP’s board of directors, by resolutions duly adopted by unanimous vote at a meeting duly called and held, has duly (i) determined that this Agreement and the Merger are advisable and fair to and in the best interests of ACP and its shareholders, (ii) approved this Agreement and the Merger and (iii) recommended that its shareholders approve this Agreement and the Merger and that such matter be submitted for consideration by its shareholders at a meeting of such shareholders. ACP has duly executed and delivered this Agreement and this Agreement is a valid and legally binding obligation of ACP, enforceable in accordance with its terms (except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar laws of general applicability relating to or affecting creditors’ rights or by general equity principles). | |
(f) Regulatory Approvals; No Violations. |
(i) No consents or approvals of, or waivers by, or filings or registrations with, any Governmental Authority or with any third party are required to be made or obtained by ACP in connection with the execution, delivery or performance by ACP of this Agreement or to consummate the Merger except for filings with the SEC and state securities authorities and the approval of this Agreement by the holders of the outstanding shares of ACP Common Stock. | |
(ii) Subject to required filings under federal and state securities laws, the execution, delivery and performance of this Agreement by ACP and the consummation of the transactions contemplated hereby and thereby do not and will not (A) constitute a breach or violation of, or a default under, or give rise to any Lien, any acceleration of remedies or any right of termination under, any law, rule or regulation or any judgment, decree, order, governmental permit or license, or agreement, indenture or instrument of ACP or to which ACP or any of its respective properties is subject or bound, (B) constitute a breach or violation of, or a default under, the articles of association or by-laws (or similar governing documents) of ACP or (C) require any consent or approval under any such law, rule, regulation, judgment, decree, order, governmental permit or license, agreement, indenture or instrument. |
(g) Financial Reports; Undisclosed Liabilities. (i) The balance sheet of ACP as of December 31, 2003, and the related statements of income, cash flow and changes in financial position of ACP for the |
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three years then ended, audited by Venman & Co., LLC, and the balance sheet and related statements of income, cash flow and changes in financial position of ACP for the nine months ended September 30, 2004, fairly present the financial position of ACP as of such dates and the results of the operations of ACP for the periods then ended, all in accordance with GAAP consistently applied (except with respect to interim period statements normal year-end adjustments and the lack of footnotes). The books and records of ACP have been, and are being, maintained in accordance with GAAP and any other applicable legal and accounting requirements. |
(i) Since September 30, 2004, ACP has not incurred any liability other than in the ordinary course of business consistent with past practice. | |
(ii) Since September 30, 2004, (A) ACP has conducted its business in the ordinary and usual course consistent with past practice (excluding the incurrence of expenses related to this Agreement and the transactions contemplated hereby) and (B) no event has occurred or circumstance arisen that, individually or taken together with all other facts, circumstances and events (described in any paragraph of this Section 5.03 or otherwise), has had or could be reasonably likely to have a Material Adverse Effect with respect to ACP. |
(h) Litigation. No litigation, claim or other proceeding before any court or governmental agency is pending against ACP and, to ACP’s knowledge, no such litigation, claim or other proceeding has been threatened and there are no facts which could reasonably give rise to such litigation, claim or other proceeding. | |
(i) Compliance With Laws. ACP: |
(i) is in substantial compliance with all applicable federal, state, local and foreign statutes, laws, regulations, ordinances, rules, judgments, orders or decrees applicable thereto or to the employees conducting such businesses, including, without limitation, Federal and State “Do Not Call,” USA Patriot Act and all other applicable fair lending laws and other laws relating to consumer sales and rights of privacy; | |
(ii) has all permits, licenses, authorizations, orders and approvals of, and has made all filings, applications and registrations with, all Governmental Authorities that are required in order to permit it to own or lease its properties and to conduct its businesses as presently conducted; all such permits, licenses, certificates of authority, orders and approvals are in full force and effect and, to ACP’s knowledge, no suspension or cancellation of any of them is threatened; and | |
(iii) has received, since December 31, 2001, no notification or communication from any Governmental Authority (A) asserting that ACP is not in compliance with any of the statutes, regulations or ordinances which such Governmental Authority enforces or (B) threatening to revoke any license, franchise, permit or governmental authorization (nor, to ACP’s knowledge, do any grounds for any of the foregoing exist). |
(j) Material Contracts; Defaults. The Disclosure Schedule sets forth a list of each material contract to which ACP is a party, bound by or subject to, and except as set forth therein ACP is not a party to, bound by or subject to any agreement, contract, arrangement, commitment or understanding (whether written or oral) (i) that is a “material contract” within the meaning of Item 601(b)(10) of the SEC’s Regulation S-K or (ii) that materially restricts the conduct of business by ACP. ACP is not in default under any contract, agreement, commitment, arrangement, lease, insurance policy or other instrument to which it is a party, by which its assets, business, or operations may be bound or affected, or under which it or its assets, business, or operations receives benefits, and there has not occurred any event that, with the lapse of time or the giving of notice or both, would constitute such a default. No power of attorney or similar authorization given directly or indirectly by ACP is currently outstanding. The Disclosure Schedule sets forth a true and complete list of all third party consents or waivers required to be obtained so as not to be in default under any contract, agreement, commitment, arrangement, lease, insurance policy or other instrument to which ACP is a party as a result of the transaction contemplated hereby. |
