1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB (MARK ONE) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For Quarterly Period Ended March 31, 1999 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 Commission File Number: 0-26804 PLANET POLYMER TECHNOLOGIES, INC. - -------------------------------------------------------------------------------- (Exact name of small business issuer as specified in its character) CALIFORNIA 33-0502606 - ---------------------------------------------------------------------------------------------------- (State or other jurisdiction of incorporation or organization) I.R.S. Employer Identification No. 9985 Businesspark Ave., Suite A, San Diego, California 92131 - ---------------------------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (619) 549-5130 - ---------------------------------------------------------------------------------------------------- (Issuer's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] YES [ ] NO Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Class Outstanding at March 31, 1999 ----- ----------------------------- Common Stock, no par value 6,355,739 2 PLANET POLYMER TECHNOLOGIES, INC. FORM 10-QSB QUARTERLY REPORT QUARTER ENDED MARCH 31, 1999 INDEX PAGE NO. -------- PART I - FINANCIAL INFORMATION Item 1 Consolidated Balance Sheet (Unaudited) March 31, 1999 2 Consolidated Statements of Operations (Unaudited) Three Months Ended March 31, 1999 and 1998 3 Consolidated Statement of Shareholders' Equity (Unaudited) Three Months Ended March 31, 1999 4 Consolidated Statements of Cash Flows (Unaudited) Three Months Ended March 31, 1999 and 1998 5 Notes to Unaudited Consolidated Financial Statements 6 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 8 PART II - OTHER INFORMATION Item 1 Legal Proceedings 12 Item 2 Changes in Securities 12 Item 3 Defaults upon Senior Securities 12 Item 4 Submission of Matters to a Vote of Security Holders 12 Item 5 Other Information 13 Item 6 Exhibits and Reports on Form 8K 14 SIGNATURES 15 3 PLANET POLYMER TECHNOLOGIES, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEET (UNAUDITED) --------------- MARCH 31, ASSETS 1999 - ------ ---- Current assets: Cash and cash equivalents $ 692,158 Accounts receivable, net of allowance for doubtful accounts of $10,000 442,751 Inventories, net 191,008 Prepaid expenses 43,365 Income tax receivable 30,168 ------------ Total current assets 1,399,450 Property and equipment, net of accumulated depreciation of $896,481 749,385 Goodwill, net of accumulated amortization of $104,004 536,018 Patents and trademarks, net of accumulated amortization of $121,570 331,432 Other assets 6,292 Deferred income taxes, net 30,952 ------------ Total assets $ 3,053,529 ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 99,272 Accrued payroll and vacation 46,543 Other accrued expenses 3,010 Unearned royalties 73,333 Current portion of capital lease obligations 12,212 ------------ Total current liabilities 234,370 Capital lease obligations, less current portion 27,957 Other liabilities 265,842 ------------ Total liabilities 528,169 ------------ Shareholders' equity: Preferred Stock, no par value 4,250,000 shares authorized No shares issued or outstanding -- Series A Convertible Preferred Stock, no par value 750,000 shares authorized 500,000 shares issued and outstanding Liquidation preference $1,000,000 804,435 Common Stock, no par value 20,000,000 shares authorized 6,355,739 shares issued and outstanding 11,881,143 Accumulated deficit (10,160,218) ------------ Total shareholders' equity 2,525,360 ------------ Total liabilities and shareholders' equity $ 3,053,529 ============ The accompanying notes are an integral part of the consolidated financial statements. 2 4 PLANET POLYMER TECHNOLOGIES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) --------------- THREE MONTHS ENDED MARCH 31, ------------------------------------- 1999 1998 ----------- ----------- Sales $ 540,977 $ 589,806 Cost of sales 490,430 515,989 ----------- ----------- Gross profit 50,547 73,817 ----------- ----------- Operating expenses: General and administrative 244,087 223,247 Marketing 46,865 58,694 Research and development, net 50,962 112,364 ----------- ----------- Total operating expenses 341,914 394,305 ----------- ----------- Loss from operations (291,367) (320,488) Other income (loss), net (4,667) 10,899 ----------- ----------- Loss before income taxes (296,034) (309,589) Income tax expense (2,272) (3,568) ----------- ----------- Net loss $ (298,306) $ (313,157) =========== =========== Loss per share (basic and diluted) $ (0.05) $ (0.06) =========== =========== Shares used in per share computations 6,189,867 5,302,206 =========== =========== The accompanying notes are an integral part of the consolidated financial statements. 