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(k) No Brokers. No action has been taken by ACP that would give rise to any valid claim against any party hereto for a brokerage commission, finder’s fee or other like payment with respect to the transactions contemplated by this Agreement. | |
(l) Employee Benefit Plans. (i) All benefit and compensation plans, contracts, policies or arrangements covering current or former employees of ACP (the“Employees”) and current or former directors of ACP including, but not limited to, “employee benefit plans” within the meaning of Section 3(3) of ERISA, and deferred compensation, stock option, stock purchase, stock appreciation rights, stock based, incentive and bonus plans (the“Benefit Plans”), are set forth in the Disclosure Schedule. True and complete copies of all Benefit Plans including, but not limited to, any trust instruments and insurance contracts forming a part of any Benefit Plans and all amendments thereto have been provided or made available to Planet. | |
(ii) All Benefits Plans, to the extent subject to ERISA, are in substantial compliance with ERISA. Each Benefit Plan which is an “employee pension benefit plan” within the meaning of Section 3(2) of ERISA(“Pension Plan”)and which is intended to be qualified under Section 401(a) of the Code, has received a favorable determination letter from the Internal Revenue Service, and ACP is not aware of any circumstances likely to result in revocation of any such favorable determination letter or the loss of the qualification of such Pension Plan under Section 401(a) of the Code. There is no material pending or threatened litigation relating to the Benefits Plans. ACP has not engaged in a transaction with respect to any Benefit Plan or Pension Plan that, assuming the taxable period of such transaction expired as of the date hereof, could subject ACP to a tax or penalty imposed by either Section 4975 of the Code or Section 502(i) of ERISA in an amount which would be material. | |
(iii) No liability under Subtitle C or D of Title IV of ERISA has been or is expected to be incurred by ACP with respect to any ongoing, frozen or terminated “single-employer plan”, within the meaning of Section 4001(a)(15) of ERISA, currently or formerly maintained by it, or the single-employer plan of any entity which is considered one employer with ACP under Section 4001 of ERISA or Section 414 of the Code (an“ERISA Affiliate”). ACP has not incurred, and does not expect to incur, any withdrawal liability with respect to a multiemployer plan under Subtitle E of Title IV of ERISA (regardless of whether based on contributions of an ERISA Affiliate). No notice of a “reportable event,” within the meaning of Section 4043 of ERISA for which the 30-day reporting requirement has not been waived, has been required to be filed for any Pension Plan or by any ERISA Affiliate within the 12-month period ending on the date hereof or will be required to be filed in connection with the transactions contemplated by this Agreement. | |
(iv) All contributions required to be made under the terms of any Benefit Plan have been timely made. Neither any Pension Plan nor any single-employer plan of an ERISA Affiliate has an “accumulated funding deficiency” (whether or not waived) within the meaning of Section 412 of the Code or Section 302 of ERISA and no ERISA Affiliate has an outstanding funding waiver. ACP has not provided, or is required to provide, security to any Pension Plan or to any single-employer plan of an ERISA Affiliate pursuant to Section 401(a)(29) of the Code. | |
(v) Under each Pension Plan which is a single-employer plan, as of the last day of the most recent plan year ended prior to the date hereof, the actuarially determined present value of all “benefit liabilities,” within the meaning of Section 4001(a)(16) of ERISA (as determined on the basis of the actuarial assumptions contained in the Pension Plan’s most recent actuarial valuation), did not exceed the then current value of the assets of such Pension Plan, and there has been no material change in the financial condition of such Plan since the last day of the most recent plan year. | |
(vi) ACP does not have any obligations for retiree health and life benefits under any Benefit Plan. ACP may amend or terminate any such Benefit Plan at any time without incurring any liability thereunder. | |
(vii) None of the execution of this Agreement, shareholder approval of this Agreement or consummation of the transactions contemplated by this Agreement will (A) entitle any employees of |
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ACP to severance pay or any increase in severance pay upon any termination of employment after the date hereof, (B) accelerate the time of payment or vesting or trigger any payment or funding (through a grantor trust or otherwise) of compensation or benefits under, increase the amount payable or trigger any other material obligation pursuant to, any of the Benefit Plans, (C) result in any breach or violation of, or a default under, any of the Benefit Plans or (D) result in any payment that would be a “parachute payment” to a “disqualified individual” as those terms are defined in Section 280G of the Code, without regard to whether such payment is reasonable compensation for personal services performed or to be performed in the future. | |
(m) Labor Matters. ACP is neither a party to nor bound by any collective bargaining agreement, contract or other agreement or understanding with a labor union or labor organization, nor is it the subject of a proceeding asserting that it has committed an unfair labor practice (within the meaning of the National Labor Relations Act) or seeking to compel ACP to bargain with any labor organization as to wages or conditions of employment, nor is there any strike or other labor dispute involving it or, to ACP’s knowledge, threatened, nor is ACP aware of any activity involving its employees seeking to certify a collective bargaining unit or engaging in other organizational activity. | |