3 5 PLANET POLYMER TECHNOLOGIES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED) --------------- SERIES A PREFERRED STOCK COMMON STOCK ---------------------- ------------------------- ACCUMULATED SHARES AMOUNT SHARES AMOUNT DEFICIT TOTAL ---------- ---------- ----------- ------------ ------------ ------------ Balance at December 31, 1998 500,000 $ 804,435 5,341,062 $ 11,009,208 $ (9,846,912) $ 1,966,731 Issuance of Common Stock and related Warrants to Agway, net of issuance costs -- -- 1,000,000 845,060 -- 845,060 Issuance of Warrants to finder for cash -- -- -- 2,500 -- 2,500 Stock Options Exercised -- -- 5,000 9,375 -- 9,375 Issuance of Common Stock as a dividend on Convertible Preferred Stock on March 15, 1999 -- -- 9,677 15,000 (15,000) -- Net loss for the three months ended March 31, 1999 -- -- -- -- (298,306) (298,306) ---------- ---------- ---------- ------------ ------------ ------------ Balance at March 31, 1999 500,000 $ 804,435 6,355,739 $ 11,881,143 $(10,160,218) $ 2,525,360 ========== ========== ========== ============ ============ ============ The accompanying notes are an integral part of the consolidated financial statements. 4 6 PLANET POLYMER TECHNOLOGIES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) --------------- THREE MONTHS ENDED MARCH 31, ------------------------------- 1999 1998 ----------- ----------- Cash flows from operating activities: Net loss $ (298,306) $ (313,157) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation and amortization 53,854 52,178 Loss on disposal of assets 9,994 -- Deferred income taxes 1,472 -- Changes in assets and liabilities: Accounts receivable, net (149,837) 30,626 Inventories, net 109,228 43,832 Prepaid expenses and other assets 5,535 17,696 Accounts payable and accrued expenses (129,609) (10,038) Unearned royalties 73,333 -- ----------- ----------- Net cash used by operating activities (324,336) (178,863) ----------- ----------- Cash flows from investing activities: Purchases of property and equipment (66,938) (25,134) Cost of patents and trademarks (20,678) (5,542) ----------- ----------- Net cash used by investing activities (87,616) (30,676) ----------- ----------- Cash flows from financing activities: Proceeds from issuance of Common Stock 1,000,000 -- Payment of equity issuance costs (73,952) -- Proceeds from issuance of warrants 2,500 -- Proceeds from stock options exercised 9,375 -- Principal payments on borrowings and capital lease obligations (97,810) (22,421) Proceeds from conversion of restricted cash to cash and cash equivalents 114,880 -- ----------- ----------- Net cash provided (used) by financing activities 954,993 (22,421) ----------- ----------- Net increase (decrease) in cash and cash equivalents 543,041 (231,960) Cash and cash equivalents at beginning of year 149,117 1,516,405 ----------- ----------- Cash and cash equivalents at end of year $ 692,158 $ 1,284,445 =========== =========== Supplemental disclosure of non-cash activity: Issuance of Common Stock dividends on Preferred Stock $ 15,000 $ 15,000 The accompanying notes are an integral part of the consolidated financial statements. 5 7 PLANET POLYMER TECHNOLOGIES, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of Presentation The accompanying unaudited consolidated financial statements of Planet Polymer Technologies, Inc. ("Planet" or the "Company") have been prepared in accordance with the interim reporting requirements of Form 10-QSB, pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of only normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 1999 are not necessarily indicative of results that may be expected for the year ending December 31, 1999. For additional information, refer to the Company's consolidated financial statements and notes thereto for the year ended December 31, 1998 contained in the Company's Form 10-KSB for the fiscal year ended December 31, 1998. Certain items shown in the consolidated financial statements for the three months ended March 31, 1998 have been reclassified to conform to the current period presentation. 2. Shareholders' Equity In November 1998, the Company entered into a Stock Purchase Agreement with a subsidiary of Agway Inc. ("Agway") whereby Agway would purchase 1,000,000 shares of Planet's Common Stock for $1,000,000 and receive a warrant to purchase up to 2,000,000 shares of Common Stock at a price of $1.00 per share. The Company's shareholders approved the transaction on January 6, 1999. The transaction was completed on January 11, 1999 and the Company received proceeds of approximately $845,000, net of issuance costs. In February 1999, Agway agreed to exercise its warrant to acquire up to 500,000 shares of the Company's Common Stock as early as July 1, 1999 at the Company's request, in the event that the Company's cash flows are less than currently projected and/or insufficient to fund its operating requirements. Under terms of an agreement with the finder responsible for the initiation of the Stock Purchase Agreement, Planet issued to the finder for $2,500 a five year warrant to purchase up to 50,000 shares of the Company's Common Stock at an exercise price of $4.125 per share. On March 15, 1999, the Company issued to the holder of Series A Preferred Stock a dividend of 9,677 shares of Common Stock valued at approximately $15,000. On March 30, 1999, a previously granted incentive stock option to purchase 5,000 shares of the Company's Common Stock at an exercise price of $1.875 per share was exercised. 3. Line of Credit On March 10, 1999, Deltco obtained a $100,000 line of credit with a financial institution under which Deltco may make borrowings for working capital and other general purposes throughout the term of the line of credit agreement which expires on March 10, 2000. Through March 31, 1999, no borrowings had been made against this line of credit. 6 8 PLANET POLYMER TECHNOLOGIES, INC. NOTES TO UNAUDITED FINANCIAL STATEMENTS - (CONTINUED) 4. Segment Information The segment information presented below reflects the Company's two reportable segments - (1) research and development of polymer technologies and materials in San Diego, California and (2) manufacturing and reprocessing of thermoplastic scrap resins by Deltco in Ashland, Wisconsin. The technologies and products developed in California are currently in a research and development stage; and therefore, no revenues were reported under this segment during the three months ended March 31, 1999 and 1998. The Company evaluates the performance of its segments based on income or loss before depreciation and amortization. The table below presents information about reported segments for the three months ended March 31, 1999 and 1998. Manufacturing Research and and Three months ended March 31, 1999 Development Reprocessing Total - --------------------------------- ----------- ------------- ----------- Revenues $ -- $ 540,977 $ 540,977 ----------- ----------- =========== (Loss) income before depreciation and amortization $ (279,817) $ 35,365 $ (244,452) ----------- ----------- Depreciation and amortization (53,854) ----------- Net loss $ (298,306) =========== Total assets $ 2,079,792 $ 973,737 $ 3,053,529 =========== =========== =========== Three months ended March 31, 1998 - --------------------------------- Revenues $ -- $ 589,806 $ 589,806 ----------- ----------- =========== (Loss) income before depreciation and amortization $ (311,305) $ 50,326 $ (260,979) ----------- ----------- Depreciation and amortization (52,178) ----------- Net loss $ (313,157) =========== Total assets $ 2,350,777 $ 1,584,860 $ 3,935,637 =========== =========== =========== 7 9 PART I - FINANCIAL INFORMATION ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS PLANET POLYMER TECHNOLOGIES, INC. Except for the historical information contained herein, the discussion in this report contains forward-looking statements that involve certain risks and uncertainties. The Company's actual results could differ materially from those discussed in this report. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and in the Company's Form 10-KSB for the fiscal year ended December 31, 1998. OVERVIEW Since the Company was founded in 1991, with exception of resources expended in connection with the purchase and ongoing operation of Deltco, substantially all of the Company's resources have been devoted to the development and commercialization of its technologies and products. This has included the expenditure of funds to develop the Company's corporate infrastructure, support the Company's marketing efforts and establish a pilot production facility, in addition to research and development. In January 1996, Planet acquired Deltco, a manufacturer and reprocessor of