(n) Environmental Matters. (i) ACP has complied at all times with applicable Environmental Laws; (ii) no real property (including buildings or other structures) currently or formerly owned or operated by ACP has been contaminated with, or has had any release of, any Hazardous Substance; (iii) ACP is not subject to liability for any Hazardous Substance disposal or contamination on any third party property; (iv) ACP has not received any notice, demand letter, claim or request for information alleging any violation of, or liability under, any Environmental Law; (v) ACP is not subject to any order, decree, injunction or other agreement with any Governmental Authority or any third party relating to any Environmental Law; (vi) there are no circumstances or conditions (including the presence of asbestos, underground storage tanks, lead products, polychlorinated biphenyls, prior manufacturing operations, dry-cleaning, or automotive services) involving ACP, any currently or formerly owned or operated property, that could reasonably be expected to result in any claims, liability or investigations against ACP, result in any restrictions on the ownership, use, or transfer of any property pursuant to any Environmental Law, or adversely affect the value of any property and (vii) ACP has delivered to Planet copies of all environmental reports, studies, sampling data, correspondence, filings and other environmental information in its possession or reasonably available to it relating to ACP, and any currently or formerly owned or operated property. | |
As used herein, the term “Environmental Laws” means any federal, state or local law, regulation, order, decree, permit, authorization, opinion, common law or agency requirement relating to: (A) the protection or restoration of the environment, health, safety, or natural resources, (B) the handling, use, presence, disposal, release or threatened release of any Hazardous Substance or (C) noise, odor, wetlands, indoor air, pollution, contamination or any injury or threat of injury to persons or property in connection with any Hazardous Substance and the term “Hazardous Substance” means any substance in any concentration that is: (A) listed, classified or regulated pursuant to any Environmental Law, (B) any petroleum product or by-product, asbestos-containing material, lead-containing paint or plumbing, polychlorinated biphenyls, radioactive materials or radon or (C) any other substance which is or may be the subject of regulatory action by any Governmental Authority in connection with any Environmental Law. | |
(o) Tax Matters. (i) (A) All Tax Returns that are required to be filed on or before the Effective Date (taking into account any extensions of time within which to file which have not expired) by or with respect to ACP, have been or will be timely filed on or before the Effective Date, (B) all such Tax Returns are or will be true and complete in all material respects, (C) all Taxes shown to be due on the Tax Returns referred to in clause (A) have been or will be timely paid in full, (D) the Tax Returns referred to in clause (A) have been examined by the Internal Revenue Service or the appropriate Tax authority or the period for assessment of the Taxes in respect of which such Tax Returns were required to be filed has expired, (E) all deficiencies asserted or assessments made as a result of such examinations have been paid in full, (F) no issues that have been raised by the relevant taxing authority in connection |
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with the examination of any of the Tax Returns referred to in clause (A) are currently pending and (G) no waivers of statutes of limitation have been given by or requested with respect to any Taxes of ACP. | |
(ii) ACP has made available to Planet true and correct copies of the United States federal income Tax Returns filed by ACP for each of the three most recent fiscal years ended on or before December 31, 2003. | |
(iii) ACP does not have any liability with respect to income, franchise or similar Taxes that accrued on or before the end of the most recent period covered by Tax Returns filed prior to the date hereof in excess of the amounts accrued with respect thereto that are reflected in the financial statements delivered to Planet. | |
(iv) ACP is not a party to any Tax allocation or sharing agreement, is not and has never been a member of an affiliated group filing consolidated or combined Tax Returns (other than a group the common parent of which is or was ACP) or otherwise has any liability for the Taxes of any Person. | |
(v) No closing agreements, private letter rulings, technical advice memoranda or similar agreement or rulings have been entered into or issued by any taxing authority with respect to ACP. | |
(vi) As of the date hereof, ACP has no reason to believe that any conditions exist that might prevent or impede the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code. | |
(vii)��(A) No Tax is required to be withheld pursuant to Section 1445 of the Code as a result of the transaction contemplated by this Agreement and (B) all Taxes that ACP is or was required by law to withhold or collect have been duly withheld or collected and, to the extent required by applicable law, have been paid to the proper Governmental Authority or other Person. | |
(p) Intentionally left blank. | |
(q) Books and Records. The books and records of ACP have been fully, properly and accurately maintained in all material respects, and there are no material inaccuracies or discrepancies of any kind contained or reflected therein, and they fairly present the financial position of ACP. | |
(r) Insurance. The Disclosure Schedule sets forth a true and complete list of all of the insurance policies, binders, or bonds maintained by ACP(“Insurance Policies”). ACP is insured with reputable insurers against such risks and in such amounts as the management of ACP reasonably has determined to be prudent in accordance with industry practices. All the Insurance Policies are in full force and effect; ACP and is not in material default thereunder; and all claims thereunder have been filed in due and timely fashion. | |