plastic resins located in Ashland, Wisconsin. Planet maintains Deltco as a wholly-owned subsidiary. Prior to the acquisition of Deltco, essentially all revenue recognized was from customer-funded research and development activities, which included service and product sales for customer pilot trials. Planet has incurred operating losses since inception and had an accumulated deficit as of March 31, 1999 of approximately $10.2 million. Pending commercial deployment of and related volume orders for the Company's products, the Company expects to incur additional losses. In November 1998, the Company entered into a Stock Purchase Agreement with a subsidiary of Agway Inc. ("Agway") whereby Agway would purchase 1,000,000 shares of Planet's Common Stock for $1,000,000 and receive a warrant to purchase up to 2,000,000 shares of Common Stock at a price of $1.00 per share. The stock purchase transaction was completed in January 1999 with the Company's shareholders' approval. Contemporaneously with the execution of the Stock Purchase Agreement, Planet and Agway entered into an agreement relating to the funding by Agway of a feasibility study (the "Feasibility Agreement") of Planet's polymer technology for use in agricultural products (other than fertilizers and certain biological products) and food products and an exclusive worldwide license (the "License Agreement") to all current and future products that utilize Planet's polymer technology for agricultural and food related purposes (other than products already covered by existing agreements). Under the terms of the Feasibility Agreement, Planet will be reimbursed for certain qualifying research and development costs relating to such applications. Under the terms of the License Agreement, Agway has the exclusive right to grant licenses and sublicenses on the technology developed under the License Agreement to other parties. In return for the rights granted to Agway, Agway is required to pay royalties to the Company determined in accordance with the terms of the License Agreement. In addition, in February 1999, the Company received a commitment from Agway whereby Agway agreed to exercise its warrant to acquire up to 500,000 shares of the Company's Common Stock as early as July 1, 1999 at the Company's request, in the event that the Company's cash flows are less than currently projected and/or insufficient to fund its operating requirements. 8 10 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED) PLANET POLYMER TECHNOLOGIES, INC. RESULTS OF OPERATIONS Revenue The Company's sales decreased from approximately $590,000 for the three months ended March 31, 1998 to approximately $541,000 for the three months ended March 31, 1999. This decrease was primarily attributable to the net effect of a decline in the sales price of Deltco's recycled polypropylene and an increase in sales volume. Price pressures relating to the sale of Deltco's recycled material resulted from lower prices in the competing virgin polypropylene market due to subdued oil prices in the latter part of 1998 whose adverse effects on selling prices continued through March 31, 1999. However, a reversal in the oil market during the three months ended March 31, 1999 has attributed to the increase in sales volume for Deltco's recycled polypropylene which serves as a generally lower cost substitute for virgin polypropylene. Cost of Sales Cost of sales decreased from approximately $516,000 for the three months ended March 31, 1998 to approximately $490,000 for the three months ended March 31, 1999. However, cost of sales increased relative to sales by approximately 3% primarily as a result of selling price pressures and as a result of a write-down of certain inventory to market of approximately $10,000 during the three months ended March 31, 1999. General and Administrative Expenses General and administrative expenses increased from approximately $223,000 for the three months ended March 31, 1998 to approximately $244,000 for the three months ended March 31, 1999. This increase was primarily attributable to increased costs of outside services and legal fees. Marketing Expenses Marketing expenses decreased from approximately $59,000 for the three months ended March 31, 1998 to approximately $47,000 for the three months ended March 31, 1999. This decrease was primarily attributable to the reduction in sales and marketing personnel. Research and Development Expenses, Net The Company's net research and development expenses decreased from approximately $112,000 for the three months ended March 31, 1998 to approximately $51,000 for the three months ended March 31, 1999. This decrease was primarily due to the Feasibility Agreement entered into with Agway. Planet has allocated research and development resources to projects that are reimbursable by Agway and other customers. Offsetting research and development revenue increased from approximately $36,000 for the three months ended March 31, 1998 to approximately $163,000 for the three months ended March 31, 1999. $139,000 of the research and development revenue for the three months ended March 31, 1999 relates to research and development costs reimbursable from Agway. 9 11 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED) PLANET POLYMER TECHNOLOGIES, INC. LIQUIDITY AND CAPITAL RESOURCES Since its inception, Planet has financed its operations primarily through the sale of equity securities and revenue from customer development agreements. Prior to its September 1995 initial public offering, the Company had raised approximately $4 million (net of issuance costs) from the private sale of Common Stock and exercise of warrants to purchase Common Stock. In September 1995, the Company completed its initial public offering in which it sold an aggregate of 1,150,000 shares of Common Stock to the public and received net proceeds of approximately $5.6 million. In January 1996, the Company used $1,125,000 in cash and issued 96,775 shares of restricted Common Stock valued at approximately $508,000 to acquire Deltco in a purchase transaction. In September 1997, the Company issued 500,000 shares of Series A Convertible Preferred Stock and warrants to purchase Common Stock for an aggregate purchase price of approximately $882,000, net of issuance costs. In January 1999, with the Company's shareholders' approval, the Company issued 1,000,000 shares of Common Stock to Agway and received proceeds of $845,000, net of issuance costs totaling approximately $155,000 (approximately $81,000 of which was paid during the three months ended December 31, 1998). In addition, from January 1999 to March 1999, the Company recorded research and development revenue of approximately $139,000 from Agway under the Feasibility Agreement. The Company anticipates that additional research and development expenditures in the agrotechnology area will be reimbursed by Agway under the Feasibility Agreement during the remainder of 1999. In addition, in February 1999, the Company received a commitment from Agway whereby Agway agreed to exercise its warrant to acquire up to 500,000 shares of the Company's Common Stock as early as July 1, 1999 at the Company's request, in the event that the Company's cash flows are less than currently projected and/or insufficient to fund its operating requirements. The Company used approximately $324,000 for operations for the three months ended March 31, 1999. Such funds were used primarily for research and development activities, marketing efforts and administrative support. The Company used approximately $88,000 for investing activities for the three months ended March 31, 1999. Such funds were used for the purchase of equipment and for the preparation and filing of patents. Net cash provided by financing activities of approximately $955,000 for the three months ended March 31, 1999 resulted from the issuance of Common Stock and warrants for aggregate proceeds of approximately $929,000, net of issuance costs paid during the three months ended March 31, 1999 of approximately $74,000, proceeds from the exercise of a stock option of approximately $9,000 and proceeds from the conversion of restricted cash to cash and cash equivalents of approximately $115,000, offset by approximately $98,000 used for the repayment of debt and capital lease obligations. On March 10, 1999, Deltco obtained a $100,000 line of credit with a financial institution under which Deltco may make borrowings for working capital and other general purposes throughout the term of the line of credit agreement which expires on March 10, 2000. Through March 31, 1999, no borrowings had been made against this line of credit. 