(s) Real Property. (i) the Disclosure Schedule contains a complete and correct list of (A) all real property or premises owned on the date hereof, in whole or in part by the ACP and all indebtedness secured by any encumbrance thereof, and (B) all real property or premises leased in whole or in part by ACP and together with a list of all applicable leases and the name of the lessor. None or such premises or properties have been condemned or otherwise taken by any public authority and no condemnation or taking is threatened or contemplated and none thereof is subject to any claim, contract or law which might affect its use or value for the purposes now made of it. None of the premises or properties of ACP is subject to any current or potential interests of third parties or other restrictions or limitations that would impair or be inconsistent in any material respect with the current use of such property by ACP. | |
(t) Each of the leases referred to in the Disclosure Schedule is valid and existing and in full force and effect, and no party thereto is in default and no notice of a claim of default by any party has been delivered to ACP or is now pending, and there does not exist any event that with notice or the passing of time, or both, would constitute a default or excuse performance by any party thereto, provided that with respect to matters relating to any party other than ACP the foregoing representation is based on the knowledge of ACP. |
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(u) Title. ACP has good title to its properties and assets (other than property as to which it is lessee) except (1) statutory liens not yet delinquent which are being contested in good faith by appropriate proceedings, and liens for taxes not yet due and (2) defects and irregularities of title and encumbrances that do not materially impair the use thereof for the purposes for which they are held. |
(a) Organization, Standing and Authority. Planet is duly organized, validly existing and in good standing under the laws of the State of California. Planet is duly qualified to do business and is in good standing in the states of the United States and foreign jurisdictions where its ownership or leasing of property or assets or the conduct of its business requires it to be so qualified. Planet has in effect all federal, state, local, and foreign governmental authorizations necessary for it to own or lease its properties and assets and to carry on its business as it is now conducted. | |
(b) Planet Stock. (i) As of the date hereof, the authorized capital stock of Planet consists solely of 20,000,000 shares of Planet Common Stock, of which no more than 2,160,368 shares were outstanding as of the date hereof, and 5,000,000 shares of Planet Preferred Stock, of which no shares were outstanding as of the date hereof. | |
(ii) The shares of Planet Common Stock to be issued in exchange for shares of ACP Common Stock in the Merger, when issued in accordance with the terms of this Agreement, will be duly authorized, validly issued, fully paid and nonassessable and the issuance thereof is not subject to any preemptive right. The shares of Planet Common Stock to be issued in exchange for shares of ACP Common Stock in the Merger will be issued (x) pursuant to an effective registration statement or applicable exemption under the Securities Act and (y) pursuant to effective registrations or exemptions under state securities laws, as applicable. | |
(c) Subsidiaries. Planet has no subsidiaries. | |
(d) Corporate Power. Planet and each of its Significant Subsidiaries has the corporate power and authority to carry on its business as it is now being conducted and to own all its properties and assets and has the corporate power and authority to execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby; and Planet has the corporate power and authority to execute, deliver and perform its obligations to consummate the transactions contemplated thereby. | |
(e) Corporate Authority. This Agreement and the transactions contemplated hereby have been authorized by all necessary corporate action of the Planet Board. This Agreement has been duly executed and delivered by Planet and this Agreement is a valid and legally binding agreement of Planet enforceable in accordance with its terms (except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar laws of general applicability relating to or affecting creditors’ rights or by general equity principles). | |
(f) Regulatory Approvals; No Violations. (i) No consents or approvals of, or waivers by, or filings or registrations with, any Governmental Authority or with any third party are required to be made or obtained by Planet or any of its Subsidiaries in connection with the execution, delivery or performance by Planet of this Agreement or to consummate the Merger except for (A) filings with the SEC and state securities authorities as are required to be obtained under the securities or “Blue Sky” laws of various states in connection with the approval by shareholders of, and the issuance of Planet Common Stock in the Merger and (B) the filing of the executed Agreement of Merger with the Secretary of State of California. As of the date hereof, Planet is not aware of any reason why the approvals set forth in Section 7.01(b) will not be received in a timely manner and without the imposition of a condition, restriction or requirement of the type described in Section 7.01(b). | |
(ii) Subject to receipt, or the making, of the consents, approvals and filings referred to in the preceding paragraph and elsewhere in this Agreement, the execution, delivery and performance of this |
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Agreement by Planet and the consummation of the transactions contemplated hereby do not and will not (A) constitute a breach or violation of, or a default under, or give rise to any Lien, any acceleration of remedies or any right of termination under, any law, rule or regulation or any judgment, decree, order, governmental permit or license, or Agreement, indenture or instrument of Planet or of any of its Subsidiaries or to which Planet or any of its Subsidiaries or properties is subject or bound, (B) constitute a breach or violation of, or a default under, the articles of incorporation or by-laws (or similar governing documents) of Planet or any of its Subsidiaries or (C) require any consent or approval under any such law, rule, regulation, judgment, decree, order, governmental permit or license, agreement, indenture or instrument. | |
(g) Financial Reports and SEC Documents; Material Adverse Effect. (i) Planet’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2003, and all other reports, registration statements, definitive proxy statements or information statements filed or to be filed by it subsequent to December 31, 2003, under the Securities Act, or under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act in the form filed or to be filed (collectively, Planet’s“SEC Documents”) with the SEC, as of the date filed or to be filed, (A) complied or will comply in all material respects as to form with the applicable requirements under the Securities Act or the Exchange Act, as the case may be and (B) did not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and each of the balance sheets contained in or incorporated by reference into any such SEC Document (including the related notes and schedules thereto) fairly presents, or will fairly present, the financial position of Planet and its Subsidiaries as of its date, and each of the statements of income and changes in shareholders’ equity and cash flows or equivalent statements in such SEC Documents (including any related notes and schedules thereto) fairly presents, or will fairly present, the results of operations, changes in shareholders’ equity and changes in cash flows, as the case may be, of Planet and its Subsidiaries for the periods to which they relate, in each case in accordance with GAAP consistently applied during the periods involved, except in each case as may be noted therein. | |
(ii) Except as described in the SEC Documents, since December 31, 2004, Planet and its Subsidiaries have conducted their respective businesses in the ordinary and usual course consistent with past practice (excluding the incurrence of expenses related to this Agreement and the transactions contemplated hereby) and no event has occurred or circumstance arisen that, individually or taken together with all other facts, circumstances and events (described in any paragraph of this Section 5.04 or otherwise), is reasonably likely to have a Material Adverse Effect with respect to Planet or its Subsidiaries. | |
(h) Litigation. No litigation, claim or other proceeding before any court or governmental agency is pending against Planet or its Subsidiaries and, to Planet’s knowledge, no such litigation, claim or other proceeding has been threatened and there are no facts which could reasonably give rise to such litigation, claim or other proceeding. | |
(i) No Brokers. No action has been taken by Planet that would give rise to any valid claim against any party hereto for a brokerage commission, finder’s fee or other like payment with respect to the transactions contemplated by this Agreement. | |
(j) Environmental Matters. (i) Planet has complied at all times with applicable Environmental Laws; (ii) no real property (including buildings or other structures) currently or formerly owned or operated by Planet has been contaminated with, or has had any release of, any Hazardous Substance; (iii) neither Planet nor any of its Subsidiaries is subject to liability for any Hazardous Substance disposal or contamination on any third party property; (iv) neither Planet nor any of its Subsidiaries has received any notice, demand letter, claim or request for information alleging any violation of, or liability under, any Environmental Law; (v) neither Planet nor any of its Subsidiaries is subject to any order, decree, injunction or other agreement with any Governmental Authority or any third party relating to any Environmental Law; and (vi) to Planet’s knowledge, there are no circumstances or conditions (including the presence of asbestos, underground storage tanks, lead products, polychlorinated biphenyls, prior |
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manufacturing operations, dry-cleaning, or automotive services) involving Planet any currently or formerly owned or operated property that could reasonably be expected to result in any claims, liability or investigations against Planet, result in any restrictions on the ownership, use, or transfer of any property pursuant to any Environmental Law, or adversely affect the value of any property. | |
(k) Insurance. Planet and its Subsidiaries are insured with reputable insurers against such risks and in such amounts as the management of Planet reasonably has determined to be prudent in accordance with industry practices. |
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(i) cooperate with each other to establish a mutually agreeable project plan to effectuate the merger; | |
(ii) provide, or use its commercially reasonable efforts to obtain from any outside contractors, all data or other files and layouts requested by Planet for use in planning the merger, as soon as reasonably practicable; | |
(iii) provide reasonable access to personnel and outside contractors to enable the merger effort to be completed on schedule; and |
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(iv) each agrees that all actions taken pursuant to this Section shall be taken in a manner intended to minimize disruption to the customary business activities of the other. |
(a) Authority; No Violation. The Shareholder has all necessary power and authority to enter into and perform all of such Shareholder’s obligations hereunder. The execution, delivery and performance of this Agreement by the Shareholder will not violate any other agreement to which such Shareholder is a party, including any voting agreement, shareholders’ agreement, trust agreement or voting trust. | |
(b) Ownership of Shares. The Shareholder is the beneficial and record owner of all of the shares of ACP capital stock and Shareholder has sole voting power and sole power to issue instructions with respect to the matters set forth in this Agreement, and sole power of disposition, with no restrictions on the voting rights, rights of disposition or otherwise, subject to applicable laws and the terms of this Agreement. | |