10 12 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED) PLANET POLYMER TECHNOLOGIES, INC. LIQUIDITY AND CAPITAL RESOURCES, CONTINUED The Company believes that its existing sources of liquidity and anticipated revenues, including revenues generated from Deltco and anticipated revenues to be derived under the Feasibility Agreement with Agway, along with Deltco's line of credit arrangement and Agway's commitment to exercise its warrants to acquire up to 500,000 shares of Common Stock as early as July 1, 1999 at the Company's request, in the event that the Company's cash flows are less than currently projected and/or insufficient to fund its operating requirements, will satisfy the Company's projected working capital and other cash requirements through at least the next twelve months. There can be no assurance, however, that future revenue decreases or changes in the Company's plans or other events affecting the Company's operating expenses will not result in the expenditure of the Company's resources. The Company expects that it will need to raise substantial additional funds to continue its current and planned operations. The Company intends to seek additional funding from existing and potential customers or through public or private equity or debt financing. There can be no assurance that additional financing will be available on acceptable terms, or at all. The Company's ability to raise additional capital may be dependent upon the stock being quoted on the Nasdaq SmallCap Market. There can be no assurance that the Company will be able to satisfy the criteria for continued quotation on the Nasdaq SmallCap Market. YEAR 2000 The Company recognizes the need to ensure that its operations will not be impacted by the year 2000 issue that results from computer applications being written along two digits rather than four to define the application year. As a result of the year 2000 issue, computer applications may recognize a date using "00" as the year 1900 rather than the year 2000, resulting in system failures or miscalculations causing disruption of operations. The Company has reviewed its material computer applications for year 2000 compliance and is working with vendors and suppliers to make its computer applications year 2000 compliant. Thus, the Company has developed a plan to modify its information technology in recognition of the year 2000 issue. The plan calls for updating existing software and hardware to newer versions that incorporate corrections to eliminate the problem. The Company used approximately $17,000 for the three months ended March 31, 1999 to update the accounting system and network and used approximately $12,000 for the three months ended March 31, 1999 to update its computers in order to be year 2000 compliant. The Company does not expect the year 2000 issue and the plan to resolve it to have a significant impact on its operations. However, if such plans cannot be completed on a timely basis, the year 2000 issue could have a material adverse impact on the Company's business, financial condition and results of operations. Because of the many uncertainties associated with year 2000 compliance issues, and because the Company's assessment is necessarily based on information from third party vendors and suppliers, there can be no assurance as to whether such assessment is correct or as to the materiality or effect if such assessment is not correct. For example, to the extent that customers would be unable to order products or pay invoices or suppliers would be unable to manufacture or deliver product, the Company's operations would be affected. The Company is currently evaluating its potential contingency plan options relating to these uncertainties. 11 13 PART II - OTHER INFORMATION PLANET POLYMER TECHNOLOGIES, INC. Item 1 - Legal Proceedings: In November 1998, the Company initiated litigation against Brian To, a former director, officer and consultant of the Company, Tarrenz Inc. and Tarrenz Management Consultants, Inc., entities owned by Brian To ("Tarrenz"), in the Superior Court of the State of California for the County of San Diego. The complaint alleges breach of contract, breach of fiduciary duty and other tort claims arising from services the defendants performed for or on behalf of the Company. The Company is seeking recovery of compensation, stock, stock options and expense reimbursements. In response to the Complaint, the defendants filed a Motion to Compel Arbitration. The Court issued an order compelling the case to arbitration on Friday, March 12, 1999. The arbitration will be conducted in San Diego pursuant to the rules of the American Arbitration Association. On April 26, 1999, the defendants answered and denied the allegations of the complaint and filed a cross-complaint against the Company alleging breach of contract, misrepresentation, slander, intentional infliction