(c) No Conflicts. Neither the execution and delivery of this Agreement nor the consummation by the Shareholder of the transactions contemplated hereby will conflict with or constitute a violation of or default under any contract, commitment, agreement, arrangement or restriction of any kind to which such Shareholder is a party or by which the Shareholder is bound. Shareholder hereby agrees to vote all of the Shares held by the Shareholder (i) in favor of the Merger, this Agreement and the transactions contemplated by the Agreement; (ii) against any action or agreement that would result in a breach in any material respect of any covenant, representation or warranty or any other obligation or agreement of ACP under the Agreement; and (iii) except with the prior written consent of Planet, against the following actions (other than the Merger and the transactions contemplated by this Agreement): (A) any extraordinary corporate transactions, such as a merger, consolidation or other business combination involving ACP; (B) any sale, lease or transfer of a material amount of the assets of ACP; (C) any material change in the present capitalization of ACP; (E) any amendment of ACP’s Articles of Incorporation; (F) any other material change in ACP’s corporate structure or business; or (G) any other action which is intended, or could reasonably be expected to, impede, interfere with, delay, postpone, discourage or materially adversely affect the contemplated economic benefits to Planet of the transactions contemplated by the Agreement. The Shareholder shall not enter into any agreement or understanding with any person or entity prior to the Termination Date (as defined below) to vote or give instructions after the Termination Date in any manner inconsistent with clauses (i), (ii) or (iii) of the preceding sentence. | |
(d) No Stock Transactions. Shareholder hereby agrees not to (i) sell, transfer, assign or otherwise dispose of any of his ACP shares or any rights, options, warrants or other securities to acquire shares of ACP without the prior written consent of Planet, (ii) pledge, mortgage or encumber such shares; or (iii) buy, sell, transfer, trade in, or otherwise dispose of, or enter into any agreement to buy, sell, transfer, trade in, or dispose of, any securities or right to acquire or dispose of any securities of Planet, or to authorize, solicit, request or advise any other person to do any of the foregoing, directly or indirectly. Shareholder agrees that he shall not sell, transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale, any Planet Common Stock (or other securities) for a period specified by any representative of the underwriters of Planet Common Stock (or other securities) not to exceed one hundred eighty (180) days following the effective date of a registration statement of Planet filed under the Securities Act;providedthat:(i) such agreement shall apply only to underwritten public offerings of Planet Common Stock; and(ii) all officers and directors of the Company and major holders of Planet’s voting securities enter into similar agreements. Shareholder agrees to execute and deliver such other agreements as may be reasonably requested by Planet or the underwriter which are consistent with the foregoing or which are necessary to give further effect thereto. Shareholder agrees that any transferee of Shareholder of any shares issued pursuant to this agreement in a private transactions shall be bound by this Section. |
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(e) Cooperation. Shareholder agrees that he will not directly or indirectly solicit any inquiries or proposals from any person relating to any proposal or transaction for the disposition of the business or assets of ACP or the acquisition of voting securities of ACP or any business combination between ACP or any person other than Planet. |
(a) Shareholder Approval. This Agreement, the Merger and the Certificate of Merger shall have been duly approved by the requisite vote of the shareholders of Planet and ACP under the laws of the state of their organization. |
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(b) Approvals. All approvals required to consummate the transactions contemplated hereby shall have been obtained and shall remain in full force and effect and all statutory waiting periods in respect thereof shall have expired and no such approvals shall contain any conditions, restrictions or requirements which the Planet Board reasonably determines in good faith would (i) following the Effective Time, have a Material Adverse Effect on Planet or (ii) reduce the benefits of the transactions contemplated hereby to such a degree that Planet would not have entered into this Agreement had such conditions, restrictions or requirements been known at the date hereof. | |
(c) 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. |
(a) Representations and Warranties. Except as otherwise provided in this Agreement or the Disclosure Schedule, the representations and warranties of Planet set forth in this Agreement shall be true and correct as of the date of this Agreement and as of the Effective Date as though made on and as of the Effective 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 Planet. ACP shall have received a certificate, dated the Effective Date, signed on behalf of Planet by the Chief Executive Officer and the Chief Financial Officer of Planet to such effect. | |
(b) Performance of Obligations of Planet. Planet shall have performed in all material respects all obligations required to be performed by them under this Agreement at or prior to the Effective Time, and ACP shall have received a certificate, dated the Effective Date, signed on behalf of Planet by the Chief Executive Officer and the Chief Financial Officer of Planet to such effect. | |
(c) No litigation or proceeding shall be pending against Planet brought by any Governmental Authority seeking to prevent consummation of the transactions contemplated thereby. |
(a) Representations and Warranties. Except as otherwise provided in this Agreement or the Disclosure Schedule, the representations and warranties of ACP set forth in this Agreement shall be true and correct as of the date of this Agreement and as of the Effective Date as though made on and as of the Effective 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 ACP. Planet shall have received a certificate, dated the Effective Date, signed on behalf of ACP by the Chief Executive Officer and the Chief Financial Officer of ACP to such effect. | |
(b) The Disclosure Schedule shall be updated and made current as of the day prior to the Effective Time of the Merger and a draft of the updated Disclosure Schedule shall have been delivered to Planet no |
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later than 72 hours prior to the Effective Time of the Merger; such update of the Disclosure Schedule shall not in any way affect the representations and warranties set forth in Section 5.03. | |
(c) Performance of Obligations of ACP. ACP shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Effective Time, and Planet shall have received a certificate, dated the Effective Date, signed on behalf of ACP by the Chief Executive Officer and the Chief Financial Officer of ACP to such effect. | |
(d) Performance of Obligations of the Shareholder. Shareholder shall have performed in all material respects all obligations required to be performed by him under this Agreement,provided, however, that this condition shall be deemed to be satisfied notwithstanding any failure to perform such obligations unless any such failure or failures, individually or in the aggregate, has had or is reasonably likely to have a Material Adverse Effect on ACP or Planet and, if requested by Planet, Planet shall have received a certificate, dated the Effective Date, signed by each Shareholder to such effect with respect to such Shareholder. | |
(e) Intentionally left blank. | |
(f) No Litigation. No litigation or proceeding shall be pending against ACP brought by any Governmental Authority seeking to prevent consummation of the transactions contemplated hereby. | |
(g) Closing Financial Statements. At least four Business Days prior to the Effective Time of the Merger, ACP shall provide Planet with ACP’s financial statements presenting the financial condition of ACP as of the close of business on the last day of the last month ended prior to the Effective Time of the Merger. Such financial statements shall have been prepared in all material respects in accordance with GAAP and other applicable legal and accounting requirements, and reflect all period-end accruals and other adjustments. Such financial statements shall be accompanied by a certificate of ACP’s chief financial officer, dated as of a date no earlier than two Business Days prior to the Effective Time of the Merger, to the effect that such financial statements continue to reflect accurately, as of the date of the certificate, the financial condition of Planet in all material respects. | |
(h) Opinions of Counsel. Planet shall have received the opinion of Blanchard, Krasner & French or other reasonably acceptable counsel, as counsel to Planet and the opinion of Brody, Wilkinson and Ober, P.C., as counsel to ACP, each dated the Effective Time, including opinions in reasonable and customary form and substance on such matters as Planet shall reasonably request, including to the effect that, on the basis of facts, representations and assumptions set forth in such opinion, which are consistent with the state of facts existing at the Effective Time of the Merger, the Merger will be treated for federal income tax purposes as a reorganization under Section 368(a) of the Code. In rendering its opinion, counsel may require and rely upon representations contained in letters from ACP, Planet and/or their officers or principal shareholders as are customary for such opinions. | |
(i) Non-competition Agreements. Planet shall have received Non-competition Agreements executed and delivered by the Shareholder, and each of the non-officer directors and executive officers of ACP in the form of Exhibit A, each of which shall remain in full force and effect. | |
(j) Consents. Planet shall have obtained each of the consents required to consummate the Merger. |
(a) Mutual Consent. At any time prior to the Effective Time, by the mutual consent of Planet and ACP if the Board of Directors of each so determines by vote of a majority of the members of its entire Board. |
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(b) Breach. At any time prior to the Effective Time, by Planet or ACP if its Board of Directors so determines by vote of a majority of the members of its entire Board, in the event of: (i) a breach by Planet or ACP, as the case may be, of any representation or warranty contained herein (subject to the standard set forth in Section 5.02), which breach cannot be or has not been cured within 30 days after the giving of written notice to the breaching party or parties of such breach; (ii) a breach by Planet or ACP, as the case may be, of any of the covenants or agreements contained herein, which breach cannot be or has not been cured within 30 days after the giving of written notice to the breaching party or parties of such breach or (iii) in the case of a termination by Planet, a breach by a Shareholder or Shareholders of any of the covenants or agreements contained in the Shareholder Agreements, which breach cannot be or has not been cured within 30 days after the giving of written notice to the breaching party or parties of such breach, provided that such breach (whether under (i), (ii) or (iii)) would be reasonably likely, individually or in the aggregate with other breaches, to result in a Material Adverse Effect with respect to Planet or ACP, as the case may be. | |
(c) Delay. At any time prior to the Effective Time, by Planet or ACP if its Board of Directors so determines by vote of a majority of the members of its entire Board, in the event that the Merger is not consummated by September 30, 2005, except to the extent that the failure of the Merger then to be consummated arises out of or results from the knowing action or inaction of (i) the party seeking to terminate pursuant to this Section 8.01(c) or (ii) any of the Shareholders (if ACP is the party seeking to terminate), which action or inaction is in violation of its obligations under this Agreement or, in the case of the Shareholders, his, her or its obligations under the relevant Shareholder Agreement. | |
(d) Acquisition Proposal. By Planet, if ACP shall have exercised a right specified in the provision set forth in Section 6.07 with respect to any Acquisition Proposal and shall, directly or through agents or representatives, continue discussion with any third party concerning such Acquisition Proposal for more than 15 Business Days after the date of receipt of such Acquisition Proposal. |
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Allergy Control Products c/o Jonathan T. Dawson Dawson Herman Capital Management, Inc. 354 Pequot Avenue P.O. Box 760 Southport, CT 06890 Telephone: (203) 254-0091 Facsimile: (203) 254-0657 |