of emotional distress and fraud. It is too early to determine the impact, if any, of this proceeding on the Company, its financial condition or the results of the Company's operations. Item 2 - Changes in Securities: In November 1998, the Company entered into a Stock Purchase Agreement with a subsidiary of Agway, Inc. whereby Agway would purchase 1,000,000 shares of Planet's Common Stock for $1,000,000 and receive a warrant to purchase up to 2,000,000 shares of Common Stock at a price of $1.00 per share. The transaction was completed in January 1999 with the Company's shareholders' approval. The 1,000,000 shares of Common Stock issued to Agway in January 1999 were issued in reliance upon the exemption from securities registration afforded by Rule 506 of Regulation D under the Securities Act of 1933, as amended. The Company filed a Registration Statement on Form S-3 covering the resale of the shares and warrant shares purchased by Agway. Such Registration Statement was declared effective on April 9, 1999. Item 3 - Defaults upon Senior Securities: None Item 4 - Submission of Matters to a Vote of Security Holders: The Annual Meeting of Shareholders of Planet Polymer Technologies, Inc. (the "Annual Meeting") was held on April 12, 1999 in San Diego, California. Proposal 1 - Amendment to the Company's Bylaws to provide that the authorized number of directors shall not be less than five (5) nor more than nine (9), with the exact number to be set at six (6) directors. Votes in Favor Votes Against Votes Abstained -------------- ------------- --------------- 5,219,551 10,025 1,800 12 14 PART II - OTHER INFORMATION - (CONTINUED) PLANET POLYMER TECHNOLOGIES, INC. Item 4 - Submission of Matters to a Vote of Security Holders, Continued: Proposal 2 - Election of Directors Each of the candidates listed below were duly elected to the Board of Directors at the Annual Meeting by the tally indicated. Candidate Votes in Favor Votes Withheld --------- -------------- -------------- Robert J. Petcavich, Ph.D. 5,189,743 41,633 Michael M. Coleman, Ph.D. 5,224,451 6,925 Thomas M. Connelly 5,221,451 9,925 H.M. Busby 5,224,451 6,925 Thomas A. Landshof 5,224,251 7,125 Dennis J. LaHood 5,224,451 6,925 Proposal 3 - Ratification of Selection of Independent Auditors Votes in Favor Votes Against Votes Abstained -------------- ------------- --------------- 5,217,951 12,025 1,400 Proposal 4 - At the request of one of the Company's shareholders, Brian To, the shareholders were asked to approve a proposal to require the Company's Board of Directors to retain independent counsel to investigate Mr. Robert Petcavich's involvement with A-Life Medical, Inc. Votes in Favor Votes Against Votes Abstained -------------- ------------- --------------- 751,562 5,231,376 0 Item 5 -Other Information: The deadline for submitting a shareholder proposal for inclusion in the Company's proxy statement and form of proxy for the Company's 2000 Annual Meeting of Shareholders pursuant to Rule 14a-8 of the Securities and Exchange Commission is November 11, 1999. The deadline for submitting a shareholder proposal or a nomination for director that is not to be included in such proxy statement and proxy is January 25, 2000. Shareholders are also advised to review the Company's Bylaws, which contain additional requirements with respect to advance notice of shareholder proposals and director nominations. 13 15 PART II - OTHER INFORMATION - (CONTINUED) PLANET POLYMER TECHNOLOGIES, INC. Item 6 - Exhibits and Reports on Form 8-K: (a)Exhibits: Exhibit Number Description -------------- ----------- 10.1 Warrant to Purchase Common Stock, dated February 25, 1999, issued by the Company to Agway Holdings, Inc. on January 11, 1999. 11.1 Statement of Computation of Common and Common Equivalent Shares 27.1 Financial Data Schedule (b)Reports on Form 8-K: On March 12, 1999, the Company filed a current report on Form 8-K which included, as requested by the Nasdaq Stock Market, its unaudited Consolidated Balance Sheet as of January 31, 1999 and unaudited Consolidated Statement of Operations for one month ended January 31, 1999. 14 16 PLANET POLYMER TECHNOLOGIES, INC. SIGNATURES In accordance with the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: May 14, 1999 Planet Polymer Technologies, Inc. /s/ ROBERT J. PETCAVICH --------------------------------------- Robert J. Petcavich President, Chief Executive Officer and Director (On behalf of Registrant and as Registrant's Principal Financial and Accounting Officer) 15