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Brody, Wilkinson and Ober, P.C. Attention: Seth L. Brody, Esq. 2507 Post Road Southport, CT 06890 Telephone: (203) 319-7100 Facsimile: (203) 254-1772 | |
Allergy Control Products c/o Ed Steube 96 Danbury Road Ridgefield, CT 06877 Telephone: (203) 438-9580 Facsimile: (203) 431-8963 | |
Planet Technologies, Inc. 6835 Flanders Drive, Ste. 500 San Diego, CA 92121 Telephone: (858) 824-0888 Facsimile: (858) 824-0891 |
Blanchard, Krasner & French Attention: Robert W. Blanchard, Esq. 800 Silverado Street, Second Floor La Jolla, CA 92037 Telephone: (858) 551-2440 Facsimile: (858) 551-2434 |
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PLANET TECHNOLOGIES, INC. |
By: |
Name: Scott L. Glenn |
Title: | President and Chief Executive Officer |
ALLERGY CONTROL PRODUCTS |
By: |
Name: | |
Title: | |
SHAREHOLDER |
Jonathan T. Dawson |
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1. | Noncompete and Nondisclosure. |
2. | Miscellaneous. |
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Officer/ Director: | Planet Technologies, Inc., a California corporation | |
By: | ||
Print Name: | ||
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1. | Duties |
2. | Base Salary and Benefits |
3. | Stock Options |
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4. | Loyal and Conscientious Performance; Noncompetition. |
5. | Termination |
(a) your repeated failure to satisfactorily perform your reasonably assigned job duties on behalf of the Company; | |
(b) your commission of an act that materially injures the business of the Company; |
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(c) your refusal or failure to follow lawful and reasonable directions of the Board or the appropriate individual to whom you report; | |
(d) your conviction of a felony involving moral turpitude that is likely to inflict or has inflicted material injury on the business of the Company; | |
(e) your engagement or in any manner participating in any activity which is directly competitive with or intentionally injurious to the Company or which violates any material provisions of Section 5 hereof or your Proprietary Information and Inventions Agreement with the Company; or | |
(f) your commission of any fraud against the Company, employees, agents or customers or use or intentional appropriation for his personal use or benefit of any funds or properties of the Company not authorized by the Board to be so used or appropriated. |
7. | Company Policy |
8. | Proprietary Information and Inventions Agreement |
9. | Entire Agreement |
10. | Governing Law |
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Sincerely, | |
Planet Technologies, Inc. |
By: |
Scott L. Glenn | |
Chairman and Chief Executive Officer |
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By: | |
Printed Name: | |
Title: |
ACCEPTED AND AGREED TO: | |
Planet Technologies, Inc. |
By: | ||
Scott L. Glenn | ||
Chairman and Chief Executive Officer | ||
Address: | 6402 Cardeno Drive La Jolla, Ca 92037 |
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TO: | Planet Technologies, Inc. | |
FROM: | ||
DATE: | ||
SUBJECT: | Previous Inventions |
Invention or Improvement | Party(ies) | Relationship | ||||
1. | ||||||
2. |
Print Name | ||
Signature | Date | |
C-38
D-1
§ 1300. | Reorganization or short-form merger; dissenting shares; corporate purchase at fair market value; definitions |
(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 undersubdivision (o)ofSection 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 andSections 1301,1302,1303 and1304; 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. | |
D-2
§ 1304. | Action to determine whether shares are dissenting shares or fair market value; limitation; joinder; consolidation; determination of issues; appointment of appraisers |
D-3
§ 1305. | Report of appraisers; confirmation; determination by court; judgment; payment; appeal; costs |
§ 1308. | Rights of dissenting shareholders pending valuation; withdrawal of demand for payment |
D-4
§ 1309. | Termination of dissenting share and shareholder status |
(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 |
§ 1311. | Exempt shares |
§ 1312. | Right of dissenting shareholder to attack, set aside or rescind merger or reorganization; restraining order or injunction; conditions |
D-5
§ 1313. | Conversions deemed to constitute a reorganization; application of chapter |
D-6
PLANET TECHNOLOGIES, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 29, 2005
The undersigned shareholder of Planet 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 July 29, 2005 at 10:00 a.m., local time, and hereby appoints MICHAEL TRINKLE and SCOTT L. GLENN, 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 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 adopt and approve the Agreement and Plan of Merger, dated March 7, 2005, among Allergy Control Products, Inc., a Delaware corporation (“ACP”) and Jonathan T. Dawson, an individual and the sole shareholder of ACP, and the Company, and to approve the merger between ACP Acquisition Corp., a wholly owned subsidiary of the Company and ACP (the “Merger”) pursuant to which ACP will become a wholly owned subsidiary of the Company and the sole shareholder will receive 600,000 shares of the common stock of the Company.
o | FOR | |
o | AGAINST | |
o | ABSTAIN |
PROPOSAL 2: To elect directors to hold office until next Annual Meeting of Shareholders and until their successors are elected.
o | FORall nominees listed below (except as marked to the contrary below). | |
o | WITHHOLD AUTHORITYto vote all nominees listed below. |
Nominees: Scott L. Glenn, Eric B. Freedus, H.M. Busby, Michael Trinkle, Ellen Preston.
To withhold authority to vote for any nominee(s), write such nominee(s)’ name(s) below:
PROPOSAL 3: To amend the 2000 Stock Option Plan TO INCREASE THE AUTHORIZED SHARES FROM 100,000 TO 350,000 SHARES.
o | FOR | |
o | AGAINST | |
o | ABSTAIN |
PROPOSAL 4: 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, 2005.
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: , 2005 | ||||
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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.
THE DEADLINE FOR THE RETURN OF YOUR PROXY IS July 28, 2005